<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 22, 1996
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Dynamic Materials Corporation
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(Exact name of registrant as specified in its charter)
Colorado 0-8328 84-00608431
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(State or other jurisdiction (Commission (IRS Employee
of incorporation) File Number) Identification No.)
551 Aspen Ridge Drive, Lafayette, CO 80026
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 665-5700
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(Former name or former address, if changed since last report)
EXHIBIT INDEX APPEARS ON PAGE 5
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 22, 1996, the Registrant acquired the assets of the
Detaclad operation of E.I. DuPont de Nemours and Company. The
Detaclad assets acquired were used by DuPont in the manufacture,
storage, handling, processing, distributing, selling and marketing of
explosion bonded clad metal plates (the "Business"), and in the
production of Mypolex[R] industrial diamonds. The Registrant
anticipates using the assets acquired for similar purposes. Although
the same machinery and equipment are used in the shock synthesis
process utilized in the production of industrial diamonds, the
Registrant did not acquire certain proprietary and other assets used
in the manufacture of Mypolex[R] industrial diamonds. In a separate
Tolling/Services Agreement, the Registrant has agreed to perform
explosive shock synthesis services for DuPont in connection with the
production of industrial diamonds according to DuPont's process for
manufacturing Mypolex[R] industrial diamonds. Under this agreement,
the Registrant will supply 100% of DuPont's requirements for such
diamonds. The assets acquired consisted principally of trade accounts
receivable, inventories, machinery, equipment (including computer
equipment), and certain trade names, patents and patent applications
used in the Business, as well as a sublease of the facilities at which
the Business is conducted.
The purchase price of $4,978,469 was paid in cash at closing.
The consideration paid was determined based on the fair market value
of the assets acquired. The purchase price is subject to post-closing
adjustment based upon subsequent accounting for accounts receivable
and inventory. The amount of the post-closing adjustment (to be
determined within 60 days of closing) is not anticipated to be
material.
There are no material relationships between the directors,
officers, or affiliates of the parties to this transaction.
The source of funds used for the acquisition included $1,200,000
of cash and $3,778,469 of borrowing from Key Bank of Colorado under a
revolving line of credit made in the ordinary course of the business.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired.
It is not practicable to provide required financial statements at
the date of the Form 8-K. In a letter dated July 8, 1996 to the
Registrant from the Office of the Chief Accountant, U.S. Securities
and Exchange Commission, the Registrant has agreed to provide
Statements of Net Assets Acquired as of December 31, 1995 on an
audited basis and as of June 30, 1996 on an unaudited basis. In
addition, a Statement of Revenues and Direct Operating Expenses will
be provided for the years ended December 31, 1994 and December 31,
1995 on an audited basis and for the six month period ended June 30,
1996 on an unaudited basis.
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The indicated financial statements will be filed not later than
60 days after this report on Form 8-K must be filed.
(b) Pro forma financial information.
In addition, pro forma financial statements complying with
Article 11 of Regulation S-X will be filed not later than 60 days
after this report on Form 8-K must be filed.
(c) Exhibits.
2.1 Purchase and Sale Agreement dated July 22, 1996 between
Dynamic Materials Corporation and E.I. DuPont de Nemours and
Company
10.1 Tolling/Services Agreement for Industrial Diamonds dated
July 22, 1996 between E.I. DuPont de Nemours and Company and
Dynamic Materials Corporation
10.2 Sublease dated July 22, 1996 between E.I. DuPont de Nemours
and Company and Dynamic Materials Corporation
10.3 Credit Facility and Security Agreement dated July 19, 1996
between Dynamic Materials Corporation and Key Bank of
Colorado.
99.1 Press release dated July 22, 1996
-3-<PAGE>
SIGNATURES
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 hereunto duly authorized.
DYNAMIC MATERIALS CORPORATION
(Registrant)
Date August 6, 1996 By: /s/ Craig N. Evans
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Name: Craig N. Evans
Title: Vice President Finance and Chief
Financial Officer
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EXHIBIT INDEX
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Exhibit
No. Description
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2.1 Purchase and Sale Agreement dated July 22, 1996 between
Dynamic Materials Corporation and E.I. DuPont de Nemours and
Company
10.1 Tolling/Services Agreement for Industrial Diamonds dated
July 22, 1996 between E.I. DuPont de Nemours and Company and
Dynamic Materials Corporation
10.2 Sublease dated July 22, 1996 between E.I. DuPont de Nemours
and Company and Dynamic Materials Corporation
10.3 Credit Facility and Security Agreement dated July 19, 1996
between Dynamic Materials Corporation and Key Bank of
Colorado.
99.1 Press release dated July 22, 1996
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PURCHASE AND SALE AGREEMENT
BETWEEN
DYNAMIC MATERIALS CORPORATION
AND
E. I. DU PONT DE NEMOURS AND COMPANY
DATED
JULY 22, 1996
<PAGE>
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 BUSINESS ASSETS . . . . . . . . . . . . . . . . . 3
(a) Machinery and Equipment. . . . . . . . . . . 3
(b) Marketing Documents and Materials. . . . . . 3
(c) Intellectual Property. . . . . . . . . . . . 3
(d) Miscellaneous. . . . . . . . . . . . . . . . 4
(e) Contracts. . . . . . . . . . . . . . . . . . 4
(f) Inventory. . . . . . . . . . . . . . . . . . 4
(g) Accounts Receivable. . . . . . . . . . . . . 4
(h) Facilities . . . . . . . . . . . . . . . . . 5
(i) Claims.. . . . . . . . . . . . . . . . . . .
ARTICLE 3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . 5
ARTICLE 4 BUYER'S ASSUMPTION OF LIABILITY AND
INDEMNITY . . . . . . . . . . . . . . . . . . . . 6
(a) Assumed and Excluded Liabilities . . . . . . 6
(b) Accounts Payable . . . . . . . . . . . . . . 7
ARTICLE 5 PURCHASE PRICE. . . . . . . . . . . . . . . . . . 7
(a) Purchase Price . . . . . . . . . . . . . . . 7
(b) Payment Term . . . . . . . . . . . . . . . . 7
(c) Allocation of Purchase Price . . . . . . . . 7
(d) Proration. . . . . . . . . . . . . . . . . . 8
(e) Instruments of Conveyance, Transfer and
Assumption . . . . . . . . . . . . . . . . . 8
ARTICLE 6 SELLER'S WARRANTIES . . . . . . . . . . . . . . . 9
(a) Corporate Status . . . . . . . . . . . . . . 9
(b) Performance of Agreement . . . . . . . . . . 9
(c) Corporate Power. . . . . . . . . . . . . . . 9
(d) Litigation . . . . . . . . . . . . . . . . . 9
(e) Intellectual Property. . . . . . . . . . . . 10
(f) Environmental Matters. . . . . . . . . . . . 10
(g) Financial Statements . . . . . . . . . . . . 11
(h) Title to Properties; Liens; Condition of
Properties . . . . . . . . . . . . . . . . . 12
(i) Taxes. . . . . . . . . . . . . . . . . . . . 12
(j) Disclosure of Material Information . . . . . 12
(k) Inventory. . . . . . . . . . . . . . . . . . 13
(l) Existing Employment Contracts. . . . . . . . 13
(m) Absence of Certain Changes . . . . . . . . . 13
(n) Product Warranty and Product Liability . . . 14
(o) Contracts. . . . . . . . . . . . . . . . . . 14
(p) Other Contracts. . . . . . . . . . . . . . . 15
(q) Compliance with Laws . . . . . . . . . . . . 15
(r) Broker's Fees. . . . . . . . . . . . . . . . 16
i.<PAGE>
(s) No Other Representations or Warranties; No
Warranty Regarding Success . . . . . . . . . 16
ARTICLE 7 BUYER'S WARRANTIES. . . . . . . . . . . . . . . . 16
(a) Corporate Status; Authorization. . . . . . . 16
(b) Performance of Agreement . . . . . . . . . . 16
(c) Broker's Fees. . . . . . . . . . . . . . . . 17
(d) Permits and Licenses . . . . . . . . . . . . 17
(e) Miscellaneous. . . . . . . . . . . . . . . . 17
ARTICLE 8 INDEMNITIES AND LIMITATION OF LIABILITY.. . . . . 17
(a) Buyer's Indemnity. . . . . . . . . . . . . . 17
(b) Seller's Indemnity . . . . . . . . . . . . . 18
(c) Assertion of Claims. . . . . . . . . . . . . 19
(d) Limitation of Liability. . . . . . . . . . . 19
ARTICLE 9 EMPLOYEE RELATIONS. . . . . . . . . . . . . . . . 19
(a) Seller's Employees . . . . . . . . . . . . . 19
(b) Compensation and Benefits. . . . . . . . . . 20
(c) Transitional Employees . . . . . . . . . . . 20
(d) Accrued Wages and Benefits; Termination Costs 20
(e) Employment Liabilities . . . . . . . . . . . 20
(f) Employee Tax Matter. . . . . . . . . . . . . 20
ARTICLE 10 OTHER MATTERS . . . . . . . . . . . . . . . . . . 21
(a) Covenant Not to Compete. . . . . . . . . . . 21
(b) Confidentiality Provisions . . . . . . . . . 21
(c) Other Remedies . . . . . . . . . . . . . . . 22
ARTICLE 11 Closing . . . . . . . . . . . . . . . . . . . . . 22
(a) Purchase Price . . . . . . . . . . . . . . . 23
(b) Instruments of Conveyance. . . . . . . . . . 23
(c) Delivery of Other Agreements . . . . . . . . 23
ARTICLE 12 POST CLOSING TRANSACTIONS . . . . . . . . . . . . 23
(a) Product Claims and Replacement Product . . . 23
(b) Books and Records. . . . . . . . . . . . . . 23
(c) Personnel Records. . . . . . . . . . . . . . 24
(d) Access to Books and Records. . . . . . . . . 24
(e) Further Assurances . . . . . . . . . . . . . 24
(f) Outstanding Collections. . . . . . . . . . . 24
(g) Signage. . . . . . . . . . . . . . . . . . . 24
(h) Computer Systems . . . . . . . . . . . . . . 24
ii.<PAGE>
ARTICLE 13 BULK SALES ACT AND TAXES. . . . . . . . . . . . . 25
(a) Bulk Sales Act . . . . . . . . . . . . . . . 25
(b) Sales, Use, Transfer and Similar Taxes . . . 25
ARTICLE 14 MISCELLANEOUS . . . . . . . . . . . . . . . . . . 25
(a) Press Release. . . . . . . . . . . . . . . . 25
(b) Fees . . . . . . . . . . . . . . . . . . . . 25
(c) Amendments . . . . . . . . . . . . . . . . . 25
(d) Successors . . . . . . . . . . . . . . . . . 25
(e) Patent License . . . . . . . . . . . . . . . 25
(f) Entire Agreement . . . . . . . . . . . . . . 25
(g) Notices. . . . . . . . . . . . . . . . . . . 26
(h) Governing Law. . . . . . . . . . . . . . . . 26
(i) Schedules. . . . . . . . . . . . . . . . . . 26
(j) Headings . . . . . . . . . . . . . . . . . . 26
(k) Counterparts . . . . . . . . . . . . . . . . 26
(l) Third Party Beneficiaries. . . . . . . . . . 26
(m) Independent Parties. . . . . . . . . . . . . 27
(n) Severability . . . . . . . . . . . . . . . . 27
(o) Export Control . . . . . . . . . . . . . . . 27
SCHEDULE 2(a)(i)
MACHINERY AND EQUIPMENT AT DUNBAR FACILITY. . . . . . . . . i
SCHEDULE 2(a)(ii)
MACHINERY AND EQUIPMENT AT KENNETT SQUARE AND COATESVILLE
FACILITIES. . . . . . . . . . . . . . . . . . . . . . . . . ix
SCHEDULE 2(b)
PRODUCTS. . . . . . . . . . . . . . . . . . . . . . . . . . x
SCHEDULE 2(c)(i)(a)
PATENTS . . . . . . . . . . . . . . . . . . . . . . . . . . xi
SCHEDULE 2(c)(i)(b)
ASSIGNMENT OF PATENTS AND PATENT APPLICATIONS . . . . . . . xii
SCHEDULE 2(c)(iii)
OPERATING AND TECHNICAL LITERATURE. . . . . . . . . . . . . xiv
SCHEDULE 2(c)(v)
FORM OF ASSIGNMENT OF TRADEMARKS. . . . . . . . . . . . . . xv
SCHEDULE 2(e)
CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . xvi
SCHEDULE 2(f)
INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . . xvii
iii.<PAGE>
SCHEDULE 2(g)
ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . . . . xx
SCHEDULE 2(h)(i)
SUBLEASE AGREEMENT. . . . . . . . . . . . . . . . . . . . . xxii
SCHEDULE 2(h)(i)
ASSIGNMENT AND ASSUMPTION OF LEASE. . . . . . . . . . . . . xxiii
SCHEDULE 3(e)
NON-ASSIGNABLE CONTRACTS. . . . . . . . . . . . . . . . . . xxiv
SCHEDULE 4(b)
ALLOCATION FOR ACCOUNTS PAYABLE . . . . . . . . . . . . . . xxv
SCHEDULE 5(e)
BILL OF SALE. . . . . . . . . . . . . . . . . . . . . . . . xxvi
SCHEDULE 6
DISCLOSURE SCHEDULE . . . . . . . . . . . . . . . . . . . . xxvii
SCHEDULE 9(a)
LIST OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . xxix
SCHEDULE 9(b)
EMPLOYEE BENEFIT PACKAGE. . . . . . . . . . . . . . . . . . xxx
SCHEDULE 9(c)
TRANSITIONAL EMPLOYEES. . . . . . . . . . . . . . . . . . . xxxi
iv.<PAGE>
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is entered into and effective as of the 22nd day
of July, 1996, between E. I. DU PONT DE NEMOURS AND COMPANY, a
Delaware corporation, with its principal place of business at 1007
Market Street, Wilmington, Delaware 19898, ("SELLER") and DYNAMIC
MATERIALS CORPORATION, a Colorado corporation, with its principal
place of business at 551 Aspen Ridge Drive, Lafayette, Colorado 80026
("BUYER").
BACKGROUND
Seller owns and operates the DETACLAD(R) explosion bonded clad
metal business (the "BUSINESS") and Seller desires to sell and Buyer
desires to purchase such Business;
NOW, THEREFORE, subject to the terms, conditions, covenants and
provisions of this Agreement, Seller and Buyer mutually covenant and
agree as follows:
ARTICLE 1
DEFINITIONS
(a) "AFFILIATE" means:
(1) any corporation owning or directly or indirectly
controlling at least thirty-five percent (35%) of the stock normally
entitled to vote for election of directors of a party, or
(2) any corporation owned or directly or indirectly
controlled by a party or a person or by a corporation defined by
subparagraph (1) above through ownership of at least fifty percent
(50%) of stock normally entitled to vote for election of directors.
(b) "AGREEMENT" means this Purchase and Sale Agreement, together
with all Schedules attached hereto.
(c) "AMENDED INFORMATION" shall have the meaning set forth in
Section 5(a).
(d) "BUSINESS" means the business engaged in by Seller under the
DETACLAD(R) trademark of manufacturing, storing, handling, processing,
distributing, selling and marketing explosion bonded clad metal.
(e) "BUSINESS ASSETS" shall have the meaning set forth in
Article 2.
(f) "CLAIMS" means any and all damages, losses, liabilities,
costs, expenses (including, without limitation, fees and disbursements
of counsel, court costs, and expenses of investigation), claims,
liens, or judgments.
1.<PAGE>
(g) "CLOSING" shall have the meaning set forth in Article 14.
(h) "CLOSING DATE" shall have the meaning set forth in
Article 14.
(i) "CONTRACTS" shall have the meaning set forth in Section
2(e).
(j) "DUNBAR FACILITY" means the explosion bonding operating
facility located in Dunbar, Pennsylvania, which includes only those
portions of the former Blue Stone Mine.
(k) "DUNBAR LEASE" means the lease agreement dated October 19,
1985, for the parcel of land that includes the Dunbar Facility (and
the former Blue Stone Mine), which lease agreement is extendible to
December 15, 2005.
(l) "EMPLOYEES" means certain of those employees of Seller
assigned to the Business as are specified in Schedule 9(a).
(m) "EXCLUDED ASSETS" shall have the meaning set forth in
Article 3.
(n) "FACILITIES" means the Dunbar Facility and the Kennett
Square Facility.
(o) "GOVERNMENTAL ENTITY" means any court, governmental
department, commission, council, board, agency or other
instrumentality of the United States of America or any foreign
country, or any state, county, municipality or local governmental body
located in the United States of America or any such other foreign
country.
(p) "INVENTORY" shall have the meaning set forth in Section
2(f).
(q) "KENNETT SQUARE FACILITY" means the office building located
in Kennett Square, Pennsylvania and comprising approximately 4650
square feet that serves as the business office of the Business
(r) "KENNETT SQUARE LEASE" means the lease agreement dated
September 8, 1988, between Seller, as tenant, and Walnut Road
Associates, as landlord, for the Kennett Square Facility, which lease
agreement extends through September 30, 1998.
(s) "OPERATING INSTRUCTIONS" means the instructions for
manufacturing, storing, handling and processing of explosion bonded
clad metal and the performance of explosive services in connection
with the production of Mypolex(R) industrial diamonds, as are to be
provided to Buyer by Seller in connection with Buyer's operation of
the Dunbar Facility after the Closing Date.
(t) "TOLLING AGREEMENT" means the Tolling/Services Agreement for
Industrial Diamonds dated as of the Closing Date between Seller and
Buyer.
(u) "SUBLEASE" means the Sublease Agreement between the parties
dated as of the Closing Date for the sublease from Seller to Buyer of
the Dunbar Facility.
2.<PAGE>
ARTICLE 2
BUSINESS ASSETS
Seller hereby grants, sells, conveys, assigns, transfers and
delivers unto Buyer, and Buyer purchases, accepts and takes delivery
of the following business assets (the "BUSINESS ASSETS") of Seller as
of the Closing Date:
(a) MACHINERY AND EQUIPMENT.
(i) The buildings, machinery and equipment located at the
Dunbar Facility which are necessary for Buyer to operate the Business
or which otherwise relate to the explosion bonding of metals and the
manufacture of cladding explosives and magazines for their storage,
and certain order entry and invoicing systems and related equipment
used solely in connection with the Business, such buildings, equipment
and machinery being more fully described in Schedule 2(a)(i) hereto
(the "DUNBAR EQUIPMENT"), and
(ii) The equipment and furnishings located at the Kennett
Square Facility or the Coatesville, Pennsylvania facility, relating
solely and specifically to quotations, metal preparation and post-
bonding operation, as are largely described in Schedule 2(a)(ii)
hereto (the "KENNETT SQUARE EQUIPMENT"; the Dunbar Equipment and the
Kennett Square Equipment being collectively referred to herein as the
"MACHINERY AND EQUIPMENT").
(b) MARKETING DOCUMENTS AND MATERIALS. Seller's business
records, customer and supplier lists, confidential and other marketing
information, price lists and information, sales history and
information and sales aids relating solely and specifically to the
explosion bonded clad metal products, all as described in Schedule
2(b) hereto which Seller manufactured in connection with the Business
(the "PRODUCTS") and located at the Dunbar Facility, the Kennett
Square Facility, or the field offices of Seller's sales
representatives, subject to Seller's continuing right to maintain
copies of the supplier lists for use in connection with its other
businesses.
(c) INTELLECTUAL PROPERTY.
(i) Except as expressly provided herein, all of Seller's
right, title and interest in and to the United States and foreign
patents and patent applications directly relating to the Business as
described in Schedule 2(c)(i)(A) hereto and any and all inventions
claimed in such patents and patent applications. Simultaneous with
the execution and delivery of this Agreement, Seller shall execute and
deliver to Buyer an instrument of assignment of such patents and
patent applications in the form attached hereto as Schedule
2(c)(i)(B). Buyer shall be responsible for the recordation of the
assignment of the patents and patent applications in the U.S. Patent
and Trademark Office and corresponding non - U.S. patent offices.
Seller shall retain a royalty-free, non-sublicensable, non-exclusive
license to such patents and patent applications for the purpose of
procuring Products from third parties for use by the Fluoroproducts
division of Seller or its Affiliates. Buyer will not assert any of
the patents or patent applications to prevent the Fluoroproducts
division of Seller or its Affiliates or their
3.<PAGE>
third party suppliers (to the extent required to supply Products to
the Fluoroproducts division of Seller or its Affiliates) from
operating under such license.
(ii) All of Seller's right, title, and interest in Seller's
other intellectual property, including technical information and know-
how, whether or not protectable by patent, copyright or trade secret
laws and solely and specifically related to the conduct of the
Business or the operation of the Machinery and Equipment or the
manufacture, testing, sale, distribution, or use of the Products or
reasonably necessary in order to enable Buyer to conduct the Business
or to operate the Machinery and Equipment, as set forth in the
proprietary process manuals, operating and technical literature
described in Schedule 2(c)(ii) hereto.
(iii) All product specifications, process specifications,
raw material specifications, packaging specifications, drawings,
blueprints, photographs, test methods, customer complaint records,
material safety data sheets, and related information relating solely
and specifically to the Business, to the Products or to the Machinery
and Equipment.
(iv) The software designed to facilitate quotations.
(v) All of the Seller's right, title and interest in and to
the registered trademarks "DETACLAD(R)" and "DETACOUPLE(R)" and the
goodwill associated therewith. Simultaneous with the execution of
delivery hereof Seller shall execute and deliver to Buyer a separate
instrument of assignment of such trademarks in the form attached
hereto as Schedule 2(c)(v). Buyer shall be responsible for the
recordation of such assignment in the U.S. Patent and Trademark Office
and corresponding non - U.S. offices.
(d) MISCELLANEOUS. The office equipment, furniture and fixture,
files, cabinets and related equipment located at the Kennett Square
Facility and the Dunbar Facility ("MISCELLANEOUS TANGIBLES").
(e) CONTRACTS. All contracts and other agreements, including
purchase and sales orders in excess of $5,000, directly relating to
the Business and described in Schedule 2(e), to the extent they shall
not have been terminated on or before the Closing Date and are
assignable (the "CONTRACTS").
(f) INVENTORY. The inventories of raw materials, stores, tools,
semi-finished product, finished product, supplies, spare parts and
packaging materials as are further described in Schedule 2(f), which
are directly related to the Business (the "INVENTORY"). The Inventory
shall be valued at Seller's cost, as determined by Seller's internal
accounting procedures.
(g) ACCOUNTS RECEIVABLE. All accounts receivable relating to
the Business that are aged no more than sixty (60) days as of the
Closing Date (the "ACCOUNTS RECEIVABLE"), with the exception of those
accounts receivables described in Schedule 2(g) hereto.
4.<PAGE>
(h) FACILITIES. Buyer and Seller hereby agrees as follows with
respect to the Facilities:
(i) DUNBAR FACILITY. Seller shall sublease the Dunbar
Facility to Buyer in accordance with the terms of the Sublease
Agreement substantially in the form attached hereto as Schedule
2(h)(i).
(ii) KENNETT SQUARE FACILITY. Seller shall sublet its
rights and delegate its duties to Buyer under the Kennett Square Lease
pursuant to the sublease and side letter substantially in the form
attached hereto as Schedule 2(h)(ii).
(i) CLAIMS. All claims against any parties directly relating to
the Business Assets, including, without limitation, unliquidated
rights under any manufacturers' and vendors' warranties or guarantees.
ARTICLE 3
EXCLUDED ASSETS
Notwithstanding anything, express or implied, to the contrary
contained in Article 2, the following properties, assets, and rights
used in, or related to Seller's operation of the Business are excluded
from Business Assets as that term is used in this Agreement:
(a) Accounts payable systems, accounting systems and related
equipment.
(b) Cash on hand or in banks or other depositories, including
investments.
(c) All refunds or other reimbursements relating to prepaid
taxes, expense and advances.
(d) Taxes withheld by Seller from its employees' salaries and
wages, and other taxes of Seller incurred by it as an employer or as a
vendor, which Seller is obligated to pay.
(e) Agreements, as follows:
(i) Non-assignable contracts described in Schedule 3(e) to
the extent the other parties to such agreements fail or refuse to give
their consent to the assignment thereof by Seller to Buyer without
recourse, provided that Seller shall assist Buyer in its efforts to
enter into substantially equivalent agreements; and
(ii) Assignable contracts which Buyer and Seller agree are
not to be assigned.
(f) Insurance policies.
(g) Off-plant records relating to the Business which are not to
be transferred to Buyer, provided Buyer is permitted reasonable access
to such records after the Closing Date.
5.<PAGE>
(h) Causes of action or claims of Seller against third parties,
whether known or unknown on the Closing Date which may arise solely in
connection with the Excluded Assets.
(i) Equipment used solely for Seller's Mypolex(R) industrial
diamonds business.
(j) Order entry and invoicing and similar corporate information
systems and related equipment, except as described in Section 2(a).
(k) Use of the DuPont name or the DuPont oval, except as
expressly provided herein.
(l) Computer software, except as described in Section 2(c)(iv).
(m) Information, including technical information, the Seller is
obliged to maintain in secret pursuant to secrecy agreements with
third parties.
(n) All other assets of Seller (including rights in land or real
estate at the Facilities) not included as part of the Business Assets
as described in Article 2.
(The items described in this Article 2 are collectively referred
to herein as the "EXCLUDED ASSETS".)
ARTICLE 4
BUYER'S ASSUMPTION OF LIABILITY AND INDEMNITY
(a) ASSUMED AND EXCLUDED LIABILITIES. Except as expressly
provided in this Agreement, Buyer shall not undertake, assume or agree
to perform, pay or discharge and expressly disclaims any and all
liabilities of Seller, whether fixed or contingent, incurred in the
ordinary course of business or otherwise, known or unknown, all of
which shall be retained by Seller, except for those obligations of
Seller under the Contracts, the Kennett Square Lease and other
obligations of Seller under purchase orders, sales orders, contracts,
licenses or permits assigned to Buyer pursuant to this Agreement or
other liabilities and obligations of Seller that arise from the
ownership, use or operation of the Business Assets occurring from and
after Closing. In addition, except as expressly provided in this
Agreement, the Sublease or the Tolling Agreement, Seller shall remain
fully responsible for all liabilities or obligations arising from
activities conducted on and all conditions of the Facilities, and all
adjacent sites, including those sites described in the Excluded
Assets, and for all activities conducted off the Facilities, to the
extent such liabilities or obligations arise from activities occurring
prior to the Closing, provided, however, that all Machinery and
Equipment are provided "as is" in accordance with Section 6(h)(ii).
Except as expressly provided in this Agreement, the Sublease or the
Tolling Agreement, Seller's responsibility (as described in the
preceding sentence) shall include, without limitation, the
responsibility to perform any and all response activities required
under any federal, state, or local law, regulation or requirement
relating to any environmental condition or circumstance.
6.<PAGE>
(b) ACCOUNTS PAYABLE. Seller shall remain responsible for all
payments and other obligations with respect to third party invoices
directly relating to Products delivered and invoiced by Seller prior
to Closing. Buyer shall be responsible for all payments and other
obligations with respect to invoices directly relating to Products
delivered and invoiced by Buyer after Closing. Each party agrees to
use commercially reasonable efforts to promptly forward invoices to
the responsible party hereunder. With respect to invoices for
materials or services ordered by Seller which are partially delivered
or performed prior to Closing, the Buyer shall initially be
responsible for payments to third parties. Within sixty (60) days
following the Closing, the total costs relating to such invoices shall
be allocated between Seller and Buyer in proportion to the respective
revenue generated as set forth in Schedule 4(b). Such allocation will
occur promptly upon receipt of the applicable invoice relating to such
products or services.
ARTICLE 5
PURCHASE PRICE
(a) PURCHASE PRICE. The purchase price to be paid by Buyer to
Seller for the Business Assets shall be the sum of Four Million Nine
Hundred Twenty-Eight Thousand Four Hundred Sixty-Nine Dollars
($4,928,469), consisting of a cash payment of Four Million Eight
Hundred Seventy-Eight Thousand Four Hundred Sixty-Nine Dollars
($4,878,469) at Closing and the application of the Fifty Thousand
Dollar ($50,000) deposit paid by Buyer to Seller on May 15, 1996 (the
"PURCHASE PRICE"). The Purchase Price includes, and assumes, the
value of Accounts Receivable as of the Closing (estimated as of July
19, 1996, (the "AMENDED INFORMATION") to be One Million Three Hundred
Forty-Six Thousand Two Hundred Seventy-Five Dollars ($1,346,275)) and
the value of the Inventory as of the Closing Date, to be valued at
Seller's cost determined in accordance with generally accepted cost
accounting procedures (estimated as of July 19, 1996, per the Amended
Information to be One Million Four Hundred Thirty-Three Thousand Four
Hundred Thirty-Six Dollars ($1,433,436)). The Purchase Price is
subject to an adjustment after Closing on a dollar-for-dollar basis to
the extent that the actual value of the Inventory and the Accounts
Receivable at Closing are not equal to the estimates provided in the
Amended Information to be determined by the Parties' review of such
financial information and documents. Such adjustment will take place
as soon as practicable after Closing, but no later than sixty (60)
days following the Closing Date.
(b) PAYMENT TERMS. The outstanding balance of the Purchase
Price shall be payable on the Closing Date in immediately available
funds in U.S. dollars by wire transfer to an account at a bank in the
United States designated in writing by Seller to Buyer.
(c) ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Business Assets in manner reasonably agreeable to
Seller as provided in an allocation schedule to be prepared by Buyer
and delivered to Seller within sixty (60) days after Closing. The
Buyer and Seller agree that the Purchase Price allocated as set forth
in this Article shall be reflected on their respective tax returns
which shall be filed on a basis consistent with such allocation.
7.<PAGE>
(d) PRORATIONS. The following prorations relating to the
Business Assets will be made as of the Closing Date, with Seller
liable to the extent such items relate to any time period up to and
including the Closing Date and Buyer liable to the extent such items
relate to periods subsequent to the Closing Date. Except as otherwise
specifically provided herein, the net amount of all such prorations
will be settled and paid by Seller, or Buyer, if applicable, within
sixty (60) days following the Closing Date:
(i) Personal property taxes, real estate taxes and
assessments, and other taxes, if any, on or with respect to the
Business Assets; provided that special assessments for work actually
commenced or levied prior to the date of this Agreement shall be paid
by Seller.
(ii) Rents, additional rents, taxes and other items payable
by Seller under any lease, license, permit, contract, service contract
or other agreement or arrangement to be assigned to or assumed by
Buyer.
(iii) The amount of rents, taxes and charges for sewer,
water, fuel, telephone, electricity and other utilities, provided that
if practicable, meter readings shall be taken at the Closing Date and
the respective obligations of the parties determined in accordance
with such readings.
(iv) Maintenance and service fees.
(v) All other items normally adjusted in connection with
similar transactions.
(vi) Fuel or oil in the storage tanks situate at the Dunbar
Facility.
The prorations shall be settled and paid within sixty (60) after
Closing. Seller agrees to furnish Buyer documents and other records
as shall be reasonably requested in order to confirm all proration
calculations.
(e) INSTRUMENTS OF CONVEYANCE, TRANSFER AND ASSUMPTION. Seller
agrees to deliver or cause to be delivered to Buyer at the Closing
full possession of all of the Business Assets together with (i) a bill
of sale substantially in the form of Schedule 5(e) hereto (the "BILL
OF SALE"); (ii) such other instruments of conveyance and transfer
reasonably required to vest in Buyer all right, title and interest in
and to the Business Assets free and clear of all liens, charges,
easements, mortgages, pledges, claims and other encumbrances in favor
of any third party, except for the Excluded Assets, other agreements
not assigned and other rights not transferred or otherwise retained by
Seller; and (iii) any and all tangible manifestations of the Business
Assets including, without limitation, all notes, records, files,
prints, drawings, schematics, diagrams, specifications and tangible
items of any sort in Seller's possession or under Seller's control
directly relating to the Business Assets, and including original
trademarks and related registrations, copyrights and related
registrations, and certificates of letters patent, and applications
and disclosures therefor, if any.
8.<PAGE>
ARTICLE 6
SELLER'S WARRANTIES
Except as otherwise set forth in a Disclosure Schedule
specifically identifying the relevant subparagraph hereof, which
exceptions shall be deemed to be representations and warranties as if
made hereunder (the "DISCLOSURE SCHEDULE"), Seller represents and
warrants that on the date hereof:
(a) CORPORATE STATUS. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has corporate power to carry on its business as now being
conducted.
(b) PERFORMANCE OF AGREEMENT. Neither the execution, delivery
or performance of this Agreement nor the consummation of the
transactions contemplated by this Agreement will:
(i) violate any provision of Seller's Certificate of
Incorporation or Bylaws or similar charter documents, each as amended,
or any law, regulation, order, judgment or decree by which the Seller
or any of its properties may be bound or to which the Business Assets
are subject; or
(ii) conflict with, result in a breach of the terms and
conditions of, result in the imposition of any lien or other
encumbrance on or with respect to any of the Business Assets as a
result of the provision of, or constitute a default under, any
agreement to which Seller is a party or by which it or any of its
properties may be bound.
(c) CORPORATE POWER. Seller has the corporate power, including
all necessary authorization, to execute, deliver and fulfill the
provisions of this Agreement, and (except as expressly provided
herein) and this Agreement constitutes Seller's legal, valid and
binding agreement enforceable against Seller in accordance with its
terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and by rules
of law governing specific performance, injunctive relief or other
equitable remedies. Seller has all requisite corporate power to own
and operate the Business Assets, and has all licenses, franchises,
rights and privileges necessary for the conduct of the Business. To
Seller's knowledge, none of the information that Seller is obliged to
maintain secret pursuant to secrecy agreements with third parties is
essential for Buyer's operation of the Business.
(d) LITIGATION. There is no material litigation, action,
investigation or proceeding pending against Seller as a result of
Seller's ownership of the Business or ownership or operation of the
Business Assets or pending against the Business Assets for any reason
whatsoever, including any claims alleging infringement of the
intellectual property rights of others, nor to Seller's knowledge, is
any such claim or proceeding threatened. Seller is not aware of any
threat by any person or federal, state, or municipal government, or
governmental or regulatory agency of its intent to institute same; and
the use or operation of the Business Assets is not subject to any
injunction, order, judgment, writ or decree. The parties
9.<PAGE>
acknowledge that Seller is responding to requests for information by
the United States International Trade Commission ("ITC") in connection
with an antidumping petition initiated by Lukens, Inc., concerning
imports of clad steel plate from Japan, as more fully described in
Section (d) of the Disclosure Schedule. After Closing, Buyer shall
promptly advise the ITC of this transaction and assume responsibility
for responding to such requests for information.
(e) INTELLECTUAL PROPERTY. Seller is conveying to Buyer all
patents, patent applications, common law trademarks, registered
trademarks and trademark applications which are owned by or licensed
to Seller and are directly related to the Business or are included in
the Business Assets. All such patents, patent applications, common
law trademarks, registered trademarks and trademark applications have
been duly registered in, filed in or issued by the U.S. Patent and
Trademark Office or, in each case, the corresponding offices of other
countries identified on said Schedule, and have been properly
maintained and renewed in accordance with all applicable provisions of
law and administrative regulations in the United States and each such
country. Use of said patents, patent applications, common law
trademarks, registered trademarks, trademark applications and other
trademark and trade secrets that are part of the Business Assets
(collectively, the "INTELLECTUAL PROPERTY") does not require the
consent of any other person and the same are freely transferable
(except as otherwise provided by law) and are owned exclusively by
Seller free and clear of any licenses, charges, attachments, liens,
encumbrances or adverse claims. Except as set forth in Section (e) of
the Disclosure Schedule, (a) no other person has in interest in or
right or license to use, or the right to license others to use, any of
the Intellectual Property, (b) there are no claims or demands of any
other person pertaining thereto and no proceedings have been
instituted, or are pending or threatened, which challenge Seller's
rights in respect thereof, (c) none of the Intellectual Property is
subject to any outstanding order, decree, judgment or stipulation, or,
to the knowledge of Seller, is being infringed by others. There are
no royalties, fees or other payments payable by Seller to any person
by reason of the ownership, use, license, sale or disposition of any
instrument or agreement governing any of the Intellectual Property.
(f) ENVIRONMENTAL MATTERS.
(i) With respect to the Business, Seller is not in
violation of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters now in existence or
hereinafter enacted or amended, including without limitation those
arising under the Resource Conservation and Recovery Act ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act
of 1986 ("CERCLA"), the Federal Clean Water Act, the Federal Clean Air
Act, the Toxic Substances Control Act, or any other federal, state or
local law, statute, regulation, ordinance, order or decree relating to
health, safety or the environment (hereinafter "ENVIRONMENTAL LAWS"),
which violation would have a material adverse effect on the Business.
(ii) With respect to the Business, Seller has not received
written notice from any third party including without limitation any
federal, state or local governmental authority, (i) that Seller or any
predecessor in interest has been identified by the United States
10.<PAGE>
Environmental Protection Agency ("EPA") as a potentially responsible
party under CERCLA with respect to a site listed on the National
Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (ii) that any
hazardous waste as defined by 42 U.S.C. Section 6903(5), any hazardous
substances as defined by 42 U.S.C. Section 9601(14), any pollutant or
contaminant as defined by 42 U.S.C. Section 9601(33) and any toxic
substance, oil or hazardous materials or other chemicals or substances
regulated by any Environmental Laws ("HAZARDOUS SUBSTANCES") which any
one of them has generated, transported or disposed of has been found
at any site at which a federal, state or local agency or other third
party has conducted or has ordered that Seller or any predecessor in
interest conduct a remedial investigation, removal or other response
action pursuant to any Environmental Law; or (iii) that any of them is
or shall be named party to any claim, action, cause of action,
complaint (contingent or otherwise), or legal or administrative
proceeding arising out of any third party's incurrence of costs,
expenses, losses or damages of any kind whatsoever in connection with
the release of Hazardous Substances. The parties acknowledge that the
EPA initiated an Investigation of the Dunbar Facility in 1991 and the
result of such investigation are reported in Environmental Priorities
Initiatives - Preliminary Assessment of Dunbar Mine, prepared by NUS
Corporation dated June 5, 1991 (the "NUS REPORT").
(iii) No portion of the Facilities have been used by Seller
or, to the best of Seller's knowledge by any other party, for the
handling, manufacturing, processing, storage or disposal of Hazardous
Substances except in accordance with applicable Environmental Laws;
(b) in the course of any activities conducted by Seller as part of the
Business no Hazardous Substances have been generated or are being used
on such properties except in accordance with applicable Environmental
Laws; (c) except as provided in the NUS Report, there have been no
releases (i.e. any past or present releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting,
escaping, disposing or dumping) or threatened releases of Hazardous
Substance on, upon, into or from the properties of the Business
(including, without limitation, all of the property subject to the
Dunbar Lease); and (d) in addition, any Hazardous Substances that have
been generated on the properties of the Business, by Seller, or to the
Seller's knowledge, by any third party have been transported offsite
only by carriers having an identification number issued by the EPA and
treated or disposed of only by treatment or disposal facilities
maintaining valid permits as required under applicable Environmental
Laws, which transporters and facilities have been and are, to Seller's
knowledge, operating in compliance with such permits and applicable
Environmental Laws.
(iv) Section (h)(iv) of the Disclosure Schedule lists all
environmental reports, investigations and investigations and audits in
the possession of Seller with respect to the operations of the
Business, or the Facilities (whether conducted by or on behalf of
Seller or a third party and whether done at the initiative of Seller
or directed by a governmental authority or other third party).
Complete and accurate copies of each such report, or the results of
each such investigation or audit, have been provided to Buyer.
(g) FINANCIAL STATEMENTS. Seller has previously delivered to
Buyer certain internal annual financial data for the calendar years
ending December 31, 1994 and December 31, 1995, including (i) earnings
data, specifically revenue; cost of goods sold; selling, general and
11.<PAGE>
administrative costs; physical distribution; and earnings before
interest and taxes; and (ii) other financial data, specifically, plant
and equipment; accounts receivable; certain cash flow information;
inventory; and intellectual property (the "FINANCIAL STATEMENTS").
Such financial data present fairly the financial condition and the
results of operations of the Business for the periods covered thereby.
(h) TITLE TO PROPERTIES; LIENS; CONDITION OF PROPERTIES.
(i) Seller has good, clear and marketable title to all of
the Business Assets. No default by Seller exists under or with
respect to any of such Business Assets and none of the Business Assets
is subject to any mortgage, pledge, lien, conditional sale agreement,
security interest, encumbrance or other charge.
(ii) The Machinery and Equipment are sold on an "AS IS,
WHERE IS" basis. Except as expressly provided herein, Seller makes no
warranty or representation of any kind or nature whatsoever with
respect to any of the Machinery and Equipment. The Machinery and
Equipment conform with all material applicable ordinances, regulations
and zoning or other laws and do not encroach on the property of
others.
(iii) As of the date of this Agreement there is, to Seller's
knowledge, no pending or threatened change in any such ordinance,
regulation or zoning or other law which would materially adversely
effect the Business, and there is, to Seller's knowledge, no pending
or threatened condemnation of any buildings, machinery, equipment or
other property that comprise the Business Assets.
(iv) The Business Assets, the Employees (and the
Transitional Employees) and certain of the Excluded Assets constitute
all of the assets presently used by Seller in conducting the Business
prior to Closing.
(i) TAXES. With respect to the Business and the Business
Assets, Seller has accurately prepared and timely filed all income tax
returns and other tax returns or other reports which are required to
be filed, and has paid, or made provision for the payment of, all
federal, state and local taxes, including, but not limited to, income
and sales taxes, which have or may have become due pursuant to said
returns or reports or pursuant to any assessment which has been
received by it. Seller is not a party to any pending action or
proceeding, nor, to Seller's knowledge, is any such action or
proceeding threatened by any governmental authority for the assessment
or collection of taxes, interest, penalties, assessments or
deficiencies, and no claim for assessment or collection of taxes,
interest, penalties, assessments or deficiencies has been asserted
against Seller with respect to the Business or the Business Assets.
The Business Assets, excluding motor vehicles and Inventory, shall
constitute an isolated sale for purposes of claiming an exemption form
sales tax under Pennsylvania state tax laws.
(j) DISCLOSURE OF MATERIAL INFORMATION. With respect to the
Business and the Business Assets, neither this Agreement nor any
Schedule hereto contains any untrue statement of a material fact, or
omits to state a material fact necessary to make the statements herein
or
12.<PAGE>
therein not misleading. No representation or warranty by Seller in
this Agreement, nor any statement, certificate, schedule or exhibit
hereto furnished or to be furnished by or on behalf of Seller pursuant
to this Agreement, nor any document or certificate delivered to Buyer
pursuant to this Agreement or in connection with transactions
contemplated hereby, contains or shall contain any untrue statement of
material fact or omits or shall omit a material fact necessary to make
the statements contained therein not misleading. All statements and
information contained in any certificate, instrument, Disclosure
Schedule or document delivered by or on behalf of Seller shall be
deemed representations and warranties by the Seller.
(k) INVENTORY. All of the Inventory is valued at cost in
accordance with Seller's internal accounting principles. Except as
set forth in Section (k) of the Disclosure Schedule, substantially all
Inventory is located in one of the Facilities (or in Coatesville, PA)
as reflected in this Agreement. All work in process contained in
Inventory constitutes items in process of production pursuant to
contracts or open orders taken in the ordinary course of business,
from regular customers of Seller, for whom Seller has no material
accounts receivable aged ninety (90) days or more except as set forth
in Section (k) of the Disclosure Schedule; neither Seller nor any such
customer is in material breach of the terms of any obligation to the
other, and, based on Seller's knowledge, valid grounds exist for any
counterclaim or set off of amounts billable to such customers upon the
completion of orders to which work in process relates. All work in
process contained in the Inventory is of a quality ordinarily produced
in accordance with the requirements of the orders to which such work
in process is identified, and, to Seller's knowledge, will require no
rework with respect to work performed prior to Closing. To the extent
that Buyer is required to rework any material work in process caused
by Seller's performance prior to Closing in order to comply with the
requirements of a sales order, Buyer shall submit to Seller an invoice
for Buyer's actual cost of rework within sixty (60) days following the
Closing Date; Seller shall pay such invoice within thirty (30) days
following receipt.
(l) EXISTING EMPLOYMENT CONTRACTS. With respect to the
Business, there are no employment contracts or collective bargaining
agreements. Seller has customary pension, bonus, profit sharing, or
other agreements or arrangements providing for employee remuneration
or benefits. All of these contracts and arrangements are in full
force and effect, and with respect to the Business, neither Seller nor
any other party is in default under them. There is no pending or, to
the best of Seller's knowledge, threatened labor dispute, strike, or
work stoppage affecting the Business Assets or the Business.
(m) ABSENCE OF CERTAIN CHANGES. Except as and to the extent set
forth in Section (m) of the Disclosure Schedule, since May 31, 1996 or
the date of Seller's most recent financial report there has not been:
(i) ADVERSE CHANGE. Any material adverse change in the
financial condition, assets, liabilities, business, prospects or
operations of Seller with respect to the Business;
13.<PAGE>
(ii) DAMAGE. Any material loss, damage or destruction,
whether covered by insurance or not, affecting the Business or the
Business Assets;
(iii) LABOR DISPUTES. Any labor dispute or disturbance
affecting the Business or the Business Assets;
(iv) COMMITMENTS. Any commitment or transaction by Seller
with respect to the Business or the Business Assets (including,
without limitation, any borrowing or capital expenditure) other than
in the ordinary course of business consistent with past practice;
(v) DISPOSITION OF PROPERTY. Any sale, lease or other
transfer or disposition of any of the Business Assets, except for the
sale of Inventory items in the ordinary course of business;
(vi) LIENS. Any mortgage, pledge, lien or encumbrance made
on any of the Business Assets;
(vii) CONTRACTS. Any entering into, amendment or
termination by Seller of any contract affecting the Business or the
Business Assets, or any waiver of material rights thereunder,
including the Contracts, other than in the ordinary course of
business, except for tolling service agreements with G.O. Carlson,
Inc. dated June 17, 1996.
(viii) CREDIT. Any grant of credit to any customer of the
Business on terms or in amounts more favorable than those which have
been extended to such customer in the past, any other change in the
terms of any credit heretofore extended, or any other change of
Seller's policies or practices with respect to the granting of credit;
(ix) NO UNUSUAL EVENTS. Any other material event or
condition not in the ordinary course of business of Seller, materially
adversely affecting the Business.
(n) PRODUCT WARRANTY AND PRODUCT LIABILITY. There are no
standard warranties, commitments or obligations with respect to
Seller's performance of services or sale of Products. There are no
product liability claims and similar claims, actions, litigation and
other proceedings relating to services rendered, which are presently
pending or which to Seller's knowledge are threatened, or which have
been asserted or commenced against Seller within the last one (1)
year, in which a party thereto either requests injunctive relief
(whether temporary or permanent) or alleges damages (whether or not
covered by insurance).
(o) CONTRACTS. True and correct copies of the Contracts will be
delivered to Buyer after its execution of this Agreement, and to the
knowledge and belief of Seller each other party thereto is in material
compliance with all the provisions thereof and no other party to any
Contract has notified Seller that it considers Seller to be in breach
thereto, and Seller has no knowledge or belief that any other party to
any contract is contemplating the breach thereof. The Contracts
constitute all of the material contracts and other agreements related
to the Business.
14.<PAGE>
(p) OTHER CONTRACTS. Except as set forth in Section (q) of the
Disclosure Schedule, with respect to the Business Assets, Seller is
not a party to, or bound by, any undischarged, written or oral:
(i) contract for the employment for any period of time
whatsoever, or restricting the employment, of any employee;
(ii) consulting agreement;
(iii) collective bargaining agreement;
(iv) contract or agreement restricting in any manner
Seller's right to compete with any other person or restricting
Seller's right to sell to or purchase from any other person;
(v) agreement with any Affiliate of Seller for or with
respect to the purchase or sale of goods or the performance of
services;
(vi) contract for the payment or receipt of license fees or
royalties to or from any person, firm or corporation;
(vii) contract of agency, representation, distribution or
franchise;
(viii) guaranty, performance, bid or completion bond, or
surety or indemnification agreement;
(ix) contract relating to the purchase, sale, use or license
of technology except licenses for third party software generally
available to the public;
(x) lease or sublease, either as leasee or subleasee,
lessor or sublessor, of personal property or intangibles;
(xi) warranty or service contracts;
(xii) joint venture, partnership or other contracts
involving a sharing of revenues, profits, losses, costs or
liabilities; or
(xiii) any other contract which provides for the receipt or
expenditure by Seller of more than $50,000, other than sales order in
the ordinary course of business.
(q) COMPLIANCE WITH LAWS. To the knowledge of Seller the
operations of the Business are in compliance with all applicable laws,
regulations and codes of the federal, state or municipal governments,
or other governmental or regulatory bodies having jurisdiction over
the Business or its operations, including, without limitation, laws
and regulations relating to employment, occupational safety and
environmental matters and the Seller has not been notified of any
noncompliance therewith.
15.<PAGE>
(r) BROKER'S FEES. Seller has incurred no obligation or
liability, contingent or otherwise, for broker's or finder's fees with
respect to the matters provided for in this Agreement.
(s) NO OTHER REPRESENTATIONS OR WARRANTIES; NO WARRANTY
REGARDING SUCCESS. Except as otherwise expressly set forth in this
Agreement, neither Seller nor any agent or representative of Seller,
has made, and Seller is not liable for or bound in any manner by, any
express or implied warranties, guarantees, promises, statements,
inducements, representations, or information pertaining to the
Business Assets or any part thereof made or furnished by Seller or any
broker employee, agent, consultant or other person representing or
purportedly representing Seller. Seller makes no warranty regarding
the probable success or profitability of the ownership, use or
operation of the Business or the Business Assets after the Closing.
Seller doesn't warrant or guarantee the Products against any health or
safety hazard. Seller shall not be liable to Buyer or any customer of
Buyer because of infringement of any patent or patent application of a
third party by Buyer. However, if Buyer has a reasonable belief that
its use of operating procedures provided by Seller pursuant to the
Tolling Agreement may infringe the proprietary rights of any third
party, Buyer shall notify Seller in writing, and the parties shall
jointly modify such procedures so that they are substantially
equivalent and non-infringing.
ARTICLE 7
BUYER'S WARRANTIES
Buyer represents and warrants that as of the date hereof:
(a) CORPORATE STATUS; AUTHORIZATION. Buyer is a corporation
duly organized, validly existing and in good standing under the laws
of the State of Colorado, and has full corporate power to execute,
deliver and perform this Agreement and to carry on its business as now
being conducted. Buyer has all corporate power to own and operate its
business, and has all licenses, franchises, rights and privileges
necessary for the conduct of its business. All corporate action on
the part of Buyer and all action on the part of its officers and
directors necessary for the authorization, execution and delivery of
this Agreement by Buyer and for the performance of Buyer's obligations
hereunder has been taken, and this Agreement and the Schedules, when
duly executed and delivered, shall constitute the legal and binding
obligations of Buyer, enforceable against Buyer in accordance with
their terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and by rules
of law governing specific performance, injunctive relief or other
equitable remedies.
(b) PERFORMANCE OF AGREEMENT. Neither the execution, delivery
or performance of this Agreement nor the consummation of transactions
contemplated by this Agreement will:
16.<PAGE>
(i) violate any provision of Buyer's Certificate of
Incorporation or Bylaws or similar charter documents, each as amended,
or any law, regulation, order, judgment or decree by which the Buyer
or any of its properties may be bound ; or
(ii) conflict with, result in a breach of the terms and
conditions of or constitute a default under any agreement to which
Buyer is a party or to which it is bound or by which any of its
properties may be bound.
(c) BROKER'S FEES. Buyer has incurred no obligation or
liability, contingent or otherwise, for broker's or finder's fees with
respect to the matters provided for in this Agreement.
(d) PERMITS AND LICENSES. Buyer will apply for and retain in
full force and effect all permits, certificates of occupancy and
licenses required to operate the Business.
(e) MISCELLANEOUS. Buyer will not instigate any activity that
would require or encourage Federal, state, municipal or other
governmental or public body or authority to investigate matters
covered by Seller's warranties or indemnities, except as may be
required of Buyer under any applicable Federal, state or local or
municipal laws, or under regulations of any governmental or public
body.
ARTICLE 8
INDEMNITIES AND LIMITATION OF LIABILITY
(a) BUYER'S INDEMNITY. For Claims asserted by Seller against
Buyer during the term (including any extensions or renewal thereof) of
the Sublease plus twelve (12) months, Buyer shall indemnify, defend
and hold harmless Seller, its directors, officers, employees, agents
and representatives and all of its Affiliates, from and against any
and all liability with respect to any Claims, of any kind or nature
whatsoever (including without limitation those for personal injury,
death, property damage or economic loss) incurred or asserted by Buyer
or by any third party (including without limitation any government
entity or Buyer's employee) in any way relating to the ownership, use
or operations of the Business Assets by Buyer, except liabilities
under Environmental Laws (which are specified in the Sublease) and
except if caused solely by willful misconduct on the part of Seller.
This indemnification shall include, without limitation, Claims
relating to the following:
(i) the breach or inaccuracy of any representation or
warranty of Buyer contained in this Agreement or in any other
agreement, instrument, certificate, schedule, document delivered by
Buyer to Seller or written statement made by Buyer to Seller and
delivered by Buyer pursuant hereto or otherwise in connection with any
of the transactions contemplated by this Agreement;
(ii) the breach of any covenant or other promise of Buyer
contained in this Agreement or in any other agreement, instrument,
certificate, schedule, document delivered by Buyer to Seller or
written statement made by Buyer to Seller and delivered by Buyer
pursuant
17.<PAGE>
hereto or otherwise in connection with any of the transactions
contemplated by this Agreement;
(iii) violations or alleged violations by Seller or by Buyer
of antitrust laws or regulations in connection with this transaction;
(iv) Buyer's operation of the Business Assets or conduct of
the Business on or after the Closing Date, including, without
limitation, operations related to Products manufactured but not
sold; or
(v) deficiencies of any kind with respect to (a) the
design, construction, maintenance, operating procedures (except for
operating procedures provided by Seller to Buyer pursuant to the
Tolling Agreement) or physical condition of any Machinery and
Equipment or (b) any information included in the marketing documents
and materials, whether any such deficiency is caused by the negligence
or gross negligence of Seller or otherwise, except to the extent
attributable to willful misconduct on the part of Seller, provided,
however, that nothing in this Section 8(a)(v) shall require Buyer to
indemnify Seller against any such liabilities, losses and costs
directly arising out of or relating to Seller's operation of the
Business or use of any such information prior to Closing.
(b) SELLER'S INDEMNITY. For Claims asserted by Buyer against
Seller within a period of twelve (12) months following the Closing
Date, Seller shall indemnify, defend and hold harmless Buyer, its
directors, officers, employees, agents and representatives, and all of
its Affiliates, from and against any and all liability with respect to
any Claims, of any kind or nature whatsoever (including without
limitation those for personal injury, death, property damage or
economic loss) incurred or asserted by Seller or by any third party
(including without limitation any government entity or Seller
employee) in any way relating to the ownership, use or operation of
the Business Assets by Seller prior to the Closing Date (except
liabilities under Environmental Laws which liabilities are specified
in the Sublease) and except if caused solely by willful misconduct on
the part of Buyer. This indemnification shall include, without
limitation, Claims relating to the following:
(i) the breach or inaccuracy of any representation or
warranty of Seller contained in this Agreement or in any other
agreement, instrument, certificate, schedule, document delivered by
Seller to Buyer, or written statement made by Seller to Buyer and
delivered by Seller pursuant hereto or otherwise in connection with
any of the transactions contemplated by this Agreement;
(ii) the breach of any covenant or other promise of Seller
contained in this Agreement or in any other agreement, instrument,
certificate, schedule, document delivered by Seller to Buyer, or
written statement made by Seller to Buyer and delivered by Seller
pursuant hereto or otherwise in connection with any of the
transactions contemplated by this Agreement;
18.<PAGE>
(iii) Seller's operation of the Business Assets or the
conduct or the Business prior to the Closing Date, including any
liability which arises as a result of products manufactured or sold by
Seller prior to the Closing;
(iv) any debt, liability or other obligation of any nature
(whether due or to become due and whether absolute, accrued, matured,
unmatured, asserted, fixed, contingent or otherwise) of Seller
relating directly or indirectly to the Business or any of the Business
Assets or any of the transactions contemplated herein, except for
liabilities assumed by Buyer pursuant to Article 4 herein;
(v) those operations of Seller not acquired by Buyer
pursuant to this Agreement; and
(vi) all warranty, product liability and similar obligations
of the Business for Products shipped prior to the Closing Date not
expressly assumed by Buyer pursuant to Article 4 herein.
(c) ASSERTION OF CLAIMS. Any suits involving claims for breach
of any warranty or representation set forth in this Agreement shall be
commenced not later than one (1) year after the date hereof. In the
event any damages or expenses are incurred by either party for which
it claims indemnification under this Agreement (the "INDEMNITEE"), the
Indemnitee shall promptly notify the other party (the "INDEMNITOR") in
writing of such damages and expenses. If any claim for
indemnification hereunder is based upon an action or claim filed or
made against the Indemnitee by a third party, then the Indemnitor
shall have the right to negotiate a settlement or compromise of any
such action or claim or to defend any such action or claim at its sole
cost and expense.
(d) LIMITATION OF LIABILITY. The liability of the parties under
this Agreement shall be limited to actual damages and shall not
include incidental, consequential, indirect or punitive damages. In
no event shall the liability of either party to the other with respect
to the matters described in this Agreement exceed 30% of the Purchase
Price.
ARTICLE 9
EMPLOYEE RELATIONS
(a) SELLER'S EMPLOYEES. As of the Closing Date, Seller will
terminate those employees of Seller assigned to the Business, except
for the Transitional Employees described in Section 9(c) below.
Following the Closing Date, Buyer will offer employment to the 17
employees of Seller specified in Schedule 9(a) (the "EMPLOYEES").
Buyer intends to, during the earlier of the (i) three (3) year period
following Closing or (ii) termination of the Sublease, use reasonable
good faith efforts to employ at-will the Employees, when all
circumstances, including Buyer's financial condition, the performance
of the Employees and the financial condition of the Business, are
taken into account. The foregoing statement is not intended and does
not impose a contractual obligation on Buyer, but is merely a
statement of the parties' intent. Effective as of the Closing Date,
Seller shall release the Employees from any secrecy
19.<PAGE>
or confidentiality agreement theretofore entered into between such
Employee and Seller, except as related to any business of the Seller
other than the Business.
(b) COMPENSATION AND BENEFITS. Buyer shall provide all
Employees with a package of employee benefits and compensation
substantially equivalent in value to those currently provided by
Seller, taking into consideration comparable equivalence of value of
the various forms of compensation in the aggregate. Buyer shall use
commercially reasonable efforts to provide the employee benefit
package described in Schedule 9(b) to the Employees, effective at
Closing.
(c) TRANSITIONAL EMPLOYEES. At no cost to Buyer, Seller shall
continue to employ at will, and shall use reasonable efforts to be
responsible for all compensation payments and benefits owed to, those
employees specified on Schedule 9(c) (the "TRANSITIONAL EMPLOYEES")
for the period specified in Schedule 9(c) for each such employee (the
"TRANSITION PERIOD") to provide services to Buyer in connection with
transitioning the operation of the Business from Seller to Buyer.
After the Closing and until the expiration of the Transition Period,
Buyer, at Buyer's expense, shall provide the Transitional Employees
with office equipment and office support services comparable to those
presently being provided to the Employees after the Closing Date.
(d) ACCRUED WAGES AND BENEFITS; TERMINATION COSTS. Seller will
be responsible for all compensation payments and benefits owed to its
employees for periods prior to Closing (and during the Transitional
Period with respect to the Transitional Employees) and all other costs
associated with the termination of its employees, including but not
limited to retirement benefits and severance payments. Buyer will be
responsible for all compensation payments and benefits owed after the
Closing Date (except with respect to the Transitional Employees) to
Seller's employees employed by Buyer.
(e) EMPLOYMENT LIABILITIES. Except as specifically described
herein, Seller shall assume and be responsible for all employment
liabilities with respect to its employees assigned to the Business in
connection with claims incurred prior to the Closing Date (and during
the Transitional Period with respect to Transitional Employees).
Buyer shall assume and be responsible for all employment liabilities
with respect to those of Seller's employees employed by Buyer in
connection with claims incurred on and after the Closing Date. For
purpose of this Section, a claim shall be considered incurred and on
the date treatment is rendered or a service performed. Worker's
Compensation claims of any employees shall be the responsibility and
liability of Seller if the claim is made prior to the Closing Date and
shall be the responsibility and liability of Buyer if the claim is
made on or after the Closing Date. To Seller's knowledge (excluding
knowledge of the affected Employees) as of the Closing Date, none of
its employees assigned to the Business has a potential Worker's
Compensation claim against Seller.
(f) EMPLOYEE TAX MATTERS. For purposes of reaching the annual
wage limitations for the Federal Insurance Contributions Act (FICA),
Federal Unemployment Tax Act (FUTA), and State Unemployment Tax Act
(SUTA), any remuneration paid by Seller during the
20.<PAGE>
calendar year and prior to the acquisition is considered to have been
paid by Buyer. Buyer and Seller will follow the "standard" IRS
procedure (as outlined in Section 4 of Revenue Procedure 84-77, 1984-2
C.B. 753) with regard to reporting of wages on form W-2 and
disposition of forms W-4 and W-5. Under the standard procedure,
Seller performs all reporting duties for wages and other compensation
it pays. Buyer reports only its own payments of wages and other
compensation. Also, the Employees must provide Buyer with new forms
W-4 and W-5 for the current year. Both parties must provide the
Employees with form W-2 by January 31, 1997. However, if requested by
any Employee, Seller must furnish the form W-2 within thirty (30) days
of the request or within thirty (30) days after the final payment of
wages, whichever is later.
ARTICLE 10
OTHER MATTERS
(a) COVENANT NOT TO COMPETE. Seller agrees that for a period of
five (5) years after the Closing it will not, directly or indirectly,
engage or invest in, own, manage, operate, control, or participate in
the ownership, management, operation, financing, or control of, be
associated with, or in any manner connected with, lend its name or any
similar name to, lend its credit to any business (other than Buyer,
its successors or assigns) in the field of explosion bonding of clad
metals ("SIMILAR PRODUCTS OR ACTIVITIES"), except as such Similar
Products or Activities are used for the development, marketing,
manufacture and sale of Seller's Mypolex(R) industrial diamonds.
Seller agrees that this covenant is reasonable with respect to its
duration, geographical area, and scope. In the event of a breach by
Seller of any covenant set forth in this Section, the term of such
covenant will be extended by the period of the duration of such
breach. Seller also understands and agrees that due to the unique
nature of the rights protected by this Section, Buyer could not be
reasonably or adequately compensated in damages in an action at law
for Seller's breach of its obligations under this Section.
(b) CONFIDENTIALITY PROVISIONS.
(i) OBLIGATION. Seller agrees that upon the Closing Date
all of the Business Assets shall be the sole and exclusive property of
Buyer and any Confidential Information (as defined below) relating to
the Business Assets shall comprise a special, valuable and unique
asset of Buyer's business, and that the confidentiality and restricted
use of such Confidential Information is an integral part of its
ascribed value. Seller shall use all reasonable efforts, not less
than those used to maintain the confidentiality of its own
confidential information, not to disclose or use such information for
a period of five (5) years following the date of this Agreement. For
purposes of this Agreement, "Confidential Information" shall mean
(a) any information, know-how, data, process, technique, design,
drawing, formula or test data relating to any research project, work
in process, future development, engineering, manufacturing, marketing,
business plan, servicing, financial or personnel matter directly
relating to the Business Assets, the Business, Buyer, its present or
future products, sales, suppliers, customers, employees, investors or
business, whether in oral, written, graphic or electronic form.
Seller shall deliver to Buyer, upon Buyer's request, copies of
documents,
21.<PAGE>
memoranda, notes, plans, records, reports and other documentation
directly relating to the Business Assets that it may possess or have
under its control, provided that Seller may maintain archival copies
of such materials.
(ii) EXCLUSIONS. Confidential Information shall not include
and Seller shall not be obligated to hold in confidence any
information which is or becomes public knowledge without breach of
this Agreement, or which is or becomes publicly available without a
confidentiality restriction and without breach of this Agreement from
a source other than Buyer, or information that Seller independently
develops after the Closing Date. Buyer acknowledges that Seller may
not disclose information disclosed to Seller by a third party which
Seller is obligated to treat as confidential or proprietary.
(iii) REMEDIES. Seller acknowledges that disclosure or use
of any Confidential Information prior to or after the Closing Date in
a manner inconsistent with this Section or any other provision of this
Agreement will cause Buyer irreparable injury which may not be
adequately compensated by damages. Accordingly, in addition to all
other remedies that Buyer may have hereunder, Buyer shall have the
right to equitable and injunctive relief to prevent the unauthorized
use or disclosure of any such Confidential Information and the right
to such damages (including without limitation, court costs and
reasonable attorneys' fees) as are occasioned by such unauthorized use
or disclosure.
(c) OTHER REMEDIES. The specific remedies to which Seller or
Buyer may resort under the terms of this Agreement are cumulative and
are not intended to be exclusive of any other remedy or means of
redress to which Seller or Buyer may be lawfully entitled if there is
any breach or threatened breach by the other party of any provision of
this Agreement. The failure of Seller or Buyer to insist, in any one
or more instances, upon the strict performance of any of the terms,
conditions or covenants of this Agreement shall not be construed as a
waiver or relinquishment for the future of such term, condition or
covenant. A receipt by Seller or Buyer of any money with knowledge of
the breach of any term, condition or covenant of this Agreement, shall
not be deemed a waiver of such breach, and no waiver, change,
modification or discharge by either party hereto of any provision in
this Agreement shall be deemed to have been made or shall be effective
unless expressed in writing and signed by both Seller and Buyer. In
addition to the other remedies provided in this Agreement, Seller and
Buyer shall be entitled to the restraint by injunction of the
violation, or attempted or threatened violation of any of the terms,
conditions or covenants of this Agreement, or to a decree compelling
performance of any of such term, condition or covenant.
ARTICLE 11
CLOSING
The closing of the transaction contemplated by this Agreement
(the "CLOSING") shall take place at the offices of E. I. du Pont de
Nemours and Company, Wilmington, Delaware 19898, on the date hereof
(the "CLOSING DATE").
22.<PAGE>
(a) PURCHASE PRICE. At the Closing, Buyer shall deliver to
Seller wire transfer for immediately available funds in Seller's favor
for an amount equal to the balance of the Purchase Price as calculated
pursuant to Article 5.
(b) INSTRUMENTS OF CONVEYANCE. At the Closing, Seller shall
deliver to Buyer the following executed instruments in such form and
substance as is reasonably satisfactory to Buyer and Seller:
(i) Bill of Sale.
(ii) Assignment of the Patents.
(iii) Assignment of Trademarks.
(iv) Assignment of the Contracts.
(v) Such other instruments and documents deemed necessary
or appropriate by Buyer, and agreed to by Seller, to effectuate the
transactions contemplated by this Agreement.
(c) DELIVERY OF OTHER AGREEMENTS. At the Closing, Buyer and
Seller shall enter into the following agreements:
(i) Tolling Agreement.
(ii) Sublease Agreement.
(iii) Sublease and side letter for the Kennett Square Lease.
ARTICLE 12
POST CLOSING TRANSACTIONS
Seller and Buyer agree that after the Closing Date:
(a) PRODUCT CLAIMS AND REPLACEMENT PRODUCT. During the period
of one (1) year after the Closing Date, Buyer shall cooperate with
Seller's efforts to resell any rejected or returned finished Products
which have been sold, shipped or set aside for a customer of Seller
prior to the Closing Date. At Seller's request, Buyer shall reprocess
any such rejected or returned finished product at a charge to Seller
equal to Buyer's costs for such services.
(b) BOOKS AND RECORDS. At Closing, or as soon after the Closing
as is reasonably practicable, Seller shall cause to be delivered to
Buyer all books and plant records exclusively used in, or related to,
Seller's operation of the Business.
23.
<PAGE>
(c) PERSONNEL RECORDS. Seller shall deliver to Buyer all
personnel records, including medical files, on Seller's former
employees who are hired by Buyer and who consent in writing to such
delivery.
(d) ACCESS TO BOOKS AND RECORDS. From time to time, upon
request by Seller, Buyer shall permit Seller reasonable access to the
books and records delivered to Buyer hereunder for the purposes of
enabling Seller to prepare and support its various tax returns and
verifying its quality control procedures with respect to filled
orders, provided Buyer shall not be required to retain such books and
records for a period of more than five (5) years from the Closing
Date.
(e) FURTHER ASSURANCES. From time to time after the Closing, at
Buyer's request and without further consideration, Seller agrees to
execute and deliver such other instruments of conveyance and transfer
and take such other action as Buyer reasonably may require more
effectively to convey, transfer to and vest in Buyer, and to put Buyer
in possession of, any property to be sold, conveyed, transferred and
delivered hereunder, including, without limitation, assistance in the
transfer of open purchase orders to Buyer. In the case of contracts
and rights, if any, that have not at the Closing been transferred
effectively due to the lack of the consent of third parties, endeavor
to obtain such consents promptly, and if any such consents be
unobtainable, to use commercially reasonably efforts to provide Buyer
with the benefits thereof in some other manner acceptable to Buyer.
In addition, Seller or Seller's designee shall reasonably cooperate
with Buyer, at Buyer's expense, in providing Buyer or Buyer's auditors
with access to certain raw financial data directly relating to the
Business Assets. Such access shall be during normal business hours
and upon reasonable advance notice to Seller within sixty (60) days
after the Closing Date. Buyer acknowledges that Seller does not
maintain audited financial statements at the Business level.
(f) OUTSTANDING COLLECTIONS. Seller shall promptly notify Buyer
of any payments received by Seller on or after the Closing Date
corresponding to any of the Accounts Receivable and shall promptly
forward all amounts so received to Buyer. Buyer shall promptly notify
Seller of any payments received by Buyer on or after the Closing Date
corresponding to Products sold by Seller on or before the Closing Date
and shall promptly forward all amounts so received to Seller.
(g) SIGNAGE. Not later, than thirty (30) days after the Closing
Date, Buyer shall remove Seller's name from the exterior of the
Facilities.
(h) COMPUTER SYSTEMS. During the period of three (3) months
after the Closing Date, Seller shall provide Buyer with reasonable
assistance in connection with transitioning its computer services.
24.<PAGE>
ARTICLE 13
BULK SALES ACT AND TAXES
(a) BULK SALES ACT. Buyer hereby waives compliance by Seller
with the requirements of any and all laws relating to bulk sales and
transfers; and as consideration for such waiver by Buyer, Seller
agrees to indemnify Buyer for any loss to Buyer resulting from any
claim by any creditors of Seller under any such law.
(b) SALES, USE, TRANSFER AND SIMILAR TAXES. Buyer shall bear
and pay all recording fees, sales or use taxes and any transfer,
transfer gain, documentation, gross receipts, value added, and other
taxes and charges, upon or with respect to the sale or transfer of the
Business Assets by Seller to Buyer pursuant to this Agreement and all
interest or penalties thereon, if any. To the extent that applicable
law or regulation imposes upon Seller the obligation to report or pay
such taxes, charges, interest, or penalty, Buyer shall promptly
reimburse Seller therefor upon receipt of Seller's invoice for the
amount of such payment. Buyer shall provide Seller with properly
completed resale certificates covering the purchase of inventories.
ARTICLE 14
MISCELLANEOUS
(a) PRESS RELEASE. Buyer and Seller shall each be at liberty to
issue a press release or public announcement following execution of
this Agreement with respect to the transaction contemplated by this
Agreement provided that the parties shall consult each other in
advance on the form and content of such releases or announcements.
(b) FEES. Except as otherwise specifically provided herein, the
parties shall pay their own expenses including attorneys' fees,
incident to the preparation and performance of this Agreement, whether
or not the transactions contemplated herein are consummated.
(c) AMENDMENTS. This Agreement shall not be amended or modified
except in writing, signed by both parties.
(d) SUCCESSORS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors
and assigns, provided neither party shall assign this Agreement or any
rights herein without the other party's prior written consent.
(e) PATENT LICENSE. Transfer by Seller to Buyer of the Business
Assets does not include any right or license for Buyer to operate
under any of Seller's patents or use any of Seller's technical
information except for the patents and technical information to be
transferred pursuant to this Agreement.
(f) ENTIRE AGREEMENT. This Agreement, including the Schedules
referred to herein, which are incorporated herein and made a part
hereof, and the Sublease Agreement
25.<PAGE>
and the Tolling Agreement, both of even date herewith, contain the
final, complete and exclusive understanding of the parties hereto with
respect to the subject matter contained herein.
(g) NOTICES. All notices, consents, requests and approvals, any
notice of change in address for the purpose of this Article, and other
communications provided for or required herein, and all legal process
in regard thereto, shall be deemed validly given, made or served, if
in writing, and delivered personally or sent by U.S. Certified Mail,
postage prepaid:
If to Seller, addressed to:
E. I. du Pont de Nemours and Company
Specialty Chemicals
1007 Market Street
Wilmington, Delaware 19898
Attention: Business Director
If to Buyer, addressed to:
Dynamic Materials Corporation
551 Aspen Ridge Drive
Lafayette, Colorado 80026
Attention: President
(h) GOVERNING LAW. This Agreement shall be governed by and
construed according to the laws of the State of Delaware, without
regard to its conflict of laws principles.
(i) SCHEDULES. All Schedules referred to herein are hereby
incorporated in this Agreement by reference.
(j) HEADINGS. The various headings used in this Agreement are
for convenience only and are not to be used in interpreting the text
of the Article in which they appear or to which they relate.
(k) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of
which shall constitute one and the same instrument.
(l) THIRD PARTY BENEFICIARIES. Notwithstanding any other
provision of this Agreement, nothing in this Agreement, express or
implied, is intended to create any third-party beneficiary rights
respecting any person or entity (including, without limitation, any
employee of Seller or person otherwise engaged in the Business), or to
confer upon any person or entity, other than the parties hereto, their
respective Affiliates, and their respective heirs, successors and
assigns, any rights, remedies or obligations under or by reason of
this Agreement, and the parties hereto specifically deny any such
intention.
26.<PAGE>
(m) INDEPENDENT PARTIES. The employees, facilities, and
equipment of Buyer shall, at all times, be under Buyer's exclusive
direction and control. Buyer's relationship with Seller shall be that
of an independent party and nothing in this Agreement shall be
construed to constitute Buyer or any of its employees or officers as
an employee, agent, joint venturer, or partner of Seller. The
employees, facilities, and equipment of Seller shall, at all times, be
under Seller's exclusive direction and control. Seller's relationship
with Buyer shall be that of an independent party and nothing in this
Agreement shall be construed to constitute Seller or any of its
employees or officers as an employee, agent, joint venturer, or
partner of Buyer.
(n) SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending
term or provision in any other, situation or in any other
jurisdiction. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid
and enforceable and that comes closest to expressing the intention of
the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time
within which the judgment may be appealed.
(o) EXPORT CONTROL. The use and disclosure of technical
information acquired pursuant to this Agreement and the exercise of
patent rights granted by this Agreement shall be subject to the
export, assets and financial control regulations of the United States
of America, but without limitation, restrictions under regulations of
the United States that may be applicable to direct or indirect
reexportation of such technical information or of equipment, products
or services directly produced by use of such technical information.
[Signature Page Follows]
27.<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed the day and year first above written.
SELLER:
E. I. DU PONT DE NEMOURS AND COMPANY
By: /s/ JEFFREY A. COE
-------------------------------------
Name: Jeffrey A. Coe
Title: Business Director
BUYER:
DYNAMIC MATERIALS CORPORATION
By: /s/ PAUL LANGE
-------------------------------------
Name: Paul Lange
Title: President
28.
CERTAIN CONFIDENTIAL MATERIAL CONTAINED
IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED.
TOLLING / SERVICES AGREEMENT FOR INDUSTRIAL DIAMONDS
THIS AGREEMENT, made and entered into as of this 22nd day of
July, 1996, by and between E. I. DU PONT DE NEMOURS AND COMPANY, a
Delaware corporation having its principal place of business at 1007
Market Street, Wilmington, Delaware 19898 (hereinafter referred to as
"DuPont") and DYNAMIC MATERIALS CORPORATION, a Colorado corporation
having its principal place of business at 551 Aspen Ridge Drive,
Lafayette, Colorado 80026 (hereinafter referred to as "Contractor").
BACKGROUND
- ----------
Contractor has on the date hereof acquired from DuPont DuPont's
DETACLAD(R) explosion bonded clad metal business, including the
Machinery and Equipment located at the Dunbar, Pennsylvania facility.
In connection with such transaction and subject to the terms and
conditions of this Agreement, Contractor agrees to (i) manufacture at
the Dunbar Facility high density ammonium nitrate explosives, and (ii)
to detonate such explosives around industrial diamond assemblies, as
described in DuPont's procedures for producing Mypolex(R) industrial
diamonds. Contractor will make available suitable facilities and
equipment and sufficiently trained and qualified employees at the
Dunbar Facility for the performance of such services as further
described herein; and
DuPont desires to avail itself of the services of Contractor for
the time, in the manner, and upon the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and of the
mutual undertakings hereunder, the Parties agree as follows:
1. REPLACEMENT OF PRIOR AGREEMENTS
-------------------------------
This Agreement, the Purchase and Sale Agreement and the Sublease
by and between DuPont and Contractor of even date herewith shall take
the place of and entirely supersede any oral or written contracts,
agreements, arrangements that deal with the same subject matter as
referenced herein.
2. DEFINITIONS
-----------
Unless otherwise defined herein, capitalized terms shall have the
same meaning herein as ascribed to them in the Purchase and Sale
Agreement dated the date hereof<PAGE>
between the parties.
"Assemblies" means Material in the form of welded driver tube /
product tube arrangements supplied by DuPont to Contractor which are
substantially ready to be shocked by detonation of the Explosives.
"Explosive" means the explosive material produced by Contractor
according to the Mypolex(R) operating procedures.
"Material" means any matter defined in DuPont's operating
instructions for the process, set forth in Exhibit 1 attached hereto,
including tubes and culverts, furnished by DuPont to Contractor for
processing, handling or for use in the production of Product.
"PPI" means Producer Price Index - Finished Goods as published by
the Bureau of Labor and Statistics in which the 1982 Index equals 100.
"Product" means the Assemblies after they have been shocked by
detonation of the Explosives.
"Production Order" means a production order for Services
submitted by DuPont to Contractor at least two (2) calendar months in
advance of the month in which the Services are required, as more
fully described in Article 5.
"Purchase and Sale Agreement" means the Purchase and Sale
Agreement - DETACLAD(R) Business between the parties dated the date
hereof.
"Quarters" means calendar quarters.
"Raw Material Fee" means the raw material fee described in
Exhibit 2.
"Service" means services necessary to (a) manufacture and test
the Explosive, and (b) convert the Material to finished Products by
detonation of Explosives, as more fully described in Article 3.
"Service Fee" means the service fee described in Exhibit 2.
3. SCOPE OF WORK AND TIMING
------------------------
Contractor shall, except to the extent otherwise expressly stated
herein, furnish all labor, supervision, materials, tools, equipment,
facilities and services to properly and efficiently do all things
necessary to (a) manufacture and test the Explosive at the Dunbar
Facility, and (b) convert the Assemblies to finished Products by
detonation of Explosives at the Dunbar Facility, in accordance with
the operating instructions set forth in Exhibit 1 attached hereto.
Such operating instructions may be modified from time to time by
mutual written agreement. In the event that such operating
instructions are required to be modified [
]*
Contractor shall not be in default under this Agreement if Contractor
is required by law to suspend operations until such operating
procedures are
* Indicates portions of text
that have been omitted. A
separate filing of such
omitted text has been made
with the Commission as part of
Registrant's application for
confidential treatment.
2<PAGE>
modified. DuPont and Contractor acknowledge and agree that if the
operating instructions are modified in a way which materially
increases or decreases the cost of the Services to Contractor, then
the parties shall negotiate a corresponding increase or decrease in
the compensation to be paid Contractor pursuant to Section 9.
DuPont shall provide Contractor with the Assemblies and the
accompanying culverts. DuPont shall notify Contractor in advance of
making any material changes to the composition of the Assemblies,
provided that DuPont shall not be obliged to disclose the specific
composition of the Assemblies. Contractor shall procure, manufacture
and test the Explosives (per the operating instructions attached as
Exhibit 1). The services to be provided are substantially set forth
in Exhibit 1 attached hereto and such services are hereinafter
referred to as "Services".
4. SAFEKEEPING/TITLE/STORAGE
-------------------------
Contractor assumes full responsibility and liability for the
safekeeping and safe handling of all DuPont Material or Product when
such Material or Product is in Contractor's care, custody and control.
Unless otherwise specified in this Agreement, title to such Material
or Product shall remain with DuPont at all times. Title to the
Explosive shall remain with Contractor at all times.
Contractor shall reimburse DuPont for DuPont's actual cost,
according to normal business accounting procedures, of any such
Material or Product lost, damaged or destroyed while in Contractor's
control. Reimbursement of such cost shall not affect DuPont's title
to such Material or Product. Contractor shall segregate such Material
or Product indicating DuPont's ownership. Contractor shall obtain
prior written approval of DuPont's Contract Administrator before
moving any such Material or Product to a location outside of the
Dunbar Facility.
DuPont reserves the right to file a U.C.C. Financial Statement or
such other documents as may be necessary under federal, state or local
law to preserve its interest in and assure its right to recover
without lien or other encumbrance any Material, Product or other
tangible items which DuPont delivers to Contractor from the control of
Contractor, its employees, agents or assigns. Contractor agrees on
behalf of itself, its employees, agents and assigns to cooperate fully
with DuPont, including the signing of any and all appropriate filing
or other documents necessary to preserve DuPont's interests in said
Material, Product or other tangible items.
Products shall be delivered F.O.B. the Dunbar Facility.
Liability for loss or damage to same shall pass to DuPont upon
Contractor's tender of delivery to DuPont's carrier for shipment to
DuPont. After Contractor's tender of delivery, DuPont shall be
3<PAGE>
responsible for all transportation charges and DuPont requested
insurance expenses, including any associated taxes, duties or
documents. At the request of DuPont, shipments will be shipped by
Contractor freight collect, or if prepaid, such freight will be
subsequently billed to DuPont and DuPont will reimburse Contractor for
such freight in accordance with Section 9 below. Unless otherwise
specified by DuPont, transportation will be by the most cost-effective
method of transportation in keeping with any particular delivery date.
At DuPont's option, Contractor will insure the shipments against
damage to or loss of the Products. Any such shipping insurance so
provided by Contractor will subsequently be billed to DuPont, and
DuPont will reimburse Contractor for such expense. Unless otherwise
agreed, packaging of shipments shall be in accordance with DuPont's
customary practices. Upon approval by DuPont, Contractor may deliver
the Products in installments.
5. QUANTITY
--------
(a) Requirements. Except as expressly provided herein,
------------
Contractor agrees to provide and DuPont agrees to purchase one hundred
percent (100%) of DuPont's requirements for the Services described
herein for its Mypolex(R) industrial diamond business.
(b) Forecast and Monthly Quantity. It is anticipated that
-----------------------------
DuPont will require Services for the following number of Assemblies:
Year Number of Assemblies (per month)
---- --------------------------------
[
]*
The foregoing forecast is not binding and is merely intended to
provide the parties with general guidance as to DuPont's demand for
Services. On request by Contractor, DuPont shall provide Contractor
with an updated forecast of DuPont's anticipated demand for Services.
Contractor acknowledges that Services are typically provided for
[ ]* per day. Notwithstanding the above, Contractor shall
not be obligated to provide Services for more than [ ]*
per month. In the event DuPont's production forecast changes, DuPont
shall inform Contractor as soon as reasonably possible of such change.
The parties agree to cooperate with each other in order to reasonably
satisfy both parties' production needs.
DuPont is developing a process wherein Contractor will be able to
explosively
* Indicates portions of text
that have been omitted. A
separate filing of such
omitted text has been made
with the Commission as part of
Registrant's application for
confidential treatment.
4<PAGE>
[
]* In the event both
parties mutually determine to use [ ]* Contractor and
DuPont shall modify the operating instructions attached hereto as
Exhibit 1 accordingly. For purposes of calculating the quantity of
Services provided per month, [
]* In no event shall Contractor be
obligated to perform [ ]* if in the parties' reasonable
opinions such services would [
]* In the event the parties cannot
agree on whether [
]* at the request of either party, an independent
consultant shall be engaged to evaluate the impact of [
]* The parties shall mutually select the
independent consultant. Such consultant shall be skilled in the field
of mining and the integrity of subterranean mines. The parties shall
share the cost of such independent consultant, whose determination
shall be final and binding upon the parties.
(c) Rolling Monthly Forecast and Production Order. DuPont shall
---------------------------------------------
also provide Contractor with rolling monthly forecasts of production
requirements hereunder. The monthly forecast shall state DuPont's
anticipated demand for the next six (6) months. To the extent
possible, DuPont shall specify in such monthly forecast the amount of
Services DuPont anticipates for [ ]* and development
activities. It is understood that all such forecasts are estimates
only and are not commitments, provided, however, DuPont will submit
written confirmation of its production orders for Services hereunder
at least two (2) months in advance of the month in which the Services
are required (the "Production Order"). The Production Order
represents DuPont's binding commitment to procure Services from
Contractor, subject to the provisions of this Agreement.
DuPont shall deliver Assemblies to Contractor no later than the
last business day of the prior calendar month. The number of
Assemblies delivered to Contractor shall be consistent with the
Production Order provided by DuPont to Contractor two (2) months
earlier. Contractor shall arrange for the delivery of the appropriate
number of culverts from DuPont's supplier, as a release against
DuPont's master purchase order for the supply of culverts. Contractor
shall furnish the Services with respect to such Assemblies by the last
day of the calendar month for which the Services were requested in the
Production Order. In the unforeseen event that Contractor does not
complete such Services by the end of any calendar month, then
Contractor shall provide such Services every normal business day until
the month's Production Order of Product has been completed, and
Contractor shall make such Product available for immediate shipment.
DuPont's Industrial Diamonds Business may, at its option, waive this
requirement upon written notice to
* Indicates portions of text
that have been omitted. A
separate filing of such
omitted text has been made
with the Commission as part of
Registrant's application for
confidential treatment.
5<PAGE>
Contractor.
In the event the Services result in one or more blown shots (as
defined in Exhibit 2 attached hereto), Contractor shall not be
required to furnish additional Services with respect to the affected
Assembly.
(d) Penalty for Delivery of Fewer Assemblies than Specified in
----------------------------------------------------------
the Production Order. The parties acknowledge that Contractor must
- --------------------
schedule time in the Dunbar Facility in order to provide Services to
DuPont. Therefore, in the event DuPont provides Contractor with fewer
Assemblies than specified in the Production Order, DuPont shall
compensate Contractor as follows:
(i) If DuPont provides Contractor with no more than one Assembly
less than specified in the Production Order, DuPont shall
pay no compensation to Contractor, but Contractor shall not
be responsible to DuPont for not completing the Services for
the Assembly which was not provided.
(ii) If (for any reason including force majeure) DuPont provides
Contractor with more than one Assembly less than specified
in the Production Order (and further provided that
Contractor is substantially in compliance with the terms and
conditions of this Agreement and the Sublease (as defined in
Paragraph 7 below), DuPont shall pay Contractor the Service
Fee [
]* for each Assembly less than
specified in the Production Order.
Contractor may, at its option, provide Services for more Assemblies
than specified in the Production Order, provided that such excess
Services shall be applied to current or subsequent quarterly take or
pay requirements, and may, at DuPont's option, be applied towards the
subsequent periods' Purchase Order requirements, . Contractor may, at
its option, waive the penalty specified in this Paragraph.
(e) DuPont shall have the obligation to take or pay for
Assemblies as further set forth in Exhibit 2 attached hereto.
6. STORAGE OF ASSEMBLIES.
---------------------
In anticipation of shipping truckloads of Assemblies and Product
to and from the Dunbar Facility at any one time on a periodic basis,
DuPont may, free of charge, store on an ongoing basis up to eight (8)
Assemblies and accompanying culverts at the Dunbar Facility for up to
thirty (30) days. Such eight (8) Assemblies and accompanying culverts
are in excess of the number specified in the monthly
* Indicates portions of text
that have been omitted. A
separate filing of such
omitted text has been made
with the Commission as part of
Registrant's application for
confidential treatment.
6<PAGE>
Production Order. In addition DuPont may, free of charge, store up
to eight (8) Product items in excess of the monthly Production Order
at the Dunbar Facility for up to thirty (30) days. Contractor shall
provide adequate space to store such Assemblies, culverts and Product.
7. SUBLEASE OF DUNBAR FACILITY
---------------------------
The parties acknowledge that DuPont has leased to Contractor the
Dunbar Facility pursuant to the terms of a Sublease Agreement between
the parties dated the date hereof (the "Sublease").
8. PERIOD OF AGREEMENT
-------------------
This Agreement will become effective as of the date hereof, and
shall continue in full force and effect until expiration or earlier
termination of the Sublease Agreement (the expiration date of the
Sublease Agreement, as extended for its full term is December 15,
2005).
In addition, this Agreement, may be earlier terminated by either
party without cause, at any time following thirty (30) months after
the date hereof, upon nine (9) months prior written notice sent to the
address set forth in the Notices Article herein. The first date that
this Agreement may be terminated without cause is thirty (30) months
following the date hereof.
In the event Contractor elects to terminate this Agreement (other
than because of the breach or non-performance of this Agreement by
DuPont), then, at DuPont's option upon written notice to Contractor,
the Sublease shall terminate on the same date. If Contractor
terminates this Agreement because of the breach or non-performance
(which is capable of cure) of the Agreement by DuPont, then the
Sublease shall continue in full force and effect. If DuPont
terminates this Agreement, the Sublease shall not terminate, provided,
however, if this Agreement is terminated by DuPont as a result of a
material breach or non-performance (which is capable of cure) by
Contractor (after applicable cure periods as provided in Paragraph
23), DuPont may, at its option and upon written notice to Contractor,
immediately terminate the Sublease .
Termination of this Agreement, which shall be accomplished
without penalty unless otherwise specifically stated herein, shall not
relieve or release either DuPont or Contractor from any rights,
liabilities or obligations they may have accrued under the law or
terms of this Agreement prior to the date of such termination. Upon
the termination or expiration of this Agreement, or any extension
thereof, Contractor shall promptly tender to DuPont all Material(s)
and Product, at which time Contractor will invoice DuPont for Services
performed prior to termination. Dupont shall pay such invoice in
accordance with the terms of Paragraph 12 herein.
7<PAGE>
If, at any time during the term of the Sublease or any extensions
or renewals thereof, Contractor purchases all or any portion of the
Dunbar Facility or obtains a lease directly from the owners thereof,
DuPont may at its option extend this Agreement on the same terms and
conditions for a period of up to five (5) years or such other period
as the parties may mutually agree.
9. COMPENSATION
------------
As consideration for Services properly provided hereunder, DuPont
agrees to pay and Contractor agrees to accept the compensation
described in Exhibit 2 attached hereto.
10. EXCLUSIVITY AND NON-COMPETE
---------------------------
During the term of this Agreement and for a period of one year
thereafter, Contractor agrees that it (a) will not provide Services in
connection with the manufacture of polycrystalline industrial diamonds
similar to those covered herein to any third parties (including
Contractor and its Affiliates) and that Contractor will provide
Services exclusively to DuPont, and (b) will not engage in
consultation, development, licensing marketing or research services
related to the Services or within the field of polycrystalline
industrial diamonds other than in connection with the performance of
the Services hereunder. Contractor shall not use, reuse, sell or
otherwise dispose of any DuPont Material or Product, except in
connection with performing Services. If Contractor fails to keep and
perform every covenant of this Article, DuPont shall be entitled to
specifically enforce the same by injunction in equity in addition to
any remedies which DuPont may have.
11. TAXES
-----
DuPont agrees either to pay directly all property taxes,
licenses, charges and assessments properly levied by any properly
constituted governmental authority upon the Material, Assemblies or
Product hereunder, or to reimburse Contractor therefore if paid by
Contractor at DuPont's written direction. Contractor assumes full
responsibility for the payment of all federal and state taxes of
whatever sort, social security and unemployment compensation taxes,
withholding taxes, gross receipts taxes, franchise taxes and all other
taxes or charges applicable to Contractor's actions, employees, and
materials used for providing Services hereunder or applicable to
Contractor's income hereunder.
8<PAGE>
12. TERMS OF PAYMENT
----------------
Contractor shall invoice DuPont once per month for all Services
properly provided under this Agreement during the preceding calendar
month.
If Contractor's invoice does not indicate that Contractor is an
incorporated entity, by use of the words (or abbreviations)
"Incorporated", "Corporation" or "P.C." as a part of Contractor's
company name, then Contractor shall display its tax identification
number (TIN) on the invoice in lieu of such designations. Failure to
furnish such information may result in withholding twenty percent
(20%) of payments in accordance with IRS regulations.
Terms of payment shall be net thirty (30) days after DuPont's
receipt of such invoice at the address set forth in the Section 32
herein. Payment shall be considered made when payment checks are
mailed by DuPont via first class mail to the address set forth in the
Notice Article herein. Contractor's invoice shall be prepared in the
form set out in Exhibit 3 attached hereto, as may be changed from time
to time upon thirty (30) days prior written notice from DuPont to
Contractor.
If payment is not received by Contractor within thirty (30) days
following DuPont's receipt of Contractor's written notice of non-
payment , DuPont shall be in default under this Agreement.
13. SHIPMENTS
---------
Freight charges, excluding detention and demurrage charges, for
all Assemblies or other items supplied directly by DuPont under this
Agreement and for all Product produced hereunder by Contractor and
shipped per DuPont's instructions, shall be paid by DuPont. Detention
and demurrage charges on incoming shipments shall be borne by
Contractor unless caused by DuPont's early or excessive delivery of
Material.
14. WASTE DISPOSAL
--------------
Contractor agrees to employ reasonable efforts to minimize the
waste generated as a result of providing Services. Contractor shall
dispose of any waste produced as a result of providing services,
including waste from blown shots,, provided, however, that Contractor
shall return to DuPont for disposal all Materials, including the
Assemblies resulting from blown shots. Contractor agrees that it will
furnish all required equipment and labor to remove and dispose of such
waste generated as a result of providing Services.
9<PAGE>
15. RECORDS AND INSPECTION
----------------------
Contractor agrees to maintain a record of all Services performed
at the Dunbar Facility. Such records shall include, without
limitation, (a) the type and quantity of explosives, and (b) the cost
of Explosives and other raw materials used in connection with the
Services, and (c) the results of inspections the Dunbar Facility and
scaling operations inside the Dunbar Facility. DuPont or its designee
shall have the right from time to time, at DuPont's cost, to inspect
and verify the records kept by Contractor in connection with this
Agreement. In addition, DuPont or its designee shall have the right
to visit, observe, audit, and inspect the facilities and operations
related to the Services performed at the Dunbar Facility at any time
during Contractor's normal business hours so long as DuPont provides
Contractor with reasonable advance notice and reasonably limits the
frequency of such visits.
16. DEVELOPMENT ACTIVITIES
----------------------
The parties acknowledge that Contractor and/or DuPont may
periodically desire to develop new and improved Services or Products,
which may include furnishing services for such development activities.
Such development activities may include, without limitation, any or
all of the following: [
]
Contractor and DuPont agree that the terms of any Services rendered by
Contractor for DuPont development activities shall be subject to prior
negotiation between the parties. Contractor shall cooperate with
DuPont in connection with such development activities. DuPont and
Contractor shall negotiate mutually agreeable schedules based on
costs, and fees for services rendered in connection with the
development activities.
17. NONDISCLOSURE
-------------
Contractor hereby agrees not to disclose to others without the
prior written consent of DuPont:
(a) the terms and conditions of this Agreement , including
the terms and conditions under which DuPont has
purchased or plans to purchase Services, provide
Material and Assemblies or receive Product from
Contractor, or
(b) the structure or composition of Material, Assemblies or
Product,
* Indicates portions of text
that have been omitted. A
separate filing of such
omitted text has been made
with the Commission as part of
Registrant's application for
confidential treatment.
10<PAGE>
information or methods which are provided by DuPont and
development activities,
except when such disclosure is necessary to provide Services.
DuPont hereby agrees not to disclose to others without the prior
written consent of Contractor:the terms and conditions of this
Agreement , including the terms and conditions under which DuPont has
purchased or plans to purchase Services, provide Material and
Assemblies or receive Product from Contractor.
18. HAZARDS
-------
Contractor acknowledges that hazards may be involved in providing
the Services described hereunder and Contractor shall provide Services
in a careful manner as specified in the Sublease.
19. ARBITRATION
-----------
In the event a dispute arises between the Parties in connection
with any aspect of this Agreement and such dispute shall not have been
resolved pursuant to good faith negotiations between the Parties, then
either Party may refer such dispute to arbitration, which shall be the
sole and exclusive means for resolution of such dispute and shall be
final and binding upon the Parties.
Any such arbitration shall be held in Philadelphia, Pennsylvania,
under the rules of the American Arbitration Association then in force
and shall be conducted in English. The arbitration panel shall
consist of three arbitrators, one of which shall be appointed by each
of the Parties, and the third arbitrator shall be appointed by the
first two arbitrators (or, in case such two arbitrators cannot agree,
then by the American Arbitration Association in accordance with its
rules).
In making their award, the arbitrators shall not be bound by the
law of any jurisdiction but shall decide the issues referred to them
in accordance with good commercial practice applying such principles
of fairness and equity as they may deem appropriate. If any question
concerning the interpretation, applicability, or enforceability of
this provision arises, the Parties agree that the interpretative law
to be applied shall be the law of the State of Delaware. Any judgment
or award rendered by the arbitrators may be entered as final in any
court having jurisdiction or an application may be made to such court
for judicial acceptance and enforcement of the award, as the case may
be.
11<PAGE>
20. INDEMNIFICATION
---------------
(a) Contractor shall, to the extent permitted by law, indemnify,
defend, and hold harmless DuPont against all claims, liabilities,
damages, losses or expenses of Contractor or any third party to the
extent arising out of any negligence, willful misconduct, breach of
contract or violations of law by Contractor, or Contractor's
employees, agents, subcontractors or assigns in the performance of
this Agreement. This indemnity will not apply where the sole cause of
the claim, liability, damage, loss or expense is the willful
misconduct or gross negligence of DuPont.
(b) DuPont shall indemnify and hold harmless Contractor from and
against, and shall compensate and reimburse Contractor for, any
claims, liabilities, damages, losses or expenses of Contractor or any
third party to the extent arising out of (i) the infringement by
DuPont's procedures for producing the Products of any third party's
----- -------
intellectual property or intellectual property rights, or (ii) any
- ------------
negligence, willful misconduct, breach of contract or violations of
law by DuPont or DuPont's employees, agents, subcontractors or assigns
in the performance of this Agreement. This indemnity will not apply
where the sole cause of the claim, liability, damage, loss or expense
is the willful misconduct or gross negligence of Contractor.
(c) The claims, liabilities, damages, losses or expenses covered
hereunder include, but are not limited to, settlements, judgments,
court costs, attorneys' fees and other litigation expenses, fines and
penalties arising out of actual or alleged (1) injury to or death of
any person, including employees of Contractor or DuPont, or (2) loss
of or damage to property, including the Dunbar Facility and other
property of Contractor or DuPont.
(d) Claims, liabilities, damages, losses or expenses arising
from violations of environmental laws are specified in the Sublease.
(e) In the event any damages or expenses are incurred by either
party for which it claims indemnification under this Agreement (the
"Indemnitee"), the Indemnitee shall promptly notify the other party
(the "Indemnitor") in writing of such damages and expenses. If any
claim for indemnification hereunder is based upon an action or claim
filed or made against the Indemnitee by a third party, then the
Indemnitor shall have the right to negotiate a settlement or
compromise of any such action or claim or to defend any such actin or
claim at its sole cost and expense.
21. PERFORMANCE OF SERVICES; ACCEPTANCE
-----------------------------------
Contractor will provide the Services hereunder in a professional
manner and shall meet the operating conditions set forth in Exhibit 1.
DuPont shall inspect all Products
12<PAGE>
upon receipt thereof at the shipping destination. Products not
rejected by written notification to Contractor within fourteen (14)
working days of receipt shall be deemed to have been accepted. DuPont
shall not be obligated to pay the Service Fee or the Raw Material Fee
for any properly rejected Products.
THIS IS AN AGREEMENT FOR SERVICES. NEITHER PARTY MAKES ANY
EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR USE OR PURPOSE.
22. MACHINERY AND EQUIPMENT
-----------------------
Contractor purchased certain Machinery and Equipment situated at
the Dunbar Facility from DuPont pursuant to the terms of the Purchase
and Sale Agreement. Contractor agrees to maintain the Machinery and
Equipment which is used in connection with the Services in good
condition and repair.
23. DEFAULT IN PERFORMING SERVICES
------------------------------
In the event that either Party hereto shall default in the
performance of any obligation specified herein, the nondefaulting
Party shall notify the other Party hereof in writing and, if such
default is not remedied within thirty (30) days from date of such
notice, or if the other Party is diligently attempting to cure such
default but is unable to cure such default within sixty (60) days from
the date of such notice, then the nondefaulting Party shall have the
right to terminate this Agreement immediately upon the expiration of
such cure period. If, in the non-defaulting Party's sole reasonable
opinion, such default may result in substantial property damage,
injury, accident or death, that Party may, at any time, immediately
suspend this Agreement without penalty or damages.
If Contractor should be adjudged bankrupt or make a general
assignment for the benefit of its creditors, or if a receiver should
be appointed on account of its insolvency, or should it fail to make
payment for materials or labor in the ordinary course of business, or
disregard laws, ordinances or other governmental regulations, DuPont
may, immediately on written notice to Contractor, terminate this
Agreement; provided, however, that if a petition under any state or
federal bankruptcy act, receivership statute or the like is filed by
any third party, or an application for a receiver of Contractor is
made by third party, DuPont may terminate this Agreement only if such
petition or application is not resolved favorably to Contractor within
sixty (60) days of DuPont's written notice to Contractor.
Termination under this Article, or any Articles hereof, shall not
relieve or release either party from any rights, liabilities, or
obligations which may have arisen prior to the date of such
termination.
13<PAGE>
Contractor acknowledges and agrees that the Services provided
hereunder are [
]* In the event Contractor materially defaults under the terms of
this Agreement and such default is not cured within a reasonable
period of time, [
]*
Except with respect to each party's indemnification obligations
set forth in Section 20 herein and except in the event of an
intentional breach of or default under this Agreement or gross
negligence, neither party shall be liable to the other party for any
incidental or consequential damages, including, without limitation,
lost profits incurred by the other party or any third party, arising
out of a breach of or default under this Agreement, even if such party
has been advised of the possibility of such damages.
24. FORCE MAJEURE
-------------
No liability shall result to either Party from delay in
performance or from nonperformance caused by circumstances beyond the
control of the Party who has delayed performance or not performed.
The nonperforming Party shall be diligent in attempting to remove any
such cause and shall promptly notify the other Party of its extent and
probable duration.
If Contractor, due to circumstances beyond its control, is unable
to supply the total demands for the Product or Services required by
the Agreement, then Contractor shall preferentially allocate its
resources so as to use its best efforts to provide the Services.
If the nonperforming Party who has delayed performance or not
performed on account of circumstances beyond its control is unable to
remove the causes within thirty (30) days or if the nonperforming
Party is diligently attempting to cure such default but is unable to
cure such default within ninety (90) days, the other Party shall have
the right to terminate, without penalty, this entire Agreement or any
portion of it.
25. INDEPENDENT CONTRACTOR
----------------------
It is understood that employees, methods, facilities and
equipment of Contractor shall at all times be under its exclusive
direction and control. Contractor's relationship to DuPont shall be
that of an independent contractor. Nothing in the Agreement shall be
construed to constitute Contractor, or any of its employees, as an
agent, associate, joint venturer or partner of DuPont.
* Indicates portions of text
that have been omitted. A
separate filing of such
omitted text has been made
with the Commission as part of
Registrant's application for
confidential treatment.
14<PAGE>
26. COMPLIANCE WITH LAWS
--------------------
Contractor agrees that in the performance of the processing
operations and other Services provided hereunder, including but not
limited to, the disposal of any waste resulting from said operations,
it will comply with all applicable laws, rules and regulations of
governmental authority in connection therewith.
27. MINORITY VENDORS
----------------
DuPont encourages Contractor to provide maximum practicable
opportunities to include Minority subcontractors and vendors among its
sources of supply in the performance of this Agreement. Minorities
include but are not limited to Black Americans, Asian Pacific
Americans and Asian-Indian Americans. A Minority business is at least
51% owned by a Minority or group of Minorities.
28. QUALITY
-------
In the event the quality of the Services is not reasonably
satisfactory to DuPont (including without limitation, Services which
do not result an Assembly which has a relatively symmetrical and
uniform reduction in circumference of the driver tube, with the bottom
end of the Assembly remaining intact), DuPont and Contractor shall
mutually investigate the problem and implement a plan to improve
Services.
29. ISO CERTIFICATION
-----------------
Contractor shall provide all necessary assistance to DuPont in
connection with procedures and practices at the Dunbar Facility in
order to maintain the ISO 9002 certification for DuPont's industrial
diamonds business. In the event Contractor is required to perform
services (that would not otherwise be performed by Contractor in
connection with its own business or in connection with the Services
provided under this Agreement) in order to maintain the ISO 9002
certification for DuPont's industrial diamonds business, then DuPont
and Contractor shall negotiate a mutually agreeable fee schedule based
on cost plus a fixed fee for such services.
30. NONDISCRIMINATION
-----------------
Contractor warrants that it complies with all applicable laws,
rules, orders and regulations of governmental authority covering the
production, sale and delivery of the goods or services specified
herein, including, but not limited to, the Equal Opportunity Clause
prescribed in 41 CFR 60-1.4; the Affirmative
15<PAGE>
Action Clause prescribed in 41 CFR 60-250.4, regarding disabled
veterans and veterans of the Vietnam Era; the Affirmative Action
Clause for Handicapped Workers prescribed in 41 CFR 60-741.4; 48 CFR
Chapter 1 Subpart 19.7 regarding Small Business and Small
Disadvantaged Business Concerns; 48 CFR Chapter 1 Subpart 20.3
regarding Utilization of Labor Surplus Area Concerns; Executive Order
12138 and regulations thereunder regarding subcontracts to women-owned
business concerns; Affirmative Action Compliance Program (41 CFR 60-
1.40); annually file SF-100 Employer Information Report (41 CFR 60-
1.7); 41 CFR 60-1.8 prohibiting segregated facilities; and the Fair
Labor Standards Act of 1938, as amended.
31. CONTRACT ADMINISTRATOR
----------------------
The Contract Administrator will represent DuPont in the
administrative phases of the work to be performed under this
Agreement. He or she will maintain an interface between the
Contractor and DuPont and will keep DuPont's Sourcing Function or any
successor function informed at all times as to the adequacy of the
Contractor's performance and progress.
In the performance of this assignment, the Contract Administrator
will have no legal right to authorize changes of any kind that are
outside the scope and compensation of this Agreement, nor shall his
actions be construed as giving implied approval of any such change.
Except as otherwise specifically provided herein, such changes shall
be effected only by a properly executed modification to this
Agreement.
32. NOTICES
-------
All notices required under this Agreement shall be in writing and
shall be effective if delivered to the Party entitled to receive the
same by hand or if deposited in the United States Mail (First Class)
addressed to such Party at the address set forth below.
All notices required or contemplated under this Agreement shall
be addressed as follows:
a. Proposed price changes, correspondence or notices involving
the contractual relationship and tax election statements
should be sent to:
E. I. du Pont de Nemours and Company
Specialty Chemicals
Brandywine Building
B-12272
1007 Market Street
Wilmington, DE 19898
Attn: Laura Prechtl
with a copy to:
16<PAGE>
E. I. du Pont de Nemours and Company
Repauno Plant
Repauno Drive
P.O. Box 68
Gibbstown, N.J. 08027
Attn: Industrial Diamonds
b. Invoices, Insurance Certificates, Accountability Reports,
Safety Reports, and routine performance summaries are to be
sent to:
E. I. du Pont de Nemours and Company
Accounts Payable
P.O. Box 631
Old Hickory, TN 37138-0631
with a copy to:
E. I. du Pont de Nemours and Company
Repauno Plant
Repauno Drive
P. O. Box 68
Gibbstown, N.J. 08027
Attn: Industrial Diamonds
17<PAGE>
c. All freight bills for DuPont's account shall be by third
party billing and forwarded to:
FMIS
E. I. du Pont de Nemours and Company
P. O. Box 8964
Wilmington, Delaware 19899
DuPont correspondence, information, documents, notices or
payments to Contractor shall be sent personally or by first-class mail
to:
Dynamic Materials Corporation
551 Aspen Ridge Drive
Lafayette, Colorado 80026
Attention: President
Either Party may change its address for notice hereunder upon no
less than thirty (30) days prior written notice thereof to the other
Party.
33. AUTHORITY
---------
The Parties hereby represent that they have full power and
authority to enter into and perform this Agreement and the Parties do
not know of any contract, agreements, promises or undertakings which
would prevent the full execution and performance of this Agreement.
34. ASSIGNMENT AND SUBCONTRACTING
-----------------------------
The parties shall not, without the prior written consent of the
other party, assign or transfer this Agreement, in whole or in part,
nor shall either party contract any work under this Agreement to any
subcontractor (other than equipment rental necessary to provide the
Services), except with the other party's prior written consent
thereof.
If, during the term of this Agreement, Contractor shall dissolve,
transfer, sell, assign, mortgage, encumber, pledge, or otherwise
dispose of (a) substantially all of its assets used to provide the
Services herein, (b) over thirty percent (30%) of its ownership or
controlling interest (whether in the form of stock or otherwise), or
if Contractor shall consolidate with or merge into another corporation
or permit one or more other corporations to consolidate or merge into
it, or if Contractor contemplates or reasonably expects the occurrence
of any event referred to in this Article, then Contractor shall give
DuPont notice of such occurrence as soon as is legally permissible.
If such occurrence or proposed occurrence is unacceptable to DuPont,
DuPont may terminate this Agreement upon written notice to Contractor.
Notwithstanding anything to the contrary contained herein, either
party may freely
18<PAGE>
assign this Agreement to the purchaser of all or substantially all of
the business to which this Agreement relates.
35. RESERVATION OF RIGHTS
---------------------
DuPont's waiver of any of its remedies afforded hereunder or by
law is without prejudice and shall not operate to waive any other
remedies which DuPont shall have available to it, nor shall such
waiver operate to waive DuPont's rights to any remedies due to a
future breach, whether of a like or different character.
36. HEADINGS
--------
All headings of the Articles of this Agreement are inserted for
convenience only and shall not affect any construction or
interpretations of this Agreement.
37. APPLICABLE LAW
--------------
This Agreement will be governed by and construed in accordance
with the laws of the State of Delaware without giving effect to
principles of conflict of law, and the courts within Delaware will be
the only courts of competent jurisdiction. This Agreement will not be
governed by the U. N. Convention on Contracts for the International
Sale of Goods.
38. SEVERABILITY
------------
In the event that any Article of this Agreement shall be found to
be void or unenforceable, such findings shall not be construed to
render any other Article of this Agreement either void or
unenforceable, and all other Articles shall remain in full force and
effect unless the Article(s) which is/are invalid or unenforceable
shall substantially affect the rights or obligations granted to or
undertaken by either Party.
39. ENTIRETY
--------
This Agreement, the Purchase and Sale Agreement and the Sublease,
together with the attachments and Exhibits specifically referenced and
attached hereto, embodies the entire understanding between DuPont and
Contractor and, except as otherwise specifically stated herein, there
are no contracts, understandings, conditions, or representations, oral
or written, with reference to the subject matter hereof which are not
merged herein.
19<PAGE>
Except as otherwise specifically stated, no modification hereto shall
be of any force or effect unless (1) reduced to writing and signed by
both Parties hereto, and (2) expressly referred to as being
modifications of this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized representatives.
E. I. DU PONT DE NEMOURS DYNAMIC MATERIALS CORPORATION
AND COMPANY
BY /s/ R. A. Gregg BY /s/ Paul Lange
---------------------------- ---------------------------------
Print Name R. A. Gregg Print Name: Paul Lange
--------------------- ------------------------
TITLE Dir - Global Services TITLE Pres/CEO
-------------------------- ------------------------------
Date 7/19/96 Date 7/22/96
--------------------------- -------------------------------
20
<PAGE>
EXHIBIT 1
---------
OPERATING INSTRUCTIONS
----------------------
No changes shall be made to the attached procedures without the
express written consent of DuPont and Contractor.
21<PAGE>
EXHIBIT 2
---------
COMPENSATION
------------
DuPont shall pay Contractor the following fees for Services provided
for each Assembly:
(a) a service fee for Services provided on each Assembly (the
"Service Fee") as follows:
Assemblies/Month Service Fee per Assembly
---------------- ------------------------
[
]*
The Service Fee shall be adjusted on April 1 of each year in
accordance with [
]*
(b) a raw material fee in the amount of Contractor's reasonable
cost of the Explosive and other raw materials directly related to
the Services (as set forth in Exhibit 1) provided on each
Assembly (the "Raw Material Fee").
provided, however, that DuPont shall not be required to pay Contractor
for Services which result in an Assembly where the bottom end of the
Assembly does not remain intact ("blown shot").
In 1996, DuPont shall take or pay Services for [
]*. In 1997 and thereafter, DuPont shall take or pay
Services for [ ]*
In the event DuPont is required to pay a penalty to Contractor
pursuant to Paragraph 5(d) of this Agreement, DuPont shall not be
required to pay Contractor twice for failure to take such Services.
As such, if failure to take Services is subject to fees under both
Paragraph 5(d) and this Exhibit, only one such fee shall be paid to
Contractor, in order that duplication of fees be avoided.
[
]*
* Indicates portions of text
that have been omitted. A
separate filing of such
omitted text has been made
with the Commission as part of
Registrant's application for
confidential treatment.
22<PAGE>
[
]*
* Indicates portions of text
that have been omitted. A
separate filing of such
omitted text has been made
with the Commission as part of
Registrant's application for
confidential treatment.
23<PAGE>
EXHIBIT 3
---------
SAMPLE INVOICE
--------------
INVOICE
Remit to:
Dynamic Materials Corporation Invoice Number: __________
551 Aspen Ridge Drive
Lafayette, Colorado 80026 Invoice Date: __________
Attention: President
Telephone: (303) 665-5700
Reference: Tolling/Services Agreement for Industrial Diamonds
Purchase Order Number: LMD-xxxxxxxxx
For Services performed during calendar month of August, 1996 as
follows:
[
]*
______________________________________________________________________
Description of Development Activities (if any):
______________________________________________________________________
* Indicates portions of text
that have been omitted. A
separate filing of such
omitted text has been made
with the Commission as part of
Registrant's application for
confidential treatment.
CERTAIN CONFIDENTIAL MATERIAL CONTAINED
IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED.
SUBLEASE
BETWEEN
E. I. du Pont de Nemours and Company
and
Dynamic Materials Corporation
<PAGE>
SUBLEASE - TABLE OF CONTENTS
----------------------------
Paragraph Page
- --------- ----
1. MASTER LEASE . . . . . . . . . . . . . . . . . . . . . 2
2. LEASED PREMISES. . . . . . . . . . . . . . . . . . . . 3
3. TOLL MANUFACTURING AGREEMENT . . . . . . . . . . . . . 6
4. REQUIREMENTS OF PUBLIC AUTHORITY . . . . . . . . . . . 7
5. TERM . . . . . . . . . . . . . . . . . . . . . . . . . 7
6. RENT . . . . . . . . . . . . . . . . . . . . . . . . . 8
7. USE. . . . . . . . . . . . . . . . . . . . . . . . . . 11
8. TAXES AND ASSESSMENTS. . . . . . . . . . . . . . . . . 12
9. REPAIR AND MAINTENANCE . . . . . . . . . . . . . . . . 13
10. ACCESS-LEASED PREMISES, RECORDS AND INSPECTION . . . . 14
11. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . 14
12. INDEMNIFICATION AND LIMITATION OF LIABILITY. . . . . . 16
13. DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . 26
14. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . 30
15. CASUALTY . . . . . . . . . . . . . . . . . . . . . . . 31
16. QUIET ENJOYMENT. . . . . . . . . . . . . . . . . . . . 33
17. ASSIGNMENT AND SUBLETTING. . . . . . . . . . . . . . . 33
18. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . 34
19. SURRENDER. . . . . . . . . . . . . . . . . . . . . . . 34
20. AMENDMENT AND RECORDATION. . . . . . . . . . . . . . . 35
21. WAIVER . . . . . . . . . . . . . . . . . . . . . . . . 35
22. BROKER . . . . . . . . . . . . . . . . . . . . . . . . 35
23. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . 36
24. PARTIAL INVALIDITY . . . . . . . . . . . . . . . . . . 37
25. NO PARTNERSHIP . . . . . . . . . . . . . . . . . . . . 38
26. CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . 38
27. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . 38
28. SUCCESSION . . . . . . . . . . . . . . . . . . . . . . 38
EXHIBIT "A"--DUNBAR FACILITY AND LEASED PREMISES
<PAGE>
SUBLEASE
--------
THIS SUBLEASE AGREEMENT (the "Lease"), entered into as of
this 22nd day of July, 1996, is by and between E. I. du Pont
de Nemours and Company, a Delaware corporation, having its principal
office and place of business at 1007 Market Street, Wilmington,
Delaware 19898 ("LANDLORD"), and Dynamic Materials Corporation a
Colorado corporation, having its principal office and place of
business at 551 Aspen Ridge Drive, Lafayette, Colorado 80026
("TENANT").
BACKGROUND
----------
(a) LANDLORD is the lessee of a tract of land situate in Fayette
County, Pennsylvania, known as the "Dunbar Facility" and;
(b) On the date hereof LANDLORD is selling to TENANT LANDLORD's
DETACLAD(R) explosion bonding clad metal business (the "Business"),
which business operates, in part, at the Leased Premises;
(c) The portion of the Dunbar Facility that includes the
approximate 27 acre operating area and the right to use the Blue Stone
Mine is referred to herein as the "Leased Premises".
(d) It is the intent of the parties hereto that LANDLORD shall
sublease the Leased Premises to TENANT upon and subject to the
conditions and limitations herein.
<PAGE>
NOW, THEREFORE, the parties hereto, intending to be legally
bound, agree as follows:
1. MASTER LEASE. By lease dated October 19, 1985, by and
------------
between the Daniel Harper Estate, as owner (hereinafter referred to as
"Owner") and E. I. du Pont de Nemours and Company, as tenant ("MASTER
LEASE"), Owner leases the Dunbar Facility, comprising approximately
378 acres, to LANDLORD. This Lease is made subject to MASTER LEASE
except where the provisions of MASTER LEASE are inconsistent with the
provisions of this Lease in which case the provisions of this Lease
will control. Where in MASTER LEASE there are duties owed by Owner to
LANDLORD which are necessary for the proper enjoyment of this Lease,
LANDLORD will make all reasonable efforts to obtain the performance of
such duties by Owner in favor of TENANT, but LANDLORD shall not be
liable for the failure of Owner under the terms of MASTER LEASE to
perform said duties nor for the result of such failure. If Owner is
in default of its obligations and LANDLORD is unsuccessful in
obtaining Owner's performance, then upon TENANT's written request
LANDLORD shall assign to TENANT its rights to enforce the Master Lease
against Owner. TENANT hereby agrees to faithfully and promptly
perform all of the obligations and duties of LANDLORD to Owner under
MASTER LEASE with respect only to the Leased Premises except the
obligation of LANDLORD to pay rent, which obligation
2<PAGE>
LANDLORD agrees to continue to perform during the term hereof.
2. LEASED PREMISES. LANDLORD, for and in consideration of
---------------
the rents, covenants and agreements hereinafter reserved, mentioned
and contained on the part of TENANT, its successors and permitted
assigns, does hereby lease, rent and demise unto TENANT, and TENANT
does hereby take and hire, upon and subject to the conditions and
limitations hereinafter expressed, a portion of the Dunbar Facility
(the "Leased Premises").
The Dunbar Facility comprises the tract of land described as
follows:
ALL THAT CERTAIN TRACT OR PARCEL OF LAND situate in the
Township of Dunbar, County of Fayette and Commonwealth
of Pennsylvania, containing approximately 378 acres,
more or less; said tract is as shown on the Mine Survey
of the former New Castle Lime & Stone Company Mine,
prepared by Sucevic Engineering, Hopwood, PA, in
September, 1979 (the "Plan") attached hereto, made a
part hereof and marked Exhibit "A".
The Leased Premises is the portion of the Dunbar Facility
containing approximately 27 acres shown on the Plan attached hereto as
Exhibit "A" and described as follows: the surface land bounded by (a)
a 2,700 foot length of the Dunbar-Ohiopyle Road (L.R. 26047) (at its
centerline) to the Southwest; (b) a line extending from the
intersection of the
3<PAGE>
mine access road and Dunbar-Ohiopyle Road approximately 800 feet to
the edge of the mine face; (c) the mine face starting from the edge of
the mine face and extending along the mine face to a point beyond the
explosives magazine that is approximately 600 feet from the centerline
of the easternmost mine portal; and (d) a line from the mine face (as
extended) traveling approximately 700 feet to the Dunbar-Ohiopyle Road
(L.R. 26047).
In addition, LANDLORD hereby leases, rents and demises unto
TENANT the right to enter and use certain of the underground passages
of the Blue Stone Mine, such passages being shown on the Plan attached
as Exhibit "A", upon and subject to the limitations hereinafter
expressed. The Plan is marked to show the primary access and
operating areas, the emergency access areas, and the areas for
explosions. Except as expressly provided herein, TENANT shall have no
right to the surface portion of the Blue Stone Mine or to the
underground passages which are not a part of the Leased Premises.
The afore-described Leased Premises are leased subject to
the following:
(1) all matters of record concerning use of the Leased Premises
and any state of facts that an inspection of the Leased
Premises would disclose;
4<PAGE>
(2) present and future zoning laws, ordinances, resolutions, and
regulations of all boards, bureaus, or commissions and
bodies of any municipal, county, state or federal sovereign
now or hereafter having or acquiring jurisdiction of the
Leased Premises and the use and improvements thereof;
(3) the effect of all present and future laws and ordinances
relating to TENANT's use of the Leased Premises;
(4) violations of laws and ordinances that might be disclosed by
an examination and inspection or search of the Leased
Premises as of the date first above written;
(5) except as set forth in Section 12, the condition and state
of repair of the Leased Premises as the same may be on the
date first above written;
(6) all taxes, assessments, water meter and water charges, sewer
rents commencing as of the date first above written;
(7) existing oil and gas leases on the Leased Premises, under
which TENANT is not permitted to drill within the area
actually occupied by
5<PAGE>
the hereinbefore referred to Blue Stone Mine; and
(8) the right of the fee Owners to enter on said Leased Premises
to cut and remove timber.
3. TOLL MANUFACTURING AGREEMENT. TENANT and LANDLORD
----------------------------
have, on the date hereof, entered into a Tolling/Services Agreement
for Industrial Diamonds (the "Tolling Agreement").
4. REQUIREMENTS OF PUBLIC AUTHORITY. During the term of
--------------------------------
this Lease, TENANT, at its own cost and expense, shall promptly
observe and comply with all present and future laws, ordinances,
requirements, orders, directives, rules and regulations of the
Federal, State, County, Town, Village and City Governments and of all
other governmental authorities affecting Leased Premises or any part
thereof whether the same are in force at the commencement of the term
of this Lease or may in the future be passed, enacted or directed,
and, except as set forth in Section 12 herein, TENANT shall pay all
costs, expenses, liabilities, losses, damages, fines, penalties,
claims and demands, including reasonable counsel fees, that may in any
manner arise out of or be imposed because of the failure of TENANT to
comply with the covenants of this Paragraph. Without limiting the
foregoing, TENANT, at TENANT's cost and expense, shall obtain and
maintain all licenses, permits and approvals necessary to perform
6<PAGE>
explosion bonding operations and services under the Tolling Agreement
and Landlord shall take all reasonable actions to assist Tenant in
obtaining the same.
5. TERM. Unless terminated as provided herein, the term of
----
this Lease shall commence on the date hereof, said date being
hereinafter referred to as the "Commencement Date", and shall expire
on December 15, 2000, provided however, that this Lease may be
extended until December 15, 2005, by TENANT giving LANDLORD written
notice of such extension prior to August 1, 1999.
6. RENT. The rent for the Leased Premises shall be as
----
follows:
(a) From and after the Commencement Date and to the expiration
or earlier termination of the this Lease, TENANT shall pay monthly, in
advance, the following sums: From the date hereof to December 15,
2000 the yearly rental shall be [
]*; and (provided this Lease is extended) from December 15,
2000 to December 15, 2005, the yearly rental shall be [
]*, said rental to be payable in
advance in equal monthly installments before the first of each month,
prorated for partial months.
(b) All other sums, charges or amounts which TENANT has agreed
to pay to LANDLORD pursuant to this Lease shall be hereinafter
referred to as "Additional Rent". All rent and
* Indicates portions of text
that have been omitted. A
separate filing of such
omitted text has been made
with the Commission as part of
Registrant's application for
confidential treatment.
7<PAGE>
Additional Rent shall be payable at the office of LANDLORD at the
address herein contained or at such other place or places as LANDLORD
shall from time to time give TENANT written notice.
7. USE.
---
(a) The Leased Premises shall be used only for (i) the operation
of the Business, including the explosion bonding of clad metals, and
(ii) performance of services pursuant to the Tolling Agreement.
TENANT shall not use or occupy the Leased Premises, or permit the same
to be used or occupied, for any other purpose. In particular, TENANT
shall have no rights to mine or extract minerals from any portion of
the Leased Premises. Only those portions of the mine designated on
the Plan may be used for explosions.
(b) In the event TENANT's operations within the limestone mine
situated on the Leased Premises result in necessary removal of rocks
from the mine, TENANT shall pile said rocks so removed in a nearby
place to be designated by LANDLORD for disposal by Owner. TENANT
shall have no right to the rocks thus removed nor to the proceeds
therefrom. Owner shall have the right of egress and ingress in order
to remove such rocks.
(c) TENANT acknowledges that the mine can become damaged by
overuse or improper use, in which case the mine may be required to be
closed or the frequency of explosions
8<PAGE>
performed in the mine may be required to be limited. In order to
prolong the life of the mine, TENANT agrees to use no more than
[ ]* of Explosive per detonation. "Explosive" means [
]*
on the date hereof. TENANT shall not manufacture, test, use or
destroy any chemical or explosive materials on the Leased Premises,
other than [
]* without the express written consent of LANDLORD,
which consent shall not be unreasonably withheld. TENANT agrees to
use and maintain the mine in such a condition that maintains and
prolongs its integrity and useful life, provided, however, that TENANT
shall have no responsibility to LANDLORD for adverse effects to the
integrity or useful life of the mine caused by (i) TENANT's use of
Explosives as specified in this paragraph, or (ii) TENANT's operations
according to [
]* as may be amended from time to time in
accordance with this Lease or the Tolling Agreement. TENANT agrees to
promptly notify LANDLORD of any actions which it knows or reasonably
believes could have resulted in soil or groundwater contamination. In
addition, TENANT agrees to periodically inspect and repair
* Indicates portions of text
that have been omitted. A
separate filing of such
omitted text has been made
with the Commission as part of
Registrant's application for
confidential treatment.
9<PAGE>
the mine, including without limitation the underhangs in the mine, so
that the mine is (i) maintained in a safe condition during the term of
this Lease, and (ii) in substantially the same condition at the end of
the term of this Lease as it is on the date first above written,
subject to normal wear and tear.
(d) TENANT acknowledges that hazards may be involved in
conducting explosions in the mine, including providing the services
under the Tolling Agreement. Accordingly, TENANT agrees to perform
all work at the Leased Premises in a careful and workmanlike manner
and to take all reasonably necessary precautions in the processing,
handling, transportation and disposal of Explosives, to avoid damage
to property or pollution. In that regard, TENANT shall provide
security precautions reasonably required to safely process, handle,
transport and dispose of the Explosives. In addition to the operating
procedures provided by LANDLORD to TENANT on the date hereof, LANDLORD
may provide TENANT with certain information regarding the operations
at the Leased Premises, including procedures for processing, handling,
transporting and disposal, as well as toxicological data. Such
supplemental information is provided without warranty or
representation as to its completeness or suitability.
LANDLORD shall have the right to immediately suspend this
Lease, without liability on the part of LANDLORD
10<PAGE>
to TENANT, if at any time LANDLORD in its reasonable judgment
determines that TENANT has materially violated any material provision
of this Article. The Lease shall remain suspended until TENANT
corrects such violation; provided that TENANT shall have a right of
access to the Leased Premises to correct such violations. Further, if
TENANT fails to correct any such violation within thirty (30) days
immediately following LANDLORD's notice to TENANT of the violation or
if TENANT is diligently attempting to cure such violation but is
unable to do so within such sixty (60) days following LANDLORD's
notice, then within sixty (60) days following LANDLORD's notice to
TENANT, LANDLORD has the right to terminate this Agreement.
8. TAXES AND ASSESSMENTS.
---------------------
(a) For the purposes of this Lease, the term "Taxes" shall mean
all real estate taxes and assessments, including substitutes therefor
or supplements thereto, assessed upon, levied against or imposed on
the Leased Premises and any improvements, fixtures and equipment
located thereon.
(b) During the term of this Lease, TENANT shall pay to LANDLORD,
as Additional Rent, for each year during the term of this Lease, any
increase in the real estate taxes levied against the Leased Premises
over and above the amount of said real estate taxes for the year 1995.
Such payment shall be made to LANDLORD, who shall pay such increase in
real estate
11<PAGE>
taxes to Owner. It is understood that, because this Lease is not on a
calendar year basis, TENANT's payment of any increase in real estate
taxes levied against the Leased Premises over and above the 1995 taxes
will be made on a pro rata basis.
(c) TENANT shall pay any and all taxes on its personal property
located on Leased Premises directly to the taxing authority.
9. REPAIR AND MAINTENANCE. TENANT shall have the right to
----------------------
construct, operate and maintain on the Leased Premises any and all
improvements deemed necessary or convenient in connection with its
operations and shall have the further right at any time to remove any
improvements, buildings or other structures of like nature within
ninety (90) days after expiration of this Lease. Facilities, such as
protective fencing and gates permanently installed, electrical wiring
and air-flow baffle walls are to be left in place at the termination
of this Lease or removed by TENANT at its expense, at LANDLORD's
option.
TENANT agrees that, at its sole cost and expense, it shall
keep and maintain the surface area of the Leased Premises (located
adjacent to the entrance of the mine), including all improvements
constructed thereon by TENANT, in good repair, replacement and
appearance during the continuance of this Lease and will with
reasonable promptness
12<PAGE>
make all structural and nonstructural, foreseen and unforeseen, and
ordinary and extraordinary changes and repairs of every kind and
nature which may be required to be made upon or in connection with
Leased Premises or any part thereof in order to keep and maintain
Leased Premises in such good repair, replacement and appearance, so
that the Leased Premises are in substantially the same condition at
the end of the term of this Lease as they are on the first date
written above, subject to normal wear and tear. Except as may be
required pursuant to Section 12 herein, LANDLORD shall not be required
to maintain, repair, or rebuild, or to make any alterations,
replacements or renewals of any nature or description to Leased
Premises or any part thereof, whether ordinary or extraordinary,
structural or nonstructural, foreseen or unforeseen, or to maintain
Leased Premises or any part thereof in any way, and except as may be
required pursuant to Section 12, herein TENANT hereby expressly waives
any right to make repairs or replacements at the expense of LANDLORD
which may be provided for in any statute or law in effect at the time
of the execution of this Lease or any statute or law which may
thereafter be enacted.
10. ACCESS - LEASED PREMISES, RECORDS AND INSPECTIONS.
-------------------------------------------------
LANDLORD or LANDLORD's agents and designees shall have the right to
enter upon the Leased Premises, including without limitation, the
underground passages of the
13<PAGE>
mine, at all reasonable times with reasonable advance notice to
TENANT, to examine same or to perform any obligation it may have
hereunder, including without limitation cleanup of residue from the
underground passages of the mine as provided in Section 12.5 and/or
removal of two (2) underground storage tanks as provided in Section
12.6; or for any reasons pursuant to any rights under the Tolling
Agreement; provided such access rights shall not interfere
unreasonably with TENANT's operation of the Leased Premises or
performance of its obligations under the Tolling Agreement.
TENANT agrees to maintain a record of all explosions
performed at the Leased Premises. Such records shall include, without
limitation, (a) the type and quantity of explosives, and (b) the
results of inspections the Leased Premises and scaling operations
inside the mine. LANDLORD or its designee shall have the right from
time to time, at LANDLORD's cost, to inspect and verify the records
kept by TENANT in connection with this Lease.
11. REPRESENTATIONS AND WARRANTIES. Except as expressly
------------------------------
provided in this Lease, LANDLORD makes no representations, warranties
or guarantees to TENANT, either expressed or implied, with respect to
the subject matter of this Lease. LANDLORD makes no representations
or warranties as to the condition of the underground passages that are
not part of the Leased Premises. LANDLORD warrants and
14<PAGE>
represents (a) that the MASTER LEASE is subsisting and is in full
force and effect, (b) LANDLORD is not in default under the MASTER
LEASE, (c) all rents and charges due thereunder are and shall be paid
in accordance with the terms thereof, and (d) that LANDLORD has full
right, power and authority to enter into this Lease. LANDLORD is
aware of no reason why the Leased Premises cannot be used by TENANT
for its intended purpose. LANDLORD covenants that, so long as TENANT
is not in material breach of the terms and conditions of this Lease,
TENANT shall peaceably and quietly have, hold, and enjoy the Leased
Premises for the term hereof and any extensions to the term. Except
as expressly provided herein, LANDLORD covenants and agrees faithfully
to observe and perform all of the material terms, covenants and
conditions of the MASTER LEASE on the part of LANDLORD to be performed
with respect to the Leased Premises, (except as required to be
performed by TENANT hereunder) and neither to do nor cause to be done,
nor suffer, nor permit any act or thing to be done which would or
might cause the MASTER LEASE to be canceled, terminated, forfeited, or
surrendered or which shall make LANDLORD liable for any damages,
claims or penalties under the provisions of the MASTER LEASE.
LANDLORD covenants and agrees to keep the MASTER LEASE in good
standing for the term hereof and any extension hereof. Both parties
disclaim and waive any implied warranties and warranties imposed by
law, including
15<PAGE>
warranties of merchantability, and warranties of fitness for a
particular purpose.
The parties acknowledge that the MASTER LEASE has not been
signed by all Owners of the Dunbar Facility. LANDLORD has no reason
to believe that any of such Owners will disturb TENANT's use or
adversely effects TENANT's peaceful, quiet enjoyment and possession of
the Leased Premises. In the event that any of such Owner's attempt to
disturb TENANT's use of the Leased Premises or adversely impact
TENANT's peaceful, quiet enjoyment and possession of the Leased
Premises, LANDLORD and TENANT shall cooperate to promptly seek to
discontinue the acts of such Owners.
12. INDEMNIFICATION AND LIMITATION OF LIABILITY. The
-------------------------------------------
following indemnifications and limitations of liability shall apply:
12.1(a) TENANT agrees to defend, indemnify and hold
harmless LANDLORD (including, its officers, directors, employees,
subcontractors and agents) from and against any and all liability,
claims, injuries (including death resulting therefrom), property
damage, fine, penalty or assessment by any public agency, cost or
expense (including costs of defense, settlement and reasonable
attorneys' fees), which (1) except as provided in Section 12.2 below,
are solely and directly caused by the TENANT's acts including without
limitation, acts of negligence, gross negligence or
16<PAGE>
willful misconduct of TENANT, its agents, employees or subcontractors
associated with, or arising out of the use of the Leased Premises, or
the performance of this Lease, including any failure to comply with
any pertinent Federal, State or local law, statute, regulation, rule,
or (2) are caused jointly by acts of TENANT including without
limitation, negligence, gross negligence or willful misconduct by
TENANT, its agents, employees or subcontractors and any acts by any
third party or parties. The term "liability" employed in the
preceding sentence, and TENANT's indemnification obligation, includes
any strict liability imposed at law, asserted against LANDLORD.
(b) LANDLORD agrees to defend, indemnify and hold harmless
TENANT (including its officers, directors, employees and agents) from
and against any and all liability, claim, injury (including death
resulting therefrom), property damage, fine, penalty or assessment by
any public agency, cost or expense (including costs of defense,
settlement and reasonable attorneys' fees), which (1) are solely and
directly caused by the negligence, gross negligence or willful
misconduct of LANDLORD, its agents, employees or subcontractors
associated with, or arising from LANDLORD's obligations under this
Agreement, or (2) are caused jointly by acts of Landlord including
without limitation negligence, gross negligence or willful misconduct
by LANDLORD it agents,
17<PAGE>
employees or subcontractors and any acts by any third party or
parties. The term "liabilities" employed in the preceding sentence,
and LANDLORD's indemnification obligation, includes any strict
liability imposed at law asserted against TENANT.
(c) Where acts or omissions of the nature referred to in
paragraphs 12.1 (a) and (b) by both TENANT and LANDLORD (including
their respective officers, directors, employees, subcontractors or
agents) have caused any liabilities, damages, fines, penalties, costs,
claims, demands and expenses, whether or not a third party's acts or
omissions also were causal, TENANT and LANDLORD shall contribute to
their common liability a pro rata share based upon the relative degree
of fault of each. In such a case the parties shall share all costs
equally until (i) there is a final court judgment allocating fault
between the parties, or (ii) the parties agree to such an allocation.
LANDLORD's indemnity shall not extend to acts or omissions
of LANDLORD or any third party with respect to the underground
passages of the mine that are not part of the Leased Premises.
(d) The provisions of this paragraph 12 shall survive the
termination of this Lease.
12.2 Notwithstanding paragraph 12.1, with respect to any
environmental issue (e.g., any environmental contamination, hazardous
wastes or substances, or compliance
18<PAGE>
with any environmental law, regulation, and/or ordinance), the
following indemnifications shall apply:
(i) Except as expressly provided in this Agreement, TENANT
agrees to defend, indemnify and hold harmless LANDLORD
(including, its officers, directors, employees and
agents) from and against all liabilities (including
third party liabilities) losses, claims, damages,
property damage, demands, judgments, fines or penalties
insofar as not prohibited by law, costs and expenses
(including, without limitation, clean-up costs and
reasonable attorneys' fees and disbursements) which
arise, or are alleged to arise, from or in connection
with (1) TENANT's violation of, or TENANT's compliance
with, any federal, state or local environmental law
relating to or arising out of [
]* provided, however, that this
indemnity shall not extend to losses, claims, damages,
property damage, demands, judgments, fines or penalties
directly related to
[
]*
* Indicates portions of text
that have been omitted. A
separate filing of such
omitted text has been made
with the Commission as part of
Registrant's application for
confidential treatment.
19<PAGE>
[
]*
that result in a violation of any existing
environmental law [
]*; or (2) the generation,
manufacture, refining, transportation, treatment,
storage, handling, disposal, discharge or spill by
TENANT or any third party occurring on or after the
date hereof of any hazardous or toxic substance or
wastes on the Leased Premises by TENANT. TENANT will
resist and defend any action, suit or proceeding
brought against LANDLORD in connection with the
foregoing by independent counsel selected by TENANT,
but which counsel is reasonably acceptable to LANDLORD.
In the event of [
]* causes (a) the [
] as provided in [
]*, or (b) TENANT's operations under [
]*
* Indicates portions of text
that have been omitted. A
separate filing of such
omitted text has been made
with the Commission as part of
Registrant's application for
confidential treatment.
20<PAGE>
[ ]*, to result in a violation
of any such environmental law, then TENANT shall notify
LANDLORD in writing and the parties shall diligently
work to [
]* provided in [
]* to bring them in compliance with such
law or laws.
(ii) LANDLORD agrees to defend, indemnify and hold harmless
TENANT (including its officers, directors, employees,
agents and partners, and the respective officers,
directors, employees and agents of said partners) from
and against all liabilities (including third party
liabilities), losses, claims, damages, property damage,
demands, judgments, fines or penalties insofar as not
prohibited by law, costs and expenses (including,
without limitation, clean-up costs and reasonable
attorneys' fees and disbursements) which arise, or are
alleged to arise, from or in connection with (1)
LANDLORD's violation of any federal, state or local
environmental law, (2) LANDLORD's compliance with any
federal, state or local environmental law, (3) [
]*
* Indicates portions of text
that have been omitted. A
separate filing of such
omitted text has been made
with the Commission as part of
Registrant's application for
confidential treatment.
21<PAGE>
[ ]* which are presently in
violation of a federal, state, or local environmental
law,(4) the generation, manufacture, refining,
transportation, treatment, storage, handling, disposal,
discharge or spill of any hazardous or toxic substance
or waste on the Leased Premises and the rest of the
Dunbar Facility by LANDLORD or any third parties
occurring prior to the date hereof, and (5) in the
event of [
]* causing (a) [
]* as provided in [ ]*, or
(b) [
]* to be
in violation of any federal, state, or local
environmental law, LANDLORD shall indemnify TENANT for
liabilities, claims, judgments, fines or damages
directly arising from [
]* as it relates to (a) [
]* as provided in [
]*, or (b) [
]*,
* Indicates portions of text
that have been omitted. A
separate filing of such
omitted text has been made
with the Commission as part of
Registrant's application for
confidential treatment.
22<PAGE>
[ ]*
LANDLORD will resist and defend any action, suit or
proceeding brought against TENANT in connection with
the foregoing by independent counsel selected by
LANDLORD, but which counsel is reasonably acceptable to
TENANT.
(iii) Except as provided above, where acts or omissions of
the nature referred to in clauses (i) and (ii) above by
both TENANT and LANDLORD (including their respective
officers, directors, employees, contractors or agents)
have caused any liabilities, claims, injuries
(including death resulting therefrom), property damage,
fines, penalties or assessments by any public agency
and costs or expenses, whether or not a third party's
acts or omissions also were causal, TENANT and LANDLORD
shall contribute to their common liability a pro rata
share based upon the relative degree of fault of each.
In such a case, the parties shall share all costs
equally until (1) there is a final court judgment
allocating fault between the parties, or (2) the
parties agree to such an allocation.
12.3 Notwithstanding any other provisions in this Lease to
the contrary, neither party nor its partners,
* Indicates portions of text
that have been omitted. A
separate filing of such
omitted text has been made
with the Commission as part of
Registrant's application for
confidential treatment.
23<PAGE>
agents, contractors, vendors or their employees, shall be liable to
the other for consequential or indirect loss or damage, including loss
of profit, loss of use, loss of operating time, loss of revenue,
increased costs of producing revenues, cost of capital, or loss of
goodwill, even if such party has been advised of the possibility of
such damages. The parties further agree that the waivers and
disclaimers of liability, indemnities, releases from liability, sole
remedy provisions and limitations on liability expressed in this Lease
shall survive termination or expiration of this Lease, and shall apply
(unless otherwise expressly indicated), whether in contract, equity,
tort or otherwise, even in the event of the fault, negligence,
including sole negligence, strict liability, or breach of warranty of
the party indemnified, released or whose liabilities are limited, and
shall extend to the partners, contractors, subcontractors, suppliers,
directors, officers and employees, agents and related or affiliated
entities of such party, and their partners, directors, officers and
employees.
12.4 If the expiration or earlier termination of this Lease
activates any environmental law requiring audits and/or filings,
(except as provided in Paragraph 12.5 and 12.6 below) TENANT shall
bear the cost of any such audits and filings required by such laws
insofar as they effect the Leased Premises.
24<PAGE>
12.5 LANDLORD and TENANT acknowledge and agree that
LANDLORD has been conducting explosive operations in the underground
passages of the Leased Premises for thirty (30) years, and that such
underground passages contain residue resulting from the detonation of
Explosives. LANDLORD agrees to remove and dispose of such residue at
a reasonable time prior to expiration or termination of the MASTER
LEASE, or as required by law. LANDLORD shall in consultation with
TENANT prepare a plan for removal and disposal of the residue.
LANDLORD and TENANT agree to share the costs and expenses of removal
and disposal of such residue pro rata based on the number of years
that the parties have been operating at the Leased Premises. The
parties acknowledge that TENANT may, at TENANT's option and at
TENANT's cost and expense, partially remove and dispose of the residue
in order to facilitate operations at the Leased Premises. Unless
otherwise agreed by the parties, LANDLORD shall have no responsibility
for such partial removal and disposal of residue.
Except as provided in Section 12.2 above or in this Section
12.5, in no event does either party indemnify the other from and
against liabilities (including third party liabilities), losses,
claims, damages, property damage, demands, judgments, fines or
penalties, costs and expenses (including, without limitation, clean-up
costs and reasonable attorneys' fees and disbursements) which arise,
or are
25<PAGE>
alleged to arise, from or in connection with the residue resulting
from detonation of explosives in the underground passages of the
Dunbar mine.
12.6 TENANT acknowledges that two (2) 1000 gallon
underground storage tanks are situate at the Leased Premises. Unless
otherwise agreed by the parties, LANDLORD agrees to remove, dispose
and , if necessary, remediate such underground storage tanks as soon
as reasonably possible. LANDLORD shall in consultation with TENANT
prepare a plan for removal and disposal of such underground storage
tanks. LANDLORD shall, at LANDLORD's cost and expense, also cleanup
any hazardous or toxic substance or waste resulting from spills,
leaks, or overflows of the contents of such tanks. TENANT shall
provide LANDLORD and LANDLORD's representatives with reasonable access
to the Leased Premises in order to remove the tanks and perform any
necessary cleanup.
13. DEFAULT.
-------
(a) Any of the following occurrences, conditions or acts shall
constitute an "Event of Default" under this Lease:
(i) If TENANT defaults in making payment when due of
any installment of rent, Additional Rent or other
amount payable hereunder by TENANT to LANDLORD,
and such default continues for a period of fifteen
(15) days after LANDLORD shall have given notice
to TENANT specifying such default;
26<PAGE>
(ii) If TENANT makes an assignment of this Lease or
sublets all or a portion of the Leased Premises,
except as is provided in Paragraph 17 herein, and
such default continues for a period of thirty (30)
days after LANDLORD shall have given notice to
TENANT specifying such default; or
(iii) If TENANT defaults in the observance or
performance of any material provision of this
Lease (other than those provisions referenced
hereinabove under subparagraph (a)(i) and (ii)),
and such default continues for a period of thirty
(30) days after LANDLORD shall have given notice
to TENANT specifying such default; provided,
however, if such default cannot be wholly cured
within such thirty (30) day period, then TENANT
shall not be deemed to be in default so long as
TENANT has commenced the cure of such default
within said thirty (30) day period and continues,
with due diligence, to prosecute said cure.
(b) Upon the occurrence of an Event of Default, LANDLORD shall
have the following remedies:
(i) With respect to an Event of Default described in
Paragraph 13(a)(i), if TENANT has not tendered
payment of the amount in default, together with
interest thereon at a rate per annum equal to one
27<PAGE>
(1) point over the Bank of America's "reference rate"
(the "Default Rate") as of the date of the Event of
Default (which interest shall be calculated from the
date of the Event of Default to the date of payment),
on or before the fifteenth (15th) day after LANDLORD
gives notice of such default under Paragraph 13(a)(i),
then LANDLORD shall have the right to terminate this
Lease by notice to TENANT. If LANDLORD exercises said
termination right, said notice shall be deemed
effective as of the fifteenth (15th) day following the
giving of such notice; provided, however, if TENANT
tenders payment of the amount in default, together with
the interest due thereon at the Default Rate, prior to
said effective date, said notice shall be deemed null
and void.
(ii) With respect to an Event of Default described in
Paragraph 13(a)(ii), LANDLORD shall have the right
to immediately terminate this Lease by notice to
TENANT.
(iii) With respect to an Event of Default described in
Paragraph 13(a)(iii), LANDLORD shall have the
right but not the obligation to take such
reasonable action as is necessary to cure the
28<PAGE>
default. All costs and expenses incurred by LANDLORD
shall be for the account of TENANT, and shall be paid
by TENANT, together with interest thereon at the
Default Rate from the date of the giving of such
statement to the date of payment, within thirty (30)
days after receipt of a reasonably detailed statement
itemizing the costs and expenses incurred by LANDLORD,
together with receipts for such amounts.
(iv) In the event of a default by LANDLORD under the terms
of the MASTER LEASE, TENANT shall have the right but
not the obligation to take such reasonable action as is
necessary to cure the default. All costs and expenses
incurred by TENANT shall be for the account of
LANDLORD, and shall be paid by LANDLORD, together with
interest thereon at the Default Rate from the date of
the giving of such statement to the date of payment,
within thirty (30) days after receipt of a reasonably
detailed statement itemizing the costs and expenses
incurred by TENANT, together with receipts for such
amounts.
14. INSURANCE.
---------
(a) TENANT shall at its expense obtain and maintain, or cause to
be obtained and maintained, insurance during the
29<PAGE>
term of this Lease: Comprehensive or Commercial General Liability
Insurance with bodily injury and property damage combined single
limits of at least [ ]* per
occurrence, with a deductible of not more than [
]*. Such insurance shall include, but not necessarily
be limited to, specific coverage for contractual liability
encompassing the indemnification provisions in Paragraph 12, broad
form property damage liability, personal injury liability, explosion
and collapse hazard coverage, and products/completed operations
liability.
(b) The amounts of insurance required in this Paragraph 14 may
be satisfied by TENANT purchasing primary coverage in the amounts
specified or by buying a separate excess Umbrella Liability policy
together with lower limit primary underlying coverage. The structure
of the coverage is TENANT's option, so long as the total amount of
insurance meets the requirements of this Paragraph 14. The coverages
described above and any Umbrella or Excess coverage should be
"occurrence" form policies. The insurance requirements listed above
are minimum requirements. LANDLORD and TENANT shall from time to time
renegotiate these minimum insurance requirements to reflect increases
in insured values where applicable. Further, neither failure to
comply nor full compliance by either party with the insurance
provisions of
* Indicates portions of text
that have been omitted. A
separate filing of such
omitted text has been made
with the Commission as part of
Registrant's application for
confidential treatment.
30<PAGE>
this Agreement shall limit or relieve TENANT from indemnifying and
holding harmless LANDLORD in compliance with the provisions of this
Agreement.
(c) In lieu of purchasing insurance coverages of the types and
in the amounts set forth in Paragraph 14 above, LANDLORD elects to
self-insure its liabilities under this Lease. Further, neither
failure to comply nor full compliance by either party with the
insurance provisions of this Lease shall limit or relieve LANDLORD
from indemnifying and holding harmless TENANT in compliance with the
provisions of this Lease.
(d) Upon LANDLORD's request, certificates of insurance
evidencing the coverages required above of TENANT shall be filed with
LANDLORD. Such certificates shall provide that the insurer will give
LANDLORD thirty (30) days advance notice of any changes in or
cancellation of coverage.
Neither failure of TENANT to comply with any or all of the
insurance provisions of the Agreement, nor the failure to secure
endorsements on the policies as may be necessary to carry out the
terms and provisions of the Agreement, shall be construed to limit or
relieve TENANT from any of its obligations under the Agreement,
including the Insurance Article.
15. CASUALTY. If, during the term of this Lease, the
--------
Leased Premises, including the mine situate on the Leased
31<PAGE>
Premises, shall be destroyed, or so injured or damaged by fire, the
elements, acts of God, or other insurable casualty, structural defects
or from any other cause so as to be unfit for occupancy or not be
economically feasible for the operation of TENANT's business, this
Lease shall, at TENANT's option, terminate and TENANT shall not be
liable to pay rent after such occurrence. If the injury or damage is
such that TENANT notifies LANDLORD as soon as reasonably possible (but
in no event more than ninety (90) days after such injury) that the
TENANT is diligently pursuing plans for restoration of the Leased
Premises and within ninety (90) working days from the delivery of such
notice, either restores the Leased Premises, or, if such restoration
cannot be completed in ninety (90) working days, commences and
diligently pursues such restoration, this Lease shall not be
terminated but the rent shall be suspended as to that portion of the
Leased Premises rendered untenantable or unsuitable for the operation
of TENANT's business and in such case any rent paid in advance but
unearned shall be refunded to TENANT. If TENANT does not notify
LANDLORD within the time hereinabove specified or if as soon as
possible (but in no event longer than ninety (90) working days after
the date of the injury), TENANT (a) is not diligently pursuing the
necessary repairs, or (b) the Parties agree that the repairs cannot be
completed within one hundred eighty (180) days following the date of
32<PAGE>
such notice, then this Lease may immediately be terminated by
LANDLORD.
16. QUIET ENJOYMENT. LANDLORD covenants and warrants that,
---------------
as long as no default on the part of TENANT shall have occurred and be
continuing under this Lease beyond any applicable grace or cure period
provided herein, LANDLORD or persons claiming by, through or under
LANDLORD will take no action or neglect to take any action which
interferes with the peaceful and quiet enjoyment and possession of the
Leased Premises by TENANT for the term hereof and any extensions to
the term.
17. ASSIGNMENT AND SUBLETTING.
-------------------------
(a) TENANT shall have the right to assign its rights and duties
under this Lease, either as collateral security or to another entity
created in connection with the financing arrangements entered into by
TENANT, by notifying LANDLORD of such assignment. In the event of any
such assignment, TENANT shall remain liable for performance hereunder
for the term of this Lease.
(b) Except as provided in the Lease, neither party may assign
this Lease in whole or in part, or any rights granted hereunder,
without the prior written consent of the other party, which consent
shall not be unreasonably withheld. Except as provided in this Lease,
any transfer, assignment, delegation or attempted transfer, assignment
or delegation
33<PAGE>
under this Lease or of any of such rights or duties herein granted or
imposed whether voluntary, by operation of law or otherwise, without
consent in writing, shall cause this Lease to be terminated at the
election of the party whose written consent has not been obtained.
TENANT shall not, without the prior written consent of LANDLORD,
sublet any portion of the Leased Premises. Subject to the foregoing,
this Lease shall be binding upon and shall inure to the benefit of the
parties and their successors and assigns.
Notwithstanding anything to the contrary contained herein,
LANDLORD may assign this Lease to the purchaser of all or
substantially all of LANDLORD's MYPOLEX(R) industrial diamonds
business and TENANT may assign this Lease to the purchaser of all or
substantially all of TENANT's business. The parties acknowledge that
consent of the Owners would be required for any such assignments.
18. GOVERNING LAW. This Lease and the performance thereof
-------------
shall be governed, interpreted, construed and regulated by the laws of
the Commonwealth of Pennsylvania.
19. SURRENDER. TENANT hereby agrees to surrender the
---------
Leased Premises in good condition and repair. Notwithstanding
anything herein to the contrary (except if required by law), TENANT
shall only be required to perform a Phase 1 environmental audit upon
the termination or expiration of this Lease. The provisions of this
Paragraph
34<PAGE>
shall survive the expiration or sooner termination of this Lease.
20. AMENDMENT AND RECORDATION. This Lease may not be
-------------------------
amended, supplemented, or modified, except by an instrument in
writing, signed by LANDLORD and TENANT. This Lease may not be
recorded by either party.
21. WAIVER. Failure of LANDLORD or TENANT to complain of
------
any act or omission on the part of the other party no matter how long
the same may continue, shall not be deemed to be a waiver by said
party of any of its rights hereunder. No waiver by LANDLORD or TENANT
at any time, express or implied, of any breach of any provision of
this Lease shall be deemed a waiver of a breach of any other provision
of this Lease or a consent to any subsequent breach of the same or any
other provision.
22. BROKER. Each party hereby represents and warrants to
------
the other party that it has not dealt with any real estate broker or
finder in connection with the transaction evidenced by this Lease, and
said party agrees to indemnify, defend and hold harmless the other
party from and against any threatened or asserted claims, liabilities,
losses or judgments (including reasonable attorneys' fees and
disbursements) by any such broker or finder claiming to have dealt
with the indemnifying party.
35<PAGE>
23. NOTICES. Every notice, approval, consent or other
-------
communication required or permitted under this Lease shall be in
writing, shall be deemed to have been duly given on the date of
receipt, and shall be either served personally on the party to whom
notice is to be given, or mailed to the party to whom notice is to be
given, by first class registered or certified mail, return receipt
requested, postage prepaid, and addressed to the addressee at the
address stated opposite its name below, or at the most recent address
specified by written notice given to the other party in the manner
provided in this Paragraph.
To LANDLORD
-----------
E. I. du Pont de Nemours and Company
Corporate Real Estate
1007 Market Street
Wilmington, DE 19898
with a copy to:
E. I. du Pont de Nemours and Company
Specialty Chemicals
Brandywine Building
1007 Market Street
Wilmington, DE 19898
Attn: Manager - Mypolex(R) industrial diamonds
and
36<PAGE>
E. I. du Pont de Nemours and Company
Specialty Chemicals
Repauno Plant
Repauno Drive
P. O. Box 68
Gibbstown, N.J. 08027
To TENANT
---------
Dynamic Materials Corporation
551 Aspen Ridge Drive
Lafayette, Colorado 80026
Attention: Chief Executive Officer
24. PARTIAL INVALIDITY. If any term, covenant, condition
------------------
or provision of this Lease or the application thereof to any person or
circumstance shall, at any time or to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such
term or provision to persons or circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected
thereby, and each term, covenant, condition and provision of this
Lease shall be valid and be enforced to the fullest extent permitted
by law. Any provision of this Lease which is invalid or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent to which it is held invalid or unenforceable, but any such
invalidity or unenforceability shall not invalidate or render
unenforceable such provision in any other jurisdiction.
37<PAGE>
25. NO PARTNERSHIP. Nothing in this Lease or the
--------------
transaction for which it is written shall constitute or create a joint
venture, partnership, agency or any other similar arrangement between
LANDLORD and TENANT, and neither party is authorized to act as agent
for the other party.
26. CAPTIONS. Titles or captions of Paragraphs contained
--------
in this Lease are inserted only as a matter of convenience and for
reference, and in no way define, limit, extend, describe or otherwise
affect the scope or meaning of this Lease or the intent of any
provision hereof. All Exhibits attached hereto shall be considered a
part hereof as though fully set forth herein.
27. COUNTERPARTS. The parties may execute this Lease in
------------
two (2) or more counterparts, which shall, in the aggregate, be signed
by both the parties; and each counterpart shall be deemed an original
instrument as against any party who has signed it.
28. SUCCESSION. All of the covenants, agreements,
----------
conditions and undertakings of this Lease shall extend and
38<PAGE>
inure to and be binding upon the successors and permitted assigns of
the respective parties hereto.
IN WITNESS WHEREOF, the parties hereunto have caused this
Agreement to be executed on the day and year first above written.
E. I. DU PONT DE NEMOURS AND COMPANY
By: /s/ W. A. Sullivan
------------------------------------------
Print Name: W. A. Sullivan
----------------------------------
Title: [ILLEGIBLE]
---------------------------------------
Date: 7/19/96
----------------------------------------
DYNAMIC MATERIALS CORPORATION
By: /s/ Paul Lange
------------------------------------------
Print Name: Paul Lange
----------------------------------
Title: Pres/CEO
---------------------------------------
Date: 7/22/96
----------------------------------------
39
CREDIT FACILITY AND
-------------------
SECURITY AGREEMENT
------------------
THIS AGREEMENT is made by and between the Company (as herein
defined) and the Bank (as herein defined).
In consideration of the covenants and agreements contained
herein, the Company and the Bank hereby mutually agree as follows:
ARTICLE I. DEFINITIONS
-----------------------
SECTION 1.1. GENERAL. Any accounting term used but not
-------
specifically defined herein shall be construed in accordance with
GAAP. The definition of each agreement, document, and instrument set
forth in Section 1.2 hereof shall be deemed to mean and include such
agreement, document, or instrument as amended, restated, or modified
from time to time.
SECTION 1.2. DEFINED TERMS. As used in this Agreement:
-------------
"ACCOUNT" shall mean (a) any account as defined in the UCC, and
-------
(b) any right to payment for Goods sold or leased or for services
rendered which is not evidenced by an Instrument or Chattel Paper,
whether or not it has been earned.
"ACCOUNT DEBTOR" shall mean the Person who is obligated on an
--------------
Account Receivable;
"ACCOUNT RECEIVABLE" shall mean:
------------------
(a) any account receivable, Account, Chattel Paper, Contract
Right, General Intangible, Document, or Instrument owned,
acquired, or received by a Person,
(b) any other indebtedness owed to or receivable owned,
acquired, or received by a Person of whatever kind and
however evidenced, and
(c) any right, title, and interest in a Person's Goods which
were sold, leased, or furnished by that Person and gave rise
to either (a) or (b) above, or both of them. This includes,
without limitation:
(1) any rights of stoppage in transit of a Person's sold,
leased, or furnished Goods,
(2) any rights to reclaim a Person's sold, leased, or
furnished Goods, and
(3) any rights a Person has in such sold, leased, or
furnished Goods that have been returned
"AFFILIATE" shall mean, with respect to a specified Person, any
---------
other Person: (a) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with such Person, (b)which beneficially owns or holds with
power to vote five percent (5%) or more of any class of the voting
stock of such Person, (c) five percent (5%) or more of the voting
stock of which other Person is beneficially owned or held by such
Person, or (d) who is an officer or director of such Person.
"AFFILIATE BANK" shall mean any of the Subsidiaries (other than
--------------
the Bank) of KeyCorp and its successors.
<PAGE>
"BANK" shall mean Key Bank of Colorado, a state chartered banking
----
corporation, and its successors and assigns.
"BUSINESS CONDITION" shall mean the financial condition, business
------------------
and assets of a Person.
"BUSINESS DAY" shall mean a day of the year on which banks are
------------
not required or authorized to close in Denver, Colorado and, if the
applicable Business Day relates to any LIBOR Rate Loan, on which
dealings are carried on in the London interbank eurodollar market.
"CAPITAL EXPENDITURES" shall mean any and all amounts invested,
--------------------
expended or incurred by a Person in respect of the purchase,
improvement, renovation or expansion of any land and depreciable or
amortizable property of such Person (including expenditures required
to be capitalized in accordance with GAAP).
"CASH COLLATERAL ACCOUNT" shall mean a commercial Deposit Account
-----------------------
designated "cash collateral account" and maintained by the Company
with Bank, without liability by Bank to pay interest thereon, from
which account Bank shall have the exclusive right to withdraw funds
until all Obligations are paid, performed, satisfied, enforced, and
observed in full.
"CASH SECURITY" shall mean all cash, Instruments, Deposit
-------------
Accounts, and other cash equivalents, whether matured or unmatured,
whether collected or in the process of collection, upon which Company
presently has or may hereafter have any claim, that are presently or
may hereafter be existing or maintained with, issued by, drawn upon,
or in the possession of Bank.
"CHATTEL PAPER" shall mean "chattel paper" as defined in the UCC.
-------------
"CODE" shall mean the Internal Revenue Code of 1986, as amended
----
from time to time.
"COLLATERAL" shall have the meaning described in Section 3.1
----------
below.
"COLLECTIONS" shall have the meaning described in Section 4.1(a)
-----------
of this Agreement.
"COMMONLY CONTROLLED ENTITY" shall mean a Person, whether or not
--------------------------
incorporated, which is under common control with the Company within
the meaning of Section 414(b) or (c) of the Code.
"COMPANY" shall mean Dynamic Materials Corporation, a Colorado
-------
corporation, with its principal office located at 551 Aspen Ridge Dr.,
Lafayette, Colorado 80026, and its successors.
"COMPANY'S LOCATION" shall mean the location of: (a) Company's
------------------
place of business, if there is only one such place of business; or (b)
if there is more than one place of business, the place (1) from which
Company manages the main part of its business operations, and (2)
where persons dealing with Company would normally look for credit
information.
"CONTRACT RIGHT" shall mean (a) any contract right, and (b) any
--------------
right to payment under a contract not yet earned by performance and
not evidenced by an Instrument or Chattel Paper.
2<PAGE>
"CONTRACT YEAR" shall mean the twelve (l2) month period which
-------------
commences on each anniversary of the execution of the Agreement.
"CREDIT LOAN" shall mean any of the revolving Loans described in
-----------
Section 2.1(a)(i) of this Agreement.
"CURRENT ASSETS" and "CURRENT LIABILITIES" shall mean the amounts
-------------- -------------------
as determined in accordance with GAAP not inconsistent with present
accounting procedures, except that all Credit Loans shall also be
considered as Current Liabilities..
"DEED OF TRUST" shall mean the Deed of Trust given by the Company
-------------
to the Bank upon certain real property owned by the Company located in
Lafayette, Colorado.
"DEPOSIT ACCOUNT" shall mean (a) any deposit account, and (b) any
---------------
demand, time, savings, passbook, or a similar account maintained with
a bank, savings and loan association, credit union, or similar
organization, other than an account evidenced by a certificate of
deposit.
"DOCUMENT" shall mean (a) any document, (b) any document of
--------
title, including a bill of lading, dock warrant, dock receipt,
warehouse receipt or order for the delivery of Goods, and any other
document which in the regular course of business or financing is
treated as adequately evidencing that the Person in possession of it
is entitled to receive, hold, and dispose of the document and the
Goods it covers, and (c) any receipt covering Goods stored under a
statute requiring a bond against withdrawal or a license for the
issuance of receipts in the nature of warehouse receipts even though
issued by a Person who is the owner of the Goods and is not a
warehouseman.
"ENVIRONMENTAL LAW" shall mean any federal, state, or local
-----------------
statute, law, ordinance, code, rule, regulation, order or decree
regulating, relating to, or imposing liability upon a Person in
connection with the use, release or disposal of any hazardous toxic or
dangerous substance, waste or material.
"EQUIPMENT" shall mean "equipment" (as defined in the UCC) and
---------
fixtures (as defined in the UCC) including, without limitation, all
machinery, equipment, furniture, furnishings, fixtures, and packaging
production equipment, parts, material handling, supplies, and motor
vehicles (titled or untitled) of every kind and description, now or
hereafter owned by the Company.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended from time to time.
"EVENT OF DEFAULT" shall mean any one or more of the occurrences
----------------
described in ARTICLE IX hereof.
"FEDERAL FUNDS RATE" shall mean, during any period, a fluctuating
------------------
interest rate per annum for each day during such period, that is the
rate determined by Bank to be the opening rate per annum paid or
payable by it on the day in question in its region market for federal
funds purchased overnight from other banking institutions.
3<PAGE>
"FEDERAL FUNDS RATE LOAN" shall mean any Loan that bears interest
-----------------------
with reference to the Federal Funds Rate.
"FINAL MATURITY DATE" shall mean the seventh annual anniversary
-------------------
date of this Agreement.
"FUNDED DEBT" shall mean all Indebtedness which matures more than
-----------
one year after the date such Indebtedness was incurred, less any
portion thereof that is payable within twelve (l2) months following
the date as of which the calculation is made.
"FUNDS FROM OPERATIONS" shall mean the aggregate of the Company's
---------------------
profit before taxes and extraordinary items plus depreciation, plus
amortization, plus deferred income taxes.
"GAAP" shall mean generally accepted accounting principles as
----
then in effect, which shall include the official interpretations
thereof by the Financial Accounting Standards Board, consistently
applied.
"GENERAL INTANGIBLE" shall mean (a) any "general intangible" (as
------------------
defined in the UCC), and (b) any personal property (including things
in action) other than Goods, Accounts, Contract Rights, Chattel Paper,
Documents, Instruments, and money.
"GOODS" shall mean (a) any "goods" (as defined in the UCC), and
-----
(b) all things which are movable at the time the security interest
granted Bank under the Agreement attaches or which are fixtures but
does not include money, Instruments, Documents, Accounts, Chattel
Paper, General Intangibles, or Contract Rights.
"HAZARDOUS MATERIALS" shall mean any substance or material
-------------------
defined or designated as a hazardous or toxic waste, hazardous or
toxic material, hazardous or toxic substance, or other similar term,
by any United States federal, state or local environmental statute,
regulation or ordinance.
"INDEBTEDNESS" shall mean for any Person (i) all obligations to
------------
repay borrowed money, direct or indirect, incurred, assumed, or
guaranteed, (ii) all obligations for the deferred purchase price of
capital assets excluding trade payables, (iii) all obligations under
conditional sales or other title retention agreements, and (iv) all
lease obligations which have been or should be capitalized on the
books of such Person.
"INSTRUMENT" shall mean "instruments" (as defined in the UCC).
----------
"INTEREST PERIOD" means, with respect to any LIBOR Rate Loan, the
---------------
period commencing on the date such Loan is made, continued, or
converted and ending on the last day of such period as selected by the
Company pursuant to the provisions below and, thereafter, each
subsequent period commencing on the last day of the immediately
preceding Interest Period and ending on the last day of such period as
selected by the Company pursuant to the provisions below. The
duration for any LIBOR Rate Loan which is a Credit Loan shall be 1
month, 2 months, or 3 months, as selected by the Company; and the
duration for any LIBOR Rate Loan which is a Term Loan shall be 3
months; provided, however, that whenever the last day of any Interest
Period would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall occur on the next succeeding
Business Day, and; provided, further, however, that if such extension
of time would
4<PAGE>
cause the last day of such Interest period for a LIBOR Rate Loan to
occur in the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business Day.
"INVENTORY" shall mean all "inventory" (as defined in the UCC)
---------
now owned or hereafter acquired by the Company, including, without
limitation, all Goods, merchandise, work-in-process, raw materials,
finished Goods, and inventory held for lease to other Persons; all
other materials, supplies, and tangible personal property of any kind,
nature, or description held for sale or lease or for display or
demonstration; and all documents of title or other Documents
pertaining thereto, and all proceeds of the foregoing.
"LIBOR RATE" means, for any Interest Period for any LIBOR Rate
----------
Loan, an interest rate per annum (rounded upwards to the next higher
whole multiple of 1/16% if such rate is not such a multiple) equal at
all times during such Interest Period to the quotient of (a) the rate
per annum (rounded upwards to the next higher whole multiple of 1/16%
if such rate is not such a multiple) at which deposits in United
States dollars are offered at 11:00 a.m. (London, England time) (or as
soon thereafter as is reasonably practicable) by prime banks in the
London interbank eurodollar market two Business Days prior to the
first day of such Interest Period in an amount and maturity of such
LIBOR Rate Loan, divided by (b) a number equal to 1.00 minus the
aggregate (without duplication) of the rates (expressed as a decimal
fraction) of the LIBOR Reserve Requirements current on the date two
Business Days prior to the first day of such Interest Period.
"LIBOR RATE LOAN" shall mean any Loan that bears interest with
---------------
reference to the LIBOR Rate.
"LIBOR RATE MARGIN" shall mean: (i) for the period commencing on
-----------------
the date of this Agreement and ending on September 30, 1996, 125 basis
points, and (ii) thereafter, such Margin as is adjusted pursuant to
Section 2.3(b)(ii) of this Agreement.
"LIBOR RESERVE REQUIREMENTS" means, for any Interest Period for
--------------------------
any LIBOR Rate Loan, the maximum reserves (whether basic,
supplemental, marginal, emergency, or otherwise) prescribed by the
Board of Governors of the Federal Reserve System (or any
successor) with respect to liabilities or assets consisting of or
including "Eurocurrency liabilities" (as defined in Regulation D of
the Board of Governors of the Federal Reserve System) having a term
equal to such Interest Period.
"LIEN" shall mean any mortgage, security interest, lien, charge,
----
encumbrance on, pledge or deposit of, or conditional sale or other
title retention agreement with respect to any property or asset.
"LOAN" OR "LOANS" shall mean any of the loan advances to the
---- -----
Company extended by the Bank in accordance with Section 2.1(a).
"LOAN BASE" shall mean an amount not in excess of the sum of the
---------
following:
(a) the greater of (1) fifty percent (50%) of the net book value
of all real property and Equipment of the Company, or (2)
seventy percent (70%) of the total appraised value of all
real property and Equipment of the Company as reflected on
an appraisal satisfactory to the Bank, in its reasonable
discretion, plus
5<PAGE>
(b) eighty percent (80%) of the amount due and owing on
Qualified Accounts Receivable, plus
(c) fifty percent (50%) of the cost or market value (whichever
is lower) of Company's Eligible Inventory which consists of
raw Inventory, plus
(d) thirty percent (30%) of the cost or market value (whichever
is lower) of Company's Eligible Inventory which consists of
work-in-process.
"LOAN CERTIFICATE" shall mean the certificate in the form of
----------------
Exhibit B attached hereto.
"LOAN DOCUMENTS" shall mean this Agreement, the Note, the Deed of
--------------
Trust, the Environmental Indemnity Agreement, and any other documents
relating thereto.
"LOCKBOX" shall have the meaning specified in Section 4.1 of this
-------
Agreement.
"LOCKBOX BANKS" shall have the meaning specified in Section 4.1
-------------
of this Agreement.
"MARGIN ADJUSTMENT DATE" shall have the meaning specified in
----------------------
Section 2.3(b) of this Agreement.
"MARGIN STOCK" shall have the meaning given to it under
------------
Regulation U of the Board of Governors of the Federal Reserve System,
as amended from time to time.
"MATERIAL ADVERSE EFFECT" shall mean material adverse effect on
-----------------------
(i) the ability of the Company and any Subsidiaries taken as a whole
to fulfill their obligations under any of the Loan Documents or
(ii) the Business Condition of the Company and any Subsidiaries taken
as a whole.
"MATERIAL AGREEMENTS" shall mean (a) any agreement to which the
-------------------
Company is a party which provides for the receipt or expenditure by
the Company or any Subsidiary of more than $150,000.00 in any 12-month
period, other than sales orders in the ordinary course of business,
and (b) any other agreement to which the Company is a party which is
material to the business of the Company.
"MULTIEMPLOYER PLAN" shall mean a Plan described in ERISA which
------------------
covers employees of the Company and employees of any other Person,
which together would be treated as a single employer for purposes of
ERISA.
"NOTE" shall mean the promissory note of Company in the form of
----
Exhibit A attached hereto evidencing the Loans;
"OBLIGATIONS" shall mean any and all indebtedness, obligations,
-----------
liabilities, contracts, indentures, agreements, warranties, covenants,
guaranties, representations, provisions, terms, and conditions of
whatever kind, now existing or hereafter arising, and however
evidenced, that are now or hereafter owed, incurred, or executed by
Company to, in favor of, or with Bank or any Affiliate Bank.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
----
established pursuant to subtitle A of Title IV or ERISA.
6<PAGE>
"PERMITTED INVESTMENT" shall mean the Company's:
--------------------
(a) investments existing on July 19, 1996 as disclosed in the
Schedule on Exhibit C hereto;
(b) extensions of credit in the nature of Accounts Receivable,
or notes receivable arising from the Company's sale or lease
of goods or services in the ordinary course of business;
(c) investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar
transactions in the ordinary course of business;
(d) investments (excluding debt obligations) received in
connection with the bankruptcy or reorganization of the
Company's customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, such
customers or suppliers arising form transactions in the
ordinary course of business;
(e) investments consisting of (i) compensation of Company
employees, officers or directors so long as the Company's
Board of Directors lawfully determines that such
compensation is in the Company's best interest, (ii) travel
advances, employee relocation loans and other employee loans
and advances lawfully made in the ordinary course of
business, and (iii) loans lawfully made to Company's
employees, officers or directors relating to the purchase of
equity securities of Company;
(f) investments in marketable U.S. Treasury and Agency
obligations;
(g) investments in certificates of deposit and bankers'
acceptances issued or created by any domestic commercial
bank;
(h) investments in instruments issued or enhanced by a member
bank of the Federal Reserve System;
(i) investments in debt obligations issued by a corporation, or
state or municipal entity rated Bb or better in accordance
with a rating system employed by either Moody's Investor's
Service, Inc. or Standard & Poor's Corporation; or
(j) investments of other types aggregating not in excess of
$200,000.00.
"PERMITTED LIEN" shall mean the following, subject to the
--------------
limitation set forth in Section 8.19 hereto:
(a) Liens existing as of the date of this Agreement and
disclosed in the Schedule on Exhibit C hereto;
(b) Liens for taxes or governmental assessments, charges, or
levies the payment of which is not at the time required by
any provision of this Agreement or any other Loan Document
unless such Liens are not delinquent or are being contested
in good faith by appropriate proceedings;
(c) Liens that secure the Company's Indebtedness for the
purchase price of any real or personal property and that
only encumber the property purchased, improvements or
accessions thereto, and proceeds thereof;
(d) Liens securing capital lease obligations;
(e) Liens on Equipment leased by the Company pursuant to an
operating lease in the ordinary course of business
(including proceeds thereof and accessions thereto) incurred
solely for the purpose of financing the lease of such
Equipment (including Liens arising from UCC financing
statements regarding leases permitted by this provision);
7<PAGE>
(f) Easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar Liens
affecting real property not interfering in any material
respect with the ordinary conduct of the business of the
Company;
(g) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payment of customs duties in
connection with the importation of Goods;
(h) Liens imposed by law, such as Liens of landlords, carriers,
warehousemen, mechanics, and materialmen arising in the
ordinary course of business for sums not yet due or being
contested by appropriate proceedings promptly initiated and
diligently conducted, provided the Company has set aside
proper amounts, determined in accordance with GAAP, for the
payment of all such Liens;
(i) Liens incurred or deposits made in the ordinary course of
business in connection with worker's compensation,
unemployment insurance, and other types of social security,
or to secure the performance of tenders, statutory
obligations, and surety and appeal bonds, or to secure the
performance and return of money bonds and other similar
obligations, but excluding Indebtedness;
(j) Liens in respect of judgments or awards with respect to
which the Company shall, in good faith, be prosecuting an
appeal or proceeding for review and with respect to which a
stay of execution upon such appeal or proceeding for review
shall have been obtained;
(k) Liens in favor of the Bank or any Affiliate Bank; and
(l) Liens incurred in connection with the extension, renewal,
refunding, refinancing, modification, amendment or
restatement of Indebtedness secured by Liens of the type
described in clauses (a), (c), (d) and (k) above, provided
that any extension, renewal or replacement Lien shall be
limited to the property encumbered by the existing Lien and
the principal amount of the indebtedness being extended,
renewed or refinanced does not increase.
"PERSON" shall mean any natural person, corporation (which shall
------
be deemed to include business trust), association, limited liability
company, partnership, joint venture, political entity, or political
subdivision thereof.
"PLAN" shall mean any plan (other than a Multiemployer
----
Plan) defined in ERISA in which the Company or any Subsidiary is, or
has been at any time during the preceding two (2) years, an "employer"
or a "substantial employer" as such terms are defined in ERISA.
"PROCEEDS" means any "proceeds" (as defined in the UCC).
--------
"QUALIFIED ACCOUNT RECEIVABLE" means an Account Receivable of
----------------------------
Company which, at all times until it is collected in full,
continuously meets the following requirements:
(a) is not subject to any claim for credit, allowance, or
adjustment by the Account Debtor or any set off or counter
claim;
(b) arose in the ordinary course of business from the
performance (fully completed) of services or bona fide sale
of Goods which have been shipped to the Account Debtor, and
not more than ninety one (91) days have elapsed since the
date of the Company's invoice for performance (fully
completed) of services or the sale of Goods for or to the
Account Debtor;
8<PAGE>
(c) does not arise outside of the United States of America,
except those Accounts Receivable which the Bank has
determined under subpart (k) below is not unsatisfactory in
any respect;
(d) is not subject to an assignment, pledge, claim, mortgage,
lien, or security interest of any type except that granted
to or in favor of Bank;
(e) Account Debtor has not rejected, returned, revoked
acceptance of, or refused to accept any of the Goods which
are the subject of the Account Receivable;
(f) Company has not received any Instrument or Chattel Paper
with respect to or in payment of the Account Receivable;
(g) are Accounts Receivable with respect to which the Account
Debtor is located in any state which requires that the
Company, in order to sue any Person in such state's court,
either: (i) qualify to do business in such state, or (ii)
file a report with the taxation division of such state for
the then current year, so long as the Company has fulfilled
such requirements to the extent applicable for the then
current year;
(h) are owed by the United States or any department, agency, or
instrumentality thereof so long as the Company has complied
with the Federal Assignment of Claims Act in respect of the
Bank's security interest therein as granted hereunder;
(i) are owed by any State or any department, agency, or
instrumentality thereof so long as the Company has complied
with any applicable statutory or regulatory requirements
thereof in respect of the Bank's security interest therein
as granted hereunder;
(j) are not owed by an Affiliate of the Company; and
(k) Bank, in the exercise of its reasonable credit judgment, has
not determined that the Account Receivable is unsatisfactory
in any respect.
"QUALIFIED INVENTORY" shall mean only such Inventory of the
-------------------
Company, valued at the lower of (i) cost (on a first in, first out
basis), or (ii) fair market value, as the Bank, in its reasonable
discretion, shall from time to time consider to be Eligible Inventory.
"RELATED EXPENSES" means any and all reasonable costs,
----------------
liabilities, and expenses (including without limitation, losses,
damages, penalties, claims, actions, reasonable attorney's fees, legal
expenses, judgments, suits, and disbursements) incurred by, imposed
upon, or asserted against, Bank in any attempt by Bank:
(a) to obtain, preserve, perfect, or enforce any security
interest evidenced by (i) the Agreement, or (ii) any other
pledge agreement, mortgage deed, deed of trust,
hypothecation agreement, guaranty, security agreement,
assignment, or security instrument executed or given by
Company to or in favor of Bank;
(b) to obtain payment, performance, and observance of any and
all of the Obligations,
(c) to maintain, insure, audit, collect, preserve, repossess,
and dispose of any of the Collateral, or
(d) incidental or related to (a) through (c) above.
"RELATED TRANSACTION DOCUMENTS" shall mean the documents listed
-----------------------------
on Exhibit C.
"REMITTANCES" shall have the meaning described in Section 4.1(a)
-----------
of this Agreement.
9<PAGE>
"REPORTABLE EVENT" shall have the meaning assigned to that term
----------------
in Section 4043 of ERISA for which the requirement of 30 days' notice
to the PBGC has not been waived by the PBGC.
"SINGLE EMPLOYER PLAN" shall mean any Plan as defined in
--------------------
Section 4001(a)(15) of ERISA.
"SUBORDINATED DEBT" shall mean Indebtedness of a Person which is
-----------------
subordinated, in a manner satisfactory to the Bank, to all
Indebtedness owing to the Bank.
"SUBSIDIARY" shall mean any Person of which more than fifty
----------
percent (50%) of (i) the voting stock entitling the holders thereof to
elect a majority of the Board of Directors, managers, or trustees
thereof, or (ii) the interest in the capital or profits of such
Person, which at the time is owned or controlled, directly or
indirectly, by the Company or one or more other Subsidiaries.
"TANGIBLE NET WORTH" shall mean the total assets of a Person less
------------------
(i) such Person's Total Indebtedness, and (ii) the aggregate amount of
all of such Person's intangible assets.
"TERMINATION DATE" shall mean the third anniversary date of this
----------------
Agreement or such earlier date on which the commitment of the Bank to
make Loans pursuant to Section 2.1(a) shall have been terminated
pursuant to this Agreement.
"TERM LOAN" shall mean any of the term loans described in Section
---------
2.1(a)(ii) of this Agreement.
"TOTAL INDEBTEDNESS" shall mean the total of all items of
------------------
indebtedness or liability which in accordance with GAAP would be
included in determining total liabilities on the liability side of the
balance sheet as of the date of determination.
"UCC" shall mean the Uniform Commercial Code in effect in the
---
State of Colorado from time to time.
The foregoing definitions shall be applicable to the singulars
and plurals of the foregoing defined terms. All accounting and
financial terms used in this Section and in this Agreement and not
otherwise defined shall be determined in accordance with GAAP
consistently applied.
ARTICLE II. CREDIT FACILITY
----------------------------
SECTION 2.1 (A). AMOUNT OF CREDIT. The Bank hereby agrees,
----------------
subject to the terms and conditions of this Agreement, to make,
continue, and convert Credit Loans to the Company as follows:
(i) The Bank will make one or more revolving Credit Loans to the
Company from time to time on and after the date of this Agreement
through and including the Termination Date, in an aggregate
principal amount not to exceed the lesser of (i) Seven Million
Five Hundred Thousand ($7,500,000.00), or (ii) the Loan Base as
calculated from time to time. The Bank will also continue Credit
Loans of any type or convert Credit Loans of one type into Loans
of another type. Until the Termination Date, the Company may
borrow, repay, and reborrow such Credit Loans up to the maximum
amount of such Credit Loans. The Company may from time to time,
upon not less than ten (l0) Business Days' prior notice
10<PAGE>
made by telegraph, telex, or telephone and confirmed in a writing
delivered to the Bank, terminate or reduce permanently, the
commitment of the Bank to make Loans pursuant to this Section
2.1(a)(i) hereof by the amount of $50,000.00 or any integral
multiple thereof; provided that the Company shall immediately pay
to the Bank the amount, if any, by which the aggregate principal
amount of such Loans outstanding exceeds such reduced commitment
of the Bank at that time. If, however, after giving effect to
any such payment any LIBOR Rate Loans would be prepaid prior to
the end of their respective Interest Periods, the notice of the
termination or permanent reduction in the commitment of the Bank
to make Loans pursuant to this Section 2.1(a)(i) shall be deemed
to be the Company's request that such termination or reduction be
effective on the last day of such Interest Periods.
(ii) If no Event of Default shall have occurred and be continuing, the
Company may, on or before the Termination Date elect to convert
all or a portion of the Credit Loans outstanding to one or more
Term Loans; whereupon the amount of the Credit Loans available to
be borrowed under Section 2.1(a)(i) above shall be permanently
and automatically reduced by the amount of such Credit Loans
converted to Term Loan(s). The Company shall make such election
by written notice delivered to Bank not less than fifteen (15)
days prior to the effective date of the Term Loan(s), specifying
the principal amount of the Term Loan(s) and the initial interest
rate applicable thereto (i.e. whether the Term Loan is to be a
LIBOR Rate Loan or a Federal Funds Rate Loan). Each Term Loan
shall be in an amount of $50,000.00 or an integral multiple
thereof. All Credit Loans outstanding on the Termination Date
shall automatically be converted to a single Term Loan. The
Company shall repay each Term Loan on a fully amortized basis
over a period commencing on the date of each Term Loan and ending
on a date not later than the Final Maturity Date. The principal
amount of each Term Loan shall be payable in consecutive and
equal quarterly installments on the last day of each March, June,
September and December (commencing with the first such date
following the fixing of the Term Loan) until the maturity date of
such Term Loan or the earlier acceleration of the maturity of the
Term Loan in accordance with ARTICLE XI hereof, when any
remaining principal balance shall be due and payable. Each
principal installment shall be an amount equal to the original
principal amount of the Term Loan divided by the number of
calendar quarters occurring between the date of the making of the
Term Loan and the maturity date of such Term Loan.
(iii) Each Credit Loan or Term Loan shall be either a LIBOR Rate Loan
or a Federal Funds Rate Loan, subject to the following
conditions:
(A) Each Loan that is made or continued as or converted into a
LIBOR Rate Loan shall be made, continued, or converted on such
Business Day, in such amount (equal to $10,000.00 or an integral
multiple thereof), and with such an Interest Period as the
Company shall request by written notice given to the Bank no
later than 11:00 a.m. (Denver, Colorado time) on the third
Business Day prior to the date of disbursement or continuation of
or conversion into the requested LIBOR Rate Loan. Each written
notice of any LIBOR Rate Loan shall be irrevocable and binding on
the Company and the Company shall indemnify the Bank against any
loss or expense incurred by the Bank as a result of any failure
by the Company to consummate such LIBOR Rate Loan, including,
without limitation, any loss (including loss of anticipated
profits) or expense incurred by reason of
11<PAGE>
liquidation or reemployment of deposits or other funds acquired
by the Bank to fund the LIBOR Rate Loan. A certificate as to the
amount of such loss or expense submitted by the Bank to the
Company shall be conclusive and binding for all purposes, absent
manifest error. In the event that the Company fails to provide
the Bank with the required written notice, the Company shall be
deemed to have given a written notice that such LIBOR Rate Loan
shall be converted to a Federal Funds Rate Loan on the last day
of the applicable Interest Period. In no event shall the Company
be permitted to select a LIBOR Rate Loan having an Interest
Period ending after the Final Maturity Date;
(B) Each Loan that is made as or converted into a Federal Funds
Loan shall be made or converted on such Business Day and in such
amount (equal to $10,000.00 or any integral multiple thereof) as
the Company shall request by written notice given to the Bank no
later than 11:00 a.m. (Denver, Colorado time) on the date of
disbursement of or conversion into the requested Federal Funds
Loan;
(C) Each LIBOR Rate Loan that is a Term Loan shall have an
Interest Period of three (3) months.
SECTION 2.2. LOANS EVIDENCED BY PROMISSORY NOTE. All Loans
----------------------------------
shall be evidenced by the Note, dated the date hereof. The Note shall
be a master note, and the principal amount of all Loans outstanding
shall be evidenced by the Note or any ledger or other record of the
Bank, which shall be presumptive evidence of the principal owing and
unpaid on the Note.
SECTION 2.3. INTEREST RATES. The Company shall pay interest on
--------------
the unpaid principal amount of each Credit Loan and Term Loan made by
the Bank from the date of such Credit Loan or Term Loan, as the case
may be, until such principal amount shall be paid in full as follows:
(a) (i) During such periods as any LIBOR Rate Loan comprising a
Credit Loan or Term Loan is outstanding, at a rate per annum
equal to the sum of the LIBOR Rate and the LIBOR Rate Margin (as
described in sub-part (b) below) in effect from time to time from
and after each Margin Adjustment Date occurring on or prior to
the date of the making, the conversion or the continuation of
such Loan, as the case may be, in accordance with this Agreement.
(ii) During such periods as any Federal Funds Rate Loan
comprising a Credit Loan or Term Loan is outstanding, at a rate
per annum equal at all times to the sum of the Federal Funds Rate
plus two hundred (200) basis points.
(b) (i) Except as otherwise provided herein, the LIBOR Rate Margin
in effect shall be adjusted as of the first day of each calendar
quarter, beginning with October 1, 1996 (each a "Margin
Adjustment Date"), in accordance with Section 2.3(b)(ii) below.
The LIBOR Rate Margin in effect shall be applicable to new
advances for Credit or Term Loans as of the date of such
advances, and to converted or continued Loans as of the date of
conversion or continuation, occurring within the calendar quarter
in which such LIBOR Rate Margin is in effect. With respect to
any LIBOR Rate Loan for which the last day of the Interest Period
is a date subsequent to the Margin Adjustment Date, such LIBOR
Rate Margin shall not be applicable until the continuation date
of such LIBOR Rate Loan, if applicable, subsequent to the Margin
Adjustment Date.
12<PAGE>
(ii) As of any Margin Adjustment Date, the LIBOR Rate Margin
shall be adjusted to be the percentage indicated in the following
table corresponding to the Company's Indebtedness to Tangible Net
Worth Ratio, which shall be calculated from the balance sheet
provided by the Company to the Bank under Section 8.1(a) of this
Agreement immediately preceding the Margin Adjustment Date.
Indebtedness to Tangible LIBOR Rate Margin
------------------------ -----------------
Net Worth Ratio
---------------
>= 2.00 to 1.00 150 Basis Points
<= 1.99 to 1.00 125 Basis Points
but > 1.00 to 1.00
<= 1.00 to 1.00 100 Basis Points
(iii) Any such adjustment to the LIBOR Rate Margin shall only
remain effective until the earlier of the next Margin Adjustment
Date or the date on which an Event of Default shall occur
(excepting therefrom an Event of Default created by the Company's
Indebtedness to Tangible Net Worth exceeding 1.99:1.00 as
required under Section 8.18 of this Agreement in which case the
LIBOR Rate Margin shall be one hundred fifty (150) basis points).
The LIBOR Rate Margin to be effective from such earlier date and
from time to time thereafter shall be the LIBOR Rate Margin as
adjusted pursuant to this Agreement; provided, however, that: (i)
-----------------
if the Company shall not deliver the financial statements in
accordance with Section 8.1 of this Agreement, the LIBOR Rate
Margin shall be two hundred (200) basis points per annum, and
(ii) if an Event of Default (excepting therefrom an Event of
Default created by the Company's Indebtedness to Tangible Net
Worth exceeding 1.99:1.00 as required under Section 8.18 of this
Agreement) shall occur which has not been waived in writing by
the Bank, the interest rate shall be the interest rate applicable
pursuant to Sub-Section (c) below.
(c) Upon the occurrence of any Event of Default and so long as such
Event of Default is continuing (excepting therefrom an Event of
Default created by the Company's Indebtedness to Tangible Net
Worth exceeding 1.99:1.00 as required under Section 8.18 of this
Agreement, or an Event of Default created by the Company's
failure to deliver the financial statements in accordance with
Section 8.1 of this Agreement), the unpaid principal amount of
all Loans, and accrued interest thereon, or any fees or any and
other sum payable hereunder, shall thereafter until paid in full
bear interest at a rate per annum equal to six hundred (600)
basis points in excess of the Federal Funds Rate in effect from
time to time.
SECTION 2.4. INTEREST PAYMENTS. The Company shall pay to the
-----------------
Bank interest on the unpaid principal balance of each Federal Funds
Rate Loan on either (i) the date such Loan is converted to a LIBOR
Rate Loan, or (ii) the last date of each March, June, September and
December. The Company shall pay to the Bank interest on the unpaid
principal balance of each LIBOR Rate loan on (i) the date such Loan is
converted to a Federal Funds Rate Loan, or (ii) the last day of the
applicable Interest Period of such Loan, whichever is earlier.
SECTION 2.5. PREPAYMENT. The Company may prepay any Federal
----------
Funds Rate Loans in whole, or in part, at any time or times. The
Company may prepay any LIBOR Rate Loan, in whole or in part, only on
the last day of the Interest Period applicable to such LIBOR Rate Loan
upon
13<PAGE>
not less than three (3) Business Days' prior written notice given to
the Bank. Each prepayment of a Term Loan shall be applied to the
principal installments in the inverse order of their respective
maturities.
SECTION 2.6. FEES. The Company shall pay to the Bank:
----
(a) A commitment fee of $37,500.00 payable upon the execution of this
Agreement;
(b) An annual fee of $2,500.00 if the total amount of the commitment
of the Bank to make Credit Loans in accordance with Section
2.1(a)(i) hereof is unused in any Contract Year during the period
from the date of this Agreement to the Termination Date, payable
on the anniversary of this Agreement and on the Termination Date;
and
(c) Prior to maturity (whether by acceleration or otherwise), for
each payment of principal or interest not paid when due, a late
fee equal to five percent (5.00%) of such payment, not to exceed
$100.00.
SECTION 2.7. COMPUTATION OF INTEREST AND FEES. Interest on
--------------------------------
Loans and unpaid fees, if any, shall be computed on the basis of a
year of 360 days and paid for the actual number of days elapsed.
SECTION 2.8. ADDITIONAL COSTS.
----------------
(a) If, due to either (i) the introduction of, or any change in, or
in the interpretation of, any law or regulation, or (ii) the
compliance with any guideline or request from any central bank or
other governmental authority (whether or not having the force of
law), there shall be any increase in the cost to the Bank of
making, funding or maintaining LIBOR Rate Loans, then the Company
shall from time to time, upon demand by the Bank pay to the Bank
additional amounts sufficient to reimburse the Bank for any such
additional costs. A certificate of the Bank submitted to the
Company as to the amount of such additional costs, shall be
conclusive and binding for all purposes, absent manifest error.
Notwithstanding anything to the contrary contained in this
Section 2.8(a), the Company shall not be obligated to indemnify
or reimburse the Bank for any additional costs which arose or
were incurred during, or is otherwise attributable to, any period
of time more than 180 days prior to the date on which the Bank
delivered its written certificate for indemnification or
reimbursement for such additional costs and such costs shall be
nondiscriminatory in nature and will apply without exception to
all Bank clients of equal standing. Upon notice from the Company
to the Bank within five (5) Business Days after the Bank notifies
the Company of any such additional costs pursuant to this Section
2.8(a), the Company may either (i) prepay in full all LIBOR Rate
Loans so affected then outstanding, together with interest
accrued thereon to the date of such prepayment, or (ii) convert
such LIBOR Rate Loans so affected then outstanding into Federal
Funds Rate Loans upon not less than four (4) Business Days'
notice to the Bank. If any such prepayment or conversion of any
LIBOR Rate Loan occurs on any day other than the last day of the
applicable Interest Period for such Loan, the Company also shall
pay to the Bank such additional amounts sufficient to indemnify
the Bank against any loss, cost, or expense incurred by the Bank
as a result of such prepayment or conversion, including, without
limitation, any loss (including loss of anticipated profits),
cost, or expense incurred by reason of the liquidation or
reemployment
14<PAGE>
of deposits or other funds acquired by the Bank to fund any such
Loan, and a certificate as to the amount of any such loss, cost,
or expense submitted by the Bank to the Company shall be
conclusive and binding for all purposes, absent manifest error.
(b) If either (i) the introduction of, or any change in, or in the
interpretation of, any law or regulation, or (ii) the compliance
with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law),
affects or would affect the amount of capital required or
expected to be maintained by the Bank or any corporation
controlling the Bank and the Bank determines that the amount of
such capital is increased by or based upon the existence of the
Loans (or commitment to make the Loans) and other extensions of
credit (or commitments to extend credit) of similar type, then,
upon demand by the Bank, the Company shall pay to the Bank from
time to time as specified by the Bank additional amounts
sufficient to compensate the Bank in the light of such
circumstances, to the extent that the Bank reasonably determines
such increase in capital to be allocable to the existence of the
Bank's Loans (or commitment to make the Loans). A certificate of
the Bank submitted to the Company as to such amounts shall be
conclusive and binding for all purposes, absent manifest error.
Notwithstanding anything to the contrary contained in this
Section 2.8(b), the Company shall not be obligated to indemnify
or reimburse the Bank for any such additional amounts which arose
or were incurred during, or is otherwise attributable to, any
period of time more than 180 days prior to the date on which the
Bank delivered its written certificate for indemnification or
reimbursement for such additional amounts and such amounts shall
be nondiscriminatory in nature and will apply without exception
to all Bank clients of equal standing. Upon notice from the
Company to the Bank within five (5) Business Days after the Bank
notifies the Company of any such additional costs pursuant to
this Section 2.8(b), the Company may either (A) prepay in full
all Loans of any types so affected then outstanding, together
with interest accrued thereon to the date of such prepayment, or
(B) convert all Loans of any types so affected then outstanding
into Loans of any other type not so affected upon not less than
four (4) Business Days' notice to the Bank. If any such
prepayment or conversion of any LIBOR Rate Loan occurs on any day
other than the last day of the applicable Interest Period for
such Loan, the Company also shall pay to the Bank such additional
amounts sufficient to indemnify the Bank against any loss, cost,
or expense incurred by the Bank as a result of such prepayment or
conversion, including, without limitation, any loss (including
loss of anticipated profits), cost, or expense incurred by reason
of the liquidation or reemployment of deposits or other funds
acquired by the Bank to fund any such Loan, and a certificate as
to the amount of any such loss, cost, or expense submitted by the
Bank to the Company shall be conclusive and binding for all
purposes, absent manifest error.
SECTION 2.9. ILLEGALITY. Notwithstanding any other provision of
----------
this Agreement, if the introduction of or any change in or in the
interpretation of any law or regulation shall make it unlawful, or any
central bank or other governmental authority shall assert that it is
unlawful, for the Bank to perform its obligations hereunder to make,
continue, or convert LIBOR Rate Loans hereunder, then, (a) on notice
thereof by the Bank to the Company, the obligation of the Bank to make
or continue a LIBOR Rate Loan or to convert any Federal Funds Rate
Loan into a LIBOR Rate Loan shall terminate and the Bank shall
thereafter be obligated to make only Federal Funds Rate Loans whenever
any written notice requests for any type LIBOR Rate Loans are
received, and (b) upon demand therefor by the Bank to the Company, the
Company shall either (i) forthwith prepay in full all LIBOR Rate Loans
then outstanding, together with interest accrued thereon, or
15<PAGE>
(ii) request that the Bank, upon four (4) Business Days' notice,
convert all LIBOR Rate Loans then outstanding into Federal Funds Rate
Loans. If any such prepayment or conversion of any LIBOR Rate Loan
occurs on any day other than the last day of the applicable Interest
Period for such Loan, the Company also shall pay to the Bank such
additional amounts sufficient to indemnify the Bank against any loss,
cost, or expense incurred by the Bank as a result of such prepayment
or conversion, including, without limitation, any loss (including loss
of anticipated profits), cost, or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by the
Bank to fund any such Loan, and a certificate as to the amount of any
such loss, cost, or expense submitted by the Bank to the Company shall
be conclusive and binding for all purposes, absent manifest error.
SECTION 2.10. INTEREST RATE SWAP CONTRACTS. The Company shall
----------------------------
have the option at any time and from time to time to enter into one or
more interest rate swap contracts with Key Capital Markets, Inc. on
any portion of the Loans outstanding, on terms and conditions mutually
agreeable to the Company and Key Capital Markets, Inc. Such interest
rate swaps may be entered into for periods up to, but not extending
beyond, the Final Maturity Date.
ARTICLE III. SECURITY AGREEMENT
--------------------------------
SECTION 3.1. GRANT OF SECURITY INTEREST. To secure the prompt
--------------------------
payment and performance of the Obligations, and in addition to any
other collateral or Lien securing the Obligations, the Company hereby
grants to the Bank a continuing security interest in and to and a
pledge of all of the tangible and intangible personal property and
assets of the Company (the "Collateral"), whether now owned or
existing or hereafter acquired or arising and wheresoever located
including, without limitation: (a) all Accounts Receivable, (b) all
Inventory, (c) all Equipment, (d) all General Intangibles (excluding
patents), (e) any and all deposits or other sums at any time credited
by or due from the Bank to the Company, whether in the Cash Collateral
Account, another Depository Account, or other account, (f) all Cash
Security, (g) all Instruments, Documents, documents of title, policies
and certificates of insurance, securities, Goods, choses in action,
Chattel Paper, cash or other property, to the extent owned by the
Company or in which the Company has an interest, (h) all Collateral
which now or hereafter is at any time in the possession or control of
the Bank or in transit by mail or carrier to or from the Bank or in
the possession of any Person acting in the Bank's behalf, without
regard to whether the Bank received the same in pledge, for
safekeeping, as agent for collection or transmission or otherwise or
whether the Bank had conditionally released the same, and any and all
balances, sums, proceeds and credits of the Company with, and any
claims of the Company against, the Bank, (i) all accessions to,
substitutions for, and all replacements, products and Proceeds,
profits and rents of the herein above-referenced property of the
Company described in this Section including, but not limited to,
proceeds of insurance policies insuring such property, (j) all books,
records, and other property including, but not limited to, credit
files, programs, printouts, computer software (to the extent not
disallowed by any agreement between the Company and third parties),
programs, and disks, magnetic tape and other magnetic media, and other
materials and records) of the Company pertaining to any such
above-referenced property of the Company, (k) all real property,
improvements, fixtures, appurtenances, leasehold interests and any
other property of similar kind or character, and (l) all "investment
property" (as defined in the UCC).
SECTION 3.2. GRANT OF LICENSE. The Company hereby grants to the
----------------
Bank, a fully-paid, royalty-free, worldwide right and license to, upon
the occurrence of an Event of Default, (a) use,
16<PAGE>
or sell or otherwise transfer, any and all of the Company's Inventory;
(b) use or sell any such work-in-process, raw materials or completed
or finished products, and (c) accept any and all orders or shipments
of products ordered by the Company from manufacturers and use or sell
any such products.
SECTION 3.3. PERFECTION. The Company shall execute such
----------
financing statements provided for by applicable law, and otherwise
take such other action and execute such assignments or other
instruments or documents, in each case as the Bank may reasonably
request, to evidence, perfect, or record the Bank's security interest
in the Collateral or to enable the Bank to exercise and enforce its
rights and remedies under this Agreement with respect to any
Collateral. The Company hereby authorizes the Bank to execute and file
any such financing statement or continuation statement on the
Company's behalf. The parties acknowledge that a carbon, photographic,
or other reproduction of this Agreement shall be sufficient as a
financing statement to the extent permitted by law.
SECTION 3.4. GENERAL REPRESENTATIONS AS TO COLLATERAL. The
----------------------------------------
Company represents that the Schedule attached as Exhibit C hereto sets
forth: (a) the principal place of business of the Company and the
office where its chief executive offices and accounting officers are
located, (b) the office where Company keeps its records concerning the
Accounts Receivable and General Intangibles, (c) the location of the
Company's registered office, (d) each location at which is located any
Inventory, Equipment or other tangible Collateral of the Company,
including, without limitation, the location of any warehouse, bailee
or consignee at which Collateral is located, and (e) all trade names,
assumed names, fictitious names and other names used by the Company
during the five (5) years prior to the date hereof.
SECTION 3.5. TITLE TO COLLATERAL; LIENS; TRANSFERS. The Company
-------------------------------------
has good, clear and merchantable title to and ownership of the
Collateral, free and clear of all Liens, except for Permitted Liens.
Except as otherwise provided herein or in any other Loan Document, and
except as to Permitted Liens and sale of Inventory in the ordinary
course of business, the Company shall not encumber, pledge, mortgage,
grant a security interest in, assign, sell, lease or otherwise dispose
of or transfer, whether by sale, merger, consolidation, liquidation,
dissolution or otherwise, any of the Collateral.
SECTION 3.6. CHANGES AFFECTING PERFECTION. The Company shall
----------------------------
not, without giving the Bank thirty (30) days prior notice thereof:
(a) make any change in any location where Company's Equipment or
material amounts of Company's Inventory is maintained or locate any of
the Company's Equipment or material amounts of the Company's Inventory
at any new locations, (b) make any change in the location of its chief
executive office, principal place of business or the office where
Company's records pertaining to its Accounts and General Intangibles
are kept, (c) add any new places of business or close any of its
existing places of business, (d) make any change in Company's name or
adopt any trade names, assumed names or fictitious names or otherwise
add any name under which the Company does business, or (e) make any
other change (other than sales of Inventory in the ordinary course of
business) which might affect the perfection or priority of the Bank's
Lien in the Collateral.
SECTION 3.7. POWER OF ATTORNEY FOR INSURANCE. Upon request of
-------------------------------
the Bank, the Company shall promptly deliver to the Bank true copies
of all reports made to insurance companies. The Company hereby
irrevocably makes, constitutes, and appoints the Bank (and all
officers, employees, or agents designated by the Bank) as its true and
lawful attorney-in-fact and agent, with full power of
17<PAGE>
substitution, such that the Bank shall have the right and authority,
upon the occurrence and during the continuance of an Event of Default
which has not been waived in writing by the Bank as required by this
Agreement, to make and adjust claims under such policies of insurance,
receive and endorse the name of the Company on, any check, draft,
instrument or other item of payment for the proceeds of such policies
of insurance and make all determinations and decisions with respect to
such policies of insurance. The Company hereby ratifies all that said
attorneys shall lawfully do or cause to be done by virtue hereof.
This power of attorney is a power coupled with an interest and shall
be irrevocable. Without waiving or releasing any obligation,
Potential Default or Event of Default by the Company under this
Agreement, the Bank may (but shall not be required to) at any time or
times thereafter maintain such action with respect thereto as the Bank
deems advisable. All sums disbursed by the Bank in connection
therewith (including, but not limited to, reasonable attorneys' and
paralegals' fees and disbursements, court costs, expenses and other
charges relating thereto) shall be payable on demand, and until paid
by the Company to the Bank, with interest thereon at the then
applicable Federal Funds Rate plus four hundred basis points, and
shall be additional Obligations under this Agreement secured by the
Collateral.
SECTION 3.8. PROTECTION OF COLLATERAL; REIMBURSEMENT. All
---------------------------------------
insurance expenses and all expenses of protecting, storing,
warehousing, insuring, handling, maintaining, and shipping any
Collateral, any and all excise, property, sales, use, or other taxes
imposed by any state, Federal, or local authority on any of the
Collateral, or in respect of the sale thereof, or otherwise in respect
of the Company's business operations which, if unpaid, could result in
the imposition of any Lien upon the Collateral, shall be borne and
paid by the Company. If the Company fails to promptly pay any portion
thereof when due, except as may otherwise be permitted under this
Agreement or under any of the other Loan Documents, the Bank, at its
option, may, but shall not be required to, pay the same. All sums so
paid or incurred by the Bank for any of the foregoing and any and all
other sums for which the Company may become liable under this
Agreement and all reasonable costs and expenses (including reasonable
attorneys' fees and paralegals' fees, legal expenses, and court costs,
expenses and other charges related thereto) which the Bank may incur
in enforcing or protecting its Liens on or rights and interests in the
Collateral or any of its rights or remedies under this Agreement or
any other agreement between the parties to this Agreement or in
respect of any of the transactions to be had under this Agreement
shall be repayable within (5) Business Days of demand and if not paid
within said five (5) Business Day period, which amount shall also
accrue interest, until paid by the Company to the Bank with interest
thereon at a rate per annum equal to the Federal Funds Rate plus four
hundred basis points, shall be additional Obligations under this
Agreement secured by the Collateral. Unless otherwise provided by
law, neither the Bank nor any Affiliate Bank shall be liable or
responsible in any way for the safekeeping of any of the Collateral or
for any loss or damage thereto or for any diminution in the value
thereof, or for any act or default of any warehouseman, carrier,
forwarding agency, or other Person whomsoever.
SECTION 3.9. INSPECTION; VERIFICATION. During regular business
------------------------
hours and with prior notice and after reasonable notice to the
Company, the Bank (by any of its officers, employees, agents,
representatives, or designees) shall have the right to inspect the
Company's Collateral and to inspect and audit, all books, records,
journals, orders, receipts, or other correspondence related thereto
(and to make extracts or copies thereof as the Bank may desire) and to
inspect the premises upon which any of the Collateral is located for
the purpose of verifying the amount, quality, quantity, value, and
condition of, or any other matter relating to, the Collateral,
provided, however, that upon the occurrence and during the continuance
- -----------------
of an Event of Default, the Bank may exercise such access and other
rights at any time the Bank deems such action necessary or desirable.
In addition to
18<PAGE>
inspections as outlined above, the Bank or its designee shall have the
right to make test verifications of the Accounts Receivable and other
Collateral and physical verifications of the Inventory and other
tangible items of the Collateral in any manner and through any
commercially reasonable medium that the Bank considers advisable, and
the Company agrees to furnish all such assistance and information as
the Bank may require in connection therewith. The Company shall pay
the costs for each of one such inspection and one such verification in
each 12-month period; provided that if an Event of Default has
occurred and is continuing, the Company shall pay the costs of all
such inspections and verifications.
SECTION 3.10. ASSIGNMENTS, RECORDS AND SCHEDULES OF ACCOUNTS.
----------------------------------------------
On or before the fifteenth (15th) calendar day of each month from and
after the date of this Agreement, the Company shall deliver to the
Bank, in form and substance acceptable to the Bank, a summary aged
trial balance of the Company's Accounts Receivable dated as of the
last day of the preceding month (and upon the Bank's request, a
detailed aged trial balance, of all then existing Accounts Receivable
specifying the names, face value and dates of invoices for each
Account Debtor obligated on an Account Receivable so listed). In
addition, upon the Bank's request, the Company shall furnish the Bank
with copies of proof of delivery and the original copy, if available,
of all documents relating to the Accounts Receivable including, but
not limited to, repayment histories and present status reports, and
such other matters and information relating to the status of then
existing Accounts Receivable as the Bank shall reasonably request. If,
upon the occurrence of an Event of Default, the Bank so requests, the
Company shall execute and deliver to the Bank, on forms supplied by
the Bank and at such intervals as the Bank may from time to time
require, written assignments of all of its Accounts after shipment of
the subject goods, together with copies of invoices and/or invoice
registers related thereto.
SECTION 3.11. REPORTING REGARDING INVENTORY. The Company shall
-----------------------------
report inventory figures no later than fifteen (15) days after the end
of each month based upon month-end balances reconciled to the period
end balance sheet. The Company's Inventory shall be reported based
upon reconciliation of the financial statements to the perpetual
inventory system or a regular physical count, as the case may be, and:
(a) the values shown on reports of Inventory shall be at the lower of
cost or market value determined in accordance with the Company's usual
cost accounting system, consistently applied, and (b) no later than
fifteen (15) days after the end of each month, or more frequently, if
the Bank shall so request, the Company shall submit to the Bank an
inventory report reconciled to the Loan Base Certificate for the end
of such month, the Company's perpetual inventory records and its
general ledger, broken down into such detail and with such categories
as the Bank shall require (including, but not limited to, a report
indicating the type, location and amount of raw materials,
work-in-process and finished goods, and all other information deemed
necessary by the Bank to determine the level of Eligible Inventory and
ineligible Inventory).
SECTION 3.12. OTHER COLLATERAL REPORTS. The Company shall
------------------------
furnish the Bank with, on or before the fifteenth (15th) day of each
month from and after the date of this Agreement, a report listing the
schedule of backlog of orders being processed by the Company, and such
other reports regarding other Collateral as the Bank from time to time
reasonably may request.
19<PAGE>
ARTICLE IV. COLLECTION OF ACCOUNTS
----------------------------------
AND LOCKBOX
-----------
SECTION 4.1. LOCKBOX; RECEIPT IN TRUST.
-------------------------
(a) Maintenance of Lockbox. The Company has rented and shall continue
----------------------
to rent the post office boxes in the name of the Company (the
"Lockboxes") as and having the addresses set forth in the
Schedule attached as Exhibit C hereto, and such other Lockboxes
and addresses as the Bank upon request of the Company may approve
from time to time. The Company shall notify all of its customers
and Account Debtors to forward all Collections of every kind due
the Company to one of the Lockboxes (such notices to be in such
form and substance as the Bank may require from time to time).
The Company shall establish and, unless otherwise directed by the
Bank, maintain blocked accounts ("Blocked Accounts") with such
other banks as are acceptable to the Bank, as set forth in each
case in the Schedule attached as Exhibit C hereto (collectively,
the "Lockbox Banks"). Each Lockbox Bank and the Company shall
have entered into a Lockbox Agreement with respect to the
Lockboxes controlled by such Lockbox Bank and with the Bank with
respect to the Blocked Account maintained at such Lockbox Bank,
each such Lockbox Agreement in form and substance satisfactory to
the Bank. All collections from Account Debtors ("Collections")
sent directly to the Lockboxes shall be deposited into the
Blocked Account in accordance with the terms of the applicable
Lockbox Agreement. The Company will promptly deposit all
remittances from Account Debtors submitted to the Company
("Remittances"), in the identical form in which such Remittances
were made (except for any necessary endorsements), whether by
cash or check, into the Blocked Account or the Cash Collateral
Account established pursuant to Section 4.2 below. Only the
Lockbox Bank, and to the extent not inconsistent with the
applicable Lockbox Agreement, the Bank, shall have at all times
sole access to the Lockbox. The Company shall take all action
necessary to grant the Lockbox Bank and, to the extent not
inconsistent with the applicable Lockbox Agreement, the Bank such
sole access. At no time shall the Company remove any item from
the Lockbox without the Bank's prior written consent. The
Company shall notify all customers or Account Debtors to pay all
Collections to the Lockboxes and all payees to pay all
Remittances to the Lockbox, the Blocked Account or such Cash
Collateral Account. The Company shall not instruct any Account
Debtor or payee to pay any Collection or Remittance to any other
place or address without the Bank's prior written consent. If
the Company neglects or refuses to notify any customer or Account
Debtor to pay any Collection to the Lockbox, the Bank shall be
entitled to make such notification. To the extent not
inconsistent with the applicable Lockbox Agreement, the Company
hereby grants to the Bank an irrevocable power of attorney,
coupled with an interest, to take in the Company's name all
action necessary to: (i) grant the Bank sole access to the
Lockbox, (ii) after the occurrence and during the continuance of
an Event of Default, contact Account Debtors to pay any
Collections to the Lockbox or for any other reason, and (iii)
endorse each Collection or Remittance delivered to the Lockbox
for deposit to the Cash Collateral Account.
(b) Receipt in Trust. Any Collections or Remittances received
----------------
directly by the Company shall be deemed held by the Company in
trust and as fiduciary for the Bank. The Company immediately
shall deposit any such Collection or Remittance, in its original
form, into one of the Blocked Account or into the Cash Collateral
Account. Pending such deposit, the Company agrees that it will
not commingle any such Collection or Remittance with any of
20<PAGE>
the Company's other funds or property, but will hold it separate
and apart therefrom in trust and as fiduciary for the Bank until
deposit is made into the Blocked Account or Cash Collateral
Account.
SECTION 4.2. CASH COLLATERAL ACCOUNT. Each Lockbox Bank shall
-----------------------
acknowledge and agree, in a manner satisfactory to the Bank, that: (i)
all Collections and Remittances deposited in the Blocked Accounts are
the sole and exclusive property of the Bank, and (ii) such Lockbox
Bank shall have no right to setoff (except as the Bank may expressly
agree upon in writing) against the Blocked Accounts. In accordance
with the terms of the applicable Lockbox Agreements, each Lockbox Bank
will wire, or otherwise transfer immediately available funds in a
manner satisfactory to the Bank, all Collections and Remittances
deposited into the Blocked Accounts to the Cash Collateral Account on
a daily basis as soon as good funds in respect to such Collection and
Remittances are collected. All funds in the Cash Collateral Account
shall be deemed to be the property of the Bank and shall be subject
only to the signing authority designated from time to time by the
Bank. The Company shall have no control over such funds. The Bank
shall have sole access to the Cash Collateral Account, and the Company
shall have no access thereto. The Company hereby grants to the Bank a
security interest in all funds held in the Lockbox and, to the extent
funds in the Cash Collateral Account were to be construed to be the
property of the Company, all funds held in the Cash Collateral Account
as security for the Obligations. The Cash Collateral Account shall not
be subject to any deduction, set-off, banker's lien or any other right
in favor of any person or entity other than the Bank. Prior to the
occurrence of an Event of Default which is continuing, deposits to the
Cash Collateral Account shall be: (i) applied immediately against the
principal and/or interest of the Loans and/or other Obligations of the
Company to the Bank under this Agreement all in such order and method
of application as may be elected by the Bank in its sole discretion;
provided, however, the Bank will use reasonable efforts to avoid
- ------------------
applications that would cause early prepayment of a LIBOR Rate Loan
prior to the expiration of its applicable Interest Period, or (ii) to
the extent not so applied by the Bank, released to the Company for use
in the Company's business.
SECTION 4.3. CREDITING OF COLLECTIONS AND REMITTANCES. For the
----------------------------------------
purpose of calculating interest and determining the aggregate Loans
outstanding and resulting loan availability hereunder, all Collections
and Remittances shall be credited to the Company on the Business Day
on or after which the Bank receives notice of the deposit of the
proceeds of such Collections and Remittances into the Cash Collateral
Account, and is in good funds with respect thereto, prior to 2:00 p.m.
(Denver, Colorado time). From time to time, upon advance written
notice to the Company, the Bank may adopt such additional or modified
regulations and procedures as it may deem reasonable and appropriate
with respect to the operation of the Cash Collateral Account, the
Lockbox and the services to be provided by the Bank under this
Agreement.
SECTION 4.4. COST OF COLLECTION. All reasonable costs of
------------------
collection of the Company's Accounts Receivable, including
out-of-pocket expenses, administrative and record-keeping costs,
reasonable attorney's fees, and all service charges and costs related
to the establishment and maintenance of the Lockbox and the Cash
Collateral Account, shall be the sole responsibility of the Company,
whether the same are incurred by the Bank or the Company, and the
Bank, in its sole discretion, may charge the same against the Company
and/or any account maintained by the Company with the Bank and the
same shall be deemed part of the Obligations hereunder. The Company
hereby indemnifies and holds the Bank harmless from and against any
loss or damage with respect to any Collection or Remittance deposited
in the Cash Collateral Account which is
21<PAGE>
dishonored or returned for any reason. If any Collection or Remittance
deposited in the Cash Collateral Account is dishonored or returned
unpaid for any reason, the Bank, in its sole discretion, may charge
the amount of such dishonored or returned Collection or Remittance
directly against the Company and/or any account maintained by the
Company with the Bank and such amount shall be deemed part of the
Obligations hereunder. The Bank shall not be liable for any loss or
damage resulting from any error, omission, failure or negligence on
the part of the Bank under this Agreement, except losses or damages
resulting from the Bank's gross negligence or willful misconduct as
determined by a final judgment of a court of competent jurisdiction.
SECTION 4.5. RETURN OF FUNDS. Upon the payment in full of all
---------------
Obligations and the termination of the Bank's commitment to make any
more Loans hereunder: (a) the Bank's security interests and other
rights in funds in the Cash Collateral Account under Section 4.2 of
this Agreement shall terminate, (b) all rights to such funds shall
revert to the Company, and (c) the Bank will, at the Company's
expense, take such steps as the Company may reasonably request to
evidence the termination of such security interests and to effect the
return to the Company of such funds.
SECTION 4.6. NOTICE TO ACCOUNT DEBTORS. The Company hereby
-------------------------
authorizes the Bank, upon the occurrence and during the continuance of
an Event of Default, in accordance with the powers conferred upon the
Bank pursuant to any applicable provision of this Agreement, to: (a)
notify any or all Account Debtors that the Accounts Receivable have
been assigned to the Bank, for the benefit of the Bank, and that the
Bank has a security interest therein, and (b) direct such Account
Debtors to make all payments due from them to the Company upon the
Accounts Receivable directly to the Bank or to a lock box designed by
the Bank; provided, however, that the Bank shall not exercise any of
------------------
its rights under this sentence unless: (i) the Company has failed to
so notify or direct any such Account Debtor following a request from
the Bank to the Company for such notification or direction, or (ii)
the Bank reasonably believes that the Company has failed to so notify
or direct any such Account Debtor. The Bank shall promptly furnish
the Company with a copy of any such notice sent. Any such notice, in
the Bank's sole discretion, may be sent on the Company's stationery,
in which event the Company shall co-sign such notice with the Bank.
SECTION 4.7. APPOINTMENT OF ATTORNEY-IN-FACT. The Company
-------------------------------
hereby irrevocably appoints the Bank (and all persons designated by
the Bank) as the Company's true and lawful attorney (and
agent-in-fact) to: upon the occurrence and during the continuance of
an Event of Default in the Company's or Bank's name: (i) demand
payment of the Accounts Receivable, (ii) enforce payment of the
Accounts Receivable, by legal proceedings or otherwise, (iii) exercise
all of the Company's rights and remedies with respect to the
collection of the Accounts and any other Collateral, (iv) settle,
adjust, compromise, extend, or renew the Accounts Receivable, (v)
settle, adjust, or compromise any legal proceedings brought to collect
the Accounts Receivable, (vi) if permitted by applicable law, sell or
assign the Accounts Receivable and other Collateral upon such terms,
for such amounts, and at such time or times as the Bank deems
advisable, (vii) discharge and release the Accounts Receivable and any
other Collateral, (viii) take control, in any manner, of any item of
payment or proceeds relating to any Collateral, (ix) prepare, file,
and sign the Company's name on a proof of claim in bankruptcy or
similar document against any Account Debtor, (x) prepare, file, and
sign the Company's name on any notice of Lien, assignment, or
satisfaction of Lien or similar document in connection with the
Accounts Receivable, (xi) do all acts and things necessary, in the
Bank's discretion, to fulfill the Company's obligations under this
Agreement, (xii) endorse the name of the Company upon any of the items
of payment or proceeds relating to any Collateral
22<PAGE>
and deposit the same to the account of the Bank on account of the
Obligations, (xiii) endorse the name of the Company upon any Chattel
Paper, document, Instrument, invoice, freight bill, bill of lading, or
similar document or agreement relating to the Accounts Receivable,
Inventory and any other Collateral, (xiv) use the Company's stationery
and sign the name of the Company to verifications of the Accounts
Receivable and notices thereof to Account Debtors, (xv) use the
information recorded on or contained in any data processing equipment
and computer hardware and software relating to the Accounts
Receivable, Inventory, and any other Collateral to which the Company
has access, and (xvi) notify post office authorities to change the
address for delivery of the Company's mail to an address designated by
the Bank, receive and open all mail addressed to the Company, and,
after removing all Collections and Remittances and other Proceeds of
Collateral, forward the mail to the Company. The Company hereby
ratifies all that said attorneys shall lawfully do or cause to be done
by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
ARTICLE V. SPECIFIC REPRESENTATIONS, WARRANTIES
------------------------------------------------
AND COVENANTS RELATING TO COLLATERAL.
------------------------------------
SECTION 5.1. DISPUTES AND CLAIMS REGARDING ACCOUNTS. The
--------------------------------------
Company shall notify the Bank promptly of all material disputes and
claims and settle or adjust them at no expense to the Bank, but no
material discount, credit or allowance outside the ordinary course of
business or material adverse extension, compromise or settlement shall
be granted to any customer or account debtor in respect of an Eligible
Account and no returns of merchandise outside the ordinary course of
business shall be accepted by the Company in settlement or
satisfaction of an Eligible Account Receivable which settlement or
satisfaction would have a Material Adverse Effect, without the Bank's
consent which consent shall not be unreasonably withheld.
SECTION 5.2. DEPOSIT ACCOUNTS. Other than: (a) the Blocked
----------------
Accounts and the Cash Collateral Account, and (b) those other Deposit
Accounts disclosed on the Schedule on Exhibit C hereto and consented
to by the Bank (such disclosed Deposit Accounts being, the "Permitted
Accounts"), neither the Company nor any of its Subsidiaries maintains
a Deposit Account or trust account for the purpose of collecting and
depositing Collections and\or Remittances or otherwise holding monies
of the Company.
SECTION 5.3. COMPLIANCE WITH TERMS OF ACCOUNTS; GENERAL
------------------------------------------
INTANGIBLES. The Company will perform and comply in all material
- -----------
respects with all obligations in respect of Accounts Receivable,
Chattel Paper, General Intangibles and under all other contracts and
agreements to which it is a party or by which it is bound relating to
the Collateral where failure to so comply would result in any material
impairment in the value of the Collateral, unless the validity thereof
is being contested in good faith by appropriate proceedings and such
proceedings do not involve the material danger of the sale, forfeiture
or loss of the Collateral which is the subject of such proceedings or
the priority of the lien in favor of the Bank thereon.
SECTION 5.4. NO WAIVERS, EXTENSIONS, AMENDMENTS. The Company
----------------------------------
will not, without the Bank's prior written consent, which consent
shall not be unreasonably withheld or delayed, grant any extension of
the time of payment of any of the Accounts, Chattel Paper or
Instruments, compromise, compound or settle the same for less than the
full amount thereof, release, wholly or partly, any person liable for
the payment thereof, or allow any credit or discount whatsoever
thereon, other than in the ordinary course of business.
23<PAGE>
SECTION 5.5. LOCATION OF COLLATERAL. All of the locations of
----------------------
the Company and its Subsidiaries and all locations of the Collateral
are set forth in the Schedule attached hereto as Exhibit C. Other than
as otherwise set forth in the Schedule on Exhibit C hereto, as amended
or supplemented by written notice to the Bank: (a) the Company does
not keep, and shall not keep, any Collateral owned by it on any
property not owned in fee simple by the Company, and (b) each of the
Subsidiaries of the Company does not keep, and shall not keep, any
Collateral owned by it on any property not owned in fee simple by the
Company except to the extent permitted by this Agreement.
SECTION 5.6. LIEN PRIORITY. From and after the date of this
-------------
Agreement, by reason of the filing of financing statements and
termination statements in all requisite governmental offices, this
Agreement and the Loan Documents will create and constitute a valid
and perfected first priority security interest (except as permitted by
this Agreement and subject to Permitted Liens) in and Lien on that
portion of the Collateral which can be perfected by such filing or
delivery, which security interest will be enforceable against the
Company and all third parties as security for payment of all
Obligations.
SECTION 5.7. LIEN WAIVERS; LANDLORD, BAILEE AND CONSIGNEE
--------------------------------------------
WAIVERS, WAREHOUSE RECEIPTS. The Company will not create, permit or
- ---------------------------
suffer to exist, and will defend the Collateral against and take such
other action as is necessary to remove, any Lien, claim or right, in
or to the Collateral, other than the Permitted Liens. The Company
shall defend the right, title and interest of the Bank in and to any
of the Company's rights to the Collateral and in and to the Proceeds
and products thereof against the claims and demands of all Persons.
In the event any Collateral of the Company comprising personal
property subject to the security interest or Lien in favor of the Bank
is at any time located on any real property not owned by the Company,
the Company will obtain and maintain in effect at all times while any
such Collateral is so located valid and effective lien waivers, in
form and substance reasonably satisfactory to the Bank whereby each
owner, landlord, consignee, bailee and mortgagee having an interest in
such real property shall disclaim any interest in such Collateral, as
the case may be, and shall agree to allow the Bank reasonable access
to such real property in connection with any enforcement of the
security interest granted hereunder.
SECTION 5.8. MAINTENANCE OF INSURANCE. The Company will
------------------------
maintain with financially sound and reputable companies, insurance
policies: (a) insuring the real property portion of the Collateral,
the Equipment, the Inventory, and all equipment subject to any lease,
against loss by fire, explosion, theft, flood (if any such properties
are located in a federally designated flood hazard area) and such
other casualties as are usually insured against by companies engaged
in the same or similar businesses, and (b) insuring the Company and
the Bank against liability for personal injury and property damage
relating to such real property, Equipment, Inventory and equipment
covered by any equipment lease, such policies to be in such form and
in such amounts and coverage as may be reasonably satisfactory to the
Bank, with losses payable to the Company and the Bank as their
respective interests may appear. All insurance with respect to the
real property, Equipment and Inventory shall: (i) provide that no
cancellation, reduction in amount, change in coverage or expiration
thereof shall be effective until at least thirty (30) days after
written notice to the Bank thereof, and (ii) be satisfactory in all
respects to the Bank.
SECTION 5.9. MAINTENANCE OF EQUIPMENT. The Company will keep
------------------------
and maintain each item of Equipment in good operating condition,
ordinary wear and tear excepted, and the Company will provide all
maintenance and service and all repairs necessary for such purpose.
24<PAGE>
SECTION 5.10. LIMITATIONS ON DISPOSITIONS OF INVENTORY AND
--------------------------------------------
EQUIPMENT. The Company will not sell, transfer, lease or otherwise
- ---------
dispose of any of the Inventory or Equipment, or attempt, offer or
contract to do so, except for (a) dispositions of Inventory in the
ordinary course of business, and (b) so long as no Event of Default
has occurred, the disposition of obsolete or worn out Equipment in the
ordinary course of business and other dispositions of Equipment
permitted by this Agreement.
SECTION 5.11. GENERAL APPOINTMENT AS ATTORNEY-IN-FACT. The
---------------------------------------
Company hereby irrevocably constitutes and appoints the Bank and any
officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of the Company and in the name of the Company
or in its own name, from time to time following the occurrence of an
Event of Default, in the Bank's reasonable discretion, for the purpose
of carrying out the terms of this Agreement, without notice (except as
specifically provided herein) to or assent by the Company, to take any
and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to effect the terms of
this Agreement, including, without limiting the generality of the
foregoing, the power and right, on behalf of the Company, to do the
following, upon notice to the Company: (a) to pay or discharge taxes,
liens, security interests or other encumbrances levied or placed on or
threatened against the Collateral, to effect any repairs or any
insurance, called for by the terms of this Agreement and to pay all or
any part of the premiums therefor and the costs thereof, and otherwise
to itself perform or comply with, or otherwise cause performance or
compliance with, any of the covenants or other agreements of the
Company contained in this Agreement which the Company has failed to
perform or with which the Company has not complied; (b) to commence
and prosecute any suits, actions or proceedings at law or in equity in
any court of competent jurisdiction to collect the Collateral or any
thereof and to enforce any other right in respect of any Collateral;
(c) to defend any suit, action or proceeding brought against the
Company with respect to any Collateral; (d) to settle, compromise or
adjust any suit, action or proceeding described above and, in
connection therewith, to give such discharges or releases as the Bank
may deem appropriate; (e) to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though the Bank were the absolute owner
thereof for all purposes; and (f) to do, at the Bank's option and the
Company's expense, at any time, or from time to time, all acts and
things which the Bank deems necessary to protect, preserve or realize
upon the Collateral and the Bank's security interest therein, in order
to effect the intent of this Agreement, all as fully and effectively
as the Company might do. This power of attorney is a power coupled
with an interest and shall be irrevocable.
SECTION 5.12. BANK NOT LIABLE. The powers conferred on the Bank
---------------
hereunder are solely to protect its interests in the Collateral and
shall not impose any duty upon it to exercise any such powers. The
Bank shall be accountable only for amounts that it actually receives
as a result of the exercise of such powers and neither it nor any of
its officers, directors, employees or agents shall be responsible to
the Company for any act or failure to act, except for its own gross
negligence or willful misconduct.
SECTION 5.13. AUTHORITY TO EXECUTE TRANSFERS. Without
------------------------------
limitation of any authorization granted to the Bank hereunder, the
Company also hereby authorizes the Bank, upon the occurrence of an
Event of Default, to execute, in connection with the exercise by the
Bank of its remedies hereunder, any endorsements, assignments or other
instruments of conveyance or transfer with respect to the Collateral.
25<PAGE>
SECTION 5.14. PERFORMANCE BY BANK OF THE COMPANY'S OBLIGATIONS.
------------------------------------------------
If the Company fails to perform or comply with any of its agreements
contained herein and the Bank shall itself perform or comply, or
otherwise cause performance or compliance, with such agreement, the
expenses of the Bank incurred in connection with such performance or
compliance, together with interest thereon at the interest rate
provided for in Section 2.3(c) hereof in effect from time to time,
shall be payable by the Company to the Bank within five (5) Business
Days following demand. In consideration of and as security for any
performance by the Bank of any of Company's obligations or agreements
hereunder, the Company does hereby (a) grant to the Bank a security
interest in the Collateral, and (b) assign to the Bank all of its
right, title, and interest (including, without limitation, all rights
to payment) arising under or with respect to all of Company's Accounts
Receivable, whether now owned or hereafter acquired or received by
Company, but not including any duty, obligation, or liability of
Company with respect thereto.
ARTICLE VI. GENERAL REPRESENTATIONS AND WARRANTIES
---------------------------------------------------
The Company represents and warrants to the Bank (which
representations and warranties will survive the delivery of the Note
and all extensions of credit under this Agreement) that:
SECTION 6.1. ORGANIZATION; CORPORATE POWER.
-----------------------------
(a) The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction in which
it is incorporated;
(b) The Company has the corporate power and authority to own its
properties and assets and to carry on its business as now being
conducted;
(c) The Company is qualified to do business in every jurisdiction in
which the ownership or leasing of its property or the doing of
business requires such qualification and the failure of such
qualification would have a Material Adverse Effect; and
(d) The Company has the corporate power to execute, deliver, and
perform its Loan Documents and to borrow hereunder.
SECTION 6.2. AUTHORIZATION OF LOAN. The execution, delivery,
---------------------
and performance of the Loan Documents and the Loans by the Company
have been duly authorized by all requisite corporate action.
SECTION 6.3. NO CONFLICT. The execution, delivery, and
-----------
performance of the Loan Documents will not (a) violate any provision
of any law, rule or regulation, the Articles of Incorporation of the
Company, or By-Laws of the Company, (b) violate any order of any court
or other agency of any federal or state government or any provision of
any material indenture, agreement, or other instrument to which the
Company is a party or by which it or any of its properties or assets
are bound, (c) conflict with, result in a breach of, or constitute
(with passage of time or delivery of notice, or both), a default under
any such material indenture, agreement, or other instrument, or
(d) result in the creation or imposition of any Lien, other than a
Permitted Lien, or other encumbrance of any nature whatsoever upon any
of the properties or assets of the Company except in favor of the
Bank.
26<PAGE>
SECTION 6.4. EXECUTION OF LOAN DOCUMENTS. The Loan Documents
---------------------------
have been duly executed and are valid and binding obligations of the
Company fully enforceable in accordance with their respective terms.
SECTION 6.5. FINANCIAL CONDITION. The following information
-------------------
with respect to the Company has heretofore been furnished to the Bank,
or with respect to Subpart (b) below, shall be delivered no later than
September 30, 1996:
(a) Audited annual financial statements of the Company for the
periods ended December 31, 1994 and December 31, 1995; and
(b) The pro forma financial statements of the Company as of June
30, 1996, which pro forma financial statements reflect the
Company's purchase of the assets of the DETACLAD explosion
bonded clad metal business and the liabilities incurred by
the Company related to such purchase.
Each of the financial statements referred to above in this
Section 6.5 was prepared in accordance with GAAP (subject in the case
of interim statements, to the absence of footnotes and normal year-end
adjustments) applied on a consistent basis, except as stated therein.
Each of the financial statements referred to above in this Section 6.5
fairly presents the financial condition or pro forma financial
condition, as the case may be, of the Company and is complete and
correct in all material respects and no Material Adverse Effect has
occurred since the date thereof.
SECTION 6.6. LIABILITIES; LIENS. The Company has made no
------------------
investment in, advance to, or guarantee of, the obligations of any
Person nor are the Company's assets and properties subject to any
claims, liabilities, Liens, or other encumbrances, except as disclosed
in the financial statements and related notes thereto referred to in
Section 6.5 hereof.
SECTION 6.7. LITIGATION. There is no action, suit, examination,
----------
review, or proceeding by or before any governmental instrumentality or
agency now pending (including any claims alleging infringement of
intellectual property rights of others) or, to the knowledge of the
Company, threatened against the Company or against any property or
rights of the Company, which, if adversely determined, would
materially impair the right of the Company to carry on business as now
being conducted; would materially adversely affect the financial
condition of the Company; or would draw into question the legal
existence of the Company or the validity authorization or
enforceability of any of the Loan Documents, except for the
litigation, if any, described in the notes to the financial statements
referred to in Section 6.5 hereof.
SECTION 6.8. PAYMENT OF TAXES. The Company has accurately
----------------
prepared and timely filed, or caused to be filed, all Federal, state,
local, and foreign tax returns required to be filed, and has paid, or
caused to be paid, all taxes as are shown on such returns, or on any
assessment received by the Company, to the extent that such taxes
become due, except as otherwise contested in good faith. The Company
has set aside proper amounts on its books, determined in accordance
with GAAP, for the payment of all taxes for the years that have not
been audited by the respective tax authorities or for taxes being
contested by the Company.
SECTION 6.9. ABSENCE OF ADVERSE AGREEMENTS. The Company is not
-----------------------------
a party to any indenture, loan or credit agreement or any lease or
other agreement or instrument or subject to any
27<PAGE>
corporate or partnership restriction which would be reasonably likely
to have a Material Adverse Effect.
SECTION 6.10. REGULATORY STATUS. Neither the making nor the
-----------------
performance of this Agreement, nor any extension of credit hereunder,
requires the consent or approval of any governmental instrumentality
or political subdivision thereof, any other regulatory or
administrative agency, or any court of competent jurisdiction.
SECTION 6.11. FEDERAL RESERVE REGULATIONS: USE OF LOAN
-----------------------------------------
PROCEEDS. The Company is not engaged principally, or as one of its
- --------
important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock. No part of the
proceeds of the Loans will be used, directly or indirectly, for a
purpose which violates any law, rule or regulation of any governmental
body, including without limitation the provisions of Regulations G, U,
or X of the Board of Governors of the Federal Reserve System, as
amended. No part of the proceeds of the Loans will be used, directly
or indirectly, to purchase or carry any Margin Stock or to extend
credit to others for the purpose of purchasing or carrying any Margin
Stock.
SECTION 6.12. SUBSIDIARIES. The Company has no Subsidiaries.
------------
SECTION 6.13. ERISA. The Company and any Commonly Controlled
-----
Entity do not maintain or contribute to any Plan which is not in
substantial compliance with ERISA. Neither the Company nor any
Commonly Controlled Entity maintains, contributes to, or is required
to make or accrue a contribution or has within any of the six
preceding years maintained, contributed to or been required to make or
accrue a contribution to any Plan subject to regulation under Title IV
of ERISA, any Plan that is subject to the minimum funding requirements
of Section 412 of the Code or Section 302 of ERISA, or any
Multiemployer Plan.
SECTION 6.14. SOLVENCY. The Company has received consideration
---------
which is the reasonable equivalent value of the obligations and
liabilities that the Company has incurred to the Bank. The Company is
not insolvent as defined in any applicable state or federal statute,
nor will the Company be rendered insolvent by the execution and
delivery of this Agreement or the Note to Bank. The Company is not
engaged or about to engage in any business or transaction for which
the assets retained by it shall be an unreasonably small capital,
taking into consideration the obligations to Bank incurred hereunder.
The Company does not intend to, nor does it believe that it will,
incur debts beyond its ability to pay them as they mature.
SECTION 6.15 SCHEDULE ON EXHIBIT C. The Schedule on Exhibit C
----------------------
accurately and completely lists the location of all real property
owned or leased by the Company. The Company enjoys quiet possession
under all material leases of real property to which it is a party as a
lessee, and all of such leases are valid, subsisting and, in full
force and effect. Except as specified in the Schedule in Exhibit C
hereto, none of the real property occupied by the Company or any
Subsidiary is located within any federal, state or municipal flood
plain zone. Except as set forth in the Schedule in Exhibit C, all of
the material properties used in the conduct of the Company's business
(i) are in good repair, working order and condition (reasonable wear
and tear excepted) and reasonably suitable for use in the operation of
the Company's business; and (ii) are currently operated and
maintained, in all material respects, in accordance with the
requirements of applicable governmental authorities.
28<PAGE>
SECTION 6.16 ACCURACY OF REPRESENTATIONS AND WARRANTIES. None
-------------------------------------------
of the Company's representations or warranties set forth in this
Agreement or in any document or certificate furnished pursuant to this
Agreement or in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a
material fact necessary to make any statement of fact contained herein
or therein, in light of the circumstances under which it was made not
misleading.
SECTION 6.17 NO INVESTMENT COMPANY. The Company is not an
----------------------
"investment company" or a company "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of
19409, as amended, which is required to register thereunder.
SECTION 6.18 APPROVALS. Except as set forth in the Schedule in
----------
Exhibit C hereto, all approvals required of the Company from all
Persons including without limitation all governmental authorities with
respect to the Loan Documents have been obtained.
SECTION 6.19 LICENSES, REGISTRATIONS, COMPLIANCE WITH LAWS, ETC.
---------------------------------------------------
The Schedule in Exhibit C hereto accurately and completely describes
all permits, governmental licenses, registrations and approvals,
material to carrying out of the Company's businesses as presently
conducted and required by law or the rules and regulations of any
federal, foreign governmental, state, county or local association,
corporation or governmental agency, body, instrumentality or
commission having jurisdiction over the Company, including but not
limited to the United States Environmental Protection Agency, the
United States Department of Labor, the United States Occupational
Safety and Health Administration, the United States Equal Employment
Opportunity Commission, the Federal Trade Commission and the United
States Department of Justice and analogous and related state and
foreign agencies. All existing material authorizations, licenses and
permits are in full force and effect, are duly issued in the name of,
or validly assigned to the Company and the Company has full power and
authority to operate thereunder. There is no material violation or
material failure of compliance or, to the Company's knowledge,
allegation of such violation or failure of compliance on the part of
the Company with any of the foregoing permits, licenses,
registrations, approvals, rules or regulations and there is no action,
proceeding or investigation pending or to the knowledge of the Company
threatened nor has the Company received any notice of such which might
result in the termination or suspension of any such permit, license,
registration or approval which in any case could have a Material
Adverse Effect.
SECTION 6.20 COPYRIGHT. The Company has not violated any of the
----------
provisions of the Copyright Revision Act of 1976, 17 U.S.C.
Section 101, et seq. Except as set forth on the Schedule on Exhibit C
-- ---
hereto, the Company has not filed any registration statements, notices
and statements of account with the United States Copyright Office.
The Schedule on Exhibit C hereto accurately and completely sets forth
all registered copyrights held by the Company and contains exceptions
to the representations contained in this Section 6.20. To the
Company's knowledge no inquiries regarding any such filings have been
received by the Copyright Office.
SECTION 6.21 ENVIRONMENTAL COMPLIANCE. Except as expressly set
------------------------
forth in the Schedule on Exhibit C hereto, neither the Company nor, to
the knowledge of management of the Company, any other Person has:
(a) ever caused, permitted, or suffered to exist any Hazardous
Material to be spilled, placed, held, located or disposed of on,
under, or about, any of the premises owned or leased by
29<PAGE>
the Company (the "Premises"), or from the Premises into the
atmosphere, any body of water, any wetlands, or on any other real
property, nor does any Hazardous Material exist on, under or about the
Premises, or in respect of Hazardous Material used or disposed of in
compliance with law;
(b) ever used (whether by the Company or by any other Person) as
a treatment, storage or disposal (whether permanent or temporary) site
for any Hazardous Waste as defined in 42 U.S.C.A. Section 6901, et
--
seq. (the Resource Recovery and Conservation Act); and
- ---
(c) any knowledge of any notice of violation, Lien or other
notice issued by any governmental agency with respect to the
environmental condition of the Premises or any other property occupied
by the Company.
The Company is in compliance with all Environmental Laws and all other
applicable federal, state and local health and safety laws,
regulations, ordinances or rules, except to the extent that any non-
compliance will not, in the aggregate, have a Materially Adverse
Effect on the Company or the ability of the Company to fulfill its
obligations under this Agreement or the Note.
SECTION 6.22 MATERIAL AGREEMENTS, ETC. The Schedule on Exhibit
-------------------------
C hereto accurately and completely lists all Material Agreements, all
of which are presently in effect. All of the Material Agreements are
legally valid, binding, and to the Company's knowledge, in full force
and effect and neither the Company nor, to the Company's knowledge,
any other parties thereto are in material default thereunder.
SECTION 6.23 PATENTS, TRADEMARKS AND OTHER PROPERTY RIGHTS. The
----------------------------------------------
Schedule on Exhibit C hereto contains a complete and accurate schedule
of all registered trademarks, registered copyrights and patents of the
Company, and pending applications therefor, and all other intellectual
property in which the Company has any rights other than "off-the-
shelf" software which is generally available to the general public at
retail. Except as set forth in the Schedule on Exhibit C hereto, the
Company owns, possesses, or has licenses to use all the patents,
trademarks, service marks, trade names, copyrights and non-
governmental licenses, and all rights with respect to the foregoing,
necessary for the conduct of its business as now conducted, without,
to the Company's knowledge, any conflict with the rights or others
with respect thereto.
SECTION 6.24 RELATED TRANSACTION DOCUMENTS. The Company has,
------------------------------
prior to the date hereof, delivered to the Bank true copies of the
Related Transaction Documents, and each and every amendment or
modification thereto.
ARTICLE VII. CONDITIONS OF LENDING
-----------------------------------
SECTION 7.1. FIRST LOAN. The obligation of the Bank to make a
----------
Loan shall be subject to satisfaction of the following conditions,
unless waived in writing by the Bank: (a) all legal matters and Loan
Documents incident to the transactions contemplated hereby shall be
reasonably satisfactory, in form and substance, to Bank's counsel;
(b) the Bank shall have received (i) certificates by an authorized
officer of the Company, upon which the Bank may conclusively rely
until superseded by similar certificates delivered to the Bank,
certifying (1) all requisite action taken in connection with the
transactions contemplated hereby, and (2) the names, signatures, and
authority of the Company's authorized signers executing the Loan
Documents, and (ii) such other documents as the Bank may reasonably
require to be executed by, or delivered on behalf of, the
30<PAGE>
Company; (c) the Bank shall have received the Note, with all blanks
appropriately completed, executed by an authorized signer of the
Company; (d) the Company shall have paid to the Bank the fee(s) then
due and payable in accordance with ARTICLE II of this Agreement; and
(e) the Bank shall have received the written opinion of legal counsel
selected by the Company and satisfactory to the Bank, dated the date
of this Agreement, in form satisfactory to the Bank and covering such
other matter(s) as the Bank may reasonably require.
SECTION 7.2. EACH LOAN. The obligation of the Bank to make any
---------
Loan shall be subject to compliance with Section 2.l herein and also
subject to satisfaction of the following conditions that at the date
of making such Loan, and after giving effect thereto: (a) no Event of
Default shall have occurred and be then continuing, (b) each
representation and warranty set forth in this Agreement and in each of
the other Loan Documents is true and correct as if then made, and (c)
no event shall have occurred or failed to occur which has or is
reasonably likely to have a Material Adverse Effect.
ARTICLE VIII. COVENANTS
------------------------
As long as credit is available hereunder or until all principal
of and interest on the Note have been paid in full:
SECTION 8.1. ACCOUNTING; FINANCIAL STATEMENTS AND OTHER
------------------------------------------
INFORMATION. The Company will maintain a standard system of
- -----------
accounting, established and administered in accordance with GAAP
consistently followed throughout the periods involved, and will set
aside on its books for each fiscal month the proper amounts or
accruals for depreciation, obsolescence, amortization, bad debts,
current and deferred taxes, prepaid expenses, and for other purposes
as shall be required by GAAP. The Company will deliver to the Bank:
(a) As soon as practicable after the end of calendar month in each
year, and in any event within fifteen (15) days thereafter, a
consolidated and consolidating balance sheet of the Company and
each of its Subsidiaries as of the end of such month, and
statements of income, changes in financial position, and
shareholders' equity of the Company for such month, certified as
complete and correct by the principal financial officer of the
Company, subject to changes resulting from year-end adjustments;
(b) As soon as practicable after the end of each fiscal year, and in
any event within ninety (90) days thereafter, a consolidated and
consolidating balance sheet of the Company and each of its
Subsidiaries as of the end of such year, and statements of
income, changes in financial position, and shareholders' equity
of the Company for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all in
reasonable detail and accompanied by a report and an unqualified
opinion of independent certified public accountants of recognized
standing, selected by the Company and satisfactory to the Bank,
which report and opinion shall be prepared in accordance with
generally accepted auditing standards, together with a
certificate by such accountants (i) briefly setting forth the
scope of their examination (which shall include a review of the
relevant provisions of this Agreement) and stating that in their
judgment such examination is sufficient to enable them to give
the certificate, and (ii) stating whether their examination has
disclosed the existence of any condition or event which
constitutes an Event of Default under this Agreement, and, if
their examination has disclosed such a condition or event,
specifying the nature and period of existence thereof;
31<PAGE>
(c) As soon as practicable, and in any event within fifteen (15) days
of the end of each calendar month in each year, a certificate by
the Company indicating the Debt to Tangible Net Worth Ratio as at
the end of such calendar month;
(d) As soon as practicable, and in any event within fifteen (15) days
of the end of each calendar month in each year, the Loan
Certificate fully completed as to all figures and information
called for therein and certified as complete and correct by a
duly authorized officer of Company; and
(e) With reasonable promptness, such other data and information as
from time to time may be reasonably requested by the Bank.
SECTION 8.2. INSURANCE; MAINTENANCE OF PROPERTIES. The Company
-------------------------------------
will maintain with financially sound and reputable insurers,
insurance with coverage and limits as may be required by law or as may
be reasonably required by the Bank. The Company will, upon request
from time to time, furnish to the Bank a schedule of all insurance
carried by it, setting forth in detail the amount and type of such
insurance. The Company will maintain in good repair, working order,
and condition, all properties used or useful in the business of the
Company.
SECTION 8.3. EXISTENCE; BUSINESS. The Company will cause to be
-------------------
done all things necessary to preserve and keep in full force and
effect its existence and rights, to conduct its business in a prudent
manner, to maintain in full force and effect, and renew from time to
time, its franchises, permits, licenses, patents, and trademarks that
are necessary to operate its business. The Company will comply in all
material respects with all valid laws and regulations now in effect or
hereafter promulgated by any properly constituted governmental
authority having jurisdiction; provided, however, the Company shall
not be required to comply with any law or regulation which it is
contesting in good faith by appropriate proceedings as long as either
the effect of such law or regulation is stayed pending the resolution
of such proceedings or the effect of not complying with such law or
regulation is not to jeopardize any franchise, license, permit patent,
or trademark necessary to conduct the Company's business.
SECTION 8.4. PAYMENT OF TAXES. The Company will pay all taxes,
----------------
assessments, and other governmental charges levied upon any of its
properties or assets or in respect of its franchises, business,
income, or profits before the same become delinquent, except that no
such taxes, assessments, or other charges need be paid if contested by
the Company in good faith and by appropriate proceedings promptly
initiated and diligently conducted and if the Company has set aside
proper amounts, determined in accordance with GAAP, for the payment of
all such taxes, changes, and assessments.
SECTION 8.5. LITIGATION; ADVERSE CHANGES. The Company will
---------------------------
promptly notify the Bank in writing of (a) any future event which, if
it had existed on the date of this Agreement, would have required
qualification of any of the representations and warranties set forth
in this Agreement or any of the other Loan Documents, and (b) any
Material Adverse Effect.
SECTION 8.6. NOTICE OF DEFAULT. The Company will promptly
-----------------
notify the Bank of any Event of Default hereunder and any demands made
upon the Company by any Person for the acceleration and immediate
payment of any Indebtedness owed to such Person.
32<PAGE>
SECTION 8.7. INSPECTION. The Company will make available for
----------
inspection by duly authorized representatives of the Bank, or its
designated agent, the Company's books, records, and properties when
reasonably requested to do so, and will furnish the Bank such
information regarding its business affairs and financial condition
within a reasonable time after written request therefor.
SECTION 8.8. ENVIRONMENTAL MATTERS. The Company and each of its
---------------------
Subsidiaries:
(a) Shall comply with all Environmental Laws, and
(b) Shall deliver promptly to Bank (i) copies of any documents
received from the United States Environmental Protection Agency
or any state, county or municipal environmental or health agency,
and (ii) copies of any documents submitted by Company or any of
its Subsidiaries to the United States Environmental Protection
Agency or any state, county or municipal environmental or health
agency concerning its operations.
SECTION 8.9. SALE OF ASSETS. The Company will not, directly or
--------------
indirectly sell, lease, transfer, or otherwise dispose of any plant or
any manufacturing facility or other assets except for (i) assets sold
for full and adequate consideration which the Board of Directors or
senior management of the Company has determined to be worn out,
obsolete, or no longer needed or useful in its business, and
(ii) assets sold in the ordinary course of business, provided that the
Company receives full and adequate consideration in exchange for such
assets sold.
SECTION 8.10. LIENS. The Company will not, directly or
-----
indirectly, create, incur, assume, or permit to exist any Lien with
respect to any property or asset of the Company now owned or hereafter
acquired other than Permitted Liens.
SECTION 8.11. INDEBTEDNESS. The Company will not, directly or
------------
indirectly, create, incur, or assume Indebtedness, or otherwise become
liable with respect to, any Indebtedness other than:
(a) Indebtedness now or hereafter payable, directly or indirectly, by
the Company to the Bank or any Affiliate Bank;
(b) Subordinated Debt of the Company;
(c) To the extent permitted by this Agreement, Indebtedness for the
lease or purchase price of any real or personal property, which
is secured only by a Permitted Lien;
(d) Unsecured Indebtedness and deferred liabilities incurred in the
ordinary course of business;
(e) Indebtedness for taxes, assessments, governmental charges, liens,
or similar claims to the extent not yet due and payable;
(f) Indebtedness of the Company existing as of the date of this
Agreement, which is expressly disclosed on the Schedule on
Exhibit C hereto;
(g) Other Indebtedness of the Company not exceeding $200,000.00 in
the aggregate outstanding at any time; and
33<PAGE>
(h) Extensions, renewals, refundings, refinancings, modifications,
amendments and restatements of any of the items listed in items
(b) through (g) above, provided that the principal amount thereof
is not increased or the terms thereof are not modified to impose
more burdensome terms upon the Company.
SECTION 8.12. INVESTMENTS; LOANS. Except for Permitted
------------------
Investments, the Company will not, directly or indirectly,
(a) purchase or otherwise acquire or own any stock or other securities
of any other Person, or (b) make or permit to be outstanding any loan
or advance (other than trade advances in the ordinary course of
business) or enter into any arrangement to provide funds or credit, to
any other Person.
SECTION 8.13. GUARANTIES. The Company will not guarantee,
----------
directly or indirectly, or otherwise become surety (including, without
limitation, liability by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to, or
otherwise invest in, any Person, or enter into any working capital
maintenance or similar agreement) in respect of any obligation or
Indebtedness of any other Person, except guaranties by endorsement of
negotiable instruments for deposit, collection, or similar
transactions in the ordinary course of business.
SECTION 8.14. MERGERS; CONSOLIDATION. The Company will not
----------------------
merge into or consolidate with any other Person or permit any other
Person to merge into or consolidate with it, or sell all or
substantially all of its assets, except that the Company may merge
into or consolidate with any other Person or permit any other Person
to merge into or consolidate with it; provided, however, that (i) the
--------- -------
Company shall be the corporation which survives such merger or results
from such consolidation; (ii) immediately after the consummation of
the transaction, and after giving effect thereto, the Company would be
permitted by the provisions of this Article VIII to incur additional
Indebtedness; and (iii) before and immediately after the consummation
of the transaction, and after giving effect thereto, no Event of
Default, or event which with notice or lapse of time or both would
become an Event of Default, exists or would exist.
SECTION 8.15. CURRENT RATIO. The Company will not permit the
-------------
ratio by which its Current Assets exceeds its Current Liabilities,
calculated at the same point in time, to be at any time less than 2.00
to 1.00.
SECTION 8.16. FUNDS FROM OPERATIONS TO TOTAL DEBT. The Company
-----------------------------------
will not permit the ratio of Funds from Operations to Total
Indebtedness, calculated annually upon the Bank's receipt of the
financial statements provided by the Company under Section 8.1(b) of
this Agreement, to be less than twenty five percent (25.00%)
SECTION 8.17. SUBORDINATED DEBT. The Company will not make any
-----------------
payment upon any outstanding Subordinated Debt, except in such manner
and amounts as may be expressly authorized in any subordination
agreement presently or hereafter held by the Bank.
SECTION 8.18. RATIO OF TOTAL INDEBTEDNESS TO TANGIBLE NET WORTH.
--------------------------------------------------
The Company will not permit the ratio of its Total Indebtedness to the
sum of its Tangible Net Worth, calculated at the same point in time,
to be at any time more than 1.99 to 1.00.
34<PAGE>
SECTION 8.19. CAPITAL EXPENDITURES. The Company will not make
--------------------
Capital Expenditures in an aggregate amount in excess of $800,000.00
in any fiscal year without thirty (30) days' prior written
notification to the Bank.
SECTION 8.20. SENIOR MANAGEMENT. The Company will not replace
-----------------
or accept the resignation of the President or Chief Executive Officer
of the Company without sixty (60) days prior written notice to Bank.
SECTION 8.21. COMPLIANCE WITH ERISA. With respect to the
---------------------
Company and any Commonly Controlled Entity, the Company will not
permit the occurrence of any of the following events to the extent
that any such events would result in a material Adverse Effect on the
Company, (a) withdraw from or cease to have an obligation to
contribute to, any Multiemployer Plan, (b) engage in any "prohibited
transaction" (as defined in Section 4975 of the Code) involving any
Plan, (c) except for any deficiency caused by a waiver of the minimum
funding requirement under Section 412 of the Code, as described above,
incur or suffer to exist any material "accumulated funding deficiency"
(as defined in Section 302 of ERISA and Section 412 of the Code) of
the Company or any Commonly Controlled Entity, whether or not waived,
involving any Single Employer Plan, (d) incur or suffer to exist any
Reportable Event or the appointment of a trustee or institution of
proceedings for appointment of a trustee for any Single Employer Plan
if, in the case of a Reportable Event, such event continues unremedied
for ten (10) days after notice of such Reportable Event pursuant to
Sections 4043(a), (c) or (d) of ERISA is given, if in the reasonable
opinion of the Bank any of the foregoing is likely to result in a
Material Adverse Effect, (e) allow or suffer to exist any event or
condition, which presents a material risk of incurring a material
liability of the Company or any Commonly Controlled Entity to PBGC by
reason of termination of any such Plan or (f) cause or permit any Plan
maintained by the Company and/or any Commonly Controlled Entity to be
out of compliance with ERISA.
SECTION 8.22. LOAN BASE. The Company will not request any Loan
---------
which, when aggregated with all other Loans outstanding under this
Agreement, exceed the Loan Base. Further, if at any time the total
Loans outstanding under this Agreement exceed the Loan Base, the
Company agrees to repay within twenty-four (24) hours one or more
Loans in amount sufficient to reduce the aggregate balances
outstanding on the Loans to an amount less than the Loan Base.
ARTICLE IX. EVENTS OF DEFAULT
------------------------------
The occurrence of any one or more of the following events shall
constitute an Event of Default under this Agreement:
SECTION 9.1. PRINCIPAL OR INTEREST. If the Company fails to pay
---------------------
any installment of principal of or interest on the Note, or any other
sums of money when due and payable under this Agreement (including but
not limited to payments required to reduce all Loan amounts to the
Loan Base) and such failure continues for twenty-four (24) hours; or
SECTION 9.2 MISREPRESENTATION. If any representation or
-----------------
warranty made herein by the Company or in any written statement,
certificate, report, or financial statement at any time furnished by,
or on behalf of, the Company in connection herewith, is incorrect or
misleading in any material respect when made; or
35<PAGE>
SECTION 9.3. FAILURE OF PERFORMANCE OF THIS AGREEMENT. Except
----------------------------------------
as otherwise provided herein, if the Company fails to perform or
observe any covenant or agreement contained in this Agreement or any
of the other Loan Documents, and such failure remains unremedied for
thirty (30) calendar days after the Bank shall have given written
notice thereof to the Company; or
SECTION 9.4. CROSS-DEFAULT. If the Company (a) fails to pay any
-------------
Indebtedness aggregating more than $100,000.00 (other than as
evidenced by the Note, which failure shall constitute an Event of
Default under Section 10.1) owing by the Company when due, whether at
maturity, by acceleration, or otherwise, or (b) fails to perform any
term, covenant, or agreement on its part to be performed under any
agreement or instrument (other than the Loan Documents, which failure
to perform shall constitute an Event of Default under Section 9.1 or
Section 9.3) evidencing, securing, or relating to such Indebtedness in
excess of $100,000 when required to be performed, or is otherwise in
default thereunder, if the effect of such failure is to accelerate, or
to permit the holder(s) of such Indebtedness or the trustee(s) under
any such agreement or instrument to accelerate, the maturity of such
Indebtedness, whether or not such failure shall be waived by such
holder(s) or trustee(s); or
SECTION 9.5. INSOLVENCY. If the Company shall discontinue
----------
business or (a) is adjudicated a bankrupt or insolvent under any law
of any existing jurisdiction, domestic or foreign, or ceases, is
unable, or admits in writing its inability, to pay its debts generally
as they mature, or makes a general assignment for the benefit of
creditors, (b) applies for, or consents to, the appointment of any
receiver, trustee, or similar officer for it or for any substantial
part of its property, or any such receiver, trustee, or similar
officer is appointed without the application or consent of the
Company, and such appointment continues thereafter undischarged for a
period of thirty (30) days, (c) institutes, or consents to the
institution of any bankruptcy, insolvency, reorganization,
arrangement, readjustment or debt, dissolution, liquidation, or
similar proceeding relating to it under the laws of any jurisdiction,
(d) any such proceeding is instituted against the Company and remains
thereafter undismissed for a period of thirty (30) days, or (e) any
judgment, writ, warrant of attachment or execution, or similar process
is issued or levied against a substantial part of the property of the
Company or any Subsidiary and such judgment, writ, or similar process
is not effectively stayed within thirty (30) days after its issue or
levy.
SECTION 9.6. LOSS OF OCCUPANCY OF PENNSYLVANIA LEASEHOLD. If
------------------------------------------
the Company, for any reason, is evicted from, or loses the right to
occupy, the Leased Premises located in Dunbar, Pennsylvania and which
are the subject of a sublease between E.I. du Pont de Nemours and
Company, as sublessor, and the Company, as sublessee.
ARTICLE X. REMEDIES UPON DEFAULT
---------------------------------
SECTION 10.1. OPTIONAL ACCELERATION. In the event that one or
---------------------
more of the Events of Default set forth in Sections 9.l through 9.6
above occurs and continues and is not waived by the Bank, then, in any
such event, and at any time thereafter, the Bank may, at its option,
terminate its commitment to make any Loan and declare the unpaid
principal of, and all accrued interest on any Note, and any other
liabilities hereunder, and all other Indebtedness of the Company to
the Bank forthwith due and payable, whereupon the same will forthwith
become due and payable without presentment, demand, protest, or other
notice of any kind, all of which the Company hereby expressly waives,
anything contained herein or in any Note to the contrary
notwithstanding.
36<PAGE>
SECTION 10.2. AUTOMATIC ACCELERATION. Upon the happening of an
----------------------
Event of Default referred to in Section 9.6 above, the unpaid
principal of, and all accrued interest on, any Note, and any other
liabilities hereunder and all other Indebtedness of the Company to the
Bank then existing will thereupon become immediately due and payable
in full and the commitment, if any, of the Bank to make any Loan, if
not previously terminated, will thereupon immediately terminate
without presentment, demand, protest, or notice of any kind, all of
which are hereby expressly waived by the Company, anything contained
herein or in any Note to the contrary notwithstanding.
SECTION 10.3. REMEDIES. The Bank shall have the rights and
--------
remedies of a secured party under the Uniform Commercial Code in
addition to the rights and remedies of a secured party provided
elsewhere within the Agreement or in any other writing executed by the
Company. The Bank may require the Company to assemble the Collateral
and make it available to the Bank at a reasonably convenient place to
be designated by the Bank. Unless the Collateral is perishable,
threatens to decline speedily in value, or is of a type customarily
sold on a recognized market, the Bank will give the Company reasonable
notice of the time and place of any public sale of the Collateral or
of the time after which any private sale or other intended disposition
thereof is to be made. The requirement of reasonable notice shall be
met if such notice is mailed (deposited for delivery, postage prepaid,
by U.S. mail) to either, at the Bank's option (l) principal office of
the Company as set forth in this Agreement (or as modified by any
change therein which the Company has supplied in writing to the Bank),
or (2) the Company's address at which the Bank customarily
communicates with the Company, at least ten (l0) days before the time
of the public sale or the time after which any private sale or other
intended disposition thereof is to be made. At any such public or
private sale, the Bank may purchase the Collateral. After deduction
for the Bank's Related Expenses, the residue of any such sale or other
disposition shall be applied in satisfaction of the Obligations in
such order of preference as the Bank may determine. Any excess, to
the extent permitted by law, shall be paid to the Company, and the
Company shall remain liable for any deficiency.
SECTION 10.4. NO WAIVER. The remedies in this ARTICLE X are in
---------
addition to, not in limitation of, any other right, power, privilege,
or remedy, either in law, in equity, or otherwise, to which the Bank
may be entitled. No failure or delay on the part of the Bank in
exercising any right, power, or remedy will operate as a waiver
thereof, nor will any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right
hereunder.
ARTICLE XI. MISCELLANEOUS
--------------------------
SECTION 11.1. AMENDMENTS. No waiver of any provision of this
----------
Agreement, the Note, or consent to departure therefrom, is effective
unless in writing and signed by the Bank. No such consent or waiver
extends beyond the particular case and purpose involved. No amendment
to this Agreement is effective unless in writing and signed by the
Company and the Bank.
SECTION 11.2. EXPENSES; DOCUMENTARY TAXES. The Company shall
---------------------------
pay (a) all out-of-pocket expenses of the Bank, including fees and
disbursements of special counsel for the Bank, in connection with the
preparation of this Agreement (which fees of special counsel shall not
exceed $10,000.00), any waiver or consent hereunder or any amendment
hereof or any Event of Default hereunder, and (b) if an Event of
Default occurs, all out-of-pocket expenses incurred by the Bank,
including reasonable fees and disbursements of counsel, in connection
with such Event of Default and collection and other enforcement
proceedings resulting therefrom. The Company shall
37<PAGE>
reimburse the Bank for its payment of all transfer taxes, documentary
taxes, assessments, or charges made by any governmental authority by
reason of the execution and delivery of this Agreement or the Note.
SECTION 11.3. INDEMNIFICATION. The Company shall indemnify and
---------------
hold the Bank harmless against any and all liabilities, losses,
damages, costs, and expenses of any kind (including, without
limitation, the reasonable fees and disbursements of counsel in
connection with any investigative, administrative or judicial
proceeding, whether or not the Bank shall be designated a party
thereto) which may be incurred by the Bank relating to or arising out
of this Agreement or any actual or proposed use of proceeds of any
Loan hereunder; provided, that the Bank shall have no right to be
indemnified hereunder for its own gross negligence, bad faith or
willful misconduct as determined by a court of competent jurisdiction.
The Company further agrees to indemnify the Bank against any loss or
expense which the Bank may sustain or incur as a consequence of any
default by the Company in payment when due of any amount due hereunder
in respect of any LIBOR Rate Loan, including, but not limited to, any
loss of profit, premium, or penalty incurred by the Bank in respect of
funds borrowed by it for the purpose of making or maintaining any such
Loan, as determined by the Bank in the exercise of its sole but
reasonable discretion. A certificate as to any such loss or expense
shall be promptly submitted by the Bank to the Company and shall, in
the absence of manifest error, be conclusive and binding as to the
amount thereof.
SECTION 11.4. CONSTRUCTION. This Agreement and the Note will be
------------
governed by and construed in accordance with the laws of the State of
Colorado, without regard to principles of conflict of laws. The
several captions to different Sections of this Agreement are inserted
for convenience only and shall be ignored in interpreting the
provisions hereof.
SECTION 11.5. EXTENSION OF TIME. Whenever any payment hereunder
-----------------
or under the Note becomes due on a date which the Bank is not open for
the transaction of business, such payment will be due on the next
succeeding Business Day and such extension of time will be included in
computing interest in connection with such payment.
SECTION 11.6. NOTICES. All written notices, requests, or other
-------
communications herein provided for must be addressed:
to the Company as follows:
Dynamic Materials Corporation
551 Aspen Ridge Dr.
Lafayette, Colorado 80026
Attn: Paul Lange, President
to the Bank as follows:
Key Bank of Colorado
3600 S. Yosemite Street
Denver, Colorado 80237
Attn: Scott Wetzel, Corporate Banking
38<PAGE>
or at such other address as either party may designate to the other in
writing. Such communication will be effective (i) if by telex, when
such telex is transmitted and the appropriate answer back is received,
(ii) if given by mail, 72 hours after such communication is deposited
in the U.S. mail certified mail return receipt requested, or (iii) if
given by other means, when delivered at the address specified in this
Section 11.6.
SECTION 11.7. SURVIVAL OF AGREEMENTS; RELATIONSHIP. All
------------------------------------
agreements, representations, and warranties made in this Agreement
will survive the making of the extension of credit hereunder, and will
bind and inure to the benefit of the Company and the Bank, and their
respective successors and assigns; provided, that no subsequent holder
--------
of the Note shall by reason of acquiring that Note, as the case may
be, become obligated to make any Loan hereunder and no successor to or
assignee of the Company may borrow hereunder without the Bank's
written assent. The relationship between the Company and the Bank
with respect to this Agreement, the Note, and any other Loan Document
is and shall be solely that of debtor and creditor, respectively, and
the Bank has no fiduciary obligation toward the Company with respect
to any such document or the transactions contemplated thereby.
SECTION 11.8. SEVERABILITY. If any provision of this Agreement
------------
or the Note, or any action taken hereunder, or any application
thereof, is for any reason held to be illegal or invalid, such
illegality or invalidity shall not affect any other provision of this
Agreement or the Note, all of which shall be construed and enforced
without reference to such illegal or invalid portion and shall be
deemed to be effective or taken in the manner and to the full extent
permitted by law.
SECTION 11.9. ENTIRE AGREEMENT. This Agreement, the Note, and
-----------------
any other Loan Document integrate all the terms and conditions
mentioned herein or incidental hereto and supersede all oral
representations and negotiations and prior writings with respect to
the subject matter hereof.
SECTION 11.10. JURY TRIAL WAIVER. THE COMPANY AND THE BANK EACH
------------------
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN THE BANK AND
THE COMPANY ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION
WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT IN ANY WAY
AFFECT, WAIVE, LIMIT, AMEND OR MODIFY THE BANK'S ABILITY TO PURSUE
REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION
CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
BETWEEN THE BANK AND THE COMPANY.
39<PAGE>
IN WITNESS WHEREOF, the Company and the Bank have each caused
this Agreement to be executed by their duly authorized officers this
19 day of July , l996.
- ---- ------
COMPANY: DYNAMIC MATERIALS CORPORATION
BY: /s/ P. Lange
-------------------------------------
TITLE: President
BANK: KEY BANK OF COLORADO
BY: /s/ Scott Wetzel
-------------------------------------
TITLE: A.V.P. Corporate Banking
----------------------------------
40<PAGE>
EXHIBIT A
PROMISSORY NOTE
---------------
$7,500,000.00 JULY 19, 1996
For value received, DYNAMIC MATERIALS CORPORATION (the
"Company") promises to pay to the order of KEY BANK OF COLORADO,
Denver, Colorado, (the "Bank"), its successor and assigns, at its main
office, on the date or dates and in the manner specified in Article II
of the Credit Agreement (as defined below), the aggregate principal
amount of the Loans as shown on any ledger or other record of the
Bank, which shall be rebuttably presumptive evidence of the principal
amount owing and unpaid on this Note.
The Company promises to pay to the order of the Bank interest on
the unpaid principal amount of each Loan made pursuant to the Credit
Agreement from the date of such Loan until such principal amount is
paid in full at such interest rate(s) and at such times as are
specified in ARTICLE II of the Credit Agreement.
This Note is the Note referred to in, and is entitled to the
benefits of, the Credit Facility and Security Agreement ("Credit
Agreement") by and between the Bank and the Company dated July 19,
l996, as the same may be hereafter amended from time to time. This
Note may be declared forthwith due and payable in the manner and with
the effect provided in the Credit Agreement, which contains provisions
for acceleration of the maturity hereof upon the happening of any
Event of Default and also for prepayment on account of principal
hereof prior to the maturity hereof upon the terms and conditions
therein specified.
Each defined term used in this Note shall have the meaning
ascribed thereto in Section 1.2 of the Credit Agreement.
The Company expressly waives presentment, demand, protest, and
notice of dishonor.
The Company acknowledges that this Note was signed in the City of
Denver, in the State of Colorado.
COMPANY: DYNAMIC MATERIALS CORPORATION
By:_________________________________
Title: President
<PAGE>
LOAN CERTIFICATE EXHIBIT B
----------------
Dynamic Materials Corporation
Certificate Date: _______________
Borrowing Base Calculation:
$ Advance Qualified
------ ------- ---------
Rate Collateral
---- ----------
Accounts Receivable
- -------------------
*Eligible Accounts Receivable 80% (A)
------- --------- ---------
*(Per loan agreement)
Inventory
- ---------
Raw Material 50% (B)
------- --------- ---------
Work In Process 30% (C)
------- --------- ---------
Property, Plant & Equipment
- ---------------------------
P,P,& E: Appraised 70% (D)
------- --------- ---------
P,P,& E: Net Book Value 50% (E)
------- --------- ---------
Total Qualified Collateral (Add lines A. through E.) (F)
---------
Less: Current Outstanding Revolving Credit Balance (G)
---------
Total Collateral Excess (Shortfall): (F.-G.)
---------
Covenant Tests:
- --------------
1.) Current Ratio _________
2.) Total Indebtedness to Tangible Net Worth _________
3.) Capital Expenditures (YTD Total) _________
4.) Funds From Operations to Total Debt (Test Annually Only) _________
5.) Date of Last Backlog Report submitted to
Bank _________
6.) Date of Last Receivable Aging submitted to
Bank _________
7.) Date of Last Inventory Analysis submitted to Bank _________
8.) Date of Last Financial Statement submitted to Bank _________
I certify that the above information is true and correct to the best
of my knowledge, and further attest that Dynamic Materials Corporation
is in full compliance with the terms and conditions of its loan
agreement with KeyBank of Colorado (the "Loan Agreement"), (ii) no
Event of Default shall have occurred and is continuing, (iii) each
representation and warranty set forth in the Loan Agreement is true
and correct as of the date of this Loan Certificate and (iv) no event
shall have occurred or failed to occur which has or is reasonably
likely to have a Material Adverse Effect (as all capitalized terms are
defined in the Loan Agreement):
BY:_________________________________ Title:______________________
Name (Print)________________________ Date: ______________________<PAGE>
EXHIBIT C
SCHEDULE OF COMPANY
-------------------
In order to induce Key Bank of Colorado ("Bank") to make loans to
Dynamic Materials Corporation ("Company") under, and pursuant to, that
Credit Facility and Security Agreement dated July 19, 1996, between
Bank and Company ("Credit Agreement"), Company represents and
certifies to Bank those matters described below as of July 19, 1996,
which representations and certifications assume the Company has closed
the transaction by which the Company is purchasing from E.I. du Pont
de Nemours and Company the assets of the DETACLAD explosion bonded
clad metal business. All capitalized terms have the meanings defined
in the Credit Agreement.
THE COMPANY'S PRINCIPAL PLACE OF BUSINESS, CHIEF EXECUTIVE OFFICES,
ACCOUNTING OFFICERS, AND RECORDS OF ACCOUNTS RECEIVABLE AND GENERAL
INTANGIBLES ARE LOCATED AT:
551 Aspen Ridge Dr.
Lafayette, Colorado 80026
THE COMPANY'S REGISTERED OFFICE IS LOCATED AT:
551 Aspen Ridge Drive
Lafayette, CO 80026
THE LOCATION OF ALL REAL PROPERTY OWNED OR LEASED BY THE COMPANY IS
DESCRIBED BELOW; NONE OF SUCH PROPERTY IS LOCATED IN ANY FEDERAL,
STATE, OR MUNICIPAL FLOOD ZONE; AND ALL SUCH PROPERTY IS IN GOOD
REPAIR, WORKING ORDER AND CONDITION, REASONABLY SUITABLE FOR USE IN
THE COMPANY'S BUSINESS OPERATIONS, AND ARE CURRENTLY OPERATED AND
MAINTAINED, IN ALL MATERIAL RESPECTS, IN ACCORDANCE WITH REQUIREMENTS
OF APPLICABLE GOVERNMENTAL AUTHORITIES:
The company owns the real estate known as 1301 Courtesy
Road, Louisville, Colorado.
The Company leases facilities at:
John Jolly Ranch -- Deertrail, Colorado
551 Aspen Ridge Drive -- Lafayette, Colorado
1255 Distel Drive -- Lafayette, Colorado
The Dunbar Mine
Kennett Square
THE COMPANY LOCATES INVENTORY, EQUIPMENT, AND ALL OTHER TANGIBLE
COLLATERAL OF THE COMPANY ONLY AT THE FOLLOWING LOCATIONS, WHICH
INCLUDES THE LOCATION OF ALL WAREHOUSES, BAILEES OR CONSIGNEES:
1301 Courtesy Road, Louisville, Colorado
1225 Distel Drive, Lafayette, Colorado
Dunbar Mine, Dunbar, Pennsylvania
<PAGE>
THE ONLY TRADE NAMES, ASSUMED NAMES, FICTITIOUS NAMES OR OTHER NAMES
USED BY THE COMPANY DURING THE FIVE YEARS PRIOR TO THE DATE OF THIS
CERTIFICATE ARE AS FOLLOWS:
E.F. Industries
Explosive Fabricators, Inc.
THE ADDRESSES OF ALL POST OFFICE BOXES RENTED BY THE COMPANY TO SERVE
AS LOCKBOXES ARE AS FOLLOWS:
Norwest Lockbox 418
THE ONLY DEPOSIT ACCOUNTS OR TRUST ACCOUNTS (COLLECTIVELY, THE
"PERMITTED ACCOUNTS") MAINTAINED BY THE COMPANY FOR THE PURPOSE OF
COLLECTING AND DEPOSITING COLLECTIONS AND\OR REMITTANCES OR OTHERWISE
HOLDING MONIES OF THE COMPANY, OTHER THAN THE BLOCKED ACCOUNTS AND
CASH COLLATERAL ACCOUNTS, ARE DISCLOSED BELOW:
Norwest Denver Operating Account
THE ONLY BANKS WITH WHICH THE COMPANY HAS, OR WILL, ESTABLISH BLOCKED
ACCOUNTS ARE AS FOLLOWS:
THE COMPANY HAS OBTAINED THE APPROVAL OF ALL PERSONS (INCLUDING ALL
GOVERNMENTAL AUTHORITIES) REQUIRED TO ALLOW THE COMPANY TO ENTER INTO
AND PERFORM ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS, EXCEPT FOR THE
FOLLOWING APPROVALS:
THE COMPANY PRESENTLY HOLDS THE PERMITS, GOVERNMENTAL LICENSES,
REGISTRATIONS AND APPROVALS (COLLECTIVELY, THE "PERMITS"), MATERIAL
TO CARRYING ON THE COMPANY'S BUSINESSES LISTED BELOW; ALL OF WHICH ARE
IN FULL FORCE AND EFFECT, ARE DULY ISSUED IN THE NAME OF, OR VALIDLY
ASSIGNED TO THE COMPANY AND THE COMPANY HAS FULL POWER AND AUTHORITY
TO OPERATE THEREUNDER; THERE ARE NO MATERIAL VIOLATIONS OR FAILURES OF
COMPLIANCE ON THE PART OF THE COMPANY WITH THE PERMITS; AND THERE ARE
NO ACTIONS, PROCEEDINGS OR INVESTIGATIONS PENDING OR, TO THE COMPANY'S
KNOWLEDGE THREATENED, NOR HAS THE COMPANY RECEIVED ANY NOTICE OF WHICH
MIGHT RESULT IN THE TERMINATION OR SUSPENSION OF ANY PERMIT WHICH IN
ANY CASE COULD HAVE A MATERIAL ADVERSE EFFECT, EXCEPT AS DISCLOSED
BELOW:
Permit from Bureau of Alcohol Tobacco and Fire Arms for
storage and use of explosives
Special use zoning allowance at Deertrail, Colorado by
Arapahoe County
Standard business licenses - State of Colorado
Storm Water Discharge Permit - State of Colorado
Air Emissions Discharge Permit - State of Colorado
Magazine permit, Federal Bureau of Alcohol, Tobacco and Fire
Arms
Explosive Manufacturing Usage Permit, Federal Bureau of
Alcohol, Tobacco and Fire Arms
44
<PAGE>
THE COMPANY HAS NOT FILED ANY REGISTRATION STATEMENTS, NOTICES OR
STATEMENTS OF ACCOUNT WITH THE UNITED STATES COPYRIGHT OFFICE EXCEPT
AS DESCRIBED BELOW; THE REGISTERED COPYRIGHTS HELD BY THE COMPANY ARE
ACCURATELY AND COMPLETELY SET FORTH BELOW; AND TO THE COMPANY'S
KNOWLEDGE NO INQUIRIES REGARDING ANY SUCH FILINGS HAVE BEEN RECEIVED
BY THE COPYRIGHT OFFICE EXCEPT AS DISCLOSED BELOW:
None.
THE REGISTERED TRADEMARKS, REGISTERED COPYRIGHTS AND PATENTS OF THE
COMPANY, PENDING APPLICATIONS THEREFOR, AND ALL OTHER INTELLECTUAL
PROPERTY IN WHICH THE COMPANY HAS ANY RIGHTS (OTHER THAN "OFF-THE-
SHELF" SOFTWARE WHICH IS GENERALLY AVAILABLE TO THE GENERAL PUBLIC AT
RETAIL) IS COMPLETELY AND ACCURATELY DESCRIBED BELOW; AND, EXCEPT AS
SET FORTH BELOW, THE COMPANY OWNS, POSSESSES, OR HAS LICENSES, AND ALL
RIGHTS WITH RESPECT TO THE FOREGOING, NECESSARY FOR THE CONDUCT OF ITS
BUSINESS AS NOW CONDUCTED, WITHOUT, TO THE COMPANY'S KNOWLEDGE, ANY
CONFLICT WITH THE RIGHTS OF OTHERS WITH RESPECT THERETO:
Registered Trademarks and Trade Names:
DynaCouple
DuraTemp
EFTEK
DETACLAD
DETACOUPLE
U.S. Patents and Patent Applications:
Explosively Bonding Metal Composite, U.S. Patent No.
5,323,955
Process for Explosively Bonding Metals, U.S. Patent No.
5,400,945
Hot Rolled Explosion-Bonded Titanium/Steel Composites,
Filing Date: March 29, 1996
ALL OF THE MATERIAL AGREEMENTS ARE ACCURATELY AND COMPLETELY LISTED
BELOW, ALL OF WHICH ARE IN EFFECT, AND ARE LEGALLY VALID, BINDING, AND
TO THE COMPANY'S KNOWLEDGE, IN FULL FORCE AND EFFECT; NEITHER THE
COMPANY, NOR TO THE COMPANY'S KNOWLEDGE, ANY OTHER PARTIES THERETO ARE
IN MATERIAL DEFAULT OF THE MATERIAL AGREEMENTS:
Sublease dated July 22, 1996 between the Company and E.I.
duPont de Nemours and Company
Tolling/Services Agreement for Industrial Diamonds dated
July 22, 1996 between the Company and E.I. du Pont de
Nemours and Company
Purchase and Sale Agreement dated July 22, 1996 between the
Company and E.I. du Pont de Nemours and Company
ASC Engineering
Thompson Metal Fabrication
Boeing Commercial
45<PAGE>
Larsen & Taibro
Nooter Corporation
Consorcio Industrial
Monsanto
Struthers Industries, Inc.
Cosmos Minerals Corporation
Trinity Industries
Graham Manufacturing
Ingalls Shipbuilding
Resolute Samantha, Ltd.
Phoenix Metallurgical Company
Scientific Engineering
Senior Engineering
Ohmstede
VDM Australia
Lukens Steel Company
Oregon Metallurgical
Teledyne Wah Chang ALbany
Timet
Titanium Industries
Franco Steel
Uniform Components
Le Tarneau Steel
American Alloy
DetaClad operation - Du Pont Corporation
ESCO
INCO
Metal 600ps
RMI Titanium
Tyesson
Carl Thompson Associates
The Wallach Company
Cooley Godward Castro Huddleson & Tatum
Chubb Insurance
Liberty Mutual Insurance
Norwest Bank Denver
Norwest Investment Services
Norwest Leasing
Colorado National Leasing
Design Fabricators
Mutual of Omaha
Northwestern Mutual Insurance
Invesco
John Jolly, Sr.
46<PAGE>
ALL OF THE RELATED TRANSACTION DOCUMENTS ARE LISTED BELOW:
Purchase and Sale Agreement dated July 22, 1996
Tolling Manufacturing Agreement dated July 22, 1996
Lease Agreement dated July 22, 1996
ALL OF THE COMPANY'S INVESTMENTS EXISTING ON JULY 19, 1996 ARE
DESCRIBED BELOW:
Norwest Denver - Operating Account
ALL OF THE LIENS EXISTING AS OF THE DATE OF THIS AGREEMENT ARE LISTED
BELOW:
Concord Financial
Sanwa Leasing
Colonial Pacific
Norwest Leasing
EXCEPT AS EXPRESSLY DESCRIBED BELOW, NEITHER THE COMPANY NOR, TO THE
KNOWLEDGE OF THE COMPANY, ANY OTHER PERSON HAS: (A) EVER CAUSED,
PERMITTED, OR SUFFERED TO EXIST ANY HAZARDOUS MATERIAL TO BE SPILLED,
PLACED, HELD, LOCATED OR DISPOSED OF ON, UNDER, OR ABOUT, ANY OF THE
PREMISES OWNED OR LEASED BY THE COMPANY (THE "PREMISES"), OR FROM THE
PREMISES INTO THE ATMOSPHERE, ANY BODY OF WATER, ANY WETLANDS, OR ON
ANY OTHER REAL PROPERTY, NOR DOES ANY HAZARDOUS MATERIAL EXIST ON,
UNDER OR ABOUT THE PREMISES, OR IN RESPECT OF HAZARDOUS MATERIAL USED
OR DISPOSED OF IN COMPLIANCE WITH LAW; (B) EVER USED (WHETHER BY THE
COMPANY OR BY ANY OTHER PERSON) AS A TREATMENT, STORAGE OR DISPOSAL
(WHETHER PERMANENT OR TEMPORARY) SITE FOR ANY HAZARDOUS WASTE AS
DEFINED IN 42 U.S.C.A. SECTION 6901, ET SEQ. (THE RESOURCE RECOVERY
-- ---
AND CONSERVATION ACT); OR (C) ANY KNOWLEDGE OF ANY NOTICE OF
VIOLATION, LIEN OR OTHER NOTICE ISSUED BY ANY GOVERNMENTAL AGENCY WITH
RESPECT TO THE ENVIRONMENTAL CONDITION OF THE PREMISES OR ANY OTHER
PROPERTY OCCUPIED BY THE COMPANY:
Those disclosed in 1989 report of the Toxic Release
Inventory Data System (TRIS) attached hereto.
47
[Letterhead of Carl Thompson Associates]
NEWS
FOR IMMEDIATE RELEASE: July 22, 1996
CONTACT: Mark Jarman, Account Executive
Carl Thompson Associates
(303) 494-5472
DYNAMIC MATERIAL CORPORATION COMPLETES THE ACQUISITION
OF DETACLAD[R], A DuPONT SUBSIDIARY
LAFAYETTE, CO., July 22, 1996 -- Dynamic Materials Corporation
(Nasdaq: BOOM), "DMC," today announced it has acquired the
Pennsylvania-based Detaclad[R] explosion bonded clad metal business of
E.I. DuPont de Nemours and Company. Detaclad[R]'s 1995 revenues were
$11.2 million DMC had $19.5 million in 1995 revenues.
Consideration for the transaction was approximately $5.0 million for
the DuPont subsidiary, subject to certain adjustments relating to in-
process inventories. Acquisition financing for the deal includes the
use of approximately $1.25 million in cash with an additional
$3.7 million provided from a $7.5 million revolving credit facility
which was closed on Friday, July 19, 1996.
"This is an outstanding deal for all parties," said Paul Lange, chief
executive officer of DMC. "I believe this will not only add directly
to our bottom line, but we will also realize operating efficiencies
and additional market opportunities as a result of this acquisition."
Lange added that DMC will continue to operate Detaclad[R]'s two
facilities in Pennsylvania, in addition to maintaining its own
operations in Louisville and Lafayette, Colorado.
In a separate tolling services agreement, DMC has agreed to perform
explosive shock synthesis services for DuPont in connection with the
production of industrial diamonds according to DuPont's process for
manufacturing Mypolex[R] industrial diamonds. Under this agreement,
DMC will supply 100% of DuPont's requirements for such diamonds.
Based in Lafayette, Colorado, Dynamic Materials Corporation is an
established leader in the use of high energy metal working, producing
explosion bonded clad metals and fabrications.
# # #
