U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
--------------------
Commission file number: 0-8328
DYNAMIC MATERIALS CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 84-0608431
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
551 ASPEN RIDGE DRIVE, LAFAYETTE 80026
(Address of principal executive office) (Zip Code)
Issuer's telephone number, including Area Code (303) 665-5700
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, $.05 PAR VALUE
(TITLE OF CLASS)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
X No
- - ---- -----
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 2,723,666 SHARES OF COMMON
STOCK AS OF OCTOBER 31, 1998.
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
DYNAMIC MATERIALS CORPORATION
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
ASSETS ------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 53,809
Accounts receivable, net of allowance for doubtful
accounts of $170,000 and $150,000, respectively 6,073,261 4,936,350
Inventories 3,587,387 4,029,559
Prepaid expenses and other 336,468 368,511
Deferred tax asset 200,000 200,000
Receivable from related party -- 221,274
------------ ------------
Total current assets 10,197,116 9,809,503
------------ ------------
PROPERTY, PLANT AND EQUIPMENT 10,581,141 5,831,687
Less- Accumulated depreciation (3,655,692) (2,988,807)
------------ ------------
Property, plant and equipment-net 6,925,449 2,842,880
------------ ------------
INTANGIBLE ASSETS, net of accumulated amortization
of $411,785 and $307,451, respectively 1,228,379 1,230,464
NOTE RECEIVABLE 280,000 --
RESTRICTED CASH AND SHORT TERM INVESTMENTS 6,461,015 --
OTHER ASSETS 383,905 522,962
------------ ------------
TOTAL ASSETS $ 25,475,864 $ 14,405,809
============ ============
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
1
<PAGE>
DYNAMIC MATERIALS CORPORATION
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Bank overdraft $ 82,536 $ --
Accounts payable 1,838,162 2,328,867
Accrued expenses 1,450,132 1,012,908
Current maturities of long-term debt and capital lease obligations 38,330 113,925
------------ ------------
Total current liabilities 3,409,160 3,455,700
LINE OF CREDIT 2,785,000 --
INDUSTRIAL DEVELOPMENT REVENUE BONDS 6,850,000 --
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 62,730 76,832
DEFERRED TAX LIABILITY 13,800 13,800
------------ ------------
Total liabilities 13,120,690 3,546,332
------------ ------------
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $.05 par value;
4,000,000 shares authorized: no issued and
outstanding shares -- --
Common stock, $.05 par value; 15,000,000 shares
authorized; 2,723,666 and 2,718,708 shares
issued and outstanding, respectively 136,184 135,936
Additional paid-in capital 6,686,940 6,587,911
Deferred compensation (59,062) --
Retained earnings 5,591,112 4,135,630
------------ ------------
12,355,174 10,859,477
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,475,864 $ 14,405,809
============ ============
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
2
<PAGE>
DYNAMIC MATERIALS CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 9,675,750 $ 7,803,059 $ 30,543,872 $ 25,462,599
COST OF PRODUCTS SOLD 7,554,313 6,059,108 24,042,453 19,809,451
------------ ------------ ------------ ------------
Gross profit 2,121,437 1,743,951 6,501,419 5,653,148
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
General and administrative expenses 1,070,726 558,785 2,401,618 1,654,089
Selling expenses 387,550 494,449 1,387,822 1,551,100
Start up costs related to new facility 86,036 -- 114,437 --
Research and development costs 2,369 10,495 28,963 27,624
------------ ------------ ------------ ------------
1,546,681 1,063,729 3,932,840 3,232,813
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 574,756 680,222 2,568,579 2,420,335
OTHER INCOME (EXPENSE):
Other income 141 257 5,625 23,763
Interest expense (75,166) (15,135) (198,811) (105,419)
Interest income 9,006 14,720 11,089 21,807
------------ ------------ ------------ ------------
Income before income tax provision 508,737 680,064 2,386,482 2,360,486
INCOME TAX PROVISION (199,000) (217,143) (931,000) (755,000)
------------ ------------ ------------ ------------
NET INCOME $ 309,737 $ 462,921 $ 1,455,482 $ 1,605,486
============ ============ ============ ============
NET INCOME PER SHARE
Basic $ 0.11 $ 0.17 $ 0.52 $ 0.60
============ ============ ============ ============
Diluted $ 0.11 $ 0.16 $ 0.50 $ 0.56
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
Basic 2,807,957 2,714,371 2,780,238 2,669,434
============ ============ ============ ============
Diluted 2,881,317 2,880,891 2,889,732 2,879,216
============ ============ ============ ============
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
3
<PAGE>
DYNAMIC MATERIALS CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In Deferred Retained
Shares Amount Capital Compensation Earnings
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1997 2,718,708 $ 135,936 $ 6,587,911 $ -- $ 4,135,630
Common stock issued for
stock option exercises 34,365 1,718 75,629 -- --
Common stock issued in
connection with the
employee stock purchase
plan 11,093 555 73,700 -- --
Shares issued in connection
with the purchase of
Spin Forge 50,000 2,500 447,300 -- --
Restricted stock grant
related to the purchase
of Spin Forge 7,500 375 67,125 (67,500) --
Amortization of deferred
compensation 8,438
Shares repurchased from
related party (98,000) (4,900) (564,725) -- --
Net income -- -- -- -- 1,455,482
----------- ----------- ----------- ----------- -----------
Balances, September 30, 1998 2,723,666 $ 136,184 $ 6,686,940 $ (59,062) $ 5,591,112
=========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
4
<PAGE>
DYNAMIC MATERIALS CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,455,482 $ 1,605,486
Adjustments to reconcile net income
to net cash from operating activities-
Depreciation 666,885 435,667
Amortization 102,083 78,134
Amortization of deferred compensation 8,438 --
Decrease (increase) in-
Accounts receivable, net (1,136,911) 438,569
Inventories 1,603,903 2,841,886
Prepaid expenses and other 113,109 (469,288)
Increase (decrease) in-
Bank overdraft 82,536 (743,471)
Accounts payable (1,252,642) (723,008)
Accrued expenses 373,838 224,913
------------ ------------
Net cash flows from operating activities 2,016,721 3,688,888
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment of bond proceeds (6,461,015) --
Purchase of Spin Forge assets (2,615,691) --
Purchase of AMK assets (905,873) --
Cash paid in connection with the shares repurchased
from related party (425,285) --
Loan to related party (280,000) --
Acquisition of property, plant and equipment (901,071) (205,477)
Change in other noncurrent assets 26,628 22,846
------------ ------------
Net cash flows used in investing activities (11,562,307) (182,631)
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
5
<PAGE>
DYNAMIC MATERIALS CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Industrial development revenue bond proceeds 6,850,000 --
Bond issue costs paid (171,151) --
Borrowings/(payments) on line of credit, net 2,785,000 (3,930,000)
Finance charges paid in connection with the reducing revolver
credit facility (33,977) --
Payments on long-term debt and capital lease obligations (89,697) (90,340)
Net proceeds from issuance of common stock 151,602 320,661
----------- -----------
Net cash flows from financing activities 9,491,777 (3,699,679)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (53,809) (193,422)
CASH AND CASH EQUIVALENTS, beginning of the period 53,809 209,650
----------- -----------
CASH AND CASH EQUIVALENTS, end of the period $ -- $ 16,228
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
1998 1997
----------- -----------
Cash paid during the period for-
Interest $ 192,893 $ 159,419
=========== ===========
Income taxes $ 819,346 $ 1,238,242
=========== ===========
</TABLE>
NONCASH INVESTING ACTIVITIES:
$139,440 of the shares repurchased from a related party were in
satisfaction of a receivable due from that party.
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
6
<PAGE>
DYNAMIC MATERIALS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The information included in the Condensed Financial Statements is unaudited but
includes all normal and recurring adjustments which, in the opinion of
management, are necessary for a fair presentation of the interim periods
presented. These Condensed Financial Statements should be read in conjunction
with the financial statements that are included in the Company's Annual Report
filed on Form 10-KSB for the year ended December 31, 1997. Certain prior period
amounts have been reclassified to conform to the current period presentation.
2. ACQUISITION OF AMK AND SPIN FORGE BUSINESSES
The Company has completed two separate business acquisitions since its December
31, 1997 fiscal year end. On January 5, 1998, the Company acquired certain
assets of AMK Welding, Inc. (AMK) for a cash purchase price of approximately
$940,000. Assets acquired consisted primarily of machinery and equipment, land
and the building that houses AMK's operations. AMK supplies commercial aircraft
and aerospace-related automatic and manual, gas tungsten and arc welding
services. On March 18, 1998, the Company completed the acquisition of certain
assets of Spin Forge, LLC (Spin Forge) for a purchase price of approximately
$3,826,000 that was paid with a combination of approximately $2,616,000 in cash,
assumption of approximately $760,000 in liabilities and 50,000 shares of DMC
Common Stock valued at $449,800. The Company's management believes Spin Forge is
one of the country's leading manufacturers of tactical missile motor cases and
titanium pressure vessels for the commercial aerospace and defense industries.
Principal assets acquired included machinery and equipment and inventories. The
Company will lease land and buildings from Spin Forge and holds an option
to purchase such property for approximately $2.9 million, subject to certain
adjustments, exercisable under certain conditions through January 2002. The
option may be extended beyond this date under specified conditions provided that
the option price must be adjusted upwards in the event that the fair market
value of the property at the time of exercise is higher than $2.9 million.
The following unaudited pro forma results of operations of the Company for the
three months ended September 30, 1997 and the nine months ended September 30,
1997 and 1998 assumes that the acquisition of AMK and Spin Forge had occurred on
January 1, 1997. These pro forma results are not necessarily indicative of the
actual results of operations that would have been achieved nor are they
necessarily indicative of future results of operations.
7
<PAGE>
<TABLE>
<CAPTION>
Three Months
Ended Nine Months Ended
September 30, September 30, September 30,
1997 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues $ 9,881,537 $ 31,805,157 $ 31,126,349
Net Income $ 549,435 $ 1,499,578 $ 1,679,484
Net Income Per Share -Basic $ 0.20 $ 0.53 $ 0.62
Net Income Per Share -Diluted $ 0.19 $ 0.51 $ 0.57
</TABLE>
3. NEW ACCOUNTING PRINCIPLE
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), which requires that companies recognize all
derivatives as either assets or liabilities in the balance sheet at fair value.
Under SFAS 133, accounting for changes in fair value of a derivative depends on
its intended use and designation. SFAS 133 is effective for fiscal years
beginning after June 15, 1999. The Company is currently assessing the effect of
this new standard.
4. INVENTORIES
This caption on the Condensed Balance Sheet includes the following:
September 30, December 31,
1998 1997
---- ----
Raw Materials $1,427,670 $ 984,788
Work-in-Process 1,982,974 2,865,164
Supplies 176,743 179,607
---------- ----------
$3,587,387 $4,029,559
========== ==========
5. NET INCOME PER SHARE:
The Company computes earnings per share (EPS) in accordance with Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share". Basic
EPS is computed by dividing net income by the weighted average number of shares
of common stock outstanding during the period. Diluted EPS recognizes the
potential dilutive effects of dilutive securities. The following represents a
reconciliation of the numerator and denominator used in the calculation of basic
and diluted EPS:
8
<PAGE>
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
Per share
Income Shares Amount
------ ------ ---------
<S> <C> <C> <C>
Net Income $ 462,921
==========
Basic earnings per share:
Income available to common shareholders $ 462,921 2,714,371 $ 0.17
========
Dilutive effect of options to purchase common
stock -- 166,520
---------- ----------
Dilutive earnings per share:
Income available to common shareholders $ 462,921 2,880,891 $ 0.16
========== ========== ========
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
Per share
Income Shares Amount
---------- ---------- --------
Net Income $ 309,737
==========
Basic earnings per share:
Income available to common shareholders $ 309,737 2,807,957 $ 0.11
========
Dilutive effect of options to purchase common
stock -- 73,360
---------- ----------
Dilutive earnings per share:
Income available to common shareholders $ 309,737 2,881,317 $ 0.11
========== ========== ========
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
Per share
Income Shares Amount
---------- ---------- --------
Net Income $1,605,486
==========
Basic earnings per share:
Income available to common shareholders $1,605,486 2,669,434 $ 0.60
========
Dilutive effect of options to purchase common
stock -- 209,782
---------- ----------
Dilutive earnings per share:
Income available to common shareholders $1,605,486 2,879,216 $ 0.56
========== ========== ========
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
For the nine months ended September 30, 1997
--------------------------------------------
Per share
Income Shares Amount
------ ------ ---------
<S> <C> <C> <C>
Net Income $1,455,482
==========
Basic earnings per share:
Income available to common shareholders $1,455,482 2,780,238 $ 0.52
========
Dilutive effect of options to purchase common
stock -- 109,494
---------- ---------
Dilutive earnings per share:
Income available to common shareholders $1,455,482 2,889,732 $ 0.50
========== ========= =========
</TABLE>
In December, 1997 the Company adopted SFAS 128 and, as a result, the Company's
reported earnings per share for the quarter and nine months ended September 30,
1997 were restated. The effect of this change on previously reported EPS data
was as follows:
Quarter Ended Nine Months Ended
September 30, September 30,
1997 1997
---- ----
Per share amounts
Primary EPS as reported $0.16 $0.56
Effect of FAS 128 0.01 0.04
----- -----
Basic EPS as restated $0.17 $0.60
===== =====
Fully diluted EPS as reported $0.16 $0.56
Effect of FAS 128 -- --
----- -----
Diluted EPS as restated $0.16 $0.56
===== =====
6. SIGNIFICANT CUSTOMER
During the quarter ended September 30, 1998, two customers accounted for
approximately 25% of net sales. No one customer accounted for more than 10% of
net sales during the nine months ended September 30, 1998. Two customers
accounted for approximately 24% of net sales during the quarter ended September
30, 1997 and one customer accounted for approximately 16% of net sales during
the nine months ended September 30, 1997. International sales as a percent of
net sales were 7% and 11% for the quarters ended September 30, 1998 and 1997,
respectively. International sales as a percent of net sales were 16% and 28% for
the nine months ended September 30, 1998 and 1997, respectively. Due to the fact
that a significant portion of the Company's sales is derived from a relatively
small number of customers, the loss of a customer, the failure to perform
existing contracts on a timely basis, to receive payment for such services in a
timely manner, or to enter into future contracts at projected volumes and
profitability levels could adversely affect the Company's ability to meet its
cash requirements exclusively through operating activities.
10
<PAGE>
7. LONG-TERM DEBT
During September 1998, the Company began construction on a new manufacturing
facility in Fayette County, Pennsylvania. This project is being financed under a
loan agreement in connection with industrial development revenue bonds issued by
the Fayette County Industrial Development Authority. The Company closed on this
financing arrangement on September 17, 1998. The principal balance outstanding
at September 30, 1998 was $6,850,000. The loan bears interest at a variable rate
which is set weekly based on the current weekly market rate for tax-exempt
bonds. The interest rate at September 30, 1998 was 3.88%. The Company has
established a bank letter of credit in the trustee's favor for the principal
amount of $6,850,000 plus 98 days accrued interest on the bonds. The letter of
credit is secured by the Company's accounts receivable, inventory, property
plant and equipment and the bond proceeds not yet expended for construction. The
portion of the borrowings not yet expended for construction was $6,461,015 as of
September 30, 1998 and was classified as restricted cash and short term
investments on the Company's balance sheet. The Company may redeem the bonds
prior to maturity at an amount equal to the outstanding principal plus any
accrued interest. The bonds mature on September 1, 2013 at which time all
amounts become due and payable.
On September 17, 1998, the Company entered into an interest rate swap agreement
with a bank under which the Company converted the variable interest rate on the
bonds to a rate that is largely fixed. Under the swap agreement, the Company has
agreed to pay the bank a fixed interest rate of 4.41% over the life of the bonds
and, in return, receive interest payments from the bank in an amount equal to
76% of the 30-day commercial paper rate. Since the current weekly tax-exempt
rate (3.88% at September 30, 1998) is lower than 76% of the commercial paper
rate (3.98% at September 30, 1998), the Company's effective rate is lower than
the fixed rate of 4.41%. If the weekly tax-exempt rate should increase above 76%
of the commercial paper rate in the future, the Company's effective interest
rate would increase above the 4.41% fixed rate.
8. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company has been named as a defendant in a lawsuit filed by a French company
who the Company had been in merger/acquisition discussions with during 1997,
seeking damages of approximately $1.3 million. The Company plans to vigorously
defend itself against such claim and management of the Company believes the
ultimate outcome of such litigation will not have a material adverse effect on
its financial condition or results of operations. No provision for liability
with respect to this claim has been made in the accompanying statements of
financial condition.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion should be read in conjunction with the
Condensed Financial Statements included elsewhere within this quarterly report.
Fluctuations in annual and quarterly operating results may occur as a result of
certain factors such as the size and timing of customer orders and competition.
Due to such fluctuations, historical results and percentage relationships are
not necessarily indicative of the results for any future period. Statements
contained in this report that are
11
<PAGE>
not historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from
projected results. Factors that could cause actual results to differ materially
include, but are not limited to, the ability to obtain new contracts at
attractive prices; the size and timing of customer orders; fluctuations in
customer demand; competitive factors; the timely completion of contracts; and
general economic conditions, both domestically and abroad. Readers are cautioned
not to place undue reliance on these forward-looking statements, which reflect
management's analysis only as of the date hereof. The Company undertakes no
obligation to publicly release the results of any revision to these
forward-looking statements that may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events. The
Company further directs readers to the factors discussed in the Company's Form
10-KSB for the year ended December 31, 1997.
GENERAL
Dynamic Materials Corporation ("DMC" or the "Company") is a worldwide
leader in the high energy metal working business. The high energy metal working
business includes the use of explosives to perform both metallurgical bonding,
or metal "cladding," and metal forming. The Company performs metal cladding
using its proprietary Dynaclad(TM) and Detaclad(R) technologies and performs
metal forming using its proprietary Dynaform(TM) technology. Historically, the
Company has generated approximately 85% to 90% of its revenues from its metal
cladding business and approximately 10% to 15% of its revenues from its metal
forming and shock synthesis businesses. The Company expects revenues from its
cladding business, as a proportion of total Company revenues, to decline as a
result of the recent AMK and Spin Forge acquisitions.
Metal Cladding. Clad metal products are used in manufacturing processes
or environments that involve highly corrosive chemicals, high temperatures
and/or high pressure conditions. For example, the Company fabricates clad metal
tube sheets for heat exchangers. Heat exchangers are used in a variety of high
temperature, high pressure, highly corrosive chemical processes, such as
processing crude oil in the petrochemical industry and processing chemicals used
in the manufacture of synthetic fibers. In addition, the Company has produced
titanium clad plates used in the fabrication of metal autoclaves to replace
autoclaves made of brick and lead for two customers in the mining industry. The
Company believes that its clad metal products are an economical,
high-performance alternative to the use of solid corrosion-resistant alloys.
Metal Forming, Welding and Assembly. Formed metal products are made from
sheet metal and forgings that are subsequently formed into precise,
three-dimensional shapes that are held to tight tolerances. Metal forming is
accomplished through both the use of explosives and traditional forming
technologies, including spinning, machining, rolling and hydraulic expansion.
DMC also performs welding services utilizing a variety of manual and automatic
welding techniques that include electron beam and gas tungsten arc welding
processes. The Company's forming and welding operations are often performed to
support the manufacture of completed assemblies and sub-assemblies required by
its customers. Assembly and fabrication services are performed utilizing the
Company's close-tolerance machining, forming, welding, inspection and other
special service capabilities. The Company's forming, welding and assembly
operations serve a variety of product applications in the commercial aircraft,
aerospace, defense and power generation industries. Product applications include
torque box webs for jet engine nacelles, tactical and ballistic missile motor
cases and titanium pressure tanks.
The Company is continually working to generate solutions to the
materials needs of customers in its target markets. Key elements of the
Company's strategy include continual improvement of its
12
<PAGE>
basic processes and product offerings, the internal development of new cladding
and forming products and the acquisition of businesses that broaden or
complement the Company's existing product lines. In July 1996, the Company
completed its first strategic acquisition when it acquired the assets of the
Detaclad(R) Division ("Detaclad") of E.I. du Pont de Nemours and Company
("DuPont"), a complementary explosion cladding business with expertise in
cladding thin metals and heat exchanger components primarily for the chemical
processing, power generation and petrochemical industries.
The Company has completed two separate business acquisitions since its
December 31, 1997 fiscal year end. On January 5, 1998, the Company acquired
certain assets of AMK Welding, Inc. (AMK) for a cash purchase price of
approximately $940,000. Assets acquired consisted primarily of machinery and
equipment, land and the building that houses AMK's operations. AMK supplies
commercial aircraft and aerospace-related automatic and manual, gas tungsten and
arc welding services and generated sales of approximately $1.2 million in its
most recent fiscal year that ended on July 31, 1997. On March 18, 1998, the
Company completed the acquisition of certain assets of Spin Forge, LLC (Spin
Forge) for a purchase price of approximately $3,826,000 that was paid with a
combination of approximately $2,616,000 in cash, assumption of approximately
$760,000 in liabilities and 50,000 shares of DMC Common Stock valued at
$449,800. The Company's management believes Spin Forge is one of the country's
leading manufacturers of tactical missile motor cases and titanium pressure
vessels for the commercial aerospace and defense industries. Principal assets
acquired included machinery and equipment and inventories. The Company will
lease land and buildings from Spin Forge, LLC and holds an option to purchase
such property for approximately $2.9 million, subject to certain adjustments,
exercisable under certain conditions through January 2002. The option may be
extended beyond this date under specified conditions provided that the option
price must be adjusted upwards in the event that the fair market value of the
property at the time of exercise is higher than $2.9 million. Spin Forge
generated sales revenues of approximately $6.5 million for the year ended
December 31, 1997.
The Company has experienced and expects to continue to experience,
quarterly fluctuations in operating results caused by various factors, including
the timing and size of orders from major customers, customer inventory levels,
shifts in product mix, the occurrence of acquisition-related costs and general
economic conditions. In addition, the Company typically does not obtain
long-term volume purchase contracts from its customers. Quarterly sales and
operating results therefore depend on the volume and timing of backlog as well
as bookings received during the quarter. A significant portion of the Company's
operating expenses are fixed, and planned expenditures are based primarily on
sales forecasts and product development programs. If sales do not meet the
Company's expectations in any given period, the adverse impact on operating
results may be magnified by the Company's inability to adjust operating expenses
sufficiently or quickly enough to compensate for such a shortfall. In addition,
the Company uses numerous suppliers of alloys, steels and other materials for
its operations. The Company typically bears a short-term risk of alloy, steel
and other component price increases, which could adversely affect the Company's
gross profit margins. Although the Company will work with customers and
suppliers to minimize the impact of any component shortages, component shortages
have had, and are expected from time to time to have, short-term adverse effects
on the Company's business. Results of operations in any period should not be
considered indicative of the results to be expected for any future period.
Fluctuations in operating results may also result in fluctuations in the price
of the Company's Common Stock.
The Year 2000 issue is the result of many computer programs being
written such that they will malfunction when reading a year of "00." This
problem could cause system failure or miscalculations
13
<PAGE>
causing disruptions of business processes. For the past year, the Company has
pursued a two-prong approach to the Year 2000 issue.
The first prong has and continues to involve an internal evaluation of
the Company's computer systems. The Company has completed a risk assessment to
identify Year 2000 priorities by analyzing and determining whether the Year 2000
related risks were low, medium or high and whether the business impact would be
marginal, manageable, critical or fatal for each system and device that may be
affected by the Year 2000 issue. Based on this risk assessment, the Company
determined that its first priority would be evaluating its MRP software. The
Company found this software to be Year 2000 compliant as certified by the vendor
and through internal testing. The Company continued this procedure for each of
the areas identified during its risk assessment as follows. The Company's
hardware was tested by advancing dates and checking for power-off date changes
and power-on date changes as well as software and hardware operation at the
advanced dates. Based upon those tests the Company believes its hardware to be
Year 2000 compliant. The Company's network operating system will be Year 2000
compliant with the installation of a forthcoming patch from the vendor. The
patch is expected to be released in the fourth quarter of 1998. The Company
expects that its desktop applications will be Year 2000 compliant by mid 1999
with the announced patches that are forthcoming from various vendors. Finally,
the Company has determined through testing that its various computer controlled
manufacturing equipment is either Year 2000 compliant or will not have any
adverse effects on manufacturing processes in the Year 2000.
The second prong of the Company's approach, which the Company emphasized
in the second and third quarter of 1998, is an integrated process of working
with suppliers and customers to ensure that the flow of goods, services or
payments will not be interrupted because of Year 2000 issues. To achieve this,
the Company has been working to implement mechanical or manual workarounds even
if Year 2000 problems arise. In many cases, such workarounds are already in
place. Additionally, the Company is requesting that its suppliers and customers
include language in their material subcontractor and consulting agreements that
request these third parties to be "internally" Year 2000 capable.
However, there can be no assurance that the failure of the Company's
suppliers and customers to be Year 2000 compliant would not have a material
adverse effect on the Company's business, financial condition or results of
operations. In addition, the Company may be adversely affected by disruptions in
the operations of other companies with which the Company does business, from
general widespread problems or an economic crisis resulting from noncompliant
Year 2000 systems.
The Company has not incurred any material historical Year 2000 costs to
date. Management does not have an estimate of future Year 2000 project costs
that may be incurred but expects such costs to be minimal since all Year 2000
compliance work is expected to be performed by Company employees. Management
expects, but makes no assurance that, future Year 2000 project costs will not
have a material adverse effect on its financial condition and results of
operations.
The Company has not formulated contingency plans in the event that
systems are not Year 2000 compliant. While management does not believe there to
be significant Year 2000 risks for the Company, manual workarounds will be
developed as part of the Company's Year 2000 compliance program. There can be no
assurance that the Company's systems will be Year 2000 compliant in time.
14
<PAGE>
QUARTER ENDED SEPTEMBER 30, 1998 COMPARED TO SEPTEMBER 30, 1997
The following table sets forth for the periods indicated the percentage
relationship to net sales of certain income statement data:
<TABLE>
<CAPTION>
Percentage of Net Sales
-----------------------
Three Months Ended September 30 Six Months Ended September 30,
------------------------------- ------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Products Sold 78.1% 77.7% 78.7% 77.8%
----- ----- ----- -----
Gross Margin 21.9% 22.3% 21.3% 22.2%
General & Administrative 11.1% 7.2% 7.9% 6.5%
Selling Expenses 4.0% 6.3% 4.5% 6.1%
Start up Costs 0.9% 0.0% 0.4% 0.0%
R & D 0.0% 0.1% 0.1% 0.1%
Income from Operations 5.9% 8.7% 8.4% 9.5%
Interest Expense 0.8% 0.2% 0.7% 0.4%
Income Tax Provision 2.1% 2.8% 3.0% 3.0%
Net Income 3.2% 5.9% 4.8% 6.3%
</TABLE>
NET SALES. Net sales for the quarter ended September 30, 1998 increased 24.0% to
$9,675,750 from $7,803,059 in the third quarter of 1997. Sales for the third
quarter of 1998 included approximately $2,615,000 from the newly acquired Spin
Forge and AMK businesses, with these sales accounting for the entire 1998 sales
increase. For the nine months ended September 30, 1998, net sales increased
20.0% to $30,543,872 from $25,462,599 in the comparable period of 1997. Spin
Forge and AMK sales of approximately $5,775,000 for the nine months ended
September 30, 1998 accounted for the entire sales increase.
GROSS PROFIT. As a result of the Company's increase in net sales, gross profit
for the quarter ended September 30, 1998 increased by 21.6% to $ 2,121,437 from
$1,743,951 in the third quarter of 1997. The gross profit margin for the quarter
ended September 30, 1998 was 21.9%, representing a 2% decline from the gross
profit margin of 22.3% for the third quarter of 1997. For the nine months ended
September 30, 1998, gross profit increased 15.0% to $6,501,419 from $5,653,148
in the comparable period of 1997. The gross profit margin for the nine months
ended September 30, 1998 was 21.3%, representing a 4% decline from the gross
profit margin of 22.2% for the first nine months of 1997. The decreased gross
margin rate for both the three and nine month periods is principally due to
proportionately lower sales of explosively formed products. A customer that
accounts for a major portion of the Company's sales of explosively-formed
products has significantly reduced its 1998 order levels for explosively-formed
parts and has informed the Company that it likely will no longer order such
parts from the Company. For both the three and nine month periods, the resulting
reduced
15
<PAGE>
sales and gross profits from the Company's explosion forming business
has been replaced by sales and gross profits generated by the recently acquired
AMK Welding and Spin Forge operations.
GENERAL AND ADMINISTRATIVE. General and administrative expenses for the quarter
ended September 30, 1998 increased 91.6% to $1,070,726 from $558,785 in the
third quarter of 1997. For the nine months ended September 30, 1998, general and
administrative expenses increased 45.2% to $2,401,618 from $1,654,089 in the
comparable period of 1997. These increases are primarily attributable to
$262,524 in non-recurring expenses relating to the departure of the Company's
former president and chief executive officer in the third quarter of 1998, and
general and administrative expenses associated with the operations of AMK
Welding and Spin Forge which were acquired on January 5, 1998 and March 18,
1998, respectively. Excluding the impact of non-recurring expenses, general and
administrative expenses are expected to remain at the higher 1998 levels to
support the acquired AMK and Spin Forge operations and other strategic business
initiatives. After adjustment for non-recurring expenses related to the
departure of the Company's former CEO, general and administrative expenses as a
percentage of net sales increased from 7.2% in the third quarter of 1997 to 8.4%
for the quarter ended September 30, 1998 and increased from 6.5% to 7.0% for the
comparable nine month periods.
SELLING EXPENSE. Selling expenses decreased by 21.6% to $387,550 for the quarter
ended September 30, 1998 from $494,449 in the second quarter of 1997. For the
six months ended September 30, 1998, selling expenses decreased 10.5% to
$1,387,822 from $1,551,100 in the comparable period of 1997. These decreases
reflect lower expense levels in a number of categories, including compensation
and benefits, advertising and promotion, reserves for bad debts and travel and
entertainment expenses. Selling expenses as a percentage of net sales decreased
from 6.3% in the third quarter of 1997 to 4.0% for the quarter ended September
30, 1998, and from 6.1% for the nine months ended September 30, 1997 to 4.5% for
the comparable period of 1998. These decreases reflect decreased spending levels
combined with the higher sales volume achieved in 1998.
START-UP COSTS. For the quarter and nine months ended September 30, 1998, the
Company began to separately report the start-up costs associated with the
construction of the new facility in Pennsylvania for the manufacture of clad
metal plates. Start-up costs for the three and nine month periods of 1998
totaled $86,036 and $114,437, respectively, and include salaries, benefits and
travel expenses for Company employees assigned to this project, field office
expenses and other operating expenses directly associated with this project. The
Company will continue to incur and separately report start-up costs in 1998 and
1999 until the new facility commences operations during the last half of 1999.
RESEARCH AND DEVELOPMENT. Research and development expenses decreased to $2,369
for the quarter ended September 30, 1998 from $10,495 in the third quarter of
1997. For the nine months ended September 30, 1998, research and development
expenses increased to $28,963 from $27,624 in the comparable period of 1997. The
Company is currently utilizing its engineering resources to support current
manufacturing activities, including plant design and equipment acquisition
activities associated with a new manufacturing facility that is under
construction in Pennsylvania, and does not expect to significantly increase
spending on research and development projects in the near future.
INCOME FROM OPERATIONS. Income from operations decreased by 15.5% to $574,756
for the quarter ended September 30, 1998 from $680,222 in the second quarter of
1997. This decrease is a direct result of non-recurring expenses in the amount
of $262,524 relating to the departure of the Company's former president and
chief executive officer and $86,036 in start-up costs discussed above. For the
nine months ended September 30, 1998, income from operations increased 6.1% to
$2,568,579 from
16
<PAGE>
$2,420,335 in the comparable period of 1997. This increase is a
direct result of the 20.0% increase in net sales and is less than expected due
to the offsetting effect of the aforementioned non-recurring expenses and
start-up costs. Income from operations as a percentage of net sales decreased to
5.9% for the three months ended September 30, 1998 from 8.7% in the comparable
1997 period and decreased to 8.4% for the nine months ended September 30, 1998
from 9.5% for the nine months ended September 30, 1997.
INTEREST EXPENSE. Interest expense increased to $75,166 for the quarter ended
September 30, 1998 from $15,135 in the third quarter of 1997. For the nine
months ended September 30, 1998, interest expense increased to $198,811 from
$105,419 in the comparable period of 1997. These increases are due to borrowings
under the Company's revolving line of credit with KeyBank of Colorado that were
required to finance the AMK Welding and Spin Forge acquisitions.
INCOME TAX PROVISION. The Company's income tax provision decreased by 8.4% to
$199,000 for the quarter ended September 30, 1998 from $217,143 in the third
quarter of 1997. The income tax provision for the nine months ended September
30, 1998 increased 23.3% to $931,000 from $755,000 for the comparable period of
1997. For the quarter and nine months ended September 30, 1998, the effective
tax rate was 39.1% and 39.0%, respectively, as compared to 31.9% and 32.0% for
the respective comparable 1997 periods. The Company expects its effective tax
rate to increase slightly in 1998 to 39.0% due to anticipated increases in state
income taxes as a result of the AMK Welding and Spin Forge acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has secured the major portion of its
operational financing from operating activities and an asset-backed revolving
credit facility. In connection with the Detaclad acquisition, the Company
entered into a $7,500,000 asset-backed revolving credit facility with KeyBank
National Association (KeyBank) in July of 1996. The credit facility had a
seven-year term and was secured by substantially all of the Company's assets,
including its accounts receivable, inventory and equipment. The maximum amount
available under the line of credit was subject to borrowing base restrictions
which were a function of defined balances in accounts receivable, inventory,
real property and equipment.
In connection with the Company's acquisition of Spin Forge on March 18,
1998 and resulting increase in the Company's asset base, the Company amended its
revolving credit facility with KeyBank. Amendments included an increase in the
total facility from $7.5 million to $10 million and separating $5 million of the
total facility into a reducing revolving credit facility to be used principally
for acquisition financing. The reducing revolving credit facility is secured by
certain of the Company's assets, including those of the acquired AMK and Spin
Forge businesses, and is not subject to borrowing base restrictions.
Availability under this facility will be reduced at the rate of $1 million per
year over its five-year term. The remaining $5 million of the revolving credit
facility will continue under the same terms and conditions as described above
for the original $7.5 million facility. The interest rate applicable to
borrowings under both the revolving credit facility and reducing revolving
credit facility is, at the Company's option, either the LIBOR Rate plus 1% to
1.5%, depending on certain conditions, or the Federal Funds Rate plus 2%. The
Company's total borrowings under the KeyBank reducing revolving credit facility
and revolving credit facility were $2,785,000 and zero, respectively, as of
September 30, 1998 and 1997.
17
<PAGE>
In March 1998, the Company's Board of Directors approved the Company's
proposal to build a new manufacturing facility in Pennsylvania at a cost of
approximately $6.8 million. The project is being financed with proceeds from
$6,850,000 in industrial development revenue bonds issued by Fayette County
Industrial Development Authority (IDA). The Company closed its loan agreement
with Fayette County IDA on September 17, 1998 and has established a bank letter
of credit in favor of the bond trustee for the principal amount of the bonds
plus 98 days of accrued interest. In connection with the letter of credit, the
reducing revolving credit facility with KeyBank was reduced from $5 million to
$4 million. The letter of credit is secured by the Company's accounts
receivable, inventory, property, plant and equipment, and bond proceeds not yet
expended for construction of the facility and purchase of related equipment.
Construction of the new facility began during the third quarter of 1998 and
should be completed during the first half of 1999. The new facility should
become fully operational during the second half of 1999.
During the nine months ended September 30, 1998, the Company generated
$2,016,721 in cash flows from operating activities as compared to generating
$3,688,888 during the first nine months of 1997. The principal sources of cash
flow from operations in the nine months ended September 30, 1998 were net income
of $1,455,482, depreciation and amortization charges of $777,406, and a decrease
in inventories of $1,603,903. These sources of operating cash flow were
partially offset by a $1,136,911 increase in accounts receivable and a $878,804
decrease in accounts payable and accrued expenses. The large increase in
accounts receivable relates to the build-up of Spin Forge accounts receivable
subsequent to the March 18, 1998 acquisition of Spin Forge (outstanding accounts
receivable on this date were not included among the assets purchased) and strong
September sales in the Company's bonding business. The current ratio was 3.0 as
of September 30, 1998 as compared to 2.8 at December 31, 1997. Investing
activities in the nine months ended September 30, 1998 used $11,562,307 of cash,
including $3,521,564 to fund the purchase of the Spin Forge and AMK assets,
$901,071 to fund capital expenditures, and $6,461,015 to temporarily invest
proceeds from the industrial development revenue bond issue. Financing
activities for the nine months ended September 30, 1998 provided $9,491,777 of
net cash. These cash flows included line of credit borrowings in the amount of
$2,785,000 to finance the purchase of Spin Forge and AMK and $6,850,000 from the
issuance of industrial development revenue bonds that will be used to finance
construction of the Company's new manufacturing facility in Pennsylvania and the
purchase of related equipment.
The Company believes that its cash flow from operations, funds expected
to be available under its amended credit facility, and proceeds from the
industrial development revenue bond financing for the new Pennsylvania
manufacturing facility will be sufficient to fund working capital and capital
expenditure requirements of its current business operations, including those of
the recently acquired AMK and Spin Forge businesses, for the foreseeable future.
However, a significant portion of the Company's sales is derived from a
relatively small number of customers; therefore, the failure to perform existing
contracts on a timely basis, and to receive payment for such services in a
timely manner, or to enter into future contracts at projected volumes and
profitability levels could adversely affect the Company's ability to meet its
cash requirements exclusively through operating activities. Consequently, any
restriction on the availability of borrowing under the line of credit could
negatively affect the Company's ability to meet its future cash requirements.
The Company's expenditures for the Pennsylvania manufacturing facility could
exceed its estimates due to construction delays, the delay in the receipt of any
required government approvals and permits, labor shortages or other factors. In
addition, the Company plans to grow both internally and through the acquisition
of complementary businesses. Increased expenditures for the Pennsylvania
manufacturing facility and/or a
18
<PAGE>
significant acquisition may require the Company to secure additional debt or
equity financing. While the Company believes it would be able to secure such
additional financing at reasonable terms, there is no assurance that this would
be the case.
19
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has been named as a defendant in a lawsuit filed in France by a
French company with which the Company had preliminary acquisition discussions
during 1997. The Company plans to vigorously defend itself against such claim
and the management of the Company believes that the ultimate outcome of such
litigation will not have a material adverse effect on the Company's financial
condition or results of operations. The Company is not party to any other legal
proceedings, the adverse outcome of which would, in management's opinion, have a
material adverse effect on the Company's business, operation results and
financial condition.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10 Material Contracts
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
10.1 Loan Agreement dated as of September 1, 1998 by and between Fayette
County Industrial Development and the Company.
10.2 Reimbursement Agreement dated as of September 1, 1998 by and between the
Company and KeyBank National Association.
10.3 Master Agreement dated as of September 15, 1998 by and between KeyBank
National Association and the Company.
10.4 Separation Agreement dated as of September 1, 1998 by and between Paul
Lange and the Company.
27 Financial Data Schedule
(b) A report on Form 8-K was filed on April 2, 1998 reporting the completion of
the acquisition of certain assets of Spin Forge, LLC, which occurred on March
18, 1998. A report on Form 8-K/A was filed on June 1, 1998. This report amended
the Form 8-K filed on April 2, 1998, to include audited financial information as
of December 31, 1997 for the Spin Forge business, which the Company acquired on
March 18, 1998. The report also included unaudited pro forma financial
information as of March 31, 1998, and for the year ended December 31, 1997.
A report on Form 8-K was filed on September 9, 1998 reporting the resignation of
Paul Lange as president and chief executive officer of the Company, and the
appointment of Joseph P. Allwein as the acting president and chief executive
officer of the Company. Both events were effective as of September 2, 1998.
20
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
DYNAMIC MATERIALS CORPORATION
(Registrant)
Date: NOVEMBER 13, 1998 /s/ Richard A. Santa
-----------------------------------
Richard A. Santa, Vice President of
Finance and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial and Accounting
Officer)
21
EXECUTION COPY
LOAN AGREEMENT
between
FAYETTE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
and
DYNAMIC MATERIALS CORPORATION
$6,850,000
FAYETTE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
MULTI-MODE VARIABLE RATE INDUSTRIAL
DEVELOPMENT REVENUE BONDS, SERIES 1998
(DYNAMIC MATERIALS CORPORATION PROJECT)
Dated
as of
September 1, 1998
Pursuant to the Indenture (defined herein), the Issuer has assigned to Star
Bank, N.A., as Trustee, for the benefit of the holders of the Bonds all right,
title and interest of the Issuer in this Loan Agreement except for the
Unassigned Issuer's Rights herein described.
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") made and entered into as of
September 1, 1998 between the FAYETTE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY, a
duly organized and validly existing public instrumentality of the Commonwealth
of Pennsylvania and a public body corporate and politic (the "Issuer"), and
DYNAMIC MATERIALS CORPORATION, a Delaware corporation (the "Borrower") (the
capitalized terms not defined in the recitals being used therein as defined in
Article I hereof),
WITNESSETH:
WHEREAS, the Fayette County Industrial Development Authority (the
"Issuer") is a duly organized and validly existing public instrumentality of the
Commonwealth of Pennsylvania (the "Commonwealth") and a public body corporate
and politic authorized pursuant to the Economic Development Financing Law, the
Act of August 23, 1967, P.L. 251, as amended (the "Act") to issue revenue bonds
for the purpose of financing the cost of projects, including industrial
facilities, as defined in the Act; and
WHEREAS, Dynamic Materials Corporation (the "Borrower") is a Delaware
corporation that has requested the Issuer to issue revenue bonds to assist the
Borrower in financing (i) the acquisition, construction and equipping of a new
manufacturing facility in North Union Township, Pennsylvania (the land and
improvements constituting such facility, the "Project"), (ii) the cost of credit
enhancement for the bond issue, (iii) capitalized interest during the
construction period, and (iv) certain costs of issuance related to the bond
issue (items (i) through (iv) collectively and as described further in Section
3.4 hereof, the "Project Costs"); and
WHEREAS, the revenue bonds are to be issued in an aggregate principal
amount of $6,850,000 and designated as the Issuer's "Multi-Mode Variable Rate
Industrial Development Revenue Bonds, Series 1998 (Dynamic Materials Corporation
Project)" (the "Bonds"); and
WHEREAS, in connection with the issuance of the Bonds, the Borrower seeks
the Issuer's execution, delivery and performance of this Agreement providing for
the loan of the proceeds of the Bonds to the Borrower to finance the Project
Costs; and
WHEREAS, the Bonds will be special limited obligations of the Issuer
payable solely from and secured by amounts received from the Borrower under this
Agreement and other amounts pledged therefor under the Indenture; and
WHEREAS, the Bonds are expected to be additionally secured by a Letter of
Credit issued by KeyBank National Association (the "Bank"); and
WHEREAS, the Bonds are expected to be privately placed with one or more
institutional investors by Key Capital Markets, Inc. (the "Placement Agent");
and
WHEREAS, the Issuer has determined that it is consistent with the purposes
of the Act to
<PAGE>
authorize the issuance of the Bonds to finance the Project Costs and to loan the
proceeds of the Bonds pursuant to this Agreement to the Borrower to accomplish
the same;
NOW, THEREFORE, in consideration of the premises and the mutual
representations and agreements hereinafter contained, the Issuer and the
Borrower agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. USE OF DEFINED TERMS. In addition to the words and terms
defined elsewhere in this Agreement or by reference to another document, the
words and terms set forth in Section 1.2 hereof shall have the meanings set
forth therein unless the context or use clearly indicates another meaning or
intent. Such definitions shall be equally applicable to both the singular and
plural forms of any of the words and terms defined therein. Capitalized terms
used and not defined in this Agreement shall have the meanings assigned to them
in the Indenture.
SECTION 1.2. DEFINITIONS. As used herein:
"Act" means the Economic Development Financing Law, the Act of August
23, 1967, P.L. 251, as amended.
"Additional Payments" means the amounts required to be paid by the
Borrower pursuant to the provisions of Section 4.2 hereof.
"Agreement" means this Loan Agreement as amended or supplemented from
time to time.
"Alternate Credit Facility" means any direct pay letter of credit or
other credit enhancement or support facility that has terms which are the same
in all material respects (except for the term and maximum interest rate but
including coverage of accrued interest on the Bonds for 98 days if the Bonds
bear interest at the Weekly Rate or for 183 days if the Bonds bear interest at
the Semi-Annual Rate or the Long-Term Rate) as the then current Credit Facility
and (i) shall have a term of not less than one year (except if the Long-Term
Rate shall then be in effect, the term of such Alternate Credit Facility shall
not expire prior to (a) the first par redemption date plus 15 days or (b) the
first redemption date plus 15 days if the Alternate Credit Facility covers the
redemption premium), (ii) shall be issued by a bank, a trust company or other
financial institution or credit provider, and (iii) the Trustee shall have
received the opinions required by Section 6.03 of the Indenture.
"Authenticating Agent" means the Authenticating Agent as defined in
the Indenture.
"Bank" means, initially, KeyBank National Association, and its
successors and assigns in its capacity as issuer of the Credit Facility and, in
the event an Alternate Credit Facility is outstanding, the issuer of the
Alternate Credit Facility.
"Bond Fund" means the Bond Fund created in the Indenture.
"Bond Pledge Agreement" means the Bond Pledge Agreement, dated as of
even date herewith, between the Borrower, the Trustee and the Bank, as amended
or supplemented from time to time.
2
<PAGE>
"Bonds" means the $6,850,000 Fayette County Industrial Development
Authority Multi-Mode Variable Rate Industrial Development Revenue Bonds, Series
1998 (Dynamic Materials Corporation Project).
"Bond Service Charges" means, for any period or payable at any time,
the principal of, premium, if any, and interest due on the Bonds for that period
or payable at that time whether due at maturity or upon acceleration or
redemption.
"Bond Year" means Bond Year, as defined in the Indenture.
"Borrower" means Dynamic Materials Corporation, a Delaware
corporation, and its lawful successors and assigns to the extent permitted by
this Agreement.
"Business Day" means any day of the year other than (i) a Saturday or
Sunday, (ii) any day on which banks located in either New York, New York, or the
principal corporate trust office of the Trustee or the designated office of the
Bank is located are required or authorized by law to remain closed, or (iii) any
day on which the New York Stock Exchange is closed.
"Code" means the Internal Revenue Code of 1986, as amended, including,
when appropriate, the statutory predecessor of the Code, and all applicable
regulations (whether proposed, temporary or final) under that Code and the
statutory predecessor of the Code, and any official rulings and judicial
determinations under the foregoing applicable to the Bonds.
"Completion Date" means the date of completion of the Project
evidenced in accordance with the requirements of Section 3.6 hereof.
"Construction Period" means the period between the beginning of the
acquisition, construction, installation, equipment or improvement of the Project
or the date on which the Bonds are delivered to the Original Purchaser,
whichever is earlier, and the Completion Date.
"Conversion" means (a) any conversion from time to time in accordance
with the terms of the Indenture of the Bonds from one Interest Rate Mode to
another Interest Rate Mode and (b) the end of any Long-Term Rate Period.
"Conversion Date" means the first date any Conversion becomes
effective.
"Counsel" means Counsel as defined in the Indenture.
"Credit Facility" means the Credit Facility as defined in the
Indenture.
"Credit Facility Account" means the Credit Facility Account created
under Section 5.01 of the Indenture.
"Defeasance Account" means the Defeasance Account created under
Section 5.01 of the Indenture.
3
<PAGE>
"Designated Representative" means each person at the time designated
to act on behalf of the Borrower by written certificate furnished to the Issuer,
the Bank, and the Trustee, containing the specimen signature of that person and
signed on behalf of the Borrower by a duly authorized officer. That certificate
may designate an alternate or alternates. In the event that all persons so
designated become unavailable or unable to act and the Borrower fail to
designate a replacement within 10 days after such unavailability or inability to
act, the Trustee may appoint an interim Designated Representative until such
time as the Borrower designates that person.
"Eligible Investments" means Eligible Investments as defined in the
Indenture.
"Engineer" means an individual or firm acceptable to the Trustee and
qualified to practice the profession of engineering or architecture under the
laws of the State.
"Event of Default" means any of the events described as an Event of
Default in Section 7.1 hereof.
"Force Majeure" means any of the causes, circumstances or events
described as constituting Force Majeure in Section 7.1. hereof.
"Holder" or "Holder of a Bond" means the Person in whose name a Bond
is registered on the Register.
"Indenture" means the Trust Indenture, dated as of even date herewith,
between the Issuer and the Trustee, as amended or supplemented from time to
time.
"Issuer" means the Fayette County Industrial Development Authority.
"Interest Rate Mode" means the Weekly Rate, the Semi-Annual Rate or
the Long-Term Rate.
"Loan" means the loan by the Issuer to the Borrower of the proceeds
received from the sale of the Bonds.
"Loan Payment Date" means, (a) while the Bonds bear interest at the
Weekly Rate, each Interest Payment Date, (b) while the Bonds bear interest at
the Semi-Annual or Long-Term Rate, the first day of each March, June, September
and December, or (c) any other date on which any principal of or interest or any
premium on the Bonds shall be due and payable, whether at maturity, upon
acceleration, call for redemption or otherwise.
"Loan Payments" means the amounts required to be paid by the Borrower
in repayment of the Loan pursuant to the provisions of the Note and of Section
4.1 hereof.
"Long-Term Rate" means the Long-Term Rate on the Bonds established in
accordance with Section 2.02(c)(iii) of the Indenture.
"Long-Term Rate Period" means the Long-Term Rate Period as defined in
the
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Indenture.
"Note" means the non-negotiable promissory note of the Borrower, dated
as of even date with the Bonds, in the form attached hereto as Exhibit A and in
the principal amount of $6,850,000, evidencing the obligation of the Borrower to
make Loan Payments (as defined in the Agreement).
"Notice Address" means:
(a) As to the Issuer: Fayette County Industrial
Development Authority
c/o Radcliffe, DeHaas & Monaghan
99 Main Street
Uniontown, PA 15401
Attention: Ernest P. DeHaas, III, Esq.
(b) As to the Borrower: Dynamic Materials Corporation
551 Aspen Ridge Drive
Lafayette, CO 80026
Attention: Chief Financial Officer
(c) As to the Trustee: Star Bank, N.A. 6th
Floor 425 Walnut Street, ML 5125
Cincinnati, OH 45202
Attention: Corporate Trust Services
(d) As to the Bank: KeyBank National
Association 127 Public Square
Cleveland, Ohio 44114-1306 Attention:
International Dept.
With a copy to: KeyBank National Association
CO-02-CP-1000
600 S. Cherry Street
Suite 1000
Denver, CO 80246
Attention: Corporate Banking
(e) As to the Key Capital Markets, Inc.
Remarketing Agent: 127 Public Square
Structured Capital Markets Group
OH-01-27-0419
Cleveland, Ohio 44114
Attention: Trading and Underwriting
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(f) As to the Tender Star Bank, N.A.
Agent: 6th Floor
425 Walnut Street, ML 5125
Cincinnati, OH 45202
Attention: Corporate Trust Services
or such additional or different address, notice of which is given under Section
8.3 hereof.
"Original Purchaser" means the Person or Persons who purchase the
Bonds upon their initial issuance and delivery.
"Paying Agent" means the Paying Agent as defined in the Indenture.
"Person" or words importing persons mean firms, associations,
partnerships (including without limitation, general and limited partnerships),
joint ventures, societies, estates, trusts, corporations, public or governmental
bodies, other legal entities and natural persons.
"Placement Agent" means Key Capital Markets, Inc., Cleveland, Ohio.
"Placement Agreement" means the Placement Agreement dated as of
September 10, 1998 among the Issuer, the Placement Agent and the Borrower.
"Plans and Specifications" means the Borrower's plans and
specifications describing the Project Facilities as now prepared and as they may
be changed as hereinafter provided.
"Private Placement Memorandum" means the Private Placement Memorandum
dated as of September 17, 1998 and distributed by the Placement Agent in
connection with the sale of the Bonds.
"Project" means, collectively, the Project Site and the Project
Facilities, together constituting a "project" as defined in the Act.
"Project Costs" means the costs of the Project specified in Section
3.4 hereof.
"Project Facilities" means the Project Facilities described in Exhibit
B hereto, together with any additions, modifications and substitutions to those
facilities.
"Project Fund" means the Project Fund created in the Indenture.
"Project Purposes" means the acquisition, construction, and equipping
and improving of a new manufacturing facility in North Union Township,
Pennsylvania, for use by the Borrower or its designee or assignee in the high
energy metal working business and any other use which may be permitted by the
Act and this Agreement.
"Project Site" means the real estate described in Exhibit C hereto,
and any additions thereto, less any removals therefrom.
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"Rebate Fund" means the Rebate Fund created under Section 5.05 of the
Indenture.
"Redemption Premium Account" means the Redemption Premium Account
created in the Indenture.
"Register" means the books kept and maintained by the Registrar for
the registration and transfer of Bonds pursuant to Section 2.04 of the
Indenture.
"Registrar" means the Registrar as defined in the Indenture.
"Reimbursement Agreement" means the Reimbursement Agreement, dated as
of September 1, 1998, between the Borrower and the Bank, as amended or
supplemented from time to time.
"Remarketing Agent" means, initially, Key Capital Markets, Inc.,
Cleveland, Ohio and any Person meeting the qualifications of, and designated
from time to time to act as Remarketing Agent under, Section 12.01 of the
Indenture.
"Remarketing Agreement" means the Remarketing Agreement, dated as of
September 1, 1998, among the Borrower, the Remarketing Agent and the Issuer in
connection with the remarketing of the Bonds.
"Remarketing Proceeds Account" means the Remarketing Proceeds Account
created in the Indenture.
"Resolution" means the resolution of the Issuer dated July 27, 1998
providing for the issuance of the Bonds and approving this Agreement, the
Indenture and related matters.
"Revenues" means (a) the Loan Payments, (b) all amounts payable to the
Trustee with respect to the principal or redemption price of, or interest on,
the Bonds (i) by the Borrower as required hereunder, (ii) upon deposit in the
Bond Fund from the proceeds of the Bonds; and (iii) by the Credit Facility
Issuer under a Credit Facility, and (c) investment income with respect to any
moneys held by the Trustee in the Bond Fund. The term "Revenues" does not
include any moneys or investments in the Rebate Fund.
"Semi-Annual Rate" means the semi-annual interest rate on the Bonds
established in accordance with Section 2.02(c)(ii) of the Indenture.
"State" means the Commonwealth of Pennsylvania.
"Tender Agent" means, initially, Star Bank, N.A., Cincinnati, Ohio and
any successor Tender Agent as determined or designated under or pursuant to the
Indenture.
"Trustee" means Star Bank, N.A., Cincinnati, Ohio, until a successor
Trustee shall have become such pursuant to the applicable provisions of the
Indenture, and thereafter "Trustee" shall mean the successor Trustee.
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"Unassigned Issuer's Rights" means all of the rights of the Issuer to
receive Additional Payments under Section 4.2 hereof, to be held harmless and
indemnified under Section 5.3 hereof, to be reimbursed for attorneys' fees and
expenses under Section 7.4 hereof, and to give or withhold consent to
amendments, changes, modifications, alterations and termination of this
Agreement under Section 8.6 hereof.
"Weekly Rate" means the weekly rate of interest on the Bonds
established in accordance with Section 2.02(c)(i) of the Indenture.
SECTION 1.3. INTERPRETATION. Any reference herein to the Issuer or to
any member or officer of the Issuer includes entities or officials succeeding to
their respective functions, duties or responsibilities pursuant to or by
operation of law or lawfully performing their functions.
Any reference to a section or provision of the Act, or to a section,
provision or chapter of any other laws, includes that section, provision or
chapter or statute as amended, modified, revised, supplemented or superseded
from time to time; provided, that no amendment, modification, revision,
supplement or superseding section, provision or chapter or statute shall be
applicable solely by reason of this provision, if it constitutes in any way an
impairment of the rights or obligations of the Issuer, the Holders, the Trustee,
the Bank or the Borrower under this Agreement.
Unless the context indicates otherwise, words importing the singular
number include the plural number, and vice versa; the terms "hereof", "hereby",
"herein", "hereto", "hereunder" and similar terms refer to this Agreement; and
the term "hereafter" means after, and the term "heretofore" means before, the
date of delivery of the Bonds. Words of any gender include the correlative words
of the other genders, unless the sense indicates otherwise.
SECTION 1.4. CAPTIONS AND HEADINGS. The captions and headings in this
Agreement are solely for convenience of reference and in no way define, limit or
describe the scope or intent of any Articles, Sections, subsections, paragraphs,
subparagraphs or clauses hereof.
(End of Article I)
8
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ARTICLE II
REPRESENTATIONS
SECTION 2.1. REPRESENTATIONS OF THE ISSUER. The Issuer makes the
following representations, covenants and warranties as the basis for the
undertakings on the part of the Borrower contained herein:
(a) The Issuer is a duly organized and validly existing public
instrumentality of the State and a public body corporate and politic.
(b) The Issuer has the power to enter into this Agreement and the
Indenture and to perform and observe the agreements and covenants on its
part contained herein and in the Indenture, including without limitation
the power to issue and sell the Bonds as contemplated herein and in the
Indenture, and by proper corporate action has duly authorized the execution
and delivery hereof.
(c) The execution and delivery of this Agreement and the Indenture by
the Issuer do not, and consummation of the transactions contemplated hereby
and fulfillment of the terms hereof by the Issuer will not, result in a
breach of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust or other agreement or instrument to
which the Issuer is now a party or by which it is now bound.
(d) The Issuer has duly authorized, executed and delivered this
Agreement and the Indenture, and assuming due authorization, execution and
delivery by the other parties thereto, such documents will constitute valid
and binding obligations of the Issuer enforceable in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
creditors' rights generally and to the exercise of judicial discretion in
accordance with general equitable principles. The Issuer has duly
authorized the issuance of the Bonds. When executed, authenticated and
delivered in accordance with the Indenture, the Bonds will constitute valid
and binding special obligations of the Issuer enforceable in accordance
with their terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
creditors' rights generally and to the exercise of judicial discretion in
accordance with general equitable principles.
(e) The Issuer has not previously pledged and covenants that it will
not in the future pledge the amounts derived from this Agreement other than
to secure the Bonds.
SECTION 2.2. REPRESENTATIONS AND COVENANTS OF THE BORROWER. The
Borrower represents and covenants that:
(a) The Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and is in good
standing and duly qualified to do business in the State and the State of
Colorado, and in all other jurisdictions in which
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<PAGE>
the ownership or lease of its property or the conduct of its business shall
require qualification.
(b) The Borrower has full power and authority to execute, deliver and
perform this Agreement, the Reimbursement Agreement, the Remarketing
Agreement, the Bond Pledge Agreement and the Note and to enter into and
carry out the transactions contemplated by those documents; and that the
execution, delivery and performance of those documents do not, and will
not, violate any provision of law applicable to it, and do not, and will
not, conflict with its certificate of incorporation or by-laws nor conflict
with or result in a default under any agreement or instrument to which it
is a party or by which it is bound, a violation of which would cause a
material adverse effect to the Borrower. This Agreement, the Reimbursement
Agreement, the Remarketing Agreement, the Bond Pledge Agreement and the
Note have, by proper action, been duly authorized, executed and delivered
by the Borrower and all steps necessary have been taken to constitute this
Agreement, the Reimbursement Agreement, the Remarketing Agreement, the Bond
Pledge Agreement, and the Note valid and binding obligations of the
Borrower. Assuming due authorization, execution and delivery by the other
parties thereto, each such document constitutes a valid and binding
obligation of the Borrower enforceable in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditors' rights generally and the
exercise of judicial discretion in accordance with general equitable
principles.
(c) The Project will be completed in accordance with the Plans and
Specifications and the Project will be operated and maintained in such
manner as to conform with all applicable zoning, planning, building,
environmental and other applicable governmental regulations and as to be
consistent with the Act.
(d) The Borrower shall not use or operate the Project in any way or
take any other action which would affect the qualification of the Project
under the Act or impair the exclusion from gross income for federal income
tax purposes of the interest on the Bonds.
(e) The Borrower intends to use or operate the Project in a manner
consistent with the Project Purposes until the date on which the Bonds have
been fully paid and know of no reason why the Project will not be so used
or operated. If, in the future, there is a cessation of that use or
operation, it will use its best efforts to resume that use or operation or
accomplish an alternate use or operation by the Borrower or others which
will be consistent with the Act and this Agreement. If the Borrower
voluntarily moves all or substantially all of the equipment which is
included in the Project from within the boundaries of the Issuer, the
Borrower will promptly prepay the Loan and cause the Bonds to be redeemed.
(f) In no event will it provide collateral to the Bank which bears a
yield higher than the yield on the Bonds within the meaning of Section 148
of the Code and any lawful regulations promulgated thereunder, except upon
receipt by the Borrower of an opinion of
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<PAGE>
nationally recognized bond counsel to the effect that the pledge of such
collateral shall not cause the interest on the Bonds to be included in
gross income for federal income tax purposes; provided, however, that no
such yield restriction or opinion is required with respect to the pledge of
any collateral that consists of "tax-exempt bonds" within the meaning of
Section 150(a)(6) of the Code.
(g) The zoning for the Project Site is appropriate for the Project and
its use.
(h) No litigation at law or in equity nor any proceeding before any
governmental agency or other tribunal involving the Borrower is pending or,
to the knowledge of the Borrower threatened, in which any liability of the
Borrower is not adequately covered by insurance and in which any judgment
or order would have a material and adverse effect upon the business or
assets of the Borrower or would materially and adversely affect the
Project, the validity of this Agreement, the Bond Pledge Agreement, the
Reimbursement Agreement, the Remarketing Agreement and the Note or the
performance of the Borrower's obligations thereunder or the transactions
contemplated hereby.
(i) The Borrower shall timely pay all real estate taxes levied against
the Project or make payments in lieu of taxes equal to the ad valorem taxes
and assessments with respect to the Project.
(End of Article II)
11
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ARTICLE III
COMPLETION OF THE PROJECT; ISSUANCE OF THE BONDS
SECTION 3.1. ACQUISITION, CONSTRUCTION, INSTALLATION, EQUIPMENT AND
IMPROVEMENT. The Borrower shall acquire, construct, furnish, equip and improve
the Project Facilities on the Project Site with all reasonable dispatch and in
accordance with the Plans and Specifications, (b) shall pay when due all fees,
costs and expenses incurred in connection with that acquisition, construction,
installation, equipment and improvement from funds made available therefor in
accordance with this Agreement or otherwise, and (c) shall ask, demand, sue for,
levy, recover and receive all those sums of money, debts and other demands
whatsoever which may be due, owing and payable under the terms of any contract,
order, receipt, writing and instruction in connection with the acquisition,
construction, furnishing, equipment and improvement of the Project, and shall
enforce the provisions of any contract, agreement, obligation, bond or other
performance security with respect thereto. It is understood that the Project is
that of the Borrower and any contracts made by the Borrower with respect
thereto, whether construction contracts or otherwise, or any work to be done by
the Borrower on the Project are made or done by the Borrower in its own behalf
and not as agent or contractor for the Issuer.
SECTION 3.2. PLANS AND SPECIFICATIONS. The Plans and Specifications
have been filed with the Issuer. The Borrower may revise the Plans and
Specifications from time to time, provided that no revision shall be made which
would change the Project Purposes, without the approval of the Issuer, and no
revision shall be made which would change the Project Purposes to other than
purposes permitted by the Act and the Code.
SECTION 3.3. ISSUANCE OF THE BONDS; APPLICATION OF PROCEEDS. To
provide funds to make the Loan for the purposes of paying the Project Costs, the
Issuer shall issue, sell and deliver the Bonds to the Original Purchaser. The
Bonds will be issued pursuant to the Indenture in the aggregate principal
amount, will bear interest, will mature and will be subject to redemption as set
forth therein. The Borrower hereby approves the terms and conditions of the
Indenture and the Bonds, and of the terms and conditions under which the Bonds
will be issued, sold and delivered.
The proceeds from the sale of the Bonds shall be loaned to the
Borrower and paid as follows: (a) a sum equal to any accrued interest, if any,
paid by the Original Purchaser shall be deposited with the Trustee and deposited
in the Bond Fund, and (b) the balance of the proceeds from the sale of the Bonds
shall be deposited in Project Fund. Pending disbursement pursuant to Section 3.4
hereof, the proceeds deposited in the Project Fund, together with any investment
earnings thereon, shall constitute a part of the Revenues assigned by the Issuer
to the payment of Bond Service Charges as provided in the Indenture.
Neither the Issuer nor the Borrower have or shall have any interest in
the Credit Facility, the Credit Facility Account, the Defeasance Account, the
Redemption Premium Account or the Remarketing Proceeds Account created under
Section 5.01 of the Indenture or the proceeds of the remarketing of the Bonds
from whatever source and wherever deposited.
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SECTION 3.4. DISBURSEMENTS FROM THE PROJECT FUND. Subject to the
provisions below, disbursements from the Project Fund shall be made only to
reimburse or pay the Borrower, or any person designated by the Borrower, for the
following Project Costs:
(a) Costs incurred directly or indirectly for or in connection with
the acquisition, construction, furnishing, equipment or improvement of the
Project, including costs incurred in respect of the Project for preliminary
planning and studies; architectural, legal, engineering, accounting,
consulting, supervisory and other services; labor, services and materials;
and recording of documents and title work.
(b) Premiums attributable to any surety bonds and insurance required
to be taken out and maintained during the Construction Period with respect
to the Project Site and the Project Facilities.
(c) Taxes, assessments and other governmental charges in respect of
the Project that may become due and payable during the Construction Period.
(d) Costs incurred directly or indirectly in seeking to enforce any
remedy against any contractor or subcontractor in respect of any actual or
claimed default under any contract relating to the Project Facilities.
(e) Financial, legal, accounting, printing and engraving fees, charges
and expenses, and all other such fees, charges and expenses incurred in
connection with the authorization, sale, issuance and delivery of the
Bonds, including, without limitation, the fees and expenses of the Trustee
and any paying agent properly incurred under the Indenture that may become
due and payable during the Construction Period; provided that the amount of
the proceeds of the Bonds used to finance issuance costs shall not exceed
2% of the aggregate face amount of the Bonds within the meaning of Section
147(g) of the Code.
(f) Any other costs, expenses, fees and charges properly chargeable to
the cost of construction, furnishing, equipment or improvement of the
Project.
(g) Payment of interest on the Bonds or fees for credit enhancement
devices applicable to the Bonds, to the extent such fees constitute a
reasonable charge for the transfer of credit risk, during the Construction
Period.
(h) Payments made to the Rebate Fund.
Any disbursements from the Project Fund for the payment of the Project
Costs shall be made by the Trustee only upon the written order of the Designated
Representative with written approval of the Bank. Each such written order shall
be in substantially the form of the disbursement request attached hereto as
Exhibit D and shall be consecutively numbered and accompanied by invoices or
other appropriate documentation supporting the payments or reimbursements
requested. Any disbursement for any item not described in, or the cost for which
item is other than as described in, the information statement filed by the
Issuer in connection with the issuance of the Bonds as
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required by Section 149(e) of the Code shall be accompanied by evidence
satisfactory to the Trustee that the average reasonably expected economic life
of the facilities being financed by the Bonds is not less than 5/6ths of the
average maturity of the Bonds or, if such evidence is not presented with the
disbursement or at the request of the Trustee, by an opinion of nationally
recognized bond counsel to the effect that such disbursement will not result in
the interest on the Bonds becoming included in the gross income of the Holders
for federal income tax purposes. At or prior to submitting a request for
disbursement pursuant to Exhibit D to this Agreement, the Designated
Representative shall provide the Trustee with either appropriate mechanics' lien
affidavits or waivers from each payee under each such prior disbursement request
or with evidence or documentation satisfactory to the Trustee that provision
against the filing of any mechanics' or similar liens with respect to the
payment being made has been taken by the Borrower by deposit or bonding. In case
any contract provides for the retention by the Borrower of a portion of the
contract price, there shall be paid from the Project Fund only the net amount
remaining after deduction of any such portion, and only when that retained
amount is due and payable, may it be paid from the Project Fund.
Any moneys in the Project Fund remaining after the Completion Date and
payment, or provision for payment, in full of the Project Costs, at the
direction of the Designated Representative, promptly shall be
(i) used to acquire, construct, install, equip and improve such
additional real or personal property in connection with the Project as is
designated by the Designated Representative and the acquisition,
construction, installation, equipment and improvement of which will be
permitted under the Act, provided that any such use shall be accompanied by
an opinion of nationally recognized bond counsel to the effect that such
use will not result in the interest on the Bonds becoming included in the
gross income of the Holders for federal income tax purposes;
(ii) used for the purchase of Bonds in the open market for the purpose
of cancellation at prices not exceeding the full market value thereof plus
accrued interest thereon to the date of payment therefor;
(iii) paid into the Bond Fund to be applied to the redemption of the
Bonds; or
(iv) used for a combination of the foregoing as is provided in that
direction.
Notwithstanding the foregoing, upon the occurrence and continuance of
an "Event of Default" as defined in Section 7.01 of the Indenture because of
which acceleration of the principal amount of the Bonds has been declared
pursuant to Section 7.03 of the Indenture, any moneys remaining in the Project
Fund shall be promptly transferred by the Trustee to the Bond Fund.
SECTION 3.5. BORROWER REQUIRED TO PAY COSTS IN EVENT PROJECT FUND
INSUFFICIENT. If moneys in the Project Fund are not sufficient to pay all
Project Costs, the Borrower nonetheless will complete the Project in accordance
with the Plans and Specifications and shall pay all such additional Project
Costs from their own funds. The Borrower shall not be entitled to any
reimbursement for any such additional Project Costs from the Issuer, the
Trustee, the Bank or any
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Holder; nor shall they be entitled to any abatement, diminution or postponement
of the Loan Payments. This Section shall not be operative if and to the extent
that compliance with it would, or reasonably might be anticipated by the
Borrower to, involve a violation of any provision of the Agreement including,
without limitation, Sections 2.2 and 5.4 of the Agreement.
SECTION 3.6. COMPLETION DATE. The Borrower shall notify the Issuer,
the Trustee and the Bank of the Completion Date by a certificate signed by the
Designated Representative stating
(a) the date on which the Project Facilities were substantially
completed,
(b) that all other facilities necessary in connection with the Project
have been acquired, constructed, furnished, equipped and improved,
(c) that the acquisition, construction, furnishing, equipment and
improvement of the Project Facilities and those other facilities have been
accomplished in such a manner as to conform with all applicable zoning,
planning, building, environmental and other similar governmental
regulations,
(d) that except as provided in subsection (e) of this Section, all
costs of that acquisition, construction, furnishing, equipment and
improvement then or theretofore due and payable have been paid, and
(e) the amounts which the Trustee shall retain in the Project Fund for
the payment of Project Costs not yet due or for liabilities which the
Borrower is contesting or which otherwise should be retained and the
reasons such amounts should be retained.
That certificate may state that it is given without prejudice to any rights
against third parties which then exist or subsequently may come into being. The
Designated Representative shall include with that certificate a statement
specifically describing all items of personal property comprising a part of the
Project Facilities. The certificate shall be delivered as promptly as
practicable after the occurrence of the events and conditions referred to in
subsections (a) through (d) of this Section.
SECTION 3.7. INVESTMENT OF FUND MONEYS. At the oral (promptly
confirmed in writing) or written request of the Designated Representative, any
moneys held as part of the Bond Fund (except moneys in the Credit Facility
Account, Defeasance Account, Remarketing Proceeds Account, or Redemption Premium
Account created under Section 5.01 of the Indenture), the Project Fund or the
Rebate Fund shall be invested or reinvested by the Trustee in Eligible
Investments. The Issuer and the Borrower each hereby covenant that they will
restrict that investment and reinvestment and the use of the proceeds of the
Bonds in such manner and to such extent, if any, as may be necessary, after
taking into account reasonable expectations at the time of delivery of and
payment for the Bonds, so that the Bonds will not constitute arbitrage bonds
under Section 148 of the Code.
Any officer of the Issuer having responsibility for issuing the Bonds
is authorized and directed, alone or in conjunction with any of the foregoing or
with any other officer, employee or
15
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agent of or consultant to the Issuer, or with the Borrower or any officer,
employee or agent of or consultant to the Borrower, to give an appropriate
certificate of the Issuer pursuant to said Section 148, for inclusion in the
transcript of proceedings for the Bonds, setting forth the reasonable
expectations of the Issuer regarding the amount and use of the proceeds of the
Bonds and the facts, estimates and circumstances on which those expectations are
based, that certificate to be premised on the reasonable expectations and the
facts, estimates and circumstances on which those expectations are based, as
provided by the Borrower, all as of the date of delivery of and payment for the
Bonds. The Borrower shall provide the Issuer with, and the Issuer's certificate
may be based on, a certificate of an appropriate officer, employee or agent of
or consultant to the Borrower setting forth the reasonable expectations of the
Borrower on the date of delivery of and payment for the Bonds regarding the
amount and use of the proceeds of the Bonds and the facts, estimates and
circumstances on which they are based.
SECTION 3.8. REBATE FUND. The Borrower agrees to make such payments to
the Trustee as are required of it under Section 5.05 of the Indenture and to pay
the costs and expenses of the independent certified public accounting firm or
firm of attorneys engaged in accordance with Section 5.05 of the Indenture. The
obligation of the Borrower to make such payments shall remain in effect and be
binding upon the Borrower notwithstanding the release and discharge of the
Indenture.
(End of Article III)
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ARTICLE IV
LOAN BY ISSUER; REPAYMENT OF THE LOAN;
LOAN PAYMENTS AND ADDITIONAL PAYMENTS
SECTION 4.1. LOAN REPAYMENT; DELIVERY OF NOTE AND CREDIT FACILITY.
Upon the terms and conditions of this Agreement, the Issuer will make the Loan
to the Borrower. In consideration of and in repayment of the Loan, the Borrower
shall make, as Loan Payments, payments sufficient in amount to pay when due the
Bond Service Charges payable on the Bonds. All such Loan Payments shall be paid
to the Trustee in accordance with the terms of the Note for the account of the
Issuer on the Loan Payment Dates and shall be held and disbursed in accordance
with the provisions of the Indenture and this Agreement for application to the
payment of Bond Service Charges. Notwithstanding the foregoing, while the Credit
Facility is in effect, the Borrower shall deposit all such Loan Payments
directly with the Credit Facility Issuer to reimburse the Credit Facility Issuer
for draws on the Credit Facility, and the Credit Facility Issuer shall apply
such amounts to the reimbursement obligation of the Borrower. The obligations of
the Borrower to make any payment referred to in this Section 4.1 shall be deemed
satisfied and discharged to the extent of the corresponding payment made by the
Credit Facility Issuer to the Trustee under the Credit Facility. It is
understood, however, that such payment by the Credit Facility Issuer shall not
relieve the Borrower of any of its obligations under the Reimbursement
Agreement, including the obligation to reimburse the Credit Facility Issuer for
any draw on the Credit Facility.
The Borrower shall be entitled to a credit against the Loan Payments
next required to be made to the extent that the balance of the Bond Fund (other
than any balance in the Credit Facility Account, Defeasance Account, Redemption
Premium Account or Remarketing Proceeds Account) is then in excess of amounts
required (a) for payment of Bonds theretofore matured or theretofore called for
redemption, (b) for payment of interest for which checks or drafts have been
drawn and mailed by the Trustee, and (c) for deposit in the Bond Fund for use
other than for the payment of Bond Service Charges on the Interest Payment Date
next following the applicable Loan Payment Date. In any event, however, if on
any Interest Payment Date, the balance in the Bond Fund is insufficient to make
required payments of Bond Service Charges, the Borrower forthwith will pay to
the Trustee, for the account of the Issuer and for deposit into the Bond Fund,
any deficiency.
To secure the Borrower's performance of their obligation under this
Agreement, the Borrower shall execute and deliver to the Trustee, concurrently
with the issuance and delivery of the Bonds, the Note.
The Note shall secure equally and ratably all outstanding Bonds.
Upon payment in full, in accordance with the Indenture, of the Bond
Service Charges on any or all Bonds, whether at maturity or by redemption or
otherwise, or upon provision for the payment thereof having been made in
accordance with the provisions of the Indenture, an appropriate notation shall
be endorsed thereon evidencing the date and amount of the principal
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payment or prepayment equal to the Bonds so paid, or with respect to which
provision for payment has been made, and that Note shall be surrendered by the
Trustee to the Borrower for cancellation if all Bonds shall have been paid (or
provision made therefor) and cancelled as aforesaid. Unless the Borrower is
entitled to a credit under express terms of this Agreement or the Note, all
payments on the Note shall be in the full amount required thereunder.
Except for such interest of the Borrower as may hereafter arise
pursuant to Section 8.2 hereof or Section 5.06 of the Indenture, the Borrower
and the Issuer each acknowledge that neither the Borrower nor the Issuer have
any interest in the Credit Facility Account, the Redemption Premium Account, the
Remarketing Proceeds Account and the Defeasance Account of the Bond Fund and any
moneys deposited therein shall be in the custody of and held by the Trustee in
trust for the benefit of the Holders and, to the extent of draws under the
Credit Facility, the Bank.
SECTION 4.2. ADDITIONAL PAYMENTS. The Borrower shall pay to the
Issuer, as Additional Payments hereunder, within five (5) days after request
therefor made in writing, any and all costs and expenses incurred or to be paid
by the Issuer in connection with the issuance and delivery of the Bonds, the
remarketing of the Bonds and the Conversion of the Bonds or otherwise related to
actions taken by the Issuer under this Agreement or the Indenture. The Borrower
shall also pay to the Issuer on each January 1 during the term of the Loan,
commencing January 1, 1999, an annual fee of $750.
The Borrower shall pay to the Trustee, the Registrar and any Paying
Agent or Authenticating Agent, their reasonable fees, charges and expenses for
acting as such under the Indenture.
The Borrower shall pay the Remarketing Agent and Tender Agent, as
Additional Payments hereunder, the fees and expenses of the Remarketing Agent
and Tender Agent under the Indenture for services rendered in connection with
the Bonds.
The Borrower shall pay to the Tender Agent in federal or other
immediately available funds not later than 3:00 p.m., New York City time, an
amount equal to the amount the Tender Agent requires in order to purchase on
behalf of the Borrower Bonds pursuant to Article III of the Indenture on the
date payment is to be made; provided, however, that the amount required to be
paid under this paragraph shall be reduced by an amount equal to the sum of the
amounts made available to the Tender Agent for such purpose from the proceeds of
the remarketing of such Bonds by the Remarketing Agent or proceeds of a draw
under the Credit Facility. The Borrower hereby authorizes the Trustee to draw
such moneys under the Credit Facility, as are necessary for the purchase of
Bonds pursuant to said Article III.
SECTION 4.3. PLACE OF PAYMENTS. The Borrower shall make all Loan
Payments as provided in Section 4.1. Additional Payments shall be made directly
to the person or entity to whom or to which they are due.
SECTION 4.4. OBLIGATIONS UNCONDITIONAL. The obligations of the
Borrower to make Loan Payments, Additional Payments and any payments required of
the Borrower under Section
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5.05 of the Indenture shall be absolute and unconditional, and the Borrower
shall make such payments without abatement, diminution or deduction regardless
of any cause or circumstances whatsoever including, without limitation, any
defense, set-off, recoupment or counterclaim which the Borrower may have or
assert against the Issuer, the Trustee, the Remarketing Agent, the Tender Agent,
the Bank or any other Person.
SECTION 4.5. ASSIGNMENT OF AGREEMENT AND REVENUES. To secure, first,
the payment of Bond Service Charges on, and the purchase of, the Bonds, and,
second, the payment to the Bank and performance by the Borrower under the
Reimbursement Agreement, the Issuer shall assign to the Trustee, by the
Indenture, any of its rights, title and interest in this Agreement (except for
the Unassigned Issuer's Rights), and the Credit Facility Account, Redemption
Premium Account, Remarketing Proceeds Account and Defeasance Account of the Bond
Fund and all moneys and investments therein (including without limitation the
proceeds of the Credit Facility) and shall grant to the Trustee, by the
Indenture, a security interest in its rights under and interest in (i) the
Project Fund and all moneys and investments therein, and (ii) the Revenues
(other than such accounts of the Bond Fund, all investments therein and the
proceeds of the Credit Facility). The Borrower hereby agrees and consent to that
assignment and grant.
SECTION 4.6. CREDIT FACILITY. Prior to the initial delivery of the
Bonds to the Original Purchaser pursuant to Section 2.01 of the Indenture, the
Borrower shall obtain and deliver, to the Trustee, the Credit Facility. The
Credit Facility shall be issued initially by the Bank pursuant to the
Reimbursement Agreement; shall be dated the date of delivery of the Bonds; shall
obligate the Bank to pay (a) an amount equal to the principal amount of the
Bonds (i) to pay the principal of the Bonds when due whether at stated maturity,
upon redemption or acceleration or (ii) to enable the Tender Agent to pay the
purchase price or portion of the purchase price equal to the principal amount of
Bonds purchased pursuant to Section 3.01 of the Indenture to the extent
remarketing proceeds are not available for such purpose, plus (b) an amount
equal to 98 days' interest accrued on the Bonds at a rate of eight percent (8%)
per annum (i) to pay interest on the Bonds when due or (ii) to enable the Tender
Agent to pay the portion of the purchase price of the Bonds purchased pursuant
to Section 3.01 of the Indenture equal to the interest accrued, if any, on such
Bonds to the extent remarketing proceeds are not available for such purpose; and
shall be in substantially the same form as the exhibit attached to the
Reimbursement Agreement and made a part thereof.
The Borrower shall take whatever action may be reasonably necessary to
maintain the Credit Facility in full force and effect during the period required
by the Indenture, including the payment of any reasonable and documented
transfer fees required by the Bank upon any transfer of the Credit Facility to
any successor Trustee pursuant to Section 11.12 of the Indenture.
(End of Article IV)
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ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
SECTION 5.1. RIGHT OF INSPECTION. Subject to reasonable security and
safety regulations and upon reasonable notice, the Issuer and the Trustee, and
their respective agents, shall have the right during normal business hours to
inspect the Project.
SECTION 5.2. LEASE, SALE OR GRANT OF USE BY BORROWER. Subject to the
provisions of the Reimbursement Agreement and with the written consent of the
Bank, the Borrower may lease or sell the Project or grant the right to occupy
and use the Project, in whole or in part, to others; provided (i) that no such
grant, sale or lease shall relieve the Borrower from its obligations under this
Agreement or the Note and (ii) that prior to any such action, the Borrower shall
deliver to the Trustee an opinion for nationally recognized bond counsel that
such action shall not adversely affect the exclusion from gross income of
interest on the Bonds.
SECTION 5.3. INDEMNIFICATION. The Borrower releases the Issuer from,
agrees that the Issuer shall not be liable for, and indemnifies the Issuer
against, all liabilities, claims, costs and expenses, including attorneys fees
and expenses, imposed upon, incurred or asserted against the Issuer, on account
of: (a) any loss or damage to property or injury to or death of or loss by any
person that may be occasioned by any cause whatsoever pertaining to the
construction, maintenance, operation and use of the Project; (b) any breach or
default on the part of the Borrower in the performance of any covenant or
agreement of the Borrower under this Agreement, the Reimbursement Agreement, the
Note or any related document, or arising from any act or failure to act by the
Borrower, or any of its agents, contractors, servants, employees or licensees;
(c) the authorization, issuance, sale, trading, redemption or servicing of the
Bonds, and the provision of any information or certification furnished in
connection therewith concerning, the Bonds, the Project, or the Borrower
including, without limitation, the Private Placement Memorandum, any information
furnished by the Borrower for, and included in, or used as a basis for
preparation of, any certifications, information statements or reports furnished
by the Issuer, and any other information or certification obtained from the
Borrower to assure the exclusion of the interest on the Bonds from gross income
for federal income tax purposes; (d) the Borrower s failure to comply with any
requirement of this Agreement or the Code pertaining to such exclusion of that
interest including the covenants in Section 5.4 hereof; and (e) any claim,
action or proceeding brought with respect to the matters set forth in (a), (b),
(c) and (d) above.
The Borrower agrees to indemnify the Trustee and the Tender Agent for,
and to hold them harmless against, all liabilities, claims, costs and expenses
incurred without negligence or bad faith on the part of the Trustee and the
Tender Agent on account of any action taken or omitted to be taken by the
Trustee and the Tender Agent in accordance with the terms of this Agreement, the
Bonds, the Reimbursement Agreement, the Credit Facility, the Note or the
Indenture or any action taken at the request of or with the consent of the
Borrower, including the reasonable and documented costs and expenses of the
Trustee and the Tender Agent in defending themselves against any such claim,
action or proceeding brought in connection with the exercise or performance of
any of their
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powers or duties under this Agreement, the Bonds, the Indenture, the
Reimbursement Agreement, the Credit Facility or the Note.
In case any action or proceeding is brought against the Issuer, the
Tender Agent or the Trustee in respect of which indemnity may be sought
hereunder, the party seeking indemnity promptly shall give notice of that action
or proceeding to the Borrower, and the Borrower upon receipt of that notice
shall have the obligation and the right to assume the defense of the action or
proceeding; provided, that failure of a party to give that notice shall not
relieve the Borrower from any of their obligations under this Section unless
that failure prejudices the defense of the action or proceeding by the Borrower.
At its own expense, an indemnified party may employ separate counsel and
participate in the defense. The Borrower shall not be liable for any settlement
made without their consent.
The indemnification set forth above is intended to and shall include
the indemnification of all affected officials, directors, officers and employees
of the Issuer, the Tender Agent and the Trustee, respectively. That
indemnification is intended to and shall be enforceable by the Issuer, the
Tender Agent and the Trustee, respectively, to the full extent permitted by law.
SECTION 5.4. BORROWER NOT TO ADVERSELY AFFECT EXCLUSION FROM GROSS
INCOME OF INTEREST ON BONDS. The Borrower hereby represents that it has taken
and caused to be taken, and covenant that they will take and cause to be taken,
all actions that may be required of them, alone or in conjunction with the
Issuer, for the interest on the Bonds to be and remain excluded from gross
income for federal income tax purposes, and represents that they have not taken
or permitted to be taken on their behalf, and covenant that they will not take
or permit to be taken on their behalf, any actions that would adversely affect
such exclusion under the provisions of the Code.
SECTION 5.5. BORROWER TO MAINTAIN ITS EXISTENCE; MERGER AND
CONSOLIDATION. The Borrower shall do all things necessary to preserve and keep
in full force and effect its existence, rights and franchises. The Borrower 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 Borrower 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 Borrower shall be the corporation which survives
such merger or results from such consolidation; (ii) prior to such action the
Borrower must deliver to the Trustee an opinion of nationally recognized bond
counsel that such action shall not adversely affect the tax-exempt status of the
Bonds; 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 5.6. ONGOING DISCLOSURE. On or before any Conversion or
remarketing that would subject the Bonds to the continuing disclosure
requirements of Section (b)(5)(i) of Securities and Exchange Commission Rule
15c2-12 under the Securities Exchange Act of 1934, as amended, the Borrower
shall enter for the benefit of the Bondholders and beneficial owners of the
Bonds into a continuing disclosure undertaking satisfying the requirements of
such Rule.
(End of Article V)
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ARTICLE VI
REDEMPTION AND PURCHASE OF BONDS
SECTION 6.1. OPTIONAL REDEMPTION. Provided no Event of Default shall
have occurred and be subsisting, at any time and from time to time, the Borrower
may deliver moneys to the Trustee in addition to Loan Payments or Additional
Payments required to be made and direct the Trustee to use the moneys so
delivered for the purpose of purchasing Bonds or of calling Bonds for optional
redemption in accordance with the applicable provisions of the Indenture
providing for optional redemption at the redemption price stated in the
Indenture; provided, however, that any moneys so used for optional redemption
shall be from the sources set forth in paragraphs (i) and (ii) of Section
5.01(c) of the Indenture. Pending application for those purposes, any moneys so
delivered shall be held by the Trustee in a special account in the Bond Fund and
delivery of those moneys shall not operate to abate or postpone Loan Payments or
Additional Payments otherwise becoming due or to alter or suspend any other
obligations of the Borrower under this Agreement.
SECTION 6.2. EXTRAORDINARY OPTIONAL REDEMPTION. The Borrower shall
have, subject to the conditions hereinafter imposed, the option to direct the
redemption of the entire unpaid principal balance of the Bonds in accordance
with the applicable provisions of the Indenture upon the occurrence of any of
the following events:
(a) The Project shall have been damaged or destroyed to such an extent
that (1) they cannot reasonably be expected to be restored, within a period
of 6 months, to the condition thereof immediately preceding such damage or
destruction or (2) their normal use and operation is reasonably expected to
be prevented for a period of 6 consecutive months.
(b) Title to, or the temporary use of, all or a significant part of
the Project shall have been taken under the exercise of the power of
eminent domain (1) to such extent that the Project cannot reasonably be
expected to be restored within a period of 6 months to a condition of
usefulness comparable to that existing prior to the taking or (2) as a
result of the taking, normal use and operation of the Project is reasonably
expected to be prevented for a period of 6 consecutive months.
(c) As a result of any changes in the Constitution of the State, the
Constitution of the United States of America, or state or federal laws or
as a result of legislative or administrative action (whether state or
federal) or by final decree, judgment or order of any court or
administrative body (whether state or federal) entered after the contest
thereof by the Issuer or the Borrower in good faith, this Agreement shall
have become void or unenforceable or impossible of performance in
accordance with the intent and purpose of the parties as expressed in this
Agreement, or if unreasonable burdens or excessive liabilities shall have
been imposed with respect to the Project or the operation thereof,
including, without limitation, federal, state or other ad valorem,
property, income or other taxes not being imposed on the date of this
Agreement other than ad valorem taxes presently levied upon privately owned
property used for the same general purpose as the Project.
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(d) Changes in the economic availability of raw materials, operating
supplies, energy sources or supplies, or facilities (including, but not
limited to, facilities in connection with the disposal of industrial
wastes) necessary for the operation of the Project for the Project
Purposes shall have occurred or technological or other changes shall have
occurred which the Borrower cannot reasonably overcome or control and
which in the Borrower's reasonable judgment render the Project uneconomic
for the Project Purposes.
To exercise that option, the Borrower shall, within 90 days following the event
authorizing the exercise of that option, or at any time during the continuation
of the condition referred to in clause (d) above, give notice to the Issuer and
to the Trustee specifying the date on which the Borrower will deliver the funds
required for that redemption, which date shall be not more than 90 days from the
date that notice is mailed and shall make arrangements satisfactory to the
Trustee for the giving of the required notice of redemption.
The amount payable by the Borrower in the event of their exercise of
the option granted in this Section shall be the sum of the following:
(i) An amount of money which, when added to the moneys and investments
held to the credit of the Bond Fund, will be sufficient pursuant to the
provisions of the Indenture to pay, at par, and discharge all then
outstanding Bonds on the earliest applicable redemption date, that amount
to be paid to the Trustee, plus
(ii) An amount of money equal to the Additional Payments relating to
the Bonds accrued and to accrue until actual final payment and redemption
of the Bonds, that amount or applicable portions thereof to be paid to the
Trustee or to the Persons to whom those Additional Payments are or will be
due.
The requirement of (ii) above with respect to Additional Payments to accrue may
be met if provisions satisfactory to the Trustee and the Issuer are made for
paying those amounts as they accrue.
The Borrower also shall have the option, in the event that title to or
the temporary use of a portion of the Project shall be taken under the exercise
of the power of eminent domain, even if the taking is not of such nature as to
permit the exercise of the redemption option upon an event specified in (b)
above, to direct the redemption, at a redemption price of 100% of the principal
amount thereof prepaid, plus accrued interest to the redemption date, of that
part of the outstanding principal balance of the Bonds as may be payable from
the proceeds received by the Borrower (after the payment of costs and expenses
incurred in the collection thereof) received in the eminent domain proceeding,
provided, that, the Borrower shall furnish to the Issuer and the Trustee a
certificate of an Engineer stating that (1) the property comprising the part of
the Project taken is not essential to continued operations of the Project in the
manner existing prior to that taking, (2) the Project has been restored to a
condition substantially equivalent to that existing prior to the taking, or (3)
other improvements have been acquired or made which are suitable for the
continued operation of the Project.
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The rights and options granted to the Borrower in this Section may be
exercised whether or not the Borrower is in default hereunder; provided, that
such default will not relieve the Borrower from performing those actions which
are necessary to exercise any such right or option granted hereunder.
SECTION 6.3. MANDATORY REDEMPTION IN EVENT OF INCLUSION IN GROSS
INCOME OF INTEREST ON BONDS. If, as provided in the Bonds and the Indenture, the
Bonds become subject to mandatory redemption because interest on any of the
Bonds is determined to be included for federal income tax purposes in the gross
income of the Holder of any Bonds (other than because a Holder is a "substantial
user" of the Project or a "related person", as those terms are used in Section
147(a) of the Code), the Borrower shall deliver to the Trustee, upon the date
requested by the Trustee, the moneys needed to pay in full the Bonds in
accordance with the mandatory redemption provisions relating thereto set forth
in the Bonds and the Indenture.
SECTION 6.4. MANDATORY REDEMPTION. The Borrower shall deliver to the
Trustee the moneys needed to redeem the Bonds in accordance with any mandatory
redemption provisions relating thereto as may be set forth in the Indenture.
SECTION 6.5. ACTIONS BY ISSUER. At the request of the Borrower or the
Trustee, the Issuer shall take all steps required of it under the applicable
provisions of the Indenture or the Bonds to effect the redemption of all or a
portion of the Bonds pursuant to this Article VI.
(End of Article VI)
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
SECTION 7.1. EVENTS OF DEFAULT. Each of the following shall be an
Event of Default:
(a) The Borrower shall fail to pay any Loan Payment on or prior to the
Loan Payment Date on which that Loan Payment is due and payable;
(b) The Borrower shall fail to deliver to the Trustee, or cause to be
delivered on their behalf, the moneys needed (i) to redeem any outstanding
Bonds in the manner and upon the date requested in writing by the Trustee
as provided in Section 6.1, 6.2, 6.3 or 6.4 of this Agreement or (ii) to
purchase any Bonds in the manner and upon the date as provided in Section
4.2 of this Agreement;
(c) The Borrower shall fail to observe and perform any other
agreement, term or condition contained in this Agreement (other than with
respect to Section 5.4 hereof), and the continuation of such failure for a
period of 30 days after notice thereof shall have been given to the
Borrower by the Issuer or the Trustee, or for such longer period as the
Issuer and the Trustee may agree to in writing; provided, that if the
failure is other than the payment of money and is of such nature that it
can be corrected but not within the applicable period, that failure shall
not constitute an Event of Default so long as the Borrower institute
curative action within the applicable period and diligently pursues that
action to completion;
(d) The Borrower shall: (i) admit in writing its inability to pay its
debts generally as they become due; (ii) have an order for relief entered
in any case commenced by or against them under the federal bankruptcy laws,
as now or hereafter in effect; (iii) commence a proceeding under any other
federal or state bankruptcy, insolvency, reorganization or similar law, or
have such a proceeding commenced against it and either have an order of
insolvency or reorganization entered against it or have the proceeding
remain undismissed and unstayed for ninety days; (iv) make an assignment
for the benefit of creditors; or (v) have a receiver or trustee appointed
for them or for the whole or any substantial part of their property;
(e) There shall occur an "Event of Default" as defined in Section
10.01 of the Indenture.
Notwithstanding the foregoing, if, by reason of Force Majeure, the
Borrower is unable to perform or observe any agreement, term or condition hereof
which would give rise to an Event of Default under subsection (c) hereof, the
Borrower shall not be deemed in default during the continuance of such
inability. However, the Borrower shall promptly give notice to the Trustee and
the Issuer of the existence of an event of Force Majeure and shall use their
best efforts to remove the effects thereof; provided that the settlement of
strikes or other industrial disturbances shall be entirely within their
discretion.
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The term Force Majeure shall mean, without limitation, the following:
(i) acts of God; strikes, lockouts or other industrial disturbances;
acts of public enemies; orders or restraints of any kind of the government
of the United States of America or of the State or any of their
departments, agencies, political subdivisions or officials, or any civil or
military authority; insurrections; civil disturbances; riots; epidemics;
landslides; lightning; earthquakes; fires; hurricanes; tornadoes; storms;
droughts; floods; arrests; restraint of government and people; explosions;
breakage, malfunction or accident to facilities, machinery, transmission
pipes or canals; partial or entire failure of utilities; shortages of
labor, materials, supplies or transportation; or
(ii) any cause, circumstance or event not reasonably within the
control of the Borrower.
The declaration of an Event of Default under subsection (d) above, and
the exercise of remedies upon any such declaration, shall be subject to any
applicable limitations of federal bankruptcy law affecting or precluding that
declaration or exercise during the pendency of or immediately following any
bankruptcy, liquidation or reorganization proceedings.
SECTION 7.2. REMEDIES ON DEFAULT. Whenever an Event of Default shall
have happened and be subsisting, any one or more of the following remedial steps
may be taken:
(a) If acceleration of the principal amount of the Bonds has been
declared pursuant to Section 7.03 of the Indenture, the Trustee shall
declare all Loan Payments to be immediately due and payable, whereupon the
same shall become immediately due and payable;
(b) The Issuer, the Bank or the Trustee may have access to, inspect,
examine and make copies of the books, records, accounts and financial data
of the Borrower pertaining to the Project; or
(c) The Issuer or the Trustee may pursue all remedies now or hereafter
existing at law or in equity to collect all amounts then due and thereafter
to become due under this Agreement, the Credit Facility or the Note or to
enforce the performance and observance of any other obligation or agreement
of the Borrower under those instruments.
Notwithstanding the foregoing, the Issuer shall not be obligated to take any
step which in its opinion will or might cause it to expend time or money or
otherwise incur liability unless and until a satisfactory indemnity bond has
been furnished to the Issuer at no cost or expense to the Issuer. Any amounts
collected as Loan Payments or applicable to Loan Payments and any other amounts
which would be applicable to the payment of Bond Service Charges collected
pursuant to action taken under this Section shall be paid into the Bond Fund and
applied in accordance with the provisions of the Indenture or, if the
outstanding Bonds have been paid and discharged in accordance with the
provisions of the Indenture, shall be paid as provided in Section 5.06 of the
Indenture for transfers of remaining amounts in the Bond Fund.
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The provisions of this Section are subject to the further limitation
that the rescission by the Trustee of its declaration that all of the Bonds are
immediately due and payable also shall constitute an annulment of any
corresponding declaration made pursuant to paragraph (a) of this Section and a
waiver and rescission of the consequences of that declaration and of the Event
of Default with respect to which that declaration has been made, provided that
no such waiver or rescission shall extend to or affect any subsequent or other
default or impair any right consequent thereon.
SECTION 7.3. NO REMEDY EXCLUSIVE. No remedy conferred upon or reserved
to the Issuer or the Trustee by this Agreement is intended to be exclusive of
any other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement, the Credit Facility or the Note, or now or hereafter existing at law,
in equity or by statute. No delay or omission to exercise any right or power
accruing upon any default shall impair that right or power or shall be construed
to be a waiver thereof, but any such right and power may be exercised from time
to time and as often as may be deemed expedient. In order to entitle the Issuer
or the Trustee to exercise any remedy reserved to it in this Article, it shall
not be necessary to give any notice, other than any notice required by law or
for which express provision is made herein.
SECTION 7.4. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES. If an
Event of Default should occur and the Issuer or the Trustee should incur
expenses, including attorneys' fees, in connection with the enforcement of this
Agreement, the Credit Facility or the Note or the collection of sums due
thereunder, the Borrower shall reimburse the Issuer and the Trustee, as
applicable, for the reasonable expenses so incurred upon demand.
SECTION 7.5. NO WAIVER. No failure by the Issuer or the Trustee to
insist upon the strict performance by the Borrower of any provision hereof shall
constitute a waiver of their right to strict performance and no express waiver
shall be deemed to apply to any other existing or subsequent right to remedy the
failure by the Borrower to observe or comply with any provision hereof.
The Issuer and the Trustee may waive any Event of Default hereunder
only with the prior written consent of the Bank.
SECTION 7.6. NOTICE OF DEFAULT. The Borrower or the Issuer shall
notify the Trustee and the Bank immediately if they become aware of the
occurrence of any Event of Default hereunder or of any fact, condition or event
which, with the giving of notice or passage of time or both, would become an
Event of Default.
(End of Article VII)
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. TERM OF AGREEMENT. This Agreement shall be and remain in
full force and effect from the date of delivery of the Bonds to the Placement
Agent until such time as all of the Bonds shall have been fully paid (or
provision made for such payment) pursuant to the Indenture and all other sums
payable by the Borrower under this Agreement and the Note shall have been paid,
except for obligations of the Borrower under Sections 4.2 and 5.3 hereof, which
shall survive any termination of this Agreement.
SECTION 8.2. AMOUNTS REMAINING IN FUNDS. Any amounts in the Bond Fund
remaining unclaimed by the Holders of Bonds for 2 years after the due date
thereof (whether at stated maturity, by redemption or pursuant to any mandatory
sinking fund requirements or otherwise), shall be paid to the Borrower; provided
that if the Trustee shall have drawn on the Credit Facility, and the Bank has
not been reimbursed by the Borrower pursuant to the Reimbursement Agreement,
such amounts remaining in the Bond Fund shall belong and be paid first to the
Bank to the extent it has not been so reimbursed. With respect to that principal
of and any premium and interest on the Bonds to be paid from moneys paid to the
Borrower or the Bank pursuant to the preceding sentence, the Holders of the
Bonds entitled to those moneys shall look solely to the Borrower for the payment
of those moneys.
Further, any other amounts remaining in the Bond Fund (other than in
the Credit Facility Account, the Remarketing Proceeds Account, the Redemption
Premium Account and the Defeasance Account) and any amounts remaining in any
other special funds or accounts (other than the Project Fund and the Rebate
Fund) created under this Agreement or the Indenture after all of the outstanding
Bonds shall be deemed to have been paid and discharged under the provisions of
the Indenture and all other amounts required to be paid under this Agreement,
the Note and the Indenture have been paid, shall be paid to the Borrower to the
extent that those moneys are in excess of the amounts necessary to effect the
payment and discharge of the outstanding Bonds; provided that if the Trustee
shall have drawn on the Credit Facility, and the Bank has not been reimbursed by
the Borrower pursuant to the Reimbursement Agreement, such amounts shall belong
and be paid first to the Bank to the extent it has not been so reimbursed.
SECTION 8.3. NOTICES. All notices, certificates, requests or other
communications hereunder shall be in writing and shall be deemed to be
sufficiently given when mailed by registered or certified mail, postage prepaid,
and addressed to the appropriate Notice Address. A duplicate copy of each
notice, certificate, request or other communication given hereunder to the
Issuer, the Borrower, the Bank, the Remarketing Agent, the Tender Agent or the
Trustee shall also be given to the others. The Borrower, the Issuer, the Bank,
the Remarketing Agent, the Tender Agent and the Trustee, by notice given
hereunder, may designate any further or different addresses to which subsequent
notices, certificates, requests or other communications shall be sent.
SECTION 8.4. EXTENT OF COVENANTS OF THE ISSUER; NO PERSONAL LIABILITY.
All
28
<PAGE>
covenants, obligations and agreements of the Issuer contained in this Agreement
or the Indenture shall be effective to the extent authorized and permitted by
applicable law. No such covenant, obligation or agreement shall be deemed to be
a covenant, obligation or agreement of any present or future member, officer,
agent or employee of the Issuer in other than his official capacity, and neither
the members of the Issuer nor any official executing the Bonds shall be liable
personally on the Bonds or be subject to any personal liability or
accountability by reason of the issuance thereof or by reason of the covenants,
obligations or agreements of the Issuer contained in this Agreement or in the
Indenture.
SECTION 8.5. BINDING EFFECT. This Agreement shall inure to the benefit
of and shall be binding in accordance with its terms upon the Issuer, the
Borrower and their respective permitted successors and assigns provided that
this Agreement may not be assigned by the Borrower (except in connection with a
lease, sale or grant of use pursuant to Section 5.2 hereof or sale or transfer
of assets pursuant to the Reimbursement Agreement) and may not be assigned by
the Issuer except to the Trustee pursuant to the Indenture or as otherwise may
be necessary to enforce or secure payment of Bond Service Charges. This
Agreement may be enforced only by the parties, their assignees and others who
may, by law, stand in their respective places.
SECTION 8.6. AMENDMENTS AND SUPPLEMENTS. Except as otherwise expressly
provided in this Agreement or the Indenture, subsequent to the issuance of the
Bonds and prior to all conditions provided for in the Indenture for release of
the Indenture having been met, this Agreement may not be effectively amended,
changed, modified, altered or terminated except in accordance with the
provisions of Article XI of the Indenture, as applicable.
SECTION 8.7. EXECUTION COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be regarded as an original and
all of which shall constitute but one and the same instrument.
SECTION 8.8. SEVERABILITY. If any provision of this Agreement, or any
covenant, obligation or agreement contained herein is determined by a court to
be invalid or unenforceable, that determination shall not affect any other
provision, covenant, obligation or agreement, each of which shall be construed
and enforced as if the invalid or unenforceable portion were not contained
herein. That invalidity or unenforceability shall not affect any valid and
enforceable application thereof, and each such provision, covenant, obligation
or agreement shall be deemed to be effective, operative, made, entered into or
taken in the manner and to the full extent permitted by law.
SECTION 8.9. GOVERNING LAW. This Agreement shall be deemed to be a
contract made under the laws of the State and for all purposes shall be governed
by and construed in accordance with the laws of the State.
(End of Article VIII)
29
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Borrower have caused this
Agreement to be duly executed in their respective names, all as of the date
first above written.
FAYETTE COUNTY INDUSTRIAL
DEVELOPMENT AUTHORITY
By: /s/ William B. Kania
------------------------------------
William B. Kania
Vice Chairman
DYNAMIC MATERIALS CORPORATION
By: /s/ Richard A. Santa
------------------------------------
Richard A. Santa
Vice President, Finance
<PAGE>
EXHIBIT A
NOTE
DYNAMIC MATERIALS CORPORATION, a Delaware corporation (the
"Borrower"), for value received, promises to pay to Star Bank, N.A., as Trustee
(the "Trustee") under the Indenture hereinafter referred to, the principal sum
of
SIX MILLION EIGHT HUNDRED AND FIFTY THOUSAND DOLLARS
($6,850,000)
and to pay interest on the unpaid balance of such principal sum from and after
September 1, 1998 (the date of delivery of this Note) at the Applicable Rate
until the payment of such principal sum has been made or provided for. As used
herein, "Applicable Rate" means the interest rates specified in Appendix I to
this Note.
This Note has been executed and delivered by the Borrower to the
Trustee pursuant to a certain Loan Agreement (the "Agreement"), dated as of
September 1, 1998, between the Fayette County Industrial Development Authority
(the "Issuer") and the Borrower. Under the Agreement, the Issuer has loaned the
Borrower the principal proceeds received from the sale of the Issuer's
$6,850,000 aggregate principal amount of Fayette County Industrial Development
Authority Multi-Mode Variable Rate Industrial Development Refunding Revenue
Bonds, Series 1998 (Dynamic Materials Corporation Project), dated the date of
their initial delivery to the original purchasers thereof (the "Bonds"), to
assist in the financing of the Project (as defined in the Agreement), and the
Borrower have agreed to repay such loan by making payments (the "Loan Payments")
at the times and in the amounts set forth in this Note for application to the
payment of the principal of and redemption premium, if any, and interest on the
Bonds as and when due. The Bonds have been issued, concurrently with the
execution and delivery of this Note, pursuant to, and are secured by, the Trust
Indenture (the "Indenture"), dated as of September 1, 1998, between the Issuer
and the Trustee. The Bonds also bear interest from their date at the Applicable
Rate payable as specified below and in Appendix I to this Note and mature on
September 1, 2013.
To provide funds to pay the principal of and redemption premium, if
any, and interest on the Bonds (the "Bond Service Charges") as and when due as
above-specified, the Borrower hereby agrees to and shall make Loan Payments on
each Loan Payment Date (as defined in the Agreement) as follows: (i) while the
Bonds bear interest at the Weekly Rate, the total interest due on the Bonds on
such Loan Payment Date and (b) on the Loan Payment Date on September 1, 2013
(i.e. the maturity date of the Bonds) all principal of the Bonds then
outstanding, and (ii) while the Bonds bear interest at the Semi-Annual Rate or
Long-Term Rate, in an amount equal to (a) prior to the first Interest Payment
Date in such Interest Rate Mode, that portion of the total interest due on the
Bonds on such first Interest Payment Date multiplied by a fraction, the
numerator of which shall be one and the denominator of which shall be the number
of Loan Payment Dates prior to such Interest Payment Date, (b) from and after
the first Interest Payment Date in such Interest Rate Mode, 1/2 of the total
interest due on the Bonds on the next succeeding Interest Payment Date, and (c)
on
A-1
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the Loan Payment Date on September 1, 2013 (i.e., the maturity date of the
Bonds) all principal of the Bonds then outstanding. In addition, to provide
funds sufficient to pay the principal of and premium, if any, and interest on
the Bonds as and when due at any other time, whether by redemption or
acceleration or otherwise, the Borrower hereby agrees to and shall make Loan
Payments in an amount sufficient to pay such principal of and premium, if any,
and interest when due and payable.
If payment or provision for payment in accordance with the Indenture
is made in respect of the principal of, and redemption premium, if any, and
interest on the Bonds from moneys other than Loan Payments, this Note shall be
deemed paid to the extent such payments or provision for payment of Bonds has
been made. To provide for payment of the Bond Service Charges, the Borrower has
arranged to deliver to the Trustee the Credit Facility. Drawings on the Credit
Facility shall not reduce in any manner Loan Payments due hereunder. However,
the Trustee shall apply such Loan Payments to the reimbursement obligation of
the Borrower to the Bank in accordance with Section 5.01 of the Indenture.
Subject to the foregoing, all Loan Payments shall be in the full amount required
hereunder.
All Loan Payments shall be payable in lawful money of the United
States of America and shall be made to the Trustee at its corporate trust office
for the account of the Issuer and deposited in the Bond Fund created by the
Indenture. Except as otherwise provided in the Indenture, such Loan Payments
shall be used by the Trustee to pay the principal of, redemption premium, if
any, and interest on the Bonds as and when due.
The obligation of the Borrower to make the payments required hereunder
shall be absolute and unconditional and the Borrower shall make such payments
without abatement, diminution or deduction regardless of any cause or
circumstances whatsoever including, without limitation, any defense, set-off,
recoupment or counterclaim which the Borrower may have or assert against the
Issuer, the Trustee, the Remarketing Agent (as defined in Appendix I) and the
Bank (as defined in Appendix I) or any other person.
This Note is subject to optional, extraordinary optional and mandatory
prepayment in whole or in part, at the prepayment price, in the amounts and upon
the conditions that the Bonds are subject to, respectively, optional and
extraordinary optional redemption. The Borrower will deliver or cause to be
delivered to the Trustee, for the account of the Issuer, such moneys as are
required to effect such prepayment under the applicable terms of the Bonds.
Whenever an Event of Default under Section 10.01 of the Indenture
shall have occurred and, as a result thereof, the principal of and any premium
on all Bonds then outstanding, and interest accrued thereon, shall have been
declared to be immediately due and payable pursuant to Section 10.03 of the
Indenture, the unpaid principal amount of and any premium and accrued interest
on this Note shall also be due and payable on the date on which the principal of
and premium and interest on the Bonds shall have been declared due and payable;
provided that the annulment of a declaration of acceleration with respect to the
Bonds shall also constitute an annulment of any corresponding declaration with
respect to this Note.
A-2
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed
in its name by its duly authorized officer as of September 1, 1998.
DYNAMIC MATERIALS CORPORATION
By:
-------------------------------------
Name:
Title:
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<PAGE>
APPENDIX I
A. DEFINITIONS
As used herein and in the Note, the following terms shall have the
following meanings:
"Applicable Rate" means, from the date hereof to and including,
September 22, 1998, 3.50% per annum, and thereafter, for each Weekly Rate Period
and so long as there is not a Semi-Annual Rate or Long-Term Rate, the Weekly
Rate established therefor, computed on the basis of a 365 or 366-day year, as
applicable, and, during a Semi-Annual Rate Period or Long-Term Rate Period, the
Semi-Annual Rate or the Long-Term Rate, respectively, computed on the basis of a
360-day year, consisting of twelve-30 day months.
"Bank" means initially, KeyBank National Association, and its
successors and assigns in its capacity as issuer of a Credit Facility and in the
event an Alternate Credit Facility is outstanding, the issuer of the Alternate
Credit Facility.
"Business Day" means any day of the year other than (i) a Saturday or
Sunday, (ii) any day on which banks located in either New York, New York, or the
principal corporate trust office of the Trustee or the designated office of the
Bank is located are required or authorized by law to remain closed, or (iii) any
day on which the New York Stock Exchange is closed.
"Conversion Date" means the first date any Conversion becomes
effective.
"Interest Payment Date" means (a) while the Bonds bear interest at the
Weekly Rate, the first Wednesday of each March, June, September and December,
and (b) while the Bonds bear interest at the Semi-Annual Rate or the Long-Term
Rate, March 1 and September 1 of each year. The first Interest Payment Date
shall be the Interest Payment Date in December, 1998. In any case, the final
Interest Payment Date shall be the maturity date.
"Interest Period" means for all Bonds the period from and including
each Interest Payment Date to and including the day next preceding the next
Interest Payment Date. The first Interest Period for the Bonds shall begin on
(and include) the date of the initial delivery of the Bonds. The final Interest
Period shall end on the maturity (or redemption) date for each Bond.
"Interest Rate Mode" means the Weekly Rate, the Semi-Annual Rate or
the Long-Term Rate.
"Long-Term Rate" means the Interest Rate Mode for the Bonds in which
the interest rate on the Bonds is determined in accordance with Section
2.02(c)(iii) of the Indenture.
"Long-Term Rate Period" means any period beginning on, and including,
the Conversion Date to the Long-Term Rate and ending on, and including, the day
preceding the Interest
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Payment Date selected by the Borrower and each period of the same duration (or
as close as possible) ending on an Interest Payment Date thereafter until the
earliest of the day preceding the change to a different Long-Term Rate Period,
the Conversion to a different Interest Rate Mode or the maturity of the Bonds.
"Purchase Date" means (a) if the Interest Rate Mode is the Weekly
Rate, any Business Day as set forth in Section 3.01(a)(i), Section 3.01(a)(iii)
and Section 3.01(a)(iv) of the Indenture, respectively, (b) if the Interest Rate
Mode is the Semi-Annual Rate, any Interest Payment Date, (c) if the Interest
Rate Mode is the Long-Term Rate, the final Interest Payment Date for each
Long-Term Rate Period, and (d) each day that Bonds are subject to mandatory
purchase pursuant to Section 3.01(b) of the Indenture.
"Rate Period" means any period during which a single interest rate is
in effect for a Bond.
"Remarketing Agent" means Key Capital Markets, Inc. and its successors
as provided in Section 12.01 of the Indenture. "Principal Office" of the
Remarketing Agent means the office designated as such in writing to the
Borrower, the Trustee and the Tender Agent.
"Semi-Annual Rate" means the Interest Rate Mode for the Bonds in which
the interest rate on the Bonds is determined in accordance with Section 2.02(b)
of the Indenture.
"Semi-Annual Rate Period" means any period beginning on, and
including, the Conversion Date to the Semi-Annual Rate and ending on, and
including, the day preceding the next Interest Payment Date thereafter and each
successive six (6) month period thereafter until the day preceding Conversion to
a different Interest Rate Mode or the maturity of the Bonds.
"Weekly Rate" means the Interest Rate for the Bonds in which the
interest rate on the Bonds is determined weekly in accordance with Section
2.02(c)(iii) of the Indenture.
"Weekly Rate Period" means the period beginning on, and including, the
date of issuance of the Bonds, and ending on, and including, the next Tuesday
and thereafter the period beginning on, and including, any Wednesday and ending
on, and including, the next Tuesday.
B. INTEREST RATE PROVISIONS
Words and terms used in this Part B as defined words and terms and not
otherwise defined in this Note or Appendix I thereto shall have the meanings
assigned to them in the Indenture.
(1) INTEREST RATES ON THE BONDS. The Bonds shall bear interest at the
Weekly Rate for the period from their original issuance date until converted to
a different Interest Rate Mode. The first Interest Payment Date shall be the
Interest Payment Date in December, 1998. During each Interest Period for each
Interest Rate Mode, the interest rate for the Bonds shall be determined in
accordance with Section 2.02(c) of the Indenture and shall be payable on the
Interest Payment Date for such Interest Period; provided that the interest rate
borne by the Bonds shall not exceed the lesser
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<PAGE>
of (i) fifteen percent (15%) per annum or (ii) so long as the Bonds are entitled
to the benefits of a Credit Facility, the maximum interest rate with respect to
the Bonds specified in the Credit Facility. Interest on the Bonds at the
interest rate or rates for the Weekly Rate shall be computed upon the basis of a
365 or 366-day year, as applicable, for the actual number of days elapsed.
Interest on the Bonds at the interest rate or rates for the Semi-Annual Rate and
the Long-Term Rate shall be computed upon the basis of a 360-day year,
consisting of twelve 30-day months. Each Bond shall bear interest on overdue
principal and, to the extent permitted by law, on overdue interest at the
Default Rate computed from the date of the Default or Event of Default.
(2) INTEREST RATE MODES. Interest Rates on the Bonds shall be
determined as follows:
(i) If the Interest Rate Mode for the Bonds is the Weekly Rate, the
interest rate on the Bonds for a particular Weekly Rate Period shall be the
rate established by the Remarketing Agent no later than 3:00 p.m.
(Cleveland, Ohio time) on the Tuesday preceding the Weekly Rate Period (or
the day preceding the Conversion of the Interest Rate Mode to the Weekly
Rate), or, if such day is not a Business Day, on the next succeeding
Business Day, as the minimum rate of interest necessary, in the judgment of
the Remarketing Agent, to enable the Remarketing Agent to sell the Bonds on
such Business Day at a price equal to the principal amount thereof, plus
accrued interest, if any, thereon.
(ii) If the Interest Rate Mode for the Bonds is the Semi-Annual Rate,
the interest rate on the Bonds for a particular Semi-Annual Rate Period
shall be the rate established by the Remarketing Agent no later than 3:00
p.m. (Cleveland, Ohio time) on the 10th Business Day next preceding the
first day of such Semi-Annual Rate Period as the minimum rate of interest
necessary, in the judgment of the Remarketing Agent, to enable the
Remarketing Agent to sell the Bonds on such first day at a price equal to
the principal amount thereof.
(iii) If the Interest Rate Mode for the Bonds is the Long-Term Rate,
the interest rate on the Bonds for a particular Long-Term Rate Period shall
be the rate established by the Remarketing Agent not later than the 15th
Business Day preceding the first day of such Long-Term Rate Period as the
minimum rate of interest necessary, in the judgment of the Remarketing
Agent, to enable the Remarketing Agent to sell the Bonds on such first day
at a price equal to the principal amount thereof
(iv) The Remarketing Agent shall provide the Trustee, the Borrower and
the Tender Agent with Immediate Notice of all interest rates.
(v) If for any reason the interest rate on a Bond is not determined by
the Remarketing Agent pursuant to (i), (ii) or (iii) above, the interest
rate for such Bond for the next succeeding Rate Period shall be the
interest rate in effect for such Bond for the preceding Rate Period.
(3) LONG-TERM RATE PERIODS.
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<PAGE>
(i) SELECTION OF LONG-TERM RATE PERIOD. The Long-Term Rate Period
shall be established by the Borrower in the notice given pursuant to
Section 2.02(e) of the Indenture (the first such Long-Term Rate Period
commencing on the Conversion Date for the Bonds to a Long-Term Rate) and
thereafter each successive Long-Term Rate Period shall be the same as that
so established by the Borrower until a different Long-Term Rate Period is
specified by the Borrower in accordance with Section 2.02 of the Indenture
or until the occurrence of a Conversion Date. Each Long-Term Rate Period
shall be one year or more in duration and shall end on the day next
preceding an Interest Payment Date; provided that if the first Long-Term
Rate Period commences on a Conversion Date other than a March 1 and
September 1, such first Long-Term Rate Period shall be of a duration as
close as possible to (but not in excess of) such Long-Term Rate Period and
shall terminate on a day preceding an Interest Payment Date; and further
provided that no Long-Term Rate Period shall extend beyond the maturity
date of the Bonds.
(ii) CHANGE OF LONG-TERM RATE PERIOD. The Borrower may change from one
Long-Term Rate Period to another Long-Term Rate Period on any Business Day
on which the Bonds are subject to optional redemption pursuant to Section
8.01(b) of the Indenture by notifying the Trustee, the Issuer, the Credit
Facility Issuer, the Tender Agent and the Remarketing Agent at least 4
Business Days prior to the 30th day prior to the proposed effective date of
the change. Such notice shall specify the last day of the next Long-Term
Rate Period which shall be the earlier of the day before the maturity date
of the Bonds or the day immediately preceding a March 1 or September 1 and
which is one year or more after the effective date and, if such change is
conditional, the interest rate limitations. Any such notice shall be
accompanied by an opinion of nationally recognized bond counsel stating
that such change is authorized by the Indenture and, if the change is from
a Long-Term Rate Period of one year to a Long-Term Rate Period of more than
one year, an opinion of nationally recognized bond counsel that such change
will not affect the exclusion from gross income for federal income tax
purposes of the interest on the Bonds. Any change by the Borrower of the
Long-Term Rate Period may be made conditional on the interest rate being
within certain limits established by the Borrower. The Remarketing Agent
shall establish what would be the interest rate for the proposed Long-Term
Rate Period in accordance with Section 2.02(c) of the Indenture. If the
interest rate established by the Remarketing Agent is not within the limits
established, then the change in the Long-Term Rate Period may be cancelled
by the Borrower, in which case the Borrower's notice of the proposed change
shall be of no effect and the Bonds shall not be subject to any mandatory
purchase pursuant to Section 3.01(b) of the Indenture. Notice of such
cancellation shall be promptly given to all Bondholders.
(4) CONVERSION OF INTEREST RATE.
(i) CONVERSION DIRECTED BY THE BORROWER. The Interest Rate Mode for
the Bonds is subject to Conversion to a different Interest Rate Mode from
time to time in whole (and not in part) by the Borrower, such right to be
exercised by notifying the Trustee, the Credit Facility Issuer, the Tender
Agent and the Remarketing Agent at least 4 Business Days
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<PAGE>
prior to the 15th day (the 30th day in the case of Conversion from or to
the Long-Term Rate) prior to the effective date of such proposed
Conversion. Such notice shall specify (A) the effective date, (B) the
proposed Interest Rate Mode, (C) if the Conversion is to the Long-Term
Rate, the end of the Long-Term Rate Period and (D) if such Conversion is
conditional, the interest rate limitations. The notice must be accompanied
by (i) an opinion of nationally recognized bond counsel stating that the
Conversion is authorized by the Indenture and, if the Conversion is from a
Rate Period of one year or less to a Rate Period of more than one year or
from a Rate Period of more than one year to a Rate Period of one year or
less, an opinion of nationally recognized bond counsel that such Conversion
will not affect the exclusion from gross income for federal income tax
purposes of the interest on the Bonds, and (ii) if the stated amount of the
Credit Facility, if any, to be held by the Trustee after such Conversion is
increased over that of the then current Credit Facility an opinion of
reputable bankruptcy counsel stating that payments of principal and
interest on the Bonds from funds drawn on such Credit Facility will not
constitute avoidable preferences with respect to the bankruptcy of the
Borrower under the Bankruptcy Code. Any Conversion by the Borrower of the
Interest Rate Mode to the Long-Term Rate may be made conditional on the
initial interest rate determined for such Interest Rate Mode being within
certain limits established by the Borrower. The Remarketing Agent shall
establish what would be the interest rate for the proposed Interest Rate
Mode in accordance with Section 2.02(c) of the Indenture. If the interest
rate established by the Remarketing Agent is not within the limits
established, then such Conversion may be cancelled by the Borrower, in
which case, the Borrower's notice of Conversion shall be of no effect and
the Bonds shall not be subject to any mandatory purchase pursuant to
Section 3.01(b) of the Indenture. Notice of such cancellation shall be
given promptly to all Bondholders.
(ii) LIMITATIONS. Any Conversion of the Interest Rate Mode for the
Bonds pursuant to paragraph (i) above must comply with the following:
(A) the Conversion Date must be an Interest Payment Date which is
a date on which the Bonds are subject to optional redemption pursuant
to Section 8.01(a), (b) or (c) of the Indenture;
(B) the Conversion Date must be a Business Day; and
(C) the Credit Facility, if any, to be held by the Trustee must
cover accrued interest for the Bonds for 98 days, if the Conversion is
to the Weekly Rate, or for 183 days, if the Conversion is to the
Semi-Annual Rate or the Long-Term Rate. If a Credit Facility will not
support the Bonds after the Conversion Date, the Borrower may only
convert the Interest Rate Mode for the Bond to a Long-Term Rate Period
which Long-Term Rate Period shall expire on the maturity date of the
Bonds.
(iii) CANCELLATION OF CONVERSION OF INTEREST RATE MODE.
Notwithstanding any provision of Section 2.02 of the Indenture, the
Interest Rate Mode shall not be converted
I-5
<PAGE>
if (A) the Remarketing Agent has not determined the initial interest rate
for the new Interest Rate Mode in accordance with Section 2.02 of the
Indenture or (B) the Trustee shall receive written notice prior to such
Conversion that either of the opinions required under Section 2.02(e)(i) of
the Indenture has been rescinded. If the Trustee shall have sent any notice
to the Bondholders regarding a Conversion of the Interest Rate Mode under
Section 2.02(e)(iii) of the Indenture, the Trustee shall promptly notify
all Bondholders of such rescission and the cancellation of any mandatory
purchase pursuant to Section 3.01(b) of the Indenture.
I-6
<PAGE>
EXHIBIT B
PROJECT FACILITIES
Upon completion of construction, the Project Facilities will consist
of a manufacturing facility including building, equipment and office space. The
manufacturing building will be approximately 48,000 square feet under roof and
the office building will be approximately 6,000 square feet. The machinery and
equipment will be used to perform prebond and postbond processing of material
explosively bonded at the Borrower's Dunbar, Pennsylvania bonding site.
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<PAGE>
EXHIBIT C
PROJECT SITE
LEGAL DESCRIPTION
[13.7 acres known as Lot No. 13 in a resubdivision of Industrial Park
No. 1, Mount Braddock, North Union Township, Pennsylvania.]
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<PAGE>
EXHIBIT D
FORM OF DISBURSEMENT REQUEST
STATEMENT NO. REQUESTING DISBURSEMENT OF FUNDS
------
FROM PROJECT FUND PURSUANT TO SECTION 3.4 OF THE
LOAN AGREEMENT DATED AS OF SEPTEMBER 1, 1998 BETWEEN
THE FAYETTE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
AND
DYNAMIC MATERIALS CORPORATION
---------------------------------
Pursuant to Section 3.4 of the Loan Agreement (the "Agreement") between the
Fayette County Industrial Development Authority (the "Issuer") and Dynamic
Materials Corporation (the "Borrower") dated as of September 1, 1998, the
undersigned Designated Representative hereby requests and authorizes Star Bank,
N.A., as trustee (the "Trustee"), as depository of the Project Fund created by
the Indenture and defined in the Agreement, to pay to the Borrower or to the
person(s) listed on the Disbursement Schedule hereto out of the moneys deposited
in the Project Fund the aggregate sum of $ to pay such person(s) or
-----------
to reimburse the Borrower in full, as indicated in the Disbursement Schedule,
for the advances, payments and expenditures made by it in connection with the
items listed in the Disbursement Schedule.
In connection with the foregoing request and authorization, the undersigned
hereby certifies that:
(a) Each item for which disbursement is requested hereunder is
properly payable out of the Project Fund in accordance with the terms and
conditions of the Agreement and none of those items has formed the basis
for any disbursement heretofore made from said Project Fund.
(b) Each such item is or was necessary in connection with the
construction, furnishing, equipment or improvement of the Project, as
defined in the Agreement.
(c) The Borrower has received, or will concurrently with payment
hereunder receive and deliver to the Trustee, appropriate waivers of any
mechanics' or other liens with respect to each item which has been paid
pursuant to a prior disbursement request.
(d) Each item for which disbursement is requested hereunder, and the
cost for each such item, is as described in the information statement filed
by the Issuer in connection with the issuance of the Bonds (as defined in
the Agreement), as required by Section 149(e) of the Code; provided that if
any such item is not as described in that information statement, attached
hereto is a computation evidencing that the average reasonably expected
economic life of the facilities which have been and will be paid for with
moneys in the Project Fund is not less than 5/6ths of the average maturity
of the Bonds.
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<PAGE>
(e) This statement and all exhibits hereto, including the Disbursement
Schedule, shall be conclusive evidence of the facts and statements set
forth herein and shall constitute full warrant, protection and authority to
the Trustee for its actions taken pursuant hereto.
(f) This statement constitutes the approval of the Borrower of each
disbursement hereby requested and authorized.
This day of , 19 .
----- ---------------- ---
Pursuant to Section 3.4 of the ----------------------------------
Agreement the foregoing Designated Representative
disbursement request is hereby
approved:
KEYBANK NATIONAL ASSOCIATION, as issuer
of the Credit Facility
By:
-----------------------
Title:
--------------------
Dated:
--------------------
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<PAGE>
DISBURSEMENT SCHEDULE
TO STATEMENT NO. REQUESTING AND AUTHORIZING DISBURSEMENT OF FUNDS
----------
FROM PROJECT FUND PURSUANT TO SECTION 3.4 OF THE LOAN AGREEMENT DATED AS OF
SEPTEMBER 1, 1998 BETWEEN THE FAYETTE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
AND DYNAMIC MATERIALS CORPORATION.
PAYEE AMOUNT PURPOSE
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<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1 USE OF DEFINED TERMS......................................... 3
SECTION 1.2 DEFINITIONS.................................................. 3
SECTION 1.3 INTERPRETATION............................................... 9
SECTION 1.4 CAPTIONS AND HEADINGS........................................ 9
ARTICLE II
REPRESENTATIONS
SECTION 2.1 REPRESENTATIONS OF THE ISSUER............................... 10
SECTION 2.2 REPRESENTATIONS AND COVENANTS OF THE BORROWER............... 10
ARTICLE III
COMPLETION OF THE PROJECT; ISSUANCE OF THE BONDS
SECTION 3.1 ACQUISITION, CONSTRUCTION, INSTALLATION, EQUIPMENT
AND IMPROVEMENT............................................. 13
SECTION 3.2 PLANS AND SPECIFICATIONS.................................... 13
SECTION 3.3 ISSUANCE OF THE BONDS; APPLICATION OF PROCEEDS.............. 13
SECTION 3.4 DISBURSEMENTS FROM THE PROJECT FUND......................... 14
SECTION 3.5 BORROWER REQUIRED TO PAY COSTS IN EVENT PROJECT
FUND INSUFFICIENT........................................... 15
SECTION 3.6 COMPLETION DATE............................................. 16
SECTION 3.7 INVESTMENT OF FUND MONEYS................................... 16
SECTION 3.8 REBATE FUND................................................. 17
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ARTICLE IV
LOAN BY ISSUER; REPAYMENT OF THE LOAN;
LOAN PAYMENTS AND ADDITIONAL PAYMENTS
SECTION 4.1 LOAN REPAYMENT; DELIVERY OF NOTE AND CREDIT
FACILITY.................................................... 18
SECTION 4.2 ADDITIONAL PAYMENTS......................................... 19
SECTION 4.3 PLACE OF PAYMENTS........................................... 19
SECTION 4.4 OBLIGATIONS UNCONDITIONAL................................... 19
SECTION 4.5 ASSIGNMENT OF AGREEMENT AND REVENUES........................ 20
SECTION 4.6 CREDIT FACILITY............................................. 20
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
SECTION 5.1 RIGHT OF INSPECTION......................................... 21
SECTION 5.2 LEASE, SALE OR GRANT OF USE BY BORROWER..................... 21
SECTION 5.3 INDEMNIFICATION............................................. 21
SECTION 5.4 BORROWER NOT TO ADVERSELY AFFECT EXCLUSION FROM
GROSS INCOME OF INTEREST ON BONDS........................... 22
SECTION 5.5 BORROWER TO MAINTAIN ITS EXISTENCE; MERGER AND
CONSOLIDATION............................................... 22
SECTION 5.6 ONGOING DISCLOSURE.......................................... 22
ARTICLE VI
REDEMPTION AND PURCHASE OF BONDS
SECTION 6.1 OPTIONAL REDEMPTION......................................... 23
SECTION 6.2 EXTRAORDINARY OPTIONAL REDEMPTION........................... 23
SECTION 6.3 MANDATORY REDEMPTION IN EVENT OF INCLUSION IN
GROSS INCOME OF INTEREST ON BONDS........................... 25
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SECTION 6.4 MANDATORY REDEMPTION........................................ 25
SECTION 6.5 ACTIONS BY ISSUER........................................... 25
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
SECTION 7.1 EVENTS OF DEFAULT........................................... 26
SECTION 7.2 REMEDIES ON DEFAULT......................................... 27
SECTION 7.3 NO REMEDY EXCLUSIVE......................................... 28
SECTION 7.4 AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES............... 28
SECTION 7.5 NO WAIVER................................................... 28
SECTION 7.6 NOTICE OF DEFAULT........................................... 28
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 TERM OF AGREEMENT........................................... 29
SECTION 8.2 AMOUNTS REMAINING IN FUNDS.................................. 29
SECTION 8.3 NOTICES..................................................... 29
SECTION 8.4 EXTENT OF COVENANTS OF THE ISSUER; NO PERSONAL
LIABILITY................................................... 29
SECTION 8.5 BINDING EFFECT.............................................. 30
SECTION 8.6 AMENDMENTS AND SUPPLEMENTS.................................. 30
SECTION 8.7 EXECUTION COUNTERPARTS...................................... 30
SECTION 8.8 SEVERABILITY................................................ 30
SECTION 8.9 GOVERNING LAW............................................... 30
EXHIBIT A--NOTE
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EXHIBIT B--PROJECT FACILITIES
EXHIBIT C--PROJECT SITE LEGAL DESCRIPTION
EXHIBIT D--FORM OF DISBURSEMENT REQUEST
iv
REIMBURSEMENT AGREEMENT
This Reimbursement Agreement, dated as of the 1st day of September, 1998
(this "Agreement" or this "Reimbursement Agreement"), by and between DYNAMIC
MATERIALS CORPORATION, a Delaware corporation (the "Borrower"), and KEYBANK
NATIONAL ASSOCIATION, a national banking association (the "Bank").
WHEREAS, the Borrower has requested the Issuer (as hereinafter defined) to
finance (i) the acquisition, construction and equipping of a new manufacturing
facility in Mount Braddock, North Union Township, Pennsylvania (the improvements
constituting such facility, the "Project", and the land on which the Project is
to be constructed, the "Premises"), and (ii) other Project Costs (as hereinafter
defined); and
WHEREAS, the Issuer proposes to provide such financing by issuing its
Fayette County Industrial Development Authority Multi-Mode Variable Rate
Industrial Development Revenue Bonds, Series 1998 (Dynamic Materials Corporation
Project) in the aggregate principal amount of Six Million Eight Hundred Fifty
Thousand Dollars ($6,850,000) (the "Bonds"), under the terms and conditions more
fully set forth in a Trust Indenture, dated as of September1, 1998, by and
between the Issuer and Star Bank, N.A., as Trustee; and
WHEREAS, to enhance the marketability of the Bonds, the Borrower has
applied to the Bank for the issuance of a letter of credit (the "Letter of
Credit") in favor of the Trustee in an amount not to exceed Six Million Nine
Hundred Ninety-Seven Thousand One Hundred Thirty-Five Dollars ($6,997,135.00) to
secure the payment of Bonds; and
WHEREAS, it is the purpose of this Reimbursement Agreement to set forth the
Bank's commitment to issue the Letter of Credit and the Borrower's agreement to
reimburse the Bank for any and all payments made by the Bank pursuant to the
Letter of Credit.
NOW THEREFORE, in consideration of the mutual agreements made herein and
other good and valuable consideration, receipt of which is hereby acknowledged,
the parties hereto agree as follows:
SECTION ONE
DEFINITIONS
SECTION 1.1. TERMS DEFINED. As used in this Reimbursement Agreement, the
following terms have the following respective meanings. 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 this
Section 1.1 shall be deemed to mean and include such agreement, document, or
instrument as amended, restated, or modified from time to time:
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"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 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.
"ASSIGNMENT" shall mean the Assignment of Leases, Rents and Profits, dated
as of September 1, 1998, from the Borrower to the Bank.
"ASSIGNMENT OF CONTRACTS" shall mean the Collateral Assignment of
Agreements and Plans, dated as of September1, 1998, from the Borrower to the
Bank.
"ASSIGNMENT OF LICENSES" shall mean the Assignment of Licenses and Permits,
dated as of September 1, 1998, from the Borrower to the Bank.
"BANK OBLIGATION" shall mean an amount equal to the outstanding liability
of the Bank from time to time under the Letter of Credit.
"BANK'S INSPECTOR" shall mean any inspector independent of the Bank and
designated by the Bank to periodically inspect the Project during construction.
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"BOND COUNSEL" shall mean Kutak Rock or any other nationally recognized
Bond Counsel reasonably acceptable to Bank.
"BOND DOCUMENTS" shall mean the Indenture, the Loan Agreement and any other
document executed by the Borrower in connection with the issuance and sale of
the Bonds (other than the Credit Documents).
"BONDS" shall mean the Six Million Eight Hundred Fifty Thousand Dollars
($6,850,000) aggregate principal amount of Fayette County Industrial Development
Authority Multi-Mode Variable Rate Industrial Development Revenue Bonds, Series
1998 (Dynamic Materials Corporation Project) issued by the Issuer pursuant to
the Indenture.
"BOND PLEDGE" shall mean the Bond Pledge Agreement, dated as of September
1, 1998, by and among the Borrower, the Trustee and the Bank.
"BUSINESS CONDITION" shall mean the financial condition, business and
assets of a Person.
"BUSINESS DAY" shall mean any day of the year other than (i) a Saturday or
Sunday, (ii) any day on which commercial banks located in New York City or the
city or cities in which are located the corporate trust offices of the Trustee
and the Tender Agent and the office of the Bank at which demands for payment
under the Letter of Credit are to be presented are authorized by law to close,
or (iii) any day on which the New York Stock Exchange is closed.
"CHATTEL PAPER" shall mean "chattel paper" as defined in the UCC.
"CLOSING DATE" shall mean September , 1998, or such other date agreed
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upon by the Borrower, Issuer, and the Bank.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"COMMONLY CONTROLLED ENTITY" shall mean a Person, whether or not
incorporated, which is under common control with the Borrower within the meaning
of Section 414(b) or (c) of the Code.
"COMPLETION DATE" shall mean October 1, 2000.
"CONSTRUCTION MANAGER" shall mean Fairchance Construction Company, Inc.
"CONTRACT MANAGEMENT AGREEMENT" shall mean the construction management
agreement between the Borrower and the Construction Manager.
"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.
"CREDIT" shall have the meaning set forth in Section 8.1(b) hereof.
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"CREDIT DOCUMENTS" shall mean this Reimbursement Agreement, the Bond
Pledge, the Mortgage, the Assignment, the Security Agreement, the Assignment of
Contracts, the Assignment of Licenses, the Environmental Indemnity and any other
document now or hereafter executed by the Issuer, the Borrower or any guarantor
in favor of the Bank which affects the rights of the Bank in or to the Project,
in whole or in part, or which secures or guarantees any sum due under any Credit
Document.
"CREDIT FACILITY AGREEMENTS" shall mean the Credit Facility and Security
Agreement dated July 19, 1996 and the Credit Facility and Security Agreement
dated March 18, 1998, both between the Borrower and the Bank.
"DATE OF ISSUANCE" shall mean the date of issuance of the Letter of Credit.
"DEFAULT RATE" means an interest rate equal to five percent (5%) above the
Prime Rate.
"DETERMINATION OF TAXABILITY" shall have the meaning assigned thereto in
the Indenture.
"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.
"DRAWING BONDS" shall have the meaning assigned thereto in the Pledge
Agreement
"ELIGIBLE INVESTMENTS" shall have the meaning assigned thereto in the
Indenture.
"ENVIRONMENTAL INDEMNITY" shall mean the Environmental Indemnity Agreement,
dated as of September1, 1998, between the Borrower and the Bank.
"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 Borrower.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
the same may from time to time be amended or supplemented, and all regulations
thereunder.
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"EVENT OF DEFAULT" shall have the meaning assigned thereto in Section 7
hereof.
"EXPIRATION DATE" shall mean September 22, 2001, subject to annual
extension as provided in Section 2.5 herein.
"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 date in
question in its region market for federal funds purchased overnight from other
banking institutions.
"FEE CALCULATION AMOUNT" shall have the meaning set forth in Section
2.2(b).
"FUNDS FROM OPERATIONS" shall mean the aggregate of the Borrower`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 on the Closing Date or which are fixtures but does not
include money, Instruments, Documents, Accounts, Chattel Paper, General
Intangibles, or Contract Rights.
"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.
"INDENTURE" shall mean the Trust Indenture, dated as of September 1, 1998,
between the Issuer and the Trustee.
"INDENTURE DEFAULT" shall mean an Event of Default under and pursuant to
the Indenture.
"INSTRUMENTS" shall mean "instruments" (as defined in the UCC).
"INTEREST COMMITMENT" shall have the meaning set forth in the Letter of
Credit.
"INTEREST COVERAGE REQUIREMENT" shall mean the amount equal to 98 days'
accrued interest at the Maximum Rate on the outstanding principal amount of the
Bonds to enable the Trustee to pay (i) the interest on the Bonds when due and
(ii) an amount equal to the interest
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portion, if any, of the purchase price of any Bonds tendered for purchase by the
holder thereof to the extent remarketing proceeds are not available for such
purposes.
"INTEREST DRAWING" shall have the meaning set forth in the Letter of
Credit.
"INTEREST PAYMENT DATE" shall have the meaning set forth in the Indenture.
"ISSUER" shall mean the Fayette County Industrial Development Authority, a
duly organized and validly existing public instrumentality of the Commonwealth
of Pennsylvania and a public body corporate and politic.
"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.
"LETTER OF CREDIT" shall mean the Letter of Credit to be issued by the Bank
on the Closing Date pursuant to this Reimbursement Agreement, such Letter of
Credit to be substantially in the form of Exhibit A hereto.
"LETTER OF CREDIT COMMITMENT" shall have the meaning set forth in the
Letter of Credit.
"LOAN AGREEMENT" shall mean the Loan Agreement, dated as of September 1,
1998, by and between the Issuer and the Borrower, as said Loan Agreement may be
amended or supplemented from time to time.
"MATERIAL ADVERSE EFFECT" shall mean material adverse effect on (i) the
ability of the Borrower and any Subsidiaries taken as a whole to fulfill their
obligations under any of the Credit Documents or (ii) the Business Condition of
the Borrower and any Subsidiaries taken as a whole.
"MATERIAL AGREEMENTS" shall mean (a) any agreement to which the Borrower is
a party which provides for the receipt or expenditure by the Borrower or any
Subsidiary of more than $500,000.00 in any 12-month period other than sales
orders in the ordinary course of business, and (b) any other agreement to which
the Borrower is a party which is material to the business of the Borrower.
"MAXIMUM RATE" shall mean a rate per annum of eight percent (8%).
"MULTIEMPLOYER PLAN" shall mean a Plan described in ERISA which covers
employees of the Borrower and employees of any other Person, which together
would be treated as a single employer for purposes of ERISA.
"MORTGAGE" shall mean the Open End Mortgage Deed and Security Agreement,
dated as of September1, 1998, from the Borrower to the Bank.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to subtitle A of Title IV or ERISA.
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"PERMITTED ENCUMBRANCES" shall mean, with respect to the Pledged
Collateral, as of any particular time, (a) Permitted Liens (b) the Credit
Documents and any security interest or other Lien created thereby, and (c) any
Permitted Encumbrances defined in any of the Credit Documents.
"PERMITTED INVESTMENT" shall mean the Borrower's:
(a) investments existing on the Closing Date;
(b) extensions of credit in the nature of Accounts Receivable, or notes
receivable arising from the Borrower'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 Borrower'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 Borrower employees,
officers or directors so long as the Borrower's Board of Directors
lawfully determines that such compensation is in the Borrower'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 Borrower's employees,
officers or directors relating to the purchase of equity securities of
Borrower;
(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.
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"PERMITTED LIENS" shall mean the following, subject to the limitation set
forth in Section 6.19 hereof:
(a) Liens existing as of the Closing Date;
(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 Credit Document unless such Liens are not
delinquent or are being contested in good faith by appropriate
proceedings;
(c) Liens that secure the Borrower'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 Borrower pursuant to an operating
lease in the ordinary course of business (including proceeds thereof
and accessions thereto) incurred solely for the purpose of financing
the lease of such Equipment (including Liens arising from UCC
financing statements regarding leases permitted by this provision);
(f) Easements, reservations, rights-of-way, restrictions, minor defects or
irregularities in title and other similar Liens affecting real
property not interfering in any material respect with the ordinary
conduct of the business of the Borrower;
(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 Borrower has set aside proper amounts, determined in
accordance with GAAP, for the payment of all such Liens;
(i) Liens incurred or deposits made in the ordinary course of business in
conjunction with worker's compensation, unemployment insurance, and
other types of social security, or to secure the performance of
tenders, statutory obligations, and surety and appeal bonds, or to
secure the performance and return of money bonds and other similar
obligations, but excluding Indebtedness;
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<PAGE>
(j) Liens in respect of judgments or awards with respect to which the
Borrower 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, partnership, political entity, or
political subdivision thereof.
"PLAN" shall mean any plan defined in Section 4021(a) of ERISA in respect
of which Borrower or any Subsidiary of the Borrower is an "employer" or a
"substantial employer" as defined in Sections 3(5) and 4001(a)(2) of ERISA,
respectively.
"PLANS AND SPECIFICATIONS" shall mean the plans and specifications, as
amended, for the Project approved by the Bank.
"PLEDGED COLLATERAL" shall mean the collateral in which the Borrower has
given the Bank a lien or security interest pursuant to any of the Credit
Documents.
"PREMISES" shall mean the real property located in Mount Braddock, North
Union Township, Pennsylvania made subject to, and more fully described in, the
Mortgage.
"PRIME RATE" shall mean that interest rate established from time to time by
the Bank as the Bank's Prime Rate, whether or not such rate is publicly
announced. The Prime Rate may not be the lowest rate charged by the Bank for
commercial or other extensions of credit.
"PROJECT FUND" shall have the meaning assigned thereto in the Indenture.
"PRINCIPAL COMMITMENT" shall have the meaning set forth in the Letter of
Credit.
"PRINCIPAL DRAWING" shall have the meaning set forth in the Letter of
Credit.
"PROJECT" shall have the meaning set forth in the recitals hereof.
"PURCHASER" shall mean the original purchaser or purchasers of the Bonds.
"REMARKETING AGENT" shall mean Key Capital Markets, Inc., Cleveland, Ohio.
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"REMARKETING DRAWING" shall have the meaning set forth in the Letter of
Credit.
"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.
"SECURITY AGREEMENT" shall mean the Security Agreement, dated as of
September 1, 1998, between the Borrower and the Bank.
"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 and to all other indebtedness which is pari passu therewith or senior
thereto.
"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 Borrower or one or more other Subsidiaries.
"TANGIBLE NET WORTH" shall mean the total assets of a Person less such
Person's (i) Total Indebtedness and (ii) aggregate amount of all intangible
assets.
"TITLE COMPANY" shall mean United General Title Insurance Company.
"TITLE POLICY" shall mean an ALTA Loan Policy of Title Insurance issued by
the Title Company to the Bank with respect to the Mortgage in accordance with
the provision of Section 4.8 hereof.
"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.
"TRUSTEE" shall mean Star Bank, N.A. or any successor Trustee under the
Indenture.
"UCC" shall mean the Uniform Commercial Code in effect in the State of
Colorado from time to time.
SECTION TWO
ISSUANCE OF LETTER OF CREDIT
SECTION 2.1. ISSUANCE OF LETTER OF CREDIT. Subject to the terms and
conditions hereof, the Bank agrees to execute and deliver the Letter of Credit.
The obligations of the Bank under the Letter of Credit shall be absolute and
irrevocable and shall be performed strictly in accordance with the terms of the
Letter of Credit and this Reimbursement Agreement.
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SECTION 2.2. FEES AND REIMBURSEMENT.
(a) The Borrower hereby agrees to pay to the Bank:
i) Before 2:00 p.m., Seattle time, on the date of any Principal
Drawing or Interest Drawing under the Letter of Credit, a sum
equal to the amount so drawn under the Letter of Credit plus (a)
interest accrued from the date of any such Principal Drawing or
Interest Drawing on the amount so drawn under the Letter of
Credit at the Default Rate pursuant to subsection (iv) of this
Section2.2(a), plus (b) any and all charges and expenses which
the Bank may pay or incur relative to such drawing under the
Letter of Credit, plus (c) a fee in the amount of Two Hundred
Dollars ($200.00) for that drawing under the Letter of Credit.
ii) Upon a Remarketing Drawing under the Letter of Credit, provided
there is then no uncured Event of Default, the Borrower shall
have until the Expiration Date to reimburse the Bank for the
amount of the Remarketing Drawing, subject to the right of the
Bank to require redemption of the Bonds pursuant to Section7.2
hereof. Any amounts received by the Bank from the remarketing of
Bonds purchased out of a Remarketing Drawing and registered to
the Bank or, at the direction of the Bank, to the Borrower, shall
be applied against the Borrower's obligation to reimburse the
Bank for the amount of the Remarketing Drawing. The amount of any
unreimbursed Remarketing Drawing shall bear interest from the
date of the Remarketing Drawing at a rate per annum equal to the
Federal Funds Rate plus one hundred fifty basis points (1.50%).
Such interest shall be payable on each Interest Payment Date for
so long as such Remarketing Drawing or any portion thereof is
unreimbursed. The payments of interest hereunder shall be
credited against the interest accrued on the Bonds pledged to the
Bank under the Bond Pledge Agreement. Interest hereunder shall be
calculated based on a 360 day year but calculated for the actual
number of days elapsed.
iii) Upon each transfer of the Letter of Credit in accordance with its
terms and as a condition thereto, a sum in such amount as shall
be necessary to cover the reasonable costs and expenses to the
Bank incurred in connection with such transfer;
iv) Interest at the Default Rate, payable on demand, on any and all
amounts of any Principal Drawing, Interest Drawing and/or
Remarketing Drawing not paid by the Borrower when due under any
section of this Reimbursement Agreement from the date such
amounts become due until payment in full;
v) For any payment of principal and/or interest not paid within ten
(10) days after such payment is due, a late charge of an amount
equal to the greater of five percent (5%) of the amount of the
payment or $50.
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vi) On demand, reasonable costs, fees and expenses incurred by the
Bank in connection with the issuance of the Letter of Credit or
the preparation or execution of any documents or opinions related
thereto;
vii) On demand, any and all reasonable expenses incurred by the Bank
in enforcing any of its rights under this Reimbursement
Agreement, or any of the Credit Documents; and
viii) On or prior to Closing Date, a one-time origination fee in the
amount of three fourths of one percent (0.75%) of the original
principal amount of the Bonds ($51,375).
(b) The Borrower hereby agrees to pay to the Bank a commission (the
"Letter of Credit Fee") equal to an amount calculated at the rate of
one percent (1.00%) per annum (using a 360-day year but calculated on
the number of actual days elapsed) of the maximum "Fee Calculation
Amount" as hereinafter defined, available on each date of payment of
the Letter of Credit Fee. The Letter of Credit Fee shall be payable in
annual installments in advance on each anniversary of the Date of
Issuance in each year until the Expiration Date of the Letter of
Credit; provided, however, that upon the Date of Issuance of the
Letter of Credit, the Borrower shall pay an installment of the Letter
of Credit Fee for the period from the Date of Issuance to and
including the day before the anniversary of the Date of Issuance in
1999. The "Fee Calculation Amount" shall be the sum of (i) the maximum
amount then available to be drawn under the Letter of Credit with
respect to the Principal Commitment plus, (ii) the maximum amount then
available to be drawn under the Letter of Credit with respect to the
Interest Commitment. If the Letter of Credit is terminated prior to
the Expiration Date, the Letter of Credit Fee shall be refunded to the
Borrower for any calendar quarter that the Letter of Credit will not
be outstanding provided that the Borrower returns or causes the return
of the Letter of Credit to the Bank prior to the start of such
calendar quarter.
(c) The Borrower shall pay to the Bank all reasonable legal,
documentation, search and recording fees, and construction monitoring
costs associated with closing and funding this transaction.
(d) If any change in any law or regulation or in the interpretation
thereof by any court or administrative or governmental authorities
charged with the administration thereof shall impose, modify or deem
applicable any reserve, special deposit or similar requirement which
would impose on the Bank any reasonable additional costs (i) generally
upon the issuance or maintenance of letters of credit by the Bank;
(ii) specifically in respect of this Reimbursement Agreement or the
Letter of Credit; or (iii) in respect of any capital adequacy
requirement (including, without limitation, a requirement which
affects the manner in which the Bank allocates capital resources to
its commitments), and the result of such imposition of additional
costs as described in clause (i), (ii), or (iii) above shall be to
increase
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the cost to the Bank of issuing or maintaining the Letter of Credit
(which increase in cost shall be the result of the Bank's reasonable
allocation of the aggregate of such cost increases resulting from such
events), then (x) within thirty days of the Bank's obtaining knowledge
of such change in law, regulations or interpretation thereof, the Bank
shall so notify the Borrower, and (y) upon receipt of such notice from
the Bank, accompanied by a certificate as to such increased cost, the
Borrower shall pay as of the effective date of such change or
interpretation all reasonable additional amounts which are necessary
to compensate the Bank for such increased cost incurred by the Bank.
The certificate of Bank as to such increased costs shall show the
manner of calculation and shall be conclusive (absent manifest error)
as to the amount thereof.
(e) The Borrower's obligations to make payments to the Bank under this
Section 2.2 shall be deemed satisfied to the extent of payments made
by the Trustee to the Bank from funds on deposit with and held by the
Trustee pursuant to the Indenture.
SECTION 2.3. BORROWER'S OBLIGATIONS UNCONDITIONAL. The payment obligations
of the Borrower under this Reimbursement Agreement shall be absolute,
unconditional and irrevocable and shall be satisfied strictly in accordance with
the terms of this Reimbursement Agreement, under all circumstances whatsoever,
including, without limitation, the following circumstances:
(a) Any lack of validity or enforceability of the Credit Documents, the
Bond Documents or any other agreement or instrument relating thereto;
(b) Any amendment or waiver of or any consent to departure from the terms
of the Letter of Credit, the Credit Documents, the Bond Documents or
any other agreement or instrument relating thereto;
(c) The existence of any claim, setoff, defense or right which the
Borrower may have at any time against any beneficiary or any
transferee of the Letter of Credit (or any persons or entities for
whom any such beneficiary or any such transferee may be acting), the
Bank or any other person or entity, whether in connection with this
Reimbursement Agreement, the transactions contemplated by the Credit
Documents or the Bond Documents, or any unrelated transaction;
(d) Any statement or any other document presented under the Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any
respect whatsoever;
(e) Payment by the Bank under the Letter of Credit against presentation of
a request which on its face appears to be in accordance with the terms
of the Letter of Credit; or
(f) Any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing.
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SECTION 2.4. PAYMENTS. All payments by the Borrower hereunder to the Bank
shall be made in lawful currency of the United States and in immediately
available funds to the office of the Bank at International Division, 700 Fifth
Avenue, Mailcode WA-31-10-5360, 53rd Floor, Seattle, Washington 98104.
SECTION 2.5. LETTER OF CREDIT EXTENSION. The Bank may in writing, effective
on September 1 of each year, commencing September1, 1999, extend the Expiration
Date of the Letter of Credit for an additional one-year period; PROVIDED,
however, that such extension shall be, in each instance, made in the sole
discretion of the Bank and the Bank may at any time, upon written notice
delivered to Borrower and Trustee, elect not to extend the Expiration Date. The
Bank shall notify Borrower and Trustee of its decision of whether the Expiration
Date shall be extended no later than thirty (30) days prior to September 1 of
each year, provided that the failure of Bank to deliver such notice, or to
deliver any notice, shall not mean that Bank has elected to extend the
Expiration Date. If the Bank extends the Expiration Date, it shall do so in the
form of an amendment to the Letter of Credit, which it shall promptly deliver to
Trustee.
SECTION THREE
REPRESENTATIONS AND WARRANTIES
The Borrower expressly represents and warrants that:
SECTION 3.1. INCORPORATION AND LEGAL AUTHORITY. Borrower is a corporation
duly incorporated and validly existing and in good standing under the laws of
the State of Delaware and has all requisite corporate power and authority to own
its property and to carry on its business as now being conducted, to enter into
the Credit Documents and the other agreements referred to herein and
transactions contemplated thereby, and to carry out the provisions and
conditions of the Credit Documents. Borrower is duly qualified to do business
and is in good standing in the Commonwealth of Pennsylvania and in every
jurisdiction where the failure to so qualify would have a material adverse
effect on the business of Borrower.
SECTION 3.2. DUE EXECUTION AND DELIVERY. Borrower has full corporate power,
authority and legal right to incur the obligations provided for in, and to
execute and deliver and to perform and observe the terms and provisions of, the
Credit Documents, and each of them has been duly executed and delivered by the
Borrower by all required action, and the Borrower has obtained all requisite
consents to the transactions contemplated thereby under any instrument to which
it is a party, and the Credit Documents constitute the legal, valid and binding
obligations of the Borrower enforceable in accordance with their respective
terms, except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency or other similar laws affecting creditors' rights
generally.
SECTION 3.3. NO BREACH OF OTHER INSTRUMENTS. Neither the execution and
delivery of the Credit Documents, nor the compliance by Borrower with the terms
and conditions of the Credit Documents, nor the consummation of the transactions
contemplated thereby, will conflict with or result in a breach of Borrower's
Certificate of Incorporation or By-Laws, each as amended, or any of the terms,
conditions or provisions of any agreement or instrument or any
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other restriction or law, regulation, rule or order of any governmental body or
agency to which Borrower is now a party or is subject, or imposition of a lien,
charge or encumbrance of any nature whatsoever upon any of the property or
assets of the Borrower pursuant to the terms of any such agreement or
instrument.
SECTION 3.4. GOVERNMENT AUTHORIZATION. No consent, approval, authorization
or order of any court or governmental agency or body is required for the
consummation by Borrower of the transactions contemplated by the Credit
Documents.
SECTION 3.5. PLEDGED COLLATERAL. Borrower has good title to the Pledged
Collateral, free and clear of all liens, pledges, mortgages, security interests,
charges, claims and other encumbrances, except Permitted Encumbrances. The
Mortgage, the Security Agreement, the Assignment and/or the Bond Pledge create a
valid and prior lien or security interest in favor of the Bank in the Pledged
Collateral, subject to no other liens or encumbrances arising by, through or
under the Borrower or any other person, except for Permitted Encumbrances.
SECTION 3.6. ABSENCE OF DEFAULTS, ETC. Borrower is not (i) in material
default under any indenture or contract or agreement to which it is a party or
by which it is bound; (ii) in violation of its Certificate of Incorporation or
By-Laws, each as amended to date; (iii) in default with respect to any order,
writ, injunction or decree of any court; or (iv) in default under any order or
license of any federal or state governmental department, which default or
violation in any of the aforesaid cases results in a Material Adverse Effect.
There exists no condition, event or act which constitutes, or after notice or
lapse of time or both would constitute, an Event of Default.
SECTION 3.7. INDEBTEDNESS OF BORROWER. The Borrower does not have
outstanding on the date hereof any Indebtedness for borrowed money, except for
such Indebtedness reflected on the financial statements referred to in Section
3.9 hereof and except in connection with the Bonds.
SECTION 3.8. SUBSIDIARIES. Borrower has no subsidiaries.
SECTION 3.9. FINANCIAL STATEMENTS. All financial statements of Borrower
furnished to the Bank on or prior to the date hereof are correct and complete in
all material respects and fairly present the financial position of Borrower at
the dates thereof and the results of Borrower's operations for the periods
covered thereby, and such financial statements, including any notes and comments
contained therein, have been prepared in accordance with GAAP on a consistent
basis throughout the periods involved.
SECTION 3.10. NO ADVERSE CHANGE. Subsequent to the date of the financial
statements referred to in Section 3.9 hereof, the Borrower has not incurred any
liabilities or obligations, direct or contingent, not in the ordinary course of
business, and there has not been any increase in the aggregate amount of
Indebtedness of the Borrower (except in connection with the issuance of the
Bonds), and there has not occurred any Material Adverse Effect.
SECTION 3.11. TAXES. Borrower has filed all tax returns which are to be
filed and has paid, or has made adequate provision for the payment of, all taxes
which have or may become
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due pursuant to said returns or to assessments received by them. The Borrower
knows of no deficiency assessment or proposed deficiency assessment of taxes
against Borrower, except as may be otherwise disclosed in writing to the Bank
prior to the date hereof.
SECTION 3.12. ERISA. No Reportable Event or Prohibited Transaction (as
defined in Section 4975 of the Code) has occurred and is continuing with respect
to any Plan and Borrower has not incurred any "accumulated funding deficiency"
as such term is defined in Section 302 of ERISA.
SECTION 3.13. LITIGATION. Except as otherwise disclosed in writing to the
Bank prior to the date hereof, there are no actions, suits or proceedings
pending, or to the knowledge of Borrower, threatened against Borrower or its
property in any court, or before or by any federal, state or municipal or other
governmental department, commission, board, bureau, agency or other
instrumentality, domestic or foreign, which could result in any adverse change
in the business, property or assets, or in the condition, financial or
otherwise, of Borrower, except for actions, suits or proceedings of a character
normally incident to the kind of business conducted by Borrower, none of which,
either individually or in the aggregate, if adversely determined, would
materially impair Borrower's right or ability to carry on its business
substantially as now conducted or materially adversely affect the financial
position or operations of the Borrower.
SECTION 3.14. OWNERSHIP OF PROPERTY. Borrower has good and marketable fee
title to, or valid leasehold interests in its real properties in accordance with
the laws of the jurisdiction where located, and good and marketable title to
substantially all its other property and assets, subject, however, in the case
of real property, to title defects and restrictions which do not materially
interfere with the operations conducted thereon by Borrower. Except for liens in
favor of the Bank, the real property and all other property and assets of the
Borrower are free from any liens or encumbrances securing Indebtedness and from
any other liens, encumbrances, charges or security interests of any kind other
than Permitted Encumbrances. Each lease to which Borrower is a party is in full
force and effect, no material default on the part of any party thereto exists,
and, as to each of such leases to which Borrower is party as lessee, Borrower
enjoys peaceful and undisturbed possession of the property affected thereby.
SECTION 3.15. NO BURDENSOME RESTRICTIONS. Borrower is not a party to any
instrument or agreement or subject to any charter or other corporate restriction
which would to a material extent adversely affect the business, property,
assets, operations or condition, financial or otherwise, of Borrower.
SECTION 3.16. ENVIRONMENTAL MATTERS. Borrower is in compliance with all
Environmental Laws and all 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
Borrower or the ability of Borrower to fulfill its obligations under this
Agreement.
SECTION 3.17. UTILITIES. All utility services necessary for the
construction of the Project and the operation of the Premises and the use and
operation thereof for its intended purposes are
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available to the Premises in sufficient capacities, including water supply,
storm sewer facilities, sanitary sewer facilities, and electric, gas and
telephone facilities.
SECTION 3.18. CONTRACT MANAGEMENT AGREEMENT. The copy of the Contract
Management Agreement previously provided to the Bank is a true, correct and
complete copy of the Contract Management Agreement; which is currently in full
force and effect.
SECTION FOUR
CLOSING CONDITIONS
The obligation of the Bank to issue the Letter of Credit on the Closing
Date shall be subject to the following conditions precedent:
SECTION 4.1. EXECUTION AND DELIVERY OF THE CREDIT DOCUMENTS AND THE BOND
DOCUMENTS. The Borrower shall have delivered to the Bank fully executed copies
of each of the Credit Documents, and the Issuer, the Trustee and the Borrower
shall have duly authorized, executed and delivered the Bond Documents,
transcript of proceedings, authorizing resolutions and incumbency certificates.
SECTION 4.2. DELIVERY OF DOCUMENTS RELATING TO THE PLEDGED COLLATERAL. The
Borrower shall have duly and validly executed and delivered the Mortgage,
Security Agreement, Assignment, the Assignment of Contracts, the Assignment of
Licenses, the Environmental Indemnity, Bond Pledge and UCC financing statements;
the Mortgage, the Assignment and the UCC financing statements shall have been
duly filed in favor of the Bank. In addition, the Borrower shall have delivered
to the Bank:
(a) Certificates of insurance and evidence of payment of premiums therefor
with respect to the insurance required by the Bank with respect to the
Premises as set forth in Section 6.2 below, including but not limited
to, general liability insurance and hazard insurance, and flood
insurance if applicable; and
(b) Evidence satisfactory to the Bank that the Project, when completed,
and the Premises, and the proposed and actual use thereof, will comply
with all applicable laws, statutes, codes, ordinances, rules and
regulations, including, but not limited to, zoning and Environmental
Laws, of all governmental authorities having jurisdiction over the
same, and that there is no action or proceeding pending (or any time
for an appeal of any decision rendered) before any court,
quasi-judicial body or administrative agency at the Date of Issuance
relating to the validity of this Reimbursement Agreement on the
transactions contemplated hereby or the proposed or actual use or
operation of the Premises.
SECTION 4.3. ISSUANCE AND SALE OF THE BONDS. The Bonds shall have been duly
issued and sold to the Purchaser pursuant to the Bond Documents.
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SECTION 4.4. REPRESENTATIONS AND WARRANTIES TRUE AS OF CLOSING AND NO EVENT
OF DEFAULT. The representations and warranties contained in this Reimbursement
Agreement and the other Credit Documents shall be true in all material respects
on the Closing Date with the same effect as though made on and as of that date
and no condition, event or act shall have occurred which constitutes an Event of
Default or, with notice or lapse of time, or both, would constitute an Event of
Default.
SECTION 4.5. OPINION OF BORROWER'S COUNSEL. The Bank shall have received
from Davis, Graham & Stubbs LLP, counsel for the Borrower, or special local
counsel for the Borrower acceptable to the Bank, a closing opinion or opinions
with respect to (i) the matters described in Sections 3.1 and 3.2 of this
Reimbursement Agreement; (ii) the matters described in Sections 3.3, 3.4, 3.6
and 3.13 of this Reimbursement Agreement, to the best of such counsel's
knowledge and belief after inquiry; and (iii) such other matters incident to the
transactions contemplated hereby as the Bank may reasonably request.
SECTION 4.6. OPINION OF OTHER COUNSEL. The Bank shall have received from
Bond Counsel an opinion with respect to the tax-exempt status of the Bonds, and
from counsel acceptable to the Bank, an opinion with respect to the absence of
any securities registration requirements with respect to the Bonds or the Letter
of Credit under the Securities Act of 1933, as amended.
SECTION 4.7. PROCEEDINGS SATISFACTORY. All proceedings taken in connection
with the execution and delivery of this Reimbursement Agreement and the other
Credit Documents shall be satisfactory to the Bank, and the Bank shall have
received copies of such certificates, documents and papers as reasonably
requested in connection therewith, all in form and substance satisfactory to the
Bank.
SECTION 4.8 ADDITIONAL DELIVERIES. Borrower shall have delivered to the
Bank:
(a) Evidence that the Premises are not located in a special flood hazard
area as identified by HUD;
(b) Certificates of insurance and evidence of payment of premiums therefor
with respect to the insurance required by the Bank with respect to the Premises
as set forth in Section 6.2 below, including, but not limited to, general
liability insurance and hazard insurance, and flood insurance if applicable;
(c) A current certified survey of the Premises prepared by a registered
surveyor satisfactory to the Bank, and containing on the face thereof the
completed certificate of the surveyor in the form of the surveyor's certificate
required by the Bank, dated not more than ninety (90) days prior to the Date of
Issuance, and in compliance with the Minimum Standard Detail Requirements for
ALTA/ASCM Class A land title surveys, as adopted by the American Land Title
Association and American Congress on Surveying and Mapping in 1992;
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(d) A current Phase I environmental audit of the Premises satisfactory to
the Bank in its sole discretion prepared by an environmental consultant
satisfactory to the Bank;
(e) A Commitment to issue an ALTA Loan Policy of Title Insurance issued by
the Title Borrower in the amount of the Letter of Credit (i) insuring that the
Mortgage, as of the time of its filing for record, is a first and best lien upon
the Premises, and that the title to the Premises is free, clear and
unencumbered, subject only to the Permitted Encumbrances; (ii) insuring the
priority of the Mortgage over mechanics or materialmen's liens; (iii) obligating
the Title Company to affirmatively insure that access to Premises is by a
dedicated and accepted public right-of-way; and (iv) including such endorsements
and affirmative insurance as may be required by the Bank, including, but not
limited to, the so-called "Pending Disbursement Endorsement" and "Revolving
Credit Endorsement"; and
(f) Evidence satisfactory to the Bank that the Project, when completed, and
the Premises, and the proposed and actual use thereof, will comply with all
applicable laws, statutes, codes, ordinances, rules and regulations, including,
but not limited to, zoning and Environmental Laws, of all governmental
authorities having jurisdiction over the same, and that there is no action or
proceeding pending (or any time for an appeal of any decision rendered) before
any court, quasi-judicial body or administrative agency at the Date of Issuance
relating to the validity of this Reimbursement Agreement on the transactions
contemplated hereby or the proposed or actual use or operation of the Premises.
SECTION FIVE
DISBURSEMENTS FROM PROJECT FUND
Borrower shall not request or receive any disbursement of funds from the
Project Fund unless the Bank shall have approved such disbursement in writing to
the Trustee, and the following conditions shall be true with respect to each
such disbursement:
SECTION 5.1. BANK'S INSPECTOR'S CERTIFICATE. Upon completion of the Project
the Bank's Inspector shall inspect the property to verify that the construction
of the Project has been performed. The Bank shall have received a certificate
from the Bank's Inspector certifying in the Bank Inspector's reasonable
determination (i) that the construction of the Project has been performed
substantially in accordance with the Plans and Specifications; and (ii) that the
quality of construction of the Project theretofore completed is in accordance
with generally accepted standards in the construction industry for the cost of
the construction of the Project. In addition, the Bank shall have the right at
any time upon request to inspect equipment purchased with Bond Proceeds. It is
understood and agreed that the Bank shall not be liable for any reason as a
result of such inspections, the parties hereby agreeing that the inspections are
solely for the benefit of the Bank.
SECTION 5.2. NO LIENS. The Bank shall have received evidence satisfactory
to the Bank that since the last preceding disbursement from the Project Fund
there has been no change in the state of title to the Premises other than
Permitted Encumbrances.
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SECTION 5.3. REQUEST FOR APPROVAL OF DISBURSEMENT. Not later than ten (10)
business days before the date on which the Borrower desires a disbursement from
the Project Fund, the Borrower shall submit to the Bank (i) a written Request
for Disbursement from the Project Fund in the form attached to the Loan
Agreement together with all attachments thereto; (ii) a revised Project Budget
showing the balance of each category of Project costs; and (iii) a requisition
using AIA Form G702 and/or G703 if the draw is used for construction or such
other form as the Bank may request, accompanied by a cost breakdown, the
accuracy of which shall be verified by the Bank's Inspector.
SECTION 5.4. TIMING. The Borrower will submit draw requests not more often
than once a month. Each disbursement for construction costs (construction costs
do not include equipment other than fixtures, purchase costs of the Premises and
costs related to the issuance of the Bonds) shall not be more than 95% of the
value of construction work-in-place, and the balance will be paid upon
completion based on requirements set forth below. Retainage will be held on a
subcontract by subcontract basis and released in connection with a particular
subcontract upon the expiration of the time for filing of any mechanic's lien
with respect to such subcontract, provided all work thereunder has been
completed to the satisfaction of the Bank and its inspector and a mechanic's
lien waiver has been received from the subcontractor for all their work done on
the property. There are no retainage requirements for "soft costs" on the
construction of the Project. "Soft costs" are defined as expenses which have no
mechanic's lien rights on the subject security (this does not include any
contingency line item under the Contract Management Agreement or any
construction contract or subcontract).
SECTION 5.5. SUPPORTING DOCUMENTATION. For draws involving any hard costs
of construction, the Borrower shall furnish the Bank with an affidavit of the
Borrower or Construction Manager identifying all subcontractors and materialmen
who have performed work or furnished materials in connection with the Project,
together with lien waivers from all contractors, subcontractors and materialmen
who have provided notices of furnishing or who have performed work or furnished
materials in connection with the Project, current through the end of the period
covered by the Borrower's most recent request, and such other evidence or
affidavits reasonably required by the Bank at the time of each request to ensure
that all bills then due and payable for labor and materials used in constructing
the Project and all bills due and payable to all contractors, subcontractors,
materialmen and their respective subcontractors, laborers, and material
suppliers have been paid in full, except those bills to be paid with the
proceeds of such disbursement, and except for retainages.
SECTION 5.6. MATERIAL DAMAGE. Notwithstanding any provision of this
Reimbursement Agreement to the contrary, if the Premises shall have suffered any
material damage or destruction prior to any disbursement from the Project Fund,
such damaged or destroyed portion shall be restored or replaced or proceeds from
an insurance policy shall be available and adequate provision for rebuilding
and/or repair of the Premises shall be made in a manner acceptable to the Bank
without cost to the Bank prior to the approval by the Bank of any further
disbursement from the Project Fund. However, proceeds in the Project Fund shall
be disbursed and used only for the purpose of financing the Project shall not be
used to finance repairs to or restoration of the Premises.
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SECTION 5.7. OTHER DISBURSEMENT APPROVAL CONDITIONS. The Bank shall not be
obligated to approve any disbursement from the Project Fund if, at the time of a
proposed disbursement, (i) an Event of Default or an event which, with the
passage of time or service of notice, or both, would be an Event of Default
under any of the Credit Documents has occurred, or (ii) any representation or
warranty made by the Borrower in any of the Credit Documents proves to be untrue
in any material respect.
SECTION 5.8. PERMITS. The Borrower shall have delivered to the Bank
building, zoning, and other required permits covering construction of the
Project together with evidence satisfactory to the Bank that all approvals
required with respect to the Premises from third parties or any governmental or
quasi-governmental authorities have been obtained or, in the case of approvals
relating to the operation of the Project which cannot be obtained until
completion of construction, evidence satisfactory to the Bank that such
approvals are obtainable. Such evidence shall include copies of all letters of
grant or approval of all zoning changes and other site plan approvals and
subdivision approvals, all variances of zoning regulations affecting the height,
bulk, location or configuration of the Project and the Premises (or satisfactory
opinion of counsel that the same are not required), and all approvals or
variances relating to parking or loading areas (both on-street and off-street)
and all appurtenant easements required by governmental authorities with respect
to the Premises.
SECTION 5.9. UTILITIES. The Borrower shall have delivered to the Bank
evidence satisfactory to the Bank that (i) the Premises has available to it
adequate water, gas and electrical supply, storm and sanitary sewage facilities,
other required public utilities, and means of access between the Premises and
public highways; and (ii) that all such facilities comply with all applicable
laws, rules and regulations, and all necessary easements to provide such utility
service to the Premises have been obtained.
SECTION 5.10. BORROWER'S AFFIDAVIT. The Borrower shall have delivered to
the Bank the affidavit of Borrower's affirming (among other things) as of the
date of each draw, (i) that all invoiced costs that as of the date prior to such
draw were due and payable for labor and material for the construction and
equipping of all improvements comprising any part of the Project furnished to
the date of Borrower's affidavit have been paid in full (in accordance with
Section 5.5 above), and (ii) that no bankruptcy or other insolvency proceedings
have been instituted by or against the Borrower.
SECTION 5.11. APPRAISAL. Notwithstanding any provisions in this Section5 to
the contrary, following the first disbursement on the Closing Date, no
subsequent disbursements for construction costs shall be made from the Project
Fund until the Bank receives an appraisal of the Premises and improvements
thereon or to be constructed thereon prepared by an appraiser satisfactory to
the Bank, meeting the requirements of applicable federal regulations for real
estate secured loans (FIRREA) and establishing the market value of the Premises
and the improvements on an "as completed" basis to be such that the amount of
the Letter of Credit Commitment allocable to real property is not greater than
75% of such market value. The foregoing restriction shall not apply to
disbursements for equipment other than fixtures, purchase costs for the Premises
and costs related to the issuance of the Bonds.
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In the event that the market value of the Premises and the improvements
does not meet the 75% loan to value requirement in the preceding paragraph, the
Bank, subject to applicable federal regulations for real estate secured loans
(FIRREA), will substitute other collateral from the Borrower to cover the
shortfall in value so as to achieve the 75% loan to value requirement.
SECTION SIX
COVENANTS
The Borrower covenants and agrees that, except as otherwise waived by the
Bank in writing, from the date of this Reimbursement Agreement and until the
obligations of the Borrower to the Bank hereunder are satisfied in full, it will
comply with the following provisions:
SECTION 6.1 ACCOUNTING: FINANCIAL STATEMENTS AND OTHER INFORMATION. The
Borrower will maintain a 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 Borrower will deliver to the Bank:
(a) As soon as practicable after the end of each calendar month in each
year and in any event within fifteen (15) days thereafter, a
consolidated and consolidating balance sheet of the Borrower 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
Borrower for such month, certified as complete and correct by the
principal financial officer of the Borrower, 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 Borrower 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
Borrower 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
Borrower 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
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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;
(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
Borrower indicating the Total Indebtedness to Tangible Net Worth ratio
as of the end of such calendar month; and
(d) With reasonable promptness, such other data and information as from
time to time may be reasonably requested by the Bank.
SECTION 6.2 INSURANCE; MAINTENANCE OF PROPERTIES. The Borrower 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 Borrower 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 Borrower will maintain in good working order, and
condition, all properties used or useful in the business of the Borrower.
SECTION 6.3 EXISTENCE; BUSINESS. The Borrower 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 Borrower
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 Borrower 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 materially jeopardize any
franchise, license. permit patent, or trademark necessary to conduct the
Borrower's business.
SECTION 6.4 PAYMENT OF TAXES. The Borrower will pay all material 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 Borrower in good faith and by appropriate
proceedings promptly initiated and diligently conducted and if the Borrower has
set aside proper amounts, determined in accordance with GAAP, for the payment of
all such taxes, changes, and assessments.
SECTION 6.5 LITIGATION; ADVERSE CHANGES. The Borrower will promptly notify
the Bank in writing of (a) any future event which, if it had existed on the
Closing Date, would have required qualification of any of the representations
and warranties set forth in this Agreement or any of the other Credit Documents,
and (b) any Material Adverse Effect.
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SECTION 6.6 NOTICE OF DEFAULT. The Borrower will promptly notify the Bank
of any Event of Default hereunder and any demands made upon the Borrower by any
Person for the acceleration and immediate payment of any Indebtedness owed to
such Person.
SECTION 6.7 INSPECTION. The Borrower will make available for inspection by
duly authorized representatives of the Bank, or its designated agent, the
Borrower'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 6.8 ENVIRONMENTAL MATTERS. The Borrower 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 Borrower 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 6.9 SALE OF ASSETS. The Borrower will not, directly or indirectly
sell, lease, transfer, or otherwise dispose of any plant or any manufacturing
facility or other assets in excess of $1,000,000, except for (i) assets sold for
full and adequate consideration which the Board of Directors or senior
management of the Borrower 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 Borrower receives full and adequate consideration in
exchange for such assets sold.
SECTION 6.10 LIENS. The Borrower will not, directly or indirectly, create,
incur, assume, or permit to exist any Lien with respect to any property or asset
of the Borrower now owned or hereafter acquired other than Permitted Liens.
SECTION 6.11 INDEBTEDNESS. The Borrower 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
Borrower to the Bank or any Affiliate Bank;
(b) Subordinated Debt of the Borrower;
(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;
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(e) Indebtedness for taxes, assessments, governmental charges, liens, or
similar claims to the extent not yet due and payable;
(f) Indebtedness of the Borrower existing as of the Closing Date that has
been expressly disclosed in writing to the Bank;
(g) Other Indebtedness of the Borrower not exceeding $200,000.00 in the
aggregate outstanding at any time: and
(h) Extensions, renewals, refundings, refinancings, modifications,
amendments and restatements of any of the items listed in items (b)
through (g) above, provided that the principal amount thereof is not
increased or the terms thereof are not modified to impose more
burdensome terms upon the Borrower.
SECTION 6.12 INVESTMENTS; LOANS. Except for Permitted Investments, the
Borrower 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 6.13 GUARANTIES. The Borrower 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 6.14 MERGERS: CONSOLIDATION. The Borrower 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 Borrower 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 Borrower 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 Borrower would be permitted by the
provisions of this Section6 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 6.15 CURRENT RATIO. The Borrower 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 6.16 FUNDS FROM OPERATIONS TO TOTAL INDEBTEDNESS. The Borrower will
not permit the ratio of Funds from Operations to Total Indebtedness, calculated
annually upon the
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Bank's receipt of the financial statements provided by the Borrower under
Section3.9 of this Agreement, to be less than twenty five percent (25.00%)
SECTION 6.17 SUBORDINATED DEBT. The Borrower 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 6.18 RATIO OF TOTAL INDEBTEDNESS TO TANGIBLE NET WORTH. The
Borrower 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.
SECTION 6.19 CAPITAL EXPENDITURES. The Borrower will not make Capital
Expenditures in an aggregate amount in excess of $1,000,000 in any fiscal year
without thirty (30) days' prior written notification to the Bank.
Notwithstanding the foregoing, the Capital Expenditure limitation set forth
herein shall not include expenditures financed by the Bonds.
SECTION 6.20 SENIOR MANAGEMENT. The Borrower will not replace the President
or Chief Executive Officer of the Borrower without sixty (60) days prior written
notice to Bank and will not accept the resignation of the President or Chief
Executive Officer of the Borrower without providing written notice to Bank,
which notice will be given to Bank as soon as reasonably possible after the
Borrower has knowledge of the same, but in no event more than three (3) days
following the date that the Borrower obtains such knowledge.
SECTION 6.21 COMPLIANCE WITH ERISA. With respect to the Borrower and any
Commonly Controlled Entity, the Borrower 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 Borrower, (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, 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 Borrower 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 Borrower 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
Borrower and/or any Commonly Controlled Entity to be out of compliance with
ERISA.
SECTION 6.22. CHANGES TO PLANS AND SPECIFICATIONS, CONTRACT MANAGEMENT
AGREEMENT. The Borrower will not make or permit to be made (a) any material
change in the Plans and Specifications, (b) any changes in excess of 10% in any
line item of the Project budget (unless there is a corresponding inverse change
in another line item in the budget), (c) any material change in the
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terms and conditions of the Contract Management Agreement, or (d) any change in
the identity of the Contract Manager.
SECTION 6.23. CONSTRUCTION OF PROJECT. The Borrower will cause the
construction of the Project to be carried forward with diligence and continuity
and to be completed by the Completion Date or a reasonable period thereafter,
and in accordance with the Plans and Specifications and all applicable zoning,
building and other laws, statutes, codes, ordinances, rules and regulations.
SECTION 6.24. ADDITIONAL FUNDS. The Borrower will, at any time or times
upon request of the Bank, deposit with the Bank such additional funds as are
reasonably determined by the Bank or the Bank's Inspector to be necessary (in
excess of the proceeds of the Bonds) to pay for substantial completion of the
Project and all costs and expenses related thereto.
SECTION 6.25. EVIDENCE OF PAYMENT OF COSTS. The Borrower will furnish to
the Bank copies of all affidavits, lien waivers, releases or other evidence
reasonably requested by the Bank from time to time to establish that all bills
for labor and materials performed or furnished in connection with the Project,
and all bills of the Construction Manager, contractors, and its subcontractors
and material suppliers have been paid in full.
SECTION 6.26. ENTRY; CORRECTION OF DEFECTIVE WORK. The Borrower will allow
the Bank, through the Bank's Inspector, and the Bank's officers, agents or
employees, at all reasonable times during business hours, (a) the right of entry
and free access to the Premises to inspect all work done, labor performed and
materials furnished in furtherance of the Project and (b) to require to be
replaced or otherwise corrected any materials or work which fails to
substantially comply with the Plans and Specifications.
SECTION 6.27. COMPLIANCE WITH CONTRACT MANAGEMENT AGREEMENT AND
CONSTRUCTION CONTRACTS. The Borrower shall comply in all material respects with
its obligations under the Contract Management Agreement and all construction
contracts.
SECTION 6.28. TITLE. The Borrower will keep the title to the Premises free
and clear of all liens, encumbrances, easements, restrictions and claims, except
for Permitted Encumbrances.
SECTION 6.29. PAYMENT SCHEDULE OF BONDS. The Borrower shall cause the
original principal amount of the Bonds to be repaid not later than the scheduled
payments described in Exhibit B attached hereto and made a part hereof.
SECTION SEVEN
EVENTS OF DEFAULT
SECTION 7.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an Event of Default under this Agreement:
(a) If Borrower fails to make or cause to be made any payment to the Bank
required to be made pursuant to the terms of the Credit Documents; or
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(b) If any representation or warranty made herein by Borrower or any
officer thereof in the Credit Documents or in any other written
statement, certificate, report, or financial statement at any time
furnished by or for Borrower in connection with any of the Credit
Documents, proves to be incorrect in any material respect when made;
or
(c) If Borrower fails to perform or observe any other provision, covenant,
or agreement contained in this Reimbursement Agreement or in any other
of the Credit Documents, and such failure remains unremedied for
thirty (30) calendar days after the Bank shall have given written
notice thereof to Borrower; or
(d) If the Borrower (a) fails to pay any Indebtedness or any other sums of
money when due and payable under either of the Credit Facility
Agreements owing by the Borrower and such failure continues for
forty-eight (48) hours, whether at maturity, by acceleration, or
otherwise, or (b) fails to perform any term, covenant, or agreement on
its part to be performed under any agreement or instrument (other than
this Reimbursement Agreement) evidencing, securing, or relating to
either of the Credit Facility Agreements, and such failure remains
unremedied for thirty (30) calendar days after the Bank shall have
given written notice thereof to the Borrower, or is otherwise in
default thereunder; or
(e) If Borrower (i) fails to pay any Indebtedness for borrowed money
(other than Indebtedness arising under this Reimbursement Agreement or
either of the Credit Facility Agreements) owing by Borrower when due,
whether at maturity, by acceleration, or otherwise; or (ii) fails to
perform any term, covenant, or agreement on its part to be performed
under any agreement or instrument (other than this Reimbursement
Agreement or either of the Credit Facility Agreements) evidencing,
securing or relating to such Indebtedness 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, unless waived by
such holder(s) or trustee(s); or
(f) If Borrower discontinues business except as otherwise permitted under
this Reimbursement Agreement; or
(g) An Indenture Default shall have occurred under the Indenture; or
(h) A Determination of Taxability shall have been made under the
Indenture; or
(i) If Borrower (i) is adjudicated a debtor or insolvent, or ceases, is
unable, or admits in writing its inability, to pay its debts as they
mature, or makes an assignment for the benefit of creditors; (ii)
applies for, or consents to, the appointment of any receiver, trustee,
or similar officer for it or for all or any substantial part of its
property, or any such receiver, trustee, or similar officer is
appointed without the application or consent of the Borrower; (iii)
institutes, or consents to the
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institution of, by petition, application, or otherwise, any bankruptcy
reorganization, arrangement, readjustment of debt, dissolution,
liquidation, or similar proceeding relating to it under the laws of
any jurisdiction; (iv) has any such proceeding described in clause
(iii) instituted against it and such proceeding remains thereafter
undismissed for a period of thirty (30) days; or (v) has any judgment,
writ, warrant of attachment or execution or similar process issued or
levied against a substantial part of its property and such judgment,
writ, or similar process is not released, vacated, or fully bonded
within thirty (30) days after its issue or levy.
SECTION 7.2. NO WAIVER; REMEDIES. If an Event of Default occurs, the Bank
may exercise any and all remedies, legal or equitable, to collect the amounts
due from the Borrower, pursuant to this Reimbursement Agreement, and in its sole
discretion, may notify the Trustee that an Event of Default has occurred and may
instruct the Trustee to redeem the Bonds. Upon receipt by the Trustee of such
instructions from the Bank, the Bonds shall be redeemed pursuant to the
Indenture. No failure on the part of the Bank to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right or remedy. The remedies
herein provided are cumulative and not exclusive of any remedies provided by law
or equity.
SECTION EIGHT
TRANSFER, REDUCTION OR TERMINATION OF LETTER OF CREDIT
SECTION 8.1. TRANSFER OF LETTER OF CREDIT; REDUCTION OR TERMINATION OF
LETTER OF CREDIT COMMITMENT AND RELATED MATTERS.
(a) The Letter of Credit may be transferred in accordance with the
provisions set forth therein.
(b) If the Borrower shall be entitled to a credit against the principal
amount of the Bonds prior to maturity (the "Credit") pursuant to an
optional redemption of a portion of the Bonds or to the purchase of
Bonds in the open market and cancellation of such Bonds in accordance
with the provisions of the Indenture or the Loan Agreement, and such
amounts have been paid by or on behalf of the Borrower other than by
the Bank, the Borrower shall have the right at any time thereafter to
reduce permanently, without penalty or premium, the Letter of Credit
Commitment in the manner set forth below. The Letter of Credit
Commitment will be reduced by an amount equal to the sum of the
following corresponding reductions in the Principal Commitment, and
the Interest Commitment: (a) the Principal Commitment will be reduced
by an amount equal to the amount of such Credit; and (b) the Interest
Commitment will be reduced by an amount equal to 98 days' accrued
interest at the Maximum Rate on the amount of such Credit. The
aforementioned reduction will occur not less than three Business Days'
after written notice to the Bank, accompanied by the written
certificate of the Trustee
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stating that the Borrower is entitled to such Credit and designating
the amount of such Credit and the date upon which such Credit shall
become effective (which shall be a Business Day).
(c) If the Letter of Credit Commitment shall be reduced pursuant to
paragraph (b) hereof, then the Bank shall amend the Letter of Credit
to reflect such reduction of the Letter of Credit Commitment as of the
effective date of such Credit and deliver such amendment to the
Trustee.
(d) The obligation of the Bank to honor Interest Drawings under the Letter
of Credit, up to the amount of the Interest Commitment (as same may
have been reduced pursuant to subsection (b) of this Section 8.1) will
be automatically reinstated to the Interest Coverage Requirement on
the date of each Interest Drawing.
(e) The Bank shall reinstate amounts drawn under the Letter of Credit
pursuant to a Remarketing Drawing, as to the Principal Commitment and
the Interest Commitment, to the extent that money is received by the
Bank (other than draws under the Letter of Credit) from the Tender
Agent described in the Indenture, which proceeds were held by the
Tender Agent for the sole purpose of reimbursing the Bank for all or a
portion of the amounts drawn pertaining to said Remarketing Drawing,
or upon the Trustee's certification that the Trustee or the Tender
Agent is holding for the benefit of the Bank Drawing Bonds, together
with an amount of money, the aggregate amount of which is equal to or
greater than the principal portion of the Remarketing Drawing.
The Letter of Credit shall terminate automatically on the earliest of (i)
the payment by the Bank to the Trustee of the final drawing available to be made
under the Letter of Credit; (ii) receipt by the Bank of the Letter of Credit and
a certificate signed by an officer of the Trustee and an authorized
representative of Borrower stating that no Bonds remain outstanding;
(iii) receipt by the Bank of the Letter of Credit and a certificate signed by an
officer of the Trustee and an authorized representative of Borrower
substantially in the form of Schedule 7 to the Letter of Credit stating that "an
Alternate Letter of Credit (as defined in the Indenture) in substitution for the
Letter of Credit has been accepted by the Trustee and is in effect"; or (iv) the
stated Expiration Date. Notwithstanding the foregoing, the Expiration Date may
be extended annually at the Bank's option as set forth in Section 2.5 hereof.
SECTION NINE
MISCELLANEOUS
SECTION 9.1. LIABILITY OF THE BANK. Between the Borrower and the Bank, the
Borrower assumes all risks of the acts or omissions of the Trustee and any
transferee of the Letter of Credit with respect to its use of the Letter of
Credit or its proceeds. Neither the Bank nor any of its officers or directors
shall be liable or responsible for: (a) the use which may be made of the Letter
of Credit or its proceeds or for any acts or omissions of the Trustee and any
transferee in connection therewith; (b) the validity, sufficiency or genuineness
of documents, inaccuracy of
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any of the statements or representations contained therein or of any
endorsement(s) thereon, even if such documents should in fact prove to be in any
or all respects invalid, insufficient, fraudulent or forged; (c) good faith
payment by the Bank against presentation of documents which do not strictly
comply with the terms of the Letter of Credit, including any failure of any
documents to bear any reference or adequate reference to the Letter of Credit;
or (d) any other circumstances whatsoever in making or failing to make payment
under the Letter of Credit, except the Borrower shall have a claim against the
Bank, and the Bank shall be liable to the Borrower, to the extent, but only to
the extent of any direct, as opposed to consequential, damages suffered by the
Borrower which the Borrower proves were caused by (i) the Bank's willful
misconduct or gross negligence in honoring a draft under the Letter of Credit,
or (ii) the Bank's willful failure to pay under the Letter of Credit after
presentation to it by the Trustee (or a successor trustee under the Indenture to
whom the Letter of Credit has been transferred in accordance with its terms) of
a sight draft and certificate strictly complying with the terms and conditions
of the Letter of Credit. In furtherance and not in limitation of the foregoing,
the Bank may accept documents that appear on their face to be in order, and may
assume the genuineness and rightfulness of any signature thereon, without
responsibility for further investigation, regardless of any notice or
information to the contrary unless actually received by the Bank; provided, that
if the Bank shall receive written notification from both the Trustee and the
Borrower that documents conforming to the terms of the Letter of Credit to be
presented to the Bank are not to be honored, the Bank agrees that it will not
honor such documents and the Borrower shall indemnify and hold the Bank harmless
from such failure to honor.
SECTION 9.2. RIGHT TO SET-OFF. Upon the occurrence of any Event of Default
hereunder the Bank is hereby irrevocably authorized at any time and from time to
time without notice to the Borrower, any such notice being expressly waived by
the Borrower, to set-off and appropriate and apply any and all deposits (general
or special, time or demand, provisional or final), in any currency, any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect or contingent or matured or unmatured, at any time held or owing by the
Bank to or for the credit or the account of the Borrower, or any part thereof in
such amounts as the Bank may elect, against and on account of the obligations
and liabilities of the Borrower to Bank hereunder and claims of every nature and
description of the Bank against the Borrower, whether arising hereunder or
otherwise, as the Bank may elect, whether or not the Bank has made any demand
for payment and although such obligations, liabilities and claims may be
contingent or unmatured. The Bank agrees to notify in writing the Borrower
promptly of any such set-off and the application made by the Bank, provided that
the failure to give such notice shall not affect the validity of such set-off
and application. The rights of the Bank under this subsection are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) which the Bank may have.
SECTION 9.3. ADDITIONAL COLLATERAL. As additional security for this
Reimbursement Agreement, the Borrower agrees that in the event that Trustee
shall, after the occurrence of a continuing Event of Default hereunder and
acceleration of the indebtedness evidenced hereby, draw upon the Letter of
Credit to pay all Bonds, the Bank shall be and become the assignee of all rights
and interests of the Issuer and the Trustee, all as provided more fully in the
Indenture. The Borrower does hereby consent to such Assignment, and does agree
to execute any and all such
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documents, instruments and certificates in connection therewith as the Bank
shall deem appropriate.
SECTION 9.4. OPTIONAL REDEMPTION. If the Borrower elects to exercise its
option to direct redemption of the Bonds by a prepayment, Borrower shall give
Bank three (3) days' prior written notice of such intent. Prior to notifying the
Trustee of its election to redeem the Bonds, the Borrower shall deliver moneys
(in good and collected funds) in an amount equal to the amount necessary to
effect the redemption to the Bank and the Bank shall then inform the Trustee
that those moneys are on deposit and that the Trustee may draw on the Letter of
Credit to effect that redemption of the Bonds.
SECTION 9.5. PLEDGE OF BONDS. Drawing Bonds which are not remarketed shall
be held by the Trustee, as agent for the Bank, as security for the obligations
of the Borrower under the Bond Pledge. The Borrower hereby grants a lien on such
Drawing Bonds while they are so held by the Trustee.
SECTION 9.6. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered, or mailed first-class postage prepaid, or receipt by fax,
independently confirmed by other than the sender's machine:
(a) if to the Bank, at:
KeyBank National Association
International Division
700 Fifth Avenue, 53rd Floor
Mailstop: WA 31-01-5360
Seattle, WA 98104
Fax Number: 206-684-6238
and a copy to:
Scot T. Wetzel, Vice President
Corporate Banking & Finance Group
KeyBank National Association
600 S. Cherry Street, Suite 1000
Denver, CO 80246
Fax Number: 303-355-6267
or at such other address as may have been furnished for such purpose to the
Borrower by the Bank in writing; or
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(b) if to the Borrower, at:
Dynamic Materials Corporation
551 Aspen Ridge Drive
Lafayette, CO 80026
Attention: Chief Financial Officer
with a copy to:
Jacqueline L. Studer, Esq.
Davis, Graham & Stubbs LLP
4410 Arapahoe Avenue, Suite 200
Boulder, Colorado 80303
FAX 303-544-5997
or at such other address as may have been furnished for such purpose to the Bank
by the Borrower in writing.
SECTION 9.7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All agreements,
representations and warranties contained in the Credit Documents shall survive
the execution and delivery of this Reimbursement Agreement, any investigation at
any time made by or on behalf of the Bank and the issuance and acceptance of the
Letter of Credit. All statements contained in any certificates or other
instruments delivered by or on behalf of the Borrower pursuant hereto shall
constitute representations and warranties by the Borrower under this
Reimbursement Agreement.
SECTION 9.8. PAYMENTS ON HOLIDAYS. Whenever any payment to be made pursuant
to this Reimbursement Agreement shall be stated to be due on a public holiday in
the State of Washington or Colorado, Saturday or Sunday, such payment may be
made on the next succeeding business day and such extension of time shall in
such case be included in computing interest, if any, in connection with such
payment.
SECTION 9.9. COMPUTATION OF INTEREST. All computations of interest
hereunder shall be made on the basis of a three hundred sixty (360) day year
consisting of twelve (12) thirty (30) day months.
SECTION 9.10. ENTIRE AGREEMENT. The Credit Documents and the Letter of
Credit embody the entire agreement and understanding between the Bank and the
Borrower and supersede all prior agreements and understandings relating to the
subject matter hereof, provided, however, that in the event of any inconsistency
between the Credit Documents and the Commitment Letter, the Credit Documents
shall control.
SECTION 9.11. PARTIES IN INTEREST. All the terms and provisions of this
Reimbursement Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto.
-33-
<PAGE>
SECTION 9.12. PARTICIPATIONS. The Bank reserves the right to sell
participations in its obligations evidenced by the Letter of Credit, provided,
however, that Borrower shall continue to deal solely with Bank in such event, it
being understood and agreed that Borrower shall have no responsibility to such
participants.
SECTION 9.13. EXPENSES. Borrower agrees, regardless of whether or not the
Bonds are eventually issued and sold and regardless of whether or not the
transactions contemplated hereby shall be consummated, to pay all reasonable
expenses actually incurred by the Bank incident to such transactions in the
preparation of documentation relating thereto, including all fees and
disbursements of the counsel to the Bank, for services to the Bank. Borrower
further agrees to pay all like expenses incurred by the Bank in connection with
any amendments of or waivers or consents requested by Borrower under or with
respect to the Credit Documents or the enforcement from time to time by the Bank
of its rights under and pursuant to the Credit Documents.
SECTION 9.14. COUNTERPARTS. This Reimbursement Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Reimbursement
Agreement by signing any such counterpart.
SECTION 9.15. GOVERNING LAW. This Reimbursement Agreement shall be governed
exclusively by and construed in accordance with the applicable laws of the State
of Colorado.
SECTION 9.16. JURY TRIAL WAIVER. THE BORROWER 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 BORROWER 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 BORROWER.
-34-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Reimbursement
Agreement to be executed as of the date first above written.
DYNAMIC MATERIALS CORPORATION
By:
---------------------------------
Title: President
KEYBANK NATIONAL ASSOCIATION
By:
---------------------------------
Title: Vice President
-35-
<PAGE>
EXHIBIT "A"
KEYBANK NATIONAL ASSOCIATION
International Division
700 Fifth Avenue, 53rd Floor
Mailstop: WA 31-01-5360
Seattle, WA 98104
Date: September 17, 1998
IRREVOCABLE TRANSFERABLE DIRECT PAY LETTER OF CREDIT NO. WSL890906
Beneficiary: Applicant:
Star Bank, N.A., Trustee Dynamic Materials Corporation
Corporate Trust Department 551 Aspen Ridge Drive
425 Walnut Street, ML 5125 Lafayette, Colorado 80026
Cincinnati, Ohio 45202-1118
AMOUNT: USD $6,997,135.00
EXPIRATION DATE: September 22, 2001
Dear Sirs:
You, as Trustee under the Trust Indenture, dated as of September 1, 1998
(the "Indenture"), between you and the Fayette County Industrial Development
Authority (the "Issuer"), pursuant to which Six Million Eight Hundred Fifty
Thousand Dollars ($6,850,000.00) in aggregate principal amount of Fayette County
Industrial Development Authority Multi-Mode Variable Rate Industrial Development
Revenue Bonds, Series 1998 (Dynamic Materials Corporation Project) (the "Bonds")
are being issued by the Issuer, are hereby irrevocably authorized to draw on
KeyBank National Association pursuant to this Irrevocable Transferable Direct
Pay Letter of Credit, for the account of Dynamic Materials Corporation, a
Delaware corporation (the "Borrower"), available by one or more of your drafts
at sight, upon the terms and conditions hereinafter set forth, an amount
(subject to reinstatement as hereinafter set forth) not exceeding Six Million
Nine Hundred Ninety-Seven Thousand One Hundred Thirty-Five Dollars
($6,997,135.00) (the "Letter of Credit Commitment") of which (a) an amount not
exceeding Six Million Eight Hundred Fifty Thousand Dollars ($6,850,000.00) (the
"Principal Commitment") may be drawn (i) to pay the principal amount of the
Bonds as and when the same become due at maturity or by acceleration or by
redemption or (ii) the portion of the purchase price equal to the principal
amount of any Bonds tendered for purchase by the Holders thereof, to the extent
remarketing proceeds are not available for such purpose; and (b) an amount not
exceeding One Hundred Forty-Seven Thousand One Hundred Thirty-Five Dollars
($147,135.00)
<PAGE>
(the "Interest Commitment") may be drawn with respect to the payment of up to 98
days' interest at a rate per annum of eight percent (8%) (using a 365-day
divisor, 366 in a leap year) (the "Maximum Rate") to pay (i) interest on the
Bonds when due or (ii) up to 98 days' interest at a rate per annum equal to the
Maximum Rate for interest accrued, if any, on Bonds tendered for purchase by the
Holders thereof, to the extent remarketing proceeds are not available for such
purpose, in each instance effective immediately and expiring at the close of
business on September 22, 2001 (the "Expiration Date").
Funds under this Letter of Credit are available to you against your
executed sight draft(s) drawn on us, stating on their face: "Drawn under KeyBank
National Association Irrevocable Transferable Direct Pay Letter of Credit No.
WSL890906" and accompanied by: (A) if the drawing is being made with respect to
the payment of principal on the Bonds, whether due at maturity, upon mandatory
or optional redemption or upon acceleration (a "Principal Drawing"), a
certificate signed by you in the form of Schedule 1 attached hereto
appropriately completed; (B) if the drawing is being made with respect to a
payment of interest on the Bonds when due (an "Interest Drawing"), a certificate
signed by you in the form of Schedule 2 hereto appropriately completed; and (c)
if a drawing is being made to pay the principal amount of and accrued interest
on any Bonds tendered for purchase by the Holders thereof, to the extent
remarketing proceeds are not available for such purpose (a "Remarketing
Drawing"), a certificate signed by you in the form of Schedule3 hereto
appropriately completed. Presentation of such draft(s) and certificate(s) shall
be made at KeyBank National Association, International Division, 700 Fifth
Avenue, 53rd Floor, Mailcode WA-31-10-5360, Seattle, WA 98104, Phone: (206)
689-5989, FAX No.: (206) 684-6238, Attention: Sharlene Sauders (or such other
person as we may from time to time specify), or at any other office of ours
which may be designated by us by written notice delivered to you. We hereby
agree that all drafts drawn under and in compliance with the terms of this
Letter of Credit and presented before 11:00 a.m. (New York City time) on a
Business Day will be duly honored by us within one Business Day after delivery
of the draft(s) and certificate(s); provided, however, if a drawing is presented
to pay the purchase price of Bonds which have not been remarketed by the
Remarketing Agent and if conforming drawing documentation is presented at or
prior to 11:00 a.m. (New York City time) on a Business Day, payments shall be
made to you on such Business Day. If requested by you, payment under this Letter
of Credit may be made by wire transfer of federal funds to your account at the
Federal Reserve Bank of San Francisco, or by deposit of immediately available
funds into a designated account that you maintain with us. As used herein,
"Business Day" shall mean any day of the year other than (i) a Saturday or
Sunday, (ii) a day on which commercial banks located in Seattle, Washington, or
the city or cities in which are located the corporate trust offices of the
Trustee and the Tender Agent, and our office at which demands for payment under
this Letter of Credit are to be presented are authorized by law to close, or
(iii) any day on which the New York Stock Exchange is closed.
Drawings hereunder shall not exceed the Letter of Credit Commitment, as the
Letter of Credit Commitment may be reduced or reinstated pursuant hereto, and,
except as hereinafter provided, each drawing honored by us shall pro tanto
reduce the amount available under this Letter of Credit.
<PAGE>
We will reinstate amounts drawn hereunder pursuant to a Remarketing Drawing
hereunder, as to the Principal Commitment and the Interest Commitment, to the
extent that money is received by us (other than from drawings under this Letter
of Credit) from the Tender Agent described in the Indenture, which proceeds were
held by the Tender Agent for the sole purpose of reimbursing us for all or a
portion of the amounts drawn pertaining to said Remarketing Drawing, or upon the
Trustee's certification that the Trustee or the Tender Agent is holding for our
benefit Bonds together with an amount of money, the aggregate amount of which is
equal to or greater than the principal portion of the Remarketing Drawing
In connection with any Interest Drawing, the Letter of Credit Commitment
will be automatically decreased by the amount of such Interest Drawing and will
be automatically reinstated by the amount of such Interest Drawing on the date
of such Interest Drawing. Upon presentation by you of any Principal Drawing, the
amount of this Letter of Credit and the amounts available to be drawn by you by
any subsequent Principal Drawing shall be automatically decreased by an amount
equal to the amount of such Principal Drawing.
If the Borrower shall be entitled to a credit against the principal amount
of the Bonds prior to maturity (the "Credit") pursuant to an optional redemption
of a portion of the Bonds, or to the purchase of Bonds in the open market and
cancellation thereof in accordance with the provisions of the Indenture, and
such amounts have been paid by or on behalf of the Borrower other than by us,
the Borrower shall have the right at any time thereafter to reduce permanently,
without penalty or premium, the Letter of Credit Commitment in the manner set
forth below. The Letter of Credit Commitment will be reduced by an amount equal
to the sum of the following corresponding reductions in the Principal Commitment
and the Interest Commitment: (i) the Principal Commitment will be reduced by an
amount equal to the amount of such Credit and (ii) the Interest Commitment will
be reduced by an amount equal to ninety eight (98) days' interest at the Maximum
Rate (using a 365-day divisor) on the amount of such Credit. The reduction in
the Letter of Credit Commitment pursuant to such Credit will occur not less than
three (3) Business Days after written notice to us, accompanied by your written
certificate in the form of Schedule 4 attached hereto, stating that the Borrower
is entitled to such reduction and designating the amount of such Credit and the
date of the Business Day upon which such reduction shall become effective. Upon
receipt of such notice and certificate we will reduce this Letter of Credit to
reflect such maximum amount then available.
Only you, as Trustee, may make a drawing under this Letter of Credit. Upon
the payment to you or your account of the amount specified in a sight draft
drawn hereunder, we shall be fully discharged on our obligation under this
Letter of Credit with respect to such sight draft, and we shall not thereafter
be obligated to make any further payments under this Letter of Credit in respect
of such sight draft to you or to any other person who may have made to you or
who makes to you a demand for payment of principal of or interest on any of the
Bonds.
This Letter of Credit shall be governed by the International Chamber of
Commerce Uniform Customs and Practice for Documentary Credits, Publication No.
500 (1993 Revision), (and including any amendments, modifications, or revisions
thereof) and the laws of the State of Ohio. Communications with respect to this
Letter of Credit shall be in writing and shall be addressed to KeyBank National
Association, International Division, 700 Fifth Avenue, 53rd
<PAGE>
Floor, Mailcode WA-31-10-5360, Seattle, WA 98104, Phone: (206) 689-5989, FAX
No.: (206) 684-6238, Attention: International Department, specifically referring
thereon to KeyBank National Association Irrevocable Transferable Direct Pay
Letter of Credit No. WSL890906.
This Letter of Credit is transferable in its entirety (but not in part) to
any transferee who has succeeded you as Trustee under the Indenture, and such
transferred Letter of Credit may be successively transferred to any Successor
Trustee or Co-Trustee thereunder, but may not be assigned, transferred or
conveyed under any other circumstance. Transfer of the amount available under
this Letter of Credit to such transferee shall be effected by the presentation
to us of this Letter of Credit accompanied by a transfer fee of $500.00 and the
transfer form in the form attached hereto as Schedule 5 and, unless this Letter
of Credit is so presented to us, we shall have no obligation hereunder to any
transferee. Upon such transfer, we will either reissue this Letter of Credit in
the maximum amount then available hereunder or otherwise amend this Letter of
Credit to reflect such maximum amount then available.
Upon the earliest of (i) the honoring by us of the final drawing available
to be made hereunder; (ii) our receipt of this outstanding Letter of Credit and
a written certificate signed by your officer and an authorized representative of
the Borrower, in the form of Schedule6 hereto appropriately completed, stating
that: (a) no Bonds are Outstanding within the meaning of the Indenture; and (b)
such officer and representative are duly authorized to sign such certificate on
behalf of you and the Borrower; (iii) our receipt of this Original Letter of
Credit and a written certificate signed by your officer and an authorized
representative of the Borrower, in the form of Schedule7 hereto appropriately
completed, stating that: (a) an Alternate Credit Facility has been accepted by
you and is in effect; and (b) such officer and representative are duly
authorized to sign such certificate on behalf of you and the Borrower; or (iv)
the Expiration Date, this Letter of Credit shall automatically terminate and be
delivered to us for cancellation.
This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited by
reference to any document, instrument or agreement referred to herein
(including, without limitation, the Bonds or the Reimbursement Agreement),
except only the certificate(s) and the sight draft(s) referred to herein; and
any such reference shall not be deemed to incorporate herein by reference any
document, instrument or agreement except for such certificate(s) and such sight
draft(s).
- - ---------------------------------- ------------------------------------
Authorized Signature Authorized Signature
<PAGE>
SCHEDULE 1
CERTIFICATE FOR THE PAYMENT OF PRINCIPAL
OF FAYETTE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
MULTI-MODE VARIABLE RATE INDUSTRIAL DEVELOPMENT
REVENUE BONDS, SERIES 1998
(DYNAMIC MATERIALS CORPORATION PROJECT)
(THE "BONDS")
KeyBank National Association
International Division, 700 Fifth Avenue, 53rd Floor
Mailcode WA-31-10-5360
Seattle, WA 98104
Re: KeyBank National Association Irrevocable Transferable Direct Pay
Letter of Credit No. WSL890906
Gentlemen:
The undersigned, a duly authorized signer of Star Bank, N.A., as Trustee
(the "Trustee"), hereby certifies to KeyBank National Association (the "Bank"),
with reference to Irrevocable Transferable Direct Pay Letter of Credit No.
WSL890906 (the "Letter of Credit" and other capitalized terms used herein and
not defined shall have their respective meanings as set forth in the Letter of
Credit) issued by the Bank in favor of the Trustee, that:
1. The Trustee is the Trustee under the Indenture for the holders of the
Bonds.
2. The Trustee is making a drawing under the Letter of Credit with respect
to the payment of principal of the Bonds.
3. The amount of principal of the Bonds which will be due and payable on
, is $ .
- - ------------------- ---------------
4. The amount of the sight draft accompanying this Certificate
($ ), together with the aggregate of all prior payments made
-------------------
pursuant to Principal Drawings under this Letter of Credit for the payment of
the Bonds, does not exceed $ .
--------------
5. The amount of the sight draft accompanying this Certificate was computed
in accordance with the terms and conditions of the Letter of Credit, the Bonds
and the Indenture.
<PAGE>
IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate
as of the day of , .
----- -------------------- ----
STAR BANK, N.A., TRUSTEE
By:
-----------------------------------
(Name and Title)
<PAGE>
SCHEDULE 2
CERTIFICATE FOR THE PAYMENT OF INTEREST
OF FAYETTE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
MULTI-MODE VARIABLE RATE INDUSTRIAL DEVELOPMENT
REVENUE BONDS, SERIES 1998
(DYNAMIC MATERIALS CORPORATION PROJECT)
(THE "BONDS")
KeyBank National Association
International Division, 700 Fifth Avenue, 53rd Floor
Mailcode WA-31-10-5360
Seattle, WA 98104
Re: KeyBank National Association Irrevocable Transferable Direct Pay
Letter of Credit No. WSL890906
Gentlemen:
The undersigned, a duly authorized signer of Star Bank, N.A., Trustee (the
"Trustee"), hereby certifies to KeyBank National Association (the "Bank"), with
reference to Irrevocable Transferable Direct Pay Letter of Credit No. WSL890906
(the "Letter of Credit" and other capitalized terms used herein and not defined
shall have their respective meanings as set forth in the Letter of Credit)
issued by the Bank in favor of the Trustee, that:
1. The Trustee is the Trustee under the Indenture for the holders of the
Bonds.
2. The Trustee is making a drawing under the Letter of Credit with respect
to a payment of interest accrued on the Bonds on or prior to their stated
maturity date.
3. The amount of interest on the Bonds which will be due and payable on
, is $ .
- - ---------------- -------------------
4. The amount of the sight draft accompanying this Certificate
($ ) does not exceed the amount available on the date hereof to be
----------
drawn under the Letter of Credit in respect of the payment of interest accrued
on the Bonds on or prior to their stated maturity date.
5. The amount of the sight draft accompanying this Certificate was computed
in accordance with the terms and conditions of the Letter of Credit, the Bonds
and the Indenture.
6. The amount of the Interest Commitment available after the draw, if
reinstated pursuant to the Letter of Credit, is $ .
----------
<PAGE>
IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate
as of the day of , .
---- --------------------- ----
STAR BANK, N.A., TRUSTEE
By:
-----------------------------------
(Name and Title)
<PAGE>
SCHEDULE 3
CERTIFICATE FOR THE PAYMENT OF PURCHASE PRICE IN REMARKETING
OF FAYETTE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
MULTI-MODE VARIABLE RATE INDUSTRIAL DEVELOPMENT
REVENUE BONDS, SERIES 1998
(DYNAMIC MATERIALS CORPORATION PROJECT)
(THE "BONDS")
KeyBank National Association
International Division, 700 Fifth Avenue, 53rd Floor
Mailcode WA-31-10-5360
Seattle, WA 98104
Re: KeyBank National Association Irrevocable Transferable Direct Pay
Letter of Credit No. WSL 890906
Gentlemen:
The undersigned, a duly authorized signer of Star Bank, N.A., as Trustee
(the "Trustee"), hereby certifies to KeyBank National Association (the "Bank"),
with reference to KeyBank National Association Irrevocable Transferable Direct
Pay Letter of Credit No. WSL890906 (the "Letter of Credit" and other capitalized
terms used herein and not defined shall have their respective meanings as set
forth in the Letter of Credit) issued by the Bank in favor of the Trustee, that:
1. The Trustee is the Trustee under the Indenture for the holders of the
Bonds. The total amount of Bonds outstanding (as defined in the Indenture) is
$ .
---------------
2. The Trustee is making a drawing under the Letter of Credit at the
written request of the Remarketing Agent (as defined in the Indenture), to pay,
pursuant to the terms of the Indenture, the purchase price equal to the
principal amount of those Bonds which the Remarketing Agent has been unable to
remarket, together with interest accrued thereon but unpaid.
3. The Trustee: (a) is delivering or causing to be delivered to the Bank,
or its designated agent, a principal amount of the Bonds, registered in the name
of the Borrower as pledgor and the Bank as pledgee, equal to the amount of the
draft accompanying this Certificate; (b) acknowledges the pledge by the Borrower
to the Bank of the Bonds delivered pursuant to subparagraph (a); and (c) agrees
that all payments of principal, premium, if any, and interest made on such Bonds
shall be made to the Bank, so long as the Bank is the pledgee of such Bonds.
4. The principal amount of the Bonds delivered to the Remarketing Agent
which the Remarketing Agent has been unable to remarket is $ . The
------------
amount of interest upon such Bonds which has accrued but is unpaid is
$ . The amount of the draft
------------
<PAGE>
accompanying this Certificate does not exceed such amount due as the purchase
price of the Bonds and interest accrued thereon.
Upon receipt by the Trustee of the amount demanded hereby, (a) the Trustee
will deliver it to Bond holders only for the purpose of payment of the purchase
price of the Bonds referenced in the second paragraph hereof, (b) no portion of
it shall be applied by the Trustee for any other purpose, and (c) no portion of
it shall be commingled with other funds held by the Trustee. This drawing is
made in accordance with the provisions of the Indenture and the Letter of
Credit.
The amount of the draw accompanying this Certificate was computed in
accordance with the terms and conditions of the Bonds and the Indenture.
IN WITNESS WHEREOF, the Trustee has executed and delivered this certificate
as of the day of , .
----- ------------------- -----
STAR BANK, N.A., TRUSTEE
By:
------------------------------------
(Name and Title)
<PAGE>
SCHEDULE 4
CERTIFICATE AS TO REDUCTION
OF LETTER OF CREDIT COMMITMENT
KeyBank National Association
International Division, 700 Fifth Avenue, 53rd Floor
Mailcode WA-31-10-5360
Seattle, WA 98104
RE: KeyBank National Association Irrevocable Transferable Direct Pay
Letter of Credit No. WSL890906
Gentlemen:
The undersigned, a duly authorized signer of Star Bank, N.A., as Trustee
(the "Trustee"), and a duly authorized representative of Dynamic Materials
Corporation. (the "Borrower"), hereby certify to KeyBank National Association,
with reference to KeyBank National Association Irrevocable Transferable Direct
Pay Letter of Credit No. WSL890906 (the "Letter of Credit" and other capitalized
terms used herein and not defined shall have their respective meanings as set
forth in the Letter of Credit) issued by KeyBank National Association in favor
of the Trustee, that:
A. The Trustee is the Trustee under the Indenture for the holders of the
Bonds.
B. The Borrower is entitled to a reduction in the Letter of Credit
Commitment. The Letter of Credit Commitment shall be reduced, effective as of
,to $ .
- - ---------------------- -----------------
C. The undersigned officer and representative are duly authorized to sign
this certificate on behalf of the Trustee and on behalf of the Borrower,
respectively.
<PAGE>
IN WITNESS WHEREOF, the Trustee and the Borrower have executed and
delivered this Certificate as of the day of , .
---- ------------------ ----
TRUSTEE: STAR BANK, N.A., as Trustee
By:
-----------------------------------
Title:
--------------------------------
BORROWER: DYNAMIC MATERIALS CORPORATION
By:
-----------------------------------
Title:
--------------------------------
<PAGE>
SCHEDULE 5
CERTIFICATE OF TRANSFER
KeyBank National Association
International Division
700 Fifth Avenue, 53rd Floor
Mailcode WA-31-10-5360
Seattle, WA 98104
Date: ,
------------------ ----
RE: KeyBank National Association Irrevocable Transferable Direct Pay
Letter of Credit No. WSL890906
Gentlemen:
For value received, the undersigned beneficiary hereby irrevocably
transfers to the following (the "Transferee"):
(Name of Transferee)
(Address)
all rights of the undersigned beneficiary to draw under the above Letter of
Credit in its entirety.
By this transfer, all rights of the undersigned beneficiary in the Letter
of Credit are transferred to the Transferee, and the Transferee shall have the
sole rights as beneficiary thereof, including sole rights relating to any
amendments of the Letter of Credit, whether increases in the amount to be drawn
thereunder, extensions of the Expiration Date thereof, or other amendments, and
whether such amendments now exist or are made after the date hereof. All
amendments of the Letter of Credit are to be advised direct to the Transferee
without necessity of any consent of or notice to the undersigned beneficiary.
The undersigned hereby certifies that the Transferee has become successor
Trustee under the Trust Indenture dated as of September1, 1998, between the
undersigned and the Fayette County Industrial Development Authority (the
"Issuer"), relating to the Issuer's $6,850,000 Multi-Mode Variable Rate
Industrial Development Revenue Bonds, Series 1998 (Dynamic Materials Corporation
Project) and has accepted such appointment in writing.
We enclose our check in the amount of $500.00 representing your transfer
fee.
<PAGE>
The original of such Letter of Credit is returned herewith, and in
accordance therewith we ask you to endorse the within transfer on the reverse
thereof and forward it directly to the Transferee with your customary notice of
transfer, or issue a replacement Letter of Credit to the Transferee as provided
therein.
Very truly yours,
SIGNATURE AUTHENTICATED STAR BANK, N.A., Trustee
By:
- - ------------------------------------- --------------------------------
(Authorized Officer)
(Bank)
- - -------------------------------------
(Authorized Signature)
<PAGE>
SCHEDULE 6
CERTIFICATE THAT NO BONDS ARE OUTSTANDING
KeyBank National Association
International Division
700 Fifth Avenue, 53rd Floor
Mailcode WA-31-10-5360
Seattle, WA 98104
RE: KeyBank National Association Irrevocable Transferable Direct Pay
Letter of Credit No. WSL890906
Gentlemen:
The undersigned, a duly authorized signer of Star Bank, N.A., as Trustee
(the "Trustee"), and , a duly authorized representative of
----------------------
Dynamic Materials Corporation (the "Borrower"), hereby certify to KeyBank
National Association, with reference to KeyBank National Association Irrevocable
Transferable Direct Pay Letter of Credit No. WSL890906 (the "Letter of Credit"
and other capitalized terms used herein and not defined shall have their
respective meanings as set forth in the Letter of Credit) issued by KeyBank
National Association in favor of the Trustee, that:
1. The Trustee is the Trustee under the Indenture for the holders of the
Bonds.
2. No Bonds are Outstanding within the meaning of the Indenture.
3. The undersigned officers and representatives are duly authorized to sign
this certificate on behalf of the Trustee and on behalf of the Borrower,
respectively.
<PAGE>
IN WITNESS WHEREOF, the Trustee and the Borrower have executed and
delivered this Certificate as of the day of , .
------- ----------------- ----
STAR BANK, N.A., TRUSTEE
By:
-----------------------------------
(Name and Title)
DYNAMIC MATERIALS CORPORATION
By:
-----------------------------------
Title:
--------------------------------
<PAGE>
SCHEDULE 7
CERTIFICATE OF ACCEPTANCE OF ALTERNATE
LETTER OF CREDIT
KeyBank National Association
International Division
700 Fifth Avenue, 53rd Floor
Mailcode WA-31-10-5360
Seattle, WA 98104
RE: KeyBank National Association Irrevocable Transferable Direct Pay
Letter of Credit No. WSL890906
Gentlemen:
The undersigned, a duly authorized signer of Star Bank, N.A., as Trustee
(the "Trustee"), and , a duly authorized representative of
--------------------
Dynamic Materials Corporation (the "Borrower"), hereby certify to KeyBank
National Association, with reference to KeyBank National Association Irrevocable
Transferable Direct Pay Letter of Credit No. WSL890906 (the "Letter of Credit"
and other capitalized terms used herein and not defined shall have their
respective meanings as set forth in the Letter of Credit) issued by KeyBank
National Association in favor of the Trustee, that:
1. The Trustee is the Trustee under the Indenture for the holders of the
Bonds.
2. An Alternate Letter of Credit in substitution for the Letter of Credit
has been accepted by the Trustee.
3. The undersigned officer and representative are duly authorized to sign
this certificate on behalf of the Trustee and on behalf of the Borrower,
respectively.
<PAGE>
IN WITNESS WHEREOF, the Trustee and the Borrower have executed and delivered
this certificate as of the day of , .
----- ------------------- ----
STAR BANK, N.A., TRUSTEE
By:
-----------------------------------
(Name and Title)
DYNAMIC MATERIALS CORPORATION
By:
-----------------------------------
Title:
--------------------------------
<PAGE>
EXHIBIT "B" -- PAYMENT SCHEDULE OF BONDS
(Reimbursement Agreement dated as of September1, 1998, by and
between Dynamic Materials Corporation and
KeyBank National Association)
<TABLE>
<CAPTION>
=================================== ================ =============================== ================
PAYMENT DUE DATE PAYMENT DUE DATE
INTEREST PAYMENT DATE IN PRINCIPAL AMOUNT INTEREST PAYMENT DATE IN PRINCIPAL AMOUNT
=================================== ================ =============================== ================
- - ----------------------------------- ---------------- ------------------------------- ----------------
<S> <C> <C> <C>
December, 1998 $ 0 June, 2006 $ 45,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
March, 1999 0 September, 2006 45,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
June, 1999 0 December, 2006 50,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
September, 1999 0 March, 2007 50,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
December, 1999 165,000 June, 2007 50,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
March, 2000 165,000 September, 2007 50,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
June, 2000 170,000 December, 2007 50,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
September, 2000 170,000 March, 2008 55,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
December, 2000 175,000 June, 2008 55,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
March, 2001 175,000 September, 2008 55,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
June, 2001 180,000 December, 2008 55,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
September, 2001 185,000 March, 2009 55,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
December, 2001 185,000 June, 2009 60,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
March, 2002 195,000 September, 2009 60,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
June, 2002 195,000 December, 2009 60,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
September, 2002 200,000 March, 2010 60,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
December, 2002 205,000 June, 2010 65,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
March, 2003 205,000 September, 2010 65,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
June, 2003 210,000 December, 2010 65,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
September, 2003 215,000 March, 2011 65,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
December, 2003 225,000 June, 2011 70,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
March, 2004 225,000 September, 2011 70,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
June, 2004 230,000 December, 2011 70,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
September, 2004 235,000 March, 2012 75,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
December, 2004 240,000 June, 2012 75,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
March, 2005 240,000 September, 2012 75,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
June, 2005 250,000 December, 2012 75,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
September, 2005 255,000 March, 2013 80,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
December, 2005 45,000 June, 2013 60,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
March, 2006 45,000 September, 2013 100,000
- - ----------------------------------- ---------------- ------------------------------- ----------------
</TABLE>
(LOCAL CURRENCY--SINGLE JURISDICTION)
ISDA(R)
International Swap Dealers Association, Inc.
MASTER AGREEMENT
Dated as of: SEPTEMBER 15, 1998
--------------------------
KEYBANK NATIONAL ASSOCIATION AND DYNAMIC MATERIALS CORPORATION
- - ----------------------------------- -------------------------------------
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 12 and in the Schedule will
have the meanings therein specified for the purpose of this Master Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions
of the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this "Agreement"), and the
parties would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for
value on that date in the place of the account specified in the
relevant Confirmation or otherwise pursuant to this Agreement, in
freely transferable funds and in the manner customary for payments in
the required currency. Where settlement is by delivery (that is, other
than by payment), such delivery will be made for receipt on the due
date in the manner customary for the relevant obligation unless
otherwise specified in the relevant Confirmation or elsewhere in this
Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event
of Default with respect to the other party has occurred and is
continuing, (2) the condition precedent that no Early Termination Date
in respect of the relevant Transaction has occurred or been effectively
designated and (3) each other applicable condition precedent specified
in this Agreement.
Copyright (c)1992 by International Swap Dealers Association, Inc.
Second Printing
<PAGE>
b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of branches or offices through which the parties make
and receive payments or deliveries.
(d) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered
into) that:--
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the laws
of the jurisdiction of its organisation or incorporation and, if
relevant under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to
perform its obligations under this Agreement and any obligations it has
under any Credit Support Document to which it is a party and has taken
all necessary action to authorise such execution, delivery and
performance;
2
ISDA(R) 1992
Second Printing
<PAGE>
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and
performance do not violate or conflict with any law applicable to it,
any provision of its constitutional documents, any order or judgment of
any court or other agency of government applicable to it or any of its
assets or any contractual restriction binding on or affecting it or any
of its assets;
(iv) CONSENTS. All governmental and other consents that are required
to have been obtained by it with respect to this Agreement or any
Credit Support Document to which it is a party have been obtained and
are in full force and effect and all conditions of any such consents
have been complied with; and
(v) OBLIGATIONS BINDING. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal,
valid and binding obligations, enforceable in accordance with their
respective terms (subject to applicable bankruptcy, reorganisation,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding at
law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party any
forms, documents or certificates specified in the Schedule or any Confirmation
by the date specified in the Schedule or such Confirmation or, if none is
specified, as soon as reasonably practicable.
(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain
in full force and effect all consents of any governmental or other authority
that are required to be obtained by it with respect to this Agreement or any
Credit Support Document to which it is a party and will use all reasonable
efforts to obtain any that may become necessary in the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:--
3
<PAGE>
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when
due, any payment under this Agreement or delivery under Section 2(a)(i)
or 2(d) required to be made by it if such failure is not remedied on or
before the third Local Business Day after notice of such failure is
given to the party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation to make
any payment under this Agreement or delivery under Section 2(a)(i) or
2(d) or to give notice of a Termination Event) to be complied with or
performed by the party in accordance with this Agreement if such
failure is not remedied on or before the thirtieth day after notice of
such failure is given to the party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation
to be complied with or performed by it in accordance with
any Credit Support Document if such failure is continuing
after any applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support
Document or the failing or ceasing of such Credit Support
Document to be in full force and effect for the purpose of
this Agreement (in either case other than in accordance
with its terms) prior to the satisfaction of all
obligations of such party under each Transaction to which
such Credit Support Document relates without the written
consent of the other party; or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;
(iv) MISREPRESENTATION. A representation made or repeated or deemed to
have been made or repeated by the party or any Credit Support Provider
of such party in this Agreement or any Credit Support Document proves
to have been incorrect or misleading in any material respect when made
or repeated or deemed to have been made or repeated;
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit
Support Provider of such party or any applicable Specified Entity of
such party (1) defaults under a Specified Transaction and, after giving
effect to any applicable notice requirement or grace period, there
occurs a liquidation of, an acceleration of obligations under, or an
early termination of, that Specified Transaction, (2) defaults, after
giving effect to any applicable notice requirement or grace period, in
making any payment or delivery due on the last payment, delivery or
exchange date of, or any payment on early termination of, a Specified
Transaction (or such default continues for at least three Local
Business Days if there is no applicable notice requirement or grace
period) or (3) disaffirms, disclaims, repudiates or rejects, in whole
or in part, a Specified Transaction (or such action is taken by any
person or entity appointed or empowered to operate it or act on its
behalf);
(vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default,
event of default or other similar condition or event (however
described) in respect of such party, any Credit Support Provider of
such party or any applicable Specified Entity of such party under one
or more agreements or instruments relating to Specified Indebtedness of
any of them (individually or collectively) in an aggregate amount of
not less than the applicable Threshold Amount (as specified in the
Schedule) which has resulted in such Specified Indebtedness becoming,
or becoming capable at such time of being declared, due and payable
under such agreements or instruments, before it would otherwise have
been due and payable or (2) a default by such party, such Credit
Support Provider or such Specified Entity (individually or
collectively) in making one or more payments on the due date thereof in
an aggregate amount of not less
4
<PAGE>
than the applicable Threshold Amount under such agreements or
instruments (after giving effect to any applicable notice requirement
or grace period);
(vii) BANKRUPTCY. The party, any Credit Support Provider of such party
or any applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to
pay its debts or fails or admits in writing its inability
generally to pay its debts as they become due; (3) makes a
general assignment, arrangement or composition with or for the
benefit of its creditors; (4) institutes or has instituted
against it a proceeding seeking a judgment of insolvency or
bankruptcy or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors' rights,
or a petition is presented for its winding-up or liquidation,
and, in the case of any such proceeding or petition instituted
or presented against it, such proceeding or petition (A) results
in a judgment of insolvency or bankruptcy or the entry of an
order for relief or the making of an order for its winding-up or
liquidation or (B) is not dismissed, discharged, stayed or
restrained in each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for its
winding-up, official management or liquidation (other than
pursuant to a consolidation, amalgamation or merger); (6) seeks
or becomes subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee,
custodian or other similar official for it or for all or
substantially all its assets; (7) has a secured party take
possession of all or substantially all its assets or has a
distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged,
stayed or restrained, in each case within 30 days thereafter;
(8) causes or is subject to any event with respect to it which,
under the applicable laws of any jurisdiction, has an analogous
effect to any of the events specified in clauses (1) to (7)
(inclusive); or (9) takes any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any
of the foregoing acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another
entity and, at the time of such consolidation, amalgamation, merger or
transfer:--
(1) the resulting, surviving or transferee entity fails to
assume all the obligations of such party or such Credit Support
Provider under this Agreement or any Credit Support Document to
which it or its predecessor was a party by operation of law or
pursuant to an agreement reasonably satisfactory to the other
party to this Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by
such resulting, surviving or transferee entity of its
obligations under this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any event specified below constitutes an Illegality if
the event is specified in (i) below, and, if specified to be applicable, a
Credit Event Upon Merger if the event is specified pursuant to (ii) below or an
Additional Termination Event if the event is specified pursuant to (iii)
below:--
(i) ILLEGALITY. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is entered into,
or due to the promulgation of, or any change in, the interpretation by
any court, tribunal or regulatory authority with competent jurisdiction
of any applicable law after such date, it becomes unlawful (other than
as a result of a breach by the party of Section 4(b)) for such party
(which will be the Affected Party):--
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in
respect of such Transaction or to comply with any other material
provision of this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such
party to perform, any contingent or other obligation which the
party (or such Credit Support Provider) has under any Credit
Support Document relating to such Transaction;
(ii) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party, such party ("X"),
any Credit Support Provider of X or any applicable Specified Entity of
X consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and
such action does not constitute an event described in Section
5(a)(viii) but the creditworthiness of the resulting, surviving or
transferee entity is materially weaker than that of X, such Credit
Support Provider or such Specified Entity,
5
<PAGE>
as the case may be, immediately prior to such action (and, in such
event, X or its successor or transferee, as appropriate, will be the
Affected Party); or
(iii) ADDITIONAL TERMINATION EVENT. If any "Additional Termination
Event" is specified in the Schedule or any Confirmation as applying,
the occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which
would otherwise constitute or give rise to an Event of Default also constitutes
an Illegality, it will be treated as an Illegality and will not constitute an
Event of Default.
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event
of Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5 (a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying
the nature of that Termination Event and each Affected Transaction and
will also give such other information about that Termination Event as
the other party may reasonably require.
(ii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1)
occurs and there are two Affected Parties, each party will use all
reasonable efforts to reach agreement within 30 days after notice
thereof is given under Section 6(b)(i) on action to avoid that
Termination Event.
(iii) RIGHT TO TERMINATE. If:--
(1) an agreement under Section 6(b)(ii) has not been effected
with respect to all Affected Transactions within 30 days after
an Affected Party gives notice under Section 6(b)(i); or
(2) an Illegality other than that referred to in Section
6(b)(ii), a Credit Event Upon Merger or an Additional Termination
Event occurs,
either party in the case of an Illegality, any Affected Party in the
case of an Additional Termination Event if there is more than one
Affected Party, or the party which is not the Affected Party in the
case of a Credit Event Upon Merger or an Additional Termination Event
if there is only one Affected Party may, by not more than 20 days
notice to the other party and provided that the relevant Termination
Event is then continuing, designate a day not earlier than the day such
notice is effective as an Early Termination Date in respect of all
Affected Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date
so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.
6
<PAGE>
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section
2(a)(i) or 2(d) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other provisions of
this Agreement. The amount, if any, payable in respect of an Early
Termination Date shall be determined pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2) giving
details of the relevant account to which any amount payable to it is to
be paid. In the absence of written confirmation from the source of a
quotation obtained in determining a Market Quotation, the records of
the party obtaining such quotation will be conclusive evidence of the
existence and accuracy of such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day
that notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event
of Default) and on the day which is two Local Business Days after the
day on which notice of the amount payable is effective (in the case of
an Early Termination Date which is designated as a result of a
Termination Event). Such amount will be paid together with (to the
extent permitted under applicable law) interest thereon (before as well
as after judgment), from (and including) the relevant Early Termination
Date to (but excluding) the date such amount is paid, at the Applicable
Rate. Such interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination results from an Event
of Default:--
(1) First Method and Market Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A)
the sum of the Settlement Amount (determined by the
Non-defaulting Party) in respect of the Terminated Transactions
Transactions and the Unpaid Amounts owing to the Non-defaulting
Party over (B) the Unpaid Amounts owing to the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply,
the Defaulting Party will pay to the Non-defaulting Party, if a
positive number, the Non-defaulting Party's Loss in respect of
this Agreement.
(3) Second Method and Market Quotation. If the Second Method
and Market Quotation apply, an amount will be payable equal to
(A) the sum of the Settlement Amount (determined by the
Non-defaulting Party) in respect of the Terminated Transactions
and the Unpaid Amounts owing to the Non-defaulting Party less
(B) the Unpaid Amounts owing to the Defaulting Party. If that
amount is a positive number, the Defaulting Party will pay it to
the Non-defaulting party; if it is a negative number, the
Non-defaulting Party will pay the absolute value of that amount
to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss
apply, an amount will be payable equal to the Non-defaulting
Party's Loss in respect of this Agreement. If that amount is a
positive number, the Defaulting Party will pay it to the
Non-defaulting Party; if
7
<PAGE>
it is a negative number, the Non-defaulting Party will pay the
absolute value of that amount to the Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results from a
Termination Event:--
(1) One Affected Party. If there is one Affected Party, the
amount payable will be determined in accordance with Section
6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4),
if Loss applies, except that, in either case, references to the
Defaulting Party and to the Non-defaulting Party will be deemed
to be references to the Affected Party and the party which is
not the Affected Party, respectively, and, if Loss applies and
fewer than all the Transactions are being terminated, Loss shall
be calculated in respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two Affected
Parties: --
(A) If Market Quotation applies, each party will
determine a Settlement Amount in respect of the
Terminated Transactions, and an amount will be
payable equal to (I) the sum of (a) one-half of the
difference between the Settlement Amount of the party
with the higher Settlement Amount ("X") and the
Settlement Amount of the party with the lower
Settlement Amount ("Y") and (b) the Unpaid Amounts
owing to X less (II) the Unpaid Amounts owing to Y;
and
(B) If Loss applies, each party will determine its Loss
in respect of this Agreement (or, if fewer than all
the Transactions are being terminated, in respect of
all Terminated Transactions) and an amount will be
payable equal to one-half of the difference between
the Loss of the party with the higher Loss ("X") and
the Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to
X; if it is a negative number, X will pay the absolute value
of that amount to Y.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies
in respect of a party, the amount determined under this Section 6(e)
will be subject to such adjustments as are appropriate and permitted by
law to reflect any payments or deliveries made by one party to the
other under this Agreement (and retained by such other party) during
the period from the relevant Early Termination Date to the date for
payment determined under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies
an amount recoverable under this Section 6(e) is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for the
loss of bargain and the loss of protection against future risks and
except as otherwise provided in this Agreement neither party will be
entitled to recover any additional damages as a consequence of such
losses.
8
<PAGE>
7. TRANSFER
Neither this Agreement nor any interest or obligation in or under this Agreement
may be transferred (whether by way of security or otherwise) by either party
without the prior written consent of the other party, except that: --
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in
any amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including
by facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of
each Transaction from the moment they agree to those terms (whether
orally or otherwise). A Confirmation shall be entered into as soon as
practicable and may be executed and delivered in counterparts
(including by facsimile transmission) or be created by an exchange of
telexes or by an exchange of electronic messages on an electronic
messaging system, which in each case will be sufficient for all
purposes to evidence a binding supplement to this Agreement. The
parties will specify therein or through another effective means that
any such counterpart, telex or electronic message constitutes a
Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power
or privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
9
<PAGE>
9. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees,
incurred by such other party by reason of the enforcement and protection of its
rights under this Agreement or any Credit Support Document to which the
Defaulting Party is a party or by reason of the early termination of any
Transaction, including, but not limited to, costs of collection.
10. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on the date
it is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received;
(iii) if sent by facsimile transmission, on the date that transmission
is received by a responsible employee of the recipient in legible form
(it being agreed that the burden of proving receipt will be on the
sender and will not be met by a transmission report generated by the
sender's facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or
the equivalent (return receipt requested), on the date that mail is
delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that
electronic message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
11. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating
to this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this
Agreement is expressed to be governed by English law, or to the
non-exclusive jurisdiction of the courts of the State of New York and
the United States District Court located in the Borough of Manhattan in
New York City, if this Agreement is expressed to be governed by the
laws of the State of New York; and
(ii) waives any objection which it may have at any time to the laying
of venue of any Proceedings brought in any such court, waives any claim
that such Proceedings have been brought in an inconvenient forum and
further waives the right to object, with respect to such Proceedings,
that such court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined
10
<PAGE>
in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any
modification, extension or re-enactment thereof for the time being in force) nor
will the bringing of Proceedings in any one or more jurisdictions preclude the
bringing of Proceedings in any other jurisdiction.
(c) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest
extent permitted by applicable law, with respect to itself and its revenues and
assets (irrespective of their use or intended use), all immunity on the grounds
of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
12. DEFINITIONS
As used in this Agreement:--
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, all Transactions affected by the occurrence of such
Termination Event and (b) with respect to any other Termination Event, all
Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"APPLICABLE RATE" means:--
(a) in respect of obligations payable or deliverable (or which would have
been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of
either party from and after the date (determined in accordance with Section
6(d)(ii)) on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which
would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the
Non-default Rate; and
(d) in all other cases, the Termination Rate.
"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as
such in this Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iii).
11
<PAGE>
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"ILLEGALITY" has the meaning specified in Section 5(b).
"LAW" includes any treaty, law, rule or regulation and "LAWFUL" and "UNLAWFUL"
will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located, (c) in
relation to any notice or other communication, including notice contemplated
under Section 5(a)(i), in the city specified in the address for notice provided
by the recipient and, in the case of a notice contemplated by Section 2(b), in
the place where the relevant new account is to be located and (d) in relation to
Section 5(a)(v)(2), in the relevant locations for performance with respect to
such Specified Transaction.
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, an amount that party reasonably
determines in good faith to be its total losses and costs (or gain, in which
case expressed as a negative number) in connection with this Agreement or that
Terminated Transaction or group of Terminated Transactions, as the case may be,
including any loss of bargain, cost of funding or, at the election of such party
but without duplication, loss or cost incurred as a result of its terminating,
liquidating, obtaining or reestablishing any hedge or related trading position
(or any gain resulting from any of them). Loss includes losses and costs (or
gains) in respect of any payment or delivery required to have been made
(assuming satisfaction of each applicable condition precedent) on or before the
relevant Early Termination Date and not made, except, so as to avoid
duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does
not include a party's legal fees and out-of-pocket expenses referred to under
Section 9. A party will determine its Loss as of the relevant Early Termination
Date, or, if that is not reasonably practicable, as of the earliest date
thereafter as is reasonably practicable. A party may (but need not) determine
its Loss by reference to quotations of relevant rates or prices from one or more
leading dealers in the relevant markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that date. For this
purpose, Unpaid Amounts in respect of the Terminated Transaction or group of
Terminated Transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after
that Early Termination Date is to be included. The Replacement Transaction would
be subject to such documentation as such party and the Reference Market-maker
may, in good faith, agree. The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
reasonably practicable as of the same day and time (without regard to different
time zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then
12
<PAGE>
one of such quotations shall be disregarded. If fewer than three quotations are
provided, it will be deemed that the Market Quotation in respect of such
Terminated Transaction or group of Terminated Transactions cannot be determined.
"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"SET-OFF" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of:--
(a) the Market Quotations (whether positive or negative) for each
Terminated Transaction or group of Terminated Transactions for which a Market
Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference
to any Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"SPECIFIED ENTITY" has the meaning specified in the Schedule.
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
13
<PAGE>
"TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"TERMINATION EVENT" means Illegality or, if specified to be applicable, a Credit
Event Upon Merger or an Additional Termination Event.
"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or performed to
(but excluding) such Early Termination Date, at the Applicable Rate. Such
amounts of interest will be calculated on the basis of daily compounding and the
actual number of days elapsed. The fair market value of any obligation referred
to in clause (b) above shall be reasonably determined by the party obliged to
make the determination under Section 6(e) or, if each party is so obliged, it
shall be the average of the fair market values reasonably determined by both
parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
KEYBANK NATIONAL ASSOCIATION DYNAMIC MATERIALS CORPORATION
- - ------------------------------------- ---------------------------------------
(Name of Party) (Name of Party)
By: /s/ Linda L. Kelly By: /s/ Richard A. Santa
------------------------------ ---------------------------
Name: Linda L. Kelly Name: Richard A. Santa
Title: Vice President Title: VP-Finance & CFO
Date: Sept. 15 1998 Date: 9/17/98
14
<PAGE>
SCHEDULE TO THE MASTER AGREEMENT
DATED AS OF SEPTEMBER 15, 1998
between KEYBANK NATIONAL ASSOCIATION and DYNAMIC MATERIALS CORPORATION
("Party A") ("Party B")
PART 1. TERMINATION PROVISIONS.
(a) "SPECIFIED ENTITY" means in relation to Party A for the purpose of:
Section 5(a)(v), NONE
--------------------------------------------------------
Section 5(a)(vi), NONE
--------------------------------------------------------
Section 5(a)(vii), NONE
--------------------------------------------------------
Section 5(b)(ii), NONE
--------------------------------------------------------
and in relation to Party B for the purpose of:
Section 5(a)(v), ANY CURRENT OR FUTURE AFFILIATE OF PARTY B
--------------------------------------------------------
Section 5(a)(vi), ANY CURRENT OR FUTURE AFFILIATE OF PARTY B
--------------------------------------------------------
Section 5(a)(vii), ANY CURRENT OR FUTURE AFFILIATE OF PARTY B
--------------------------------------------------------
Section 5(b)(ii), ANY CURRENT OR FUTURE AFFILIATE OF PARTY B
--------------------------------------------------------
(b) "SPECIFIED TRANSACTION" will have the meaning specified in Section 12 of
this Agreement.
(c) The "CROSS DEFAULT" provisions of Section 5(a)(vi) will apply to Party B.
(d) "SPECIFIED INDEBTEDNESS" will have the meaning specified in Section 12 of
this Agreement.
(e) "THRESHOLD AMOUNT" means $100,000.
(f) The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(ii) will apply
to Party B.
(g) The "AUTOMATIC EARLY TERMINATION" provision of Section 6(a) will apply to
Party B.
(h) PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e) of this
Agreement: - The Second Method and Market Quotation will apply.
(i) ADDITIONAL TERMINATION EVENT. For the purpose of Section 5(b) (iii) of
this Agreement, it shall be an "Additional Termination Event" with Party B
being the Affected Party if any Credit Support Document expires,
terminates, or fails or ceases to be in full force and effect for the
purpose of this Agreement in accordance with its terms prior to the
satisfaction of all obligations of Party B under each Transaction.
Page 1 of 3
<PAGE>
SCHEDULE TO MASTER AGREEMENT
PART 2. AGREEMENT TO DELIVER DOCUMENTS.
For the purpose of Section 4(a) of this Agreement, Party B agrees to deliver the
following documents:
(a) A certificate of an authorized officer of Party B evidencing the necessary
corporate authorizations, resolutions, and approvals with respect to the
execution, delivery and performance of this Agreement, and certifying the
names, true signatures, and authority of the officer(s) signing this
Agreement and executing Transactions hereunder.
(b) Quarterly and annual financial statements when requested by Party A.
PART 3. MISCELLANEOUS.
(a) ADDRESSES FOR NOTICES: For the purpose of Section 10(a) of this Agreement
Address for notices or communications to Party A:
Address: 127 PUBLIC SQUARE, OH-01-27-0405, CLEVELAND, OHIO 44114
-----------------------------------------------------------------
Attention: INTEREST RATE RISK MANAGEMENT
---------------------------------------------------------------
Facsimile No.: (216) 689-4737 Telephone No: 303-320-5053
----------------- -----------------
Address for notices or communications to Party B:
Address: 551 ASPEN RIDGE DRIVE, LAFAYETTE, CO 80026
-----------------------------------------------------------------
Attention: RICK SANTA, CFO
---------------------------------------------------------------
Facsimile No.: 303-604-3948 Telephone No: 303-604-3938
----------------- -----------------
(b) CALCULATION AGENT. The Calculation Agent is Party A.
(c) CREDIT SUPPORT DOCUMENT: Reimbursement Agreement between Party A and Party
B dated September 1, 1998. Security Agreement between Party A and Party B
dated September 1, 1998. Open-End Mortgage Deed and Security Agreement
between Party A and Party B dated September 1, 1998.
(d) CREDIT SUPPORT PROVIDER. None.
(e) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of New York without reference to
choice of law doctrine.
(f) DEFINITIONS. Section 12 is modified as follows:
(i) "Default Rate" means Prime +2%.
(g) PAYMENTS.
Party A will make payments to Party B by transfer to the account of
Party B at KeyBank National Association (ACCOUNT NUMBER: PLEASE
PROVIDE).
Page 2 of 3
<PAGE>
SCHEDULE TO MASTER AGREEMENT
Party B will make payments to Party A by transfer from the account of
Party B at KeyBank National Association (ACCOUNT NUMBER: PLEASE
PROVIDE), and Party A is irrevocably authorized to debit such account
for each such payment (it being understood that Party B will at all
times maintain sufficient balances in such account for such
purposes).
PART 4. OTHER PROVISIONS.
ADDITIONAL REPRESENTATION. Party B represents to Party A (which representation
will be deemed to be repeated by Party B on each date on which a Transaction is
entered into) that it, or any Credit Support Provider, has either: (i) total
assets exceeding $10,000,000, or (ii) a net worth of $1,000,000, and is entering
into the Transaction in connection with the conduct of its business or to manage
the risk of an asset or liability owned or incurred, or reasonably likely to be
owned or incurred in the conduct of its business.
EVENT OF DEFAULT. Each Party agrees to notify the other party of the occurrence
of any Event of Default or Potential Event of Default immediately upon learning
of the occurrence thereof.
DISCLAIMER. In entering into this Agreement, Party B understands that there is
no assurance as to the direction in which interests rates in financial markets
may move in the future and that Party A makes no covenant, representation, or
warranty in this regard or in regard to the suitability of the terms of the
Agreement or any Transaction to the particular needs and financial situation of
Party B. Party B represents, which representation shall be deemed repeated with
respect to and at the time of each Transaction, that it has had the opportunity,
independently of Party A and Party A's affiliates, officers, employees, and
agents, to consult its own financial advisors and has determined that it is in
Party B's interest to enter into the Agreement and any Transaction.
KEYBANK NATIONAL ASSOCIATION DYNAMIC MATERIALS CORPORATION
- - ------------------------------------- ---------------------------------------
(Name of Party) (Name of Party)
By: /s/ Linda L. Kelly By: /s/ Richard A. Santa
------------------------------ ---------------------------
Name: Linda L. Kelly Name: Richard A. Santa
Title: Vice President Title: VP-Finance & CFO
Page 3 of 3
SEPARATION AGREEMENT
This SEPARATION AGREEMENT ("Agreement") is entered into by and between
PAUL LANGE, an individual ("MR. LANGE"), and DYNAMIC MATERIALS CORPORATION, a
Delaware corporation (the "COMPANY") (collectively referred to herein as the
"PARTIES"), as of September 1, 1998 (the "RESIGNATION DATE").
RECITALS
WHEREAS, Mr. Lange has agreed to resign as a member of the Board of
Directors of the Company, and as the President and Chief Executive Officer of
the Company effective as of the Resignation Date and as an employee of the
Company effective as of October 4, 1998 (the "EMPLOYMENT SEPARATION DATE");
WHEREAS, the Company has accepted Mr. Lange's resignation and
wishes to provide Mr. Lange with certain benefits, in consideration of his
service to the Company and the promises and covenants of Mr. Lange contained
herein;
WHEREAS, Mr. Lange and the Company desire finally to compromise, settle
and discharge all claims, controversies, demands, actions or causes of action
which Mr. Lange, his family or agents may have or claim to have against the
Company.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants and
other good and valuable consideration contained herein, it is hereby agreed by
and between the Parties hereto as follows:
1. ACCRUED VACATION AND PERSONAL DAYS. The Parties acknowledge and
agree that the Company has paid Mr. Lange concurrently with the signing of this
Agreement, all of his accrued vacation and personal days due and owed him
through the Employment Separation Date, and that he has not, and will not,
accrue any additional vacation or personal days after the Employment Separation
Date. Mr. Lange acknowledges that he is not entitled to any payment in respect
of sick days.
2. PAYMENTS AND BENEFITS. The Company agrees to provide Mr. Lange
with the following as part of this Agreement:
(a) PAYMENTS. In lieu of any and all other benefits or payments that
might be due or payable to Mr. Lange in connection with the termination of his
employment with the Company, on the Effective Date (as defined in Section 6
hereof), the Company will pay to Mr. Lange a lump sum payment equivalent to
seven (7) weeks of Mr. Lange's current salary.
(b) HEALTH INSURANCE. To the extent permitted by the federal COBRA
law and by the Company's current group health insurance policies, Mr. Lange will
be eligible to continue health insurance benefits for himself and his family for
which the Company will pay until December 31, 1998 at which time the policy
shall convert to an individual policy. The Parties
<PAGE>
acknowledge that Mr. Lange has already been provided with a separate timely
notice of his COBRA rights.
(c) VEHICLE LEASE. With respect to the vehicle leased by the Company
for use by Mr. Lange, Mr. Lange will have this option: (1) Mr. Lange may
purchase the vehicle pursuant to the terms and conditions contained in the
lease; or (2) Mr. Lange may agree, subject to the approval of the bank holding
the lease, to assume lease payments from the Company. Mr. Lange must choose one
option within thirty (30) days of the Resignation Date. During such period Mr.
Lange will be the sole driver of the vehicle, except in cases of emergency. A
violation of the foregoing will result in the vehicle immediately being returned
to the Company.
(d) OTHER COMPENSATION OR BENEFITS. Mr. Lange acknowledges that,
except as expressly provided in this Agreement, he will not receive any
additional compensation, bonus, severance or benefits after the Resignation
Date.
(e) STOCK OPTIONS. All stock options vested as of the Resignation
Date will continue to be exercisable under the standard terms and conditions of
the Company's applicable option plan
3. WITHHOLDING ISSUES. The Parties agree that the Company will
withhold all required federal, state and local income taxes and any other
required withholdings as necessary from all payments under this Agreement. Mr.
Lange acknowledges that he will be entirely responsible for payment of any taxes
which may be due on the payments to be made to him under this Agreement. He
acknowledges and understands that the Company makes no representation or
warranty with respect to the tax treatment by any local, state or federal tax
authority of such payments. Mr. Lange agrees to indemnify the Company and hold
it harmless with regard to any payment of tax, penalty or interest which the
Company may be required to pay by any tax authority with respect to payments to
be made to him under this Agreement.
4. EXPENSE REIMBURSEMENT. Mr. Lange will be entitled to receive any
expense reimbursement, as of yet unpaid, for reasonable and approved business
expenses incurred through the Resignation Date. Signed expense vouchers for all
claimed reimbursement of expenses have been duly submitted to the Company or
will have been received by the Company within thirty (30) days of the
Resignation Date.
5. MUTUAL RELEASES
(a) RELEASE BY MR. LANGE. Mr. Lange, both in his individual capacity
and as a shareholder and prior officer and director of the Company, and on
behalf of his family, relatives, heirs, devisees, estate, agents and assigns,
hereby (i) releases, acquits, and forever discharges the Company, its officers,
directors, agents, servants, employees, attorneys, shareholders, successors,
assigns and affiliates, of and from any and all claims, liabilities, demands,
causes of action, costs, expenses, attorneys fees, damages, indemnities and
obligations of every kind and nature, in law, equity, or otherwise, known and
unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or
in any way related to agreements, events, acts or conduct at any time prior to
the Effective Date (as defined below) of this Agreement, including, but not
limited to: all such claims and demands directly or indirectly arising out of or
in any way connected
2
<PAGE>
with the Company's employment of Mr. Lange or the termination of that
employment; claims or demands related to salary, bonuses, commissions, stock,
stock options, vacation pay, fringe benefits, severance pay, expense
reimbursements, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Americans with
Disabilities Act of 1990; the federal Age Discrimination in Employment Act of
1967, as amended ("ADEA"); Colorado's Labor and Employment Code; the Colorado
Anti- Discrimination Act of 1957, as amended; tort law; contract law; wrongful
discharge; discrimination; fraud; defamation; emotional distress; breach of the
implied covenant of good faith and fair dealing; interference with prospective
economic advantage, and interference with contract, and (ii) agrees to refrain
and forebear from asserting or otherwise bringing against the Company any such
claims. This release shall not apply with respect to the indemnification
provided by the Company to Mr. Lange to the full extent permitted by Delaware
law for acts committed by Mr. Lange within the scope of his employment with the
Company.
(b) CONDITIONAL RELEASE BY THE COMPANY. Except as to specific
obligations incurred by Mr. Lange in this Agreement and subject to subsection
(c) of this Section, the Company hereby (i) releases, acquits, and forever
discharges Mr. Lange, both in his individual capacity and as a shareholder and
prior officer of the Company, and his heirs, successors and assigns, of and from
any and all known claims, liabilities, demands, causes of action, costs,
expenses, attorneys fees, damages, indemnities and obligations of every kind and
nature, in law, equity, or otherwise, arising out of or in any way related to
agreements, events, acts or conduct at any time prior to the Effective Date (as
defined below) of this Agreement (the "KNOWN CLAIMS"), including, but not
limited to: all such claims and demands directly or indirectly arising out of or
in any way connected with the Company's employment of Mr. Lange or the
termination of that employment, or Mr. Lange's serving on the Company's Board of
Directors or resignation therefrom; claims pursuant to any federal, state or
local law or cause of action; tort law; contract law; fraud; defamation; breach
of the implied covenant of good faith and fair dealing; interference with
prospective economic advantage, and interference with contract, and (ii) agrees
to refrain and forebear from asserting or otherwise bringing against Mr. Lange
any such Known Claims.
(c) CONDITIONAL RELEASE TRIGGER EVENTS. From and after (90) days
following the Effective Date, during which the Company will conduct an
investigation relating to Mr. Lange (the "INVESTIGATION"), the Company hereby
(i) releases, acquits, and forever discharges Mr. Lange, both in his individual
capacity and as a shareholder and prior officer of the Company, and his heirs,
successors and assigns, of and from any and all claims, liabilities, demands,
causes of action, costs, expenses, attorneys fees, damages, indemnities and
obligations of every kind and nature, in law, equity, or otherwise, known or
unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or
in any way related to agreements, events, acts or conduct at any time prior to
the Effective Date (as defined below) of this Agreement (the "UNKNOWN CLAIMS"),
including, but not limited to: all such claims and demands directly or
indirectly arising out of or in any way connected with the Company's employment
of Mr. Lange or the termination of that employment, or Mr. Lange's serving on
the Company's Board of Directors or resignation therefrom; claims pursuant to
any federal, state or local law or cause of action; tort law; contract law;
fraud; defamation; breach of the implied covenant of good faith and fair
dealing; interference with prospective economic advantage, and interference with
contract, and (ii) agrees
3
<PAGE>
to refrain and forebear from asserting or otherwise bringing against Mr. Lange
any such Unknown Claims (the "TOTAL RELEASE"); provided, however, that the Total
Release shall not apply to activities and incidents revealed, uncovered or
otherwise determined by the Investigation ("DISCOVERED ITEMS").
(d) INDEMNIFICATION. Mr. Lange agrees to cooperate with the Company
in connection with the Investigation in all reasonable respects. The Company
will notify Mr. Lange of any Discovered Items promptly after the ninety (90) day
period. The Total Release will apply at the end of the ninety (90) day period
except to the extent of any such Discovered Items, and any such Discovered Items
will be subject to indemnification as follows. Mr. Lange agrees to promptly
indemnify and otherwise reimburse the Company for all claims based on any
Discovered Items, if and to the extent any such claim is judicially determined
in favor of the Company, together with associated legal and professional fees
and costs, including those related to the portion of the Investigation that gave
rise to the particular Discovered Item.
6. ADEA WAIVER. Mr. Lange specifically acknowledges that he is
knowingly and voluntarily waiving and releasing any rights he may have under the
ADEA. He also acknowledges that the consideration given for the waiver and
release in the preceding paragraph is in addition to anything of value to which
he was already entitled. He further acknowledges that he has been advised by
this writing that: (a) his waiver and release do not apply to any claims that
may arise after the Effective Date of this Agreement; (b) he should consult an
attorney prior to executing this Agreement; (c) he has twenty-one (21) days
within which to consider this Agreement (although he may choose to voluntarily
execute this Agreement earlier); (d) he has seven (7) days following the
execution of this Agreement to revoke the Agreement; (e) this Agreement shall
not be effective until the date upon which the revocation period has expired,
which shall be the eighth day after this Agreement is executed by Mr. Lange,
provided that the Company has also signed the Agreement by that date (the
"EFFECTIVE DATE").
7. FORM OF RESIGNATION. Mr. Lange agrees to resign as a member of
the Board of Directors of the Company and as President and Chief Executive
Officer of the Company by signing the form of resignation attached hereto as
Exhibit A.
8. PUBLIC STATEMENTS.
(a) Mr. Lange will not make any public statement or private statement
likely to be publicly disseminated that defames or otherwise disparages the
Company, any of its directors, officers, employees or its business, including
past and present actions and decisions of the Company.
(b) Neither the Company nor any of its representatives or affiliates
will make any public statement or private statement likely to be publicly
disseminated that defames of otherwise disparages Mr. Lange or his performance
as the President and Chief Executive Officer of the Company or as a member of
the Board of Directors.
9. OTHER STATEMENTS. Mr. Lange will not communicate in any way with
any stockholders, customers, suppliers or other interested parties of the
Company, including investment analysts, regarding the Company or its business.
If any such parties contact Mr.
4
<PAGE>
Lange regarding the Company or its business, Mr. Lange will state that he has
"no comment" and immediately refer such parties to Mr. Mark Jarman ("MR.
JARMAN").
10. SURRENDER OF PROPERTY. Mr. Lange will return all files, records,
lists, administrative procedure guidelines, literature, products, equipment,
marketing material and all other materials owned by the Company which are used
by Mr. Lange or in the custody of Mr. Lange, including, but not limited to, all
personal computers, facsimile machines, other office equipment and rugs used or
stored in Mr. Lange's residence and all sporting event tickets, including
without limitation, the return of each specific item listed on Exhibit B
attached hereto or the equivalent cash payment listed on such Exhibit B. All
such items must be returned within two (2) days of the Resignation Date. Any
tickets held in Mr. Lange's name shall be transferred to the Company, along with
all possible priority rights in such tickets.
11. COMPANY PREMISES. Mr. Lange agrees not to enter the Company's
premises for any reason after the Resignation Date. If Mr. Lange requires access
to satisfy Paragraph 10 of this Agreement or to retrieve personal property, such
visits must occur after the Company's normal business hours and Mr. Lange must
obtain permission from Mr. Jarman, at least one (1) day in advance of such
proposed visit and be accompanied by two members of the Board of Directors and
Mr. Jarman onto the Company's premises.
12. REIMBURSEMENT OBLIGATIONS. Mr. Lange agrees to fully reimburse
the Company in the amount of Ninety Three Thousand Eighty-Five Dollars ($93,085)
for which he hereby acknowledges and agrees that he owes to the Company in
respect of certain advances and benefits received. Mr. Lange will repay this
amount to the Company pursuant to the terms of the Promissory Note in the form
attached hereto as Exhibit C. As of November 1, 1998, if Mr. Lange has not
satisfied the obligations of the Promissory Note, he may transfer Company stock
currently owned by him in an amount sufficient to satisfy the principal and
interest of the Promissory Note. The price of such stock shall be the average
price of the Company's stock for the ten (10) days prior to the transfer.
13. SECURITIES LAWS. Mr. Lange acknowledges that he must comply with
all federal and state securities laws upon selling his stock into the open
market.
14. STANDSTILL. Except for capital stock owned and options vested as
of the Resignation Date, Mr. Lange shall not purchase, acquire or own, or offer
or agree to purchase, acquire or own, directly or indirectly, any capital stock
of the Company (or enter into any arrangements or understandings with any third
party to do any of the foregoing or engage on behalf of any third party to do
any of the foregoing). The provision of this Section 13 shall cease to have any
further force or effect two (2) years from the Resignation Date. Mr. Lange shall
immediately notify the Secretary of the Company in the event he is contacted by
any third party regarding any activities enumerated in this section or the like.
15. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the heirs, family, personal representatives, successors and
assigns of Mr. Lange, and shall bind and inure to the benefit of Company, and
its successors and assigns.
5
<PAGE>
16. AUTHORITY. The Company represents and warrants that the
undersigned has the authority to act on behalf of the Company and to bind the
Company, and all who may claim through it, to the terms and conditions of this
Agreement. Mr. Lange represents and warrants that he has the capacity to act on
his own behalf, on his family's behalf and on behalf of all others who might
claim through him, to bind them to the terms and conditions of this Agreement.
Each Party warrants and represents that there are no liens or claims of lien or
assignments in law or equity or otherwise of or against any of the claims or
causes of action released herein.
17. CONFIDENTIALITY. The provisions of this Agreement shall be held
in strictest confidence by Mr. Lange and by the Company and shall not be
publicized or disclosed in any manner whatsoever. Notwithstanding the
prohibition in the preceding sentence: (a) Mr. Lange may disclose this
Agreement, in confidence, to his immediate family and to third parties in
connection with his transition arrangements, but only to the extent necessary;
(b) the Parties may disclose this Agreement in confidence to their respective
attorneys, accountants, auditors, tax preparers, and financial advisors; (c) the
Company may disclose this Agreement as necessary to fulfill standard or legally
required corporate reporting or disclosure requirements, and in connection with
third party due diligence related to the Company's financing, licensing,
strategic partnering and/or business combination activities, and within the
Company on a "need to know" basis (e.g. to its Board of Directors); and (d) the
Parties may disclose this Agreement insofar as such disclosure may be necessary
to enforce its terms or as otherwise required by law or legal process.
18. CONFIDENTIALITY AND ASSIGNMENT OF INVENTIONS. Mr. Lange agrees
that as a key employee of the Company he is required to have executed a Key
Employee Proprietary Information and Inventions Agreement (the "PROPRIETARY
INFORMATION AGREEMENT") in the form attached hereto as Exhibit D. Mr. Lange
further agrees that if he can not produce an executed Proprietary Information
Agreement within two (2) days of the Resignation Date, he will sign the form
attached as Exhibit D.
19. MUTUALITY OF DRAFTING. For purposes of construction, this
Agreement shall be deemed to have been jointly drafted by the Parties and their
counsel and any ambiguity shall not be construed against either Party.
20. ENTIRE AGREEMENT. This Agreement constitutes the complete, final,
and exclusive embodiment of the entire agreement between the Parties with
respect to the subject matter hereof and completely supersedes any and all prior
agreements between the Parties, including, but not limited to, all employment
agreements between the Parties, and shall be specifically enforceable. This
Agreement is executed without reliance upon any prior negotiation, promise,
agreement, warranty or representation, written or oral, by any Party or any
representative of any Party other than those expressly contained herein. Each
Party has carefully read this Agreement, has been afforded the opportunity to be
advised of its meaning and consequences by his or its respective attorney, and
signs the same of his or its own free will. This Agreement may not be amended or
modified except in a writing signed by both Mr. Lange and a duly authorized
officer of the Company.
21. SEVERABILITY. If any provision of this Agreement is determined to
be invalid or unenforceable, in whole or in part, this determination will not
affect any other provision of this
6
<PAGE>
Agreement and the provision in question shall be modified by the court so as to
be rendered enforceable.
22. PARAGRAPH HEADINGS. The paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement
23. NO ADMISSIONS. It is understood and agreed by Mr. Lange and the
Company that this Agreement represents a compromise settlement of various
matters, and that the promises and payments in consideration of this Agreement
shall not be construed to be an admission of any liability or obligation by
either Party to the other Party or to any other person.
24. APPLICABLE LAW. The Agreement shall be deemed to have been
entered into and shall be construed and enforced in accordance with the laws of
the state of Colorado as applied to contracts made and to be performed entirely
within Colorado.
25. COSTS AND FEES. Except as specifically set forth herein, the
Parties will bear their own costs, expenses, and attorneys' fees, whether
taxable or otherwise, incurred in or arising out of or in any way related to the
negotiation, preparation or review of this Agreement. If any Party brings an
action to enforce this Agreement, the prevailing party in such action shall be
entitled to recover his or its attorneys fees or costs, in addition to any other
relief to which that Party may be entitled.
26. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
27. NOTICES. Notices to Mr. Lange will be sent to him at
4588 Sunshine Canyon Drive, Boulder, Colorado 80302. Notices to the Company
shall be sent to Dynamic Materials Corporation, 551 Aspen Ridge Drive,
Lafayette, Colorado 80026, Attn: Richard A. Santa, Chief Financial Officer.
28. EFFECT OF BREACH OF RELEASE. In the event Mr. Lange breaches any
provisions of this Agreement, he will be in breach of the entire Agreement and
the release in Section 5(b) hereof will be automatically revoked and terminated.
7
<PAGE>
IN WITNESS WHEREOF, the Parties have duly authorized and caused this
Agreement to be executed.
PAUL LANGE
Dated: , 1998 By:
--------------- --------------------------
DYNAMIC MATERIAL CORPORATION
ON BEHALF OF THE
BOARD OF DIRECTORS
Dated: , 1998 By:
--------------- --------------------------
George W. Morgenthaler
By:
--------------------------
David E. Bartlett
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
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<CURRENT-ASSETS> 10,197,116
<PP&E> 10,581,141
<DEPRECIATION> 3,655,692
<TOTAL-ASSETS> 25,475,864
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