SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): MARCH 18, 1998
DYNAMIC MATERIALS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 0-8328 84-0608431
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(State or other jurisdiction (Commission (IRS Employee
of incorporation) File Number) Identification No.)
551 ASPEN RIDGE DRIVE, LAFAYETTE, CO 80026
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 665-5700
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(Former name or former address, if changed since last report)
EXHIBIT INDEX APPEARS ON PAGE 5
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 18, 1998, the Registrant acquired certain assets of Spin Forge,
LLC. The assets acquired were used by Spin Forge in the manufacture, selling and
marketing of metal formed products, including tactical missile motor cases and
titanium pressure vessels for the commercial aerospace and defense industries
(the "Business"). The Registrant anticipates using the assets acquired for
similar purposes. The assets acquired consisted principally of inventories,
machinery, equipment (including computer equipment), and certain trade names
used in the Business, as well as a lease of the facilities at which the Business
is conducted.
The purchase price of $3,860,411 was paid by the delivery of $2,351,789 in
cash, the assumption of certain liabilities in the amount of $1,058,822 and the
delivery of 50,000 shares of the Registrant's Common Stock valued at $8.996 per
share or the average closing price of the Registrant's Common Stock over the 45
day period immediately preceding the closing. The purchase price is subject to
post-closing adjustment based upon subsequent accounting adjustments for
inventory and assumed liabilities. The amount of the post-closing adjustment (to
be determined within 60 days of closing) is not anticipated to be material. In
addition, the Registrant paid $10,000 at the closing for an option to purchase
the real property at which the operations of the Business are conducted at a
purchase price of $2,880,000 (subject to certain adjustments), which option may
be exercised under certain conditions until January 2002, subject to the
Registrant's right to extend the option under certain conditions.
There are no material relationships between the directors, officers, or
affiliates of the parties to this transaction. Joseph Allwein, President of Spin
Forge, LLC, became the Vice President and General Manager of the Spin Forge
Division of the Registrant upon the closing of the transaction.
The source of funds used for the acquisition included $2,351,789 of
borrowing from KeyBank of Colorado under a revolving line of credit made in the
ordinary course of business.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of business acquired.
It is not practicable to provide required financial statements at the date
of the Form 8-K. The Registrant shall provide an audited balance sheet as of
December 31, 1997 and an audited statement of income and cash flow for the year
ended December 31, 1997. The indicated financial statements will be filed not
later than 60 days after this report on Form 8-K must be filed.
(b) Pro forma financial information.
In addition, pro forma financial statements complying with Article 11 of
Regulation S-X will be filed not later than 60 days after this report on Form
8-K must be filed.
(c) Exhibits.
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2.1 Asset Purchase Agreement, dated as of March 18, 1998, between the
Registrant, Spin Forge, LLC, Joseph Allwein and Darlene Bauer
Allwein.
10.1 Option Agreement, dated as of March 18, 1998, between the Registrant
and Spin Forge, LLC.
10.2 Operating Lease, dated as of March 18, 1998, between the Registrant
and Spin Forge, LLC.
10.3 Loan Agreement, dated as of March 18, 1998, between the Registrant
and Spin Forge, LLC.
10.4 Personal Services Agreement, dated as of March 18, 1998, between the
Registrant and Joseph Allwein.
10.5 Stock Agreement, dated as of March 18, 1998, between the Registrant
and Spin Forge, LLC.
10.6 Stock Agreement, dated as of March 18, 1998, between Joseph Allwein
and the Registrant.
10.7 Non-Competition Agreement, dated as of March 18, 1998, between
Joseph Allwein and the Registrant.
10.8 Master Promissory Note, dated as of March 18, 1998, by Spin Forge,
LLC.
10.9 Personal Guaranty, dated as of March 18, 1998, between the
Registrant, Joseph Allwein and Darleen Bauer Allwein.
99.1 Press release dated March 18, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DYNAMIC MATERIALS CORPORATION
(Registrant)
Date April 1, 1998 By: /S/ RICHARD A. SANTA
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Name: Richard A. Santa
Title: Vice President, Finance, Chief
Financial Officer and Secretary
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EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
2.1 Asset Purchase Agreement, dated as of March 18, 1998, between the
Registrant, Spin Forge, LLC, Joseph Allwein and Darlene Bauer
Allwein.
10.1 Option Agreement, dated as of March 18, 1998, between the Registrant
and Spin Forge, LLC.
10.2 Operating Lease, dated as of March 18, 1998, between the Registrant
and Spin Forge, LLC.
10.3 Loan Agreement, dated as of March 18, 1998, between the Registrant
and Spin Forge, LLC.
10.4 Personal Services Agreement, dated as of March 18, 1998, between the
Registrant and Joseph Allwein.
10.5 Stock Agreement, dated as of March 18, 1998, between the Registrant
and Spin Forge, LLC.
10.6 Stock Agreement, dated as of March 18, 1998, between Joseph Allwein
and the Registrant.
10.7 Non-Competition Agreement, dated as of March 18, 1998, between
Joseph Allwein and the Registrant.
10.8 Master Promissory Note, dated as of March 18, 1998, by Spin Forge,
LLC.
10.9 Personal Guaranty, dated as of March 18, 1998, between the
Registrant, Joseph Allwein and Darleen Bauer Allwein.
99.1 Press release dated March 18, 1998.
Dynamic Materials Corporation
Asset Purchase Agreement
among
Dynamic Materials Corporation,
Spin Forge, LLC,
Joe Allwein
and
Darleen Bauer Allwein
Dated
March 18, 1998
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TABLE OF CONTENTS
Page
1. Transfer of Assets, Payment, and Related Matters.......................1
1.1 Transfer of Assets...............................................1
1.2 Retained Assets..................................................1
1.3 Certain Assumption of Obligations and Liabilities................2
1.4 Consideration....................................................3
1.5 Escrow Arrangements..............................................5
1.6 Payment of Liabilities; Release of Liens.........................5
1.7 Allocation of Consideration......................................6
1.8 Sales and Use Taxes..............................................6
1.9 Instruments of Conveyance, Transfer and Assumption...............6
1.10 Consents and Approvals...........................................6
1.11 Seller Loan......................................................7
2. Closing................................................................7
3. Representations and Warranties by Seller and Members...................8
3.1 Organization and Standing........................................8
3.2 Corporate Power; Authorization...................................8
3.3 No Breach, Etc...................................................8
3.4 Financial Statements.............................................8
3.5 Title to Properties: Liens: Condition of Properties..............9
3.6 Taxes............................................................9
3.7 No Liabilities..................................................10
3.8 Litigation, Etc.................................................10
3.9 Patents, Trade Names and Trademarks.............................10
3.10 Compliance with Laws............................................11
3.11 Environmental Matters...........................................11
3.12 Governmental Permits............................................12
3.13 Disclosure of Material Information..............................13
3.14 Insurance.......................................................13
3.15 Inventory.......................................................14
3.16 Major Customers.................................................14
3.17 Existing Employment Contracts...................................14
3.18 Employee Benefits...............................................15
3.19 Required Consents and Approvals.................................16
3.20 Absence of Certain Changes......................................17
3.21 Product Warranty and Product Liability..........................18
3.22 Member List.....................................................18
3.23 Assets Necessary to Business....................................18
3.24 Contracts and Commitments.......................................18
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4. Representations and Warranties of Purchaser...........................20
4.1 Organization and Standing.......................................20
4.2 Corporate Power; Authorization..................................20
4.3 No Breach, Etc..................................................21
4.4 Purchase Stock..................................................21
4.5 Disclosure of Material Information..............................21
5. Closing...............................................................21
5.1 Time and Place..................................................21
5.2 Actions at Closing..............................................21
6. Post-Closing Matters..................................................24
6.1 Use of Seller's Name............................................24
6.2 Sales Tax Matters...............................................24
6.3 Finders Fees; Payments..........................................24
6.4 SEC Filings.....................................................25
6.5 Bulk Transfer Law...............................................25
7. Indemnification.......................................................25
7.1 Indemnification of Purchaser....................................25
7.2 Indemnification of Seller.......................................25
8. Indemnification Procedures............................................26
8.1 Notice..........................................................26
8.2 Third Party Claims..............................................26
8.3 Other Claims....................................................27
8.4 Calculation of Losses...........................................27
8.5 Nonexclusivity of Indemnification Remedies......................27
8.6 Minimum Damages.................................................27
9. Maximum Damages.......................................................27
10. Survival of Representations and Warranties............................28
11. Confidentiality Provisions............................................28
11.1 Obligation......................................................28
11.2 Exclusions......................................................28
11.3 Remedies........................................................28
12. Entire Agreement and Amendments; Section Headings.....................29
13. Counterparts..........................................................29
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14. Successors and Assigns................................................29
15. Applicable Law........................................................29
16. Expenses..............................................................29
17. Equitable Relief......................................................29
18. "Knowledge" Definition................................................30
19. Further Assurances....................................................30
20. Notices...............................................................30
21. Severability and Waiver...............................................31
22. Public Announcements..................................................31
23. Third Party Beneficiaries.............................................31
24. Pronouns..............................................................31
25. Attorneys' Fees.......................................................31
EXHIBITS
Exhibit A Assets
Exhibit B Assumed Liabilities
Exhibit C Bill of Sale
Exhibit D Disclosure Schedule
Exhibit E1 Non-Competition Agreement (Spin Forge, LLC)
Exhibit E2 Non-Competition Agreement (Arroyo, Gomez, Strum)
Exhibit F Personal Services Agreement
Exhibit G Operating Lease
Exhibit H Option Agreement
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Exhibit I Loan Agreement
Exhibit J Legal Description of Real Property
Exhibit K Stock Agreement
Exhibit L Stock Pledge
Exhibit M Escrow Agreement
Exhibit N Opinion of Davis, Graham & Stubbs LLP
Exhibit O Master Promissory Note
Exhibit P Adjustment Statement
Exhibit Q-1 Proprietary Information Agreement -- Key Employees
Exhibit Q-2 Proprietary Information Agreement -- All Other Employees
Exhibit R Opinion of Wolf, Rifkin & Shapiro
Exhibit S Personal Guaranty
Exhibit T Non-Competition Agreement (Allwein)
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("AGREEMENT") is entered into as of the 18th
day of March, 1998 (the "EFFECTIVE DATE") among Dynamic Materials Corporation, a
Delaware corporation ("PURCHASER"), having a principal place of business at 551
Aspen Ridge Drive, Lafayette, CO 80026, Spin Forge, LLC, a California limited
liability company ("SELLER"), having a principal place of business at 1700 East
Grand Avenue, El Segundo, California 90245 and Joe Allwein and Darleen Bauer
Allwein (each a "MEMBER"), having a principal place of business at 1700 East
Grand Avenue, El Segundo, California 90245.
RECITALS
A. Seller owns a metal fabrication business located at 1700 East Grand
Avenue, El Segundo, California 90245, and owns certain tangible and intangible
assets related to such business. That business, as Seller currently conducts it,
is referred to as the "BUSINESS."
B. Seller desires to sell such business and assets and Purchaser desires
to purchase such business and assets.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions set forth below, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties to this
Agreement hereby agree as follows:
TERMS
1. TRANSFER OF ASSETS, PAYMENT, AND RELATED MATTERS.
1.1 TRANSFER OF ASSETS. In consideration of the payment to Seller by
Purchaser pursuant to Section 1.4 below, and subject to the terms and conditions
of this Agreement, Seller hereby assigns, conveys, transfers and sells to
Purchaser as of the closing provided for in Section 2 below (the "CLOSING"), all
right, title and interest in and to all of the assets of Seller relating to the
Business, including without limitation, those tangible, intangible and contract
assets, rights and personal properties, all subject to Section 1.2 below, as
more particularly described in EXHIBIT A attached hereto and incorporated herein
by reference (collectively, the "ASSETS").
1.2 RETAINED ASSETS. The foregoing notwithstanding, Seller shall retain
and the Assets shall not include the following (collectively, the "RETAINED
ASSETS"):
a. Seller's limited liability company franchise, limited liability
company record books containing minutes of meetings of members, and such other
records as have to do exclusively with Seller's organization or capitalization
(provided, however, that Purchaser and its representatives
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shall have access to such documents at reasonable times and on reasonable notice
for the purpose of inspecting and making copies of them);
b. real property consisting of land and buildings located in Los
Angeles County, California, with a street address of 1700 East Grand Avenue, El
Segundo, California 90245, as is more particularly described in EXHIBIT J
attached hereto and by this reference incorporated herein, at which the Business
operates (collectively the "REAL PROPERTY") and which is subject to an Operating
Lease and an Option Agreement substantially in the form of EXHIBITS G and H
hereto, respectively;
c. any Materials of Environmental concern (as defined in Section
3.11(b) hereof);
d. all trade accounts receivable of Seller as of the Closing Date;
e. Seller's insurance policies;
f. that certain License Agreement, dated as of October 20, 1997, by
and between Seller and Southern California Edison Company, a California
corporation;
g. cash; and
h. Schedule 1.2.
1.3 CERTAIN ASSUMPTION OF OBLIGATIONS AND LIABILITIES. Purchaser shall not
undertake, assume or agree to perform, pay or discharge, and expressly
disclaims: (a) any and all liabilities associated with the Assets or the
Business, including liabilities associated with the Retained Assets, and (b) any
and all other liabilities, obligations or the like of or related to Seller,
except for the liabilities described on EXHIBIT B attached hereto and
incorporated herein by reference (the "ASSUMED LIABILITIES"). In addition,
except for the Assumed Liabilities, Seller shall remain fully responsible for
all liabilities or obligations arising from activities conducted on and all
conditions (including, without limitation, any environmental contamination) of
the site where the Assets are located, and all adjacent sites, including the
Real Property, and for all activities conducted off the site which relate to the
Assets or the operations in which the Assets were previously employed, but only
to the extent such liabilities or obligations arise from activities or
conditions taking place or existing prior to the Closing. Seller's
responsibility (as described in the preceding sentence) shall include, without
limitation, the responsibility to perform any and all response activities
required under any federal, state, or local law, regulation or requirement
relating to any environmental condition or circumstance, but only to the extent
such activities are required due to environmental conditions or circumstances
taking place or existing prior to the Closing.
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1.4 CONSIDERATION.
a. Subject to the terms and conditions of this Agreement, as
consideration for the Assets transferred to Purchaser hereunder, Purchaser shall
pay to Seller at the Closing the sum of Three Million Eight Hundred Sixty
Thousand Four Hundred Eleven Dollars ($3,860,411) (the "PURCHASE PRICE"). The
Purchase Price includes an estimated value of the Inventory (as defined in
Exhibit A) of $1,015,919 which estimated value is derived from the February
Balance Sheet (as defined in Subparagraph d(4) below).
b. Purchaser shall pay the Purchase Price as follows:
(1) At the Closing, the Purchase Price, less the sum of (a)
$449,800 (the "STOCK CONSIDERATION"), (b) the estimated amount of the Trade
Payables (as defined in Exhibit B) on the Closing Date as derived from the
February Balance Sheet, (c) the estimated amount of the Customer Deposits on the
Closing Date as derived from the February Balance Sheet, (d) the estimated
amount of the Accrued Liabilities (as defined in EXHIBIT B) on the Closing Date
as derived from the February Balance Sheet, (e) the Foothill Payoff, and (f) the
Hoover Payoff. The result of the foregoing calculation is referred to as the
"CASH DELIVERY." The Cash Delivery is subject to adjustment as provided in
Subparagraph c. below. The Cash Delivery shall be reduced by the Escrow Amount,
which shall be paid on the Closing Date in cash by wire transfer or certified
funds by Purchaser to the Escrow Agent as provided in Section 1.5.
(2) At the Closing, Purchaser shall deliver to Seller 50,000
shares of Purchaser Common Stock, par value $.05 per share (the "PURCHASE
STOCK"), which number of shares is subject to adjustment as provided in
Subparagraph e below. The parties agree that the "STOCK CONSIDERATION" was
determined by valuing the Purchase Stock at the closing price on the Nasdaq
National Market averaged over the 45 day period ending on the day before the
Closing; SUBJECT, HOWEVER, to a "floor" value of $400,000 and a "cap" on the
value of $600,000. The Purchase Stock shall be subject to certain restrictions
as set forth in the Stock Agreement in the form attached hereto as EXHIBIT K and
in the Stock Pledge in the form attached hereto as EXHIBIT L.
(3) At the Closing, $371,391.66 (the "FOOTHILL PAYOFF") shall
be paid to Foothill Capital Corporation ("FOOTHILL") in cash by wire transfer or
certified funds pursuant to written instructions provided to Purchaser by
Foothill at least two business days prior to Closing, all in accordance with the
terms of Section 1.6.
(4) At the Closing, $825,000 (the "HOOVER PAYOFF") shall be
paid to Hoover Group, Inc. ("HOOVER") in cash by wire transfer or certified
funds pursuant to written instructions provided to Purchaser by Hoover at least
two business days prior to Closing, all in accordance with the terms of Section
1.6.
(5) At the Closing, $100,000 (the "ESCROW AMOUNT") shall be
paid to the Escrow Agent, as defined in Section 1.5, in cash by wire transfer of
funds to be held in escrow in accordance with the terms of Section 1.5.
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c. ADJUSTMENT PROCEDURE.
(1) At the Closing, Seller shall deliver to Purchaser the
February Balance Sheet. The Cash Delivery paid at the Closing shall be derived
from the estimated values of the Inventory, Trade Payables, Customer Deposits
and Accrued Liabilities as reflected in the February Balance Sheet. Within 15
days after the Closing, Seller shall deliver to Purchaser the Closing Balance
Sheet. Seller shall determine the amounts of the difference between the February
Balance Sheet and the Closing Balance Sheet with respect to the Inventory, Trade
Payables, Customer Deposits and Accrued Liabilities, if any, and the resulting
adjustment to be made to the Cash Delivery, and shall deliver a statement of
that adjustment in substantially the form attached hereto as EXHIBIT P (the
"ADJUSTMENT STATEMENT") within that 15 day period. Purchaser shall have 45
business days after it receives the Adjustment Statement to object to any
calculation contained in the Adjustment Statement. If Purchaser does not make
any objection within that period, the Adjustment Statement and Closing Balance
Sheet shall be deemed final and conclusive with respect to the determination of
any adjustment to be made to the Cash Delivery, and shall be binding on the
parties to this Agreement.
(2) If Purchaser objects to any calculation on the Adjustment
Statement, the parties shall, within 10 business days, mutually determine the
correct calculation. If the parties cannot resolve the objection within that
time, they shall refer the dispute to the Independent Accountant (as defined
below).
(3) The Independent Accountant shall review the calculation to
which Purchaser objected, and shall resolve all objections as soon as
practicable, but no later than 10 business days after the Independent Accountant
receives all information from Seller and Purchaser that the Independent
Accountant may reasonably request regarding the objection. The Adjustment
Statement as the Independent Accountant may modify or approve shall be deemed
final and conclusive with respect to the determination of any adjustment to be
made to the Purchase Price, and shall be binding on the parties to this
Agreement. Seller and Purchaser shall each pay one-half of the Independent
Accountant's fees and expenses in resolving any such objection.
(4) ADJUSTMENT TO CASH DELIVERY. The actual amount of the Cash
Delivery shall be based on the final determination of the Adjustment Statement,
whether by Seller and Purchaser or the Independent Accountant. If that final
amount is greater than the Cash Delivery that Purchaser made at the Closing,
then Purchaser shall immediately deliver to Seller, in cash by wire transfer or
certified funds, the additional amount of the Cash Delivery due to Seller and
any interest accrued thereon from the date of the Closing. If that final amount
is less than the Cash Delivery that Purchaser made at the Closing, then
Purchaser shall submit the Adjustment Statement, signed by Purchaser and Seller,
to the Escrow Agent. Upon receipt of the Adjustment Statement, the Escrow Agent
shall immediately refund to Purchaser in cash, by wire transfer or certified
funds, the additional amount of the Cash Delivery due to Purchaser and any
interest accrued thereon from the date of the Closing. Interest shall accrue at
the rate in effect with respect to the Escrow Amount pursuant to the Escrow
Agreement.
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d. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
(1) "CLOSING BALANCE SHEET" means Seller's unaudited balance
sheet dated as of the Closing Date.
(2) "FEBRUARY BALANCE SHEET" means Seller's unaudited balance
sheet dated as of February 28, 1998.
(3) "INDEPENDENT ACCOUNTANT" means an accounting firm mutually
selected by Seller and Purchaser. If Seller and Purchaser are unable to agree on
the Independent Accountant within 5 business days after Purchaser delivers to
Seller any objection to the Adjustment statement within the time provided above,
then the Independent Accountant shall be Arthur Anderson, LLP.
e. ADJUSTMENTS TO PURCHASE STOCK. If the closing price per share for
the Purchase Stock on the Nasdaq National Market averaged over the 45 day period
ending the day before the Closing (the "BENCHMARK PRICE") is greater than $12.00
per share, then the number of shares of Purchase Stock shall be reduced by an
amount equal to (i) the number of shares of Purchase Stock multiplied by (ii) a
fraction, the numerator of which shall be the amount by which the Benchmark
Price exceeds $12.00 per share, and the denominator of which is the Benchmark
Price. If the Benchmark Price is less than $8.00 per share, then the number of
shares of Purchase Stock shall be increased by an amount equal to (i) the number
of shares of Purchase Stock multiplied by (ii) a fraction, the numerator of
which shall be the amount by which $8.00 per share exceeds the Benchmark Price,
and the denominator of which is the Benchmark Price.
1.5 ESCROW ARRANGEMENTS. Pursuant to an Escrow Agreement to be entered
into among Purchaser, Seller, Member and Allan L. Hale (the "ESCROW AGENT") in
substantially the form attached hereto as Exhibit M (the "ESCROW AGREEMENT"),
$100,000 of the Purchase Price shall be delivered to the Escrow Agent at the
Closing. Such monies, together with all interest accrued thereon, are
hereinafter referred to as the "ESCROW AMOUNT." Upon such time as the parties
have settled and made payment for any adjustment as required under subparagraph
1.4(c) hereof, such portion of the Escrow Amount not previously claimed by or
paid to Purchaser as part of the adjustments contemplated by Section 1.4(c)
shall be disbursed to Seller in accordance with the terms of the Escrow
Agreement. Seller, Member and Purchaser agree that each will execute and deliver
such instruments and documents as are furnished by any other party to enable
such furnishing party to receive those portions of the Escrow Amount to which
the furnishing party is entitled under the provisions of the Escrow Agreement
and this Agreement. Seller and Purchaser shall each pay one-half of the Escrow
Agent's fees and expenses.
1.6 PAYMENT OF LIABILITIES; RELEASE OF LIENS. On or before the Closing,
Seller shall have provided to Purchaser letters from Foothill and Hoover, in a
form satisfactory to Purchaser in its sole discretion, which sets forth the
amount necessary to repay in full the obligations owed to Foothill
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and Hoover, respectively, as of the Closing Date (the "PAY-OFF LETTERS"), along
with written wire transfer instructions.
1.7 ALLOCATION OF CONSIDERATION. The allocation of consideration paid by
Purchaser for the Assets shall be allocated as determined by Purchaser promptly
after Closing and approved by Seller, which approval shall not be unreasonably
withheld or delayed. Purchaser and Seller hereby affirm that they shall each
adhere to any such allocation for the purposes of all tax returns filed by them
subsequent to such date, including the determination by Seller of taxable gain
or loss on the sale of the Assets and the determination by Purchaser of the tax
basis of the Assets, for the purposes of all financial statements and in all
other circumstances.
1.8 SALES AND USE TAXES. Seller shall bear sole responsibility for and
shall pay all sales, use and other transfer taxes (collectively, "TRANSFER
TAXES") arising by reason of the transfer of the Assets according to the terms
of this Agreement. The foregoing notwithstanding, Purchaser shall provide Seller
with reasonable assistance in obtaining relevant exemptions from applicable
sales and use taxes, which assistance shall include, without limitation,
reasonable efforts to obtain necessary exemption certificates from the
applicable taxing authorities (for example, certificates required by the State
Board of Equalization).
1.9 INSTRUMENTS OF CONVEYANCE, TRANSFER AND ASSUMPTION. Seller agrees to
deliver or cause to be delivered to Purchaser at the Closing full possession of
all of the Assets at the place or places where the Assets are located as of the
Effective Date, together with (i) a bill of sale attached as EXHIBIT C hereto
(the "BILL OF SALE"); (ii) such other instruments of conveyance and transfer as
shall be effective to vest in Purchaser all right, title and interest in and to
the Assets free and clear of all liens, charges, easements, mortgages, pledges,
claims and other encumbrances in favor of any third party, except as disclosed
in the Disclosure Schedule (as defined below); and (iii) any and all tangible
manifestations of the Assets including. without limitation, all notes, records,
files, prints, drawings, schematics diagrams, specifications and tangible items
of any sort in Seller's possession or under Seller's control relating to the
Assets, and including original trademarks and related registrations, copyrights
and related registrations, and certificates of letters patent, and applications
and disclosures therefor, if any. Such delivery shall include all present
versions and, to the extent in Seller's possession or control, predecessor
versions.
1.10 CONSENTS AND APPROVALS. Seller shall use its best efforts to obtain
all consents (including, without limiting the generality of the foregoing,
consents or approvals of any government or governmental agency) necessary to the
assignment and transfer to Purchaser to effect the sale, delivery, transfer and
conveyance of the Assets contemplated by Section 1.1. From time to time after
the Closing, at Purchaser's request and without further consideration, Seller
agrees to execute and deliver such other instruments of conveyance and transfer
and take such other action as Purchaser reasonably may require more effectively
to convey, transfer to and vest in Purchaser, and to put Purchaser in possession
of, any property to be sold, conveyed, transferred and delivered hereunder. All
consents, waivers or approvals required with respect to all of the Contracts or
other rights as listed on Section 3.19 of the Disclosure Schedule have been
obtained, other than the consents, waivers or approvals for the Contracts or
rights as listed on Schedule 1.10 attached hereto
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(the "EXCLUDED CONTRACTS"). Until a required consent, waiver or approval is
obtained with respect to a particular Excluded Contract, Seller shall provide
Purchaser with all of the benefits of such Excluded Contract (except benefits
that accrued to Seller prior to the Closing), including, without limitation, the
right to any payments due to Seller under the Excluded Contracts, provided,
however, that in the event a required consent, waiver or approval is not
obtained with respect to an Excluded Contract within 180 days of the Closing,
Purchaser shall be entitled to indemnification for such contract pursuant to
Section 7 hereof. Notwithstanding anything to the contrary herein, neither this
Agreement nor any of the instruments or documents executed or delivered in
connection with this Agreement shall constitute an assignment or assumption of
an Excluded Contract without a required waiver, consent or approval for such
contract.
1.11 SELLER LOAN. Purchaser shall lend to Seller at Closing the amount of
Two Hundred Eighty Thousand Dollars ($280,000) (the "SELLER LOAN AMOUNT") in
accordance with the terms of the loan agreement (the "LOAN AGREEMENT") attached
hereto as EXHIBIT I. As further provided in Loan Agreement, Purchaser shall make
additional advances to Seller, the amount of which shall be added to and shall
become part of the Seller Loan Amount subject to repayment according to the
terms of the Loan Agreement. The obligations of the Seller under the Loan
Agreement shall be secured by a pledge of the Purchase Stock and personal
guaranties by Member and Darleen Bauer Allwein.
1.12 DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, SELLER MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND OR NATURE
WHATSOEVER REGARDING THE ASSETS, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
1.13 EMPLOYEES. Effective upon the Closing, Seller will terminate the
employment of all its employees. Effective as of the Closing, Purchaser shall
offer to employ each of Seller's employees on substantially the same terms and
conditions as such employees are employed by Seller prior to the Closing.
Purchaser shall continue or reinstate Seller's employee identified on Schedule
1.13(A) attached hereto who is currently on leave and whose employment is
required to be continued or reinstated by Seller under applicable state or
federal law. Purchaser shall also assume vacation leave accrued prior to the
Closing by employees who are employed by Purchaser immediately after the Closing
all as identified in Schedule 1.13(B) attached hereto. Purchaser's obligations
as set forth under this Section 1.13 are referred to as the "EMPLOYEE
OBLIGATIONS." Seller shall provide reasonable assistance to Purchaser after the
Closing to obtain signed copies of Purchaser's standard Proprietary Information
Agreement in the forms attached hereto as Exhibits Q-1 and Q-2 from all
employees who are employed by Purchaser immediately after the Closing.
2. CLOSING. The closing of the transactions provided for in Section 1 above
shall take place at the offices of Wolf, Rifkin & Shapiro, LLP, 11400 W. Olympic
Boulevard, Ninth Floor, Los Angeles, California 90064, at 10:00 a.m. on March
18, 1998 (the "CLOSING DATE"), or such other place, time and date as the parties
may agree.
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3. REPRESENTATIONS AND WARRANTIES BY SELLER AND MEMBERS. Except as set forth in
the Disclosure Schedule in EXHIBIT D attached hereto and incorporated by
reference (the "DISCLOSURE SCHEDULE"), Seller and Members each hereby, jointly
and severally, represent and warrant to Purchaser as follows:
3.1 ORGANIZATION AND STANDING. Seller is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
California. Seller has all requisite power under the Beverly-Killea Limited
Liability Company Act (the "LLC ACT"), its Articles of Organization and its
Operating Agreement to own and operate its properties and assets, and to carry
on its business as conducted and possesses all licenses, franchises, rights and
privileges necessary for the conduct of its business. Seller is qualified to do
business in all jurisdictions in which such qualification is required, except
where the failure to qualify does not have a material adverse effect on Seller
or the Business. Seller does not own any interest in any corporation,
partnership or other entity.
3.2 CORPORATE POWER; AUTHORIZATION. Seller has all requisite power and
authority to enter into this Agreement and the Exhibits attached hereto, to sell
and transfer the Assets, and to carry out and perform all of its obligations
under the terms of this Agreement and the Exhibits. All action on the part of
Seller and Seller's officers, managers, members, assignees and other holders of
voting control of or beneficial interests in the Seller that is necessary for
the authorization, execution and delivery of this Agreement and the Exhibits by
Seller and for the performance of Seller's obligations hereunder and thereunder
for the sale and transfer of the Assets has been taken in accordance with the
LLC Act, Seller's Articles of Organization and its Operating Agreement. This
Agreement and the Exhibits, when executed and delivered, shall constitute the
legal and binding obligations of Seller, enforceable against Seller in
accordance with their terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and by rules of law
governing specific performance, injunctive relief or other equitable remedies.
3.3 NO BREACH, ETC. The execution and delivery of this Agreement by Seller
and Members of all documents to be executed by Seller and Members in connection
with the transactions contemplated hereby do not, and the performance and
consummation by Seller and Members of the transactions contemplated by this
Agreement and the Exhibits will not, result in any conflict with, breach or
violation of or default, termination, forfeiture or lien under (or upon the
failure to give notice or the lapse of time, or both, result in any conflict
with, breach or violation of or default, termination, forfeiture or lien under)
any terms or provisions of Seller's Articles of Organization or Operating
Agreement or similar charter documents, each as amended, or any statute, rule,
regulation, judicial or governmental decree, order or judgment, or any
agreement, lease or other instrument, to which either Seller or either Member is
a party or to which either of them or the Assets are subject.
3.4 FINANCIAL STATEMENTS. Seller has previously delivered to Purchaser
unaudited balance sheets and statements of operations of Seller as of and for
the fiscal years ended December 31, 1995, 1996 and 1997 (the "FINANCIAL
STATEMENTS"). Seller has also previously delivered certain additional items of
financial data as of and for the fiscal years ended December 31, 1995, 1996 and
1997,
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which data includes the following: (i) earnings and revenue data; (ii) cost of
goods sold; (iii) selling, general and administrative expenses; (iv) physical
distribution; (v) earnings before interest and taxes; (vi) data concerning
plant, property and equipment; (vii) data concerning accounts receivable; (viii)
data concerning inventories; and (ix) data concerning intellectual properties
(the "FINANCIAL DATA"). The Financial Statements and Financial Data as of
December 31, 1995, and 1996, are to Seller's knowledge, complete and accurate in
all material respects. The Financial Statements and Financial Data as of
December 31, 1997 have been certified as correct, complete and accurate in all
material respects by Joe Allwein. All of the Financial Statements have been
prepared in accordance with generally accepted accounting principles (except for
the exclusion of manufacturing overhead from inventory valuations, the notes to
such statements and year-end adjustments, in no case having an adverse material
effect upon results presented in such financial statements) applied consistently
during the periods covered thereby and present fairly the financial condition of
Seller at the dates of such statements and the results of its operations for the
periods covered thereby.
3.5 TITLE TO PROPERTIES: LIENS: CONDITION OF PROPERTIES.
a. Seller has good and marketable title to all of the Assets. No
default by Seller or either of the Members exists under or with respect to any
of such Assets and none of the Assets is subject to any mortgage, pledge, lien,
conditional sale agreement, security interest, encumbrance or other charge.
b. As of the Closing Date, each item of machinery and equipment
owned or leased by Seller and included in the Assets is in good working order,
subject to normal wear and tear, and all such buildings, machinery, and
equipment have been well maintained and are in a condition suitable for Seller's
operation of the Business. The Assets conform with all material applicable
ordinances, regulations and zoning or other laws and do not encroach on the
property of others.
c. As of the date of this Agreement there is to Seller's knowledge
no pending or threatened change in any such ordinance regulation or zoning or
other law, and there is to Seller's knowledge no pending or threatened
condemnation of any or all such buildings, machinery and equipment.
d. The Assets shall include all rights, properties, interest in
properties and assets necessary to permit Purchaser to conduct the Business
after the Closing substantially as it has been conducted prior to the Closing.
3.6 TAXES. With respect to the Business and the Assets, Seller and each of
the Members have accurately prepared and timely filed all income tax returns and
other tax returns or other reports which are required to be filed, and has paid,
or made provision for the payment of, all federal, state and local taxes,
including, but not limited to, income, property, franchise, excise, and sales
and use taxes, which have or may have become due pursuant to said returns or
reports or pursuant to any notice of deficiency or any assessment which has been
received by it. Neither Seller nor either Member is a party to any pending
action or proceeding, nor, to the best knowledge of Seller, is any
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such action or proceeding threatened by any governmental authority for the
assessment or collection of taxes, interest, penalties, assessments or
deficiencies, and no claim for assessment or collection of taxes, interest,
penalties, assessments or deficiencies has been asserted against Seller or
either of the Members with respect to the Business or the Assets.
3.7 NO LIABILITIES. As of the date of this Agreement, neither Seller nor
either Member has, nor has any had, (i) any liabilities or obligations (absolute
or contingent) of any nature, except as set forth in Section 3.7 of the
Disclosure Schedule, or (ii) any change in the nature of the business, results
of operations, prospects, financial condition, method of accounting or
accounting practice or manner of conducting the Business, other than changes in
the ordinary course of such business, none of which has had, or may reasonably
be expected to have, a material adverse effect on the Assets or the Business, or
the results of operations, prospects, financial condition or manner of operating
the Assets or conducting the Business taken as a whole.
3.8 LITIGATION, ETC. With respect to the Business and the Assets, no
action, suit, proceeding or investigation of any nature, including any claims
alleging infringement of the intellectual property rights of others, is pending
or, to either Member's or Seller's knowledge, threatened against Seller or
either Member, nor, to the best knowledge of Seller, is there any basis
therefor. The foregoing includes, without limitation: any action, suit,
proceeding or investigation, pending or threatened, which questions the validity
of this Agreement or the Exhibits or the right of Seller or either Member to
enter into this Agreement or the Exhibits or to sell and transfer the Assets, or
which might result, either individually or in the aggregate, in any material
adverse change in the Assets, condition, affairs or prospects of the Business or
of Seller or either Member, financial or otherwise; any litigation pending or to
Seller's knowledge threatened which might affect the ability of Purchaser to
operate the Business or to use the Assets; and any litigation pending or, to
Seller's or either Member's knowledge, threatened against Seller or either
Member by reason of the past employment relationship of any employee, officer or
consultant of Seller or either Member, the activities of Seller or either
Member, or negotiations by Seller or either Member with possible purchasers of,
or investors in, Seller, all with respect to the Business or the Assets. There
is no judgment, decree, injunction, rule or order of any court, governmental
department, commission agency, instrumentality or arbitrator or other similar
ruling outstanding against Seller or either Member affecting the Business or the
Assets. No action, suit, proceeding or investigation is pending or threatened by
Seller or either Member affecting the Business or the Assets.
3.9 PATENTS, TRADE NAMES AND TRADEMARKS. All patents, patent applications,
registered copyrights, trade names, registered trademarks and trademark
applications which are owned by or licensed to Seller and are associated with
the Business or are included in the Assets are listed in Section 3.9 of the
Disclosure Schedule, which section indicates with respect to each the nature of
Seller's interest therein and the expiration date thereof or the date on which
Seller's interest therein terminates. All such patents, patent applications,
registered trademarks and trademark applications have been duly registered in,
filed in or issued by the United States Patent and Trademark Office, and all
such registered copyrights have been duly registered in, filed in or issued by
the United States Copyright Office, or, in each case, the corresponding offices
of other countries identified on Section 3.9 of the Disclosure Schedule, and
have been properly maintained and renewed in
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accordance with all applicable provisions of law and administrative regulations
in the United States and each such country. Seller's use of said patents, patent
applications, registered copyrights, other copyrights, trade names, registered
trademarks, trademark applications and other trademarks, and trade secrets
(collectively, the "INTELLECTUAL PROPERTY") does not require the consent of any
other person and the same are freely transferable (except as otherwise provided
by law) and are owned exclusively by Seller, free and clear of any licenses,
charges, attachments, liens, encumbrances or adverse claims. Except as set forth
in Section 3.9 of the Disclosure Schedule: (a) no other person has an interest
in or right or license to use, or the right to license others to use, any of the
Intellectual Property, (b) there are no claims or demands of any other person
pertaining thereto and no proceedings have been instituted, or are pending or
threatened, which challenge Seller's rights in respect thereof, (c) none of the
Intellectual Property is subject to any outstanding order, decree, judgment or
stipulation, or, to the best knowledge of Seller, is being infringed by others,
(d) no claim has been made and no proceeding has been filed or is threatened to
be filed charging Seller with infringement of any adversely held patent, trade
name, trademark or copyright, and (e) there does not exist (i) any unexpired
patent with claims which are or would be infringed by products of Seller or by
apparatus, methods or designs employed by Seller in manufacturing such products
or (ii) any patent or application therefor or invention which would materially
adversely affect Seller's ability to manufacture, use or sell any such product,
apparatus, method or design. There are no royalties, fees or other payments
payable by Seller to any person by reason of the ownership, use, license, sale
or disposition of any instrument or agreement governing any of the Intellectual
Property.
3.10 COMPLIANCE WITH LAWS. Seller is not in violation of any laws and
regulations which apply to the conduct of the Business, including, without
limitation, laws and regulations relating to employment, occupational safety and
environmental matters that would have a material adverse affect on the Business
or the Assets. Seller has not received notice of, and to Seller's knowledge,
there has never been, any citation, fine or penalty imposed upon or asserted
against Seller under any federal, state or local law or regulation relating to
employment, occupational safety, zoning or environmental matters relating to the
Business or the Assets.
3.11 ENVIRONMENTAL MATTERS.
a. Seller has materially complied with, and is in material
compliance with, all applicable Environmental Laws (as defined below). Seller
possesses, and has provided to Purchaser true and accurate copies of, all
permits, approvals, registrations, licenses or other authorizations required by
any governmental authority pursuant to any Environmental Law applicable to the
Business or the Assets, the absence of which would have a material adverse
effect on the Business or the Assets. There is no pending or, to Seller's
knowledge, threatened civil or criminal litigation, written notice of violation,
formal administration proceeding, or investigation, inquiry or information
request by any governmental authority, relating to any Environmental Law to
which Seller is a party or to Seller's knowledge is threatened to be made a
party. For purposes of this Agreement, "ENVIRONMENTAL LAW" means any federal,
state or local law, statute, rule or regulation or the common law relating to
the environment or occupational health and safety, including without limitation
any statute, regulation or order pertaining to (i) treatment, storage, disposal,
generation and transportation of industrial, toxic or hazardous substances or
solid or hazardous waste; (ii) air,
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water and noise pollution; (iii) groundwater and solid contamination; (iv) the
release or threatened release into the environment of industrial, toxic or
hazardous substances, or solid or hazardous waste, including without limitation
emissions, discharges, injections, spills, escapes or dumping of pollutants,
contaminants or chemicals; (v) the protection of wild life, marine sanctuaries
and wetlands, including without limitation all endangered and threatened
species; (vi) storage tanks, vessels and containers; (vii) underground and other
storage tanks or vessels, abandoned, disposed or discarded barrels, containers
and other closed receptacles; (viii) health and safety of employees and other
persons; and (ix) manufacture, processing, use, distribution, treatment,
storage, disposal, transportation or handling of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or oil or petroleum
products or solid or hazardous waste. As used herein, the terms "release" and
"environment" shall have the meaning set forth in the federal Comprehensive
Environmental Compensation, Liability and Response Act of 1980 ("CERCLA").
b. Except as set forth in Section 3.11 of the Disclosure Schedule,
since the date on which Seller began operating the Business, there have been no
releases of any Materials of Environmental Concern (as defined below) into the
environment at any parcel of real property or any facility presently or formerly
owned, operated or controlled by Seller. Except as set forth in Section 3.11 of
the Disclosure Schedule, to Seller's knowledge, prior to the date on which
Seller began operating the Business, there have been no such releases of any
Materials of Environmental Concern. With respect to any releases of Materials of
Environmental Concern, Seller has given all required notices to government
authorities, copies of which have been provided to Purchaser. Seller is not
aware of any releases into the environment of Materials of Environmental Concern
at parcels of real property or facilities presently or formerly owned, operated
or controlled by Seller that could reasonably be expected to have an impact on
the real property or facilities owned, operated or controlled by Seller. For
purposes of this Agreement, "MATERIALS OF ENVIRONMENTAL CONCERN" means any
chemicals, pollutants or contaminants, hazardous substances (as such term is
defined under CERCLA), solid wastes and hazardous wastes (as such terms are
defined under Federal Resources Conservation and Recovery Act), toxic materials,
oil or petroleum and petroleum products.
c. Set forth in Section 3.11(c) of the Disclosure Schedule is a list
of all environmental reports, investigations and audits in the possession of
Seller with respect to the operations of, or real property owned or leased by
Seller (whether conducted by or on behalf of Seller or a third party and whether
done at the initiative of Seller or directed by a governmental authority or
other third party). Complete and accurate copies of each such report, or the
results of each such investigation or audit, have been provided to Purchaser.
d. Seller is not aware of any material environmental liability
arising out of the utilization by Seller of any solid and hazardous waste
transporter or treatment, storage and disposal facility.
3.12 GOVERNMENTAL PERMITS. Seller owns, holds or possesses all federal,
state or local governmental permits, certificates, licenses, franchises,
privileges, immunities, approvals and other authorizations which are necessary
to entitle it to own or lease, operate and use the Assets and to
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carry on and conduct the Business (herein collectively called "GOVERNMENTAL
PERMITS"), except for such Governmental Permits that can now or hereafter be
obtained without delay and at nominal cost and as to which the failure to so
own, hold or possess would not have a material adverse effect on the Assets or
the Business. In connection with the Assets and the Business, Seller has
fulfilled and performed its obligations under each of the Governmental Permits
owned, held or possessed by it, and no event has occurred or exists which
constitutes a breach or default under any such Governmental Permit or which
permits, or after notice or lapse of time or both, would permit revocation or
termination of any such Governmental Permit or which may adversely affect in any
material respect the rights of Seller thereunder.
3.13 DISCLOSURE OF MATERIAL INFORMATION. With respect to the Business and
the Assets, neither this Agreement nor any Exhibit or Schedule hereto contains
any untrue statement of a material fact, or omits to state a material fact
necessary to make the statements herein or therein not misleading. No
representation or warranty by Seller or either Member in this Agreement, nor any
statement, certificate, schedule or exhibit hereto furnished or to be furnished
by or on behalf of Seller or either Member pursuant to this Agreement, nor any
document or certificate delivered to Purchaser pursuant to this Agreement or in
connection with transactions contemplated hereby, contains or shall contain any
untrue statement of material fact or omits or shall omit a material fact
necessary to make the statements contained therein not misleading. All
statements and information contained in any certificate, instrument, Disclosure
Schedule or document delivered by or on behalf of Seller or either Member shall
be deemed representations and warranties by the Seller and Members. There is no
fact (other than factors affecting the Business' industry generally) known to
Seller or either Member which materially adversely affects or may in the future
materially adversely affect the operations, properties or condition (financial
or otherwise) of the Business or the Assets.
3.14 INSURANCE. Set forth in Section 3.14 of the Disclosure Schedule is a
complete and accurate list and summary description of all policies of fire,
casualty, general liability, product liability, workers compensation, health and
other forms of insurance presently in effect with respect to the business and
properties of Seller, true and correct copies of which have heretofore been
delivered to Purchaser. Section 3.14 of the Disclosure Schedule includes,
without limitation, the carrier, the description of coverage, the limits of
coverage, retention or deductible amounts, amount of annual premiums, date of
expiration and the date through which premiums have been paid with respect to
each such policy, and any pending claims in excess of $50,000. All such policies
are valid, outstanding and enforceable policies and provide insurance coverage
for the properties, assets and operations of Seller, of the kinds, in the
amounts and against the risks customarily maintained by organizations similarly
situated; and no such policy (nor any previous policy) provides for or is
subject to any currently enforceable retroactive rate or premium adjustment,
loss sharing arrangement or other actual or contingent liability arising wholly
or partially out of events arising prior to the date hereof. Section 3.14 of the
Disclosure Schedule indicates each policy as to which (a) the coverage limit has
been reached or (b) the total incurred losses to date equal 75 % or more of the
coverage limit. No notice of cancellation or termination has been received with
respect to any such policy, and Seller has no knowledge of any act or omission
of Seller which could result in cancellation of any such policy prior to its
scheduled expiration date (except any cancellations resulting from the
consummation of the transactions contemplated by this Agreement). Seller has
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not been refused any insurance with respect to any aspect of the operations of
the Business nor has its coverage been limited by any insurance carrier to which
it has applied for insurance or with which it has carried insurance during the
last three years. Seller duly and timely made all claims that, to Seller's
knowledge, it has been entitled to make under each policy of insurance. Since
Seller's inception, all products liability and general liability policies
maintained by or for the benefit of Seller have been "occurrence" policies and
not "claims made" policies. There is no claim by Seller pending under any such
policies as to which coverage has been questioned, denied or disputed by the
underwriters of such policies, and Seller does not have knowledge of any basis
for denial of any claim under any such policy. Seller has not received any
written notice from or on behalf of any insurance carrier issuing any such
policy that insurance rates therefor will hereafter be substantially increased
(except to the extent that insurance rates may be increased for all similarly
situated risks) or that there will hereafter be a cancellation or an increase in
a deductible (or an increase in premiums in order to maintain an existing
deductible) or nonrenewal of any such policy. Such policies are sufficient in
all material respects for compliance by Seller with all requirements of law and
with requirements of all contracts to which Seller is a party.
3.15 INVENTORY. All inventories of raw materials, work-in-process, tooling
and finished goods (including all such in transit) of Seller, together with all
related packaging materials, reflected on Seller's February Balance Sheet
consists of a quality and quantity usable and saleable in the ordinary course of
business, have commercial values at least equal to the value shown on the
February Balance Sheet and is valued, at the lower of cost or market, in
accordance with Seller's internal accounting procedures which exclude an
allocation of manufacturing overhead costs to inventory but includes
Seller-owned tooling and an offset for customer prepayments for materials
included in work-in-process. All Inventory purchased since the date of the
February Balance Sheet consists of a quality and quantity usable and saleable in
the ordinary course of business. Except as set forth in Section 3.15 of the
Disclosure Schedule, all Inventory is located on premises owned or leased by
Seller as reflected in this Agreement. All work-in-process contained in
Inventory constitutes items in process of production pursuant to contracts or
open orders taken in the ordinary course of business, from regular customers of
Seller with no recent history of credit problems with respect to Seller; neither
Seller nor any such customer is in material breach of the terms of any
obligation to the other. All work-in-process is of a quality ordinarily produced
in accordance with the requirements of the orders to which such work-in-process
is identified, and will require no rework with respect to work performed prior
to Closing.
3.16 MAJOR CUSTOMERS. Section 3.16 of the Disclosure Schedule contains a
list of the five (5) largest customers of Seller for the most recent fiscal year
(determined on the basis of the total dollar amount of net sales) showing the
total dollar amount of net sales to each such customer during each such year.
Seller does not have any knowledge or information of any facts indicating, nor
any other reason to believe, that any of the customers listed in Section 3.16 of
the Disclosure Schedule will not continue to be customers of Purchaser after the
Closing at substantially the same level of purchases as heretofore.
3.17 EXISTING EMPLOYMENT CONTRACTS. Section 3.17 of the Disclosure
Schedule contains a list of all employment contracts and collective bargaining
agreements, and all pension, bonus,
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profit sharing, or other agreements or arrangements providing for employee
remuneration or benefits to which Seller is a party or by which they are bound;
all of these contracts and arrangements are in full force and effect, and
neither Seller nor any other party is in default under them. There have been no
claims of defaults and, to the best of Seller's knowledge there are no facts or
conditions which if continued, or on notice, will result in a default under
these contracts or arrangements. There is no pending or, to the best of Seller's
knowledge, threatened labor dispute, strike, or work stoppage affecting the
Assets or the Business.
3.18 EMPLOYEE BENEFITS.
a. Section 3.18 of the Disclosure Schedule lists all Employee Plans
covering persons currently or formerly employed by Seller ("EMPLOYEES"). The
term "EMPLOYEE PLAN" includes any pension, retirement, savings, disability,
medical, dental, health, life (including, without limitation, any individual
life insurance policy under which any Employee is the named insured and as to
which Seller makes premium payments, whether or not Seller is the owner,
beneficiary or both of such policy), death benefit, group insurance,
profit-sharing, deferred compensation, stock option, bonus (including without
limitation, holiday, vacation, Christmas and other bonus practices to which
Seller is a party or is bound or which relate to the operation of the Business
with respect to Employees), incentive, vacation pay, severance pay, or other
employee benefit plan, trust arrangement, agreement, policy or commitment
(including, without limitation, any employee pension benefit plan as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("PENSION PLAN"), and any employee welfare benefit plan as defined in
Section 3(1) of ERISA ("WELFARE PLAN")), whether or not any of the foregoing is
funded or insured and whether written or oral, which is intended to provide or
does in fact provide benefits to any or all current Employee's, and (i) to which
Seller is party or by which Seller (or any of the rights, properties or assets
of the Company) is bound, (ii) with respect to which Seller has made any
payments, contributions or commitments, or may otherwise have any liability
(whether or not Seller still maintains such plan, trust, arrangement, contract,
agreement, policy or commitment) or (iii) under which any current Member,
Employee or agent of Seller is a beneficiary as a result of his employment or
affiliation with Seller.
b. With respect to any Employee, Seller has no obligation to
contribute to (or any other liability with respect to) any funded or unfunded
Welfare Plan, whether or not terminated, which provides medical, health, life
insurance or other welfare-type benefits for current or future retirees or
current, future or former Employees (including their dependents and spouses)
except for limited continued medical benefit coverage for former Employees,
their spouses and their other dependents as required to be provided under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
and Seller is in compliance in all material respects with the continued medical
and other welfare benefit coverage requirements of COBRA and all other
applicable laws.
c. With respect to any Employee, Seller does not maintain,
contribute to or have any material liability under (or with respect to) any
Pension Plan which is a tax qualified "defined benefit plan" (as defined in
Section 3(35) of ERISA) or, a tax-qualified "defined contribution plan"
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(as defined in Section 3(34) of ERISA), or a non-qualified deferred compensation
plan for certain highly compensated or management employees whether or not
terminated. All contributions (including all employer contributions and employee
salary reduction contributions) which are due have been paid to each Employee
Plan or are reflected as a liability on the books of Seller and all
contributions for any period ending on or before the Effective Date which are
not yet due have been paid to each such Employee Plan or accrued in accordance
with the past custom and practice of Seller. All premiums or other payments for
all periods ending on or before the Closing Date have been paid with respect to
each such Employee Plan which is a Welfare Plan.
d. Seller has, with respect to all current and former Employee Plans
(and all related trusts, insurance contracts and funds), at all times complied
in all material respects with the applicable requirements of ERISA, the Internal
Revenue Code of 1986, as amended (the "CODE") and all other applicable statutes,
common law, regulations and regulatory pronouncements, or has, in the exercise
of its reasonable judgment, determined that such statutes (including ERISA),
common law, regulations and regulatory pronouncements were and are not
applicable to Seller. Seller has not engaged in nor is it bound to enter into,
any transaction with respect to any Employee Plan which would subject Seller to
any material liability due to either a civil penalty assessed pursuant to
Section 502(I) of ERISA or the tax or penalty on prohibited transactions imposed
by Section 4975 of the Code. No actions, suits or claims with respect to the
assets of any Employee Plan (and all related trusts, insurance contracts and
funds), other than routine claims for benefits, are pending or to Seller's
knowledge threatened which could result in a material adverse effect on the
Business. There are not now, nor have there been, any tax-qualified retirement
plans sponsored or maintained by Seller for Employees since January 1, 1975, nor
are there any unfunded obligations with respect thereto. With respect to any
Employee, Seller has no obligation to contribute to (or any other liability with
respect to) any "multi-employer plan," as defined in the Multi-employer Pension
Plan Amendments Act of 1980, and Seller has not incurred any current or
potential withdrawal or termination liability as a result of a complete or
partial withdrawal from any multi-employer plan or the sale of the Assets. Each
Employee Plan intended to qualify under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be qualified under the
requirements of section 401(a) of the Code, the Internal Revenue Service has
issued a determination letter to that effect, and such letter remains effective
and has not been revoked. No unfulfilled obligation to contribute with respect
to an Employee Plan exists with respect to any Employee Plan year ending on or
before December 31, 1997, except as shown in the Closing Balance Sheet. There is
no agreement or promise, written or oral, of Seller to the effect that any
Employee Plan may not be terminated at Seller's discretion at any time, subject
to applicable law. The Closing Balance Sheet reflects all accrued vacation and
other benefits for Seller's employees as of the date thereof.
3.19 REQUIRED CONSENTS AND APPROVALS. Except as set forth in Section 3.19
of the Disclosure Schedule, Seller and each of the Members has the right, power,
legal capacity, and authority to enter into, and perform their respective
obligations under, this Agreement, and no approvals or consents or any persons
are necessary in connection with it. The execution and delivery of this
Agreement by Seller has been duly authorized by its members in accordance with
the LLC Act and Seller's Articles of Organization and its Operating Agreement.
Except as set forth in Section 3.19 of the Disclosure Schedule, no Contract or
other right necessary to effect the sale,
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delivery, transfer and conveyance of the Assets requires the consent, waiver or
approval of any person or entity.
3.20 ABSENCE OF CERTAIN CHANGES. Except as and to the extent set forth in
Section 3.20 of the Disclosure Schedule, since February 28, 1998 thru the
Closing Date, there has not been:
a. ADVERSE CHANGE. Any adverse change in the financial condition,
assets, liabilities, business, prospects or operations of Seller;
b. DAMAGE. Any loss, damage or destruction, whether covered by
insurance or not, affecting Seller's business or properties;
c. INCREASE IN COMPENSATION. Any increase in the salaries, wages or
other remuneration or compensation, or in any benefits payable or to become
payable to any employee or agent of Seller (including, without limitation, any
increase or change pursuant to any bonus, pension, profit sharing, retirement or
other plan or commitment), or any bonus or other employee benefit granted, made
or accrued;
d. LABOR DISPUTES. Any labor dispute or disturbance;
e. COMMITMENTS. Any commitment or transaction by Seller (including,
without limitation, any borrowing or capital expenditure) other than in the
ordinary course of business consistent with past practice;
f. DISTRIBUTIONS. Any liquidating or non-liquidating distribution
made to any member or assignee with respect to a membership interest in Seller,
including any distribution made by reason of the death or retirement of a
member, or any other payment to any member or assignee of Seller as such a
member or assignee;
g. DISPOSITION OF PROPERTY. Any sale, lease or other transfer or
disposition of any properties or assets of Seller, except for the sale of
inventory items in the ordinary course of business;
h. INDEBTEDNESS. Except with respect to Purchaser's loans to Seller,
any indebtedness for borrowed money incurred, assumed or guaranteed by Seller or
either Member;
i. LIENS. Any mortgage, pledge, lien or encumbrance made on any of
the properties or assets of Seller or either Member;
j. AMENDMENT OF CONTRACTS. Any entering into, amendment or
termination by Seller of any contract, or any waiver of material rights
thereunder, other than in the ordinary course of business;
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k. LOANS AND ADVANCES. Any loan or advance (other than advances to
employees in the ordinary course of business for travel and entertainment in
accordance with past practice) to any person including, but not limited to, any
officer, manager or employee of Seller, or any member, assignee or affiliate;
l. CREDIT. Any grant of credit to any customer on terms or in
amounts more favorable than those which have been extended to such customer in
the past, any other change in the terms of any credit heretofore extended, or
any other change of Seller's policies or practices with respect to the granting
of credit; or
m. NO UNUSUAL EVENTS. Any other event or condition not in the
ordinary course of business of Seller or either Member.
3.21 PRODUCT WARRANTY AND PRODUCT LIABILITY. Section 3.21 of the
Disclosure Schedule contains a true, correct and complete copy of all of
Seller's warranties for its products and services. There have been no variations
from such warranties. There are no express warranties, commitments or
obligations with respect to Seller's products or performance of services.
Section 3.21 of the Disclosure Schedule contains a description of all product
liability claims and similar claims, actions, litigation and other proceedings
relating to Seller's products or services rendered, which are presently pending
or which to Seller's knowledge are threatened, or which have been asserted or
commenced against Seller within the last year, in which a party thereto either
requests injunctive relief (whether temporary or permanent) or alleges damages
(whether or not covered by insurance). There are no defects in Seller's products
or services which would adversely affect performance of Seller's products or
services or create an unusual risk of injury to persons or property. Seller's
products and services have been designed or performed so as to meet and comply
with all governmental standards and specifications currently in effect and have
received all governmental and customer approvals necessary to allow their
production or performance.
3.22 MEMBER LIST. Section 3.22 of the Disclosure Schedule sets forth a
complete list of the names of all the members, assignees or other persons who
beneficially own an economic or voting control interest in Seller, together with
the percentage interest in voting rights and in the capital, profits and losses
beneficially owned by each such member, assignee or other person. Each person so
listed that is an individual is a competent adult and is the beneficial owner of
the membership interest so listed in his or her name, with the sole right to
vote, dispose of, and receive distributions with respect to such membership
interest.
3.23 ASSETS NECESSARY TO BUSINESS. The Assets include all property and
assets, tangible and intangible, and all leases, licenses and other agreements,
which are necessary to permit Purchaser to carry on, or currently use or hold
for use in, the Business as presently conducted.
3.24 CONTRACTS AND COMMITMENTS.
a. REAL PROPERTY LEASES. Except as set forth in Section 3.25(a) of
the Disclosure Schedule, neither Seller nor Member has any leases of real
property.
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b. PERSONAL PROPERTY LEASES. Except as set forth in Section 3.25(b)
of the Disclosure Schedule, neither Seller nor Member has any leases of personal
property.
c. PURCHASE COMMITMENTS. Seller does not have any purchase
commitments for inventory items or supplies that, together with amounts on hand,
constitute in excess of three (3) months normal usage or which are at an
excessive price, except the purchase of titanium forgings where Seller has a
firm purchase order from Seller's customers in support of the purchase
commitment.
d. SALES COMMITMENTS. Except as set forth in Section 25(d) of the
Disclosure Schedule, neither Seller nor the Member has any sales contracts or
commitments to customers which aggregate in excess of $50,000 to any one
customer (or group of affiliated customers). Seller does not have any sales
contracts or commitments, except those made in the ordinary course of business,
at arm's length, and no such contract or commitment is for a sales price which
would result in a loss (determined on a gross profit margin basis) to Seller.
e. CONTRACTS WITH AFFILIATES AND CERTAIN OTHERS. Seller does not
have any agreement, understanding, contract or commitment (written or oral) with
any affiliate or any other manager, officer, employee, agent, or consultant that
is not cancelable by Seller on notice of not longer than 30 days without
liability, penalty or premium of any nature or kind whatsoever.
f. POWERS OF ATTORNEY. Neither Seller nor either Member has given a
power of attorney, which is currently in effect, to any person, firm or
corporation for any purpose whatsoever.
g. COLLECTIVE BARGAINING AGREEMENTS. Seller is not a party to any
collective bargaining agreements with any unions, guilds, shop committees or
other collective bargaining groups.
h. LOAN AGREEMENTS. Except as set forth in Section 3.25(h) of the
Disclosure Schedule, neither Seller nor either Member is obligated under any
loan agreement, promissory note, letter of credit, or other evidence of
indebtedness as a signatory, guarantor or otherwise.
i. GUARANTEES. Neither Seller nor either Member has guaranteed the
payment or performance of any person, firm or corporation, agreed to indemnify
any person or act as a surety, or otherwise agreed to be contingently or
secondarily liable for the obligations of any person, except in the ordinary
course of business.
j. CONTRACTS SUBJECT TO RENEGOTIATION. Seller is not a party to any
contract with any governmental body which is subject to renegotiation.
k. BURDENSOME OR RESTRICTIVE AGREEMENTS. Except as shown on Section
3.24(k) of the Disclosure Schedule, neither Seller nor Joe Allwein is a party to
nor is either bound by any agreement, deed, lease or other instrument which is
so burdensome as to materially affect or impair
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the operation of the Business. Without limiting the generality of the foregoing,
neither Seller nor Joe Allwein is a party to nor is either of them bound by any
agreement requiring Seller or Joe Allwein to assign any interest in any trade
secret or proprietary information, or prohibiting or restricting Seller or Joe
Allwein from competing in any business or geographical area or soliciting
customers or otherwise restricting the Business from carrying on its business
anywhere in the world.
l. SALES REPRESENTATIVE AGREEMENTS. Section 3.24(1) of the
Disclosure Schedule contains a list of all sales representative agreements of
Seller.
m. OTHER MATERIAL CONTRACTS. Seller has previously disclosed to
Purchaser any lease, contract or commitment of any nature involving
consideration or other expenditure in excess of $50,000, or involving
performance over a period of more than three months, or which is otherwise
individually material to the operations of Seller.
n. NO DEFAULT. Neither Seller nor either Member is in default under
any lease, contract or commitment, nor has any event or omission occurred which
through the passage of time or the giving of notice, or both, would constitute a
default thereunder or cause the acceleration of any of Seller's or either
Member's obligations or result in the creation of any lien on any of the assets
owned, used or occupied by Seller or either Member. Based on Seller's best
knowledge or what Seller reasonably should know, no third party is in default
under any lease, contract or commitment to which Seller is a party, nor has any
event or omission occurred which, through the passage of time or the giving of
notice, or both, would constitute a default thereunder or give rise to an
automatic termination, or the right of discretionary termination, thereof.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby represents and
warrants to Seller as follows:
4.1 ORGANIZATION AND STANDING. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Purchaser has all requisite corporate power to own and operate its properties
and assets, and to carry on its business as conducted and possesses all
licenses, franchises, rights and privileges necessary for the conduct of its
business. Purchaser is qualified to do business in all jurisdictions in which
such qualification is required.
4.2 CORPORATE POWER; AUTHORIZATION. Purchaser has all requisite legal and
corporate power and authority to enter into this Agreement and to carry out and
perform all of its obligations under the terms of this Agreement. All corporate
action on the part of Purchaser and all action on the part of its shareholders,
officers and directors necessary for the authorization, execution and delivery
of this Agreement and the Exhibits by Purchaser and for the performance of
Purchaser's obligations hereunder has been taken, and this Agreement and the
Exhibits, when duly executed and delivered, shall constitute the legal and
binding obligations of Purchaser, enforceable against Purchaser in accordance
with their terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement
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of creditors' rights and by rules of law governing specific performance,
injunctive relief or other equitable remedies.
4.3 NO BREACH, ETC. The execution and delivery of this Agreement by
Purchaser and all documents to be executed by Purchaser in connection with the
transactions contemplated hereby do not, and the performance and consummation by
Purchaser of the transactions contemplated by this Agreement and the Exhibits
will not, result in any conflict with, breach or violation of or default,
termination, forfeiture or lien under (or upon the failure to give notice or the
lapse of time, or both, result in any conflict with, breach or violation of or
default, termination, forfeiture or lien under) any terms or provisions of
Purchaser's Certificate of Incorporation or Bylaws or similar charter documents,
each as amended, or any statute, rule, regulation, judicial or governmental
decree, order or judgment, or any agreement, lease or other instrument, to which
Purchaser is a party or by which its assets are bound.
4.4 PURCHASE STOCK. The offer, sale and issuance of the Purchase Stock in
conformity with the terms of this Agreement are exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended, and are
exempt from qualification under the requirements of California law, subject to
any requirement that an appropriate notice be filed pursuant to the California
Corporate Securities Law of 1968. The Purchase Stock, when issued to Seller,
will be validly issued, fully paid and non-assessable. Except for the
restrictions set forth in the Stock Agreement (as defined below) and the Stock
Pledge (as defined below), when issued to Seller, the Purchase Stock shall be
free and clear of any lien, claim, encumbrance, security interest, pledge or
other right of any third party, and no option, warrant, restriction, right or
other agreement or commitment is or shall be outstanding or existing with
respect to the Purchase Stock. There are no rights in or claims possessed by any
person or entity enforceable against Purchaser in law or at equity to compel any
of the foregoing.
4.5 DISCLOSURE OF MATERIAL INFORMATION. No representation or warranty by
Purchaser in this Agreement, nor any statement, certificate, schedule or exhibit
hereto furnished or to be furnished by or on behalf of Purchaser pursuant to
this Agreement, nor any document or certificate delivered to Seller pursuant to
this Agreement or in connection with transactions contemplated hereby, contains
or shall contain any untrue statement of material fact or omits or shall omit a
material fact necessary to make the statements contained therein not misleading.
All statements and information contained in any certificate, instrument,
Disclosure Schedule or document delivered by or on behalf of Purchaser shall be
deemed representations and warranties by the Purchaser.
5. CLOSING.
5.1 TIME AND PLACE. The Closing shall be held as contemplated by Section
2.
5.2 ACTIONS AT CLOSING. At the Closing, in order to consummate the
transactions contemplated by this Agreement, each of the following actions shall
occur:
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a. AGREEMENT EXECUTED BY BOTH PARTIES. Each party shall duly execute
and deliver to the other party this Agreement.
b. PERFORMANCE BY PURCHASER. At the Closing, Purchaser shall duly
execute (where applicable) and deliver, or cause to be executed and delivered,
to Seller the following:
(1) The Cash Delivery by wire transfer to those accounts
designated by Seller (including, without limitation, wire transfers necessary to
pay the liabilities contemplated by paragraph c.16 below);
(2) An agreement providing for Purchaser to employ Joseph
Allwein after the Closing (the "PERSONAL SERVICES AGREEMENT") in the form
attached hereto as EXHIBIT F;
(3) The Operating Lease in the form attached hereto as EXHIBIT
G;
(4) The Option Agreement in the form attached hereto as
EXHIBIT H;
(5) The Stock Agreement in the form attached hereto as EXHIBIT
K;
(6) The Stock Pledge in the form attached hereto as EXHIBIT L;
(7) The Loan Agreement in the form attached hereto as EXHIBIT
I;
(8) The Escrow Agreement in the form attached hereto as
EXHIBIT M;
(9) An opinion of Davis, Graham & Stubbs LLP, counsel to
Purchaser, in the form attached hereto as EXHIBIT N;
(10) The Purchase Stock; and
(11) Satisfactory evidence of any approval of any regulatory
authorities whose approvals to the transactions contemplated by this Agreement
are required by law.
c. PERFORMANCE BY SELLER. At the Closing, Seller and/or Member shall
duly execute and deliver, or cause to be executed and delivered, to Purchaser
the following:
(1) The Bill of Sale;
(2) The Non-Competition Agreement in the form attached hereto
as EXHIBIT E-1, and Non-Competition Agreements of Arnold Arroyo, Ray Gomez and
Dennis Strum (the "KEY EMPLOYEES") in the form attached hereto as EXHIBIT E-2;
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(3) The Personal Services Agreement and related Proprietary
Information Agreement and Non-Competition Agreement in the forms attached hereto
as Exhibits Q-1 and T, respectively;
(4) The Operating Lease;
(5) The Option Agreement;
(6) The Master Promissory Note in the form attached hereto as
Exhibit O;
(7) The Stock Agreement;
(8) The Stock Pledge;
(9) The Loan Agreement;
(10) The Escrow Agreement;
(11) The Personal Guaranty of Joe Allwein and Darleen Bauer
Allwein in the form attached hereto as EXHIBIT S;
(12) The February Balance Sheet;
(13) Seller's amended Articles of Organization and Operating
Agreement, certified by all of Seller's members, which shall provide that Seller
may not take any of the actions as set forth in Section 5 of the Loan Agreement
without Purchaser's consent, which Purchaser shall not unreasonably withhold,
and that in the event that any of such actions take place without such consent,
such action or actions shall be void and without force or effect.
(14) Evidence satisfactory to Purchaser in its sole
discretion, that as of the Closing all of Seller's liabilities and accrued
obligations have been fully paid, other than those immaterial liabilities and
obligations agreed to by Purchaser at the Closing and which are set forth on the
February Balance Sheet, and that all liens, mortgages or other security
interests relating to those liabilities and obligations have been released,
which evidence shall include, without limitation, UCC termination statements and
other documentation evidencing the termination and release of the liens and
security interests held by Foothill and Hoover; PROVIDED, HOWEVER, that the
provisions of this paragraph shall not apply to any liabilities, obligations,
liens, mortgages or other security interests owing or relating to (i) Assumed
Liabilities, (ii) the Dover Note (as defined in the Loan Agreement), including,
without limitation, any deed of trust or related document relating to the Dover
Note, (iii) Freedom Forge Corporation, a Delaware corporation, including,
without limitation, that certain Assumption and Modification of Promissory Note
made by Seller to Freedom Forge Corporation and dated as of December 11, 1996,
and any amendment thereto;
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(15) The waivers, consents and approvals contemplated by
Section 1.10 above that Seller has obtained as of the Closing;
(16) An opinion of Wolf, Rifkin & Shapiro, LLP, counsel to
Seller, in the form attached hereto as EXHIBIT R;
(17) Satisfactory evidence of any approval of any regulatory
authorities whose approvals are required by law;
(18) A certified copy of resolutions of Seller's members
approving the transactions contemplated by this Agreement as required by
applicable law, Seller's Articles of Organization, Operating Agreement or any
other applicable instrument;
(19) Certificate of Good Standing of Seller; and
(20) Such other evidence of the performance of all covenants
required of Seller by this Agreement at or before the Closing, as Purchaser or
its counsel may reasonably require.
d. By closing the transactions contemplated by this Agreement, each
party acknowledges that all deliveries required in this Section 5.2 have been
received; other than any deliveries permitted after the Closing, including,
without limitation, any consents, waivers or other approvals contemplated in
Section 1.10.
6. POST-CLOSING MATTERS.
6.1 USE OF SELLER'S NAME. At the Closing, Seller shall assign all its
rights and interest in the names "Spin Forge" and "Spin Forge, LLC," along with
all of Seller's other trademarks or trade names, to Purchaser. Following
Closing, neither Seller nor any affiliate shall, without the prior written
consent of Purchaser, make any use of the name "Spin Forge, LLC," "Spin Forge"
or any of Seller's other trademarks or trade names, or any other trade name or
trademark confusingly similar thereto, except as may be necessary for Seller to
pay its liabilities, prepare tax returns and other reports and exist in good
standing as a limited liability company.
6.2 SALES TAX MATTERS. Subject to Purchaser's obligations under Section
1.6 above, as soon as reasonably practicable following the Closing, Seller shall
timely file with the appropriate governmental authority all state and local
transfer, sales and use tax returns and shall make all other filings which may
be required in connection with the transactions contemplated hereby.
6.3 FINDERS FEES; PAYMENTS. Each party agrees to pay its own broker or
finders' fees in connection with any of the transactions contemplated by this
Agreement. Each party represents and warrants to the other that neither it, nor
any of its managers, officers, directors, employees, members, shareholders,
assignees or agents, have retained, employed or used any broker or other finder
in connection with the transactions contemplated by this Agreement or in
connection with the
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negotiation of this Agreement. Seller and Purchaser further agree to indemnify,
defend and hold harmless the other from against any loss, liability, damage,
cost claim, or expense, including, without limitation, reasonable attorneys'
fees, incurred by reason of any brokerage, commission, or finder's fee alleged
to be payable because of any act, omission, or statement of the indemnifying
party.
6.4 SEC FILINGS. Seller shall provide reasonable assistance to Purchaser,
at Purchaser's sole cost and expense, in furnishing reasonable financial data
relating to the Assets for inclusion in connection with a filing by the
Purchaser of Form 8-K with the Securities and Exchange Commission ("SEC"), if
required, during a period of sixty (60) days following the Closing. Such
assistance shall include furnishing financial data to Purchaser's independent
auditors.
6.5 BULK TRANSFER LAW. The parties waive compliance with the California
Uniform Commercial Code Bulk Sales law.
7. INDEMNIFICATION.
7.1 INDEMNIFICATION OF PURCHASER. Notwithstanding any investigation of the
business, financial condition, prospects or assets of Seller and Members made by
or on behalf of Purchaser prior to the Closing, Seller and Members shall,
jointly and severally, indemnify, defend and hold harmless Purchaser and its
respective officers, directors, employees, control persons, advisors and agents
from and against all damages, losses (including, without limitation, with
respect to clause (c) hereof, lost profits), expenses and liabilities (including
reasonable attorneys' fees) whether or not involving a Third Party Claim (the
foregoing are referred to collectively as "DAMAGES") relating to or arising out
of or in connection with (a) any breach of warranty or covenant or any
inaccurate, incomplete or erroneous representation of Seller or Members
contained in this Agreement or in any schedule, exhibit, agreement, certificate,
list or other instrument delivered pursuant hereto; (b) Transfer Taxes; (c) any
and all benefits (the "EXCLUDED CONTRACT BENEFITS"), including, without
limitation, prices of, revenue from and orders for products or services, to
which Seller was entitled under the Excluded Contracts as such contract was in
effect immediately prior to the Closing to the extent that Purchaser is unable
to realize such benefits due to a failure to obtain a required waiver, consent
or approval for the assignment of such contract, or (d) any liabilities of
Seller other than the Assumed Liabilities notwithstanding the waiver by
Purchaser of compliance with the provisions of the bulk sales or bulk transfer
statutes of the California Uniform Commercial Code.
7.2 INDEMNIFICATION OF SELLER. Notwithstanding any investigation of the
business, financial condition, prospects or assets of Purchaser made by or on
behalf of Seller prior to the Closing, Purchaser shall indemnify, defend and
hold harmless Seller and its respective officers, managers, employees, control
persons, advisors and agents from and against all Damages relating to or arising
out of or in connection with (a) any breach of warranty or covenant or any
inaccurate, incomplete or erroneous representation of Purchaser contained in
this Agreement or in any schedule, exhibit, agreement, certificate, list or
other instrument delivered pursuant hereto or, (b) the Assumed Liabilities.
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8. INDEMNIFICATION PROCEDURES.
8.1 NOTICE. In the event Purchaser, Seller or their respective officers,
directors, managers, employees, control persons, advisors and agents (each
individually the "INDEMNIFIED PARTY") seeks indemnification or defense under
Section 7 above, the Indemnified Party shall give the party from whom
indemnification is requested (the "INDEMNIFYING PARTY") written notice as
promptly as practicable after the Indemnified Party has received notice or
obtains knowledge of the matter that has given or could give rise to a right of
indemnification or defense under this Agreement. Such notice shall state the
amount of losses, if any, and the method of computation thereof, all with
reasonable specificity and shall contain a reference to the provisions of this
Agreement with respect to which such right of indemnification or defense is
claimed.
8.2 THIRD PARTY CLAIMS. With respect to any Damages to which the indemnity
or defense obligations of Section 7 apply and which arise from any third party
claim (a "THIRD PARTY CLAIM"), the Indemnified Party shall give the Indemnifying
Party written notice as promptly as practicable after receiving notice of any
Third Party Claim, but the failure to notify the Indemnifying Party will not
relieve the Indemnifying Party of any liability that it may have to any
Indemnified Party, except to the extent that the Indemnifying Party demonstrates
that the defense of such action is prejudiced by the Indemnifying Party's
failure to give such notice. If the Indemnifying Party acknowledges in writing
its obligation to indemnify the Indemnified Party hereunder against any losses
that may result from any Third Party Claim (subject to the limitations set forth
in this Section 7), then the Indemnifying Party shall be entitled, at its
option, to assume and control the defense of such Third Party Claim at its
expense and through counsel of its choice (subject to the consent of the
Indemnified party, not to be unreasonably withheld or delayed) upon giving
written notice of its intention to do so to the Indemnified Party. In such case,
the Indemnified Party shall be permitted, at its option, to participate in the
defense of any such Third Party Claim with counsel of its own choosing and at
its own expense; provided, however, that the Indemnified Party shall have the
right at the Indemnifying Party's expense, to, at its option, either (i) assume
the defense or (ii) have separate counsel if, in the reasonable judgment of the
Indemnified Party upon advice of outside counsel, representation of both the
Indemnified Party and the Indemnifying Party by the Indemnifying Party's counsel
would be inappropriate due to an actual or potential conflict of interest
between such parties, or if any such claim involves a matter which could have a
material adverse effect upon the Business. The parties agree to cooperate to the
fullest extent possible in connection with any claim for which indemnification
is or may be sought hereunder. If the Indemnifying Party does not elect to
assume and control the defense of such Third Party Claim, then the Indemnified
Party may, at its option, elect to assume and control such defense at the
reasonable expense of the Indemnifying Party (subject to the consent of the
Indemnifying Party, not to be unreasonably withheld or delayed) and through
counsel of the Indemnified Party's choice. If the Indemnifying Party exercises
its right to undertake the defense of any such Third Party Claim as provided
above, the Indemnified Party shall cooperate with the Indemnifying Party and
make available to the Indemnifying Party all pertinent records, materials and
information in its possession or under its control as is reasonably requested by
the Indemnifying Party. Similarly, if the Indemnified Party rightfully
undertakes the defense of any Third Party Claim, the Indemnifying Party shall
cooperate with the Indemnified Party and make available to it all such records,
materials and information in
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the Indemnifying Party's possession or under its control relating thereto as is
reasonably requested by the Indemnified Party. No Third Party Claim may be
settled by the Indemnifying Party or the Indemnified Party without the written
consent, not to be unreasonably withheld or delayed, of the other party;
provided, however, that if such settlement involves the payment of money only
and, by the payment of that money, the Indemnified Party is fully indemnified
and the Indemnified Party refuses to consent thereto, the Indemnifying Party
shall cease to be obligated with respect to such Third Party Claim. In no event
will either party conduct the defense of any Third Party Claim in a manner that
will unreasonably detract from or otherwise interfere with or disrupt the other
party's business or customers.
8.3 OTHER CLAIMS. A claim for indemnification for any matter not involving
a Third Party Claim may be asserted by notice to the party from whom
indemnification is sought.
8.4 CALCULATION OF LOSSES. The parties shall make appropriate adjustments
for the proceeds of any insurance coverage of, or any other form of cost
recovery obtained by, the Indemnified Party in determining the amount of Damages
for purposes of this Section 8, provided that the indemnifiable Damages shall
then be increased by any additional expense or liability associated with the
obtaining of benefits under such coverage, to the extent of and as a result of
such Damages.
8.5 NONEXCLUSIVITY OF INDEMNIFICATION REMEDIES. The indemnification
remedies and other remedies in this Section 8 shall not be deemed to be
exclusive. Accordingly, the exercise by any person of any of its rights under
this Section 8 shall not be deemed to be an election of remedies and shall not
be deemed to prejudice, or to constitute or operate as a waiver of, any other
right or remedy that such person may be entitled to exercise, whether under this
Agreement, under any other contract, under any statute, rule or other legal
requirement, at common law, in equity or otherwise.
8.6 MINIMUM DAMAGES. No party shall have any obligation or liability to
any other party under this Section 8 until the aggregate amount of all Damages
for which the Indemnified Party seeks or claims defense or indemnification
pursuant to this Section 8 (the "INDEMNIFIED DAMAGES") exceeds a threshold of
$25,000. Once an Indemnified Party's Indemnified Damages meet or exceed $25,000,
such party may seek or claim defense or indemnification for the full amount of
Indemnified Damages. However, this Section 8.5 will not apply to any breach of
any of Seller's or Member's representations and warranties of which either
Seller or Member had knowledge at any time prior to the date on which such
representation or warranty is made or any intentional breach by either Seller or
Member of any covenant or obligation, and Seller and Member will be jointly and
severally liable for all damages with respect to such breach. In addition, this
Section 8.6 will not apply to any breach of Purchaser's representations and
warranties where Purchaser had knowledge that such representation or warranty
was untrue at any time prior to the date on which such representation or
warranty is made or any intentional breach by Purchaser of any covenant or
obligation, and Purchaser will be liable for all damages with respect to such
breach.
9. MAXIMUM DAMAGES. Notwithstanding anything to the contrary in this Agreement,
but subject to the next sentence, the Members' aggregate liability under this
Agreement for Damages
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<PAGE>
or otherwise (including, without limitation, for any breach of any covenant,
representation, warranty, indemnity, defense obligation or other obligation
under this Agreement) shall not exceed Two Million Four Hundred Thousand Dollars
($2,400,000). However, this Section 9 will not apply to (i) any breach of any of
either the Member's or Seller's representations and warranties where either of
the Members or Seller had knowledge that such representation or warranty was
untrue at any time prior to the date on which such representation and warranty
is made or any intentional breach by either Seller or either of the Members of
any covenant or obligation, and (ii) Transfer Taxes and Seller and Member will
be jointly and severally liable for all Damages with respect to such breaches.
10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by Seller and Purchaser under this Agreement in connection with
the transactions contemplated hereby or in any schedule, exhibit, agreement,
certificate, list or other instrument delivered pursuant hereto shall survive
the Closing and any investigation made at any time with respect thereto and
shall terminate 24 months following the Closing Date; PROVIDED, HOWEVER, that
the representations and warranties contained in Sections 3.1, 3.2, 4.1 and 4.2
above shall terminate when the applicable statutes of limitations with respect
to such matters in question expire (after giving effect to any extension thereof
by waiver or otherwise) or 24 months following the Closing Date, whichever is
later.
11. CONFIDENTIALITY PROVISIONS.
11.1 OBLIGATION. Seller and Member agree that upon the Closing Date all of
the Assets shall be the sole and exclusive property of Purchaser and any
Confidential Information (as defined below) relating to the Assets shall
comprise a special, valuable and unique asset of Purchaser's business, and that
the confidentiality and restricted use of such Confidential Information is an
integral part of its ascribed value. Seller and Member shall use all reasonable
efforts, not less than those used to maintain the confidentiality of their own
confidential information, not to disclose or use such information after the date
of this Agreement. For purposes of this Agreement, "CONFIDENTIAL INFORMATION"
shall mean (a) any information, know-how, data, process, technique, design,
drawing, formula or test data relating to any research project, work in process,
future development, engineering, manufacturing, marketing, business plan,
servicing, financial or personnel matter relating to the Assets, the Business,
Purchaser, its present or future products, sales, suppliers, customers,
employees, investors or business, whether in oral, written, graphic or
electronic form; and (b) any information disclosed to Seller by any third party
which Seller is obligated to treat as confidential or proprietary, including all
whole or partial copies and versions thereof occurring in any form which
satisfies the terms and conditions of this Section 11.1.
11.2 EXCLUSIONS. Confidential Information shall not include and Seller
shall not be obligated to hold in confidence any information which (i) is or
becomes public knowledge without breach of this Agreement, or (ii) which is or
becomes publicly available without a confidentiality restriction and without
breach of this Agreement from a source other than Purchaser.
11.3 REMEDIES. Seller acknowledges that disclosure or use of any
Confidential Information prior to or after the Closing Date in a manner
inconsistent with this Section 10 or any
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<PAGE>
other provision of this Agreement will cause Purchaser irreparable injury which
may not be adequately compensated by damages. Accordingly, in addition to all
other remedies that Purchaser may have hereunder Purchaser shall have the right
to equitable and injunctive relief to prevent the unauthorized use or disclosure
of any such Confidential Information and the right to such damages (including
without limitation, court costs and reasonable attorneys' fees) as are
occasioned by such unauthorized use or disclosure.
12. ENTIRE AGREEMENT AND AMENDMENTS; SECTION HEADINGS. This Agreement, including
the Exhibits and schedules referred to herein, which are incorporated herein and
made a part hereof, contains the final complete and exclusive understanding of
the parties hereto with respect to the subject matter contained herein and may
be amended or terminated only by a written instrument executed by Seller and
Purchaser or their respective successors or assigns. There are no
representations, promises, warranties, covenants or undertakings other than
those expressly set forth herein, and any of same prior to the Closing, together
with the Letter of Intent dated January 28, 1998 by and between Purchaser and
Seller, are hereby merged into this Agreement. The section and 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.
13. 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.
14. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors and
assigns of the parties hereto; provided, however, that neither this Agreement
nor any rights or obligations accruing hereunder may be assigned or is
assignable by Seller or Purchaser, or may be delegated or is delegable, and any
attempted assignment or delegation shall be null and void.
15. APPLICABLE LAW. This Agreement shall be construed and enforced in accordance
with the laws of the State of California without regard to its choice-of or
conflict-of-laws rules and venue for any action to enforce or interpret this
Agreement shall be in a court of competent jurisdiction located in the State of
Colorado and each of the parties consents to the jurisdiction of such court in
any such action or proceeding and waives any objection to venue laid therein.
16. EXPENSES. Each party shall be responsible for its own fees and expenses,
including fees and expenses of legal counsel and/or accountants, incurred in
connection with the negotiation and preparation of this Agreement, the
associated documents and the consummation of the transactions contemplated
hereby and thereby.
17. EQUITABLE RELIEF. Seller and Member each further acknowledge that any breach
of warranty or covenant or any other provision of this Agreement will cause
Purchaser irreparable injury which may not be adequately compensated by damages.
Accordingly, in addition to all other remedies that Purchaser may have hereunder
Purchaser shall have the right to equitable and injunctive relief, including the
right to request specific performance of Seller's or Member's obligations
hereunder.
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<PAGE>
18. "KNOWLEDGE" DEFINITION. As used herein, the expressions "knowledge," "best
of knowledge," "aware" or similar expressions include only the actual knowledge
of an individual or, in the case of Seller or Purchaser, the named individuals
listed below and the knowledge any of them should reasonably have by virtue of
his or her position, authority, responsibilities and activities, including all
such information as is in the files under the control or sued by such
individual. When such terms are used in connection with the knowledge of Seller,
such knowledge shall mean the knowledge of Joe Allwein and Darleen Bauer
Allwein. When such terms are used in connection with the knowledge of Purchaser
such knowledge shall mean the knowledge of Paul Lange, Richard Santa and Michael
Beam.
19. FURTHER ASSURANCES. The parties shall at their own cost and expense execute
and deliver such further documents and instruments and shall take such other
actions as may be reasonably required or appropriate to carry out the intent and
purposes of this Agreement.
20. NOTICES. All notices, requests, demands and other communications under this
Agreement shall be given in writing and shall be served either personally, by
facsimile or delivered by first class mail, registered or certified, return
receipt requested, postage prepaid and properly addressed as follows:
If to the Purchaser: Dynamic Materials Corporation
551 Aspen Ridge Drive
Lafayette, Colorado 80026
Attn: Richard Santa, Chief Financial Officer
Fax: 303/604-1897
With a copy to: Davis, Graham & Stubbs LLP
Suite 4700
370 Seventeenth Street
Denver, Colorado 80202
Attn.: David Bartlett
Fax: 303/892-7400
If to Seller: Spin Forge, LLC
1700 East Grand Avenue
El Segundo, CA 90245
Attn.: Joseph Allwein
Fax: 310-640-8599
With a copy to: Wolf, Rifkin & Shapiro, LLP
11400 W. Olympic Blvd.
Los Angeles, California 90064
Fax: 310-479-1422
Attn: Richard Grant
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<PAGE>
Notice shall be deemed received upon the earliest of actual receipt,
confirmed facsimile or three (3) days following mailing pursuant to this
Section.
21. SEVERABILITY AND WAIVER. In the event that any provision of this Agreement
is held to be invalid or unenforceable, the valid or enforceable portion thereof
and the remaining provisions of this Agreement will remain in full force and
effect. Any waiver (express or implied) by either party of any default or breach
of this Agreement shall not constitute a waiver of any other or subsequent
default or breach.
22. PUBLIC ANNOUNCEMENTS. Purchaser and Seller shall consult upon the substance
of any and all press releases, publicity statements and other communications to
the public or to vendors and customers of Seller with respect to this Agreement
and the transactions contemplated hereby. However, Seller shall not at any time
make any such communication without the consent of the Purchaser.
23. THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall be construed to
create any rights in any of Seller's or Purchaser's employees or in any other
person as a third party beneficiary or otherwise.
24. PRONOUNS. All pronouns used in this Agreement shall be deemed to refer to
the masculine, feminine or neuter gender, as the context requires.
25. ATTORNEYS' FEES. Should any litigation or arbitration occur between the
parties to this Agreement respecting or arising out of this Agreement, the
successful or prevailing party shall be entitled to recover its reasonable
attorneys' fees and other costs in connection therewith, including, without
limitation, any attorneys' fees incurred after a judgment has been rendered by a
court of competent jurisdiction.
IN WITNESS WHEREOF, the parties hereto have fully executed this Agreement
as of the date first written above.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
PURCHASER:
Dynamic Materials Corporation
/s/Richard Santa
-----------------------------------------
Richard Santa
Vice President, Finance and Chief
Financial Officer
SELLER:
Spin Forge, LLC
/s/Joe Allwein
-----------------------------------------
Joe Allwein
President and Manager
/s/Darleen Bauer Allwein
-----------------------------------------
Darleen Bauer Allwein, Vice President
MEMBERS:
/s/Joe Allwein
-----------------------------------------
Joe Allwein
/s/Darleen Bauer Allwein
-----------------------------------------
Darleen Bauer Allwein
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OPTION AGREEMENT
THIS OPTION AGREEMENT (this "AGREEMENT") is made and entered into on
this 18th day of March, 1998 by and between Dynamic Materials Corporation, a
Delaware corporation ("DMC"), and Spin Forge, LLC, a California limited
liability company ("OWNER").
RECITALS
This Agreement is made with respect to the following facts:
A. Owner owns the real property (the "OWNED LAND") located in Los
Angeles County, California with a street address of 1700 East Grand Avenue, El
Segundo, California 90245 and more particularly described on EXHIBIT A attached
hereto and by this reference made part hereof. The Owned Land, together with all
appurtenant easements and other appurtenances thereto, and together with all
buildings, structures, and other improvements located thereon and all fixtures
attached thereto (collectively, the "BUILDING") is referred to herein
collectively as the "PROPERTY."
B. The Property is currently subject to that certain Operating Lease
dated as of an even date herewith (the "OPERATING LEASE"), between Owner and
DMC, providing for the lease by DMC from Owner of the Owned Land and the
Building.
C. DMC is interested in obtaining an option to purchase the
Property, and Owner is willing to grant such an option to DMC, on and subject to
the terms and conditions set forth in this Agreement.
D. DMC and Owner are entering into this Agreement in connection with
that certain Asset Purchase Agreement (the "PURCHASE AGREEMENT") dated as of an
even date herewith and which they are entering into concurrently with this
Agreement. Capitalized terms used in this Agreement and not otherwise defined in
this Agreement shall have the meanings ascribed in the Purchase Agreement.
AGREEMENT
In consideration of the payment by DMC to Owner of the Option Fee
(as defined herein), and in consideration of the promises and agreements of the
parties set forth herein, the sufficiency of which is hereby acknowledged by
both Owner and DMC, Owner and DMC do hereby promise and agree as follows:
1. OPTION. Owner hereby grants to DMC an exclusive option (the
"OPTION") to purchase the Property on the terms and subject to the conditions
set forth in this Agreement.
A. OPTION FEE. In consideration for the exclusive right
granted hereby to DMC to purchase the Property pursuant to the terms
set forth herein, DMC shall,
<PAGE>
simultaneously with the full execution of this Agreement, pay to
Owner Ten Thousand Dollars ($10,000) (the "OPTION FEE"). The Option
Fee shall be fully earned by Owner upon the execution of this
Agreement. In no event shall any portion of the Option Fee be
refundable to DMC.
B. TERM. The term of the Option (the "TERM") shall commence on
the date hereof and shall expire upon the termination of the
Operating Lease.
C. TIME OF EXERCISE. The Option may be exercised by DMC at any
time after June 30, 1998 and until the expiration of the Term.
D. PROCEDURE FOR EXERCISE. The Option may be exercised during
the time specified in Section 1(C) by delivering to Owner a written
notice of exercise (the "EXERCISE NOTICE") during that time stating
that DMC has exercised the Option.
2. PURCHASE PRICE.
A. CALCULATION OF PURCHASE PRICE. The purchase price for the
Property upon the exercise of the Option (the "PURCHASE PRICE")
shall equal $2,880,000 (the "UNADJUSTED PRICE") minus the Prepayment
Discount, if any; provided, however, that in the event the Option is
exercised after January 1, 2002, the Purchase Price shall be equal
to the fair market value (as determined pursuant to the procedure
set forth in Article 1, Section C of the Operating Lease) of the
Property at the time the Option is exercised, provided that in no
event shall the Purchase Price be less than $2,880,000 and provided
further that in the event the Option is exercised before January 1,
2002, but the purchase of the Property is not closed due to the
default of the Owner, Purchaser shall be entitled to purchase the
property at the Purchase Price in effect at the time of the original
exercise, provided that the purchase of the Property is closed
within a reasonable period of time after Owner has cured such
default.
B. DEFINITIONS. As used herein, the following terms shall have
the following meanings:
(1) The term "PREPAYMENT DISCOUNT" shall mean an amount
equal to fifty percent (50%) of the result of {(a) minus (b)},
where (a) is the outstanding principal amount on the Dover
Note on the Prepayment Date and (b) is the amount of principal
actually paid on the Prepayment Date in order to repay the
entire balance of the Dover Note on the Prepayment Date.
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<PAGE>
(2) The term "PREPAYMENT DATE" shall mean the date on
which Owner prepays the Dover Note in full.
(3) The term "DEBT" shall mean the amount of principal
and interest outstanding under the Master Promissory Note.
C. REDUCTION FOR ASSUMED LIABILITIES. In the event that DMC
assumes or otherwise relieves or releases, directly or indirectly,
Owner from Owner's obligations under the Dover Note prior to the
full satisfaction by Owner of such obligations, the Purchase Price
shall be reduced by the amount of such assumption or the amount of
liability under the Dover Note from which Owner is otherwise
relieved or released.
3. DOCUMENTS RECEIVED BY DMC. DMC hereby acknowledges that, as of
the date of this Agreement, DMC has received copies of the following documents:
A. The Land Title Survey of the Property prepared by Gary
J. Olsen, dated June 27, 1997 (the "SURVEY").
B. The Owner's Policy of Title Insurance Number 7130117X49
covering the Property dated effective February 26, 1998
issued by Chicago Title Insurance Company to Owner; and
Owner's Policy of Title Insurance Number 9632400-8
covering the Property dated effective December 11, 1996
issued by First American Title Insurance Company (the
"CURRENT POLICY").
4. OWNER'S AFFIRMATIVE OPERATING COVENANT. During the Term and, if
the Option is exercised by DMC, until consummation of the transactions
contemplated by the Option (the "CLOSING") or termination of this Agreement,
Owner shall operate, maintain, and repair the Property in a manner required
under the Operating Lease.
5. OWNER'S NEGATIVE OPERATING COVENANT. During the Term and, if the
Option is exercised by DMC, until the Closing or termination of this Agreement,
Owner shall not, without the prior written consent of DMC, which consent shall
not be unreasonably withheld, sell, convey, option, lease, or otherwise cloud
title to the Property, or any portion thereof, or contract to do any of the
foregoing.
6. TITLE. Title to the Property shall be subject to the following
matters:
A. The lien for general real property taxes, general
assessments, and all installments of special assessments
against the Property for the year of Closing and all
subsequent years.
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<PAGE>
B. The matters set forth in the Current Policy.
C. Any and all matters accepted or deemed accepted by DMC
pursuant to PARAGRAPH 8 of this Agreement.
The foregoing title exceptions are hereinafter together called the "PERMITTED
EXCEPTIONS."
7. TITLE COMMITMENT. Owner shall, within 10 days after its receipt
of the Exercise Notice, furnish to DMC a preliminary title insurance report in
favor of DMC (the "PRELIMINARY REPORT") from a title insurance company
reasonably acceptable to both Owner and DMC (the "TITLE COMPANY") showing title
to the Property to be vested in Owner. The Title Company shall deliver to DMC
copies of all recorded instruments referred to in the Preliminary Report.
8. TITLE MATTERS.
A. OBJECTION BY DMC. Within 10 days after DMC's receipt of the
Preliminary Report, DMC may give Owner notice of all title defects
shown therein which are not Permitted Exceptions under any of
PARAGRAPHS 6A through 6B and which are not accepted by DMC as
Permitted Exceptions (the "NEW EXCEPTIONS"). Any and all New
Exceptions affecting all or any portion of the Property disclosed by
the Preliminary Report (as exceptions, requirements, or otherwise)
which are not objected to by notice from DMC to Owner given within
such period, shall be deemed accepted by DMC and shall constitute
Permitted Exceptions.
B. OWNER'S OPTION TO CURE. In the event DMC gives Owner timely
notice of DMC's objection to any New Exceptions shown by the
Preliminary Report, Owner shall have the right to cure such New
Exceptions; provided that Owner shall not be obligated hereby to
cure any such New Exceptions or to incur any expense in connection
with any such cure. For purposes hereof, a New Exception shall be
deemed cured if (i) the Title Company deletes the New Exception from
the Preliminary Report or (ii) the Title Company undertakes in
writing to add a provision to the Owner's Policy obligating the
Title Company, within the limits of such Owner's Policy, to protect
DMC against loss or damage incurred on account of such New
Exception.
C. TERMINATION BY DYNAMIC. If each of the New Exceptions
objected to by DMC has not been cured prior to the date of the
Closing, DMC shall have the right, as its sole and exclusive remedy,
to be exercised by written notice given to Owner at or prior to the
Closing, to either: (i) terminate this Agreement; (ii) waive its
objection to such New Exceptions and accept the same as Permitted
Exceptions;
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<PAGE>
or (iii) reduce the Purchase Price by a reasonable amount to
reflect the value of the New Exception as mutually agreed by
Owner and DMC, provided that Owner and DMC shall have no
obligation to agree on such amount. In the event DMC does not
notify Owner of its decision to terminate, reduce the Purchase
Price or waive within such period of time, DMC shall be deemed to
have waived its objection to such New Exceptions and to have
accepted such New Exceptions as Permitted Exceptions. In the
event that this Agreement is terminated by DMC pursuant to this
PARAGRAPH 8C, both parties shall thereupon be relieved of all
further obligations hereunder.
9. AS-IS SALE. During the Term, DMC has been the sole occupant of
the Property and has operated the Property and conducted a portion of its
business at the Property. As a result, DMC is thoroughly familiar with the
condition of the Property. DMC IS NOT RELYING ON ANY REPRESENTATION, WARRANTY,
WRITTEN INFORMATION, DATA, REPORT OR STATEMENT OF OWNER OR ITS AGENTS AS TO THE
CONDITION OF THE PROPERTY, AND IS PURCHASING THE PROPERTY IN ITS "AS-IS"
"WHERE-IS" CONDITION, WITH ALL FAULTS, BASED SOLELY UPON DMC'S KNOWLEDGE OF THE
PROPERTY AND ITS OWN INDEPENDENT INSPECTION AND REVIEW OF THE PROPERTY. BY
CONSUMMATING THE CLOSING, DMC SHALL BE DEEMED TO HAVE BEEN SATISFIED WITH ALL
ASPECTS OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE CONDITION AND
PHYSICAL ASPECTS OF THE BUILDING, THE CONDITION OF THE PROPERTY, THE
AVAILABILITY OF UTILITIES AND SANITARY FACILITIES FOR DMC'S INTENDED USE OF THE
PROPERTY, AND THE SUITABILITY OF THE PROPERTY FOR DMC'S INTENDED USE.
10. PRORATIONS. General real property taxes, general assessments,
and current installments of special assessments on the Property for the year of
the Closing shall be prorated to the date of Closing based on the amounts paid
on the Property for the year prior to the year of the Closing. All other items
of income and expense for the Property shall be prorated to the date of the
Closing based upon the best information available on the date of the Closing
regarding the amounts payable therefor. Such prorations shall be reprorated
between the parties after the Closing upon the determination of the actual
amounts payable therefor.
11. CLOSING. The purchase and sale of the Property, and each of the
deliveries contemplated below, shall be consummated through an escrow (the
"ESCROW") with an escrow company located in Los Angeles County that is
reasonably satisfactory to Owner and DMC (the "ESCROW HOLDER"). Escrow shall be
opened as soon as practicable following DMC's exercise of the Option. This
Agreement, together with any escrow instructions required by the Escrow Holder
to be delivered to the Escrow Holder shall constitute the Escrow Holder's
instructions. Owner and DMC agree to execute and deliver to the Escrow Holder
such additional and supplemental instructions; PROVIDED, HOWEVER, in the event
of any conflict or inconsistency between this Agreement and any other
instructions delivered to the Escrow Holder, the terms of this Agreement
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<PAGE>
shall govern the duties of the Escrow Holder and the rights and obligations of
DMC and Owner. At the Closing:
A. DMC shall pay to Owner the Purchase Price in cash, by
cancellation of the Debt (as defined in PARAGRAPH 2 of this
Agreement), certified check, cashier's check, wire transfer, or
other immediately available funds acceptable to Owner, or any
combination of the foregoing.
B. Owner shall convey the Property fee simple absolute to DMC
by grant deed, free and clear of all liens and encumbrances, subject
only to the Permitted Exceptions.
C. Owner shall assign or otherwise transfer to DMC, and DMC
shall assume all obligations of Owner under, any and all service,
maintenance, and management agreements affecting the Property and
all plans, specifications, surveys, studies, warranties, licenses,
permits, certificates of occupancy, and all similar items in Owner's
possession or control affecting the Property.
D. Owner shall obtain the unconditional commitment of the
Title Company to issue to DMC its standard form owner's policy of
title insurance (the "OWNER'S POLICY") insuring title to the
Property in DMC in the amount of the Unadjusted Price, subject only
to the Permitted Exceptions.
E. The parties shall each do or cause to be done such other
matters and things as shall be necessary to consummate the Closing.
Each party shall pay (through delivery into the Escrow) one-half of any charges
imposed by the Escrow Holder, Owner shall pay the premium charged by the Title
Company for the Owner's Policy, and DMC shall pay all recording, documentary,
and similar fees and transfer taxes incurred in connection with the Closing.
12. SALES COMMISSIONS. Owner and DMC shall each indemnify the other
and hold the other harmless against any and all claims for commissions, fees, or
other compensation made by any real estate broker, agent, salesman, finder, or
other person as a result of the sale of the Property contemplated herein on
account of any implied or express commitment or undertaking to pay such a
commission made by the indemnifying party.
13. NO ASSIGNMENT. This Agreement shall be binding and effective on
and inure to the benefit of the successors and assigns of the parties hereto.
Neither party shall, without the prior written consent of the other party,
assign or otherwise transfer or encumber this Agreement or any interest of
either party herein; provided that DMC may assign this Agreement, without the
prior
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<PAGE>
written consent of Owner, to any entity controlling, controlled by, or
under common control with DMC.
14. RECORDING. Owner and DMC shall, promptly upon the request of
either of them, execute a short form memorandum of this Agreement, in form and
substance acceptable to both Owner and DMC and suitable for recording, and, at
the option of either party, may file such memorandum for recording in the real
property records of Los Angeles County, California.
15. SPECIFIC PERFORMANCE. The parties agree that it is impossible to
measure in money the damages which will accrue to DMC by reason of a failure by
Owner to perform any of the obligations as set forth in this Agreement.
Accordingly, Owner agrees that DMC may have specific performance of this
Agreement in any court of competent jurisdiction. Furthermore, if DMC or any
successor-in-interest institute any action or proceeding to enforce the
provisions of this Agreement, any person (including Owner) against whom such
action or proceeding is brought hereby waives the claim or defense therein that
DMC or any successor-in-interest has an adequate remedy at law.
16. ATTORNEYS' FEES. In the event that a law suit is brought to
enforce or interpret all or any portion of this Agreement, the prevailing party
in such suit shall be entitled to recover, in addition to any other relief
available to such party, reasonable costs and expenses, including, without
limitation, attorneys' fees, incurred in connection with such suit.
17. NOTICES. All notices provided for herein shall be in writing and
shall be deemed given to a party when a copy thereof, addressed to such party as
provided herein, is actually delivered by personal delivery, by overnight
courier service, by successful facsimile transmission, or by certified or
registered mail, return receipt requested, to the address of such party. All
notices to Owner shall be addressed to Owner at the following address and
facsimile number or such other address and facsimile number of which Owner gives
DMC notice hereunder:
If to Owner: Spin Forge, LLC
1700 East Grand Avenue
El Segundo, California 90245
Attention: Joseph Allwein
Telephone: (310) 640-8099
Facsimile: (310) 640-8599
With a copy to: Wolf, Rifkin & Shapiro, LLP
11400 West Olympic Boulevard
Ninth Floor
Los Angeles, California 90064-1565
Attention: Richard S. Grant, Esq.
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<PAGE>
Telephone: (310) 478-4100
Facsimile: (310) 479-1422
All notices to DMC shall be addressed to DMC at the following address and
facsimile number or such other address and facsimile number of which DMC gives
Owner notice hereunder:
If to DMC: Dynamic Materials Corporation
551 Aspen Ridge Drive
Lafayette, Colorado 80026
Attention: Richard Santa
Telephone: (303) 604-1897
Facsimile: (303) 665-5700
With a copy to: Davis, Graham & Stubbs LLP
Suite 4700
370 Seventeenth Street
Denver, Colorado 80202
Attention: David Bartlett
Telephone: (303) 892-9400
Facsimile: (303) 892-7400
18. GOVERNING LAW AND VENUE. The validity and effect of this
Agreement shall be determined in accordance with the laws of the State of
California (without regard to its conflict of law doctrine) and the venue for
any action to enforce or interpret this Agreement shall be in a court of
competent jurisdiction located in the State of Colorado and each of the parties
consents to the jurisdiction of such court in any such action or proceeding and
waives any objection to venue laid therein.
19. SURVIVAL. This Agreement and all obligations provided herein
shall, to the extent not fully satisfied and performed by or through the
Closing, survive the Closing and the conveyance of title to the Property.
20. COMPUTATION OF TIME. If any event or performance hereunder is
scheduled or required to occur on a date which is on a Saturday, Sunday, or
legal state or federal holiday in Denver, Colorado, the event or performance
shall be required to occur on the next day which is not a Saturday, Sunday, or
legal state or federal holiday in Denver, Colorado.
21. ENTIRE AGREEMENT. This Agreement contains the entire
understanding and agreement between the parties with respect to the subject
matter hereof and supersedes all prior commitments, understandings, warranties,
and negotiations, all of which are by the execution hereof
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<PAGE>
rendered null and void. No amendment or modifications of this Agreement shall be
made or deemed to have been made unless in writing, executed by the party or
parties to be bound thereby.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the dates indicated below intending that it be valid and effective from and
after the date first written above.
DYNAMIC MATERIALS CORPORATION,
a Delaware corporation
By: /s/Richard Santa
-------------------------------------
Its: Vice-President & CFO
------------------------------------
Date: 3/18/98
------------------------------------
SPIN FORGE, LLC,
a California limited liability company
By: /s/Joe Allwein
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Its: President
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Date: 3/18/98
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OPERATING LEASE
This OPERATING LEASE (this "Lease") is made and entered into as of
the 18th day of March 1998, by and among Spin Forge, LLC, a California limited
liability company ("Lessor"), Dynamic Materials Corporation, a Delaware
corporation ("Lessee"), only with respect to Article 3, Joe Allwein ("Allwein").
RECITALS
A. Lessor owns the real property located in Los Angeles County,
California, with a street address of 1700 East Grand Avenue, El Segundo,
California 90245, as more particularly described in EXHIBIT A attached hereto
and by this reference made a part hereof (the "LAND"), including the
manufacturing, storage and administrative buildings and any and all other
improvements located thereon (including surface parking facilities containing
approximately ______ spaces and any other incidental improvements)
(collectively, the "BUILDINGS").
B. As used herein, the term "Premises" shall mean and refer
collectively to the Land and the Building[s].
C. Lessor wishes to lease to Lessee, and Lessee wishes to lease from
Lessor, the Premises on and subject to the terms and conditions set forth
herein.
D. The parties hereto have executed as of an even date herewith an
Asset Purchase Agreement (the "PURCHASE AGREEMENT"). Capitalized terms used in
this Lease and not otherwise defined shall have the meaning ascribed to such
terms in the Purchase Agreement.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the sufficiency
of which is hereby acknowledged by the parties hereto, Lessor and Lessee each
hereby promise and agree as follows:
ARTICLE 1
DEMISED PREMISES AND TERM OF LEASEHOLD
A. Lessor, for and in consideration of the rent and other amounts
herein reserved to be paid by Lessee and in consideration of the covenants
herein to be kept and performed by Lessee does hereby lease to Lessee the
Premises.
B. The term of this Lease (the "TERM") shall commence on March 18,
1998 (the "Commencement Date") and end on the first day of January, 2002.
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C. Lessor hereby grants to Lessee an option (the "OPTION") to extend
the Term of this Lease for one additional period of ten (10) years commencing
immediately after the end of the initial Term (the "EXTENDED TERM"). If no Event
of Default (as defined below) has occurred and is continuing, the Option may be
exercised by Lessee by written notice given to Lessor at least 60 days prior to
the expiration of the initial Term. During the Extended Term, all references
herein to the "TERM" shall be deemed to refer to such Extended Term, as
appropriate. During the Extended Term, Lessee shall take the Premises in their
as is condition, and Lessee shall lease the same hereunder on the same terms and
conditions as set forth herein, except that the Base Rent payable by Lessee
hereunder during the Extended Term (the "EXTENDED TERM BASE RENT") shall be the
fair market rental value of the Premises as determined by the parties at the
time that Lessee exercises the Option. In the event the parties are unable to
agree on the Extended Term Base Rent, Lessor shall determine the Extended Term
Base Rent within ten (10) business days after Lessee exercises the Option as
permitted by this Paragraph C, and shall deliver a statement of that amount to
Lessee within that time. If Lessee objects to the Extended Term Base Rent as
determined by Lessor, Lessee shall, within ten (10) business days after
receiving notice thereof from Lessor, notify Lessor of Lessee's objection. The
parties shall thereafter attempt to agree on the Extended Term Base Rent. If,
however, within ten (10) business days, they are unable to agree on the amount
of the Extended Term Base Rent, then the matter shall be submitted to the
Appraiser. The Appraiser shall review Lessor's calculation of the Extended Term
Base Rent and shall determine the final Extended Term Base Rent within fifteen
(15) business days after the Appraiser has received from the parties all
information that the Appraiser may reasonably request. The Appraiser's
determination of the Extended Term Base Rent shall be deemed final and
conclusive for purposes of this Lease. Lessor and Lessee shall each pay one-half
of the Appraiser's fees and expenses in determining the Extended Term Base Rent.
The Appraiser shall be a real estate appraiser mutually agreed upon by Lessor
and Lessee. If Lessee and Lessor are unable to agree upon such appraiser within
five (5) business days after Lessee notifies Lessor of Lessee's objection to the
Extended Term Base Rent, each party shall select its own appraiser and the two
appraisers shall select a third appraiser. Such third appraiser shall be the
Appraiser.
D. Notwithstanding anything to the contrary in this Lease, if Lessee
exercises its option to purchase the Premises pursuant to the Option Agreement,
and the Term expires prior to the closing of Lessee's purchase of the Premises,
then the Term shall automatically extend until (i) the closing of that purchase,
or (ii) the time that the option terminates because Lessee does not proceed with
that purchase, whichever occurs first. During that extended term, Lessee shall
lease the Premises from Lessor on the terms and subject to the conditions that
were in effect at the time that the extended term went into effect. In the event
that the Term expires pursuant to clause (ii) of this Paragraph D,
notwithstanding anything to the contrary in this Lease, the period during which
Lessee may exercise the Option shall be extended until ten (10) business days
after the expiration of the Term.
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ARTICLE 2
RENT
A. During the initial Term of this Lease, Lessee shall pay to Lessor
base rent in amounts equal to the amounts of interest due and payable under the
Dover Note. The amounts of interest due and payable ("Base Rent") and the
corresponding due dates for each of such payments under the Dover Note are set
forth in Schedule A attached to this Lease (the "PAYMENT SCHEDULE"). Base Rent
shall be paid by Lessee to Lessor in immediately available funds on a date (the
"RENT DUE DATE") at least three (3) business days prior to the date on which the
corresponding monthly interest payment becomes due under the Dover Note as set
forth on the Payment Schedule; provided, however, that Base Rent for any
fraction of a month at the commencement or expiration of this Lease shall be
prorated. The Payment Schedule shall be updated by Lessor in writing should the
interest payment amounts or due dates under the Dover Note change for any
reason; provided, however, that Lessee shall not be bound by any change to the
Payment Schedule with respect to a payment unless Lessee has been notified in
writing with respect to a change to such payment at least ten (10) business days
prior to the Rent Due Date for such payment and Lessee shall in no event be
required to pay any amounts due under the Dover Note due to a default under the
Dover Note caused solely by Lessor, including without limitation, penalties,
increases in interest rate or other payments. All payments of rent shall be made
payable to Lessor and shall be sent to Lessor at the address set forth herein or
such other address as Lessor shall from time to time designate by written notice
to Lessee.
B. In addition to the rent contemplated by the immediately preceding
paragraph, Lessee shall be responsible for the payment of all amounts required
to maintain and operate the Premises (collectively, "Operating Costs") incurred
by Lessor in connection with this Lease or the Premises, including, without
limitation, Taxes (as defined below) pursuant to the terms of ARTICLE 5 of this
Lease, utility costs pursuant to the terms of ARTICLE 6 of this Lease,
maintenance and repair costs pursuant to the terms of ARTICLE 7 of this Lease
and insurance costs pursuant to the terms of ARTICLE 12 of this Lease. Operating
Costs shall not include the cost of any financing or ground lease on the
Premises (other than Base Rent), capital improvements to the Premises (unless
approved by Lessee in its sole discretion), management costs or overhead. Lessor
shall present request for payment of additional rent to Lessee, together with
evidence of payment of such costs as Lessee may reasonably require. Lessee shall
make payment to Lessor within thirty (30) days of receipt of such request.
C. In the event that Lessee assumes the Dover Note or otherwise
relieves or releases Lessor from Lessor's obligations under the Dover Note in
accordance with the provisions of the Loan Agreement, Lessee's obligation to
make payments of Base Rent under ARTICLE 2 shall be canceled and extinguished.
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ARTICLE 3
ALLWEIN'S OBLIGATION
Allwein acknowledges that he owns a fifty percent (50%) interest in
Lessor and is also a key officer of Lessee with the responsibility of
supervising and managing the operations of Lessee located at the Premises.
Allwein hereby agrees that for so long as he is employed by Lessee, he is
responsible for monitoring the compliance by Lessee of all obligations of Lessee
under the Lease. Allwein also hereby agrees that for so long as he is employed
by Lessee that he will at all times act in the best interest of Lessee and in a
way not adverse to Lessee notwithstanding his position as an owner of a
controlling interest in Lessor. In the event that any Event of Default occurs
during the Term of this Lease due to Allwein's negligence, willful misconduct or
breach of his obligations under this Article 3, such Event of Default shall be
deemed cured and Lessee shall suffer no adverse consequences and shall be in the
same position as if such Event of Default had not occurred.
ARTICLE 4
USE OF THE PREMISES
A. During the Term of this Lease, the Premises will be used and
occupied for any and all purposes directly or indirectly related to the conduct
of a manufacturing business and all related administrative and general business
purposes and for any other legal purpose.
B. No nuisance will be permitted on or about the Premises; and
nothing shall be done upon or about the Premises which shall be unlawful or
offensive or contrary to any law, ordinance, regulation, or requirement of any
public authority or insurance inspection or rating bureau or similar
organization having jurisdiction, or which may be injurious to or materially
adversely affect the quality of the Premises. Lessee will not take any action
which will cause the Building to become overloaded, damaged, or defaced. Lessee
will procure all licenses and permits which may be required for any use made of
the Premises; provided, however, that Lessor shall provide reasonable assistance
in obtaining such licenses or permits. Waste and refuse shall be removed from
the Premises on a regular basis at Lessee's expense. Lessee will not do, or
suffer to be done, or keep or suffer to be kept, or omit to do anything, upon or
about the Premises which may prevent the obtaining of any insurance on the
Premises for hazards, including, without limitation, fire, extended coverage,
and public liability insurance, or which may make void or voidable any such
insurance or which may create any extra premiums for, or increase the rate of,
any such insurance.
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ARTICLE 5
PROPERTY TAXES
A. Lessee shall reimburse Lessor for all ad valorem and other real
property taxes and any and all other taxes, assessments, levies and other
charges of any kind, general and special, foreseen and unforeseen, including,
without limitation, all installments of principal and interest required to pay
any existing or future general or special assessments payable during the Term,
and any increases resulting from reassessments made in connection with a change
of ownership, new construction or any other cause (now or later imposed by any
governmental or quasi-governmental authority or special district having the
power to tax or levy assessments, which are levied or assessed against or with
respect to the value, occupancy or use of all or any portion of the Property as
now constructed or as may at any later time be constructed, altered or otherwise
changed) relating to the time period of the Term only, or Lessor's interest in
the Premises, the fixtures, equipment and other property of Lessor, real or
personal, that are an integral part of and located on the Premises, the gross
receipts, income or rentals from the Premises, or the use of parking areas,
public utilities or energy within the Premises or Lessor's leasing of the
Premises (the foregoing are collectively referred to as "Property Taxes")
attributable to any period during the Term. If at any time during the Term the
method of taxation or assessment of the Premises prevailing as of the
Commencement Date is altered so that, in lieu of or in addition to any Property
Tax, there shall be levied, assessed or imposed (whether because of a change in
the method of taxation or assessment, creation of a new tax or charge, or any
other cause) an alternate or additional tax or charge (i) on the value, use or
occupancy of the Premises or Lessor's interest in the Premises or (ii) on or
measured by the gross receipts, income or rentals from the Premises, or on
Lessor's leasing of the Premises, or computed in any manner with respect to the
operation of the Premises, then any tax or charge, however designated, shall be
included within the meaning of the term Property Taxes for purposes of this
Lease. Notwithstanding anything to the contrary in this Lease, the inclusion of
any services, facilities or improvements in Property Taxes shall not be deemed
to impose an obligation on Lessor to provide those services, facilities or
improvements. Lessee shall pay such amounts to Lessor within 30 days after
Lessee's receipt of a written statement therefor from Lessor together with
evidence of the amount of such taxes and the payment thereof by Lessor.
B. Lessor shall supply to Lessee copies of all statements, invoices,
or bills for such taxes, and all notices of assessment, valuation, or other
similar notices or documents, promptly upon receipt thereof by Lessor. At any
time and from time to time, Lessee shall have the right, and Lessor shall use
reasonable efforts to cooperate with Lessee, to initiate any action to contest
the amount, applicability, or any other aspect of such taxes in good faith
pursuant to any procedures available to parties responsible for the payment of
such taxes; provided that Lessee shall take any steps reasonably necessary in
connection with any such contest to ensure that the Premises shall not be
subject to the risk of foreclosure, loss, or forfeiture in connection with such
contest.
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C. Lessee shall pay before delinquency any and all personal property
taxes accruing during the Term of this Lease attributable to Lessee's trade
fixtures, inventory, equipment, and other personal property located on the
Premises.
ARTICLE 6
UTILITIES
Lessee shall pay all charges for gas, water, sewage, electricity,
and any other utilities ("Utilities") accruing during the Term of this Lease and
used by Lessee at the Premises. If any such charges are not paid when due,
Lessor may pay the same, and any amount so paid by Lessor shall thereupon become
due Lessor from Lessee as additional rent. Lessee shall pay such amounts within
thirty (30) days of Lessor's receipt of a written statement therefor from Lessor
together with evidence of the amount of such payment as Lessee may reasonably
require. Lessor shall have no obligation to provide Utilities to the Premises;
provided, however, that Lessor shall provide such assistance and cooperation as
may be required by Lessee to arrange for such Utilities to be supplied to the
Premises.
ARTICLE 7
REPAIRS AND MAINTENANCE; HAZARDOUS MATERIALS
A. Throughout the Term of this Lease, Lessee, at its sole cost and
expense, shall operate, maintain, and keep the Premises in good order and
repair, including, without limitation, all landscaping, parking surfaces,
walk-ways, curbs, gutters, and sidewalks, and all mechanical, HVAC, electrical,
and plumbing systems, equipment, and facilities, excluding any damage caused by
ordinary wear and tear, by acts of God or the elements, or by fire or other
casualty, provided that nothing in this Article 7 shall limit or modify Lessee's
obligations under this Lease to pay Operating Expenses or maintain insurance. If
any such repairs are not made by Lessee promptly after written request from
Lessor, Lessor may make such repairs and all out-of-pocket costs incurred by
Lessor in connection therewith shall constitute additional rent hereunder.
Lessee shall pay such amounts within thirty (30) days of Lessor's receipt of a
written statement therefor from Lessor together with evidence of the amount of
such payment as Lessee may reasonably require.
B. Lessee agrees that Lessee's handling, transportation, storage,
treatment, disposal or use of Materials of Environmental Concern in or about the
Premises shall comply with all applicable Environmental Laws.
C. To the extent that and so long as Allwein is in compliance with
Article 3 hereof, Lessee agrees to indemnify, defend and hold harmless Lessor
from and against any liabilities, costs, fees, losses, claims, damages,
penalties, fines, attorneys' fees, expert fees, court costs, remediation costs,
investigation costs and other expenses resulting from or arising out of the use,
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storage, treatment, transportation, release, or disposal of Materials of
Environmental Concern that occur during the Term in any manner which violates
Article 7B hereof.
D. If Lessee receives notice that the presence of Materials of
Environmental Concern results in the contamination or deterioration of the
Premises or any water or soil beneath the Premises, Lessee shall notify Lessor.
E. Lessee shall promptly notify Lessor of any communication received
from any governmental entity concerning Materials of Environmental Concern or
the violation of Environmental Laws that relate to the Premises.
ARTICLE 8
MECHANICS' LIENS
Any mechanic's lien filed against the Premises for work or materials
ordered or contracted for by Lessee shall be discharged by Lessee at Lessee's
expense within sixty (60) days after Lessee's receipt of written notice thereof.
In the event of Lessee's contesting or disputing the validity of the lien or the
reasonableness of the amount claimed or in the event Lessee disputes or contests
any part of the claim made against it by a mechanic's lien claimant, the
foregoing obligation on the part of the Lessee to discharge the lien within
sixty (60) days shall be waived by Lessor provided that Lessee bonds the lien or
provides other security against the payment thereof in a form reasonably
satisfactory to Lessor.
ARTICLE 9
ALTERATIONS
Lessee shall not make any structural modifications to the Building
without Lessor's prior written consent. Lessee shall not make any major
alterations (all alterations costing in excess of $100,000 to be considered
major alterations), additions or improvements to the Premises or any part
thereof without the prior written consent of Lessor, which consent shall not be
unreasonably withheld, and then only at Lessee's sole expense. Should Lessor
fail to act upon Lessee's written request for such approval for a period of
fifteen (15) days from receipt thereof, such failure shall be deemed an approval
by Lessor. Lessee shall carry such worker's compensation insurance, general
liability insurance, and such other insurance as Lessor may reasonably require
in connection with Lessee's performance of any alterations to the Premises. All
alterations, decorations, additions, and improvements of every kind, nature, and
description made by Lessee (not including Lessee's trade fixtures, equipment,
inventory, and personal property), shall become the property of Lessor upon the
expiration of the Term of this Lease.
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ARTICLE 10
SUBORDINATION
This Lease is subject and subordinate to all mortgages which may now
or hereafter be placed on the real property of which the Premises form a part,
and to all renewals, modifications, consolidations, replacements, and extensions
thereof; provided that, before any subordination of this Lease to any such
mortgage shall be effective, the holder thereof shall have delivered to Lessee a
written agreement, in form and substance reasonably satisfactory to Lessee, that
Lessee's rights under this Lease will not be disturbed by such holder
notwithstanding any foreclosure or exercise of any other right or remedy by such
holder under such mortgage.
ARTICLE 11
INDEMNITY
A. Lessee shall indemnify, defend and save Lessor and Lessor's
agents, employees, managers and members ("Lessor's Related Parties") harmless
from and against any and all claims, suits, actions, liabilities, costs, fees,
damages, and/or causes of action, including, without limitation, reasonable
attorney's fees (collectively, "Claims and Liabilities") arising during the term
of this Lease; for any personal injury, loss of life, and/or damage to property
sustained in or about the Premises and from and against any orders or judgments
which may be entered in connection therewith, and from and against all costs,
counsel fees, expenses, and liabilities incurred in the defense of any such
claim and the investigation thereof whether or not a lawsuit is instituted;
provided that Lessee does not hereby indemnify or agree to save Lessor harmless
from or against any Claims and Liabilities arising from or related to any
negligence or act or omission by Lessor, or any of Lessor's agents, employees,
managers, members or contractors, or any breach or failure by Lessor to perform
any obligation of Lessor under this Lease.
ARTICLE 12
INSURANCE - WAIVER OF CLAIMS - WAIVER OF SUBROGATION
A. Lessee shall carry public liability insurance in a primary
coverage amount of not less than $1,000,000.00 per occurrence single limit and
excess coverage in an amount not less than $2,000,000.00 per occurrence and
$3,000,000.00 in the aggregate. Such insurance coverages shall name Lessee as
the insured party and shall name Lessor and any additional parties having an
insurable interest designated by Lessor in a written notice given to Lessee as
additional insured parties. Such public liability insurance coverages shall
cover or protect against any and all Claims and Liabilities arising from acts,
activities or omissions that take place during the Term of this Lease for any
personal injury, loss of life, or damage to property sustained in or about the
Premises by reason or as a result of the Lessee's occupancy thereof and from and
against any orders, judgments, and decrees which may be entered thereon, and
from and against all costs, counsel's fees, expenses,
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and liabilities incurred in and about the defense of any such Claims and
Liabilities and the investigation thereof, whether or not a lawsuit is
instituted. Additionally, Lessee shall obtain fire and extended "all-risks"
coverage insurance for any and all property, furniture, furnishings, equipment,
trade fixtures, and contents placed upon the Premises by Lessee. Certificates of
such insurance coverage shall be delivered to Lessor as soon as practicable
after Lessee's receipt of any written request therefor from Lessor. All such
insurance coverage required to be obtained by Lessee shall be at Lessee's sole
cost and expense. All insurance required to be carried by Lessee hereunder shall
be with companies, on forms and with loss payable clauses reasonably
satisfactory to Lessor. No such policy shall be cancelable except after thirty
(30) days written notice to Lessor.
B. At all times during the Term of this Lease, Lessee shall, at
Lessee's sole cost and expense, obtain and keep in full force and effect fire
and extended "all-risks" coverage insurance for the Building and all fixtures,
equipment, systems, and facilities attached thereto or incorporated therein in
an amount not less than 100% of the full replacement cost thereof with carriers
and on such other terms and conditions as shall from time to time be
commercially reasonable for similar properties. Such fire and extended
"all-risks" coverage shall have Lessee as the insured party and shall name
Lessor as an additional insured party.
C. Lessor and Lessee each hereby waive, for themselves and on behalf
of their respective insurance carriers, any and all claims, causes of action,
and rights of subrogation which may arise against the other for any damages,
losses, costs, or liabilities (including, without limitation, property damage,
bodily injury, and loss of life) arising from or related to any fire or other
casualty affecting the Building or any other part of the Premises, or from any
other cause (including, without limitation, the negligence of either of the
parties hereto or their respective agents, employees, or contractors), to the
extent that such party has obtained, or is required by the terms of this Lease
to have obtained, insurance coverage against such damages. Lessor and Lessee
shall each cause all of the insurance policies maintained by such party under
this Lease to contain waiver of subrogation provisions.
ARTICLE 13
DESTRUCTION - FIRE OR OTHER CAUSE
A. If the Premises are destroyed or damaged to the extent of 10% or
more of the then full replacement cost from a cause not insured against under
either Lessor's or Lessee's casualty insurance policy, Lessee shall have the
right to terminate this Lease by giving written notice of termination to Lessor
within thirty (30) days after the date of the damage or destruction. If the
Lease is not so terminated, then Lessee shall diligently proceed to repair and
restore the Premises.
B. If the Premises or the Building are destroyed or damaged to the
extent of 10% or more of the then full replacement cost from a cause covered by
either Lessee's or Lessor's casualty insurance, and that damage or destruction
may be repaired or restored within ninety (90) days after
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commencement of repair or restoration, then Lessee shall diligently proceed to
repair and restore the Premises and Lessor shall pay over any proceeds of such
insurance to Lessee. If Lessee determines that the Premises cannot be repaired
or restored within that period, the Lessee shall have the right to terminate
this Lease by written notice to Lessor given within sixty (60) days after the
date of damage or destruction.
C. Upon a termination under this Article 13, Lessee's obligation to
pay rent and other charges under this Lease shall terminate as of the date of
the damage or destruction or as of the date Lessee ceases to do business at the
Premises, whichever occurs later; provided, however, that in the event of a
termination under this Article 13 Lessee shall pay to Lessor an amount equal to
(a) the balance outstanding on the Dover Note as of the termination date, proof
of which shall be demonstrated in a manner acceptable to Lessee; less (b) the
sum of (i) the fair market value of the Premises as determined pursuant to the
procedure set forth in Article 1, Section C hereof and (ii) any proceeds
received by Lessor in respect of the damage or destruction pursuant to which the
Lease was terminated.
D. Except as expressly provided in this Lease, damage to or
destruction of the Premises or the Building shall not terminate this Lease or
result in any abatement of rent. Lessee waives any right of offset against
Lessee's rental obligations that may be provided by any statute or rule of law.
E. Without limiting the generality of the foregoing provisions of
this Article 13, Lessor shall not in any event be responsible for insuring
against any loss, damage, or destruction to Lessee's leasehold improvements or
to fixtures, inventory or other Lessee-owned improvements or property.
F. Lessee shall give prompt written notice to Lessor in the event of
any casualty damage to the Premises.
ARTICLE 14
EMINENT DOMAIN
A. If the whole of the Premises shall be acquired or condemned by
eminent domain for any public or quasi-public use or purpose, or be conveyed in
lieu of any such taking, or if a part of the Premises shall be so acquired or
condemned, and if such partial taking or acquisition renders the Premises
unsuitable for the business of Lessee in Lessee's reasonable discretion, then
the Term of this Lease shall cease and terminate as of the earlier of the date
of the transfer of title or the date of taking possession of the Premises and
all rent shall be paid up to that date.
B. In the event of a partial taking, or conveyance of the Premises
in lieu thereof, which is not extensive enough to render the Premises unsuitable
for the business of Lessee, Lessor,
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to the extent possible and to the extent of proceeds of any award for such
taking made available to Lessor, shall promptly restore the Premises to a
condition comparable to its condition immediately prior to such taking (less the
portion lost in the taking), and this Lease shall continue in full force and
effect. In such case rent shall be abated on a fair and equitable basis to the
extent of any reduction, if any, in the area of the Premises resulting from such
taking and not restored.
C. In the event of any condemnation, taking or conveyance in lieu
thereof, as hereinbefore provided, whether whole or partial, Lessee shall not be
entitled to any part of the award or price, as damages or otherwise, for such
condemnation, taking or conveyance, and Lessor shall receive and be entitled to
the full amount of such award except for any portion designated as relocation
costs, or award for taking Lessee's equipment or improvements.
ARTICLE 15
ASSIGNMENT AND SUBLEASE
A. Neither party shall assign its interest in this Lease or sublet
the Premises or any part or parts thereof, nor transfer or encumber this Lease
in whole or in part without first obtaining the written consent of the other
party, which consent shall not be unreasonably withheld; provided that Lessee
shall have the right, without obtaining Lessor's consent, to assign this Lease
to any entity which controls, is controlled by, or is under common control with
Lessee, or any entity which is the surviving entity in any merger or
consolidation of or with Lessee, or to any entity which acquires all or
substantially all of the assets of Lessee. Upon any such assignment, Lessee
shall no longer be liable on this Lease and shall be released from performing
any of the terms, covenants, and conditions hereof.
ARTICLE 16
ACCESS TO PREMISES
Lessor, or Lessor's agents, shall have the right to enter the
Premises at any time or times upon reasonable prior notice to Lessee to examine
the same. If Lessee shall not be personally present to open and permit the entry
to the Premises at any reasonable time when for any reason entry therein shall
be necessary or permissible, Lessor or Lessor's agent may enter the same by a
master key or, in the event of an emergency, make forcible entry upon the same
without rendering Lessor or Lessor's agents liable therefor.
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ARTICLE 17
DEFAULT
It shall constitute an "Event of Default" under this Lease if
Lessee:
(A) Fails to pay when due hereunder any rental or other
charge or amount required to be paid by Lessee hereunder if
(i) the failure to pay Base Rent continues for five (5)
business days after written notice thereof is given by Lessor
to Lessee, or (ii) the failure to pay Operating Costs
continues for ten (10) business days after written notice
thereof is given by Lessor to Lessee.
(B) Fails to perform any other of the terms, conditions,
or covenants of this Lease to be observed or performed by
Tenant if the failure continues for more than thirty (30)
business days after written notice thereof is given by Lessor
to Lessee.
(C) Shall become bankrupt or insolvent, or file or have
filed against it any bankruptcy proceedings, or take or have
taken against it in any court pursuant to any statute,
either of the United States or of any state, a petition of
bankruptcy or insolvency, or for reorganization or for the
appointment of a receiver or trustee of all or substantially
all of Lessee's property, or if Lessee makes a general
assignment for the benefit of creditors.
ARTICLE 18
REMEDIES OF LESSOR
A. In the event of the occurrence of any Event of Default, Lessor
may elect, upon thirty (30) days written notice to Lessee:
(1) To terminate this Lease, in which case all
outstanding items of rent shall be paid by Lessee
up to the time of such Event of Default, together
with such costs as Lessor may incur for legal
expenses, attorneys' fees, and/or putting the
Premises in good order for preparing the same for
rental. Lessor shall use reasonable efforts to
relet the Premises or any part thereof, either in
the name of Lessor or otherwise, but in any event
for the account of Lessee for all or a portion of
the balance of the Term hereunder.
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(2) To continue this Lease, and from time to time,
without terminating this Lease, either (i) recover
all rent and other amounts owing hereunder as they
become due, or (ii) relet the Premises or any part
of the Premises on behalf of Lessee for any term,
at any rent, and pursuant to any other provisions
as Lessor deems advisable.
B. The following additional provisions shall apply should an Event
of Default occur:
(1) None of the following remedial actions, singly or
in combination, shall be construed as Lessor's
election to terminate this Lease, unless Lessor
has given Lessee written notice that this Lease is
terminated: (i) any act by Lessor to maintain or
preserve the Premises; (ii) any efforts by Lessor
to relet the Premises; (iii) any re-entry,
repossession, or reletting of the Premises; or
(iv) any re-entry, repossession, or reletting of
the Premises by Lessor pursuant to this Article
18. If Lessor takes any of the previous remedial
actions without terminating this Lease, Lessor may
nevertheless at any time after taking any remedial
action terminate this Lease by written notice to
Lessee.
(2) If Lessor relets the Premises, Lessor shall apply
the revenue as follows: first, to the payment of
any cost of reletting, including, without
limitation, finder's fees and leasing commissions;
and second, to the payment of rent and other
amounts due and unpaid. Lessor shall hold and
apply the residue, if any, to payment of future
amounts payable as they become due. Should revenue
from reletting during any month, after application
pursuant to the foregoing provisions, be less than
the sum of (i) Lessor's expenditures for the
Premises during that month and (ii) the amounts
due from Lessee during that month, Lessee shall
pay the deficiency to Lessor immediately upon
demand.
(3) After the occurrence of an Event of Default,
Lessor, in addition to or in lieu of exercising
other remedies, may, but without any obligation to
do so, cure the breach underlying the Event of
Default for and at Lessee's account and expense.
Lessee shall, upon demand, immediately reimburse
Lessor for all costs, including, without
limitation, costs of settlements,
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defense, court costs, and attorneys' fees, that
Lessor may incur in the course of any cure.
(4) No security or guaranty for the performance of
Lessee's obligations, which Lessor may now or
hereafter hold, shall in any way constitute a bar
or defense to any action initiated by Lessor for
unlawful detainer or for the recovery of the
Premises, for enforcement of any obligation of
Lessee, or for the recovery of damages caused by
an Event of Default.
(5) No right or remedy conferred upon or reserved to
Lessor is intended to be exclusive of any other
right or remedy given now or later existing at law
or in equity or by statute. Lessor's waiver of any
violation or nonperformance shall not be deemed a
waiver of any subsequent violation or
nonperformance, nor shall Lessor's forbearance to
exercise a remedy for any violation or
nonperformance by Lessee be deemed a waiver by
Lessor of rights or remedies with respect to that
violation or nonperformance.
C. In addition to the foregoing remedies, in the event of the
occurrence of any Event of Default by Lessee, Lessor shall have the right to
invoke any remedy otherwise available at law or in equity.
ARTICLE 19
SURRENDER OF THE PREMISES
At the expiration of the Term of this Lease, Lessee shall peaceably
surrender the Premises, including all alterations, additions, improvements, and
repairs made thereto (but excluding all trade fixtures, equipment, inventory,
signs, and other personal property), broom clean and in good condition and
repair, ordinary wear and tear and damage caused by acts of God, the elements,
fire, or other casualty excepted. Lessee shall remove all its property not
required to be surrendered to Lessor (pursuant to Article 9 or otherwise) before
surrendering the Premises as aforesaid, and shall repair any damage to the
Premises caused thereby. Any personal property remaining in the Premises at the
expiration of the Term shall be deemed abandoned by Lessee and Lessor may claim
the same and shall in no circumstances have any liability to Lessee therefor.
ARTICLE 20
FEES AND EXPENSES
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In the event of the occurrence of any Event of Default by Lessee,
Lessor may immediately, or at any time thereafter and without further notice,
perform the same for Lessee's account and expense. Lessee shall, upon demand,
immediately reimburse Lessor for all costs, including without limitation, costs
of settlement, defense, court costs, and attorneys' fees, that Lessor may incur
in the course of any cure.
ARTICLE 21
NO REPRESENTATION BY LESSOR
Lessor or Lessor's agents have made no representations or warranties
as to the Premises of any kind, nature, or description and none is asserted by
Lessee to have been made to it as an inducement to enter into this Lease. As
further provided in this Lease, Lessee accepts the Premises in their "AS-IS,"
"WHERE-IS" condition.
ARTICLE 22
NOTICES
All notices, demands, requests, elections, and other communication
provided for herein shall be in writing and shall be deemed given to a party
when a copy thereof, addressed to such party as provided herein, is actually
delivered to such address (or delivery is refused) by commercial courier, by
successful facsimile transmission, or by certified or registered mail, return
receipt requested.
All notices to Lessor shall be addressed to Lessor at the following address and
facsimile number or such other addresses and facsimile numbers of which Lessor
gives Lessee notice hereunder:
If to Lessor: Spin Forge, LLC
1700 East Grand Avenue
El Segundo, California 90245
Attention: Joseph Allwein
Facsimile: (310) 640-8599
Telephone: (310) 640-8099
With a copy to: Wolf, Rifkin & Shapiro, LLP
11400 West Olympic Boulevard
Ninth Floor
Los Angeles, California 90064-1565
Attention: Richard S. Grant, Esq.
Facsimile: (310) 479-1422
Telephone: (310) 478-4100
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All notices to Lessee shall be addressed to Lessee at the following address and
facsimile number or such other addresses and facsimile numbers of which Lessee
gives Lessor notice hereunder:
If to Lessee: Dynamic Materials Corporation
551 Aspen Ridge Drive
Lafayette, CO 80026
Attention:
Facsimile: (303) 604-1897
Telephone: (303) 665-5700
With a copy to: Davis, Graham & Stubbs LLP
Suite 4700
370 Seventeenth Street
Denver, Colorado 80202
Attention: David Bartlett, Esq.
Facsimile: (303) 892-9400
Telephone: (303) 892-7400
ARTICLE 23
BROKERAGE COMMISSION AND INDEMNIFICATION
Lessee hereby represents and warrants to Lessor that Lessee has not
dealt with any broker, agent, salesperson, or other similar representative in
connection with this Lease. Lessor hereby represents and warrants to Lessee that
Lessor has not dealt with any broker, agent, salesperson, or other similar
representative in connection with this Lease. Lessee shall indemnify Lessor and
hold Lessor harmless against any and all claims for commissions, fees, or other
compensation made by any real estate broker, agent, salesperson, or other
similar representative on account of any implied or express commitment or
undertaking by Lessee in connection with the transaction contemplated herein.
Lessor shall indemnify Lessee and hold Lessee harmless against any and all
claims for commissions, fees, or other compensation made by any real estate
broker, agent, salesperson, or other similar representative on account of any
implied or express commitment or undertaking by Lessor in connection with this
Lease.
ARTICLE 24
NULLITY OF PROVISIONS
The finding of one provision, clause, or paragraph of this Lease to
be null and void shall not have an effect upon the remaining provisions of this
Lease and all other provisions shall remain in full force and effect, and the
provision, clause, or paragraph found to be null and void shall be enforced to
the fullest extent permissible.
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<PAGE>
ARTICLE 25
INUREMENT
This Agreement, and all rights, duties, and obligations set forth
herein, shall inure to and be binding upon the parties hereto and their
respective successors and assigns.
ARTICLE 26
TRANSFER OF LESSOR'S INTEREST
In the event of any transfer of Lessor's interest in this Lease in
accordance with Article 15, Lessor shall continue to be liable and shall not be
released from the performance or observance of any agreements or conditions on
the part of Lessor to be performed or observed subsequent to the time of said
transfer, provided that, from and after the date of said transfer, the
transferee shall be primarily liable for the performance and observance of such
agreements and conditions and such transferee shall execute and deliver to
Lessee a written confirmation of such assumption.
ARTICLE 27
ATTORNEYS' FEES
In the event that a law suit or other proceeding is brought to
enforce or interpret all or any portion of this Lease, the prevailing party in
such suit shall be entitled to recover, in addition to any other relief
available to such party, reasonable costs and expenses, including, without
limitation, reasonable attorneys' fees, incurred in connection with such suit or
proceeding, including, without limitation, any attorneys' fees incurred after a
judgment has been rendered by a court of competent jurisdiction.
ARTICLE 28
ENTIRE AGREEMENT
This instrument represents the entire and only agreement between the
parties with respect to the leasing of the Premises and no oral statements or
representations or prior written matter not contained herein shall have any
force or effect and this Lease shall not be modified in any way except by a
writing subscribed by both parties with the same formalities as this instrument.
ARTICLE 29
LAW AND VENUE
The validity and effect of this Agreement shall be determined,
interpreted, and enforced is accordance with the laws of the State of California
(without regard to its conflict of law doctrines) and the venue for any action
to enforce or to interpret this Agreement shall be in a court
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of competent jurisdiction located in the State of Colorado and each of the
parties consents to the jurisdiction of such court in any such action or
proceeding and waives any objection to venue laid therein.
ARTICLE 30
QUIET ENJOYMENT
Lessor hereby covenants that it has good and lawful authority to
make this Lease and fully warrants the right, title, and interest conveyed
hereby, and will defend the same against the claims of all persons whomsoever.
IN WITNESS WHEREOF, the parties hereto have executed this Lease on
the dates set forth below intending that it be valid and effective from and
after the day and year first written above.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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LESSOR:
Spin Forge, LLC,
a California limited liability company
By: /s/Joe Allwein
-----------------------------------
Its: President
----------------------------------
Date: 3/18/98
---------------------------------
LESSEE:
Dynamic Materials Corporation,
a Delaware corporation
By: /s/Richard Santa
-----------------------------------
Its: Vice-President, Finance & CFO
----------------------------------
Date: 3/18/98
---------------------------------
ALLWEIN:
/s/Joe Allwein
--------------------------------------
Joe Allwein
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LOAN AGREEMENT
THIS LOAN AGREEMENT (this "LOAN AGREEMENT") is made and entered into as of
this 18th day of March, 1998 by and between Spin Forge, LLC, a California
limited liability company with principal offices at 1700 East Grand Avenue, El
Segundo, California 90245 ("BORROWER") and Dynamic Materials Corporation, a
Delaware corporation, with principal offices at 551 Aspen Ridge Drive,
Lafayette, Colorado 80026 ("LENDER"). Capitalized terms not otherwise defined
herein shall have the meaning ascribed to them in the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties each hereby promise and agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings, unless the context otherwise requires:
"BORROWER FINANCIAL STATEMENTS" shall mean an income
statement, a balance sheet, a trial balance, a statement of cash disbursements,
a statement of cash receipts and all bank statements for all accounts of Spin
Forge, LLC.
"DEBT" shall mean, for any Person, all indebtedness of such
Person for borrowed money or for the deferred purchase price of Property or
services for which such Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which such Person otherwise assures a
creditor against loss.
"DOVER" shall mean DDI Properties, Inc., a Delaware
corporation, along with any of its successors or assigns.
"DOVER NOTE" shall mean the Assumption of and Second
Modification of Unconditional Promissory Note by and between Borrower and Dover,
dated December 11, 1996.
"EVENT OF DEFAULT" shall mean the occurrence of any of the
events specified in Section 6 hereof.
"FREEDOM FORGE" shall mean Freedom Forge Corporation, a
Delaware corporation, along with any of its successors or assigns.
"FREEDOM FORGE NOTE" shall mean the Assumption and
Modification of Promissory Note and Restated Promissory Note by and between
Borrower and Freedom Forge, dated December 11, 1996.
"GUARANTOR" shall mean Joseph Allwein and Darlene Bauer.
<PAGE>
"GUARANTOR FINANCIAL STATEMENTS" shall mean a personal balance
sheet and a personal bank statement for Joseph Allwein and Darlene Bauer.
"INDEBTEDNESS" shall mean any and all amounts owing or to be
owing by Borrower to Lender in connection with the Master Promissory Note or any
Security Instruments, including this Agreement, and all other liabilities of
Borrower to Lender from time to time existing, whether in connection with this
or other transactions.
"LIABLE PARTY" shall mean Borrower, any Guarantor, and any
other drawer, accepter, endorser, guarantor, surety, accommodation party or
other Person now or hereafter primarily or secondarily liable upon or for
payment of all or any part of the Indebtedness evidenced by this Agreement, the
Master Promissory Note and the Security Instruments.
"MASTER PROMISSORY NOTE" shall mean the promissory note of the
Borrower described in Section 2.1 hereof and being in the form of note attached
as Exhibit A hereto, together with any and all renewals, extensions for any
period, increases or rearrangements thereof.
"MATURITY DATE" shall mean January 1, 2002.
"MAXIMUM RATE" shall mean the maximum nonusurious rate of
interest allowed to be charged by Lender to Borrower by applicable law, as such
applicable law or rate of interest is in effect from time to time.
"OPERATING LEASE" shall mean that certain Operating Lease by
and between Borrower and Lender dated as of an even date herewith.
"OPTION AGREEMENT" shall mean that certain Option Agreement by
and between Borrower and Lender dated as of an even date herewith.
"PERSON" shall mean any individual, corporation, partnership,
joint venture, association, joint stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof, or any
other form of entity.
"PROPERTY" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"PURCHASE AGREEMENT" shall mean that certain Asset Purchase
Agreement dated as of an even date herewith.
"REAL PROPERTY" shall mean all of Borrower's right, title and
interest in real property consisting of land and buildings, together with all
structures, improvements, fixtures, appurtenant easements and other appurtances
thereto, located in Los Angeles County, California,
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<PAGE>
with a street address of 1700 East Grand Avenue, El Segundo, California 90245,
as is more particularly described on Exhibit A to the Option Agreement.
"SECURITY INSTRUMENTS" shall mean this Agreement, the Stock
Pledge Agreement and the Personal Guaranty described or referred to in Section 8
of this Agreement and any and all other agreements or instruments now or
hereafter executed and delivered by the Borrower or any other Person in
connection with, or as security for the payment or performance of, the Master
Promissory Note or this Agreement, as such agreements may be amended or
supplemented from time to time.
2. AMOUNT AND TERMS OF LOAN.
2.1 ADVANCES. Subject to the terms and conditions of this Agreement,
Lender agrees to make advances to Borrower from time to time, the dates and
amounts of which advances are set forth on Schedule A attached hereto, as may be
amended from time to time upon the mutual written agreement of the parties. To
evidence the advances made by Lender pursuant to this Section 2.1, the Borrower
shall issue, execute and deliver the Master Promissory Note in the principal
amount of up to $600,000 dated of even date herewith and payable in full on the
Maturity Date. Lender shall not be obligated to make advances under this
Agreement if the amount of such advance, together with the then outstanding
principal balance of the Master Promissory Note, would exceed $600,000, unless
Lender (in its sole and absolute discretion) otherwise agrees in writing to
advance additional funds in which case such additional amounts shall constitute
further advances hereunder subject to all the terms and conditions of this
Agreement, the Master Promissory Note, and the Security Instruments. In the
event that the unpaid principal amount under the Master Promissory Note at any
time, for any reason, exceeds $600,000, Borrower covenants and agrees to pay the
excess principal amount forthwith upon demand unless Lender otherwise agrees in
writing. Such excess principal amount shall in all respects be deemed to be
included among the loans or advances made pursuant to the terms of this
Agreement.
2.2 NOTICE AND MANNER OF BORROWING. The amount and date of each
advance shall be set forth in Schedule A attached hereto unless Borrower
notifies Lender in writing of a proposed amendment to Schedule A at least ten
(10) business days prior to a scheduled advance and Lender, in its sole and
absolute discretion, agrees in writing to Borrower's proposed amendment.
2.3 CONDITIONS TO ADVANCES. Lender's obligation to extend each
advance pursuant to Section 2.1 above shall be subject to the following
conditions:
(a) In the event an advance is requested to be made on a date
other than a date set forth on Schedule A, Lender shall have received and
agreed in writing to a proposed amendment to Schedule A in accordance with
Section 2.2;
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(b) Lender shall have received Borrower Financial Statements
and Guarantor Financial Statements for the relevant time periods pursuant
to Section 4.2 hereof along with such other documents as Lender has
reasonably requested;
(c) No Event of Default or default or event which with notice
or the passage of time or both would become an Event of Default shall have
occurred and be continuing, including, without limitation, any failure by
Borrower to timely make any and all principal and interest payments due
to Dover under the Dover Note and due to Freedom Forge under the Freedom
Forge Note;
2.4 INTEREST RATE. The unpaid principal balance from time to time
outstanding under the Master Promissory Note shall bear no interest; provided,
however, that all past due principal on the Master Promissory Note, whether due
as a result of acceleration or maturity or otherwise, shall bear interest from
the date payment thereof shall have become due until the same is fully paid at
the Maximum Rate.
2.5 PREPAYMENT. Borrower, in its sole and absolute discretion,
reserves the right of prepaying the principal outstanding under the Master
Promissory Note, in full or in part, at any time without the payment of any
prepayment premium or fee.
3. REPRESENTATIONS AND WARRANTIES. In order to induce Lender to enter into
this Agreement, Borrower represents and warrants to Lender as follows:
3.1 LIMITED LIABILITY COMPANY EXISTENCE. Borrower is a limited
liability company duly organized, legally existing and in good standing under
the laws of the State of California, and is duly qualified as a foreign limited
liability company in all jurisdictions wherein the Property owned or the
business transacted by it makes such qualification necessary.
3.2 POWER AND AUTHORIZATION. Borrower is duly authorized and
empowered to incur the obligations provided for in this Agreement and to create
and issue the Master Promissory Note; and Borrower is duly authorized and
empowered to execute, deliver and perform the Security Instruments, including
this Agreement, to which it is a party; and Borrower has taken all limited
liability company action necessary to authorize the execution, delivery and
performance of this Agreement, the Master Promissory Note and the Security
Instruments to which it is a party.
3.3 BINDING OBLIGATIONS. This Agreement, the Master Promissory Note
and the Security Instruments constitute valid and legally binding obligations of
Borrower and the Guarantors, as the case may be, enforceable in accordance with
their respective terms except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditor's rights and by rules of law governing
specific performance, injunctive relief or other equitable remedies.
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3.4 TAXES; GOVERNMENTAL CHARGES. Borrower has filed all tax returns
and reports required to be filed and has paid all taxes, assessments, fees and
other governmental charges levied upon it or upon its Properties or income which
are due and payable, including interest and penalties, or has provided adequate
reserves for the payment thereof.
3.5 DEFAULTS. Borrower is not in default nor has any event or
circumstance occurred which, but for the passage of time or the giving of
notice, or both, would constitute a default under any loan or credit agreement,
indenture, mortgage, deed of trust, security agreement or other agreement or
instrument evidencing or pertaining to any Debt of Borrower, or under any
material agreement or instrument to which Borrower is a party or by which it is
bound. No Event of Default hereunder has occurred and is continuing.
3.6 TITLES. Borrower has good title to its Property, free and
clear of all liens, except:
(a) The Second Amended Deed of Trust securing the Dover Note;
and
(b) Security Instruments securing the Indebtedness evidenced
by this Agreement and the Master Promissory Note.
3.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties made by Borrower in connection with this Agreement, the Master
Promissory Note and the Security Instruments shall survive the delivery of the
Master Promissory Note and the making of advances thereunder and shall terminate
at such time as the Indebtedness evidenced by this Agreement, the Master
Promissory Note and the Security Instruments has been paid in full.
4. AFFIRMATIVE COVENANTS. The Borrower will at all times comply with the
covenants contained in this Section 4, from the date hereof and for so long as
any part of the Indebtedness is outstanding.
4.1 POWER AND AUTHORIZATION. Lender is duly authorized and empowered
to incur the obligations provided for in this Agreement; and Lender is duly
authorized and empowered to execute, deliver and perform this Agreement; and
Lender has taken all action necessary to authorize the execution, delivery and
performance of this Agreement.
4.2 BINDING OBLIGATIONS. This Agreement constitutes valid and
legally binding obligations of Lender, enforceable in accordance with their
respective terms except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditor's rights and by rules of law governing
specific performance, injunctive relief or other equitable remedies.
4.3 AUDIT RIGHT. Borrower will maintain complete and accurate books
of record and account and will permit any officer, employee or agent of Lender
to visit and inspect any of the
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Property of Borrower, examine any Borrower Financial Statements or books of
record and account, examine any Guarantor Financial Statements, perform audits
on the Borrower and any of Borrower's Property, take copies and extracts
therefrom, and discuss the affairs, finances and accounts of Borrower with
Borrower's members, officers and accountants, all at such times and as often as
the Lender may desire.
4.4 REPORTING. Borrower will promptly furnish to Lender from time to
time upon request by Lender such information regarding the business and affairs
and financial condition of Borrower as Lender may reasonably request, and will
furnish on a monthly basis to Lender the following:
(a) Borrower Financial Statements on a monthly basis within 15
business days after the end of the applicable month; and
(b) Guarantor Financial Statements and such other information
as Lender may reasonably request concerning the financial condition of the
Guarantor as of each June 30 and December 31, within 20 business days
after such date, and at such other times as Lender may request.
4.5 NOTICE OF CERTAIN EVENTS. Borrower will notify Lender
immediately if Borrower becomes aware of the occurrence of any Event of Default
or of any fact, condition, or event that, with the giving of notice or the
passage of time, or both, could become an Event of Default, or of the failure of
Borrower to observe any of its undertakings in accordance with this Agreement,
the Master Promissory Note or the Security Instruments.
4.6 TAXES AND OTHER LIENS. Borrower will pay and discharge promptly
all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or upon any of its Property as well as all claims of any kind
which, if unpaid, might become a lien or encumbrance upon any or all of its
Property.
4.7 MAINTENANCE. Borrower will (i) maintain its limited liability
company existence, rights and franchises; (ii) observe and comply with all
present and future laws applicable to it in the operation of its business and
all material agreements to which it is subject.
4.8 PERFORMANCE OF OBLIGATIONS. Borrower will pay the Master
Promissory Note according to the reading, tenor and effect thereof, and Borrower
will do and perform every act and discharge all of the obligations to be
performed and discharged by Borrower under the Security Instruments, including
this Agreement, at the time or times and in the manner specified.
4.9 PAYMENT OF DEBT. Borrower will make all payments of principal
and interest, on or before the date on which such payments become due and
payable, with respect to all Debt existing from time to time for which Borrower
is directly or indirectly liable, including, without
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limitation, all payments of principal and interest due under the Dover Note and
the Freedom Forge Note.
4.10 ALTERATIONS TO DOVER NOTE. Borrower will provide Lender with
copies of all documents, including correspondence, relating to any amendments or
modifications of the Dover Note including, without limitation, any changes in
the payment schedule under the Dover Note.
4.11 REIMBURSEMENT OF EXPENSES. Borrower will, upon request,
promptly reimburse Lender for all amounts expended, advanced or incurred by
Lender to satisfy any obligation of Borrower under this Agreement or any
Security Instrument, to collect upon the Master Promissory Note, or to enforce
the rights of Lender under this Agreement of any other Security Instrument,
which amounts will include all court costs, attorneys' fees and accountants'
fees.
4.12 MINIMUM BALANCE. Borrower shall maintain a cash balance of no
less than Two Hundred Thousand Dollars ($200,000) at all times.
5. NEGATIVE COVENANTS. The Borrower will at all times comply with the
covenants contained in this Section 5, from the date hereof and for so long as
any part of the Indebtedness is outstanding. Borrower will not, without the
prior written consent of Lender:
(a) file a petition for bankruptcy or reorganization;
(b) other than as required under the Purchase Agreement,
attempt to sell, lease, exchange, transfer or otherwise dispose of,
whether by distribution, gift, abandonment or otherwise, any of its
Property including, without limitation, any attempted sale, lease,
exchange, transfer or other disposition of the Real Property;
(c) grant, create, incur, assume, permit or suffer to exist
any lien, mortgage, pledge, security interest, or other encumbrance with
respect to any of its Property, whether now owned or hereafter acquired,
including, without limitation, the Real Property, except:
(i) The Second Amended Deed of Trust securing
the Dover Note; and
(ii) Security Instruments securing the
Indebtedness evidenced by this Agreement and
the Master Promissory Note;
(d) make any liquidating or non-liquidating distributions or
any payments to its members, assignees, agents, employees or consultants
or any other Person other than (i) payments made in the ordinary course of
business or (ii) the distribution of any proceeds received by Seller
pursuant to the Purchase Agreement unless otherwise provided herein;
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(e) permit any change in membership, including, without
limitation, any sale or assignment of a member's interest in Borrower.
Borrower will not, without prior written consent of Lender, change its
limited liability company name or structure, or consolidate with, merge
into or acquire any Person, or permit any other Person to consolidate
with, merge into or acquire Borrower;
(f) file any articles of dissolution or take any other
equivalent action which would affect its organization and existence under
California law;
(g) enter into any obligations, contractual or otherwise, with
any Person other than any such obligations entered into in the ordinary
course of business;
(h) incur or suffer to exist any Debt or other obligation with
respect to which it is directly or indirectly liable, whether as a
borrower, guarantor or otherwise, except:
(i) the Dover Note,
(ii) the Freedom Forge Note, and
(iii) the Indebtedness;
(i) permit any amendment to its Articles of Organization or
its Operating Agreement (except for any amendment (i) that is not material
and (ii) the effect of which would not impair Lender's rights under this
Agreement, the Master Promissory Note or the Security Instruments).
6. EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an Event of Default under this Agreement:
6.1 PAYMENTS. Borrower shall fail to make any payment of principal
or interest due with respect to the Master Promissory Note or defaults in any
other manner under the Dover Note; provided, however, that such failure shall
not constitute an Event of Default if such failure is caused directly by
Lender's continued failure to make rent payments under the Operating Lease or to
make advances as required under Section 2.1 hereof, and provided further that in
the event Borrower defaults under the Dover Note, Lender may work directly with
Dover to cure any such default.
6.2 REPRESENTATIONS AND WARRANTIES. The determination by Lender that
(i) any representation or warranty made by Borrower or any Guarantor in any
Security Instrument, including this Agreement was incorrect in any material
respect as of the date thereof; or (ii) any representation, statement, financial
statement (including, without limitation, the Borrower Financial Statements and
the Guarantor Financial Statements), certificate or data furnished or made by
the Borrower or any Guarantor (or any officer, accountant or attorney of the
Borrower or any Guarantor) under this
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<PAGE>
Agreement or any Security Instrument was untrue in any material respect, as of
the date as of which the facts therein set forth were stated or certified.
6.3 AFFIRMATIVE COVENANTS. A breach of any of the covenants or
agreements contained in Section 4 of this Agreement if such breach is capable of
being cured and has not been cured to the satisfaction of Lender within three
(3) business days after written notice is given by Lender to Borrower.
6.4 NEGATIVE COVENANTS. A breach of any of the covenants or
agreements contained in Section 5 of this Agreement if such breach if such
breach is capable of being cured and has not been cured to the satisfaction of
Lender within three (3) business days after written notice is given by Lender to
Borrower.
6.5 OTHER SECURITY INSTRUMENT OBLIGATIONS. A breach by Borrower or
Guarantor of any of the covenants or agreements contained in any Security
Instrument other than this Agreement, and such breach continues unremedied
beyond the expiration of any applicable grace period which may be expressly
allowed under such Security Instrument.
6.6 DEFAULT ON OTHER DEBT. Borrower or any Liable Party defaults in
any payment of principal of or interest on any other Debt, including, without
limitation, the Dover Note and the Freedom Forge Note, beyond any period of
grace provided with respect thereto, or in any performance of any other
agreement, term, or condition contained in any agreement or instrument under or
by which any such Debt is created, evidenced or secured if the effect of such
default is to cause such obligation to become due before its stated maturity or
to permit the holder(s) of such obligation or the trustee(s) under any such
agreement or instrument to cause such obligation to become due prior to its
stated maturity, whether or not such default or failure to perform is waived by
the holder(s) of such obligation or such trustee(s).
6.7 INVOLUNTARY BANKRUPTCY OR OTHER PROCEEDINGS. With respect to
Borrower or any Liable Party:
(a) death or insolvency (however such insolvency may be
evidenced);
(b) commencement of any proceeding, procedure or remedy
supplementary to or in enforcement of a judgment against Borrower or any
other Liable Party, or with respect to any Property of any of them;
(c) action by any governmental authority or any court to take
possession of any substantial part of the Property of (or in the case of
an entity, such action to assume control over the affairs or operations
of) Borrower or any other Liable Party;
(d) appointment of a receiver for to take possession of the
Property of Borrower or any other Liable Party;
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<PAGE>
(e) issuance of a writ or order of attachment or garnishment
against any of the Property of Borrower or any other Liable Party;
(f) commencement of an involuntary case or other proceeding
against Borrower or any other Liable Party seeking reduction,
cancellation, abatement or other relief with respect to the debts or other
liabilities of Borrower or any other Liable Party through liquidation,
reorganization or other relief pursuant to any bankruptcy, insolvency or
other similar law now or hereafter in effect; or
(g) entry of an order for relief against Borrower or any other
Liable Party in any case under the Federal Bankruptcy Code or any other
bankruptcy, insolvency or other similar law now or hereafter in effect.
6.8 VOLUNTARY PETITIONS. With respect to Borrower or any Liable
Party:
(a) commencement of a voluntary case or other proceeding by
Borrower or any other Liable Party seeking reduction, cancellation,
abatement or other relief with respect to the debts or other liabilities
of Borrower or any other Liable Party through liquidation, reorganization
or other relief pursuant to any bankruptcy, insolvency or other similar
law now or hereafter in effect, including consent to any such relief; or
(b) a general assignment for the benefit of creditors or a
failure generally to, or an admission in writing of an inability to, pay
debts as they become due by Borrower or any other Liable Party.
6.9 UNDISCHARGED JUDGMENTS. Failure by Borrower to pay, bond or
otherwise discharge within thirty (30) days any judgment or order for the
payment of money in excess of $10,000 that is not otherwise being satisfied in
accordance with its terms and is not stayed on appeal or otherwise being
appropriately contested in good faith.
6.10 MATERIAL ADVERSE CHANGE. The occurrence of a material adverse
change in the financial condition of Borrower or any Guarantor or any other
event or circumstance which gives Lender reasonable grounds upon which to
conclude that Borrower or a Guarantor, as the case may be, may not or will not
be able to perform or observe in the normal course their obligations under this
Agreement, the Master Promissory Note or any Security Instrument.
7. REMEDIES. Upon the occurrence of an Event of Default, Lender shall, in
its sole and absolute discretion, have the following rights and remedies:
7.1 ACCELERATION. Lender shall have the right to immediately declare
all unpaid principal on the Master Promissory Note due and payable, without
demand for payment, presentment
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<PAGE>
for payment, protest, notice of intent to accelerate, notice of acceleration or
any other notices of any kind, each of which is hereby expressly waived by
Borrower.
7.2 TERMINATION OF LENDER'S OBLIGATIONS. Lender shall have the right
to immediately terminate and cease performance of any and all of Lender's
obligations under this Agreement, the Master Promissory Note and the Operating
Lease.
7.3 ASSUMPTION OF DOVER NOTE. Lender shall have the right to either
(i) assume Borrower's obligations under the Dover Note, or (ii) purchase the
Dover Note from the holder of the Dover Note provided the holder consents to
such sale.
7.4 ADDITIONAL RIGHTS. After any acceleration in accordance with
Section 7.1, Lender shall have, in addition to the rights and remedies provided
by this Agreement and the Master Promissory Note, all those rights and remedies
provided by the Security Instruments and by all applicable laws, including,
without limitation, the Uniform Commercial Code as enacted in the State of
California.
8. SECURITY INSTRUMENTS. The Indebtedness shall be secured by a
combination of the Stock Pledge Agreement and the Personal Guaranty. Lender may
release all or some portion of the pledged shares upon a written required made
by Joe Allwein provided that (i) no Event of Default has occurred and is
continuing under this Agreement and (ii) Lender is satisfied in its sole and
absolute discretion that the payment of the Indebtedness will be sufficiently
secured after such requested release.
9. MISCELLANEOUS.
9.1 FURTHER ASSURANCE. From time to time, Borrower will execute and
deliver to Lender such additional documents and will provide such additional
information as Lender may reasonably request to carry out the terms of this
Agreement and be informed of Borrower's financial condition and affairs.
9.2 CUMULATIVE RIGHTS AND WAIVERS. Each and every right granted to
Lender hereunder or under the Master Promissory Note or any Security Instrument
delivered hereunder or in connection herewith, or allowed at law or equity shall
be cumulative of and may be exercised in addition to any and all other rights of
Lender, and no delay or failure in exercising any right shall operate as a
waiver thereof, nor shall any single or partial exercise by Lender of any right
preclude any other or future exercise thereof or the exercise of any other
right. Borrower expressly waives any presentment, demand, protest, or other
notice of any kind. No notice to or demand on Borrower or the Guarantors in any
case shall, of itself, entitle Borrower or the Guarantors to any other or
further notice or demand in similar or other circumstances. No delay or omission
by Lender in exercising any power or right hereunder shall impair any such right
or power or be construed as a waiver thereof or any acquiescence therein, nor
shall any single or partial exercise of any such power preclude other or further
exercise thereof, or the exercise of any other right or power hereunder.
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<PAGE>
9.3 USURY. Regardless of any provision contained in this Agreement,
the Master Promissory Note or the Security Instruments, the holder of the Master
Promissory Note shall never be entitled to contract for, charge, receive, take,
collect, reserve or apply as interest on the Master Promissory Note any amount
in excess of the Maximum Rate, and, in the event such holder ever contracts for,
charges, receives, takes, collects, reserves or applies as interest any such
excess, such amount which would be deemed excessive interest shall be subject to
the usury provisions contained in the Master Promissory Note.
9.4 NOTICES. All notices, requests, demands and other communications
under this Agreement shall be given in writing and shall be served either
personally, by facsimile or delivered by first class mail, registered or
certified, return receipt requested, postage prepaid and properly addressed as
follows:
If to Borrower: Spin Forge, LLC
1700 East Grand Avenue
El Segundo, CA 90245
Attn: Joseph Allwein
Fax: (310) 640-8599
With a copy to: Wolf, Rifkin & Shapiro, LLP
11400 W. Olympic Blvd.
Los Angeles, CA 90064
Attn: Richard Grant, Esq.
Fax: (310) 479-1422
If to Lender: Dynamic Materials Corporation
551 Aspen Ridge Drive
Lafayette, CO 80026
Attn: Richard Santa, Chief Financial Officer
Fax: (303) 604-1897
With a copy to: Davis, Graham & Stubbs LLP
Suite 4700
370 Seventeenth Street
Denver, CO 80202
Attn: David Bartlett, Esq.
Fax: (303) 892-7400
Notice shall be deemed received upon the earliest of actual receipt,
confirmed facsimile transmission or three (3) days following mailing in
accordance with this Section 9.4. Each party may change its address for notice
by the giving of notice thereof to the other party in the manner above stated.
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<PAGE>
9.5 AMENDMENT. This Agreement may be amended, modified or
supplemented only by written agreement of the parties hereto.
9.6 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, however, that neither this Agreement
nor any rights or duties hereunder may be assigned or delegated, as the case may
be, by Borrower without the prior written consent of Lender.
9.7 HEADINGS. The headings in this Agreement are inserted for
convenience and identification only and are not intended to describe, interpret,
define, or limit the scope, extent, or intent of this Agreement or any provision
thereof.
9.8 ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding of the parties hereto, and supersedes all prior agreements or
understandings (whether written or oral), with respect to the subject matter
hereof. There are no restrictions, promises, representations, warranties,
covenants or undertakings, other than those expressly set forth or referred to
herein.
9.9 GOVERNING LAW AND VENUE. The validity of this Agreement and any
of its terms and provisions, as well as the rights and duties of the parties
hereunder, shall be governed by the laws of the State of California (without
regard to its conflicts of law doctrines) and the venue for any action to
enforce or to interpret this Agreement shall be in a court of competent
jurisdiction located in the State of Colorado and each of the parties consents
to the jurisdiction of such court in any such action or proceeding and waives
any objection to venue laid therein.
9.10 SEVERABILITY AND INVALID PROVISIONS. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under present or
future laws effective during the term hereof, such provision shall be fully
severable; and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof;
and the remaining provisions hereof shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision(s) there shall be added automatically as a part of this
Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid and enforceable
and that shall not be more restrictive than the one severed herefrom.
9.11 GENDER AND NUMBER. Wherever the context requires, the gender of
all words used in this Agreement shall include the masculine, feminine and
neuter, and the number of all words shall include the singular and the plural.
9.12 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
BORROWER:
SPIN FORGE, LLC
/s/Joseph Allwein
-------------------------------------------
Joseph Allwein
LENDER:
DYNAMIC MATERIALS CORPORATION
/s/Richard A. Santa
-------------------------------------------
By: Richard A. Santa
Title: Vice President & CFO
-14-
PERSONAL SERVICES AGREEMENT
This Personal Services Agreement (this "AGREEMENT"), effective as of
March 18, 1998, is by and between Dynamic Materials Corporation, a Delaware
corporation (the "COMPANY"), and Joe Allwein ("EMPLOYEE"). Unless the context of
this Agreement specifically indicates otherwise, capitalized terms used herein
shall have the meanings given them in the Asset Purchase Agreement (the
"PURCHASE AGREEMENT") by and among Employee, Spin Forge, LLC, a California
limited liability company ("SELLER") and the Company.
WHEREAS, the Company wishes to employ Employee, and Employee desires to
accept such employment, on the terms and conditions set forth herein:
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and promises contained herein, the parties agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee as Vice President
and General Manager of the Spin Forge/Aerospace Division of the Company
reporting to the President and CEO of the Company, and Employee hereby accepts
such employment and agrees to perform such duties and responsibilities as are
assigned to him from time-to-time by the President and CEO and the Board of
Directors of the Company.
2. FULL-TIME BEST EFFORTS. Employee shall devote his full and exclusive
professional time and attention to the performance of his obligations under this
Agreement, and will at all times faithfully, industriously and to the best of
his ability, experience and talent, perform all of his obligations hereunder.
3. TERM OF AGREEMENT. This Agreement shall be effective on the date
hereof and shall continue for two (2) years (the "TERM") unless sooner
terminated pursuant to Section 5 below.
4. COMPENSATION; REIMBURSEMENT.
(a) BASE SALARY. During the term of this Agreement, the
Company shall pay Employee a monthly salary of $11,250 (such monthly salary, as
may be increased from time-to-time, is referred to herein as the "BASE SALARY")
payable in such installments as is the policy of the Company with respect to
other similarly situated employees. Employee will be eligible for a merit salary
review at year-end 1998 and annually thereafter, consistent with the Company's
policy for executive officers.
(b) PERFORMANCE BONUS. Based upon performance and achievement
of mutually agreed upon goals, Employee will be eligible to receive a bonus of
up to 50% of Employee's Base Salary. Such bonus will be within the sole
discretion of the Board of Directors of the Company and will be based upon
Employee's performance and achievement of mutually agreed upon goals.
<PAGE>
During 1998, the amount of the performance bonus for which Employee is otherwise
eligible under this paragraph will be prorated on a monthly basis and reduced to
reflect the actual number of months that Employee is employed with the Company.
(c) STOCK GRANT. Upon employment, Employee will receive 7,500
shares of the Company's Common Stock which will vest in four equal annual
installments upon each of the first four anniversaries of Employee's employment
date pursuant to the Company's standard Stock Agreement and subject to the
resale restrictions applicable to restricted securities under state and federal
securities laws.
(d) STOCK OPTIONS. On the Employee's employment date, which
date is anticipated to be the Closing Date of the transactions contemplated by
the Purchase Agreement, Employee will be granted an option to purchase 35,000
shares of the Common Stock of the Company pursuant to the 1997 Equity Incentive
Plan of the Company (the "OPTION PLAN") pursuant to the Company's standard
Option Agreement. The exercise price per share will equal the closing stock
price as reported by the Nasdaq National Market on the date of grant. The stock
option will vest in four equal annual installments upon each of the first four
anniversaries of Employee's employment date subject to the standard terms and
conditions for options granted to similarly situated employees. Such options are
intended to qualify as incentive stock options to the maximum extent allowed by
Section 422 of the Internal Revenue Code.
(e) BENEFITS. Employee shall be entitled to receive all
benefits materially comparable to those generally available from time-to-time to
other executives of the Company, including: (i) term life insurance coverage in
the amount of $270,000, which is in addition to the standard term life insurance
coverage provided in the Company's standard benefits plan; (ii) participation in
the executive long-term disability plan, subject to any waiting periods or
exclusions required by the insurance provider; (iii) four weeks of vacation per
year until such time as Employee's length of service entitles Employee to
additional vacation; (iv) participation in the Company's standard benefit
programs including health and dental insurance, term life insurance, accidental
death and dismemberment insurance, short and long term disability, paid holidays
and certain other standard benefits provided by the Company; and (v)
participation in the Company's 401(k) retirement plan with a matching
contribution made by the Company equal to 50% of Employee's contribution to the
plan.
(f) COMPANY AUTOMOBILE. The Company shall provide Employee a
leased Company automobile, which shall have a leasing cost at substantially the
same level as automobiles provided to similarly situated employees, for so long
as similarly situated employees are entitled to this benefit. In addition, the
Company will pay all automobile insurance expenses for such automobile.
(g) EXPENSE REIMBURSEMENT. The Company shall reimburse
Employee for all travel expenses and other disbursements incurred by Employee
for or on behalf of the Company in
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<PAGE>
the performance of his duties hereunder, subject to and in accordance with the
Company's expense reimbursement policies and procedures, as amended from
time-to-time.
5. TERMINATION.
(a) The Company may terminate the Agreement at any time for
Cause (as hereinafter defined) effective immediately upon written notice to
Employee. Such notice shall specify that a termination is being made for Cause
and shall state the basis therefor. For purposes of this Agreement, termination
for "Cause" shall be defined as termination because of:
(i) The willful and continued failure by
Employee to substantially perform, or the
gross negligence in the performance of, his
duties hereunder for a period of fifteen
days after the Chief Executive Officer of
the Company has made a written demand for
performance which specifically identifies
the manner in which he believes that
Employee has not substantially performed his
duties.
(ii) The commission by Employee of a willful act
of dishonesty or misconduct which is
injurious to the Company.
(iii) A conviction or a plea of guilty or nolo
contendere in connection with fraud or any
crime that constitutes a felony in the
jurisdiction involved.
(iv) The willful misconduct by Employee with
respect to the business and affairs of the
Company, including the violation of any
material Company policy.
(v) The breach of any representation, warranty
or covenant of Employee or Seller contained
in the Purchase Agreement, the Operating
Lease by and among Employee, Seller and the
Company, or the Option Agreement by and
among Employee, Seller and the Company, all
dated as of an even date herewith.
A termination pursuant to this Section 5(a) shall take effect 30 days
after the giving of the notice contemplated hereby unless Employee shall, during
such 30-day period, remedy to the satisfaction of the Company the behavior
specified in such notice; provided, however, that such termination shall take
effect immediately upon the giving of such notice if the Company shall have
determined that such behavior is not remediable (which determination shall be
stated in such notice).
(b) The Company may terminate the Employee's employment for
any reason other than Cause at any time (referred to herein as a termination
Without Cause) the Term.
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<PAGE>
(c) INVOLUNTARY TERMINATION.
(i) If Employee is incapacitated or disabled by
accident, sickness or otherwise so as to
render Employee mentally or physically
incapable of performing the services
required to be performed by Employee under
this Agreement for a period of 90
consecutive days or longer or for a total
of 90 days within any six-month period, the
Company may, at that time or within any
reasonable time thereafter, at its option,
terminate the employment of the Employee
under this Agreement immediately upon
giving the Employee notice to that effect.
(ii) If Employee dies during the Term, the Term
shall be deemed to have terminated as of the
date of Employee's death.
(iii) Any termination of the Term under this
Section 5(c) is hereinafter referred to as
an "Involuntary Termination."
(d) Any termination of the employment of the Employee
hereunder other than (i) a termination for Cause, (ii) a termination Without
Cause or (iii) an Involuntary Termination shall be deemed to be a Voluntary
Termination. A Voluntary Termination shall be deemed to be effective immediately
upon such termination.
(e) Upon the termination of the Employee's employment
hereunder pursuant to an Involuntary Termination, a termination for Cause, a
termination Without Cause or a Voluntary Termination, neither Employee nor
Employee's beneficiary or estate shall have any further rights or claims against
the Company under this Agreement except the right to receive:
(i) the unpaid portion of the Base Salary
provided for in Section 4(a), computed on
a pro rata basis to the date of termination;
(ii) reimbursement for any expenses for which
Employee shall not have theretofore been
reimbursed as provided in Section 4; and
(iii) if Employee has been terminated pursuant to
a termination Without Cause, Employee shall
be entitled, in addition to the amounts
computed pursuant to Sections 5(a) and (b),
to continue receiving the Base Salary for a
period equal to the longer of (A) six months
from the date of termination, or (B) that
period beginning on the termination date
and ending on the second anniversary of the
date of this Agreement, provided that
Employee shall continue to comply with the
applicable provisions of this Agreement.
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<PAGE>
6. PROPRIETARY INFORMATION AGREEMENT. Employee shall enter into the
Company's standard form of Proprietary Information Agreement attached hereto as
Exhibit A as of the date hereof.
7. NON-COMPETITION AGREEMENT. Employee shall enter into the
Non-Competition Agreement attached hereto as Exhibit B as of the date hereof.
8. MISCELLANEOUS.
(a) JUDICIAL LIMITATION. In the event that any provision of
this Agreement is more restrictive than permitted by the law of the jurisdiction
in which the Company seeks enforcement thereof, the provisions of this Agreement
shall be limited only to that extent that a judicial determination finds the
same to be unreasonable or otherwise enforceable. Such invalidity or
unenforceability shall not affect any other terms herein, but such term shall be
deemed deleted, and such deletion shall not affect the validity of the other
terms hereof. In addition, if any one or more of the terms contained in this
Agreement shall for any reason be held to be excessively broad or of an overly
long duration, that term shall be construed in a manner to enable it to be
enforced to the extent compatible with applicable law. Moreover, notwithstanding
any judicial determination that any provision of this Agreement is not
specifically enforceable the parties intend that the Company shall nonetheless
be entitled to recover monetary damages as a result of any breach hereof.
(b) INJUNCTIVE RELIEF. In view of the nature of the rights in
goodwill, business reputation and prospects of the Company to be protected under
this Agreement, Employee understands and agrees that the Company could not be
reasonably or adequately compensated in damages in an action at law for
Employee's breach of his obligations hereunder. Accordingly, Employee
specifically agrees that he shall be entitled to temporary and permanent
injunctive relief to enforce the provisions of this Agreement and that such
relief may be granted without the necessity or proving actual damages. This
provision with respect to injunctive relief shall not, however, diminish the
right of the Company to claim and recover damages in addition to injunctive
relief.
(c) WAIVER. The failure of the Company to enforce at any time
any of the provisions of this Agreement or to require at any performance by
Employee of the provisions hereof shall in no way be construed to be a waiver of
such provisions or to affect either the validity of this Agreement, or any part
hereof, or the right of the Company thereafter to enforce each and every
provision in accordance with the terms of this Agreement.
(d) SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
(e) ASSIGNABILITY. This Agreement shall be freely assignable
by the Company and shall inure to the benefit of its successors and assigns.
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<PAGE>
(f) ENTIRE AGREEMENT. This Agreement, including the
Proprietary Information Agreement and the Non-Competition Agreement referred to
herein, which are incorporated herein and made a part hereof, embody the entire
agreement and understanding of the parties hereto and supersede all prior
agreements or understandings (whether written or oral) with respect to the
subject matter hereof.
(g) GOVERNING LAW AND VENUE. The validity of this Agreement
and any of its terms and provisions, as well as the rights and duties of the
parties hereunder, shall be governed by the laws of the State of California
(without regard to its conflicts of law doctrines) and the venue for any action
to enforce or to interpret this Agreement shall be in a court of competent
jurisdiction located in the State of Colorado and each of the parties consents
to the jurisdiction of such court in any such action or proceeding and waives
any objection to venue laid therein.
(h) AMENDMENTS. This Agreement may not be amended, altered or
modified other than by a written agreement between the parties hereto.
(i) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which shall together constitute one and the same instrument. This Agreement
shall become binding when one or more counterparts hereof shall bear the
signatures of all of the parties indicated as the signatories hereto.
(j) NOTICES. All notices, requests, demands and other
communications under this Agreement shall be given in writing and shall be
served either personally, by facsimile or delivered by first class mail,
registered or certified, return receipt requested, postage prepaid and properly
addressed to the parties as noticed herein. Notice shall be deemed received upon
the earliest of actual receipt, confirmed facsimile or three (3) days following
mailing pursuant to this section.
(k) INTERPRETATION. Each party has had the opportunity and has
reviewed and revised this Agreement and, therefore, the rule of construction
requiring that any ambiguity be resolved against the drafting party shall not be
employed in the interpretation of this Agreement. The section headings contained
in this Agreement are for convenience and reference purposes only and shall not
affect in any way the meaning and interpretation of this Agreement.
(l) ATTORNEYS' FEES AND COSTS. If either party shall commence
any action or proceeding against the other to enforce the provisions hereof, or
to recover damages as a result of the alleged breach of any provisions hereof,
the prevailing party therein shall be entitled to recover all reasonable costs
incurred in connection therewith, including reasonable attorneys' fees.
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<PAGE>
EXECUTED as of the date first set forth above.
DYNAMIC MATERIALS CORPORATION
/s/Richard Santa
---------------------------------------
Richard Santa
Vice President, Finance and
Chief Financial Officer
EMPLOYEE
/s/Joseph Allwein
---------------------------------------
Joe Allwein
-7-
STOCK AGREEMENT
THIS STOCK AGREEMENT (this "AGREEMENT") is made this 18th day of March,
1998 by and between DYNAMIC MATERIALS CORPORATION, a Delaware corporation
("PURCHASER"), having a principal place of business at 551 Aspen Ridge Drive,
Lafayette, Colorado 80026 and SPIN FORGE, LLC, a California limited liability
company ("SELLER"), having a principal place of business at 1700 East Grand
Avenue, El Segundo, California 90245.
RECITALS
A. Purchaser, Seller and Joseph Allwein ("ALLWEIN") have entered into a
certain Asset Purchase Agreement (the "PURCHASE AGREEMENT") dated as of an even
date herewith whereby Purchaser is purchasing certain assets owned by Seller and
used in the conduct of Seller's metal fabrication business. Capitalized terms
not otherwise defined herein shall have the meanings ascribed to such terms in
the Purchase Agreement.
B. As part of the consideration given for the assets purchased by
Purchaser under the Purchase Agreement, Purchaser is obligated to deliver 50,000
shares of Purchaser Common Stock, which number of shares is subject to
adjustment in accordance with the procedures set forth in the Purchase Agreement
(the "PURCHASE STOCK").
C. Purchaser desires to issue the Purchase Stock upon the terms and
conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and conditions set forth below, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties to this Agreement hereby agree as follows:
1. VESTING OF PURCHASE STOCK. A certain portion of the Purchase Stock
shall be subject to the option set forth in this Section 1 ("PURCHASE OPTION").
In the event Allwein shall cease to be employed by Purchaser (including a parent
or subsidiary of Purchaser) at any time prior to the third anniversary of
Allwein's employment (the Closing Date being considered the first day of
Allwein's employment for purposes of this Agreement (the "COMMENCEMENT DATE"))
for any reason, or no reason with or without cause, the Purchaser shall have the
right, at any time within ninety (90) days after the date Allwein ceases to be
so employed (the "TERMINATION DATE"), to exercise the Purchase Option, which
consists of the right to purchase from the Seller or his personal
representative, as the case may be, at the closing sales price of the Company's
Stock as reported on the Nasdaq National Market on the Termination Date (the
"OPTION PRICE"), up to but not exceeding the number of shares of the Purchase
Stock which have not vested under the provisions of Section 2 below, upon the
terms hereinafter set forth.
<PAGE>
2. VESTING SCHEDULE. Seller's right to receive the Purchase Stock shall
vest in accordance with the following schedule:
PORTION OF PURCHASE STOCK
IF TERMINATION DATE IS SUBJECT TO THE PURCHASE OPTION
- ------------------------------------------ ------------------------------
After the Commencement Date and before the 75%
first anniversary of the Commencement Date
After the first anniversary of the 50%
Commencement Date and before the second
anniversary of the Commencement Date
After the second anniversary of the 25%
Commencement Date and before the third
anniversary of the Commencement Date
After third anniversary after the Commencement 0%
Date
3. NO EMPLOYMENT AGREEMENT. Nothing in this Agreement shall affect in any
manner whatsoever the right or power of Purchaser to terminate Allwein's
employment for any reason, or for no reason, with or without cause.
4. MERGERS; ADJUSTMENTS; ETC. If, from time to time during the period
prior to the date which is three years after the Closing Date:
(a) there is any stock dividend or liquidating dividend of cash
and/or property, stock split, or other change in the character or amount
of any of the outstanding securities of Purchaser; or
(b) there is any consolidation, merger or sale of all, or
substantially all, of the assets of Purchaser;
then, in such event, any and all new, substituted or additional securities or
other property to which Seller is entitled by reason of its ownership of the
Purchase Stock shall be immediately subject to this Agreement and shall be
included in the term "Purchase Stock" for all purposes of this Agreement.
5. RESTRICTIONS UNDER SECURITIES LAWS. Seller acknowledges that it is
aware that the Purchase Stock to be issued to it by Purchaser pursuant to the
Purchase Agreement and this Agreement has not been registered under the
Securities Act of 1933 (the "SECURITIES ACT") and that the Purchase Stock is
deemed to constitute "restricted securities" under Rule 144 promulgated under
the Securities Act. In this regard, Seller represents and warrants to Purchaser
that Seller will hold the Purchase Stock for Seller's own account and has no
present intention of distributing or selling
- 2 -
<PAGE>
the Purchase Stock except as permitted under the Securities Act. Seller further
represents and warrants that Seller has either (i) preexisting personal or
business relationships with Purchaser or any of its officers, directors or
controlling persons, or (ii) the capacity to protect its own interests in
connection with the receipt of the Purchase Stock by virtue of the business or
financial expertise of any professional advisors to the Seller who are
unaffiliated with and who are not compensated by the Purchaser or any of its
affiliates, directly or indirectly. Seller acknowledges that the exemption from
registration of the Purchase Stock under the Securities Act provided under Rule
144 of the Securities Act will not be available for at least two years from the
Closing Date unless at least one year from the Closing Date (i) a public trading
market then exists for the Common Stock of Purchaser, (ii) adequate information
concerning Purchaser is then available to the public, and (iii) Seller complies
with the other terms and conditions of Rule 144. Seller further acknowledges
that any sale of Purchase Stock may be made only in limited amounts in
accordance with the terms and conditions of Rule 144.
6. RESTRICTIVE LEGENDS. All certificates representing shares of Purchase
Stock subject to the terms of this Agreement shall have endorsed thereon the
following legends:
(a) THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS SET FORTH IN A STOCK AGREEMENT BETWEEN THE CORPORATION AND
THE REGISTERED HOLDER, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THIS CORPORATION. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY SHARES SUBJECT TO
SUCH RESTRICTIONS IS VOID WITHOUT PRIOR EXPRESS WRITTEN CONSENT OF THE ISSUER OF
THESE SHARES.
(b) THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1993 (THE "SECURITIES ACT"). THEY MAY NOT
BE SOLD OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED UNLESS THE SECURITIES ARE
REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION THEREFROM IS AVAILABLE.
(c) Any legend required to be placed thereon by appropriate Blue Sky
officials.
7. TRANSFER RESTRICTIONS. Seller shall not sell or transfer any shares of
the Purchase Stock that have not vested in accordance with the schedule set
forth in Section 2 of this Agreement. Without in any way limiting the foregoing,
Seller further agrees that it shall in no event make any transfer or disposition
of all or any portion of the Purchase Stock unless and until:
(a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with said registration statement; or
(b) Seller shall have (i) notified Purchaser of the proposed
transfer or disposition by providing Purchaser with a detailed written statement
of the circumstances surrounding the proposed transfer or disposition, and (ii)
furnished Purchaser with an opinion of Seller's counsel to
- 3 -
<PAGE>
the effect that such transfer or disposition will not require registration of
such shares under the Securities Act, which opinion shall have been concurred in
by counsel for Purchaser, such concurrence not to be unreasonably withheld.
8. VOID TRANSFERS. Purchaser shall not be required (i) to transfer on its
books any shares of Purchase Stock which shall be been sold or transferred in
violation of any of the provisions set forth in this Agreement, or (ii) to treat
as owner of such shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such shares shall have been so transferred.
9. NOTICE. Except as otherwise provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be delivered in person, with receipt acknowledged, or sent by confirmed
facsimile or by United States mail as the case may be, registered or certified,
return receipt requested, postage prepaid and addressed as follows:
If to Purchaser: Dynamic Materials Corporation
551 Aspen Ridge Drive
Lafayette, Colorado 80026
Attn: Richard Santa, Chief Financial Officer
Telephone: 303/604-3938
Fax: 303/604-1897
With a copy to: Davis, Graham & Stubbs LLP
Suite 4700
370 Seventeenth Street
Denver, Colorado 80202
Attn: David Bartlett, Esq.
Telephone: 303/892-9400
Fax: 303/892-7400
If to Seller: Spin Forge, LLC
1700 East Grand Avenue
El Segundo, California 90245
Attn: Joseph Allwein
Telephone: 310-640-8099
Fax: 310-640-8599
With a copy to: Wolf, Rifkin & Shapiro, LLP
11400 West Olympic Boulevard
Los Angeles, California 90064
Attn: Richard Grant, Esq.
Telephone: 310-478-4100
Fax: 310-479-1422
- 4 -
<PAGE>
Or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, three (3) business days after the same shall have
been deposited in the United States mail, or when received by confirmed
facsimile.
10. ENTIRE AGREEMENT. This Agreement constitutes and contains the entire
agreement of the parties and supersedes any and all prior and contemporaneous
agreements, negotiations, correspondence, understandings and communications
between the parties, whether written or oral, respecting the subject matter
hereof.
11. SEVERABILITY. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be adjusted, if possible, rather than
voided in order to achieve the intent of the parties to the extent possible. In
any event, all other provisions of this Agreement shall be deemed valid and
enforceable to the full extent possible.
12. GOVERNING LAW AND VENUE. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without regard
to its choice-of or conflicts-of-laws, rules and venue for any action to enforce
or interpret this Agreement shall be in a court of competent jurisdiction
located in the State of Colorado and each of the parties consents to the
jurisdiction of such court in any such action or proceeding and waives any
objection to venue laid therein.
13. INUREMENT. This Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of Purchaser and Seller.
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so delivered shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
15. HEADINGS. The section headings contained herein are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
- 5 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
PURCHASER:
DYNAMIC MATERIALS CORPORATION
By: /s/Richard Santa
-----------------------------------------
Title: Vice President & CFO
--------------------------------------
SELLER:
SPIN FORGE, LLC
By: /s/Joe Allwein
-----------------------------------------
Title: President
--------------------------------------
- 6 -
STOCK AGREEMENT
THIS STOCK AGREEMENT (this "AGREEMENT") is made this 18th day of March,
1998 by and between DYNAMIC MATERIALS CORPORATION, a Delaware corporation (the
"COMPANY"), having a principal place of business at 551 Aspen Ridge Drive,
Lafayette, Colorado 80026 and JOSEPH ALLWEIN ("ALLWEIN"), an individual having a
principal place of business at 1700 East Grand Avenue, El Segundo, California
90245.
RECITALS
A. The Company, Allwein, Darleen Bauer Allwein and Spin Forge, LLC, a
California limited liability company ("SELLER"), have entered into a certain
Asset Purchase Agreement (the "PURCHASE AGREEMENT") dated as of an even date
herewith whereby the Company is purchasing certain assets owned by Seller and
used in the conduct of Seller's metal fabrication business. Capitalized terms
not otherwise defined herein shall have the meanings ascribed to such terms in
the Purchase Agreement.
A. The Company and Allwein have entered into a certain Personal
Services Agreement (the "PERSONAL SERVICES AGREEMENT") dated as of an even date
herewith whereby the Company has employed Allwein as Vice President and General
Manager of the Spin Forge/Aerospace Division of the Company.
B. The Company has agreed to issue 7,500 shares of the Company's Common
Stock to Allwein as part of his compensation under the terms of the Personal
Services Agreement subject to certain restrictions as set forth herein (the
"STOCK").
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions set forth below, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties to this Agreement hereby agree as follows:
1. VESTING OF PURCHASE STOCK. A certain portion of the Stock shall be
subject to the vesting schedule set forth in Section 2 of this Agreement. In the
event Allwein shall cease to be employed by the Company (including a parent or
subsidiary of the Company) at any time prior to the fourth anniversary of
Allwein's employment (the Closing Date being considered the first day of
Allwein's employment for purposes of this Agreement (the "COMMENCEMENT DATE"))
for any reason, or no reason with or without cause, Allwein shall forfeit and
shall have no rights concerning, interest in or claim to the unvested portion of
the Stock as determined in accordance with the vesting schedule set forth in
Section 2 of this Agreement. Upon the date on which Allwein ceases to be so
employed (the "TERMINATION DATE"), the unvested portion of the Stock shall
revert to the Company;
<PAGE>
provided, however, that the termination of Allwein's employment with the Company
prior to the fourth anniversary of the Commencement Date shall not affect
Allwein's right to receive the vested portion of the Stock.
2. VESTING SCHEDULE. Allwein's right to receive the Stock shall vest in
accordance with the following schedule:
PORTION OF STOCK WHICH ALLWEIN
IF TERMINATION DATE IS SHALL FORFEIT PURSUANT TO SECTION
1 OF THIS AGREEMENT
- ----------------------------------------- ---------------------------------
After the Commencement Date and before the 100%
first anniversary of the Commencement Date
After the first anniversary of the 75%
Commencement Date and before the second
anniversary of the Commencement Date
After the second anniversary of the 50%
Commencement Date and before the third
anniversary of the Commencement Date
After the third anniversary of the 25%
Commencement Date and before the fourth
anniversary of the Commencement Date
0%
After the fourth anniversary of the
Commencement Date
3. NO EMPLOYMENT AGREEMENT. Nothing in this Agreement shall affect in
any manner whatsoever the right or power of the Company to terminate Allwein's
employment for any reason, or for no reason, with or without cause.
4. MERGERS; ADJUSTMENTS; ETC. If, from time to time during the period
prior to the date which is four years after the Commencement Date:
(a) there is any stock dividend or liquidating dividend of
cash and/or property, stock split, or other change in the character or
amount of any of the outstanding securities of the Company; or
(b) there is any consolidation, merger or sale of all, or
substantially all, of the assets of the Company;
- 2 -
<PAGE>
then, in such event, any and all new, substituted or additional securities or
other property to which Allwein is entitled by reason of his ownership of the
Stock shall be immediately subject to this Agreement and shall be included in
the term "Stock" for all purposes of this Agreement.
5. RESTRICTIONS UNDER SECURITIES LAWS. Allwein acknowledges that he is
aware that the Stock to be issued to him by the Company pursuant to the Personal
Services Agreement and this Agreement has not been registered under the
Securities Act of 1933 (the "SECURITIES ACT") and that the Stock is deemed to
constitute "restricted securities" under Rule 144 promulgated under the
Securities Act. In this regard, Allwein represents and warrants to the Company
that Allwein will hold the Stock for his own account and has no present
intention of distributing or selling the Stock except as permitted under the
Securities Act. Allwein further represents and warrants that he has either (i)
preexisting personal or business relationships with the Company or any of its
officers, directors or controlling persons, or (ii) the capacity to protect his
own interests in connection with the receipt of the Stock by virtue of the
business or financial expertise of any professional advisors to him who are
unaffiliated with and who are not compensated by the Company or any of its
affiliates, directly or indirectly. Allwein acknowledges that the exemption
from registration of the Stock under the Securities Act provided under Rule 144
of the Securities Act will not be available for at least two years from the
Commencement Date unless at least one year from the Commencement Date (i) a
public trading market then exists for the Common Stock of the Company, (ii)
adequate information concerning the Company is then available to the public,
and (iii) Allwein complies with the other terms and conditions of Rule 144.
Allwein further acknowledges that any sale of Stock may be made only in
limited amounts in accordance with the terms and conditions of Rule 144.
6. RESTRICTIVE LEGENDS. All certificates representing shares of Stock
subject to the terms of this Agreement shall have endorsed thereon the following
legends:
(a) THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS SET FORTH IN A STOCK AGREEMENT BETWEEN THE CORPORATION AND
THE REGISTERED HOLDER, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THIS CORPORATION. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY SHARES SUBJECT TO
SUCH RESTRICTIONS IS VOID WITHOUT PRIOR EXPRESS WRITTEN CONSENT OF THE ISSUER OF
THESE SHARES.
(b) THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993 (THE "SECURITIES ACT"). THEY
MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED UNLESS THE
SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION THEREFROM IS
AVAILABLE.
(c) Any legend required to be placed thereon by appropriate
Blue Sky officials.
7. TRANSFER RESTRICTIONS. Allwein shall not sell or transfer any shares
of the Stock that have not vested in accordance with the schedule set forth in
Section 2 of this Agreement. Without
- 3 -
<PAGE>
in any way limiting the foregoing, Allwein further agrees that he shall in no
event make any transfer or disposition of all or any portion of the Stock unless
and until:
(a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with said registration statement; or
(b) Allwein shall have (i) notified the Company of the
proposed transfer or disposition by providing the Company with a detailed
written statement of the circumstances surrounding the proposed transfer or
disposition, and (ii) furnished the Company with an opinion of Allwein's counsel
to the effect that such transfer or disposition will not require registration of
such shares under the Securities Act, which opinion shall have been concurred in
by counsel for the Company, such concurrence not to be unreasonably withheld.
8. VOID TRANSFERS. The Company shall not be required (i) to transfer on
its books any shares of Stock which shall be been sold or transferred in
violation of any of the provisions set forth in this Agreement, or (ii) to treat
as owner of such shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such shares shall have been so transferred.
9. NOTICE. Except as otherwise provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be delivered in person, with receipt acknowledged, or sent by confirmed
facsimile or by United States mail as the case may be, registered or certified,
return receipt requested, postage prepaid and addressed as follows:
If to the Company: Dynamic Materials Corporation
551 Aspen Ridge Drive
Lafayette, Colorado 80026
Attn: Richard Santa, Chief Financial Officer
Telephone: 303/604-3938
Fax: 303/604-1897
With a copy to: Davis, Graham & Stubbs LLP
Suite 4700
370 Seventeenth Street
Denver, Colorado 80202
Attn: David Bartlett, Esq.
Telephone: 303/892-9400
Fax: 303/892-7400
- 4 -
<PAGE>
If to Allwein: Dynamic Materials Corporation
Spin Forge/Aerospace Division
1700 East Grand Avenue
El Segundo, California 90245
Attn: Joseph Allwein
Telephone: 310-640-8099
Fax: 310-640-8599
With a copy to: Wolf, Rifkin & Shapiro, LLP
11400 West Olympic Boulevard
Los Angeles, California 90064
Attn: Richard Grant, Esq.
Telephone: 310-478-4100
Fax: 310-479-1422
Or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be
deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, three (3) business days after the same
shall have been deposited in the United States mail, or when received by
confirmed facsimile.
10. ENTIRE AGREEMENT. This Agreement constitutes and contains the
entire agreement of the parties and supersedes any and all prior and
contemporaneous agreements, negotiations, correspondence, understandings and
communications between the parties, whether written or oral, respecting the
subject matter hereof.
11. SEVERABILITY. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be adjusted, if possible, rather than
voided in order to achieve the intent of the parties to the extent possible. In
any event, all other provisions of this Agreement shall be deemed valid and
enforceable to the full extent possible.
12. GOVERNING LAW AND VENUE. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado, without regard
to its choice-of or conflicts-of-laws, rules and venue for any action to enforce
or interpret this Agreement shall be in a court of competent jurisdiction
located in the State of Colorado and each of the parties consents to the
jurisdiction of such court in any such action or proceeding and waives any
objection to venue laid therein.
13. INUREMENT. This Agreement shall be binding upon and shall inure to
the benefit of the successors and assigns of the Company and Allwein.
- 5 -
<PAGE>
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so delivered shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
15. HEADINGS. The section headings contained herein are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
- 6 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
DYNAMIC MATERIALS CORPORATION
/s/Richard Santa
---------------------------------------
Richard A. Santa
Vice President, Finance and
Chief Financial Officer
JOSEPH ALLWEIN
/s/Joseph Allwein
----------------------------------------
Joseph Allwein
- 7 -
DYNAMIC MATERIALS CORPORATION
NON-COMPETITION AGREEMENT
IN CONNECTION WITH
SALE OF BUSINESS
This Non-Competition Agreement (the "NON-COMPETITION AGREEMENT") is
made as of the 18th day of March, 1998, by and between Dynamic Materials
Corporation, a Delaware corporation ("DMC"), and Joseph Allwein, an individual
("ALLWEIN"). This is the Non-Competition Agreement contemplated by that certain
Asset Purchase Agreement (the "AGREEMENT"), dated March 18, 1998 by and between
DMC, Allwein and Spin Forge, LLC, a California limited liability company ("SPIN
FORGE").
WHEREAS, DMC, Allwein and Spin Forge have entered into the Agreement,
dated March 18, 1998 providing for the acquisition by DMC of certain tangible
and intangible assets related to Spin Forge's metal fabrication business (the
"BUSINESS");
WHEREAS, Allwein owns a substantial interest of Spin Forge;
WHEREAS, in order to protect the value of the assets and goodwill being
acquired, DMC requires that Allwein agree to certain restrictions on Allwein's
ability to compete with DMC in the future;
WHEREAS, DMC and Spin Allwein desire that the Acquisition and the
transactions contemplated by the Agreement be consummated; and
WHEREAS, pursuant to the terms and conditions of the Agreement, Allwein
shall execute and deliver this Non-Competition Agreement to DMC prior to the
Closing.
NOW, THEREFORE, as inducement to DMC to proceed with the Closing and in
consideration of such Closing, and in consideration of the mutual covenants and
agreements contained herein and in the Agreement and for other good and valuable
consideration hereby acknowledged, intending to be legally bound, the parties
hereto do hereby agree as follows:
1. NON-COMPETITION. Allwein agrees that it shall not, directly or
indirectly, for the term of this Agreement, whether as an owner, consultant,
partner, joint venturer, stockholder, broker, agent, principal, trustee,
licensor or in any capacity whatsoever (a) own, manage, operate, join, control,
finance or participate in the ownership, management, operation, control or
financing of, or be connected as an officer, director, employee, partner,
principal, agent, representative, consultant, licensor, licensee or otherwise
with, any business or enterprise engaged in any business which is competitive
with DMC in the Business, or (b) engage in any other manner, in any business
which is competitive with DMC in the Business; provided, however, that
acquisition or ownership of less than 2 % of the outstanding shares of any
corporation engaged in any business which is competitive with DMC in the
Business whose stock is publicly traded shall not constitute a violation of this
<PAGE>
Non-Competition Agreement. As used herein, "Business" shall mean the business
of DMC as presently conducted and as may be conducted from time-to-time
hereafter.
2. TERM. This Agreement shall remain in effect for a period of
thirty-six (36) months from the date hereof.
3. JUDICIAL LIMITATION. In the event that any provision of this
Non-Competition Agreement is more restrictive than permitted by the law of the
jurisdiction in which DMC seeks enforcement thereof, the provisions of this
Non-Competition Agreement shall be limited only to that extent that a judicial
determination finds the same to be unreasonable or otherwise unenforceable. Such
invalidity or unenforceability shall not affect any other terms herein, but such
term shall be deemed deleted, and such deletion shall not affect the validity of
the other terms hereof. In addition, if any one or more of the terms contained
in this Non-Competition Agreement shall for any reason be held to be excessively
broad or of an overly long duration that term shall be construed in a manner to
enable it to be enforced to the extent compatible with applicable law. Moreover,
notwithstanding any judicial determination that any provision of this
Non-Competition Agreement is not specifically enforceable the parties intend
that DMC shall nonetheless be entitled to recover monetary damages as a result
of any breach hereof.
4. INJUNCTIVE RELIEF. In view of the nature of the rights in goodwill,
business reputation and prospects of DMC to be protected under this
Non-Competition Agreement, Allwein understands and agrees that DMC could not be
reasonably or adequately compensated in damages in an action at law for
Allwein's breach of its obligations hereunder. Accordingly, Allwein specifically
agrees that DMC shall be entitled to temporary and permanent injunctive relief
to enforce the provisions of this Non-Competition Agreement and that such relief
may be granted without the necessity of proving actual damages. This provision
with respect to injunctive relief shall not, however, diminish the right of DMC
to claim and recover damages in addition to injunctive relief.
5. WAIVER. The failure of DMC to enforce at any time any of the
provisions of this Non-Competition Agreement or to require at any time
performance by Allwein of the provisions hereof shall in no way be construed to
be a waiver of such provisions or to affect either the validity of this
Non-Competition Agreement, or any part hereof, or the right of DMC thereafter to
enforce each and every provision in accordance with the terms of this
Non-Competition Agreement.
6. SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Non-Competition Agreement shall not affect the other
provisions hereof, and this Non-Competition Agreement shall be construed in all
respects as if such invalid or unenforceable provisions were omitted.
7. ASSIGNABILITY. This Non-Competition Agreement shall be freely
assignable by DMC and shall inure to the benefit of its successors and assigns.
8. GOVERNING LAW AND VENUE. The validity of this Agreement and any of
its terms and provisions, as well as the rights and duties of the parties
hereunder, shall be governed by the laws
-2-
<PAGE>
of the State of Colorado (without regard to its conflicts of law doctrines) and
the venue for any action to enforce or to interpret this Agreement shall be in a
court of competent jurisdiction located in the State of Colorado and each of the
parties consents to the jurisdiction of such court in any such action or
proceeding and waives any objection to venue laid therein.
9. AMENDMENTS. This Non-Competition Agreement may not be amended,
altered or modified other than by a written agreement between the parties
hereto.
10. COUNTERPARTS. This Non-Competition Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which shall together constitute one and the same instrument. This
Non-Competition Agreement shall become binding when one or more counterparts
hereof shall bear the signatures of all of the parties indicated as the
signatories hereto.
11. NOTICES. All notices, requests, demands and other communications
under this Non-Competition Agreement shall be given in writing and shall be
served either personally, by facsimile or delivered by first class mail,
registered or certified, return receipt requested, postage prepaid and properly
addressed to the parties as noted herein. Notice shall be deemed received upon
the earliest of actual receipt, confirmed facsimile or three (3) days following
mailing pursuant to this section.
12. INTERPRETATION. Each party has had the opportunity and has reviewed
and revised this Non-Competition Agreement and, therefore, the rule of
construction requiring that any ambiguity be resolved against the drafting party
shall not be employed in the interpretation of this Non-Competition Agreement.
The section headings contained in this Non-Competition Agreement are for
convenience and reference purposes only and shall not affect in any way the
meaning and interpretation of this Non-Competition Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Non-Competition Agreement as of the date first above written.
/s/Joseph Allwein
----------------------------------------
Joseph Allwein
1700 East Grand Avenue
El Segundo, CA 90245
DYNAMIC MATERIALS CORPORATION
By: /s/Richard Santa
-------------------------------------
Richard Santa
Vice President, Finance and
Chief Financial Officer
551 Aspen Ridge Drive
Lafayette, CO 80026
-3-
MASTER
PROMISSORY NOTE
$600,000.000 Los Angeles, California March 18, 1998
SECTION ONE
TERMS OF NOTE
Spin Forge, LLC, a California limited liability company ("MAKER"),
whose address for the purposes of this Master Promissory Note (the "NOTE") is
1700 East Grand Avenue, El Segundo, California 90245, for value received,
without grace, in the manner, on the dates and in the amounts set forth herein,
promises to pay to the order of Dynamic Materials Corporation, a Delaware
corporation ("PAYEE"), whose address for the purposes of this Note is 551 Aspen
Ridge Drive, Lafayette, Colorado 80026, at 551 Aspen Ridge Drive, Lafayette,
Colorado 80026, or at such other place as Payee may hereafter designate, the
principal sum of $600,000.00, or so much thereof as may be advanced hereunder
and confirmed in a writing delivered by Holder to Maker. Reference is made to
that certain Loan Agreement (the "LOAN AGREEMENT") as of an even date herewith
entered into by Maker and Payee and pursuant to which Maker is delivering this
Note. Capitalized terms used in this Note and not otherwise defined in this Note
shall have the meanings ascribed to such terms in the Loan Agreement.
SECTION TWO
ADVANCES
Payee shall make advances under this Note as required by the Loan
Agreement. The time that advances shall be made under this Note, and the amount
of those advances, are set forth on Schedule A attached hereto, provided,
however, that such advances shall be made subject to the terms and conditions of
the Loan Agreement. The aggregate amount of all advances made under this Note
shall not exceed $600,000.00 unless Payee, in its sole and absolute discretion,
otherwise agrees in writing to advance additional funds, in which case such
additional funds shall constitute advances subject to the terms of this Note.
In the event that the unpaid principal amount under this Note at any
time, for any reason, exceeds the maximum amount hereinabove specified (except
with regard to interest that was added into this Note as principal), Maker
covenants and agrees to pay the excess principal amount forthwith upon demand
unless Payee otherwise agrees in writing. Such excess principal amount shall in
all respects be deemed to be included among the loans or advances made pursuant
to the terms of this Note.
<PAGE>
SECTION THREE
INTEREST RATE
The unpaid principal balance from time to time outstanding hereunder
shall bear no interest; provided, however, that in the event the Maturity Date
of this Note is extended as provided in Section Four hereof, the unpaid
principal balance under this Note as of January 2, 2002 shall begin to accrue
interest on January 2, 2002 at a rate equal to the prime rate as reported in the
Wall Street Journal on January 2, 2002 (or, if January 2, 2002 is not a business
day, the next succeeding business day); and provided further, that all past due
principal on this Note, whether due as the result of acceleration or maturity or
otherwise, shall bear interest from the date payment thereof shall have become
due until the same is fully paid at the Maximum Rate.
SECTION FOUR
MATURITY
The entire unpaid principal balance of this Note shall be due and
payable on January 1, 2002 (the "MATURITY DATE"); provided, however, that in the
event the term of the Operating Lease is extended for an Extended Term as
provided thereunder, the Maturity Date of this Note may be extended, at the sole
discretion of Payee, until December 31, 2003 or such other date as Payee shall
determine in its sole discretion.
SECTION FIVE
PAYMENTS
Maker, in its sole and absolute discretion, reserves the right of
prepaying the principal of this Note, in full or in part, at any time without
the payment of any prepayment premium or fee. All payments made on this Note
shall be made in immediately available funds. All such payments shall be made to
Payee at the address set forth in Section One not later than 2:00 p.m. Mountain
Time on the date such payments become due hereunder.
SECTION SIX
RECORDS
The date and amount of (i) all advances and (ii) each payment made with
respect to principal outstanding under this Note shall be recorded by Payee on
Schedule B attached hereto. The failure to record any such amount or any error
in so recording any such amount shall not, however, limit or otherwise affect
the obligations of Maker to repay the unpaid principal amount of this Note.
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<PAGE>
SECTION SEVEN
OVERDUE AMOUNTS
All past due principal on this Note, whether due as the result of
acceleration or maturity or otherwise, shall bear interest from the date the
payment thereof shall have become due until the same is fully paid at the
Maximum Rate. The term "MAXIMUM RATE" shall mean the maximum nonusurious rate of
interest allowed to be charged by Payee to Maker by applicable law, as such
applicable law or rate of interest is in effect from time to time.
SECTION EIGHT
ACCELERATION
If an Event of Default (as defined in the Loan Agreement) occurs under
the Loan Agreement or any instrument now or hereafter executed in connection
with or as security for this Note, then the holder hereof may, at its sole
option, declare the entirety of the outstanding principal balance of this Note
immediately due and payable. Failure to exercise said option at any time shall
not constitute a waiver on the part of the holder hereof of the right to
exercise said option at any other time.
SECTION NINE
SECURITY
This Note is secured by a security interest in Maker's stock in Dynamic
Materials Corporation as evidenced by that certain Stock Pledge Agreement, dated
of even date herewith, made between Maker and Payee. This Note is also
guaranteed by that certain Personal Guaranty, dated of even date herewith, made
between Payee and Joe Allwein and Darlene Bauer, respectively.
SECTION TEN
WAIVER OF PRESENTMENT, ETC.
Maker and each other Liable Party expressly and specifically (i)
severally waive grace, presentment for payment, demand for payment, notice of
intent to accelerate and notice of acceleration, notice of dishonor, protest and
notice of protest, notice of nonpayment, and any and all other notices, the
filing of suit and diligence in collecting this Note or enforcing any of the
security herefor, (ii) severally agree to any substitution, subordination,
exchange or release of any security held for the payment of this Note or any
other obligation to the holder hereof and release of any party primarily or
secondarily liable hereon, (iii) severally agree that the holder hereof shall
not be required first to institute suit or exhaust its remedies hereon against
Maker or other parties liable hereon or to enforce its rights against them or
any security herefor in order to enforce payment of this Note by any of them,
and (iv) severally agree to any extension or postponement of time of payment of
this Note and to any other indulgence with respect hereto without notice thereof
to any of them.
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<PAGE>
SECTION ELEVEN
EXPENSES AND ATTORNEYS' FEES
If this Note is not paid at maturity, however such maturity may be
brought about, and this Note is placed in the hands of an attorney for
collection or if collection by suit or through the probate court, bankruptcy
court, or by any other legal or judicial proceeding is sought, Maker agrees to
pay expenses incurred by Payee, including reasonable attorneys' fees and
expenses.
SECTION TWELVE
SEVERABILITY
If any provision of this Note is held to be illegal, invalid or
unenforceable, such provision shall be fully severable herefrom. This Note shall
be construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom.
SECTION THIRTEEN
COMPLIANCE WITH USURY LAWS
It is the intention of Maker and Payee to conform strictly to
applicable usury laws. Accordingly, notwithstanding any provision to the
contrary in this Note, the aggregate of all interest and any other charges or
consideration constituting interest under applicable usury law that is taken,
reserved, contracted for, charged or received under this Note, or otherwise in
connection with this loan transaction shall under no circumstances exceed the
maximum amount of interest allowed by the usury law applicable to this loan
transaction. If any excess interest charge or consideration in such respect is
taken, reserved, contracted for, charged, received or provided for in this Note,
whether by the terms of this Note or because the maturity of the indebtedness
evidenced by this Note is accelerated for any reason, or in the event of any
required or permitted prepayment, then in any such event (i) the provisions of
this paragraph shall govern and control; (ii) neither Maker nor Maker's heirs,
executors, administrators, legal representatives, assigns or any other Liable
Party shall be obligated to pay the amount of such interest to the extent that
it is in excess of the Maximum Rate; (iii) any excess shall be deemed a mistake
and canceled automatically and, if theretofore paid, shall be credited on this
Note by the holder hereof (or, if this Note shall have been paid in full,
refunded to Maker); and (iv) the effective rate of interest shall be
automatically subject to reduction to the Maximum Rate allowed as the usury law
may now or hereafter be construed by courts of appropriate jurisdiction. Without
limiting the foregoing, all calculations of the rate of interest taken,
reserved, contracted for, charged, received or provided for under this Note or
which are made for the purpose of determining whether the interest rate exceeds
the Maximum Rate shall be made, to the extent allowed by law, by amortizing,
prorating, allocating and spreading in equal parts during the period of the full
stated term of the loan evidenced hereby, including any extension thereof, all
interest at any time taken, reserved, contracted for, charged, received or
provided for under this Note.
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<PAGE>
SECTION FOURTEEN
GOVERNING LAW AND VENUE
This Note shall be governed by and construed in accordance with the
laws of the State of California in all respects, including matters of
construction, validity and performance. Venue for any action to enforce or to
interpret this Note shall be in a court of competent jurisdiction located in the
State of Colorado and each of the parties consents to the jurisdiction of such
court in any such action or proceeding and waives any objection to venue laid
therein.
SECTION FIFTEEN
HEADINGS
The Section headings used herein are intended for reference and shall
not by themselves determine the construction or interpretation of this Note.
MAKER:
SPIN FORGE, LLC
By: /s/Joe Allwein
-------------------------------
Its: President
-------------------------------
Date: 3/18/98
------------------------------
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PERSONAL GUARANTY
THIS PERSONAL GUARANTY (this "GUARANTY") is entered into this 18th day
of March, 1998 by and among JOSEPH ALLWEIN, an individual having his principal
place of business at 1700 East Grand Avenue, El Segundo, California 90245,
DARLENE BAUER, an individual having a principal residence at
(Joseph Allwein and Darlene Bauer referred to herein each
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individually as a "GUARANTOR" and collectively as "GUARANTORS"), and DYNAMIC
MATERIALS CORPORATION, a Delaware corporation ("LENDER"), having its principal
place of business at 551 Aspen Ridge Drive, Lafayette, Colorado 80026.
RECITALS
A. Lender, Joseph Allwein and Spin Forge, LLC, a California limited
liability company ("BORROWER") are parties to a certain Asset Purchase Agreement
(the "PURCHASE AGREEMENT"), dated as of an even date herewith, whereby Lender is
acquiring certain assets from Borrower.
B. As part of the transactions contemplated by the Purchase Agreement,
Guarantors have requested Lender to make advances to Borrower in accordance with
the terms of a certain Loan Agreement (the "LOAN AGREEMENT"), dated as of an
even date herewith, by and between Borrower and Lender. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to such terms in the
Loan Agreement.
C. Joseph Allwein is President, manager and owner of a fifty percent
(50%) membership interest in Borrower. Darlene Bauer is manager and owner of a
fifty percent (50) membership interest in Borrower.
D. Lender has conditioned its agreement to enter into the Loan
Agreement upon Guarantors' execution and delivery of this Guaranty.
AGREEMENT
NOW, THEREFORE, in order to induce Lender to enter into the Loan
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. GUARANTY.
1.1 UNCONDITIONAL GUARANTY OF PAYMENT. Guarantors, jointly and
severally, hereby irrevocably, absolutely and unconditionally guarantee to
Lender the punctual and complete payment and performance when due (whether by
stated maturity, acceleration or otherwise) of all indebtedness of Borrower to
Lender created under the Loan Agreement, whether prior or subsequent
<PAGE>
to the date hereof (all such indebtedness being the "LIABILITIES"), together
with the prompt payment of all expenses, including reasonable attorneys' fees,
incidental to the collection of the Liabilities. The term "indebtedness" is used
herein in its most comprehensive sense and includes any and all advances, debts,
obligations and liabilities heretofore, now or hereafter made, incurred or
created, whether voluntary or involuntary and whether due or not due, absolute
or contingent, liquidated or unliquidated, determined or undetermined, and
whether recovery upon such indebtedness may be or hereafter become
unenforceable. The Liabilities and all other obligations and covenants to be
performed by Guarantors under this Guaranty shall hereinafter from time to time
be collectively referred to as the "GUARANTY OBLIGATIONS." Guarantors, jointly
and severally, hereby unconditionally and irrevocably agree that if the Borrower
shall fail for any reason to pay to Lender any amount payable when due,
Guarantors shall thereupon immediately pay to Lender the full amount then due.
The obligations of Guarantors hereunder shall be absolute, unconditional and
continuing so long as there shall remain any Liabilities due and payable, or to
become due and payable, by Borrower to Lender.
1.2 EXPENSES. Guarantors, jointly and severally, hereby agree
to pay all expenses incurred by Lender in connection with the enforcement of
Lender's rights under this Guaranty including, without limitation, reasonable
attorneys' fees and legal expenses.
2. PAYMENTS. All payments to be made by Guarantors to Lender hereunder
shall be paid in immediately available funds addressed to Lender at the address
first set forth above.
3. ABSOLUTE GUARANTY. Guarantors agree that the liability hereunder
shall be the immediate, direct and primary obligation of Guarantors and shall
not be contingent upon Lender's exercise or enforcement of any remedy that
Lender may have against Borrower or any other Person, or against any collateral
or any security for the Guaranty Obligations. Without limiting the generality of
the foregoing, the Guaranty Obligations shall remain in full force and effect
without regard to and shall not be impaired by, nor shall Guarantors be
released, exonerated or discharged by, any of the following events:
(a) insolvency, bankruptcy, reorganization, arrangement,
adjustment, composition, assignment for the benefit
of creditors, death, liquidation, winding up or
dissolution of death of Borrower, Guarantors or any
other guarantor of the Liabilities;
(b) any limitation, discharge or cessation of the
liability of Borrower, Guarantors or any other
guarantor for the Liabilities due to any statute,
regulation or rule of law or any invalidity or
unenforceability in whole or in part of the Loan
Agreement or any other guaranty of the Liabilities;
(c) any merger, acquisition, consolidation or change in
structure of Borrower or any other guarantor of the
Liabilities; or any sale, lease, transfer or other
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<PAGE>
disposition of any or all of the assets or membership
interests of Borrower, Guarantors or any other
guarantor of the Liabilities;
(d) any assignment or other transfer, in whole or in
part, of Lender's interests in and rights under the
Loan Agreement and this Guaranty including, without
limitation, Lender's right to receive payment of the
Liabilities and the Guaranty Obligations;
(e) any claim, defense, counterclaim or setoff, other
than that of prior performance, that Borrower,
Guarantors or any other guarantor of the Liabilities
may have or assert including, but not limited to, any
defense of incapacity or lack of corporate or other
authority to execute any documents relating to the
Liabilities, the Guaranty Obligations or any other
guaranty obligations;
(f) any cancellation, renunciation or surrender of any
debt instrument evidencing the Liabilities;
(g) Lender's amendment, modification, renewal or
extension of any documents or agreements relating to
the Loan Agreement, the Liabilities, or the Guaranty
Obligations;
(h) the exercise or nonexercise of any power, right or
remedy with respect to the Liabilities or the
Guaranty Obligations by Lender including, but not
limited to, compromise, release, settlement or waiver
with or of Borrower or Guarantors;
(i) Lender's vote, claim, distribution, election,
acceptance, action or inaction in any bankruptcy case
related to the Liabilities or the Guaranty
Obligations; and
(j) any impairment or invalidity of any collateral
securing the Guaranty Obligations or any failure to
perfect any of Lender's liens thereon or security
interests therein.
4. REPRESENTATIONS AND WARRANTIES. Guarantors, jointly and severally,
hereby represent and warrant to Lender that:
(a) Each Guarantor is legally competent to execute,
deliver and perform this Guaranty,
(b) The execution, delivery and performance by Guarantors
of this Guaranty does not require any authorization
or approval or other action by, or any notice to
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<PAGE>
or filing with, any governmental authority or any
other party except such as have been obtained or made
and do not, except as contemplated by the Loan
Agreement or this Guaranty, result in the
imposition or creation of any lien, security interest
or other encumbrance.
(c) The execution, delivery and performance of this
Guaranty will not violate any law or regulation, or
any order or decree of any court or governmental
instrumentality, will not conflict with or result in
the breach of, or constitute a default under any
indenture, mortgage, deed of trust, lease, agreement
or other instrument to which either Guarantor is a
party or by which either Guarantor or any of their
property is bound, will not result in the creation
or imposition of any Lien upon any of the property
of either Guarantor and the same do not require the
consent or approval of any governmental body, agency,
authority or any other Person except those already
obtained.
(d) This Guaranty constitutes the legal, valid and
binding obligation of each of the Guarantors,
enforceable in accordance with its terms, except as
the enforceability thereof may be subject to or
limited by bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws
relating to ro affecting the rights of creditors
generally.
(e) There is no action, suit or proceeding affecting
either of the Guarantors pending or threatened before
any court, arbitrator or governmental authority which
may have an adverse effect on the ability of either
of the Guarantors to perform its obligations under
this Guaranty.
(f) The Guaranty Obligations are not subject to any
offset or defense against Lender or Borrower of any
kind.
(g) Each of the Guarantors covenant, warrant and
represent to Lender that all representations and
warranties contained in this Guaranty shall be true
at the time of Guarantors' execution of this Guaranty
and shall continue to be true until the Liabilities
have been paid or otherwise satisfied in full.
5. THE BORROWER. Each Guarantor acknowledges that its obligations
hereunder will not be affected by (a) Lender's failure properly to create a
security interest in any collateral, (b) Lender's failure to create or maintain
a priority with respect to the security interest purported to be created in any
collateral, or (c) any act or omission of Lender (whether negligent or
otherwise) which adversely affects the value of any collateral or Lender's
security interest therein or lien thereon or the priority of such security
interest. Each Guarantor acknowledges that, to date, Lender has obtained no
collateral or other security from the Borrower relating to the Liabilities
except for Borrower's pledge of 50,000 shares of Lender's Common Stock owned by
Borrower (subject to certain vesting
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<PAGE>
restrictions as set forth in that certain Stock Agreement dated as of an even
date herewith) according to the terms of that certain Stock Pledge Agreement
dated as of an even date herewith.
6. WAIVER. Each Guarantor hereby expressly waives (a) diligence,
presentment, demand for payment, protest, benefit of any statute of limitations
affecting Borrower's liability under the Loan Agreement or the enforcement of
this Guaranty; (b) discharge due to any disability of Borrower; (c) any defenses
of Borrower to obligations under the Loan Agreement not arising under the
express terms of the Loan Agreement or from material breach thereof by Lender
which under the law has the effect of discharging Borrower from the Liabilities
as to which this Guaranty is sought to be enforced; (d) the benefit of any act
or omission by Lender which directly or indirectly results in or aids the
discharge of Borrower from any of the Liabilities by operation of law or
otherwise; (e) all notices whatsoever, including, without limitation, notice of
acceptance of this Guaranty and the incurring of the Liabilities; and (f) any
requirement that Lender exhaust any right, power or remedy or proceed against
Borrower or any other security for, or any other guarantor of, or any other
party liable for, any of the Liabilities or any portion thereof. Each Guarantor
specifically agrees that it shall not be necessary or required, and neither
Guarantor shall be entitled to require, that Lender (i) file suit or proceed to
assert or obtain a claim for personal judgment against Borrower, for the
Liabilities; (ii) make any effort at collection or enforcement of Liabilities
from the Borrower; (iii) foreclose against or seek to realize upon any
collateral or any other security now or hereafter existing for the Liabilities;
(iv) file suit or proceed to obtain or assert a claim for personal judgment
against Guarantor or any other guarantor or other party liable for the
Liabilities; (v) make any effort at collection of the Liabilities from any such
party; (vi) exercise or assert any other right or remedy to which Lender is or
may be entitled in connection with the Liabilities or any security or guaranty
relating thereto; or (vii) file any claim against assets of Borrower before or
as a condition of enforcing the liability of either Guarantor under this
Guaranty. Notwithstanding anything to the contrary set forth in this Section 6,
Lender agrees that it shall not assert any demand or claim against Guarantors
until it shall first have delivered to Borrower a written demand for payment in
full of the outstanding Liabilities.
No election to proceed in one form of action or against any party or on
any obligation shall constitute a waiver of Lender's right to proceed in any
other form of action or against either Guarantor or any other Person, or
diminish the liability of either Guarantor, or affect the right of Lender to
proceed against either Guarantor for any deficiency, except to the extent Lender
realizes payment by such action, notwithstanding the effect of such action upon
either Guarantor's rights of subrogation, reimbursement or indemnity, if any,
against any Person.
7. TOLLING OF STATUTE OF LIMITATIONS. Each Guarantor agrees that any
payment or performance of any of the Liabilities or other acts which tolls any
statute of limitations applicable to the Liabilities shall also toll the statute
of limitations applicable to such Guarantor's liability under this Guaranty.
8. CERTAIN RIGHTS. Lender may pursue its rights and remedies under this
Guaranty against both Guarantors, jointly and severally, and shall be entitled
to payment hereunder
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<PAGE>
notwithstanding (a) any action taken by Lender to enforce any of its rights or
remedies under any security agreement, stock pledge, deed of trust or other
security document or guaranty or (b) any payment received under any security
agreement, stock pledge, deed of trust or other security document or guaranty.
In pursuing its rights under this Guaranty, Lender need not join either or both
Guarantors in any suit against Borrower or join Borrower in any suit against
either or both Guarantors.
9. CONTINUING GUARANTY. This Guaranty shall be a continuing guaranty
and shall remain in full force and effect until the Guaranty Obligations,
whether already incurred or incurred hereafter, have been paid or otherwise
satisfied in full. Any other guarantors of all or a portion of the Liabilities
may be released without affecting the liability of Guarantors hereunder.
10. SUBROGATION. Each Guarantor hereby waives any right of subrogation
which such Guarantor has or may have as against Borrower with respect to such
Guarantor's obligations to Lender hereunder. In addition, each Guarantor hereby
waives any right to proceed against Borrower, now or hereafter, for
contribution, indemnity, reimbursement, and any other suretyship rights and
claims, whether direct or indirect, liquidated or contingent, which the
undersigned may now have or hereafter have as against Borrower with respect to
such Guarantor's obligations to Lender hereunder. Each Guarantor also hereby
waives any rights of recourse to or with respect to any asset of Borrower. The
undersigned Guarantors agree that in light of the foregoing waivers, the
execution of this Guaranty shall not be deemed to make the Guarantors
"creditors" of Borrower, and that, for purposes of Sections 547 and 550 of the
United States Bankruptcy Code, Guarantors shall not be deemed "creditors" of
Borrower.
11. REINSTATEMENT. This Guaranty shall remain in full force and effect
and continue to be effective if at any time payment and performance of the
Liabilities or any part thereof, whether by or on account of Borrower or
Guarantors, is, pursuant to applicable law, avoided, rescinded or reduced in
amount or must otherwise be restored or returned by any obligee of the
Liabilities, including Lender, whether as a "voidable preference", "fraudulent
conveyance" or otherwise, all as though such payment or performance had not been
made. In the event that any payment or part thereof is avoided, rescinded,
reduced, restored or returned, the Liabilities shall be reinstated and deemed
reduced only by such amount paid and not so avoided, rescinded, reduced,
restored or returned.
12. EVENTS OF DEFAULT.
12.1 EVENT OF DEFAULT. The occurrence of any one or more of
the following events shall constitute an "Event of Default":
(a) the occurrence of an Event of Default under or as
defined in the Loan Agreement; or
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<PAGE>
(b) either Guarantor fails to perform or pay in full any
of the Guaranty Obligations as and when due and
payable under this Guaranty or when declared to be
due and payable by Lender, whichever is earlier; or
(c) either Guarantor fails or neglects to perform, keep
or observe any other term, provision, condition,
covenant, warranty or representation contained in
this Guaranty that is required to be performed,
kept or observed by such Guarantor; provided,
however, that if such condition is capable of being
cured, such Event of Default shall cease to
exist if such condition is cured to Lender's
reasonable satisfaction before the expiration of
ten (10) business days after Lender gives notice
thereof to Guarantors; or
(d) any representation or warranty made by either
Guarantor to Lender in this Guaranty or in any
statement, report, financial statement or certificate
delivered by either Guarantor to Lender is not true
and correct or is misleading, in any material
respect, when made or delivered; or
(e) the commencement by either Guarantor of a voluntary
case under the federal bankruptcy laws as now
constituted or hereafter amended or any other
applicable federal or state bankruptcy, insolvency
or similar law; or the consent by either Guarantor
to the appointment of a receiver, liquidator,
assignee, trustee, custodian, sequestrator, agent or
other similar official for such Guarantor for any
substantial part of its properties; or the making by
either Guarantor of any assignment for the benefit
of creditors; or the taking of any action by or on
behalf of either Guarantor in furtherance of any of
the foregoing; or
(f) the filing of a petition with a court having
jurisdiction over either Guarantor to commence an
involuntary case for such Guarantor under the federal
bankruptcy laws as now constituted or hereafter
amended or any other applicable federal or state
bankruptcy, insolvency or similar law, or the
appointment of a receiver, liquidator, assignee,
trustee, custodian, sequestrator, agent or other
similar official for such Guarantor for any
substantial part of its property; or any substantial
part of either Guarantor's property is subject to
any levy, execution, attachment, garnishment or
temporary protective order and the failure to obtain
the dismissal of such petition or appointment or the
continuance of such decree or order unstayed and in
effect for or within a period of sixty (60) days
from the date of such filing, appointment or entry
of such order of decree.
12.2 ACCELERATION OF THE LIABILITIES. Upon and after an Event
of Default hereunder, then and in either such event all or any portion of the
Guaranty Obligations may, at the option of
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<PAGE>
Lender and without demand, notice or legal process of any kind, be declared and
immediately shall become due and payable.
13. NO WAIVER; AMENDMENTS. No failure on the part of Lender to
exercise, no delay in exercising and no course of dealing with respect to, 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. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law. This Guaranty may
not be amended or modified except by written agreement among Guarantors and
Lender and no consent or waiver hereunder shall be valid unless in writing and
signed by Lender.
14. BUSINESS DEBT. Each Guarantor hereby represents and agrees that
none of the Liabilities of Borrower to Lender and none of the Guaranty
Obligations is consumer debt or was or shall be incurred by Borrower or
Guarantors respectively, primarily for personal, family or household purposes.
Each Guarantor further agrees and represents that the Liabilities are and shall
be incurred by Borrower and the Guaranty Obligations are and shall be incurred
by Guarantors for business and commercial purposes only.
15. NOTICE. Lender shall provide Guarantors with a copy of any notice
of default to Borrower as provided under the Loan Agreement; provided, however,
that the failure of Lender to provide such notice to Guarantors will not
exonerate either Guarantor of any obligations under this Guaranty. Except as
otherwise provided herein, any notice or other communication herein required or
permitted to be given shall be in writing and may be delivered in person, with
receipt acknowledged, or sent by telex, telecopy, facsimile or by Unites States
mail as the case may be, registered or certified, return receipt requested,
postage prepaid and addressed as follows:
If to Lender Dynamic Materials Corporation
551 Aspen Ridge Drive
Lafayette, Colorado 80026
Attn: Richard Santa, Chief Financial Officer
Telephone: 303/604-3938
Fax: 303/604-1897
With a copy to: Davis, Graham & Stubbs LLP
Suite 4700
370 Seventeenth Street
Denver, Colorado 80202
Attn: David Bartlett, Esq.
Telephone: 303/892-9400
Fax: 303/892-7400
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<PAGE>
If to Guarantors: Joseph Allwein and Darlene Bauer
1700 East Grand Avenue
El Segundo, California 90245
Telephone: 310-640-8099
Fax: 310-640-8599
With a copy to: Wolf, Rifkin & Shapiro, LLP
11400 West Olympic Boulevard
Los Angeles, California 90064
Attn: Richard Grant, Esq.
Telephone: 310-478-4100
Fax: 310-479-1422
Or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, or three (3) business days after the same shall have
been deposited in the United States mail.
16. ENTIRE AGREEMENT. This Guaranty constitutes and contains the entire
agreement of the parties and supersedes any and all prior and contemporaneous
agreements, negotiations, correspondence, understandings and communications
between the parties, whether written or oral, respecting the subject matter
hereof.
17. SEVERABILITY. If any provision of this Guaranty is held to be
unenforceable for any reason, it shall be adjusted, if possible, rather than
voided in order to achieve the intent of the parties to the extent possible. In
any event, all other provisions of this Guaranty shall be deemed valid and
enforceable to the full extent possible.
18. SUBORDINATION OF INDEBTEDNESS. Any indebtedness or other obligation
of Borrower now or hereafter held by or owing to Guarantors is hereby
subordinated in time and right of payment of all Liabilities of Borrower to
Lender.
19. GOVERNING LAW AND VENUE. This Guaranty shall be binding upon and
inure to the benefit of Guarantors and Lender and their respective successors
and assigns, except that neither Guarantor shall have the right to assign its
rights or delegate its duties hereunder or otherwise assign any interest herein
without the prior written consent of Lender. This Guaranty shall be governed by
and construed in accordance with the laws of the State of Colorado, without
regard to its choice-of or conflicts-of-laws, rules and venue for any action to
enforce or interpret this Guaranty shall be in a court of competent jurisdiction
located in the State of Colorado and each of the parties consents
-9-
<PAGE>
to the jurisdiction of such court in any such action or proceeding and waives
any objection to venue laid therein.
20. COUNTERPARTS. This Guaranty may be executed in any number of
counterparts, each of which when so delivered shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
21. DISCHARGE. This Guaranty shall terminate and the Guarantors shall
be released and discharged from all liability under this Guaranty from the date
on which all the Guaranty Obligations have been finally paid and satisfied to
Lender in full.
IN WITNESS WHEREOF, the parties have executed and delivered this
Guaranty as of the date first written above.
GUARANTORS:
/s/Joseph Allwein
------------------------------------------
Joseph Allwein
/s/Darleen Bauer
------------------------------------------
Darlene Bauer
LENDER:
DYNAMIC MATERIALS CORPORATION
By: /s/Richard Santa
---------------------------------------
Title: Vice President & CFO
------------------------------------
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[LETTERHEAD OF DYNAMIC MATERIALS CORPORATION]
DMC ANNOUNCES CLOSING OF SPIN FORGE PURCHASE
FOR IMMEDIATE RELEASE
Wednesday, March 18, 1998
Contact: Richard A. Santa Mark W. Jarman
Chief Financial Officer Investor Relations
Dynamic Materials Corporation Dynamic Materials Corporation
303-604-3938 303-604-3923
LAFAYETTE, CO--Dynamic Materials Corporation, (Nasdaq: BOOM), 'DMC,' has
completed the acquisition of certain assets of Spin Forge, LLC. Spin Forge,
located in El Segundo, California, is one of the country's leading manufacturers
of tactical missile motor cases and titanium pressure vessels for commercial
aerospace and defense industries.
The unaudited 1997 revenues for Spin Forge were approximately $6.5
million. The Spin Forge backlog at December 31, 1997 was approximately $14
million, of which an estimated $8 million is expected to ship in calendar year
1998. The Spin Forge assets were purchased with a combination of cash, DMC
common stock and the assumption of certain liabilities for a total purchase
price of approximately $3.86 million. The purchased assets do not include the
real property, which will be leased from Spin Forge, LLC with an option to
purchase at a future time. Spin Forge will operate at its current location as a
division of DMC.
"Bringing Spin Forge under the DMC umbrella will immediately benefit
shareholders in a number of ways," said Paul Lange, DMC's president and CEO.
"Spin Forge has solid, long-term
<PAGE>
contracts that extend into the year 2000. These orders result in an attractive
backlog of business in the aerospace and defense industries - markets DMC has
been looking to penetrate further." Lange continued, "Moreover, Spin Forge has
unique computer numerically controlled, large-diameter shear-forming
capabilities that are under-utilized and under-marketed, which we will seek to
support at once."
Lange also pointed out that Joseph Allwein, the president of Spin Forge,
has become the newest member of DMC's management team. Mr. Allwein has 20 years
of management and operating experience, most recently with various growth
companies and turnaround situations.
Except for the historical information contained herein, this news release
contains forward-looking statements that involve risks and uncertainties,
including, but not limited to, the timing and size of orders by major customers,
customer inventory levels, retention of key customers, shifts in product mix,
the availability and timing of potential future acquisitions, the occurrence of
acquisition-related costs, general economic conditions as they affect the
Company's key customers, as well as the other risks detailed from time to time
in the Company's SEC reports, including the report on Form 10-KSB for the year
ended December 31, 1996.
Based in Lafayette, Colorado, Dynamic Materials Corporation is an
established leader in the use of high energy metal working, producing explosion
bonded clad metal plates and a variety of metal fabrications for commercial
aircraft, aerospace and defense industries.
FOR MORE INFORMATION ON DYNAMIC MATERIALS CORPORATION
VISIT THE COMPANY'S WEB SITE AT WWW.DYNAMICMATERIALS.COM
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