FIRST AMENDMENT TO REIMBURSEMENT AGREEMENT
THIS FIRST AMENDMENT TO REIMBURSEMENT AGREEMENT (this "First Amendment"),
executed this 14th day of June, 2000, is by and between DYNAMIC MATERIALS
CORPORATION, a Delaware corporation ("Borrower") and KEYBANK NATIONAL
ASSOCIATION, a national banking association ("Bank").
R E C I T A L S:
A. On September 1, 1998, the Borrower and the Bank entered into that
certain Reimbursement Agreement (the "Agreement") pursuant to which the Bank
agreed to issue a letter of credit in favor of the Trustee (defined therein) in
an amount not to exceed $6,997,135.00 to secure payment of certain Fayette
County Industrial Development Authority Multi-Mode Variable Rate Industrial
Development Revenue Bonds, Series 1998 (Dynamic Materials Corporation Project)
in the aggregate principal amount of $6,850,000 (the "Bonds").
B. In addition to the Agreement, the Borrower and the Bank entered into the
Credit Facility Agreements (as defined in the Reimbursement Agreement), which
Credit Facility Agreements were amended by that certain Amended and Restated
Credit Facility and Security Agreement dated as of November 30, 1998 which, as
amended by that certain First Amendment to Amended and Restated Credit Facility
and Security Agreement (the "First Amendment") dated December 31, 1998, provided
for loans up to Fourteen Million Dollars ($14,000,000) (the "Credit Facility
Loans"). The obligations of Borrower pursuant to the Agreement are
cross-collateralized and cross-defaulted with the obligations of Borrower
pursuant to the Credit Facility Loans.
C. On or about January 20, 2000, the Borrower and SNPE, Inc., a Delaware
corporation ("SNPE"), entered into a Stock Purchase Agreement (the "Stock
Purchase Agreement"), pursuant to which SNPE will purchase (i) approximately
2,100,000 shares of the stock of the Company for approximately Five Million
Eight Hundred Thousand Dollars ($5,800,000), resulting in SNPE having a fifty
and eight-tenths percent (50.8%) ownership interest in the Company and (ii) a
One Million Two Hundred Thousand Dollar ($1,200,000) subordinated note
convertible into Company stock (collectively, the "Acquisition").
D. The Borrower has agreed to use the majority of the proceeds from the
Acquisition, together with such other loan proceeds in an amount not to exceed
$3,500,000 from SNPE to the Borrower (the "SNPE Intercompany Debt"), which
amount may be increased to not more than $4,500,000 upon the written request of
Borrower to SNPE and subject to the terms and conditions set forth in the Credit
Facility and Security Agreement evidencing the SNPE Intercompany Debt dated as
of the date hereof, to pay in full the Credit Facility Loans and in connection
therewith, the Bank has agreed to release and/or modify certain of the
collateral securing such Credit Facility Loans, provided that certain of the
covenants and conditions set forth in the Agreement are modified as set forth
herein.
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NOW, THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, the parties hereto covenant and agree as follows:
1. REIMBURSEMENT AGREEMENT AMENDMENT. The Agreement is hereby amended as
follows:
(i) A. The following definitions shall be added to Section 1.1 of the
Agreement:
"Bank Collateral" shall mean that certain collateral described in
Exhibit B of the First Amendment to Reimbursement Agreement.
"Convertible Subordinated Note" shall mean that certain note in the
aggregate principal amount of One Million Two Hundred Thousand Dollars
($1,200,000) executed by the Borrower in favor of SNPE, a copy of
which is attached to the Stock Purchase Agreement.
"Net Worth" shall mean the total assets of the Borrower less (i) the
Borrower's Total Indebtedness (exclusive of the then outstanding
principal balance of the Convertible Subordinated Note) and (ii) any
and all stock or other securities of any other Person acquired or
owned by the Borrower subsequent to the date hereof which is not
otherwise required by GAAP to be consolidated in Borrower's financial
statements and any and all loans to or the providing of funds or
credit to any other Person or any account receivables (other than
trade or other receivables in the ordinary course of business) from
any other Person subsequent to the date hereof which are not otherwise
required by GAAP to be consolidated in Borrower's financial
statements.
"Security Agreement" shall mean the Amended and Restated Security
Agreement between the Borrower and the Bank attached as Exhibit C of
the First Amendment to Reimbursement Agreement.
"Subordinated Debt" shall mean Indebtedness of a Person which is
subordinated, in a manner satisfactory to the Bank, to all
Indebtedness owing to the Bank, including, but not limited to, the
Convertible Subordinated Note, and to all other indebtedness which is
pari passu therewith or senior thereto.
"Tangible Net Worth" shall mean the total assets of the Borrower less
(i) the Borrower's Total Indebtedness (exclusive of the then
outstanding principal balance of the Convertible Subordinated Note),
(ii) the Borrower's aggregate amount of all intangible assets and
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(iii) any and all stock or other securities of any other Person
acquired or owned by the Borrower subsequent to the date hereof which
is not otherwise required by GAAP to be consolidated in Borrower's
financial statements and any and all loans to or the providing of
funds or credit to any other Person or any account receivables (other
than trade or other receivables in the ordinary course of business)
from any other Person subsequent to the date hereof which are not
otherwise required by GAAP to be consolidated in Borrower's financial
statements.
B. The definition of "Credit Facility Agreements" shall be of no
further effect in connection with the Reimbursement Agreement.
C. The following subsection (m) shall be added to the definition of
"Permitted Liens":
(m) Liens granted in favor of SNPE as of the date of the First
Amendment to Reimbursement Agreement which do not encumber any portion
of any of the Bank Collateral.
(ii) Section 2.5 of the Agreement shall be deleted in its entirety and the
parties acknowledge and agree that the Letter of Credit shall expire on
September 22, 2001, without further extension.
(iii) The fifteen (15) day period set forth in Section 6.1(a) of the
Agreement shall be replaced with thirty (30) days.
(iv) The reference to an "unqualified opinion" in Section 6.1(b) of the
Agreement shall be modified to an "opinion".
(v) Sections 6.1(c) and (d) of the Agreement shall be deleted in their
entirety and replaced with the following:
(c) promptly after the filing thereof, copies of the state and
federal tax returns of the Borrower and all schedules thereto;
(d) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower shall have
sent to its stockholders, and promptly after the sending or filing
thereof, copies of all regular and periodic reports which the Borrower
shall file with the Securities and Exchange Commission or any national
securities exchange;
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(e) As soon as practicable, and in any event within thirty (30)
days of the end of each calendar month in each year, a certificate by
the Borrower and all relevant facts in reasonable detail to evidence,
and the computations as to, whether or not the Borrower is in
compliance with the financial covenants set forth in Sections 6.15,
6.18, 6.19 and 6.30 hereof; and
(f) With reasonable promptness, such other data and information
as from time to time may be reasonably requested by the Bank.
(vi) Section 6.8(b) of the Agreement shall be deleted in its entirety and
replaced with the following:
(b) Shall deliver promptly to the Bank copies of any documents of
a material nature, excluding such documents transmitted in the
ordinary course of Borrower's business, which are: (i) received from
the United States Environmental Protection Agency or any state, county
or municipal environment or health agency, and (ii) submitted by
Borrower or any of its Subsidiaries to the United States Environmental
Protection Agency or any state, county or municipal environment or
health agency concerning its operations.
(vii) Section 6.9 of the Agreement shall be deleted in its entirety and
replaced with the following:
Sale of Assets. The Borrower will not, directly or indirectly sell,
lease, transfer, or otherwise dispose of any plant or any
manufacturing facility or other assets which are included in the Bank
Collateral (as defined in Paragraph 2 below) (i) without receipt of
full and adequate consideration therefor, or (ii) involving amounts
exceeding $150,000 in any single transaction. The Borrower will not,
directly or indirectly sell, lease, transfer, or otherwise dispose of
any plant or any manufacturing facility or other assets which are not
included in the Bank Collateral and which involve amounts exceeding
$500,000 in any single transaction without fifteen (15) days' prior
written notification to the Bank. Any and all proceeds from any sale
or other disposition of assets which constitute Bank Collateral (which
assets involve amounts exceeding $150,000 in any single transaction
and are not replaced with assets of equal or greater value) shall be
applied, as directed by the Bank, in connection with the reimbursement
of any and all payments made by the Bank pursuant to the Letter of
Credit or the further securing of any outstanding amounts then owing
to the Bank pursuant to the Reimbursement Agreement.
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(viii) Section 6.10 of the Agreement shall be deleted and replaced in its
entirety with the following:
Liens. The Borrower will not, directly or indirectly, create, incur,
assume, or permit to exist any Lien with respect to any property or
asset of the Borrower (now owned or hereafter acquired) which is
included in the Bank Collateral, other than Permitted Liens. The
Borrower will not, directly or indirectly, create, incur, assume, or
permit to exist any Lien with respect to any property or asset of the
Borrower (now owned or hereafter acquired) which is not included in
the Bank Collateral, other than Permitted Liens, without fifteen (15)
days' prior written notification to the Bank.
(ix) Sections 6.11(c) and 6.11(g) of the Agreement shall be deleted and
replaced in their entirety with the following:
(c) Indebtedness which is secured only by a Permitted Lien or
which is secured only by property which is not included in the Bank
Collateral and then, in such event, Borrower shall only be required to
provide the Bank with fifteen (15) days' prior written notification of
such Indebtedness; and
(g) Other Indebtedness of the Borrower not covered under subparts
(a) through (f) of this Section 6.11 not exceeding $100,000 in the
aggregate outstanding at any time; and
(x) Section 6.12 of the Agreement shall be deleted and replaced in its
entirety with following:
Investments; Loans. Except for Permitted Investments, the Borrower
will not, directly or indirectly, (a) purchase or otherwise acquire or
own any stock or other securities of any other Person, or (b) make or
permit to be outstanding any loan or advance (other than trade
advances in the ordinary course of business) or enter into any
arrangement to provide funds or credit, to any other Person without
fifteen (15) days' prior written notification to the Bank.
(xi) Section 6.13 of the Agreement shall be deleted and replaced in its
entirety with the following:
Guaranties. The Borrower will not guarantee, directly or indirectly,
or otherwise become surety (including, without limitation, liability
by way of agreement, contingent or otherwise, to purchase, to provide
funds for payment, to supply funds to, or otherwise invest in, any
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Person, or enter into any working capital maintenance or similar
agreement) in respect of any obligation or Indebtedness of any other
Person, except guaranties by endorsement of negotiable instruments for
deposit, collection, or similar transactions in the ordinary course of
business, without fifteen (15) days' prior written notification to the
Bank; provided, however, that any such guaranties shall be included in
the calculation of Indebtedness of the Borrower in connection with any
financial covenants of the Borrower set forth in Section 6 of this
Agreement.
(xii) Section 6.15 of the Agreement shall be deleted and replaced in its
entirety with the following:
Current Ratio. On the last day of each month during the term of this
Agreement (commencing June 30, 2000), the Borrower will have a ratio
of Current Assets to Current Liabilities that is not less than 1.85 to
1.00. For purposes of calculating the Current Ratio set forth herein,
the SNPE Intercompany Debt will not be included as a Current Liability
of Borrower.
(xiii) Section 6.16 of the Agreement shall be deleted in its entirety.
(xiv) Section 6.17 of the Agreement shall be deleted in its entirety and
replaced with the following:
Subordinated Debt. The Borrower will not make any payment upon any
outstanding Subordinated Debt, except in such manner and amounts as
may be expressly authorized in any subordination agreement presently
or hereafter held by the Bank or as expressly set forth in the
Convertible Subordinated Note.
(xv) Section 6.18 of the Agreement shall be deleted and replaced in its
entirety with the following:
Ratio of Total Indebtedness to Tangible Net Worth. The ratio of
Borrower's Total Indebtedness to Tangible Net Worth, as measured on
the last day of each month (commencing June 30, 2000), shall not
exceed a ratio of 3.0 to 1.00.
(xvi) A new Section 6.30 shall be added to the Agreement as follows:
Section 6.30. Minimum Net Worth. Borrower's Net Worth at any time
during the term of this Agreement shall not be less than $12,500,000,
as measured on the last day of each month.
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(xvii) A new Section 7.1(j) shall be added as an Event of Default under the
Agreement as follows:
(j) If Borrower fails to perform or observe any covenant or agreement
contained in the Stock Purchase Agreement or the Acquisition does not
close on or before June 30, 2000.
(xviii) The Bank's address for notices as set forth in Section 9.6 of the
Agreement shall be modified as follows:
KeyBank National Association
International Division
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ Floor
Mailstop:WA 31-01-5360
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax Number: ▇▇▇-▇▇▇-▇▇▇▇
and a copy to:
H. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
KeyBank National Association
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax Number: ▇▇▇-▇▇▇-▇▇▇▇
2. CONDITIONS. The amendments set forth in Paragraph 1 shall be of no
effect unless and until the following conditions have been satisfied:
(i) On the closing date of the Acquisition, the Bank shall have received
from Borrower, by wire transfer to an account directed by the Bank, funds in an
amount sufficient to satisfy the entire outstanding indebtedness owing to the
Bank in connection with the Credit Facility Loans (the "Payoff Amount"). The
Bank shall also have received the written opinion of legal counsel for the
Borrower, dated the date of this Agreement, in form satisfactory to the Bank and
covering such matters as the Bank may reasonably require.
(ii) Within twenty (20) days following the Bank's receipt of the Payoff
Amount, the Bank and/or the Borrower, as applicable, will execute the following:
(1) UCC financing statements amending the collateral description set forth in
the existing UCC-1 financing statements filed by Borrower in favor of the Bank
in the state and county offices referenced in Exhibit A attached hereto to the
collateral description set forth in Exhibit B attached hereto (the "Bank
Collateral") and (2) the Amended and Restated Security Agreement in the form
attached hereto as Exhibit C. Such UCC amendments referenced in this
subparagraph (ii) shall be filed and /or recorded by Borrower with the
appropriate county clerk and recorder/secretary of state offices, at Borrower's
sole cost and expense.
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(iii) The Bank shall have received evidence satisfactory to the Bank (1)
that the execution, delivery and performance of the documents and actions
contemplated by this First Amendment have been duly authorized by all requisite
corporate action of the Borrower, (2) that the Acquisition has closed and/or the
proceeds of the SNPE Intercompany Debt have been funded and delivered to the
Borrower and (3) as to such other matters as the Bank may reasonably require.
3. DOCUMENT RATIFICATION. Subject to the amendments set forth in Paragraph
1, all of the terms and conditions contained in the Agreement shall remain
unmodified and in full force and effect.
4. RELEASE. Except as specifically set forth herein, the execution of this
First Amendment by the Bank does not and shall not constitute a waiver of any
rights or remedies to which the Bank is entitled pursuant to the Agreement, nor
shall the same constitute a waiver of any default now existing or which may
occur in the future with respect to the Agreement. The Borrower hereby agrees
that the Bank has fully performed its obligations pursuant to the Agreement
through the date hereof and hereby waives, releases and relinquishes any and all
known claims whatsoever that it may have against the Bank with respect to the
Agreement through the date hereof.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER. The Borrower
represents, warrants and covenants to the Bank:
(a) No default or event of default under the Agreement as modified herein,
nor any event, that, with the giving of notice or the passage of time or both,
would be a default or an event of default under the Agreement as modified herein
has occurred and is continuing.
(b) There has been no material adverse change in the financial condition of
the Borrower or any other person whose financial statement has been delivered to
the Bank in connection with the Agreement from the most recent financial
statement received by the Bank.
(c) Each and all representations and warranties of the Borrower in the
Agreement are accurate on the date hereof, except for those items which the Bank
has been notified of in writing or provided by the Borrower as of the date
hereof.
(d) The Borrower has no known claims, counterclaims, defenses, or set-offs
with respect to the Agreement as modified herein.
(e) The Agreement as modified herein is the legal, valid, and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms.
(f) The Borrower shall execute, deliver, and provide to the Bank such
additional agreements, documents, and instruments as may be reasonably required
by the Bank to effectuate the intent of this Agreement and shall pay all of the
Bank's fees and expenses relating to this Agreement, including, without
limitation, any recording and filing fees and the Bank's reasonable legal
expenses incurred in connection with this Agreement.
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6. CONTROLLING LAW. The terms and provisions of this First Amendment shall
be construed in accordance with and governed by the laws of the State of
Colorado.
7. BINDING EFFECT. This First Amendment shall be binding upon and inure to
the benefit of the parties hereto, their successors and assigns.
8. CAPTIONS. The paragraph captions utilized herein are in no way intended
to interpret or limit the terms and conditions hereof, rather, they are intended
for purposes of convenience only.
9. COUNTERPARTS. This First Amendment may be executed in any number of
counterparts, each of which shall be effective only upon delivery and thereafter
shall be deemed an original, and all of which shall be taken to be one and the
same instrument, for the same effect as if all parties hereto had signed the
same signature page. Any signature page of this First Amendment may be detached
from any counterpart of this First Amendment without impairing the legal effect
of any signatures thereon and may be attached to another counterpart of this
First Amendment identical in form hereto but having attached to it one or more
additional signature pages.
10. DEFINED TERMS. Capitalized terms not defined herein shall have the same
meaning as set forth in the Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
as of the day and year first above written.
BANK:
KEY BANK NATIONAL ASSOCIATION
By: /s/ H. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
Name: H. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
BORROWER:
DYNAMIC MATERIALS CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. Santa
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. Santa
Title: VP Finance and Chief Financial
Officer
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EXHIBIT A
UCC FILING OFFICES
1. Colorado Secretary of State
2. Colorado County Filings:
Arapahoe
Boulder
3. California Secretary of State
4. California County Filings:
Los Angeles
5. Connecticut Secretary of State
6. Connecticut County Filings:
South Windsor
7. Pennsylvania Secretary of Commonwealth
8. Pennsylvania County Filings:
Fayette County
A-1
EXHIBIT B
FORM AMENDED COLLATERAL DESCRIPTION
All of Debtor's right, title and interest in the Collateral (as hereinafter
defined) located on or used in connection with the real property described on
Exhibit A attached hereto and made a part hereof for all purposes (the
"Property"), or otherwise used in connection with or arising from the business
and operations of the Bonding Division, whether now owned or hereafter acquired
or received by the Debtor, or in which the Debtor now has or hereafter may
acquire any right, title or interest:
DEFINITIONS
"Account," "Chattel Paper," "Consumer Goods," "Deposit Account,"
"Document," "Farm Products," "General Intangible," "Goods," "Instrument," and
"Proceeds," have the meanings as set forth in the Uniform Commercial Code in
effect in the State of Colorado, including any amendments thereof and any
substitutions therefor, which definitions are hereby incorporated by reference
as though fully rewritten herein. "Investment Property," "Securities Account,"
"Securities Intermediary" and "Financial Assets" have the meanings as set forth
in the Uniform Commercial Code in effect in the State of Colorado, including any
amendments thereof and any substitutions therefor, which definitions are hereby
incorporated by reference as though fully rewritten herein.
"Account Control Agreement" means an Account Control Agreement as defined
in Subsection 7(a) of the Security Agreement.
"Account Debtor" means the Person who is obligated on an Account
Receivable.
"Accounts Receivable" means:
(a) any account receivable, Account, Chattel Paper, General Intangible,
Document, or Instrument owned, acquired or received by a Person,
(b) any other indebtedness owed to or receivable owned, acquired or
received by a Person of whatever kind and however evidenced, and
(c) any right, title and interest in a Person's Goods which were sold,
leased or furnished by that Person and gave rise to either (a) or (b) above, or
both of them. This includes, without limitation,
(1) any rights of stoppage in transit of a Person's sold, leased or
furnished Goods,
(2) any rights to reclaim a Person's sold, leased or furnished Goods,
and
(3) any rights a Person has in such sold, leased or furnished Goods
that have been returned to or repossessed by that Person.
B-1
"Accounts Receivable Collection Account" means a commercial Deposit Account
which may be maintained by Company with Bank in the name of the Bank, without
liability by Bank to pay interest thereon, from which account Bank shall have
the exclusive right to withdraw funds until all Obligations are paid, performed
and observed in full.
"Bank" means KEYBANK NATIONAL ASSOCIATION, a national banking association,
whose principal office is located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: H. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
"Bonding Division" means the business unit of the Debtor engaged in the
manufacture of explosion bonded clad metal products primarily for the
petrochemical and chemical processing industries referred to as the "Explosive
Metal Working Group", "Explosive Manufacturing", "Metal Cladding", or "Shock
Synthesis" in the Debtor's annual report on form 10-K filed on March 30, 2000
for the period ended December 31, 1999.
"Collateral" means:
(a) all of Company's Accounts Receivable, whether now owned or hereafter
acquired or received by Company;
(b) all of Company's Inventory, whether now owned or hereafter acquired by
Company;
(c) all of Company's Equipment, whether now owned or hereafter acquired by
Company, including, without limitation, the property of the Debtor set forth on
Exhibit B attached hereto;
(d) all of Company's General Intangibles and other personal property and
rights, whether now owned or hereafter acquired by Company, including but not
limited to trademarks, tradenames, patents, copyrights, tax refunds, choses in
action and contract rights;
(e) all of Company's Investment Collateral, each Securities Account,
including without limitation the account named in the Account Control Agreement
and all Financial Assets of the Company; and
(f) all of the Proceeds, products, profits and rents of Company's Accounts
Receivable, Inventory, Equipment, Investment Collateral and General Intangibles
and all books and records, including computer software used in connection with
any of the Collateral.
Notwithstanding the foregoing, the Collateral shall not include that
certain sublease (the "Sublease") dated July 22, 1996, between the Company and
▇. ▇. ▇▇▇▇▇▇ de Nemours ("DuPont") and those assets located on the property
covered by the Sublease used directly in connection with the services provided
by the Company to DuPont under that certain Tolling/Services Agreement for
Industrial Diamonds dated July 22, 1996 (as assigned from DuPont to Mypodiamond,
Inc.), all of which assets are located at the Company's facility in ▇▇▇▇▇▇,
Pennsylvania.
B-2
"Company" means DYNAMIC MATERIALS CORPORATION, an organized and existing
company under the laws of the State of Delaware.
"Company's Location" means the location of:
(a) Company's place of business, if there is only one such place of
business, or
(b) if there is more than one place of business, the place (1) from which
Company manages the main part of its business operations, and (2) where Persons
dealing with Company would normally look for credit information.
"Equipment" means:
(a) any equipment and fixtures, including without limitation, machinery,
office furniture and furnishings, tools, dies, jigs and any warranty and other
claims against the vendor or supplier of such equipment,
(b) all Goods that are used or bought for use primarily in a Person's
business,
(c) all Goods that are not Consumer Goods, Farm Products, or Inventory, and
(d) all substitutes or replacements for, and all parts, accessories,
additions, attachments, or accessions to the foregoing.
"Event of Default" means the occurrence of any of the events set forth in
Section 8 of the Security Agreement.
"General Intangibles" means all general intangibles as set forth in the
Uniform Commercial Code in effect in the State of Colorado, whether now existing
or hereafter arising, including, without limitation, all contract rights, rights
of the Company with respect to pledges made to the Company by third parties, all
trademarks, copyrights, patents and other intellectual property rights as set
forth on Exhibit C attached hereto.
"Inventory" means:
(a) any inventory,
(b) all Goods that are raw materials,
(c) all Goods that are work in process,
(d) all Goods that are materials used or consumed in the ordinary course of
a Person's business,
B-3
(e) all Goods that are in the ordinary course of a Person's business, held
for sale or lease or furnished or to be furnished under contracts of service,
and
(f) all substitutes and replacements for, and parts, accessories,
additions, attachments, or accessions to (a) to (e) above.
"Investment Collateral" means, in connection with the Bonds and the Bond
Documents, as defined in the Reimbursement Agreement described in the Security
Agreement (i) any free credit balance or other money, now or hereafter credited
to, or owing from any Securities Intermediary to the Company, (ii) any commodity
contracts, securities (certificated or uncertificated), Instruments, Documents,
Financial Assets or other Investment Property distributed from any Securities
Account now or in the future, (iii) all the proceeds of the sale, exchange,
redemption or exercise of any of the foregoing, including, but not limited to,
any dividend, interest payment or other distribution of cash or property in
respect of any of the foregoing, (iv) any rights incidental to the ownership of
any of the foregoing, such as voting, conversion and registration rights and
rights of recovery for violation of applicable securities laws and (v) all books
and records relating to any of the foregoing.
"Obligations" means any of the following obligations, whether direct or
indirect, absolute or contingent, secured or unsecured, matured or unmatured,
originally contracted with Bank or another Person, and now or hereafter owing to
or acquired in any manner partially or totally by Bank or in which Bank may have
acquired a participation, contracted by Company alone or jointly or severally
with another Person:
(a) any and all indebtedness, obligations, liabilities, contracts,
indentures, agreements, warranties, covenants, guaranties, representations,
provisions, terms, and conditions of whatever kind, now existing or hereafter
arising, and however evidenced, that are now or hereafter owed, incurred, or
executed by Company to, in favor of, or with Bank and are set forth or contained
in, referred to, evidenced by, or executed with reference to, the Reimbursement
Agreement or the Security Agreement, and including any partial or total
extension, restatement, renewal, amendment, and substitution thereof or
therefor;
(b) any and all claims of whatever kind of Bank against Company, now
existing or hereafter arising, including, without limitation, any arising out of
or in any way connected with warranties made by Company to Bank in connection
with any Instrument deposited with or purchased by Bank;
(c) any and all of Bank's Related Expenses.
"Organization" and "Person" means, as applicable, any natural person,
corporation (which shall be deemed to include a business trust), association,
limited liability company, partnership, joint venture, political entity, or
political subdivision thereof.
"Reimbursement Agreement" means the Reimbursement Agreement dated as of
September 1, 1998, as amended by that certain First Amendment to Reimbursement
Agreement dated June 14,
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2000, executed by and between the Company and Bank, pursuant to which Bank
executed and delivered to Trustee (as defined in the Reimbursement Agreement) an
Irrevocable Transferable Letter of Credit in the original aggregate amount of
Six Million Nine Hundred Ninety-Seven Thousand One Hundred Thirty-Five Dollars
($6,997,135.00), and including any partial or total amendment, renewal,
restatement, extension, or substitution thereof or therefor.
"Related Expenses" means any and all costs, liabilities, and expenses
(including, without limitation, losses, damages, penalties, claims, actions,
reasonable attorney's fees, legal expenses, judgments, suits, and disbursements)
incurred by, imposed upon, or asserted against, Bank in any attempt by Bank:
(a) to obtain, preserve, perfect, or enforce the security interest
evidenced by (i) the Security Agreement, or (ii) any other pledge agreement,
mortgage deed, hypothecation agreement, guaranty, security agreement,
assignment, or security instrument executed or given by Company to or in favor
of Bank,
(b) to obtain payment, performance, and observance of any and all of the
Obligations,
(c) to maintain, insure, collect, preserve, or upon any Event of Default,
repossess and dispose of any of the Collateral, or
(d) incidental or related to (a) through (c) above, including, without
limitation, interest thereupon from the date incurred, imposed, or asserted
until paid at the rate payable pursuant to the Reimbursement Agreement, but in
no event greater than the highest rate permitted by law.
"Security Agreement" means the Amended and Restated Security Agreement
dated as of June 14, 2000 between Company and Bank, and including any partial or
total amendment, renewal, restatement, extension, or substitution of or for such
agreement.
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EXHIBIT C
AMENDED AND RESTATED SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT AMENDS AND REPLACES, IN ITS
ENTIRETY, THAT CERTAIN SECURITY AGREEMENT DATED SEPTEMBER 1, 1998 BETWEEN THE
COMPANY AND THE BANK.
As of this 14th day of June, 2000, Company and Bank (as herein defined), in
consideration of the premises and the covenants and agreements contained herein,
hereby mutually agree as follows:
1. DEFINITIONS
"Account," "Chattel Paper," "Consumer Goods," "Deposit Account,"
"Document," "Farm Products," "General Intangible," "Goods," "Instrument," and
"Proceeds," have the meanings as set forth in the Uniform Commercial Code in
effect in the State of Colorado, including any amendments thereof and any
substitutions therefor, which definitions are hereby incorporated by reference
as though fully rewritten herein. "Investment Property," "Securities Account,"
"Securities Intermediary" and "Financial Assets" have the meanings as set forth
in the Uniform Commercial Code in effect in the State of Colorado, including any
amendments thereof and any substitutions therefor, which definitions are hereby
incorporated by reference as though fully rewritten herein.
"Account Control Agreement" means an Account Control Agreement as defined
in Subsection 7(a).
"Account Debtor" means the Person who is obligated on an Account
Receivable.
"Accounts Receivable" means:
(a) any account receivable, Account, Chattel Paper, General
Intangible, Document, or Instrument owned, acquired or received
by a Person,
(b) any other indebtedness owed to or receivable owned, acquired or
received by a Person of whatever kind and however evidenced, and
(c) any right, title and interest in a Person's Goods which were
sold, leased or furnished by that Person and gave rise to either
(a) or (b) above, or both of them. This includes, without
limitation,
(1) any rights of stoppage in transit of a Person's sold, leased
or furnished Goods,
(2) any rights to reclaim a Person's sold, leased or furnished
Goods, and
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(3) any rights a Person has in such sold, leased or furnished
Goods that have been returned to or repossessed by that
Person.
"Accounts Receivable Collection Account" means a commercial Deposit Account
which may be maintained by Company with Bank in the name of the Bank, without
liability by Bank to pay interest thereon, from which account Bank shall have
the exclusive right to withdraw funds until all Obligations are paid, performed
and observed in full.
"Bank" means KEYBANK NATIONAL ASSOCIATION, a national banking association,
whose principal office is located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: H. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
"Bonding Division" means the business unit of the Debtor engaged in the
manufacture of explosion bonded clad metal products primarily for the
petrochemical and chemical processing industries referred to as the "Explosive
Metal Working Group", "Explosive Manufacturing", "Metal Cladding", or "Shock
Synthesis" in the Debtor's annual report on form 10-K filed on March 30, 2000
for the period ended December 31, 1999.
"Collateral" means:
(a) all of Company's Accounts Receivable, whether now owned or
hereafter acquired or received by Company;
(b) all of Company's Inventory, whether now owned or hereafter
acquired by Company;
(c) all of Company's Equipment, whether now owned or hereafter
acquired by Company, including, without limitation, the property
of the Debtor set forth on Exhibit B attached hereto;
(d) all of Company's General Intangibles and other personal property
and rights, whether now owned or hereafter acquired by Company,
including but not limited to trademarks, tradenames, patents,
copyrights, tax refunds, choses in action and contract rights;
(e) all of Company's Investment Collateral, each Securities Account,
including without limitation the account named in the Account
Control Agreement and all Financial Assets of the Company; and
(f) all of the Proceeds, products, profits and rents of Company's
Accounts Receivable, Inventory, Equipment, Investment Collateral
and General Intangibles and all books and records, including
computer software used in connection with any of the Collateral.
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(g) Notwithstanding the foregoing, the Collateral shall not include
that certain sublease (the "Sublease") dated July 22, 1996,
between the Company and ▇. ▇. ▇▇▇▇▇▇ de Nemours ("DuPont") and
those assets located on the property covered by the Sublease used
directly in connection with the services provided by the Company
to DuPont under that certain Tolling/Services Agreement for
Industrial Diamonds dated July 22, 1996 (as assigned from DuPont
to Mypodiamond, Inc.), all of which assets are located at the
Company's facility in ▇▇▇▇▇▇, Pennsylvania.
"Company" means DYNAMIC MATERIALS CORPORATION, an organized and existing
company under the laws of the State of Delaware.
"Company's Location" means the location of:
(a) Company's place of business, if there is only one such place of
business, or
(b) if there is more than one place of business, the place (1) from
which Company manages the main part of its business operations,
and (2) where Persons dealing with Company would normally look
for credit information.
"Equipment" means:
(a) any equipment and fixtures, including without limitation,
machinery, office furniture and furnishings, tools, dies, jigs
and any warranty and other claims against the vendor or supplier
of such equipment,
(b) all Goods that are used or bought for use primarily in a Person's
business,
(c) all Goods that are not Consumer Goods, Farm Products, or
Inventory, and
(d) all substitutes or replacements for, and all parts, accessories,
additions, attachments, or accessions to the foregoing.
"Event of Default" means the occurrence of any of the events set forth in
Section 8 of the Security Agreement.
"General Intangibles" means all general intangibles as set forth in the
Uniform Commercial Code in effect in the State of Colorado, whether now existing
or hereafter arising, including, without limitation, all contract rights, rights
of the Company with respect to pledges made to the Company by third parties, all
trademarks, copyrights, patents and other intellectual property rights as set
forth on Exhibit D attached hereto.
"Inventory" means:
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(a) any inventory,
(b) all Goods that are raw materials,
(c) all Goods that are work in process,
(d) all Goods that are materials used or consumed in the ordinary
course of a Person's business,
(e) all Goods that are in the ordinary course of a Person's business,
held for sale or lease or furnished or to be furnished under
contracts of service, and
(f) all substitutes and replacements for, and parts, accessories,
additions, attachments, or accessions to (a) to (e) above.
"Investment Collateral" means, in connection with the Bonds and the Bond
Documents, as defined in the Reimbursement Agreement described in this Security
Agreement (i) any free credit balance or other money, now or hereafter credited
to, or owing from any Securities Intermediary to the Company, (ii) any commodity
contracts, securities (certificated or uncertificated), Instruments, Documents,
Financial Assets or other Investment Property distributed from any Securities
Account now or in the future, (iii) all the proceeds of the sale, exchange,
redemption or exercise of any of the foregoing, including, but not limited to,
any dividend, interest payment or other distribution of cash or property in
respect of any of the foregoing, (iv) any rights incidental to the ownership of
any of the foregoing, such as voting, conversion and registration rights and
rights of recovery for violation of applicable securities laws and (v) all books
and records relating to any of the foregoing.
"Obligations" means any of the following obligations, whether direct or
indirect, absolute or contingent, secured or unsecured, matured or unmatured,
originally contracted with Bank or another Person, and now or hereafter owing to
or acquired in any manner partially or totally by Bank or in which Bank may have
acquired a participation, contracted by Company alone or jointly or severally
with another Person:
(a) any and all indebtedness, obligations, liabilities, contracts,
indentures, agreements, warranties, covenants, guaranties,
representations, provisions, terms, and conditions of whatever
kind, now existing or hereafter arising, and however evidenced,
that are now or hereafter owed, incurred, or executed by Company
to, in favor of, or with Bank and are set forth or contained in,
referred to, evidenced by, or executed with reference to, the
Reimbursement Agreement or the Security Agreement, and including
any partial or total extension, restatement, renewal, amendment,
and substitution thereof or therefor;
(b) any and all claims of whatever kind of Bank against Company, now
existing or hereafter arising, including, without limitation, any
arising out of or in any
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way connected with warranties made by Company to Bank in
connection with any Instrument deposited with or purchased by
Bank;
(c) any and all of Bank's Related Expenses.
"Organization" and "Person" means, as applicable, any natural person,
corporation (which shall be deemed to include a business trust), association,
limited liability company, partnership, joint venture, political entity, or
political subdivision thereof.
"Reimbursement Agreement" means the Reimbursement Agreement dated as of
September 1, 1998, as amended by that certain First Amendment to Reimbursement
Agreement dated June 14, 2000, executed by and between the Company and Bank,
pursuant to which Bank executed and delivered to Trustee (as defined in the
Reimbursement Agreement) an Irrevocable Transferable Letter of Credit in the
original aggregate amount of Six Million Nine Hundred Ninety-Seven Thousand One
Hundred Thirty-Five Dollars ($6,997,135.00), and including any partial or total
amendment, renewal, restatement, extension, or substitution thereof or therefor.
"Related Expenses" means any and all costs, liabilities, and expenses
(including, without limitation, losses, damages, penalties, claims, actions,
reasonable attorney's fees, legal expenses, judgments, suits, and disbursements)
incurred by, imposed upon, or asserted against, Bank in any attempt by Bank:
(a) to obtain, preserve, perfect, or enforce the security interest
evidenced by (i) the Security Agreement, or (ii) any other pledge
agreement, mortgage deed, hypothecation agreement, guaranty,
security agreement, assignment, or security instrument executed
or given by Company to or in favor of Bank,
(b) to obtain payment, performance, and observance of any and all of
the Obligations,
(c) to maintain, insure, collect, preserve, or upon any Event of
Default, repossess and dispose of any of the Collateral, or
(d) incidental or related to (a) through (c) above, including,
without limitation, interest thereupon from the date incurred,
imposed, or asserted until paid at the rate payable pursuant to
the Reimbursement Agreement, but in no event greater than the
highest rate permitted by law.
"Security Agreement" means this agreement between Company and Bank, and
including any partial or total amendment, renewal, restatement, extension, or
substitution of or for such agreement.
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2. SECURITY INTEREST IN COLLATERAL
In consideration of and as security for the full and complete payment,
performance, and observance of all Obligations, Company does hereby (a) grant to
Bank a security interest in the Collateral, located on or used in connection
with the real property described on Exhibit A attached hereto and made a part
hereof for all purposes (the "Property") or otherwise used in connection with or
arising from the business and operations of the Bonding Division, whether now
owned or hereafter acquired or received by the Debtor, or in which the Debtor
now has or hereafter may acquire any right, title or interest and (b) assign to
Bank all of its right, title, and interest (including, without limitation, all
rights to payment) arising under or with respect to all of Company's Accounts
Receivable, whether now owned or hereafter acquired or received by Company, but
not including any duty, obligation, or liability of Company with respect
thereto.
3. WARRANTIES
Company represents and warrants to Bank (which representations and
warranties shall survive the execution of the Reimbursement Agreement) that:
(a) The execution, delivery, and performance hereof are within
Company's corporate powers, have been duly authorized, and are
not in contravention of law or the terms of Company's Certificate
of Incorporation or Code of Regulations or of any indenture,
agreement, or undertaking to which Company is party or by which
it is or may be bound;
(b) Except for any security interest granted to or in favor of Bank
and those set forth on Exhibit C attached hereto, Company is, and
as to Collateral to be acquired after the date hereof will be,
the owner of the Collateral free from any claim, lien,
encumbrance, or security interest of any type, and Company agrees
that it will defend, at its sole expense, the Collateral against
all claims and demands of all Persons at any time claiming the
same or any interest therein;
(c) Subject to any limitation stated herein or in connection
herewith, all information furnished to Bank concerning Company or
the Collateral, is or will be at the time such information is
furnished, accurate and correct in all material respects and
complete insofar as is necessary to give Bank true and accurate
knowledge of the subject matter;
(d) Company is the lawful owner of and has full and unqualified right
to transfer a security interest in all of the Collateral to Bank.
Such Collateral is not and will not, so long as Company has any
Obligations to Bank, be subject to any financing statement,
encumbrance, claim, lien, or security interest of any type except
any granted to or in favor of Bank and except Permitted
Encumbrances as set forth on Exhibit C;
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(e) Company's Location is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇.
4. COVENANTS
Company undertakes, covenants, and agrees that, until the full and complete
payment, performance, and observance of all Obligations, Company:
(a) shall promptly provide Bank with prior written notification of:
(1) any change in any location where Company's Inventory or
Equipment is maintained, and any new locations where
Company's Inventory or Equipment is to be maintained,
(2) the location of any new places of business for the Bonding
Division and the changing or closing of any of its existing
places of business for the Bonding Division,
(3) any change in Company's name,
(4) any change in Company's Location,
(5) any material encumbrance upon or claim asserted against any
of the Collateral, and
(6) the occurrence of any event known to the Company, other than
changes in general market conditions adequately reported in
the general news media, that would have a material adverse
effect upon the aggregate value of the Collateral or upon
the security interest of the Bank;
(b) shall at all reasonable times and upon reasonable notice allow
Bank by or through any of its officers, agents, employees,
attorneys, or accountants to:
(1) examine, inspect, and make extracts from Company's books and
other records,
(2) examine and inspect Company's Inventory and Equipment
wherever located, and
(3) arrange for verification of Company's Accounts Receivable
and to specifically identify those Accounts Receivable of
the Company attributable to the Bonding Division, under
reasonable procedures, directly with Account Debtors or by
other methods;
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(c) shall promptly furnish to Bank upon request:
(1) additional information and statements with respect to the
Collateral,
(2) information relating to the Company's Instruments, Chattel
Paper, Documents, and any other writings relating to or
evidencing any of the Company's Accounts Receivable
(including, without limitation, computer printouts or
typewritten reports listing the current mailing address of
all present Account Debtors), and
(3) any other writings and information Bank may reasonably
request;
(d) shall upon request of Bank promptly take such action and promptly
make, execute, and deliver all such additional and further items,
deeds, assurances, and instruments as Bank may require,
including, without limitation, financing statements, so as to
completely vest in and ensure to Bank its rights hereunder and in
and to the Collateral;
(e) if any of Company's Accounts Receivable arise out of contracts
with or orders from the United States or any of its departments,
agencies, or instrumentalities, shall promptly notify Bank in
writing of same and shall execute any writing or take any action
required by Bank with reference to the Federal Assignment of
Claims Act;
(f) hereby authorizes Bank or Bank's designated agent (but without
obligation by Bank to do so) to incur Related Expenses (whether
prior to, upon, or subsequent to any Event of Default), and
Company shall promptly repay, reimburse, and indemnify Bank for
any and all Related Expenses;
(g) cause the Securities Intermediary to send to the Bank a complete
and accurate copy of every statement, confirmation, notice or
other communication concerning the Securities Account that the
Securities Intermediary sends to the Company;
(h) shall not grant any consensual or permit to exist any
non-consensual mortgage, encumbrance, security interest, or other
lien upon any Collateral except any granted to or in favor of
Bank and except Permitted Encumbrances;
(i) shall not sell, lease, transfer, assign, encumber or otherwise
dispose of any of the Collateral or withdraw any money or
property from any Securities Account, except as otherwise
expressly permitted herein;
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(j) shall neither attempt to modify nor attempt to terminate the
Account Control Agreement or the customer agreement with any
Securities Intermediary under which any Securities Account was
established;
(k) shall not permit material uninsured loss, damage, theft or
destruction of the Collateral, nor permit levy, seizure, or
attachment to, of, or upon any of the Collateral or any attempt
to accomplish the foregoing; and
(l) shall not use any Collateral in violation of any applicable
statute, ordinance, or regulation.
5. COLLECTIONS AND RECEIPT OF PROCEEDS
(a) Upon the occurrence and during the continuance of any Event of
Default, after written notification thereof to Company, Bank, or
Bank's designated agent, shall have the right and power (as
Company's hereby constituted and appointed attorney-in-fact),
which, being coupled with an interest, shall remain irrevocable
until all Obligations are fully and completely paid, performed,
and observed, at any time to:
(1) notify the Account Debtors on any or all of Company's
Accounts Receivable of the Bank's security interest in and
assignment of those Accounts Receivable upon which the
respective Account Debtors are liable, and to request from
such Account Debtors, in Bank's name or in Company's name,
information concerning the Accounts Receivable and amounts
owing thereon,
(2) notify purchasers of any or all of Company's Inventory of
Bank's security interest therein, and to request from such
Persons, at any time, in Bank's name or in Company's name,
information concerning Company's Inventory and the amounts
owing thereon by such purchasers,
(3) notify and require the Account Debtors on any or all of
Company's Accounts Receivable to make payment upon such
Accounts Receivable directly to Bank,
(4) notify and require purchasers of Company's Inventory to make
payment of their indebtedness directly to Bank,
(5) receive, retain, acquire, take, endorse, assign, deliver,
accept, and deposit, in Bank's name or Company's name, any
and all of Company's cash, Instruments, Chattel Paper,
Documents, Proceeds of Accounts Receivable, Proceeds of
Inventory, collections of
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Accounts Receivable, and any other writings relating to any
of the Collateral theretofore collected, received or
retained by Company pursuant to Subsection 5(b) below or
thereafter collected, received, or retained by Company,
(6) require Company to open and maintain an Accounts Receivable
Collection Account,
(7) cause all remittances representing all collections and all
Proceeds of Company's Accounts Receivable and Inventory to
be mailed to a lock box as designated by the Bank, to which
Bank shall have access for the processing of such items in
accordance with the provisions, terms, and conditions of
Bank's customary lock box agreement, and
(8) take such other action with respect to any or all of the
Collateral, in such manner and at such times, as Bank may
deem advisable, including, without limitation, the
following: collection, legal proceedings, compromises,
settlements, adjustments, extensions, postponements,
exchanges, releases, and sales.
Bank may, in its sole discretion, at any time and from time to
time, apply all or any portion of the collected balance in the
Accounts Receivable Collections Account (allowing two (2) days
for collection and clearance of remittances) as a credit against
Company's outstanding obligations. If any remittance shall be
dishonored, or if, upon final payment, any claim with respect
thereto shall be made against Bank on its warranties of
collection, Bank may charge the amount of such item against the
Accounts Receivable Collections Account or any other Deposit
Account maintained by Company with Bank, and, in any event,
retain same and Company's interest therein as additional security
for the Obligations. Bank may, in its sole discretion, at any
time and from time to time, release funds from the Accounts
Receivable Collections Account to Company for use in Company's
business. The balance in the Accounts Receivable Collections
Account may be withdrawn by Company upon termination of the
Security Agreement in accordance with Subsection 12(d).
(b) With respect to Company's Instruments, Documents, and Chattel
Paper, upon the occurrence and during the continuance of any
Event of Default, after written request from Bank, Company shall
immediately deliver or cause to be delivered to Bank all of
Company's Instruments, Chattel Paper, and Documents,
appropriately endorsed either, at Bank's option, (i) to Bank's
order, without limitation or qualification, or (ii) for deposit
in the Accounts Receivable Collection Account. Bank, or Bank's
designated agent, is hereby constituted and appointed Company's
attorney-in-fact with authority and power to so endorse any and
all Instruments, Documents, and Chattel Paper
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upon Company's failure to do so. Such authority and power, being
coupled with an interest, shall be (i) irrevocable until all
Obligations are paid, performed, and observed in full, (ii)
exercisable by Bank at any time and without any request upon
Company by Bank to so endorse, and (iii) exercisable in Bank's
name or Company's name. Company hereby waives presentment,
demand, notice of dishonor, protest, notice of protest, and any
and all other similar notices with respect thereto, regardless of
the form of any endorsement thereof. Bank shall not be bound or
obligated to take any action to preserve any rights in the
foregoing against any prior parties thereto.
(c) Except as otherwise provided in Subsections 5(a) or 5(b), Company
is authorized (1) to collect and enforce, by all lawful means,
all of Company's Accounts Receivable, and (2) to receive and
retain, by all lawful means, and use any and all Proceeds of all
of Company's Accounts Receivable and Inventory. The lawful
collection and enforcement of all of Company's Accounts
Receivable and the lawful receipt and retention by Company of all
Proceeds of all of Company's Accounts Receivable and Inventory
shall be as Bank's agent.
6. INSURANCE AND USE OF INVENTORY AND EQUIPMENT
(a) Until any Event of Default:
(1) Company may retain possession of and use its Equipment and
Inventory in any lawful manner not inconsistent with any
applicable terms, conditions, and provisions of:
(i) the Security Agreement,
(ii) the Reimbursement Agreement, and
(iii) any insurance policy thereon.
(2) Company may sell or lease its Inventory in the ordinary
course of business; provided, however, that a sale or lease
in the ordinary course of business does not include a
transfer in partial or total satisfaction of a debt, except
for transfers in satisfaction of partial or total purchase
money prepayments by a buyer in the ordinary course of
Company's business.
(3) Company may use and consume any raw materials or supplies,
the use and consumption of which are necessary in order to
carry on Company's business.
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(4) When the Company determines in good faith that any Equipment
shall have become inadequate, obsolete, worn-out,
unsuitable, undesirable or unnecessary or should otherwise
be replaced, the Company may remove such Equipment, provided
that the Company, in connection therewith:
(i) may remove, without substitution or payment, and
without the Bank's prior written consent, Equipment not
in excess of $150,000 annually in the aggregate; or
(ii) may substitute and install other Equipment having equal
or greater value (but not necessarily the same
function) in the operation of the Company's business.
(b) Company shall obtain, and at all times maintain, insurance upon
its Inventory and Equipment in such form, written by such
companies, in such amounts, for such period, and against such
risks as may be reasonably acceptable to Bank, with provisions
reasonably satisfactory to Bank for payment of all losses
thereunder to Bank and Company as their interests may appear
(loss payable endorsement in favor of Bank), and, if required by
Bank, Company will deposit the policies with Bank. Any such
policies of insurance shall provide for no less than ten (10)
days prior written cancellation notice to Bank. Any sums received
by Bank in payment of insurance losses, returns, or unearned
premiums under the policies may, at the option of Bank, be
applied upon any Obligation whether or not the same is then due
and payable, or may be delivered to Company for the purpose of
replacing, repairing, or restoring its Inventory or Equipment;
provided that if (i) no Event of Default exists under the
Reimbursement Agreement or any of the other Credit Documents (as
defined in the Reimbursement Agreement), (ii) the total cost of
repairing, replacing or restoring such Inventory and/or Equipment
does not exceed one- third of the appraised value of all the
Company's Inventory and Equipment, and (iii) the Company has
provided to the Bank's reasonable satisfaction evidence that such
replacement, repair or restoration can be accomplished at a cost
not greater than the insurance proceeds plus other funds readily
available to the Company, the Bank shall make the insurance
proceeds after deduction of the Bank's cost of collection of such
insurance proceeds, available to the Company for such
replacement, repair or restoration. Company hereby assigns to
Bank any return or unearned premium which may be due upon
cancellation of any such policies for any reason and directs the
insurers to pay Bank any amount so due. Subject to the existence
of the circumstances described in the proviso in the third
sentence of this Section 6(b), Bank, or Bank's designated agent,
is hereby constituted and appointed Company's attorney-in-fact
(either in the name of Company or in the name of the Bank) to
make adjustments of all insurance losses, sign all
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applications, receipts, releases, and other papers necessary for
the collection of any such loss, and any return of unearned
premium, execute proof of loss, make settlements, and endorse and
collect all Instruments payable to Company or issued in
connection therewith. Notwithstanding any action by Bank
hereunder, any and all risk of loss or damage to Company's
Inventory and Equipment to the extent of any and all deficiencies
in the effective insurance coverage thereof is hereby expressly
assumed by Company.
7. INVESTMENT COLLATERAL
(a) Prior to acquiring any Investment Collateral, the Company shall
have executed and delivered and caused the Securities
Intermediary to execute and deliver to the Bank an Account
Control Agreement in a form satisfactory to the Bank for the
purpose of perfecting the security interest of the Bank granted
by the Company herein.
(b) If no Event of Default has occurred, the Company may make trades
in the Securities Account and exercise any voting or consensual
rights that it may have as to any of the Investment Collateral
for any purpose which is not inconsistent with this Agreement or
the Reimbursement Agreement. If any Event of Default has
occurred, (i) the Company shall cease making trades in the
Securities Account, (ii) the Bank may exercise all voting or
consensual rights as to any of the Investment Collateral, (iii)
the Company shall deliver to the Bank all notices, proxy
statements, proxies and other information and instruments
relating to the exercise of such rights received by the Company
from the issuers of any Investment Collateral promptly upon the
receipt thereof and (iv) the Company shall, at the request of the
Bank, execute and deliver to the Bank any proxies or other
instruments which are, in the sole judgment of the Bank,
necessary for the Bank to validly exercise such voting and
consensual rights.
(c) The Company acknowledges that it has made or will make its own
arrangements for keeping informed of changes or potential changes
affecting the Investment Collateral (including, but not limited
to, conversions, subscriptions, exchanges, reorganizations,
dividends, tender offers, mergers, consolidations and shareholder
meetings). The Company agrees that the Bank has no responsibility
to inform the Company of such matters or to take any action with
respect thereto even if any of the Investment Collateral has been
registered in the name of the Bank or its agent or nominee.
(d) All items of income, gain, expense and loss recognized in the
Securities Account shall be reported to the Internal Revenue
Service and all state and local taxing authorities under the name
and taxpayer identification number of the Company.
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8. EVENTS OF DEFAULT
Upon the occurrence of any one or more of the following Events of Default,
any and all Obligations shall, at the option of Bank and notwithstanding any
period of time permitted or allowed by any writing evidencing an Obligation,
become immediately due and payable without notice, demand, protest, or
presentment, all of which are hereby expressly waived by Company:
(a) Subject to any applicable grace period, the occurrence of an
Event of Default under the terms of the Reimbursement Agreement;
(b) Failure of Company to perform or observe any covenant or
agreement contained in this Security Agreement and any Account
Control Agreement and any such failure continues for thirty (30)
days following notice of such failure by the Bank to the Company
or any representation or warranty made herein by Company is
incorrect or misleading in any material respect when made.
(c) Failure of Company to promptly pay, perform, or observe when due,
whether upon demand, at maturity, by acceleration, or otherwise,
any of the other Obligations.
9. RIGHTS AND REMEDIES UPON EVENT OF DEFAULT
(a) Upon the occurrence of any such Event of Default and at all times
thereafter, Bank shall have the rights and remedies of a secured
party under the Uniform Commercial Code in effect in the State of
Colorado in addition to the rights and remedies provided
elsewhere within the Security Agreement or in any other writing
executed by Company. Bank may require Company to assemble the
Collateral and make it available to Bank at a reasonably
convenient place to be designated by Bank. Unless the Collateral
is perishable, threatens to decline speedily in value, or is of a
type customarily sold on a recognized market, Bank will give
Company reasonable notice of the time and place of any public
sale of the Collateral or of the time after which any private
sale or other intended disposition thereof is to be made. The
requirement of reasonable notice shall be met if such notice is
mailed in accordance with Section 12(b) hereof, at least ten (10)
days before the time of the public sale or the time after which
any private sale or other intended disposition thereof is to be
made. At any such public or private sale, Bank may purchase the
Collateral. After deduction for Bank's Related Expenses, the
residue of any such sale shall be applied in satisfaction of the
Obligations in such order of preference as Bank may determine.
Any excess, to the extent permitted by law, shall be paid to
Company, and Company shall remain liable for any deficiency.
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(b) If any of the Investment Collateral is sold on credit or for
future delivery, it need not be retained by the Bank until the
purchase price is paid and the Bank shall incur no liability if
the purchaser fails to take up or pay for the Investment
Collateral. In the case of such failure, the Investment
Collateral may be sold again.
(c) The Company shall execute and deliver to the purchasers of any
Investment Collateral all instruments and other documents
necessary or proper to sell, convey and transfer title to such
Investment Collateral and, if approval of any sale of Investment
Collateral by any governmental body or officer is required, the
Company shall prepare or cooperate fully in the preparation of
and cause to be filed with such governmental body or officer all
necessary or property applications, reports and forms and do all
other things necessary or proper to expeditiously obtain such
approval.
10. APPOINTMENT OF BANK AS AGENT
The Company hereby appoints and constitutes Bank, its successors and
assigns, as its agent and attorney-in-fact for the purpose of carrying out the
provisions of this Agreement and taking any action or executing any instrument
that Bank considers necessary or convenient for such purpose, including the
power to endorse and deliver checks, notes and other instruments for the payment
of money in the name of and on behalf of Company, to endorse and deliver in the
name of and on behalf of the Company securities certificates and execute and
deliver in the name of and on behalf of the Company instructions to the issuers
of uncertificated securities, and to execute and file in the name of and on
behalf of the Company financing statements (which may be photocopies of this
Agreement) and continuations and amendments to financing statements in the State
of Colorado or elsewhere and Forms 4, 5, 144 and Schedules 13D and 13G with the
United States Securities and Exchange Commission. This appointment is coupled
with an interest and is irrevocable and will not be affected by the dissolution
or bankruptcy of the Company nor by the lapse of time. If the Company fails to
perform any act required by this Agreement, the Bank may perform such act in the
name of and on behalf of the Company and at its expense which shall be
chargeable to Company as provided herein and in the Reimbursement Agreement. The
Company hereby consents and agrees that the issuers of or obligors of the
Investment Collateral or any registrar or transfer agent or trustee for any of
the Investment Collateral shall be entitled to accept the provisions hereof as
conclusive evidence of the rights of the Bank to effect any transfer pursuant to
this Agreement and the authority granted to the Bank herein, notwithstanding any
other notice or direction to the contrary heretofore or hereafter given by the
Company, or any other person, to any of such issuers, obligors, registrars,
transfer agents, or trustees.
11. IMPACT OF REGULATION
The Company acknowledges that compliance with the Securities Act of 1933,
as amended, and the rules and regulations thereunder and any relevant state
securities laws and other applicable
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laws may impose limitations on the right of Bank to sell or otherwise dispose of
securities included in the Investment Collateral. For this reason, the Company
hereby authorizes the Bank to sell any securities included in the Investment
Collateral in such manner and to such persons as would, in the judgment of the
Bank, help to ensure that the transfer of such securities will be given prompt
and effective approval by any relevant regulatory authorities will not require
any of the securities to be registered or qualified under any applicable
securities laws. The Company understands that a sale under the foregoing
circumstances may yield a substantially lower price for such Investment
Collateral than would otherwise be obtainable if the same were registered and
sold in the open market, and the Company agrees that the Bank shall not be held
responsible for selling any of the Investment Collateral at an inadequate price
even if the Bank accepts the first offer received or if only one possible
purchaser appears or bids at any such sale. If the Bank shall sell any
securities included in the Investment Collateral at such sale, the Bank shall
have the right to rely upon the advice and opinion of any qualified appraiser or
investment banker as to the commercially reasonable price obtainable on the sale
thereof but shall not be obligated to obtain such advice or opinion. The Company
hereby assigns to the Bank any registration rights or similar rights the Company
may have from time to time with respect to any of the Investment Collateral.
12. GENERAL
(a) If any provisions of this Security Agreement, or any action taken
hereunder, or any application thereof, is for any reason held to
be illegal or invalid, such illegality or invalidity shall not
affect any other provision of this Security Agreement, each of
which shall be construed and enforced without reference to such
illegal or invalid portion and shall be. deemed to be effective
or taken in the manner and to the full extent permitted by law.
(b) Bank shall not be deemed to have waived any of Bank's rights
hereunder or under any other writing executed by Company unless
such waiver be in writing and signed by Bank. No delay or
omission on part of Bank in exercising any right shall operate as
a waiver of such right or any other right. A waiver on any one
occasion shall not be construed as a bar to or waiver of any
right or remedy on any future occasion. All Bank's rights and
remedies, whether evidenced hereby or by any other writing shall
be cumulative and may be exercised singularly or concurrently.
Any written demands, written requests, or written notices to
Company that Bank may elect to give shall be effective when
deposited for delivery, postage prepaid, by U.S. mail, and
addressed either, at Bank's option, to (1) Company's Location set
forth in Subsection 3(e) of this Security Agreement (as modified
by any change therein which Company has supplied in writing to
Bank) or (2) Company's address at which Bank customarily
communicates with Company. If at any time or times, by assignment
or otherwise, Bank transfers any of the Obligations or any part
of the Collateral to another person, such transfer shall carry
with it Bank's powers and rights under this Agreement with
respect to the obligation or Collateral so transferred and the
transferee shall have said powers and
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rights, whether or not they are specifically referred to in the
transfer. To the extent that Bank retains any other of the
Obligations or any part of the Collateral, Bank will continue to
have the rights and powers herein set forth with respect thereto.
(c) The laws of the State of Colorado, without regard to principles
of conflict of laws, shall govern the construction of this
Security Agreement (including, without limitation, any terms not
specifically defined in this Security Agreement that may be so
specifically defined pursuant to the Reimbursement Agreement
inclusive, and including any amendments thereof or any
substitution therefor) and the rights and duties of the parties
hereto. Company agrees that Bank may make a photocopy of this
Security Agreement in the ordinary course of business and such
photocopy may be used in place of the original of the Security
Agreement. A carbon, photographic or other reproduction of this
Security Agreement may be used as a financing statement. This
Security Agreement shall be binding upon and inure to the benefit
of Company and Bank and their respective successors and assigns.
The rights and powers herein given to the Bank are in addition to
those otherwise created or existing in the same Collateral by
virtue of other agreements or writings.
(d) The term of this Security Agreement shall commence with the date
hereof and shall continue until terminated by either Company or
Bank. Company may terminate this Security Agreement by giving
Bank not less than thirty (30) days prior written notice thereof
and by paying, performing, and observing all of the Obligations
in full on or before such termination date.
(e) In the Security Agreement, unless the context otherwise requires,
words in the singular number include the plural and words in the
plural number include the singular.
(f) Company hereby releases Bank from and agrees to indemnify and
hold harmless Bank, and its officers, agents, and employees for
any and all claims of Company or any other Person for damage or
loss caused by any act or acts hereunder or in furtherance hereof
whether by omission or commission, and whether based upon any
error of judgment or mistake of law or fact (except gross
negligence or willful misconduct) on the part of Bank, or its
officers, agents, and employees.
(g) Bank is hereby authorized to fill in all blank spaces herein, to
correct patent errors herein, to complete or correct the
description of the Collateral, and to date the Security
Agreement.
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COMPANY, TO THE EXTENT PERMITTED BY LAW, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY AND ALL RIGHTS TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN BANK AND COMPANY
ARISING OUR OF, IN CONNECTION WITH, RELATING TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THE SECURITY AGREEMENT
OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION THEREWITH OR TO TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT
IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY BANK'S ABILITY TO PURSUE
REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED
IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED AND DELIVERED BY
COMPANY TO BANK. COMPANY HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF
BANK NOR BANK'S COUNSEL HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT BANK WOULD
NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO
JURY TRIAL PROVISION. COMPANY ACKNOWLEDGES THAT BANK HAS BEEN INDUCED TO ENTER
INTO AND ACCEPT THIS SECURITY AGREEMENT, BY, INTER ALIA, THE PROVISIONS OF THIS
PARAGRAPH.
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Security Agreement to be executed on the day and year first above
written.
COMPANY: DYNAMIC MATERIALS CORPORATION
By: ___________________________________
Name: ___________________________________
Title: ___________________________________
BANK: KEYBANK NATIONAL ASSOCIATION
By: ___________________________________
Name: ___________________________________
Title: ___________________________________
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EXHIBIT A
PROPERTY DESCRIPTION
Attached
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EXHIBIT B
COLLATERAL LIST
Attached
C-20
EXHIBIT C
PERMITTED ENCUMBRANCES
The Permitted Encumbrances are as defined in the Reimbursement Agreement
described in this Security Agreement.
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EXHIBIT D
INTELLECTUAL PROPERTY
Attached
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