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.

                                        1
<PAGE>

     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

                                        2
<PAGE>

          (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;

                                        3
<PAGE>

               (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.

                                        4
<PAGE>

     (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

                                        5
<PAGE>

          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.

                                        6
<PAGE>

     (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
           700 Fifth Avenue, 53rd Floor
           Mailstop:WA 31-01-5360
           Seattle, WA 98104
           Fax Number: 206-684-6238

           and a copy to:

           H. Daniel Willetts
           KeyBank National Association
           3300 East First Avenue, Second Floor
           Denver, Colorado 80206
           Fax Number: 303-316-2310

     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.

                                        7
<PAGE>

     (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.

                                        8
<PAGE>

     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. Daniel Willetts
                                               ---------------------------------
                                      Name:    H. Daniel Willetts
                                      Title:   Vice President


                                      BORROWER:

                                      DYNAMIC MATERIALS CORPORATION

                                      By:      /s/ Richard A. Santa
                                               ---------------------------------
                                      Name:    Richard A. Santa
                                      Title:   VP Finance and Chief Financial
                                               Officer

                                        9
<PAGE>

                                    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
<PAGE>

                                    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
<PAGE>

     "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 3300 East First  Avenue,  Second  Floor,
Denver, Colorado 80206, Attention: H. Daniel Willetts.

     "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
E. I. duPont 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 Dunbar,
Pennsylvania.

                                       B-2
<PAGE>

     "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
<PAGE>

     (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,

                                       B-4
<PAGE>

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.

                                       B-5
<PAGE>

                                    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

                                       C-1
<PAGE>

               (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 3300 East First  Avenue,  Second  Floor,
Denver, Colorado 80206, Attention: H. Daniel Willetts.

     "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.

                                       C-2
<PAGE>

          (g)  Notwithstanding  the foregoing,  the Collateral shall not include
               that  certain  sublease  (the  "Sublease")  dated July 22,  1996,
               between the Company  and E. I. duPont 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 Dunbar, 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:

                                       C-3
<PAGE>

          (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

                                       C-4
<PAGE>

               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.

                                       C-5
<PAGE>

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;

                                       C-6
<PAGE>

          (e)  Company's Location is 551 Aspen Ridge Drive, Lafayette, Colorado,
               80026.

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;

                                       C-7
<PAGE>

          (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;

                                       C-8
<PAGE>

          (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

                                       C-9
<PAGE>

                    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

                                      C-10
<PAGE>

               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.

                                      C-11
<PAGE>

               (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

                                      C-12
<PAGE>

               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.

                                      C-13
<PAGE>

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.

                                      C-14
<PAGE>

          (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

                                      C-15
<PAGE>

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

                                      C-16
<PAGE>

               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.

                                      C-17
<PAGE>

     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:   ___________________________________

                                      C-18
<PAGE>

                                    EXHIBIT A

                              PROPERTY DESCRIPTION


                                    Attached


                                      C-19
<PAGE>

                                    EXHIBIT B

                                 COLLATERAL LIST


                                    Attached


                                      C-20
<PAGE>

                                    EXHIBIT C

                             PERMITTED ENCUMBRANCES


     The Permitted  Encumbrances are as defined in the  Reimbursement  Agreement
described in this Security Agreement.


                                      C-21
<PAGE>

                                    EXHIBIT D

                              INTELLECTUAL PROPERTY


                                    Attached


                                      C-22