Document:

Exhibit 10.27

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                          CREDIT AND SECURITY AGREEMENT

                                 BY AND BETWEEN

                          DYNAMIC MATERIALS CORPORATION

                                       AND

                        WELLS FARGO BUSINESS CREDIT, INC.

                                December 4, 2001

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ARTICLE I......................................................................1

   Section 1.1   Definitions...................................................1

   Section 1.2   Other Definitional Terms; Rules of Interpretation............10

ARTICLE II....................................................................11

   Section 2.1   Revolving Advances...........................................11

   Section 2.2   Procedures for Requesting Revolving Advances.................11

   Section 2.3   Capital Adequacy.............................................12

   Section 2.4   Letters of Credit............................................13

   Section 2.5   Special Account..............................................13

   Section 2.6   Payment of Amounts Drawn Under Letters of Credit;
                 Obligation of Reimbursement..................................14

   Section 2.7   Obligations Absolute.........................................15

   Section 2.8   Interest; Minimum Interest Charge; Default Interest;
                 Clearance Days; Participations; Usury........................15

   Section 2.9   Fees.........................................................16

   Section 2.10  Time for Interest Payments; Payment on Non-Banking Days;
                 Computation of Interest and Fees.............................17

   Section 2.11  Lockbox; Collateral Account; Application of Payments.........18

   Section 2.12  Voluntary Prepayment; Reduction of the Maximum Line;
                 Termination of the Credit Facility by the Borrower...........19

   Section 2.13  Mandatory Prepayment.........................................19

   Section 2.14  Revolving Advances to Pay Obligations........................19

   Section 2.15  Use of Proceeds..............................................19

   Section 2.16  Liability Records............................................19

ARTICLE III...................................................................20

   Section 3.1   Grant of Security Interest...................................20

   Section 3.2   Notification of Account Debtors and Other Obligors...........20

   Section 3.3   Assignment of Insurance......................................20

   Section 3.4   Occupancy....................................................20

   Section 3.5   License......................................................21

   Section 3.6   Financing Statement..........................................21

   Section 3.7   Setoff.......................................................22

   Section 3.8   Collateral...................................................22

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ARTICLE IV....................................................................22

   Section 4.1   Conditions Precedent to the Initial Revolving Advance
                 and Letter of Credit.........................................22

   Section 4.2   Conditions Precedent to All Revolving Advances and
                 Letters of Credit............................................24

ARTICLE V.....................................................................25

   Section 5.1   Existence and Power; Name; Chief Executive Office;
                 Inventory and Equipment Locations; Federal Employer
                 Identification Number........................................25

   Section 5.2   Capitalization...............................................25

   Section 5.3   Authorization of Borrowing; No Conflict as to
                 Law or Agreements............................................25

   Section 5.4   Legal Agreements.............................................26

   Section 5.5   Subsidiaries.................................................26

   Section 5.6   Financial Condition; No Adverse Change.......................26

   Section 5.7   Litigation...................................................26

   Section 5.8   Regulation U.................................................26

   Section 5.9   Taxes........................................................26

   Section 5.10  Titles and Liens.............................................27

   Section 5.11  Intellectual Property Rights.................................27

   Section 5.12  Plans........................................................28

   Section 5.13  Default......................................................28

   Section 5.14  Environmental Matters........................................28

   Section 5.15  Submissions to Lender........................................29

   Section 5.16  Financing Statements.........................................29

   Section 5.17  Rights to Payment............................................30

ARTICLE VI....................................................................30

   Section 6.1   Reporting Requirements.......................................30

   Section 6.2   Financial Covenants..........................................34

   Section 6.3   Permitted Liens; Financing Statements........................35

   Section 6.4   Indebtedness.................................................36

   Section 6.5   Guaranties...................................................36

   Section 6.6   Investments and Subsidiaries.................................37

   Section 6.7   Dividends and Distributions..................................37

   Section 6.8   Salaries.....................................................37

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   Section 6.9   Books and Records; Inspection and Examination................37

   Section 6.10  Account Verification.........................................38

   Section 6.11  Compliance with Laws.........................................38

   Section 6.12  Payment of Taxes and Other Claims............................38

   Section 6.13  Maintenance of Properties....................................38

   Section 6.14  Insurance....................................................39

   Section 6.15  Preservation of Existence....................................39

   Section 6.16  Delivery of Instruments, etc.................................39

   Section 6.17  Sale or Transfer of Assets; Suspension of Business
                 Operations...................................................39

   Section 6.18  Consolidation and Merger; Asset Acquisitions.................40

   Section 6.19  Sale and Leaseback...........................................40

   Section 6.20  Restrictions on Nature of Business...........................40

   Section 6.21  Accounting...................................................40

   Section 6.22  Discounts, etc...............................................40

   Section 6.23  Plans........................................................40

   Section 6.24  Place of Business; Name......................................40

   Section 6.25  Constituent Documents; S Corporation Status..................41

   Section 6.26  Performance by the Lender....................................41

   Section 6.27  SNPE.........................................................41

ARTICLE VII...................................................................41

   Section 7.1   Events of Default............................................41

   Section 7.2   Rights and Remedies..........................................44

   Section 7.3   Certain Notices..............................................44

ARTICLE VIII..................................................................45

   Section 8.1   No Waiver; Cumulative Remedies; Compliance with Laws.........45

   Section 8.2   Amendments, Etc..............................................45

   Section 8.3   Addresses for Notices; Requests for Accounting...............45

   Section 8.4   Further Documents............................................46

   Section 8.5   Costs and Expenses...........................................46

   Section 8.6   Indemnity....................................................46

   Section 8.7   Participants.................................................47

   Section 8.8   Execution in Counterparts; Telefacsimile Execution...........47

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   Section 8.9   Retention of Borrower's Records..............................47

   Section 8.10  Binding Effect; Assignment; Complete Agreement;
                 Exchanging Information.......................................47

   Section 8.11  Severability of Provisions...................................48

   Section 8.12  Headings.....................................................48

   Section 8.13  Governing Law; Jurisdiction, Venue; Waiver of Jury Trial.....48

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                          CREDIT AND SECURITY AGREEMENT

                          Dated as of December 4, 2001

     DYNAMIC MATERIALS CORPORATION, a Delaware corporation (the "Borrower"), and
WELLS FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"),
hereby agree as follows:

                                   ARTICLE I

                                   DEFINITIONS

     Section 1.1 Definitions. For all purposes of this Agreement, except as
otherwise expressly provided, the following terms shall have the meanings
assigned to them in this Section or in the Section referenced after such term:

     "Accounts" means all of the Borrower's accounts, as such term is defined in
the UCC, generated by the Borrower's U.S. operations, including each and every
right of the Borrower to the payment of money, whether such right to payment now
exists or hereafter arises, whether such right to payment arises out of a sale,
lease or other disposition of goods or other property, out of a rendering of
services, out of a loan, out of the overpayment of taxes or other liabilities,
or otherwise arises under any contract or agreement, whether such right to
payment is created, generated or earned by the Borrower or by some other person
who subsequently transfers such person's interest to the Borrower, whether such
right to payment is or is not already earned by performance, and howsoever such
right to payment may be evidenced, together with all other rights and interests
(including all Liens) which the Borrower may at any time have by law or
agreement against any account debtor or other obligor obligated to make any such
payment or against any property of such account debtor or other obligor; all
including but not limited to all present and future accounts, contract rights,
loans and obligations receivable, chattel papers, bonds, notes and other debt
instruments, tax refunds and rights to payment in the nature of general
intangibles.

     "Affiliate" or "Affiliates" means any Person controlled by, controlling or
under common control with the Borrower, including any Subsidiary of the
Borrower. For purposes of this definition, "control," when used with respect to
any specified Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.

     "Agreement" means this Credit and Security Agreement.

     "Availability" means the difference of (i) the Borrowing Base and (ii) the
sum of (A) the outstanding principal balance of the Note plus (B) the L/C Amount
plus (C) any reserves imposed by the Lender in its sole discretion.

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     "Banking Day" means a day on which the Federal Reserve Bank of New York is
open for business.

     "Base Rate" means the rate of interest publicly announced from time to time
by Wells Fargo Bank National Association at its principal office in San
Francisco as its "prime rate", with the understanding that the "prime rate" is
one of Wells Fargo's base rates (not necessarily the lowest of such rates) and
serves as the basis upon which effective rates of interest are calculated for
loans making reference thereto.

     "Book Net Worth" means the aggregate of the common and preferred
shareholders' equity in the Borrower, excluding equity infusions after the date
hereof and the impact of any asset impairment expense, and otherwise determined
in accordance with GAAP.

     "Borrowing Base" means at any time the lesser of:

          (a)  the Maximum Line; or

          (b)  subject to change from time to time in the Lender's sole
     discretion, the sum of:

               (i)  80% of Eligible Accounts, plus

               (ii) the lesser of (A) 50% of Eligible Inventory or (B)
                    $2,000,000.

     "Capital Expenditures" means for a period, any expenditure of money during
such period for the lease, purchase or other acquisition of any capital asset.

     "Change of Control" means the occurrence of any of the following events:
any Person, other than SNPE, Inc., or "group" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934) is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934, except that a Person will be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than fifty percent (50%) of the voting power of
all classes of voting stock of the Borrower.

     "Collateral" means (A) all of the Borrower's Accounts and Inventory, (B)
all sums on deposit in any Collateral Account or in any other U.S. deposit
account, any items in any Lockbox and all sums on deposit in the Special
Account, (C) all of the following, acquired by the Borrower with respect to its
U.S. operations after the date hereof the purchase of which constitutes a
Capital Expenditure: all of the Borrower's chattel paper, documents, Equipment,
General Intangibles, goods, instruments and Investment Property and (D) all of
the following related to all of the foregoing: the Borrower's chattel paper,
deposit accounts, documents, Equipment, General Intangibles, goods, instruments,
Investment Property, letter-of-credit rights and letters of credit, together
with (i) all substitutions and replacements for and products of any of the
foregoing; (ii) in the case of all goods, all accessions; (iii) all accessories,
attachments, parts, equipment and repairs now or hereafter attached or affixed
to or used in connection with any goods; (iv) all warehouse receipts, bills of
lading and other documents of title now or

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hereafter covering such goods; (v) all collateral subject to the Lien of any
Security Document; (vi) any money, or other assets of the Borrower that now or
hereafter come into the possession, custody, or control of the Lender; and (vii)
proceeds of any and all of the foregoing.

     "Collateral Account" means the "Lender Account" as defined in the Lockbox
and Collection Account Agreement.

     "Commitment" means the Lender's commitment to make Revolving Advances to,
and to cause the Issuer to issue Letters of Credit for the account of, the
Borrower pursuant to Article II.

     "Constituent Documents" means with respect to any Person, as applicable,
such Person's certificate of incorporation, articles of incorporation or
by-laws.

     "Credit Facility" means the credit facility being made available to the
Borrower by the Lender under Article II.

     "Current Maturities of Long Term Debt" means as of a given date, the amount
of the Borrower's long-term debt and capitalized leases which became due and
were actually paid during the applicable period ending on the designated date.

     "Debt" means of a Person as of a given date, all items of indebtedness or
liability which in accordance with GAAP would be included in determining total
liabilities as shown on the liabilities side of a balance sheet for such Person
and shall also include the aggregate payments required to be made by such Person
at any time under any lease that is considered a capitalized lease under GAAP.

     "Debt Service Coverage Ratio" means the ratio of (i) the sum of (A) Funds
from Operations and (B) Interest Expense minus (C) unfinanced Capital
Expenditures to (ii) the sum of (A) Current Maturities of Long Term Debt and (B)
Interest Expense.

     "Default" means an event that, with giving of notice or passage of time or
both, would constitute an Event of Default.

     "Default Period" means any period of time beginning on the first day of any
month during which a Default or Event of Default has occurred and ending on the
date the Lender notifies the Borrower in writing that such Default or Event of
Default has been cured or waived.

     "Default Rate" means an annual interest rate equal to three percent (3%)
over the Floating Rate, which interest rate shall change when and as the
Floating Rate changes.

     "Director" means a director of the Borrower, if the Borrower is a
corporation, a governor of the Borrower, if the Borrower is a limited liability
company, or a partner of the Borrower, if the Borrower is a partnership.

     "ERISA" means the Employee Retirement Income Security Act of 1974.

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     "ERISA Affiliate" means any trade or business (whether or not incorporated)
that is a member of a group which includes the Borrower and which is treated as
a single employer under Section 414 of the IRC.

     "Eligible Accounts" means all unpaid Accounts arising from the sale or
lease of goods or the performance of services, net of any credits, but excluding
any such Accounts having any of the following characteristics:

          (i) That portion of Accounts unpaid 90 days or more after the invoice
     date;

          (ii) That portion of Accounts that is disputed or subject to a claim
     of offset or a contra account;

          (iii) That portion of Accounts not yet earned by the final delivery of
     goods or rendition of services, as applicable, by the Borrower to the
     customer, including progress billings, and that portion of Accounts for
     which an invoice has not been sent to the applicable account debtor;

          (iv) That portion of Accounts owed by account debtors located in the
     states of New Jersey, Minnesota, Indiana, or West Virginia (or any other
     state that requires a creditor to file a business activity report or
     similar document in order to bring suit or otherwise enforce its remedies
     against such account debtor in the courts or through any judicial process
     of such state), unless the Borrower has qualified to do business in such
     state, or has filed a notice of business activities report with the
     applicable division of taxation, the department of revenue, or with such
     other state offices, as appropriate, for the then-current year, or is
     exempt from such filing requirement;

          (v) Accounts constituting (i) proceeds of copyrightable material
     unless such copyrightable material shall have been registered with the
     United States Copyright Office, or (ii) proceeds of patentable inventions
     unless such patentable inventions have been registered with the United
     States Patent and Trademark Office;

          (vi) Accounts owed by any unit of government, whether foreign or
     domestic (provided, however, that there shall be included in Eligible
     Accounts that portion of Accounts owed by such units of government for
     which the Borrower has provided evidence satisfactory to the Lender that
     (A) the Lender has a first priority perfected security interest and (B)
     such Accounts may be enforced by the Lender directly against such unit of
     government under all applicable laws);

          (vii) Accounts owed by an account debtor located outside the United
     States which are not (A) backed by a bank letter of credit naming the
     Lender as beneficiary or assigned to the Lender, in the Lender's possession
     or control, and with respect to which a control agreement concerning the
     letter-of-credit rights is in effect, and acceptable to the Lender in all
     respects, in its sole discretion, or (B) covered by a foreign receivables
     insurance policy acceptable to the Lender in its sole discretion;

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          (viii) Accounts owed by an account debtor that is insolvent, the
     subject of bankruptcy proceedings or has gone out of business;

          (ix) Accounts owed by an Owner, Subsidiary, Affiliate, Officer or
     employee of the Borrower;

          (x) Accounts not subject to a duly perfected security interest in the
     Lender's favor or which are subject to any Lien in favor of any Person
     other than the Lender;

          (xi) That portion of Accounts that has been restructured, extended,
     amended or modified;

          (xii) That portion of Accounts that constitutes advertising, finance
     charges, service charges or sales or excise taxes;

          (xiii) That portion of the aggregate Accounts owed by a single account
     debtor that exceeds 15% of all Accounts of the Borrower;

          (xiv) Accounts owed by an account debtor, regardless of whether
     otherwise eligible, if 20% or more of the total amount due under Accounts
     from such debtor is ineligible under clauses (i), (ii) or (xi) above; and

          (xv) Accounts, or portions thereof, otherwise deemed ineligible by the
     Lender in its sole discretion.

     "Eligible Inventory" means all Inventory of the Borrower, at the lower of
cost or market value as determined in accordance with GAAP; but excluding any
Inventory having any of the following characteristics:

          (i) Inventory that is: in-transit; located at any warehouse, job site
     or other premises not approved by the Lender in writing; located in any
     location for which the financing statements filed by the Lender would be
     insufficient to perfect a first priority security interest in such
     Inventory; covered by any negotiable or non-negotiable warehouse receipt,
     bill of lading or other document of title; on consignment from any Person;
     on consignment to any Person or subject to any bailment unless such
     consignee or bailee has executed an agreement with the Lender;

          (ii) Supplies, packaging, maintenance parts or sample Inventory;

          (iii) That portion of the aggregate work-in-process Inventory
     consisting of non-material components of work-in-process Inventory that
     exceeds 45% of all work-in-process Inventory of the Borrower;

          (iv) Inventory that is damaged, obsolete, slow moving or not currently
     saleable in the normal course of the Borrower's operations;

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          (v) Inventory that the Borrower has returned, has attempted to return,
     is in the process of returning or intends to return to the vendor thereof;

          (vi) Inventory that is perishable or live;

          (vii) Inventory manufactured by the Borrower pursuant to a license
     unless the applicable licensor has agreed in writing to permit the Lender
     to exercise its rights and remedies against such Inventory;

          (viii) Inventory that is subject to a Lien in favor of any Person
     other than the Lender; and

          (ix) Inventory otherwise deemed ineligible by the Lender in its sole
     discretion.

     "Environmental Law" means any federal, state, local or other governmental
statute, regulation, law or ordinance dealing with the protection of human
health and the environment.

     "Equipment" means all of the Borrower's equipment, as such term is defined
in the UCC, held by its U.S. operations, whether now owned or hereafter
acquired, including but not limited to all present and future machinery,
vehicles, furniture, fixtures, manufacturing equipment, shop equipment, office
and recordkeeping equipment, parts, tools, supplies, and including specifically
the goods described in any equipment schedule or list herewith or hereafter
furnished to the Lender by the Borrower.

     "Event of Default" has the meaning specified in Section 7.1.

     "Financial Covenants" means the covenants set forth in Section 6.2.

     "Floating Rate" means, with respect to the Revolving Advances, an annual
interest rate equal to the sum of the Base Rate plus the Interest Rate Margin.

     "Funding Date" has the meaning specified in Section 2.1.

     "Funds From Operations" means for a given period, the sum of (i) Net Income
excluding extraordinary gains, (ii) depreciation and amortization, (iii)
deferred income taxes, and (iv) other non-cash items, each as determined for
such period in accordance with GAAP.

     "GAAP" means generally accepted accounting principles, applied on a basis
consistent with the accounting practices applied in the financial statements
described in Section 5.6.

     "General Intangibles" means all of the Borrower's general intangibles, as
such term is defined in the UCC, held by its U.S. operations, whether now owned
or hereafter acquired, including all present and future Intellectual Property
Rights, customer or supplier lists and contracts, manuals, operating
instructions, permits, franchises, the right to use the Borrower's name, and the
goodwill of the Borrower's business.

     "Guarantor(s)" means any Person hereafter guarantying the Obligations. On
the date hereof, there are no Guarantors.

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     "Hazardous Substances" means pollutants, contaminants, hazardous
substances, hazardous wastes, petroleum and fractions thereof, and all other
chemicals, wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.

     "IRC" means the Internal Revenue Code of 1986.

     "Infringe" when used with respect to Intellectual Property Rights means any
infringement or other violation of Intellectual Property Rights.

     "Intellectual Property Rights" means all actual or prospective rights
arising in connection with any intellectual property or other proprietary
rights, including all rights arising in connection with copyrights, patents,
service marks, trade dress, trade secrets, trademarks, trade names or mask
works.

     "Interest Expense" means for a fiscal year-to-date period, the Borrower's
total gross interest expense during such period (excluding interest income), and
shall in any event include (i) interest expensed (whether or not paid) on all
Debt, (ii) the amortization of debt discounts, (iii) the amortization of all
fees payable in connection with the incurrence of Debt to the extent included in
interest expense, and (iv) the portion of any capitalized lease obligation
allocable to interest expense.

     "Interest Rate Margin" means one percent (1.0%); provided, however, that if
(i) no Event of Default then exists, and (ii) the Borrower's audited financial
statements for the fiscal year ending December 31, 2001, demonstrate that the
Borrower's Net Income for such fiscal year equals or exceeds $2,150,000, the
Interest Rate Margin shall be reduced to one half of one percent (0.50%) as of
the first day of the month following the month such financial statements are
delivered to the Lender.

     "Inventory" means all of the Borrower's inventory, as such term is defined
in the UCC, held by its U.S. operations, whether now owned or hereafter
acquired, whether consisting of whole goods, spare parts or components, supplies
or materials, whether acquired, held or furnished for sale, for lease or under
service contracts or for manufacture or processing, and wherever located.

     "Investment Property" means all of the Borrower's investment property, as
such term is defined in the UCC, held by its U.S. operations, whether now owned
or hereafter acquired, including but not limited to all securities, security
entitlements, securities accounts, commodity contracts, commodity accounts,
stocks, bonds, mutual fund shares, money market shares and U.S. Government
securities.

     "Issuer" means the issuer of any Letter of Credit.

     "L/C Amount" means the sum of (i) the aggregate face amount of any issued
and outstanding Letters of Credit and (ii) the unpaid amount of the Obligation
of Reimbursement.

     "L/C Application" means an application and agreement for letters of credit
in a form acceptable to the Issuer and the Lender.

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     "Letter of Credit" has the meaning specified in Section 2.4.

     "Licensed Intellectual Property" has the meaning specified in Section
5.11(c).

     "Lien" means any security interest, mortgage, deed of trust, pledge, lien,
charge, encumbrance, title retention agreement or analogous instrument or
device, including the interest of each lessor under any capitalized lease and
the interest of any bondsman under any payment or performance bond, in, of or on
any assets or properties of a Person, whether now owned or hereafter acquired
and whether arising by agreement or operation of law.

     "Loan Documents" means this Agreement, the Note, the Security Documents and
any L/C Application.

     "Lockbox" means "Lockbox" as defined in the Lockbox and Collection Account
Agreement.

     "Lockbox and Collection Account Agreement" means the Lockbox and Collection
Account Agreement by and among the Borrower, Wells Fargo Bank West, Regulus
West, LLC and the Lender, of even date herewith.

     "Material Adverse Effect" means any of the following:

          (i) a material adverse effect on the business, operations, results of
     operations, prospects, assets, liabilities or financial condition of the
     Borrower;

          (ii) a material adverse effect on the ability of the Borrower to
     perform its obligations under the Loan Documents;

          (iii) a material adverse effect on the ability of the Lender to
     enforce the Obligations or to realize the intended benefits of the Security
     Documents, including a material adverse effect on the validity or
     enforceability of any Loan Document or of any rights against any Guarantor,
     or on the status, existence, perfection, priority (subject to Permitted
     Liens) or enforceability of any Lien securing payment or performance of the
     Obligations; or

          (iv) any claim against the Borrower or threat of litigation which if
     determined adversely to the Borrower would cause the Borrower to be liable
     to pay an amount exceeding $500,000 or would be an event described in
     clauses (i), (ii) and (iii) above.

     "Maturity Date" means December 4, 2004.

     "Maximum Line" means $6,000,000 unless said amount is reduced pursuant to
Section 2.12, in which event it means such lower amount.

     "Minimum Interest Charge" has the meaning given in Section 2.8(b).

     "Multiemployer Plan" means a multiemployer plan (as defined in Section
4001(a)(3) of ERISA) to which the Borrower or any ERISA Affiliate contributes or
is obligated to contribute.

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     "Net Income" means fiscal year-to-date after-tax net income from continuing
operations, excluding the impact of any asset impairment expense, and otherwise
as determined in accordance with GAAP.

     "Note" means the Borrower's revolving promissory note, payable to the order
of the Lender in substantially the form of Exhibit A hereto.

     "Obligation of Reimbursement" has the meaning specified in Section 2.6(a).

     "Obligations" means the Note, the Obligation of Reimbursement and each and
every other debt, liability and obligation of every type and description which
the Borrower may now or at any time hereafter owe to the Lender, whether such
debt, liability or obligation now exists or is hereafter created or incurred,
whether it arises in a transaction involving the Lender alone or in a
transaction involving other creditors of the Borrower, and whether it is direct
or indirect, due or to become due, absolute or contingent, primary or secondary,
liquidated or unliquidated, or sole, joint, several or joint and several, and
including all indebtedness of the Borrower arising under any Loan Document or
guaranty between the Borrower and the Lender, whether now in effect or hereafter
entered into.

     "Officer" means with respect to the Borrower, an officer of the Borrower,
if the Borrower is a corporation, a manager of the Borrower, if the Borrower is
a limited liability company, or a partner of the Borrower, if the Borrower is a
partnership.

     "Owned Intellectual Property" has the meaning specified in Section 5.11(a).

     "Owner" means with respect to the Borrower, each Person having legal or
beneficial title to an ownership interest in the Borrower or a right to acquire
such an interest.

     "Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA)
maintained for employees of the Borrower or any ERISA Affiliate and covered by
Title IV of ERISA.

     "Permitted Lien" has the meaning specified in Section 6.3(a).

     "Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

     "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA)
maintained for employees of the Borrower or any ERISA Affiliate.

     "Premises" means all premises where the Borrower conducts its business and
has any rights of possession, including the premises legally described in
Exhibit C attached hereto.

     "Related Documents" has the meaning specified in Section 2.7

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     "Reportable Event" means a reportable event (as defined in Section 4043 of
ERISA), other than an event for which the 30-day notice requirement under ERISA
has been waived in regulations issued by the Pension Benefit Guaranty
Corporation.

     "Revolving Advance" has the meaning specified in Section 2.1.

     "Security Documents" means this Agreement, the Lockbox and Collection
Account Agreement and any other document delivered to the Lender from time to
time to secure the Obligations.

     "Security Interest" has the meaning specified in Section 3.1.

     "SNPE Loan Agreement" means the Term Loan Agreement, by and between the
Borrower and SNPE, Inc., dated as of July 3, 2001.

     "SNPE Note" means the Borrower's Term Note, dated as of July 3, 2001,
payable to the order of SNPE, Inc. in the original principal amount of
$4,000,000, together with all renewals, extensions and modifications thereof and
any note or notes issued in substitution therefor.

     "SNPE Indebtedness" means all obligations arising under the SNPE Note and
the SNPE Loan Agreement.

     "Special Account" means a specified cash collateral account maintained by a
financial institution acceptable to the Lender in connection with Letters of
Credit, as contemplated by Section 2.5.

     "Subsidiary" means any corporation of which more than 50% of the
outstanding shares of capital stock having general voting power under ordinary
circumstances to elect a majority of the board of Directors of such corporation,
irrespective of whether or not at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency, is at the time directly or indirectly owned by the Borrower, by the
Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries.

     "Termination Date" means the earliest of (i) the Maturity Date, (ii) the
date the Borrower terminates the Credit Facility, or (iii) the date the Lender
demands payment of the Obligations after an Event of Default pursuant to Section
7.2.

     "UCC" means the Uniform Commercial Code as in effect in the state
designated in Section 8.13 as the state whose laws shall govern this Agreement,
or in any other state whose laws are held to govern this Agreement or any
portion hereof.

     "Unused Amount" has the meaning specified in Section 2.9(b).

     "Wells Fargo Bank West" means Wells Fargo Bank West, National Association.

     Section 1.2 Other Definitional Terms; Rules of Interpretation. The words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to

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<PAGE>

this Agreement as a whole and not to any particular provision of this Agreement.
All accounting terms not otherwise defined herein have the meanings assigned to
them in accordance with GAAP. All terms defined in the UCC and not otherwise
defined herein have the meanings assigned to them in the UCC. References to
Articles, Sections, subsections, Exhibits, Schedules and the like, are to
Articles, Sections and subsections of, or Exhibits or Schedules attached to,
this Agreement unless otherwise expressly provided. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". Unless the context in which used herein otherwise clearly requires,
"or" has the inclusive meaning represented by the phrase "and/or". Defined terms
include in the singular number the plural and in the plural number the singular.
Reference to any agreement (including the Loan Documents), document or
instrument means such agreement, document or instrument as amended or modified
and in effect from time to time in accordance with the terms thereof (and, if
applicable, in accordance with the terms hereof and the other Loan Documents),
except where otherwise explicitly provided, and reference to any promissory note
includes any promissory note which is an extension or renewal thereof or a
substitute or replacement therefor. Reference to any law, rule, regulation,
order, decree, requirement, policy, guideline, directive or interpretation means
as amended, modified, codified, replaced or reenacted, in whole or in part, and
in effect on the determination date, including rules and regulations promulgated
thereunder.

                                   ARTICLE II

                     AMOUNT AND TERMS OF THE CREDIT FACILITY

     Section 2.1 Revolving Advances. The Lender agrees, on the terms and subject
to the conditions herein set forth, to make advances to the Borrower from time
to time from the date all of the conditions set forth in Section 4.1 are
satisfied (the "Funding Date") to the Termination Date (the "Revolving
Advances"). The Lender shall have no obligation to make a Revolving Advance to
the extent the amount of the requested Revolving Advance exceeds Availability.
The Borrower's obligation to pay the Revolving Advances shall be evidenced by
the Note and shall be secured by the Collateral. Within the limits set forth in
this Section 2.1, the Borrower may borrow, prepay pursuant to Section 2.12 and
reborrow.

     Section 2.2 Procedures for Requesting Revolving Advances. The Borrower
shall comply with the following procedures in requesting Revolving Advances:

          (a) Time for Requests. The Borrower shall request each Revolving
     Advance not later than 10:00 a.m., Denver, Colorado time on the Banking Day
     which is the date the Revolving Advance is to be made. Each such request
     shall be effective upon receipt by the Lender, shall be in writing or by
     telephone or telecopy transmission, to be confirmed in writing by the
     Borrower if so requested by the Lender, shall be by (i) an Officer of the
     Borrower; or (ii) a person designated as the Borrower's agent by an Officer
     of the Borrower in a writing delivered to the Lender; or (iii) a person
     whom the Lender reasonably believes to be an Officer of the Borrower or
     such a designated agent. The Borrower shall repay all Revolving Advances
     even if the Lender does not receive such confirmation and even if the
     person requesting a Revolving Advance was not in fact authorized to do so.
     Any request for a Revolving Advance, whether written or

                                       11

<PAGE>

     telephonic, shall be deemed to be a representation by the Borrower that the
     conditions set forth in Section 4.2 have been satisfied as of the time of
     the request.

          (b) Disbursement. Upon fulfillment of the applicable conditions set
     forth in Article IV, the Lender shall disburse the proceeds of the
     requested Revolving Advance by crediting the same to the Borrower's demand
     deposit account maintained with Wells Fargo Bank West unless the Lender and
     the Borrower shall agree in writing to another manner of disbursement.

     Section 2.3 Capital Adequacy. If the Lender determines at any time that its
Return has been reduced as a result of any Rule Change, the Lender may so notify
the Borrower and require the Borrower, beginning thirty (30) days after such
notice, to pay it the amount necessary to restore its Return to what it would
have been had there been no Rule Change. For purposes of this Section 2.3:

          (i) "Capital Adequacy Rule" means any law, rule, regulation,
     guideline, directive, requirement or request regarding capital adequacy, or
     the interpretation or administration thereof by any governmental or
     regulatory authority, central bank or comparable agency, whether or not
     having the force of law, that applies to any Related Lender, including
     rules requiring financial institutions to maintain total capital in amounts
     based upon percentages of outstanding loans, binding loan commitments and
     letters of credit.

          (ii) "L/C Rule" means any law, rule, regulation, guideline, directive,
     requirement or request regarding letters of credit, or the interpretation
     or administration thereof by any governmental or regulatory authority,
     central bank or comparable agency, whether or not having the force of law,
     that applies to any Related Lender, including those that impose taxes,
     duties or other similar charges, or mandate reserves, special deposits or
     similar requirements against assets of, deposits with or for the account
     of, or credit extended by any Related Lender, on letters of credit.

          (iii) "Related Lender" includes (but is not limited to) the Lender,
     any parent of the Lender, any assignee of any interest of the Lender
     hereunder and any participant in the Credit Facility.

          (iv) "Return", for any period, means the percentage determined by
     dividing (i) the sum of interest and ongoing fees earned by the Lender
     under this Agreement during such period, by (ii) the average capital the
     Lender is required to maintain during such period as a result of its being
     a party to this Agreement, as determined by the Lender based upon its total
     capital requirements and a reasonable attribution formula that takes
     account of the Capital Adequacy Rules and L/C Rules then in effect, costs
     of issuing or maintaining any Revolving Advance or Letter of Credit and
     amounts received or receivable under this Agreement or the Note with
     respect to any Revolving Advance or Letter of Credit. Return may be
     calculated for each calendar quarter and for the shorter period between the
     end of a calendar quarter and the date of termination in whole of this
     Agreement.

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<PAGE>

          (v) "Rule Change" means any change in any Capital Adequacy Rule or L/C
     Rule occurring after the date of this Agreement, or any change in the
     interpretation or administration thereof by any governmental or regulatory
     authority, but the term does not include any changes that at the Funding
     Date are scheduled to take place under the existing Capital Adequacy Rules
     or L/C Rules or any increases in the capital that the Lender is required to
     maintain to the extent that the increases are required due to a regulatory
     authority's assessment of that Lender's financial condition.

     The initial notice sent by the Lender shall be sent as promptly as
practicable after the Lender learns that its Return has been reduced, shall
include a demand for payment of the amount necessary to restore the Lender's
Return for the quarter in which the notice is sent, and shall state in
reasonable detail the cause for the reduction in its Return and its calculation
of the amount of such reduction. Thereafter, the Lender may send a new notice
during each calendar quarter setting forth the calculation of the reduced Return
for that quarter and including a demand for payment of the amount necessary to
restore its Return for that quarter. The Lender's calculation in any such notice
shall be conclusive and binding absent demonstrable error.

     Section 2.4 Letters of Credit.

          (a) The Lender agrees, on the terms and subject to the conditions
     herein set forth, to cause an Issuer to issue, from the Funding Date to the
     Termination Date, one or more irrevocable standby or documentary letters of
     credit (each, a "Letter of Credit") for the Borrower's account by
     guaranteeing payment of the Borrower's obligations or being a co-applicant.
     The Lender shall have no obligation to cause an Issuer to issue any Letter
     of Credit if the face amount of the Letter of Credit to be issued would
     exceed the lesser of:

               (i) $500,000 less the L/C Amount, or

               (ii) Availability.

     Each Letter of Credit, if any, shall be issued pursuant to a separate L/C
     Application entered into between the Borrower and the Lender for the
     benefit of the Issuer, completed in a manner satisfactory to the Lender and
     the Issuer. The terms and conditions set forth in each such L/C Application
     shall supplement the terms and conditions hereof, but if the terms of any
     such L/C Application and the terms of this Agreement are inconsistent, the
     terms hereof shall control.

          (b) No Letter of Credit shall be issued with an expiry date later than
     the Termination Date in effect as of the date of issuance.

          (c) Any request to cause an Issuer to issue a Letter of Credit shall
     be deemed to be a representation by the Borrower that the conditions set
     forth in Section 4.2 have been satisfied as of the date of the request.

     Section 2.5 Special Account. If the Credit Facility is terminated for any
reason while any Letter of Credit is outstanding, the Borrower shall thereupon
pay the Lender in immediately

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<PAGE>

available funds for deposit in the Special Account an amount equal to the L/C
Amount. The Special Account shall be an interest bearing account maintained for
the Lender by any financial institution acceptable to the Lender. Any interest
earned on amounts deposited in the Special Account shall be credited to the
Special Account. The Lender may apply amounts on deposit in the Special Account
at any time or from time to time to the Obligations in the Lender's sole
discretion. The Borrower may not withdraw any amounts on deposit in the Special
Account as long as the Lender maintains a security interest therein. The Lender
agrees to transfer any balance in the Special Account to the Borrower when the
Lender is required to release its security interest in the Special Account under
applicable law.

     Section 2.6 Payment of Amounts Drawn Under Letters of Credit; Obligation of
Reimbursement. The Borrower acknowledges that the Lender, as co-applicant, will
be liable to the Issuer for reimbursement of any and all draws under Letters of
Credit and for all other amounts required to be paid under the applicable L/C
Application. Accordingly, the Borrower shall pay to the Lender any and all
amounts required to be paid under the applicable L/C Application, when and as
required to be paid thereby, and the amounts designated below, when and as
designated:

          (a) The Borrower shall pay to the Lender on the day a draft is honored
     under any Letter of Credit a sum equal to all amounts drawn under such
     Letter of Credit plus any and all reasonable charges and expenses that the
     Issuer or the Lender may pay or incur relative to such draw and the
     applicable L/C Application, plus interest on all such amounts, charges and
     expenses as set forth below (the Borrower's obligation to pay all such
     amounts is herein referred to as the "Obligation of Reimbursement").

          (b) Whenever a draft is submitted under a Letter of Credit, the
     Borrower authorizes the Lender to make a Revolving Advance in the amount of
     the Obligation of Reimbursement and to apply the proceeds of such Revolving
     Advance thereto. Such Revolving Advance shall be repayable in accordance
     with and be treated in all other respects as a Revolving Advance hereunder.

          (c) If a draft is submitted under a Letter of Credit when the Borrower
     is unable, because a Default Period exists or for any other reason, to
     obtain a Revolving Advance to pay the Obligation of Reimbursement, the
     Borrower shall pay to the Lender on demand and in immediately available
     funds, the amount of the Obligation of Reimbursement together with
     interest, accrued from the date of the draft until payment in full at the
     Default Rate. Notwithstanding the Borrower's inability to obtain a
     Revolving Advance for any reason, the Lender is irrevocably authorized, in
     its sole discretion, to make a Revolving Advance in an amount sufficient to
     discharge the Obligation of Reimbursement and all accrued but unpaid
     interest thereon.

          (d) The Borrower's obligation to pay any Revolving Advance made under
     this Section 2.6, shall be evidenced by the Note and shall bear interest as
     provided in Section 2.8.

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<PAGE>

     Section 2.7 Obligations Absolute. The Borrower's obligations arising under
Section 2.6 shall be absolute, unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of Section 2.6, under all circumstances
whatsoever, including (without limitation) the following circumstances:

          (a) any lack of validity or enforceability of any Letter of Credit or
     any other agreement or instrument relating to any Letter of Credit
     (collectively the "Related Documents");

          (b) any amendment or waiver of or any consent to departure from all or
     any of the Related Documents;

          (c) the existence of any claim, setoff, defense or other right which
     the Borrower may have at any time, against any beneficiary or any
     transferee of any Letter of Credit (or any persons or entities for whom any
     such beneficiary or any such transferee may be acting), or other person or
     entity, whether in connection with this Agreement, the transactions
     contemplated herein or in the Related Documents or any unrelated
     transactions;

          (d) any statement or any other document presented under any Letter of
     Credit proving to be forged, fraudulent, invalid or insufficient in any
     respect or any statement therein being untrue or inaccurate in any respect
     whatsoever;

          (e) payment by or on behalf of the Issuer under any Letter of Credit
     against presentation of a draft or certificate which does not strictly
     comply with the terms of such Letter of Credit; or

          (f) any other circumstance or happening whatsoever, whether or not
     similar to any of the foregoing.

     Section 2.8 Interest; Minimum Interest Charge; Default Interest; Clearance
Days; Participations; Usury.

          (a) Note. Except as set forth in subsections (c) and (f), the
     outstanding principal balance of the Note shall bear interest at the
     Floating Rate.

          (b) Minimum Interest Charge. Notwithstanding the interest payable
     pursuant to subsection (a), the Borrower shall pay to the Lender interest
     of not less than $10,000 per calendar month (the "Minimum Interest Charge")
     during the term of this Agreement, and the Borrower shall pay any
     deficiency between the Minimum Interest Charge and the amount of interest
     otherwise calculated under subsection (a) on the first day of each month
     and on the Termination Date.

          (c) Default Interest Rate. At any time during any Default Period, in
     the Lender's sole discretion and without waiving any of its other rights
     and remedies, the principal of the Revolving Advances outstanding from time
     to time shall bear interest at

                                       15

<PAGE>

     the Default Rate, effective for any periods designated by the Lender from
     time to time during that Default Period.

          (d) Clearance Days. Notwithstanding Section 2.11(b)(ii), interest at
     the interest rate applicable under this Section 2.8 shall accrue on the
     amount of all payments (even if in the form of immediately available
     federal funds) for one (1) day for clearance.

          (e) Participations. If any Person shall acquire a participation in the
     Revolving Advances under this Agreement, the Borrower shall be obligated to
     the Lender to pay the full amount of all interest calculated under this
     Agreement, along with all other fees, charges and other amounts due under
     this Agreement, regardless if such Person elects to accept interest with
     respect to its participation at a lower rate than the Floating Rate, or
     otherwise elects to accept less than its prorata share of such fees,
     charges and other amounts due under this Agreement.

          (f) Usury. In any event no rate change shall be put into effect which
     would result in a rate greater than the highest rate permitted by law.
     Notwithstanding anything to the contrary contained in any Loan Document,
     all agreements which either now are or which shall become agreements
     between the Borrower and the Lender are hereby limited so that in no
     contingency or event whatsoever shall the total liability for payments in
     the nature of interest, additional interest and other charges exceed the
     applicable limits imposed by any applicable usury laws. If any payments in
     the nature of interest, additional interest and other charges made under
     any Loan Document are held to be in excess of the limits imposed by any
     applicable usury laws, it is agreed that any such amount held to be in
     excess shall be considered payment of principal hereunder, and the
     indebtedness evidenced hereby shall be reduced by such amount so that the
     total liability for payments in the nature of interest, additional interest
     and other charges shall not exceed the applicable limits imposed by any
     applicable usury laws, in compliance with the desires of the Borrower and
     the Lender. This provision shall never be superseded or waived and shall
     control every other provision of the Loan Documents and all agreements
     between the Borrower and the Lender, or their successors and assigns.

     Section 2.9 Fees.

          (a) Origination Fee. The Borrower shall pay the Lender a fully earned
     and non-refundable origination fee of $30,000, due and payable upon the
     execution of this Agreement. The Lender has received $30,000 toward payment
     of this fee and the fees, costs and expenses described in Section 2.9(c)
     and 8.5.

          (b) Unused Line Fee. For the purposes of this Section 2.9, "Unused
     Amount" means the Maximum Line reduced by outstanding Revolving Advances
     and the L/C Amount. The Borrower agrees to pay to the Lender an unused line
     fee at the rate of one quarter of one percent (0.25%) per annum on the
     average daily Unused Amount from the date of this Agreement to and
     including the Termination Date, due and payable monthly in arrears on the
     first day of the month following the month in which such fee accrues and on
     the Termination Date.

                                       16

<PAGE>

          (c) Audit Fees. The Borrower shall pay the Lender, on demand, audit
     fees in connection with any audits or inspections conducted by the Lender
     of any Collateral or the Borrower's operations or business at the rates
     established from time to time by the Lender as its audit fees (which fees
     are currently $85 per hour per auditor), together with all actual
     out-of-pocket costs and expenses incurred in conducting any such audit or
     inspection; provided, however, that except during Default Periods, the
     Borrower shall not have to reimburse the Lender for such fees, costs and
     expenses related to audits in excess of one audit per quarter.

          (d) Termination and Line Reduction Fees. If the Credit Facility is
     terminated (i) by the Lender during a Default Period that begins before a
     Maturity Date, (ii) by the Borrower (A) as of a date other than a Maturity
     Date or (B) as of a Maturity Date but without the Lender having received
     written notice of such termination at least 90 days before such Maturity
     Date, or if the Borrower reduces the Maximum Line, the Borrower shall pay
     to the Lender a fee in an amount equal to a percentage of the Maximum Line
     (or the reduction of the Maximum Line, as the case may be) as follows: (A)
     one and one half percent (1.50%) if the termination or reduction occurs on
     or before the first anniversary of the Funding Date; (B) one percent (1.0%)
     if the termination or reduction occurs after the first anniversary of the
     Funding Date but on or before the second anniversary of the Funding Date;
     and (C) one half of one percent (0.50%) if the termination or reduction
     occurs after the second anniversary of the Funding Date.

          (e) Waiver of Termination and Line Reduction Fees. The Borrower will
     not be required to pay the termination and line reduction fees otherwise
     due under subsection (e) if such termination or line reduction is made
     because of refinancing by an affiliate of the Lender.

          (f) Letter of Credit Fees. The Borrower agrees to pay to the Lender on
     the date of the issuance of each Letter of Credit issued hereunder, a fully
     earned and non-refundable Letter of Credit fee equal to two percent (2.0%)
     of the face amount of each Letter of Credit issued hereunder.

          (g) Other Fees. The Lender may from time to time, upon five (5) days
     prior notice to the Borrower during a Default Period, charge additional
     fees for Revolving Advances made in excess of the Borrowing Base, for late
     delivery of reports, in lieu of imposing interest at the Default Rate, and
     for other reasons. The Borrower's request for a Revolving Advance at any
     time after such notice is given and such five (5) day period has elapsed
     shall constitute the Borrower's agreement to pay the fees described in such
     notice.

     Section 2.10 Time for Interest Payments; Payment on Non-Banking Days;
Computation of Interest and Fees.

          (a) Time For Interest Payments. Interest shall be due and payable in
     arrears on the first day of each month following the month in which such
     interest accrues and on the Termination Date.

                                       17

<PAGE>

          (b) Payment on Non-Banking Days. Whenever any payment to be made
     hereunder shall be stated to be due on a day which is not a Banking Day,
     such payment may be made on the next succeeding Banking Day, and such
     extension of time shall in such case be included in the computation of
     interest on the Revolving Advances or the fees hereunder, as the case may
     be.

          (c) Computation of Interest and Fees. Interest accruing on the
     outstanding principal balance of the Revolving Advances and fees hereunder
     outstanding from time to time shall be computed on the basis of actual
     number of days elapsed in a year of 360 days.

     Section 2.11 Lockbox; Collateral Account; Application of Payments.

          (a) Lockbox and Collateral Account.

               (i) The Borrower shall instruct all account debtors to pay all
          Accounts directly to the Lockbox. If, notwithstanding such
          instructions, the Borrower receives any payments on Accounts, the
          Borrower shall deposit such payments into the Collateral Account.
          Until so deposited, the Borrower shall hold all such payments in trust
          for and as the property of the Lender and shall not commingle such
          payments with any of its other funds or property. All deposits in the
          Collateral Account shall constitute proceeds of Collateral and shall
          not constitute payment of the Obligations.

               (ii) All items deposited in the Collateral Account shall be
          subject to final payment. If any such item is returned uncollected,
          the Borrower will immediately pay the Lender, or, for items deposited
          in the Collateral Account, the bank maintaining such account, the
          amount of that item, or such bank at its discretion may charge any
          uncollected item to the Borrower's commercial account or other
          account. The Borrower shall be liable as an endorser on all items
          deposited in the Collateral Account, whether or not in fact endorsed
          by the Borrower.

          (b) Application of Payments.

               (i) The Borrower may, from time to time, in accordance with the
          Lockbox and Collection Account Agreement, cause funds in the
          Collateral Account to be transferred to the Lender's general account
          for payment of the Obligations. Except as provided in the preceding
          sentence, amounts deposited in the Collateral Account shall not be
          subject to withdrawal by the Borrower, except after full payment and
          discharge of all Obligations.

               (ii) All payments to the Lender shall be made in immediately
          available funds and shall be applied to the Obligations upon receipt
          by the Lender. Funds received from the Collateral Account shall be
          deemed to be immediately available. The Lender may hold all payments
          not constituting immediately

                                       18

<PAGE>

          available funds for three (3) additional days before applying them to
          the Obligations.

     Section 2.12 Voluntary Prepayment; Reduction of the Maximum Line;
Termination of the Credit Facility by the Borrower. Except as otherwise provided
herein, the Borrower may prepay the Revolving Advances in whole at any time or
from time to time in part. The Borrower may terminate the Credit Facility or
reduce the Maximum Line at any time if it (i) gives the Lender at least 30 days'
prior written notice and (ii) pays the Lender termination and Maximum Line
reduction fees in accordance with Sections 2.5(e). Any reduction in the Maximum
Line must be in an amount of not less than $100,000 or an integral multiple
thereof. If the Borrower reduces the Maximum Line to zero, all Obligations shall
be immediately due and payable. Subject to termination of the Credit Facility
and payment and performance of all Obligations, the Lender shall, at the
Borrower's expense, release or terminate the Security Interest and the Security
Documents to which the Borrower is entitled by law, including Revised Article 9
of the UCC.

     Section 2.13 Mandatory Prepayment. Without notice or demand, if the sum of
the outstanding principal balance of the Revolving Advances plus the L/C Amount
shall at any time exceed the Borrowing Base, the Borrower shall (i) first,
immediately prepay the Revolving Advances to the extent necessary to eliminate
such excess and (ii) if prepayment in full of the Revolving Advances is
insufficient to eliminate such excess, pay to the Lender in immediately
available funds for deposit in the Special Account an amount equal to the
remaining excess.. Any payment received by the Lender under this Section 2.13 or
under Section 2.12 may be applied to the Obligations, in such order and in such
amounts as the Lender, in its discretion, may from time to time determine.

     Section 2.14 Revolving Advances to Pay Obligations. Notwithstanding
anything in Section 2.1, the Lender may, in its discretion at any time or from
time to time, without the Borrower's request and even if the conditions set
forth in Section 4.2 would not be satisfied, make a Revolving Advance in an
amount equal to the portion of the Obligations from time to time due and
payable.

     Section 2.15 Use of Proceeds. The Borrower shall use the proceeds of
Revolving Advances and each Letter of Credit for ordinary working capital
purposes and to retire certain debt owed to SNPE, Inc.

     Section 2.16 Liability Records. The Lender may maintain from time to time,
at its discretion, records as to the Obligations. All entries made on any such
record shall be presumed correct until the Borrower establishes the contrary.
Upon the Lender's demand, the Borrower will admit and certify in writing the
exact principal balance of the Obligations that the Borrower then asserts to be
outstanding. Any billing statement or accounting rendered by the Lender shall be
conclusive and fully binding on the Borrower unless the Borrower gives the
Lender specific written notice of exception within 30 days after receipt.

                                       19

<PAGE>

                                  ARTICLE III

                      SECURITY INTEREST; OCCUPANCY; SETOFF

     Section 3.1 Grant of Security Interest. The Borrower hereby pledges,
assigns and grants to the Lender a lien and security interest (collectively
referred to as the "Security Interest") in the Collateral, as security for the
payment and performance of the Obligations. Upon request by the Lender, the
Borrower will grant the Lender a security interest in all commercial tort claims
it may have against any Person.

     Section 3.2 Notification of Account Debtors and Other Obligors. The Lender
may at any time, during a Default Period, notify any account debtor or other
person obligated to pay the amount due that such right to payment has been
assigned or transferred to the Lender for security and shall be paid directly to
the Lender. The Borrower will join in giving such notice if the Lender so
requests. At any time after the Borrower or the Lender gives such notice to an
account debtor or other obligor and so long as a Default Period exists, the
Lender may, but need not, in the Lender's name or in the Borrower's name, (a)
demand, sue for, collect or receive any money or property at any time payable or
receivable on account of, or securing, any such right to payment, or grant any
extension to, make any compromise or settlement with or otherwise agree to
waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor; and (b) as the
Borrower's agent and attorney-in-fact, notify the United States Postal Service
to change the address for delivery of the Borrower's mail to any address
designated by the Lender, otherwise intercept the Borrower's mail, and receive,
open and dispose of the Borrower's mail, applying all Collateral as permitted
under this Agreement and holding all other mail for the Borrower's account or
forwarding such mail to the Borrower's last known address.

     Section 3.3 Assignment of Insurance. As additional security for the payment
and performance of the Obligations, the Borrower hereby assigns to the Lender
any and all monies (including proceeds of insurance and refunds of unearned
premiums) due or to become due under, and all other rights of the Borrower with
respect to, any and all policies of insurance now or at any time hereafter
covering the Collateral or any evidence thereof or any business records or
valuable papers pertaining thereto, and the Borrower hereby directs the issuer
of any such policy to pay all such monies directly to the Lender. At any time,
whether or not a Default Period then exists, the Lender may (but need not), in
the Lender's name or in the Borrower's name, execute and deliver proof of claim,
receive all such monies, endorse checks and other instruments representing
payment of such monies, and adjust, litigate, compromise or release any claim
against the issuer of any such policy.

     Section 3.4 Occupancy.

          (a) The Borrower hereby irrevocably grants to the Lender the right to
     take exclusive possession of the Premises at any time during a Default
     Period.

                                       20

<PAGE>

          (b) The Lender may use the Premises only to hold, process,
     manufacture, sell, use, store, liquidate, realize upon or otherwise dispose
     of goods that are Collateral and for other purposes that the Lender may in
     good faith deem to be related or incidental purposes.

          (c) The Lender's right to hold the Premises shall cease and terminate
     upon the earlier of (i) payment in full and discharge of all Obligations
     and termination of the Credit Facility, (ii) final sale or disposition of
     all goods constituting Collateral and delivery of all such goods to
     purchasers, and (iii) the end of a Default Period.

          (d) The Lender shall not be obligated to pay or account for any rent
     or other compensation for the possession, occupancy or use of any of the
     Premises; provided, however, that if the Lender does pay or account for any
     rent or other compensation for the possession, occupancy or use of any of
     the Premises, including any rent owed by Mypodiamond, Inc. to its landlord,
     the Borrower shall reimburse the Lender promptly for the full amount
     thereof. In addition, the Borrower will pay, or reimburse the Lender for,
     all taxes, fees, duties, imposts, charges and expenses at any time incurred
     by or imposed upon the Lender by reason of the execution, delivery,
     existence, recordation, performance or enforcement of this Agreement or the
     provisions of this Section 3.4.

     Section 3.5 License. Without limiting the generality of any other Security
Document, the Borrower hereby grants to the Lender a non-exclusive, worldwide
and royalty-free license to use or otherwise exploit all Intellectual Property
Rights of the Borrower for the purpose of: (a) completing the manufacture of any
in-process materials during any Default Period so that such materials become
saleable Inventory, all in accordance with the same quality standards previously
adopted by the Borrower for its own manufacturing and subject to the Borrower's
reasonable exercise of quality control; and (b) selling, leasing or otherwise
disposing of any or all Collateral during any Default Period.

     Section 3.6 Financing Statement. The Borrower authorizes the Lender to file
from time to time where permitted by law, such financing statements against
collateral described as "all personal property" as the Lender deems necessary or
useful to perfect the Security Interest. A carbon, photographic or other
reproduction of this Agreement or of any financing statements signed by the
Borrower is sufficient as a financing statement and may be filed as a financing
statement in any state to perfect the security interests granted hereby. For
this purpose, the following information is set forth:

                  Name and address of Debtor:

                  Dynamic Materials Corporation
                  5405 Spine Road
                  Boulder, CO  80301
                  Federal Employer Identification No. 84-0608431

                                       21

<PAGE>

                  Name and address of Secured Party:

                  Wells Fargo Business Credit, Inc.
                  MAC C7300-300
                  1740 Broadway
                  Denver, Colorado  80274
                  Federal Employer Identification No. 41-1237652

     Section 3.7 Setoff. The Lender may at any time or from time to time, at its
sole discretion and without demand and without notice to anyone, setoff any
liability owed to the Borrower by the Lender, whether or not due, against any
Obligation, whether or not due. In addition, each other Person holding a
participating interest in any Obligations shall have the right to appropriate or
setoff any deposit or other liability then owed by such Person to the Borrower,
whether or not due, and apply the same to the payment of said participating
interest, as fully as if such Person had lent directly to the Borrower the
amount of such participating interest.

     Section 3.8 Collateral. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Borrower may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application. The Lender has no obligation to clean-up or otherwise prepare the
Collateral for sale. The Borrower waives any right it may have to require the
Lender to pursue any third person for any of the Obligations.

                                   ARTICLE IV

                              CONDITIONS OF LENDING

     Section 4.1 Conditions Precedent to the Initial Revolving Advance and
Letter of Credit. The Lender's obligation to make the initial Revolving Advance
or to cause any Letters of Credit to be issued shall be subject to the condition
precedent that the Lender shall have received all of the following, each in form
and substance satisfactory to the Lender:

          (a) This Agreement, properly executed by the Borrower.

          (b) The Note, properly executed by the Borrower.

          (c) A true and correct copy of any and all leases pursuant to which
     the Borrower is leasing the Premises, together with a landlord's disclaimer
     and consent with respect to each such lease.

                                       22

<PAGE>

          (d) A true and correct copy of any and all mortgages pursuant to which
     the Borrower has mortgaged the Premises, together with a mortgagee's
     disclaimer and consent with respect to each such mortgage.

          (e) A true and correct copy of any and all agreements pursuant to
     which the Borrower's property is in the possession of any Person other than
     the Borrower, together with, in the case of any goods held by such Person
     for resale, (i) a consignee's acknowledgment and waiver of Liens, (ii) UCC
     financing statements sufficient to protect the Borrower's and the Lender's
     interests in such goods, and (iii) UCC searches showing that no other
     secured party has filed a financing statement against such Person and
     covering property similar to the Borrower's other than the Borrower, or if
     there exists any such secured party, evidence that each such secured party
     has received notice from the Borrower and the Lender sufficient to protect
     the Borrower's and the Lender's interests in the Borrower's goods from any
     claim by such secured party.

          (f) An acknowledgment and waiver of Liens from each warehouse in which
     the Borrower is storing Inventory.

          (g) A true and correct copy of any and all agreements pursuant to
     which the Borrower's property is in the possession of any Person other than
     the Borrower, together with, (i) an acknowledgment and waiver of Liens from
     each subcontractor who has possession of the Borrower's goods from time to
     time, (ii) UCC financing statements sufficient to protect the Borrower's
     and the Lender's interests in such goods, and (iii) UCC searches showing
     that no other secured party has filed a financing statement covering such
     Person's property other than the Borrower, or if there exists any such
     secured party, evidence that each such secured party has received notice
     from the Borrower and the Lender sufficient to protect the Borrower's and
     the Lender's interests in the Borrower's goods from any claim by such
     secured party.

          (h) The Lockbox and Collection Account Agreement, properly executed by
     the Borrower and Wells Fargo Bank West.

          (i) Control agreements, properly executed by the Borrower and each
     bank at which the Borrower maintains deposit accounts.

          (j) Current searches of appropriate filing offices showing that (i) no
     Liens have been filed and remain in effect against the Borrower except
     Permitted Liens or Liens held by Persons who have agreed in writing that
     upon receipt of proceeds of the initial Revolving Advances, they will
     satisfy, release or terminate such Liens in a manner satisfactory to the
     Lender, and (ii) the Lender has duly filed all financing statements
     necessary to perfect the Security Interest, to the extent the Security
     Interest is capable of being perfected by filing.

          (k) A certificate of the Borrower's Secretary or Assistant Secretary
     certifying that attached to such certificate are (i) the resolutions of the
     Borrower's Directors and, if required, Owners, authorizing the execution,
     delivery and performance of the Loan Documents, (ii) true, correct and
     complete copies of the Borrower's Constituent

                                       23

<PAGE>

     Documents, and (iii) examples of the signatures of the Borrower's Officers
     or agents authorized to execute and deliver the Loan Documents and other
     instruments, agreements and certificates, including Revolving Advance
     requests, on the Borrower's behalf.

          (l) A current certificate issued by the Delaware Secretary of State,
     certifying that the Borrower is in compliance with all applicable
     organizational requirements of the State of Delaware.

          (m) Evidence that the Borrower is duly licensed or qualified to
     transact business in all jurisdictions where the character of the property
     owned or leased or the nature of the business transacted by it makes such
     licensing or qualification necessary.

          (n) A certificate of an Officer of the Borrower confirming, in his
     personal capacity, the representations and warranties set forth in Article
     V.

          (o) An opinion of counsel to the Borrower, addressed to the Lender.

          (p) Certificates of the insurance required hereunder, with all hazard
     insurance containing a lender's loss payable endorsement in the Lender's
     favor and with all liability insurance naming the Lender as an additional
     insured.

          (q) Payment of the fees and commissions due under Section 2.9 through
     the date of the initial Revolving Advance or Letter of Credit and expenses
     incurred by the Lender through such date and required to be paid by the
     Borrower under Section 8.5, including all legal expenses, including
     reasonable legal fees, incurred through the date of this Agreement.

          (r) Evidence that after making the initial Revolving Advance,
     satisfying all obligations owed to the Borrower's prior lender, satisfying
     all intercompany debt obligations, satisfying all trade payables older than
     60 days from invoice date, book overdrafts and closing costs, Availability
     shall be not less than $500,000.

          (s) Documentation of satisfactory test results at the Mount Braddock,
     Pennsylvania location.

          (t) The Amendment to Convertible Subordinated Note properly executed
     by SNPE, Inc. and the Borrower.

          (u) Such other documents as the Lender in its sole discretion may
     require.

     Section 4.2 Conditions Precedent to All Revolving Advances and Letters of
Credit. The Lender's obligation to make each Revolving Advance and to cause each
Letter of Credit to be issued shall be subject to the further conditions
precedent that:

          (a) the representations and warranties contained in Article V are
     correct on and as of the date of such Revolving Advance or issuance of a
     Letter of Credit as though

                                       24

<PAGE>

     made on and as of such date, except to the extent that such representations
     and warranties relate solely to an earlier date; and

          (b) no event has occurred and is continuing, or would result from such
     Revolving Advance or issuance of a Letter of Credit which constitutes a
     Default or an Event of Default.

                                   ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

     The Borrower represents and warrants to the Lender as follows:

     Section 5.1 Existence and Power; Name; Chief Executive Office; Inventory
and Equipment Locations; Federal Employer Identification Number. The Borrower is
a corporation, duly organized, validly existing and in good standing under the
laws of the State of Delaware and is duly licensed or qualified to transact
business in all jurisdictions where the character of the property owned or
leased or the nature of the business transacted by it makes such licensing or
qualification necessary. The Borrower has all requisite power and authority to
conduct its business, to own its properties and to execute and deliver, and to
perform all of its obligations under, the Loan Documents. During its existence,
the Borrower has done business solely under the names set forth in Schedule 5.1
and Boom, Inc. The Borrower's chief executive office and principal place of
business is located at the address set forth in Schedule 5.1, and all of the
Borrower's records relating to its business or the Collateral are kept at that
location. All Inventory and Equipment is located at that location or at one of
the other locations listed in Schedule 5.1. The Borrower's federal employer
identification number is correctly set forth in Section 3.6.

     Section 5.2 Capitalization. Schedule 5.2 constitutes a correct and complete
list of all Persons holding ownership interests and rights to acquire ownership
interests which if fully exercised would cause such Person to hold more than
five percent (5%) of all ownership interests of the Borrower on a fully diluted
basis, and an organizational chart showing the ownership structure of all
Subsidiaries of the Borrower.

     Section 5.3 Authorization of Borrowing; No Conflict as to Law or
Agreements. The execution, delivery and performance by the Borrower of the Loan
Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of the Borrower's Owners; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof; (iii) violate
any provision of any law, rule or regulation (including Regulation X of the
Board of Governors of the Federal Reserve System) or of any order, writ,
injunction or decree presently in effect having applicability to the Borrower or
of the Borrower's Constituent Documents; (iv) result in a breach of or
constitute a default under any indenture or

                                       25

<PAGE>

loan or credit agreement or any other material agreement, lease or instrument to
which the Borrower is a party or by which it or its properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any Lien
(other than the Security Interest) upon or with respect to any of the properties
now owned or hereafter acquired by the Borrower.

     Section 5.4 Legal Agreements. This Agreement constitutes and, upon due
execution by the Borrower, the other Loan Documents will constitute the legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms, except as enforcement may be limited
by equitable principals or by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally.

     Section 5.5 Subsidiaries. Except as set forth in Schedule 5.5 hereto, the
Borrower has no Subsidiaries.

     Section 5.6 Financial Condition; No Adverse Change. The Borrower has
furnished to the Lender its audited financial statements for its fiscal year
ended December 31, 2000 and unaudited financial statements for the
fiscal-year-to-date period ended September 30, 2001, and those statements fairly
present the Borrower's financial condition on the dates thereof and the results
of its operations and cash flows for the periods then ended and were prepared in
accordance with GAAP. Since the date of the most recent financial statements,
there has been no change in the Borrower's business, properties or condition
(financial or otherwise) which has had a Material Adverse Effect.

     Section 5.7 Litigation. There are no actions, suits or proceedings pending
or, to the Borrower's knowledge, threatened against or affecting the Borrower or
any of its Affiliates or the properties of the Borrower or any of its Affiliates
before any court or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, which, if determined adversely to the
Borrower or any of its Affiliates, would have a Material Adverse Effect.

     Section 5.8 Regulation U. The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Revolving Advance will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock.

     Section 5.9 Taxes. The Borrower and its Affiliates have paid or caused to
be paid to the proper authorities when due all U.S. federal, state and local
taxes required to be withheld by each of them. Prior to July 3, 2001, the
Borrower and its Affiliates have paid or caused to be paid to the proper
authorities when due all foreign federal, state, provincial, local and other
taxes required to be withheld by each of them. On and after July 3, 2001, to the
knowledge of the Borrower, the Borrower and its Affiliates have paid or caused
to be paid to the proper authorities when due all foreign federal, state,
provincial, local and other taxes required to be withheld by each of them. The
Borrower and its Affiliates have filed all foreign and U.S. federal, state,
provincial, local or other tax returns which to the knowledge of the Officers of
the Borrower or

                                       26

<PAGE>

any Affiliate, as the case may be, are required to be filed, and the Borrower
and its Affiliates have paid or caused to be paid to the respective taxing
authorities all taxes as shown on said returns or on any assessment received by
any of them to the extent such taxes have become due.

     Section 5.10 Titles and Liens. The Borrower has good and absolute title to
all Collateral free and clear of all Liens other than Permitted Liens. No
financing statement naming the Borrower as debtor is on file in any office
except to perfect only Permitted Liens.

     Section 5.11 Intellectual Property Rights.

          (a) Owned Intellectual Property. Schedule 5.11 is a complete list of
     all patents, applications for patents, trademarks, applications to register
     trademarks, service marks, applications to register service marks, mask
     works, trade dress and copyrights for which the Borrower is the owner of
     record (the "Owned Intellectual Property"). Except as disclosed on Schedule
     5.11, (i) the Borrower owns the Owned Intellectual Property free and clear
     of all restrictions (including covenants not to sue a third party), court
     orders, injunctions, decrees, writs or Liens, whether by written agreement
     or otherwise, (ii) no Person other than the Borrower owns or has been
     granted any right in the Owned Intellectual Property, (iii) all Owned
     Intellectual Property is valid, subsisting and enforceable and (iv) the
     Borrower has taken all commercially reasonable action necessary to maintain
     and protect the Owned Intellectual Property.

          (b) Agreements with Employees and Contractors. The Borrower has
     entered into a legally enforceable agreement with each of its employees and
     subcontractors listed on Schedule 5.11, obligating each such Person to
     assign to the Borrower, without any additional compensation, any
     Intellectual Property Rights created, discovered or invented by such Person
     in the course of such Person's employment or engagement with the Borrower
     (except to the extent prohibited by law), and further requiring such Person
     to cooperate with the Borrower, without any additional compensation, in
     connection with securing and enforcing any Intellectual Property Rights
     therein; provided, however, that the foregoing shall not apply with respect
     to employees and subcontractors whose job descriptions are of the type such
     that no such assignments are reasonably foreseeable.

          (c) Intellectual Property Rights Licensed from Others. Schedule 5.11
     is a complete list of all agreements under which the Borrower has licensed
     Intellectual Property Rights from another Person ("Licensed Intellectual
     Property") other than readily available, non-negotiated licenses of
     computer software and other intellectual property used solely for
     performing accounting, word processing and similar administrative tasks
     ("Off-the-shelf Software") and a summary of any ongoing payments the
     Borrower is obligated to make with respect thereto. Except as disclosed on
     Schedule 5.11 and in written agreements copies of which have been given to
     the Lender, the Borrower's licenses to use the Licensed Intellectual
     Property are free and clear of all restrictions, Liens, court orders,
     injunctions, decrees, or writs, whether by written agreement or otherwise.
     Except as disclosed on Schedule 5.11, the Borrower is not obligated or
     under any liability whatsoever to make any payments of a material nature by
     way of royalties,

                                       27

<PAGE>

     fees or otherwise to any owner of, licensor of, or other claimant to, any
     Intellectual Property Rights.

          (d) Other Intellectual Property Needed for Business. Except for
     Off-the-shelf Software and as disclosed on Schedule 5.11, the Owned
     Intellectual Property and the Licensed Intellectual Property constitute all
     Intellectual Property Rights used or necessary to conduct the Borrower's
     business as it is presently conducted or as the Borrower reasonably
     foresees conducting it.

          (e) Infringement. Except as disclosed on Schedule 5.11, the Borrower
     has no knowledge of, and has not received any written claim or notice
     alleging, any Infringement of another Person's Intellectual Property Rights
     (including any written claim that the Borrower must license or refrain from
     using the Intellectual Property Rights of any third party) nor, to the
     Borrower's knowledge, is there any threatened claim or any reasonable basis
     for any such claim.

     Section 5.12 Plans. Except as disclosed to the Lender in writing prior to
the date hereof, neither the Borrower nor any ERISA Affiliate (i) maintains or
has maintained any Pension Plan, (ii) contributes or has contributed to any
Multiemployer Plan or (iii) provides or has provided post-retirement medical or
insurance benefits with respect to employees or former employees (other than
benefits required under Section 601 of ERISA, Section 4980B of the IRC or
applicable state law). Neither the Borrower nor any ERISA Affiliate has received
any notice or has any knowledge to the effect that it is not in full compliance
with any of the requirements of ERISA, the IRC or applicable state law with
respect to any Plan. No Reportable Event exists in connection with any Pension
Plan. Each Plan which is intended to qualify under the IRC is so qualified, and
no fact or circumstance exists which may have an adverse effect on the Plan's
tax-qualified status. Neither the Borrower nor any ERISA Affiliate has (i) any
accumulated funding deficiency (as defined in Section 302 of ERISA and Section
412 of the IRC) under any Plan, whether or not waived, (ii) any liability under
Section 4201 or 4243 of ERISA for any withdrawal, partial withdrawal,
reorganization or other event under any Multiemployer Plan or (iii) any
liability or knowledge of any facts or circumstances which could result in any
liability to the Pension Benefit Guaranty Corporation, the Internal Revenue
Service, the Department of Labor or any participant in connection with any Plan
(other than routine claims for benefits under the Plan).

     Section 5.13 Default. The Borrower is in compliance with all provisions of
all agreements, instruments, decrees and orders to which it is a party or by
which it or its property is bound or affected, the breach or default of which
could have a Material Adverse Effect.

     Section 5.14 Environmental Matters.

          (a) To the Borrower's best knowledge, there are not present in, on or
     under the Premises any Hazardous Substances in such form or quantity as to
     create any material liability or obligation for either the Borrower or the
     Lender under the common law of any jurisdiction or under any Environmental
     Law, and no Hazardous Substances have ever

                                       28

<PAGE>

     been stored, buried, spilled, leaked, discharged, emitted or released in,
     on or under the Premises in such a way as to create any such material
     liability.

          (b) To the Borrower's best knowledge, the Borrower has not disposed of
     Hazardous Substances in such a manner as to create any material liability
     under any Environmental Law.

          (c) Except as provided on Schedule 5.14, There are not and there never
     have been any requests, claims, notices, investigations, demands,
     administrative proceedings, hearings or litigation, relating in any way to
     the Premises owned by the Borrower or the Borrower, alleging material
     liability under, violation of, or noncompliance with any Environmental Law
     or any license, permit or other authorization issued pursuant thereto. To
     the Borrower's knowledge, there are not and there never have been any
     requests, claims, notices, investigations, demands, administrative
     proceedings, hearings or litigation, relating in any way to the Premises
     leased by the Borrower, alleging material liability under, violation of, or
     noncompliance with any Environmental Law or any license, permit or other
     authorization issued pursuant thereto. To the Borrower's best knowledge, no
     such matter is threatened or impending.

          (d) To the Borrower's best knowledge, the Borrower's businesses are
     and have in the past always been conducted in accordance with all
     Environmental Laws and all licenses, permits and other authorizations
     required pursuant to any Environmental Law and necessary for the lawful and
     efficient operation of such businesses are in the Borrower's possession and
     are in full force and effect. No permit required under any Environmental
     Law is scheduled to expire within 12 months and, to the Borrower's
     knowledge, there is no threat that any such permit will be withdrawn,
     terminated, limited or materially changed.

          (e) To the Borrower's best knowledge, the Premises are not and never
     have been listed on the National Priorities List, the Comprehensive
     Environmental Response, Compensation and Liability Information System or
     any similar federal, state or local list, schedule, log, inventory or
     database.

          (f) The Borrower has delivered to Lender all environmental
     assessments, audits, reports, permits, licenses and other documents
     describing or relating in any way to the Premises or Borrower's businesses.

     Section 5.15 Submissions to Lender. All financial and other information
provided to the Lender by or on behalf of the Borrower in connection with the
Borrower's request for the credit facilities contemplated hereby is (i) true and
correct in all material respects, (ii) does not omit any material fact necessary
to make such information not misleading and, (iii) as to projections, valuations
or proforma financial statements, present a good faith opinion as to such
projections, valuations and proforma condition and results.

     Section 5.16 Financing Statements. The Borrower has provided to the Lender
signed financing statements and has authorized the filing of financing
statements sufficient when filed to perfect the Security Interest and the other
security interests created by the Security

                                       29

<PAGE>

Documents. When such financing statements are filed in the offices noted
therein, the Lender will have a valid and perfected security interest in all
Collateral which is capable of being perfected by filing financing statements.
None of the Collateral is or will become a fixture on real estate, unless a
sufficient fixture filing is in effect with respect thereto.

     Section 5.17 Rights to Payment. Each right to payment and each instrument,
document, chattel paper and other agreement constituting or evidencing
Collateral is (or, in the case of all future Collateral, will be when arising or
issued) the valid, genuine and legally enforceable obligation, subject to no
defense, setoff or counterclaim, of the account debtor or other obligor named
therein or in the Borrower's records pertaining thereto as being obligated to
pay such obligation.

                                   ARTICLE VI

                                    COVENANTS

     So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing which consent
shall be given as determined by the Lender in its sole discretion in compliance
with applicable lender liability laws:

     Section 6.1 Reporting Requirements. The Borrower will deliver, or cause to
be delivered, to the Lender each of the following, which shall be in form and
detail acceptable to the Lender:

          (a) Annual Financial Statements. As soon as available, and in any
     event within 90 days after the end of each fiscal year of the Borrower, the
     Borrower will deliver, or cause to be delivered, to the Lender, the
     Borrower's audited financial statements with the unqualified opinion of
     independent certified public accountants selected by the Borrower and
     acceptable to the Lender, which annual financial statements shall include
     the Borrower's balance sheet as at the end of such fiscal year and the
     related statements of the Borrower's income, retained earnings and cash
     flows for the fiscal year then ended, prepared on a consolidated basis to
     include any Affiliates, all in reasonable detail and prepared in accordance
     with GAAP, together with (i) copies of all management letters prepared by
     such accountants; (ii) a report signed by such accountants stating that in
     making the investigations necessary for said opinion they obtained no
     knowledge, except as specifically stated, of any Default or Event of
     Default 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; and (iii) a certificate of the Borrower's chief
     financial officer stating that such financial statements have been prepared
     in accordance with GAAP and whether or not such Officer has knowledge of
     the occurrence of any Default or Event of Default and, if so, stating in
     reasonable detail the facts with respect thereto. As soon as available, and
     in any event within 90 days after the end of each fiscal year of the
     Borrower, the Borrower will deliver, or cause to be delivered, to the
     Lender, the Borrower's internally prepared financial statements for the
     Borrower's U.S. operations, prepared on a consolidating basis, which annual
     financial statements shall

                                       30

<PAGE>

     include the Borrower's balance sheet as at the end of such fiscal year and
     the related statements of the Borrower's income, retained earnings and cash
     flows for the fiscal year then ended, all in reasonable detail and prepared
     in accordance with GAAP, together with a certificate of the Borrower's
     chief financial officer stating that such financial statements have been
     prepared in accordance with GAAP and whether or not such Officer has
     knowledge of the occurrence of any Default or Event of Default and, if so,
     stating in reasonable detail the facts with respect thereto.

          (b) Monthly Financial Statements. As soon as available and in any
     event within 20 days after the end of each month, the Borrower will deliver
     to the Lender an unaudited/internal balance sheet and statements of income
     and retained earnings of the Borrower for the Borrower's U.S. operations as
     at the end of and for such month and for the year to date period then
     ended, prepared, if the Lender so requests, on a consolidated basis to
     include any Affiliates, in reasonable detail and stating in comparative
     form the figures for the corresponding date and periods in the previous
     year, all prepared in accordance with GAAP, subject to year-end audit
     adjustments; and accompanied by a certificate of the Borrower's chief
     financial officer, substantially in the form of Exhibit B hereto stating
     (i) that such financial statements have been prepared in accordance with
     GAAP, subject to year-end audit adjustments, (ii) whether or not such
     Officer has knowledge of the occurrence of any Default or Event of Default
     not theretofore reported and remedied and, if so, stating in reasonable
     detail the facts with respect thereto, and (iii) 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.

          (c) Quarterly Financial Statements. As soon as available and in any
     event within 45 days after the end of each month, the Borrower will deliver
     to the Lender an unaudited/internal balance sheet and statements of income
     and retained earnings of the Borrower for the Borrower's U.S. operations as
     at the end of and for such month and for the year to date period then
     ended, prepared on a consolidating basis, in reasonable detail and stating
     in comparative form the figures for the corresponding date and periods in
     the previous year, all prepared in accordance with GAAP, subject to
     year-end audit adjustments; and accompanied by a certificate of the
     Borrower's chief financial officer, stating that such financial statements
     have been prepared in accordance with GAAP, subject to year-end audit
     adjustments and whether or not such Officer has knowledge of the occurrence
     of any Default or Event of Default not theretofore reported and remedied
     and, if so, stating in reasonable detail the facts with respect thereto.

          (d) Collateral Reports. Within 15 days after the end of each month or
     more frequently if the Lender so requires, the Borrower will deliver to the
     Lender agings of the Borrower's accounts receivable and its accounts
     payable, an inventory certification report, a backlog report of sales
     orders backed by firm purchase orders, a calculation of the Borrower's
     Accounts, Eligible Accounts, Inventory and Eligible Inventory as at the end
     of such month or shorter time period and a Borrowing Base reconciliation
     report.

          (e) Projections. At least 30 days before the beginning of each fiscal
     year of the Borrower, the Borrower will deliver to the Lender the projected
     balance sheets and

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<PAGE>

     income statements for each month of such year, each in reasonable detail,
     representing the Borrower's good faith projections and certified by the
     Borrower's chief financial Officer as being the most accurate projections
     available and identical to the projections used by the Borrower for
     internal planning purposes, together with a statement of underlying
     assumptions and such supporting schedules and information as the Lender may
     in its discretion require.

          (f) Weekly Reports. Weekly or more frequently if the Lender so
     requires, the Borrower will deliver to the Lender all credit memos, sales
     reports, inventory reports listing inventory levels, receivables schedules,
     collection reports, copies of invoices to account debtors in excess of
     $250,000, shipment documents and delivery receipts for goods sold in excess
     of $250,000 and copies of all deposit slips.

          (g) Litigation. Reasonably promptly after the commencement thereof,
     the Borrower will deliver to the Lender notice in writing of all litigation
     and of all proceedings before any governmental or regulatory agency
     affecting the Borrower (i) of the type described in Section 5.14(c) or (ii)
     which seek a monetary recovery against the Borrower in excess of $50,000.

          (h) Defaults. As promptly as practicable (but in any event not later
     than five business days) after an Officer of the Borrower obtains knowledge
     of the occurrence of any Default or Event of Default, the Borrower will
     deliver to the Lender notice of such occurrence, together with a detailed
     statement by a responsible Officer of the Borrower of the steps being taken
     by the Borrower to cure the effect thereof.

          (i) Plans. As soon as possible, and in any event within 30 days after
     the Borrower knows or has reason to know that any Reportable Event with
     respect to any Pension Plan has occurred, the Borrower will deliver to the
     Lender a statement of the Borrower's chief financial Officer setting forth
     details as to such Reportable Event and the action which the Borrower
     proposes to take with respect thereto, together with a copy of the notice
     of such Reportable Event to the Pension Benefit Guaranty Corporation. As
     soon as possible, and in any event within 10 days after the Borrower fails
     to make any quarterly contribution required with respect to any Pension
     Plan under Section 412(m) of the IRC, the Borrower will deliver to the
     Lender a statement of the Borrower's chief financial Officer setting forth
     details as to such failure and the action which the Borrower proposes to
     take with respect thereto, together with a copy of any notice of such
     failure required to be provided to the Pension Benefit Guaranty
     Corporation. As soon as possible, and in any event within 10 days after the
     Borrower knows or has reason to know that it has or is reasonably expected
     to have any liability under Section 4201 or 4243 of ERISA for any
     withdrawal, partial withdrawal, reorganization or other event under any
     Multiemployer Plan, the Borrower will deliver to the Lender a statement of
     the Borrower's chief financial Officer setting forth details as to such
     liability and the action which the Borrower proposes to take with respect
     thereto.

          (j) Disputes. Promptly upon knowledge thereof, the Borrower will
     deliver to the Lender notice of (i) any disputes or claims by the
     Borrower's customers exceeding

                                       32

<PAGE>

     $50,000 individually or $100,000 in the aggregate during any fiscal year
     and (ii) any goods returned to or recovered by the Borrower.

          (k) Officers and Directors. Promptly upon knowledge thereof, the
     Borrower will deliver to the Lender notice any change in the persons
     constituting the Borrower's Officers and Directors.

          (l) Collateral. Promptly upon knowledge thereof, the Borrower will
     deliver to the Lender notice of any loss of or material damage to any
     Collateral or of any substantial adverse change in any Collateral or the
     prospect of payment thereof.

          (m) Commercial Tort Claims. Promptly upon knowledge thereof, the
     Borrower will deliver to the Lender notice of any commercial tort claims it
     may bring against any Person, including the name and address of each
     defendant, a summary of the facts, an estimate of the Borrower's damages,
     copies of any complaint or demand letter submitted by the Borrower, and
     such other information as the Lender may reasonably request.

          (n) Intellectual Property.

               (i) The Borrower will give the Lender 30 days prior written
          notice of its intent to acquire or to grant material Intellectual
          Property Rights and upon request shall provide the Lender with copies
          of all proposed documents and agreements concerning such rights.

               (ii) Promptly upon knowledge thereof, the Borrower will deliver
          to the Lender notice of (A) any Infringement of its Intellectual
          Property Rights by others, (B) claims that the Borrower is Infringing
          another Person's Intellectual Property Rights and (C) any threatened
          cancellation, termination or material limitation of its Intellectual
          Property Rights.

               (iii) Promptly upon receipt, the Borrower will give the Lender
          copies of all registrations and filings with respect to its
          Intellectual Property Rights.

          (o) Reports to Owners. Promptly upon their distribution, the Borrower
     will deliver to the Lender copies of all financial statements, reports and
     proxy statements which the Borrower shall have sent to its Owners.

          (p) SEC Filings. Promptly after the sending or filing thereof, the
     Borrower will deliver to the Lender copies of all regular and periodic
     reports which the Borrower shall file with the Securities and Exchange
     Commission or any national securities exchange.

          (q) Violations of Law. Promptly upon knowledge thereof, the Borrower
     will deliver to the Lender notice of the Borrower's violation of any law,
     rule or regulation, the non-compliance with which could have a Material
     Adverse Effect on the Borrower.

                                       33

<PAGE>

          (r) Other Reports. From time to time, with reasonable promptness, the
     Borrower will deliver to the Lender any and all deposit records, equipment
     schedules, copies of invoices to account debtors and such other material,
     reports, records or information as the Lender may request.

     Section 6.2 Financial Covenants.

          (a) Minimum Debt Service Coverage Ratio. The Borrower will maintain,
     during each period described below, its Debt Service Coverage Ratio for its
     U.S. operations, determined as at the end of each such period, at not less
     than the ratio set forth opposite such period (numbers appearing between "<
     >" are negative):

                                                    Minimum Debt Service
                Period                                 Coverage Ratio
                ------                                 --------------
The three months ending December 31, 2001               0.89 to 1.00
The three months ending March 31, 2002                 (0.21) to 1.00
The six months ending June 30, 2002                     0.14 to 1.00
The nine months ending September 30, 2002               0.79 to 1.00
The twelve months ending December 31, 2002              1.01 to 1.00

          (b) Minimum Book Net Worth. The Borrower will maintain, during each
     period described below, its Book Net Worth for its U.S. operations,
     determined as at the end of each month, at an amount not less than the
     amount set forth opposite such period (numbers appearing between "( )" are
     negative):

                   Period                                 Minimum Book Net Worth
                   ------                                 ----------------------
The calendar month ending October 31, 2001                      $15,261,000
The calendar month ending November 30, 2001                     $15,261,000
The calendar month ending December 31, 2001                     $15,261,000
The calendar month ending January 31, 2002                      $14,952,000
The calendar month ending February 28, 2002                     $14,952,000
The calendar month ending March 31, 2002                        $14,952,000
The calendar month ending April 30, 2002                        $14,952,000
The calendar month ending May 31, 2002                          $14,952,000
The calendar month ending June 30, 2002                         $15,335,000
The calendar month ending July 31, 2002                         $15,335,000
The calendar month ending August 31, 2002                       $15,335,000
The calendar month ending September 30, 2002                    $16,136,000
The calendar month ending October 31, 2002                      $16,136,000
The calendar month ending November 30, 2002                     $16,136,000
The calendar month ending December 31, 2002 and thereafter      $16,911,000

                                       34

<PAGE>

          (c) Minimum Net Income. The Borrower will achieve, during each period
     described below, Net Income for its U.S. operations, determined as at the
     end of each such period, of not less than the amount set forth opposite
     such period (numbers appearing between "( )" are negative):

                    Period                            Minimum Net Income
                    ------                            ------------------
The three months ending December 31, 2001                  ($165,000)
The three months ending March 31, 2002                     ($309,000)
The six months ending June 30, 2002                          $74,000
The nine months ending September 30, 2002                   $875,000
The twelve months ending December 31, 2002                 $1,650,000

          (d) Minimum Cash Balance plus Excess Availability. From and after
     September 30, 2002, during each calendar quarter, the sum of the Borrower's
     cash balance in its operating account held at Wells Fargo Bank West plus
     Availability, determined immediately after the Borrower has made a payment
     due to SNPE, Inc. under the SNPE Loan Agreement or the SNPE Note during
     such quarter, shall be at least $500,000.

          (e) Capital Expenditures. During the period from the date hereof to
     and including December 31, 2002, the Borrower will not incur or contract to
     incur Capital Expenditures of more than $2,150,000 in the aggregate.

          (f) New Financial Covenants. On or before December 31, 2002, the
     Borrower and the Lender shall agree on new covenant levels for this Section
     6.2 for periods after such date. The new covenant levels will be based on
     the Borrower's projections for such periods and shall be no less stringent
     than the present levels, but if the Borrower and the Lender do not agree,
     the Lender may designate the required amounts in its sole discretion, based
     on the Borrower's projections for such periods, and such covenants shall be
     no less stringent than the present levels. The failure by the Borrower to
     maintain such designated amounts shall constitute an Event of Default.

     Section 6.3 Permitted Liens; Financing Statements.

          (a) The Borrower will not create, incur or suffer to exist any Lien
     upon or of any of its assets, now owned or hereafter acquired, to secure
     any indebtedness; excluding, however, from the operation of the foregoing,
     the following (collectively, "Permitted Liens"):

               (i) in the case of any of the Borrower's property which is not
          Collateral, covenants, restrictions, rights, easements and minor
          irregularities in title which do not materially interfere with the
          Borrower's business or operations as presently conducted;

                                       35

<PAGE>

               (ii) Liens in existence on the date hereof and listed in Schedule
          6.3 hereto, securing indebtedness for borrowed money permitted under
          Section 6.4;

               (iii) the Security Interest and Liens created by the Security
          Documents;

               (iv) purchase money Liens relating to the acquisition of
          machinery and equipment of the Borrower not exceeding the lesser of
          cost or fair market value thereof, not exceeding $100,000 for any one
          purchase or $500,000 in the aggregate during any fiscal year, and so
          long as no Default Period is then in existence and none would exist
          immediately after such acquisition;

               (v) deposits or pledges of cash to secure obligations under
          worker's compensation, social security or similar laws, or under
          unemployment insurance;

               (vi) deposits or pledges of cash to secure bids, tenders,
          statutory obligations, surety and appeal bonds and other obligations
          of like nature arising in the ordinary course of the Borrower's
          business;

               (vii) mechanics', workers', materialmens' or other like liens
          arising in the ordinary course of the Borrower's business with respect
          to obligations which are not due or which are being contested in good
          faith by the Borrower; and

               (viii) present or future zoning laws and ordinances or other laws
          and ordinances restricting the occupancy, use or enjoyment of any real
          property.

          (b) The Borrower will not amend any financing statements in favor of
     the Lender except as permitted by law.

     Section 6.4 Indebtedness. The Borrower will not incur, create, assume or
permit to exist any indebtedness or liability on account of deposits or advances
or any indebtedness for borrowed money or letters of credit issued on the
Borrower's behalf, or any other indebtedness or liability evidenced by notes,
bonds, debentures or similar obligations, except:

          (a) indebtedness arising hereunder;

          (b) indebtedness of the Borrower in existence on the date hereof and
     listed in Schedule 6.4 hereto; and

          (c) indebtedness relating to Permitted Liens.

     Section 6.5 Guaranties. The Borrower will not assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with any
obligations of any other Person, except:

          (a) the endorsement of negotiable instruments by the Borrower for
     deposit or collection or similar transactions in the ordinary course of
     business; and

                                       36

<PAGE>

          (b) guaranties, endorsements and other direct or contingent
     liabilities in connection with the obligations of other Persons, in
     existence on the date hereof and listed in Schedule 6.4 hereto.

     Section 6.6 Investments and Subsidiaries. The Borrower will not purchase or
hold beneficially any stock or other securities or evidences of indebtedness of,
make or permit to exist any loans or advances to, or make any investment or
acquire any interest whatsoever in, any other Person, including any partnership
or joint venture, except:

          (a) investments in direct obligations of the United States of America
     or any agency or instrumentality thereof whose obligations constitute full
     faith and credit obligations of the United States of America having a
     maturity of one year or less, commercial paper issued by U.S. corporations
     rated "A-1" or "A-2" by Standard & Poor's Corporation or "P-1" or "P-2" by
     Moody's Investors Service or certificates of deposit or bankers'
     acceptances having a maturity of one year or less issued by members of the
     Federal Reserve System having deposits in excess of $100,000,000 (which
     certificates of deposit or bankers' acceptances are fully insured by the
     Federal Deposit Insurance Corporation);

          (b) travel advances or loans to the Borrower's Officers and employees
     not exceeding at any one time an aggregate of $100,000;

          (c) advances in the form of progress payments, prepaid rent not
     exceeding one month or security deposits; and

          (d) current investments in the Subsidiaries in existence on the date
     hereof and listed in Schedule 5.5 hereto.

     Section 6.7 Dividends and Distributions. During a Default Period, the
Borrower will not declare any dividends (other than dividends payable solely in
stock of the Borrower) on any class of its stock or make any payment on account
of the purchase, redemption or other retirement of any shares of such stock or
make any distribution in respect thereof, either directly or indirectly. The
Borrower will not pay any dividends (other than dividends payable solely in
stock of the Borrower) on any class of its stock or make any payment on account
of the purchase, redemption or other retirement of any shares of such stock or
make any distribution in respect thereof, either directly or indirectly;
provided, however, that, after December 31, 2002, if (i) no Default Period
exists immediately prior to and immediately after, (ii) average Availability is
more than $500,000 over the three month period immediately prior to, and (iii)
Availability would be more than $500,000 immediately after, such payment, the
Borrower may pay dividends on any class of its stock in an aggregate amount of
up to fifty percent (50%) of the preceding year's annual Net Income.

     Section 6.8 Salaries. The Borrower will not pay excessive or unreasonable
salaries, bonuses, commissions, consultant fees or other compensation.Section
6.9 Books and Records; Inspection and Examination. The Borrower will keep
accurate books of record and account for itself pertaining to the Collateral and
pertaining to the Borrower's business and financial condition and such other
matters as the Lender may from time to time request in which true and complete

                                       37

<PAGE>

entries will be made in accordance with GAAP and, upon the Lender's request,
will permit any officer, employee, attorney or accountant for the Lender to
audit, review, make extracts from or copy any and all company and financial
books and records of the Borrower at all times during ordinary business hours,
to send and discuss with account debtors and other obligors requests for
verification of amounts owed to the Borrower, and to discuss the Borrower's
affairs with any of its Directors, Officers, employees or agents. The Borrower
hereby irrevocably authorizes all accountants and third parties to disclose and
deliver to Lender, at the Borrower's expense, all financial information, books
and records, work papers, management reports and other information in their
possession regarding the Borrower. The Borrower will permit the Lender, or its
employees, accountants, attorneys or agents, to examine and inspect any
Collateral or any other property of the Borrower at any time during ordinary
business hours.

     Section 6.10 Account Verification. The Lender may at any time and from time
to time send or require the Borrower to send requests for verification of
accounts or notices of assignment to account debtors and other obligors. The
Lender may also at any time and from time to time telephone account debtors and
other obligors to verify accounts.

     Section 6.11 Compliance with Laws.

          (a) The Borrower will (i) comply with the requirements of applicable
     laws and regulations, the non-compliance with which would materially and
     adversely affect its business or its financial condition and (ii) use and
     keep the Collateral, and require that others use and keep the Collateral,
     only for lawful purposes, without violation of any federal, state or local
     law, statute or ordinance.

          (b) Without limiting the foregoing undertakings, the Borrower
     specifically agrees that it will comply with all applicable Environmental
     Laws and obtain and comply with all permits, licenses and similar approvals
     required by any Environmental Laws, and will not generate, use, transport,
     treat, store or dispose of any Hazardous Substances in such a manner as to
     create any material liability or obligation under the common law of any
     jurisdiction or any Environmental Law.

     Section 6.12 Payment of Taxes and Other Claims. The Borrower will pay or
discharge, when due, (a) all taxes, assessments and governmental charges levied
or imposed upon it or upon its income or profits, upon any properties belonging
to it (including the Collateral) or upon or against the creation, perfection or
continuance of the Security Interest, prior to the date on which penalties
attach thereto, (b) all federal, state and local taxes required to be withheld
by it, and (c) all lawful claims for labor, materials and supplies which, if
unpaid, might by law become a Lien upon any properties of the Borrower;
provided, that the Borrower shall not be required to pay any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which proper reserves
have been made.

     Section 6.13 Maintenance of Properties.

          (a) The Borrower will keep and maintain the Collateral and all of its
     other properties necessary or useful in its business in good condition,
     repair and working order

                                       38

<PAGE>

     (normal wear and tear excepted) and will from time to time replace or
     repair any worn, defective or broken parts; provided, however, that nothing
     in this Section 6.13 shall prevent the Borrower from discontinuing the
     operation and maintenance of any of its properties if such discontinuance
     is, in the Borrower's judgment, desirable in the conduct of the Borrower's
     business and not disadvantageous in any material respect to the Lender. The
     Borrower will take all commercially reasonable steps necessary to protect
     and maintain its Intellectual Property Rights.

          (b) The Borrower will defend the Collateral against all Liens, claims
     or demands of all Persons (other than the Lender) claiming the Collateral
     or any interest therein. The Borrower will keep all Collateral free and
     clear of all Liens except Permitted Liens. The Borrower will take all
     commercially reasonable steps necessary to prosecute any Person Infringing
     its Intellectual Property Rights and to defend itself against any Person
     accusing it of Infringing any Person's Intellectual Property Rights.

     Section 6.14 Insurance. The Borrower will obtain and at all times maintain
insurance with insurers believed by the Borrower to be responsible and
reputable, in such amounts and against such risks as may from time to time be
required by the Lender, but in all events in such amounts and against such risks
as is usually carried by companies engaged in similar business and owning
similar properties in the same general areas in which the Borrower operates.
Without limiting the generality of the foregoing, the Borrower will at all times
keep all tangible Collateral insured against risks of fire (including so-called
extended coverage), theft, collision (for Collateral consisting of motor
vehicles) and such other risks and in such amounts as the Lender may reasonably
request, with any loss payable to the Lender to the extent of its interest, and
all policies of such insurance shall contain a lender's loss payable endorsement
for the Lender's benefit. All policies of liability insurance required hereunder
shall name the Lender as an additional insured.

     Section 6.15 Preservation of Existence. The Borrower will preserve and
maintain its existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business and shall conduct
its business in an orderly, efficient and regular manner.

     Section 6.16 Delivery of Instruments, etc. Upon request by the Lender, the
Borrower will promptly deliver to the Lender in pledge all instruments,
documents and chattel paper constituting Collateral, duly endorsed or assigned
by the Borrower.

     Section 6.17 Sale or Transfer of Assets; Suspension of Business Operations.
The Borrower will not sell, lease, assign, transfer or otherwise dispose of (i)
the stock of any Subsidiary, (ii) all or a substantial part of its assets, or
(iii) any Collateral or any interest therein (whether in one transaction or in a
series of transactions) to any other Person other than (i) the sale of Inventory
in the ordinary course of business and (ii) the sale of obsolete or worn out
Equipment. The Borrower will not liquidate, dissolve or suspend business
operations. The Borrower will not transfer any part of its ownership interest in
any Intellectual Property Rights and will not permit any agreement under which
it has licensed Licensed Intellectual Property to lapse, except that the
Borrower may transfer such rights or permit such agreements to lapse if it shall
have reasonably determined that the applicable Intellectual Property Rights are
no longer

                                       39

<PAGE>

useful in its business. If the Borrower transfers any Intellectual Property
Rights for value, the Borrower will pay over the proceeds to the Lender for
application to the Obligations. The Borrower will not license any other Person
to use any of the Borrower's Intellectual Property Rights, except that the
Borrower may grant licenses in the ordinary course of its business in connection
with sales of Inventory or provision of services to its customers.

     Section 6.18 Consolidation and Merger; Asset Acquisitions. The Borrower
will not consolidate with or merge into any Person, or permit any other Person
to merge into it, or acquire (in a transaction analogous in purpose or effect to
a consolidation or merger) all or substantially all the assets of any other
Person.

     Section 6.19 Sale and Leaseback. The Borrower will not enter into any
arrangement, directly or indirectly, with any other Person whereby the Borrower
shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which the Borrower intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.

     Section 6.20 Restrictions on Nature of Business. The Borrower will not
engage in any line of business materially different from that presently engaged
in by the Borrower and will not purchase, lease or otherwise acquire assets not
related to its business.

     Section 6.21 Accounting. The Borrower will not adopt any material change in
accounting principles other than as required by GAAP. The Borrower will not
adopt, permit or consent to any change in its fiscal year.

     Section 6.22 Discounts, etc. The Borrower will not grant any discount,
credit or allowance to any customer of the Borrower or accept any return of
goods sold other than in the ordinary course of business; provided, however,
that the Borrower will not grant any discount, credit or allowance to any
customer of the Borrower or accept any return of goods sold during a Default
Period. The Borrower will not at any time modify, amend, subordinate, cancel or
terminate the obligation of any account debtor or other obligor of the Borrower
other than in the ordinary course of business; provided, however, that the
Borrower will not modify, amend, subordinate, cancel or terminate the obligation
of any account debtor or other obligor of the Borrower during a Default Period.

     Section 6.23 Plans. Unless disclosed to the Lender pursuant to Section
5.12, neither the Borrower nor any ERISA Affiliate will (i) adopt, create,
assume or become a party to any Pension Plan, (ii) incur any obligation to
contribute to any Multiemployer Plan, (iii) incur any obligation to provide
post-retirement medical or insurance benefits with respect to employees or
former employees (other than benefits required by law) or (iv) amend any Plan in
a manner that would materially increase its funding obligations.

     Section 6.24 Place of Business; Name. The Borrower will not transfer its
chief executive office or principal place of business, or move, relocate, close
or sell any business location. The Borrower will not permit any tangible
Collateral or any records pertaining to the Collateral to be located in any
state or area in which, in the event of such location, a financing

                                       40

<PAGE>

statement covering such Collateral would be required to be, but has not in fact
been, filed in order to perfect the Security Interest. The Borrower will not
change its name or jurisdiction of organization.

     Section 6.25 Constituent Documents; S Corporation Status. The Borrower will
not amend its Constituent Documents. The Borrower will not become an S
Corporation.

     Section 6.26 Performance by the Lender. If the Borrower at any time fails
to perform or observe any of the foregoing covenants contained in this Article
VI or elsewhere herein, and if such failure shall continue for a period of ten
calendar days after the Lender gives the Borrower written notice thereof (or in
the case of the agreements contained in Sections 6.12 and 6.14, immediately upon
the occurrence of such failure, without notice or lapse of time), the Lender
may, but need not, perform or observe such covenant on behalf and in the name,
place and stead of the Borrower (or, at the Lender's option, in the Lender's
name) and may, but need not, take any and all other actions which the Lender may
reasonably deem necessary to cure or correct such failure (including the payment
of taxes, the satisfaction of Liens, the performance of obligations owed to
account debtors or other obligors, the procurement and maintenance of insurance,
the execution of assignments, security agreements and financing statements, and
the endorsement of instruments); and the Borrower shall thereupon pay to the
Lender on demand the amount of all monies expended and all costs and expenses
(including reasonable attorneys' fees and legal expenses) incurred by the Lender
in connection with or as a result of the performance or observance of such
agreements or the taking of such action by the Lender, together with interest
thereon from the date expended or incurred at the Default Rate. To facilitate
the Lender's performance or observance of such covenants of the Borrower, the
Borrower hereby irrevocably appoints the Lender, or the Lender's delegate,
acting alone, as the Borrower's attorney in fact (which appointment is coupled
with an interest) with the right (but not the duty) from time to time to create,
prepare, complete, execute, deliver, endorse or file in the name and on behalf
of the Borrower any and all instruments, documents, assignments, security
agreements, financing statements, applications for insurance and other
agreements and writings required to be obtained, executed, delivered or endorsed
by the Borrower under this Section 6.26.

     Section 6.27 SNPE. The Borrower will not amend or modify or permit the
amendment or modification of the SNPE Note or the SNPE Loan Agreement, each
dated as of July 3, 2001.

                                  ARTICLE VII

                     EVENTS OF DEFAULT, RIGHTS AND REMEDIES

     Section 7.1 Events of Default. "Event of Default", wherever used herein,
means any one of the following events:

          (a) Default in the payment of any Obligations when they become due and
     payable;

          (b) Default in the performance, or breach, of any covenant or
     agreement of the Borrower contained in this Agreement;

                                       41

<PAGE>

          (c) A Change of Control shall occur;

          (d) The Borrower or any Guarantor shall be or become insolvent, or
     admit in writing its or his inability to pay its or his debts as they
     mature, or make an assignment for the benefit of creditors; or the Borrower
     or any Guarantor shall apply for or consent to the appointment of any
     receiver, trustee, or similar officer for it or him or for all or any
     substantial part of its or his property; or such receiver, trustee or
     similar officer shall be appointed without the application or consent of
     the Borrower or such Guarantor, as the case may be; or the Borrower or any
     Guarantor shall institute (by petition, application, answer, consent or
     otherwise) any bankruptcy, insolvency, reorganization, arrangement,
     readjustment of debt, dissolution, liquidation or similar proceeding
     relating to it or him under the laws of any jurisdiction; or any such
     proceeding shall be instituted (by petition, application or otherwise)
     against the Borrower or any such Guarantor; or any judgment, writ, warrant
     of attachment or execution or similar process shall be issued or levied
     against a substantial part of the property of the Borrower or any
     Guarantor;

          (e) A petition shall be filed by or against the Borrower or any
     Guarantor under the United States Bankruptcy Code naming the Borrower or
     such Guarantor as debtor;

          (f) Any representation or warranty made by the Borrower in this
     Agreement, by any Guarantor in any guaranty delivered to the Lender, or by
     the Borrower (or any of its Officers) or any Guarantor in any agreement,
     certificate, instrument or financial statement or other statement
     contemplated by or made or delivered pursuant to or in connection with this
     Agreement or any such guaranty shall prove to have been incorrect in any
     material respect when deemed to be effective;

          (g) The rendering against the Borrower of an arbitration award, final
     judgment, decree or order for the payment of money in excess of $200,000
     and the continuance of such arbitration award, judgment, decree or order
     unsatisfied and in effect for any period of 30 consecutive days without a
     stay of execution;

          (h) A default under any bond, debenture, note or other evidence of
     material indebtedness of the Borrower owed to any Person other than the
     Lender, including without limitation SNPE, Inc., or under any indenture or
     other instrument under which any such evidence of indebtedness has been
     issued or by which it is governed, or under any material lease or other
     contract, and the expiration of the applicable period of grace, if any,
     specified in such evidence of indebtedness, indenture, other instrument,
     lease or contract;

          (i) Any demand, receipt or acceptance of any payment (whether of
     principal, interest or otherwise) by SNPE, Inc. from the Borrower in
     respect of the SNPE Indebtedness, or the exercise of any right of setoff in
     respect of the SNPE Indebtedness, other than scheduled payments (but not
     prepayments) of principal and interest required to be paid under the SNPE
     Note; or a default under the Convertible Subordinated Note,

                                       42

<PAGE>

     dated June 14, 2000 by the Borrower in favor of SNPE, Inc., by either the
     Borrower or SNPE, Inc.

          (j) Any Reportable Event, which the Lender determines in good faith
     might constitute grounds for the termination of any Pension Plan or for the
     appointment by the appropriate United States District Court of a trustee to
     administer any Pension Plan, shall have occurred and be continuing 30 days
     after written notice to such effect shall have been given to the Borrower
     by the Lender; or a trustee shall have been appointed by an appropriate
     United States District Court to administer any Pension Plan; or the Pension
     Benefit Guaranty Corporation shall have instituted proceedings to terminate
     any Pension Plan or to appoint a trustee to administer any Pension Plan; or
     the Borrower or any ERISA Affiliate shall have filed for a distress
     termination of any Pension Plan under Title IV of ERISA; or the Borrower or
     any ERISA Affiliate shall have failed to make any quarterly contribution
     required with respect to any Pension Plan under Section 412(m) of the IRC,
     which the Lender determines in good faith may by itself, or in combination
     with any such failures that the Lender may determine are likely to occur in
     the future, result in the imposition of a Lien on the Borrower's assets in
     favor of the Pension Plan; or any withdrawal, partial withdrawal,
     reorganization or other event occurs with respect to a Multiemployer Plan
     which results or could reasonably be expected to result in a material
     liability of the Borrower to the Multiemployer Plan under Title IV of
     ERISA;

          (k) An event of default shall occur under any Security Document;

          (l) The Borrower shall liquidate, dissolve, terminate or suspend its
     business operations or otherwise fail to operate its business in the
     ordinary course, or sell or attempt to sell all or substantially all of its
     assets, without the Lender's prior written consent;

          (m) Default in the payment of any amount owed by the Borrower to the
     Lender other than any indebtedness arising hereunder;

          (n) Any Guarantor or person signing a support agreement in favor of
     the Lender shall repudiate, purport to revoke or fail to perform his or its
     obligations under such guaranty or support agreement in favor of the
     Lender, any individual Guarantor shall die or any other Guarantor shall
     cease to exist;

          (o) Any person who has executed a support agreement in connection with
     the Credit Facility shall die, become mentally or physically incapacitated,
     or cease to be employed by the Borrower; provided, however, that such
     occurrence shall not constitute an Event of Default if within 60 days of
     such occurrence (i) the Borrower employs a replacement acceptable to the
     Lender in its sole discretion and (ii) such replacement executes a support
     agreement substantially in the form of the agreement executed by the person
     so replaced; or

          (p) Any breach, default or event of default by or attributable to any
     Affiliate under any agreement between such Affiliate and the Lender shall
     occur.

                                       43

<PAGE>

     Section 7.2 Rights and Remedies. During any Default Period, the Lender may
exercise any or all of the following rights and remedies:

          (a) the Lender may, by notice to the Borrower, declare the Commitment
     to be terminated, whereupon the same shall forthwith terminate;

          (b) the Lender may, by notice to the Borrower, declare the Obligations
     to be forthwith due and payable, whereupon all Obligations shall become and
     be forthwith due and payable, without presentment, notice of dishonor,
     protest or further notice of any kind, all of which the Borrower hereby
     expressly waives;

          (c) the Lender may, without notice to the Borrower and without further
     action, apply any and all money owing by the Lender to the Borrower to the
     payment of the Obligations;

          (d) the Lender may exercise and enforce any and all rights and
     remedies available upon default to a secured party under the UCC, including
     the right to take possession of Collateral, or any evidence thereof,
     proceeding without judicial process or by judicial process (without a prior
     hearing or notice thereof, which the Borrower hereby expressly waives) and
     the right to sell, lease or otherwise dispose of any or all of the
     Collateral (with or without giving any warranties as to the Collateral,
     title to the Collateral or similar warranties), and, in connection
     therewith, the Borrower will on demand assemble the Collateral and make it
     available to the Lender at a place to be designated by the Lender which is
     reasonably convenient to both parties;

          (e) the Lender may make demand upon the Borrower and, forthwith upon
     such demand, the Borrower will pay to the Lender in immediately available
     funds for deposit in the Special Account pursuant to Section 2.13 an amount
     equal to the aggregate maximum amount available to be drawn under all
     Letters of Credit then outstanding, assuming compliance with all conditions
     for drawing thereunder;

          (f) the Lender may exercise and enforce its rights and remedies under
     the Loan Documents; and

          (g) the Lender may exercise any other rights and remedies available to
     it by law or agreement.

Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (d) or (e) of Section 7.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind. If the Lender sells any of the Collateral on credit, the
Obligations will be reduced only to the extent of payments actually received. If
the purchaser fails to pay for the Collateral, the Lender may resell the
Collateral and shall apply any proceeds actually received to the Obligations.

     Section 7.3 Certain Notices. If notice to the Borrower of any intended
disposition of Collateral or any other intended action is required by law in a
particular instance, such notice

                                       44

<PAGE>

shall be deemed commercially reasonable if given (in the manner specified in
Section 8.3) at least ten calendar days before the date of intended disposition
or other action.

                                  ARTICLE VIII

                                  MISCELLANEOUS

     Section 8.1 No Waiver; Cumulative Remedies; Compliance with Laws. No
failure or delay by the Lender in exercising any right, power or remedy under
the Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
under the Loan Documents. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law. The Lender may
comply with any applicable state or federal law requirements in connection with
a disposition of the Collateral and such compliance will not be considered
adversely to affect the commercial reasonableness of any sale of the Collateral.

     Section 8.2 Amendments, Etc. No amendment, modification, termination or
waiver of any provision of any Loan Document or consent to any departure by the
Borrower therefrom or any release of a Security Interest shall be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.

     Section 8.3 Addresses for Notices; Requests for Accounting. Except as
otherwise expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United States mail,
(c) sent by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed or telecopied to the party to whom notice is
being given at its address or telecopier number as set forth below next to its
signature or, as to each party, at such other address or telecopier number as
may hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if delivered by overnight courier, or (d)
the date of transmission if delivered by telecopy, except that notices or
requests delivered to the Lender pursuant to any of the provisions of Article II
shall not be effective until received by the Lender. All requests under Section
9-210 of the UCC (i) shall be made in a writing signed by a Person authorized
under Section 2.2(a), (ii) shall be personally delivered, sent by registered or
certified mail, return receipt requested, or by overnight courier of national
reputation, (iii) shall be deemed to be sent when received by the Lender and
(iv) shall otherwise comply with the requirements of Section 9-210. The Borrower
requests that the Lender respond to all such requests which on their face appear
to come from an authorized individual and releases the Lender from any liability
for so responding. The Borrower shall pay the Lender the maximum amount allowed
by law for responding to such requests.

                                       45

<PAGE>

     Section 8.4 Further Documents. The Borrower will from time to time execute,
deliver, endorse and authorize the filing of any and all instruments, documents,
conveyances, assignments, security agreements, financing statements, control
agreements and other agreements and writings that the Lender may reasonably
request in order to secure, protect, perfect or enforce the Security Interest or
the Lender's rights under the Loan Documents (but any failure to request or
assure that the Borrower executes, delivers, endorses or authorizes the filing
of any such item shall not affect or impair the validity, sufficiency or
enforceability of the Loan Documents and the Security Interest, regardless of
whether any such item was or was not executed, delivered or endorsed in a
similar context or on a prior occasion).

     Section 8.5 Costs and Expenses. The Borrower shall pay on demand all costs
and expenses, including reasonable attorneys' fees, incurred by the Lender in
connection with the Obligations, this Agreement, the Loan Documents, any Letter
of Credit and any other document or agreement related hereto or thereto, and the
transactions contemplated hereby, including all such costs, expenses and fees
incurred in connection with the negotiation, preparation, execution, amendment,
administration, performance, collection and enforcement of the Obligations and
all such documents and agreements and the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interest.

     Section 8.6 Indemnity. In addition to the payment of expenses pursuant to
Section 8.5, the Borrower shall indemnify, defend and hold harmless the Lender,
and any of its participants, parent corporations, subsidiary corporations,
affiliated corporations, successor corporations, and all present and future
officers, directors, employees, attorneys and agents of the foregoing (the
"Indemnitees") from and against any of the following (collectively, "Indemnified
Liabilities"):

               (i) any and all transfer taxes, documentary taxes, assessments or
          charges made by any governmental authority by reason of the execution
          and delivery of the Loan Documents or the making of the Revolving
          Advances;

               (ii) any claims, loss or damage to which any Indemnitee may be
          subjected if any representation or warranty contained in Section 5.14
          proves to be incorrect in any respect or as a result of any violation
          of the covenant contained in Section 6.11(b); and

               (iii) any and all other liabilities, losses, damages, penalties,
          judgments, suits, claims, costs and expenses of any kind or nature
          whatsoever (including the reasonable fees and disbursements of
          counsel) in connection with the foregoing and any other investigative,
          administrative or judicial proceedings, whether or not such Indemnitee
          shall be designated a party thereto, which may be imposed on, incurred
          by or asserted against any such Indemnitee, in any manner related to
          or arising out of or in connection with the making of the Revolving
          Advances and the Loan Documents or the use or intended use of the
          proceeds of the Revolving Advances.

                                       46

<PAGE>

If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrower's sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's obligation
under this Section 8.6 shall survive the termination of this Agreement and the
discharge of the Borrower's other obligations hereunder.

     Section 8.7 Participants. The Lender and its participants, if any, are not
partners or joint venturers, and the Lender shall not have any liability or
responsibility for any obligation, act or omission of any of its participants.
All rights and powers specifically conferred upon the Lender may be transferred
or delegated to any of the Lender's participants, successors or assigns.

     Section 8.8 Execution in Counterparts; Telefacsimile Execution. This
Agreement and other Loan Documents may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts, taken together, shall constitute but
one and the same instrument. Delivery of an executed counterpart of this
Agreement by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.

     Section 8.9 Retention of Borrower's Records. The Lender shall have no
obligation to maintain any electronic records or any documents, schedules,
invoices, agings, or other papers delivered to the Lender by the Borrower or in
connection with the Loan Documents for more than four months after receipt by
the Lender.

     Section 8.10 Binding Effect; Assignment; Complete Agreement; Exchanging
Information. The Loan Documents shall be binding upon and inure to the benefit
of the Borrower and the Lender and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
To the extent permitted by law, the Borrower waives and will not assert against
any assignee any claims, defenses or set-offs which the Borrower could assert
against the Lender. This Agreement shall also bind all Persons who become a
party to this Agreement as a borrower. This Agreement, together with the Loan
Documents, comprises the complete and integrated agreement of the parties on the
subject matter hereof and supersedes all prior agreements, written or oral, on
the subject matter hereof. Without limiting the Lender's right to share
information regarding the Borrower and its Affiliates with the Lender's
participants, accountants, lawyers and other advisors, the Lender, Wells Fargo &
Company, and all direct and indirect subsidiaries of Wells Fargo & Company, may
exchange any and all information they may have in their possession regarding the
Borrower and its Affiliates, and the Borrower waives

                                       47

<PAGE>

any right of confidentiality it may have with respect to such exchange of such
information except with respect to any such exchange in violation of the
Lender's internal confidentiality policy.

     Section 8.11 Severability of Provisions. Any provision of this Agreement
which is prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.

     Section 8.12 Headings. Article, Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.

     Section 8.13 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial. The
Loan Documents shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Colorado. The
parties hereto hereby (i) consent to the personal jurisdiction of the state and
federal courts located in the State of Colorado in connection with any
controversy related to this Agreement; (ii) waive any argument that venue in any
such forum is not convenient, (iii) agree that any litigation initiated by the
Lender or the Borrower in connection with this Agreement or the other Loan
Documents may be venued in either the state or federal courts located in the
City and County of Denver, Colorado and (iv) agree that a final judgment in any
such suit, action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
ON OR PERTAINING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       48

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.

Dynamic Materials Corporation                Dynamic Materials COrporation
5405 Spine Road
Boulder, CO  80301                           By: _______________________________
Telecopier:  (303) 604-1897                       Richard Santa
Attention:  Richard Santa                         Its Vice President,
e-mail:  rsanta@dynamicmaterials.com                   Chief Financial Officer
                                                       and Secretary
Wells Fargo Business Credit, Inc.            WELLS FARGO BUSINESS CREDIT, INC.
MAC-C7300-300
1740 Broadway
Denver, Colorado  80274                      By: _______________________________
Telecopier:  (303) 863-4904                       Martin E. Tracy
Attention:  Martin E. Tracy                       Its Commercial Banking Officer
e-mail:  martin.e.tracy@wellsfargo.com

                                       49

<PAGE>

                         Table of Exhibits and Schedules

      Exhibit A         Form of Note

      Exhibit B         Compliance Certificate

      Exhibit C         Premises

      Schedule 5.1      Trade Names, Chief Executive Office, Principal Place of
                        Business, and Locations of Collateral

      Schedule 5.2      Capitalization and Organizational Chart

      Schedule 5.5      Subsidiaries

      Schedule 5.11     Intellectual Property Disclosures

      Schedule 5.14     Environmental Matters

      Schedule 6.3      Permitted Liens

      Schedule 6.4      Permitted Indebtedness and Guaranties

<PAGE>

                                      Exhibit A to Credit and Security Agreement

                                 REVOLVING NOTE

$6,000,000                                                      Denver, Colorado
                                                                December 4, 2001

     For value received, the undersigned, DYNAMIC MATERIALS CORPORATION, a
Delaware corporation (the "Borrower"), hereby promises to pay on the Termination
Date under the Credit Agreement (defined below), to the order of WELLS FARGO
BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"), at its main
office in Denver, Colorado, or at any other place designated at any time by the
holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Six Million Dollars
($6,000,000) or, if less, the aggregate unpaid principal amount of all Revolving
Advances made by the Lender to the Borrower under the Credit Agreement (defined
below) together with interest on the principal amount hereunder remaining unpaid
from time to time, computed on the basis of the actual number of days elapsed
and a 360-day year, from the date hereof until this Note is fully paid at the
rate from time to time in effect under the Credit and Security Agreement of even
date herewith (the "Credit Agreement") by and between the Lender and the
Borrower. The principal hereof and interest accruing thereon shall be due and
payable as provided in the Credit Agreement. This Note may be prepaid only in
accordance with the Credit Agreement.

     This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Note referred to in the Credit Agreement. This Note is secured, among other
things, pursuant to the Credit Agreement and the Security Documents as therein
defined, and may now or hereafter be secured by one or more other security
agreements, mortgages, deeds of trust, assignments or other instruments or
agreements.

     The Borrower shall pay all costs of collection, including attorneys' fees
and legal expenses if this Note is not paid when due, whether or not legal
proceedings are commenced.

     Presentment or other demand for payment, notice of dishonor and protest are
expressly waived.

                               DYNAMIC MATERIALS CORPORATION

                               By:
                                   -----------------------------------
                                   Name: Richard Santa
                                   Its:  Vice President, Chief Financial Officer
                                         and Secretary

                                      A-1

<PAGE>

                                      Exhibit B to Credit and Security Agreement

                             Compliance Certificate

To:       Martin E. Tracy
          Wells Fargo Business Credit, Inc.

Date:     __________________, 200___

Subject:  Dynamic Materials Corporation
          Financial Statements

          In accordance with our Credit and Security Agreement dated as of
December 4, 2001 (the "Credit Agreement"), attached are the financial statements
of Dynamic Materials Corporation (the "Borrower") as of and for ______________,
200__ (the "Reporting Date") and the year-to-date period then ended (the
"Current Financials"). All terms used in this certificate have the meanings
given in the Credit Agreement.

          I certify that the Current Financials have been prepared in accordance
with GAAP, subject to year-end audit adjustments, and fairly present the
Borrower's financial condition as of the date thereof.

          Events of Default. (Check one):

          |_| The undersigned does not have knowledge of the occurrence of a
          Default or Event of Default under the Credit Agreement except as
          previously reported in writing to the Lender.

          |_| The undersigned has knowledge of the occurrence of a Default or
          Event of Default under the Credit Agreement not previously reported in
          writing to the Lender and attached hereto is a statement of the facts
          with respect to thereto. The Borrower acknowledges that pursuant to
          Section 2.8(c) of the Credit Agreement, the Lender may impose the
          Default Rate at any time during the resulting Default Period.

          Financial Covenants. I further hereby certify as follows:

     1. Minimum Debt Service Coverage Ratio. Pursuant to Section 6.2(a) of the
Credit Agreement, as of the Reporting Date, the Borrower's Debt Service Coverage
Ratio was _____ to 1.00 which |_| satisfies |_| does not satisfy the requirement
that such ratio be no less than ______ to 1.00 on the Reporting Date as set
forth in table below (numbers appearing between "< >" are negative):

                                      B-1

<PAGE>

                                                         Minimum Debt Service
            Period                                          Coverage Ratio
            ------                                          --------------
The three months ending December 31, 2001                    0.89 to 1.00
The three months ending March 31, 2002                     (0.21) to 1.00
The six months ending June 30, 2002                          0.14 to 1.00
The nine months ending September 30, 2002                    0.79 to 1.00
The twelve months ending December 31, 2002                   1.01 to 1.00

     2. Minimum Book Net Worth. Pursuant to Section 6.2(b) of the Credit
Agreement, as of the Reporting Date, the Borrower's Book Net Worth was
$____________ which |_| satisfies |_| does not satisfy the requirement that such
amount be not less than $_____________ on the Reporting Date as set forth in
table below (numbers appearing between "( )" are negative):

                 Period                                   Minimum Book Net Worth
                 ------                                   ----------------------
The calendar month ending October 31, 2001                      $15,261,000
The calendar month ending November 30, 2001                     $15,261,000
The calendar month ending December 31, 2001                     $15,261,000
The calendar month ending January 31, 2002                      $14,952,000
The calendar month ending February 28, 2002                     $14,952,000
The calendar month ending March 31, 2002                        $14,952,000
The calendar month ending April 30, 2002                        $14,952,000
The calendar month ending May 31, 2002                          $14,952,000
The calendar month ending June 30, 2002                         $15,335,000
The calendar month ending July 31, 2002                         $15,335,000
The calendar month ending August 31, 2002                       $15,335,000
The calendar month ending September 30, 2002                    $16,136,000
The calendar month ending October 31, 2002                      $16,136,000
The calendar month ending November 30, 2002                     $16,136,000
The calendar month ending December 31, 2002 and thereafter      $16,911,000

     3. Minimum Net Income. Pursuant to Section 6.2(c) of the Credit Agreement,
the Borrower's Net Income for the ________ period ending on the Reporting Date,
was $____________, which |_| satisfies |_| does not satisfy the requirement that
such amount be not less than $_____________ during such period as set forth in
table below period (numbers appearing between "( )" are negative):

                                      B-2

<PAGE>

                  Period                                      Minimum Net Income
The three months ending December 31, 2001                        ($165,000)
The three months ending March 31, 2002                           ($309,000)
The six months ending June 30, 2002                                $74,000
The nine months ending September 30, 2002                         $875,000
The twelve months ending December 31, 2002                      $1,650,000

     4. Minimum Cash Balance plus Excess Availability. Pursuant to Section
6.2(d) of the Credit Agreement, for the ________ period ending on the Reporting
Date, the sum of the Borrower's cash balance in its operating account held at
Wells Fargo Bank West plus Availability, determined immediately after the
Borrower made the debt payment due to SNPE, Inc. during such quarter, was
$____________, which |_| satisfies |_| does not satisfy the requirement that
such amount be not less than $500,000.

     5. Capital Expenditures. Pursuant to Section 6.2(e) of the Credit
Agreement, during the period from December 4, 2001, to and ending on the
Reporting Date, the Borrower has expended or contracted to expend during the
period ended ______________, 200___, for Capital Expenditures,
$__________________ in the aggregate which |_| satisfies |_| does not satisfy
the requirement that such expenditures not exceed $2,150,000 in the aggregate.

     Attached hereto are all relevant facts in reasonable detail to evidence,
and the computations of the financial covenants referred to above. These
computations were made in accordance with GAAP.

                                        DYNAMIC MATERIALS CORPORATION

                                        By:
                                           -------------------------------------
                                           Its Chief Financial Officer

                                      B-3

<PAGE>

                                         Exhibit C Credit and Security Agreement

                                    Premises

     The Premises referred to in the Credit and Security Agreement are legally
described as follows:

Owned Real Property

Description                Address                           Original Deed Date
--------------------------------------------------------------------------------
Mt. Braddock, PA Plant     1138 Industrial Park Drive        September 22, 1998
                           Mount Braddock, PA 15465

Legal Description:

          All that certain piece, parcel or tract of land situate in North Union
          Township, Fayette County, Pennsylvania known as Lot No. 13 in a
          Resubdivision of Industrial Park No. 1, Mount Braddock, the same
          appearing of record in the Office of the Recorder of Deeds for Fayette
          County, Pennsylvania, in Plan Book No. 31, page 76.

AMK Welding                283 Sullivan Ave                  January 5, 1998
                           South Windsor, CT 06074

Legal Description:

          Known as No. 283 Sullivan Avenue; Northerly by Sullivan Avenue 190.24
          feet; Easterly by land now or formerly of Sperry Wood Corporation, 310
          feet; Southerly by land now or formerly of Alva Rossi et al., (the
          second piece hereafter described) 215.93 feet; Westerly by Patria
          Road, 284.31 feet; and Northwesterly by the arc of a curve connecting
          the southerly street line of Sullivan Avenue with the easterly street
          line of Patria Road, 39.95 feet.

          Lot 8 Patria Lane (connected to above parcel)      January 5, 1998

Legal Description:

          Lot No. 8 as shown on a map or plan entitled "Patria Industrial Park
          Sullivan Avenue South Windsor Scale 1' x 40' May 1970 William J.
          Carrington Reg L.S. Revisions: Lots 2 and 3 now known as Parcel "A" on
          file in the Town Clerk's Office in said Town of South Windsor.

          Said premises are more particularly bounded and described as follow:
          Northerly by land now or formerly of Alva Rossi, et al (the first
          piece above described), 215.93 feet; Easterly by land now or formerly
          of Sperry wood Corporation, 110 feet; Southerly by land now or
          formerly of Abraharo Patria (Lot No. 7 on the aforesaid map), 215.93
          feet; and Westerly by Patria Road, 110 feet.

                                      C-1

<PAGE>

Leased Real Property

                                                  Original
Description                   Address           Commencement  Lease Expiration
------------------------------------------------------------------------------
Dunbar, PA Mine Site  Dunbar-Ohiopyle Rd. RR2  July 22, 1996  Dec. 15, 2000 with
                      Dunbar, PA  15431                       renewal through
                                                              Dec. 15, 2005

Legal Description:

          ALL THAT CERTAIN TRACT OR PARCEL OF LAND situate in the Township of
          Dunbar, County of Fayette and Commonwealth of Pennsylvania, containing
          approximately 378 acres, more or less; said tract is as shown on the
          Mine Survey of the former New Castle Lime & Stone Company Mine,
          prepared by Sucevic Engineering, Hopwood, PA, in September 1979.

Spin Forge            1700 East Grand Avenue   March 18, 1998 Jan. 1, 2002, with
                      El Segundo, CA  90245                   renewal through
                                                              Jan. 1, 2012

Legal Description:

          Those portions of Lots 364, 365, 366, 367, and 368, in Block 123 per
          map recorded in Map Book 22. Pages 106 and 107, in the office of the
          County Recorder of said County, lying southwesterly of the following
          described line:

          Beginning at the intersection of found punch marks on the rim of a
          manhole, no reference, accepted as the Northwest corner of Lot 340 per
          said Map Book, also accepted as a point on the centerline of Grand

          Avenue, said intersection of found punch marks being South
          89(degree)53'52" West, 328.41 feet measured, 328.50 feet record, from
          the intersection of found punch marks on the rim of a manhole, no
          reference, accepted as the Northeast corner of said Lot 368, also
          accepted as a point on the centerline of Grand Avenue;

          thence North 89(degree)53' 52" East, along the Northerly line of said
          Lot 340, 109.58 feet to the True Point of Beginning of this
          description; thence South 30(degree)28'58" East, 432.77 feet to a
          point in the Easterly line of Lot 364 per said Map Book.

Precision Machined  1017 Smithfield Drive   December 1, 1998  Dec. 1, 2003, with
Products            Ft. Collins, CO  80524                    renewal through
                                                              Dec. 1, 2008

Legal Description:

          Lot 17, Smithfield Addition, Larimer County, Colorado

                                      C-2

<PAGE>

Corporate Offices   5405 Spine Road         April 1, 2001     Feb. 28, 2003,
                    Boulder, CO  80301                        Sublease with
                                                              Flextronics Int'l

Legal Description:

          Lot 13, the Greens Industrial Park, a Subdivision in the City of
          Boulder, County of Boulder, State of Colorado; also known by street
          and number as 5405 Spine Road, Boulder, Colorado 80301

Corporate Offices   5405 Spine Road         March 1, 2003    Feb. 28, 2006, with
                    Boulder, CO  80301                       renewal through
                                                             Feb. 28, 2009
Legal Description:

          Lot 13, the Greens Industrial Park, a Subdivision in the City of
          Boulder, County of Boulder, State of Colorado; also known by street
          and number as 5405 Spine Road, Boulder, Colorado 80301

                                      C-3

<PAGE>

                                   Schedule 5.1 to Credit and Security Agreement

        Trade Names, Chief Executive Office, Principal Place of Business,
                           and Locations of Collateral

                                   Trade Names
                                   -----------
                          Dynamic Materials Corporation
                                Dynamic Materials
                                       DMC
                                   Boom, Inc.
              Clad Metal division of Dynamic Materials Corporation
                           Explosive Fabricators, Inc.
                              Explosive Fabricators
                           Precision Machined Products
    Precision Machined Products, a division of Dynamic Materials Corporation
                                       PMP
                                   Spin Forge
             Spin Forge, a division of Dynamic Materials Corporation
                                    Detaclad
              Detaclad, a division of Dynamic Materials Corporation
                                   AMK Welding
            AMK Welding, a division of Dynamic Materials Corporation
                                       AMK

               Chief Executive Office/Principal Place of Business
               --------------------------------------------------
                          Dynamic Materials Corporation
                                 5405 Spine Road
                                Boulder, CO 80301

                     Other Inventory and Equipment Locations
                     ---------------------------------------

Clad Metal Division                              Spin Forge Division
--------------------------------------------------------------------------------
Mt. Braddock Facility                            1700 East Grand Ave
1138 Industrial Park Drive                       El Segundo, CA 90245
Mount Braddock, PA 15465

Dunbar Mine                                      Precision Machined Products
Dunbar-Ohiopyle Road                             Division
RR 2, Box 141                                    ---------------------------
Dunbar, PA 15431                                 1017 Smithfield Drive
                                                 Ft. Collins, CO 80524

                                                 AMK Welding Division
                                                 --------------------------
                                                 283 Sullivan Ave.
                                                 South Windsor, CT 06074

                                      S-1

<PAGE>

                                   Schedule 5.2 to Credit and Security Agreement

                     Capitalization and Organizational Chart

Holder       Type of Rights/Stock  No. of shares (after    Percent interest on a
                                   exercise of all rights  fully diluted basis
                                   to acquire shares)

SNPE, Inc.   Common Stock               2,763,491               55.09%

                              Organizational Chart

Dynamic Materials Corporation (DMC)
                  |
                  |
             Nobelclad (subsidiary of DMC)
                          |
                          |
                  Nitro Metall (subsidiary of Nobelclad)

                                      S-2

<PAGE>

                                   Schedule 5.5 to Credit and Security Agreement

                                  Subsidiaries

Nobelclad S.A., a French Societe Anonyme (subsidiary of Dynamic Materials
Corporation)

Nitro Metall A.B., a Swedish Aktiebolag (subsidiary of Nobelclad)

                                      S-3

<PAGE>

                                  Schedule 5.11 to Credit and Security Agreement

                        Intellectual Property Disclosures

Patent Information

Patent                                                 Date              Date
Number         Description                             Filed           Granted
--------------------------------------------------------------------------------

4,333,597      Method of explosively forming           5/27/80         6/8/82
               Bi-Metal Tube Plate Joints

4,518,111      Method of Fabricating a Bi-Metal        10/17/83        5/21/85
               Tube

4,600,332      Aluminum Titanium Transition            1/11/85         7/15/86
               Joint Between Aluminum and
               Steel Bodies

4,934,952      Corrosion Resistant Bonding Strap       3/28/89         6/19/90

5,001,299      Explosively Formed Electronic           6/1/89          3/19/91
               Packages

5,022,144      Method of Manufacture Power             3/2/89          6/11/91
               Hybrid Microcircuit

5,190,831      Bonded Titanium/Steel Components        11/5/91         3/2/93

5,213,904      Aluminum/Steel Transition Joint         11/5/91         5/25/93

4,220,027      Method for Explosive Forming            7/10/75         9/2/80
               of Tubular Molds for Continuous
               Steel Casting

5,109,594      Method of Making a Sealed               3/18/91         5/5/92
               Transition Joint

5,041,019      Transition Joint for Microwave          11/1/90         8/20/91
               Package

5,296,647      Assembly for Connecting an              10/25/91        3/22/94
               Electrical Box to a Plate With a
               Bimetallic Flange

                                      S-4

<PAGE>

Patent                                                 Date              Date
Number         Description                             Filed            Granted
--------------------------------------------------------------------------------

5,323,955      Explosively Bonding Metal               2/26/93         6/28/94
               Composite

5,400,945      Process for Explosively Bonding         6/18/93         3/28/95
               Metals

* US Patents Expiration Dates are subject to a variety of factors and cannot be
guaranteed.

Patent Assignments

Docket
Number     Description                         Date        Inventor(s)/Comments
--------------------------------------------------------------------------------

127 600    Selectively Bonded Metal Plate      2/10/92     William F. Sharp

127 700    Electronic Component Housing        7/13/92     Albert V. Suppinger &
           Module                                          Prem R. Hingorany

           Method of Fabricating a Bi-Metal    10/17/83    Roy Hardwick (Serial
           Tube                                            No. 542,532)

Patent Applications

Serial
Number     Description                         Date        Inventor(s)/Comments
--------------------------------------------------------------------------------

341.832    Method of Line Initiation for       1/22/82     Roy Hardwick (Docket
           Explosively Welding Large                       No. F81009)
           Area Plates

360.068    Explosively Formed Electronic       6/1/89      Prem Hingorany
           Packages and Method of                          (Docket No. F8813CIP)
           Manufacture

08/829.530 Hot Rolled Explosion Bonded         3/28/97     Bergmann et al.
           Titanium Steel Metal Composite

338.849    Controlled Expansion Microwave      4/17/89
           Packages and Method of
           Manufacture

                                      S-5

<PAGE>

Foreign Patents

Number         Foreign Patents                Recorded       Serial Number
--------------------------------------------------------------------------------

1,361.303  French Patent to Du Pont           3/20/69          54.081

1,075.938  Explosive Welding - Philipchuk
           & Bois Patent - Canada

Trademarks

                                                       Registration
Number              Description                            Date
--------------------------------------------------------------------------------

1.861.612           Dynalock                             11/8/94

1.598.407           EFTEK                                5/29/90

729.821             DETACLAD                             7/20/65

883.356             DETACOUPLE                           12/30/69

         Foreign Trademark Registration of DETACLAD:
         Jurisdiction                                        Registration Number
         ----------------------------------------------------------------------
         United Kingdom                                      892074
         Spain                                               499 809
         Italy                                               474 275
         China                                               256 374
         Canada                                              157029
         Australia                                           A-200,889
         Switzerland                                         345467

Invention Disclosure

Date             Description                         Inventor(s)/Comments
-------------------------------------------------------------------------------

10/4/91    Superior Quality, Low Cost Ferritic       John Banker
           Steel Clad

10/4/91    Sacrificial Surface Tri Clad for Severe   John Banker/Carl E. Stevens
           Corrosion Application

Date             Description                         Inventor(s)/Comments
-------------------------------------------------------------------------------

9/13/88    Explosively Clad Copper Body Power        John Banker/Jerry Comer
           Hybrid Package and Method of
           Manufacture

                                      S-6

<PAGE>

12/1/82    Method of Fabrication a Zirconium         Roy Hardwick
           Lined Bi-Metal Tube

11/17/93   Cryo-TTJ (Cryogenic Transitional Joint)   Edward G. Reineke

List of Key Technical Employees - All Have Signed Borrower's Employee
Proprietary Information and Inventions Agreements

John Banker            Curtis Prothe
John Knoll             Chad Toth
Jose Olivas

The Borrower is currently in discussions with Sigmabond (a Canadian company)
regarding the ownership of intellectual property used in connection with the
European cladding operations of Nobelclad (used only in research at this time).
Sigmabond is claiming that the Borrower is infringing on its intellectual
property.

                                      S-7

<PAGE>

                                  Schedule 5.14 to Credit and Security Agreement

                              Environmental Matters

Notices of Violation - Industrial Waste Effluent Limits, dated November 15, 1999
and February 24, 2000, received from the City of El Segundo, Ca.

Dynamic Materials Corporation received a letter from the City of El Segundo, Ca.
on June 7, 2000 indicating the facility was in compliance with respect to the
Notices of Violations above.

                                      S-8

<PAGE>

                                   Schedule 6.3 to Credit and Security Agreement

                                 Permitted Liens

<TABLE>
<CAPTION>

                                                                                    Filing
            Creditor                       Collateral             Jurisdiction       Date        Filing No.
            --------                       ----------             ------------      ------       ----------
<S>                             <C>                              <C>             <C>          <C>
CIT Group, Inc.                   Hankook Proturn CNC Turning       Colorado        10/20/99    19992058333
                                  Ctr.

CIT Group, Inc.                   Hankook Proturn CNC Turning      California       10/20/99    9929960362
                                  Ctr.

Wells Fargo Equipment Finance,    Mori Seiki Vertical               Colorado        8/22/00     20002076006
Inc.                              Machining Ctr.

Wells Fargo Equipment Finance,    Mori Seiki CNC Turning Ctr.       Colorado         1/2/01     20012000220
Inc.

McDonnel Douglas Corp.            Remaining forgings On MCD        California        2/4/00     3960397
                                  P.O. #'s 921438, 913537 &
                                  920770

</TABLE>

                                      S-9

<PAGE>

                                   Schedule 6.4 to Credit and Security Agreement

                      Permitted Indebtedness and Guaranties

<TABLE>
<CAPTION>

                                  Indebtedness

                                         Amount          Maturity           Periodic
             Creditor                 Outstanding          Date             Payment                Collateral
------------------------------------ ----------------- ---------------- ------------------- ---------------------------
<S>                                  <C>              <C>               <C>                 <C>
Industrial Development Revenue         $5,465,000       Sept. 2013        Varies from         PA Facility Property,
Bonds                                                                     $45,000 to          Plan & Equipment
                                                                          $255,000

SNPE, Inc. Convertible                 $1,200,000        06/14/05              ---            Subordinated to all
Subordinated Note                                                                             senior indebtedness.
                                                                                              No collateral.

SNPE, Inc. Term Loan                   $4,000,000         7/3/05          $333,333            Stock of Nobelclad
                                                                          Quarterly
                                                                          Beginning
                                                                          9/30/02

</TABLE>

                                   Guaranties

                                      NONE

                               Depository Accounts

Savings Bank of Manchester
923 Main Street, PO Box 231
Manchester, CT 06045-0231
Acct:  9500192751

                                      S-10<PAGE>

                                                                    Exhibit 10.6

                              AMENDED AND RESTATED
                          AECOM TECHNOLOGY CORPORATION
                STOCK INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
                -----------------------------------------------

                        ARTICLE I.   GENERAL PROVISIONS

1.   PURPOSE
     -------

     The purpose of this Amended and Restated AECOM Technology Corporation Stock
     Incentive Plan For Non-Employee Directors (the "Plan") is to provide each
     Director with the ability to increase his or her proprietary interest in
     the Company's long-term prospects by providing for the grant of options to
     purchase AECOM Common Stock to Directors.

2.   DEFINITIONS
     -----------

     The following definitions shall be applicable throughout the Plan:

     (a)  "Act" means the Securities Act of 1933, as amended from time to time.

     (b)  "Agreement" means a written agreement setting forth the terms of an
          Option.

     (c)  "Beneficiary" means the person(s) who, upon the death of a
          Participant, shall have acquired pursuant to Article III(1), the right
          to receive the benefits specified under this Plan in the event of a
          Director's death.

     (d)  "Board" means the Board of Directors of AECOM Technology Corporation.

     (e)  "Code" means the Internal Revenue Code of 1986, as amended from time
          to time.

     (f)  "Committee" means the Compensation Committee of the Board or any other
          committee appointed by the Board to administer the Plan, which
          committee shall be comprised only of two or more directors or such
          greater number of directors as may be required under applicable law.

     (g)  "Common Stock" means the common stock ($.001 par value) of AECOM
          Technology Corporation; provided that upon the effective date of the
          merger of AECOM Technology Corporation with and into the AECOM Merger
          Subsidiary Corporation (the "Merger"), common stock means shares of
          the Class B common stock, in either case, subject to adjustment
          pursuant to Article I(3)(b). Upon the effective date of the Merger,
          each share of common stock subject to outstanding Awards will be
          converted into one share of the Class A common stock of AECOM Merger
          Corporation, and the aggregate amount of Class A common stock subject
          to a participant's outstanding Awards will be divided pro-rata into
          shares of class A-1, A-2 and A-3 common stock.

     (h)  "Company" means AECOM Technology Corporation.

                                      -1-
<PAGE>

     (i)  "Director" means any director of the Company who is not employed by
          the Company or any of its Subsidiaries or by any holder of more than
          five percent (5%) of the outstanding voting securities of the Company.

     (j)  "Event" shall mean any of the following:

          (i)   Approval by the stockholders of the Company of the dissolution
                or liquidation of the Company;

          (ii)  Approval by the stockholders of the Company of an agreement to
                merge or consolidate, or otherwise reorganize, with or into one
                or more entities which are not Subsidiaries, as a result of
                which less than 50% of the outstanding voting securities of the
                surviving or resulting entity are, or are to be, owned by former
                stockholders of the Company (excluding from the term "former
                stockholders" a stockholder who is, or as a result of the
                transaction in question becomes, an "affiliate", as that term is
                used in the Exchange Act and the Rules promulgated thereunder,
                of any party to such merger, consolidation or reorganization);
                or

          (iii) Approval by the stockholders of the Company of the sale of
                substantially all of the Company's business and/or assets to a
                person or entity which is not a Subsidiary.

     (k)  "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     (l)  "Exercise Price" means with respect to each share of Common Stock
          subject to an Option, the price at which such share may be purchased
          from the Company pursuant to the exercise of such Option.

     (m)  "Fair Market Value" means, as of any specified date:

          (i)   If the Common Stock is listed or admitted to trade on a national
                securities exchange, the closing price of the Common Stock on
                the Composite Tape, as published in the Western Edition of the
                Wall Street Journal, of the principal national securities
                exchange on which the Common Stock is so listed or admitted to
                trade, on such date, or, if there is no trading of the Common
                Stock on such date (or if the market has not closed at the
                applicable time), then the closing price of the Common Stock as
                quoted on such Composite Tape on the next preceding date on
                which there was trading in such shares;

          (ii)  If the Common Stock is not listed or admitted to trade on a
                national securities exchange, the last/closing price for the
                Common Stock on such date, as furnished by the National
                Association of Securities Dealers, Inc. ("NASD") through the
                NASDAQ National Market Reporting System or a similar
                organization if the NASD is no longer reporting such
                information;

                                      -2-
<PAGE>

          (iii) If the Common Stock is not listed or admitted to trade on a
                national securities exchange and is not reported on the National
                Market Reporting System, the mean between the bid and asked
                price for the Common Stock on such date, as furnished by the
                NASD or a similar organization; or

          (iv)  If the Common Stock is not listed or admitted to trade on a
                national securities exchange, is not reported on the National
                Market Reporting System and if bid and asked prices for the
                Common Stock are not furnished by the NASD or a similar
                organization, the value as established by the Committee at such
                time for purposes of this Plan.

     (n)  "Nonqualified Stock Option" means any Option that does not comply with
          the provisions of Section 422 of the Code.

     (o)  "Option" means the right to purchase Common Stock as provided in
          Article II.

     (p)  "Participant" means a Director who has been granted Options under this
          Plan.

     (q)  "Personal Representative" means the person or persons who, upon the
          disability or incompetence of a Director, shall have acquired on
          behalf of the Director, by legal proceeding or otherwise, the right to
          receive the benefits specified in this Plan.

     (r)  "Plan" means this Amended and Restated AECOM Technology Corporation
          Stock Incentive Plan For Non-Employee Directors.

     (s)  "Subsidiary" means any corporation or any other entity a majority of
          whose outstanding voting stock or voting power is beneficially owned
          directly or indirectly by the Company.

     (t)  "Termination" means retirement from the Board or termination of
          service as a Director for any other reason.

3.   SHARES; ADJUSTMENTS IN EVENT OF CHANGES IN CAPITALIZATION
     ---------------------------------------------------------

     (a)  Shares Authorized for Issuance; Cut Backs. There shall be reserved for
          issuance under the Plan [100,000] shares of Common Stock, subject to
          adjustment pursuant to subsection (b) below, in connection with the
          award of Options. Such shares shall be authorized but unissued shares
          of Common Stock. If any Option shall expire without having been
          exercised in full, the shares subject to the unexercised portion of
          such Option shall again be available for the purposes of the Plan. If
          any grant of an Option would cause the sum of the shares of Common
          Stock previously issued and shares issuable under outstanding Options
          under the Plan to exceed the maximum number of shares authorized under
          the Plan, the Company shall prorate among the Eligible Directors the
          grant of new Options. If and for so long as no available share
          authorization remains, no additional Options shall be granted for such
          duration.

                                      -3-
<PAGE>

     (b)  Adjustments in Certain Events. In the event of any change in the
          outstanding Common Stock of the Company by reason of any stock split,
          stock dividend, recapitalization, merger, consolidation,
          reorganization, combination, or exchange of shares, split-up, split-
          off, spin-off, liquidation or other similar change in capitalization,
          or any distribution to common shareholders other than cash dividends,
          the number or kind of shares that may be issued under the Plan shall
          be automatically adjusted so that the proportionate interest of the
          Directors shall be maintained as before the occurrence of such event.
          Such adjustment shall be conclusive and binding for all purposes of
          the Plan.

4.   ELIGIBILITY
     -----------

     Any Director of the Company shall be eligible to participate in the Plan.

5.   ADMINISTRATION
     --------------

     Full power and authority to construe, interpret and administer the Plan
     shall be vested in the Committee.  Decisions of the Committee shall be
     final, conclusive and binding upon all parties.  Day-to-day administration
     of the Plan shall be the responsibility of the Company's Corporate Human
     Resources Department.  This Department may authorize new or modify existing
     forms for use under this Plan so long as any such modified or new forms are
     not inconsistent with the terms of the Plan.

                             ARTICLE II.   OPTIONS

1.   INITIAL OPTION GRANT
     --------------------

     On the effective date of this Plan, each person who is a Director as of
     such date shall be awarded an Option to purchase 5,000 shares of Common
     Stock.  After the effective date, if any person who qualifies as a Director
     under this Plan becomes a director of the Company, such Director shall be
     granted (without further action by the Committee) an option to purchase
     5,000 shares of Common Stock; the date of grant of which shall be the date
     the Director takes office.

2.   ANNUAL OPTION GRANT
     -------------------

     On the first business day following the Company's Annual Meeting of
     Shareholders in 1996 and each year thereafter until 2005, or, if no such
     meeting is held, on April 1 or the first business day thereafter, and each
     year thereafter, each person who is a Director of the Company on the Award
     Date shall be automatically granted (without further action by the
     Committee) an Option to purchase 2,500 shares of Common Stock.

3.   OPTION TERMS
     ------------

     Options granted under the Plan shall be subject to the following terms and
     conditions:

                                      -4-
<PAGE>

     (a)  Option Designation and Agreement. Any Option granted under the Plan
          shall be granted as a Nonqualified Stock Option. Each Option shall be
          evidenced by an Agreement between the recipient and the Company
          containing the terms and conditions of the Option.

     (b)  Option Price. The Exercise Price of Common Stock issued pursuant to
          each Option shall be equal to 100% of the Fair Market Value of the
          Common Stock on the date of grant.

     (c)  Term of Option. No Option shall be exercisable more than ten years
          after the date the Option is granted, subject to earlier termination
          as provided below.

     (d)  Vesting. Options granted under the Plan shall vest six months after
          the date of grant.

     (e)  Exercise. Options, to the extent they are vested, may be exercised in
          whole or in part at any time during the option period; provided,
          however, that an option may not be exercised at any time for fewer
          than 100 shares (or the total remaining shares covered by the Option
          if fewer than 100 shares) during the term of the Option. The specified
          number of shares will be issued upon receipt by the Company of (i)
          notice from the optionee of exercise of an Option, and (ii) payment to
          the Company (as provided in (f) below) of the Exercise Price for the
          number of shares with respect to which the Option is exercised. Each
          such notice and payment shall be delivered or mailed by postpaid mail,
          addressed to the Treasurer of the Company at AECOM Technology
          Corporation, 555 South Flower Street, Suite 3700, Los Angeles,
          California 90071, or such other place as the Company may designate
          from time to time.

     (f)  Payment for Shares. The Exercise Price for the Common Stock shall be
          paid in full when the Option is exercised. The Exercise Price may be
          paid in whole or in part (i) in cash, (ii) in whole shares of Common
          Stock owned by the Director six months or longer and evidenced by
          negotiable certificates, valued at their Fair Market Value on the date
          of exercise, (iii) by a combination of such methods of payment, or
          (iv) in such other form or in such other manner as the Committee may
          determine. In addition, a Director may exercise the Option by
          effecting a "cashless exercise" of the Option; that is providing
          assurance from a broker registered under the Exchange Act, of the
          delivery of the proceeds of an imminent sale of the stock to be issued
          pursuant to the exercise of such Option, such sale to be made at the
          direction of the Director.

     (g)  Termination. If a Director's service on the Board terminates by reason
          of (i) normal retirement from the Board at age 72, (ii) the death or
          total and permanent disability within the meaning of Section 22(e)(3)
          of the Code of such Director, (iii) an Event, or (iv) voluntary early
          retirement to take a position in governmental service, any Option held
          by such Director may thereafter be exercised by the Director, or in
          the event of death by his or her Beneficiary, to the extent it was
          vested and exercisable at the time of termination (i) for a period
          equal to the

                                      -5-
<PAGE>

          number of years of completed Board service as of the date of
          termination of the Director on whose behalf the Option is exercised,
          or (ii) until the expiration of the stated term of such Option,
          whichever period is the shorter. In the event of termination for any
          reason other than those set forth above, any Option held by such
          Director may thereafter be exercised by the Director to the extent it
          was vested and exercisable at the time of termination (i) for a period
          of one year from the date of such termination or (ii) until the
          expiration of the stated term of such Option, whichever period is the
          shorter.

     (h)  Term. No Option shall be granted pursuant to the Plan on or after the
          tenth anniversary of the effective date of this Plan, but Option
          awards granted prior to such tenth anniversary may extend beyond that
          date until the expiration of their terms.

                    ARTICLE III.   MISCELLANEOUS PROVISIONS

1.   BENEFICIARY DESIGNATION
     -----------------------

     A Director may designate any person to whom payments are to be made if the
     Director dies before receiving payment of all amounts due hereunder.  A
     designation of Beneficiary will be effective only after the signed Election
     is filed with the Secretary of the Company while the Director is alive and
     will cancel all designations of a Beneficiary signed and filed earlier.  If
     the Director fails to designate a Beneficiary as provided above, remaining
     unpaid amounts shall be paid to the estate of such Director.  If all
     Beneficiaries of the Director die before the Director or before complete
     payment of all amounts due hereunder, the remaining unpaid amounts shall be
     paid to the estate of the last to die of such Beneficiaries.

2.   INALIENABILITY OF BENEFITS
     --------------------------

     (a)  Limit On Exercise and Transfer.  Unless otherwise expressly provided
          ------------------------------
          in (or pursuant to) this Article III(2), by applicable law and by the
          Award Agreement, as the same may be amended, (i) Awards are non-
          transferable and shall not be subject in any manner to sale, transfer,
          anticipation, alienation, assignment, pledge, encumbrance or charge;
          (ii) Awards shall be exercised only by the Participant; and (iii)
          amounts payable or shares issuable pursuant to any Award shall be
          delivered only to (or for the account of) the Participant.  The
          Committee shall disregard any attempt at transfer, assignment or other
          alienation prohibited by the preceding sentence and shall pay or
          deliver such cash or shares of Common Stock in accordance with the
          provisions of the Plan.

     (b)  Exceptions.  The Committee may permit Awards to be exercised by and
          ----------
          paid to certain persons or entities related to the Participant,
          including but not limited to members of the Participant's immediate
          family, or charitable institutions, trusts or other entities
          controlled by or whose beneficiaries or beneficial owners are the
          Participant and/or members of the Participant's immediate family or to
          such other related persons or entities as may be approved by the
          Committee, pursuant to such

                                      -6-
<PAGE>

          conditions and procedures, including limitations on subsequent
          transfers, as the Committee may establish. Any permitted transfer
          shall be subject to the condition that the Committee receive evidence
          satisfactory to it that the transfer (i) is being made for essentially
          donative, estate and/or tax planning purposes on a gratuitous or
          donative basis and without consideration (other than nominal
          consideration or in exchange for an interest in a qualified
          transferee), and (ii) will not compromise the Corporation's ability to
          register shares issuable under this Plan on SEC Form S-8 under the
          Securities Act.

     (c)  Further Exceptions to Limits On Transfer.  The exercise and transfer
          ----------------------------------------
          restrictions in Article III(2)(a) shall not apply to (i) transfers to
          the Corporation,  (ii) the designation of a beneficiary to receive
          benefits in the event of the Participant's death or, if the
          Participant has died, transfers to or exercise by the Participant's
          beneficiary, or, in the absence of a validly designated beneficiary,
          transfers by will or the laws of descent and distribution, (iii)
          transfers to a family member (or former family member) pursuant to a
          domestic relations order if approved or ratified by the Committee, or
          (iv)  if the Participant has suffered a disability, permitted
          transfers or exercises on behalf of the Participant by his or her
          legal representative.

3.   GOVERNING LAW
     -------------

     The provisions of this Plan shall be interpreted and construed in
     accordance' with the laws of the State of California, without giving effect
     to the doctrine of conflict of laws.

4.   AMENDMENTS
     ----------

     The Committee may amend, alter or terminate this Plan at any time without
     the prior approval of the Directors.  The Company, with the consent of the
     Participant, may make such modifications of the terms and conditions of
     such Participant's Options as it shall deem advisable.  No Options may be
     granted during any suspension of this Plan or after its termination.  The
     amendment, suspension or termination of this Plan shall not, without the
     consent of the Participant, alter or impair any rights or obligations
     pertaining to any Awards granted under this Plan prior to such amendment,
     suspension or termination.

5.   COMPLIANCE WITH RULE 16B-3
     --------------------------

     It is the intention of the Company that the Plan comply in all respects
     with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act to the
     extent that such Rule is applicable to the Company and that Plan
     participants remain non-employee directors ("Non-Employee Directors") for
     purposes of administering other employee benefit plans of the Company and
     having such other plans be exempt from Section 16(b) of the Exchange Act.
     Therefore, if any Plan provision is found not to be in compliance with Rule
     16b-3 or if any Plan provision would disqualify Plan participants from
     remaining Non-Employee Directors, that provision shall be deemed amended so
     that the Plan does so comply and the Plan participants remain Non-Employee
     Directors, to the extent permitted by law and deemed advisable by the
     Committee, and in all events the Plan shall

                                      -7-
<PAGE>

     be construed in favor of its meeting the requirements of Rule 16b-3.

6.   EFFECTIVE DATE
     --------------

     This restated Plan shall be effective as of March [___], 2002.

                                         AECOM TECHNOLOGY CORPORATION

                                         By:
                                            -----------------------------------

                                      -8-

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