Exhibit 10.6


 


OPTION AGREEMENT


 


This OPTION AGREEMENT (the “Agreement”), dated September 17, 2004
for reference purposes only, is by and between DYNAMIC MATERIALS CORPORATION,
a Delaware corporation (“DMC”), and AEROJET-GENERAL CORPORATION, an Ohio
corporation (“Aerojet”).  The “Effective
Date” of this Agreement shall be the first date upon which both Seller and
Buyer have executed this Agreement.


 


RECITALS


 


A.                                   DMC
is in the business of metal machining in the manufacture of certain rocket
motor case and pressure tanks (the “Business”) and conducts the Business on
real property located in Los Angeles County, California, with a street address
of 1700 East Grand Avenue, El Segundo, California 90245, utilizing the
buildings, structures, improvements and fixtures on same real property
(collectively, the “Property”), subject to an Operating Lease dated
March 18, 1998, as amended by that certain Agreement and Amendment to
Operating Lease dated February 1, 2000 (as amended, the “Master Lease”),
with Spin Forge LLC, a California limited liability company (“Spin Forge”), as
lessor.


 


B.                                     Spin
Forge has granted to DMC an exclusive option to purchase the Property pursuant
to that certain Option Agreement dated March 18, 1998, as amended by that
certain Amendment Number 1 to Option Agreement dated June 28, 2001, as
further amended by that certain Amendment Number 2 to Option Agreement, dated
May 20, 2002, as further amended by that certain Amendment Number 3 to Option
Agreement dated March 14, 2003, as further amended by that certain
Amendment Number 4 to Option Agreement dated April 22, 2004, as further
amended by that certain Amendment Number 5 to Option Agreement dated
September 17, 2004 (as amended, the “Option Agreement”).  A copy of the Option Agreement is attached
hereto as Exhibit A, and incorporated herein by this reference.


 


C.                                     Pursuant
to that certain Agreement dated September 17, 2004 (the “Master
Agreement”), DMC has agreed to, among other things, sell and transfer to
Aerojet certain of its rights and assets to enable Aerojet to operate the
Business on the Property.


 


D.                                    In
accordance with the Master Agreement, DMC and Aerojet have entered into a
sublease of the Master Lease, dated September 17, 2004, pursuant to which
Aerojet shall sublease the Property from DMC (the “Sublease”).


 


E.                                      Also
in accordance with the Master Agreement, Aerojet desires to acquire from DMC,
and DMC desires to grant to Aerojet, an option to purchase from DMC all of
DMC’s right, title and interest in and to the Option Agreement (collectively, the
“Property Option Rights”).


 


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AGREEMENTS


 


NOW, THEREFORE, in consideration of the foregoing recitals which are
specifically incorporated into the body of this Agreement, the mutual promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, DMC and Aerojet agree as follows:


 


1.                                       Option
Terms.


 


(a)                                  Grant of Option. 
Subject to the terms and conditions of this Agreement and for good and
valuable consideration, as more particularly described in the Master Agreement,
DMC hereby grants to Aerojet an exclusive option to purchase the Property
Option Rights on the terms and conditions set forth in this Agreement (the
“Option”).


 


(b)                                 Term.  The Option
shall commence on the Effective Date and terminate on August 1, 2005 (the
“Option Term”).


 


(c)                                  Exercise.  In the event
Aerojet elects to exercise the Option, it shall do so by notifying DMC in
writing within the Option Term in accordance with the notice provisions in
Section 8 below.


 


(d)                                 Memorandum
of Option.  Concurrently with the
execution and delivery of this Agreement by DMC, DMC shall deliver to Escrow
Holder a Memorandum of Option substantially in the form attached hereto as Exhibit
B, and incorporated herein by this reference, duly executed and
acknowledged by each of DMC and Spin Forge 
together with instructions to Escrow Holder to record the Memorandum of
Option in the Official Records of Los Angeles County, California.  In the event Aerojet does not exercise the
Option within the Option Term or in the event this Agreement is terminated
under paragraph 3 below or for any other reason, Aerojet shall deliver to DMC
and Spin Forge upon demand a quitclaim deed in a form suitable for recordation covering
the Property so as to eliminate any cloud on Spin Forge’s title to the
Property.


 


2.                                       Purchase Terms


 


(a)                                  Purchase Consideration. 
In the event Aerojet exercises the Option, DMC shall sell to Aerojet,
and Aerojet shall purchase from DMC, the Property Option Rights for
consideration (the “Purchase Consideration”) equal to the value of the Property
Option Rights as reasonably agreed to by the parties.  Each of DMC and Aerojet covenant and agree to negotiate in good
faith to reach agreement upon the type and amount of the Purchase Consideration
as soon as practicable following the Effective Date, but in no event later than
December 15, 2004.


 


(b)                                 Closing.  The closing
of Aerojet’s purchase of the Property Option Rights in accordance with this
Agreement (the “Closing”) shall occur within five (5) business days of Aerojet
providing notice to DMC of its election to exercise the Option pursuant to
Section 1(c) above.  The Closing
shall occur through the Escrow with the Escrow Holder (as such terms are
defined in the Option Agreement).  At
the Closing, the following shall occur: (i) the parties shall execute and
deliver: (A) a written assignment and assumption agreement regarding the Option
Agreement, substantially in the form attached hereto as Exhibit C and incorporated
herein by this


 


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reference, and (B) such escrow instructions as are reasonable and
necessary to carry out the provisions of this Agreement; (ii) Aerojet shall
deliver to DMC the Purchase Consideration; and (iii) a Memorandum of Assignment
of Option, substantially in the form attached hereto as Exhibit D and
incorporated herein by this reference, duly executed and acknowledged by DMC,
Spin Forge, and Aerojet, shall be recorded in the Official Records of Los
Angeles County, California.


 


3.                                       Termination of Agreement. 
If Aerojet does not exercise the Option on or before August 1, 2005
in accordance with Section 1(c) above, or in the event the parties are
unable to agree upon the type and amount of the Purchase Consideration by
November 30, 2004, as provided in Section 2(a) above, this Agreement
shall automatically terminate, and except otherwise provided herein, the
parties shall have no further rights or obligations under this Agreement.


 


4.                                       Acknowledgement Regarding Sublease and Other Ancillary
Agreements.  The parties acknowledge and agree that
nothing herein shall affect the parties’ respective rights and obligations
under the Sublease, or under the Equipment Lease or the License Agreement (as
such terms are defined in the Master Agreement).


 


5.                                       Allocation of Costs.  Each of DMC
and Aerojet shall pay one-half of all escrow and any other closing fees
incurred in connection with the Closing. 
DMC and Aerojet shall each pay all attorneys’ fees and costs incurred by
such party in connection with the negotiation, execution, delivery and
performance of this Agreement by such party.


 


6.                                       Representations and Warranties.


 


(a)                                  By DMC.  DMC
represents and warrants to Aerojet as follows, except with respect to environmental
matters, which are governed exclusively by the Master Agreement:


 


(i)                                     DMC has the
power and authority to enter into this Agreement, and to grant the Option as
provided herein.


 


(ii)                                  This Agreement has been duly executed and
delivered by an authorized representative of DMC and constitutes the legal,
valid and binding obligations of DMC in accordance with its terms.


 


(iii)                               To the best of DMC’s knowledge, there is no suit,
action, arbitration, legal, administrative or other proceeding or inquiry, pending
or threatened against or relating to DMC which would affect DMC’s ability to
perform its obligations under this Agreement.


 


(iv)                              All of the representations and warranties
of DMC set forth in the Master Agreement, are true and correct in all material respects
as of the date hereof as though such representations and warranties were made
on and as of the date hereof, except as contemplated or permitted by the Master
Agreement and except to the extent that any such representation or warranty is
made as of a specified date, in which case such representation or warranty
shall have been true and correct as of such date.


 


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(v)                                 The copy of the Option Agreement attached
hereto as Exhibit A, is a true, correct and complete copy of the Option
Agreement; such Option Agreement is in full force and effect and has not been
otherwise amended, modified, or supplemented, and constitutes the entire
agreement between the optionor and optionee under the Option Agreement.


 


(vi)                              There exists no breach, uncured default,
or event or condition that, with the giving of notice or the passage of time or
both, would constitute a breach or default under the Option Agreement; and
there are no existing claims, defenses or payments to become due under the
Option Agreement except for those contained in the Option Agreement.


 


(vii)                           DMC has not previously assigned, pledged,
hypothecated, conveyed or otherwise transferred any of its right, title or
interest in and to the Option Agreement to any other party.


 


(b)                                 By Aerojet.  Aerojet
represents and warrants to DMC as follows:


 


(i)                                     Aerojet has full power and authority to
enter into this Agreement, and to grant the Option as provided herein.


 


(ii)                                  This Agreement has been duly executed and
delivered by an authorized representative of Aerojet and constitutes the legal,
valid and binding obligations of Aerojet in accordance with its terms.


 


(iii)                               To the best of Aerojet’s knowledge, there is no suit,
action, arbitration, legal, administrative or other proceeding or inquiry,
pending or threatened against or relating to Aerojet which would affect
Aerojet’s ability to perform its obligations under this Agreement.


 


(iv)                              All of the representations and warranties
of Aerojet set forth in the Master Agreement, are true and correct in all
material respects as of the date hereof as though such representations and
warranties were made on and as of the date hereof, except as contemplated or
permitted by the Master Agreement and except to the extent that any such representation
or warranty is made as of a specified date, in which case such representation
or warranty shall have been true and correct as of such date.


 


(c)                                  Survival.  Each of the
parties acknowledge and agree that all of the representations and warranties
made by such party in this Section 6 shall survive the exercise by Aerojet
of the Option and the Closing, except to the extent any such representations
and warranties are limited under the Master Agreement.


 


7.                                       DMC’s Pre-Closing Covenants. 
DMC covenants and agrees that, between the Effective Date and the
Closing or earlier termination of this Agreement:


 


(a)                                  DMC shall timely perform all of its
obligations under the Option Agreement in accordance with the terms and
conditions of the Option Agreement and shall not take any action which would be
materially inconsistent with the provisions of the Option Agreement.


 


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(b)                                 No provision of the Option Agreement,
shall be amended or modified without the prior written consent of Aerojet, such
consent not to be unreasonably withheld, delayed or conditioned.


 


DMC shall not, without the prior written consent of Aerojet (which
consent shall not be unreasonably withheld, delayed or conditioned): (i) agree
to any cure or other settlement of inaccurate representations and warranties
made by Spin Forge under the Option Agreement; (ii) grant any consent or agree to any change in Spin Forge’s covenants under
Sections 4 and 5 of the Option Agreement, or waive any obligation of Spin
Forge under the Option Agreement; (iii) waive any conditions precedent to the
obligations of Spin Forge under the Option Agreement; or (iv) consent to any
assignment by Spin Forge of its rights and/or obligations under the Option  Agreement.


 


(c)                                  Promptly upon receipt by DMC of any notice or other communication from Spin
Forge under the Option Agreement, DMC shall provide a true, correct and
complete copy of such notice or other communication to Aerojet.


 


(d)                                 Concurrent with the closing of the
purchase of the Property pursuant to the Option Agreement, Aerojet and DMC
shall terminate the Master Lease and the Sublease.


 


8.                                       Notices.  Any notice,
demand, approval, consent, or other communication required or desired to be
given under this Agreement in writing shall be given in the manner set forth
below, addressed to the party to be served at the addresses set forth beneath
such party’s signature on this Agreement, or at such other address for which
that party may have given notice under the provisions of this Section.  Any notice, demand, approval, consent, or
other communication given by (a) mail shall be deemed to have been given when
deposited in the United States mail, first class and postage prepaid; (b)
overnight common carrier courier service shall be deemed to be given on the
business day immediately following the date it was deposited with such common
carrier; (c) delivery in person or by messenger shall be deemed to have been
given upon delivery in person or by messenger; or (d) electronic facsimile shall
be deemed to have been given on the earlier of (i) the date and at the time as
the sending party (or such party’s agent) shall have received from the
receiving party (or such party’s agent) oral confirmation of the receipt of
such transmission or (ii) one hour after the completion of transmission of the
entire communication.


 


9.                                       Legal Costs.  If any party
to this Agreement shall take any action to enforce this Agreement or bring any
action or commence any arbitration for any relief against any other party,
declaratory or otherwise, arising out of this Agreement, the losing party shall
pay to the prevailing party a reasonable sum for attorneys’ and experts’ fees
and costs incurred in taking such action, bringing such suit and/or enforcing
any judgment granted therein, all of which shall be deemed to have accrued upon
the commencement of such action and shall be paid whether or not such action is
prosecuted to judgment.  Any judgment or
order entered in such action shall contain a specific provision providing for
the recovery of attorneys’ and experts’ fees and costs due hereunder and shall
be determined by a court of competent jurisdiction and not by a jury.  For the purposes of this Section, attorneys’
and experts’ fees and costs shall include, without limitation, fees incurred in
the following:  (a) postjudgment
motions; (b) contempt proceedings; (c) garnishment, levy, and debtor and third
party examinations; (d) discovery; (e) bankruptcy litigation; and (f) appeals.


 


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10.                                 Brokers.  Aerojet and
DMC each warrant and represent to the other that it has not retained, nor is it
obligated to, any person for brokerage, finder’s or similar services in
connection with the transactions contemplated by this Agreement, and that no
commission, finder’s fee or other brokerage or agent’s compensation can be
properly claimed by any person or entity based upon the acts of such party with
regard to the transactions which are the subject matter of this Agreement.  Each party shall indemnify, defend and hold
harmless the other party against from and against all claims, demands,
liabilities, losses, damages, costs and expenses (including, without
limitation, reasonable attorneys’ fees, costs of expert witnesses, court costs
and other litigation expenses) arising from or related to such party’s breach
of the foregoing representation and warranty.


 


11.                                 Time of the Essence.  Time is of
the essence of this Agreement.  In the
event that any date specified in this Agreement falls on Saturday, Sunday or a
public holiday on which public agencies and major banks are not open for
business (each a “Non-Business Day”), such date shall be deemed to be the
succeeding business day.  For purposes
of this Agreement, the term “business day” shall mean any day other than a
Non-Business Day.


 


12.                                 Binding on Successors. 
This Agreement shall be binding not only upon the parties but also,
subject to the limitations set forth in Section 13, upon their heirs,
personal representatives, assigns, and other successors in interest.


 


13.                                 Assignment.  Aerojet may
not assign its interests under this Agreement to any other party without the
prior written consent of DMC. 
Notwithstanding the foregoing, DMC agrees that Aerojet may assign its
rights to, and delegate its duties and obligations under, this Agreement to an
affiliate of Aerojet, at or prior to the Closing without the prior written
consent of DMC.  For purposes of this
Agreement, the term “affiliate” shall mean any partnership, corporation, trust
or other entity or association, directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control with
Aerojet.  The term “control,” as used in
the immediately preceding sentence, means, with respect to a corporation or limited
liability company the right to exercise, directly or indirectly, more than
fifty percent (50%) of the voting rights attributable to the controlled
corporation or limited liability company, and, with respect to any individual,
partnership, trust, other entity or association, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of the controlled entity.


 


14.                                 Entire Agreement; Modification; Waiver. 
This Agreement constitutes the entire agreement between Aerojet and DMC
pertaining to the subject matter contained in it and supersedes all prior and
contemporaneous agreements, representations, and understandings.  No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by all the
parties.  No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver.  No waiver shall be
binding unless executed in writing by the party making the waiver.


 


15.                                 Further Assurances.  DMC and
Aerojet agree to take such additional actions and to execute such additional
documents, including escrow instructions, as may be reasonable and necessary to
carry out the provisions of this Agreement.


 


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16.                                 Severability.  Each
provision of this Agreement is severable from any and all other provisions of
this Agreement.  Should any provision(s)
of this Agreement be for any reason unenforceable, the balance shall
nonetheless be of full force and effect.


 


17.                                 Governing Law.  This
Agreement shall be governed and construed in accordance with the laws of the
State of California.


 


18.                                 Drafting.  The parties
to this Agreement agree that this Agreement is the product of joint
draftsmanship and negotiation and that should any of the terms be determined by
a court, or in any type of quasi-judicial or other proceeding, to be vague,
ambiguous and/or unintelligible, that the same sentences, phrases, clauses or
other wordage or language of any kind shall not be construed against the
drafting party in accordance with California Civil Code Section 1654, and
that each such party to this Agreement waives the effect of such statute.


 


19.                                 Counterparts.  This
Agreement may be executed in two (2) or more counterparts, each of which shall
be deemed an original (including copies sent to a party by facsimile
transmission) as against the party signing such counterpart, but which together
shall constitute one and the same instrument.


 


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
set forth below.


 


	
  DMC:

  	
   

  	
  AEROJET:

  
	
   

  	
   

  	
   

  
	
  DYNAMIC MATERIALS CORPORATION,

  	
   

  	
  AEROJET-GENERAL CORPORATION, an

  
	
  a Delaware corporation

  	
   

  	
  Ohio corporation

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:  September 17,
  2004

  	
   

  	
  Dated:  September 17,
  2004

  
	
  Address:

  	
   

  	
  Address:

  
	
  Dynamic Materials Corporation

  	
   

  	
  Aerojet-General Corporation

  
	
  5405 Spine Road

  	
   

  	
  P.O. Box 1036

  
	
  Boulder, CO 80301

  	
   

  	
  Camden, AR 71711-1036

  
	
  Attn: President

  	
   

  	
  Attn:  Robert Shenton,

  
	
  Tel:  (303) 604-3999

  	
   

  	
  Vice President, Operations

  
	
  Fax:  (303) 604-1897

  	
   

  	
  Tel:  (870) 574-3198

  
	
   

  	
   

  	
  Fax:  (870) 574-3528

  
	
  With a copy to:

  	
   

  	
  For delivery by courier use:

  
	
  Dynamic Materials Corporation

  	
   

  	
  Highland Industrial Park

  
	
  5405 Spine Road

  	
   

  	
  Camden, AR 71701

  
	
  Boulder, CO 80301

  	
   

  	
   

  
	
  Attn:  Chief Financial Officer

  	
   

  	
  With a copy to:

  
									



 


7

















 


	
  Tel: (303) 604-3999

  	
   

  	
  Aerojet-General Corporation

  
	
  Fax: (303) 604-1897

  	
   

  	
  P.O. Box 13222, Dept. 0106

  
	
   

  	
   

  	
  Sacramento, California 95813-6000

  
	
   

  	
   

  	
  Attn:  Brian E. Sweeney, Esq.

  
	
   

  	
   

  	
  Vice President, Legal and Contracts

  
	
   

  	
   

  	
  Tel:  (916) 351-8588

  
	
   

  	
   

  	
  Fax:  (916) 351-8610

  
	
   

  	
   

  	
  For delivery by courier use:

  
	
   

  	
   

  	
  Highway 50 and Aerojet Road

  
	
   

  	
   

  	
  Rancho Cordova, CA 95742

  



 


	
  Exhibits:

  
	
  A

  	
  -

  	
  Copy of Option Agreement

  
	
  B

  	
  -

  	
  Form of Memorandum of Option

  
	
  C

  	
  -

  	
  Form of Assignment and Assumption of Option Agreement

  
	
  D

  	
  -

  	
  Form of Memorandum of Assignment of Option

  



 


8

















 


ACKNOWLEDGMENT AND CONSENT OF OWNER


 


The undersigned hereby approves and consents to: (a) the foregoing
grant by DMC to Aerojet of the Option as set forth in the foregoing Agreement;
(b) the form of the assignment and assumption agreement attached to the
Agreement as Exhibit C; and (c) the recordation in the Official Records
of Los Angeles County, California, of the Memorandum of Option and the
Memorandum of Assignment of Option on the terms and conditions set forth in the
Agreement, and in the forms attached to the Agreement as Exhibits B and D,
respectively.


 


	
   

  	
  SPIN FORGE, LLC, a California limited

  liability company

  
	
   

  	
   

  
	
  Dated: September 17, 2004

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
							



 


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