Document:

Exhibit 10.3

 

OPTION PURCHASE
AGREEMENT

 

THIS OPTION PURCHASE AGREEMENT (“Agreement”), is
dated as of November 4, 2005, and is entered into by and between DYNAMIC MATERIALS CORPORATION, a Delaware corporation (“DMC”), and SPIN FORGE, LLC,
a California limited liability company (“Owner”), with
regard to the following:

 

A.                                   The Owner owns certain real property (the
“Land”) located in Los Angeles County,
California, commonly known as 1700 East Grand Avenue, which is more
particularly described on Exhibit A
attached to this Agreement and incorporated herein by this reference.  The Land, together with all appurtenant
easements and other appurtenances thereto, as well as all buildings,
structures, and other improvements located thereon and all fixtures attached
thereto, are referred to collectively as the “Property.”

 

B.                                     The Owner and DMC entered into a certain
Operating Lease dated as of March 18, 1998 and amended that Operating
Lease by a certain Agreement and Amendment to Operating Lease dated as of February 1,
2000 (as amended, the “Lease”).

 

C.                                     Also as of March 18, 1998, DMC and
the Owner entered into an Option Agreement dated as of March 18, 1998
giving DMC an option (the “Option”) to
purchase the Property from the Owner, which Option Agreement has previously been
amended five times (as amended, the “Option Agreement”).

 

D.                                    DMC subleased the Property to
Aerojet-General Corporation (“Aerojet”)
pursuant to that certain written Sublease between DMC and Aerojet dated September 17,
2004 (the “Sublease”), a copy of which is
attached to this Agreement as Exhibit B.
DMC also assigned its rights in the Option to Aerojet pursuant to that certain
written Option Agreement between DMC and Aerojet dated September 17, 2004
(the “Option Assignment”).  By the terms of the Option Assignment,
Aerojet’s rights in the Option terminated on August 1, 2005.

 

E.                                      DMC has approached the Owner about
further amending the Option Agreement to facilitate DMC’s possible sale of the
Property to a third party after it exercises the Option. The Owner has,
instead, proposed to DMC that it repurchase the Option.  The parties have reached agreement on such a
resale of the entire Option to the Owner on the terms and conditions set forth
in this Agreement so that, upon such resale, DMC will have no further rights in
the Option or the Option Agreement.

 

F. All capitalized terms used not defined herein or
the Glossary of Terms attached hereto shall have the meanings ascribed to those
terms in the Option Agreement.

 

NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:

 

1.                                       Purchase of Option. DMC hereby
agrees to sell to the Owner and the Owner hereby agrees to buy from DMC the
entire Option and the Option Agreement, free and clear of

 

 

any lien, claim, right of third party or
other encumbrance, for the Purchase Price and on the other terms herein set
forth.

 

2.                                       Purchase Price.  The
Purchase Price (“Purchase Price”) for the Option
and Option Agreement shall be Two Million Three Hundred Thousand and No/100
Dollars ($2,300,000.00).

 

3.                                       Payment of Purchase Price.  The
Purchase Price shall be paid to DMC as follows:

 

(a)                                  Deposit.  On the date
of this Agreement (the “Effective Date”),
the Owner shall pay to DMC outside of Escrow cash in the amount of One Hundred
Thousand Dollars ($100,000.00) (the “Non-Refundable Deposit”).
At the Close of Escrow (as defined below), the amount of the Non-Refundable
Deposit shall be credited towards payment of the Purchase Price.  If the Escrow does not close, the
Non-Refundable Deposit shall be applied as set forth in this Agreement.

 

(b)                                 Cash Balance.  No
later than two (2) business days prior to the Scheduled Close of Escrow
(as defined below), the Owner shall deposit into Escrow the balance of the Purchase
Price in cash, plus such other funds as may be required for the Owner to
satisfy all prorations and other costs payable by it pursuant to the terms of
this Agreement.  DMC shall provide wiring
instructions (“Wiring Instructions”) to the
Escrow Holder prior to the Scheduled Close of Escrow for the payment of the
Purchase Price to DMC.

 

4.                                       Escrow and Deliveries Into Escrow.  DMC and the Owner shall cause the Opening of
Escrow (as defined below) to occur on the Effective Date by taking the actions
required of them in this Section 4.

 

(a)  Owner agrees to deliver into the
Escrow within three (3) business days of the date hereof each of the
following:

 

(i)                                     a
fully executed counterpart of this Agreement, duly executed by Owner;

 

(ii)                                  two
fully executed counterparts of an agreement in the form of the Amended and
Restated Option Agreement attached hereto as Exhibit C
(the “Amended and Restated Option Agreement”),
duly executed by Owner;

 

(iii)                               two fully executed
counterparts of an assignment of the Sublease (the “Sublease
Assignment”) in the form of Exhibit D attached
hereto, duly executed by Owner; and

 

(iv)                              the
amount of any cash prorations computed in accordance with Paragraph 10 and
which are payable by Owner.

 

(v)                                 The Owner also agrees
to pay the remaining amount of the Purchase Price into Escrow no later than two
(2) days prior to the Scheduled Close of Escrow.

 

 

(b) DMC agrees to deliver into the
Escrow within three business days after the date hereof each of the following:

 

(i)                                     a
fully executed counterpart of this Agreement, duly executed by DMC;

 

(ii)                                  two
fully executed counterparts of the Amended and Restated Option Agreement, duly
executed by DMC;

 

(iii)                               two
fully executed counterparts of the Sublease Assignment, duly executed by DMC;

 

(iv)                              a fully executed
quitclaim deed in the form of Exhibit E
to this Agreement, duly executed by Aerojet and in recordable form (the “Aerojet Deed”); and

 

(v)                                 a
fully executed quitclaim deed in the form of Exhibit F
to this Agreement, duly executed by DMC and in recordable form (the “DMC Deed”).

 

(c)                                  Within five (5) days
after the Opening of Escrow, the Escrow holder shall deliver a letter to the
parties confirming the date of the Opening of Escrow.

 

5.                                       Conditions to the Close of Escrow.

 

(a)                                  [Intentionally deleted.]

 

(b)                                 Conditions
Precedent to DMC’s Obligations.  The Close of Escrow and DMC’s obligations with
respect to the transaction contemplated by this Agreement are subject to:

 

(i)                                     Owner’s Deliveries.  The
Owner having delivered the funds and documents it is required by this Agreement
to deliver into the Escrow.

 

(ii)                                  Breach of
Warranty.  Each representation
and warranty of the Owner herein shall be true and correct as of the Close of
Escrow.  Escrow Holder shall assume that
this condition has been satisfied unless notified to the contrary in writing by
DMC prior to the Close of Escrow.

 

(c)                                  Failure of
Close of Escrow.  If the
Escrow fails to close for a reason other than DMC’s default under this
Agreement, (i) this Agreement and the Escrow shall terminate, (ii) the
Non-Refundable Deposit shall be retained by DMC as liquidated damages in
accordance with the provisions of Paragraph 13 (b) of this Agreement and (iii) the
Option Agreement as amended by the Amended and Restated Option Agreement shall
become effective as of 12:00 a.m. February 1, 2006 (the “Restated Option Agreement Effective Date”).  Unless and until the Amended and Restated
Option Agreement becomes effective pursuant to the terms of this paragraph, the
Option Agreement shall remain in full force and effect in its present form.

 

 

(d)                                 Instructions
to Escrow Holder.  If this
Agreement and the Escrow terminate pursuant to the immediately preceding
paragraph, Escrow Holder is hereby instructed to promptly (i) deliver a
fully executed original of each of the Amended and Restated Option Agreement to
DMC and the Owner, (ii) deliver all copies of the Sublease Assignment to
DMC and (iii)  deliver to Owner and DMC all other funds and documents
deposited by them, respectively, into Escrow which are held by Escrow Holder on
the date of said termination, less, in the case of the party otherwise entitled
to such funds, however, the amount of any cancellation charges required to be
paid by such party under Paragraph 5(e).

 

(e)                                  Cancellation
Fees and Expenses.  In the
event this Escrow terminates because of the default of either party, the
defaulting party shall pay all cancellation charges required to be paid by and
to Escrow Holder.  In all other cases,
all such cancellation charges shall be borne equally by the Owner and DMC.

 

(f)                                    Close of Escrow.  The
Close of Escrow shall occur on January 31, 2006, or such earlier date
agreed to by the parties (as applicable, the “Scheduled
Close of Escrow”).

 

6.                                       [Intentionally
deleted.]

 

7.                                       Costs and Expenses.

 

(a)                                  DMC’s
Obligations.  DMC shall pay:

 

(i)                                     Transfer Tax.  Documentary transfer tax chargeable on the Aerojet Deed and the DMC
Deed, if any.

 

(i)                                     Escrow Fees.  One-half (2) of all escrow fees and costs.

 

(ii)                                  Prorations.  DMC’s share of prorations,
if any.

 

(b)                                 Owner’s
Obligations.  The Owner shall
pay (in addition to the Purchase Price):

 

(i)                                     Escrow Fees.  One-half (2) of all escrow fees and costs.

 

(ii)                                  Prorations.  The Owner’s share of
prorations, if any.

 

(c)                                  Professional
Fees, Etc.  The Owner and DMC
shall each pay the legal and professional fees and fees of other consultants
incurred by each of them respectively in connection with the transactions
herein contemplated.

 

8.                                       Prorations.  The
parties recognize that Aerojet is required to pay most expenses related to the
operation of the Property and that there will be few, if any, expenses that are
to be prorated in connection with the sale of the Option. Nevertheless, the
parties agree that any revenues and other income from the Property, real
property taxes and operating expenses, if any, affecting the Property and not
paid directly by Aerojet pursuant to the provisions of the Sublease shall be
prorated as of 11:59 p.m. on the day preceding the Close of Escrow. All
bonds or special

 

 

assessments, if any, due after the Close of Escrow, which relate to the
Property and relate to events occurring prior to the Close of Escrow, shall be
prorated as of the Close of Escrow.  Any
supplementary tax bills received by the Owner following the Close of Escrow and
not payable by Aerojet pursuant to the provisions of the Sublease relating to a
period prior to the Close of Escrow shall be prorated by the parties as if said
tax bills had been available at the Close of Escrow. All real property taxes
and other prorations with respect to the Property shall be calculated as of
11:59 p.m. on the day preceding the Close of Escrow. For purposes of
calculating prorations, the Owner shall be deemed to be in title to the
Property, and therefore entitled to the income, if any, and responsible for the
expenses, for the entire day upon which the Close of Escrow occurs.

 

9.                                       Disbursements and Other Actions by Escrow Holder.  On the date of the Scheduled
Close of Escrow or such earlier time as the parties elect to close escrow,
provided that each party has satisfied each of its obligations required by this
Agreement to occur prior to the date of the Scheduled Close of Escrow, Escrow
Holder shall promptly undertake all of the following in the manner indicated:

 

(a)                                  Funds.  Except as otherwise herein provided, disburse
all funds deposited with Escrow Holder, less items to be charged to DMC
hereunder, if any, to DMC as provided in DMC’s Wiring Instructions.

 

(b)                                 Recording.  Cause to be recorded in the Official Records
the Aerojet Deed first followed by the DMC Deed,
together with such other instruments, if any, that the parties may mutually
direct to be recorded in the Official Records, and obtain conformed copies
thereof for distribution to the Owner and DMC.

 

(c)                                  Deliver.  Deliver (i) to each party (1) a
fully executed original of this Agreement and (2) a fully executed copy of
the Sublease Assignment, and (ii) to Owner all originals of the Amended
and Restated Option Agreement (which the parties agree shall then be of no
force or effect, each party agreeing to destroy all executed originals and
execution copies thereof).

 

(d)                                 The Owner expressly
agrees that notwithstanding the recordation of the Aerojet Deed and the Close
of Escrow it shall not disturb Aerojet in its occupancy and quiet enjoyment of
the Property pursuant to the Sublease so long as Aerojet complies with its
obligations thereunder. The parties agree that Aerojet is intended to be a
third party creditor beneficiary of this paragraph.

 

10.                                 [Intentionally
deleted.]

 

11.                                 DMC’s
Representations and Warranties. 
In addition to any other express agreements of DMC herein contained, the
following constitute representations and warranties of DMC to the Owner, all of
which representations and warranties shall survive the sale of the Option from
DMC to Owner and the Close of Escrow. 
Each of such representations and warranties shall be continuing and
shall remain true and correct as of the Close of Escrow with the same force and
effect as if remade by DMC in a separate certificate at that time.

 

 

(a)                                  Authority.  DMC has the legal power, right and authority
to enter into this Agreement and to execute and deliver this Agreement, to
consummate the transactions contemplated by this Agreement, and to execute and
deliver the other documents, instruments and agreements required to be executed
or delivered by DMC under this Agreement without the necessity of any act or
consent of any other person whomsoever.

 

(b)                                 Requisite
Action.  The execution, delivery and performance by DMC
of this Agreement and each and every agreement, document and instrument
provided for in this Agreement have been duly authorized and approved by all
corporate action on the part of DMC.

 

(c)                                  Binding
Nature.  This Agreement and
all documents required hereby to be executed by DMC are and shall be valid,
legally binding obligations of and enforceable against DMC in accordance with
their terms, subject, only to applicable bankruptcy, insolvency,
reorganization, moratorium laws or similar laws or equitable principles
affecting or limiting the rights of contracting parties generally.

 

(d)                                 Contracts.  There are no oral or written contracts
between DMC and any other person or entity with respect to the ownership,
operation, maintenance, use or occupancy of the Property, other than the
Sublease and the Option Assignment.  DMC
has not assigned or otherwise granted any right or interest in the Option or
the Option Agreement to any person or entity, other than the rights expressly
granted to Aerojet under the Option Assignment. 
The Sublease has not been modified or amended in any manner
whatsoever.  The Option Assignment is
terminated and of no force or effect.  Neither Aerojet nor any other person or entity has any right to
exercise any right under the Option Assignment, and Aerojet has not
assigned any of its rights under the Option Assignment to any person or
entity.  Upon the Close of Escrow, Owner
will be the sole owner of the Option and the Option Agreement, free and clear
of any lien, claim, right of third party or other encumbrance whatsoever, other
than any encumbrance placed on the Option or Option Agreement solely by Owner.

 

(e)                                  Title
Matters.  Except as expressly
disclosed in the Option Agreement, upon the recordation of the Aerojet Deed and
the DMC Deed in the Official Records, there will be no matters of record
against the Property placed there by DMC or caused by the acts or omissions of
DMC or any of its agents or representatives.

 

(f)                                    [Intentionally
deleted.]

 

(g)                                 Option.  DMC has not exercised and could not exercise
the Option.

 

(h)                                 Property
Conditions.  DMC has not
become aware of any material adverse conditions affecting the Property caused
by any third party.

 

12.                                 Owner’s
Representations and Warranties.         In
addition to any express agreements of the Owner herein contained, the following
constitute representations and warranties of the Owner to DMC.  Each of such representations and warranties
shall be continuing and shall remain true and correct as of the Close of Escrow
with the same force and effect as if remade by Owner in a separate certificate
at that time.

 

 

(a)                                  Authority.  The Owner has the legal power, right and
authority to enter into this Agreement, and the instruments referenced herein,
and to consummate the transactions contemplated hereby.

 

(b)                                 Requisite
Action.  All requisite action
has been taken by the Owner in connection with the entering into this
Agreement, and the instruments herein referenced, and the consummation of the
transactions hereby contemplated.

 

(c)                                  Binding
Nature.  This Agreement and
all documents required hereby to be executed by the Owner are and shall be
valid, legally binding obligations of and enforceable against the Owner in
accordance with their terms, subject, only to applicable bankruptcy,
insolvency, reorganization, moratorium laws or similar laws or equitable principles
affecting or limiting the rights of contracting parties generally.

 

(d)                                 In addition to any
information concerning the Property of which Owner has become aware as a result
of its ownership of the Property, Owner has had the opportunity to inspect the
Property and evaluate the condition of the Property.

 

(e)                                  [Intentionally
deleted.]

 

(f)                                    No Other Representations.  DMC has made no representations or warranties
to the Owner, oral or written, except as may be specifically set forth in this
Agreement, the Lease Assignment, or the Lease.

 

(g)                                 [Intentionally
deleted.]

 

13.                                 Legal and
Equitable Enforcement of this Agreement; Indemnities.

 

(a)                                  Default by
DMC.  In the event the Close
of Escrow and the consummation of the transactions herein contemplated do not
occur by reason of any default by DMC, the Owner shall have the right to pursue
any right, claim, damage and remedy available to it at law or in equity.

 

(b)                                 Default by
Owner.  IN THE EVENT THE CLOSE
OF ESCROW AND THE CONSUMMATION OF THE TRANSACTION HEREIN CONTEMPLATED DO NOT
OCCUR AS HEREIN PROVIDED ON OR BEFORE THE SCHEDULED CLOSE OF ESCROW AS A RESULT
OF A REASON OTHER THAN DMC’S DEFAULT, THE OWNER AND DMC AGREE THAT IT WOULD BE
IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE DAMAGES WHICH DMC MAY SUFFER.  THEREFORE THE OWNER AND DMC HEREBY AGREE THAT
A REASONABLE ESTIMATE OF THE TOTAL NET DETRIMENT THAT DMC WOULD SUFFER IN THE
EVENT ESCROW FAILS TO CLOSE FOR ANY REASON OTERH THAN DMC’S DEFAULT IS AND
SHALL BE, AS DMC’S SOLE AND EXCLUSIVE REMEDY (WHETHER AT LAW OR IN EQUITY), (I)
AN AMOUNT EQUAL TO THE NON-REFUNDABLE DEPOSIT PLUS ANY INTEREST ACCRUED
THEREON, AND (II) THE AMENDED AND RESTATED OPTION AGREEMENT BECOMING EFFECTIVE
ON THE RESTATED OPTION EFFECTIVE DATE. SAID REMEDY SHALL BE DMC’S FULL, AGREED
AND LIQUIDATED

 

 

DAMAGES FOR THE FAILURE OF ESCROW TO CLOSE ON OR BEFORE THE SCHEDULED
CLOSE OF ESCROW, ALL OTHER CLAIMS TO DAMAGES OR OTHER REMEDIES BEING HEREIN
EXPRESSLY WAIVED BY DMC.  THE PAYMENT OF
THE NON-REFUNDABLE DEPOSIT AS LIQUIDATED DAMAGES AND THE EFFECTIVENESS OF THE
AMENDED AND RESTATED OPTION AGREEMENT ON THE RESTATED OPTION AGREEMENT
EFFECTIVE DATE IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF
CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED
DAMAGES TO DMC PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 and 1677.
DMC HEREBY WAIVES THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 3389.

 

	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Owner’s Initials

  	
   

  	
  DMC’s Initials

  	
   

  

 

(c)                                  Owner’s Indemnity.  Owner
shall indemnify, defend and hold harmless DMC, and each of DMC’s officers,
directors, agents and representatives, and each of their successors and
assigns, from and against any and all claims, liabilities, demands, lawsuits,
litigation, losses, damages (including consequential damages and penalties),
fees, costs and expenses (including settlement costs, and costs and expenses of
counsel and other professional fees, including those incurred in investigating,
bringing or defending any claim or action or threatened claim or action),
obligations, liens, executions, fines, awards, indebtedness, defenses and
causes of action, of every and whatever type, kind, nature, description or
character (collectively, “Claims and Liabilities”),
arising out of, connected with or relating to any breach by Owner of any of its
representations and warranties under this Agreement.

 

(d)                                 DMC’s
Indemnity.  DMC shall
indemnify, defend and hold harmless Owner, and each of Owner’s managers,
members, agents and representatives, and each of their successors, heirs and
assigns, from and against any and all Claims and Liabilities arising out of,
connected with or relating to any breach by DMC of any of its representations
and warranties under this Agreement.

 

(e)                                  Non-Exclusive
Remedy.  The indemnities set
forth in paragraphs (c) and (d) of this Section 13 shall forever
terminate on the first anniversary of the Close of Escrow, other than those
Claims and Liabilities for which a party has demanded indemnification in
writing from the other party prior to such time, which Claims and Liabilities
shall survive such termination.  The
rights and remedies set forth in paragraphs (c) and (d) of this Section 13
shall not be exclusive, but shall be cumulative with any other rights and
remedies available.

 

14.                                 Notices.  All notices or other communications required
or permitted hereunder shall be in writing, and shall be personally delivered
(including by means of professional messenger service) or sent by registered or
certified mail, postage prepaid, return receipt requested, or by facsimile
transmission followed by delivery of a “hard” copy, and shall be deemed
received upon the date of receipt thereof.

 

 

	
  If to Owner:

  	
   

  	
  Spin Forge,
  LLC

  
	
   

  	
   

  	
  2 Evergreen
  Road

  
	
   

  	
   

  	
  Severna
  Park, Maryland 21146

  
	
   

  	
   

  	
  Attention:
  Joseph Allwein

  
	
   

  	
   

  	
  Facsimile:
  (410) 431-7050

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Van Etten
  Suzumoto & Becket LLP

  
	
   

  	
   

  	
  1620 26th
  Street, Suite 600 North

  
	
   

  	
   

  	
  Santa
  Monica, California 90404

  
	
   

  	
   

  	
  Attention:
  Richard S. Grant, Esq.

  
	
   

  	
   

  	
  Facsimile:
  (310) 315-8210

  	
  A

  
	
   

  	
   

  	
   

  
	
  If to DMC:

  	
   

  	
  Dynamic
  Materials Corporation

  
	
   

  	
   

  	
  5405 Spine
  road

  
	
   

  	
   

  	
  Boulder,
  Colorado 80301

  
	
   

  	
   

  	
  Attention:
  Richard Santa

  
	
   

  	
   

  	
  Facsimile:
  (303) 604-1897

  
	
   

  	
   

  	
   

  
	
  With a copy
  to:

  	
   

  	
  Milan D. Smith, Jr., Esq.

  
	
   

  	
   

  	
  Smith Crane Robinson & Parker, LLP

  
	
   

  	
   

  	
  Suite 500, 21515 Hawthorne Boulevard

  
	
   

  	
   

  	
  Torrance, California 90503

  
	
   

  	
   

  	
  Fax: (310) 543-4507

  
	
   

  	
   

  	
   

  
	
  To Escrow
  Holder:

  	
   

  	
  Carolyn Marcial

  
	
   

  	
   

  	
  Escrow Officer

  
	
   

  	
   

  	
  First American Title Insurance Company

  
	
   

  	
   

  	
  National Commercial Services

  
	
   

  	
   

  	
  520 N. Central Avenue, 8th Floor

  
	
   

  	
   

  	
  Glendale, California 91203

  
	
   

  	
   

  	
  Facsimile: (818) 242-5916

  

 

Notice of change of address shall be given by written notice in the
manner detailed in this Paragraph 14.

 

15.                                 Broker.
At the Close of Escrow, DMC shall pay from funds accruing to DMC through
Escrow, pursuant to DMC’s separate agreement (the “Listing
Agreement”) with Grubb & Ellis Company (“Broker”), the brokerage commission and fees owed to DMC’s
Broker in connection with the transactions contemplated by this Agreement. The
Owner represents and warrants to DMC that it is not represented in this
transaction by the Broker. DMC represents and warrants to the Owner that except
for the Broker, it has engaged no other broker or finder in connection with any
transaction contemplated by this Agreement. The Owner represents and warrants
to DMC that it has engaged no broker or finder in connection with any
transaction contemplated by this Agreement. In the event any claims for brokers’
or finders’ fees or commissions in connection with the negotiation, execution
or consummation of this Agreement are made by anyone other than the Broker
against DMC, then the Owner shall indemnify, save

 

 

harmless and defend DMC from and against such claims if they are based
upon any statement or representation or agreement by the Owner, and DMC shall
indemnify, save harmless and defend the Owner from and against any claims,
liabilities, damages, fees, losses, costs and expenses (including reasonable
attorneys’ fees and expenses) 
if made or based upon any statement, representation or agreement
made by DMC or as a result of claims of Broker or pursuant to the Listing
Agreement.

 

16.                                 Required
Actions of Owner and DMC.  The
Owner and DMC each agree to execute all such instruments and documents and to
take all actions pursuant to the provisions hereof in order to consummate the
purchase and sale herein contemplated and shall use their good faith efforts
and due diligence to accomplish the Close of Escrow in accordance with the
provisions hereof.

 

17.                                 Assignment.  This Agreement may not be assigned
by either party.

 

18.                                 Miscellaneous.

 

(a)                                  Partial
Invalidity.  If any term or
provision of this Agreement or the application thereof to any person or
circumstance shall, to any extent, be invalid or unenforceable, the remainder
of this Agreement, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each such term and provision of this
Agreement shall be valid and be enforced to the fullest extent permitted by
law.

 

(b)                                 Waivers.  No waiver of any breach of any covenant or
provision herein contained shall be deemed a waiver of any preceding or
succeeding breach thereof, or of any other covenant or
provision herein contained.  No extension
of time for performance of any obligation or act shall be deemed an extension
of the time for performance of any other obligation to act except those of the
waiving party, which shall be extended by a period of time equal to the period
of the delay.

 

(c)                                  Successors
and Assigns.  This Agreement
shall be binding upon and shall inure to the benefit of the permitted
successors and assigns of the parties hereto.

 

(d)                                 Professional
Fees.  In the event any action
or suit is brought by a party hereto against another party hereunder by reason
of any breach of any of the covenants, agreements or provisions on the part of
the other party arising out of this Agreement, then the prevailing party shall
be entitled to have and recover of and from the other party all costs and
expenses of the action or suit, including, without limitation, actual attorney
fees, accounting and engineering fees, and any other professional fees
resulting therefrom.

 

(e)                                  Entire
Agreement.  This Agreement
(including all Exhibits attached hereto) is the final expression of, and
contains the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior understandings with respect
thereto.  This Agreement may not be
modified, changed, supplemented or terminated, nor may any obligations
hereunder be waived, except by written instrument signed by the party to be
charged or by its agent duly authorized in writing or as otherwise expressly
permitted herein.  The parties

 

 

do not intend to
confer any benefit hereunder on any person, firm or corporation other than the
parties hereto.

 

(f)                                    Time of Essence.  DMC
and the Owner hereby acknowledge and agree that time is strictly of the essence
with respect to each and every term, condition, obligation and provision hereof
and that failure to timely perform any of the terms, conditions, obligations or
provisions hereof by either party shall constitute a material breach of and a
non-curable (but waivable) default under this Agreement by the party so failing
to perform.  The provisions of this
paragraph shall apply to the requirement in this Agreement that Escrow shall
close on or before the date of the Scheduled Close of Escrow.

 

(g)                                 Construction.  Headings at the beginning of each paragraph
and subparagraph are solely for the convenience of the parties and are not a
part of the Agreement.  Whenever required
by the context of this Agreement, the singular shall include the plural and the
masculine shall include the feminine and vice versa.  This Agreement shall not be construed as if
it had been prepared by one of the parties, but rather as if both parties had
prepared the same.  Unless otherwise
indicated, all references to paragraphs and subparagraphs are to this
Agreement.  All exhibits referred to in
this Agreement and the Glossary of Terms are attached and incorporated by this
reference.  In the event the date on
which Owner or DMC is required to take any action under the terms of this
Agreement is not a business day, the action shall be taken on the next
succeeding business day.  A “business day” shall be a day on which the Escrow Holder is
regularly open for business to the general public.

 

(h)                                 Governing
Law.  The parties hereto
acknowledge that this Agreement has been negotiated and entered into in the
State of California.  The parties hereto
expressly agree that this Agreement shall be governed by, interpreted under,
and construed and enforced in accordance with the laws of the State of
California.

 

(i)                                     Separate Counterparts.  This document may be executed in one or more
separate counterparts, each of which, when so executed, shall be deemed to be
an original.  Such counterparts shall,
together, constitute and be one and the same instrument.

 

(j)                                     Further Assurances.  Each party hereto agrees that it will, at
anytime and from time to time after the Close of Escrow, upon request of the
other party hereto, do, execute, acknowledge and deliver or will cause to be
done, executed, acknowledged or delivered, such further acts, deeds,
assignments, conveyances and assurances as may reasonably be required for the
better carrying out of the transaction envisioned by this Agreement. The
parties agree that upon the Close of Escrow, the Owner shall have the
unilateral right to record a termination of any Memorandum of Option concerning
the Option Agreement and/or the Operating Lease.

 

//

 

//

 

//

 

 

IN WITNESS WHEREOF,
the parties hereto have executed this Agreement as of the date and year
hereinabove written.

 

 

	
   

  	
  DYNAMIC
  MATERIALS CORPORATION,

  
	
   

  	
   a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SPIN
  FORGE, LLC,

  
	
   

  	
  a California
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
						

 

 

GLOSSARY
OF TERMS

 

1.                                       “Close of Escrow” means the date the DMC Deed and the Aerojet
Deed are recorded in the Official Records.

 

2.                                       “Escrow” means the escrow opened with the Escrow Holder for
the consummation of the transaction described in this Agreement.

 

3.                                       “Escrow Holder” means Carolyn Marcial Escrow Officer First
American Title Insurance Company National Commercial Services 520 N. Central
Avenue, 8th Floor Glendale, California 91203.

 

4.                                       “Official Records” means the records of the County Recorder
Los Angeles County.

 

5.                                       “Opening of Escrow” means the date on which a fully executed
copy of this Agreement is delivered to Escrow Holder by Owner and DMC and DMC
and Owner have delivered into the Escrow the other documents and agreements
required to be delivered into the Escrow under Section 4 above.

 

 

EXHIBIT A

 

LEGAL
DESCRIPTION OF PROPERTY

 

[TO BE
ATTACHED AT EXECUTION]

 

 

EXHIBIT B

 

SUBLEASE

 

[TO BE
ATTACHED AT EXECUTION]

 

 

EXHIBIT C

 

AMENDED AND RESTATED OPTION AGREEMENT

 

THIS AMENDED AND RESTATED OPTION AGREEMENT
(this “Agreement”) is made and entered into on
this              
by and between DYNAMIC MATERIALS CORPORATION, a
Delaware corporation (“DMC”), and SPIN FORGE, LLC, a California limited liability company (“Owner”), with respect to the following facts:

 

A.                                   The
Owner owns real property (the “Owned Land”)
located in Los Angeles County, California with a street address of 1700 East
Grand Avenue, El Segundo, California 90245 and more particularly described on Exhibit A attached hereto and incorporated herein by
this reference. The Owned Land, together with all appurtenant easements and
other appurtenances thereto, together with all buildings, structures, and other
improvements located thereon and all fixtures attached thereto (collectively,
the “Building”), is referred to herein
collectively as the “Property.”

 

B.                                     The
Property is currently subject to that certain Operating Lease dated as of March 18,
1998 (the “Operating Lease”) between Owner
and DMC providing for the lease of the Property by DMC from Owner.

 

C.                                     DMC
and Owner have entered into an Option Agreement dated as of March 18,
1998, which agreement (as heretofore modified, the “Option
Agreement”) has been previously modified by written Amendments One
through Five inclusive.

 

D.                                    The
Option Agreement was entered into concurrently with that certain Asset Purchase
Agreement (the “Purchase Agreement”) dated as of March 18,
1998.  Capitalized terms used in this
Agreement and not otherwise defined in this Agreement shall have the meanings
ascribed thereto in the Purchase Agreement.

 

E.                                      DMC has subleased
the Property to Aerojet-General Corporation (“Aerojet”) pursuant to the provisions of a Sublease dated September 17,
2004 (the “Sublease”).

 

F.                                      DMC
and Owner wish to further amend the Option Agreement and to restate the
contents thereof in its entirety as set forth herein.

 

NOW, THEREFORE, in consideration of the
payment by DMC to Owner of the Option Fee and the Extension Fee and in consideration
of the promises and agreements of the parties set forth herein, the sufficiency
of which is hereby acknowledged by both Owner and DMC, Owner and DMC hereby
promise and agree as follows:

 

1.                                       Option. Owner hereby grants to DMC an exclusive option (the “Option”) to purchase the Property on the terms and subject
to the conditions set forth in this Agreement.

 

 

A.                                   Term. The term of the Option (the “Term”)
commenced as of March 18, 1998 and shall terminate on January 1,
2012.

 

B.                                     Time of Exercise. The Option may be exercised by DMC at any
time from and after November 1, 2006 12:01 a.m. P.S.T. until the
expiration of the Term.

 

C.                                     Procedure for Exercise. The Option may be exercised during
the time specified in Section 1(B) by delivering to Owner a written
notice of exercise (the “Exercise Notice”)
stating that DMC is thereby exercising the Option.

 

2.                                       Purchase Price.

 

The purchase price for the Property upon exercise of the Option (the “Purchase Price”) shall be Two Million Eight Hundred Eighty
Thousand Dollars ($2,880,000.00); provided, however, that if the Option is
exercised after January 31, 2007, the Purchase Price shall the greater of (A) the
fair market value of the Property at the time the Option is exercised (as
determined in accordance with the procedures set forth in Article 1, Section C
of the Operating Lease for the determination of “Extended
Term Base Rent”) or (B) Two Million Eight Hundred Eighty
Thousand Dollars ($2,880,000.00); and provided further that if the Option is
exercised on or before January 31, 2007 but the purchase of the Property
is not closed on or before January 31, 2007 due to the default of the
Owner or the fact that the sixty (60) day period called for in Section 11
hereof has not yet passed, the Purchase Price shall be Two Million Eight
Hundred Eighty Thousand Dollars ($2,880,000.00), provided that the purchase of
the Property is closed within a reasonable period of time after Owner has cured
such default.

 

3.                                       Documents Received by DMC. DMC hereby acknowledges that, as
of the date of this Agreement, DMC has received copies of the following
documents:

 

A.                                   The
Land Title Survey of the Property prepared by Guy J. Olsen, dated June 27,
1997.

 

B.                                     The
Owner’s Policy of Title Insurance Number 7130117X49 covering the Property dated
effective February 26, 1998 issued by Chicago Title Insurance Company to
Owner; and Owner’s Policy of Title Insurance Number 9632400-8 covering the
Property dated effective December 11, 1996 issued by First American Title
Insurance Company (the “Current Policy”).

 

4.                                       Owner’s Affirmative Operating Covenants. Until the earliest
to occur of the end of the Term, the purchase of the Property by DMC (or any
assignee of DMC’s interest in the Option), or the termination of this
Agreement, Owner shall operate, maintain, and repair the Property in a manner
required under the Operating Lease. In addition, Owner agrees to further
cooperate with DMC as follows:

 

A.                                   Owner
hereby agrees that DMC (and/or its nominee(s)) and their agents (“Authorized Parties”) shall have the right during the Term to
access all and any part of the Property to undertake such inspections,
investigations, tests, studies (including, but not limited to, entitlement
and/or economic and feasibility studies and the environmental condition of the

 

 

Property), review materials and determine the feasibility of obtaining
such permits (including, without limitation, those related to title, lawful
subdivision, economic and feasibility studies, zoning, building codes, setback
and other similar requirements and other governmental regulations, engineering
tests, government entitlements, economic feasibility and the existence and
location of utilities), as DMC or other Authorized Party may elect to obtain.
The activities envisioned and authorized by this Section 4 (A) are
sometimes referred to herein as “Section 4 (A) Activities.”

 

B.                                     The
rights granted in Section 4 (A) above are expressly conditioned upon
fulfillment of the following requirements:

 

(i)                                     The Authorized
Parties shall not unreasonably interfere with Aerojet’s or any authorized third
party’s use or operation of the Property;

 

(ii)                                  Representatives of
Owner shall be notified at least two (2) business days prior to the time
when any Authorized Party will be on the Property and Owner’s representatives
shall have the right to accompany the Authorized Party at all times when the
same are on the Property and to take “split samples” of any tests conducted;

 

(iii)                               No Authorized Party
shall invade, alter or destroy the Property, nor any improvement thereon in any
manner whatsoever, except as expressly agreed by Owner; provided, however,
Authorized Parties may do such invasive environmental, soils and geological
testing as may be commercially reasonable so long as the requirements of subsection (e) and
Section 3 below are satisfied;

 

(iv)                              DMC shall obtain and
maintain (i) liability insurance in the amount of, at least, One Million
Dollars ($1,000,000) for property damage coverage and in the amount of, at
least, One Million Dollars ($1,000,000) for personal injury coverage, and (ii) such
workers’ compensation insurance and disability insurance, as required by law,
all of which insurance shall name Owner as an additional insured party with
respect to DMC and any other Authorized Party. 
DMC (or any Authorized Party desiring to enter upon the Property to
undertake Section 4 (A) Activities) shall provide to Owner one or
more certificates of insurance evidencing such coverage prior to entering upon
the Property for the purpose of conducting any Section 4 (A) Activities;
and

 

(v)                                 Except as expressly
noted herein, any Section 4 (A) Activity performed on, or in
connection with the Property by DMC, or any other Authorized Party, shall be at
that party’s sole cost and expense.  DMC,
for itself and any Authorized Party, covenants and agrees to pay, or caused to
be paid, in full all persons who perform labor upon or furnish materials to the
Property and not to permit or suffer any mechanic’s or materialman’s lien(s) of
any kind or nature to be asserted or enforced against the Property, for any
work done or materials furnished thereon or thereto at the instance or request
of, or on behalf of DMC, or any other Authorized Party.  Moreover, DMC shall have the responsibility
to remove, or cause to be removed, from the Property and lawfully dispose of
all cuttings, debris, core samples, test borings, materials, and any other
remains or samples resulting from any Section 4 (A) Activities, at
its sole cost and expense.

 

 

C.                                     DMC,
for itself and any Authorized Party, hereby agrees to indemnify, defend and
hold Owner, its agents, representatives and assigns, free and harmless from and
against any and all losses, costs, liabilities, claims, damages or expenses of
any kind (including, without imitation, reasonable attorney fees and costs) arising
out of any Section 4 (A) Activities, or any other acts or omissions
caused, suffered, authorized or permitted by DMC, or any other Authorized
Party, on or in connection with the Property in connection with the carrying
out of any Section 4 (A) Activities. 
Moreover, DMC hereby agrees, at its sole cost and expense, to promptly
restore, or cause to be restored, the Property substantially to its condition
immediately prior to the performance of the Section 4 (A) Activities
by DMC or any other Authorized Party.

 

D.                                    Owner understands
that DMC and/or another Authorized Party may undertake the necessary processes
and investigations with the cognizant government authorities for the master
planning of the Property (“Master Planning Activities”),
including, but not limited to, obtaining from the City of El Segundo and any
other cognizant governmental entities, a vesting tentative map, environmental
impact reports, conditional use permits, and/or any other entitlement(s) deemed
necessary or appropriate by DMC or any Authorized Party to enhance the
developability of the Property.

 

E.                                      Owner hereby
authorizes DMC and any other Authorized Party to undertake the Master Planning
Activities with respect to the Property and, subject to the restrictions herein
contained, authorizes DMC and such other Authorized Party to exercise such
powers in its name and stead as may be necessary and appropriate in connection
therewith.

 

F.                                      Owner
hereby agrees to join in executing any applications for governmental approvals
and/or entitlements reasonably as may be requested by DMC from time to time in
connection with such Master Planning Activities, but with no personal
obligation being assumed by Owner beyond that of executing applications or
other documents prepared by DMC or an Authorized Party in connection with the
Property.  DMC will reimburse, or cause the relevant Authorized Party to reimburse, Owner’s
reasonable out-of-pocket expenses, if any, incurred in cooperating with such
attempts to obtain governmental approvals.

 

G.                                     The
agreement by Owner to cooperate with such Master Planning Activities and any
other provision of this Agreement shall not be construed as making either a
partner or joint venturer of the other.

 

H.                                    If
for any reason DMC or another Authorized Party does not acquire the Property
from Owner, DMC shall deliver to Owner, at no cost or expense to Owner, such
written work product, except that which is subject to a recognized legal
privilege, pertaining to the development and improvement of the Property as it
has in its possession or control.

 

5.                                       Owner’s Negative Operating Covenant. Until the earliest to
occur of the end of the Term, the purchase of the Property by DMC (or any
assignee of DMC’s interest in the Option) or the termination of this Agreement,
Owner shall not, without the prior written consent of DMC, which consent shall
not be unreasonably withheld, sell, convey, further option, lease, or otherwise
cloud title to the Property or any portion thereof or contract to do any of the
foregoing.

 

6.                                       Title.                   Title
to the Property shall be subject to the following matters:

 

 

A.                                   The
lien for general real property taxes, general assessments, and all installments
of special assessments against the Property for the year of Closing and all
subsequent years.

 

B.                                     The
matters set forth in the Current Policy other than monetary liens that are
approved pursuant to Section 6 (A) or 6 (C).

 

C.                                     Any
and all matters accepted or deemed accepted by DMC pursuant to Section 8
of this Agreement.

 

The foregoing
title exceptions are collectively referred to herein as the “Permitted Exceptions.”

 

7.                                       Title Commitment. Owner shall within ten (10) days
after its receipt of the Exercise Notice, furnish to DMC a preliminary report
(the “Preliminary Report”) from a title
insurance company reasonably acceptable to both Owner and DMC (the “Title Company”) showing title to the Property vested in
Owner. Contemporaneous with the delivery of the Preliminary Report, the Title
Company shall deliver to DMC copies of all instruments referred to in the
Preliminary Report.

 

8.                                       Title Matters.

 

A.                                   Objection by DMC. Within ten (10) days after DMC’s
receipt of the Preliminary Report, DMC shall give Owner notice of all title
defects to which it objects disclosed by the Preliminary Report (“Title Defects”) that are not already deemed approved
pursuant to Section 6 (A) and (B) hereof. Any and all Title
Defects which are not objected to by notice from DMC to Owner given within said
ten (10) day period shall be deemed accepted by DMC and shall constitute
Permitted Exceptions.

 

B.                                     Owner’s Option to Cure. In the event DMC gives Owner timely
notice of DMCs objection to any Title Defects, Owner shall have the right to
cure such Title Defects at or prior to the Closing as provided in this Section 8
(B) but shall not be obligated hereby to cure any such Title Defects or to
incur any expense in connection with any such cure.  For purposes hereof, a Title Defects shall be
deemed cured if (i) the Title Company deletes the Title Defects from the
Preliminary Report and the Policy; or (ii) the Title Company undertakes in
writing to add a provision to the Policy obligating the Title Company, within
the limits of such Policy, to protect DMC against loss or damage incurred on
account of such Title Defects.

 

C.                                     Termination by DMC. If each of the Title Defects timely
objected to by DMC has not been cured prior to the date of the Closing, DMC
shall have the right, as its sole and exclusive remedy, to be exercised by
written notice given to Owner at or prior to the Closing, to: (i) terminate
this Agreement; (ii) waive its objection to such Title Defects and accept
the same as Permitted Exceptions; or (iii) reduce the Purchase Price to
reflect the detriment to the Property caused by the Title Defects as mutually
agreed by Owner and DMC, provided that Owner and DMC shall have no obligation
to agree on such amount.  In the event
DMC does not notify Owner and the Escrow Holder at or prior to the Closing (i) of
its decision to terminate this

 

 

Agreement, (ii) that
the Owner and DMC have not reached agreement on the reduction of the Purchase
Price, or (iii) DMC has decided not to waive its objection(s) to any
non-cured Title Defects, DMC shall be deemed to have waived its objection to
such Title Defects and to have accepted such Title Defects as Permitted Exceptions.  In the event this Agreement is terminated by
DMC pursuant to this Section 8 (C) both parties shall thereupon be
relieved of all further obligations hereunder.

 

9.                                     As-Is Sale. DMC is thoroughly familiar with the condition of
the Property.  DMC IS NOT RELYING ON ANY
REPRESENTATION, WARRANTY, WRITTEN INFORMATION, DATA, REPORT OR STATEMENT OF
OWNER OR ITS AGENTS AS TO THE CONDITION OF THE PROPERTY AND IS PURCHASING THE
PROPERTY IN ITS “AS-IS” “WHERE-IS” CONDITION, WITH ALL FAULTS, BASED SOLELY UPON
DMC’S KNOWLEDGE OF THE PROPERTY AND ITS OWN INDEPENDENT INSPECTION AND REVIEW
OF THE PROPERTY. BY CONSUMMATING THE CLOSING, DMC SHALL BE DEEMED TO HAVE BEEN
SATISFIED WITH ALL ASPECTS OF THE PROPERTY, INCLUDING. WITHOUT
LIMITATION, THE CONDITION AND PHYSICAL ASPECTS OF THE BUILDING, THE CONDITION
OF THE PROPERTY, THE AVAILABILITY OF UTILITIES AND SANITARY FACILITIES AND THE
SUITABILITY OF THE PROPERTY FOR ITS INTENDED USE.

 

10.                                 Prorations. Real
property taxes, assessments, and current installments of special assessments on
the Property shall be prorated to the date of Closing.  All other items of income and expense for the
Property shall be prorated to the date of the Closing based upon the best
information available on the date of the Closing. Prorations under this Section 10
based upon estimated amounts or deferred until further information becomes
available shall be re-prorated between the parties after the Closing as soon as
the information required to make a definitive proration becomes available.

 

11.                                 Closing. The
purchase and sale of the Property, and each of the deliveries contemplated
below, shall be consummated on or before sixty (60) calendar days after the
date of the Exercise Notice through an escrow (the “Escrow”)
with an escrow company located in Los Angeles County that is reasonably
satisfactory to Owner and DMC (the “Escrow Holder”).  Escrow shall be opened as soon as practicable
following DMC’s exercise of the Option. 
This Agreement, as well as any escrow instructions executed by DMC and
Owner at the request of the Escrow Holder shall constitute the Escrow Holder’s
instructions.  In the event of any
conflict or inconsistency between this Agreement and any other instructions
delivered to the Escrow Holder, the terms of this Agreement shall govern the
duties of the Escrow Holder and the rights and obligations of DMC and Owner. At
the Closing:

 

A.                                   DMC
(or any assignee of DMC’s interest in the Option) shall pay to Owner the
Purchase Price as well in cash or other immediately available funds

 

B.                                     Owner
shall convey the fee simple absolute of the Property to DMC (or any assignee of
DMC’s interest in the Option) by grant deed, free and clear of all liens and
encumbrances, subject only to the Permitted Exceptions.

 

 

C.                                     Owner
shall assign, deliver and otherwise transfer (as appropriate) to DMC (or any
assignee of DMC’s interest in the Option) and DMC (or any assignee of DMC’s
interest in the Option) shall assume (as appropriate) all obligations of Owner
under, any and all service, maintenance and management agreements, if any,
affecting the Property unless DMC (or any assignee of DMC’s interest in the
Option) have requested that Owner terminate any such prior to the Closing, and
all plans, specifications, surveys, studies, warranties, licenses, permits,
certificates of occupancy and all other similar items in Owner’s possession or
control affecting the Property.

 

D.                                    Owner
shall obtain the unconditional commitment of the Title Company to issue to DMC
its ALTA extended coverage policy of title insurance (the “Policy”)
insuring title to the Property in DMC (or any assignee of DMC’s interest in the
Option) in the amount of the Purchase Price.

 

E.                                      The
parties shall each do or cause to be done such other matters and things as
shall be necessary or appropriate to consummate the Closing.

 

F.                                      Each
party shall pay (through deliver into the Escrow or from funds derived from a
portion of the Purchase Price) one-half of any charges imposed by the Escrow
Company for its services, Owner shall pay the premium charged by the Title
Company for the Policy, the cost of any survey or survey update necessary for
the Title Company to issue the Policy, the cost of any Documentary Transfer
Tax, and the cost of discharging any monetary encumbrance that is a lien on the
Property, and DMC (or any assignee of DMC’s interest in the Option) shall pay
all recording fees.

 

12.                                 Sales Commissions. Owner and DMC shall each indemnify,
defend and hold the other harmless from and against any and all claims for
commissions, fees or other compensation made by any real estate broker, agent,
salesman, finder, or other person as a result of the sale of the Property
herein contemplates on account of any implied or express commitment or
undertaking to pay such a commission or fee made by the indemnifying party.

 

13.                                 Assignment. This Agreement shall be binding and effective on
and inure to the benefit of the successors and assigns of the parties
hereto.  Either party shall have the
right to assign its rights under this Agreement to any person or entity without
obtaining the consent of the other party. Upon any such assignment and the
assumption in writing by the assignee of all obligations and benefits under
this Agreement by the assignee (with a copy of such assignment and assumption
being delivered to the non-assigning party hereunder) the assignor shall be
relieved of any further financial or other obligation to the other party under
this Agreement.

 

14.                              Recording. Owner
and DMC shall promptly upon the request of either of them execute a short form
memorandum of this Agreement in form and substance acceptable to both Owner and
DMC and suitable for recording and, at the option of either party, may file
such memorandum for record in the Official Records of Los Angeles County,
California.

 

15.                               Specific
Performance. The parties agree that it is impossible to measure in
money the damages which would accrue to DMC by reason of a failure by Owner to
perform any of the obligations as set forth in this Agreement.  Accordingly, Owner agrees that DMC

 

 

may
have specific performance of this Agreement in any court of competent
jurisdiction.  Furthermore, if DMC or any
successor-in-interest institutes any action or proceeding to enforce the
provisions of this Agreement, any person (including Owner) against whom such
action or proceeding is brought hereby waives the claim or defense therein that
DMC or any successor-in-interest has an adequate remedy at law.

 

16.                                Attorneys’
Fees. In the event that a law suit is brought to enforce or
interpret all or any portion of this Agreement, the prevailing party in such
suit shall be entitled to recover, in addition to any other relief available to
such party, reasonable costs and expenses, including, without limitation,
attorneys’ fees, incurred in connection with such suit.

 

17.                                 Notices. All notices provided for herein shall be in writing
and shall be deemed given to a party when a copy thereof, addressed to such
party as provided herein, is actually delivered by personal delivery, by
overnight courier service, by facsimile transmission, or by certified or
registered mail, return receipt requested, to the address of such party.  All notices to Owner shall be addressed to
Owner at the following address and facsimile number or such other address and
facsimile number of which Owner gives DMC notice hereunder:

 

	
  If to Owner:

  	
   

  	
  Spin Forge,
  LLC

  
	
   

  	
   

  	
  2 Evergreen
  Road

  
	
   

  	
   

  	
  Severna
  Park, Maryland 21146

  
	
   

  	
   

  	
  Attention:
  Joseph Allwein

  
	
   

  	
   

  	
  Facsimile:
  (410) 431-7050

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Van Etten
  Suzumoto & Becket LLP

  
	
   

  	
   

  	
  1620 26th
  Street, Suite 600 North

  
	
   

  	
   

  	
  Santa
  Monica, California 90404

  
	
   

  	
   

  	
  Attention:
  Richard S. Grant, Esq.

  
	
   

  	
   

  	
  Facsimile:
  (310) 315-8210

  	
  A

  
	
   

  	
   

  	
   

  
	
  All notices
  to DMC shall be addressed to DMC at the following address and facsimile
  number or such other address and facsimile number of which DMC gives Owner
  notice hereunder:

  
	
   

  	
   

  	
   

  
	
  If to DMC:

  	
   

  	
  Dynamic
  Materials Corporation

  
	
   

  	
   

  	
  5405 Spine
  road

  
	
   

  	
   

  	
  Boulder,
  Colorado 80301

  
	
   

  	
   

  	
  Attention:
  Richard Santa

  
	
   

  	
   

  	
  Facsimile:
  (303) 604-1897

  
	
   

  	
   

  	
   

  
	
  With a copy
  to:

  	
   

  	
  Milan D. Smith, Jr., Esq.

  
	
   

  	
   

  	
  Smith Crane Robinson & Parker, LLP

  
	
   

  	
   

  	
  Suite 500, 21515 Hawthorne Boulevard

  
	
   

  	
   

  	
  Torrance, California 90503

  
	
   

  	
   

  	
  Fax: (310) 543-4507

  

 

 

Either party may change its address for notice purposes by giving
notice thereof to the other party in accordance with the provisions of this Section 17.

 

18.                                 Governing Law and Venue. The validity and effect of this
Agreement shall be determined in accordance with the laws of the State of
California (without regard to its conflict of law doctrine) and the venue for
any action to enforce or interpret this Agreement shall be in a court of
competent jurisdiction located in the State of California and each of the
parties consents to the jurisdiction of such court in any such action or
proceeding and waives any objection to venue laid therein.

 

19.                                 Survival. This Agreement and all obligations provided herein
shall, to the extent not fully satisfied and performed by or through the
Closing, survive the Closing and the conveyance of title to the Property.

 

20.                                 Computation of Time. If any event or performance hereunder
is scheduled or required to occur on a date which is on a Saturday, Sunday, or
legal state or federal holiday in Los Angeles, California, the event or
performance shall be required to occur on the next day which is not a Saturday,
Sunday, or legal state or federal holiday in Los Angeles, California.

 

21.                                 Entire Agreement. This Agreement contains the entire
understanding and agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements, commitments, understandings,
warranties, and negotiations, all of which are by the execution hereof rendered
null and void.  No amendment or
modification of this Agreement shall be made or deemed to have been made unless
in writing, executed by the party or parties to be bound thereby.

 

IN WITNESS WHEREOF, the parties hereto have
executed this Agreement on the dates indicated below intending that it be valid
and effective from and after the date first above written.

 

	
   

  	
  DYNAMIC
  MATERIALS CORPORATION,

  
	
   

  	
   a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SPIN
  FORGE, LLC,

  
	
   

  	
  a California
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
						

 

 

EXHIBIT D

 

SUBLEASE ASSIGNMENT

 

[TO BE ATTACHED AT EXECUTION]

 

 

EXHIBIT E

 

AEROJET
DEED

 

[TO BE
ATTACHED AT EXECUTION]

 

 

EXHIBIT F

 

DMC DEED

 

[TO BE
ATTACHED AT EXECUTION]Exhibit 10.5.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (“Agreement”) is entered into as of July 20, 2005 by
and between Commercial Capital Bancorp, Inc. (the “Holding Company”), a
corporation organized under the laws of the State of Nevada, with its
headquarters office located in the City of Irvine, Orange County, California,
and James R. Daley, a California resident
(the “Employee”).

 

The
Holding Company desires to enter into this Agreement with Employee pursuant to
which Employee would be employed as the Executive Vice President of the Holding
Company, on the terms and subject to the conditions set forth herein, and
Employee desires to be so employed.

 

On the basis of
the foregoing facts, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, and in further consideration of the mutual
covenants and agreements contained herein, the parties agree as follows:

 

1.             Employee’s Representation to
Holding Company.

 

As a condition to
Holding Company’s willingness to enter into this Agreement with Employee,
Employee hereby represents that his employment hereunder and his performance of
the duties of those positions will not breach any agreement or obligation of
any kind to which Employee is now or expects to be subject at the time of
execution of this Agreement, including but not limited to agreements with or
other obligations to any of Employee’s current or prior employers or any other
entity to which Employee has provided services.

 

Employee
understands that the Holding Company prohibits the use of confidential
information belonging to any entity from being used in connection with Holding
Company’s business and Employee represents that he has not brought with him,
nor will he use, any confidential information from any entity.  Employee represents that Employee can fully
perform his duties under this Agreement, without using or disclosing any
confidential information belonging to any of Employee’s former employers.  Employee understands that as an employee of
the Holding Company, Employee will be expected to use all information that is
generally known and used by persons with training and experience comparable to
Employee’s and all information that is common knowledge in the industry or
otherwise legally in the public domain.

 

The Holding
Company agrees to indemnify and defend Employee in any action or proceeding
which is brought by another entity for breach of a confidentiality requirement
or obligation, provided that Employee is determined not to have breached any
such confidentiality requirement or obligation or this Section 1.

 

2.             Term.

 

(a)           Subject
to the provisions below, the Holding Company agrees to employ Employee, and
Employee agrees to be employed by the Holding Company, subject to the terms and
conditions of this Agreement, for a term of three (3) years (“the Term”) unless
employment is earlier terminated pursuant to the termination provisions of this
Agreement, commencing on the date first set forth above (the “Employment Period”).

 

 

(b)           Subject
to the notice provisions of this paragraph, on the first annual anniversary of
the date first above written and each annual anniversary thereafter, the Term
of this Agreement shall automatically be extended for an additional one year,
unless the Holding Company or the Employee gives written notice to the other
party or parties hereto of such party’s or parties’ election not to extend the
Term, with such notice to be given not less than ninety (90) days prior to any
such anniversary date.  The Holding
Company’s Board of Directors (“Board of Directors”) will review this Agreement
annually for purposes of determining whether to extend the Agreement.  If any party gives timely notice that the
Term will not be extended, then this Agreement shall terminate at the conclusion
of its remaining Term.  References herein
to the Term of this Agreement and/or the Employment Period shall refer both to
the initial Term and successive Terms.

 

3.             Duties and Authority; Board
Representation.

 

(a)           During
the Employment Period, Employee shall devote all his productive time, ability
and attention to the business and affairs of the Holding Company and its
subsidiaries.  Employee shall not
directly render service of a business, commercial or professional nature to any
other person or organization other than the Holding Company and its
subsidiaries without the consent of the Board of Directors.  However, nothing in this paragraph prohibits
Employee from, or requires the Board of Directors to approve or consent to
Employee serving as an advisor or Board member of a charitable or nonprofit
organization or serving as an advisor or director of any corporation which does
not compete with the business of the Holding Company, so long as such service
does not materially interfere with the performance of employment duties.  Employee agrees that during the Employment
Period, he will use his best efforts, skill and abilities to promote the
Holding Company’s interests and to serve as the Executive Vice President of the
Holding Company. Employee shall perform such customary, appropriate and
reasonable executive duties as are normally assigned to the Executive Vice
President at other thrift holding companies, including such duties as are
delegated to him from time to time by the Board of Directors.  Employee shall report directly to the Holding
Company’s Chairman and Chief Executive Officer.

 

(b)           At
such time that a minimum of $1.0 billion of new Transaction Account Deposits
(as defined in the footnote to Section 5(c) hereof) have been on deposit at
Commercial Capital Bank, FSB (the “Bank”) for at least 60 days (calculated on
an average daily balance basis), with the concurrence of Employee, the Holding
Company agrees to take all action necessary to appoint or elect Employee as a
director of the Holding Company.

 

4.             Holding Company’s Authority.  Employee agrees to observe and comply with
the Holding Company’s rules and regulations as adopted by the Board of
Directors regarding performance of his duties and to carry out and to perform
orders, directions and policies stated by the Board of Directors to him
periodically, either orally or in writing.

 

5.             Compensation.

 

(a)           The
Holding Company, through the Bank, agrees to pay to Employee during each year
of this Agreement an annual base salary of $500,000, beginning on the date
first set forth above and payable in accordance with the Bank’s standard
biweekly payroll policy and subject to such withholding as required by law or
policy.  The base salary shall be
reviewed annually by the Bank’s Board of Directors, on or before January 31 of
each year for that year, and may be changed by mutual agreement of the parties.

 

2

 

(b)           The
Holding Company, through the Bank, also agrees to pay a bonus of $500,000 upon
the execution of this Agreement, which is specifically conditioned on the
Employee’s continued employment with the Bank for three (3) years in accordance
with the terms of this Agreement. 
Employee hereby acknowledges and agrees that if either (i) he should
voluntarily elect to terminate his employment hereunder for other than good
reason (as defined herein or (ii) if Employee is terminated by the Holding
Company or the Bank for cause (as defined in each employment agreement), in
either circumstance, Employee shall immediately return to the Bank the portion
of the $500,000 bonus which is equal to the product of $500,000 times the
remaining percentage of the three year Term (calculated by the number of days
based on a 365 day year) that Employee did not fulfill with the Holding Company
and the Bank.

 

(c)           Pursuant to the Hawthorne Financial
Corporation 2001 Stock Incentive Plan which was assumed by the Holding Company
subsequent to its acquisition of Hawthorne Financial Corporation (“Plan”),
Employee is granted a restricted share right which entitles Employee to receive
shares of the Holding Company’s common stock upon the satisfaction of the
vesting requirements set forth in the table below.  Employee shall receive a Stock Issuance
Agreement issued pursuant to the Plan consistent with the restricted share
right referenced herein.

 

Vesting Schedule

 

	
  (Minimum Transaction Account Deposits(1)
  attributable to Employee which are on deposit in the Bank for at least 60
  days (calculated on an average daily balance basis)

  	
   

  	
  (Represents shares of the Holding Company’s
  common stock to be issued)(2)

  
	
  Less than $500
  million

  	
   

  	
  0

  
	
  $500 million

  	
   

  	
  40,000

  
	
  $1 billion

  	
   

  	
  40,000

  
	
  $1.5 billion

  	
   

  	
  40,000

  
	
  $2 billion

  	
   

  	
  40,000

  
	
  $2.5 billion

  	
   

  	
  40,000

  
	
  $3 billion

  	
   

  	
  40,000

  

(1)                                  For purposes of this Agreement “Transaction
Account Deposits” means savings accounts, money market accounts and demand
deposit accounts.

 

(2)                                  In accordance with the Plan, shares of
the Holding Company’s common stock may not be issued before one year from the
date of the grant of the restricted share right, regardless of the attainment
of the required performance goal.  The
date of the restricted share right is the date of this Agreement.

 

3

 

(d)           The Holding Company, through the
Bank, agrees to pay to Employee $700,000 at such time as there is a minimum of
$100 million in Transaction Account Deposits (as defined in the footnote to
Section 5(c) hereof) attributable to Employee which are on deposit in the Bank
for at least 60 days (calculated on an average daily balance basis).

 

(e)           After the full vesting of the share
right awards pursuant to Section 5(c) hereof, the Employee will become eligible
to receive from the Bank a bonus or bonuses, and to receive from the Holding
Company stock options and restricted stock awards, in each case, in such amount
as, in such a manner as, and at such time as, the Board of Directors of the
Holding Company or the Bank, as the case may be, in its discretion, determines
is appropriate.

 

(f)            Following the completion of the services
provided to the Employee pursuant to Section 5(h), the Holding Company, through
the Bank, shall provide a car allowance of $1,000 per month during the
Employment Period.

 

(g)           The Holding Company, through the
Bank, agrees to pay the pro rata portion of the monthly dues (based on actual
business use as evidenced by receipts) for the Wilshire Country Club, or such
other facility as may be mutually agreed upon by the parties hereto.

 

(h)           The Holding Company understands that
it is the Employee’s intention and desire to work out of the Holding Company’s
headquarters office in Irvine, California and to relocate his personal
residence closer to the Holding Company’s headquarters.  In order to facilitate Employee’s move, for a
period of not more than six months from the date of this Agreement, the Holding
Company, through the Bank, agrees to provide Employee with a car service
selected by the Holding Company to transport Employee to and from his residence
to the Holding Company’s headquarters.

 

(i)            During the Employment Period,
Employee shall be eligible to participate in any retirement, pension or
profit-sharing plan, including any non-qualified, deferred compensation or
salary continuation plan, or similar employee benefit plan or retirement or
bonus program of the Holding Company and its subsidiaries, to the extent that
he is eligible under the provisions of the plan and commensurate with his
position in relationship to other participants and pursuant to the terms of the
plans or programs of the Holding Company and its subsidiaries.

 

(j)            The Holding Company, through the
Bank, shall provide medical, dental and other insurance, including key man life
and disability, for Employee on the same terms as provided for all executive
officers of the Holding Company and its subsidiaries.

 

6.             Reimbursement of Expenses.  The services required by the Holding Company
and its subsidiaries will require Employee to incur business, entertainment and
community relations expenses and the Holding Company or its subsidiaries hereby
agrees to provide credit cards and charge accounts for Employee’s use for such
expenses. The Holding Company or its subsidiaries agrees to reimburse Employee
for all out-of-pocket expenses which are business related, upon
submission of appropriate documentation and approval by the Chairman and Chief
Executive

 

4

 

Officer of the Holding
Company.  Such expenses may include
membership fees and dues to organizations approved by the Board.  Each expense, to be reimbursed, must be of a
nature qualifying it as a proper deduction on the income tax returns of the
Holding Company as a business expense and not as deductible compensation to
Employee.  The records and other
documentary evidence submitted by Employee to the Holding Company or its
subsidiaries with each request for reimbursement of such expenses shall be in
the form required by applicable statutes and regulations issued by appropriate
taxing authorities for the substantiation of such expenditures as deductible business
expenses of the Holding Company and not as deductible compensation to Employee.

 

7.             Confidential Information.  Employee agrees that he shall not, without
the prior written permission of the Holding Company in each case, publish,
disclose or make available to any other person, firm or corporation, either
during or after the termination of this Agreement, any confidential information
which Employee may obtain during the Employment Period, or which Employee may
create prior to the end of the Employment Period relating to the business of
the Holding Company and its subsidiaries, or to the business of any customer or
supplier of any of them; provided, however, Employee may use such information
during the Employment Period for the benefit of the Holding Company and its
subsidiaries. Employee agrees to execute any and all such additional agreements
and instruments that the Holding Company may deem reasonably necessary in order
to protect the confidentiality of such confidential information or otherwise to
effectuate the purpose and intent of this Section 7.  Prior to or at the termination of this
Agreement, Employee shall return all documents, files, notes, writings and
other tangible evidence of such confidential information to the Holding Company
and its subsidiaries. This Section 7 shall survive the expiration or
termination of this Agreement.

 

8.             Covenant Not to Solicit
Customers or Fellow Employees.

 

(a)           Subject to Section 8(b) hereof,
Employee agrees that for a period of eighteen (18) months following the
termination of employment with the Holding Company, he will not solicit,
directly or indirectly, divert or attempt to divert for himself or for any
third party, the business of any customer with whom the Holding Company and its
subsidiaries had done business during the preceding one year period. Employee
recognizes and acknowledges that any customer list and financial information
concerning any of the Holding Company’s customers, as it may exist from time to
time, is a valuable, special and unique asset of the Holding Company’s
business.

 

(b)           To the extent that Employee has
terminated his employment with the Holding Company and desires to solicit the
business of any customer of the Holding Company who has had Transaction Account
Deposits attributed to the Employee for purposes of Section 5(c) hereof,
Employee agrees to observe the following time periods during which no
solicitation of such customers may be made:

 

5

 

	
  Period of time from start of
  Agreement when termination occurs:

  	
   

  	
  Months
  Before Employee May Solicit Customer

  
	
  0 - 6 months

  	
   

  	
  None

  
	
  7 - 12 months

  	
   

  	
  3 months

  
	
  13 - 18 months

  	
   

  	
  6 months

  
	
  19 - 24 months

  	
   

  	
  12 months

  
	
  25 - 30 months

  	
   

  	
  15 months

  
	
  31 - 36 months

  	
   

  	
  18 months

  

 

(c)           Employee agrees not to solicit directly
or indirectly, divert or attempt to divert for himself or for any third party,
the services of any officer or employee of the Holding Company and its
subsidiaries during the period of 18 months following the termination of
employment with the Holding Company.

 

(d)           This Section 8 shall survive the
expiration or termination of this Agreement.

 

9.             Remedy.  Employee understands that, because of the
unique character of the services to be rendered by Employee hereunder, the
Holding Company would not have any adequate remedy at law for the breach or
threatened breach by Employee of any one or more of the covenants set forth in
this Agreement and therefore expressly agrees that the Holding Company in
addition to any other rights or remedies which may be available to it, shall be
entitled to injunctive and other equitable relief to prevent or remedy a breach
of this Agreement by Employee.

 

10.           Termination of Employee Without
Cause.

 

(a)           Upon the occurrence of an Event of
Termination (as herein defined) during Employee’s Term of employment under this
Agreement, the provisions of this Section shall apply.

 

(b)           As used in this Agreement, an “Event
of Termination” shall mean and include any one or more of the following: (i)
the termination by the Holding Company of Employee’s full-time employment
hereunder for any reason other than a termination governed by Section 13 below,
or Termination for Cause, as defined in Section 11 below; (ii) Employee’s
termination with good reason from the Holding Company’s employ in accordance
with Section 10(c) below upon any (A) failure to elect or reelect or to appoint
or reappoint Employee as Executive Vice President, unless consented to by the
Employee, (B) a material change in Employee’s function, duties, or
responsibilities with the Holding Company or its subsidiaries, which change
would cause Employee’s position to become one of substantially lesser
responsibility, importance, or scope from the position and attributes thereof
described in Section 3 above, unless consented to by Employee, (C) a relocation
of Employee’s principal place of employment by more than 30 driving miles from
its location at the effective date of this Agreement, unless consented to by
the Employee, (D) a material reduction in the benefits and perquisites to Employee
from those being provided as of the effective date of this Agreement, unless
consented to by Employee, (E) a liquidation or dissolution of the Holding
Company or its subsidiaries, or (F) breach of this Agreement by the Holding
Company.

 

6

 

(c)           Upon the occurrence of any event of a
type described in clauses (ii)(A), (B), (C), (D), (E) or (F), of Section 10,
Employee shall have the right to terminate with good reason his employment
under this Agreement by delivering written notice to the Holding Company not
less than sixty (60) days following the occurrence of such event, which
termination with good reason shall be effective only if such event shall not be
cured within thirty (30) days after Holding Company’s receipt of such
notice.  The date of any Event of
Termination shall be referred to herein as the “Date of Termination.”

 

(d)           Upon the occurrence of an Event of
Termination by the Holding Company, the Holding Company, through the Bank,
shall pay to Employee an amount equal to his base salary for the remaining
portion of the Term (such payment, the “Severance Payment”), as severance pay
in lieu of and in substitution for any other claims for salary and continued
benefits hereunder (based on Employee’s base salary and benefits prevailing at
the time of termination).  At the
election of the Employee, the Severance Payment shall be made to Employee: (a)
in a lump sum on the Date of Termination, or (b) on a semi-monthly basis in
approximately equal installments over a period of thirty-six (36) months
following the Date of Termination, or (c) on an annual basis in approximately
equal installments over a period of thirty-six (36) months following the Date
of Termination.  Payment of the Severance
Payment shall be in addition to all other sums owed to Employee under
applicable law or this Agreement for all periods prior to the Date of
Termination, including, without limitation, sums owed in respect of accrued
paid time off (“PTO”), accrued bonus, if any, and reimbursable expenses.  Notwithstanding anything in this Agreement to
the contrary, no bonus shall be deemed to have been accrued unless and until
any such bonus has been duly authorized by the Holding Company’s Board of
Directors or a duly authorized committee thereof. Accrued bonuses shall mean
the bonus amount determined in accordance with Section 5(e).

 

(e)           With respect to any stock options
issued to the Employee that were outstanding on the Date of Termination, any
options which were not exercisable on the Date of Termination shall
automatically become exercisable upon the Date of Termination, and shall remain
exercisable in full for a period of thirty (30) days.

 

(f)            Upon the occurrence of an Event of
Termination, the Holding Company, through the Bank, will cause to be continued
for the Employee and his previously covered dependents life, medical, dental
and disability coverage that the Employee agrees is substantially equivalent to
the coverage maintained by the Holding Company or its subsidiaries for Employee
and his dependents prior to the Date of Termination at no cost to the Employee,
to the extent, if any, that the insurance carrier will allow, and except to the
extent such coverage may be changed in its application to all employees of the
Holding Company and its subsidiaries.  If
this coverage is not available, the Holding Company will cause the Bank to pay
to Employee an amount equal to the monthly premiums paid to the carrier for the
coverage that was in force prior to the Date of Termination for the remaining
Term of this Agreement.

 

7

 

11.           Termination of Employee for Cause.  The Board of Directors may terminate Employee’s
employment at any time, but any termination by the Board of Directors for other
than cause shall not prejudice the Employee’s right to compensation or other
benefits under this Agreement.  The
Employee shall have no right to receive compensation or other benefits for any
period after termination for cause. 
Termination for cause shall include termination because of the Employee’s
personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final regulatory cease and desist order, or
material breach of any provision of this Agreement.

 

12.           Termination Upon Employee’s Death;
Effect of Termination on Other Plans. 
Notwithstanding anything herein contained, if Employee shall die, this
Agreement shall terminate one year from the date of Employee’s death, whereupon
Employee’s estate shall be entitled to receive, through the Bank, his salary,
accrued PTO, and any bonus earned up through the date of termination. Such
termination shall not affect any rights which Employee may have at the time of
his death pursuant to any of the Holding Company or its subsidiaries plans or
arrangements for insurance, PTO or stock options, or for any other death
benefit, bonus, or retirement benefit, which accrued rights thereafter shall be
enjoyed by Employee’s estate and continue to be governed by the provision of
such plans and arrangements to the extent they are not inconsistent with the
terms of this Agreement.  The Holding
Company, through the Bank, will cause to be continued for the Employee’s
previously covered dependants life, medical and dental coverage that is
substantially equivalent to the coverage maintained by the Holding Company or
its subsidiaries for Employee’s dependants prior to the employee’s death at no
cost to the Employee.  Such coverage
shall cease upon the expiration of the remaining Term of this Agreement.

 

13.           Change in Control.

 

(a)           For purposes of this Agreement, a “Change
in Control” of the Holding Company or its subsidiaries shall mean an event of a
nature that: (i) would be required to be reported in response to Item 1(a) of
the current report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”); or (ii) results in a Change in Control of the Holding Company or its
subsidiaries within the meaning of the Home Owners’ Loan Act of 1933, as
amended, the Federal Deposit Insurance Act and the Rules and Regulations
promulgated by the Office of Thrift Supervision (the “OTS”), as in effect on
the date hereof (provided, that in applying the definition of change in control
as set forth under the rules and regulations of the OTS, the Board of Directors
shall substitute its judgment for that of the OTS); or (iii) without limitation
such a Change in Control shall be deemed to have occurred at such time as (A)
any “person” (as the term is used in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of voting securities of the Holding
Company or its subsidiaries representing 20% or more of the Holding Company or
its subsidiaries outstanding voting securities or right to acquire such
securities except for any voting securities of the Bank purchased by the
Holding Company and any voting securities purchased by any employee benefit
plan of the Bank or the Holding Company, or (B) individuals who constitute the
Board of Directors on the date hereof (the “Incumbent Board”) cease for any
reason to constitute at least a majority thereof, provided that any person
becoming

 

8

 

a director subsequent to the date hereof whose election was approved by
a vote of at least three-quarters of the directors comprising the Incumbent
Board, or whose nomination for election by the Holding Company’s stockholders
was approved by a Nominating Committee solely comprised of members who are
Incumbent Board members, shall be, for purposes of this clause (B), considered
as though he were a member of the Incumbent Board, (C) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Holding Company or its subsidiaries or similar transaction occurs
or is effectuated in which the Holding Company or its subsidiaries is not the
resulting entity; provided, however, that such an event listed above will be
deemed to have occurred or to have been effectuated upon the receipt of all
required federal regulatory approvals not including the lapse of any statutory
waiting periods, or (D) a proxy statement shall be distributed soliciting
proxies from stockholders of the Holding Company, by someone other than the
current management of the Holding Company, seeking stockholder approval of a
plan of reorganization, merger or consolidation of the Holding Company or its
subsidiaries with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to such plan or transaction are
exchanged for or converted into cash or property or securities not issued by
the Holding Company or its subsidiaries shall be distributed; or (E) a tender
offer is made and accepted for 20% or more of the voting securities of the
Holding Company  or its subsidiaries then
outstanding.

 

(b)           If
a Change in Control has occurred pursuant to Section 13(a) above or the Board
Directors has determined that a Change in Control has occurred, Employee shall
be entitled to the benefits provided in paragraphs (c) and (d) of this Section
13 upon his subsequent termination of employment at any time during the Term of
this Agreement due to: (1) Employee’s dismissal or (2) Employee’s termination
for good reasons unless such termination is because of his death or Termination
for Cause.

 

(c)           Upon
Employee’s entitlement to benefits pursuant to Section 13(b), the Holding
Company, through the Bank, shall pay Employee, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay or liquidated damages, or both, a sum equal to the
greater of: (1) the payments due for the remaining Term of the Agreement; or
(2) three (3) times Employee’s highest annual compensation for the last five (5)
years (such payment, the “Severance Payment”). Such annual compensation shall
include Base Salary, commissions, bonuses, contributions or accruals on behalf
of Employee to any pension and profit sharing plans, including any
non-qualified, deferred compensation or salary continuation plans, any benefits
to be paid or received under any stock-based benefit plan, severance payments,
directors or committee fees and value of fringe benefits paid or to be paid to
the Employee during such years. At the election of the Employee, the Severance
Payment shall be made to Employee: (a) in a lump sum on the Date of
Termination, or, (b) on a semi-monthly basis in approximately equal
installments over a period of thirty-six (36) months following the, Date of
Termination or (c) on an annual basis in approximately equal installments over
a period of thirty-six (36) months following the Date of Termination.  Payment of the Severance Payment shall be in
addition to all other sums owed to Employee under applicable law for all periods
prior to the Date of Termination, including, without limitation, sums owed in
respect of accrued PTO, accrued bonus, if any, and reimbursable expenses.  Notwithstanding anything in this Agreement to
the contrary, no bonus shall be deemed to have been accrued unless and until
any such bonus has been duly authorized by the Holding Company’s Board of
Directors or a duly authorized committee thereof.  Such payments shall not be reduced in the
event Employee obtains other employment following termination of employment.

 

9

 

(d)           Upon
the Employee’s entitlement to benefits pursuant to Section 13(b), the Holding
Company, through the Bank, will cause to be continued for the Employee and his
previously covered dependents life, medical, dental and disability coverage
that the Employee agrees is substantially equivalent to the coverage maintained
by the Holding Company for Employee and his dependents prior to his termination
at no cost to the Employee. Such coverage and payments shall cease upon the
expiration of thirty-six (36) months following the Date of Termination.

 

14.           Parachute
Payment Provision.  In each calendar year
that the Employee is entitled to receive payments or benefits under the
provisions of the Agreement, the Holding Company shall determine if an excess
parachute payment (as defined in Section 4999 of the Internal Revenue Code of
1986, as amended, and any successor provision thereto (the “Code”)) exists.
Such determination shall be made after taking any reductions permitted pursuant
to Section 280G of the Code and the regulations thereunder. Any amount
determined to be an excess parachute payment after taking into account such
reductions shall be hereafter referred to as the “Initial Excess Parachute
Payment.”  As soon as practicable after a
Change in Control, the Initial Excess Parachute Payment shall be determined.
Upon the Date of Termination following a Change in Control, the Holding Company
shall pay the Employee, subject to applicable withholding requirements under
applicable state or federal law, an amount equal to:

 

(i)            twenty
(20) percent of the Initial Excess Parachute Payment (or such other amount
equal to the tax imposed under Section 4999 of the Code); and

 

(b)           such
additional amount (tax allowance) as may be necessary to compensate the
Employee for the payment by the Employee of state and local and federal income
and excise taxes on the payment provided under Clause (a) and on any payments
under this Clause (b). In computing such tax allowance, the payment to be made
under Clause (a) shall be multiplied by the “gross up percentage”(“GUP”).  The GUP shall be determined as follows:

 

	
  GUP =

  	
   

  	
  Tax Rate

  	
   

  
	
   

  	
   

  	
  1-Tax Rate

  	
   

  

 

The “Tax Rate” for purposes of computing the GUP shall
be the sum of the highest marginal federal and state and local income and
employment-related tax rates, including any applicable excise tax rates,
applicable to the Employee in the year in which the payment under Clause (a) is
made.

 

(c)           Notwithstanding
the foregoing, if it shall subsequently be determined in a final judicial
determination or a final administrative settlement to which the Employee is a
party that the excess parachute payment as defined in Section 4999 of the Code,
reduced as described above, is more than the Initial Excess Parachute Payment
(such different amount being hereafter referred to as the “Determinative Excess
Parachute Payment”) then the Holding Company’s independent accountants shall
determine the amount (the “Adjustment Amount”) the Holding Company must pay to
the Employee in order to put the Employee in the same position as the

 

10

 

Employee would have been if the Initial Excess Parachute Payment had
been equal to the Determinative Excess Parachute Payment. In determining the
Adjustment Amount, independent accountants of the Holding Company shall take
into account any and all taxes (including any penalties and interest) paid by
or for the Employee or refunded to the Employee or for the Employee’s benefit.
As soon as practicable after the Adjustment Amount has been so determined, the
Holding Company shall pay the Adjustment Amount to the Employee. In no event
however, shall the Employee make any payment under this paragraph to the
Holding Company.

 

(d)           For
purposes of the foregoing, in the event there is any disagreement between
Employee and the Holding Company as to whether one or more payments to which
Employee becomes entitled under this Agreement constitute parachute payments
under Code Section 280G or as to the determination of the Initial Excess
Parachute Payment or the Determinative Excess Parachute Payment, such dispute
will be resolved as follows:

 

(i)            In
the event temporary, proposed or final Treasury Regulations in effect at the
time under Code Section 280G (or applicable judicial decisions) specifically
address the status of any such payment or the method of valuation therefor, the
characterization afforded to such payment by the Treasury Regulations (or such
decisions) will, together with the applicable valuation methodology, be
controlling.

 

(ii)           In
the event Treasury Regulations (or applicable judicial decisions) do not
address the status of any payment in dispute, the matter will be submitted for
resolution to a nationally-recognized independent accounting firm mutually
acceptable to Employee and the Holding Company (“Independent Accountant”).  The resolution reached by the Independent
Accountant will be final and controlling; provided, however, that if in the
judgment of the Independent Accountant, the status of the payment in dispute
can be resolved through the obtainment of a private letter ruling from the
Internal Revenue Service, a formal and proper request for such ruling will be
prepared and submitted, and the determination made by the Internal Revenue
Service in the issued ruling will be controlling.  All expenses incurred in connection with the
retention of the Independent Accountant and (if applicable) the preparation and
submission of the ruling request shall be borne by the Holding Company.

 

15.           Modification.  This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by written instrument duly executed by each party.

 

16.           Notices.  Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested or delivered against receipt to the
party at the address set forth following the signature line of this Agreement
or to such other address as the party shall have furnished in writing.  Notice to the estate of Employee shall be
sufficient if addressed to Employee as provided in this Section 16. Any notice
or other communication given by certified mail shall be deemed given at the
time of certification thereof, except for a notice changing a party’s address
which shall be deemed given at the time of receipt thereof.

 

11

 

17.           Dispute
Resolution Procedures.  Except with
respect to any claim for equitable relief (the pursuit of which shall not be
subject to the provisions of this Section 17), any controversy or claim arising
out of or this Agreement or the Employee’s employment with the Holding Company
or the termination thereof, including, but not limited to, any claim of
discrimination under state or federal law, shall be settled by binding
arbitration in accordance with the Rules of the American Arbitration
Association; and judgment upon the award rendered in such arbitration shall be
final and may be entered in any court having jurisdiction thereof. Notice of
the demand for arbitration shall be filed in writing with the other party to
this Agreement and with the American Arbitration Association. In no event shall
the demand for arbitration be made after the date when the institution of legal
or equitable proceedings based on such claim, dispute or other matter in
question would be barred by the applicable statute of limitations. This
agreement to arbitrate shall be specifically enforceable under the prevailing
arbitration law. Any party desiring to initiate arbitration procedures
hereunder shall serve written notice on the other party. The parties agree that
an arbitrator shall be selected pursuant to these provisions within thirty (30)
days of the service of the notice of arbitration. In the event of any
arbitration pursuant to these provisions, the parties shall retain the rights
of all discovery provided pursuant to the California Code of Civil Procedure
and the Rules thereunder.  Any
arbitration initiated pursuant to these provisions shall be on an expedited
basis and the dispute shall be heard within one hundred twenty (120) days
following the serving of the notice of arbitration and a written decision shall
be rendered within sixty (60) days thereafter. All rights, causes of action,
remedies and defenses available under California law and equity are available
to the parties hereto and shall be applicable as though in a court of law. The
parties shall share equally all costs of any such arbitration.

 

18.           Miscellaneous.

 

(a)           This
Agreement is drawn to be effective in the State of California and shall be
construed in accordance with California laws, except to the extent superseded
by federal law. No amendment or variation of the terms of this Agreement shall
be valid unless made in writing and signed by Employee and a duly authorized
representative of the Bank.

 

(b)           Any
waiver by either party of a breach of any provision of this Agreement shall not
operate as to be construed to be a waiver of any other breach of such provision
or of any breach of any other provision of this Agreement. The failure of a
party to insist upon strict adherence to any term of this Agreement on one or
more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing.

 

(c)           Employee’s
rights and obligations under this Agreement shall not be transferable by
assignment or otherwise, such rights shall not be subject to commutation,
encumbrance or the claims of Employee’s creditors, and any attempt to do any of
the foregoing shall be void. The provisions of this Agreement shall be binding
upon and inure to the benefit of the Holding Company and its successors and
those who are its assigns under Section 13.

 

(d)           This
Agreement does not create, and shall not be construed as creating, any rights
enforceable by a person not a party to this Agreement (except as provided in
subsection (c) above).

 

12

 

(e)           The
headings in this Agreement are solely for the convenience of reference and
shall be given no effect on the construction or interpretation of this
Agreement.

 

(f)            This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. It shall be governed by and construed in accordance with the laws
of the State of California, without giving effect to conflict of laws, except
where federal law governs.

 

13

 

IN WITNESS WHEREOF, the Holding Company and Employee have executed
this Agreement to be effective as of the day and year written above.

 

 

	
  HOLDING COMPANY:

  	
  COMMERCIAL CAPITAL BANCORP 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen H. Gordon

  	
   

  
	
   

  	
   

  	
  Stephen H. Gordon 

  
	
   

  	
   

  	
  Chairman and Chief Executive Officer 

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  8105 Irvine Center Drive 

  
	
   

  	
   

  	
  Suite 1500

  
	
   

  	
   

  	
  Irvine, CA 92618

  
	
   

  	
   

  
	
  EMPLOYEE:

  	
   

  	
  /s/ James R. Daley

  	
   

  
	
   

  	
   

  	
  James R. Daley 

  
					

 

14

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