EXECUTION COPY
OPTION AND RIGHT OF FIRST OFFER AGREEMENT
THIS OPTION AND RIGHT OF FIRST OFFER AGREEMENT (this "AGREEMENT") is
made and entered into on this 1st day of December, 1998 by and between DYNAMIC
MATERIALS CORPORATION, a Delaware corporation ("DMC"), and JEA PROPERTY, LLC, a
Colorado limited liability company ("OWNER").
RECITALS
WHEREAS, Owner owns the real property (the "OWNED LAND") located in
Larimer County, Colorado with a street address of 0000 Xxxxxxxxxx Xxxxx, Xxxx
Xxxxxxx, Xxxxxxxx 00000 and more particularly described on Exhibit A attached
hereto and by this reference made a part hereof. The Owned Land, together with
all appurtenant easements and other appurtenances thereto, and 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."
WHEREAS, the Property is currently subject to that certain Operating
Lease dated as of an even date herewith (the "OPERATING LEASE"), between Owner
and DMC, providing for the lease by DMC from Owner of the Owned Land and the
Building.
WHEREAS, DMC is interested in obtaining an option to purchase the
Property, and Owner is willing to grant such an option to DMC, on and subject to
the terms and conditions set forth in this Agreement.
WHEREAS, upon the expiration of the option to purchase the Property,
DMC is interested in obtaining a right of first offer to purchase the Property,
and Owner is willing to grant such an option to DMC, on and subject to the terms
and conditions set forth in this Agreement.
WHEREAS, DMC and Owner are entering into this Agreement in connection
with that certain Asset Purchase Agreement (the "PURCHASE AGREEMENT") which they
previously entered into. Capitalized terms used in this Agreement and not
otherwise defined in this Agreement shall have the meanings ascribed in the
Purchase Agreement.
AGREEMENT
In consideration of the payment by DMC to Owner of the Option Fee and
the First Offer Fee (as defined herein), 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 do 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.
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a. OPTION FEE. In consideration for the exclusive
option right granted hereby to DMC to purchase the Property pursuant to the
terms set forth herein, DMC shall, simultaneously with the full execution of
this Agreement, pay to Owner Two Thousand Dollars ($2,000) (the "OPTION FEE").
The Option Fee shall be fully earned by Owner upon the execution of this
Agreement. In no event shall any portion of the Option Fee be refundable to DMC.
b. TERM. The term of the Option (the "OPTION TERM")
shall commence on the date hereof and shall expire two years from such date.
c. TIME OF EXERCISE. The Option may be exercised by
DMC at any time during the Option Term.
d. PROCEDURE FOR EXERCISE. The Option may be
exercised during the time specified in Section 1(c) by delivering to Owner a
written notice of exercise (the "EXERCISE NOTICE") during that time stating that
DMC has exercised the Option.
2. RIGHT OF FIRST OFFER. Subsequent to the expiration of the
Option Term, Owner hereby grants to DMC an exclusive right of first offer (the
"FIRST OFFER") to purchase the Property in the event Owner decides to sell the
Property to any third party.
a. FIRST OFFER FEE. In consideration for the
exclusive right of first offer granted hereby to DMC to purchase the Property
pursuant to the terms set forth herein, DMC shall, simultaneously with the full
execution of this Agreement, pay to Owner Eight Hundred Dollars ($800) (the
"FIRST OFFER FEE"). The First Offer Fee shall be fully earned by Owner upon the
execution of this Agreement. In no event shall any portion of the First Offer
Fee be refundable to DMC.
b. TERM. The term of the First Offer (the "FIRST
OFFER TERM") shall commence upon the expiration of the Option Term and shall
expire eight years from such date.
c. TIME OF EXERCISE. The First Offer may be
exercised by DMC at any time during the First Offer Term if Owner decides to
sell the Property to any third party.
d. PROCEDURE OF FIRST OFFER. If Owner decides to
sell the Property, Owner must notify DMC in writing within five (5) business
days of such decision. Once the First Offer Purchase Price is established
pursuant to Section 4 below, DMC shall have ten (10) business days to purchase
the Property or notify Owner in writing that it will not exercise its First
Offer. If DMC does not exercise its First Offer within the specified time, DMC
shall lose its right of First Offer. Provided that the Option Purchase Price,
including any amount allocated to leasehold improvements, as described below, is
greater than the amount offered by any third party, Owner is obligated to sell
the Property to DMC.
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3. OPTION PURCHASE PRICE. The purchase price for the
Property upon the exercise of the Option (the "OPTION PURCHASE PRICE") shall be
equal to the fair market value (as determined pursuant to the procedure set
forth in the Operating Lease) of the Property at the time the Option is
exercised. Such Option Purchase Price shall be reduced by the amount of the
Purchase Price as defined in the Purchase Agreement that is allocated to
leasehold improvements under the Purchase Agreement. Exhibit B attached hereto
sets forth all such leasehold improvements and the amounts allocated thereto.
4. FIRST OFFER PURCHASE PRICE. The purchase price for the
Property upon the exercise of the First Offer (the "FIRST OFFER PURCHASE PRICE")
shall be equal to the fair market value (as determined pursuant to the procedure
set forth in the Operating Lease) of the Property at the time the First Offer is
exercised. Such First Offer Purchase Price shall be reduced by the amount of the
Purchase Price as defined in the Purchase Agreement that is allocated to
leasehold improvements under the Purchase Agreement as set forth in Exhibit B
attached hereto.
5. DOCUMENTS RECEIVED BY DMC. DMC hereby acknowledges that,
as of the date of this Agreement, DMC has received copies of the Owner's Policy
of Title Insurance Number 446903 covering the Property dated effective September
12, 1995 issued by First American Title Insurance Company to Owner (the "CURRENT
POLICY").
6. OWNER'S AFFIRMATIVE OPERATING COVENANT. During the Option
Term and the First Offer Term, and the periods contemplated by Sections 1(d) and
2(d) above (collectively, the "CLOSING") or termination of this Agreement, Owner
shall operate, maintain, and repair the Property in a manner required under the
Operating Lease.
7. OWNER'S NEGATIVE OPERATING COVENANT. During the Option
Term and the period contemplated by Section 1(d) above, Owner shall not, without
the prior written consent of DMC sell, convey, option, lease, or otherwise cloud
title to the Property, or any portion thereof, or contract to do any of the
foregoing. Further, during the First Offer Term and the period contemplated by
Section 2(d) above, Owner may not take any actions, either directly or
indirectly, to market the Property to any third parties, with the exception of
obtaining an appraisal on the Property by a commercial real estate firm and
transferring the Property into a family trust or partnership for estate planning
purposes.
8. 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.
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c. Any and all matters accepted or deemed accepted by
DMC pursuant to Section 10 of this Agreement.
The foregoing title exceptions are hereinafter together called the "PERMITTED
EXCEPTIONS."
9. TITLE COMMITMENT. Owner shall, within 10 days after its
receipt of the Exercise Notice or after Owner accepts DMC's offer under Section
3(d), furnish to DMC a preliminary title insurance report in favor of DMC (the
"PRELIMINARY REPORT") from a title insurance company reasonably acceptable to
both Owner and DMC (the "TITLE COMPANY") showing title to the Property to be
vested in Owner. The Title Company shall deliver to DMC copies of all recorded
instruments referred to in the Preliminary Report.
10. TITLE MATTERS.
a. OBJECTION BY DMC. Within 10 days after DMC's
receipt of the Preliminary Report, DMC may give Owner notice of all title
defects shown therein which are not Permitted Exceptions under any of Section
7(a) through 7(b) and which are not accepted by DMC as Permitted Exceptions (the
"NEW EXCEPTIONS"). Any and all New Exceptions affecting all or any portion of
the Property disclosed by the Preliminary Report (as exceptions, requirements,
or otherwise) which are not objected to by notice from DMC to Owner given within
such 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 DMC's objection to any New Exceptions shown by the
Preliminary Report, Owner shall have the right to cure such New Exceptions;
provided that Owner shall not be obligated hereby to cure any such New
Exceptions or to incur any expense in connection with any such cure. For
purposes hereof, a New Exception shall be deemed cured if (i) the Title Company
deletes the New Exception from the Preliminary Report or (ii) the Title Company
undertakes in writing to add a provision to the Owner's Policy obligating the
Title Company, within the limits of such Owner's Policy, to protect DMC against
loss or damage incurred on account of such New Exception.
c. TERMINATION BY DMC If each of the New Exceptions
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 either: (iii)
terminate this Agreement; (ii) waive its objection to such New Exceptions and
accept the same as Permitted Exceptions; or (iii) reduce the Option Purchase
Price or the First Offer Purchase Price by a reasonable amount to reflect the
value of the New Exception 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 of its decision to terminate, reduce the Option Purchase
Price or the First Offer Purchase Price or waive within such period of time, DMC
shall be deemed to have waived its objection to such New Exceptions and to have
accepted such New Exceptions as Permitted Exceptions. In the event that this
Agreement is terminated by DMC
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pursuant to this Section 9(c), both parties shall thereupon be relieved of all
further obligations hereunder.
11. AS-IS SALE. During the Option Term and First Offer,
DMC has been the sole occupant of the Property and has operated the Property and
conducted a portion of its business at the Property. As a result, 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 FOR DMC'S INTENDED USE OF THE PROPERTY, AND THE SUITABILITY
OF THE PROPERTY FOR DMC'S INTENDED USE.
12. PRORATIONS. General real property taxes, general
assessments, and current installments of special assessments on the Property for
the year of the Closing shall be prorated to the date of Closing based on the
amounts paid on the Property for the year prior to the year of the 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 regarding the amounts payable therefor. Such prorations shall be
reprorated between the parties after the Closing upon the determination of the
actual amounts payable therefor.
13. CLOSING. At the Closing:
a. If DMC is exercising its Option, DMC shall pay to
Owner the Option Purchase Price or the First Offer Purchase Price in cash,
certified check, cashier's check, wire transfer, or other immediately available
funds acceptable to Owner, or any combination of the foregoing. If DMC is
exercising its First Offer, DMC shall pay to Owner the agreed upon purchase
price in cash, certified check, cashier's check, wire transfer, or other
immediately available funds acceptable to Owner, or any combination of the
foregoing.
b. Owner shall convey the Property fee simple
absolute to DMC by grant deed, free and clear of all liens and encumbrances,
subject only to the Permitted Exceptions.
c. Owner shall assign or otherwise transfer to DMC,
and DMC shall assume all obligations of Owner under, any and all service,
maintenance, and management agreements affecting the Property and all plans,
specifications, surveys, studies, warranties, licenses, permits, certificates of
occupancy, and all similar items in Owner's possession or control affecting the
Property.
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d. Owner shall obtain the unconditional commitment of
the Title Company to issue to DMC its standard form owner's policy of title
insurance (the "OWNER'S POLICY") insuring title to the Property in DMC in the
amount that DMC pays for the Property, subject only to the Permitted Exceptions.
e. The parties shall each do or cause to be done such
other matters and things as shall be necessary to consummate the Closing.
Owner shall pay the premium charged by the Title Company for the Owner's Policy,
and DMC shall pay all recording, documentary, and similar fees and transfer
taxes incurred in connection with the Closing.
14. SALES COMMISSIONS. Owner and DMC shall each indemnify the
other and hold the other harmless 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 contemplated
herein on account of any implied or express commitment or undertaking to pay
such a commission made by the indemnifying party.
15. NO ASSIGNMENT. This Agreement shall be binding and
effective on and inure to the benefit of the successors and assigns of the
parties hereto. Neither party shall, without the prior written consent of the
other party, assign or otherwise transfer or encumber this Agreement or any
interest of either party herein; provided that DMC may assign this Agreement,
without the prior written consent of Owner, to any entity controlling,
controlled by, or under common control with DMC.
16. 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 recording in the
real property records of Larimer County, Colorado.
17. SPECIFIC PERFORMANCE. The parties agree that it is
impossible to measure in money the damages which will 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 institute 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.
18. 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.
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19. 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 successful 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: JEA Property, LLC
0000 Xxxxxxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx
With a copy to: Xxxxx, Xxxxxxxxx & Xxx, P.C.
000 Xxxx Xxx Xxxxxx, 00xx Xxxxx
Xxxx Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxx
Fax: (000) 000-0000
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
000 Xxxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxxxx
Facsimile: (000) 000-0000
With a copy to: Xxxxx, Xxxxxx & Xxxxxx LLP
0000 Xxxxxxxx Xxx., Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxxxxxxx Xxxxxx
Facsimile: (000) 000-0000
20. GOVERNING LAW AND VENUE. The validity and effect of this
Agreement shall be determined in accordance with the laws of the State of
Colorado (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 Colorado 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.
21. 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.
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22. 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 Denver, Colorado, 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 Denver, Colorado.
23. ENTIRE AGREEMENT. This Agreement contains the entire
understanding and agreement between the parties with respect to the subject
matter hereof and supersedes all prior commitments, understandings, warranties,
and negotiations, all of which are by the execution hereof
rendered null and void. No amendment or modifications 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.
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IN WITNESS WHEREOF, the parties hereto have executed this
OPTION AND RIGHT OF FIRST OFFER AGREEMENT on the dates indicated below intending
that it be valid and effective from and after the date first written above.
DYNAMIC MATERIALS CORPORATION,
a Delaware corporation
/S/ XXXXXX X. XXXXXXX
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Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
JEA PROPERTY, LLC
a Colorado limited liability company
/S/ XXXXXXX X. XXXXXXX
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Xxxxxxx X. Xxxxxxx
Member
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EXHIBIT A
The legal description of the Property is as follows:
Xxx 00, Xxxxxxxxxx Xxxxxxxx, Xxxxxxx Xxxxxx, Xxxxxxxx
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