OPTION AGREEMENT
THIS OPTION AGREEMENT (this "AGREEMENT") is made and entered into on
this 18th day of March, 1998 by and between Dynamic Materials Corporation, a
Delaware corporation ("DMC"), and Spin Forge, LLC, a California limited
liability company ("OWNER").
RECITALS
This Agreement is made with respect to the following facts:
A. Owner owns the real property (the "OWNED LAND") located in Los
Angeles County, California with a street address of 0000 Xxxx Xxxxx Xxxxxx, Xx
Xxxxxxx, Xxxxxxxxxx 00000 and more particularly described on EXHIBIT A attached
hereto and by this reference made 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."
B. 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.
C. 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.
D. DMC and Owner are entering into this Agreement in connection with
that certain Asset Purchase Agreement (the "PURCHASE AGREEMENT") dated as of an
even date herewith and which they are entering into concurrently with this
Agreement. 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
(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.
A. OPTION FEE. In consideration for the exclusive 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 Ten Thousand Dollars ($10,000) (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 "TERM") shall commence on
the date hereof and shall expire upon the termination of the
Operating Lease.
C. TIME OF EXERCISE. The Option may be exercised by DMC at any
time after June 30, 1998 and until the expiration of the 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. PURCHASE PRICE.
A. CALCULATION OF PURCHASE PRICE. The purchase price for the
Property upon the exercise of the Option (the "PURCHASE PRICE")
shall equal $2,880,000 (the "UNADJUSTED PRICE") minus the Prepayment
Discount, if any; provided, however, that in the event the Option is
exercised after January 1, 2002, the Purchase Price shall be equal
to the fair market value (as determined pursuant to the procedure
set forth in Article 1, Section C of the Operating Lease) of the
Property at the time the Option is exercised, provided that in no
event shall the Purchase Price be less than $2,880,000 and provided
further that in the event the Option is exercised before January 1,
2002, but the purchase of the Property is not closed due to the
default of the Owner, Purchaser shall be entitled to purchase the
property at the Purchase Price in effect at the time of the original
exercise, provided that the purchase of the Property is closed
within a reasonable period of time after Owner has cured such
default.
B. DEFINITIONS. As used herein, the following terms shall have
the following meanings:
(1) The term "PREPAYMENT DISCOUNT" shall mean an amount
equal to fifty percent (50%) of the result of {(a) minus (b)},
where (a) is the outstanding principal amount on the Dover
Note on the Prepayment Date and (b) is the amount of principal
actually paid on the Prepayment Date in order to repay the
entire balance of the Dover Note on the Prepayment Date.
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(2) The term "PREPAYMENT DATE" shall mean the date on
which Owner prepays the Dover Note in full.
(3) The term "DEBT" shall mean the amount of principal
and interest outstanding under the Master Promissory Note.
C. REDUCTION FOR ASSUMED LIABILITIES. In the event that DMC
assumes or otherwise relieves or releases, directly or indirectly,
Owner from Owner's obligations under the Dover Note prior to the
full satisfaction by Owner of such obligations, the Purchase Price
shall be reduced by the amount of such assumption or the amount of
liability under the Dover Note from which Owner is otherwise
relieved or released.
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 Xxxx
X. Xxxxx, dated June 27, 1997 (the "SURVEY").
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 COVENANT. During the Term and, if
the Option is exercised by DMC, until consummation of the transactions
contemplated by the Option (the "CLOSING") or termination of this Agreement,
Owner shall operate, maintain, and repair the Property in a manner required
under the Operating Lease.
5. OWNER'S NEGATIVE OPERATING COVENANT. During the Term and, if the
Option is exercised by DMC, until the Closing or termination of this Agreement,
Owner shall not, without the prior written consent of DMC, which consent shall
not be unreasonably withheld, sell, convey, 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.
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B. The matters set forth in the Current Policy.
C. Any and all matters accepted or deemed accepted by DMC
pursuant to PARAGRAPH 8 of this Agreement.
The foregoing title exceptions are hereinafter together called the "PERMITTED
EXCEPTIONS."
7. TITLE COMMITMENT. Owner shall, within 10 days after its receipt
of the Exercise Notice, 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.
8. 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
PARAGRAPHS 6A through 6B 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 DYNAMIC. 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: (i) terminate this Agreement; (ii) waive its
objection to such New Exceptions and accept the same as Permitted
Exceptions;
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or (iii) reduce the 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 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 pursuant to this
XXXXXXXXX 0X, xxxx parties shall thereupon be relieved of all
further obligations hereunder.
9. AS-IS SALE. During the Term, 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.
10. 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.
11. CLOSING. The purchase and sale of the Property, and each of the
deliveries contemplated below, shall be consummated 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, together with any escrow instructions required by the Escrow Holder
to be delivered to the Escrow Holder shall constitute the Escrow Holder's
instructions. Owner and DMC agree to execute and deliver to the Escrow Holder
such additional and supplemental instructions; PROVIDED, HOWEVER, 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
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shall govern the duties of the Escrow Holder and the rights and obligations of
DMC and Owner. At the Closing:
A. DMC shall pay to Owner the Purchase Price in cash, by
cancellation of the Debt (as defined in PARAGRAPH 2 of this
Agreement), 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.
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 of the Unadjusted Price, 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.
Each party shall pay (through delivery into the Escrow) one-half of any charges
imposed by the Escrow Holder, 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.
12. 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.
13. 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
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written consent of Owner, to any entity controlling, controlled by, or
under common control with DMC.
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 recording in the real
property records of Los Angeles County, California.
15. 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.
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 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: Spin Forge, LLC
0000 Xxxx Xxxxx Xxxxxx
Xx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Wolf, Xxxxxx & Xxxxxxx, LLP
00000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
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Telephone: (000) 000-0000
Facsimile: (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
Attention: Xxxxxxx Santa
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxx, Xxxxxx & Xxxxxx LLP
Suite 4700
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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 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.
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 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.
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 commitments, understandings, warranties,
and negotiations, all of which are by the execution hereof
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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.
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 written above.
DYNAMIC MATERIALS CORPORATION,
a Delaware corporation
By: /s/Xxxxxxx Santa
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Its: Vice-President & CFO
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Date: 3/18/98
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SPIN FORGE, LLC,
a California limited liability company
By: /s/Xxx Xxxxxxx
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Its: President
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Date: 3/18/98
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