EQUIPMENT LEASE AGREEMENT

Exhibit 10.3

Execution Copy

EQUIPMENT LEASE AGREEMENT

This Equipment Lease Agreement is made this 17 day of September, 2004, by and between Dynamic Materials Corporation, a Delaware corporation, having a principal office at 5405 Spine Road, Boulder CO, 80301 (“LESSOR”), and Aerojet-General Corporation, an Ohio corporation, having its principal office at Highway 50 & Aerojet Road, Rancho Cordova CA, 95742 (“LESSEE”).  All terms not defined herein shall have the same meaning as set forth in that certain Agreement dated as of September 17, 2004, between LESSOR and LESSEE (the “ Agreement”).

WHEREAS, LESSOR and LESSEE are parties to the Agreement relating to the sale of the Spin Forge Assets; and

WHEREAS, LESSOR owns the equipment listed on Schedule A hereto (the “EQUIPMENT”); and

WHEREAS, LESSEE wishes to lease the EQUIPMENT from LESSOR, all of which is located at 1700 East Grand Avenue, El Segundo CA, 90245 (the “PREMISES”); and

WHEREAS, LESSOR wishes to lease the EQUIPMENT to LESSEE upon certain terms and conditions.

NOW, THEREFORE, in consideration of the rental payments to be made hereunder by LESSEE to LESSOR and the mutual terms, covenants, and conditions hereinafter set forth, and subject to the terms and conditions hereof, LESSOR does hereby lease to LESSEE and LESSEE does hereby take and hire from LESSOR, the EQUIPMENT.

Terms and Conditions

1.                                        LEASE .  LESSOR and LESSEE agree that the terms of this Equipment Lease Agreement shall apply to and be incorporated by reference into Schedule A hereto.  This

Equipment Lease Agreement shall be enforceable upon execution by LESSEE and subsequent counter-signature by LESSOR indicating acceptance.

2.                                        RENTAL PAYMENTS .  Unless otherwise agreed in writing, each regular periodic payment of rent due during the term of this Equipment Lease Agreement shall be due on the first day of the month (the billing date) with the first payment due on the first day of the month following the Closing Date, which shall be prorated, if necessary.  Each periodic rental installment shall be at the rate of 1/96 of the net book value of the EQUIPMENT determined as of -[June 30, 2004 (the “NET BOOK VALUE”), as set forth on Schedule A hereto.  Payments shall be made by LESSEE at LESSOR’s address set forth herein or as otherwise directed by LESSOR.  LESSEE shall not abate, set off, or deduct any amount or reduce any payment for any reason without the prior written consent of LESSOR.  Payments are delinquent if not in LESSOR’s possession by the due date.

3.                                        COMMENCEMENT AND TERMINATION .  The term of this Equipment License Agreement shall commence on the Closing Date, and shall terminate on January 1, 2007 (the “INITIAL TERM”), unless extended in accordance with Article 4 below (the “EXTENDED TERM” and together with the INITIAL TERM, the “TERM”), or upon notice by LESSOR in the case of LESSEE’s material default which has not been cured following 30 days’ notice.  In the event LESSEE retains part or all of the EQUIPMENT beyond the TERM, then the terms and provisions of this Equipment Lease Agreement shall stay in effect during such hold-over period, subject to LESSOR’s right on default to terminate this Equipment Lease Agreement.  LESSEE may terminate this Equipment Lease Agreement at the expiration of the TERM by providing LESSOR with a notice of termination 60 days prior to the end of the TERM.

4.                                        OPTION TO EXTEND TERM .  Provided that no Event of Default (as defined in Article 20) exists under this Equipment Lease Agreement, LESSEE shall have the option to extend the TERM to a full eight (8) years from the Closing Date; provided, however, that LESEE must exercise this option in writing no later than January 1, 2006.  If LESSEE exercises the option to renew this Equipment Lease Agreement, such renewal shall be upon the terms and conditions of this Equipment Lease Agreement, at the rate specified in Article 2 hereof.

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5.                                        OPTION TO PURCHASE .  Provided that no Event of Default exists under this Equipment Lease Agreement, LESSEE shall have the option to purchase any or all of the Equipment at the expiration of the Initial Term or the Extended Term for a purchase price equal to the NET BOOK VALUE of the EQUIPMENT, reduced by the amount of any payments made by LESSEE under this Equipment Lease Agreement.  If LESSEE chooses to exercise its right to assume LESSOR’S property rights on the PREMISES by August 1, 2005 as set forth in the Option Agreement of even date herewith, then LESSEE shall be required to purchase all the EQUIPMENT as described herein no later than January 1, 2007.  If LESSEE elects to purchase the EQUIPMENT, LESSEE shall purchase from LESSOR, and LESSOR shall sell to LESSEE the EQUIPMENT on an AS IS, WHERE IS, BASIS except that LESSOR shall warrant title and that the EQUIPMENT is free and clear of all liens and encumbrances arising by or through the LESSOR, except for any liens or encumbrances caused by LESSEE, regardless of whether permitted pursuant to Section 7 hereof, or taxes or other impositions for which LESSEE is obligated to pay under this Equipment Lease Agreement or relating to the purchase of the EQUIPMENT.  LESSOR shall provide LESSEE with a bill of sale following the payment in full.

6.                                        NO WARRANTIES BY LESSOR .  LESSOR makes no warranty, express, implied or statutory, as to any matter whatsoever, including the condition of the EQUIPMENT, its merchantability or its fitness for any particular purpose, and as to LESSOR, LESSEE leases the EQUIPMENT “as is.”  LESSEE has conducted a customary review of the operational EQUIPMENT and is not aware of any faulty safety devices. Notwithstanding the foregoing, LESSOR warrants that all safety devices relating to the EQUIPMENT have been maintained to at least comply with minimum manufacturer and prevailing occupational safety standards.

7.                                        ASSIGNMENT .  Without LESSOR’s prior written consent, LESSEE shall not assign, transfer, pledge, or otherwise dispose of this Equipment Lease Agreement, any interest therein, or sublease or loan or permit a security interest, lien, charge, encumbrance or other similar interest in the EQUIPMENT or permit it to be used by anyone other than LESSEE or LESSEE’s qualified employees.  LESSOR may assign this Equipment Lease Agreement and/or permit a security interest, lien, charge, encumbrance, or other similar interest in the

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EQUIPMENT, in whole or in part, to one or more assignees, with notice to LESSEE.  LESSOR’s assignee(s) and/or the secured party(ies) may reassign this Equipment Lease Agreement, and/or such security interest with notice to LESSEE.  Each such assignee and/or such secured party shall have all rights of LESSOR under the LEASE, but no such assignee or secured party shall be bound to perform any obligation of LESSOR.  LESSEE acknowledges that any assignment or transfer by LESSOR shall not materially change LESSEE’s duties or obligations under this Equipment Lease Agreement nor materially increase the burdens or risks imposed on LESSEE.

8.                                        OWNERSHIP .  The EQUIPMENT shall at all times remain the personal property of LESSOR.  LESSEE will at all times, at its own cost and expense, keep the EQUIPMENT free and clear of all claims, liens, and legal processes of creditors of LESSEE.

9.                                        LOCATION AND RIGHT OF INSPECTION .  The EQUIPMENT shall be kept at the PREMISES, and shall not be removed therefrom without LESSOR’s prior written consent. LESSOR or its representative shall have the right at any time during normal business hours and upon reasonable notice to inspect the EQUIPMENT and for that purpose has access to the location of the EQUIPMENT.

10.                                  USE AND OPERATION .  LESSEE shall use the EQUIPMENT in a careful manner and shall comply with all laws, ordinances, rules or any other local, state or federal requirements relating to its possession, use and maintenance.  LESSEE represents that the EQUIPMENT shall be used in its business or commercial concern and that no item of EQUIPMENT will be used for personal, family, or household purposes.

11.                                  REPAIRS AND ALTERATIONS .  LESSEE shall at its own expense maintain the EQUIPMENT in good repair, appearance, and functional order.  LESSEE agrees to comply with all maintenance schedules and procedures recommended by the manufacturer of the EQUIPMENT and, if available, purchase or otherwise enter into and adhere to dealer maintenance contracts.  LESSEE shall not make any alterations, additions, or improvements to the EQUIPMENT without LESSOR’s prior written consent.  All alterations, additions, or improvements made to the EQUIPMENT shall belong to LESSOR.

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12.                                  LOSS AND DAMAGE .  LESSEE shall bear the entire risk of loss, theft, damage, or destruction of the EQUIPMENT from any cause whatsoever.  No loss, theft, damage, or destruction of the EQUIPMENT shall relieve LESSEE of the obligation to pay rent or to comply with any other obligation under this Equipment Lease Agreement.  In the event of damage to any item of EQUIPMENT, LESSEE shall promptly notify LESSOR of such damage and immediately place the same in good repair at LESSEE’s expense. If LESSOR determines that any item of EQUIPMENT is lost, stolen, destroyed, or damaged beyond repair, LESSEE shall, at LESSEE’s option: (a) replace the same with like equipment in good repair, acceptable to LESSOR; or (b) pay LESSOR a sum equal to (i) all amounts due by LESSEE to LESSOR under the LEASE up to the date of the loss and (ii) the NET BOOK VALUE of the EQUIPMENT, reduced by the amount of any payments made by LESSEE under this EQUIPMENT LEASE AGREEMENT.

13.                                  INSURANCE .  LESSEE shall provide and maintain primary insurance against loss, theft, damage, or destruction of the EQUIPMENT in an amount specified in Schedule A hereto, with loss payable to LESSOR.  At LESSOR’s request, LESSEE also shall provide and maintain primary comprehensive general all risk liability insurance.  Such insurance shall include, but shall not be limited to, product liability coverage, insuring LESSOR and LESSEE, with a severability of interest endorsement or its equivalent, against any and all loss or liability for all damages, either to persons, property, or otherwise, which might result from or happen in connection with the condition, use, or operation of the EQUIPMENT, with such limits and with an insurer reasonably satisfactory to LESSOR.  Each policy shall expressly provide that the insurance as to LESSOR shall not be invalidated by any act, omission, or neglect of LESSEE and cannot be materially altered or canceled without thirty (30) days’ written notice to LESSOR.  As to each policy, LESSEE shall furnish to LESSOR a certificate of insurance from the insurer evidencing the insurance coverage required by this section.  All such insurance shall include the name of LESSOR as an additional insured.  All obligations of this section shall extend throughout the TERM and until the EQUIPMENT is returned to LESSOR.

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14.                                  TAXES .  LESSEE agrees to pay and indemnify and hold LESSOR harmless from and against all sales, use, personal property, leasing and other taxes (together with any penalties, fines or interest thereof) imposed after the Closing Date against LESSOR, LESSEE or the EQUIPMENT by any governmental authority with respect to the EQUIPMENT.

15.                                  INDEMNITY .  With regard to bodily injury and property damage liability only, LESSEE will indemnify and hold LESSOR harmless from and against any and all claims, costs, expenses, damages, and liabilities, including reasonable attorneys’ fees, arising out of the ownership (for strict liability in tort only), possession, leasing, operation, control, use, maintenance, delivery, or other disposition of the EQUIPMENT arising from acts or events during the TERM.  However, LESSEE is not responsible to a party indemnified hereunder for any claims, costs expenses, damages, and liabilities occasioned by the gross negligent acts of such indemnified party.  LESSEE agrees to carry bodily injury and property damages liability insurance during the term of this Equipment Lease Agreement as provided in Article 13; any amounts received by LESSOR under the insurance will be credited against LESSEE’s obligations under this Article.  LESSOR will also be indemnified for twelve months after the TERM if the EQUIPMENT is required to be returned to LESSOR to the extent the claim arises out of LESSEE’s use of the EQUIPMENT, including, but not limited to, faulty upkeep, improper repairs and unauthorized alterations.

16.                                  LATE CHARGES AND INTEREST .  If LESSEE fails to pay LESSOR any amount when due or, in the case of an amount due to one other than LESSOR, if LESSOR pays an amount on LESSEE’s behalf, then LESSEE shall pay LESSOR a late charge of  five percent (5%) of such amount or $250, whichever is greater, for each calendar month or part thereof for which rent or other sum shall be delinquent or shall have been paid by LESSOR on LESSEE’s behalf.  The amount of any charges assessed hereunder shall be added to and become part of the next rental payment or shall be separately invoiced, at LESSOR’s option. Interest shall accrue on any unpaid or unreimbursed amounts at an  annual rate of three percent (3%) greater than the rate announced from time to time by Wells Fargo National Bank Association at its principal office in san Francisco as its “prime rate”, from the due date until paid by LESSEE.

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17.                                  TIME OF THE ESSENCE .  Time is of the essence of this Equipment Lease Agreement. This provision shall not be waived by the acceptance on occasion of late or defective performance.

18.                                  QUIET ENJOYMENT .  So long as LESSEE shall not be in default hereunder and LESSOR continues to receive all rent and other sums payable by LESSEE hereunder in accordance with the terms hereof, neither LESSOR nor its assignee, shall interfere with LESSEE’s right of quiet enjoyment and use of the EQUIPMENT.

19.                                  LESSEE REPRESENTATIONS .  LESSEE hereby represents, warrants and covenants that with respect to this Equipment Lease Agreement: (a) The execution, delivery and performance hereof by the LESSEE has been duly authorized by all necessary corporate action; (b) The individual executing such was duly authorized to do so; (c) This Equipment Lease Agreement constitutes the legal, valid and binding obligations of the LESSEE enforceable in accordance with its terms.

20.                                  DEFAULT .  LESSEE shall be in default if (a) LESSEE shall fail to pay rent or any other amount provided for under this Equipment Lease Agreement within five (5) days after the same becomes due and payable; (b) LESSEE fails to observe, keep or perform any other provision of this Equipment Lease Agreement, and such failure shall continue for a period of thirty (30) days without cure; (c) LESSEE shall abandon the EQUIPMENT; (d) except as inconsistent with federal bankruptcy law, any proceeding in bankruptcy, receivership, or insolvency shall be commenced against LESSEE or its property or any guarantor or such guarantor’s property, LESSEE or any guarantor files voluntarily for bankruptcy or reorganization, or LESSEE or any guarantor makes an assignment for the benefit of its creditors; (e) LESSEE or any guarantor makes any misrepresentation or false statement as to its credit or financial standing in connection with the execution or the further performance of the LEASE; (f) any attachment or execution be levied on any of LESSEE’s property; (g) LESSEE permits any other entity or person to use the EQUIPMENT without the prior written consent of LESSOR; or (h) in the business and affairs of LESSEE or any guarantor there occurs a material change which

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shall impair the security of the EQUIPMENT or increase LESSOR’s credit risk involved in the LEASE.  Each of the foregoing events shall constitute an “EVENT OF DEFAULT.”

21.                                  REMEDIES .  In the event of LESSEE’s default, LESSOR shall have the right and option, but not the obligation, to exercise any one or more of the following remedies, which remedies or any of them may be exercised by LESSOR without notice to LESSEE and without any election of remedies by LESSOR: (a) LESSOR may declare all sums due and to become due under this Equipment Lease Agreement immediately due and payable; (b) LESSOR may institute litigation to collect any sums due pursuant to the foregoing subsection (a) that are not promptly paid by LESSEE; (b) LESSOR may institute litigation to collect all rents and other amounts due as of the date of such default together with any sums that may accrue up to the date of trial; (c) LESSOR may institute litigation to specifically enforce the terms of this Equipment Lease Agreement; (d) LESSOR may terminate this Equipment Lease Agreement; or (e) LESSOR may pursue any other remedy now, or hereafter, existing in law or equity.  However, damages for any future rentals and/or LESSOR’s residual value in the EQUIPMENT shall be limited to the NET BOOK VALUE of the EQUIPMENT, reduced by the amount of any payments made by LESSEE under this EQUIPMENT LEASE AGREEMENT.

22.                                  MODIFICATION .  Neither this Equipment Lease Agreement nor any other document or Schedule constituting this Equipment Lease Agreement can be modified or amended except by written agreement signed and dated by both LESSOR and LESSEE.

23.                                  SUCCESSOR INTERESTS .  Subject to any prohibition against assignment contained herein, this Equipment Lease Agreement shall be binding upon and inure to the benefit of the heirs, successors, and assigns of the parties.  As used in this Equipment Lease Agreement, the term “LESSOR” shall include any assignee or secured party of LESSOR where appropriate.

24.                                  NOTICES .                                          All notices, requests, demand, claims and other communications hereunder shall be in writing.  Any such written communication shall be deemed to have been duly given (except as may otherwise be specifically provided herein to the contrary), and shall be deemed sufficient to preserve the rights of the sending party, if either (i) mailed by certified or

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registered mail, with postage prepaid by sender, or shipped by express courier service, with charges prepaid by sender and receipted for by or on behalf of the intended recipient, in each case to the following address (or to such other address as any part may designate for himself or itself by notice to the other parties given pursuant hereto), or else (ii) delivered by hand and receipted for by or on behalf of the intended recipient:

Lessee shall remit all payments required under this Equipment Lease Agreement to Lessor’s lockbox account at:

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25.                                  GOVERNING LAW.  This Agreement shall be governed by and construed in accordance with the domestic laws of the State of California without giving effect to any choice or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California.

26.                                  WAIVER OF JURY TRIAL .  LESSOR AND LESSEE HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

27.                                  WAIVER .  Failure of LESSOR at any time to require performance of any provision of this Equipment Lease Agreement shall not limit any right of LESSOR to enforce that provision, nor shall any waiver by LESSOR of any breach or any provision be a waiver of any succeeding breach of that provision or a waiver of that provision itself or any other provision.

28.                                  NUMBER AND CAPTIONS .  As used herein, the singular shall include the plural, and the plural the singular. All captions used herein are intended solely for convenience of reference and shall in no way limit or explain any of the provisions of this Equipment Lease Agreement.

29.                                  DUPLICATE ENFORCEABLE AS ORIGINAL .  LESSEE hereby consents to the use of this Equipment Lease Agreement, along with a photocopy hereof, for all purposes including, but not limited to, evidence in litigation or any other judicial proceeding.

30.                                  SEVERABILITY .  If any provision of this Equipment Lease Agreement is held invalid, such invalidity shall not affect other provisions that can be given effect without the invalid provision.

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31.                                  ENTIRE AGREEMENT .  This Equipment Lease Agreement, together with the Ancillary Agreements and any exhibits and schedules hereto or thereto, contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, written or oral, with respect thereto.  No amendment, supplement, modification, waiver or termination of this Equipment Lease Agreement shall be implied or binding (including any alleged waiver based on a party’s knowledge of any inaccuracy in any representation or any breach of warranty or covenant contained herein) unless in writing and signed by the party against which such amendment, supplement, modification, waiver or termination is asserted.  No waiver of a provision of this Equipment Lease Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly therein provided.

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IN WITNESS WHEREOF, the Parties hereto have executed this Equipment Lease Agreement as of the date first above written.

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Execution Copy

Equipment Lease - Schedule A