FOURTH MODIFICATION AGREEMENT
BY THIS FOURTH MODIFICATION AGREEMENT (the "Agreement"), made and
entered into as of the 27th day of September, 2001, WELLS FARGO BANK,
NATIONAL ASSOCIATION, a national banking association, whose address is 100 West
Washington, Phoenix, Arizona 85003 (hereinafter called "Lender"), and SCHUFF
INTERNATIONAL, INC., a Delaware corporation ("Borrower") as successor in
interest to SCHUFF STEEL COMPANY, a Delaware corporation (hereinafter called
"Original Borrower"), whose address is 420 South 19th Avenue, Phoenix, Arizona
85009, in consideration of the mutual covenants herein contained and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, hereby confirm and agree as follows:
SECTION 1. RECITALS.
1.1 Original Borrower and Lender, as Lender, Arranger, Administrative
Agent, Issuing Bank and Swing Line Lender, entered into a Credit Agreement dated
June 30, 1998 (the "Credit Agreement"), which provided for, among other things,
(a) a revolving line of credit (the "RLC") in the amount of $25,000,000.00 since
reduced to $15,000,000.00, evidenced by a Revolving Promissory Note dated June
30, 1998, executed by the Borrower (the "RLC Note"), and (b) a revolving line of
credit (the "Swing Line" and with the RLC, the "Loans") in the amount of
$5,000,000.00, evidenced by a Revolving Promissory Line dated June 30, 1998,
executed by the Company (the "Swing Line Note" and with the RLC Note the
"Notes"), all upon the terms and conditions contained therein. The Credit
Agreement was subsequently amended by that Modification Agreement dated as of
March 10, 1999, by that Second Modification Agreement dated as of March 28, 2000
and that Third Modification Agreement dated as of August 21, 2000 (collectively,
the "Modification"). All undefined capitalized terms used herein shall have the
meaning given them in the Credit Agreement. The Credit Agreement, the Notes and
all other agreements, documents and instruments relating to the Loans, as
modified by the Modification, are referred to as the Loan Documents.
1.2 Original Borrower has become a Subsidiary of Borrower and Borrower
wishes to assume the obligations of Original Borrower under the Credit Agreement
and the Loan Documents.
1.3 Lender is willing to modify accordingly the Loan Documents, subject
to the terms and conditions herein.
SECTION 2. ASSUMPTION BY BORROWER.
Borrower hereby assumes and agrees to perform all of the duties,
obligations and promises of Original Borrower as set forth in or arising under
the Loan Documents, to be bound by all of the terms, conditions and provisions
of the Loan Documents and to do any and all acts and things required under the
Loan Documents to be done by Original Borrower, except to the extent modified in
this Agreement.
<PAGE>
SECTION 3. LOAN AGREEMENT.
3.1 The following definitions in Section 1.1 of the Credit Agreement
are hereby amended to read as follows:
"Borrower" means Schuff International, Inc., a
Delaware corporation.
"EBITDA" means, as of any date of determination, as
to Borrower and its Subsidiaries, the sum of their net income
plus interest expense, corporate income tax expense,
depreciation and amortization.
"Fixed Charge Coverage Ratio" means, for the prior
four Fiscal Quarters, the ratio of (i) EBITDA plus operating
lease expenses, to (ii) the sum of scheduled principal
payments of Borrower and its Subsidiaries on their long-term
Indebtedness, interest expense, operating lease expense and
all principal reductions (redemption or purchase) of their
long-term bond Indebtedness.
"Loan" means any group of Advances made at any one
time by the Lenders under the Commitment pursuant to Article
2.
"Maturity Date" means June 30, 2003.
"Net Funded Debt" means the sum of the Indebtedness
and Contingent Obligations of Borrower and its Subsidiaries,
less any Cash in excess of $5,000,000 shown on balance sheets.
"Note" means any of the promissory notes made by
Borrower in favor of a Lender evidencing Advances under that
Lender's Pro Rata Share of the Commitment, substantially in
the form of Exhibit C, either as originally executed or as the
same may from time to time be supplemented, modified, amended,
renewed, extended or supplanted.
"Obligations" means all present and future
obligations of every kind or nature of Borrower at any time
and from time to time owed to the Administrative Agent, the
Issuing Bank or the Lenders or any one or more of them under
any one or more of the Loan Documents, whether due or to
become due, matured or unmatured, liquidated or unliquidated,
or contingent or noncontingent, including obligations of
performance as well as obligations of payment, and including
interest that accrues after the commencement of any proceeding
under any Debtor Relief Law by or against Borrower or any
Subsidiary of Borrower.
-2-
<PAGE>
"Outstanding Balance" means the sum at any time of
(i) the outstanding principal amount of the Loans, plus (ii)
the Letter of Credit Balance.
3.2 Section 1.1 of the Credit Agreement is hereby amended by the
deletion of the following definitions therein and all references to such defined
terms in the Credit Agreement are also hereby deleted:
Interest Coverage Ratio
Swing Line
Swing Line Balance
Swing Line Commitment
Swing Line Lender
Swing Line Loans
Swing Line Note
3.3 Article 2B of the Credit Agreement is hereby amended to read as
follows:
ARTICLE 2B
[Intentionally left blank]
3.4 Section 6.11(b) of the Credit Agreement is hereby amended to read
as follows:
(b) [Intentionally left blank]
3.5 Schedule 3.1 of the Credit Agreement is hereby amended to read as
attached hereto.
3.6 Exhibits "B", "D", "F" and "G" of the Credit Agreement are hereby
amended to read as attached hereto.
SECTION 4. OTHER MODIFICATIONS, RATIFICATIONS AND AGREEMENTS.
4.1 All references to the Credit Agreement in the Loan Documents are
hereby amended to refer to the Credit Agreement as hereby amended.
4.2 Borrower acknowledges that the indebtedness evidenced by the Notes
is just and owing, that the balance thereof is correctly shown in the records of
Lender as of the date hereof, and Borrower agrees to pay the indebtedness
evidenced by the Notes according to the terms thereof, as herein modified.
4.3 Borrower hereby reaffirms to Lender each of the representations,
warranties, covenants and agreements of Borrower set forth in the Notes and the
Credit Agreement, with the same force and effect as if each were separately
stated herein and made as of the date hereof.
4.4 Borrower hereby ratifies, reaffirms, acknowledges, and agrees that
the Notes and the Credit Agreement, represent valid, enforceable and collectible
obligations of Borrower, and
-3-
<PAGE>
that there are no existing claims, defenses, personal or otherwise, or rights of
setoff whatsoever with respect to any of these documents or instruments. In
addition, Borrower hereby expressly waives, releases and absolutely and forever
discharges Lender and its present and former shareholders, directors, officers,
employees and agents, and their separate and respective heirs, personal
representatives, successors and assigns, from any and all liabilities, claims,
demands, damages, action and causes of action, of which Borrower has, or may
reasonably be expected to have knowledge, that Borrower may now have, or has had
prior to the date hereof, or that may hereafter arise with respect to acts,
omissions or events occurring prior to the date hereof and, without limiting the
generality of the foregoing, from any and all liabilities, claims, demands,
damages, actions and causes of action, known or unknown, contingent or matured,
arising out of, or in any way connected with, the Loans. Borrower further
acknowledges and represents that no event has occurred and no condition exists
that, after notice or lapse of time, or both, would constitute a default under
this Agreement, the Notes or the Credit Agreement.
4.5 All terms, conditions and provisions of the Notes and the Credit
Agreement are continued in full force and effect and shall remain unaffected and
unchanged except as specifically amended hereby. The Notes and the Credit
Agreement, as amended hereby, are hereby ratified and reaffirmed by Borrower,
and Borrower specifically acknowledges the validity and enforceability thereof.
4.6 Lender hereby consents to the assumption by Borrower of the duties,
obligations and promises of Original Borrower pursuant to Section 2 of this
Agreement.
SECTION 5. GENERAL.
5.1 This Agreement in no way acts as a release or relinquishment of
those rights securing payment of the Loans. Such rights are hereby ratified,
confirmed, renewed and extended by Borrower in all respects.
5.2 The modifications contained herein shall not be binding upon Lender
until Lender shall have received all of the following:
(a) An original of this Agreement, a Security Agreement and a
Pledge Agreement, each fully executed by the Borrower.
(b) An original Consent and Agreement of Guarantors executed
by each Guarantor.
(c) Original Continuing Guaranties and Security Agreements,
fully executed by Schuff Steel Company, a Delaware corporation, Aitken,
Inc., a Texas corporation, and On-Time Steel Management, Inc., a
Delaware corporation.
(d) Such resolutions or authorizations and such other
documents as Lender may require relating to the existence and good
standing of the Borrower and each Subsidiary and the authority of any
person executing this Agreement or other documents on behalf of the
Borrower and each Subsidiary.
-4-
<PAGE>
5.3 Borrower shall execute and deliver such additional documents and do
such other acts as Lender may reasonably require to fully implement the intent
of this Agreement.
5.4 Borrower shall pay all costs and expenses, including, but not
limited to, reasonable attorneys' fees incurred by Lender in connection
herewith, whether or not all of the conditions described in Paragraph 4.2 above
are satisfied. Lender, at its option, but without any obligation to do so, may
advance funds to pay any such costs and expenses that are the obligation of the
Borrower, and all such funds advanced shall bear interest at the highest rate
provided in the RLC Note and shall be due and payable upon demand.
5.5 Notwithstanding anything to the contrary contained herein or in any
other instrument executed by Borrower or Lender, or in any other action or
conduct undertaken by Borrower or Lender on or before the date hereof, the
agreements, covenants and provisions contained herein shall constitute the only
evidence of Lender's consent to modify the terms and provisions of the Credit
Agreement. Accordingly, no express or implied consent to any further
modifications involving any of the matters set forth in this Agreement or
otherwise shall be inferred or implied by Lender's execution of this Agreement.
Further, Lender's execution of this Agreement shall not constitute a waiver
(either express or implied) of the requirement that any further modification of
the Loans or of the Notes or the Credit Agreement, shall require the express
written approval of Lender; no such approval (either express or implied) has
been given as of the date hereof.
5.6 Time is hereby declared to be of the essence hereof of the Loans,
of the Notes and of the Credit Agreement, and Lender requires, and Borrower
agrees to, strict performance of each and every covenant, condition, provision
and agreement hereof, of the Notes and the Credit Agreement.
5.7 This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their heirs, personal representatives,
successors and assigns.
5.8 This Agreement is made for the sole protection and benefit of the
parties hereto, and no other person or entity shall have any right of action
hereon.
-5-
<PAGE>
5.9 This Agreement shall be governed by and construed according to the
laws of the State of Arizona.
IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
SCHUFF INTERNATIONAL, INC., a Delaware
corporation as successor in interest to
SCHUFF STEEL COMPANY, a Delaware
corporation
By: /s/ [Illegible]
----------------------------------------
Name: [Illegible]
--------------------------------------
Its: CFO
---------------------------------------
COMPANY
WELLS FARGO BANK, NATIONAL ASSOCIATION, a
national banking association
By: /s/ John Helms
----------------------------------------
Name: John Helms
--------------------------------------
Its: Vice President
---------------------------------------
LENDER
-6-
<PAGE>
CONSENT AND AGREEMENT OF GUARANTORS
Each of the undersigned Guarantors executed a Continuing Guaranty dated
as of March 10, 1999 (each, a "Guaranty") as described in the Credit Agreement
dated as of June 30, 1998 (as amended from time to time, the "Credit Agreement")
between WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association,
and SCHUFF STEEL COMPANY, a Delaware corporation (the "Original Borrower"). Each
of the undersigned Guarantors hereby consents and agrees to the modifications
and all other matters contained in the foregoing Fourth Modification Agreement
of even date herewith.
Each of the undersigned Guarantors hereby also consents to the
assumption of the obligations of the Original Borrower under the Credit
Agreement and the other Loan Documents by Schuff International, Inc., a Delaware
corporation (the "Borrower") as successor in interest to the Original Borrower
and hereby agrees that the definitions of "Borrower" in its respective Guaranty
is hereby amended to mean "Schuff International, Inc."
BANNISTER STEEL INC., a California
corporation
By: /s/ Scott A. Schuff
---------------------------------------
Name: Scott A. Schuff
-------------------------------------
Its: VP
--------------------------------------
ADDISON STEEL, INC., a Florida corporation
By: /s/ Scott A. Schuff
---------------------------------------
Name: Scott A. Schuff
-------------------------------------
Its: VP
--------------------------------------
QUINCY JOIST COMPANY, a Florida
corporation
By: /s/ Scott A. Schuff
---------------------------------------
Name: Scott A. Schuff
-------------------------------------
Its: VP
--------------------------------------
<PAGE>
SIX INDUSTRIES, INC., a Texas corporation
By: /s/ Scott A. Schuff
---------------------------------------
Name: Scott A. Schuff
-------------------------------------
Its: VP
--------------------------------------
Dated as of 27th of September, 2001
-2-
<PAGE>
SCHEDULE 3.1
PRICING GRID
<TABLE>
<CAPTION>
Eurodollar Rate
Leverage Ratio Spread Base Rate Spread Facility Fee Rate
-------------- ------ ---------------- -----------------
<S> <C> <C> <C>
3.50 or higher 3.00% 1.00% .500%
3.00 or higher 2.50% 0.50% .375%
2.75 or higher 2.25% 0.25% .375%
2.50 or higher 2.125% 0% .250%
below 2.50 2.00% 0% .250%
</TABLE>
<PAGE>
EXHIBIT "B"
COMPLIANCE CERTIFICATE
FOR FISCAL QUARTER/YEAR ENDING
________________, 20__
Wells Fargo Bank, National Association
100 West Washington
Phoenix, Arizona 85003
Attn: John Helms Date:
------------------
#4101-251
Dear Ladies and Gentlemen:
This Compliance Certificate refers to the Credit Agreement dated as of
June 30, 1998 (as it may hereafter be amended, modified, extended or restated
from time to time, the "Credit Agreement"), among SCHUFF INTERNATIONAL, INC., a
Delaware corporation ("Borrower") as successor in interest to Schuff Steel
Company, the Lenders named therein, and WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent for the Lenders and as Arranger, Issuing Bank and Swing
Line Lender. Capitalized terms used and not otherwise defined herein shall have
the meanings assigned to such terms in the Credit Agreement.
Pursuant to Section 7.1 of the Credit Agreement, the undersigned
certifies that:
1. Enclosed are the required financial statements for the [fiscal
quarter] [fiscal year] ending _________________ ("Reporting Period") for
Borrower as required under Section 7.1 of the Credit Agreement.
2. To the best of the undersigned's knowledge, no "Event of Default" or
"Default" has occurred [or if so, specifying the nature and extent thereof and
any corrective actions taken or to be taken].
3. As of the last day of the Reporting Period, the computations below
were true and correct:
<PAGE>
<TABLE>
<CAPTION>
I. SECTION 6.11(a) LEVERAGE RATIO
<S> <C> <C>
Numerator: Net Funded Debt A
-----------
Divided by
Denominator: EBITDA B
-----------
Ratio: Equals (A/B): X
-----------
Maximum Permitted: 3.75 to 1.0
-----------
II. SECTION 6.11(c) FIXED CHARGE COVERAGE RATIO
Numerator: EBITDA
-----------
+ Operating Lease Expense
-----------
Equals: A
-----------
Divided by
Denominator: Scheduled Principal Payments
-----------
+ Interest Payments
-----------
+ Operating Lease Expense
-----------
+ Principal Reduction (redemption or repurchase)
-----------
Equals: B
-----------
Ratio: Equals (A/B): X
-----------
Minimum Permitted: 1.75 to 1.0
-----------
III. SECTION 6.11(d) EBITDA (prior twelve months)
Minimum Permitted $25,000,000
-----------
Actual
-----------
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C> <C>
IV. SECTION 6.10(a) MAINTENANCE CAPITAL EXPENDITURES
Maximum Permitted $ 5,000,000
-----------
Actual
-----------
</TABLE>
SCHUFF INTERNATIONAL, INC., a Delaware
corporation
By:
----------------------------------------
Name:
--------------------------------------
Its:
---------------------------------------
Senior Officer
-3-
<PAGE>
EXHIBIT "D"
CONTINUING GUARANTY
TO: WELLS FARGO BANK, NATIONAL ASSOCIATION for itself and as Agent
1. GUARANTY; DEFINITIONS. In consideration of any credit or other
financial accommodation heretofore, now or hereafter extended or made to SCHUFF
INTERNATIONAL, INC., a Delaware corporation ("Borrower"), by WELLS FARGO BANK,
NATIONAL ASSOCIATION, for itself and as agent for one or more Lenders ("Bank"),
and for other valuable consideration, the undersigned ,
a corporation ("Guarantor"), jointly and severally
unconditionally guarantees and promises to pay to Bank, or order, on demand in
lawful money of the United States of America and in immediately available
funds, any and all Indebtedness of Borrower to Bank. The term "Indebtedness" is
used herein in its most comprehensive sense and includes any and all advances,
debts, obligations and liabilities of Borrower, heretofore, now or hereafter
made, incurred or created, whether voluntary or involuntary and however
arising, whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and whether Borrower may be liable
individually or jointly with others, or whether recovery upon such Indebtedness
may be or hereafter becomes unenforceable. The term "Lenders" means those
Lenders listed from time to time in that Credit Agreement dated as of June 30,
1998 between Schuff Steel Company, a Delaware corporation as predecessor in
interest to Borrower and Bank as Administrative Agent for the Lenders and as
Arranger, Issuing Bank and Swing Line Lender.
2. MAXIMUM LIABILITY; SUCCESSIVE TRANSACTIONS; REVOCATION; OBLIGATION
UNDER OTHER GUARANTIES. The liability of Guarantor shall not exceed at any one
time the sum of FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000.00) for
principal, plus all interest thereon and costs and expenses pertaining to the
enforcement of this Guaranty and/or the collection of the Indebtedness of
Borrower to Bank. Notwithstanding the foregoing, Bank may permit the
Indebtedness of Borrower to exceed Guarantor's liability. This is a continuing
guaranty and all rights, powers and remedies hereunder shall apply to all past,
present and future Indebtedness of Borrower to Bank, including that arising
under successive transactions which shall either continue the Indebtedness,
increase or decrease it, or from time to time create new Indebtedness after all
or any prior Indebtedness has been satisfied, and notwithstanding the death,
incapacity, dissolution, liquidation or bankruptcy of Borrower or Guarantor or
any other event or proceeding affecting Borrower or Guarantor. This Guaranty
shall not apply to any new Indebtedness created after actual receipt by Bank of
written notice of its revocation as to such new Indebtedness; provided however,
that loans or advances made by Bank to Borrower after revocation under
commitments existing prior to receipt by Bank of such revocation, and
extensions, renewals or modifications, of any kind, of Indebtedness incurred by
Borrower or committed by Bank prior to receipt by Bank of such revocation,
shall not be considered new Indebtedness. Any such notice must be sent to Bank
by registered U.S. mail, postage prepaid, addressed to its office at 100 West
Washington, Phoenix, Arizona 85003, Attention: John Helms #S4101-251, or at
such other address as Bank shall from time to time designate. Any payment by
Guarantor shall not reduce Guarantor's maximum obligation hereunder unless
written notice to that effect is actually received by Bank at or prior to the
time
<PAGE>
of such payment. The obligations of Guarantor hereunder shall be in addition to
any obligations of Guarantor under any other guaranties of any liabilities or
obligations of Borrower or any other person heretofore or hereafter given to
Bank unless said other guaranties are expressly modified or revoked in writing;
and this Guaranty shall not, unless expressly herein provided, affect or
invalidate any such other guaranties.
3. OBLIGATIONS JOINT AND SEVERAL; SEPARATE ACTIONS; WAIVER OF STATUTE OF
LIMITATIONS; REINSTATEMENT OF LIABILITY. The obligations hereunder are joint and
several and independent of the obligations of Borrower, and a separate action
or actions may be brought and prosecuted against Guarantor whether action is
brought against Borrower or any other person, or whether Borrower or any other
person is joined in any such action or actions. Guarantor acknowledges that
this Guaranty is absolute and unconditional, there are no conditions precedent
to the effectiveness of this Guaranty, and this Guaranty is in full force and
effect and is binding on Guarantor as of the date written below, regardless of
whether Bank obtains collateral or any guaranties from others or takes any
other action contemplated by Guarantor. Guarantor waives the benefit of any
statute of limitations affecting Guarantor's liability hereunder or the
enforcement thereof, and Guarantor agrees that any payment of any Indebtedness
or other act which shall toll any statute of limitations applicable thereto
shall similarly operate to toll such statute of limitations applicable to
Guarantor's liability hereunder. The liability of Guarantor hereunder shall be
reinstated and revived and the rights of Bank shall continue if and to the
extent for any reason any amount at any time paid on account of any
Indebtedness guaranteed hereby is rescinded or must otherwise be restored by
Bank, whether as a result of any proceedings in bankruptcy or reorganization or
otherwise, all as though such amount had not been paid. The determination as to
whether any amount so paid must be rescinded or restored shall be made by Bank
in its sole discretion; provided however, that if Bank chooses to contest any
such matter at the request of Guarantor, Guarantor agrees to indemnify and hold
Bank harmless from and against all costs and expenses, including reasonable
attorneys' fees, expended or incurred by Bank in connection therewith,
including without limitation,in any litigation with respect thereto.
4. AUTHORIZATIONS TO BANK. Guarantor authorizes Bank either before or
after revocation hereof, without notice to or demand on Guarantor, and without
affecting Guarantor's liability hereunder, from time to time to: (a) alter,
compromise, renew, extend, accelerate or otherwise change the time for payment
of, or otherwise change the terms of the Indebtedness or any portion thereof,
including increase or decrease of the rate of interest thereon; (b) take and
hold security for the payment of this Guaranty or the Indebtedness or any
portion thereof, and exchange, enforce, waive, subordinate or release any such
security; (c) apply such security and direct the order or manner of sale
thereof, including without limitation, a non-judicial sale permitted by the
terms of the controlling security agreement or deed of trust, as Bank in its
discretion may determine; (d) release or substitute any one or more of the
endorsers or any other guarantors of the Indebtedness, or any portion thereof,
or any other party thereto; and (e) apply payments received by Bank from
Borrower to any Indebtedness of Borrower to Bank, in such order as Bank shall
determine in its sole discretion, whether or not such Indebtedness is covered
by this Guaranty, and Guarantor hereby waives any provision of law regarding
application of payments which specifies otherwise. Bank may without notice
assign this Guaranty in whole or in part. Upon Bank's request, Guarantor agrees
to provide to Bank copies of Guarantor's financial statements.
-2-
<PAGE>
5. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Bank that: (a) this Guaranty is executed at Borrower's request; (b) Guarantor
shall not, without Bank's prior written consent, sell, lease, assign, encumber,
hypothecate, transfer or otherwise dispose of all or a substantial or material
part of Guarantor's assets other than in the ordinary course of Guarantor's
business; (c) Bank has made no representation to Guarantor as to the
creditworthiness of Borrower; and (d) Guarantor has established adequate means
of obtaining from Borrower on a continuing basis financial and other
information pertaining to Borrower's financial condition. Guarantor agrees to
keep adequately informed from such means of any facts, events or circumstances
which might in any way affect Guarantor's risks hereunder, and Guarantor
further agrees that Bank shall have no obligation to disclose to Guarantor any
information or material about Borrower which is acquired by Bank in any manner.
6. GUARANTOR'S WAIVERS.
(a) Guarantor waives any right to require Bank to: (i) proceed against
Borrower or any other person; (ii) marshal assets or proceed against or exhaust
any security held from Borrower or any other person; (iii) give notice of the
terms, time and place of any public or private sale of personal property
security held from Borrower or any other person, or otherwise comply with the
provisions of A.R.S. section 47-9504; (iv) take any action or pursue any other
remedy in Bank's power; or (v) make any presentment or demand for performance,
or give any notice of nonperformance, protest, notice of protest or notice of
dishonor hereunder or in connection with any obligations or evidences of
indebtedness held by Bank as security for or which constitute in whole or in
part the Indebtedness guaranteed hereunder, or in connection with the creation
of new or additional Indebtedness.
(b) Guarantor waives any defense to its obligations hereunder based
upon or arising by reason of: (i) any disability or other defense of Borrower
or any other person; (ii) the cessation or limitation from any cause
whatsoever, other than payment in full, of the Indebtedness of Borrower or any
other person; (iii) any lack of authority of any officer, director, partner,
agent or any other person acting or purporting to act on behalf of Borrower, if
a corporation, partnership or other type of entity, or any defect in the
formation of such Borrower; (iv) the application by Borrower of the proceeds of
any Indebtedness for purposes other than the purposes represented by Borrower
to, or intended or understood by, Bank or Guarantor; (v) any act or omission by
Bank which directly or indirectly results in or aids the discharge of Borrower
or any portion of the Indebtedness by operation of law or otherwise, or which
in any way impairs or suspends any rights or remedies of Bank against Borrower;
(vi) any impairment of the value of any interest in any security for the
Indebtedness or any portion thereof, including without limitation, the failure
to obtain or maintain perfection or recordation of any interest in any such
security, the release of any such security without substitution, and/or the
failure to preserve the value of, or to comply with applicable law in disposing
of, any such security; or (vii) any modification of the Indebtedness, in any
form whatsoever, including any modification made after revocation hereof to any
Indebtedness incurred prior to such revocation, and including without
limitation the renewal, extension, acceleration or other change in time for
payment of, or other change in the terms of, the Indebtedness or any portion
thereof, including increase or decrease of the rate of interest thereon. Until
all Indebtedness shall have been paid in full, Guarantor shall have no right of
subrogation, and Guarantor waives any right to enforce any remedy which Bank
now has or may hereafter have against Borrower or any other person, and waives
any benefit of,
-3-
<PAGE>
or any right to participate in, any security now or hereafter held by Bank.
Guarantor further waives all rights and defenses Guarantor may have arising out
of (A) any election of remedies by Bank, even though that election of remedies,
such as a non-judicial foreclosure with respect to any security for any portion
of the Indebtedness, destroys Guarantor's rights of subrogation or Guarantor's
rights to proceed against Borrower for reimbursement, or (B) any loss of rights
Guarantor may suffer by reason of any rights, powers or remedies of Borrower in
connection with any anti-deficiency laws or any other laws limiting, qualifying
or discharging Borrower's Indebtedness, whether by operation of law or
otherwise, including any rights Guarantor may have to a fair market value
hearing to determine the size of a deficiency following any trustee's
foreclosure sale or other disposition of any real property security for any
portion of the Indebtedness, and Guarantor waives the benefits of A.R.S.
sections 12-1566, 12-1641 et seq., 33-814,44-142 and Rule 17(F) of the Arizona
Rules of Civil Procedure.
7. BANK'S RIGHTS WITH RESPECT TO GUARANTOR'S PROPERTY IN BANK'S
POSSESSION. In addition to all liens upon and rights of setoff against the
monies, securities or other property of Guarantor given to Bank by law, Bank
shall have a lien upon and a right of setoff against all monies, securities and
other property of Guarantor now or hereafter in the possession of or on deposit
with Bank, whether held in a general or special account or deposit or for
safekeeping or otherwise, and every such lien and right of setoff may be
exercised without demand upon or notice to Guarantor. No lien or right of setoff
shall be deemed to have been waived by any act or conduct on the part of Bank,
or by any neglect to exercise such right of setoff or to enforce such lien, or
by any delay in so doing, and every right of setoff and lien shall continue in
full force and effect until such right of setoff or lien is specifically waived
or released by Bank in writing.
8. SUBORDINATION. Any Indebtedness of Borrower now or hereafter held by
Guarantor is hereby subordinated to the Indebtedness of Borrower to Bank. Such
Indebtedness of Borrower to Guarantor is assigned to Bank as security for this
Guaranty and the Indebtedness and, if Bank requests, shall be collected and
received by Guarantor as trustee for Bank and paid over to Bank on account of
the Indebtedness of Borrower to Bank but without reducing or affecting in any
manner the liability of Guarantor under the other provisions of this Guaranty.
Any notes or other instruments now or hereafter evidencing such Indebtedness of
Borrower to Guarantor shall be marked with a legend that the same are subject to
this Guaranty and, if Bank so requests, shall be delivered to Bank. Guarantor
will, and Bank is hereby authorized in the name of Guarantor from time to time
to, execute and file financing statements and continuation statements and
execute such other documents and take such other action as Bank deems necessary
or appropriate to perfect, preserve and enforce it rights hereunder.
9. REMEDIES; NO WAIVER. All rights, powers and remedies of Bank hereunder
are cumulative. No delay, failure or discontinuance of Bank in exercising any
right, power or remedy hereunder shall affect or operate as a waiver of such
right, power or remedy; nor shall any single or partial exercise of any such
right, power or remedy preclude, waive or otherwise affect any other or further
exercise thereof or the exercise of any other right, power or remedy. Any
waiver, permit, consent or approval of any kind by Bank of any breach of this
Guaranty, or any such waiver of any provisions or conditions hereof, must be in
writing and shall be effective only to the extent set forth in writing.
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10. COSTS, EXPENSES AND ATTORNEYS' FEES. Guarantor shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with the enforcement of any of Bank's rights,
powers or remedies and/or the collection of any amounts which become due to Bank
under this Guaranty, and the prosecution or defense of any action in any way
related to this Guaranty, whether incurred at the trial or appellate level, in
an arbitration proceeding or otherwise, and including any of the foregoing
incurred in connection with any bankruptcy proceeding (including without
limitation, any adversary proceeding, contested matter or motion brought by
Bank or any other person) relating to Guarantor or any other person or entity.
All of the foregoing shall be paid by Guarantor with interest from the date of
demand until paid in full at a rate per annum equal to the greater of ten
percent (10%) or the Prime Rate in effect from time to time. The "Prime Rate"
is a base rate that Bank from time to time establishes and which serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto.
11. SUCCESSORS; ASSIGNMENT. This Guaranty shall be binding upon and inure
to the benefit of the heirs, executors, administrators, legal representatives,
successors and assigns of the parties; provided however, that Guarantor may not
assign or transfer any of its interests or rights hereunder without Bank's
prior written consent. Guarantor acknowledges that Bank has the right to sell,
assign, transfer, negotiate or grant participations in all or any part of, or
any interest in, any Indebtedness of Borrower to Bank and any obligations with
respect thereto, including this Guaranty. In connection therewith, Bank may
disclose all documents and information which Bank now has or hereafter acquires
relating to Guarantor and/or this Guaranty, whether furnished by Borrower,
Guarantor or otherwise. Guarantor further agrees that Bank may disclose such
documents and information to Borrower.
12. AMENDMENT. This Guaranty may be amended or modified only in writing
signed by Bank and Guarantor.
13. UNDERSTANDING WITH RESPECT TO WAIVERS; SEVERABILITY OF PROVISIONS.
Guarantor warrants and agrees that each of the waivers set forth herein is made
with Guarantor's full knowledge of its significance and consequences, and that
under the circumstances, the waivers are reasonable and not contrary to public
policy or law. If any waiver or other provision of this Guaranty shall be held
to be prohibited by or invalid under applicable public policy or law, such
waiver or other provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such waiver or
other provision or any remaining provisions of this Guaranty.
14. GOVERNING LAW. This Guaranty shall be governed by and construed in
accordance with the laws of the State of Arizona.
15. ARBITRATION.
(a) Arbitration. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in
accordance with the terms of this Guaranty. A "Dispute" shall mean any action,
dispute, claim or controversy of any kind,
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whether in contract or tort, statutory or common law, legal or equitable, now
existing or hereafter arising under or in connection with, or in any way
pertaining to, this Guaranty and each other document, contract and instrument
required hereby or now or hereafter delivered to Bank in connection herewith
(collectively, the "Documents"), or any past, present or future extensions of
credit and other activities, transactions or obligations of any kind related
directly or indirectly to any of the Documents, including without limitation,
any of the foregoing arising in connection with the exercise of any self-help,
ancillary or other remedies pursuant to any of the Documents. Any party may by
summary proceedings bring an action in court to compel arbitration of a
Dispute. Any party who fails or refuses to submit to arbitration following a
lawful demand by any other party shall bear all costs and expenses incurred by
such other party in compelling arbitration of any Dispute.
(b) Governing Rules. Arbitration proceedings shall be administered
by the American Arbitration Association ("AAA") or such other administrator as
the parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
Documents. The arbitration shall be conducted at a location in Arizona selected
by the AAA or other administrator. If there is any inconsistency between the
terms hereof and any such rules, the terms and procedures set forth herein
shall control. All statutes of limitation applicable to any Dispute shall
apply to any arbitration proceeding. All discovery activities shall be
expressly limited to matters directly relevant to the Dispute being arbitrated.
Judgment upon any award rendered in an arbitration may be entered in any court
having jurisdiction; provided however, that nothing contained herein shall be
deemed to be a waiver by any party that is a bank of the protections afforded
to it under 12 U.S.C. section 91 or any similar applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary
remedies, including without limitation injunctive relief, sequestration,
attachment, garnishment or the appointment of a receiver, from a court of
competent jurisdiction before, after or during the pendency of any arbitration
or other proceeding. The exercise of any such remedy shall not waive the right
of any party to compel arbitration hereunder.
(d) Arbitrator Qualifications and Powers; Awards. Arbitrators must be
active members of the Arizona State Bar or retired judges of the state or
federal judiciary of Arizona, with expertise in the substantive law applicable
to the subject matter of the Dispute. Arbitrators are empowered to resolve
Disputes by summary rulings in response to motions filed prior to the final
arbitration hearing. Arbitrators (i) shall resolve all Disputes in accordance
with the substantive law of the state of Arizona, (ii) may grant any remedy or
relief that a court of the state of Arizona could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award, and (iii) shall have the power to award recovery of all costs and fees,
to impose sanctions and to take such other actions as they deem necessary to
the same extent a judge could pursuant to the Federal Rules of Civil Procedure,
the Arizona Rules of Civil Procedure or other applicable law. Any Dispute in
which the amount in controversy is $5,000,000.00 or less shall be decided by a
single arbitrator who shall not render an award of greater than $5,000,000.00
(including damages, costs, fees and expenses). By submission to a
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<PAGE>
single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000.00 Any Dispute in which the amount in controversy exceeds
$5,000,000.00 shall be decided by majority vote of a panel of three
arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations.
(e) Judicial Review. Notwithstanding anything herein to the contrary, in
any arbitration in which the amount in controversy exceeds $25,000,000.00, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
Arizona, and (iii) the parties shall have in addition to the grounds referred
to in the Federal Arbitration Act for vacating, modifying or correcting an
award the right to judicial review of (A) whether the findings of fact rendered
by the arbitrators are supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the state of
Arizona. Judgment confirming an award in such a proceeding may be entered only
if a court determines the award is supported by substantial evidence and not
based on legal error under the substantive law of the state of Arizona.
(f) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Documents or the subject matter of the Dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Documents or any relationship between the parties.
IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty
as of ____________, 20____.
_______________________________, a
__________________corporation
By:_______________________________
Name:_____________________________
Title:____________________________
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EXHIBIT "F"
PLEDGE AND IRREVOCABLE PROXY SECURITY AGREEMENT
THIS PLEDGE AND IRREVOCABLE PROXY SECURITY AGREEMENT is made and entered
into as of the __ day of ________, 20__, by SCHUFF INTERNATIONAL, INC., a
Delaware corporation (hereinafter called "Pledgor"), whose chief executive
office (or residence if Pledgor is an individual without an office) is located
at 420 South 19th Avenue, Phoenix, Arizona 85009, in favor of WELLS FARGO BANK,
NATIONAL ASSOCIATION, and its successors and assigns, for itself and as agent
for one or more Lenders (as hereinafter defined) (hereinafter called "Secured
Party"), whose address is 100 West Washington, Phoenix, Arizona 85003,
Attention: John Helms #S4101-251.
1. RECITALS
1.1 Secured Party has agreed to make certain financial accommodations to
Pledgor.
1.2 Secured Party's agreement to make financial accommodations to Pledgor
is conditioned upon Secured Party's receiving a pledge and security interest in
all stock and securities issued by ____________________________________________,
a(n) _________________________________ corporation (hereinafter when referred
to in this capacity called the "Company"), now owned or hereafter acquired by
Pledgor.
1.3 Pledgor is the owner of ______ shares of the ______ stock of the
Company that Pledgor desires to pledge to Secured Party in connection with
Secured Party's financial accommodations to Pledgor.
2. PLEDGE OF STOCK
2.1 Pledgor hereby assigns, transfers, pledges and delivers to Secured
Party and grants Secured Party a security interest in all issued and outstanding
stock in the Company now owned or hereafter acquired by Pledgor, including
without limitation the stock described on Schedule "A" attached hereto and by
this reference made a part hereof, together with all earnings thereon, all
additions thereto, all proceeds thereof from sale or otherwise, all
substitutions therefor, and all securities issued with respect thereto as a
result of any stock dividend, stock split, warrants or other rights,
reclassification, readjustment or other change in the capital structure of the
Company, and the securities of any corporation or other properties received
upon the conversion or exchange thereof pursuant to any merger, consolidation,
reorganization, sale of assets or other agreement or received upon any
liquidation of the Company or such other corporation (all hereinafter called
the "Pledged Securities").
2.2 Upon the execution of this Agreement, Pledgor shall deliver to
Secured Party certificates for the Pledged Securities, together with
appropriate stock transfer powers therefor duly executed by Pledgor in blank in
the form of Exhibit "1" attached hereto. Immediately upon receipt, Pledgor
shall deliver to Secured Party all certificates and other evidences of the
Pledged Securities that come into the possession, custody or control of
Pledgor, together with appropriate stock transfer powers therefor duly executed
by Pledgor in blank, and any other property
<PAGE>
constituting part of the Pledged Securities, free and clear of any prior lien,
claim, charge or encumbrance.
2.3 Secured Party may receive, hold and/or dispose of the Pledged
Securities subject and pursuant to all the terms, conditions and provisions
hereof and of the Loan Agreement (defined below) until the Obligation (defined
below) has been discharged in full. Secured Party is hereby authorized and
empowered to take any and all action with respect to such property as
authorized hereunder. In its discretion and without notice to Pledgor, Secured
Party may take any one or more of the following actions, without liability
except to account for property actually received by it:
(a) transfer to or register in its name or the name of its nominee
any of the Pledged Securities, with or without indication of the security
interest herein created, and whether or not so transferred or registered,
receive the income, dividends and other distributions thereon and hold them
or apply them to the Obligation in any order of priority;
(b) exercise or cause to be exercised all voting and corporate powers
with respect to any of the Pledged Securities so registered or transferred,
including all rights of conversion, exchange, subscription or any other
rights, privileges or options pertaining to such Pledged Securities, as if
the absolute owner thereof;
(c) insure any of the Pledged Securities;
(d) exchange any of the Pledged Securities for other property upon a
reorganization, recapitalization or other readjustment and, in connection
therewith, deposit any of the Pledged Securities with any committee or
depositary upon such terms as the Secured Party may determine;
(e) in its name, or in the name of Pledgor, demand, sue for, collect
or receive any money or property at any time payable or receivable on
account of, or in exchange for, any of the Pledged Securities and, in
connection therewith, endorse notes, checks, drafts, money orders,
documents of title or other evidences of payment, shipment or storage in
the name of Pledgor; and
(f) make any compromise or settlement deemed advisable with respect
to any of the Pledged Securities.
Secured Party shall be under no duty to exercise, or to withhold the exercise
of, any of the rights, powers, privileges and options expressly or implicitly
granted to Secured Party in this Agreement, and shall not be responsible for
any failure to do so or delay in so doing.
3. OBLIGATION SECURED
This Agreement shall secure, in such order of priority as Secured Party
may elect:
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<PAGE>
(a) Payment of the aggregate sum of $15,000,000.00 according to the
terms of those Revolving Promissory Notes dated June 30, 1998, each made by
Schuff Steel Company, a Delaware corporation (the "Prior Borrower") to
which Pledgor is the successor in interest, payable respectively to the
order of one of the Lenders, each evidencing a revolving line of credit,
all or any part of which may be advanced to Pledgor, repaid by Pledgor and
readvanced to Pledgor, from time to time, subject to the terms and
conditions thereof, with interest thereon, extension and other fees, late
charges, prepayment premiums and attorneys' fees, according to the terms
thereof, and all extensions, modifications, renewals or replacements
thereof (hereinafter called the "RLC Notes");
(b) Payment of the sum of $5,000,000.00, according to the terms of that
Revolving Promissory Note dated June 30, 1998, made by the Prior Borrower,
payable to the order of Secured Party as the Swing Line Lender, evidencing
a revolving line of credit, all or any part of which may be advanced to
Pledgor, repaid by Pledgor and readvanced to Pledgor, from time to time,
subject to the terms and conditions thereof, with interest thereon,
extension and other fees, late charges, prepayment premiums and attorneys'
fees, according to the terms thereof, and all extensions, modifications,
renewals or replacements thereof (hereinafter called the "Swing Line Note"
and with the RLC Notes, the "Note");
(c) Payment, performance and observance by Pledgor of each covenant,
condition, provision and agreement contained in that Credit Agreement dated
June 30, 1998, by and between the Prior Borrower, and the lenders listed
from time to time therein (collectively, the "Lenders"), and Secured Party,
as Arranger, Administrative Agent, Issuing Bank and Swing Line Lender
(hereinafter called the "Credit Agreement") and of all monies expended or
advanced by Secured Party pursuant to the terms thereof or to preserve any
right of Secured Party thereunder;
(d) Payment, performance and observance by Pledgor of each covenant,
condition, provision and agreement contained herein and of all monies
expended or advanced by Secured Party pursuant to the terms hereof, or to
preserve any right of Secured Party hereunder, or to protect or preserve
the Collateral or any part thereof; and
(e) Payment and performance of any and all other indebtedness,
obligations and liabilities of Pledgor to Secured Party of every kind and
character, direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter incurred, whether such indebtedness is from
time to time reduced and thereafter increased or entirely extinguished and
thereafter reincurred.
All of the indebtedness and obligations secured by this Agreement are
hereinafter collectively called the "Obligation."
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<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF PLEDGOR
Pledgor hereby represents and warrants that:
4.1 If Pledgor is a corporation, partnership or trust, it (i) is duly
organized, validly existing and in good standing under the laws of the state in
which it is organized; (ii) is qualified to do business and is in good standing
under the laws of each state in which it is doing business; (iii) has full
power and authority to own its properties and assets and to carry on its
business as now conducted; and (iv) is fully authorized and permitted to
execute and deliver this Agreement. The execution, delivery and performance by
Pledgor of this Agreement and all other documents and instruments relating to
the Obligation will not result in any breach of the terms and conditions of,
nor constitute a default under, any agreement or instrument under which Pledgor
is a party or is obligated. Pledgor is not in default in the performance or
observance of any covenants, conditions or provisions of any such agreement or
instrument.
4.2 The address of Pledgor set forth at the beginning of this Agreement is
the chief executive office of Pledgor (or Pledgor's residence if Pledgor is an
individual without an office).
4.3 The Pledged Securities are and shall be duly and validly issued and
pledged in accordance with applicable law, and this Agreement shall not
contravene any law, agreement or commitment binding Pledgor or the Company, and
Pledgor shall defend the right, title, lien and security interest of Secured
Party in and to the Pledged Securities against the claims and demands of all
persons and other entities whatsoever.
4.4 Pledgor has the right, power and authority to convey good and
marketable title to the Pledged Securities; and the Pledged Securities and the
proceeds thereof are and shall be free and clear of all claims, mortgages,
pledges, liens, encumbrances and security interest of every nature whatsoever
other than as imposed hereby or as set forth, if at all, on Schedule "A"
attached hereto.
5. IRREVOCABLE PROXY
5.1 Pledgor irrevocably constitutes and appoints Secured Party, whether or
not the Pledged Securities have been transferred into the name of Secured Party
or its nominee, as Pledgor's proxy with full power, in the same manner, to the
same extent and with the same effect as if Pledgor were to do the same, in the
sole discretion of Secured Party:
(a) To call a meeting of the stockholders of the Company and to vote the
Pledged Securities, to seek the consent of such stockholders, to remove the
directors of the Company, or any of them, and to elect new directors of the
Company, who thereafter shall manage the affairs of the Company, operate its
properties and carry on its business, and otherwise take any action with
respect to the business, properties and affairs of the Company that such new
directors shall deem necessary or appropriate, including, but not limited to,
the maintenance, repair, renewal or alteration of any or all of the properties
of the Company, the leasing, subleasing, sale or other disposition of any or all
of such properties, the borrowing of money on the credit of the Company
(whether from Secured Party or others) that in the judgment of such new
directors shall be necessary to
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<PAGE>
preserve any of such properties or to discharge the obligations of the
Company, and the employment of any or all agents, attorneys, counsel, or
other employees as deemed by such new directors to be necessary for the
proper operation or conduct of the business, properties and affairs of the
Company;
(b) To consent to any and all actions by or with respect to the
Company for which consent of the stockholders of the Company is or may be
necessary or appropriate; and
(c) Without limitation, to do all things that Pledgor can do or could
do as stockholder of the Company, giving Secured Party full power of
substitution and revocation;
provided, however, that (i) the foregoing irrevocable proxy shall not be
exercisable by Secured Party, and Pledgor alone shall have the foregoing
powers, so long as there is no Event of Default hereunder, and (ii) this
irrevocable proxy shall terminate at such time as this Agreement is no longer
in full force and effect. The foregoing proxy is coupled with an interest
sufficient in law to support an irrevocable power and shall be irrevocable and
shall survive the death or incapacity of Pledgor. Pledgor hereby revokes any
proxy or proxies heretofore given to any person or persons and agrees not to
give any other proxies in derogation hereof until such time as this Agreement
is no longer in full force and effect.
6. COVENANTS OF PLEDGOR
6.1 Pledgor shall not sell, transfer, assign or otherwise dispose of any
of the Pledged Securities or any interest therein without obtaining the prior
written consent of Secured Party and shall keep the Pledged Securities free of
all security interests or other encumbrances except the lien and security
interests granted herein.
6.2 Pledgor shall pay when due all taxes, assessments, expenses and other
charges which may be levied or assessed against the Pledged Securities.
6.3 Pledgor shall give Secured Party immediate written notice of any
change in Pledgor's name as set forth above and of any change in the location
of Pledgor's chief executive office (or residence if Pledgor is an individual
without an office).
6.4 Pledgor, at its cost and expense, shall protect and defend the Pledged
Securities, this Agreement and all of the rights of Secured Party hereunder
against all claims and demands of other parties. Pledgor shall pay all claims
and charges that in the opinion of Secured Party might prejudice, imperil or
otherwise affect the Pledged Securities. Pledgor shall promptly notify Secured
Party of any levy, distraint or other seizure, by legal process or otherwise,
of all or any part of the Pledged Securities and of any threatened or filed
claims or proceedings that might in any way affect or impair the terms of this
Agreement.
6.5 If Pledgor shall fail to pay any taxes, assessments, expenses or
charges, to keep all of the Pledged Securities free from other security
interests, encumbrances or claims, or to perform otherwise as required herein,
Secured Party may advance the monies necessary to pay the same or to so perform.
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<PAGE>
6.6 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if, under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof, all
amounts paid, suffered or incurred by Secured Party under the terms hereof and
all amounts paid, suffered or incurred by Secured Party in exercising any
authority granted herein, including reasonable attorneys' fees, shall be added
to the Obligation, shall be secured hereby, shall bear interest at the highest
rate payable on any of the Obligation until paid, and shall be due and payable
by Pledgor to Secured Party immediately without demand.
6.7 Secured Party shall use such reasonable care in handling, preserving
and protecting the Pledged Securities in its possession as it uses in handling
similar property for its own account. Secured Party, however, shall have no
liability for the loss, destruction or disappearance of any Pledged Securities
unless there is affirmative proof of a lack of due care; the lack of due care
shall not be implied solely by virtue of any loss, distribution or
disappearance. Secured Party shall not be required to take any steps necessary
to preserve any rights in the Pledged Securities against prior parties or to
protect, perfect, preserve or maintain any security interest given to secure the
Pledged Securities.
6.8 Immediately upon demand by Secured Party, Pledgor shall execute and
deliver to Secured Party such other and additional applications, acceptances,
stock powers, authorizations, irrevocable proxies, dividend and other orders,
chattel paper, instruments or other evidences of payment and such other
documents as Secured Party may reasonably request to secure to Secured Party the
rights, powers and authorities intended to be conferred upon Secured Party by
this Agreement. All assignments and endorsements by Pledgor shall be in such
form and substance as may be satisfactory to Secured Party.
7. EVENTS OF DEFAULT; REMEDIES
7.1 "Event of Default" hereunder shall mean any "Event of Default" as
defined in the Loan Agreement.
7.2 Upon the occurrence of any Event of Default and at any time while such
Event of Default is continuing, Secured Party shall have the following rights
and remedies and may do one or more of the following:
(a) Declare all or any part of the Obligation to be immediately due
and payable, and the same, with all costs and charges, shall be collectible
thereupon by action at law:
(b) Transfer the Pledged Securities or any part thereof into its own
name or that of its nominee so that Secured Party or its nominee may appear
of record as the sole owner thereof;
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<PAGE>
(c) Vote any or all of the Pledged Securities and give all consents,
waivers and ratifications in respect thereof and otherwise acting with
respect thereto as though it were the absolute owner thereof;
(d) Exercise any and all rights of conversion, exchange,
subscription, or any other rights, privileges or options pertaining to any
of the Pledged Securities including, but not limited to, the right to
exchange, at its discretion, any or all of the Pledged Securities upon the
merger, consolidation, reorganization, recapitalization or other
readjustment of the Company or upon the exercise by Pledgor or Secured
Party of any right, privilege or option pertaining to any of the shares of
the Pledged Securities, and in connection therewith to deposit and deliver
such shares of Pledged Securities with any committee, depository, transfer
agent, registrar or any other agency upon such terms as Secured Party may
determine without liability except to account for the property actually
received by it;
(e) Receive and retain any dividend or other distribution on account
of the Pledged Securities; and
(f) Sell any or all of the Pledged Securities in accordance with the
provisions hereof;
but Secured Party shall have no duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for any failure to do so or
delay in so doing. Pledgor waives all rights to be advised or to receive any
notices, statements or communications received by Secured Party or its nominee
as the record owner of all or any of the Pledged Securities. Any cash received
and retained by Secured Party as additional collateral hereunder may be applied
to payment in the manner provided in Subparagraph 7.3(c) below.
7.3 In connection with Secured Party's right to sell any or all of the
Pledged Securities, upon the occurrence of any Event of Default and at any time
while such Event of Default is continuing:
(a) (i) Secured Party shall have the right at any time and
from time to time to sell, resell, assign and deliver, in its
discretion, all or any part of the Pledged Securities in one or
more units, at the same or different times, and all right, title
and interest, claim and demand therein, and right of redemption
thereof, at private sale, or at public sale to the highest bidder
for cash, upon credit or for future delivery, Pledgor hereby waiving
and releasing to the fullest extent permitted by law any and all
equity or right of redemption. If any of the Pledged Securities are
sold by Secured Party upon credit or for future delivery, Secured
Party shall not be liable for the failure of the purchaser to
purchase or pay for same, and, in the event of any such failure,
Secured Party may resell such Pledged Securities. In no event shall
Pledgor be credited with any part of
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the proceeds of the sale of any Pledged Securities until cash payment
thereof has actually been received by Secured Party.
(ii) No demand, advertisement or notice, all of which are hereby
expressly waived, shall be required in connection with any sale or other
disposition of all or any part of the Pledged Securities that threatens to
decline speedily in value or that is of a type customarily sold on a
recognized market; otherwise Secured Party shall give Pledgor at least five
(5) days' prior notice of the time and place of any public sale or of the
time after which any private sale or other dispositions are to be made,
which Pledgor agrees is reasonable, all other demands, advertisements and
notices being hereby waived. Upon any sale, whether under this Agreement or
by virtue of judicial proceedings, Secured Party may bid for and purchase
any or all of the Pledged Securities and, upon compliance with the terms of
the sale, may hold, retain, possess and dispose of such items in its own
absolute right without further accountability, and as purchaser at such
sale, in paying the purchase price, may turn in any note or notes held by
Secured Party in lieu of cash up to the amount that would, upon
distribution of the net proceeds of such sale in accordance with
Subparagraph 7.3(c) hereof, be payable to Secured Party. In case the amount
so payable thereon shall be less than the amount due thereon, the note or
notes turned in (in lieu of cash) shall be returned to the holder thereof
after being properly stamped to show the partial payment effected by such
purchase.
(b) Pledgor recognizes that Secured Party may be unable to effect a sale to
the public of all or a part of the Pledged Securities by reason of prohibitions
contained in applicable securities laws, but may be compelled to resort to one
or more sales to a restricted group of purchasers who will be obliged to agree,
among other things, to acquire such Pledged Securities for their own account,
for investment and not with a view to the distribution or resale thereof.
Pledgor agrees that sales so made may be at prices and other terms less
favorable to the seller than if such Pledged Securities were sold to the public,
and that Secured Party has no obligation to delay sale of any such Pledged
Securities for the period of time necessary to permit the issuer of such Pledged
Securities to register the same for sale to the public under applicable
securities laws. Pledgor agrees that negotiated sales made under the foregoing
circumstances shall be deemed to have been made in a commercially reasonable
manner.
(c) In all sales of Pledged Securities, public or private, Secured Party
shall apply the proceeds of sale as follows:
(i) First, to the payment of all costs and expenses, incurred hereunder
or for the sale, transfer, or delivery, including broker's and attorneys'
fees.
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<PAGE>
(ii) Next to the payment of the Obligation; and
(iii) The balance, if any, to Pledgor or to the person or
persons entitled thereto upon proper demand.
7.4 Secured Party shall have the right, for and in the name, place and
stead of Pledgor, to execute endorsements, assignments or other instruments of
conveyance or transfer with respect to all or any of the Pledged Securities and
any instruments, documents and statements that Pledgor is obligated to furnish
or execute hereunder. Pledgor shall execute and deliver such additional
documents as may be necessary to enable Secured Party to implement such right.
7.5 Pledgor shall pay all costs and expenses, including without limitation
court costs and reasonable attorneys' fees, incurred by Secured Party in
enforcing payment and performance of the Obligation or in exercising the rights
and remedies of Secured Party hereunder. All such costs and expenses shall be
secured by this Agreement and by all other lien and security documents securing
the Obligation. In the event of any court proceedings, court costs and
attorneys' fees shall be set by the court and not by jury and shall be included
in any judgment obtained by Secured Party.
7.6 In addition to any remedies provided herein for an Event of Default,
Secured Party shall have all the rights and remedies afforded a secured party
under the Uniform Commercial Code and all other legal and equitable remedies
allowed under applicable law. No failure on the part of Secured Party to
exercise any of its rights hereunder arising upon any Event of Default shall be
construed to prejudice its rights upon the occurrence of any other or subsequent
Event of Default. No delay on the part of Secured Party in exercising any such
rights shall be construed to preclude it from the exercise thereof at any time
while that Event of Default is continuing. Secured Party may enforce any one or
more rights or remedies hereunder successively or concurrently. By accepting
payment or performance of any of the Obligation after its due date, Secured
Party shall not thereby waive the agreement contained herein that time is of the
essence, nor shall Secured Party waive either its right to require prompt
payment or performance when due of the remainder of the Obligation or its right
to consider the failure to so pay or perform an Event of Default.
8. MISCELLANEOUS PROVISIONS
8.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the right and interest granted
herein; Secured Party may resort, for the payment or performance of the
Obligation, to its several securities therefor in such order and manner as it
may determine.
8.2 Without notice or demand, without the necessity for any additional
endorsements, without affecting the obligations of Pledgor hereunder or the
personal liability of any person for payment or performance of the Obligation,
and without affecting the rights and interests granted
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<PAGE>
herein, Secured Party, from time to time, may: (i) extend the time for payment
of all or any part of the Obligation, accept a renewal note therefor, reduce the
payments thereon, release any person liable for all or any part thereof, or
otherwise change the terms of all or any part of the Obligation; (ii) take and
hold other security for the payment or performance of the Obligation and
enforce, exchange, substitute, subordinate, waive or release any such security;
(iii) join in any extension or subordination agreement; or (iv) release any part
of the Pledged Securities from this Agreement.
8.3 Pledgor waives and agrees not to assert: (i) any right to require
Secured Party to proceed against any guarantor, to proceed against or exhaust
any other security for the Obligation, to pursue any other remedy available to
Secured Party, or to pursue any remedy in any particular order or manner; (ii)
the benefits of any statute of limitations affecting the enforcement hereof;
(iii) the benefits of any legal or equitable doctrine or principle of
marshalling; (iv) demand, diligence, presentment for payment, protest and
demand, and notice of extension, dishonor, protest, demand and nonpayment,
relating to the Obligation; and (v) any benefit of, and any right to participate
in, any other security now or hereafter held by Secured Party.
8.4 The terms herein shall have the meanings in and be construed under the
Uniform Commercial Code. This Agreement shall be governed by and construed
according to the internal laws of the State of Arizona. Each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be void or
invalid, the same shall not affect the remainder hereof which shall be effective
as though the void or invalid provision had not been contained herein.
8.5 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement
executed by Pledgor and a duly authorized officer of Secured Party.
8.6 This is a continuing agreement, which shall remain in full force and
effect until actual receipt by Secured Party of written notice of its revocation
as to future transactions and shall remain in full force and effect thereafter
until all of the Obligation incurred before the receipt of such notice, and all
of the Obligation incurred thereafter under commitments extended by Secured
Party before the receipt of such notice, shall have been paid and performed in
full.
8.7 No setoff or claim that Pledgor now has or may in the future have
against Secured Party shall relieve Pledgor from paying or performing its
obligations hereunder.
8.8 Time is of the essence hereof. If more than one Pledgor is named
herein, the word Pledgor shall mean all and any one or more of them, severally
and collectively. All liability hereunder shall be joint and several. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their heirs, personal representatives, successors and assigns. The
term "Secured Party" shall include not only the original Secured Party hereunder
but also any future owner and holder, including pledgees, of the note or notes
evidencing the Obligation. The provisions hereof shall apply to the parties
according to the context thereof and without regard to the number or gender of
words or expressions used.
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<PAGE>
8.9 All notices required or permitted to be given hereunder shall be in
writing and may be given in person or by United States mail, by delivery service
or by electronic transmission. Any notice directed to a party to this Agreement
shall become effective upon the earliest of the following: (i) actual receipt by
that party; (ii) delivery to the designated address of that party, addressed to
that party; or (iii) if given by certified or registered United States mail,
twenty-four (24) hours after deposit with the United States Postal Service,
postage prepaid, addressed to that party at its designated address. The
designated address of a party shall be the address of that party shown at the
beginning of this Agreement or such other address as that party, from time to
time, may specify by notice to the other parties.
8.10 A carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement.
IN WITNESS WHEREOF, these presents are executed as of the date indicated
above.
SCHUFF INTERNATIONAL, INC., a Delaware
corporation
By:
____________________________________
Name:
____________________________________
Title:
____________________________________
PLEDGOR
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<PAGE>
SCHEDULE "A"
All issued and outstanding shares of stock in ______________________, a(n)
__________________________ corporation, now or hereafter owned by Pledgor, which
as of the date hereof consists of the __________ shares of ____________ stock.
<PAGE>
EXHIBIT "1"
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, the undersigned does hereby sell, assign and transfer
to _____________________________________, ______________ (_______) shares of
common stock of ______________________________, a(n) ___________ corporation
(the "Corporation"), represented by certificate number ____ in the name of the
undersigned on the books of the Corporation.
The undersigned does hereby irrevocably constitute and appoint any officer
of the Corporation as attorney to transfer said stock on the books of the
Corporation with full power of substitution in the premises.
Dated as of _____________________.
SCHUFF INTERNATIONAL, INC., a Delaware
corporation
By:
____________________________________
Name:
____________________________________
Title:
____________________________________
<PAGE>
EXHIBIT "G"
SECURITY AGREEMENT
(____________)
THIS SECURITY AGREEMENT is made and entered into as of the _____ day of
___________, 20___, by __________________________________________________, a
_______________ corporation (hereinafter called "Debtor"), whose chief
executive office is located at 420 South 19th Avenue, Phoenix, Arizona 85009,
in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking
association, and its successors and assigns, for itself and as agent for one or
more Lenders (as hereinafter defined) (hereinafter called "Secured Party"),
whose address is 100 West Washington, Phoenix, Arizona 85003, Attention: John
Helms #S4101-251.
1. SECURITY INTEREST
Debtor hereby grants to Secured Party a security interest (hereinafter
called the "Security Interest") in all of Debtor's right, title and interest in
and to the personal property described on Schedule "A" attached hereto and by
this reference incorporated herein (the "Collateral").
2. OBLIGATION SECURED
The Security Interest shall secure, in such order of priority as Secured
Party may elect:
(a) Payment of the aggregate sum of $15,000,000.00 according to the
terms of those Revolving Promissory Notes dated June 30, 1998, each made by
Schuff Steel Company, a Delaware corporation (as predecessor in interest to
Schuff International, Inc., a Delaware corporation) (hereinafter called
"Borrower"), payable respectively to the order of one of the Lenders, each
evidencing a revolving line of credit, all or any part of which may be
advanced to Borrower, repaid by Borrower and readvanced to Borrower, from
time to time, subject to the terms and conditions thereof, with interest
thereon, extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms thereof, and all extensions,
modifications, renewals or replacements thereof (hereinafter called the
"RLC Notes");
(b) Payment of the sum of $5,000,000.00, according to the terms of
that Revolving Promissory Note dated June 30, 1998, made by Borrower,
payable to the order of Secured Party as the Swing Line Lender, evidencing
a revolving line of credit, all or any part of which may be advanced to
Borrower, repaid by Borrower and readvanced to Borrower, from time to time,
subject to the terms and conditions thereof, with interest thereon,
extension and other fees, late charges, prepayment premiums and attorneys'
fees, according to the strict terms thereof, and all extensions,
modifications, renewals or replacements thereof (hereinafter called the
"Swing Line Note" and with the RLC Notes, the "Note");
<PAGE>
(c) Payment, performance and observance by Borrower of each covenant,
condition, provision and agreement contained in that Credit Agreement dated
June 30, 1998 (the "Credit Agreement"), by and between Borrower, and the
lenders listed from time to time therein (collectively, the "Lenders"), and
Secured Party, as Arranger, Administrative Agent, Issuing Bank and Swing Line
Lender and of all monies expended or advanced by Secured Party pursuant to the
terms thereof or to preserve any right of Secured Party thereunder as
permitted hereunder;
(d) Payment, performance and observance by Debtor of each covenant,
condition, provision and agreement contained herein and of all monies expended
or advanced by Secured Party pursuant to the terms hereof, or to preserve any
right of Secured Party hereunder, or to protect or preserve the Collateral or
any part thereof as permitted hereunder; and
(e) Payment and performance of any and all other indebtedness,
obligations and liabilities of Debtor and/or Borrower to Secured Party of every
kind and character, direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter incurred, whether such indebtedness is
from time to time reduced and thereafter increased or entirely extinguished and
thereafter reincurred.
All of the indebtedness and obligations secured by this Agreement are
hereinafter collectively called the "Obligation."
3. USE; LOCATION; CONSTRUCTION
3.1 The Collateral is or will be used or produced primarily for business
purposes.
3.2 The Collateral will be kept at Debtor's address set forth at the
beginning of this Agreement.
3.3 Debtor's records concerning the Collateral will be kept at Debtor's
address set forth at the beginning of this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF DEBTOR
Debtor hereby represents and warrants that:
4.1 If Debtor is a "registered organization" (as defined in the UCC), it
(i) represents that its name as described in the preamble to this Agreement is
accurate; (ii) represents that its chief executive office is located at the
address described in the preamble to this Agreement; (iii) is duly organized,
validly existing and in good standing under the laws of the State of Texas (the
"State") as a corporation; (iv) is qualified to do business and is in good
standing under the laws of the state in which the Collateral is located and in
each state in which it is doing business; (v) has full power and authority to
own its properties and assets and to carry on its businesses as now conducted;
and (vi) is fully authorized and permitted to execute and deliver this
Agreement and to enter into any transactions evidenced by any portion of the
Collateral. The execution, delivery
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<PAGE>
and performance by Debtor of this Agreement and all other documents and
instruments relating to the Obligation will not result in any material breach
of the terms and conditions or constitute a default under any material
agreement or instrument under which Debtor is a party or is obligated. Debtor
is not in material default in the performance or observance of any covenants,
conditions or provisions of any such agreement or instrument.
4.2 Debtor is the owner of the Collateral free of all security interests
or other encumbrances except the Security Interest and Permitted Encumbrances
and no financing statement covering the Collateral is filed or recorded in any
public office except those necessary to perfect the interests which constitute
Permitted Encumbrances.
4.3 The Collateral is, and is intended to be, used, produced or acquired
by Debtor for use primarily for the purpose marked in Section 3 above. The
address of Debtor set forth at the beginning of this Agreement is the chief
executive office of Debtor. If a portion of the Collateral is or will become a
fixture, it will be affixed to the real property as described above.
4.4 Each account, chattel paper or general intangible included in the
Collateral is genuine and enforceable in accordance with its terms against the
party named therein who is obligated to pay the same (hereinafter called
"Obligor"), and the security interests that are part of each item of chattel
paper included in the Collateral are valid, first and prior perfected security
interests subject only to Permitted Encumbrances. Each Obligor is solvent, and
the amount that Debtor has represented to Secured Party as owing by each
Obligor is the amount actually and unconditionally owing by that Obligor,
without deduction except for normal cash discounts where applicable; no Obligor
has any defense, setoff, claim or counterclaim against Debtor that can be
asserted against Secured Party whether in any proceeding to enforce the
Security Interest or otherwise. Each document, instrument and chattel paper
included in the Collateral is complete and regular on its face and free from
evidence of forgery or alteration. No default has occurred in connection with
any instrument, document or chattel paper included in the Collateral,
no payment in connection therewith is overdue and no presentment, dishonor or
protest has occurred in connection therewith.
4.5 The Debtor's Federal employer identification number is ____________.
4.6 If the Debtor is a registered organization, the Debtor's state
organization number is 004232773.
5. COVENANTS OF DEBTOR
5.1 Debtor shall not sell, transfer, assign or otherwise dispose of any
Collateral or any interest therein (except as permitted in the Credit
Agreement) without obtaining the prior written consent of Secured Party and
shall keep the Collateral free of all security interests or other encumbrances
except the Security Interest and Permitted Liens. Although proceeds of
Collateral are covered by this Agreement, this shall not be construed to mean
that Secured Party consents to any sale of the Collateral.
5.2 Debtor shall keep and maintain the Collateral in good condition and
repair and shall not use the Collateral in violation of any provision of this
Agreement or any applicable statute, ordinance or regulation or any policy of
insurance insuring the Collateral.
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<PAGE>
5.3 Debtor shall provide and maintain insurance insuring the Collateral
against risks, with coverage and in form and amount satisfactory to Secured
Party as required in the Credit Agreement. At Secured Party's request, Debtor
shall deliver to Secured Party the original policies of insurance containing
endorsements naming Secured Party as a loss payee.
5.4 Debtor shall pay when due all taxes, assessments and other charges
which may be levied or assessed against the Collateral as required in the
Credit Agreement.
5.5 Debtor shall prevent any portion of the Collateral that is not a
fixture from being or becoming a fixture and shall prevent any portion of the
Collateral from being or becoming an accession to other goods that are not part
of the Collateral.
5.6 If the Collateral includes motor vehicles, Debtor shall not remove or
permit such motor vehicles to be removed from the State of Arizona without the
prior written consent of Secured Party, shall keep all titled vehicles properly
registered with and licensed by the State of Arizona, shall provide Secured
Party with the license numbers of all titled vehicles, shall cause the Security
Interest to be shown as a valid first lien on the Certificate of Title for all
titled vehicles subject to Permitted Encumbrances and shall deliver lien filing
receipts to Secured Party as evidence thereof.
5.7 Debtor, upon demand, shall promptly deliver to Secured Party all
instruments, documents and chattel paper included in the Collateral and all
invoices, shipping or delivery records, purchase orders, contracts or other
items reasonably related to the Collateral as may be necessary to perfect the
Security Interest in the Collateral. Debtor shall notify Secured Party
immediately of any default by any Obligor in the payment or performance of its
obligations with respect to any Collateral. Debtor, without Secured Party's
prior written consent, shall not make or agree to make any substitution for, or
credit, adjustment or allowance on, any Collateral.
5.8 Debtor shall give Secured Party immediate written notice of any change
in the location of: (i) Debtor's chief executive office; (ii) the Collateral or
any part thereof; (iii) Debtor's records concerning the Collateral or (iv) the
State of Debtor's organization.
5.9 Secured Party or its agents may inspect the Collateral at reasonable
times and may enter into any premises where the Collateral is or may be located.
Debtor shall keep records concerning the Collateral in accordance with generally
accepted accounting principles and, unless waived in writing by Secured Party,
shall mark its records and the Collateral to indicate the Security Interest.
Secured Party shall have free and complete access to Debtor's records upon
reasonable request and shall have the right to make extracts therefrom or copies
thereof. Upon request of Secured Party from time to time, Debtor shall submit
up-to-date schedules of the items comprising the Collateral in such detail as
Secured Party may require and shall deliver to Secured Party confirming specific
assignments of all accounts, instruments, documents and chattel paper included
in the Collateral.
5.10 Debtor, at its cost and expense, shall protect and defend this
Agreement, all of the rights of Secured Party hereunder, and the Collateral
against all claims and demands of other parties, including without limitation
defenses, setoffs, claims and counterclaims asserted by any Obligor against
Debtor and/or Secured Party. Debtor shall pay all reasonable claims and charges
-4-
<PAGE>
that in the opinion of Secured Party might materially prejudice, imperil or
otherwise affect the Collateral or the Security Interest. Debtor shall promptly
notify Secured Party of any material levy, distraint or other seizure by legal
process or otherwise of any part of the Collateral and of any threatened or
filed material claims or proceedings that might materially affect or impair the
terms of this Agreement.
5.11 The Security Interest, at all times, shall be perfected and
shall be prior to any other interests in the Collateral except any Permitted
Liens. Debtor shall act and perform as necessary and shall execute and file all
security agreements, financing statements, continuation statements and other
documents reasonably requested by Secured Party to establish, maintain and
continue the perfected Security Interest. Debtor, on demand, shall promptly pay
all costs and expenses of filing and recording, including the costs of any
searches, reasonably deemed necessary by Secured Party from time to time to
establish and determine the validity and the continuing priority of the
Security Interest.
5.12 If Debtor shall fail to pay any taxes, assessments, expenses or
charges, to keep all of the Collateral free from other security interests,
encumbrances or claims, except any Permitted Liens to keep the Collateral in
good condition and repair, to procure and maintain insurance thereon, or to
perform otherwise as required herein, Secured Party may advance the monies
necessary to pay the same, to accomplish such repairs, to procure and maintain
such insurance or to so perform; Secured Party is hereby authorized to enter
upon any property in the possession or control of Debtor for such purposes.
5.13 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof and all
amounts paid, suffered or incurred by Secured Party in exercising any authority
granted herein, including reasonable attorneys' fees, shall be added to the
Obligation, shall be secured by the Security Interest, shall bear interest at
the highest rate payable on any of the Obligation until paid, and shall be due
and payable by Debtor to Secured Party immediately without demand.
5.14 Debtor will not sign or authorize the signing on its behalf or
the filing of any financing statement naming it as debtor covering all or any
portion of the Collateral except as permitted by the Credit Agreement.
6. NOTIFICATION AND PAYMENTS; COLLECTION OF COLLATERAL; USE OF COLLATERAL BY
DEBTOR
6.1 Secured Party, before or after the occurrence of any Event of
Default, defined below, and without notice to Debtor, may notify any or all
Obligors of the existence of the Security Interest and may direct the Obligors
to make all payments on the Collateral to Secured Party. Until Secured Party
has notified the Obligors to remit payments directly to it, Debtor, at Debtor's
own cost and expense, shall collect or cause to be collected the accounts and
monies
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<PAGE>
due under the accounts, documents, instruments and general intangibles or
pursuant to the terms of the chattel paper. Secured Party shall not be liable or
responsible for any embezzlement, conversion, negligence or default by Debtor or
Debtor's agents with respect to such collections; all agents used in such
collections shall be agents of Debtor and not agents of Secured Party. Unless
Secured Party notifies Debtor in writing that it waives one or more of the
requirements set forth in this sentence, any payments or other proceeds of
Collateral received by Debtor, before or after notification to Obligors, shall
be held by Debtor in trust for Secured Party in the same form in which received,
shall not be commingled with any assets of Debtor and shall be turned over to
Secured Party not later than the next business day following the day of receipt.
All payments and other proceeds of Collateral received by Secured Party directly
or from Debtor shall be applied to the Obligation in such order and manner and
at such time as Secured Party, in its sole discretion, shall determine. in
addition, Debtor shall promptly notify Secured Party of the return to or
possession by Debtor of goods underlying any Collateral; Debtor shall hold the
same in trust for Secured Party and shall dispose of the same as Secured Party
directs.
6.2 Secured Party, before or after the occurrence of an Event of Default,
may demand, collect and sue on the Collateral (either in Debtor's or Secured
Party's name), enforce, compromise, settle or discharge the Collateral and
endorse Debtor's name on any instruments, documents, or chattel paper included
in or pertaining to the Collateral; Debtor hereby irrevocably appoints Secured
Party its attorney in fact for all such purposes.
6.3 Until the occurrence of an Event of Default, Debtor may: (i) use,
consume and sell any inventory included in the Collateral in any lawful manner
in the ordinary course of Debtor's business provided that all sales shall be at
commercially reasonable prices; and (ii) subject to Paragraphs 6.1 and 6.2
above, retain possession of any other Collateral and use it in any lawful manner
consistent with this Agreement.
7. COLLATERAL IN THE POSSESSION OF SECURED PARTY
7.1 Secured Party shall use such reasonable care in handling, preserving
and protecting the Collateral in its possession as it uses in handling similar
property for its own account. Secured Party, however, shall have no liability
for the loss, destruction or disappearance of any Collateral unless there is
affirmative proof of gross negligence or a lack of due care; the lack of due
care shall not be implied solely by virtue of any loss, destruction or
disappearance.
7.2 Debtor shall be solely responsible for taking any and all actions to
preserve rights against all Obligors; Secured Party shall not be obligated to
take any such actions whether or not the Collateral is in Secured Party's
possession. Debtor waives presentment and protest with respect to any instrument
included in the Collateral on which Debtor is in any way liable and waives
notice of any action taken by Secured Party with respect to any instrument,
document or chattel paper included in any Collateral that is in the possession
of Secured Party.
8. EVENTS OF DEFAULT; REMEDIES
8.1 The occurrence of any of the following events or conditions shall
constitute and is hereby defined to be an "Event of Default":
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<PAGE>
(a) Any failure or neglect to perform or observe any of the terms,
provisions, or covenants of this Agreement.
(b) The occurrence of any event of default under the Credit
Agreement.
8.2 Secured Party, so far as may be lawful, may purchase all or any part
of the Collateral offered at any public or private sale made in the enforcement
of Secured Party's rights and remedies hereunder consistent with the Uniform
Commercial Code.
8.3 Any demand or notice of sale, disposition or other intended action
hereunder or in connection herewith, whether required by the Uniform Commercial
Code or otherwise, shall be deemed to be commercially reasonable and effective
if such demand or notice is given to Debtor at least ten (10) days prior to such
sale, disposition or other intended action, in the manner provided herein for
the giving of notices.
8.4 Debtor shall pay all reasonable costs and expenses, including without
limitation costs of Uniform Commercial Code searches, court costs and reasonable
attorneys' fees, incurred by Secured Party in enforcing payment and performance
of the Obligation or in exercising the rights and remedies of Secured Party
hereunder. All such costs and expenses shall be secured by this Agreement and by
all deeds of trust and other lien and security documents securing the
Obligation. In the event of any court proceedings, reasonable court costs and
reasonable attorneys' fees shall be set by the court and not by jury and shall
be included in any judgment obtained by Secured Party.
8.5 In addition to any remedies provided herein for an Event of Default,
Secured Party shall have all the rights and remedies afforded a secured party
under the Uniform Commercial Code and all other legal and equitable remedies
allowed under applicable law. No failure on the part of Secured Party to
exercise any of its rights hereunder arising upon any Event of Default shall be
construed to prejudice its rights upon the occurrence of any other or subsequent
Event of Default. No delay on the part of Secured Party in exercising any such
rights shall be construed to preclude it from the exercise thereof at any time
while that Event of Default is continuing. Secured Party may enforce any one or
more rights or remedies hereunder successively or concurrently. By accepting
payment or performance of any of the Obligation after its due date, Secured
Party shall not thereby waive the agreement contained herein that time is of the
essence, nor shall Secured Party waive either its right to require prompt
payment or performance when due of the remainder of the Obligation or its right
to consider the failure to so pay or perform an Event of Default.
9. MISCELLANEOUS PROVISIONS
9.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the Security Interest; Secured Party
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<PAGE>
may resort, for the payment or performance of the Obligation, to its several
securities therefor in such order and manner as it may determine.
9.2 Without notice or demand, without affecting the obligations of Debtor
hereunder or the personal liability of any person for payment or performance of
the Obligation, and without affecting the Security Interest or the priority
thereof, Secured Party, from time to time, may: (i) extend the time for payment
of all or any part of the Obligation, accept a renewal note therefor, reduce
the payments thereon, release any person liable for all or any part thereof, or
otherwise change the terms of all or any part of the Obligation; (ii) hold
other security for the payment or performance of the Obligation and enforce,
exchange, substitute, subordinate, waive or release any such security; (iii)
join in any extension or subordination agreement; or (iv) release any part of
the Collateral from the Security Interest.
9.3 Debtor waives and agrees not to assert: (i) any right to require
Secured Party to proceed against any guarantor, to proceed against or exhaust
any other security for the Obligation, to pursue any other remedy available to
Secured Party, or to pursue any remedy in any particular order or manner; (ii)
the benefits of any statute of limitations affecting the enforcement hereof;
(iii) demand, diligence, presentment for payment, protest and demand, and
notice of extension, dishonor, protest, demand and nonpayment, relating to the
Obligation; and (iv) any benefit of, and any right to participate in, any other
security now or hereafter held by Secured Party.
9.4 The terms herein shall have the meanings in and be construed under
the Uniform Commercial Code as in effect in the State of Arizona from time to
time (the "UCC"). This Agreement shall be governed by and construed according
to the laws of the State of Arizona. Each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be void or invalid, the same
shall not affect the remainder hereof which shall be effective as though the
void or invalid provision had not been contained herein.
9.5 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement
executed by Debtor and a duly authorized officer of Secured Party.
9.6 This is a continuing Agreement which shall remain in full force and
effect until actual receipt by Secured Party of written notice of its
revocation as to future transactions and shall remain in full force and effect
thereafter until all of the Obligation incurred before the receipt of such
notice, and all of the Obligation incurred thereafter under commitments
extended by Secured Party before the receipt of such notice, shall have been
paid and performed in full.
9.7 No setoff or claim that Debtor now has or may in the future have
against Secured Party shall relieve Debtor from paying or performing the
Obligation.
9.8 Time is of the essence hereof. If more than one Debtor is named
herein, the word "Debtor" shall mean all and any one or more of them,
severally and collectively. All liability hereunder shall be joint and several.
This Agreement shall be binding upon, and shall inure to the benefit of, the
parties hereto and their heirs, personal representatives, successors and
assigns.
-8-
<PAGE>
The term "Secured Party" shall include not only the original Secured Party
hereunder but also any future owner and holder, including pledgees, of note or
notes evidencing the Obligation. The provisions hereof shall apply to the
parties according to the context thereof and without regard to the number or
gender of words or expressions used.
9.9 All notices required or permitted to be given hereunder shall be in
writing and may be given in person or by United States mail, by delivery service
or by electronic transmission. Any notice directed to a party to this Agreement
shall become effective upon the earliest of the following: (i) actual receipt by
that party; (ii) delivery to the designated address of that party, addressed to
that party; or (iii) if given by certified or registered United States mail,
thirty-six (36) hours after deposit with the United States Postal Service,
postage prepaid, addressed to that party at its designated address. The
designated address of a party shall be the address of that party shown at the
beginning of this Agreement or such other address as that party, from time to
time, may specify by notice to the other parties.
9.10 A carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement. Debtor hereby authorizes the filing
of a financing statement with respect to the Collateral by the Secured Party.
9.11 The capitalized terms used herein and not otherwise defined shall
have the same meanings as set forth in the Credit Agreement.
10. NON-DEBTOR BORROWER PROVISIONS
10.1 All advances of principal under the Note shall be made to Borrower
subject to and in accordance with the terms thereof. If Borrower is a
corporation or partnership, it is not necessary for Secured Party to inquire
into the powers of Borrower or the officers, directors, partners or agents
acting or purporting to act on its behalf. Debtor is and shall continue to be
fully informed as to all aspects of the business affairs of Borrower that it
deems relevant to the risks it is assuming and hereby waives and fully
discharges Secured Party from any and all obligations to communicate to Debtor
any facts of any nature whatsoever regarding Borrower and Borrower's business
affairs.
10.2 Debtor authorizes Secured Party, without notice or demand, without
affecting the obligations of Debtor hereunder or the personal liability of any
person for payment or performance of the Obligation and without affecting the
lien or the priority of the Security Interest, from time to time, at the
request of any person primarily obligated therefor, to renew, compromise,
extend, accelerate or otherwise change the time for payment or performance of,
or otherwise change the terms of, all or any part of the Obligation, including
increase or decrease any rate of interest thereon. Debtor waives and agrees not
to assert: (i) any right to require Secured Party to proceed against Borrower;
(ii) the benefits of any statutory provision limiting the liability of a
surety, including without limitation the benefit of Section 12-1641, et seq.,
of the Arizona Revised Statutes; and (iii) any defense arising by reason of any
disability or other defense of Borrower or by reason of the cessation from any
cause whatsoever of the liability of Borrower. Debtor shall have no right of
subrogation and hereby waives any right to enforce any remedy which Secured
Party now has, or may hereafter have, against Borrower.
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<PAGE>
IN WITNESS WHEREOF, these presents are executed as of the date indicated
above.
______________________________________, a
______________________ corporation
By:__________________________________
Name:________________________________
Title:_______________________________
DEBTOR
-10-
<PAGE>
SCHEDULE "A"
COLLATERAL DESCRIPTION
----------- -----------
A. All of the property described below in, to or under which Debtor now
has or hereafter acquires any right, title or interest, whether present,
future, or contingent, and in Debtor's expectancy to acquire such property (all
of the property described on this schedule is herein called the "Collateral"):
(a) All money, accounts, general intangibles, instruments, documents
and chattel paper now existing or hereafter arising or acquired from time
to time in the course of Debtor's business as now or hereafter conducted,
including all accounts receivable, notes, drafts, lease agreements and
security agreements, and all goods, if any, represented thereby;
(b) All inventory now owned or hereafter arising or acquired,
including all goods held for sale or lease in Debtor's business, as now or
hereafter conducted, and all materials, work in process and finished goods
used or to be consumed in Debtor's business (whether or Debtor holds legal
title thereto or whether any such inventory is represented by warehouse
receipts or bills of lading or has been or may be placed in transit or
delivered to a public warehouse);
(c) All equipment, including all furniture, fixtures, furnishings,
vehicles (whether titled or non-titled), machinery, materials and supplies,
wherever located, including but not limited to such items used in
connection with Debtor's business and/or described on the Collateral
Schedule (if any) attached hereto and by this reference made a part hereof,
together with all parts, accessories, attachments, additions thereto or
replacements therefor;
(d) All rights as unpaid seller or lienor that arise in connection
with any of the Collateral, including the rights of replevin, reclamation
and stoppage in transit, and the right to sue or file mechanics' or
materialmen's liens in the name of Debtor or otherwise for the unpaid
balances due thereunder;
(e) All tax refund claims, all policies or certificates of insurance
covering any of the Collateral, all contracts, agreements or rights of
indemnification, guaranty or surety relating to any of the Collateral, and
all claims, awards, loss payments, proceeds and premium refunds that may
become payable with respect to any such policies, certificates, contracts,
agreements or rights;
(f) All ledger cards, invoices, delivery receipts, worksheets, books
of accounts, statements, correspondence, customer lists, files, journals,
ledgers and records in any form, written or otherwise, related to any of
the Collateral;
(g) Tradenames, trademarks and service marks (subject to any
franchise or license agreements relating thereto);
<PAGE>
(h) All claims for loss or damage to or in connection with any of the
Collateral, all other claims in any form for the payment of money,
including tort claims, and all rights with respect to such claims and all
proceeds thereof;
(i) All accessions to any of the Collateral;
(j) All products and proceeds of the Collateral, in any form,
including all proceeds received, due or to become due from any sale,
exchange or other disposition of any of the Collateral, whether such
proceeds are cash or noncash in nature or are represented by checks,
drafts, notes or other instruments for the payment of money; and
(k) All property that is now or at any time hereafter may be in
Secured Party's possession or control in any capacity, including without
limitation all money owed or that becomes owed to Debtor and all money
deposited for the account of Debtor.
All "Collateral Schedules," if any, attached hereto are hereby incorporated
into this collateral description as if set forth here and at each reference
thereto.
B. All of Debtor's right, title and interest in and to all Accounts (as
defined in the Arizona UCC), Chattel Paper (as defined in the Arizona UCC),
Documents (as defined in the Arizona UCC), Equipment (as defined in the Arizona
UCC), Fixtures (as defined in the Arizona UCC), General Intangibles (as defined
in the Arizona UCC), Instruments (as defined in the Arizona UCC), Inventory (as
defined in the Arizona UCC), Investment Property (as defined in the Arizona
UCC), Letter-of-Credit Rights (a