<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 8, 1997
REGISTRATION NO. 333- .
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SCHUFF STEEL COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 1791 86-0318760
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
420 SOUTH 19TH AVENUE
PHOENIX, ARIZONA 85009
(602) 252-7787
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SCOTT A. SCHUFF
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SCHUFF STEEL COMPANY
420 SOUTH 19TH AVENUE
PHOENIX, ARIZONA 85009
(602) 252-7787
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
STEVEN D. PIDGEON, ESQ. GARY D. GILSON, ESQ.
SNELL & WILMER L.L.P. BLACKWELL SANDERS MATHENY WEARY
ONE ARIZONA CENTER & LOMBARDI L.C.
PHOENIX, ARIZONA 85004-0001 2300 MAIN STREET, SUITE 1100
(602) 382-6000 KANSAS CITY, MISSOURI 64108
(816) 274-6800
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH OFFERING AGGREGATE AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE PRICE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) FEE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value................ 2,530,000 $12.00 $30,360,000 $9,200
- -------------------------------------------------------------------------------------------------------------------
Total............................................................................................. $9,200
===================================================================================================================
</TABLE>
(1) Includes 330,000 shares of Common Stock that the Underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 8, 1997
2,200,000 SHARES
SCHUFF STEEL COMPANY
COMMON STOCK
------------------------
All of the 2,200,000 shares of common stock, $.001 par value per share (the
"Common Stock"), offered hereby are being sold by Schuff Steel Company (the
"Company"). Prior to this offering, there has been no public market for the
Common Stock of the Company. Application has been made for inclusion of the
Common Stock on the Nasdaq National Market under the symbol "SHUF." It is
currently estimated that the initial public offering price will be between
$10.00 and $12.00 per share. See "Underwriting" for factors to be considered in
determining the initial public offering price.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share...................... $ $ $
- -------------------------------------------------------------------------------------------------
Total(3)....................... $ $ $
=================================================================================================
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933, as amended, in connection with
this offering. See "Underwriting."
(2) Before deducting expenses of this offering payable by the Company estimated
at $675,000, including a fee payable to the Company's financial consultant.
See "Underwriting."
(3) The Company has granted the Underwriters a 30-day option to purchase up to
330,000 additional shares of Common Stock on the same terms and conditions
as the securities offered hereby solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions, and Proceeds to Company will be $ ,
$ , and $ , respectively. See "Underwriting."
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them and subject to
certain other conditions including the right of the Underwriters to withdraw,
cancel, modify or reject any order in whole or in part. It is expected that
delivery of the shares will be made against payment therefor on or about
, 1997.
------------------------
PRINCIPAL FINANCIAL SECURITIES, INC.
The date of this Prospectus is , 1997
<PAGE> 3
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT AND OTHER STABILIZING TRANSACTIONS. SUCH TRANSACTIONS
MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, THE OVER-THE-COUNTER MARKET OR
OTHERWISE. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and Consolidated Financial Statements, including the Notes thereto,
appearing elsewhere in this Prospectus. Except as otherwise specified, all
information in this Prospectus: (i) gives effect to the redomestication merger
of the Company's predecessor Arizona corporation with and into the Company and
the exchange of 50,000 shares of Common Stock for each then issued and
outstanding share of common stock of the predecessor corporation pursuant to
such merger; (ii) gives effect to the revocation of the Company's subchapter S
election immediately prior to the closing of this offering; and (iii) assumes no
exercise of either the over-allotment option granted to the Underwriters or
currently outstanding stock options granted by the Company. Except as otherwise
specified, all references herein to the "Company" or "Schuff" include Schuff
Steel Company, a Delaware corporation, its subsidiary, and its predecessor
Arizona corporation. Investors should carefully consider the information set
forth herein under the heading "Risk Factors" and are urged to read this
Prospectus in its entirety.
THE COMPANY
Schuff Steel Company is a rapidly growing steel fabrication and erection
firm that provides a fully integrated range of steel construction services.
Schuff operates primarily in the southwestern United States with a concentration
in Arizona, Nevada and southern California, and has recently expanded its
operations into South America and Mexico. The Company is the largest steel
fabrication and erection firm serving the Arizona industrial and commercial
markets, a position it recently enhanced with the 1997 acquisition of B&K Steel
Fabrications, Inc. ("B&K Steel"). The Company also believes that it is the
leading steel fabricator and erector for the hotel and casino industry in
Nevada. Engineering News Record ranked the Company as the second largest steel
erection subcontractor in the United States based upon 1995 revenues and as the
largest steel erection subcontractor in the United States based upon 1994
revenues.
Schuff has achieved significant growth in revenues and pre-tax income over
the past five years. Revenues have more than doubled from $47.0 million in 1992
to $103.9 million ($113.3 million giving pro forma effect to the 1997 B&K Steel
acquisition) in 1996. During that same period, pre-tax income have grown at a
compound annual growth rate of 101.5%, from $610,000 in 1992 to $10.1 million in
1996.
The Company seeks to differentiate itself from its competitors by providing
a fully integrated range of steel construction services, including engineering,
detailing, fabrication and erection, and by providing a level of service and
expertise necessary to accommodate large, fast track projects. The Company
believes that there is an increasing trend in the industry to design and build
projects according to accelerated time schedules. The fast track,
"design-as-you-go" nature of these projects creates a demand for integrated
contractors that can (i) reduce the logistical and coordination problems
inherent in using multiple subcontractors and (ii) more efficiently respond to
rapid and multiple design changes while minimizing the project delays and cost
overruns commonly associated with such changes. The complexity and size of these
projects is particularly suited to contractors with extended financial and
operational capabilities. The Company believes that it has gained a reputation
in the industry as a reliable, fully integrated provider of engineering,
detailing, fabrication and erection services with the ability to complete large,
complex projects on a timely, cost efficient basis.
The Company has provided its integrated fabrication and erection services
to a wide variety of projects, including hotels and casinos, office complexes,
hospitals, mining facilities, manufacturing plants, shopping malls, sports
stadiums, large diameter water pipes, and other public works projects. Examples
of major projects include: Bank One Ballpark, a baseball stadium featuring a
fully retractable steel roof being constructed for Major League Baseball's
Arizona Diamondbacks franchise; Agua Fria Siphon Project, an aqueduct system
with over two miles of specially fabricated 21 foot diameter pipe; MGM Grand
Hotel & Casino in Las Vegas, the world's largest hotel and casino; Intel Corp.'s
Fab 12 Plant, one of the largest semiconductor manufacturing plants in the
United States; and Bajo de la Alumbrera in Argentina, one of the largest copper
mines in the world.
3
<PAGE> 5
The Company believes that the steel fabrication and erection industry is
highly fragmented and that many of its competitors are small businesses that
offer limited services or confine operations to local or regional markets. Given
the trend toward the use of fully integrated contractors, the Company believes
the industry may experience consolidation and that it is well positioned to take
advantage of potential acquisition opportunities.
BUSINESS STRATEGY
The Company's objective is to achieve and maintain a leading market
position in each of its geographic and specific product markets. The Company
seeks to achieve this objective by pursuing the following business strategies:
(i) promoting its ability to provide a fully integrated range of engineering,
detailing, fabrication and erection services, which enables the Company to
compete more effectively on large, complex, fast track, "design-as-you-go"
projects; (ii) focusing its engineering, detailing, fabrication and erection
expertise on distinct product segments requiring unique or innovative
techniques, where the Company typically experiences less competition; (iii)
diversifying its construction projects across a wide range of commercial,
industrial and specialty projects; and (iv) offering in-house project management
and engineering expertise not typically provided by steel fabricators or
erectors, which facilitates the Company's ability to procure contracts for
large, more complicated projects.
GROWTH STRATEGY
The Company seeks to achieve continued growth and diminish the impact of
business and economic cycles by pursuing the following strategies: (i) promoting
growth internally by adding sales and marketing personnel dedicated to fast
growing markets, further developing its engineering and design capabilities and
fabrication capacity, and continually updating its fabrication and detailing
equipment and technologies; (ii) capitalizing on the highly fragmented nature of
the steel fabrication and erection industry by pursuing selective acquisitions
of companies that offer the Company increased plant facilities, opportunities to
increase market share in selected geographic markets, penetration of new product
market segments and access to domestic and international markets targeted by the
Company for geographic expansion; (iii) pursuing additional project
opportunities by continuing to diversify into new geographic and product
markets, leveraging its existing relationships with key national and
multi-national general contractors and other customers, and establishing new
strategic alliances; and (iv) expanding its international operations by pursuing
opportunities in South America, Mexico and Southeast Asia.
The Company was incorporated in Arizona in 1976 and reincorporated under
the laws of Delaware in 1997. The Company's principal executive offices are
located at 420 South 19th Avenue, Phoenix, Arizona 85009, and its telephone
number is (602) 252-7787.
4
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered........................ 2,200,000 shares(1)
Common Stock to be outstanding immediately
after this offering....................... 7,200,000 shares(1)
Use of proceeds............................. Purchase of specialized equipment, funding
of the subchapter S distribution to the
Company's present stockholders, and general
corporate and working capital purposes. See
"Use of Proceeds" and "S Corporation
Distribution."
Proposed Nasdaq National Market symbol...... "SHUF"
</TABLE>
- ---------------
(1) Excludes 330,000 shares of Common Stock that may be sold by the Company upon
exercise of the Underwriters' over-allotment option. Also excludes 345,500
shares of Common Stock issuable upon exercise of stock options outstanding
under the Company's 1997 Stock Option Plan with an exercise price of $5.00
per share, and 22,500 shares of Common Stock issuable upon exercise of stock
options to be granted to the Company's non-employee directors upon their
appointment to the Board of Directors at the closing of this offering at an
exercise price equal to the initial public offering price. See "Management,"
"Description of Capital Stock" and "Underwriting."
5
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected summary financial data as of the
dates and for the periods indicated. The historical financial data for each year
in the five-year period ended December 31, 1996 are derived from the audited
financial statements of the Company. The quarterly periods reflect unaudited
results of the Company, which, in the opinion of management, reflect all
adjustments, consisting only of normal recurring adjustments, necessary to
fairly present the Company's financial position and results of operations for
the periods presented. The results for any interim period are not necessarily
indicative of results to be expected for a full fiscal year. The following table
also sets forth unaudited pro forma financial information for each period that
gives effect to the revocation of the Company's S corporation status. The
following data should be read in conjunction with, and are qualified by
reference to, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Company's Consolidated Financial Statements and
Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------ ------------------
1992 1993 1994 1995 1996(1) 1996 1997
------- ------- ------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT
DATA:
Revenues...................... $46,991 $58,640 $68,199 $62,090 $103,912 $ 10,410 $25,507
Cost of revenues.............. 41,752 50,376 58,874 54,222 86,998 8,418 21,655
------- ------- ------- ------- ------- -------- -------
Gross profit................ 5,239 8,264 9,325 7,868 16,914 1,992 3,852
General and administrative
expenses.................... 4,102 4,367 4,915 5,284 6,715 1,357 2,081
------- ------- ------- ------- ------- -------- -------
Operating income............ 1,137 3,897 4,410 2,584 10,199 635 1,771
Interest expense.............. (583) (627) (718) (752) (452) (147) (95)
Other income.................. 56 60 67 618 303 52 96
------- ------- ------- ------- ------- -------- -------
Income before income tax.... 610 3,330 3,759 2,450 10,050 540 1,772
Pro forma income taxes(2)..... 245 1,330 1,500 980 4,020 215 710
------- ------- ------- ------- ------- -------- -------
Pro forma net income(2)..... $ 365 $ 2,000 $ 2,259 $ 1,470 $ 6,030 $ 325 $ 1,062
======= ======= ======= ======= ======= ======== =======
Pro forma net income per
share(2).................... $ 0.07 $ 0.39 $ 0.44 $ 0.28 $ 1.16 $ 0.06 $ 0.20
Shares used in
computation(3).............. 5,188 5,188 5,188 5,188 5,188 5,188 5,188
OTHER DATA:
Backlog(4).................... $34,466 $18,387 $22,544 $80,834 $ 67,335 $126,061 $65,550
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31,
----------------------
1997 PRO
1997 FORMA AS
SELECTED BALANCE SHEET DATA: ACTUAL ADJUSTED(5)
-------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital, including
current portion of long
term debt................. $ 5,700 $ 4,804 $ 8,498 $ 7,965 $ 8,476 $ 8,598 $20,029
Total assets................ 22,681 25,387 26,244 25,260 43,969 48,160 59,591
Long term debt, excluding
current portion........... 3,720 3,806 7,057 5,271 2,753 2,777 2,777
Stockholders' equity........ 4,256 5,320 6,032 6,768 10,682 11,436 22,867
</TABLE>
6
<PAGE> 8
- ---------------
(1) Does not give effect to the Company's acquisition of B&K Steel on January
31, 1997, which was accounted for under the purchase method of accounting.
Accordingly, financial information relating to B&K Steel has not been
included in periods prior to the acquisition. Giving effect to the
acquisition of B&K Steel, as if it had occurred on January 1, 1996, the
Company's pro forma and unaudited revenues, gross profit, income before
income taxes, pro forma net income (after pro forma income taxes), and pro
forma net income per share would have been $113,291,000, $18,097,000,
$10,165,000, $6,099,000, and $1.18, respectively.
(2) Prior to this offering, the Company elected to be treated as an S
corporation under the Internal Revenue Code of 1986, as amended (the
"Code"). As an S corporation, the Company is not subject to income taxes.
Pro forma net income reflects the provision for income taxes that would have
been recorded had the Company been subject to income taxes as a C
corporation for all periods, assuming an effective tax rate of 40%. Pro
forma net income does not include credits of $300,000 to income to be
recorded upon revocation of the Company's subchapter S election. See "S
Corporation Distribution" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(3) Shares used in the computation of pro forma net income per share are based
upon a weighted average number of common shares and common stock equivalents
outstanding during each year. In accordance with Securities and Exchange
Commission Staff Accounting Bulletin Number 83, all issuances of the
Company's common stock options at prices below the expected initial public
offering price during the twelve-month period preceding the proposed
offering have been treated as common stock equivalents as if they had been
issued at the Company's inception using the treasury stock method.
(4) Backlog is the amount of potential future revenues to be recognized upon
performance of contracts awarded to the Company. Backlog increases as new
contract commitments are received, decreases as revenues are recognized, and
increases or decreases to reflect modifications in the work to be performed
under a contract. Of the Company's $67.3 million backlog as of December 31,
1996, approximately $13.1 million was attributable to three projects for a
single customer in Las Vegas, Nevada, and approximately $34.3 million was
attributable to the Bank One Ballpark project in Phoenix, Arizona. Of the
Company's $65.6 million backlog at March 31, 1997, approximately $15.9
million was attributable to two projects for a single customer in Las Vegas,
and approximately $26.8 million was attributable to the Bank One Ballpark
project. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business -- Backlog."
(5) Gives effect to (i) the sale of the 2,200,000 shares of Common Stock by the
Company offered hereby at an assumed initial public offering price of $11.00
per share and the application of the estimated net proceeds therefrom,
including payment of the $10.7 million portion of the S Corporation
Distribution that existed at March 31, 1997 and (ii) an increase to
stockholders' equity to reflect the recognition of a deferred tax asset, and
corresponding credit to income, in the amount of $300,000 upon revocation of
the Company's S corporation election. See "Use of Proceeds," "S Corporation
Distribution," "Capitalization" and Note 1 to Consolidated Financial
Statements.
7
<PAGE> 9
RISK FACTORS
Investment in the Common Stock offered hereby involves certain risks. In
addition to the other information included elsewhere in this Prospectus,
prospective investors should give careful consideration to the following factors
before purchasing shares of the Common Stock offered hereby.
DEPENDENCE ON CONSTRUCTION INDUSTRY
The Company earns virtually all of its revenues in the building
construction industry, which is subject to local, regional and national economic
cycles. The Company's revenues and cash flows depend to a significant degree on
major construction projects in various industries, including the hotel and
casino, retail shopping, health care, mining, computer chip manufacturing,
public works and other industries. The failure to obtain major projects, delays
in awards of major projects, or cancellation of major projects could result in
under-utilization of the Company's resources, which would adversely impact the
Company's revenues and cash flows. These factors are largely beyond the control
of the Company. If construction activity declines significantly in the Company's
principal markets, the Company's business, financial condition and results of
operations would be adversely affected.
FIXED PRICE CONTRACTS
A substantial portion of the Company's projects currently are performed on
a fixed price basis. In bidding on projects, the Company estimates its costs,
including projected increases in costs of labor, material and services. Despite
these estimates, costs and gross profit realized on a fixed price contract may
vary from estimated amounts because of unforeseen conditions or changes in job
conditions, variations in labor and equipment productivity over the terms of
contracts, higher than expected increases in labor or material costs and other
factors. These variations could have a material adverse effect on the Company's
business, financial condition and results of operations for any period. See
"Business -- Contracting Methods and Performance Bonding."
DEPENDENCE ON SUBCONTRACTORS
The Company routinely relies on subcontractors to perform a significant
portion of its fabrication and project detailing to fulfill projects that the
Company cannot fulfill in-house due to capacity constraints or that are in
markets in which the Company has not established a strong local presence. With
respect to these projects, the Company's success depends on its ability to
retain and successfully manage these subcontractors. Any difficulty in
attracting and retaining qualified subcontractors on terms and conditions
favorable to the Company could have an adverse effect on the Company's ability
to complete these projects in a timely and cost effective manner.
UNION CONTRACTS
The Company currently is a party to a number of collective bargaining
agreements with various unions representing the Company's fabrication and
erection employees. These contracts expire or are subject to expiration at
various times in the future. The inability of the Company to renew such
contracts could result in work stoppages and other labor disturbances, which
could disrupt the Company's business and adversely affect the Company's results
of operations. See "Business -- Employees."
PERCENTAGE OF COMPLETION ACCOUNTING
The Company recognizes revenues using the percentage of completion
accounting method. Under this method, revenues are recognized based on the ratio
that costs incurred to date bear to the total estimated costs to complete the
project. Estimated losses on contracts are recognized in full when the Company
determines that a loss will be incurred. The Company frequently reviews and
revises revenues and total cost estimates as work progresses on a contract and
as contracts are modified. Accordingly, revenue adjustments based upon the
revised completion percentage are reflected in the period that estimates are
revised. Although revenue estimates are based upon management assumptions
supported by historical experience, these estimates could vary materially from
actual results. To the extent percentage of completion adjustments reduce
previously reported revenues, the Company would recognize a charge against
operating results, which could have a
8
<PAGE> 10
material adverse effect on the Company's results of operations for the
applicable period. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Introduction."
GEOGRAPHIC CONCENTRATION
The Company's fabrication and erection operations currently are conducted
primarily in Arizona and Nevada, states in which the construction industry has
experienced substantial growth during recent years. Of the $103.9 million in
revenues earned by the Company in 1996, the Company estimates that approximately
$66.5 million, or 64.0%, of those revenues were related to projects in Arizona
and Nevada. Because of this concentration, the Company's business may be
adversely affected in the event of a downturn in general economic conditions
existing in Arizona and Nevada and in the southwestern United States generally.
See "Business -- Primary Markets and Products."
BACKLOG
The Company's backlog can be significantly affected by the receipt, or
loss, of individual contracts. For example, approximately 40.9% of the Company's
$65.5 million backlog at March 31, 1997 was attributable to the Bank One
Ballpark project in Phoenix, Arizona. In the event one or more large contracts
were terminated or their scope reduced, the Company's backlog would decrease
substantially. The Company's future business and results of operations may be
adversely affected if it is unable to replace significant contracts when lost or
completed, or if it otherwise fails to maintain a sufficient level of backlog.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Backlog."
OPERATING RISKS
Construction and heavy steel plate weldments involve a high degree of
operational risk. Natural disasters, adverse weather conditions, design,
fabrication and erection errors and work environment accidents can cause death
or personal injury, property damage and suspension of operations. The occurrence
of any of these events could result in loss of revenues, increased costs, and
liability to third parties. Litigation arising from such an occurrence may cause
the Company to be named as a defendant in lawsuits asserting substantial claims.
Although the Company maintains risk management, insurance, and safety programs
intended to prevent or mitigate losses, there can be no assurance that any of
these programs will be adequate or that the Company will be able to maintain
adequate insurance in the future at rates that it considers reasonable. See
"Business -- Legal Proceedings and Insurance."
RISKS OF INTERNATIONAL OPERATIONS
The Company is expanding into international markets, with approximately
13.7% of its revenues in 1996 relating to projects outside the United States.
The Company's international operations are subject to certain political,
economic and other uncertainties, including risks of war, nationalization of
assets, renegotiation or nullification of existing contracts, changing political
conditions, changing laws and policies affecting trade and investment, and
overlap of different tax structures. Although the Company currently attempts to
limit its exposure to currency fluctuations by dealing solely in United States
dollars, there can be no assurance that the Company's international operations
will escape the risks of fluctuating currency values, hard currency shortages,
or controls on currency exchange.
COMPETITION
Many small and various large companies offer fabrication, erection and
related services that compete with those provided by the Company. Local and
regional companies offer competition in one or more of the Company's geographic
markets or product segments. Out of state or international companies may provide
competition in any market. The Company competes for every project it obtains.
Although the Company believes customers consider, among other things, the
availability and technical capabilities of equipment and personnel, efficiency,
safety record and reputation, price competition usually is the primary factor in
determining which qualified contractor with available equipment is awarded a
contract. Competition has resulted in pressure on pricing and operating margins,
and the effects of competitive pressure in the industry may continue. Some of
the Company's competitors have greater capital and other resources than the
Company and are well established in their respective markets. There can be no
assurance that the Company's
9
<PAGE> 11
competitors will not substantially increase their commitment of resources
devoted to competing aggressively with the Company or that the Company will be
able to compete profitably with its competitors.
SUBSTANTIAL LIQUIDITY REQUIREMENTS
The Company's operations require significant amounts of working capital to
procure materials for contracts to be performed over relatively long periods,
and for purchases and modifications of heavy-duty and specialized fabrication
equipment. In addition, the Company's contract arrangements with customers
sometimes require the Company to provide payment and performance bonds and, in
selected cases, letters of credit, to partially secure the Company's obligations
under its contracts, which may require the Company to incur significant
expenditures prior to receipt of payments. Furthermore, the Company's customers
often will retain a portion of amounts otherwise payable to the Company during
the course of a project as a guarantee of completion of that project. To the
extent the Company is unable to receive project payments in the early stages of
a project, the Company's cash flow would be reduced, which could have a material
adverse effect on the Company's business, financial conditions and results of
operations. See "Management's Discussion and Analysis and Results of
Operations -- Liquidity and Capital Resources."
NO ASSURANCE OF SUCCESSFUL ACQUISITIONS
The Company intends to consider acquisitions of and alliances with other
companies in its industry that could complement the Company's business,
including the acquisition of entities in diverse geographic regions and entities
offering greater access to industries and markets not currently served by the
Company. There can be no assurance that suitable acquisition or alliance
candidates can be identified or, if identified, that the Company will be able to
consummate such transactions. Further, there can be no assurance that the
Company will be able to integrate successfully any acquired companies into its
existing operations, which could increase the Company's operating expenses.
Moreover, any acquisition by the Company may result in potentially dilutive
issuances of equity securities, incurrence of additional debt and amortization
of expenses related to goodwill and intangible assets, all of which could
adversely affect the Company's profitability. Acquisitions involve numerous
risks, such as diverting attention of the Company's management from other
business concerns, the entrance of the Company into markets in which it has had
no or only limited experience and the potential loss of key employees of the
acquired company, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Growth Strategy."
DEPENDENCE UPON KEY PERSONNEL
The Company's success depends on the continued services of the Company's
senior management and key employees as well as the Company's ability to attract
additional members to its management team with experience in the steel
fabrication and erection industry. The unexpected loss of the services of any of
the Company's key management personnel, or its inability to attract new
management when necessary, could have a material adverse effect upon the
Company. See "Management."
POTENTIAL ENVIRONMENTAL LIABILITY
The Company's operations and properties are affected by numerous federal,
state and local environmental protection laws and regulations, such as those
governing discharges to air and water and the handling and disposal of solid and
hazardous wastes. Compliance with these laws and regulations has become
increasingly stringent, complex and costly. There can be no assurance that such
laws and regulations or their interpretation will not change in a manner that
could materially and adversely affect the Company. Certain environmental laws,
such as the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") and its state law counterparts, provide for strict and joint and
several liability for investigation and remediation of spills and other releases
of toxic and hazardous substances. These laws may apply to conditions at
properties currently or formerly owned or operated by an entity or its
predecessors, as well as to conditions at properties at which wastes or other
contamination attributable to an entity or its predecessors come to be located.
The Company can give no assurance that it, or entities for which it may be
responsible, will not incur such liability in connection with the investigation
and remediation of facilities it currently operates (or formerly owned or
operated) or other locations in a manner that could materially and adversely
affect the Company. See "Business -- Environmental Regulation."
10
<PAGE> 12
GOVERNMENTAL REGULATION
Many aspects of the Company's operations are subject to governmental
regulations in the United States and in other countries in which the Company
operates, including regulations relating to occupational health and workplace
safety, principally the Occupational Safety and Health Act and regulations
thereunder. Although the Company believes that it is in material compliance with
such laws, there can be no assurance that it will be able to maintain this
status. Further, the Company cannot determine to what extent future operations
and earnings of the Company may be affected by new legislation, new regulations
or changes in or new interpretations of existing regulations. See
"Business -- Governmental Regulation."
CONTROL BY MAJORITY STOCKHOLDERS; ABILITY TO ISSUE PREFERRED STOCK
Upon completion of this offering, Mr. David A. Schuff, the Company's
Chairman and co-founder, and Mr. Scott A. Schuff, the Company's President, Chief
Executive Officer, co-founder and a member of its Board of Directors,
collectively will control the voting of approximately 69.4% of the outstanding
Common Stock. As a result, these individuals will control the vote on all
matters requiring approval of the stockholders, including causing or restricting
the sale or merger of the Company. In addition, the Company's Certificate of
Incorporation authorizes the Company to issue shares of "blank check" preferred
stock, the designation, number, voting powers, preferences, and rights of which
may be fixed or altered from time to time by the Board of Directors.
Accordingly, the Board of Directors has the authority, without stockholder
approval, to issue preferred stock with rights that could adversely affect the
voting power or other rights of the holders of the Common Stock. See
"Management," "Principal Stockholders" and "Description of Capital Stock --
Preferred Stock."
ABSENCE OF PRIOR MARKET FOR COMMON STOCK; DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no public trading market for the
Common Stock. Consequently, the price of the Common Stock offered hereby will be
determined through negotiations between the Company and the Representative. In
addition, there can be no assurance that a regular trading market for the Common
Stock will develop after this offering or that, if developed, any such market
will be sustained. See "Underwriting."
POSSIBLE VOLATILITY OF STOCK PRICE
The stock market has experienced price and volume fluctuations that have
affected the market for many companies and have often been unrelated to the
operating performance of such companies. The market price of the Common Stock
could also be subject to significant fluctuations in response to variations in
the Company's quarterly operating results, analyst reports, announcements
concerning the Company, legislative or regulatory changes in the interpretation
of existing statutes or regulations affecting the Company's business,
litigation, general trends in the industry and other events or factors.
SHARES ELIGIBLE FOR FUTURE SALE
There will be 7,200,000 shares of Common Stock outstanding upon
consummation of this offering (assuming no exercise of the over-allotment option
granted to the Underwriters). Of these shares, 2,200,000 shares of Common Stock
will be freely tradeable. The 5,000,000 remaining shares of Common Stock are
beneficially held by Messrs. David A. Schuff and Scott A. Schuff who, together
with the Company, have agreed not to sell, contract to sell or otherwise dispose
of any shares of Common Stock without the consent of the Representative for a
period of 180 days after the date of this Prospectus. Upon expiration of these
agreements, these shares will be eligible for sale in the public markets subject
to the notice, manner of sale, volume limitations, and current public reporting
requirements imposed by Rule 144 ("Rule 144") promulgated under the Securities
Act of 1933, as amended (the "Securities Act"). Sales of substantial amounts of
Common Stock in the open market, or the availability of such shares for sale
following this offering, could adversely affect the prevailing market price of
the Common Stock and may make it more difficult for the
11
<PAGE> 13
Company to sell its equity securities in the future on terms it deems
appropriate. See "Shares Eligible for Future Sale," "Principal Stockholders" and
"Underwriting."
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of Common Stock offered hereby will suffer immediate and
substantial dilution in the net tangible book value of the Common Stock from the
initial public offering price. See "Dilution."
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Prospectus contains forward-looking statements including statements
regarding, among other items, the Company's business strategy, growth strategy,
and anticipated trends in the Company's business. Additional written or oral
forward-looking statements may be made by the Company from time to time in
filings with the Securities and Exchange Commission or otherwise. The words
"believe," "expect," "anticipate," and "project" and similar expressions
identify forward-looking statements, which speak only as of the date the
statement is made. These forward-looking statements are based largely on the
Company's expectations and are subject to a number of risks and uncertainties,
some of which cannot be predicted or quantified and are beyond the Company's
control. Future events and actual results could differ materially from those set
forth in, contemplated by, or underlying the forward-looking statements.
Statements in this Prospectus, including those set forth in "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" describe factors, among others, that could contribute
to or cause such differences. In light of these risks and uncertainties, there
can be no assurance that the forward-looking information contained in this
Prospectus will in fact transpire or prove to be accurate. All subsequent
written and oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by this
section.
12
<PAGE> 14
THE COMPANY
Founded in 1976, the Company initially operated primarily as a steel
erector on commercial and industrial building projects and subcontracted steel
fabrication services to others. Due to a sharp increase in commercial and
industrial construction activity in the 1980's, many of the Company's
fabrication subcontractors could not meet the increased demand for steel
fabrication services and raised prices to the Company. In August 1985, the
Company acquired the assets of Marathon Steel Company, a Phoenix, Arizona-based
steel fabrication contractor. The acquisition of Marathon Steel Company enabled
the Company to become less dependent on steel fabrication subcontractors and to
continue its pursuit of large, more complicated construction projects.
The Company is a fully integrated fabricator and erector of structural
steel and heavy steel plate. The Company fabricates and erects structural steel
for commercial and industrial construction projects such as high and low rise
buildings and office complexes, hotels and casinos, convention centers, sports
arenas, shopping malls, hospitals, dams, bridges, mines and power plants. The
Company also specializes in the fabrication and erection of heavy steel plate,
including large diameter water pipe, water storage tanks, pollution control
scrubbers, tunnel liners, pressure vessels, and a variety of customized
projects. The Company seeks to differentiate its operations by offering
complete, turnkey steel construction services featuring engineering, detailing,
shop fabrication and field erection. By offering an integrated package of steel
construction services from a single source, the Company is able to respond more
efficiently to the design and construction challenges associated with large,
complex, "fast track" construction projects.
The Company was incorporated in Arizona in 1976 and was reincorporated in
Delaware in 1997. The Company's principal executive offices are located at 420
South 19th Avenue, Phoenix, Arizona 85009, and its telephone number is (602)
252-7787.
13
<PAGE> 15
S CORPORATION DISTRIBUTION
Since 1987, the Company has been subject to taxation under subchapter S of
the Code. As a result, the taxable income of the Company has been attributed and
taxed directly to the Company's stockholders, rather than to the Company.
Historically, the Company has not distributed all of its taxable income. Amounts
in excess of estimated stockholder tax liabilities and certain other
distributions have been retained as working capital and used to support business
operations.
The following table sets forth the Company's taxable income and accrued
distributions from the date of its S corporation election in 1987 through March
31, 1997:
<TABLE>
<S> <C>
Taxable income................................................. $26.1 million
Less: Distributions accrued and paid through March 31, 1997.... 10.6 million
Less: Distributions accrued but unpaid at March 31, 1997....... 4.8 million
-------------
Undistributed taxable income at March 31, 1997................. $10.7 million
=============
</TABLE>
Undistributed taxable income is estimated to increase from $10.7 million at
March 31, 1997 to $12.0 million at the closing of this offering. A distribution
payable to stockholders equal to all remaining undistributed taxable income will
be accrued and paid in connection with the closing of this offering, reducing
the retained earnings of the Company to an estimated $1.6 million. This
distribution will be paid from the proceeds of this offering (the "S Corporation
Distribution"). Purchasers of shares in this offering will not receive any of
this distribution. See "Use of Proceeds" and "Capitalization."
The Company intends to revoke its S corporation election prior to the
closing of this offering. Upon revocation of its S corporation election, the
Company will become subject to income taxation and, in connection therewith, the
Company will record a deferred tax asset of $300,000 in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Note 1 to Consolidated Financial Statements.
14
<PAGE> 16
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,200,000 shares of
Common Stock offered hereby, after deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company (including
amounts payable to the Company's financial consultant), are estimated to be
approximately $21.8 million ($25.2 million if the Underwriters' over-allotment
option is exercised in full) based upon an assumed initial public offering price
of $11.00 per share. The Company anticipates that such net proceeds will be used
as follows: (i) approximately $12.0 million to fund the S Corporation
Distribution; (ii) approximately $2.5 million to purchase specialized
fabrication equipment; and (iii) the balance for general corporate purposes,
including, when and if available, the acquisition of businesses complementary to
the Company's business and growth strategy. The Company has no pending
commitments for and is not engaged in negotiations in connection with any
acquisitions. See "S Corporation Distribution."
Until applied as set forth above, all proceeds will be invested in
short-term, interest bearing, investment grade or equivalent securities or bank
certificates of deposit. Investment of the net proceeds in short-term
investments rather than operations could adversely affect the Company's overall
return on its capital.
DIVIDEND POLICY
Except for the distributions described in "Use of Proceeds" and "S
Corporation Distribution" above, the Company intends to retain earnings to
finance the operations and expansion of the Company's business and does not
anticipate paying cash dividends on its Common Stock in the foreseeable future.
See "Description of Capital Stock."
15
<PAGE> 17
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of March 31, 1997, and the pro forma as adjusted amounts, which reflect (i) the
sale of the 2,200,000 shares of Common Stock offered hereby at an assumed
initial public offering price of $11.00 per share, after deducting the
underwriting discount and estimated offering expenses, (ii) the application of
the estimated net proceeds therefrom, including payment of the $10.7 million
portion of the S Corporation Distribution that existed at March 31, 1997 and
(iii) an increase in retained earnings to reflect recognition of a deferred tax
asset and corresponding credit to income in the amount of $300,000 upon
revocation of the Company's S corporation election. See "Use of Proceeds," "S
Corporation Distribution," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 1 to Consolidated Financial
Statements. The table should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997,
-----------------------
PRO FORMA
ACTUAL AS ADJUSTED
------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Long term debt, including current portion...................... $ 3,094 $ 3,094
Stockholders' equity:
Preferred Stock, $.001 par value; 1,000,000 shares
authorized; no shares outstanding......................... -- --
Common Stock, $.001 par value; 20,000,000 shares authorized;
5,000,000 shares issued and outstanding, actual; 7,200,000
shares issued and outstanding, as adjusted(1)............. 5 7
Unfunded pension losses(2)................................... (541) (541)
Additional paid in capital................................... 15 21,844
Retained earnings............................................ 11,957 1,557(3)
------- -------
Total stockholders' equity........................... 11,436 22,867
------- -------
Total capitalization........................................... $14,530 $25,961
======= =======
</TABLE>
- ---------------
(1) Excludes up to 330,000 shares of Common Stock that may be sold by the
Company upon the exercise of the Underwriters' over-allotment option. Also
excludes up to 345,500 shares of Common Stock issuable upon exercise of
stock options outstanding at March 31, 1997 under the Company's 1997 Stock
Option Plan, and 22,500 shares of Common Stock issuable upon exercise of
stock options to be granted to the Company's non-employee directors upon
their appointment to the Board of Directors at the closing of this offering.
See "Management," "Description of Capital Stock" and "Underwriting."
(2) See Note 6 to Consolidated Financial Statements.
(3) The pro forma as adjusted retained earnings represent retained earnings of
the Company generated when it was taxed as a C corporation prior to its
conversion to a S corporation in 1987. These retained earnings will not be
distributed to the current stockholders of the Company. See "S Corporation
Distribution" and "Use of Proceeds."
16
<PAGE> 18
DILUTION
The net tangible book value of the Company's Common Stock at March 31, 1997
was $11.3 million, or $2.27 per share of Common Stock. Net tangible book value
per common share represents the book value of the Company's tangible assets less
total liabilities divided by the number of shares of Common Stock outstanding.
At March 31, 1997, the Company had $10.7 million of undistributed taxable
income. If such amount had been distributed on that date, the Company's pro
forma tangible net book value would have been $600,000, or $0.13 per share.
Without taking into account any changes in such net tangible book value
subsequent to March 31, 1997, other than to give effect to (i) the sale by the
Company of 2,200,000 shares of Common Stock offered hereby (after deducting the
underwriting discount and estimated offering expenses) and the application of
the estimated proceeds thereof, including payment of the March 31, 1997 portion
of the S Corporation Distribution, and (ii) an increase in retained earnings to
reflect the recognition of a deferred tax asset, and corresponding credit to
income, in the amount of $300,000 upon revocation of the Company's S corporation
election, the pro forma net tangible book value of the Company as of March 31,
1997 would have been $22.8 million, or $3.16 per share. This represents an
immediate increase in net tangible book value of $3.03 per share to current
stockholders and immediate dilution of $7.84 per share to new investors
purchasing Common Stock pursuant to this offering. Dilution per share to new
investors represents the difference between the amount per share paid by
purchasers of Common Stock of the Company pursuant to this offering and the pro
forma net tangible book value per share of Common Stock immediately after
completion of this offering. The following table illustrates the per share
effect of this dilution on an investor's purchase of shares:
<TABLE>
<S> <C> <C>
Initial public offering price per common share.................... $11.00
Pro forma net tangible book value per common share before this
offering..................................................... $0.13
Increase in pro forma net tangible book value per common share
attributable to new investors................................ 3.03
As adjusted pro forma net tangible book value per common share
after this offering............................................. 3.16
------
Dilution per common share to new investors........................ $ 7.84
======
</TABLE>
The foregoing table excludes up to 330,000 shares of Common Stock that may
be sold by the Company upon the exercise of the Underwriters' over-allotment
option. The table also excludes 345,500 shares of Common Stock issuable upon
exercise of stock options granted under the Company's 1997 Stock Option Plan at
an exercise price of $5.00 per share and 22,500 shares of Common Stock issuable
upon exercise of stock options to be granted to the Company's non-employee
directors upon their appointment to the Board of Directors at the closing of
this offering with an exercise price equal to the initial public offering price.
Assuming the exercise of all such options, the pro forma net tangible book value
per share before this offering would be $0.49, the pro forma net tangible book
value per share after this offering would be $3.27, and the dilution per share
to new investors would be $7.73. See "Description of Capital Stock,"
"Underwriting" and "Management."
17
<PAGE> 19
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following sets forth selected historical consolidated financial data of
the Company for each of the years in the five-year period ended December 31,
1996 and for the three month periods ended March 31, 1996 and 1997. The selected
annual historical consolidated financial data are derived from the Company's
Consolidated Financial Statements audited by Ernst & Young LLP, independent
auditors. The selected annual historical consolidated financial data for the
three month periods ended March 31, 1996 and 1997 have been derived from the
Company's unaudited Consolidated Financial Statements for such periods. In the
opinion of management, the following unaudited data reflects all adjustments,
consisting only of normal recurring adjustments, necessary to fairly present the
Company's financial position and results of operations for the periods
presented. The results for any interim period are not necessarily indicative of
results to be expected for a full fiscal year. For additional information, see
the Consolidated Financial Statements of the Company and Notes thereto included
elsewhere in this Prospectus. The following table should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and is qualified by reference thereto and to the Company's
Consolidated Financial Statements and Notes thereto.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------- ------------------
1992 1993 1994 1995 1996(1) 1996 1997
------- ------- ------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues............................... $46,991 $58,640 $68,199 $ 62,090 $103,912 $ 10,410 $25,507
Cost of revenues....................... 41,752 50,376 58,874 54,222 86,998 8,418 21,655
------- ------- ------- -------- -------- -------- -------
Gross profit......................... 5,239 8,264 9,325 7,868 16,914 1,992 3,852
General and administrative expenses.... 4,102 4,367 4,915 5,284 6,715 1,357 2,081
------- ------- ------- -------- -------- -------- -------
Operating income..................... 1,137 3,897 4,410 2,584 10,199 635 1,771
Interest expense....................... (583) (627) (718) (752) (452) (147) (95)
Other income........................... 56 60 67 618 303 52 96
------- ------- ------- -------- -------- -------- -------
Income before income taxes........... 610 3,330 3,759 2,450 10,050 540 1,772
Pro forma income taxes(2).............. 245 1,330 1,500 980 4,020 215 710
------- ------- ------- -------- -------- -------- -------
Pro forma net income(2).............. $ 365 $ 2,000 $ 2,259 $ 1,470 $ 6,030 $ 325 $ 1,062
======= ======= ======= ======== ======== ======== =======
Pro forma net income per share(2)...... $ 0.07 $ 0.39 $ 0.44 $ 0.28 $ 1.16 $ 0.06 $ 0.20
Shares used in computation(3).......... 5,188 5,188 5,188 5,188 5,188 5,188 5,188
OPERATING DATA:
Backlog(4)............................. $34,466 $18,387 $22,544 $ 80,834 $ 67,335 $126,061 $65,550
BALANCE SHEET DATA:
Cash and cash equivalents.............. $ 90 $ 113 $ 63 $ 289 $ 7,253 $ 1,554 $ 4,750
Restricted funds on deposit(5)......... -- -- -- 220 2,249 220 2,896
Costs and recognized earnings in excess
of billings on uncompleted
contracts(6)......................... 681 714 777 1,076 871 62 1,332
Billings in excess of costs and
recognized earnings on uncompleted
contracts(6)......................... 5,846 4,215 6,506 5,940 19,623 13,207 22,407
Property and equipment, net............ 1,887 4,310 4,666 4,222 5,116 4,214 5,758
Total assets........................... 22,681 25,387 26,244 25,260 43,969 31,487 48,160
Long term debt, excluding current
portion.............................. 3,720 3,806 7,057 5,271 2,753 3,511 2,777
Stockholders' equity................... $ 4,256 $ 5,320 $ 6,032 $ 6,768 $ 10,682 $ 6,961 $11,436
</TABLE>
18
<PAGE> 20
- ---------------
(1) Does not give effect to the Company's acquisition of B&K Steel on January
31, 1997, which was accounted for under the purchase method of accounting.
Accordingly, financial information relating to B&K Steel has not been
included in periods prior to the acquisition. Giving effect to the
acquisition of B&K Steel as if it had occurred on January 1, 1996, the
Company's pro forma and unaudited revenues, gross profit, income before
income taxes, pro forma net income (after pro forma income taxes), and pro
forma net income per share would have been $113,291,000, $18,097,000,
$10,165,000, $6,099,000, and $1.18, respectively.
(2) Prior to this offering, the Company elected to be treated as an S
corporation under the Code. As an S corporation, the Company is not subject
to income taxes. Pro forma net income reflects the provision for income
taxes that would have been recorded had the Company been subject to income
taxes as a C corporation for all periods, assuming an effective tax rate of
40%. Pro forma net income does not include projected credits of $300,000 to
income to be recorded upon revocation of the Company's S corporation
election. See "S Corporation Distribution" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(3) Shares used in the computation of pro forma net income per share are based
upon the weighted average number of common shares and common stock
equivalents outstanding during each year. In accordance with Securities and
Exchange Commission Staff Accounting Bulletin Number 83, all issuances of
the Company's common stock options at prices below the expected initial
public offering price during the twelve-month period preceding the proposed
offering have been treated as common stock equivalents as if they had been
issued at the Company's inception using the treasury stock method.
(4) Backlog is the amount of potential future revenues to be recognized upon
performance of contracts awarded to the Company. Backlog increases as new
contract commitments are received, decreases as revenues are recognized, and
increases or decreases to reflect modifications in the work to be performed
under a contract. Of the Company's $67.3 million backlog as of December 31,
1996, approximately $13.1 million was attributable to three projects for a
single customer in Las Vegas, Nevada, and approximately $34.3 million was
attributable to the Bank One Ballpark project in Phoenix, Arizona. Of the
Company's $65.6 million backlog at March 31, 1997, approximately $15.9
million was attributable to two projects for a single customer in Las Vegas,
and approximately $26.8 million was attributable to the Bank One Ballpark
project. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business -- Backlog."
(5) Restricted funds on deposit represent funds on deposit in an interest
bearing escrow account which are maintained in lieu of retention for a
specific contract. Retentions on contract receivables are amounts due which
are withheld until the completed project has been accepted by the customer
in accordance with the contract. See Note 1 to Consolidated Financial
Statements.
(6) The Company recognizes revenues and costs from construction projects using
the percentage of completion accounting method. Under this method, revenues
are recognized based upon the ratio of the costs incurred to date to the
total estimated costs to complete the project, commencing when progress is
sufficient to estimate final results with reasonable accuracy, which
typically occurs when fabricated product is shipped to the project site or
when erection of the project commences. Construction contracts with
customers generally provide that billings are to be made monthly in amounts
which are commensurate with the extent of performance under the contracts.
Costs and recognized earnings in excess of billings on uncompleted contracts
primarily represent revenues earned under the percentage of completion
method which have not been billed, and also include costs incurred in excess
of billings on contracts for which sufficient work has not been performed to
allow for recognition of revenues. Billings in excess of costs and
recognized earnings on uncompleted contracts represent amounts billed on
contracts in excess of the revenues allowed to be recognized under the
percentage of completion method on those contracts.
19
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information regarding the
Company's financial position as of December 31, 1995 and 1996 and March 31, 1996
and 1997, and its results of operations for the years ended December 31, 1994,
1995, and 1996 and the three months ended March 31, 1996 and 1997. This
discussion should be read in conjunction with the preceding "Selected
Consolidated Financial and Operating Data" and the Company's Consolidated
Financial Statements and related Notes thereto and other financial data
appearing elsewhere in this Prospectus. Results of operations for interim
periods are not necessarily indicative of results to be expected for the full
fiscal year. For information relating to factors that could affect future
operating results, see "Risk Factors." Any forward-looking statements included
in this section or elsewhere in the Prospectus should be considered in light of
such risk factors, as well as the information set forth below and in other
portions of the Prospectus, any of which could cause the Company's actual
results to differ materially from those discussed herein.
INTRODUCTION
The Company's results of operations are affected primarily by (i) the level
of commercial and industrial construction in its principal markets, (ii) the
Company's ability to win project contracts, (iii) the amount and complexity of
project changes requested by customers or general contractors, (iv) the
Company's success in utilizing its resources at or near full capacity, and (v)
the Company's ability to complete contracts on a timely and cost effective
basis. The level of commercial and industrial construction activity is related
to several factors, including local, regional and national economic conditions,
interest rates, availability of financing, and the supply of existing facilities
relative to demand.
The Company has observed a trend in the steel fabrication and erection
industry toward large, complex, fast track, "design-as-you-go" projects. These
projects are well-suited to integrated contractors that can (i) reduce the
logistical and coordination problems inherent in the use of multiple
subcontractors to complete a large, complex project and (ii) more efficiently
respond to rapid and multiple design changes while minimizing project delays and
cost overruns commonly associated with such changes. The complexity and size of
these projects requires subcontractors possessing extended financial and
operational capabilities. Typically, these projects offer greater potential
profit than small, less complex projects because project management and overhead
requirements for large projects usually are proportionately less. Individual
large projects can have a substantial impact upon the Company's results of
operations and cause significant fluctuations from quarter to quarter.
The Company obtains contracts through competitive bidding or negotiation,
which generally are either fixed price or cost-plus arrangements. Historically,
most of the Company's work is performed on a fixed price basis. In bidding or
negotiating contracts, the Company must estimate its costs, including projected
increases in labor, material, and services costs. Project duration typically
lasts from three to twelve months.
The Company recognizes revenues using the percentage of completion
accounting method. Under this method, revenues are recognized based upon the
ratio of costs incurred to date to the estimated total cost to complete the
project. Revenue recognition begins when progress is sufficient to estimate
final results with reasonable accuracy, which typically occurs when fabricated
product is shipped to the project site or when erection of the project
commences. Revenues relating to changes in the scope of a contract are
recognized when the customer has authorized the change, the work is commenced
and the Company has made an estimate of the amount that will be paid for the
change. The cumulative impact of revisions in total cost estimates during the
progress of work is reflected in the period in which these revisions become
known. Estimated losses on contracts are recognized in full when it is
determined that a loss will be incurred on a contract.
Cost of revenues consists of the costs of materials, equipment, direct
labor, fringe benefits, and indirect costs associated with detailing,
fabrication and erection, including rent, depreciation and supervisory labor.
Other costs not associated with specific projects are included in general and
administrative expenses.
20
<PAGE> 22
Gross profit margins can be positively affected by large, more complex
projects, the percentage of negotiated contracts relative to competitively bid
contracts, the number and scope of contract modifications, and improvements in
operating efficiencies. Gross profit margins can be adversely affected by
construction delays, inefficient or under-utilization of the Company's
resources, availability and cost of materials and labor, the timing and
performance of work by other contractors, weather conditions, and construction
site conditions.
Backlog increases as contract commitments are obtained, decreases as
revenues are recognized, and increases or decreases to reflect modifications in
the work to be performed under the contract. The timing of contract commitments,
the size of projects and other factors beyond the Company's control can cause
significant fluctuation in backlog outstanding at any given date.
The Company presently is taxed as an S corporation for income tax purposes.
Accordingly, its income is taxed directly to its stockholders. Prior to the
completion of this offering, the Company's S corporation election will be
revoked and thereafter the Company will be subject to income tax as a C
corporation. For purposes of the financial information contained in this
section, pro forma income tax expense has been included assuming an income tax
rate of 40%, and pro forma net income reflects this provision.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain financial
data as a percentage of revenues:
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues......................... 86.3 87.3 83.7 80.9 84.9
----- ----- ----- ----- -----
Gross profit........................... 13.7 12.7 16.3 19.1 15.1
General and administrative expenses...... 7.2 8.5 6.5 13.0 8.2
----- ----- ----- ----- -----
Operating income....................... 6.5 4.2 9.8 6.1 6.9
Interest expense......................... (1.1) (1.2) (0.4) (1.4) (0.4)
Other income............................. 0.1 1.0 0.3 0.5 0.4
----- ----- ----- ----- -----
Income before income taxes............. 5.5 4.0 9.7 5.2 6.9
Pro forma income taxes................... 2.2 1.6 3.9 2.1 2.7
----- ----- ----- ----- -----
Pro forma net income................... 3.3% 2.4% 5.8% 3.1% 4.2%
===== ===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31,
1996
Revenues. Revenues increased by 145.0% to $25.5 million for the three
months ended March 31, 1997 from $10.4 million for the three months ended March
31, 1996. The increase was attributable primarily to a greater number of large
individual contracts in 1997 as compared to 1996 and to an unusually low revenue
quarter for 1996 due to the Company being in the early stages of large contracts
for which revenue recognition had not begun. The revenues in the period ended
March 31, 1997 also included two months of revenues of B&K Steel following its
acquisition by the Company on January 31, 1997. The average revenues for the
Company's ten largest revenue generating projects in the three month period
ended March 31, 1997 was $2.0 million versus $850,000 in the three month period
ended March 31, 1996. One contract, relating to Bank One Ballpark, produced
revenues of $9.0 million for the first quarter of 1997. The largest contract in
progress during the three month period ended March 31, 1996 contributed only
$2.7 million to revenues earned in that quarter.
Gross profit. Gross profit increased by 93.4% to $3.9 million for the
three months ended March 31, 1997 from $2.0 million for the three months ended
March 31, 1996. The increase was attributable primarily to a 145.0% increase in
revenues. As a percentage of revenues, gross profit declined to 15.1% in 1997
from 19.1% in 1996 due to above-average 1996 margins from higher than
anticipated revenues from requested contract modifications.
21
<PAGE> 23
General and administrative expenses. General and administrative expenses
increased by 53.4% to $2.1 million for the three months ended March 31, 1997
from $1.4 million for the three months ended March 31, 1996. General and
administrative expenses as a percentage of revenues decreased to 8.2% in 1997
from 13.0% in 1996 due to the 145.0% increase in revenues and a less than
proportionate increase in general and administrative expenses required to
support the increase in revenues. The Company believes that it currently has
sufficient management and administrative resources to support continued growth
in revenues without a proportionate increase in general and administrative
expenses.
Interest expense. Interest expense decreased by 35.4% to $95,000 for the
three months ended March 31, 1997 from $147,000 for the three months ended March
31, 1996. The decrease was attributable to the lower average line of credit
borrowings, which was made possible by the Company's ability to increase its
billings in excess of costs and recognized earnings on uncompleted contracts.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Pro forma net income. Pro forma net income increased by 226.8% to $1.1
million for the three months ended March 31, 1997 from $325,000 for the three
months ended March 31, 1996.
Backlog. Backlog at March 31, 1997 was $60.5 million less than at March
31, 1996. Backlog at March 31, 1996 was unusually high due to the receipt of
five contracts, each in excess of $10.0 million, during the fourth quarter of
1995 and the first quarter of 1996. These contracts produced backlog totalling
$86.5 million at March 31, 1996, $50.0 million of which was attributable to the
first and second phases of the Bank One Ballpark project. Backlog at March 31,
1997 included $26.8 million relating to the second and third phases of the Bank
One Ballpark project. The Company's backlog at March 31, 1997 also reflected
approximately $15.9 million attributable to two projects for a single customer
in Las Vegas.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues. Revenues increased by 67.4% to $103.9 million in 1996 from $62.1
million in 1995. The increase was attributable primarily to larger individual
contracts in 1996 compared to 1995, including the Bank One Ballpark, which
contributed $19.8 million. The Bank One Ballpark project is expected to generate
total revenues approaching $55.0 million when completed in 1998. The average
revenues for the Company's ten largest revenue generating projects was $7.8
million in 1996 versus $3.3 million in 1995. Excluding Bank One Ballpark, the
ten largest revenue generating projects averaged $6.4 million in 1996, which
represented a 93.9% increase over the 1995 average of $3.3 million.
Gross profit. Gross profit increased by 115.0% to $16.9 million in 1996
from $7.9 million in 1995 primarily due to the 67.4% increase in revenues. As a
percentage of revenues, gross profit increased to 16.3% in 1996 from 12.7% in
1995. The increase as a percentage of revenues was attributable primarily to
greater overhead absorption, better pricing associated with larger projects,
improved operating efficiencies, and modifications to specific contracts.
General and administrative expenses. General and administrative expenses
increased by 27.1% to $6.7 million in 1996 from $5.3 million in 1995. Of the
$1.4 million increase in 1996, $590,000 was attributable to bonus payments to
employees and $529,000 was attributable to a deferred compensation plan
implemented in 1996. The Company's deferred compensation plan was terminated in
1997. General and administrative expenses as a percentage of revenues decreased
to 6.5% in 1996 from 8.5% in 1995 due to the benefits of having larger average
contracts in 1996. In 1995, the Company experienced a 9.0% decrease in revenues
from 1994 and elected not to reduce general and administrative costs
proportionately in anticipation of future contract awards, thereby causing
higher general and administrative expenses as a percentage of revenues.
Interest expense. Interest expense decreased by 39.9% to $452,000 in 1996
from $752,000 in 1995. The decrease was attributable to the lower average line
of credit borrowings, which reflected in large part the Company's ability to
increase its billings in excess of costs and recognized earnings on uncompleted
contracts. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
22
<PAGE> 24
Pro forma net income. Pro forma net income increased by 310.2% to $6.0
million in 1996 from $1.5 million in 1995.
Backlog. Backlog at December 31, 1996 was $13.5 million less than at
December 31, 1995 due to the receipt of four contract awards that collectively
represented backlog of $47.2 million at December 31, 1995. Additionally, the
high level of backlog at the end of the first quarter of 1996 caused the Company
to become more selective in the pursuit of new contract awards during the
remainder of the year. Of the backlog at December 31, 1996, approximately $13.1
million was attributable to three projects for a single customer in Las Vegas,
Nevada, and approximately $34.3 million was attributable to the Bank One
Ballpark project in Phoenix, Arizona.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues. Revenues decreased by 9.0% to $62.1 million in 1995 from $68.2
million in 1994. The decrease was attributable primarily to the completion of
two large construction projects during 1994, delays in commencing work on
certain new projects, and a focus on certain targeted projects that did not
materialize. The average revenues for the Company's ten largest revenue
generating projects was $3.3 million in each of 1995 and 1994.
Gross profit. Gross profit decreased by 15.6% to $7.9 million in 1995 from
$9.3 million in 1994. As a percentage of revenues, gross profit decreased to
12.7% in 1995 from 13.7% in 1994 due primarily to the decrease in revenues
coupled with the relatively fixed nature of certain expenses.
General and administrative expenses. General and administrative expenses
increased by 7.5% to $5.3 million in 1995 from $4.9 million in 1994. General and
administrative expenses as a percentage of revenues increased to 8.5% in 1995
from 7.2% in 1994. In 1995, the Company experienced a 9.0% decrease in revenues
from 1994 and elected not to reduce general and administrative costs
proportionately in anticipation of future contract awards, thereby causing
higher general and administrative expenses as a percentage of revenues.
Interest expense. Interest expense increased by 4.7% to $752,000 in 1995
from $718,000 in 1994. The increase was attributable to slightly higher average
amounts outstanding on the Company's revolving line of credit.
Pro forma net income. Pro forma net income decreased by 34.9% to $1.5
million in 1995 from $2.3 million in 1994.
Backlog. Backlog at December 31, 1995 was $58.3 million greater than at
December 31, 1994 due to the receipt of four contract awards totalling $47.2
million in the fourth quarter of 1995.
23
<PAGE> 25
QUARTERLY DATA
The following table sets forth certain quarterly consolidated financial
data for each of the Company's last nine quarters and such data as a percentage
of the Company's revenues for the respective quarters. The information has been
derived from unaudited consolidated financial statements prepared by management
that, in the opinion of management, reflect all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of such
quarterly information. The operating results for any quarter are not necessarily
indicative of the results to be expected for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
FISCAL YEAR
FISCAL YEAR 1995 FISCAL YEAR 1996 1997
--------------------------------------- --------------------------------------- -----------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31
-------- ------- -------- ------- -------- ------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues..................... $17,994 $11,909 $12,481 $19,706 $10,410 $29,691 $38,861 $24,950 $25,507
Cost of revenues............. 15,897 10,256 10,695 17,374 8,418 25,600 32,976 20,004 21,655
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit................. 2,097 1,653 1,786 2,332 1,992 4,091 5,885 4,946 3,852
General and administrative
expenses................... 1,283 1,306 1,255 1,440 1,357 1,500 1,748 2,110 2,081
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income............. 814 347 531 892 635 2,591 4,137 2,836 1,771
Interest expense............. (182) (217) (189) (164) (147) (90) (100) (115) (95)
Other income................. 25 13 17 563 52 80 75 96 96
------- ------- ------- ------- ------- ------- ------- ------- -------
Income before income taxes... 657 143 359 1,291 540 2,581 4,112 2,817 1,772
Pro forma income taxes....... 263 57 144 516 215 1,034 1,645 1,126 710
------- ------- ------- ------- ------- ------- ------- ------- -------
Pro forma net income......... $ 394 $ 86 $ 215 $ 775 $ 325 $ 1,547 $ 2,467 $ 1,691 $ 1,062
======= ======= ======= ======= ======= ======= ======= ======= =======
AS A PERCENTAGE OF REVENUES
--------------------------------------------------------------------------------------------------
Revenues..................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues............. 88.3 86.1 85.7 88.2 80.9 86.2 84.9 80.2 84.9
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit................. 11.7 13.9 14.3 11.8 19.1 13.8 15.1 19.8 15.1
General and administrative
expenses................... 7.1 11.0 10.0 7.3 13.0 5.1 4.5 8.4 8.2
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income............. 4.6 2.9 4.3 4.5 6.1 8.7 10.6 11.4 6.9
Interest expense............. (1.0) (1.8) (1.5) (0.8) (1.4) (0.3) (0.3) (0.5) (0.4)
Other income................. 0.1 0.1 0.1 2.9 0.5 0.3 0.2 0.4 0.4
------- ------- ------- ------- ------- ------- ------- ------- -------
Income before income taxes... 3.7 1.2 2.9 6.6 5.2 8.7 10.5 11.3 6.9
Pro forma income taxes....... 1.5 0.5 1.2 2.6 2.1 3.5 4.2 4.5 2.7
------- ------- ------- ------- ------- ------- ------- ------- -------
Pro forma net income......... 2.2% 0.7% 1.7% 4.0% 3.1% 5.2% 6.3 % 6.8% 4.2%
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
24
<PAGE> 26
LIQUIDITY AND CAPITAL RESOURCES
The Company attempts to structure the payment arrangements under its
contracts to match costs incurred under the project. To the extent the Company
is able to bill in advance of costs incurred, it generates working capital
through billings in excess of costs and recognized earnings on uncompleted
contracts. To the extent the Company is not able to bill in advance of costs, it
relies on its credit facilities to meet its working capital needs. At March 31,
1997, the Company had no borrowings under its line of credit due in large part
to its billings in excess of costs and recognized earnings on uncompleted
contracts of $22.4 million. At March 31, 1997, the Company had working capital
of approximately $8.6 million. The Company believes that it has sufficient
liquidity through its present resources and the existence of its bank credit
facility to meet its near term financial needs.
The Company's short term cash needs are primarily for working capital to
support operations including receivables, inventories, and other costs incurred
in performing its contracts. Operating activities provided cash flows of
$251,000 for the three months ended March 31, 1997 and $14.4 million for the
year ended December 31, 1996. For the first quarter of 1997, operating cash
flows were less than net income due to increased working capital requirements.
For the year ended December 31, 1996, operating cash flows were greater than net
income (excluding pro forma income taxes) due to favorable billings relating to
contracts in process. Investing activities required $705,000 for the three
months ended March 31, 1997 and $2.3 million during the year ended December 31,
1996, substantially all of which were related to purchases of property and
equipment and the cash portion of the acquisition of B&K Steel. Financing
activities consumed $2.0 million for the three months ended March 31, 1997 and
$5.1 million for the year ended December 31, 1996, which were related primarily
to repayments of long-term debt and line of credit balances. Also included in
financing activities were distributions to stockholders for income taxes related
to the operations of the business and other stockholder distributions. These
distributions totaled $776,000 for the three months ended March 31, 1997 and
$2.3 million for the year ended December 31, 1996. Other than the S Corporation
Distribution, the Company does not anticipate paying any future dividends. See
"Dividend Policy."
The Company has a credit facility with a commercial bank that is subject to
renewal on June 30, 1998 and is collateralized by contract receivables,
equipment and inventory. This agreement permitted the Company to borrow up to an
amount equal to 75% of qualifying contracts receivable, but in no event less
than $1.0 million. The Company recently modified its line of credit to increase
its minimum borrowing capacity to $2.5 million through July 31, 1997. The
Company is in the process of renegotiating the terms of this credit facility,
including its minimum borrowing capacity. The Company's ability to borrow up to
$6.5 million is subject to, among other restrictions, billings in excess of cost
and recognized earnings on uncompleted contracts. As of March 31, 1997, other
than the $1.0 million minimum, there was no additional credit available under
the line for future borrowings due to the high level of billings in excess of
costs and recognized earnings on uncompleted contracts. The Company also
maintains an equipment financing line of credit pursuant to which it may borrow
up to $500,000.
The Company has two other long-term debt commitments that are related to
its property and equipment. One is a subordinated note payable to a limited
partnership comprised of the Company's present stockholders and certain of their
family members, which requires monthly payments of $12,037 plus interest and
matures in 1999. The balance on this loan was approximately $2.3 million at
March 31, 1997. The other long-term debt of the Company consists of two notes in
the aggregate principal amount of $796,250 incurred as part of the consideration
paid to the sellers in the B&K Steel acquisition. Such notes are payable in five
equal annual installments ending in 2002. The acquisition of B&K Steel, which
had 1996 revenues of approximately $9.4 million, was accounted for under the
purchase method of accounting. The fair value for the tangible net assets
acquired approximated the purchase price so no goodwill was recorded with
respect to the transaction.
The Company leases its fabrication and office facilities from a partnership
in which the present beneficial stockholders of the Company and their family
members are the general and limited partners. Under the lease for the Company's
principal fabrication and office facilities, the Company's annual rental
payments were $264,000 in 1996, increasing to $292,000 for 1997, $414,000 for
1998, $556,000 for 1999, $601,000 in 2000, and $605,000 in each year thereafter
during the 20 year term of the lease. The lease agreement for the B&K Steel
property and equipment provides for rental payments in the amount of $340,000
per year over the 20
25
<PAGE> 27
year term of the lease. The Company also leases additional office facilities
adjacent to the Company's existing principal office and shop facilities. This
office lease provides for rental payments of $135,000 per year over the 20 year
term of the lease. See "Business -- Properties" and "Certain Relationships and
Related Transactions."
The Company estimates that its capital expenditures for 1997 will be
approximately $2.5 million. The Company believes that its available funds, cash
generated by operating activities and funds available under its bank credit
facility will be sufficient to fund these capital expenditures and its working
capital needs. However, the Company may expand its operations through future
acquisitions and may require additional equity or debt financing. If the Company
engages in any acquisitions, it may be required to obtain additional debt or
equity financing. See "Risk Factors -- Substantial Liquidity Requirements."
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Statements of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation" (FAS 123), establishes a fair value method of accounting for
stock based compensation plans and for transactions in which an entity acquires
goods or services from non-employees in exchange for equity instruments. The
Company adopted this standard effective January 1, 1996. FAS 123 encourages, but
does not require, companies to record compensation costs for stock based
employee compensation. The Company has chosen to account for stock based
compensation to employees utilizing the intrinsic value method of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly, compensation costs for stock options is measured as the excess, if
any, of the fair market value of the Company's stock at the date of grant over
the amount an employee must pay to acquire the stock. The Company's first stock
option grants were made in February 1997, thereby making the standards
applicable to the quarter ended March 31, 1997. The grants were made at amounts
that management believes equal the fair value of its Common Stock at the date of
grant and, accordingly, no compensation expense was required.
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
(FAS 128), issued by the Financial Accounting Standards Board in February 1997,
is effective for periods ending after December 15, 1997. At that time, the
Company will be required to change the method currently used to compute earnings
per share and to restate all prior periods. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock options
will be excluded. The impact is expected to result in an increase in pro forma
primary earnings per share for the year ended December 31, 1996 of $0.05 and for
the quarters ended March 31, 1996 and March 31, 1997 of $0.00 and $0.01,
respectively. The impact of FAS 128 on the calculation of fully diluted pro
forma earnings per share for these periods is not expected to be material.
26
<PAGE> 28
BUSINESS
GENERAL
The Company is a rapidly growing steel fabrication and erection company
that provides a fully integrated range of steel construction services.
Engineering News Record, a professional trade publication, ranked the Company
the second largest steel erection subcontractor in the United States based on
1995 revenues and the largest steel erection subcontractor in the United States
based on 1994 revenues. The Company seeks to differentiate its operations by
offering complete, turnkey steel construction services featuring engineering,
detailing, shop fabrication and field erection. By offering a single source of
steel construction services, the Company is able to respond more efficiently to
the design and construction challenges associated with large, fast track,
"design-as-you-go" construction projects.
The Company's services are employed in the construction of a variety of
commercial and industrial structures, such as hotels and casinos, office
buildings, hospitals, manufacturing plants, mining facilities, shopping malls,
sports stadiums, power plants, bridges, large diameter water pipes and other
public works projects. Its customers include general contractors, project
owners, engineering firms, mine operators and various governmental entities. The
Company operates primarily in the southwestern United States with a
concentration in Arizona, Nevada, and southern California, and is expanding its
operations in South America and Mexico.
The Company has experienced significant growth in revenues and pre-tax
income over the past five years. Revenues have more than doubled from $47.0
million in 1992 to $103.9 million ($113.3 million giving pro forma effect to the
1997 B&K Steel acquisition) in 1996. During that same period, pre-tax income has
grown at a compound annual growth rate of 101.5%, from $610,000 in 1992 to $10.1
million in 1996.
OVERVIEW OF INDUSTRY
Companies engaged in the steel fabrication and erection industry prepare
detailed shop drawings, fabricate and erect structural steel and steel plate
weldments, and perform related engineering services for the construction of
various facilities. The primary customers for these services include private
developers, general contractors, engineering firms, and governmental agencies
involved in a variety of large scale construction projects. Historically, these
customers have relied on multiple subcontractors to perform various services to
complete a single project, primarily because few companies in this industry
offer fully integrated engineering, detailing, fabrication and erection
services.
The Company believes that there is an increasing trend in the construction
industry toward complex, fast track, "design-as-you-go" projects. This trend is
largely driven by the desire of project owners to more quickly secure the
benefits of revenue producing projects, such as casinos, mines and computer chip
plants. These projects require that all phases of construction be accomplished
in accordance with compressed time schedules. Further, because many construction
activities are dependent on the progress of steel erection, timely completion of
this phase is critical. These projects also are characterized by numerous design
changes requiring that all construction participants coordinate their efforts in
order to respond quickly and efficiently in implementing these changes. These
trends have created a demand for fully integrated fabrication and erection
contractors that can (i) avoid the coordination difficulties inherent in the use
of multiple subcontractors and (ii) implement rapid and multiple design changes
in a coordinated and timely manner, preventing project delays and reducing costs
to the general contractor or owner. The Company believes that it has gained a
reputation in the industry as a reliable, fully integrated provider of
engineering, detailing, fabrication, and erection services with the ability to
complete large, complex projects on a timely, cost efficient basis.
The Company also believes that the steel fabrication and erection industry
is highly fragmented and that many of its competitors are small businesses
operating in local or regional markets. Given the trend toward the use of fully
integrated contractors and the large number of smaller companies engaged in this
industry, the Company believes the industry may experience consolidation.
27
<PAGE> 29
BUSINESS STRATEGY
The Company's objective is to achieve and maintain a leading market
position in each of its geographic and specific product markets. The Company
believes that its track record of providing quality services on a timely basis
has enabled it to garner a dominant share of the primary geographic markets
served by it and to increase its market share of large, fast track projects in
markets in which it maintains a significant presence. The Company will continue
to pursue its objective by implementing a strategy comprised of the following
components:
Promote Coordinated Service Capabilities. The Company promotes its
ability to provide a fully integrated range of engineering, detailing,
fabrication, and erection services, which enables the Company to compete
more effectively on large, "design-as-you-go" projects that typically offer
more favorable contract terms. The Company believes it is positioned to
capitalize on industry trends toward construction of large, fast track
projects incorporating numerous design changes, and the increasing demand
for fully integrated fabrication and erection contractors capable of both
implementing those design changes in a timely and cost efficient manner and
providing overall project management capabilities.
Emphasize Innovative Services. The Company focuses its engineering,
detailing, fabrication and erection expertise on distinct product segments
requiring unique or innovative techniques, where the Company typically
experiences less competition and more advantageous negotiated contract
opportunities. The Company has extensive experience in providing services
requiring complex fabrication and erection techniques and other unusual
project needs, such as specialized transportation, steel treatment or
specialty coating applications. These service capabilities have enabled the
Company to address such design sensitive projects as computer chip
manufacturing facilities, large diameter underground water pipes, and
uniquely designed hotels and casinos.
Diversify Customer and Product Base. Although the Company seeks to
garner a leading share of the geographic and product markets in which it
competes, it also seeks to diversify its construction projects across a
wide range of commercial, industrial, and specialty projects. The following
chart sets forth the percentage of revenues attributable to the Company's
various geographic and project markets for 1996:
<TABLE>
<CAPTION>
INDUSTRIAL COMMERCIAL OTHER
---------- ---------- -----
<S> <C> <C> <C>
Arizona........................ 12% 30% 1%
California..................... 2% 19% --
Nevada......................... 4% 18% --
International.................. 14% -- --
</TABLE>
In recent periods, the Company has focused efforts on diversifying
into international markets. Accordingly, the Company believes that its
combined diversification into new geographic, specific product and
international markets will better enable it to expand its revenue base and
to reduce the impact of periodic market or economic conditions adversely
impacting one or more of its market segments.
Employ Unique Technical Expertise. The Company offers in-house
project management and design expertise not typically provided by steel
fabricators and erectors. The Company employs two registered structural
engineers and approximately 30 design and detailing personnel, which
permits the Company to occupy a more influential role in critical design
decisions on many projects. The Company believes that its ability to offer
these services allows it to negotiate rather than bid on a greater
percentage of its contracts, which enables the Company to obtain terms more
favorable to it than the terms of competitively bid projects, while at the
same time providing overall cost savings and project efficiencies to its
customers. The Company's technical expertise also permits it to compete
more effectively for projects offering unique structural or design
challenges, such as the fully retractable roof on the Bank One Ballpark,
the Salt River Siphon Replacement Project, and specialty coating of large
diameter water pipe. See "Business -- Primary Markets and Products."
28
<PAGE> 30
GROWTH STRATEGY
The Company believes that the steel fabrication and erection industry will
continue to be characterized by large, complex, fast track projects. The
complexity and size of these projects requires companies with extended financial
and operational capabilities. With its integrated service capabilities and
financial and management strength, the Company intends to take advantage of this
trend. Additionally, the fragmented nature of the industry provides the Company
opportunities for growth. The Company seeks to achieve continued growth and
diminish the impact of business and economic cycles by pursuing a growth
strategy consisting of the following components:
Promote Internal Growth. The Company intends to pursue continued
internal growth by adding sales and marketing personnel to dedicated, fast
growing markets in which the Company is actively pursuing new projects, by
further developing its engineering and design capabilities and fabrication
capacity, and by continually updating its fabrication and detailing
equipment and technologies. The Company believes that these efforts will
enhance its market share, revenues, and operating income in its existing
and targeted principal markets and improve its operating capacity.
Recently, the Company dedicated one sales manager to the rapidly expanding
Nevada commercial and industrial market and appointed one full-time
marketing representative to pursue new project opportunities in South
America. In addition, the Company recently secured additional office and
administrative facilities, which will permit the expansion of its existing
detailing, estimating, and other project operations. The Company also
intends to invest approximately $2.5 million in new fabrication equipment
and technologies in 1997.
Acquire Synergistic Businesses. The Company will pursue selective
acquisitions of steel fabrication and erection companies that offer the
Company increased plant facilities, opportunities to increase market share
in selected geographic markets, penetration of new product market segments,
and access to domestic and international markets targeted by the Company
for geographic expansion. Such acquisitions may also provide the additional
benefits of increased purchasing efficiencies with respect to steel and
other raw materials, payment and performance bonding and insurance
premiums, and more efficient allocation and utilization of labor resources
among projects within its geographic markets. The Company believes that
many of its competitors operate primarily on a local or limited geographic
basis and, while having established relationships in those markets, lack
the resources to compete for large or more complex projects. In addition,
the industry is highly fragmented with many of the Company's competitors
being closely or family held entities.
In January 1997, the Company completed the acquisition of all of the
outstanding capital stock of B&K Steel, a competitor of the Company located
in the Phoenix metropolitan area. B&K Steel is primarily a fabrication
contractor and had operating revenue of approximately $9.4 million in 1996.
The Company believes that the acquisition of B&K Steel will enable the
Company to capture a larger share of the Arizona industrial and commercial
market and will provide the Company with increased access to the mining
industry throughout the southwestern United States. The acquisition of B&K
Steel also provides the Company with additional fabrication facilities
located near the Company's existing facilities.
Create Additional Project Opportunities. The Company believes that
its ability to efficiently coordinate and implement numerous design and
logistical changes on large or more complex fast track projects, combined
with its established long term relationships with key national and
multi-national general contractors and other customers, will provide the
Company with opportunities to market its services in a number of markets in
which the Company has not yet achieved a leading position or conducted
significant operations. Domestically, the Company plans to expand into
markets in which it believes it can leverage its existing expertise to
achieve a significant share of such markets. Among the regions targeted by
the Company for domestic expansion are the Pacific Northwest, which
presents several opportunities in the expanding computer chip manufacturing
industry, and Texas, which offers the Company convenient and cost effective
access to its developing international markets.
The Company also will seek to capture significant market share in
selected product markets. Among other markets, the Company is seeking to
increase its participation in the construction of sports stadiums and
airports and, through its acquisition of B&K Steel, the mining and smaller
commercial construction
29
<PAGE> 31
markets. The Company plans to participate in these markets through the
acquisition of existing participants, expansion of strategic customer
relationships into new markets, and through increased sales and marketing
efforts generally.
Expand Internationally and Develop Strategic Alliances. The Company
recently has developed its presence in selected international markets,
including Chile and Argentina, and is pursuing opportunities in Mexico and
Southeast Asia. Each of these international markets is expected to have a
growing demand for services offered by the Company. In Argentina, the
Company recently completed fabrication and erection coordination services
for mill facilities at one of the largest copper mines in the world. The
Company also completed a large mining project in Chile. In addition, the
Company will seek to expand internationally by partnering with existing
multi-national customers such as Fluor Daniel, Inc. and Bechtel Group,
Inc., as well as other international structural and design engineering
firms, and by entering into strategic alliances with leading foreign
fabricators and erectors in the Company's targeted international markets.
The Company believes that its international alliances also will help to
reduce its risk of entry into foreign markets by partnering with entities
having an established presence and experience in such markets.
The Company has developed a strategic alliance with Corey, S.A. de
C.V., Mexico's leading steel fabrication and erection contractor. Pursuant
to this alliance, the parties intend to form a corporate joint venture that
intends to provide detailing services to the Company's domestic operations.
The Mexico joint venture intends to use state of the art Stru-Cad and
Autocad design systems, and is expected to significantly expand the
Company's internal detailing capacity. The Company believes its investment
in this joint venture will reduce its reliance on detailing subcontractors
and improve the Company's cost profile. The Company expects the alliance to
provide it access to several large projects in Mexico through Corey's
marketing, importation, and fabrication support.
PRIMARY MARKETS AND PRODUCTS
The Company's current principal geographic markets include Arizona and
Nevada. The Company also has a substantial presence in southern California and
currently is expanding into selected international markets. Set forth below is a
description of the Company's primary markets and products.
Arizona Market. The Company is the leading steel fabrication and erection
firm in Arizona. The Company has been a prominent participant in many of
Arizona's largest and most visible public and private projects, including the
expansion of Sky Harbor Airport in Phoenix, which involved the night time
erection of pedestrian walkways linking the airport's main concourses; the
erection of 10,000 tons of bridge plate girders for the interchange of
Interstates 10 and 17 in Phoenix; and the fabrication of the Roosevelt Dam
penstock near Phoenix. In addition, the Company believes that it is the dominant
fabricator and erector for Arizona's rapidly growing semiconductor and computer
chip industry. The Company's major projects in this industry have included the
fabrication and erection of structural steel for Intel Corp.'s "Fab 12"
facility, which was one of the largest construction projects of its kind in the
United States in 1994 and 1995; the fabrication and erection of Motorola Inc.'s
Chandler, Arizona computer chip manufacturing facility in 1995; and the
1995-1996 fabrication and erection of portions of the Sumitomo Energy Center, a
new wafer manufacturing plant constructed by Sumitomo Sitix in Scottsdale,
Arizona. Recent large Arizona-based projects include:
- BANK ONE BALLPARK. In 1995, the Company was awarded a contract to
provide steel fabrication and erection services for the Bank One Ballpark
in Phoenix, a new state of the art baseball stadium for Major League
Baseball's Arizona Diamondbacks franchise that will feature, among other
things, a fully retractable roof consisting of steel components detailed,
fabricated, and erected by the Company. The stadium contract is divided
into three phases representing a total of approximately $55 million in
revenues to the Company, of which approximately $29 million had been earned
as of March 31, 1997. The stadium will require over 20,000 tons of
structural steel and the employment of approximately 160 iron workers at
the peak of construction.
- BARROWS NEUROLOGICAL INSTITUTE. The Company was the fabricator and
erector for the Barrows Neurological Center in Phoenix, Arizona. Due to the
unique nature of this facility, the project required
30
<PAGE> 32
highly specialized vibration control which resulted in a structural frame
that weighs five times normal tonnage for a building of this size.
- MAYO HOSPITAL. The Company is the fabricator and erector for the
Mayo Clinic's newest hospital facility currently being constructed in
Phoenix, Arizona.
Nevada Market. The Company believes that it is the dominant fabricator and
erector in the Nevada hotel and casino construction industry, which has
experienced rapid expansion over the past several years and is expected to
continue its expansion for the foreseeable future. The Company maintains a sales
manager dedicated to pursue Nevada-based projects. In recent years, the Company
has completed several large fast track projects in the Nevada hotel and casino
industry, including the 500,000 square foot Sands Expo and Convention Center,
which was completed in nine months; the Mirage Hotel and Casino; the Holiday
Riverboat remodeling project, which involved the fabrication and erection of two
120 foot high river boat "stacks" constructed by the Company during the active
operation of the resort; the launch tower of the "SkyScreamer SkyCoaster" thrill
ride at the MGM Grand Theme Park, a 220 foot high structure that was erected by
the Company in only three days; and the Orleans Hotel and Casino, which involved
the fabrication and erection of over 7,900 tons of structural steel for the
casino, entertainment, and retail areas. Among the Company's recent hotel and
casino projects in Nevada are the following:
- BELLAGIO HOTEL AND CASINO. The Company is the fabricator and
erector for the casino and retail areas of the Bellagio Hotel and Casino, a
new $1.2 billion Spanish-themed resort consisting of over one million
square feet of retail and casino space and a 37 story hotel tower with
approximately 3,800 rooms.
- MGM GRAND HOTEL AND CASINO RENOVATION. This structure is presently
the world's largest hotel and casino with 5,005 hotel rooms and one million
square feet of retail and casino space. The Company's participation
includes the completion of a facade renovation and the provision of
fabrication and erection services for the new MGM Convention Center, which
will consist of over 250,000 square feet of convention area.
- NEW YORK, NEW YORK HOTEL AND CASINO. The Company was the fabricator
and erector for the New York, New York hotel and casino, which required
approximately 6,500 tons of structural steel and represented a contract
price to the Company of over $15 million. The hotel was constructed to
resemble the New York City skyline, including replicas of the Statute of
Liberty, the Brooklyn Bridge, and other New York City landmarks.
- LUXOR HOTEL AND CASINO SHOWROOM THEATER. The Company has been
involved in the construction of the Luxor Hotel and Casino Showroom Theater
and renovation of the hotel ballroom.
California Market. The Company has maintained a strong presence in the
California market and intends to achieve a greater share of this geographic
market as it experiences an increase in new construction activity. The Company
provided fabrication and erection services for several new hospital facilities
in California, including the new Children's Hospital and Health Center in San
Diego, the expansion of the Sharp Women's Center in San Diego, which required
construction around existing and operating hospital wings, and the Valley
Medical Center in San Jose. The Company also was selected as the fabricator and
erector for the Fashion Valley Mall in San Diego, which involved the fabrication
and erection of over 7,000 tons of steel for a new second level of retail
shopping space, which was erected at night over the existing shopping facility
without disturbing the ordinary operations of the mall.
Specialty Markets. In addition to seeking to achieve a leading market
share in the principal geographic markets that it serves, the Company focuses
its fabrication and erection expertise on distinct product segments,
particularly product segments requiring unique or specialized expertise where
the Company has the potential to achieve a dominant market share. A recent
example of such a product segment is large diameter water pipe used in
governmental aqueduct systems. These projects require the complex formation and
welding of steel plate into large diameter pipe sections that are used to
transport water from major supply sources to various population centers,
primarily in the arid southwestern United States. The Company has developed
in-house specialized fabrication equipment used to construct and weld these pipe
sections, a unique coal tar and fiberglass enamel application system used to
coat the pipe, and customized transportation equipment
31
<PAGE> 33
necessary to deliver the system to its ultimate destination. The Company's
expertise and specialized equipment development has made it a dominant
fabricator and erector of these large aqueduct projects in Arizona, Nevada, and
California. The Company's recently completed large diameter pipe projects
include the following:
- SALT RIVER SIPHON REPLACEMENT PROJECT. The Company served as the
fabricator and erector for the Salt River Siphon Replacement project, a
project requiring the fabrication of over 8,500 feet of 21 foot diameter
pipe for the U. S. Bureau of Reclamation. The system will transport water
from the Salt River near Phoenix, Arizona to the major population centers
of Arizona.
- AGUA FRIA SIPHON PROJECT. This project was similar in scope to and
followed the Company's successful completion of the Salt River Siphon
project, and entailed the specialized fabrication and erection of over two
miles of 21 foot diameter pipe from the Central Arizona Project canal
system under the Agua Fria River to Phoenix, Arizona.
- MOHAVE UNDERGROUND AQUEDUCT. The Company was the contractor for the
Mohave Underground Aqueduct project, a massive underground siphon system
for the California Department of Water that will transport water to San
Bernardino, California. The aqueduct system utilized over seven miles of 12
foot diameter pipe.
- RIVER MOUNTAIN TUNNEL. The Company recently completed fabrication
of the River Mountain Tunnel water system in Nevada, which consists of
several uniquely constructed pieces of 12 foot diameter pipe, which will be
used to transport water to Las Vegas, Nevada.
Other recent specialty projects completed by the Company include the
fabrication and erection of a missile launch complex at Vandenberg Air Force
Base, a thermal blast simulator for the U. S. Corps of Engineers designed to
test military and other equipment against the simulated forces of an atomic
blast, and numerous large capacity water storage tanks holding up to five
million gallons of water that have been fabricated by the Company for a variety
of governmental agencies, private utilities, and other industrial customers.
International Markets. The Company recently has focused its expansion into
selected international markets such as South America and Mexico, and is
exploring opportunities in Southeast Asia. In South America, the Company
provided the design consultation, fabrication, and delivery of approximately
7,200 tons of structural steel for the Bajo de la Alumbrera mining project in
Argentina, which is anticipated to be one of the largest copper mines in the
world when completed. In Chile, the Company recently completed the Verde Gold
mine project for Fluor Daniel, Inc. In Mexico, the Company is currently
providing the fabrication of an ore facility and conveyor system.
32
<PAGE> 34
Following is a list of selected projects in the Company's principal
geographic and product market segments which the Company is currently
constructing or has completed within the last ten years, each of which
represents a contract price in excess of $1,000,000:
<TABLE>
<S> <C>
COMPUTER CHIP PLANTS LOCATION
- --------------------- --------
Intel C-12 Phoenix, AZ
Motorola Bldg 99 Phoenix, AZ
Western Digital Irvine, CA
NEC Megaline Project Sacramento, CA
Intel NADC and C-5 Bldgs Chandler, AZ
Intel C-7 Chandler, AZ
HOSPITALS
- ---------
Valley Medical Center Santa Clara, CA
Mayo Hospital Phoenix, AZ
Children's Hospital San Diego, CA
Sharps Hospital Women's Center San Diego, CA
Riverside In-Patient Hospital Riverside, CA
Barrows Neurological Center Phoenix, AZ
Kaiser Clinic Los Angeles, CA
Veterans Administration Hospital San Diego, CA
HOTEL, CASINOS AND CONVENTION CENTERS
- ---------------------
MGM Grand Hotel & Casino Las Vegas, NV
Bellagio Hotel & Casino Las Vegas, NV
New York, New York Hotel & Casino Las Vegas, NV
Sands Convention Center Las Vegas, NV
The Orleans Hotel & Casino Las Vegas, NV
Boulder Station Hotel & Casino Las Vegas, NV
Luxor Hotel & Casino Theater Las Vegas, NV
The Mirage Hotel & Casino Las Vegas, NV
Flamingo Hilton Las Vegas, NV
Desert Inn Hotel & Casino Las Vegas, NV
Hard Rock Hotel & Casino Las Vegas, NV
LARGE DIAMETER WATER PIPE LOCATION
- ---------------------------
Mojave Siphon Pipe Adelanto, CA
Agua Fria Siphon Maricopa County, AZ
Salt River Siphon Maricopa County, AZ
Control Gorge Penstock Bishop, CA
Waddel Dam Siphon Pipe Maricopa County, AZ
INDUSTRIAL FACILITIES AND MINES
- -----------------------------
Bajo de la Alumbrera Argentina, South America
Verde Gold Santiago, Chili
Newmont Gold Mill #2, #4, #5 Carlin, NV
Phelps Dodge Mining Facility Morenci, AZ
U.S. Corps of Engineers Desalinization Plant Yuma, AZ
Titanium Metals Plant Henderson, NV
Preheater Tower Rillito, AZ
General Mills Process Plant Albuquerque, NM
AIRPORTS
- -------
Phoenix Sky Harbor (Terminal 4) Phoenix, AZ
McCarren Airport Las Vegas, NV
Skywest Terminal Salt Lake City, UT
DISTRIBUTION CENTERS
- -------------------
Smiths Distribution Center Tolleson, AZ
Smiths Distribution Center Riverside, CA
Toyota Distribution Center Ontario CA
Anheuser Busch Ontario, CA
Ralphs Grocery Distribution Los Angeles, CA
SHOPPING MALLS
- ---------------
Scottsdale Fashion Square Scottsdale, AZ
Galleria at Sunset Las Vegas, NV
Boulevard Mall Expansion Las Vegas, NV
Nordstrom Department Store Santa Ana, CA
Fashion Valley Mall San Diego, CA
Barney's of New York Beverley Hills, CA
The Shops at Arizona Center Phoenix, AZ
SPORTS ARENAS
- -------------
Bank One Ballpark Phoenix, AZ
America West Arena Phoenix, AZ
</TABLE>
33
<PAGE> 35
BUSINESS OPERATIONS
The primary services provided by the Company are engineering and
preparation of detail drawings, shop fabrication, and field erection. Following
is a description of the Company's principal services.
- Engineering and Detailing. The Company maintains significant
in-house structural engineering and detailing capabilities which enable it
to implement and coordinate with its shop and field personnel changes to
building and structural designs sought by project owners or general
contractors, and to help influence critical determinations as to the most
cost effective systems, designs, connections, and erection procedures for a
particular project. The Company's detailers prepare detail shop drawings of
the dimensions, positions, locations, and connections, and the fabrication
and erection sequences of, each piece of steel utilized in a project, and
continually update these drawings to accommodate design and other changes.
The Company utilizes a Stru-CAD automated detailing system that interacts
electronically with the Company's numerically controlled fabrication
equipment and produces updated detail drawings electronically, which are
delivered to each of the Company's domestic and foreign field locations.
The Company's detailing division initially prepares advance materials bills
by size and length of each steel piece within pre-defined areas or
sequences of erection for each project. Detailers coordinate directly with
customers and the Company's fabrication and erection teams to determine and
plan the order of fabrication and erection of a project and associated
personnel and equipment requirements.
- Shop Fabrication. The Company's fabrication services consist of the
procurement from steel producers of raw steel shapes in different sizes and
lengths. These shapes vary in cross-section from I-beams to angle, channel,
tube, pipe, and plate. Upon delivery of these steel shapes, and prior to
fabrication, the Company prepares load lists that identify the sequence and
date that each individual piece of steel is required on a project, a
procedure that reduces the handling of and the need to store materials in
the field. Upon completion of detailed shop drawings, the Company's
fabrication shop cuts the raw steel pieces to length, drills and punches
holes through the use of numerically controlled beam lines, and completes
coping and beveling with its numerically controlled machinery and automated
burning equipment. The Company then fabricates fittings and completes
welding and inspection of each finished structural piece. The Company
utilizes advanced technologies to inspect weld seams, which significantly
reduces costs, fabrication hours, and the likelihood of structural defects.
After the completion of processing to customer specifications, finished
pieces are loaded for shipment to the construction site, often pursuant to
just-in-time delivery schedules.
- Field Erection. The erection process typically consists of
pre-assembly of steel component parts at the project site, the lifting of
components by crane to the appropriate location at the site and the final
assembly of major components to form the steel backbone of the project. The
Company's field erection crews erect fabricated steel components in
accordance with erection drawings prepared and updated by the Company's
detailers. The erection process for each project is managed by experienced
field supervisors and the Company employs local union erection personnel on
an as needed basis in areas near the project sites.
PROJECT MANAGEMENT
All contract awards to the Company are assigned a project number which is
used to track each steel component and man-hour associated with the project
through the entire construction process. All project drawings, specifications,
and completion schedules on a project are reviewed by the Company's General
Manager and all projects are assigned one or more Project Managers who assume
primary responsibility for all aspects of the project, subject to oversight by
the General Manager. Often a Project Manager assigned to a given project will
have significant experience in similar projects. A Project Manager generally
will be responsible for one to five projects in various stages of completion at
any given time, depending on the scope, complexity, and geographic location of
such projects. Each project is divided into critical sequences of steel groups
that follow the anticipated erection or fabrication path. Each sequence follows
a timeline and the status is continually monitored. The General Manager and
Project Manager for each project coordinate and manage design changes or other
changes in scheduled completion deadlines in an effort to minimize overall
project
34
<PAGE> 36
delays. The Company provides production bonuses to its Project Managers based
on, among other factors, the achievement of lower costs on a project than the
estimated costs used to formulate the initial bid or price or prices of
subsequent change orders, and the ability to minimize costs or cost overruns on
particularly complex projects or on projects that exceed initial cost estimates.
The Company believes that a key factor in its success has been its ability
to provide through its in-house personnel valuable input and assistance to
general contractors, engineering firms, and other customers with respect to
overall project design of fabrication and erection sequences and other critical
project decisions, which often results in overall project cost savings and
efficiencies and helps to solidify key customer relationships. In addition to
its centralized project management, the Company also uses a high percentage of
skilled erection employees local to projects and utilizes advanced scheduling
systems to enhance its ability to provide project management services to
customers complementary to its core engineering, detail drawing, shop
fabrication, and field erection services.
SAFETY AND QUALITY ASSURANCE
The Company has adopted and maintains important safety policies that are
administered and enforced by the Company's top management. The Company considers
workplace accident prevention to be of primary importance in all phases of its
operations and provides continual training on safety procedures and techniques
to all of its shop and field personnel.
The Company uses advanced welding and fabrication technologies and all of
the Company's products are fabricated in accordance with applicable industry and
specific customer standards and specifications. The Company has achieved and
maintains a level three certification by the American Institute of Steel
Construction (AISC) with respect to its fabrication operations, the highest
level of certification available from AISC. In addition, the Company's welding
employees are certified in accordance with the American Society of Mechanical
Engineers (ASME) Section IX, Non-Destructive Examination Inspector Certification
to Society Non-Destructive Testing TC-IA Standards. The Company has developed
project-specific and Company-wide quality assurance and quality control
programs, and utilizes sophisticated x-ray and ultra-sonic systems to inspect
weld seams.
SALES AND ESTIMATING
The Company's domestic sales and marketing efforts are led by five sales
managers. Each sales manager is responsible primarily for the Company's sales
and marketing efforts in defined geographic areas. The Company also employs one
full-time international marketing representative responsible primarily for the
development of the emerging South American and Mexican markets. In addition, the
Company employs ten full-time project estimators and one chief estimator. The
Company's sales representatives maintain relationships with and make personal
and other sales calls on general contractors, architects, engineers, and other
potential sources of business to determine potential new projects under
consideration, which provide the Company with valuable market information and
new project opportunities. The Company maintains future projects reports in
order to track the weekly progress of new opportunities. The Company's sales
efforts are further supported by most of its executive officers and by its
engineering personnel, who have substantial experience in the design,
fabrication, and erection of structural steel and heavy steel plate.
The Company competes for new project opportunities through its relationship
and interaction with its active and prospective customer base, which provides
the Company with valuable current market information and sales opportunities. In
addition, the Company frequently is contacted by governmental agencies in
connection with public construction projects, and by large private sector
project owners and by general contractors and engineering firms in connection
with new building projects such as plants, warehouse and distribution centers,
and other industrial and commercial facilities.
Upon selection of projects to bid or price, the Company's estimating
division reviews and prepares projected costs of shop, field, detail drawing
preparation and crane hours, steel and other raw materials, and
35
<PAGE> 37
other costs. On bid projects, a formal bid is prepared detailing the specific
services and materials to be provided by the Company, payment terms and project
completion timelines. Upon acceptance, the Company's bid proposal is finalized
in a definitive contract.
CONTRACTING METHODS AND PERFORMANCE BONDING
The Company's projects are awarded through a competitive bid process or are
obtained through negotiation, in either case generally using one of two types of
contract pricing approaches: fixed price or cost-plus pricing. Under the fixed
price approach, the Company receives the price fixed in the contract, subject to
adjustment only for change orders placed by the customer. As a result, the
Company retains all cost savings but is also responsible for cost overruns.
Under the cost-plus arrangement, the Company receives a specified fee in excess
of its direct labor and material cost, up to a maximum amount, and thus seeks to
gain protection against cost overruns and sometimes benefits directly from cost
savings. Historically, a substantial majority of the Company's contracts have
been fixed price arrangements.
While customers may consider a number of factors, including availability,
capability, reputation, and safety record, price and the ability to meet
customer imposed project schedules are the principal factors on which the
Company obtains contracts. Generally, the Company's contracts and projects vary
in length from three to twelve months depending on the size and complexity of
the project, project owner demands, and other factors.
The Company's contract arrangements with customers sometimes require the
Company to provide payment and performance bonds and, in selected cases
typically associated with international projects, letters of credit, to
partially secure the Company's obligations under its contracts. Bonding
requirements typically arise in connection with public works projects and
sometimes with respect to certain private contracts. The Company's payment and
performance bonds are obtained through surety companies and typically cover the
entire contract price on a project. The Company believes that its bonding
capacity provides a competitive advantage in some cases due to the Company's
ability to obtain large bonds and to negotiate more favorable pricing of bonds.
BACKLOG
The Company considers backlog an important indicator of its operating
condition because its engineering, detailing, fabrication, and erection services
are characterized by long lead times for projects and orders. The Company
defines its backlog of contract commitments as the potential future revenues to
be recognized upon performance of contracts awarded to the Company. Backlog
increases as new contract commitments are obtained, decreases as work is
performed and the related revenues are recognized, and increases or decreases as
modifications in work are performed under a contract. As of December 31, 1996,
the Company's backlog was $67.3 million. As of March 31, 1996 and 1997, the
Company's backlog was $126.1 million and $65.6 million, respectively. Of the
Company's $67.3 million backlog as of December 31, 1996, approximately $13.1
million was attributable to three projects for a single customer in Las Vegas,
Nevada, and approximately $34.3 million was attributable to the Bank One
Ballpark project in Phoenix, Arizona. Of the Company's $65.6 million backlog as
of March 31, 1997, approximately $15.9 million was attributable to two projects
for a single customer in Las Vegas, and approximately $26.8 million was
attributable to the Bank One Ballpark project. The Company expects approximately
97% of its backlog as of December 31, 1996, and approximately 97% of its backlog
as of March 31, 1997, to be recognized as revenues in 1997.
COMPETITION
The principal geographic and product markets served by the Company are
highly competitive. The Company competes with other contractors on a local,
regional, or national basis, and, in certain cases, on an international basis.
The Company has different competitors for each of its services and product
segments and within each geographic market served by the Company. The Company
believes that it can compete effectively for new projects both nationally and
internationally and that it is among the largest competitors in its industry.
Among the principal competitive factors within the industry are price,
timeliness of completion of projects,
36
<PAGE> 38
quality, reputation, and the desire of customers to utilize specific contractors
with whom they have favorable relationships and prior experience. Certain of the
Company's competitors have financial and operating resources greater than those
of the Company.
GOVERNMENTAL REGULATION
The Company's operations are governed by and subject to government
regulations in the United States and in foreign countries in which the Company
operates, including laws and regulations relating to workplace safety and worker
health, principally the Occupational Safety and Health Act and regulations
thereunder in the United States. With respect to its international operations,
the Company is subject to a number of laws and regulations, including those
relating to taxation of its earnings and earnings of its personnel and its use
of local personnel and suppliers. The Company's operations are subject to the
risk of changes in federal, state, and local laws and policies which may impose
restrictions on the Company, including trade restrictions, expropriation or
nationalization decrees, confiscatory tax systems, primary or secondary boycotts
or embargos directed at specific countries, import restrictions or other trade
barriers, and mandatory sourcing rules, any of which could, if adopted or
implemented, materially and adversely affect the Company. The Company believes
that it is in material compliance with the laws and regulations under which it
and its operations are currently governed and does not believe that future
compliance with such laws and regulations will have a material and adverse
effect on it. The Company cannot determine, however, to what extent future
operations and earnings of the Company may be affected by new legislation, new
regulations, or changes in or new interpretations of existing regulations.
The Company is subject to licensure and holds licenses in each of the
states in the United States in which it operates and in certain local
jurisdictions within such states. The Company believes that it is in material
compliance with all contractor licensing requirements in the various states in
which it operates. The loss or revocation of any license or the limitation on
any of the Company's primary services thereunder in any state in which the
Company conducts substantial operations could prevent the Company from
conducting further operations in such jurisdiction and would have a material
adverse effect on the Company.
ENVIRONMENTAL REGULATION
The Company's operations and properties are affected by numerous federal,
state, and local environmental protection laws and regulations, such as those
governing discharges into air and water, and the handling and disposal of solid
and hazardous waste. The requirements of these laws and regulations have become
increasingly stringent, complex, and costly to comply with. In addition, the
Company may be subject to claims alleging personal injury or property damage as
a result of alleged exposure to hazardous substances. The Company is not aware
of any non-compliance with environmental laws that could have a material adverse
effect on the Company's business or operations. There can be no assurance,
however, that such laws, regulations, or their interpretation will not change in
the future in a manner that could materially and adversely affect the Company.
Certain environmental laws, such as CERCLA, provide for strict and joint
and several liability for investigation and/or remediation of spills and other
releases of hazardous substances. Such laws may apply to conditions at
properties presently owned or operated by the Company or its predecessors, as
well as to conditions at properties at which waste or other contamination
attributable to an entity or its predecessors come to be located. The Company's
facilities have been operated for many years, and substances that are or might
be considered hazardous were used at such locations. The Company does not
anticipate incurring material capital expenditures for environmental controls or
for investigation or remediation of environmental conditions during the current
or succeeding fiscal year. Nevertheless, the Company can give no assurance that
it, or entities for which it may be responsible, will not incur liability in
connection with the investigation and remediation of facilities it currently
owns or operates or other locations in a manner that could materially and
adversely affect the Company.
37
<PAGE> 39
EMPLOYEES
As of March 31, 1997, the Company employed approximately 765 people. The
number of persons employed by the Company on an hourly basis fluctuates directly
in relation to the amount of business performed by the Company. Certain of the
fabrication and erection personnel employed by the Company are represented by
the United Steelworkers of America, the International Association of Bridge,
Structural and Ornamental Iron Workers Union, the International Union of
Operating Engineers, and the International Brotherhood of Boilermakers, Iron
Shipbuilders, Blacksmiths, Forgers and Helpers Union. The Company is a party to
several separate collective bargaining agreements with such unions in certain of
the Company's current operating regions, which expire (if not renewed) at
various times in the future. Most of the Company's collective bargaining
agreements are subject to automatic annual or other renewal unless either party
elects to terminate the agreement on the scheduled expiration date. The Company
considers its relationship with its employees to be good and, other than
sporadic and unauthorized work stoppages of an immaterial nature, none of which
have been related to the Company's own labor relations, the Company has not
experienced a work stoppage or other labor disturbance. See "Risk
Factors -- Union Contracts."
The Company utilizes third-party fabrication subcontractors on many of its
projects and also subcontracts detailing services from time to time when it
lacks available in-house capacity for such services. The Company's inability to
engage fabrication and detailing subcontractors on terms favorable to the
Company could limit the Company's ability to complete projects in a timely
manner or compete for new projects and could have a material adverse effect on
the Company. See "Risk Factors -- Dependence on Subcontractors."
PROPERTIES
The Company's primary fabrication facilities consist of over 400,000 square
feet of shop space under roof on approximately 26 acres in Phoenix, Arizona.
These facilities also house the Company's executive and administrative offices
and engineering and detailing division and are leased by the Company from a
partnership owned by certain affiliates of the Company. This lease was recently
amended as of March 1, 1997 and expires on February 28, 2017. Annual rent under
the lease totaled $252,000 and $264,000 for 1995 and 1996, respectively, and
will be $292,000 in 1997, $414,000 in 1998, $556,000 in 1999, $601,000 in 2000,
and $605,000 in each year thereafter during the remaining term of the lease,
subject to increase every five years commencing in 2002 pursuant to a Consumer
Price Index formula. See "Certain Relationships and Related Transactions."
With the acquisition of B&K Steel, the Company added approximately 145,000
square feet of covered fabrication, office, engineering and detailing facilities
on approximately 23 acres in Gilbert, Arizona. The property on which B&K Steel's
facilities are located was acquired by a partnership owned by certain affiliates
of the Company and is leased to the Company by that partnership. This lease
commenced on March 1, 1997 and expires on February 28, 2017. Annual rent under
the lease is estimated to be $283,000 in 1997 and $340,000 in each year
thereafter, subject to increase every five years commencing in 2002 based on a
Consumer Price Index formula. See "Certain Relationships and Related
Transactions."
A partnership owned by certain affiliates of the Company has acquired and
is leasing to the Company additional facilities consisting of approximately
22,000 square feet of office space adjacent to its existing principal
fabrication and office facilities. This lease commenced on May 1, 1997 and
expires April 30, 2017. Annual rent under the lease will be $90,000 in 1997 and
$135,000 in each year thereafter, subject to increase every five years based on
a Consumer Price Index formula. The Company anticipates that a portion of the
premises will be subleased. See "Certain Relationships and Related
Transactions."
Under each of the foregoing leases, the Company also is obligated to pay
all taxes, insurance and maintenance costs.
38
<PAGE> 40
SUPPLIERS
The Company currently purchases a majority of its steel and steel
components from several domestic and foreign steel producers and suppliers.
However, steel is readily available from numerous foreign and domestic steel
producers. The Company is not dependent on any one supplier. The Company
believes that its relationships with its suppliers are good and has no long term
commitments with any of its suppliers.
LEGAL PROCEEDINGS AND INSURANCE
Construction in general and the fabrication and erection of structural
steel and heavy steel plate in particular involve a high degree of operational
risk. Adverse weather conditions, operator and other error, and other unforeseen
factors can cause personal injury or loss of life, severe damage to or
destruction of property and equipment, and suspension of operations. Litigation
arising from such occurrences may result in the Company being named as a party
to lawsuits asserting substantial claims or to administrative or criminal
actions that may involve substantial monetary penalties or the restriction of
the Company's operations in one or more jurisdictions.
The Company is a defendant in lawsuits from time to time, including
lawsuits arising in the normal course of its business. While it is impossible at
this time to determine with certainty the ultimate outcome of these lawsuits,
the Company's management believes that adequate provisions have been made for
probable losses as best as can be determined at this time and that the ultimate
outcome, after provisions therefor, will not have a material adverse effect on
the Company.
The Company maintains workers compensation insurance that provides full
coverage of statutory workers compensation benefits. The Company also maintains
employer liability insurance in its principal geographic markets in amounts of
$1,000,000 per accident for bodily injury by accident and $1,000,000 per
employee (and as a policy limit) for bodily injury by disease and contractors
commercial general liability insurance in the amount of $1,000,000. In addition,
the Company maintains umbrella coverage limits of $14,000,000. The Company also
maintains insurance against property damage caused by fire, flood, explosion and
similar catastrophic events that may result in physical damage or destruction of
the Company's facilities and property. All policies are subject to various
deductibles and coverage limitations. Although management of the Company
believes that the Company's insurance is adequate for its present needs, there
can be no assurance that the Company will be able to maintain adequate insurance
at premium rates that management considers commercially reasonable, nor can
there be any assurance that such coverage will be adequate to cover all claims
that may arise.
The adequacy of reserves applicable to the potential costs of being engaged
in litigation and potential liabilities resulting from litigation are reviewed
as developments in the litigation warrant. The Company seeks to mitigate the
effects of loss or damage through the maintenance of risk management, insurance,
and safety programs. There can be no assurance, however, that the Company's
efforts to mitigate losses will be successful or that any losses incurred will
not exceed the Company's insurance or estimated reserves therefor. See "Risk
Factors -- Operating Risks."
39
<PAGE> 41
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
In connection with the closing of this offering, the Company intends to
expand the size of its Board of Directors and has nominated five additional
directors to fill the resulting newly created directorships, including three
non-employee director-nominees. Information concerning the Company's current
directors and executive officers, and persons nominated to become directors upon
the closing of this offering, is set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- --------------------------------- --- --------------------------------------------
<S> <C> <C>
David A. Schuff.................. 65 Chairman of the Board of Directors
Scott A. Schuff.................. 38 President and Chief Executive Officer,
Director
Dennis F. Randall................ 52 Vice President and General Manager,
Director -- Nominee
Kenneth F. Zylstra............... 55 Vice President and Chief Financial Officer,
Director -- Nominee
Edward M. Carson................. 67 Director -- Nominee
H. Wilson Sundt.................. 64 Director -- Nominee
Dennis DeConcini................. 60 Director -- Nominee
</TABLE>
David A. Schuff has served as the Chairman of the Board of Directors since
its inception and is a co-founder of the Company. Mr. Schuff served as President
and Chief Executive Officer of the Company from its founding in 1976 to 1995.
Mr. Schuff has been involved in the steel fabrication and erection business in a
number of capacities since 1958. David A. Schuff is the father of Scott A.
Schuff.
Scott A. Schuff is the President and Chief Executive Officer of the
Company, a co-founder of the Company, and a member of its Board of Directors.
Mr. Schuff has served in numerous capacities with the Company since its founding
in 1976, and has been a member of the Board of Directors since 1976 and has been
the President and Chief Executive Officer since 1995.
Dennis F. Randall has served as Vice President and the General Manager of
the Company since 1993. Prior to 1993, Mr. Randall was President, Chief
Executive Officer and a director of Havens Steel Company. Mr. Randall holds a
B.E.S. degree in Civil Engineering from Brigham Young University and completed
the Advanced Management Program at Harvard University. Mr. Randall has been
nominated and has agreed to serve as a director of the Company upon the closing
of this offering.
Kenneth F. Zylstra has served as Vice President and Chief Financial Officer
of the Company since 1983, and has been an officer of Schuff since 1979. Prior
to 1979, Mr. Zylstra was associated with Ernst & Young (then Ernst & Ernst). Mr.
Zylstra received a B.B.A. Degree in Public Accounting from Loyola University --
Chicago, and is a member of the American Institute of Certified Public
Accountants, the Illinois CPA Society, and the Construction Financial Management
Association. Mr. Zylstra has been nominated and has agreed to serve as a
director of the Company upon the closing of this offering.
Edward M. Carson has been nominated and has agreed to serve as a director
of the Company upon the closing of this offering. Mr. Carson was the Chairman of
the Board of Directors of First Interstate Bancorp, a bank holding company, from
1990 through April 1996, and was its Chief Executive Officer from 1990 through
1994. Mr. Carson currently is a director of Wells Fargo & Co., one of the
largest bank holding companies in the western United States. Mr. Carson also
serves as a director of Aztar Corporation, Castle & Cooke, Inc., and Terra
Industries, Inc.
H. Wilson Sundt has been nominated and has agreed to serve as a director of
the Company upon the closing of this offering. Mr. Sundt has served as the
Chairman of the Board of Directors and Chief Executive Officer of Sundt Corp., a
privately held general construction contracting firm, since 1976, and served as
its President from 1979 through 1983. Mr. Sundt also serves as a director of
Tucson Electric Power Company, an electric utility based in Tucson, Arizona. Mr.
Sundt has been active in the construction industry since 1957.
40
<PAGE> 42
Dennis DeConcini has been nominated and has agreed to serve as a director
of the Company upon the closing of this offering. Mr. DeConcini is a former
United States Senator for Arizona and currently is a partner of Parry and Romani
Associates, Inc., a consulting firm based in Washington, D.C., and is a partner
of DeConcini, McDonald, Brammer, Yetwin & Lacy, P.C., a law firm with offices in
Tucson and Phoenix, Arizona, and in Washington, D.C. Mr. DeConcini also serves
by appointment of the President of the United States on the Board of Directors
of the Federal Home Loan Mortgage Corporation (Freddie Mac), a federally
chartered mortgage finance corporation.
KEY EMPLOYEES
Donald T. Engler has served as Vice President -- Marketing of the Company
since 1994, and in that capacity is primarily responsible for the Company's
industrial and foreign sales. From 1991 to 1994, Mr. Engler served as Vice
President -- Plate Division of the Company. Mr. Engler is a registered engineer.
Randy J. Eskelson has served as Vice President -- Estimating and Sales of
the Company since 1988. Mr. Eskelson is primarily responsible for sales in
Arizona, California, New Mexico, Hawaii, Washington, Oregon and Utah.
Leslie R. Dias has served as Vice President -- Industrial Sales for the
Company since 1985. Mr. Dias joined the Company in 1985 after the Company's
acquisition of Marathon Steel Company.
Michael T. Wittig has served as Vice President -- Manufacturing and
Engineering since 1993, and in that capacity, is primarily responsible for
implementation of new technologies in the Company's detailing and manufacturing
operations. Prior to 1993, Mr. Wittig was a systems coordinator with the
Company.
Donald T. Pekau has served as Vice President -- Project Coordination since
1991, and in that capacity supervises a number of the Company's Project
Managers.
Forrest Paysnoe has served as Vice President -- Field Operations since
1992, and in that capacity is responsible for all aspects of field operations
and is the safety coordinator on each of the Company's job sites.
COMMITTEES OF THE BOARD OF DIRECTORS
Effective upon the closing of this offering, the Company will establish a
Compensation Committee and an Audit Committee. The Compensation Committee, all
of the members of which will be non-employee directors, will review executive
salaries and administer any bonus, incentive compensation, and stock option
plans of the Company. In addition, the Compensation Committee will consult with
management of the Company regarding compensation policies and practices of the
Company. The Audit Committee, all of the members of which also will be
non-employee directors, will review the professional services provided by the
Company's independent auditors, the annual consolidated financial statements of
the Company and the Company's system of internal controls.
DIRECTOR FEES
The Company's non-employee directors will be compensated for attendance at
meetings of the Board of Directors and at meetings of committees of the Board of
Directors of which they are members, and will be reimbursed for reasonable
travel expenses incurred in connection with attendance at each Board and
committee meeting pursuant to policies to be established by the Board of
Directors. Each non-employee director will receive options to purchase 7,500
shares of Common Stock upon the closing of this offering with an exercise price
equal to the initial public offering price of the Common Stock. All of the stock
options will vest one year after the date of grant. Directors who are also
officers of the Company will not be compensated for their services as directors.
41
<PAGE> 43
SUMMARY OF EXECUTIVE COMPENSATION
The table below sets forth information concerning the annual and long term
compensation for services rendered in all capacities to the Company during the
fiscal year ended December 31, 1996, of those persons who were, at December 31,
1996: (i) the chief executive officer of the Company and (ii) each of the other
executive officers of the Company whose total annual salary and bonus exceeded
$100,000 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------------------------------------
--------------------------------- RESTRICTED
OTHER ANNUAL STOCK SECURITIES LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS UNDERLYING PAYOUTS COMPENSATION(1)
PRINCIPAL POSITION ($) ($) ($) ($) OPTIONS(#) ($) ($)
- ---------------------- --------- -------- ------------ ---------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Scott A. Schuff....... 260,008 22,000 5,069 -- -- -- --
President and Chief
Executive Officer
David A. Schuff....... 296,411 22,825 4,890 -- -- -- --
Chairman of the Board
of Directors
Dennis Randall(2)..... 118,088 33,225 3,955 -- -- -- 739
Vice President and
General Manager
Kenneth F.
Zylstra(2).......... 111,155 51,025 4,615 -- -- -- 1,218
Vice President and
Chief Financial
Officer
</TABLE>
- ---------------
(1) The amounts shown in this column represent the dollar value of 401(k) plan
contributions made by the Company for the benefit of the Named Executive
Officers. See "Management -- 401(k) Plan."
(2) The amounts shown exclude $62,445 set aside for each of Messrs. Randall and
Zylstra pursuant to the Company's Supplemental Retirement and Deferred
Compensation Plan more fully described below, which will be paid in 1997.
This plan has since been terminated. See "Management -- Deferred
Compensation Plan."
1997 STOCK OPTION PLAN
In February 1997, the Company's Board of Directors and stockholders
approved the Schuff Steel Company 1997 Stock Option Plan (the "Option Plan").
Under the Option Plan, the Company may grant incentive stock options or
non-qualified stock options to directors, employees, consultants, and advisors
of the Company. The Company believes that the Option Plan promotes the success
and enhances the value of the Company by linking the personal interests of
participants to those of the Company's stockholders and providing participants
with an incentive for outstanding performance. The total number of shares of
Common Stock available for awards under the Option Plan is 600,000, subject to a
proportionate increase or decrease in the event of a stock split, reverse stock
split, stock dividend, or other adjustment to the Company's total number of
issued and outstanding shares of Common Stock.
Following this offering, the Option Plan will be administered by the Board
of Directors or a committee that is appointed by, and serves at the discretion
of, the Board of Directors consisting solely of non-employee directors. The
Board of Directors or the committee, as the case may be, will have the exclusive
authority to administer the Option Plan, including the power to determine
eligibility, the type and number of awards to be granted, and the terms and
conditions of any award granted, including the price and timing of awards. As of
the date of this Prospectus, the Company has granted options to purchase 345,500
shares of Common Stock to various of its employees. Generally, such options are
subject to vesting over a five-year period, with 20% of the options becoming
exercisable by the holder thereof on each successive anniversary date of the
grant. The exercise price of the options granted to date is $5.00 per share.
42
<PAGE> 44
401(k) PLAN
Under the Company's 401(k) retirement savings plan, eligible employees may
direct that a portion of their compensation, up to a maximum of $9,500 per year,
be withheld by the Company and contributed to their account. All 401(k) plan
contributions are placed in a trust fund to be invested by the 401(k) plan's
trustee, except that the 401(k) plan may permit participants to direct the
investment of their account balances among mutual or investment funds available
under the plan. The 401(k) plan permits the Company to provide discretionary
matching contributions not to exceed 25% of the amount deferred up to 5% of a
participant's compensation. Amounts contributed to participant accounts under
the 401(k) plan and any earnings or interest accrued on the participant accounts
are generally not subject to federal income tax until distributed to the
participant and may not be withdrawn until death, retirement, or termination of
employment.
DEFERRED COMPENSATION PLAN
In 1996, the Company maintained a Supplemental Retirement and Deferred
Compensation Plan, pursuant to which it contributed on a discretionary basis to
certain key employees 10% of annual net profits, which amount was allocated
among participants in accordance with individual agreements between the Company
and such participants. In 1996, the Company recorded expenses of $528,900 in
accordance with this Plan. This Plan was terminated in 1997 and the Company is
considering alternative bonus arrangements for certain key employees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the year ended December 31, 1996, the Company's Board of Directors
established levels of compensation for certain of the Company's executive
officers without the involvement of the Compensation Committee, which had not
yet been formed. David A. Schuff and Scott A. Schuff, the Company's Chairman and
President/Chief Executive Officer, respectively, participated in the
deliberations regarding executive compensation that occurred during 1996. The
Board of Directors will select members of the Compensation Committee following
the closing of this offering, each of which will be a non-employee member of the
Company's Board of Directors.
43
<PAGE> 45
PRINCIPAL STOCKHOLDERS
As of April 30, 1997, the outstanding shares of the Company's Common Stock
were beneficially owned by the persons listed below. To the knowledge of the
Company, all persons listed below have sole voting and investment power with
respect to their shares, except to the extent that authority is shared by their
respective spouses under applicable law.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING(1) AFTER OFFERING(1)
--------------------- ---------------------
NAME OF BENEFICIAL OWNER(2) NUMBER PERCENT NUMBER PERCENT
- --------------------------------------------------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C>
David A. Schuff and Nancy A. Schuff(3)............. 2,550,000 51.0% 2,550,000 35.4%
Scott A. Schuff(4)................................. 2,450,000 49.0% 2,450,000 34.0%
All directors, director-nominees and executive
officers as a group (7 persons).................. 5,000,000 100% 5,000,000 69.4%
</TABLE>
- ---------------
(1) A person is deemed to be the beneficial owner of securities that can be
acquired within 60 days from the date set forth above through the exercise
of any option, warrant, or right. Shares of Common Stock subject to options,
warrants, or rights that are currently exercisable or exercisable within 60
days are deemed outstanding for the purpose of computing the percentage of
the person holding such options, warrants, or rights, but are not deemed
outstanding for computing the percentage of any other person. The amounts
and percentages are based upon 5,000,000 shares of Common Stock outstanding
as of April 30, 1997, and 7,200,000 shares of Common Stock outstanding as of
the closing of this offering, respectively.
(2) The address of each of the listed stockholders is 420 South 19th Avenue,
Phoenix, Arizona 85009.
(3) 2,050,000 of these shares are owned by the Schuff Family Trust Under Trust
Agreement dated June 28, 1983, as amended, and 500,000 of these shares are
owned by the Schuff Irrevocable Trust Under Trust Agreement Dated December
31, 1996. David A. Schuff and Nancy A. Schuff are co-trustees of each of the
trusts and exercise voting and investment power over such shares.
(4) 2,250,000 of these shares are owned by the Scott A. Schuff Family Trust
Under Trust Agreement dated March 12, 1992, as amended, and 200,000 of these
shares are owned by the Scott A. Schuff Irrevocable Trust Under Trust
Agreement dated December 31, 1996, as amended. Scott A. Schuff is the
trustee of each of these trusts and exercises voting and investment power
over such shares.
44
<PAGE> 46
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since its inception, the Company has maintained business relationships and
engaged in certain transactions with the affiliated companies and parties
described below. In the future, any transactions between the Company and its
affiliated entities, executive officers, directors, or significant stockholders
will require the approval of a majority of the non-employee directors of the
Company and will be on terms that will be no less favorable to the Company than
the Company could obtain from non-affiliated parties.
The Company and B&K Steel lease their respective fabrication and office
facilities from 19th Avenue/ Buchanan Limited Partnership, an Arizona limited
partnership (the "Schuff Partnership"). The general and limited partners of the
Schuff Partnership are David A. Schuff, Scott A. Schuff, and certain of their
family members. David A. Schuff is a co-founder and the Chairman of the Board of
Directors of the Company, and Scott A. Schuff is a Director and the President
and Chief Executive Officer of the Company. David A. Schuff and Scott A. Schuff
presently are the beneficial owners of 100% of the outstanding Common Stock of
the Company and it is estimated that after this offering they will own
beneficially approximately 69.4% of the issued and outstanding Common Stock of
the Company (or approximately 66.4% if the Underwriters' over-allotment option
is exercised). See "Management" and "Principal Stockholders."
In March 1997, the Company entered into a new lease agreement with the
Schuff Partnership with respect to its primary fabrication facilities. These
facilities include approximately 400,000 square feet of shop space under roof
situated on approximately 26 acres. This new lease agreement was based upon a
third party appraisal of the property and an assumed annual rate of return of
10%, which took into account the location and use of the property, potential
tenants, comparable returns on similar properties, and other relevant factors.
The new lease increased the Company's annual rent payments from $264,000 in 1996
to $292,000 for 1997, $414,000 for 1998, $556,000 for 1999, $601,000 for 2000,
and $605,000 for each year thereafter, subject to increase in 2002 and every
five years thereafter based on a Consumer Price Index formula, which represents
an annual rent per square foot of improved space of $0.66, $0.73, $1.04, $1.39,
$1.50 and $1.51, respectively. The agreement also enabled the Company to extend
the lease term to 20 years. The Company also is obligated under the lease to
reimburse the Schuff Partnership an additional amount equal to any taxes
incurred by it in connection with the lease payments, and is obligated to pay
insurance and maintenance expenses. The term of this lease expires on February
28, 2017.
In March 1997, the Company also entered into a lease agreement with the
Schuff Partnership with respect to the recently acquired B&K Steel property,
consisting of approximately 145,000 square feet of covered fabrication, office,
engineering and detailing facilities on approximately 23 acres. Based upon the
same methodology described above, the Company entered into a lease with
substantially similar terms for the property and equipment with annual rent
payments of approximately $340,000 over 20 years, subject to increase every five
years based on a Consumer Price Index formula, representing an annual rent per
square foot of improved space of approximately $2.34. The rent was based upon a
recent appraisal of the underlying property. The Company also is obligated to
reimburse the Schuff Partnership for taxes incurred by it in connection with the
lease payments. The term of the lease expires on February 28, 2017.
Effective May 1, 1997, the Schuff Partnership leased to the Company
approximately 22,000 square feet of additional office facilities adjacent to the
Company's existing principal office and shop facilities. Based upon the same
methodology described above, the Company entered into a lease with substantially
similar terms for the property with annual rent payments of $135,000 over 20
years, subject to increase every five years based on a Consumer Price Index
formula, representing an annual rent per square foot of improved space of
approximately $6.14. The rent was based upon the purchase price of the property,
which was determined by arm's-length negotiation with the seller. The Company is
also obligated to reimburse the Schuff Partnership for taxes incurred by it in
connection with the lease and is obligated to pay insurance and maintenance
costs. This lease expires on April 30, 2017. See "Business -- Properties."
In 1989, the Schuff Partnership borrowed $5,000,000 from a commercial bank
in connection with its refinancing of the property on which the Company's
principal facilities are located (the "Partnership Loan"). The Schuff
Partnership in turn loaned $4,249,062 to the Company and the Company delivered
to the Schuff Partnership a subordinated promissory note in that amount (the
"Subordinated Loan"). As of March 31,
45
<PAGE> 47
1997, the principal balance of the Subordinated Loan was $2,265,016. In April
1996, in connection with the refinancing of the Partnership Loan, the Company
guaranteed repayment of the Schuff Partnership's indebtedness under that loan,
which guarantee is anticipated to be released following the closing of this
offering.
Mr. David A. Schuff, Mrs. Nancy A. Schuff, his wife, and Mr. Scott A.
Schuff have personally guaranteed the Company's indebtedness under its revolving
credit and equipment purchase facilities.
The Company historically has made cash advances to its principal
stockholders. Such advances have been evidenced by recourse promissory notes
that are payable on demand after one year. As of March 31, 1997, there were no
amounts owed by David A. Schuff and Scott A. Schuff under such notes. The
Company does not intend to continue the practice of advancing funds to its
stockholders after this offering.
The Company currently purchases a portion of its steel inventory from
Arizona Steel, Inc., an Arizona corporation ("Arizona Steel"), in which Scott A.
Schuff owns a 75% interest. Arizona Steel is a steel distribution center formed
in January 1997 that sells steel pieces to a number of fabrication contractors,
one of approximately twenty from which the Company purchases steel from time to
time. The Company purchases most of its steel inventory directly from various
steel mills but from time to time purchases small quantities of steel from local
steel distribution centers as a result of special needs that do not permit the
lead time or volumes normally associated with mill purchases. The Company
currently includes Arizona Steel among its list of suppliers, all of which bid
for purchase orders by the Company on the basis of cost, availability and
delivery. It is the Company's policy not to make purchases from Arizona Steel
unless it offers the most competitive terms based on the factors listed above.
In the first four months of 1997, the Company purchased approximately $47,000 of
steel from Arizona Steel, representing less than 0.5% of the steel purchased
from all suppliers during that period.
46
<PAGE> 48
DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock does not purport
to be complete and is subject in all respects to applicable Delaware law and to
the provisions of the Company's Certificate of Incorporation and Bylaws, copies
of which have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.
The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock, par value $.001 per share, and 1,000,000 shares of Preferred
Stock, par value $.001 per share. Immediately following the completion of this
offering, 7,200,000 shares of Common Stock will be issued and outstanding and no
shares of Preferred Stock will be issued and outstanding.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held of
record on all matters on which stockholders are entitled to vote. Holders of
Common Stock do not have cumulative voting rights, and therefore holders of a
majority of the shares voting for the election of directors can elect all of the
directors. Holders of Common Stock are entitled to receive such dividends as may
be declared from time to time by the Board of Directors out of funds legally
available therefor. The Company does not anticipate declaring cash dividends in
the foreseeable future. See "Dividend Policy." In the event of liquidation,
dissolution, or winding up of the Company, the holders of Common Stock are
entitled to share ratably in any corporate assets remaining after payment of all
debts, subject to any preferential rights of any outstanding Preferred Stock.
Holders of Common Stock have no preemptive, conversion, or redemption rights and
are not subject to further calls or assessments by the Company. All of the
outstanding shares of Common Stock are, and the shares offered by the Company
hereby will be, if issued, validly issued, fully paid, and nonassessable. As of
the date of this Prospectus, there are four record holders of Common Stock.
PREFERRED STOCK
The Board of Directors of the Company has the authority, without further
action by the Company's stockholders, to issue from time to time up to 1,000,000
shares of Preferred Stock in one or more series and to fix the number of shares,
designations, voting powers, preferences, optional and other special rights, and
the restrictions or qualifications thereof. The rights, preferences, privileges,
and restrictions or qualifications of different series of Preferred Stock may
differ with respect to dividend rates, amounts payable on liquidation, voting
rights, conversion rights, redemption provisions, sinking fund provisions, and
other matters. The issuance of Preferred Stock could: (i) decrease the amount of
earnings and assets available for distribution to holders of Common Stock; (ii)
adversely affect the rights and powers, including voting rights, of holders of
Common Stock; and (iii) have the effect of delaying, deferring, or preventing a
change in control of the Company. The Company has no present plans to issue any
shares of Preferred Stock.
ANTI-TAKEOVER LAW
The Company is subject to Section 203 of the General Corporation Law of the
State of Delaware ("Section 203"), which restricts certain transactions and
business combinations between a corporation and an "Interested Stockholder"
owning 15% or more of the corporation's outstanding voting stock for a period of
three years from the date the stockholder becomes an Interested Stockholder.
Subject to certain exceptions, unless the transaction is approved by the board
of directors or the holders of at least two-thirds of the outstanding voting
stock of the corporation (excluding shares held by the Interested Stockholder),
Section 203 prohibits significant business transactions such as a merger with,
disposition of assets to, or receipt of disproportionate financial benefits by
the Interested Stockholder, or any other transaction that would increase the
Interested Stockholder's proportionate ownership of any class or series of the
corporation's stock. The statutory ban does not apply if, upon consummation of
the transaction in which any person becomes an Interested Stockholder, the
Interested Stockholder owns at least 85% of the outstanding voting stock of the
corporation (excluding shares held by persons who are both directors and
officers or by certain employee stock plans).
47
<PAGE> 49
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation provides that to the fullest
extent permitted by Delaware law, a director of the Company shall not be
personally liable to the Company or its stockholders for monetary damages for
breach of such director's fiduciary duty, except for liability: (i) for any
breach of the director's duty of loyalty to the Company or its stockholders;
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law; (iii) in respect of certain unlawful
dividend payments or stock redemptions or repurchases; and (iv) for any
transaction from which the director derives an improper benefit. The effect of
the provision of the Company's Certificate of Incorporation is to eliminate the
rights of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against a director
for breach of the fiduciary duty of care as a director (including breaches
resulting from negligent or grossly negligent behavior), except in the
situations described in clauses (i) through (iv) above. This provision does not
limit or eliminate the rights of the Company or any stockholder to seek
nonmonetary relief such as an injunction or rescission in the event of a breach
of a director's duty of care. In addition, the Company's Certificate of
Incorporation provides that the Company shall indemnify any person who is or was
a director, officer, employee, or agent of the Company, or who is or was serving
at the request of the Company as a director, officer, employee, or agent of
another corporation or entity, against expenses, liabilities, and losses
incurred by any such person by reason of the fact that such person is or was
acting in such capacity. The Company's Certificate of Incorporation also permits
it to secure insurance on behalf of any director, officer, employee, or agent of
the Company for any liability arising out of such person's actions in such
capacity.
The Company contemplates entering into agreements to indemnify its
directors and officers. These agreements would, among other things, indemnify
the Company's directors and officers for certain expenses (including attorneys'
fees), judgments, fines, and settlement amounts incurred by any such person in
any action or proceeding, including any action by or in the right of the
Company, arising out of such person's services as a director or officer of the
Company, any subsidiary of the Company, or any other company or enterprise to
which such person provides services at the request of the Company. To the extent
that the Board of Directors or the stockholders of the Company may in the future
wish to limit or repeal the ability of the Company to provide indemnification as
set forth in the Company's Certificate of Incorporation, such repeal or
limitation may not be effective as to directors or officers who are parties to
the indemnification agreements because their rights to full protection would be
contractually assured by such agreements. It is anticipated that similar
contracts may be entered into, from time to time, with future directors of the
Company. The Company believes that the indemnification provisions in its
Certificate of Incorporation and in the indemnification agreements are necessary
to attract and retain qualified persons as directors and officers.
CERTAIN BYLAW PROVISIONS
The Company's Bylaws contain several provisions that regulate the
nomination of directors and the submission of proposals in connection with
stockholder meetings. The Company's Bylaws require that any stockholder desiring
to propose business or nominate a person to the Board of Directors at an annual
stockholders meeting must give notice of any proposals not less than 90 days
prior to the anniversary date of the immediately preceding annual meeting,
subject to certain exceptions. Such notice is required to contain certain
information as set forth in the Bylaws. No business matter shall be transacted
nor shall any person be eligible for election as a director of the Company
unless proposed or nominated, as the case may be, in strict accordance with this
procedure set forth in the Company's Bylaws.
Although the Bylaws do not give the Board of Directors any power to approve
or disapprove of stockholder nominations for the election of directors or of any
other business desired by stockholders to be conducted at an annual or any other
meeting, the Bylaws may have the effect of precluding a nomination for the
election of directors or the conduct of business at a particular annual meeting
if the proper procedures are not followed or may discourage or deter a third
party from conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempting to obtain control of the Company, even if the
conduct of such solicitation or such attempt might be beneficial to the Company
and its stockholders. The Company's procedures with respect to all stockholder
proposals and the nomination of directors will be conducted in
48
<PAGE> 50
accordance with Section 14 of the Securities Exchange Act of 1934, as amended,
and the rules promulgated thereunder.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock of the Company is
Harris Trust Company of California, 601 S. Figueroa, Los Angeles, California
95517.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
7,200,000 shares of Common Stock. Of these shares, the 2,200,000 shares of
Common Stock sold in this offering, plus any additional shares sold upon
exercise of the Underwriters' over-allotment option, will be freely tradeable
without restriction under the Securities Act. Commencing 180 days following the
date of this Prospectus, 5,000,000 shares of Common Stock held by existing
stockholders will become eligible for sale under Rule 144, subject to compliance
with the volume limitations and other requirements of Rule 144.
In general, under Rule 144 persons (or persons whose shares are aggregated)
who have beneficially owned "restricted" shares for at least one year, including
persons who are "affiliates" of the Company, as that term is defined under Rule
144, are entitled to sell (in accordance with the provisions specified in the
rule) within any three-month period a number of shares that does not exceed the
greater of one percent of the then outstanding shares of the Company's Common
Stock (72,000 shares immediately following this offering assuming no exercise of
the Underwriters' over-allotment option) or the average weekly trading volume of
the Common Stock during the four calendar weeks preceding the date on which
notice of the sale is filed with the Commission. All of the 5,000,000 shares
presently outstanding are "restricted" shares and have been beneficially owned
by persons who are "affiliates" of the Company for more than one year.
The Company, its existing stockholders, directors, director-nominees and
officers have agreed with the Underwriters that, except in certain
circumstances, they will not issue, offer to sell, sell, contract to sell, or
otherwise dispose of any shares of Common Stock or any shares convertible or
exchangeable into any shares of Common Stock for a period of 180 days after the
date of this Prospectus without the prior written consent of the Representative.
Prior to this offering, there has been no public market for the Company's
Common Stock and no prediction can be made of the effect, if any, that market
sales of shares or the availability of such shares for sale will have on the
market price prevailing from time to time. Nevertheless, sales of substantial
amounts of the Common Stock in the public market could adversely affect
prevailing market conditions and could impair the Company's future ability to
raise capital through the sale of its equity securities. See "Risk Factors --
Shares Eligible for Future Sale."
49
<PAGE> 51
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters") for whom Principal Financial
Securities, Inc. is acting as representative (the "Representative"), have
severally agreed to purchase from the Company, and the Company has agreed to
sell to the Underwriters, the respective number of shares of Common Stock set
forth opposite each Underwriter's name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------------------------------------------------------------ ---------
<S> <C>
Principal Financial Securities, Inc. .............................
---------
Total...................................................
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to certain conditions precedent, including
the absence of any material adverse change in the Company's business and the
receipt of certain certificates, opinions, and letters from the Company and its
respective counsel and the Company's independent certified public accountants.
The nature of the Underwriters' obligation is such that they are committed to
purchase and pay for all the shares of Common Stock if any are purchased. In the
event of a failure by any Underwriter to purchase its portion of the Common
Stock, the Underwriting Agreement provides, depending upon the total number of
shares of Common Stock involved in the default, that the purchase commitments of
the other Underwriters may be increased or that the Underwriting Agreement may
be terminated, without prejudice to the right of any party as against any
defaulting Underwriter.
The Company has been advised by the Representative that the Underwriters
propose to offer the shares of Common Stock directly to the public at the
initial public offering price set forth on the cover page of this Prospectus and
to certain securities dealers at such price less a concession not in excess of
$ per share. The Underwriters may allow, and such selected dealers may
reallow, a discount not in excess of $ per share to certain brokers and
dealers. After the initial public offering of the shares, the public offering
price and other selling terms may be changed by the Representative. No change in
such terms shall change the amount of proceeds to be received by the Company as
set forth on the cover page of this Prospectus.
The Representative is permitted to engage in certain transactions that
stabilize the price of the Common Stock. Such transactions consist of bids or
purchases for the purpose of fixing or maintaining the price of the Common
Stock. If the Underwriters create a short position in the Common Stock in
connection with this offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Representative may
reduce that short position by purchasing Common Stock in the open market. The
Representative may also elect to reduce any short position by exercising all or
part of the over-allotment option described below. The Representative may also
impose a penalty bid on certain Underwriters. This means that if the
Representative purchases shares of Common Stock in the open market to reduce the
Underwriters' short position or to stabilize the price of the Common Stock, they
may reclaim the amount of the selling concession from the Underwriters who sold
those shares as part of this offering. In general, purchases of a security for
the purpose of stabilization or to reduce a short position could cause the price
of the security to be higher than it might be in the absence of such purchases.
The imposition of a penalty bid might also have an effect on the price of a
security to the extent that it discourages resales of the security. Neither the
Company nor any of the Underwriters makes any representation or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of the Common Stock. In addition, neither the Company nor
any of the Underwriters makes any representation that the Representative will
engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.
50
<PAGE> 52
The Company has granted an option to the Underwriters, exercisable for a
period of 30 days after the date of this Prospectus, to purchase up to an
additional 330,000 shares of Common Stock at the public offering price set forth
on the cover page of this Prospectus, less the underwriting discounts and
commissions. The Underwriters may exercise this option only to cover
over-allotments, if any. To the extent that the Underwriters exercise this
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase such additional shares of Common Stock in approximately
the same proportion as set forth in the above table.
Prior to this offering, there has been no established trading market for
the Common Stock. Consequently, the initial public offering price for the Common
Stock offered hereby has been determined by negotiation among the Company and
the Representative. Among the factors considered in such negotiations were the
preliminary demand for the Common Stock, the prevailing market and economic
conditions, the Company's results of operations, estimates of the business
potential and prospects of the Company, the present state of the Company's
business operations, an assessment of the Company's management, the
consideration of these factors in relation to the market valuation of comparable
companies in related businesses, the current condition of the markets in which
the Company operates, and other factors deemed relevant. There can be no
assurance that an active trading market will develop for the Common Stock or
that the Common Stock will trade in the public market subsequent to this
offering at or above the initial public offering price.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters and their controlling persons against certain liabilities under the
Securities Act or will contribute to payments the Underwriters and their
controlling persons may be required to make in respect thereof. The Company has
been advised that, in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
The foregoing is a brief summary of certain provisions of the Underwriting
Agreement and does not purport to be a complete statement of its terms and
conditions. A copy of the Underwriting Agreement is on file with the Commission
as an exhibit to the Registration Statement of which this Prospectus forms a
part. See "Additional Information."
CONSULTING AGREEMENT
The Company has executed a consulting agreement with Mr. D. Ronald Yagoda
dated as of January 15, 1997. Pursuant to this agreement, Mr. Yagoda agreed to
assist the Company in developing its business plan and corporate structure,
interviewing and selecting investment bankers, meeting with investment bankers,
security analysts, portfolio managers, stockbrokers, and others and, based upon
such review and services, to provide consultation services for purposes of
assisting the Company in connection with an initial public offering. Under the
agreement, as of April 27, 1997, the Company has paid Mr. Yagoda $15,000 in fees
for services rendered by Mr. Yagoda, and has agreed to pay Mr. Yagoda a fee
equal to 0.5% of the proceeds of this offering. The agreement terminates on
January 15, 1998. Mr. Yagoda is not affiliated or associated with the
Representative or the Underwriters.
LEGAL MATTERS
The validity of the shares offered hereby is being passed upon for the
Company by Snell & Wilmer L.L.P., Phoenix, Arizona. Certain legal matters will
be passed upon for the Underwriters by Blackwell Sanders Matheny Weary &
Lombardi, L.C., Kansas City, Missouri.
EXPERTS
The financial statements of Schuff Steel Company at December 31, 1996 and
1995, and for each of the three years in the period ended December 31, 1996,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
51
<PAGE> 53
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act of 1933 with respect to the Common Stock offered
hereby. This Prospectus constitutes a part of the Registration Statement and
does not contain all of the information set forth therein and in the exhibits
thereto, certain portions of which have been omitted as permitted by the rules
and regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is hereby made to such
Registration Statement and exhibits. Statements contained in this Prospectus as
to the contents of any document are not necessarily complete and in each
instance are qualified in their entirety by reference to the copy of the
appropriate document filed with the Commission. The Registration Statement,
including the exhibits thereto, may be examined without charge at the
Commission's public reference facility at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. In addition, copies of all or any part of
the Registration Statement, including such exhibits thereto, may be obtained
from the Commission at its principal office in Washington, D.C., upon payment of
the fees prescribed by the Commission. The Commission maintains a World Wide Web
site (http://www.sec.gov) that contains reports, proxy statements, and other
information regarding registrants, such as the Company, that file electronically
with the Commission.
The Registration Statement and the reports and other information to be
filed by the Company following this offering in accordance with the Securities
Exchange Act of 1934, as amended, can be inspected and copied at the principal
office of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549, and at the following regional offices of the Commission:
7 World Trade Center, New York, NY 10048, and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, IL 60601. Copies of such material may
be obtained from the Public Reference Section of the Commission at its principal
office at 450 Fifth Street, N.W., Washington D.C. 20549, upon payment of the
fees prescribed by the Commission.
52
<PAGE> 54
SCHUFF STEEL COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors...................................................... F-2
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1995 and 1996, and March 31, 1997
(unaudited).................................................................... F-3
Consolidated Statements of Income for the years ended December 31, 1994, 1995, and
1996, and the three months ended March 31, 1996 and 1997 (unaudited)........... F-4
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 1994, 1995, and 1996, and the three months ended March 31,
1997(unaudited)................................................................ F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995,
and 1996, and the three months ended March 31, 1996 and 1997 (unaudited)....... F-6
Notes to Consolidated Financial Statements.......................................... F-7
</TABLE>
F-1
<PAGE> 55
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Schuff Steel Company
We have audited the accompanying balance sheets of Schuff Steel Company as
of December 31, 1996 and 1995, and the related statements of income, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Schuff Steel Company at
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Phoenix, Arizona
March 21, 1997, except for Note 13
as to which the date is May 8, 1997
F-2
<PAGE> 56
SCHUFF STEEL COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31
------------------- MARCH 31
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 289 $ 7,253 $ 4,750
Restricted funds on deposit............................... 220 2,249 2,896
Receivables............................................... 11,287 16,885 18,654
Costs and recognized earnings in excess of billings on
uncompleted contracts.................................. 1,076 871 1,332
Inventories............................................... 7,770 11,311 14,164
Prepaid expenses.......................................... 218 178 504
------- ------- -------
TOTAL CURRENT ASSETS.............................. 20,860 38,747 42,300
Property and equipment...................................... 12,325 14,274 15,253
Less amortization and accumulated depreciation.............. 8,103 9,158 9,495
------- ------- -------
4,222 5,116 5,758
Intangible pension asset.................................... 120 106 102
Other assets................................................ 58 -- --
------- ------- -------
$25,260 $43,969 $48,160
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 3,985 $ 4,043 $ 2,350
Accrued payroll and employee benefits..................... 933 1,539 2,830
Other accrued liabilities................................. 562 367 1,023
Stockholder distributions payable......................... 1,071 4,555 4,775
Billings in excess of costs and recognized earnings on
uncompleted contracts.................................. 5,940 19,623 22,407
Current portion of long-term debt......................... 404 144 317
------- ------- -----------
TOTAL CURRENT LIABILITIES......................... 12,895 30,271 33,702
Long-term debt, less current portion........................ 5,271 2,753 2,777
Accrued pension cost........................................ 326 263 245
Stockholders' equity
Preferred Stock, $.001 par value -- authorized 1,000,000
shares, none issued.................................... -- -- --
Common Stock, $.001 par value -- authorized 20,000,000
shares, 5,000,000 shares issued and outstanding........ 5 5 5
Additional paid-in-capital................................ 15 15 15
Unfunded pension losses................................... (426) (519) (541)
Retained earnings......................................... 7,174 11,181 11,957
------- ------- -----------
6,768 10,682 11,436
------- ------- -----------
$25,260 $43,969 $48,160
======= ======= =========
</TABLE>
See accompanying notes.
F-3
<PAGE> 57
SCHUFF STEEL COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
-------------------------------- -------------------
1994 1995 1996 1996 1997
------- ------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................................ $68,199 $62,090 $103,912 $10,410 $25,507
Cost of revenues........................ 58,874 54,222 86,998 8,418 21,655
------- ------- -------- ------- -------
GROSS PROFIT.................. 9,325 7,868 16,914 1,992 3,852
General and administrative expenses..... 4,915 5,284 6,715 1,357 2,081
------- ------- -------- ------- -------
OPERATING INCOME.............. 4,410 2,584 10,199 635 1,771
Interest expense........................ (718) (752) (452) (147) (95)
Other income............................ 67 618 303 52 96
------- ------- -------- ------- -------
NET INCOME.................... $ 3,759 $ 2,450 $ 10,050 $ 540 $ 1,772
======= ======= ======== ======= =======
Pro forma net income data (unaudited)
Net income as reported................ $ 3,759 $ 2,450 $ 10,050 $ 540 $ 1,772
Pro forma tax provision............... 1,500 980 4,020 215 710
------- ------- -------- ------- -------
Pro forma net income.................. $ 2,259 $ 1,470 $ 6,030 $ 325 $ 1,062
======= ======= ======== ======= =======
Pro forma net income per share.......... $ 0.44 $ 0.28 $ 1.16 $ 0.06 $ 0.20
======= ======= ======== ======= =======
Shares used in computation.............. 5,188 5,188 5,188 5,188 5,188
======= ======= ======== ======= =======
</TABLE>
See accompanying notes.
F-4
<PAGE> 58
SCHUFF STEEL COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNFUNDED
--------------- PAID-IN PENSION RETAINED
SHARES AMOUNT CAPITAL LOSSES EARNINGS TOTAL
------ ------ ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1994.................... 5,000 $5 $ 15 $ (536) $ 5,836 $ 5,320
Changes in unfunded pension losses....... -- -- -- (27) -- (27)
Distributions to stockholders............ -- -- -- -- (3,020) (3,020)
Net income............................... -- -- -- -- 3,759 3,759
--
----- --- ---- ------- -------
Balance December 31, 1994.................. 5,000 5 15 (563) 6,575 6,032
Changes in unfunded pension losses....... -- -- -- 137 -- 137
Distributions to stockholders............ -- -- -- -- (1,851) (1,851)
Net income............................... -- -- -- -- 2,450 2,450
--
----- --- ---- ------- -------
Balance December 31, 1995.................. 5,000 5 15 (426) 7,174 6,768
Changes in unfunded pension losses....... -- -- -- (93) -- (93)
Distributions to stockholders............ -- -- -- -- (6,043) (6,043)
Net income............................... -- -- -- -- 10,050 10,050
--
----- --- ---- ------- -------
Balance December 31, 1996.................. 5,000 5 15 (519) 11,181 10,682
Changes in unfunded pension losses
(unaudited)........................... -- -- -- (22) -- (22)
Distributions to stockholders
(unaudited)........................... -- -- -- -- (996) (996)
Net income (unaudited)................... -- -- -- -- 1,772 1,772
--
----- --- ---- ------- -------
Balance March 31, 1997 (unaudited)......... 5,000 $5 $ 15 $ (541) $ 11,957 $11,436
===== == === ==== ======= =======
</TABLE>
See accompanying notes.
F-5
<PAGE> 59
SCHUFF STEEL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
------------------------------ ------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................... $ 3,759 $ 2,450 $ 10,050 $ 540 $ 1,772
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.............. 1,248 1,248 1,267 297 361
Gain on disposal of property and
equipment............................... (10) (20) (13) (9) (12)
Changes in operating assets and
liabilities:
Restricted funds on deposit............. -- (220) (2,029) -- (647)
Receivables............................. 248 4,092 (5,598) (1,264) (522)
Costs and recognized earnings in excess
of billings on uncompleted
contracts............................. 79 (1,014) 205 1,015 137
Inventories............................. (1,104) (2,461) (3,541) (4,496) (2,757)
Prepaid expenses........................ 80 47 40 (269) (233)
Accounts payable........................ 376 1,882 58 (3,558) (2,482)
Accrued payroll and employee benefits... 124 (322) 606 284 1,266
Other accrued liabilities............... (325) (362) (195) 4,105 627
Billings in excess of costs and
recognized earnings on uncompleted
contracts............................. 2,291 (566) 13,683 7,266 2,777
Accrued pension cost.................... (73) (97) (142) (31) (36)
-------- -------- -------- -------- -------
NET CASH PROVIDED BY OPERATING
ACTIVITIES....................... 6,693 4,657 14,391 3,880 251
INVESTING ACTIVITIES
Increase in receivables from stockholders.... (227) -- (185) -- --
Repayment of receivables from stockholders... 191 45 18 12 --
Acquisitions of property and equipment....... (1,615) (814) (2,337) (294) (310)
Proceeds from disposals of property and
equipment.................................. 21 30 189 13 32
Purchase of business......................... -- -- -- -- (427)
-------- -------- -------- -------- -------
NET CASH USED IN INVESTING
ACTIVITIES....................... (1,630) (739) (2,315) (269) (705)
FINANCING ACTIVITIES
Proceeds from revolving line of credit and
long-term borrowings....................... 67,977 64,558 33,500 16,025 --
Principal payments on revolving line of
credit and long-term debt.................. (70,553) (66,436) (36,278) (17,785) (1,273)
Cash distributions to stockholders........... (2,537) (1,814) (2,334) (586) (776)
-------- -------- -------- -------- -------
NET CASH USED IN FINANCING
ACTIVITIES....................... (5,113) (3,692) (5,112) (2,346) (2,049)
-------- -------- -------- -------- -------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................. (50) 226 6,964 1,265 (2,503)
Cash and cash equivalents at beginning of
period..................................... 113 63 289 289 7,253
-------- -------- -------- -------- -------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD........................... $ 63 $ 289 $ 7,253 $ 1,554 $ 4,750
======== ======== ======== ======== =======
</TABLE>
See accompanying notes.
F-6
<PAGE> 60
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Schuff Steel Company ("the Company") is a steel fabrication and erection
contractor based in Phoenix, Arizona. The Company's construction projects are
located primarily in Arizona, Nevada, California and South America.
Principles of Consolidation
As more fully described in Note 13, the Company acquired B&K Steel
Fabrications, Inc. (B&K Steel) on January 31, 1997 and accounted for the
transaction using the purchase method. Effective as of that date, B&K Steel
became a wholly owned subsidiary of the Company. Accordingly, commencing with
the three month period ended March 31, 1997 the Company began consolidating the
financial statements of B&K Steel from the date of acquisition. All intercompany
transactions have been eliminated for the three months ended March 31, 1997.
Financial statements for the years ended December 31, 1994, 1995 and 1996 are
not consolidated since the Company had no subsidiaries during those periods.
Interim Financial Information
The consolidated financial statements for the three months ended March 31,
1996 and 1997 are unaudited but include all adjustments (consisting only of
normal recurring adjustments) that the Company considers necessary for a fair
presentation of financial position and results of operations. Operating results
for the three months ended March 31, 1997 are not necessarily indicative of the
results that may be expected for any future periods.
Operating Cycle
Balance sheet items expected to be paid or received within one year are
classified as current. Assets and liabilities relating to long-term construction
contracts are included in current assets and current liabilities in the
accompanying balance sheet, since they will be realized or liquidated in the
normal course of contract completion, although completion may require more than
one year.
Revenue and Cost Recognition
The Company performs its services primarily under fixed-price contracts and
recognizes revenues and costs from construction projects using the percentage of
completion method. Under this method, revenue is recognized based upon the ratio
of the costs incurred to date to the total estimated costs to complete the
project. Revenue recognition begins when progress is sufficient to estimate
final results with reasonable accuracy. Costs include all direct material and
labor costs related to contract performance, subcontractor costs, indirect
labor, and fabrication plant overhead costs, which are charged to contract costs
as incurred. Revenues relating to changes in the scope of a contract are
recognized when the customer has authorized the change, the work is commenced
and the Company has made an estimate of the amount that is probable of being
paid for the change. Revisions in estimates during the course of contract work
are reflected in the accounting period in which the facts requiring the revision
become known. Provisions for estimated losses on uncompleted contracts are made
in the period a loss on a contract becomes determinable.
Construction contracts with customers generally provide that billings are
to be made monthly in amounts which are commensurate with the extent of
performance under the contracts. Contract receivables arise principally from the
balance of amounts due on progress billings on jobs under construction.
Retentions on
F-7
<PAGE> 61
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
contract receivables are amounts due on progress billings which are withheld
until the completed project has been accepted by the customer.
Costs and recognized earnings in excess of billings on uncompleted
contracts primarily represent revenue earned under the percentage of completion
method which has not been billed, and also include costs incurred in excess of
the billings on contracts for which sufficient work has not been performed to
allow for the recognition of revenue. Billings in excess of related costs and
recognized earnings on uncompleted contracts represent amounts billed on
contracts in excess of the revenue allowed to be recognized under the percentage
of completion method on those contracts.
Cash and cash equivalents
Cash consists of cash in noninterest bearing checking accounts. Cash
equivalents consist of investments in a money market mutual fund which is
invested in financial instruments and securities issued and guaranteed by the
U.S. Treasury, the U.S. government or its agencies or instrumentalities. All
such investments are completely liquid and are made through the Company's bank
pursuant to an investment and custody agreement.
Restricted Funds on Deposit
Restricted funds on deposit represent funds in an interest bearing escrow
account which is maintained in lieu of contract receivable retentions for a
specific contract.
Inventories
Inventories, primarily steel components which have been charged to specific
contracts, are stated at the lower of cost or market under the first-in,
first-out method.
Property and Equipment
Property and equipment is stated at cost and is depreciated over the
estimated useful lives, which generally range from five to ten years, of the
related assets using the straight line method. Leasehold improvements are
amortized over the shorter of the lease term or the estimated useful life.
Amortization of leasehold improvements is included in depreciation and
amortization.
Income Taxes
In 1987, the stockholders of the Company elected under Subchapter S of the
Internal Revenue Code to include the Company's income in their own income for
federal and state income tax purposes. As a result, the Company was not subject
to federal or state income taxes at December 31, 1996. At December 31, 1996, the
Company's tax basis differed from the amounts used for financial reporting
purposes. The income tax basis was higher by approximately $750,000.
Accordingly, if the Company converted to a C corporation as of December 31,
1996, it would have recorded a net deferred tax asset of approximately $300,000
and recorded a deferred tax benefit of the same amount to reflect the tax effect
of cumulative differences at conversion. At December 31, 1996 and March 31,
1997, retained earnings included approximately $9,900,000 and $10,700,000,
respectively, of income taxed directly to stockholders.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments", requires that the Company disclose
estimated fair values of financial instruments. Cash and cash equivalents,
restricted funds on deposit, receivables, accounts payable, and other accrued
liabilities are
F-8
<PAGE> 62
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
carried at amounts that reasonably approximate their fair values. The Company
believes the carrying amount of their long-term debt approximates fair value at
December 31, 1996.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
receivables. The Company maintains cash and cash equivalents, restricted funds
on deposit and certain other financial instruments with large financial
institutions. The Company performs periodic evaluations of the relative credit
standing of those financial institutions that are considered in the Company's
investment strategy. Concentrations of credit risk with respect to receivables
are limited as the Company's customers tend to be larger general contractors on
adequately funded projects and the Company has certain lien rights.
Use of Estimates
The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles necessarily requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the balance sheet date and the reported amounts of revenues and expenses during
the reporting period for long-term contracts.
The Company has a substantial history of making reasonably dependable
estimates of the extent of progress towards completion, contract revenues, and
contract costs on its long-term contracts. The estimates inherent in such
provisions are periodically evaluated and revisions are made as required to
reflect the most up-to-date information. However, due to uncertainties inherent
in the estimation process, actual results could differ materially from those
estimates.
Long-Lived Assets
The Company adopted the provisions of Financial Accounting Standards Board
Statement No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived Assets
to Be Disposed Of", which requires impairment losses to be recorded on
long-lived assets used in operations, such as equipment and improvements and
intangible assets, when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amount of the assets. Based upon its assessment as of December 31,
1996 and March 31, 1997, management does not believe there are any adjustments
required to its long-lived assets as a result of implementing FAS 121.
Pro Forma Net Income Data
Pro forma net income per share is computed using weighted average common
shares outstanding and common stock equivalents if dilutive. Pro forma tax
provision is based on the effective tax rate that the Company believes would
have been incurred had the Company not been a S corporation for income tax
purposes. That rate of 40% is comprised of a 34% federal statutory rate plus an
effective state tax rate net of federal benefit of 6%. Under Securities and
Exchange Commission Staff Accounting Bulletin 83, common stock equivalents
include the dilutive effect of stock options granted within one year of an
initial public offering at prices less than the anticipated offering price for
all years presented.
Impact of Recently Issued Accounting Standards
Statement of Financial Accounting Standards No. 128 (FAS 128), "Earnings
Per Share", issued by the Financial Accounting Standards Board in February 1997,
is effective for periods ending after December 15,
F-9
<PAGE> 63
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. The impact is expected to result in an
increase in pro forma primary earnings per share for the year ended December 31,
1996 of $0.05 and for the quarters ended March 31, 1996 and 1997 of $0.00 and
$0.01, respectively. The impact of FAS 128 on the calculation of fully diluted
pro forma earnings per share for these periods is not expected to be material.
2. RECEIVABLES AND CONTRACTS IN PROGRESS
Receivables consist of the following at:
<TABLE>
<CAPTION>
DECEMBER 31
------------------- MARCH 31
1995 1996 1997
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Contract receivables:
Contracts in progress............................. $ 7,362 $11,566 $14,170
Unbilled retentions............................... 3,632 5,112 4,379
------- ------- -------
10,994 16,678 18,549
Notes receivable.................................... 125 65 49
Other receivables................................... 168 142 56
------- ------- -------
$11,287 $16,885 $18,654
======= ======= =======
</TABLE>
Substantially all of the Company's receivables are due from general
contractors located in Arizona, California and Nevada.
Costs and estimated earnings on completed and uncompleted contracts consist
of the following at:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------- MARCH 31
1995 1996 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Costs incurred on completed and contracts in
progress......................................... $127,028 $162,648 $121,548
Estimated earnings................................. 18,324 23,058 17,285
-------- -------- --------
145,352 185,706 138,833
Less progress billings............................. 150,216 204,458 159,908
-------- -------- --------
$ (4,864) $(18,752) $(21,075)
======== ======== ========
Included in the accompanying consolidated balance
sheets under the following captions:
Costs and recognized earnings in excess of
billings on uncompleted contracts............. $ 1,076 $ 871 $ 1,332
Billings in excess of costs and recognized
earnings on uncompleted contracts............. (5,940) (19,623) (22,407)
-------- -------- --------
$ (4,864) $(18,752) $(21,075)
======== ======== ========
</TABLE>
F-10
<PAGE> 64
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
3. INVENTORIES
Inventories consist of the following at:
<TABLE>
<CAPTION>
DECEMBER 31
------------------ MARCH 31
1995 1996 1997
------ ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials........................................ $1,351 $ 665 $ 882
Fabrication in process............................... 6,052 10,032 12,668
Finished goods....................................... 367 614 614
------ ------- -------
$7,770 $11,311 $14,164
====== ======= =======
</TABLE>
The Company separately identifies and values the portion of its inventory
that is undergoing fabrication processes to prepare it for direct sale to a
customer or shipment to an erection site for use on a customer construction
project. Such amounts are reflected as fabrication in process inventory.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at:
<TABLE>
<CAPTION>
DECEMBER 31
------------------- MARCH 31
1995 1996 1997
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Property and equipment:
Leasehold improvements.............................. $ 1,498 $ 2,334 $ 2,388
Furniture and fixtures.............................. 91 91 189
Transportation equipment............................ 1,273 1,308 1,419
Machinery and equipment............................. 7,134 7,995 8,638
Cranes.............................................. 648 654 644
Office equipment.................................... 275 285 291
Detailing equipment................................. 83 83 83
EDP equipment....................................... 1,323 1,524 1,601
------- ------- -------
12,325 14,274 15,253
Less amortization and accumulated depreciation...... 8,103 9,158 9,495
------- ------- -------
$ 4,222 $ 5,116 $ 5,758
======= ======= =======
</TABLE>
F-11
<PAGE> 65
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
5. LONG-TERM DEBT
Long-term debt consists of the following at:
<TABLE>
<CAPTION>
DECEMBER 31
----------------- MARCH 31
1995 1996 1997
------ ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Note payable to a bank under a revolving line of credit
agreement maturing in 1998, with interest payable
monthly at the bank's prime rate plus 0.25 percent.... $1,647 $ -- $ --
Subordinated note payable to a related party, payable in
monthly installments of $12,037, plus interest at the
bank's prime rate plus 2.50 percent, maturing in
1999.................................................. 3,053 2,897 2,265
Notes payable to individuals under a stock purchase
agreement payable in annual installments of $159,250
plus interest at 5.73 percent, maturing in 2002....... -- -- 796
Note payable to a bank, paid in full in 1996............ 975 -- --
Other................................................... -- -- 33
------ ------ ------
5,675 2,897 3,094
Less current portion.................................... 404 144 317
------ ------ ------
$5,271 $2,753 $2,777
====== ====== ======
</TABLE>
The Company's revolving line of credit agreement is subject to renewal on
June 30, 1998 and is collateralized by contract receivables, equipment and raw
materials inventory. This agreement permits the Company to borrow up to an
amount equal to 75 percent of qualifying contract receivables and in total shall
not exceed $6,500,000, with further reductions to availability based upon, among
other restrictions, billings in excess of costs levels. As of December 31, 1996
and March 31, 1997, there was no availability for future borrowings under the
Company's revolving line of credit agreement. On March 31, 1997, the Company
modified its revolving line of credit agreement to permit borrowings of up to
$1,000,000 regardless of availability under the formula. The agreement was
subsequently modified to temporarily increase the minimum borrowing permitted
regardless of the formula to $2,500,000 through July 31, 1997. The Company made
interest payments on its line of credit of $272,160, $271,653, and $63,798 for
the years ended December 31, 1994, 1995 and 1996, respectively, and $48,366 and
$4,701 for the three months ended March 31, 1996 and 1997, respectively.
The subordinated note payable to a related party is a long-term loan from a
partnership owned by related parties which include the Company's stockholders.
The partnership obtained the funds loaned to the Company from a bank under terms
similar to those included in the loan it made to the Company. In April 1996, the
partnership refinanced its loan with the same bank used by the Company. Under
the terms of the new loan agreement between the partnership and the bank, the
Company has guaranteed repayment of the partnership's loan, which amounted to
$2,921,736 at December 31, 1996 and $2,883,954 at March 31, 1997.
Principal amounts of long-term debt maturing subsequent to December 31,
1996 are: 1997 -- $144,444, 1998 -- $144,444 and 1999 -- $2,608,396. The Company
made interest payments of $402,959, $449,439 and $420,050 for the years ended
December 31, 1994, 1995 and 1996, respectively, and $133,747 and $55,419 for the
three months ended March 31, 1996 and 1997, respectively, on its long-term debt.
F-12
<PAGE> 66
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
6. EMPLOYEE BENEFIT PLANS
The Company maintains a 401(k) retirement savings plan which covers
eligible employees and which permits participants to contribute to the plan,
subject to Internal Revenue Code restrictions. The plan also permits the Company
to make discretionary matching contributions, which amounted to $34,952 during
the year ended December 31, 1996 (none in 1994 or 1995) and $8,738 and $10,065
for the three month periods ended March 31, 1996 and 1997, respectively.
In 1996, the Company adopted the "Supplemental Retirement and Deferred
Compensation Plan" for certain management employees. The Plan is an unfunded
deferred compensation plan whereby the Company contributes an amount equal to 10
percent of annual net profits after deducting distributions payable to
stockholders, as defined in the Plan. During the year ended December 31, 1996,
total expense recognized by the Company was $528,900, which is currently
scheduled for distribution to eligible employees in 1997. This plan was
terminated effective January 1, 1997.
Substantially all of the Company's fabrication and erection workforce is
subject to collective bargaining agreements. The Company made contributions to
union sponsored benefit plans of $764,013, $883,225 and $1,122,119 during the
years ended December 31, 1994, 1995 and 1996, respectively, and $176,572 and
$409,148 during the three months ended March 31, 1996 and 1997, respectively.
Information from the administrators of these plans is not available to permit
the Company to determine its share of accumulated benefits and related assets.
The Company has a 401(k) defined contribution retirement savings plan for
union steelworkers. Currently, only participants contribute to this plan on a
voluntary basis, subject to Internal Revenue Code restrictions. All account
balances are 100 percent vested.
The Company has a second noncontributory defined benefit plan that is
maintained for union steelworkers and provides for pension and disability
benefits. During 1989, the Company reached agreement with the local
representatives of the United Steelworkers of America to freeze all pension
credits effective December 31, 1988. All pension credits are 100 percent vested.
The unfunded portion of the plan is being reduced by continued contributions by
the Company. The Company currently contributes 60 cents for each hour worked by
each participant. The Company's funding policy is to make monthly contributions
to the plan sufficient to at least meet minimum funding amounts required by law.
Currently, the plan is party to an insurance contract whereby the insurer
provides benefits under the plan. Company contributions are held by the insurer
in a collective investment fund which is managed by the insurer and which is
invested in stocks, bonds and money market instruments. The net assets available
for plan benefits are reflected at contract value, which approximates market
value.
The Company accounts for pension expense under its noncontributory defined
benefit pension plan under the provisions of Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions."
The weighted average discount rate used in determining the actuarial
present value of accumulated and projected benefit obligations was decreased
from 7.0 percent in 1995 to 6.5 percent in 1996. As a result of this change, the
projected benefit obligation increased by $207,242. The expected long-term rate
of return on plan assets was 8.5 percent in both 1995 and 1996. The weighted
average rate of compensation increase is not applicable because the benefit is
not pay related.
F-13
<PAGE> 67
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
The following table sets forth the funded status of the plan as provided by
consulting actuaries at December 31, 1995 and 1996 and as estimated by
management at March 31, 1997:
<TABLE>
<CAPTION>
DECEMBER 31
----------------- MARCH 31
1995 1996 1997
------ ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of accumulated and projected
benefit obligations, all of which are fully vested.... $1,752 $2,003 $ 2,051
Plan assets at fair value............................... 1,426 1,740 1,806
------ ------ ------
Funded status -- projected benefit obligation in excess
of plan assets........................................ $ 326 $ 263 $ 245
====== ====== ======
Comprised of:
Prepaid pension cost before adjustment to recognize
additional minimum liability....................... $ 220 $ 362 $ 399
Unrecognized net loss................................. (426) (519) (541)
Unrecognized net obligation........................... (120) (106) (103)
------ ------ ------
Adjustment to recognize minimum liability............... $ (326) $ (263) $ (245)
====== ====== ======
Net pension cost includes the following components:
Service costs......................................... $ 50 $ 50 $ 13
Interest cost on projected benefit obligation......... 118 122 32
Actual return on plan assets.......................... (291) (231) (45)
Net amortization and deferral......................... 223 128 14
------ ------ ------
Net period pension cost................................. $ 100 $ 69 $ 14
====== ====== ======
</TABLE>
7. STOCKHOLDERS' EQUITY
Due to the Company's income tax status as a qualified S corporation, only
one class of stock may be issued and outstanding, and all outstanding shares
must be identical as to the rights of the holders in the profits and assets of
the Company, although differences in voting rights are permitted.
The Company has the authority to issue a total of two hundred thousand
shares of no par value stock, of which fifty thousand shares must be Class A
Common Stock, fifty thousand shares must be Class B Common Stock, and one
hundred thousand shares must be Preferred Stock. The Class A Common Stock and
the Class B Common Stock are identical in all respects except that the holders
of the Class B Common Stock have no voting power for any purpose and are not
entitled to notice of any meeting of stockholders. As of December 31, 1995 and
1996, only Class A Common Stock had been issued (See Note 13).
The Company also has the authority to issue preferred stock in amounts with
such designations, preferences, voting rights, privileges and such other
restrictions and qualifications as the Board of Directors may, by resolution,
establish. The Company has not set aggregate or per share amounts at which
preferred shares may be called or are subject to redemption through sinking fund
operations or otherwise. No preferred stock has been issued.
It is the policy of the Company to also make distributions to stockholders
in such amounts as are required to enable them to pay income taxes attributable
to their allocable share of taxable income from the Company. Pursuant to
provisions in the Company's revolving line of credit agreement, the Company is
also permitted at its discretion to declare an annual dividend to the
stockholders providing the Company maintains certain financial criteria.
F-14
<PAGE> 68
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
Following is an analysis of stockholder distributions for the years ended
December 31, 1994, 1995 and 1996 and the three months ended March 31, 1996 and
1997:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31 MARCH 31
---------------------------- -----------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Stockholder distributions payable at
beginning of period................. $ 981 $1,297 $1,071 $1,071 $4,555
Additions (deductions):
Life insurance premiums............. 346 346 346 87 87
Current year income taxes........... 1,821 1,217 5,105 284 909
Prior year income taxes............. 35 (93) (73) -- --
Less: Prior year refunds applied to
current year taxes............... (17) (79) (35) -- --
Current year dividend............... 554 460 700 -- --
Prior year dividend................. 281 -- -- -- --
------ ------ ------ ------ ------
3,020 1,851 6,043 371 996
Cash distributions:
Life insurance premiums............. 226 226 226 57 57
Current year income taxes........... 1,111 369 925 -- --
Prior year income taxes............. 918 691 798 529 304
Current year dividend............... -- 128 185 -- --
Prior year dividend................. 282 400 200 -- 415
------ ------ ------ ------ ------
2,537 1,814 2,334 586 776
Noncash distributions applied to
receivables from stockholders....... 167 263 225 29 --
------ ------ ------ ------ ------
Stockholder distributions payable at
end of period....................... $1,297 $1,071 $4,555 $ 827 $4,775
====== ====== ====== ====== ======
</TABLE>
8. STOCK OPTIONS
The Company established a qualified stock option plan ("the Plan")
effective February 5, 1997. The exercise price of the options, as well as the
vesting period, are established by the Company's Board of Directors. A summary
of activity under the Plan is as follows:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
---------------------
SHARES WEIGHTED-
AVAILABLE AVERAGE
UNDER EXERCISE
OPTION NUMBER PRICE
--------- ------- ---------
<S> <C> <C> <C>
Balance at February 5, 1997 (inception of Plan)....... -- -- $ --
Authorized.......................................... 600,000 -- --
Granted............................................. -- 345,500 5.00
Exercised........................................... -- -- --
Canceled............................................ -- -- --
------- ------- -----
Balance at March 31, 1997............................. 600,000 345,500 $5.00
======= ======= =====
Exercisable at March 31, 1997......................... --
=======
</TABLE>
F-15
<PAGE> 69
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
All options granted in 1997 had an exercise price of $5.00 per share which
was equal to the fair value of the Company's common stock, at the date of grant,
as estimated by its Board of Directors. The weighted-average remaining
contractual life of those options is approximately five years.
The Company's 1997 Stock Option Plan has authorized the grant of options up
to 600,000 shares to officers, directors or key employees of the Company. All
options have ten year terms and generally vest ratably over five years from the
date of grant. The fair value of options granted during the three months ended
March 31, 1997 was $1.26.
The Company has elected to follow Accounting Principles Board Opinion
Number 25 (APB 25), "Accounting for Stock Issued to Employees", and related
interpretations in accounting for its stock options issued to employees because,
as discussed below, the alternative fair value accounting provided for under
Statement of Financial Accounting Standards No. 123 (FAS 123), "Accounting for
Stock-Based Compensation", requires use of option valuation models that were not
developed for use in valuing stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the fair value of the
underlying stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income and pro forma earnings per share
is required by FAS 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of FAS 123. The fair
value for these options was estimated at the date of grant using a Black Scholes
Option pricing model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1997
---------------
<S> <C>
Contractual term of the award................. 10 years
Expected life of award........................ 5 years
Volatility.................................... .01
Fair value of stock at grant date............. $5.00
Option exercise price......................... $5.00
Risk-free interest rate....................... 6 percent
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models requires the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The Company's
pro forma net income under FAS 123 is not materially different from historical
results.
9. RELATED PARTY TRANSACTIONS
The Company leases certain property from a partnership owned by related
parties including the Company's stockholders. Effective March 1, 1997, the
Company terminated the existing lease and executed a new 20-year lease with the
same partnership. The lease requires monthly lease payments ranging from $24,611
in 1997 to $50,427 in 2000 and thereafter with additional stipulated rent
increases every five years based on the Consumer Price Index. The Company is
also obligated to pay the partnership any taxes related to the lease payments.
Rent expense under the related party lease totaled $252,683, $263,561, and
$273,570 for the years
F-16
<PAGE> 70
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
ended December 31, 1994, 1995 and 1996, respectively, and $68,699 and $69,104
for the three months ended March 31, 1996 and 1997, respectively.
Effective March 1, 1997, the Company also executed a 20-year lease of
certain property with the partnership discussed above. Such property was part of
the acquisition discussed in Note 13. The lease requires monthly lease payments
of $28,333 with additional stipulated rent increases every five years based on
the Consumer Price Index. The Company is also obligated to pay the partnership
any taxes related to the lease payments. The Company has guaranteed the debt of
the partnership relating to this property. The outstanding balance of such debt
was $2,191,583 at March 31, 1997.
Future minimum rentals (excluding taxes), by year, and in the aggregate
under these noncancelable operating leases at December 31, 1996, are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1997........................................... $ 575
1998........................................... 754
1999........................................... 896
2000........................................... 941
2001........................................... 945
Thereafter..................................... 14,335
-------
$ 18,446
=======
</TABLE>
The Company also leases certain property, vehicles, and equipment from
nonrelated parties for which it incurred rent expense of $158,506, $134,032 and
$232,955 for the years ended December 31, 1994, 1995 and 1996, respectively, and
$55,224 and $94,809 for the three months ended March 31, 1996 and 1997,
respectively.
10. SIGNIFICANT CUSTOMERS
The Company had revenues from certain customers that were in excess of 10
percent of the respective year's revenues as follows (for years in which the
respective customer's revenue were less than 10% no percentage is stated):
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31 ENDED MARCH 31
-------------------------- ---------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Customer A.............................. -- 11.2% -- -- --
Customer B.............................. -- -- 13.7% -- --
Customer C.............................. -- -- -- 25.5% --
Customer D.............................. 10.0% 10.4% 13.4% 28.7% 18.0%
Customer E.............................. -- -- 19.5% -- 35.4%
Customer F.............................. -- -- 11.5% -- --
Customer G.............................. 18.6% 14.4% -- -- --
</TABLE>
During the years ended December 31, 1995 and 1996 and the three months
ended March 31, 1997 the Company's revenues included approximately $1,894,000,
$14,280,000 and $2,328,000, respectively, relating to projects carried out
internationally for which approximately $0, $1,776,000 and $463,369 was in
accounts receivable at December 31, 1995, 1996 and March 31, 1997, respectively.
F-17
<PAGE> 71
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
11. OTHER INCOME
During 1995, the Company received $175,000 as a result of a settlement with
third parties relating to damages to Company equipment. In addition, the Company
received $371,194 from a claim related to misappropriation of funds by a former
employee.
12. CONTINGENCIES
The Company is involved from time to time through the ordinary course of
business in certain claims, litigation, and assessments. Due to the nature of
the construction industry, the Company's employees from time to time become
subject to injury, or even death, while employed by the Company. The Company
does not believe there are any such contingencies at December 31, 1996 for which
the eventual outcome would have a material adverse impact on the Company.
During 1996, the primary contractor on the Company's largest contract has
claimed that the Company was liable under delay provisions and is seeking
damages. While the Company believes that the reasons for the delay were such
that the Company should not be liable, the Company has reduced expected revenues
by approximately $900,000 due to this uncertainty.
During 1996, the Company was named as a defendant in a lawsuit relating to
an incident at one of its worksites whereby one of its employees was killed in a
crane accident. The Company believes the loss, if any, relating to the incident
will be fully insured and does not expect the ultimate outcome of the matter to
have a material adverse impact on its financial position.
Relating to the incident set forth in the prior paragraph, the Company has
been named as a defendant in a lawsuit brought by the crane operator who claims
he was assaulted by employees of the Company after the incident. The Company's
insurance carrier has declined coverage. However, management does not expect the
amount of loss, if any, relating to the ultimate resolution of this matter to
have a material adverse impact on its financial position.
13. SUBSEQUENT EVENT
On January 31, 1997, the Company acquired 100 percent of the outstanding
capital stock of B&K Steel Fabrications, Inc. ("B&K"), a steel fabricator
located in Gilbert, Arizona, for $1,223,194, consisting of $426,944 in cash and
$796,250 in two promissory notes payable in annual installments over five years
including interest at 5.73 percent. In addition, the Company prepaid $1,090,000
of the subordinated note payable discussed in Note 5 to enable a related party
lessor to the Company to acquire the real property upon which B&K is located,
and certain equipment attached to the property. The acquisition was not
significant to the Company under the definitions used by the Securities and
Exchange Commission, and will be accounted for under the purchase method of
accounting. After assigning fair values to the tangible assets acquired, and
liabilities assumed, there was no goodwill generated by the purchase. The
results of operations of B&K will be included in those of the Company commencing
February 1, 1997. Had the purchase taken place as of January 1, 1996, the
combined business would have had revenues of $113,291,000, income before taxes
of $18,097,000, pro forma net income (using a 40 percent effective tax rate) of
$6,099,000 and pro forma net income per share of $1.18. However, such
information may not be indicative of future operations of the combined business.
Subsequent to March 31, 1997 the Company entered into a lease agreement
with a partnership owned by related parties including the Company's stockholders
for additional office space acquired by the partnership that is adjacent to the
Company's existing principal office and shop facilities. The lease commences May
1, 1997 and expires on April 30, 2017. The lease requires monthly rental
payments of $11,250, subject to increase
F-18
<PAGE> 72
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS
UNAUDITED)
every five years based on a Consumer Price Index formula. In conjunction with
the lease, the Company has guaranteed the related debt incurred by the
partnership to acquire the property in the amount of $999,999.
On May 8, 1997, the Company effected a 50,000 for one common stock split.
Accordingly, all shares of common stock have been restated in the financial
statements to reflect the effect of this stock split. At the same time, the
Company also reincorporated in Delaware and changed its authorized shares and
classes of stock. The information set forth in the financial statements reflect
the authorized shares after having given effect to the reincorporation.
F-19
<PAGE> 73
======================================================
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, ANY OF THE UNDERWRITERS, OR ANY OTHER
PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
The Company........................... 13
S Corporation Distribution............ 14
Use of Proceeds....................... 15
Dividend Policy....................... 15
Capitalization........................ 16
Dilution.............................. 17
Selected Consolidated Financial and
Operating Data...................... 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 20
Business.............................. 27
Management............................ 40
Principal Stockholders................ 44
Certain Relationships and Related
Transactions........................ 45
Description of Capital Stock.......... 47
Shares Eligible for Future Sale....... 49
Underwriting.......................... 50
Legal Matters......................... 51
Experts............................... 51
Additional Information................ 52
Index to Consolidated Financial
Statements.......................... F-1
Report of Independent Auditors........ F-2
Consolidated Financial Statements..... F-3
</TABLE>
------------------------
UNTIL , 1997 (25 CALENDAR DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF THE DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
2,200,000 SHARES
SCHUFF STEEL
COMPANY
COMMON STOCK
------------------------
PROSPECTUS
------------------------
PRINCIPAL FINANCIAL
SECURITIES, INC.
, 1997
======================================================
<PAGE> 74
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Other expenses in connection with the issuance and distribution of the
securities to be registered hereunder, all of which will be paid by the
registrant, will be substantially as follows:
<TABLE>
<CAPTION>
ITEM AMOUNT
-------------------------------------------------------------------------- --------
<S> <C>
SEC Registration Fee...................................................... $ 9,200
NASD Filing Fee........................................................... $ 3,536
Nasdaq National Market Listing Fee........................................ $ 35,500
*Blue Sky Fees and Expenses (including legal fees)........................ $ 5,000
*Accounting Fees and Expenses............................................. $125,000
*Legal Fees and Expenses.................................................. $175,000
*Consulting Fees.......................................................... $150,000
*Printing and Engraving................................................... $ 90,000
*Registrar and Transfer Agent's Fees...................................... $ 20,000
*Underwriters' Expenses................................................... $ 40,000
*Miscellaneous Expenses................................................... $ 21,764
--------
Total........................................................... $675,000
========
</TABLE>
- ---------------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation provides that a director of the
Company shall not be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability for: (i) any breach of the director's duty of loyalty to the Company
or its stockholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) liability for
payments of dividends or stock purchases or redemptions in violation of Section
174 of the Delaware General Corporation Law; or (iv) any transaction from which
the director derived an improper personal benefit. In addition, the Company's
Certificate of Incorporation provides that the Company shall to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the corporation to provide broader
indemnification rights than such law permitted the corporation to provide prior
to such amendment), indemnify and hold harmless any person who was or is a
party, or is threatened to be made a party to or is otherwise involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that such person
is or was a director or officer of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan (hereinafter an "Indemnitee")
against expenses, liabilities and losses (including attorneys' fees, judgments,
fines, excise taxes or penalties paid in connection with the Employee Retirement
Income Security Act of 1974, as amended, and amounts paid in settlement)
reasonably incurred or suffered by such Indemnitee in connection therewith;
provided, however, that except as otherwise provided with respect to proceedings
to enforce rights to indemnification, the Company shall indemnify any such
Indemnitee in connection with a proceeding (or part thereof) initiated by such
Indemnitee only if such proceeding or part thereof was authorized by the board
of directors of the Company.
The right to indemnification set forth above includes the right to be paid
by the Company the expenses (including attorneys' fees) incurred in defending
any such proceeding in advance of its final disposition; provided, however,
that, if the Delaware General Corporation Law requires, an advancement of
expenses
II-1
<PAGE> 75
incurred by an Indemnitee in his capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such Indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Company of an undertaking, by or on behalf of
such Indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is not further right to
appeal that such Indemnitee is not entitled to be indemnified for such expenses
under this section or otherwise. The rights to indemnification and to the
advancement of expenses conferred herewith are contract rights and continue as
to an Indemnitee who has ceased to be a director, officer, employee or agent and
inures to the benefit of the Indemnitee's heirs, executors and administrators.
The Delaware General Corporation Law provides that indemnification is
permissible only when the director, officer, employee, or agent acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the conduct was unlawful. The
Delaware General Corporation Law also precludes indemnification in respect of
any claim, issue, or matter as to which an officer, director, employee, or agent
shall have been adjudged to be liable to the Company unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine that, despite such adjudication of liability but in view
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
The Company has agreed to indemnify the Underwriters and their controlling
persons, and the Underwriters have agreed to indemnify the Company and its
controlling persons, against certain liabilities, including liabilities under
the Securities Act. Reference is made to the Underwriting Agreement filed as
part of the Exhibits hereto.
For information regarding the Company's undertaking to submit to
adjudication the issue of indemnification for violation of the securities laws,
see Item 17 hereof.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On May 8, 1997, the Company reincorporated from Arizona to Delaware by way
of a merger in which the predecessor of the Company, an Arizona corporation,
merged with and into a newly created Delaware subsidiary of the Company. In the
merger, each share of the Arizona corporation's issued and outstanding common
stock was exchanged for 50,000 shares of the Delaware corporation's common stock
and each option to purchase one share of the Arizona corporation's common stock
was exchanged for 50,000 options to purchase shares of the Delaware
corporation's common stock. All share figures set forth above give effect to
this exchange ratio. Exemption from registration for this transaction was
claimed pursuant to Section 4(2) of the Securities Act regarding transactions by
an issuer not involving any public offering and/or pursuant to Rule 145 under
the Securities Act regarding transactions the sole purpose of which is to change
an issuer's domicile solely within the United States.
On February 5, 1997, the Company granted stock options to purchase a total
of 6.91 shares of its common stock at an exercise price of $250,000 per share.
All of these options vest over a five year period with 20% of such options of
each grantee vesting on each anniversary of the date of grant. After the
reincorporation, the options were exchanged for 345,500 options to purchase the
Company's Common Stock at an exercise price of $5.00 per share. Exemption from
restriction for these transactions was claimed pursuant to Section 4(2) of the
Securities Act regarding transactions by an issuer not involving any public
offering.
II-2
<PAGE> 76
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------- -----------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement by and between Principal Financial Securities, Inc.
and the Registrant*
1.2 Consulting Agreement by and between D. Ronald Yagoda and the Registrant
3.1(a) Certificate of Incorporation of the Registrant
3.1(b) Certificate of Amendment of Certificate of Incorporation of the Registrant
3.2 Bylaws of the Registrant
4.1 Certificate of Incorporation of the Registrant (filed as Exhibit 3.1)
4.6 Form of Certificate representing Common Stock*
5 Form of Opinion of Snell & Wilmer L.L.P. regarding the legality of the Common Stock
being registered
10.1(a) Loan Agreement dated June 30, 1996 between the Registrant and Bank One, Arizona, NA
10.1(b) Variable Rate Revolving Line of Credit Note dated June 30, 1996
10.2(a) Revolving Line of Credit Loan Agreement and Addendum dated June 30, 1995 between
the Registrant and Bank One, Arizona, NA
10.2(b) Variable Rate Revolving Line of Credit Note and Addendum dated June 30, 1995
10.2(c) Modification Agreement dated June 30, 1996 between the Registrant and Bank One,
Arizona, NA
10.2(d) Continuing Guaranty dated June 30, 1995 between David A. Schuff, Nancy A. Schuff
and Bank One, Arizona, NA
10.2(e) Continuing Guaranty dated June 30, 1995 between Scott A. Schuff and Bank One,
Arizona, NA
10.2(f) Modification Agreement dated March 31, 1997 between the Registrant and Bank One,
Arizona, NA
10.2(g) Modification Letter Agreement dated May 7, 1997 between the Registrant and Bank
One, Arizona NA
10.3(a) Loan Agreement and Addendum dated June 30, 1995 between the Registrant and Bank
One, Arizona, NA
10.3(b) Variable Rate Line of Credit Note and Addendum dated June 30, 1995
10.3(c) Modification Agreement dated June 30, 1996 between the Registrant and Bank One,
Arizona, NA
10.4 Continuing Guaranty dated April 22, 1996 between the Registrant and Bank One,
Arizona, NA
10.5 Guaranty of Payment dated April 22, 1997 between the Registrant and Bank One,
Arizona, NA
10.6 Guaranty of Payment dated January 31, 1997 between the Registrant and Bank One,
Arizona, NA
10.7 Promissory Note dated December 31, 1989 between the Registrant and 19th
Avenue/Buchanan Limited Partnership
10.8 Lease dated March 1, 1997 for 420 S. 19th Avenue in Phoenix, Arizona between 19th
Avenue/Buchanan Limited Partnership and the Registrant
10.9 Lease dated March 1, 1997 for 619 N. Cooper Road in Gilbert, Arizona between 19th
Avenue/Buchanan Limited Partnership and the Registrant
10.10 Lease dated May 1, 1997 for 1841 W. Buchanan Street in Phoenix, Arizona between
19th Avenue/Buchanan Limited Partnership and the Registrant
</TABLE>
II-3
<PAGE> 77
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------- -----------------------------------------------------------------------------------
<S> <C>
10.11 Schuff Steel Company Supplemental Retirement and Deferred Compensation Plan
10.12(a) Schuff Steel Company 1997 Stock Option Plan
10.12(b) Form of Incentive Stock Option Agreement for 1997 Stock Option Plan
10.12(c) Form of Non-Qualified Stock Option Agreement for 1997 Stock Option Plan
11 Earnings per Share Computation
21 List of Subsidiaries
23.1 Consent of Ernst & Young LLP, independent auditors
23.2 Consent of Snell & Wilmer L.L.P. (included in Exhibit 5)
24 Power of Attorney (see signature page included in Registration Statement)
27 Financial Data Schedule
99.1 Consent of Edward M. Carson
99.2 Consent of H. Wilson Sundt
99.3 Consent of Dennis DeConcini
99.4 Consent of Kenneth F. Zylstra
99.5 Consent of Dennis Randall
</TABLE>
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules:
The financial statement schedules have been omitted since they are not
applicable.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denomination and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4), or 497(b) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein and this offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 78
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Phoenix, State of Arizona, on May 8, 1997.
SCHUFF STEEL COMPANY
By: /s/ Scott A. Schuff
--------------------------------------
Scott A. Schuff
President, and Chief Executive
Officer
Each person whose signature appears below hereby constitutes and appoints
Scott A. Schuff, and Kenneth F. Zylstra, and each of them, as his
attorney-in-fact and agent, with the power of substitutions, for and in the
name, place, and stead of the undersigned, to sign any and all amendments to
this Registration Statement, and to file the same with exhibits thereto, and
other documents in connection therewith with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorney-in-fact or
his substitute or substitutes may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------------- -------------
<S> <C> <C>
/s/ David A. Schuff Chairman of the Board of Directors May 8, 1997
- ----------------------------------------
David A. Schuff
/s/ Scott A. Schuff President, Chief Executive Officer May 8, 1997
- ---------------------------------------- and Director (Principal executive
Scott A. Schuff officer)
/s/ Kenneth F. Zylstra Vice President and Chief Financial May 8, 1997
- ---------------------------------------- Officer (Principal financial and
Kenneth F. Zylstra accounting officer)
</TABLE>
II-5
<PAGE> 79
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF EXHIBIT NUMBERED PAGE
- ------- ---------------------------------------------------------------------- -------------
<S> <C> <C>
1.1 Form of Underwriting Agreement between Principal Financial Securities,
Inc. and the Registrant*
1.2 Consulting Agreement by and between D. Ronald Yagoda and the
Registrant
3.1(a) Certificate of Incorporation of the Registrant
3.1(b) Certificate of Amendment of Certificate of Incorporation of the
Registrant
3.2 Bylaws of the Registrant
4.1 Certificate of Incorporation of the Registrant (filed as Exhibit 3.1)
4.6 Form of Certificate representing Common Stock*
5 Form of Opinion of Snell & Wilmer L.L.P. regarding the legality of the
common stock being registered
10.1(a) Loan Agreement dated June 30, 1996 between the Registrant and Bank
One, Arizona, NA
10.1(b) Variable Rate Revolving Line of Credit Note dated June 30, 1996
10.2(a) Revolving Line of Credit Loan Agreement and Addendum dated June 30,
1995 between the Registrant and Bank One, Arizona, NA
10.2(b) Variable Rate Revolving Line of Credit Note and Addendum dated June
30, 1995
10.2(c) Modification Agreement dated June 30, 1996 between the Registrant and
Bank One, Arizona, NA
10.2(d) Continuing Guaranty dated June 30, 1995 between David A. Schuff, Nancy
A. Schuff and Bank One, Arizona, NA
10.2(e) Continuing Guaranty dated June 30, 1995 between Scott A. Schuff and
Bank One, Arizona, NA
10.2(f) Modification Agreement dated March 31, 1997 between the Registrant and
Bank One, Arizona, NA
10.2(g) Modification Letter Agreement dated May 7, 1997 between the Registrant
and Bank One, Arizona, NA
10.3(a) Loan Agreement and Addendum dated June 30, 1995 between the Registrant
and Bank One, Arizona, NA
10.3(b) Variable Rate Line of Credit Note and Addendum dated June 30, 1995
10.3(c) Modification Agreement dated June 30, 1996 between the Registrant and
Bank One, Arizona, NA
10.4 Continuing Guaranty dated April 22, 1996 between the Registrant and
Bank One, Arizona, NA
10.5 Guaranty of Payment dated April 22, 1997 between the Registrant and
Bank One, Arizona, NA
10.6 Guaranty of Payment dated January 31, 1997 between the Registrant and
Bank One, Arizona, NA
10.7 Promissory Note dated December 31, 1989 between the Registrant and
19th Avenue/Buchanan Limited Partnership
10.8 Lease dated March 1, 1997 for 420 S. 19th Avenue in Phoenix, Arizona
between 19th Avenue/Buchanan Limited Partnership and the Registrant
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF EXHIBIT NUMBERED PAGE
- ------- ---------------------------------------------------------------------- -------------
<S> <C> <C>
10.9 Lease dated March 1, 1997 for 619 N. Cooper Road in Gilbert, Arizona
between 19th Avenue/Buchanan Limited Partnership and the Registrant
10.10 Lease dated May 1, 1997 for 1841 W. Buchanan Street in Phoenix,
Arizona between 19th Avenue/Buchanan Limited Partnership and the
Registrant
10.11 Schuff Steel Company Supplemental Retirement and Deferred Compensation
Plan
10.12(a) Schuff Steel Company 1997 Stock Option Plan
10.12(b) Form of Incentive Stock Option Agreement for 1997 Stock Option Plan
10.12(c) Form of Non-Qualified Stock Option Agreement for 1997 Stock Option
Plan
11 Earnings per Share Computation
21 List of Subsidiaries
23.1 Consent of Ernst & Young LLP, independent auditors
23.2 Consent of Snell & Wilmer L.L.P. (included in Exhibit 5)
24 Power of Attorney (see signature page included in Registration
Statement)
27 Financial Data Schedule
99.1 Consent of Edward M. Carson
99.2 Consent of H. Wilson Sundt
99.3 Consent of Dennis DeConcini
99.4 Consent of Kenneth F. Zylstra
99.5 Consent of Dennis Randall
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 1.2
CONSULTING AGREEMENT
THIS AGREEMENT is made and entered into effective as of the 15th
day of January, 1997, by and between SCHUFF STEEL COMPANY, an Arizona
corporation ("Company"), and D. RONALD YAGODA ("Consultant").
R E C I T A L S:
A. The Company is an Arizona closely-held corporation that wishes to
become publicly owned through the sale of shares to the public.
B. Consultant is experienced in the investment banking field and
familiar with the steps necessary to assist a closely-held business in becoming
a publicly held company.
C. The Company is willing to engage Consultant to perform consulting
services for its benefit and is willing to pay Consultant a reasonable fee for
those services.
D. The parties hereto desire to enter into this Agreement upon the
terms and conditions hereinafter set forth.
A G R E E M E N T S:
1. CONSULTING SERVICES. Consultant agrees to provide consulting
services to the Company relating to the Company's transition from a closely-held
corporation to a publicly held corporation including, but not limited to, the
following:
(a) Assisting the Company in developing its investment image;
(b) Interviewing and selecting investment bankers;
(c) Meeting with investment bankers, security analysts,
portfolio managers, stockbrokers, and traders;
(d) Assisting in determining the appropriate pricing for an
initial public offering;
(e) Being available for investor and due diligence meetings;
and
(f) Working with attorneys and investment bankers on
registration statement as needed.
- 1 -
<PAGE> 2
2. CONSULTING FEE. In consideration of Consultant's performance of
the services referred to in Paragraph 1 for the term hereof, the Company agrees
to pay to Consultant a consulting fee in an amount equal to one-half percent
(1/2%) of the capital raised in the public offering, payable as follows:
(a) FIFTEEN THOUSAND DOLLARS ($15,000.00) shall be payable
upon execution of this Agreement; and
(b) The remaining balance shall be due and payable upon
completion of the public offering.
3. TERM. The term of this Agreement shall commence on the date
hereof and continue for one (1) year, ending on January 15, 1998.
Notwithstanding anything else to the contrary herein, either party can terminate
this Agreement upon fourteen (14) days written notice to the other party.
4. CONFIDENTIAL INFORMATION. It is expressly understood and agreed
that all trade secrets and know-how of the Company are confidential and are the
sole property of the Company. Consultant shall have no right to possession of
such trade secrets and know-how other than in the discharge of its duties
hereunder. Consultant shall not divulge to third parties the content of any
trade secrets which may have been acquired by virtue of this Agreement. The
obligations provided for in this Paragraph 0 shall survive any termination of
this Agreement.
5. LIABILITY OF CONSULTANT. In the course of carrying out his duties
as obligated under this Agreement, Consultant shall be liable only for gross
negligence, bad faith or breach of an expressed provision of this Agreement, but
in all other respects, shall not be liable to the Company for any mistake of
judgment. If the Company becomes liable or responsible for the payment of any
debt, encumbrance, liability or judgment arising out of or resulting from
Consultant's performance under this Agreement, and the payment of such debt,
encumbrance, liability or a judgment did not arise through the gross negligence
or bad faith of Consultant, the Company shall indemnify Consultant for any and
all such expense.
6. INDEPENDENT CONTRACTOR STATUS. Consultant is providing services
to the Company only for the purposes and to the extent set forth in this
Agreement, and Consultant's relation to the Company shall at all times during
the term of this Agreement be that of an independent contractor. Consultant
shall not be considered as having employee status or as being entitled to
participate in any plans, arrangements, or distributions by the Company
pertaining to or in connection with any pension plan, stock plan, bonus plan,
profit sharing plan or similar plan or benefit for the Company's employees.
7. COST AND EXPENSES. The Company shall reimburse Consultant for
reasonable out-of-pocket costs and expenses incurred by Consultant in connection
with the
- 2 -
<PAGE> 3
performance of his duties as described herein; provided, however, before
incurring any costs and expenses relating to travel or entertainment, Consultant
shall obtain the prior written approval of the Company. Failure to obtain such
written approval before incurring such costs and expenses shall negate the
Company's responsibility for their reimbursement hereunder.
8. NOTICES. Any notices, statements, payments or other
communications by the parties hereto to the other party shall be directed to the
address set forth below:
If to the Company: Scott A. Schuff
420 S. 19th Avenue
Phoenix, Arizona 85009
If to Consultant: D. Ronald Yagoda
7320 E. Butherus Drive
Suite 206
Scottsdale, Arizona 85260
9. ASSIGNMENTS. Neither party shall assign this Agreement or any
portion of the rights without the prior written consent of the other party
hereto.
10. BINDING EFFECT. This Agreement, and its terms and provisions,
shall be binding upon, and inure to, the benefit of the parties, their
successors, administrators, executors and assigns, except as otherwise provided
herein.
11. COMPLETE AGREEMENT. This Agreement sets forth all of the
covenants, agreements, conditions and understandings between the parties hereto,
and there are no covenants, promises, agreements, conditions or understandings,
either oral or written, between them other than as set forth herein, and those
agreements which are executed contemporaneously herewith. This Agreement cannot
be modified or changed except by a written instrument executed by all the
parties hereto.
12. CONSTRUCTION. This Agreement shall be construed in accordance
with and be governed by the laws of the State of Arizona.
IN WITNESS WHEREOF, the parties hereto have set their hands the day
and year first above written.
COMPANY:
SCHUFF STEEL COMPANY, an Arizona
corporation
- 3 -
<PAGE> 4
By: /s/ Scott A. Schuff
-----------------------------------
Scott A. Schuff, President
CONSULTANT:
/s/ D. Ronald Yagoda
----------------------------------------
D. RONALD YAGODA
-4-
<PAGE> 1
Exhibit 3.1(a)
CERTIFICATE OF INCORPORATION
OF
SCHUFF STEEL COMPANY
ARTICLE ONE
The name of the Corporation is SCHUFF STEEL COMPANY.
ARTICLE TWO
The address of the Corporation's registered office in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is Corporation Trust
Company.
ARTICLE THREE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE FOUR
The Corporation shall have perpetual existence.
ARTICLE FIVE
The total number of shares of stock which the Corporation shall
have authority to issue is Twenty-Five Million (25,000,000), consisting of Five
Million (5,000,000) shares of Preferred Stock, par value $0.001 per share
(hereinafter referred to as "Preferred Stock"), and Twenty Million (20,000,000)
shares of Common Stock, par value $0.001 per share (hereinafter referred to as
"Common Stock").
The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby authorized to provide for the
issuance of shares of Preferred Stock in series and, by filing a certificate
pursuant to the applicable law of the State of Delaware (hereinafter referred to
as a "Preferred Stock Designation"), to establish from time to time the number
of shares to be included in each such series, and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations and restrictions thereof. The authority of the Board
of Directors with respect to each series shall include, but not be limited to,
determination of the following:
<PAGE> 2
A. The designation of the series, which may be by
distinguishing number, letter or title.
B. The number of shares of the series, which number the
Board of Directors may thereafter (except where otherwise
provided in the Preferred Stock Designation) increase or
decrease (but not below the number of shares thereof then
outstanding).
C. The amounts payable on, and the preferences, if any,
of shares of the series in respect of dividends, and whether
such dividends, if any, shall be cumulative or noncumulative.
D. Dates at which dividends, if any, shall be payable.
E. The redemption rights and price or prices, if any,
for shares of the series.
F. The terms and amount of any sinking fund provided
for the purchase or redemption of shares of the series.
G. The amounts payable on, and the preferences, if any,
of shares of the series in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
affairs of the Corporation.
H. Whether the shares of the series shall be
convertible into or exchangeable for shares of any other class
or series, or any other security, of the Corporation or any
other corporation, and, if so, the specification of such other
class or series of such other security, the conversion or
exchange price or prices or rate or rates, any adjustments
thereof, the date or dates at which such shares shall be
convertible or exchangeable and all other terms and conditions
upon which such conversion or exchange may be made.
I. Restrictions on the issuance of shares of the same
series or of any other class or series.
J. The voting rights, if any, of the holders of shares
of the series.
The Common Stock shall be subject to the express terms of the
Preferred Stock and any series thereof. Except as may be provided in this
Certificate of Incorporation or in a Preferred Stock Designation, the holders of
shares of Common Stock shall be entitled to one vote for each such share upon
all questions presented to the stockholders. Except as may be provided in this
Certificate of Incorporation or in a Preferred Stock Designation, the Common
Stock shall have the exclusive right to vote for the election of directors and
for all other purposes, and holders of Preferred Stock shall not be entitled to
receive notice of any meeting of stockholders at which they are not entitled to
vote.
2
<PAGE> 3
The Corporation shall be entitled to treat the person in whose
name any share of its stock is registered as the owner thereof for all purposes
and shall not be bound to recognize any equitable or other claim to, or interest
in, such share on the part of any other person, whether or not the Corporation
shall have notice thereof, except as expressly provided by applicable law.
ARTICLE SIX
Except as otherwise provided in this Certificate of
Incorporation, the Board of Directors of the Corporation shall have the power to
make, alter or repeal the Bylaws of the Corporation. With respect to the power
of the stockholders of the Corporation to make, alter or repeal the Bylaws of
the Corporation, notwithstanding anything contained in this Certificate of
Incorporation or any provision of law that might otherwise require a lessor
vote, the Bylaws may not be made, altered or repealed by the stockholders, and
no provision inconsistent therewith shall be adopted by the stockholders,
without the affirmative vote of the holders of at least seventy-five percent
(75%) of the voting power of all of the shares of the Corporation entitled to
vote generally in the election of directors, voting together as a single class.
ARTICLE SEVEN
Election of members to the Board of Directors need not be by
written ballot unless the Bylaws of the Corporation shall so provide.
Meetings of the stockholders of the Corporation may be held
within or without the State of Delaware, as the Bylaws may provide. The books of
the Corporation may be kept (subject to any provision contained in the Delaware
General Corporation Law) outside the State of Delaware at such place or places
as may be designated from time to time by the Board of Directors or in the
Bylaws of the Corporation.
ARTICLE EIGHT
A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) under Section 174 of the Delaware General Corporation
Law; or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended. Any repeal or modification of this
provision shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification. The
limitation of liability provided herein shall continue after a director has
ceased to occupy such position as to acts or omissions occurring during such
director's term of terms of office.
3
<PAGE> 4
ARTICLE NINE
A. The Corporation shall to the fullest extent authorized by the
Delaware General Corporation Law, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide prior to such amendment), indemnify and
hold harmless any person who was or is a party, or is threatened to be made a
party to or is otherwise involved in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that such person is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (hereinafter an "Indemnitee") against
expenses, liabilities and losses (including attorneys' fees, judgments, fines,
excise taxes or penalties paid in connection with the Employee Retirement Income
Security Act of 1974, as amended, and amounts paid in settlement) reasonably
incurred or suffered by such Indemnitee in connection therewith; provided,
however, that except as provided in this section with respect to proceedings to
enforce rights to indemnification, the Corporation shall indemnify any such
Indemnitee in connection with a proceeding (or part thereof) initiated by such
Indemnitee only if such proceeding or part thereof was authorized by the Board
of Directors of this Corporation.
B. The right to indemnification conferred in this section shall
include the right to be paid by the Corporation the expenses (including
attorneys' fees) incurred in defending any such proceeding in advance of its
final disposition; provided, however, that, if the Delaware General Corporation
Law requires, an advancement of expenses incurred by an Indemnitee in his
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such Indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such Indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is not further right to appeal that such Indemnitee is
not entitled to be indemnified for such expenses under this section or
otherwise. The rights to indemnification and to the advancement of expenses
conferred in this section shall be contract rights and such rights shall
continue as to an Indemnitee who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the Indemnitee's heirs, executors and
administrators.
C. If a claim under the two preceding paragraphs of this section
is not paid in full by the Corporation within sixty (60) days after a written
claim has been received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be twenty
(20) days, the Indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole or
in part in any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the Indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit. In (i) any suit brought by the
4
<PAGE> 5
Indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the Indemnitee to enforce a right to an advancement of expenses) and
(ii) in any suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the Corporation shall be
entitled to recover such expenses upon a final adjudication that the Indemnitee
has not met any applicable standard for indemnification set forth in the
Delaware General Corporation Law. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the Indemnitee is proper in the circumstances
because the Indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the Indemnitee has not met such applicable standard of
conduct, shall create a presumption that the Indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the Indemnitee is not
entitled to be indemnified, or to such advancement of expenses under this
section or otherwise, shall be on the Corporation.
D. The rights to indemnification and advancement of expenses
conferred in this section shall not be exclusive of any other rights which any
person may have or hereafter acquire under any statute, this Corporation's
Certificate of Incorporation, as it may be amended or restated from
time-to-time, any agreement, vote of stockholders or disinterested directors, or
otherwise. No amendment or repeal of this Article Nine shall apply to or have
any effect on any right to indemnification provided hereunder with respect to
any acts or omissions occurring prior to such amendment or repeal.
E. The Corporation shall have the power to purchase and maintain
insurance, at its expense, to protect itself and any director, officer, employee
or agent of the Corporation or another corporation, partnership, joint venture,
trust or other enterprise (including an employee benefit plan) against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law. The Corporation may also create a trust fund,
grant a security interest and/or use other means (including, but not limited to,
letters of credit, surety bonds and/or similar arrangements), as well as enter
into contracts providing indemnification to the full extent authorized or
permitted by law and including as part thereof provisions with respect to any or
all of the foregoing, to ensure the payment of such amounts as may become
necessary to effect indemnification as provided therein, or elsewhere.
F. For purposes of this section, references to the "Corporation"
shall include any subsidiary of this Corporation from and after the acquisition
thereof by this Corporation, so that any person who is a director, officer,
employee or agent of such subsidiary after the acquisition thereof by this
Corporation shall stand in the same position under the provisions of this
section as such person would have had had such person served in such position
for this Corporation.
5
<PAGE> 6
G. The Corporation may, to the extent authorized from time to
time by the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of this section with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
ARTICLE TEN
The name and mailing address of the incorporator is Scott A.
Schuff, 420 South 19th Avenue, Phoenix, Arizona 85009.
ARTICLE ELEVEN
The number of directors constituting the initial Board of
Directors of the Corporation is two (2). The size of the Board of Directors may
be increased or decreased in the manner provided in the Bylaws of the
Corporation. All corporate powers of the Corporation shall be exercised by or
under the direction of the Board of Directors except as otherwise provided
herein or by law. The name and address of the persons who are to serve as
directors until the first annual meeting of stockholders or until their
successors are elected and qualified are:
Name Address
Scott A. Schuff 420 South 19th Avenue
Phoenix, Arizona 85009
David A. Schuff 420 South 19th Avenue
Phoenix, Arizona 85009
ARTICLE TWELVE
A director may only be removed by the stockholders for cause at
a special meeting of stockholders duly called for such purpose and only by the
affirmative vote of at least two-thirds (2/3) of the stock of this Corporation
issued and outstanding and entitled to vote thereon, notwithstanding that a
lesser percentage may be specified by law. As used herein, "cause" for the
removal of a director shall be deemed to exist (i) if there has been a finding
by not less than a majority of the disinterested directors not subject to the
action that cause exists and such disinterested directors have recommended
removal to the stockholders, or (ii) as otherwise provided by law. A director
may not be removed from office prior to the expiration of his term except as
provided herein.
ARTICLE THIRTEEN
Special meetings of the stockholders of the Corporation, for any
lawful purpose or purposes, may be called only by the Chairman of the Board or
the President, and shall be
6
<PAGE> 7
called by the Chairman of the Board or the President at the written request, or
by resolution adopted by the affirmative vote of a majority of the Board of
Directors. Such request shall state the purpose or purposes of the proposed
meeting. Stockholders of the Corporation shall not be entitled to request a
special meeting of the stockholders.
ARTICLE FOURTEEN
Subject to any conditions imposed by law, the Corporation
expressly denies the application of the Arizona Corporate Takeover Laws, Arizona
Revised Statutes Sections 10-2701 et seq., or any successor thereto.
ARTICLE FIFTEEN
The Corporation reserves the right to amend, alter, change, or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by the Delaware General Corporation Law.
I, THE UNDERSIGNED, for the purposes of forming a Corporation
under the laws of the State of Delaware, do make, file and record this
Certificate, and do certify that the facts herein stated are true.
DATED this 6 day of May, 1997.
_____________________________
Scott A. Schuff, Incorporator
7
<PAGE> 1
EXHIBIT 3.1(b)
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION OF
SCHUFF STEEL COMPANY
Schuff Steel Company, a corporation organized and existing under the
General Corporation Law of Delaware ("Corporation") does hereby certify:
FIRST: The Corporation has not received any payment for any of its
stock.
SECOND: The amendment to the Certificate of Incorporation of the
Corporation set forth in the following resolution unanimously approved by the
Corporation's Board of Directors and was duly adopted in accordance with the
provisions of Section 241 of the General Corporation Law of the State of
Delaware:
"RESOLVED, that the first paragraph of Article Five of the
Certificate of Incorporation of the Corporation is amended in its
entirety to read as follows:
"The total number of shares of stock which the Corporation
shall have authority to issue is Twenty-One Million (21,000,000),
consisting of One Million (1,000,000) shares of Preferred Stock,
par value $0.001 per share (hereinafter referred to as "Preferred
Stock"), and Twenty Million (20,000,000) shares of Common Stock,
par value $0.001 per share (hereinafter referred to as "Common
Stock")."
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to its Certificate of Incorporation to be signed by its duly
authorized director (as no officers have been elected as of this date), this
7th day of May, 1997.
SCHUFF STEEL COMPANY
/s/ Scott A. Schuff
-----------------------
By: Scott A. Schuff
Its: Director
<PAGE> 1
Exhibit 3.2
BY-LAWS
OF
SCHUFF STEEL COMPANY
ARTICLE 1
OFFICES
Section 1.1 Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 1.2 Other Offices. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors or the officers may from time to time determine.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
Section 2.1 Place of Meetings. Meetings of the stockholders
for the election of directors or for any other purpose shall be held at such
time and place, either within or without the State of Delaware, as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2.2 Annual Meetings. The annual meetings of
stockholders shall be held on such date and at such time as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting, at which meetings the stockholders shall elect by a plurality vote
members of the Board of Directors in the class whose term shall expire at such
annual meeting, and transact such other business as may properly be brought
before the meeting. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 2.3 Special Meetings. Subject to the rights of the
holders of any series of preferred stock, par value $0.001 per share, of the
Corporation (the "Preferred Stock") or any other series or class of stock as set
forth in the Certificate of Incorporation, special meetings of the stockholders
may be called for any purpose only by the Chairman of the Board or the
President, and shall be called by the Chairman of the Board or the President
pursuant to a resolution adopted by a majority of the entire Board of Directors.
As used in this Article and in these By-Laws generally, the term "entire Board
of Directors" means the total number of directors which the Corporation would
have if there were no vacancies.
<PAGE> 2
Section 2.4 Quorum. Except as otherwise provided by law or by
the Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote, present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given not less than ten nor more than sixty days
before the date of the adjourned meeting to each stockholder entitled to vote at
the meeting.
Section 2.5 Voting. Unless otherwise required by law, the
Certificate of Incorporation or these By-Laws, any question brought before any
meeting of stockholders shall be decided by the vote of the holders of a
majority of the stock represented and entitled to vote thereat. Each stockholder
represented at a meeting of stockholders shall be entitled to cast one vote for
each share of the capital stock entitled to vote held by such stockholder. Votes
may be cast in person or by proxy but no proxy may be voted on or after three
years from its date, unless such proxy provides for a longer period. The Board
of Directors, in its discretion, or the officer of the Corporation presiding at
a meeting of stockholders, in such officer's discretion, may require that any
votes cast at such meeting be cast by written ballot.
Section 2.6 List of Stockholders Entitled to Vote. The officer
of the Corporation who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 2.7 Stock Ledger. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 2.6 or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
Any good faith decision in regard to such matters by the officer of the
Corporation who has charge of the stock ledger of the Corporation, which may be
the Secretary, any Assistant Secretary or any other appropriate officer of the
Corporation, shall be final.
2
<PAGE> 3
Section 2.8 Nomination of Directors. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors of the Corporation. Nominations of persons for election to
the Board of Directors may be made at any annual meeting of stockholders (a) by
or at the direction of the Board of Directors (or any duly authorized committee
thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder
of record on the date of the giving of the notice provided for in this Section
2.8 and on the record date for the determination of stockholders entitled to
vote at such annual meeting and (ii) who gives timely notice in proper written
form to the Secretary of the Corporation, as prescribed below.
To be timely, a stockholder's notice must be delivered to or
mailed and received by the Secretary of the Corporation at least 120 days prior
to the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that with respect to the annual meeting to be
held in 1997, the anniversary date shall be deemed to be May 15, 1997; and
further provided, however, that in the event that the annual meeting is called
for a date that is not within 30 days before or after such anniversary date,
notice by the stockholder in order to be timely must be received not later than
the close of business on the tenth day following the day on which such notice of
the date of the annual meeting was mailed or such public disclosure of the date
of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth (i) the name and address of the stockholder who intends
to make the nomination and of the person or persons to be nominated; (ii) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting (including the number of shares of
stock of the Corporation owned beneficially or of record by such stockholder and
the nominee or nominees) and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; (iii) a
description of all arrangements or understandings between the stockholders and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (iv) such other information regarding each nominee proposed by such
stockholder as would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission had
each nominee been nominated, or intended to be nominated, by the Board of
Directors; and (v) the consent of each nominee to serve as a director of the
Corporation if so elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 2.8. If the Chairman of the meeting determines that a nomination was not
made in accordance with the foregoing procedures, the Chairman shall declare to
the meeting that the nomination was defective and such defective nomination
shall be disregarded. Notwithstanding compliance with the foregoing provisions,
the Board of Directors shall not be obligated to include information as to any
stockholder nominee for director in any proxy statement or other communication
sent to stockholders, except as provided by applicable law.
3
<PAGE> 4
Section 2.9 Business at Annual Meetings. No business may be
transacted at an annual meeting of stockholders, other than business that is
either (a) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors (or any duly authorized
committee thereof), (b) otherwise properly brought before the annual meeting by
or at the direction of the Board of Directors (or any duly authorized committee
thereof) or (c) otherwise properly brought before the annual meeting by any
stockholder of the Corporation (i) who is a stockholder of record on the date of
the giving of the notice provided for in this Section 2.9 and on the record date
for the determination of stockholders entitled to vote at such annual meeting
and (ii) who gives timely notice in proper written form to the Secretary of the
Corporation, as prescribed below.
To be timely, a stockholder's notice must be delivered to or
mailed and received by the Secretary of the Corporation at least 120 days prior
to the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that with respect to the annual meeting to be
held in 1997, the anniversary date shall be deemed to be May 15, 1997; and
further provided, however, that in the event that the annual meeting is called
for a date that is not within 30 days before or after such anniversary date,
notice by the stockholder in order to be timely must be received not later than
the close of business on the tenth day following the day on which such notice of
the date of the annual meeting was mailed or such public disclosure of the date
of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting; (ii) the name and record address of such stockholder;
(iii) the class or series and number of shares of capital stock of the
Corporation that are owned beneficially or of record by such stockholder; (iv) a
description of all arrangements or understandings between such stockholder and
any other person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material interest of such
stockholder in such business; and (v) a representation that such stockholder
intends to appear in person or by proxy at the annual meeting to bring such
business before the meeting.
No business shall be conducted at the annual meeting of
stockholders except business brought before the annual meeting in accordance
with the procedures set forth in this Section 2.9. If the Chairman of the
meeting determines that business was not properly brought before the annual
meeting in accordance with the foregoing procedures, the Chairman shall de clare
to the meeting that the business was not properly brought before the meeting and
such business shall not be transacted. Notwithstanding compliance with the
foregoing provisions, the Board of Directors shall not be obligated to include
information as to any stockholder business or proposals in any proxy statement
or other communication sent to stockholders, except as provided by applicable
law.
4
<PAGE> 5
ARTICLE 3
DIRECTORS
Section 3.1 Duties and Powers. The business and affairs of the
Corporation shall be managed and controlled by a Board of Directors, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the stockholders.
Section 3.2 Number. The first Board of Directors shall consist
of the persons named in the Certificate of Incorporation. Thereafter, the Board
shall consist of not less than one (1) nor more than nine (9) members. The Board
of Directors will have the power to increase or decrease its size subject to
these limits and to fill any vacancies that may occur in its membership, whether
resulting from an increase in the size of the Board or otherwise.
Section 3.3 Election of Directors. Directors shall be elected
by a plurality of the votes cast at annual meetings of stockholders or special
meetings called for that purpose. Any director may resign at any time upon
notice to the Corporation. Directors need not be stock holders. Each director
elected shall hold office until his or her successor is duly elected and
qualified, or until he or she resigns or is removed as a director, whichever
occurs first.
Section 3.4 Meetings. The Board of Directors of the
Corporation may hold meetings both regular and special, either within or without
the State of Delaware. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as may from time to time be
determined by the Board of Directors. Special meetings of the Board of Directors
may be called by the Chairman or the President or by a majority of the directors
then in office. Notice thereof stating the place, date and hour of the meeting
shall be given to each director either by mail not less than 48 hours before the
date of the meeting, by telephone, facsimile or telegram on 24 hours' notice, or
on such shorter notice as the person or persons calling such meeting may deem
necessary or appropriate in the circumstances.
Section 3.5 Quorum. Except as may be otherwise specifically
provided by law, the Certificate of Incorporation or these By-Laws, at all
meetings of the Board of Directors, a majority of the Board of Directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors. If a quorum shall not be present at any meeting of
the Board of Directors, the directors present at that meeting may adjourn the
meeting, without notice other than announcement at the meeting, until a quorum
is present.
Section 3.6 Actions of Board. Unless otherwise provided by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members
5
<PAGE> 6
of the Board of Directors or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or committee.
Section 3.7 Meetings by Means of Conference Telephone. Unless
otherwise provided by the Certificate of Incorporation or these By-Laws, members
of the Board of Directors of the Corporation, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 3.7 shall
constitute presence in person at such meeting.
Section 3.8 Committees. The Board of Directors may, by
resolution passed by a majority of the entire Board of Directors, designate one
or more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the event of the absence or
disqualification of a member of a committee, and in the absence of a designation
by the Board of Directors of an alternate member to replace the absent or
disqualified member, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member. A majority of the
members of a committee, including any alternate members, shall constitute a
quorum of such committee. Any committee, to the extent allowed by law and
provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation. Each committee shall
keep regular minutes and report to the Board of Directors when required.
Section 3.9 Compensation. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings. In addition, the Board of
Directors may adopt one or more director compensation plans using securities of
the Corporation.
Section 3.10 Interested Directors. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of the Corporation's directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present at
or participates in the meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction, or solely because such director's
vote is counted for such purpose if (i) the material facts as to such director's
relationship or interest and as to the contract or transaction are disclosed or
are
6
<PAGE> 7
known to the Board of Directors or the committee, and the Board of Directors or
committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
such director's relationship or interest and as to the contract or transaction
are disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by a vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board of Directors,
a committee thereof, or the stockholders. Interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee that authorizes the contract or transaction.
ARTICLE 4
OFFICERS
Section 4.1 General. The officers of the Corporation shall be
chosen by the Board of Directors and may include a President, a Secretary, and a
Treasurer. The Board of Directors, in its discretion, may also choose a Chairman
of the Board of Directors (who must be a director) and one or more Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any
number of offices may be held by the same person, unless otherwise prohibited by
law, the Certificate of Incorporation or these By-Laws. The officers of the
Corporation need not be stockholders of the Corporation nor, except in the case
of the Chairman of the Board of Directors, directors of the Corporation. The
officers of the Corporation may sign and execute documents on behalf of the
Corporation, whether requiring a seal or otherwise, when authorized by these
ByLaws, the Board of Directors, the Chairman or President.
Section 4.2 Election. The Board of Directors at its first
meeting held after each annual meeting of stockholders shall elect the officers
of the Corporation who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be deter mined from time
to time by the Board of Directors; and all officers of the Corporation shall
hold office until their successors are chosen and qualified, or until their
earlier resignation or removal. Any officer elected by the Board of Directors
may be removed at any time by the affirmative vote of a majority of the Board of
Directors. Any vacancy occurring in any office of the Corporation shall be
filled by the Board of Directors. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors or by a committee thereof.
Section 4.3 Voting Securities Owned by the Corporation. Powers
of attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed in
the name of and on behalf of the Corporation by the Chairman, President or any
Vice President and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to vote
in person or by proxy at any meeting of security holders of any corporation in
which the Corporation may own
7
<PAGE> 8
securities and at any such meeting shall possess and may exercise any and all
rights and power incident to the ownership of such securities and which, as the
owner thereof, the Corporation might have exercised and possessed if present.
The Board of Directors may, by resolution, from time to time confer like powers
upon any other person or persons.
Section 4.4 Chairman of the Board of Directors. The Chairman
of the Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. The Chairman may be the Chief
Executive Officer of the Corporation, and except where by law the signature of
the President is required, the Chairman of the Board of Directors shall possess
the same power as the President to sign all contracts, certificates and other
instruments of the Corporation which may be authorized by the Board of
Directors. During the absence or disability of the President, the Chairman of
the Board of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board of Directors shall also
perform such other duties and may exercise such other powers as from time to
time may be assigned to the Chairman by these By-Laws or by the Board of
Directors. All officers of the Corporation shall be under the supervision of the
Chairman, if there be one, and shall perform all such duties as shall be
assigned by the Chairman.
Section 4.5 President. The President, if there shall be one,
shall, subject to the control of the Board of Directors and, if there be one,
the Chairman of the Board of Directors, have general supervision of the business
of the Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. In the event of the absence or disability of
the Chairman of the Board of Directors, or if there be none, the President shall
preside at all meetings of the stockholders and the Board of Directors. The
President shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to the President by these By-Laws,
by the Board of Directors or by the Chairman.
Section 4.6 Vice Presidents. At the request of the President
or in the President's absence or in the event of the President's inability or
refusal to act (and if there be no Chairman of the Board of Directors), the Vice
President or the Vice Presidents if there is more than one (in the order
designated by the Board of Directors) shall perform the duties of the President,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Each Vice President shall perform such other
duties and have such other powers as the Board of Directors, Chairman and/or the
President from time to time may prescribe.
Section 4.7 Secretary. The Secretary shall attend all meetings
of the Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
requested or appropriate. The Secretary shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors, Chairman or President. If the Secretary shall be unable or shall
refuse to cause to be given notice of all meetings of the stockholders and
special meetings of the Board of Directors, and if there be no Assistant
Secretary, then either the Board of
8
<PAGE> 9
Directors or the President may choose another officer to cause such notice to be
given. The Secretary shall have custody of the seal of the Corporation, if there
is one, and the Secretary or any Assistant Secretary, shall have authority to
affix the same to any instrument requiring it and when so affixed, it may be
attested by the signature of the Secretary or by the signature of any Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by such
officer's signature. The Secretary shall see that all books, reports,
statements, certificates and other documents and records required by law to be
kept or filed are properly kept or filed, as the case may be.
Section 4.8 Treasurer. The Treasurer shall supervise the
maintenance of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Board of Directors or Chairman. The Treasurer shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, Chairman or
President, and shall render to the Chairman, President and the Board of
Directors, at regular meetings of the Board of Directors, or when the Board of
Directors or Chairman so requires, an account of all transactions as Treasurer
and of the financial condition of the Corporation. The Treasurer shall perform
such other duties and have such powers as the Board of Directors, Chairman or
President from time to time may prescribe. If required by the Board of Directors
or Chairman, the Treasurer shall give the Corporation a bond in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
or Chairman for the faithful performance of the duties of such office and for
the restoration to the Corporation, in case of the Treasurer's death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in the Treasurer's possession or under
such officer's control belonging to the Corporation.
Section 4.9 Assistant Secretaries. Assistant Secretaries, if
there be any, shall per form such duties and have such powers as from time to
time may be assigned to them by the Board of Directors, the Chairman, the
President, any Vice President, if there be one, or the Secretary, and in the
absence of the Secretary or in the event of such officer's disability or refusal
to act, shall perform the duties of the Secretary, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
Secretary.
Section 4.10 Assistant Treasurers. Assistant Treasurers, if
there be any, shall perform such duties and have such powers as from time to
time may be assigned to them by the Board of Directors, the Chairman, the
President, any Vice President, if there be one, or the Treasurer, and in the
absence of the Treasurer or in the event of such officer's disability or refusal
to act, shall perform the duties of the Treasurer, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
Treasurer. If required by the Board of Directors or Chairman, an Assistant
Treasurer shall give the Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors or Chairman for the
faithful performance of the duties of such officer's office and for the
restoration to the Corporation, in case of the Assistant Treasurer's death,
resignation, retirement or removal from office, of all books, papers, vouchers,
9
<PAGE> 10
money and other property of whatever kind in such officer's possession or under
such officer's control belonging to the Corporation.
Section 4.11 Other Officers. Such other officers as the Board
of Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors, Chairman, or
President. The Board of Directors may delegate to any other officer of the
Corporation the power to choose such other officers and to prescribe their
respective duties and powers.
ARTICLE 5
STOCK
Section 5.1 Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by such holder in the Corporation.
Section 5.2 Signatures. When a certificate is countersigned by
(i) a transfer agent other than the Corporation or its employee, or (ii) a
registrar other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
Section 5.3 Lost Certificates. The Secretary may direct a new
certificate to be issued in place of any certificate issued by the Corporation
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed. When authorizing the issuance of a replacement certificate, the
Secretary may, in such officer's discretion and as a condition precedent to the
issuance there of, require the owner of such lost, stolen or destroyed
certificate, or such owner's legal representative, to advertise the same in such
manner as the Secretary shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 5.4 Transfers. Stock of the Corporation may be
transferred in the manner prescribed by law and in these By-Laws. Transfers of
stock shall be made on the books of the Corporation only by the person named in
the certificate or by such person's attorney lawfully constituted in writing and
upon the surrender of the certificate therefor, which shall be canceled before a
new certificate shall be issued.
10
<PAGE> 11
Section 5.5 Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than 60 days nor less than 10
days before the date of such meeting, nor more than 60 days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 5.6 Beneficial Owners. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
ARTICLE 6
NOTICES
Section 6.1 Notices. Whenever written notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stock holder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corporation, with postage
thereon prepaid or such notice may be given personally, by facsimile, overnight
delivery, telegram, telex, or cable at such address. Such notice shall be deemed
to be given at the earlier of receipt of such notice or at the time when the
same shall be deposited in the United States mail or otherwise transmitted.
Section 6.2 Waivers of Notice. Whenever any notice is required
by law, the Certificate of Incorporation or these By-Laws to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
ARTICLE 7
GENERAL PROVISIONS
Section 7.1 Dividends. Dividends upon the capital stock of the
Corporation, subject to applicable law and the provisions of the Certificate of
Incorporation, if any, may be declared by
11
<PAGE> 12
the Board of Directors at any regular or special meeting, and may be paid in
cash, in property, or in shares of the capital stock. Before payment of any
dividend, there may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the Board of Directors from time to time, in
its absolute discretion, deems proper as a reserve or reserves for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
Section 7.2 Disbursements. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
Section 7.3 Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
Section 7.4 Corporate Seal. The Corporation may have a
corporate seal, which shall have inscribed thereon the words "Corporate Seal".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise. However, nothing in these By-Laws or in the
Certificate of Incorporation of the Corporation shall be construed to require a
corporate seal to be affixed to any document.
ARTICLE 8
AMENDMENTS
Section 8.1 These By-Laws may be altered, amended or repealed,
in whole or in part, or new By-Laws may be adopted by the stockholders, subject
to the provisions of the Certificate of Incorporation, or by the Board of
Directors; provided, however, that notice of such alteration, amendment, repeal
or adoption of new By-Laws be contained in the notice of such meeting of
stockholders or Board of Directors as the case may be.
12
<PAGE> 1
Exhibit 5
May __, 1997
Schuff Steel Company
420 South 19th Avenue
Phoenix, Arizona 85009
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as counsel to Schuff Steel Company, a Delaware
corporation (the "Company"), in connection with the preparation and filing with
the United States Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "Securities Act"), of the Company's Registration
Statement on Form S-1 (the "Registration Statement"), relating to the
registration of 2,530,000 shares of the Company's Common Stock, par value $.001
per share (the "Common Stock"). In arriving at the opinions expressed below, we
have reviewed the Registration Statement and the exhibits thereto. In addition,
we have reviewed the originals or copies certified or otherwise identified to
our satisfaction of all such corporate records of the Company and such other
instruments and other certificates of public officials, officers and
representatives of the Company and such other persons, and we have made such
investigation of law as we have deemed appropriate as a basis for the opinions
expressed below. In rendering the opinions expressed below, we have assumed
that the signatures on all documents that we have reviewed are genuine and that
the Common Stock conforms in all material respects to the description thereof
set forth in the Registration Statement.
Based upon the foregoing, we advise you that, in our opinion, when the
following events have occurred:
(a) The Registration Statement has become effective under the
Securities Act;
(b) The due authorization, registration, and delivery of the
certificate or certificates evidencing the Common Stock has occurred;
(c) The due authorization, execution and delivery of the Underwriting
Agreement;
(d) The compliance with all applicable contracts, agreements, and
instruments in respect of the issuance of the Common Stock; and
(e) The Common Stock is issued and sold and consideration has been
received therefore in the manner specified in the Registration Statement and
the exhibits thereto; then
The Common Stock to be issued by you will be legally issued, fully paid
and non-assessable.
The foregoing opinion is limited to the federal law of the United
States of America and the General Corporation Law of the State of Delaware. We
express no opinion as to the application of the various state securities laws
to the offer, sale, issuance or delivery of the Common Stock.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Registration Statement and in the Prospectus included therein.
Very truly yours,
SNELL & WILMER L.L.P.
<PAGE> 1
EXHIBIT 10.1(a)
BANK ONE, ARIZONA, NA
LOAN AGREEMENT
This Agreement is entered into by and between SCHUFF STEEL COMPANY, an
Arizona corporation ("Borrower") and Bank One, Arizona, NA, a national banking
association ("Bank").
Borrower has applied to Bank for a loan in the amount of $1,000,000.00. In
consideration of Bank making said loan the Borrower hereby warrants and agrees
as follows:
1. THE LOAN. This loan shall be repaid in accordance with the terms of the
promissory note(s) prepared by Bank and executed by Borrower. The purpose of
this loan is to support Standby Letters of Credit.
2. BUSINESS ORGANIZATION. Borrower is a corporation. The primary business
operation of Borrower is structural steel erection company. Borrower's form of
organization and primary business operation shall remain the same during the
term of this Agreement.
3. COLLATERAL. As security for the loan the Borrower will provide the
following collateral under duly executed security documents and agrees to be
bound by the terms contained therein:
S/A - INVENTORY, RECEIVABLES AND RIGHTS TO PAYMENT
S/A - EQUIPMENT
4. NET WORTH. A minimum tangible net worth of $6,100,000.00 and a minimum
owner's equity of 21.0% shall be maintained where "Owner's Equity" "Owner's
Equity Percentage" shall mean the results obtained by dividing (A) Tangible Net
Worth (as herein defined) by (B) Borrower's Total Assets on a six month average.
5. NET WORKING CAPITAL. While the loan is outstanding, current assets
shall be maintained in excess of current liabilities by $4,900,000.00 and a
current ratio of 1.25:1.00 shall be maintained and calculated by dividing
current assets by current liabilities after deducting short term advances to
shareholders. The outstanding balance on the $6,500,000.00 Revolving Line of
Credit will be considered to be a current liability for the purpose of
calculating both "Net Working Capital" and "Current Ratio".
6. INVESTMENT IN FIXED ASSETS. Acquisition or purchase of fixed assets
shall not exceed $N/A during any 12-month period, without prior consent of Bank.
7. LEASING OF CAPITAL EQUIPMENT. No lease of personal property will be
entered into which would cause Borrower's total rental obligations for personal
property to exceed $N/A per fiscal year, without prior consent of Bank.
8. SUBORDINATION OF EXISTING DEBT. The following indebtedness of Borrower
will be subordinated to Bank's loan in a manner satisfactory to Bank:
NAME OF CREDITOR AMOUNT
---------------- ------
(a) $
(b) N/A $
(c) $
9. DIVIDENDS. No corporate dividends in excess of $N/A shall be paid
during any 12-month period, without prior consent of Bank.
10. COMPENSATION. No annual salary, bonuses, withdrawals, or other
compensation, in cash or otherwise, shall be paid in excess of the following
limits to the persons indicated or to any other person.
1
<PAGE> 2
NAME ANNUAL AMOUNT
---- -------------
(a) N/A $
(b) $
(c) $
11. CHANGE OF OWNERSHIP. Borrower will not repurchase any company issued
stock, buy out a Partnership interest or materially change ownership of the
company without prior written consent of Bank.
12. FINANCIAL STATEMENTS. Borrower shall furnish Bank: (i) as soon as
available and in any event within one hundred fifty (150) days after the end of
each fiscal year of Borrower, financial statements which accurately reflect
Borrower's assets, liabilities and net worth as of the end of the fiscal year
and profit and loss statements for the fiscal year with the following
certification requirement: Independent certified public financial statements,
(ii) as soon as available and in any event within sixty (60) days after the end
of each monthly period, financial reports of Borrower which accurately reflect
Borrower's assets, liabilities and net worth as of the end of the period, and
with the following certification requirement: Borrower prepared, and (iii) as
soon as available and in any event within thirty (30) days of filing, a copy of
Borrower's federal income tax return(s) for each year, together with all
schedules and other documents filed with such returns. Borrower shall furnish
such other information as Bank may reasonably require from time to time.
Borrower shall cause Guarantor, David A. and Nancy A. Schuff, to furnish
Bank: (A) annual updated balance sheet in such form and with such certifications
as may be reasonably required by Bank, and (B) a copy of such person's federal
income tax return for such calendar year, together with all schedules and other
documents filed with such return, both by August 15th of each year.
Borrower shall cause Guarantor, Scott A. Schuff, to furnish Bank: (A)
annual updated balance sheet in such form and with such certifications as may be
reasonably required by Bank, and (B) a copy of such person's federal income tax
return for such calendar year, together with all schedules and other documents
filed with such return, both by August 15th of each year.
13. WARRANTIES AND COVENANTS.
(a) Borrower warrants that all transactions with Bank, including the
execution of all agreements and instruments by any representative on behalf of
Borrower, are and will be duly authorized and that Bank may rely upon any
statements and representations made by Borrower with respect to such
authorizations.
(b) Borrower warrants that all financial statements and other
statements or reports given to Bank are and will be accurate.
(c) Borrower will keep all books and records of the business on a
consistent basis in accordance with generally accepted accounting practices and
will permit a representative of Bank to examine and audit the books at such
reasonable times as Bank may request.
(d) Borrower will maintain executive and management personnel
satisfactory to Bank.
(e) Borrower will promptly inform Bank of any material litigation
involving Borrower or of any other adverse matter which may occur, the effect of
which may prejudice the payment of the loan.
(f) Borrower will not, in the operation of the business, incur other
indebtedness for borrowed money, or act as guarantor for any indebtedness of
others or lend money, or encumber any of the assets of the business except to
Bank. Borrower will not sell, transfer or assign any assets or engage in any
other material transactions, except in the ordinary course of business.
(g) Borrower will pay all current bills and obligations when due.
Borrower will keep all permits and franchises necessary for the conduct of its
business in force and effect and will keep all of its equipment, machinery and
vehicles in good repair.
(h) Borrower will maintain adequate fire, public liability and other
hazard liability insurance. All policies covering property given as security for
the loan(s) shall have a loss payable clause in favor of Bank.
(i) This Agreement shall continue as long as the loan or any part
thereof or any renewal or extension thereof remains unpaid.
(j) No consent or waiver by the Bank of the terms of this Agreement
shall be effective unless in writing. Time is of the essence of this Agreement.
No waiver of any breach or default of Borrower shall be deemed a waiver of any
breach or default thereafter occurring or a waiver of the time is of the essence
provision. Failure of Bank to take steps to collect the indebtedness due it or
to exercise its rights in the collateral shall not be a waiver of its right to
take action at a subsequent date.
2
<PAGE> 3
14. DEFAULT. Any one of the following events shall constitute the default
of Borrower under this loan and all collateral instruments securing the unpaid
balance thereof:
(a) Nonpayment of any installment of principal or interest when due.
(b) Breach of any of Borrower's warranties or the making of any
material misrepresentation.
(c) Appointment of a receiver or trustee to take possession of the
business or of any portion of the collateral and the continuance of such
receiver or trustee in possession for a period of 10 days.
(d) Petition by Borrower for reorganization or arrangement under the
bankruptcy laws.
(e) Attachment, garnishment, levy of execution, or judicial seizure
of any portion of the collateral which is not dismissed or stayed within 10
days.
(f) Insolvency of Borrower.
(g) Discontinuance by Borrower of the business operations or
abandonment of any substantial portion of Borrower's assets.
If any event of default shall occur, the whole of the principal sum
then remaining unpaid on all notes and other obligations to Bank, together with
the interest thereon, shall become immediately due and payable at the election
of Bank.
If suit is instituted to collect the notes and other obligations,
Borrower promises to pay, in addition to the costs and disbursements allowed by
law, such additional sums as the court may award as attorney's fees.
15. EXPENSES. Borrower shall reimburse Bank, upon demand, for all of
Bank's direct expenses in connection with making any and all loans and the
perfection of Bank's security interests.
16. CONDITION OF BANK'S OBLIGATIONS. All agreements or commitments of Bank
to make any loan or advance to Borrower are and will be subject to the following
terms and conditions:
(a) Due and punctual performance by Borrower of all of Borrower's
agreements with Bank.
(b) Correctness of all statements and representations by Borrower to
Bank.
(c) Execution and delivery by Borrower of all loan and security
instruments in such form as Bank shall require.
(d) Acceptance and approval by Bank of all collateral.
(e) Payment by Borrower of any and all fees and charges specified by
Bank.
(f) Verification and approval of Borrower's credit.
(g) No material adverse matter occurring.
17. Any modification, waiver or other change of this agreement must be
agreed to in writing.
18. ADDITIONAL PROVISIONS. See attached sheet for additional provisions
incorporated by reference in this Agreement.
IN WITNESS WHEREOF, this Agreement is executed this 30th day of June, 1996.
BORROWER
SCHUFF STEEL COMPANY,
an Arizona corporation
By_____________________________________
David A. Schuff, Chairman
BANK
BANK ONE, ARIZONA, NA,
a national banking association
By_____________________________________
Brad Richards, Vice President
3
<PAGE> 1
EXHIBIT 10.1(b)
- --------------------------------------------------------------------------------
APPROVED BY:
- --------------------------------------------------------------------------------
Officer Name Officer No. Dept./Branch Name
BRAD RICHARDS 269181 COMMERCIAL BANKING GROUP
- --------------------------------------------------------------------------------
Dept./Branch No. Account No. Commitment No. Note No. Class
781 7938640665 273 281
- --------------------------------------------------------------------------------
Loan $ Name
1,000,000.00 SCHUFF STEEL COMPANY, AN ARIZONA CORPORATION
- --------------------------------------------------------------------------------
Rate Interest From Renewal of Note
BOAZ PRIME + 0.25% TO MOVE WITH PRIME JUNE 30, 1996
- --------------------------------------------------------------------------------
Collateral
S/A - A/R , INVENTORY; S/A - EQUIPMENT
- --------------------------------------------------------------------------------
BANK ONE, ARIZONA, NA
REVOLVING LINE OF CREDIT NOTE
VARIABLE RATE
Phoenix, Arizona June 30, 1996
FOR VALUE RECEIVED, the undersigned ("Borrower"), promises to pay on or
before June 29, 1997 to BANK ONE, ARIZONA, NA, a national banking association,
("Bank"), or order, the aggregate principal amount outstanding on Borrower's
revolving line of credit as shown on Bank's records which shall at all times be
conclusive and govern, with interest payable monthly on the unpaid balance
outstanding from time to time at an annual rate equal to one quarter percent
(0.25%) more than the rate of interest publicly announced by BANK ONE, ARIZONA,
NA, as its "prime rate", as such rate shall change from time to time during the
term hereof. Interest is to be charged on a daily basis for the actual number of
days the principal is outstanding from the date of disbursement to date of
maturity. The rate of interest agreed to shall include the interest rate as
shown above, in accordance with the terms of this note, plus any compensating
balance requirement and any additional charges, costs and fees incident to this
loan to the extent they are deemed to be interest under applicable Arizona law.
It is expressly agreed by Borrower that the maximum outstanding principal at any
one time on this note shall not exceed the amount of ONE MILLION AND 00/100
DOLLARS ($1,000,000.00), and the amount outstanding on this note at any specific
time shall be the total amount advanced hereunder by Bank less the amount of
principal payments made hereon from time to time by Borrower. All amounts
payable hereunder shall be paid in lawful money of the United States. Should the
rate of interest as calculated under this note exceed that allowed by law, the
applicable rate of interest will be the maximum rate of interest allowed by
applicable law.
Principal and interest shall be payable at the Commercial Banking Center
office of Bank One, Arizona, NA in Phoenix, Arizona, or at such other place as
the holder hereof may designate. At Bank's option, any payments may be applied
first to accrued interest and then to principal. All past-due payments of
principal or interest shall bear interest from their due date until paid at a
rate of interest 2% per annum higher than the interest rate specified above or
12% per annum, whichever is higher, payable on demand.
This note shall become immediately due and payable at the option of the
holder hereof without presentment or demand or any notice to Borrower or any
other person obligated hereon, upon default in the payment of any of the
principal hereof or any interest thereon when due, or in payment under any other
agreement between Borrower and Bank, or if any event occurs or condition exists
which authorized the acceleration of the maturity hereof under any security
agreement, mortgage, deed of trust or other agreement made by Borrower in favor
of Bank. Failure to exercise this option shall not constitute a waiver of the
right to exercise the same in the event of any subsequent default.
In the event any holder hereof utilizes the services of an attorney in
attempting to collect the amounts due hereunder or to enforce the terms hereof
or of any agreements related to this indebtedness, or if any holder hereof
becomes party plaintiff or defendant in any legal proceeding in relation to the
property described in any instrument securing this note or for the recovery or
protection of the indebtedness evidenced hereby, Borrower, its successors and
assigns, shall repay to such holder hereof, on demand, all costs and expenses so
incurred, including reasonable attorneys' fees, including those costs, expenses
and attorneys' fees incurred after the filing by or against the Borrower of any
proceeding under any chapter of the Bankruptcy Act, or similar federal or state
statute, and whether incurred in connection with the involvement of any holder
hereof as creditor
1
<PAGE> 2
in such proceedings or otherwise.
2
<PAGE> 3
Borrower and all sureties, endorsers and guarantors of this note waive
demand, presentment for payment, notice of non-payment, protest, notice of
protest and all other notice, filing of suite and diligence in collecting this
note or the release of any party primarily or secondarily liable hereon and
further agree that it will not be necessary for any holder hereof, in order to
enforce payment of this note by any of them, to first institute suit or exhaust
its remedies against any maker or others liable herefor, and consent to any
extension or postponement of time of payment of this note or any other
indulgence with respect hereto without notice thereof to any of them.
Bank and Borrower will establish specific instructions and procedures by
which draws against said credit will be presented for disbursement, but nothing
contained herein shall create a duty on the part of Bank to make said
disbursement if Borrower is in default.
Address:
P.O. Box 39670
Phoenix, AZ 85069-9670
SCHUFF STEEL COMPANY,
an Arizona corporation
By____________________________________
David A. Schuff, Chairman
Borrower's Signature
3
<PAGE> 1
EXHIBIT 10.2(a)
REVOLVING LINE OF CREDIT
LOAN AGREEMENT
(ACCOUNTS RECEIVABLE AND INVENTORY)
This agreement is entered into by and between Schuff Steel Company, an Arizona
corporation ("Borrower") and Bank One, Arizona, NA ("Bank").
RECITALS:
Borrower desires to obtain from Bank a revolving line of credit ("Loan") and
Bank is willing to make the Loan, but only on the terms and conditions
hereinafter set forth.
NOW, THEREFORE in consideration of the premises and the mutual promises herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. LOAN.
1.1 REVOLVING LINE OF CREDIT. Subject to the terms and conditions contained
herein and in the other documents, instruments and agreements executed in
connection with the Loan and the security therefor ("Loan Documents"), Bank will
establish for Borrower the Loan as a revolving line of credit against which Bank
will make advances ("Advances") from time to time for the purpose of providing
working capital to Borrower. Subject to the terms hereof, Borrower shall have
the right to obtain Advances, repay Advances and obtain additional Advances;
however, all of the Advances hereunder shall be viewed as a single loan. At no
time shall the unpaid principal balance of the Loan exceed the amount set forth
in Section 13 hereof ("Maximum Amount") and all Advances of the Loan shall be
made on or before the date set forth in Section 13 hereof.
1.2 ADVANCES. Subject to the terms and conditions hereof, Advances of the Loan
will be made in amounts not to exceed the amount ("Borrowing Base") calculated
in accordance with the formula set forth in the Borrowing Base Certificate,
attached hereto as Exhibit A and by this reference incorporated herein. In
calculating the Borrowing Base, the percentage set forth in Section 13 hereof of
the amount of Total Eligible Accounts Receivable and the percentage set forth in
Section 13 hereof of the amount (determined on the basis of the lower of cost or
market value) of Total Eligible Inventory shall be used. "Eligible Account
Receivable" is an amount owing to Borrower, as determined by Bank in its sole
and absolute discretion, which has arisen from the delivery and/or shipment of
products previously made and from services rendered for which an invoice has
been issued by Borrower to its customer ("Customer") (a) which amount is not
subject to any offset, counterclaim or defense asserted by the Customer, (b)
which amount is subject to a perfected security interest in favor of Bank and is
not subject to any other security interest, lien, claim or encumbrances, (c)
which amount has not remained unpaid for more than the number of days set forth
in Section 13 after the date due under the terms of the related invoice, (d)
where not more than fifteen percent (15%) of the total amount owing from the
Customer has remained unpaid for more than the number of days set forth in
Section 13 after the date due under the terms of the related invoice, (e) which
amount is not an uninsured amount owing from Customer located in a foreign
country and (f) which amount is not owing from the United States of America or
any agency, department or subdivision thereof, unless a properly executed
assignment of claims has been received by Bank. "Eligible Inventory" is the
inventory of Borrower (consisting of those items within the categories set forth
in Section 13), as determined by Bank in its sole and absolute discretion, to be
(a) in good condition and salable in the ordinary course of Borrower's business,
(b) owned by Borrower free and clear of any mortgages, liens, security
interests, claims, encumbrances or rights of others, excepting only the security
interests in favor of Bank, (c) located at a location identified in a Security
Agreement (hereinafter defined), (d) subject to a perfected security interest in
favor of Bank, (e) not subject to any consignment to any Customer and (f) not
acquired by Borrower in or as part of a bulk transfer of sale or assets unless
Borrower has complied with all applicable bulk sales or bulk transfer laws.
1.3 NOTE. The Loan shall be evidenced by a promissory note ("Note") of even date
herewith in a form prepared and approved by Bank in the Maximum Amount, payable
in accordance with the terms thereof. Interest on the principal amount
outstanding from time to time shall be charged as provided in the Note and
should such rate of interest as calculated thereunder exceed that allowed by
law, the applicable rate of interest will be the maximum rate of interest
allowed by applicable law.
1.4 PREPAYMENTS. If for any reason the aggregate principal amount of the Loan
outstanding at any time shall exceed the maximum amount permitted to be borrowed
in accordance with Section 1.2 hereof, Borrower, without notice or demand, shall
immediately make a principal payment to Bank in an amount equal to such excess
plus accrued and unpaid interest hereon. Borrower may from time to time, prepay
all or part of the outstanding principal balance of the Loan.
1.5 REMITTANCE ACCOUNT. If so indicated in Section 13 hereof, the proceeds
received by Borrower from its inventory and collection of accounts receivable,
which, pursuant to the Security Agreements (hereinafter defined), are required
to be transmitted to Bank, shall be handled and administered by Bank in and
through a remittance account in accordance with the provisions of the Security
Agreements.
2. SECURITY.
2.1 SECURITY AGREEMENTS. As security for the payment of the Note, the Loan, and
all other liabilities and obligations of Borrower to Bank, now existing or
hereafter created, Borrower shall grant to Bank a security interest in all of
Borrower's inventory, accounts receivable, rights to payment and such other
property ("Property"), as more particularly described in one or more security
agreements ("Security Agreements") executed by Borrower and delivered to Bank in
form and substance satisfactory to Bank, in its sole and absolute discretion.
The Security Agreements shall grant to Bank a first and prior security interest
in and to the Property, except as otherwise expressly provided therein.
1
<PAGE> 2
2.2 ADDITIONAL DOCUMENTS. Borrower shall execute from time to time upon the
request of Bank, such financing statements or other documents reasonably
required by Bank to perfect or continue Bank's security interests described
herein.
2
<PAGE> 3
3. ADVANCES.
3.1 CONDITIONS PRECEDENT TO ADVANCES. Bank shall have no obligation to make any
Advance until the conditions set forth in the following subparagraphs and
elsewhere herein have been satisfied at the expense of Borrower, as determined
by Bank in its sole and absolute discretion:
(a) Borrower shall have delivered to Bank, in form and substance satisfactory
to Bank, this Agreement, the Note, the Security Agreements and such other
documents, instruments, financing statements, certificates and agreements as
Bank may reasonably request;
(b) If Borrower is a corporation or a partnership, Borrower shall have
delivered to Bank, in form and substance satisfactory to Bank in its sole and
absolute discretion certified copies of resolutions of Borrower's board of
directors or partners, as the case may be, authorizing Borrower to execute,
deliver, honor and perform the Loan Documents and to grant the security
interest in the Property as provided in the Security Agreements and
certifying the names and signatures of the officers or partners, as the case
may be, of Borrower authorized to sign the Loan Documents;
(c) All of Bank's liens and security interests securing the Loan, shall have
been validly perfected;
(d) No material adverse change shall have occurred in the business or
financial condition of Borrower or any guarantor since the date of the latest
financial statements given to Bank by on behalf of Borrower or such
guarantor;
(e) Each of the warranties and representations made by Borrower in the Loan
Documents shall be true and correct as of the date of each Advance; and
(f) Borrower shall have kept and performed the various covenants, obligations
and agreements on its part to be kept and performed under the Loan Documents
and no Event of Default, or act or event which with the giving of notice or
the passage of time, or both, would constitute an Event of Default hereunder
or under any of the other Loan Documents, shall have occurred and be
continuing.
3.2 REQUEST FOR ADVANCES. Advances may be made by Bank at the oral or written
request of the persons named in Section 13 hereof, either one acting alone, who
are authorized to request Advances and direct disposition of any such Advances
until written notice of the revocation of such authority is received from
Borrower by Bank. Each request by Borrower for an Advance shall constitute a
reaffirmation, as of the date of such request, of all of the representations and
warranties of Borrower contained in this Agreement and in the other Loan
Documents.
3.3 NO WAIVER. No Advance shall constitute a waiver of any of the conditions to
any further Advances nor, in the event Borrower is unable to satisfy any such
condition, shall any such Advance have the effect of precluding Bank from
thereafter declaring such inability to be an Event of Default (as hereinafter
defined).
4. FEES.
4.1 FEES. As additional consideration for Bank's commitment to make Advances,
Borrower agrees to pay to Bank the following fees, which shall be non-refundable
to Borrower, shall be held and retained by Bank as its sole property and shall
not be applied to any payments due under the Loan Documents other than this
Section 4:
(a) a commitment fee in the amount set forth in Section 13 hereof, payable on
or before the date hereof;
(b) a non-utilization fee computed at the rate per annum set forth in Section
13 hereof on the unused portion of the Maximum Amount and payable quarterly
in arrears to be calculated from the date hereof, where the phrase "unused
portion of the Maximum Amount" means the average difference between (i) the
Maximum Amount and (ii) the outstanding principal balance of the Loan on each
day during such period; and
(c) an inspection fee in the amount per inspection set forth in Section 13
hereof, payable within ten (10) days of Borrower being billed therefor by
Bank.
5. REPRESENTATIONS AND WARRANTIES.
5.1 REPRESENTATIONS AND WARRANTIES. Borrower makes the following representations
and warranties to Bank, which representations and warranties shall survive the
execution of this Agreement:
(a) Legal Status. Borrower, if a corporation, partnership, trust, or other
legal entity, has been duly organized and is validly existing under the laws
of its State of Incorporation or formation, as the case may be, and is
qualified to transact business, and has made all filings and is in good
standing, in the State of Arizona and in every other jurisdiction in which
the nature of its business requires such qualifies;
(b) No Violation. The making and performance of Borrower of the Loan
Documents does not violate any provision of law, nor any provision of
Borrower's formation documents, including, without limitation, Articles of
Incorporation or any partnership or trust agreement, or result in a breach
of, or constitute a default under, any agreement, indenture or other
instrument to which Borrower is a party or by which Borrower may be bound;
(c) Authorization. This Agreement and the other Loan Documents have been duly
authorized, executed and delivered, and are legal, valid and binding
agreements of Borrower enforceable against Borrower in accordance with their
terms, except as enforceability may be limited by bankruptcy, solvency,
reorganization, moratorium or similar laws effecting creditors' rights
generally and by general principles of equity;
(d) Financial Statements. All financial statements and reports that have
heretofore been presented to Bank in conjunction with the transaction which
is the subject of this Agreement, have been prepared in conformity with
generally accepted accounting principals consistently applied, fairly and
accurately present the financial condition and income of the subject thereof,
as of the date given, and neither contain any untrue statement of a material
fact nor fail to state a material fact required in order to make such
financial
3
<PAGE> 4
statements not misleading. Since the date of such financial statements, there
has been no adverse material change in the financial condition or operations
of the subject thereof.
(e) Consent and Licenses. No consent, approval or authorization of, or
registration or filing with, any governmental body or authority, or any other
person, firm or entity not a party hereto, is or will be required as a
condition to the valid execution, delivery, performance or enforceability of
the Loan Documents, or the transactions contemplated hereby or thereby, or to
the conduct of Borrower's business;
(f) Litigation. There is no litigation either pending or, to the best of its
knowledge, threatened against Borrower before any court or administrative
agency, or before any arbitrator, which may have a material adverse effect on
the assets, business, financial conditions or operations of Borrower, or
which would prevent or hinder the performance of Borrower's obligations under
the Loan Documents, and, furthermore, Borrower has not violated any law and,
to the best of its knowledge, is not the subject of any investigation by a
governmental agency that could result in an indictment or a forfeiture or
seizure of any of its assets;
(g) Environmental Matters. Borrower, to the best of its knowledge after due
investigation, is in compliance in all material respects with all applicable
environmental, health and safety statutes and regulations and Borrower does
not have any material contingent liability in connection with any improper
treatment, storage, disposal or release into the environment of any hazardous
or toxic waste or substance;
(h) Margin Securities. Borrower will not directly or indirectly invest all or
any part of the proceeds of the Loan in any security subject to the margin
requirements of Regulations G, T, U, or X of the Board of Governors of the
Federal Reserve System or use all or any part of proceeds of the Loan to
reduce or retire any indebtedness which was originally incurred to purchase
any margin securities or for any other purpose which would violate any of the
margin regulations of the Board of Governors of the Federal Reserve System;
(i) ERISA. Borrower is in compliance with the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") , and the regulations and
published interpretations thereunder, and no Reportable Event (as defined in
ERISA) has occurred with respect to any plan subject thereto. Borrower has
not incurred any material funding deficiency within the meaning of ERISA and
has not incurred any material liability to the Pension Benefit Guarantee
Corporation in connection with any such plan established or maintained by
Borrower; and
(j) Investment Company Act. Borrower is not, and is not directly or
indirectly controlled by, or acting on behalf of, any person which is, an
"Investment Company" within the meaning of the Investment Company Act of
1940, as amended.
6. COVENANTS OF BORROWER.
6.1 COVENANTS. Until the payment in full of the Loan and until the fulfillment
of all of its obligations hereunder and under the other Loan Documents, Borrower
shall comply with the following covenants:
(a) Books and Records. Borrower shall at all times keep accurate and complete
books, records and accounts of all of Borrower's business activities,
prepared in accordance with generally accepted accounting principles
consistently applied, and Borrower shall permit Bank, or any persons
designated by Bank, at any reasonable time, to inspect, audit and examine
such books, records and accounts and to make copies or extracts thereof;
(b) Statements and Reports. Borrower shall furnish to Bank:
(i) within the number of days set forth in Section 13 hereof after the end
of each fiscal year of Borrower, financial statements of Borrower, which
shall include a balance sheet, an income statement showing the results of
operations for such a fiscal year and a change in financial position
statement for such fiscal year, together, in each case, with the
comparable figures for the immediately preceding fiscal year, all in
reasonable detail and prepared in accordance with generally accepted
accounting principles, consistently applied, which statements shall
contain the certification requirements set forth in Section 13 hereof;
(ii) within the number of days set forth in Section 13 hereof after the
end of each of the fiscal periods of Borrower set forth in Section 13
hereof, financial reports of Borrower, which shall include a balance
sheet, an income statement showing the results of operations for such
fiscal period and a change in financial position statement for such fiscal
period, together, in each case, with the comparable figures for the
immediately preceding corresponding fiscal period, all in reasonable
detail and prepared in accordance with generally accepted accounting
principles, consistently applied, and containing the certifications
required pursuant to Section 13 hereof;
(iii) with each such set of financial statements, a certificate prepared
as at the end of the period covered by such financial statements, showing
the computation as of such date of each of the financial covenants
contained in Section 6.1(d);
(iv) within twenty (20) days after the end of each month a Borrowing Base
Certificate in the form attached hereto as Exhibit A, to which shall be
attached the following reports:
(A) An aging and listing of all accounts receivable prepared in
accordance with generally accepted accounting principles which itemizes
each account debtor by name and addresses and which states the total
amount payable to Borrower and contains a breakdown indicating future
amounts due and when due, current amounts due, amounts thirty (30) days
past due, sixty (60) days past due, and ninety (90) or more days past
due, and reflecting any credit adjustments, returns and allowances;
(B) An aging and listing of all accounts payable-trade prepared in a
similar manner;
(C) A complete and detailed description of all inventory containing a
breakdown into the categories referenced in Section 1.2 hereof and set
forth in Section 13 hereof;
(v) promptly, from time to time, upon request of Bank, such other
information concerning the financial condition, business and affairs of
Borrower as shall be reasonably requested by bank;
(c) Notices. Borrower shall promptly notify Bank in writing of the occurrence
of any Event of Default under any of the Loan Documents or any act or event
which, with the giving of notice or the passage of time, or both, would be
such an Event of Default and of any legal
4
<PAGE> 5
action, proceeding or investigation threatened or instituted against Borrower
that might have a material adverse effect upon the operations, financial
condition or business of Borrower or Borrower's ability to repay the Loan, or
Bank's security interest in the Property, and from time to time, at Bank's
request, Borrower will furnish to Bank a summary of the status of all such
actions, proceedings or investigation;
(d) Financial Covenants. Except as otherwise noted, all capitalized terms
referred to in the following financial covenants shall be determined in
accordance with generally accepted accounting principles, consistently
applied:
(i) a minimum Tangible Net Worth shall be maintained in the amount set
forth in Section 13 hereof, where "Tangible Net Worth" shall mean the sum
of the following: Capital, Capital Surplus and Retained Earnings, less the
sum of the value on Borrower's books of all intangible assets, including,
but not limited to, goodwill, patents, franchises, trademarks, copyrights
and the write-up in the book value of any assets resulting therefrom after
acquisition;
(ii) a minimum Owner's Equity shall be maintained of the percentage set
forth in Section 13 hereof, where "Owner's Equity" shall mean the results
obtained by dividing (A) Tangible Net Worth by (B) Borrower's Total Assets
less Intangibles;
(iii) a minimum current ratio, calculated by dividing Borrower's Current
Assets by Borrower's Current Liabilities, shall be maintained at the ratio
set forth in Section 13 hereof;
(iv) a minimum Working Capital shall be maintained in the amount set forth
in Section 13 hereof, where "Working Capital" shall mean Borrower's
Current Assets less Borrower's Current Liabilities; and
(v) a minimum interest coverage ratio calculated by dividing Borrower's
Total Earnings before interest and taxes by Borrower's Total Interest
Expense shall be maintained at the ratio set forth in Section 13 hereof;
(e) Maintain Business. Borrower shall maintain in full force and effect all
licenses, permits, authorizations, bonds, franchises and other rights
necessary or desirable to the profitable conduct of its business, shall
continue in, and limit its operations to, the same general lines of business
as are presently conducted and shall comply with all applicable laws, orders,
regulations and ordinances of all governmental authorities, and, if a
corporation or partnership, shall maintain its corporate or partnership
existence;
(f) Mergers, Sale of Assets. Borrower will not, without Bank's prior written
consent: (i) sell, lease, transfer or dispose of substantially all of its
assets to another entity; or (ii) consolidate with or merge into another
entity, permit any other entity to merge into it or consolidate with it, or
permit any transfer of the ownership of, or power to control, Borrower;
(g) Dividends and Other Distributions. If so indicated in Section 13 hereof,
Borrower (if a corporation or a partnership) will not, without Bank's prior
written consent, declare, order, pay or make, directly or indirectly: (i) any
dividend or other distribution on or on account of any shares of any class of
stock or any partnership interest of Borrower now or hereafter outstanding,
except a dividend payable solely in shares of Borrower's common stock; (ii)
any management fee; (iii) any loans to shareholders or partners of Borrower;
or (iv) any redemption, retirement, purchase or other acquisition of any
shares of any class of stock or partnership interest of Borrower now or
hereafter outstanding or of any warrants or rights to purchase any such stock
or partnership interest, except (if Borrower is a corporation) to the extent
that the consideration paid for any such redemption, retirement, purchase or
acquisition consists of shares of Borrower's common stock;
(h) Capital Expenditures. Borrower will not, without Bank's prior written
consent, in any twelve (12) month period, purchase, invest in or otherwise
acquire additional fixed assets, which in the aggregate cost Borrower more
than the amount set forth in Section 13 hereof;
(i) Leases. Borrower will not, without Bank's prior written consent, enter
into any lease of personal property which would cause Borrower's total rental
obligations in any fiscal year to exceed the amount set forth in Section 13
hereof;
(j) Indebtedness. Borrower will not, without Bank's prior written consent,
(i) incur, create, assume or permit to exist any obligation or indebtedness,
except (A) existing indebtedness disclosed on financial statements previously
delivered to Bank, (B) the Loan and (C) other indebtedness and trade
obligations and normal accruals in the ordinary course of business not yet
due and payable; (ii) become liable, directly, or indirectly, as guarantor or
otherwise, for any obligation of any other person or entity, except existing
obligations of such kind previously disclosed to Bank in writing, in excess
of the amount set forth in Section 13;
(k) Insurance. Borrower shall maintain and keep in force insurance of the
types and amounts customarily carried in its lines of business, including,
without limitation, fire, public liability, product liability, property
damage and workers' compensation, such insurance to be carried with companies
and in amounts satisfactory to Bank, in its reasonable discretion, and
Borrower shall deliver to Bank from time to time as Bank may request,
schedules setting forth all insurance then in effect and copies of the
policies; and
(l) Environmental Matters. Borrower will take all reasonable actions to
prevent the occurrence of any material violation of any applicable
environmental, health and safety statues and regulations, or any order or
judgment of any court with respect to environmental pollution or
contamination, hazardous waste disposal or any other environmental matter and
Borrower shall promptly give written notice to Bank of the following
occurrences and of the steps being taken by Borrower, with respect thereto:
(i) notice that Borrower's operations are not in full compliance with the
requirements of applicable environmental, health and safety statutes and
regulations; (ii) notice that Borrower is subject to a governmental
investigation evaluating whether any remedial action is needed to respond to
the release of any hazardous or toxic waste or substance into the
environment; or (iii) notice that any properties or assets of Borrower are
subject to any environmental lien.
7. EVENTS OF DEFAULT.
7.1 EVENTS OF DEFAULT. The occurrence of one or more of the following events
shall constitute an Event of Default under this Agreement:
(a) There shall occur an event of default under a Security Agreement;
(b) Borrower fails to observe or perform any of the covenants, conditions and
agreements on the part of Borrower contained herein or in any of the other
Loan Documents other than the Security Agreements;
5
<PAGE> 6
(c) If any representation or warranty made by Borrower to Bank contained
herein or in any of the other Loan Documents proves to have been untrue in
any material respect when made; or
(d) Borrower shall be in default in the payment or performance of any
material obligation under any indenture, contract, mortgage, deed of trust or
other agreement or instrument to which Borrower is a party or by which it is
bound.
8. REMEDIES OF BANK UPON DEFAULT.
8.1 REMEDIES. At any time after any Event of Default has occurred, Bank may,
without presentment, demand, protest or further notice of any kind (all of which
are hereby expressly waived) and, notwithstanding the provisions contained in
any other document or instrument executed or to be executed by Borrower to Bank
hereunder or contained in any other agreement, take any one or more of the
following actions:
(a) Declare the entire principal and any accrued interest on the Loan,
together with all costs and expenses, to be immediately due and payable, and
to enforce payment thereof by any means permitted by law or in equity;
(b) Without accelerating payment, enforce the payment of sums of principal
and interest then due (including any penalty interest or late payment
charges);
(c) Require Borrower to take or refrain from taking any action which may be
necessary to cure such Event of Default and to obtain affirmative or negative
injunctions or restraining orders with respect thereto;
(d) Obtain the appointment of a receiver of the business and assets of
Borrower;
(e) File suit for any sums owing or for damages; and
(f) Exercise any other remedy or right provided in law or in equity or
permitted under this Agreement, the Security Agreements or any of the other
Loan Documents.
8.2 REMEDIES CUMULATIVE. Any and all remedies conferred upon Bank shall be
deemed cumulative with, and nonexclusive of any other remedy conferred hereby or
by law, and Bank in the exercise of any one remedy shall not be precluded from
the exercise of any other.
9. ATTORNEYS' FEES AND EXPENSES.
In addition to interest on principal as stated in the Note, Borrower shall pay
all costs of closing the Loan and all expenses of Bank with respect thereto,
including, but not limited to, inspection fees and in-house and outside legal
fees (including legal fees incurred by Bank subsequent to the closing of the
Loan in connection with the disbursement and administration of the Loan), filing
fees and similar items. Said attorneys' fees and costs may, at Bank's option, be
deducted from the disbursements of Loan proceeds hereunder. In addition to any
liability Borrower may have under Arizona Revised Statutes 12-341.01, Borrower
shall pay Bank's attorneys' fees and costs incurred in the collection of any
indebtedness hereunder, or in enforcing this Agreement, whether or not suit is
brought, and any attorneys' fees and costs incurred by Bank in any proceeding
under the Federal Bankruptcy Code in order to collect any indebtedness hereunder
or to preserve, protect or realize upon any security for such indebtedness.
10. WAIVER.
Any waiver of any of the terms of this Agreement by Bank shall not be construed
as a waiver of any other terms of this Agreement, and no waiver shall be
effective unless made in writing. The failure of Bank to exercise any right with
respect to the declaration of any default shall not be deemed or construed to
constitute a waiver by, or to preclude Bank from exercising any right with
respect to such default at a later date or with respect to any subsequent
default by Borrower.
11. NOTICES.
Any notices required or permitted to be given pursuant to the Loan Documents
shall be in writing and shall be given by personal delivery or by mailing the
same by United States mail, postage prepaid, to the address set forth in Section
13 hereof. Any such notice shall be deemed received for purposes of this
Agreement upon delivery if given by personal delivery or three (3) days after
the mailing thereof if given by mail. If either party desires to change the
address to which notices are to be sent it shall do so in writing and deliver
the same to the other party in accordance with the notice provisions set forth
above.
12. MISCELLANEOUS.
12.1 PARTIES. This Agreement is made solely between Borrower and Bank, no other
person shall have any right of action hereunder. The parties expressly agree
that no person shall be a third-party beneficiary to this Agreement.
12.2 INDEMNITY. Borrower agrees to and shall indemnify, hold harmless and defend
Bank from any liability, claims or losses resulting from the disbursement of the
proceeds of the Loan or from the condition of the Property whether arising
during or after the term of the Loan. This provision shall survive repayment of
the Loan and shall continue in full force and effect so long as the possibility
of such liability, claims or losses exists.
12.3 ENTIRE AGREEMENT. This Agreement (including, if so indicated in Section 13
hereof, the Addendum attached hereto and by this reference incorporated herein),
together with all other Loan Documents, constitutes the entire agreement of the
parties hereto and thereto, and no prior agreement or understanding with respect
to the Loan, whether written or oral and including, but not limited to, any loan
commitment issued by Bank to Borrower, shall be of any further force or effect,
all such other prior agreements and commitments having been superseded in their
entirety by the Loan Documents.
12.4 ASSIGNMENT. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective executors, administrators, heirs,
successors and assigns; provided, however, that neither this Agreement nor any
rights or obligations hereunder shall be assignable by Borrower without the
prior express written consent of Bank first had any obtained, and any purported
assignment made
6
<PAGE> 7
in contravention hereof shall be void. Bank may assign any part of or all of the
Loan and its rights and obligations hereunder at any time in its sole
discretion. Bank may participate all or any portion of the Loan to such other
party or parties as Bank shall select.
12.5 GOVERNING LAW. This Agreement and each of the Loan Documents shall be
construed in accordance with and governed by the internal law, and not the law
of conflicts, of the State of Arizona.
12.6 TIME. Time is of the essence hereof.
12.7 SURVIVAL. The representations and warranties hereunder shall survive the
closing of the Loan and Bank may enforce such representations and warranties at
any time. Borrower's covenants shall survive the closing of the Loan and shall
be performed fully and faithfully by Borrower at all times. The indemnities of
Borrower shall survive repayment of the Loan.
12.8 SEVERABILITY. If any term or provision of this Agreement of any other Loan
Document, or the application thereof to any circumstance, shall be invalid,
illegal or unenforceable to any extent, such term or provision shall not
invalidate or render unenforceable any other term or provision of this Agreement
or any other Loan Document, or the application of such term or provision to any
other circumstance. To the extent permitted by law, the parties hereto hereby
waive any provision of law that renders any term or provision hereof invalid or
unenforceable in any respect.
13. STATEMENT OF TERMS.
1.1 Maximum Amount: $6,500,000.00 1.1 Expiration Date: 6/30/97
1.2 Eligible Receivables Percentage: 75% 1.2 Eligible Inventory Percentage: NA%
1.2(c) No. of Days Past Due: 90 1.2(d) No. of Days Past Due: 90
<TABLE>
<S> <C> <C> <C>
1.2 Inventory Categories: Raw Materials x yes o no Work In Process x yes o no Finished Goods x yes o no
</TABLE>
1.5 Remittance Account o is x is not required
3.2 Persons Authorized to Request Advances: DAVID A. SCHUFF, CHAIRMAN OR SCOTT
-------------------------------------
SCHUFF, PRESIDENT, OR KENNETH ZYLSTRA, VP-FINANCE, OR NANCY A. SCHUFF,
- --------------------------------------------------------------------------------
TREASURER/SECRETARY, OR PHYLLIS D. LOWE
- --------------------------------------------------------------------------------
4.1 (a) Commitment Fee: $1/8 of 1% annually
4.1 (b) Non-Utilization Fee: N/A% per annum
4.1 (c) Inspection Fee: N/A% per inspection
6.1 (b) (i) Statements due within 150 days of each fiscal year
----------
Certification Requirements: CPA AUDITED
-----------------------------------------
- --------------------------------------------------------------------------------
6.1 (b) (ii) Statements due within 60 days of each month
---------- ---------------
Certification Requirements: COMPANY PREPARED
----------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
6.1 (d) (i) Minimum Tangible Net Worth: $5,300,000.00 6.1 (d) (ii) Owner's Equity: 21%*
6.1 (d) (iii) Current Ratio: *:1.0 6.1 (d) (iv) Minimum Working Capital: $*
6.1 (d) (v) Interest Coverage Ratio: N/A:1.0 6.1 (g) Dividends and Other Distributions o are x are not permitted
6.1 (h) Capital Expenditures: $N/A 6.1 (i) Leases: $N/A
6.1 (j) Indebtedness: $N/A *See Addendum attached hereto
</TABLE>
11. Address for Notices:
To Borrower: SCHUFF STEEL COMPANY To Bank: Bank One, Arizona, NA
--------------------------- Commercial Banking Center A-664
P.O. BOX 39670 P.O. BOX 71
-------------------------- -------------------------------
PHOENIX, AZ 85069 PHOENIX, AZ 85071
-------------------------- -------------------------------
Attention: DAVID. A SCHUFF Attention: BRAD RICHARDS
---------------- ---------------------
12.3 Addendum x is o is not attached hereto and incorporated herein.
IN WITNESS WHEREOF, the parties have executed this Agreement this 30th day of
--------
JUNE, 1995
- ---- --
Borrower: SCHUFF STEEL COMPANY, Bank:
an Arizona Corporation
7
<PAGE> 8
BANK ONE, ARIZONA, NA
By: SEE ATTACHED ADDENDUM By: SEE ATTACHED ADDENDUM
FOR SIGNATURES FOR SIGNATURES
PRINTED NAME: DAVID A. SCHUPP PRINTED NAME: BRAD RICHARDS
TITLE: CHAIRMAN TITLE: VICE PRESIDENT
8
<PAGE> 9
ADDENDUM TO
REVOLVING LINE OF CREDIT LOAN AGREEMENT
(ACCOUNTS RECEIVABLE AND INVENTORY)
BETWEEN SCHUFF STEEL COMPANY, an Arizona corporation ("BORROWER") AND
BANK ONE, ARIZONA, NA ("BANK")
DATED JUNE 30, 1995
1. Section 6.1(b)(iv) of the Agreement is modified to read in its entirety as
follows:
(iv) within twenty five (25) days after the end of each month a Borrowing Base
Certificate in the form attached hereto as Exhibit A, to which shall be attached
the following reports:
(A) An aging and listing of all accounts receivable prepared in
accordance with generally accepted accounting principles which itemizes
each account debtor by name and address and which states the total
amount payable to Borrower and contains a breakdown indicating future
amounts due and when due, current amounts due, amounts thirty (30) days
past due, sixty (60) days past due, and ninety (90) or more days past
due, and reflecting any credit adjustments, returns and allowances:
(B) An aging and listing of all accounts payable-trade prepared in a
similar manner;
(C) A complete and detailed description of all inventory containing a
breakdown into the categories referenced in Section 1.2 hereof and set
forth in Section 13 hereof;
2. Section 6.1(b) is amended to include subsection (vi) as follows:
(vi) Borrower shall cause Related Entity, 19TH AVENUE/BUCHANAN LIMITED
PARTNERSHIP("BLP"), to furnish Bank: (A) as soon as available and in
any event within ninety (90) days after the end of each fiscal year of
BLP, financial statements which accurately reflect BLP assets,
liabilities and net worth as of the end of the fiscal year and profit
and loss statements for the fiscal year with the following
certification requirement: CPA Compiled, (B) as soon as available and
in any event within thirty (30) days of filing, a copy of BLP federal
income tax return(s) for each year, together with all schedules and
other documents filed with such returns.
3. Section 6.1(b) of the Agreement is hereby amended to include subsection (vii)
as follows:
(vii) Borrower shall cause Guarantor, David A. Schuff ( Nancy A.), to
furnish Bank: (A) annual updated balance sheet in such form and with
such certifications as may be reasonably required by Bank, and (B)
within thirty (30) days of filing, a copy of such person's federal
income tax return(s) for each calendar year, together with all
schedules and other documents filed with such return.
4. Section 6.1(b) of the Agreement is hereby amended to include subsection
(viii) as follows:
(viii) Borrower shall cause Guarantor, Scott A. Schuff, to furnish
Bank: (A) annual updated balance sheet in such form and with such
certifications as may be reasonably required by Bank, and (B) within
thirty (30) days of filing, a copy of such person's federal income tax
return(s) for each calendar year, together with all schedules and other
documents filed with such return.
Page 1 of 3
<PAGE> 10
5. Section 6.1(d)(ii) of the Agreement is modified to read in its entirety as
follows:
(ii) a minimum Owner's Equity shall be maintained of the percentage set
forth in Section 13 hereof, where "Owner's equity" "Owner's Equity
Percentage" shall mean the results obtained by dividing (A) Tangible
Net Worth (as herein defined) by (B) Borrower's Total Assets on a six
month average.
6. Section 6.1(d)(iii)and(iv) of the Agreement are modified to read in its
entirety as follows:
Net Working Capital. While the loan is outstanding, current assets
shall be maintained in excess of current liabilities by $4,500,000.00
and a current ratio of 1.25:1.0 shall be maintained and calculated by
dividing current assets by current liabilities after deducting short
term advances to share holders. The outstanding balance on the
Revolving Line of Credit will be considered to be a current liability
for the purpose of calculating both "Net working capital" and "Current
ratio".
7. Section 6.1(d) of the Agreement is hereby modified to include subsection (vi)
as follows:
(vi) Except for Permitted Payments and Distributions (defined below).
Borrower shall not directly or indirectly (A) declare or pay any
dividend or other distribution on or on account of any capital stock or
other securities of Borrower. (B) pay any management fee. or (C) make
any other payment or distribution to any stockholder in Borrower.
"PERMITTED PAYMENTS AND DISTRIBUTIONS" means. (aa) dividends payable
solely in shares of the common stock of Borrower. (bb) annual dividends
not exceeding in any fiscal year borrower the aggregate amount of
income taxes payable by the stockholders of Borrower during that fiscal
year of Borrower on the income of Borrower as a Subchapter S
corporation ("TAX DIVIDENDS"), (cc) payments, dividends, or other
distributions at the times and in the amounts needed to pay the
premiums on the two life insurance policies now in effect on the lives
of David A. Schuff and Scott A. Schuff, each policy being in the face
amount of $3,000,000, ("PREMIUM AMOUNTS"), and (dd) dividends or other
distributions during each fiscal year of Borrower of no more than sixty
percent (60%) of Residual Net Profits for the preceding fiscal year. In
all events Borrower shall retain an not pay out or distribute forty
percent (40%) of Residual Net Profits for each fiscal year of Borrower.
"RESIDUAL NET PROFITS" means, for any fiscal year of Borrower, net
profits of Borrower during the preceding fiscal year of Borrower
determined according to generally accepted account principles, less Tax
Dividends and Premium Amounts during the current fiscal year of
Borrower.
Page 2 of 3
<PAGE> 11
DATED: JUNE 30, 1995
Bank:
BANK ONE, ARIZONA, NA
By:___________________________________
Brad Richards, Vice President
Borrower:
SCHUFF STEEL COMPANY, an Arizona corporation
By:_________________________________
Its: President
Page 3 of 3
<PAGE> 1
EXHIBIT 10.2(b)
<TABLE>
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
APPROVED BY: BRAD RICHARDS - 269181 COMMERCIAL BANKING CENTER
- -----------------------------------------------------------------------------------------------------
Dept./Br. # A664 Acct. # 7938640665 Comm. # 0000018 Note # 00000133 Class
- -----------------------------------------------------------------------------------------------------
NAME SCHUFF STEEL COMPANY, an Arizona corporation Loan $6,500,000.00
- -----------------------------------------------------------------------------------------------------
Rate * Interest From Renewal of Note 26
- -----------------------------------------------------------------------------------------------------
Collateral S/A - Inventory, Receivables, RTP DTD 9/14/94 & S/A - Equipment DTD 9/15/94
- -----------------------------------------------------------------------------------------------------
* Bank One, Arizona NA, Prime Rate Plus .25% to move with Prime
</TABLE>
BANK ONE, ARIZONA, NA
REVOLVING LINE OF CREDIT NOTE
(VARIABLE RATE)
Phoenix, Arizona June 30, 1995
FOR VALUE RECEIVED, the undersigned ("Borrower"), promises to pay on or
before June 30, 1997 to BANK ONE, ARIZONA, NA, ("Bank"), or order, the aggregate
principal amount outstanding on Borrower's revolving line of credit as shown on
Bank's records which shall at all times be conclusive and govern, with interest
payable monthly on the unpaid balance outstanding from time to time at an annual
rate equal to one quarter* percent (0.250%) more than the "prime rate" of
interest charged by Bank One, Arizona, NA, as such rate shall change from time
to time during the term hereof. Interest is to be charged on a daily basis for
the actual number of days the principal is outstanding from the date of
disbursement to date of maturity. The rate of interest agreed to shall include
the interest rate as shown above, in accordance with the terms of this note,
plus any compensating balance requirement and any additional charges, costs and
fees incident to this loan to the extent they are deemed to be interest under
applicable Arizona law. It is expressly agreed by Borrower that the maximum
outstanding principal at any one time on this note shall not exceed the amount
of SIX MILLION FIVE HUNDRED THOUSAND AND NO/100THS DOLLARS ($6,500,000.00), and
the amount outstanding on this note at any specific time shall be the total
amount advanced hereunder by Bank less the amount of principal payments made
hereon from time to time by Borrower. All amounts payable hereunder shall be
paid in lawful money of the United States. Should the rate of interest as
calculated under this note exceed that allowed by law, the applicable rate of
interest will be the maximum rate of interest allowed by applicable law.
Principal and interest shall be payable at the Commercial Banking
Center office of Bank One, Arizona, NA in Phoenix, Arizona, or at such other
place as the holder hereof may designate. At Bank's option, any payments may be
applied first to accrued interest and then to principal. All past-due payments
of principal or interest shall bear interest from their due date until paid at a
rate of interest 2% per annum higher than the interest rate specified above or
12% per annum, whichever is higher, payable on demand.
This note shall become immediately due and payable at the option of the
holder hereof without presentment or demand or any notice to Borrower or any
other person obligated hereon, upon default in the payment of any of the
principal hereof or any interest thereon when due, or in payment under any other
agreement between Borrower and Bank, or if any event occurs or condition exists
which authorizes the acceleration of the maturity hereof under any security
agreement, mortgage, deed of trust or other agreement made by Borrower in favor
of Bank. Failure to exercise this option shall not constitute a waiver of the
right to exercise the same in the event of any subsequent default.
*See Addendum attached hereto
1
<PAGE> 2
In the event any holder hereof utilizes the services of an attorney in
attempting to collect the amounts due hereunder or to enforce the terms hereof
or of any agreements related to this indebtedness, or if any holder hereof
becomes party plaintiff or defendant in any legal proceeding in relation to the
property described in any instrument securing this note or for the recovery or
protection of the indebtedness evidenced hereby, Borrower, its successors and
assigns, shall repay to such holder hereof, on demand, all costs and expenses so
incurred, including reasonable attorneys' fees, including those costs, expenses
and attorneys' fees incurred after the filing by or against the Borrower of any
proceeding under any chapter of the Bankruptcy Act, or similar federal or state
statute, and whether incurred in connection with the involvement of any holder
hereof as creditor in such proceedings or otherwise.
Borrower and all sureties, endorsers and guarantors of this note waive
demand, presentment for payment, notice of non-payment, protest, notice of
protest and all other notice, filing of suit and diligence in collecting this
note or the release of any party primarily or secondarily liable hereon and
further agree that it will not be necessary for any holder hereof, in order to
enforce payment of this note by any of them, to first institute suit or exhaust
its remedies against any maker or others liable herefor, and consent to any
extension or postponement of time of payment of this note or any other
indulgence with respect hereto without notice thereof to any of them.
Bank and Borrower will establish specific instructions and procedures
by which draws against said credit will be presented for disbursement, but
nothing contained herein shall create a duty on the part of Bank to make said
disbursement if Borrower is in default.
SCHUFF STEEL COMPANY, an Arizona corporation
POST OFFICE BOX 39670
PHOENIX, AZ 85069
SEE ATTACHED ADDENDUM FOR SIGNATURES
DAVID A. SCHUFF, CHAIRMAN
Dept./BP #A664 Acct #7938640665 Comm #0000018 Note #00000133 Class
Name SCHUFF STEEL COMPANY, an Arizona corporation Loan $6,500,000.00
Rate * Interest from Renewal of Note 26
* BANK ONE, ARIZONA, NA, PRIME RATE PLUS .25% TO MOVE WITH PRIME
2
<PAGE> 3
ADDENDUM TO REVOLVING LINE OF CREDIT NOTE, DATED JUNE 30, 1995, 1995 ("ORIGINAL
NOTE"), BETWEEN SCHUFF STEEL COMPANY , AN ARIZONA CORPORATION
("BORROWER") AND BANK ONE, ARIZONA, NA, A NATIONAL BANKING ASSOCIATION
("BANK"),IN THE ORIGINAL PRINCIPAL AMOUNT OF $ 6,500,000.00.
This Addendum is hereby incorporated into the Original Note as if fully
set forth therein. This Addendum and the Original Note shall be read together as
a consistent agreement. To the extent of any necessary inconsistency between the
two, however, the terms and provisions of this Addendum shall control. The
integrated agreement of the Original Note and this Addendum is herein called the
Note.
SECTION 1. RECITALS.
1.1 In the Revolving Line of Credit Loan Agreement, dated JUNE 30, 1995
("LOAN AGREEMENT"), between Borrower and Bank, Bank has agreed to extend to
Borrower credit up to $ 6,500,000.00. Borrower may obtain advances (individually
an "ADVANCE" and collectively the "ADVANCES") as provided in the Loan Agreement.
1.2 Interest on Advances, as provided in the Note, is at the rate per
annum ("VARIABLE RATE") equal to sum of (i) one quarter percent (0.25%) and (ii)
the rate per annum most recently publicly announced by Bank, or its successors,
in Phoenix, Arizona, as its "prime rate", as in effect from time to time. The
Variable Rate will change on each day that the "prime rate" changes. The "prime
rate" is not necessarily the best or lowest rate offered by Bank, and Bank may
lend to its customers at rates that are at, above, or below its "prime rate".
1.3 The purpose of this Addendum is to provide for some or all Advances
to bear interest at a fixed rate at the election of Borrower, all as more
specifically provided in this Addendum.
SECTION 2 DEFINITIONS. As used in the Note:
"BUSINESS DAY" means a day of the year on which banks are not required
or authorized to close in Phoenix, Arizona, and, with respect to a Fixed Rate
Loan, a day on which dealings are carried on in the London interbank market.
"FIXED RATE" means the rate per annum equal to the sum of (i) two and
one-half percent (2.50%) per annum, and (ii) the rate of interest determined by
Bank, based on Telerate System reports (Page 3807) or such other source as may
be selected by Bank, to be the rate at which deposits in United States dollars
are offered by major banks in London, England, to other major banks in the
London interbank market at 11:00 a.m. (London, England, local time) on the first
day of the Interest Period for the period in the London interbank market equal
to or next greater than the Interest Period.
"FIXED RATE LOAN" means a Loan that bears or is requested to bear
interest at the Fixed Rate.
"INTEREST PERIOD" means, for each Fixed Rate Loan, the period
commencing on the date selected by Borrower and ending on the last day of the
period selected by Borrower as provided herein and, thereafter, each subsequent
period commencing on the last day of the immediately preceding Interest Period
and ending on the last day of the period selected by Borrower as provided
herein. The duration of each Interest Period shall be thirty (30), sixty (60),
or ninety (90) days, as selected by Borrower as provided herein, provided,
however, that:
(a) Interest Periods commencing on the same date shall be of the same
duration;
(b) Whenever the last day of an Interest Period would otherwise occur
on a day other than a Business Day, the last day of the Interest Period shall be
extended to occur on the next succeeding Business Day, provided, however, that
if the extension would cause the last day of the Interest Period to occur in the
next following calendar month, the last day of the Interest Period shall occur
on the next preceding Business Day;
(c) No Interest Period shall extend beyond the Maturity Date; and
(d) As to a Fixed Rate Loan less than $1,000,000, the Interest Period
must start on a Business Day that is one of the last five (5) days of a calendar
month.
Page 1 of 3
<PAGE> 4
"LOAN" means a Fixed Rate Loan or a Variable Rate Loan.
"MATURITY DATE" means June 30, 1996.
"VARIABLE RATE LOAN" means a Loan that bears or that is requested to
bear interest at the Variable Rate.
SECTION 3 INTEREST RATE.
3.1 Except to the extent that unpaid Advances bear interest at the
Fixed Rate, interest shall accrue on unpaid Advances at the Variable Rate.
3.2 In connection with any Advance, Borrower may elect on any Business
Day, upon notice that is received by Bank not later than 12:00 p.m. (Phoenix,
Arizona, local time) on such Business Day, that such Advance shall be a Fixed
Rate Loan (defined below). Each such notice shall specify (i) the date of such
Advance, (ii) the amount of such Advance, and (iii) the Interest Period . In
addition, Borrower may on any Business Day, upon notice that is received by Bank
not later than 12:00 p.m. (Phoenix, Arizona local time) on such Business Day,
convert any amount previously advanced under the Loan Agreement from one type of
Loan into the other type of Loan or continue a Fixed Rate Loan as a Fixed Rate
Loan for a new Interest Period, provided, that Borrower may make an election to
convert a Fixed Rate Loan to a Variable Rate Loan or to continue a Fixed Rate
Loan as a Fixed Rate Loan only on the last day of the Interest Period. Each such
notice of conversion or continuation shall specify (i) the date of such
conversion or continuation, (ii) the amount to be converted or continued, and
(iii) if applicable, the Interest Period. Any Advance not complying with the
foregoing requirements for an Advance bearing interest at the Fixed Rate shall
bear interest at the Variable Rate. Any Fixed Rate Loan not continued as a Fixed
Rate Loan in compliance with the foregoing requirements shall, after the end of
the Interest Period, bear interest at the Variable Rate, whether or not Borrower
has elected to convert the Fixed Rate Loan to a Variable Rate Loan.
3.3 Each Fixed Rate Loan shall bear interest, during the Interest
Period for such Fixed Rate Loan, at the Fixed Rate.
3.4 Interest at the Variable Rate shall be computed on the basis of a
365 day year and accrue on a daily basis for the actual number of days elapsed.
Interest at the Fixed Rate shall be computed on the basis of a 360 day year and
shall accrue on a daily basis for the actual number of days elapsed.
3.5 Notwithstanding any provision of the Loan Agreement to the
contrary:
3.5.1 Bank shall be entitled to fund and maintain its funding of
all or any part of any Fixed Rate Loan in any manner it sees fit.
3.5.2 If prior to the commencement of any Interest Period, Bank
determines by reason of circumstances affecting the London interbank market,
adequate and reasonable means do not exist for ascertaining the Fixed Rate for
such Interest Period in the manner provided in the definition of "Fixed Rate",
then Bank shall promptly give notice thereof to Borrower and the respective
amount as to which Borrower has requested the Fixed Rate shall bear interest at
the Variable Rate.
3.5.3 A Fixed Rate Loan must be in a minimum amount of $500,000. If
at any time a Fixed Rate Loan becomes less than $500,000, Bank, at its option,
may convert the Fixed Rate Loan to a Variable Rate Loan.
SECTION 4. PREPAYMENT AND CONVERSION PREMIUM. Borrower may prepay the
outstanding principal balance hereof, in whole or in part, at any time prior to
the Maturity Date. With any such prepayment of a Fixed Rate Loan or with a
conversion election of a Fixed Rate Loan to a Variable Rate Loan, in either case
other than on the last Business Day of the Interest Period for such Fixed Rate
Loan ("INTEREST PERIOD TERMINATION DATE") (whether made voluntarily or
involuntarily as a result of an acceleration of the Maturity Date or otherwise),
Borrower shall also pay (a) all accrued and unpaid interest on the principal
being prepaid, (b) all Other Amounts then due, and (c) a prepayment premium, if
any, equal to the product of (i) the Average Lost Monthly Interest Income and
(ii) the number of months from the date of prepayment to the Interest Period
Termination Date (with any fraction of a month counted as a month), discounted
to present value at the Discount Rate over a period equal to one-half of the
number of months in (ii) above. At the option of Bank, in its absolute and sole
discretion, any prepayment shall be applied to installments coming due under the
Note in the inverse order of their due dates.
Page 2 of 3
<PAGE> 5
As used in this SECTION 4:
"AVERAGE LOST MONTHLY INTEREST INCOME" means the amount determined by
dividing (i) the product of the Average Principal and the Lost Rate, by (ii) 12,
where:
"AVERAGE PRINCIPAL" means the amount equal to either (i) one half the
sum of (A) the amount of principal being prepaid and (B) the amount of principal
that is scheduled to be due on the Interest Period Termination Date ("BALLOON
AMOUNT"), or (ii) the amount of principal being prepaid, if such amount is less
than the Balloon Amount; and
"LOST RATE" means the rate per annum equal to the percentage, if any,
by which (i) the yield to maturity of United States Treasury debt obligations
having a maturity date nearest to the Interest Period Termination Date
("TREASURY OBLIGATIONS") determined as of the first day of the respective
Interest Period exceeds (ii) the yield to maturity of Treasury Obligations
determined on the date of prepayment.
"DISCOUNT RATE" means the rate per annum equal to the yield to maturity
of Treasury Obligations determined on the date of prepayment.
"OTHER AMOUNTS" means all amounts payable by Borrower to Bank under
this Note and all other documents related to any indebtedness of Borrower to
Bank.
The maturity date and yield to maturity of Treasury Obligations shall be
determined by Bank, in its absolute and sole discretion, on the basis of
quotations published in The Wall Street Journal or other comparable sources.
IN WITNESS WHEREOF, this Addendum is executed and appended to the
Original Note as of the date thereof.
DATED JUNE 30, 1995
SCHUFF STEEL COMPANY
an Arizona corporation
By:_______________________________
Name: SCOTT A. SCHUFF
___________________
Title: PRESIDENT
_______________
Page 3 of 3
<PAGE> 1
Exhibit 10.2(c)
MODIFICATION AGREEMENT
DATE: JUNE 30, 1996
PARTIES: Borrower: SCHUFF STEEL COMPANY,
an Arizona corporation.
Bank: BANK ONE, ARIZONA, NA,
a national banking association
RECITALS:
A. Bank has extended to Borrower credit ("LOAN") in the principal
amount of $6,500,000.00 pursuant to the Revolving Line of Credit Loan Agreement
(Accounts Receivable and Inventory), dated June 30, 1995 ("LOAN AGREEMENT"), and
evidenced by the Revolving Line of Credit Note (Variable Rate), dated June 30,
1995 ("NOTE"). The unpaid principal of the Loan as of the date hereof is $0.00.
B. The Loan and/or guaranty of Loan is secured by, among other things,
(i) the Continuing Security Agreement Inventory, Receivables and Rights to
Payment, dated September 15, 1994, and (ii) the Security Agreement Consumer
Goods, Equipment and Farm Equipment, Including Titled Vehicles, dated September
15, 1994, both by Borrower for the benefit of Bank (the agreements, documents,
and instruments securing the Loan and the Note are referred to individually and
collectively as the ("SECURITY DOCUMENTS").
C. The Note, the Loan Agreement, the Security Documents, any
arbitration resolution, and all other agreements, documents, and instruments
evidencing, securing, or otherwise relating to the Loan, as modified in the
Modifications, are sometimes referred to individually and collectively as the
"LOAN DOCUMENTS".
D. Borrower has requested that Bank modify the Loan and the Loan
Documents as provided herein. Bank is willing to so modify the Loan and the Loan
Documents, subject to the terms and conditions herein.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
2.1 The Loan Documents are modified as follows:
2.1.1 The maturity date of the Loan and the Note is changed
from June 30, 1997, to June 30, 1998. On the maturity date Borrower shall pay to
Bank the unpaid principal, accrued and unpaid interest, and all other amounts
payable by Borrower under the Loan Documents as modified herein.
2.1.2 The reference to Expiration Date in Section 1.1 in
Section 13 of the Loan Agreement is changed from June 30, 1997, to June 30,
1998.
1
<PAGE> 2
2.1.3 The reference to Section 6.1(b)(i) and (ii) in Section
13 of the Loan Agreement are hereby deleted in their entirety and replaced with
the following:
6..1(b)(i) Statements due within one hundred fifty
(150) days of each fiscal year Certification
Requirements: Independent certified public accountant
satisfactory to Bank to audit financial statements
and deliver an unqualified opinion on the financial
statements.
6.1(b)(ii) Statements due within sixty (60) days of
each month Certification Requirements: Borrower
prepared financial statements
2.1.4 Section 6.1(b)(iv) of the Loan Agreement is hereby
deleted in its entirety and replaced with the following:
(iv) within twenty (25) days after the end of each
month a Borrowing Base Certificate in the form
attached hereto as Exhibit A, to which shall be
attached the following reports:
(A) an aging and listing of all accounts
receivable prepared in accordance with
generally accepted accounting principles
which itemizes each account debtor by name
and which states the total amount payable to
Borrower and contains a breakdown indicating
future amounts due and when due, current
amounts due, amounts thirty (30) days past
due, sixty (60) days past due, and ninety
(90) or more days past due, and reflecting
any credit adjustments, returns and
allowances;
(B) An aging and listing of all accounts
payable-trade prepared in a similar manner;
2.1.5 Section 6.1(b)(vi) of the Loan Agreement is hereby
deleted and replaced with the following:
(vi) As soon as available and in any event within
thirty (30) days of filing, Borrower shall deliver a
copy of Borrower's federal income tax return(s) for
each year, together with all schedules and other
documents filed with such returns.
2.1.6 Section 6.1(b) (vii) and (viii) of the Loan Agreement
are hereby deleted in their entirety and replaced with the following:
(vii) Borrower shall cause Guarantor, David A. and
Nancy A. Schuff, to furnish Bank: (A) annual updated
balance sheet in such form and with such
certifications as may be reasonable required by Bank,
and (B) a copy of such person's federal income tax
return for such calendar year, together with all
schedules and other documents filed with such return,
both by August 15th of each year.
(viii) Borrower shall cause Guarantor, Scott A.
Schuff, to furnish Bank: (A) annual updated balance
sheet in such form and with such certifications as
may be reasonably required by Bank, and (B) a copy of
such person's federal income tax return for such
calendar year, together with all schedules and other
documents filed with such return, both by August 15th
of each year.
2.1.7 Sections 6.1(d) (iii) and (iv) of the Loan Agreement are
hereby deleted in their entirety and replaced with the following:
(iii) a minimum current ratio, calculated by dividing
Borrower's Current Assets by Borrower's Current
Liabilities after deducting short term advances to
shareholders, shall be maintained at the ratio set
forth in Section 13 hereof. The outstanding balance
on the Revolving Line of Credit will be considered to
be a current liability for the purpose of calculating
"Current Ratio";
(iv) a minimum Working Capital shall be maintained in
the amount set forth in Section 13 hereof, where
"Working Capital" shall mean Borrower's Current
Assets less Borrower's Current Liabilities after
deducting short term advances to shareholders. The
outstanding balance on the Revolving Line of Credit
will be considered to be a current liability for the
purpose of calculating "Net Working Capital"; and
2.1.8 The reference to Sections 6.1(d)(i) (iii) and (iv) in
Section 13 of the Loan Agreement are hereby deleted in their entirety and
replaced with the following:
6.1 (d) (i) Minimum Tangible Net Worth: $6,100,000.00
2
<PAGE> 3
6.1 (d) (iii) Current Ratio 1.25:1.0
6.1 (d) (iv) Minimum Working Capital: $4,900,000.00
2.1.9 The Loan Agreement is hereby modified to add Sections
14, 15, 16, 17, 18 and 19 as follows:
14. Definitions. Capitalized terms used herein shall have the meanings set
forth in the RLC Loan Agreement and the following terms shall have the
following meanings:
"Commitment" means the agreement of BANK hereunder to issue Letters of Credit
pursuant to the terms and conditions in Letter of Credit Agreements and to make
Advances pursuant to the terms and conditions in the Agreement.
"Existing Letter(s) of Credit" means any and all letter(s) of credit issued by
BANK at the request of BORROWER prior to the date of this Agreement, as to which
letter(s) of credit the date that is the Standard Number of Days after the last
date for payment of drafts drawn or drawn and accepted thereunder is after the
date of this Agreement.
"Letter of Credit Agreement" means BANK's standard form Application and
Agreement for Commercial Letter of Credit, BANK's standard form Application for
Standby Letter of Credit and Standby Letter of Credit Agreement, or other
standard application and agreement for letters of credit in use by BANK from
time to time.
"Letters of Credit" means the letters of credit in BANK's standard form from
time to time issued pursuant to this Agreement and any Existing Letters of
Credit.
"Reimbursement Amount" means the amount BORROWER is obligated to pay to BANK
under a Letter of Credit Agreement in respect of a draft drawn or drawn and
accepted under the respective Letter of Credit, which amount shall be the amount
of the draft or acceptance and all costs, expenses, fees, and other amounts then
payable by BORROWER to BANK under the Letter of Credit Agreement.
"Standard Number of Days" means the standard number of days established by BANK
from time to time to allow for delivery to BANK of drafts drawn under letters of
credit issued by BANK and presented to financial institutions other than BANK
for delivery to BANK. BANK may change such number of days at any time and from
time to time in its absolute and sole discretion without notice to BORROWER and
may have a different number of days for commercial letters of credit and standby
letters of credit.
15. Letters of Credit.
15.1 Issuance of Letters of Credit. Subject to the terms and conditions
of this Agreement and the Letter of Credit Agreements and subject to the
policies, procedures, and requirements of BANK in effect from time to time for
issuance of Letters of Credit (including, without limitation, payment of letter
of credit fees), BANK agrees to issue, from time to time on or before the
scheduled Commitment expiration date set forth in the Agreement, Letters of
Credit upon request by and for the account of BORROWER , provided that as to
each requested Letter of Credit BORROWER has delivered to BANK a completed and
executed Letter of Credit Agreement, and provided further that the date that is
the Standard Number of Days after the last date for payment of drafts drawn or
drawn and accepted under a requested Letter of Credit is before the scheduled
Commitment expiration date set forth in the Agreement. Each reference in this
Agreement to "issue" or "issuance" or other forms of such words in relation to
Letters of Credit shall also include any extension or renewal of a Letter of
Credit. Upon occurrence of an Event of default, or any condition or event that
with notice, passage of time, or both would be an Event of default, BANK, in its
absolute and sole discretion and without notice, may suspend the commitment to
issue Letters of Credit. In addition, upon occurrence of an Event of default,
BANK, in its absolute and sole discretion and without notice, may terminate the
commitment to issue Letters of Credit.
15.2 Issuance Procedure. To obtain a Letter of Credit, BORROWER shall
complete and execute a Letter of Credit Agreement and submit it to the letter of
credit department of BANK. Upon receipt of a completed and executed Letter of
Credit Agreement, BANK will process the application in accordance with the
policies, procedures, and requirements of BANK then in effect. If the
application meets the requirements of BANK and is within the policies of BANK
then in effect, BANK will issue the requested Letter of Credit.
15.3 Reimbursement of BANK for Payment of Drafts Drawn or Drawn and
Accepted Under Letters of Credit. The obligation of BORROWER to reimburse BANK
for payment by BANK of drafts drawn or drawn and accepted under a Letter of
Credit shall be as provided in the respective Letter of Credit Agreement. BANK
will notify BORROWER of payment by BANK of a draft drawn or drawn and accepted
under a Letter of Credit and of the respective Reimbursement Amount and will
give BORROWER the election (i) to pay the Reimbursement Amount pursuant to the
respective Letter of Credit Agreement or (ii) to pay the Reimbursement Amount by
BANK making an Advance subject to the terms and conditions of this Agreement and
applying the proceeds of the Advance to pay the Reimbursement Amount. If
3
<PAGE> 4
BORROWER does not communicate to BANK its election within two Business Days
after notification by BANK of payment of the draft or acceptance, BORROWER shall
be deemed to have elected to pay the Reimbursement Amount by BANK making an
Advance hereunder, provided that if the terms and conditions in this Agreement
for an Advance hereunder are not satisfied, BORROWER shall be deemed to have
elected to pay the Reimbursement Amount pursuant to the Letter of Credit
Agreement. Each Advance to pay a Reimbursement Amount shall be dated the date
that BANK pays the respective draft or acceptance and shall accrue interest from
and after such date. If BORROWER is to pay the Reimbursement Amount pursuant to
the Letter of Credit Agreement, BORROWER shall also pay to BANK interest on the
Reimbursement Amount from and including the date BANK pays the respective draft
or acceptance at the rate per annum at which interest is then accruing under the
Line of Credit Note until the Reimbursement Amount and such interest are paid in
full, provided that if BORROWER fails to pay the Reimbursement Amount and
accrued interest thereon within five (5) days after notification by BANK to
BORROWER of payment of the respective draft or acceptance, interest thereafter
shall accrue at the interest rate applicable to past-due payments under the Line
of Credit Note. Such interest shall be computed on the basis of a 360-day year
and accrue on a daily basis for the actual number of days elapsed.
Notwithstanding the above, if BORROWER elects or is deemed to have elected to
pay the Reimbursement Amount pursuant to the Letter of Credit Agreement and
fails to pay the Reimbursement Amount and interest thereon within five (5) days
after notification by BANK to BORROWER , BANK, in its absolute and sole
discretion and without notice to BORROWER and regardless of whether the terms
and conditions in this Agreement for Advances are satisfied, may make an Advance
under this Agreement in the amount of the Reimbursement Amount and accrued
interest thereon and apply the proceeds of such Advance to pay the Reimbursement
Amount and accrued interest.
16. Letters of Credit and Advances. Letters of Credit may be issued by BANK at
the oral or written request of the respective person or persons designated in
the Agreement to request Advances. Such person or persons are hereby authorized
by BORROWER to request Letters of Credit and Advances, to execute and deliver
Letter of Credit Agreements on behalf of BORROWER , and to direct disposition of
the proceeds of Advances until written notice of the revocation of such
authority is received from BORROWER by BANK and BANK has had a reasonable time
to act upon such notice. BANK shall have no duty to monitor for BORROWER or to
report to BORROWER the use of Letters or Credit or proceeds of Advances.
Advances shall be disbursed by BANK in the manner agreed upon by BANK and
BORROWER from time to time.
17. Limit on Letters of Credit and Advances. Anything in the Loan Documents to
the contrary notwithstanding, the sum from time to time of (i) the aggregate
amount of outstanding and undrawn Letters of Credit, (ii) the aggregate amount
of outstanding and unpaid drafts drawn or drawn and accepted under Letters of
Credit, (iii) the aggregate amount of unpaid Reimbursement Amounts, and (iv) the
amount of outstanding and unpaid Advances shall not exceed the lesser of (A) the
Maximum Amount and (B) the Borrowing Base, provided, that if such sum at any
time exceeds the lesser of (A) and (B), BORROWER , without notice or demand,
shall immediately make a payment to BANK in an amount equal to the sum of (1)
such excess and (2) accrued and unpaid interest thereon.
18. Collateral Upon Event of Default. Upon an event of default and demand by
BANK in its absolute and sole discretion, BORROWER shall immediately deliver to
BANK, as security for all obligations of Borrower under the Loan Documents
(including, without limitation, the obligation to pay Reimbursement Amounts),
immediately available funds in an amount equal to the sum of (i) the aggregate
amount of outstanding and undrawn Letters of Credit, and (ii) the aggregate
amount of outstanding and unpaid drafts drawn or drawn and accepted under
Letters of Credit. BORROWER hereby grants to BANK a security interest in all
such funds delivered to BANK to secure payment and performance of said
obligations.
19. Conditions Precedent to Each Advance and Letter of Credit. BANK shall be
obligated to issue a Letter of Credit or make an Advance when requested by
BORROWER only if the representations and warranties by the Loan Parties in the
Loan Documents are accurate on and as of the date of this Agreement and on and
as of the date of issuance of the Letter of Credit or of making the Advance
before and after giving effect to the Letter of Credit or the Advance and the
application of the proceeds of the Advance. Delay or failure by BANK to insist
on satisfaction of any condition of issuance of a Letter of Credit or making an
Advance shall not be a waiver of such condition precedent or any other condition
precedent. If BORROWER is unable to satisfy any condition precedent of issuance
of a Letter of Credit or making an Advance, the issuance of the Letter of Credit
or the making of the Advance shall not preclude BANK from thereafter declaring
the condition or event causing such inability to be an event of default.
4
<PAGE> 5
2.2 Each of the Loan Documents is modified to provide that it shall be
a default or an event of default thereunder if Borrower shall fail to comply
with any of the covenants of Borrower herein or if any representation or
warranty by Borrower herein is materially incomplete, incorrect, or misleading
as of the date hereof.
2.3 Each reference in the Loan Documents to any of the Loan Documents
shall be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or interests
in property granted as security in the Loan Documents shall remain as security
for the Loan and the obligations of Borrower in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Loan
Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial
condition of Borrower or any other person whose financial statement has been
delivered to Bank in connection with the Loan from the most recent financial
statement received by Bank.
4.3 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance with
their terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this Agreement and the performance of the Loan
Documents as modified herein have been duly authorized by all requisite action
by or on behalf of Borrower. This Agreement has been duly executed and delivered
on behalf of Borrower.
5. BORROWER COVENANTS.
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such
additional agreements, documents, and instruments as reasonably required by Bank
to effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in law
or equity of Borrower, whether now known or unknown to Borrower, (i) in respect
of the Loan, the Loan Documents, or the actions or omissions of Bank in respect
of the Loan or the Loan Documents and (ii) arising from events occurring prior
to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this
Agreement, Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all
amounts, other than interest and principal, due and payable by Borrower under
the Loan Documents as of the date hereof.
5
<PAGE> 6
5.3.2 All the internal and external costs and expenses incurred by Bank
in connection with this Agreement (including, without limitation, inside and
outside attorneys, title, filing, and recording costs, expenses, and fees).
5.3.3 A documentation fee of $300.00.
5.3.4 A commitment fee of $8,125.00.
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations of
Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) if required by Bank, Borrower
and any guarantor(s) of the Loan have executed and delivered to Bank an
arbitration resolution, and (iv) each guarantor of the Loan has executed the
Consent of Guarantor(s) below.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
WAIVER.
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Loan Documents as modified herein may be
changed, discharged, supplemented, terminated, or waived except in a writing
signed by the parties thereto.
8. BINDING EFFECT.
The Loan Documents as modified herein shall be binding upon and shall inure to
the benefit of Borrower and Bank and their respective successors and assigns.
9. CHOICE OF LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Arizona, without giving effect to conflicts of law principles.
10. COUNTERPART EXECUTION.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
DATED as of the date first above stated.
SCHUFF STEEL COMPANY,
an Arizona corporation
By_______________________________________
David A. Schuff, Chairman
BANK ONE, ARIZONA, NA,
a national banking association
By_______________________________________
Brad Richards, Vice President
7
<PAGE> 7
CONSENT OF GUARANTOR(S)
The undersigned (i) consent to the modification of the Loan Documents and all
other matters in the foregoing Agreement, (ii) reaffirm the Continuing Guaranty,
dated June 30, 1995 and any other agreements, documents and instruments securing
or otherwise relating thereto ("Guarantor Documents"), (iii) acknowledge that
the Guarantor Documents continue in full force and effect, remain unchanged,
except as specifically modified hereby, and are valid, binding and enforceable
in accordance with their respective terms, (iv) agree that all references, if
any, in the Guarantor Documents to any of the Loan Documents are modified to
refer to those documents as modified by the Agreement, and (v) agree to be bound
by the release of Bank set forth in the Agreement.
Dated as of the date of the Agreement.
______________________________________
David A. Schuff
______________________________________
Nancy A. Schuff
CONSENT OF GUARANTOR(S)
The undersigned (i) consent to the modification of the Loan Documents and all
other matters in the foregoing Agreement, (ii) reaffirm the Continuing Guaranty,
dated June 30, 1995 and any other agreements, documents and instruments securing
or otherwise relating thereto ("Guarantor Documents"), (iii) acknowledge that
the Guarantor Documents continue in full force and effect, remain unchanged,
except as specifically modified hereby, and are valid, binding and enforceable
in accordance with their respective terms, (iv) agree that all references, if
any, in the Guarantor Documents to any of the Loan Documents are modified to
refer to those documents as modified by the Agreement, and (v) agree to be bound
by the release of Bank set forth in the Agreement.
Dated as of the date of the Agreement.
______________________________________
Scott A. Schuff
8
<PAGE> 1
EXHIBIT 10.2 (d)
CONTINUING GUARANTY
TO: BANK ONE, ARIZONA, NA, a national banking association
1. For valuable consideration, the undersigned ("Guarantors"), jointly and
severally, unconditionally guarantee and promise to pay to BANK ONE, ARIZONA, NA
("Bank"), or order, on demand, in lawful money of the United States, any and all
Indebtedness of SCHUFF STEEL COMPANY, an Arizona corporation ("Borrower"), to
Bank. The word "Indebtedness" includes any and all loans, debts, obligations and
liabilities of whatever nature of Borrower owed to Bank whenever and however
made, incurred or created, whether recovery upon such Indebtedness may be barred
by any statue of limitations, whether such Indebtedness may be otherwise
unenforceable, and whether Borrower is liable individually or jointly with
others.
2. The liability of Guarantors shall not exceed at any one time the total
of (i) the principal sum of TEN MILLION AND NO/100THS Dollars ($10,000,000.00)
plus (ii) all interest owed thereon plus (iii) all costs, attorneys' fees,
losses and expenses which may be incurred by Bank by reason of Borrower's
default in the payment of the Indebtedness.
3. This Guaranty shall bind and obligate the undersigned and their
successors and assigns with Borrower, jointly and severally, for the payment of
the Indebtedness. A separate action may be commenced against Guarantors whether
action is brought against Borrower or whether Borrower may be joined in any such
action. Guarantors waive any defenses Borrower may now or hereafter have to
payment of the Indebtedness.
4. Guarantors authorize Bank, without notice or demand and without
affecting Guarantors' liability hereunder, to, from time to time: (a) renew,
compromise, extend, revise, accelerate or otherwise change the time for payment
of, or otherwise change the terms of, the Indebtedness or any part thereof (
including the rate of interest thereon); (b) take security for the payment of
this Guaranty or the Indebtedness, and exchange, enforce, waive, or release any
such security, or take additional security; (c) apply any proceeds from such
security or take additional security; (d) apply any proceeds from such security
and direct the order or manner of sale of such security as Bank, in its
discretion, may determine; and (e) release or substitute any one or more of the
Guarantors or additional Guarantors.
5. The obligation of the Guarantors shall remain in full force and effect
until the entire Indebtedness shall have been paid, and shall not be affected
upon the happening of any event, including without limitation, any of the
following: (a) the Bank's failure to give notice to the Guarantors of the
occurrence of any event of default in the payment of the Indebtedness or
performance of the Borrower; (b) the Bank's waiver of the payment, performance
or observance by the Borrower of any obligations, covenants or agreements
related in any way to the Indebtedness; (c) the Bank's impairment, modification,
release or amendment of any obligation, covenant or term of any agreement
related to the Indebtedness; (d) the voluntary or involuntary liquidation,
dissolution, sale or other disposition of any of the Borrower's assets or any
insolvency, bankruptcy, reorganization or other similar proceedings affecting
Borrower; or (e) any event or action that would, in the absence of this clause,
result as a matter of law in the release or discharge of the Guarantors from the
performance or observance of any obligation, covenant or agreement contained
herein other than payment in full of the Indebtedness.
Page 1 of 3
<PAGE> 2
6. Guarantors waive any right to require Bank to (a) proceed against
Borrowers, Guarantors, or other guarantors; (b) proceed against or exhaust any
security held from Guarantor or Borrowers; or (c) pursue any other remedy in
Bank's power whatsoever. Guarantors waive the benefits of Arizona Revised
Statues Section 33-814. Guarantors agree that if the Indebtedness is secured in
whole or part by a deed of trust on real property, Bank may proceed to foreclose
any other collateral first or may proceed against Guarantors, Borrower or any
obligor without waiving its right to exercise its remedies and foreclose its
lien under such deed of trust at a later time. Bank may, without notice, assign
this Guaranty in whole or in part.
7. Guarantors shall have no right of indemnity, reimbursement ,
contribution or subrogation as to Borrower unless Bank, at its option, so
elects. Guarantors hereby waive any right to enforce any remedy which Bank now
has, or may hereafter have, against Borrower, and hereby waive any benefit of,
any right to participate in, any security now or hereafter held by Bank.
Guarantors acknowledge that Borrower may owe other sums and obligations to Bank.
Guarantors agree that any payments received by Bank, other than from Guarantors
under this Guaranty, whether from the Borrower or from the proceeds of any
collateral or otherwise, may be applied by Bank upon any amounts owned to Bank
in such order and manner as Bank may determine in its sole discretion.
Guarantors waive all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor and notices of
acceptance of this Guaranty and of the existence, creation , or incurring of new
or additional Indebtedness. Guarantors waive the benefits of Arizona Revised
Statute Sections 12-1641 and 12-1642.
8. Guarantors agree to pay reasonable attorney's fees and all other costs
and expenses which may be incurred by Bank in the enforcement of this Guaranty.
Guarantors hereby indemnify Bank against all costs or repayments incurred by
Bank or required of Bank as a result of payment hereunder being challenged as a
preference.
9. Bank shall have a lien upon, and a right of set-off against, all
monies, securities and other property of Guarantors now or hereafter in the
possession of or on deposit with Bank, whether held in a general or special
account, or for safekeeping or otherwise; and every such lien and right of
set-off may be exercised without demand upon, or notice to Guarantors until the
Indebtedness is paid in full.
10. This Guaranty is cumulative as to amounts and does not revoke or alter
any guaranty previously delivered to Bank or any guaranty subsequently deliver
to Bank. This Guaranty does not in any manner limit the amount of any borrowing
or other financing arrangement between Bank and Borrower.
11. Guarantors acknowledge that the execution of this Guaranty shall not
entitle Guarantors to rely on the Bank to preserve or maintain any collateral or
other security that Bank may now have or hereafter acquire in connection with
the Indebtedness. Guarantors hereby release Bank from any obligation to inspect,
preserve or maintain any collateral or other security that Bank may now have or
hereafter acquire in connection with the Indebtedness, and any obligation to
monitor, control or see to the use of any monies advanced to the Borrower.
Guarantors further waive any and all rights to receive reports or other
information Bank may have relating to Borrower.
Page 2 of 3
<PAGE> 3
12. If Guarantor is a corporation or a partnership, Guarantor represents
and warrants that: (a) it has the necessary power under law and its governing
documents to make the agreements on its part herein contained; (b) the execution
of this Guaranty has been authorized by all necessary and proper actions; (c)
the execution and delivery of this Guaranty, the consummation of the
transactions contemplated hereby, and the fulfillment of or compliance with the
terms and conditions of this Guaranty do not conflict with or result in a breach
of any of the terms, conditions or provisions of any agreement or instrument to
which it is a party or by which it is bound; and (d) Guarantor agrees that
during the term of this Guaranty it will maintain its separate existence, and
will not dissolve, terminate, merge or consolidate.
13. Any married person who is a Guarantor hereby expressly agrees that
recourse may be had against their separate property as well as all community
property for all their obligations under this Guaranty.
14. Guarantors agree that during the term of this Guaranty they will not
transfer or dispose of any material part of their assets except in the ordinary
course of business for a full and fair consideration. Guarantors agree that
during the term of this Guaranty they will furnish annually, within 90 days
after the close of each year or fiscal year, as the case may be, a financial
statement consisting of a balance sheet and such other financial information as
Bank may reasonably request.
15. This Guaranty applies to, is binding upon, and insures to the benefit
of all parties hereto, and their successors and assigns.
16. If any part or parts of this Guaranty shall at any time be held to be
invalid or unenforceable by binding arbitration or by a court of competent
jurisdiction, the remaining part or parts of the Guaranty shall be and remain in
full force and effect.
17. This Guaranty shall be construed in accordance with the laws of the
State of Arizona.
18. Guarantors acknowledge the Bank would not have allowed the
Indebtedness to exist except for the consideration received from Guarantor's
promise to pay pursuant to this Guaranty.
19. All words used herein in the plural shall be deemed to have been used
in the singular where the context and construction so requires; and when there
is more than one Borrower named herein, the word "Borrower" shall mean all of
them.
INDIVIDUAL GUARANTOR
Dated:JUNE 30, 1995
- ---------------------------------------
DAVID A. SCHUFF
- ---------------------------------------
NANCY A. SCHUFF
Page 3 of 3
<PAGE> 1
EXHIBIT 10.2 (e)
CONTINUING GUARANTY
TO: BANK ONE, ARIZONA, NA, a national banking association
1. For valuable consideration, the undersigned ("Guarantors"), jointly and
severally, unconditionally guarantee and promise to pay to BANK ONE, ARIZONA, NA
("Bank"), or order, on demand, in lawful money of the United States, any and all
Indebtedness of SCHUFF STEEL COMPANY, an Arizona corporation ("Borrower"), to
Bank. The word "Indebtedness" includes any and all loans, debts, obligations and
liabilities of whatever nature of Borrower owed to Bank whenever and however
made, incurred or created, whether recovery upon such Indebtedness may be barred
by any statue of limitations, whether such Indebtedness may be otherwise
unenforceable, and whether Borrower is liable individually or jointly with
others.
2. The liability of Guarantors shall not exceed at any one time the total
of (i) the principal sum of TEN MILLION AND NO/100THS Dollars ($10,000,000.00)
plus (ii) all interest owed thereon plus (iii) all costs, attorneys' fees,
losses and expenses which may be incurred by Bank by reason of Borrower's
default in the payment of the Indebtedness.
3. This Guaranty shall bind and obligate the undersigned and their
successors and assigns with Borrower, jointly and severally, for the payment of
the Indebtedness. A separate action may be commenced against Guarantors whether
action is brought against Borrower or whether Borrower may be joined in any such
action. Guarantors waive any defenses Borrower may now or hereafter have to
payment of the Indebtedness.
4. Guarantors authorize Bank, without notice or demand and without
affecting Guarantors' liability hereunder, to, from time to time: (a) renew,
compromise, extend, revise, accelerate or otherwise change the time for payment
of, or otherwise change the terms of, the Indebtedness or any part thereof (
including the rate of interest thereon); (b) take security for the payment of
this Guaranty or the Indebtedness, and exchange, enforce, waive, or release any
such security, or take additional security; (c) apply any proceeds from such
security or take additional security; (d) apply any proceeds from such security
and direct the order or manner of sale of such security as Bank, in its
discretion, may determine; and (e) release or substitute any one or more of the
Guarantors or additional Guarantors.
5. The obligation of the Guarantors shall remain in full force and effect
until the entire Indebtedness shall have been paid, and shall not be affected
upon the happening of any event, including without limitation, any of the
following: (a) the Bank's failure to give notice to the Guarantors of the
occurrence of any event of default in the payment of the Indebtedness or
performance of the Borrower; (b) the Bank's waiver of the payment, performance
or observance by the Borrower of any obligations, covenants or agreements
related in any way to the Indebtedness; (c) the Bank's impairment, modification,
release or amendment of any obligation, covenant or term of any agreement
related to the Indebtedness; (d) the voluntary or involuntary liquidation,
dissolution, sale or other disposition of any of the Borrower's assets or any
insolvency, bankruptcy, reorganization or other similar proceedings affecting
Borrower; or (e) any event or action that would, in the absence of this clause,
result as a matter of law in the release or discharge of the Guarantors from the
performance or observance of any obligation, covenant or agreement contained
herein other than payment in full of the Indebtedness.
Page 1 of 3
<PAGE> 2
6. Guarantors waive any right to require Bank to (a) proceed against
Borrowers, Guarantors, or other guarantors; (b) proceed against or exhaust any
security held from Guarantor or Borrowers; or (c) pursue any other remedy in
Bank's power whatsoever. Guarantors waive the benefits of Arizona Revised
Statues Section 33-814. Guarantors agree that if the Indebtedness is secured in
whole or part by a deed of trust on real property, Bank may proceed to foreclose
any other collateral first or may proceed against Guarantors, Borrower or any
obligor without waiving its right to exercise its remedies and foreclose its
lien under such deed of trust at a later time. Bank may, without notice, assign
this Guaranty in whole or in part.
7. Guarantors shall have no right of indemnity, reimbursement ,
contribution or subrogation as to Borrower unless Bank, at its option, so
elects. Guarantors hereby waive any right to enforce any remedy which Bank now
has, or may hereafter have, against Borrower, and hereby waive any benefit of,
any right to participate in, any security now or hereafter held by Bank.
Guarantors acknowledge that Borrower may owe other sums and obligations to Bank.
Guarantors agree that any payments received by Bank, other than from Guarantors
under this Guaranty, whether from the Borrower or from the proceeds of any
collateral or otherwise, may be applied by Bank upon any amounts owned to Bank
in such order and manner as Bank may determine in its sole discretion.
Guarantors waive all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor and notices of
acceptance of this Guaranty and of the existence, creation , or incurring of new
or additional Indebtedness. Guarantors waive the benefits of Arizona Revised
Statute Sections 12-1641 and 12-1642.
8. Guarantors agree to pay reasonable attorney's fees and all other costs
and expenses which may be incurred by Bank in the enforcement of this Guaranty.
Guarantors hereby indemnify Bank against all costs or repayments incurred by
Bank or required of Bank as a result of payment hereunder being challenged as a
preference.
9. Bank shall have a lien upon, and a right of set-off against, all
monies, securities and other property of Guarantors now or hereafter in the
possession of or on deposit with Bank, whether held in a general or special
account, or for safekeeping or otherwise; and every such lien and right of
set-off may be exercised without demand upon, or notice to Guarantors until the
Indebtedness is paid in full.
10. This Guaranty is cumulative as to amounts and does not revoke or alter
any guaranty previously delivered to Bank or any guaranty subsequently deliver
to Bank. This Guaranty does not in any manner limit the amount of any borrowing
or other financing arrangement between Bank and Borrower.
11. Guarantors acknowledge that the execution of this Guaranty shall not
entitle Guarantors to rely on the Bank to preserve or maintain any collateral or
other security that Bank may now have or hereafter acquire in connection with
the Indebtedness. Guarantors hereby release Bank from any obligation to inspect,
preserve or maintain any collateral or other security that Bank may now have or
hereafter acquire in connection with the Indebtedness, and any obligation to
monitor, control or see to the use of any monies advanced to the Borrower.
Guarantors further waive any and all rights to receive reports or other
information Bank may have relating to Borrower.
Page 2 of 3
<PAGE> 3
12. If Guarantor is a corporation or a partnership, Guarantor represents
and warrants that: (a) it has the necessary power under law and its governing
documents to make the agreements on its part herein contained; (b) the execution
of this Guaranty has been authorized by all necessary and proper actions; (c)
the execution and delivery of this Guaranty, the consummation of the
transactions contemplated hereby, and the fulfillment of or compliance with the
terms and conditions of this Guaranty do not conflict with or result in a breach
of any of the terms, conditions or provisions of any agreement or instrument to
which it is a party or by which it is bound; and (d) Guarantor agrees that
during the term of this Guaranty it will maintain its separate existence, and
will not dissolve, terminate, merge or consolidate.
13. Any married person who is a Guarantor hereby expressly agrees that
recourse may be had against their separate property as well as all community
property for all their obligations under this Guaranty.
14. Guarantors agree that during the term of this Guaranty they will not
transfer or dispose of any material part of their assets except in the ordinary
course of business for a full and fair consideration. Guarantors agree that
during the term of this Guaranty they will furnish annually, within 90 days
after the close of each year or fiscal year, as the case may be, a financial
statement consisting of a balance sheet and such other financial information as
Bank may reasonably request.
15. This Guaranty applies to, is binding upon, and insures to the benefit
of all parties hereto, and their successors and assigns.
16. If any part or parts of this Guaranty shall at any time be held to be
invalid or unenforceable by binding arbitration or by a court of competent
jurisdiction, the remaining part or parts of the Guaranty shall be and remain in
full force and effect.
17. This Guaranty shall be construed in accordance with the laws of the
State of Arizona.
18. Guarantors acknowledge the Bank would not have allowed the
Indebtedness to exist except for the consideration received from Guarantor's
promise to pay pursuant to this Guaranty.
19. All words used herein in the plural shall be deemed to have been used
in the singular where the context and construction so requires; and when there
is more than one Borrower named herein, the word "Borrower" shall mean all of
them.
INDIVIDUAL GUARANTOR
Dated:JUNE 30, 1995
- ---------------------------------------
SCOTT A. SCHUFF
Page 3 of 3
<PAGE> 1
Ex. 10.2(f)
CLN# 7938640665/91
MODIFICATION AGREEMENT
DATE: MARCH 31, 1997
PARTIES: Borrower: SCHUFF STEEL COMPANY,
an Arizona corporation.
Bank: BANK ONE, ARIZONA, NA,
a national banking association
RECITALS:
A. Bank has extended to Borrower credit ("LOAN") in the principal amount
of $6,500,000.00 pursuant to the Revolving Line of Credit Loan Agreement
(Accounts Receivable and Inventory), dated June 30, 1995 ("LOAN AGREEMENT"), and
evidenced by the Revolving Line of Credit Note (Variable Rate), dated June 30,
1995 ("NOTE"). The unpaid principal of the Loan as of the date hereof is $0.00.
B. The Loan and/or guaranty of Loan is secured by, among other things, (i)
the Continuing Security Agreement Inventory, Receivables and Rights to Payment,
dated September 15, 1994, and (ii) the Security Agreement Consumer Goods,
Equipment and Farm Equipment, Including Titled Vehicles, dated September 15,
1994, both by Borrower for the benefit of Bank (the agreements, documents, and
instruments securing the Loan and the Note are referred to individually and
collectively as the ("SECURITY DOCUMENTS").
C. Bank and Borrower have executed and delivered previously the following
agreements ("MODIFICATIONS") modifying the terms of the Loan, the Note, the Loan
Agreement, and/or the Security Documents: Modification Agreement, dated June 30,
1996. (The Note, the Loan Agreement, the Security Documents, any arbitration
resolution, and all other agreements, documents, and instruments evidencing,
securing, or otherwise relating to the Loan, as modified in the Modifications,
are sometimes referred to individually and collectively as the "LOAN
DOCUMENTS". Hereinafter, "NOTE", "LOAN AGREEMENT", and "SECURITY DOCUMENTS"
shall mean such documents as modified in the Modifications.)
D. Borrower has requested that Bank modify the Loan and the Loan Documents
as provided herein. Bank is willing to so modify the Loan and the Loan
Documents, subject to the terms and conditions herein.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
2.1 The Loan Documents are modified as follows:
2.1.1 Section 1.2 of the Loan Agreement is modified to read in its
entirety as follows:
1.2 ADVANCES. Subject to the terms and conditions hereof,
Advances of the Loan will be made in amounts not to exceed the
amount ("Borrowing Base") calculated in accordance with the formula
set forth in the Borrowing Base Certificate, attached hereto as
Exhibit A and by this reference incorporated herein. In calculating
the Borrowing Base, the percentage set forth in Section 13 hereof
of the amount of Total Eligible Accounts Receivable of Borrower and
B & K Steel Fabrications, Inc., an Arizona corporation ("B&K")
(collectively, "Entities"), and the percentage set forth in Section
13 hereof of the amount (determined on the basis of the lower of
cost or market value) of Total Eligible Inventory of the Entities
shall be used. "Eligible Account
1
<PAGE> 2
Receivable" is an amount owing to the Entities, as determined by Bank in
its sole and absolute discretion, which has arisen from the delivery and/or
shipment of products previously made and from services rendered for which
an invoice has been issued by one of the Entities to its customer
("Customer") (a) which amount is not subject to any offset, counterclaim or
defense asserted by the Customer, (b) which amount is subject to a
perfected security interest in favor of Bank and is not subject to any
other security interest, lien, claim or encumbrances, (c) which amount has
not remained unpaid for more than the number of days set forth in Section
13 after the date due under the terms of the related invoice, (d) where not
more than fifteen percent (15%) of the total amount owing from the Customer
has remained unpaid for more than the number of days set forth in Section
13 after the date due under the terms of the related invoice, (e) which
amount is not an uninsured amount owing from Customer located in a foreign
country and (f) which amount is not owing from the United States of America
or any agency, department or subdivision thereof, unless a properly
executed assignment of claims has been received by Bank. "Eligible
Inventory" is the inventory of the Entities (consisting of those items
within the categories set forth in Section 13), as determined by Bank in
its sole and absolute discretion, to be (a) in good condition and salable
in the ordinary course of the Entities' business, (b) owned by one of the
Entities free and clear of any mortgages, liens, security interests,
claims, encumbrances or rights of others, excepting only the security
interests in favor of Bank, (c) located at a location identified in a
Security Agreement (hereinafter defined), (d) subject to a perfected
security interest in favor of Bank, (e) not subject to any consignment to
any Customer and (f) not acquired by any of the Entities in or as part of a
bulk transfer of sale or assets unless one of the Entities has complied
with all applicable bulk sales or bulk transfer laws. Notwithstanding
anything in this paragraph to the contrary, Borrower shall be entitled to
Advances of the Loan of at least $1,000,000.00 regardless of the Borrowing
Base calculation.
2.1.2 Section 1.5 of the Loan Agreement is hereby modified to read in its
entirety as follows:
1.5 REMITTANCE ACCOUNT. If so indicated in Section 13 hereof, the
proceeds received by either of the Entities from its inventory and
collection of accounts receivable, which, pursuant to the Security
Agreements (hereinafter defined), are required to be transmitted to Bank,
shall be handled and administered by Bank in and through a remittance
account in accordance with the provisions of the Security Agreements.
2.1.3 Section 2.1 and 2.2 of the Loan Agreement are hereby modified to read in
their entirety as follows:
2.1 SECURITY AGREEMENTS. As security for the payment of the Note, the
Loan, and all other liabilities and obligations of Borrower to Bank, now
existing or hereafter created, Borrower shall grant and cause B&K to grant,
to Bank a security interest in all of the Entities' inventory, accounts
receivable, rights to payment and such other property ("Property"), as more
particularly described in one or more security agreements ("Security
Agreements") executed by the Entities and delivered to Bank in form and
substance satisfactory to Bank, in its sole and absolute discretion. The
Security Agreements shall grant to Bank a first and prior security interest
in and to the Property, except as otherwise expressly provided therein.
2.2 ADDITIONAL DOCUMENTS. Borrower shall execute and cause B&K to execute
from time to time upon the request of Bank, such financing statements or
other documents reasonably required by bank to perfect or continue Bank's
security interests described herein.
2.1.4 Section 3.1 of the Loan Agreement is hereby modified to read in its
entirety as follows:
3.1 CONDITIONS PRECEDENT TO ADVANCES. Bank shall have no obligation to
make any Advance until the conditions set forth in the following
subparagraphs and elsewhere herein have been satisfied at the expense of
Borrower, as determined by Bank in its sole and absolute discretion:
(a) Borrower shall have delivered to Bank, or caused B&K to have
delivered to Bank, in form and substance satisfactory to Bank, this
Agreement, the Note, the Security Agreements and such other documents,
instruments, financing statements, certificates and agreements as Bank
may reasonably request;
(b) If Borrower or B&K is a corporation or a partnership, Borrower
shall have delivered to Bank, and caused B&K to have delivered to
Bank, in form and substance satisfactory to Bank in its sole and
absolute discretion certified copies of resolutions of the Boards of
Directors of Borrower and B&K, authorizing Borrower and B&K to
execute, deliver, honor and perform the Loan Documents and to grant
the security interest in the Property as provided in the Security
Agreements and certifying the names and signatures of the officers or
partners, as the case may be, of Borrower and B&K authorized to sign
the Loan Documents;
(c) All of Bank's liens and security interest securing the Loan, shall
have been validly perfected;
2
<PAGE> 3
(d) No material adverse change shall have occurred in the
business or financial condition of Borrower or any guarantor
since the date of the latest financial statements given to
Bank by on behalf of Borrower or such guarantor;
(e) Each of the warranties and representations made by
Borrower and B&K in the Loan Documents shall be true and
correct as of the date of each Advance; and
(f) Borrower and B&K shall have kept and performed the various
covenants, obligations and agreements on its part to be kept
and performed under the Loan Documents and no Event of Default,
or act or event which with the giving of notice or the passage
of time, or both, would constitute an Event of Default
hereunder or under any of the other Loan Documents, shall have
occurred and be continuing.
2.1.5 Section 6.1(a) and (b)(i), (ii), (iii), (iv) and (v) of the
Loan Agreement are hereby modified to read in their entirety as follows:
6.1 COVENANTS. Until the payment in full of the Loan and until the
fulfillment of all of its obligations hereunder and under the other
Loan Documents, Borrower shall, and shall cause B & K to comply with
the following covenants:
(a) Books and Records. Borrower shall, and shall cause B & K, at all
times keep accurate and complete books, records and accounts of all
of Borrower's and B & K's business activities, prepared in
accordance with generally accepted accounting principles
consistently applied, and Borrower shall, and shall cause B & K to
permit Bank, or any persons designated by Bank, at any reasonable
time, to inspect, audit and examine such books, records and accounts
and to make copies or extracts thereof;
(b) Statements and Reports. Borrower shall furnish or cause to be
furnished to Bank:
(i) within the number of days set forth in Section 13 hereof
after the end of each fiscal year of the Entities, consolidated
financial statements of the Entities, which shall include a
balance sheet, an income statement showing the results of
operations for such a fiscal year and a change in financial
position statement for such fiscal year, together, in each case,
with the comparable figures for the immediately preceding fiscal
year, all in reasonable detail and prepared in accordance with
generally accepted accounting principles, consistently applied,
which statements shall contain the certification requirements
set forth in Section 13 hereof;
(ii) within the number of days set forth in Section 13 hereof
after the end of each of the fiscal periods of the Entities set
forth in Section 13 hereof, consolidated financial reports of
the Entities, which shall include a balance sheet, an income
statement showing the results of operations for such fiscal
period and a change in financial position statement for such
fiscal period, together, in each case, with the comparable
figures for the immediately preceding corresponding fiscal
period, all in reasonable detail and prepared in accordance with
generally accepted accounting principles, consistently applied,
and containing the certifications required pursuant to Section
13 hereof;
(iii) with each such set of financial statements, a certificate
prepared as at the end of the period covered by such financial
statements, showing the computation as of such date of each of
the financial covenants contained in Section 6.1(d);
(iv) within twenty five (25) days after the end of each month a
Borrowing Base Certificate in the form attached hereto as
Exhibit A, to which shall be attached the following reports:
(A) An aging and listing of all accounts receivable
prepared in accordance with generally accepted accounting
principles which itemizes each account debtor by name and
addresses and which states the total amount payable to the
Entities and contains a breakdown indicating future amounts
due and when due, current amounts due, amounts thirty (30)
days past due, sixty (60) days past due, and ninety (90) or
more days past due, and reflecting any credit adjustments,
returns and allowances;
(B) An aging and listing of all accounts payable-trade
prepared in a similar manner;
(C) A complete and detailed description of all inventory
containing a breakdown into the categories referenced in
Section 1.2 hereof and set forth in Section 13 hereof;
(v) promptly, from time to time, upon request of Bank, such
other information concerning the financial condition, business
and affairs of the Entities as shall be reasonably requested by
bank;
2.2 Each of the Loan Documents is modified to provide that it shall be
a default or an event of default thereunder if Borrower shall fail to comply
with any of the covenants of Borrower herein or if any representation or
warranty by Borrower herein is materially incomplete, incorrect, or misleading
as of the date hereof.
2.3 Each reference in the Loan Documents to any of the Loan Documents
shall be a reference to such document as modified herein.
3
<PAGE> 4
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
---------------------------------------------
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or interests
in property granted as security in the Loan Documents shall remain as security
for the Loan and the obligations of Borrower in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
---------------------------------------
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents
as modified herein, nor any event, that, with the giving of notice or the
passage of time or both, would be a default or an event of default under the
Loan Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial
condition of Borrower or any other person whose financial statement has been
delivered to Bank in connection with the Loan from the most recent financial
statement received by Bank.
4.3 Each and all representations and warranties of Borrower in the
Loan Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs
with respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance with
their terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified
herein. The execution and delivery of this Agreement and the performance of the
Loan Documents as modified herein have been duly authorized by all requisite
action by or on behalf of Borrower. This Agreement has been duly executed and
delivered on behalf of Borrower.
5. BORROWER COVENANTS.
------------------
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such
additional agreements, documents, and instruments as reasonably required by
Bank to effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges
Bank and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in
law or equity of Borrower, whether now known or unknown to Borrower, (i) in
respect of the Loan, the Loan Documents, or the actions or omissions of Bank in
respect of the Loan or the Loan Documents and (ii) arising from events
occurring prior to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this
Agreement, Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all
amounts, other than interest and principal, due and payable by Borrower under
the Loan Documents as of the date hereof.
5.3.2 All the internal and external costs and expenses
incurred by Bank in connection with this Agreement (including, without
limitation, inside and outside attorneys, title, filing, and recording costs,
expenses, and fees).
5.4 Contemporaneously with the execution and delivery of this
Agreement, Borrower has executed and delivered, or caused to be executed and
delivered, to Bank, as additional security for the Loan and the Note, (i) the
Continuing Security Agreement Inventory, Receivables and Rights to Payment, and
(ii) the Security Agreement Consumer Goods, Equipment and Farm Equipment,
including Titled Vehicles, both dated of even date herewith ("Security
Agreements"), both by B&K for the benefit of Bank. As used in this Agreement,
"LOAN DOCUMENTS" shall include the Security Agreements.
4
<PAGE> 5
5.5 Contemporaneously with the execution and delivery of this
Agreement, Borrower has caused to be executed and delivered to Bank the
Continuing Guaranty, dated of even date herewith, by B&K, for the benefit of
Bank.
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations of
Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) if required by Bank, Borrower
and any guarantor(s) of the Loan have executed and delivered to Bank an
arbitration resolution, and (iv) each guarantor of the Loan has executed the
Consent of Guarantor(s) below.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Loan Documents as modified herein may be
changed, discharged, supplemented, terminated, or waived except in a writing
signed by the parties thereto.
8. BINDING EFFECT.
The Loan Documents as modified herein shall be binding upon and shall inure to
the benefit of Borrower and Bank and their respective successors and assigns.
9. CHOICE OF LAW.
This Agreement shall be governed by and construed in accordance with the laws
of the State of Arizona, without giving effect to conflicts of law principles.
10. COUNTERPART EXECUTION.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
DATED as of the date first above stated.
SCHUFF STEEL COMPANY,
an Arizona corporation
By /s/ David A. Schuff
------------------------------
David A. Schuff, Chairman
BANK ONE, ARIZONA, NA,
a national banking association
By /s/ Brad Richards
------------------------------
Brad Richards, Vice President
5
<PAGE> 6
CONSENT OF GUARANTOR(S)
The undersigned (i) consent to the modification of the Loan Documents and all
other matters in the foregoing Agreement, (ii) reaffirm the Continuing
Guaranty, dated June 30, 1995 and any other agreements, documents and
instruments securing or otherwise relating thereto ("Guarantor Documents"),
(iii) acknowledge that the Guarantor Documents continue in full force and
effect, remain unchanged, except as specifically modified hereby, and are
valid, binding and enforceable in accordance with their respective terms, (iv)
agree that all references, if any, in the Guarantor Documents to any of the
Loan Documents are modified to refer to those documents as modified by the
Agreement, and (v) agree to be bound by the release of Bank set forth in the
Agreement.
Dated as of the date of the Agreement.
/s/ David A. Schuff
-----------------------------------------
David A. Schuff
/s/ Nancy A. Schuff
-----------------------------------------
Nancy A. Schuff
CONSENT OF GUARANTOR(S)
The undersigned (i) consent to the modification of the Loan Documents and all
other matters in the foregoing Agreement, (ii) reaffirm the Continuing
Guaranty, dated June 30, 1995 and any other agreements, documents and
instruments securing or otherwise relating thereto ("Guarantor Documents"),
(iii) acknowledge that the Guarantor Documents continue in full force and
effect, remain unchanged, except as specifically modified hereby, and are
valid, binding and enforceable in accordance with their respective terms, (iv)
agree that all references, if any, in the Guarantor Documents to any of the
Loan Documents are modified to refer to those documents as modified by the
Agreement, and (v) agree to be bound by the release of Bank set forth in the
Agreement.
Dated as of the date of the Agreement.
/s/ Scott A. Schuff
--------------------------------------
Scott A. Schuff
6
<PAGE> 7
EXHIBIT "A"
SCHUFF STEEL COMPANY
BORROWING BASE
1. Total Contract A/R $____________
2. Less: over 90 $____________
3. Less: Retention $____________
4. Less: Other Ineligibles $____________
5. Net Contract Accounts Receivable as of ____________ $____________
LESS THE SUM OF THE FOLLOWING IF NEGATIVE (DO NO ADD IF POSITIVE)
6. Total Gross Inventory $____________
7. Less: Accts Payable/Book overdraft $____________
8. Less: Billings in excess of cost $____________
9. Plus: Cost in excess of billings $____________
10. Plus: Unbilled $____________
11. Total Cost as of ____________ $____________
12. Times Advance Factor x 75%
13. Borrowing Potential $____________
(or $1,000,000.00, whichever is greater)
14. Net Loan Outstanding Month Ending____________ $____________
15. Outstanding LOC's $____________
16. Available Advance Ln #13 + (Ln #13 - Ln #14) - Ln #15. $____________
(Advance available on RLC not to exceed $6,500M)
SCHUFF STEEL COMPANY
By___________________________
Its__________________________
<PAGE> 1
EX. 10.2(g)
BANK ONE, ARIZONA, NA
P.O. BOX 71, DEPT. AZ1-1178
PHOENIX, AZ 85001-0071
BANK ONE May 7, 1997
Schuff Steel Company
P.O. Box 39670
Phoenix, AZ 85069
Re: Revolving Line of Credit Note in the principal amount of $6,500,000.00,
dated June 30, 1995 ("Loan") made pursuant to Revolving Line of Credit Loan
Agreement (Accounts Receivable and Inventory), dated June 30, 1995, as modified
("Loan Agreement") between SCHUFF STEEL COMPANY, an Arizona corporation
("Borrower") and Bank One, Arizona, NA ("Bank")
Gentlemen:
The Loan Agreement shall be modified as follows:
1. The last sentence of Section 1.2 of the Loan Agreement is modified to read
in its entirety as follows:
Notwithstanding anything in this paragraph to the contrary, and until
July 31, 1997, Borrower shall be entitled to Advances of the Loan of at
least $2,500,000.00 regardless of the Borrowing Base calculation. After
July 31, 1997, Borrower shall be entitled to Advances of the Loan of at
least $1,000,000.00, regardless of the Borrowing Base calculation.
All other terms and conditions of the Loan, including the Loan Agreement and
all other agreements, documents and instruments evidencing, securing, or
otherwise relating to the Loan (collectively, "Loan Documents") shall remain in
full force and effect.
If the foregoing terms of this Letter Agreement meet with your approval, please
sign where indicated below, have the Consent of Guarantor(s) executed by the
guarantors, and return a fully executed copy to the Bank to the attention of
Brad Richards.
BANK ONE, ARIZONA, NA
By /s/ Brad Richards
-----------------------------
Brad Richards, Vice President
CONSENTED AND AGREED TO:
"Borrower"
SCHUFF STEEL COMPANY,
an Arizona corporation
By /s/ David A. Schuff
-------------------------
David A. Schuff, Chairman
1
<PAGE> 1
EXHIBIT 10.3 (a)
LOAN AGREEMENT
This Agreement is entered into by and between SCHUFF STEEL COMPANY, an
Arizona corporation ("Borrower") and Bank One, Arizona, NA, a national banking
association ("Bank").
Borrower has applied to Bank for a loan in the amount of $500,000.00. In
consideration of Bank making said loan the Borrower hereby warrants and agrees
as follows:
1. THE LOAN. This loan shall be repaid in accordance with the terms of
the promissory note(s) prepared by Bank and executed by Borrower. The purpose of
this loan is to purchase equipment.
2. BUSINESS ORGANIZATION. Borrower is a Corporation. The primary business
operation of Borrower is STRUCTURAL STEEL ERECTION COMPANY. Borrower's form of
organization and primary business operation shall remain the same during the
term of this Agreement.
3. COLLATERAL. As security for the loan the Borrower will provide the
following collateral under duly executed security documents and agrees to be
bound by the terms contained therein:
S/A EQUIPMENT DTD 9/15/94
4. NET WORTH. A minimum tangible net worth of $5,300,000.00 and a
minimum owner's equity of * % shall be maintained at all times so
long as the loan is outstanding, as determined in accordance with generally
accepted accounting practices consistently applied. "Tangible net worth" shall
mean the sum of the following, determined in accordance with generally accepted
accounting practices and principles: capital, capital surplus and retained
earning, less the sum of the value on the borrower's books of all intangible
assets including but not limited to: goodwill, patents, franchises, trademarks,
copyrights and the write-up in the book value of any assets resulting therefrom
after acquisition. "Owner's equity" shall be defined and computed as "tangible
net worth" (as herein defined) divided by total assets.
5. NET WORKING CAPITAL. While the loan is outstanding, current assets
shall be maintained in excess of current liabilities by $ * and a current
ratio of * : * shall be maintained and calculated by dividing current
assets by current liabilities, as determined in accordance with generally
accepted accounting practices.
6. INVESTMENT IN FIXED ASSETS. Acquisition or purchase of fixed assets
shall not exceed $ N/A during any 12-month period, without prior consent of
Bank.
7. LEASING OF CAPITAL EQUIPMENT. No lease of personal property will be
entered into which would cause Borrower's total rental obligations for personal
property to exceed
* SEE ATTACH ADDENDUM
1
<PAGE> 2
$ N/A per fiscal year,
---------------------------------
without prior consent of Bank.
8. SUBORDINATION OF EXISTING DEBT. The following indebtedness of Borrower
will be subordinated to Bank's loan in a manner satisfactory to Bank:
<TABLE>
<CAPTION>
NAME OF CREDITOR AMOUNT
---------------- ------
<S> <C>
(a) N/A $N/A
(b) $
(c) $
</TABLE>
9. DIVIDENDS. No corporate dividends in excess of $ *
shall be paid during any 12-month period, without prior consent of Bank.
10. COMPENSATION. No annual salary, bonuses, withdrawals, or other
compensation, in cash or otherwise, shall be paid in excess of the following
limits to the persons indicated or to any other person.
<TABLE>
<CAPTION>
NAME ANNUAL AMOUNT
<S> <C>
(a) N/A $N/A
(b) $
(c) $
</TABLE>
11. CHANGE OF OWNERSHIP. Borrower will not repurchase any company issued
stock, buy out a Partnership interest or materially change ownership of the
company without prior written consent of Bank.
12. FINANCIAL STATEMENTS. Borrower will furnish Bank, no later than
90 days after the end of its fiscal year, financial statements which
accurately reflect Borrower's assets, liabilities and net worth as of the end of
the fiscal year and profit and loss statements for the fiscal year in such form
and with such certifications as may be reasonably required by Bank. Borrower
shall also furnish Bank MONTHLY (INSERT MONTHLY, QUARTERLY, SEMI-ANNUAL)
financial statements, as previously defined, no later than 60 days after their
preparation. Borrower shall furnish Bank the above statements and such other
statements and reports containing such other information and with such
certifications as Bank may reasonably require from time to time.
13. WARRANTIES AND COVENANTS.
(a) Borrower warrants that all transactions with Bank, including
the execution of all agreements and instruments by any representative on behalf
of Borrower, are and will be duly authorized and that Bank may rely upon any
statements and representations made by Borrower with respect to such
authorizations.
(b) Borrower warrants that all financial statements and other
statements or reports given to Bank are and will be accurate.
(c) Borrower will keep all books and records of the business on a
consistent basis in accordance with generally accepted accounting practices and
will permit a representative of Bank to examine and audit the books at such
reasonable times as Bank may request.
(d) Borrower will maintain executive and management personnel
satisfactory to Bank.
(e) Borrower will promptly inform Bank of any material litigation
involving Borrower or of any other adverse matter which may occur, the effect of
which may prejudice the payment of the loan.
(f) Borrower will not, in the operation of the business, incur
other indebtedness for borrowed money, or act as guarantor for any indebtedness
of others or lend money, or encumber any of the assets of the business except to
Bank. Borrower will not sell, transfer or assign any assets or engage in any
other material transactions, except in the ordinary course of business.
(g) Borrower will pay all current bills and obligations when due.
Borrower will keep all permits and
* SEE ATTACHED ADDENDUM
2
<PAGE> 3
franchises necessary for the conduct of its business in force and effect and
will keep all of its equipment, machinery and vehicles in good repair.
(h) Borrower will maintain adequate fire, public liability and
other hazard liability insurance. All policies covering property given as
security for the loan(s) shall have a loss payable clause in favor of Bank.
(i) This Agreement shall continue as long as the loan or any part
thereof or any renewal or extension thereof remains unpaid.
(j) No consent or waiver by the Bank of the terms of this
Agreement shall be effective unless in writing. Time is of the essence of this
Agreement. No waiver of any breach or default of Borrower shall be deemed a
waiver of any breach or default thereafter occurring or a waiver of the time is
of the essence provision. Failure of Bank to take steps to collect the
indebtedness due it or to exercise its rights in the collateral shall not be a
waiver of its right to take action at a subsequent date.
14. DEFAULT. Any one of the following events shall constitute the default
of Borrower under this loan and all collateral instruments securing the unpaid
balance thereof:
(a) Nonpayment of any installment of principal or interest when
due.
(b) Breach of any of Borrower's warranties or the making of any
material misrepresentation.
(c) Appointment of a receiver or trustee to take possession of the
business or of any portion of the collateral and the continuance of such
receiver or trustee in possession for a period of 10 days.
(d) Petition by Borrower for reorganization or arrangement under
the bankruptcy laws.
(e) Attachment, garnishment, levy of execution, or judicial
seizure of any portion of the collateral which is not dismissed or stayed within
10 days.
(f) Insolvency of Borrower.
(g) Discontinuance by Borrower of the business or abandonment of
any substantial portion of Borrower's assets.
If any event of default shall occur, the whole of the principal
sum then remaining unpaid on all notes and other obligations to Bank, together
with the interest thereon, shall become immediately due and payable at the
election of Bank. If suit is instituted to collect the notes and other
obligations, Borrower promises to pay, in addition to the costs and
disbursements allowed by law, such additional sums as the court may award as
attorney's fees.
15. EXPENSES. Borrower shall reimburse Bank, upon demand, for all of
Bank's direct expenses in connection with making any and all loans and the
perfection of Bank's security interests.
16. CONDITION OF BANK'S OBLIGATIONS. All agreements or commitments of
Bank to make any loan or advance to Borrower are and will be subject to the
following terms and conditions:
(a) Due and punctual performance by Borrower of all of Borrower's
agreements with Bank.
(b) Correctness of all statements and representations by Borrower
to Bank.
(c) Execution and delivery by Borrower of all loan and security
instruments in such form as Bank shall require.
(d) Acceptance and approval by Bank of all collateral.
(e) Payment by Borrower of any and all fees and charges specified
by Bank.
(f) Verification and approval of Borrower's credit.
(g) No material adverse matter occurring.
17. Any modification, waiver or other change of this agreement must be
agreed to in writing.
ADDITIONAL PROVISIONS. See attached sheet for additional provisions incorporated
by reference in this Agreement.
IN WITNESS WHEREOF, this Agreement is executed this 30th day of June, 1995.
3
<PAGE> 4
BORROWER
SCHUFF STEEL COMPANY, an Arizona corporation
By: ________________________________________
DAVID A. SCHUFF, CHAIRMAN
By: ________________________________________
SCOTT A. SCHUFF, PRESIDENT
BANK
BANK ONE, ARIZONA, NA
By: ____________________________________
BRAD RICHARDS, VICE PRESIDENT
4
<PAGE> 5
ADDENDUM TO
LOAN AGREEMENT
BETWEEN SCHUFF STEEL COMPANY, an Arizona corporation ("BORROWER") AND
BANK ONE, ARIZONA, NA ("BANK")
DATED JUNE 30, 1995
1. Section 4 of the Agreement is hereby modified to include as follows:
a minimum Owner's Equity shall be maintained of the 21%, where "Owner's
equity" "Owner's Equity Percentage" shall mean the results obtained by
dividing (A) Tangible Net Worth (as herein defined) by (B) Borrower's
Total Assets on a six month average.
2. Section 5 of the Agreement is modified to read in its entirety as follows:
Net Working Capital. While the loan is outstanding, current assets shall
be maintained in excess of current liabilities by $4,500,000.00 and a
current ratio of 1.25:1.0 shall be maintained and calculated by dividing
current assets by current liabilities after deducting short term advances
to share holders. The outstanding balance on the $6,500,000.00 Revolving
Line of Credit will be considered to be a current liability for the
purpose of calculating both "Net working capital" and "Current ratio".
3. Section 12, paragraph 2 is hereby is deleted in its entirety and replaced
with the following:
Borrower will furnish Bank, annual financial statements of CPA Audited
quality, and monthly financial statement of company prepared quality as
outlined above. Borrower shall furnish such other information as Bank may
reasonably require from time to time.
Borrower will cause Related Entity, 19TH AVENUE/BUCHANAN LIMITED
PARTNERSHIP ("BLP"), to furnish Bank: (A) as soon as available and in any
event within ninety (90) days after the end of each fiscal year of BLP,
financial statements which accurately reflect BLP assets, liabilities and
net worth as of the end of the fiscal year and profit and loss statements
for the fiscal year with the following certification requirement: CPA
Compiled, (B) as soon as available and in any event within thirty (30)
days of filing, a copy of BLP federal income tax return(s) for each year,
together with all schedules and other documents filed with such returns.
Borrower will cause Guarantor, David A. Schuff ( Nancy A.), to furnish
Bank: (A) annual updated balance sheet in such form and with such
certifications as may be reasonably required by Bank, and (B) within
thirty (30) days of filing, a copy of such person's federal income tax
return(s) for each calendar year, together with all schedules and other
documents filed with such return.
Page 1 of 2
<PAGE> 6
Borrower will cause Guarantor, Scott A. Schuff, to furnish Bank: (A)
annual updated balance sheet in such form and with such certifications as
may be reasonably required by Bank, and (B) within thirty (30) days of
filing, a copy of such person's federal income tax return(s) for each
calendar year, together with all schedules and other documents filed with
such return.
4. Section 14 of the Agreement is modified to include subsection (h) as follows:
(h) An occurrence of any condition or event that is a default, designated
as a default, an Event of Default in any other Loan Documents or any
agreement, document or instrument relating to any other indebtedness of
Borrower to Bank, the same shall be an event of default under this
Agreement.
5. Section 18 of the Agreement is modified to read in its entirety as follows:
Except for Permitted Payments and Distributions (defined below). Borrower
shall not directly or indirectly (A) declare or pay any dividend or other
distribution on or on account of any capital stock or other securities of
Borrower. (B) pay any management fee. or (C) make any other payment or
distribution to any stockholder in Borrower. "PERMITTED PAYMENTS AND
DISTRIBUTIONS" means. (aa) dividends payable solely in shares of the
common stock of Borrower. (bb) annual dividends not exceeding in any
fiscal year borrower the aggregate amount of income taxes payable by the
stockholders of Borrower during that fiscal year of Borrower on the income
of Borrower as a Subchapter S corporation ("TAX DIVIDENDS"), (cc)
payments, dividends, or other distributions at the times and in the
amounts needed to pay the premiums on the two life insurance policies now
in effect on the lives of David A. Schuff and Scott A. Schuff, each policy
being in the face amount of $3,000,000, ("PREMIUM AMOUNTS"), and (dd)
dividends or other distributions during each fiscal year of Borrower of no
more than sixty percent (60%) of Residual Net Profits for the preceding
fiscal year. In all events Borrower shall retain an not pay out or
distribute forty percent (40%) of Residual Net Profits for each fiscal
year of Borrower. "RESIDUAL NET PROFITS" means, for any fiscal year of
Borrower, net profits of Borrower during the preceding fiscal year of
Borrower determined according to generally accepted account principles,
less Tax Dividends and Premium Amounts during the current fiscal year of
Borrower.
DATED: JUNE 30, 1995
Bank:
BANK ONE, ARIZONA, NA
BY:__________________________________
Brad Richards, Vice President
Borrower:
SCHUFF STEEL COMPANY, an Arizona corporation
By:__________________________________
Its: President
Page 2 of 2
<PAGE> 1
Exhibit 10.3(b)
<TABLE>
<CAPTION>
APPROVED BY:
Brad Richards - 269181 COMMERCIAL BANKING CENTER
<S> <C> <C> <C> <C>
________________________________________________________________________________________________
Dept./Br # A664 Acc # 7938640663 Comm # 0000042 Note # 00000141 Class
________________________________________________________________________________________________
Name SCHUFF STEEL COMPANY, an Arizona corporation Loan $500,000.00
________________________________________________________________________________________________
Rate * Interest From Renewal of Note 59
________________________________________________________________________________________________
Collateral S/A EQUIPMENT DTD 9/15/94
________________________________________________________________________________________________
*BANK ONE, ARIZONA, NA, PRIME RATE PLUS .50% TO MOVE WITH PRIME
</TABLE>
BANK ONE, ARIZONA, NA
LINE OF CREDIT NOTE
(VARIABLE RATE)
Phoenix, Arizona June 30, 1995
FOR VALUE RECEIVED, the undersigned ("Borrower"), promises to pay on or
before June 30, 1996 to BANK ONE, ARIZONA, NA ("Bank"), or order, the aggregate
principal amount outstanding on Borrower's revolving line of credit as shown on
Bank's records which shall at all times be conclusive and govern, with interest
payable monthly on the unpaid balance outstanding from time to time at an annual
rate equal to one-half* percent (0.500%) more than the "prime rate" of interest
charged by Bank One, Arizona, N.A., as such rate shall change from time to time
during the term hereof. Interest is to be charged on a daily basis for the
actual number of days the principal is outstanding from the date of disbursement
to date of maturity. The rate of interest agreed to shall include the interest
rate as shown above, in accordance with the terms of this note, plus any
compensating balance requirement and any additional charges, costs and fees
incident to this loan to the extent they are deemed to be interest under
applicable Arizona law. Bank and Borrower will establish specific instructions
and procedures by which draws against said credit will be presented for
disbursement, but nothing contained herein shall create a duty on the part of
Bank to make said disbursement if Borrower is in default. This note does not
evidence a revolving line of credit and the undersigned shall not be entitled to
total disbursements hereunder exceeding FIVE HUNDRED THOUSAND AND NO/100THS
DOLLARS ($500,000.00). All amounts payable hereunder shall be paid in lawful
money of the United States. Should the rate of interest as calculated under this
note exceed that allowed by law, the applicable rate of interest will be the
maximum rate of interest allowed by applicable law.
Principal and interest shall be payable at the Commercial Banking
Center office of Bank One, Arizona, NA in Phoenix, Arizona, or at such other
place as the holder hereof may designate. At Bank's option, any payments may be
applied first to accrued interest and then to principal. All past-due payments
of principal or interest shall bear interest from their due date until paid at a
rate of interest 2% per annum higher than the interest rate specified above or
12% per annum, whichever is higher, payable on demand.
This note shall become immediately due and payable at the option of the
holder hereof without presentment or demand or any notice to Borrower or any
other person obligated hereon, upon default in the payment of any of the
principal hereof or any interest thereon when due, or in payment under any other
agreement between Borrower and Bank, or if any event occurs or condition exists
which authorized the acceleration of the maturity hereof under any security
agreement, mortgage, deed of trust or other agreement made by Borrower in favor
of Bank. Failure to exercise this option shall not constitute a waiver of the
right to exercise the same in the event of any subsequent default.
* SEE ATTACHED ADDENDUM
1
<PAGE> 2
In the event any holder hereof utilizes the services of an attorney in
attempting to collect the amounts due hereunder or to enforce the terms hereof
or of any agreements related to this indebtedness, or if any holder hereof
becomes party plaintiff or defendant in any legal proceeding in relation to the
property described in any instrument securing this note or for the recovery or
protection of the indebtedness evidenced hereby, Borrower, its successors and
assigns, shall repay to such holder hereof, on demand, all costs and expenses so
incurred, including reasonable attorneys' fees, including those costs, expenses
and attorneys' fees incurred after the filing by or against the Borrower of any
proceeding under any chapter of the Bankruptcy Act, or similar federal or state
statute, and whether incurred in connection with the involvement of any holder
hereof as creditor in such proceedings or otherwise.
Borrower and all sureties, endorsers and guarantors of this note waive
demand, presentment for payment, notice of nonpayment, protest, notice of
protest and all other notice, filing of suit and diligence in collecting this
note or the release of any party primarily or secondarily liable hereon and
further agree that it will not be necessary for any holder hereof, in order to
enforce payment of this note by any of them, to first institute suit or exhaust
its remedies against any maker or others liable herefor, and consent to any
extension or postponement of time of payment of this note or any other
indulgence with respect hereto without notice thereof to any of them.
Bank and Borrower will establish specific instructions and procedures
by which draws against said credit will be presented for disbursement, but
nothing contained herein shall create a duty on the part of Bank to make said
disbursement if Borrower is in default.
Address:
SCHUFF STEEL COMPANY, an Arizona corporation
POST OFFICE BOX 39670
PHOENIX, AZ 85069
SEE ATTACHED ADDENDUM FOR SIGNATURES
DAVID A. SCHUFF, CHAIRMAN
OR
SEE ATTACHED ADDENDUM FOR SIGNATURES
SCOTT A. SCHUFF, PRESIDENT
Dept./Br #A664 Acct# 7938640665 Comm #0000042 Note #00000141 Class
Name SCHUFF STEEL COMPANY, an Arizona corporation Loan $500,000.00
Rate* Interest from June 30, 1995 Renewal of Note 59
*Bank One, Arizona NA, Prime Rate Plus .50% TO MOVE WITH PRIME
2
<PAGE> 3
ADDENDUM TO LINE OF CREDIT NOTE, DATED JUNE 30, 1995, 1995 ("ORIGINAL NOTE"),
BETWEEN SCHUFF STEEL COMPANY, AN ARIZONA
CORPORATION ("BORROWER") AND BANK ONE, ARIZONA, NA, A NATIONAL BANKING
ASSOCIATION ("BANK"), IN THE ORIGINAL PRINCIPAL AMOUNT OF $500,000.00.
This Addendum is hereby incorporated into the Original Note as if fully
set forth therein. This Addendum and the Original Note shall be read together as
a consistent agreement. To the extent of any necessary inconsistency between the
two, however, the terms and provisions of this Addendum shall control. The
integrated agreement of the Original Note and this Addendum is herein called the
Note.
SECTION 1. RECITALS.
1.1 In the Loan Agreement, dated JUNE 30, 1995 ("LOAN AGREEMENT"),
between Borrower and Bank, Bank has agreed to extend to Borrower credit up to
$500,000.00. Borrower may obtain advances (individually an "ADVANCE" and
collectively the "ADVANCES") as provided in the Loan Agreement.
1.2 Interest on Advances, as provided in the Note, is at the rate per
annum ("VARIABLE RATE") equal to sum of (i) one half percent (0.50%) and (ii)
the rate per annum most recently publicly announced by Bank, or its successors,
in Phoenix, Arizona, as its "prime rate", as in effect from time to time. The
Variable Rate will change on each day that the "prime rate" changes. The "prime
rate" is not necessarily the best or lowest rate offered by Bank, and Bank may
lend to its customers at rates that are at, above, or below its "prime rate".
1.3 Under the Note, the maturity date on which all Advances, interest,
and any other Amounts payable by Borrower is due and payable is June 30, 1996
("MATURITY DATE").
1.4 The purpose of this Addendum is to grant to Borrower the option to
periodically make elections (i) to extend the Maturity Date as to a Term-Out
Amount (as defined below) of the then unpaid advances that are not then a for a
term between one and five years from the election and (ii) to select the
Cariable Rate or the Fixed Rate (as defined below) as the interest rate on the
Term-Out Amount, all as more specifically provided in this Addendum.
SECTION 2 DEFINITIONS. As used in the Note:
"BUSINESS DAY" means a day of the year on which banks are not required
or authorized to close in Phoenix, Arizona, and, with respect to a Fixed Rate
Loan Term-Out Amount, a day on which dealings are carried on in the London
interbank market.
"EXTENDED MATURITY DATE" means, as to a Term-Out Amount, the last day
of the respective Term-Out Period.
"FIXED RATE" means the rate per annum equal to the sum of (i) two and
three-quarters percent (2.75%) per annum, and (ii) the rate of interest
determined by Bank, based on Telerate System reports (Page 3807) or such other
source as may be selected by Bank, to be the rate at which deposits in United
States dollars are offered by major banks in London, England, to other major
banks in the London interbank market at 11:00 a.m. (London, England, local time)
on the first day of the Interest Period for the period in the London interbank
market equal to or next greater than the Interest Period.
"FIXED RATE LOAN TERM-OUT AMOUNT" means an amount for which a Term-Out
Period (as defined below) is chosen.
"TERM-OUT PERIOD" means, for each Term-Out Amount, a period of one year
and no more than five (5) years commencing on the Term-Out Effective Date and
ending on the last day of at least such period, all as selected by borrower as
provided herein, provided, however, that:
(a) Term-Out Periods commencing on the same date shall be of the same
duration;
(b) Whenever the last day of any Term-Out Periods would otherwise occur
on a day other than a Business Day, the last day of the Term-Out Period shall be
extended to occur on the next succeeding Business Day, provided, however, that
if the extension would cause the last day of the Term-Out Period to occur in the
next following calendar month, the last day of the Term-out Period shall occur
on the next preceding Business Day;
Page 1 of 3
<PAGE> 4
(c) No Term-Out Period shall extend beyond the June 30, 2002.
SECTION 3 TERM-OUT, PAYMENTS, AND INTEREST RATE.
3.1 Except to the extent that unpaid Advances are included in a
Term-out Amount, interest shall accrue on unpaid Advances at the variable Rate,
borrower shall pay to Bank accrued and unpaid interest monthly on the date
specified in the Note, and Borrower shall pay to Bank all then outstanding
principal, interest thereon, an Other Amounts payable to Bank on the Maturity
Date.
3.2 In connection with any Advance, Borrower may elect on any Business
Day, upon notice that is received by Bank not later than 12:00 p.m. (Phoenix,
Arizona, local time) on such Business Day, that such Advance shall be a Fixed
Rate Term-Out Amount (defined below). Each such notice shall specify (i) the
date of such Advance, (ii) the amount of such Advance, and (iii) the Term-Out
Amount Period . In addition, Borrower may on any Business Day, upon notice that
is received by Bank not later than 12:00 p.m. (Phoenix, Arizona local time) on
such Business Day, convert any amount previously advanced under the Loan
Agreement from one type of Loan into the other type of Loan or continue a Fixed
Rate Term-Out as a Fixed Rate Loan for a new Interest Period, provided, that
Borrower may make an election to convert a Fixed Rate Term-out Amount to a
Variable Rate Term-Out Amount or to continue a Fixed Rate Term-Out as a Fixed
Rate Amount only on the last day of the Term-Out Period. Each such notice of
conversion or continuation shall specify (i) the date of such conversion or
continuation, (ii) the amount to be converted or continued, and (iii) if
applicable, the Term-Out Period. Any Advance not complying with the foregoing
requirements for an Advance bearing interest at the Fixed Rate Term-Out Amount
shall bear interest at the Variable Rate. Any Fixed Rate Term-Out not continued
as a Fixed Rate Term-Out Amount in compliance with the foregoing requirements
shall, after the end of the Term-Out Amount, bear interest at the Variable Rate,
whether or not Borrower has elected to convert the Fixed Rate Term-Out Amount to
a Variable Rate Loan.
3.4 Interest at the Variable Rate shall be computed on the basis of a
365 day year and accrue on a daily basis for the actual number of days elapsed.
Interest at the Fixed Rate shall be computed on the basis of a 360 day year and
shall accrue on a daily basis for the actual number of days elapsed.
3.5 Notwithstanding any provision of the Loan Agreement to the
contrary:
3.5.1 Bank shall be entitled to fund and maintain its funding of
all or any part of any Fixed Rate Loan Term-Out Amount in any manner it sees
fit.
3.5.2 If prior to the commencement of any Term-Out Period, Bank
determines by reason of circumstances affecting the London interbank market,
adequate and reasonable means do not exist for ascertaining the Fixed Rate for
such Term-Out Period in the manner provided in the definition of "Fixed Rate",
then Bank shall promptly give notice thereof to Borrower and the respective
amount as to which Borrower has requested the Term-Out Amount shall bear
interest at the Variable Rate.
3.5.3 Each Term-Out Amount shall be at least $100,000, provided,
however, that the last Term-Out Amount, may at the option of Borrower, be a
lesser amount.
SECTION 4. PREPAYMENT AND CONVERSION PREMIUM. Borrower may prepay the
outstanding principal balance hereof, in whole or in part, at any time prior to
the Maturity Date. With any such prepayment of a Fixed Rate Term-Out Amount
other than extend the maturity date or with a conversion election of a Fixed
Rate Loan to a Variable Rate Loan, in either case other than on the last
Business Day of the Term-Out Period for such Fixed Rate Loan Term-Out Amount
("INTEREST PERIOD TERMINATION DATE") (whether made voluntarily or involuntarily
as a result of an acceleration of the Maturity Date or otherwise), Borrower
shall also pay (a) all accrued and unpaid interest on the principal being
prepaid, (b) all Other Amounts then due, and (c) a prepayment premium, if any,
equal to the product of (i) the Average Lost Monthly Interest Income and (ii)
the number of months from the date of prepayment to the Term-Out Period
Termination Date (with any fraction of a month counted as a month), discounted
to present value at the Discount Rate over a period equal to one-half of the
number of months in (ii) above. At the option of Bank, in its absolute and sole
discretion, any prepayment shall be applied to installments coming due under the
Note in the inverse order of their due dates.
As used in this SECTION 4:
"AVERAGE LOST MONTHLY INTEREST INCOME" means the amount determined by
dividing (i) the product of the Average Principal and the Lost Rate, by (ii) 12,
where:
Page 2 of 3
<PAGE> 5
"AVERAGE PRINCIPAL" means the amount equal to either (i) one half the
sum of (A) the amount of principal being prepaid and (B) the amount of principal
that is scheduled to be due on the Extended Maturity Date ("BALLOON AMOUNT"), or
(ii) the amount of principal being prepaid, if such amount is less than the
Balloon Amount; and
"LOST RATE" means the rate per annum equal to the percentage, if any,
by which (i) the yield to maturity of United States Treasury debt obligations
having a maturity date nearest to the Interest Period Termination Date
("TREASURY OBLIGATIONS") determined as of the first day of the respective
Term-Out Period exceeds (ii) the yield to maturity of Treasury Obligations
determined on the date of prepayment.
"DISCOUNT RATE" means the rate per annum equal to the yield to maturity
of Treasury Obligations determined on the date of prepayment.
"OTHER AMOUNTS" means all amounts payable by Borrower to Bank under
this Note and all other documents related to any indebtedness of Borrower to
Bank.
The maturity date and yield to maturity of Treasury Obligations shall be
determined by Bank, in its absolute and sole discretion, on the basis of
quotations published in The Wall Street Journal or other comparable sources.
IN WITNESS WHEREOF, this Addendum is executed and appended to the
Original Note as of the date thereof.
Dated June 30, 1995
SCHUFF STEEL COMPANY
an Arizona corporation
By:_______________________________
Name: SCOTT A. SCHUFF
Title: PRESIDENT
Page 3 of 3
<PAGE> 1
Exhibit 10.3(c)
MODIFICATION AGREEMENT
DATE: JUNE 30, 1996
PARTIES: Borrower: SCHUFF STEEL COMPANY,
an Arizona corporation.
Bank: BANK ONE, ARIZONA, NA,
a national banking association
RECITALS:
A. Bank has extended to Borrower credit ("LOAN") in the principal
amount of $500,000.00 pursuant to the Loan Commitment, ("COMMITMENT") dated June
30, 1995 and the Loan Agreement, dated June 30, 1995 ("AGREEMENT")
(collectively, "LOAN AGREEMENT"), and evidenced by the Line of Credit Note
(Variable Rate), dated June 30, 1995 ("NOTE"). The unpaid principal of the Loan
as of the date hereof is $0.00.
B. The Loan and/or guaranty of Loan is secured by, among other things,
(i) the Continuing Security Agreement Inventory, Receivables and Rights to
Payment, dated September 15, 1994, and (ii) the Security Agreement Consumer
Goods, Equipment and Farm Equipment, Including Titled Vehicles, dated September
15, 1994, both by Borrower for the benefit of Bank (the agreements, documents,
and instruments securing the Loan and the Note are referred to individually and
collectively as the ("SECURITY Documents").
C. The Note, the Loan Agreement, the Security Documents, any
arbitration resolution, and all other agreements, documents, and instruments
evidencing, securing, or otherwise relating to the Loan, are sometimes referred
to individually and collectively as the "LOAN DOCUMENTS".
D. Borrower has requested that Bank modify the Loan and the Loan
Documents as provided herein. Bank is willing to so modify the Loan and the Loan
Documents, subject to the terms and conditions herein.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
2.1 The Loan Documents are modified as follows:
2.1.1 The maturity date of the Loan and the Note is changed
from June 30, 1996, to June 29, 1997. On the maturity date Borrower shall pay to
Bank the unpaid principal, accrued and unpaid interest, and all other amounts
payable by Borrower under the Loan Documents as modified herein.
2.1.2 The Commitment expiration date is hereby changed to from
June 30, 1996, to June 29, 1997.
2.1.3 Section 4 of the Agreement is hereby deleted in its
entirety and replaced with the following:
4. Net Worth. A minimum tangible net worth of
$6,100,000.00 and a minimum owner's equity shall be
maintained of 21%, where Owner's Equity" "Owner's
Equity Percentage" shall mean the results obtained by
dividing (A) tangible Net Worth (as herein defined)
by (B) Borrower's Total Assets on a six month
average.
<PAGE> 2
2.1.4 Section 5 of the Agreement is hereby deleted in its entirety
and replaced with the following:
5. Net Working Capital. While the loan is outstanding, current
assets shall be maintained in excess of current liabilities by
$4,900,000.00 and a current ratio of 1.25:1.0 shall be
maintained and calculated by dividing current assets by
current liabilities after deducting short term advances to
shareholders. The outstanding balance on the $6,500,000.00
Revolving Line of Credit will be considered to be a current
liability for the purpose of calculating both "Net Working
Capital and "Current Ratio".
2.1.5 Section 12 of the Agreement is hereby deleted in its entirety
and replaced with the following:
12. Financial Statements. Borrower shall furnish Bank: (i) as
soon as available and in any event within one hundred fifty
(150) days after the end of each fiscal year of Borrower,
financial statements which accurately reflect Borrower's
assets, liabilities and net worth as of the end of the fiscal
year and profit and loss statements for the fiscal year with
the following certification requirement: Independent certified
public financial statements, (ii) as soon as available and in
any event within sixty (60) days after the end of each monthly
period, financial reports of Borrower which accurately reflect
Borrower's assets, liabilities and net worth as of the end of
the period, and with the following certification requirement:
Borrower prepared, and (iii) as soon as available and in any
event within thirty (30) days of filing, a copy of Borrower's
federal income tax return(s) for each year, together with all
schedules and other documents filed with such returns.
Borrower shall furnish such other information as Bank may
reasonably require from time to time.
Borrower shall cause Guarantor, David A. and Nancy A.
Schuff, to furnish Bank: (A) annual updated balance sheet in
such form and with such certifications as may be reasonably
required by Bank, and (B) a copy of such person's federal
income tax return for such calendar year, together with all
schedules and other documents filed with such return, both by
August 15th of each year.
Borrower shall cause Guarantor, Scott A. Schuff, to
furnish Bank: (A) annual updated balance sheet in such form
and with such certifications as may be reasonably required by
Bank, and (B) a copy of such person's federal income tax
return for such calendar year, together with all schedules and
other documents filed with such return, both by August 15th of
each year.
2.1.3 The Commitment is hereby modified to add Sections 3, 4, 5, 6,
7, and 8 as follows:
3. Definitions. The Loan Commitment and this Addendum are hereinafter referred
to as the "Agreement". As used herein, the following terms shall have the
following meanings:
"Advance" means an advance by BANK to DEBTOR hereunder.
"Commitment" means the agreement of BANK hereunder to issue Letters of Credit
pursuant to the terms and conditions in Letter of Credit Agreements and to make
Advances pursuant to the terms and conditions in the Agreement.
"Existing Letter(s) of Credit" means any and all letter(s) of credit issued by
BANK at the request of DEBTOR prior to the date of this Agreement, as to which
letter(s) of credit the date that is the Standard Number of Days after the last
date for payment of drafts drawn or drawn and accepted thereunder is after the
date of this Agreement.
"Letter of Credit Agreement" means BANK's standard form Application and
Agreement for Commercial Letter of Credit, BANK's standard form Application for
Standby Letter of Credit and Standby Letter of Credit Agreement, or other
standard application and agreement for letters of credit in use by BANK from
time to time.
"Letters of Credit" means the letters of credit in BANK's standard form from
time to time issued pursuant to this Agreement and any Existing Letters of
Credit.
"Loan Documents" means this Agreement, the Note, the Letter of Credit Agreements
executed and delivered by DEBTOR in connection with Letters of Credit from time
to time, and any other agreements, documents, or instruments from time to time
evidencing, guarantying, securing, or otherwise relating to the Note, as they
may be amended, modified, extended, renewed, or supplemented from time to time.
"Reimbursement Amount" means the amount DEBTOR is obligated to pay to BANK under
a Letter of Credit Agreement in respect of a draft drawn or drawn and accepted
under the respective Letter of Credit, which amount shall be the amount of the
draft or acceptance and all costs, expenses, fees, and other amounts then
payable by DEBTOR to BANK under the Letter of Credit Agreement.
"Standard Number of Days" means the standard number of days established by BANK
from time to time to allow for delivery to BANK of drafts drawn under letters of
credit issued by BANK and presented to financial institutions other than BANK
for delivery to BANK. BANK may change such number of days at any time and from
time to time in its absolute and sole discretion
<PAGE> 3
without notice to DEBTOR and may have a different number of days for commercial
letters of credit and standby letters of credit.
4. Letters of Credit.
4.1 Issuance of Letters of Credit. Subject to the terms and conditions
of this Agreement and the Letter of Credit Agreements and subject to the
policies, procedures, and requirements of BANK in effect from time to time for
issuance of Letters of Credit (including, without limitation, payment of letter
of credit fees), BANK agrees to issue, from time to time on or before the
scheduled Commitment expiration date set forth in the Agreement, Letters of
Credit upon request by and for the account of DEBTOR, provided that as to each
requested Letter of Credit DEBTOR has delivered to BANK a completed and executed
Letter of Credit Agreement, and provided further that the date that is the
Standard Number of Days after the last date for payment of drafts drawn or drawn
and accepted under a requested Letter of Credit is before the scheduled
Commitment expiration date set forth in the Agreement. Each reference in this
Agreement to "issue" or "issuance" or other forms of such words in relation to
Letters of Credit shall also include any extension or renewal of a Letter of
Credit. Upon occurrence of an event of default , or any condition or event that
with notice, passage of time, or both would be an event of default , BANK, in
its absolute and sole discretion and without notice, may suspend the commitment
to issue Letters of Credit. In addition, upon occurrence of an event of default
, BANK, in its absolute and sole discretion and without notice, may terminate
the commitment to issue Letters of Credit.
4.2 Issuance Procedure. To obtain a Letter of Credit, DEBTOR shall
complete and execute a Letter of Credit Agreement and submit it to the letter of
credit department of BANK. Upon receipt of a completed and executed Letter of
Credit Agreement, BANK will process the application in accordance with the
policies, procedures, and requirements of BANK then in effect. If the
application meets the requirements of BANK and is within the policies of BANK
then in effect, BANK will issue the requested Letter of Credit.
4.3 Reimbursement of BANK for Payment of Drafts Drawn or Drawn and
Accepted Under Letters of Credit. The obligation of DEBTOR to reimburse BANK for
payment by BANK of drafts drawn or drawn and accepted under a Letter of Credit
shall be as provided in the respective Letter of Credit Agreement. BANK will
notify DEBTOR of payment by BANK of a draft drawn or drawn and accepted under a
Letter of Credit and of the respective Reimbursement Amount and will give DEBTOR
the election (i) to pay the Reimbursement Amount pursuant to the respective
Letter of Credit Agreement or (ii) to pay the Reimbursement Amount by BANK
making an Advance subject to the terms and conditions of this Agreement and
applying the proceeds of the Advance to pay the Reimbursement Amount. If DEBTOR
does not communicate to BANK its election within two Business Days after
notification by BANK of payment of the draft or acceptance, DEBTOR shall be
deemed to have elected to pay the Reimbursement Amount by BANK making an Advance
hereunder, provided that if the terms and conditions in this Agreement for an
Advance hereunder are not satisfied, DEBTOR shall be deemed to have elected to
pay the Reimbursement Amount pursuant to the Letter of Credit Agreement. Each
Advance to pay a Reimbursement Amount shall be dated the date that BANK pays the
respective draft or acceptance and shall accrue interest from and after such
date. If DEBTOR is to pay the Reimbursement Amount pursuant to the Letter of
Credit Agreement, DEBTOR shall also pay to BANK interest on the Reimbursement
Amount from and including the date BANK pays the respective draft or acceptance
at the rate per annum at which interest is then accruing under the Line of
Credit Note until the Reimbursement Amount and such interest are paid in full,
provided that if DEBTOR fails to pay the Reimbursement Amount and accrued
interest thereon within five (5) days after notification by BANK to DEBTOR of
payment of the respective draft or acceptance, interest thereafter shall accrue
at the interest rate applicable to past-due payments under the Line of Credit
Note. Such interest shall be computed on the basis of a 360-day year and accrue
on a daily basis for the actual number of days elapsed. Notwithstanding the
above, if DEBTOR elects or is deemed to have elected to pay the Reimbursement
Amount pursuant to the Letter of Credit Agreement and fails to pay the
Reimbursement Amount and interest thereon within five (5) days after
notification by BANK to DEBTOR, BANK, in its absolute and sole discretion and
without notice to DEBTOR and regardless of whether the terms and conditions in
this Agreement for Advances are satisfied, may make an Advance under this
Agreement in the amount of the Reimbursement Amount and accrued interest thereon
and apply the proceeds of such Advance to pay the Reimbursement Amount and
accrued interest.
<PAGE> 4
5. Letters of Credit and Advances. Letters of Credit may be issued by BANK at
the oral or written request of the respective person or persons designated in
the Agreement to request Advances. Such person or persons are hereby authorized
by DEBTOR to request Letters of Credit and Advances, to execute and deliver
Letter of Credit Agreements on behalf of DEBTOR, and to direct disposition of
the proceeds of Advances until written notice of the revocation of such
authority is received from DEBTOR by BANK and BANK has had a reasonable time to
act upon such notice. BANK shall have no duty to monitor for DEBTOR or to report
to DEBTOR the use of Letters or Credit or proceeds of Advances. Advances shall
be disbursed by BANK in the manner agreed upon by BANK and DEBTOR from time to
time.
6. Limit on Letters of Credit and Advances. Anything in the Loan Documents to
the contrary notwithstanding, the sum from time to time of (i) the aggregate
amount of outstanding and undrawn Letters of Credit, (ii) the aggregate amount
of outstanding and unpaid drafts drawn or drawn and accepted under Letters of
Credit, (iii) the aggregate amount of unpaid Reimbursement Amounts, and (iv) the
amount of outstanding and unpaid Advances shall not exceed the amount of the
Commitment, provided, that if such sum at any time exceeds such amount, DEBTOR,
without notice or demand, shall immediately make a payment to BANK in an amount
equal to the sum of (A) such excess and (B) accrued and unpaid interest thereon.
7. Collateral Upon Event of Default. Upon an event of default and demand by BANK
in its absolute and sole discretion, DEBTOR shall immediately deliver to BANK as
security for all Obligations immediately available funds in an amount equal to
the sum of (i) the aggregate amount of outstanding and undrawn Letters of
Credit, and (ii) the aggregate amount of outstanding and unpaid drafts drawn or
drawn and accepted under Letters of Credit. DEBTOR hereby grants to BANK a
security interest in all such funds delivered to BANK to secure payment and
performance of the Obligations.
8. Conditions Precedent to Each Advance and Letter of Credit. BANK shall be
obligated to issue a Letter of Credit or make an Advance when requested by
DEBTOR only if the representations and warranties by the Loan Parties in the
Loan Documents are accurate on and as of the date of this Agreement and on and
as of the date of issuance of the Letter of Credit or of making the Advance
before and after giving effect to the Letter of Credit or the Advance and the
application of the proceeds of the Advance. Delay or failure by BANK to insist
on satisfaction of any condition of issuance of a Letter of Credit or making an
Advance shall not be a waiver of such condition precedent or any other condition
precedent. If DEBTOR is unable to satisfy any condition precedent of issuance of
a Letter of Credit or making an Advance, the issuance of the Letter of Credit or
the making of the Advance shall not preclude BANK from thereafter declaring the
condition or event causing such inability to be an event of default.
2.2 Each of the Loan Documents is modified to provide that it shall be
a default or an event of default thereunder if Borrower shall fail to comply
with any of the covenants of Borrower herein or if any representation or
warranty by Borrower herein is materially incomplete, incorrect, or misleading
as of the date hereof.
2.3 Each reference in the Loan Documents to any of the Loan Documents
shall be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or interests
in property granted as security in the Loan Documents shall remain as security
for the Loan and the obligations of Borrower in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Loan
Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial
condition of Borrower or any other person whose financial statement has been
delivered to Bank in connection with the Loan from the most recent financial
statement received by Bank.
4.3 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.
<PAGE> 5
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance with
their terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this Agreement and the performance of the Loan
Documents as modified herein have been duly authorized by all requisite action
by or on behalf of Borrower. This Agreement has been duly executed and delivered
on behalf of Borrower.
5. BORROWER COVENANTS.
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such
additional agreements, documents, and instruments as reasonably required by Bank
to effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in law
or equity of Borrower, whether now known or unknown to Borrower, (i) in respect
of the Loan, the Loan Documents, or the actions or omissions of Bank in respect
of the Loan or the Loan Documents and (ii) arising from events occurring prior
to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this
Agreement, Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all
amounts, other than interest and principal, due and payable by Borrower under
the Loan Documents as of the date hereof.
5.3.2 All the internal and external costs and expenses incurred by
Bank in connection with this Agreement (including, without limitation, inside
and outside attorneys, title, filing, and recording costs, expenses, and fees).
5.3.3 A documentation fee of $300.00.
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations of
Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) if required by Bank, Borrower
and any guarantor(s) of the Loan have executed and delivered to Bank an
arbitration resolution, and (iv) each guarantor of the Loan has executed the
Consent of Guarantor(s) below.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
WAIVER.
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Loan Documents as modified herein may be
changed, discharged, supplemented, terminated, or waived except in a writing
signed by the parties thereto.
8. BINDING EFFECT.
The Loan Documents as modified herein shall be binding upon and shall inure to
the benefit of Borrower and Bank and their respective successors and assigns.
9. CHOICE OF LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Arizona, without giving effect to conflicts of law principles.
<PAGE> 6
10. COUNTERPART EXECUTION.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
DATED as of the date first above stated.
SCHUFF STEEL COMPANY,
an Arizona corporation
By_______________________________________
David A. Schuff, Chairman
BANK ONE, ARIZONA, NA,
a national banking association
By_______________________________________
Brad Richards, Vice President
CONSENT OF GUARANTOR(S)
The undersigned (i) consent to the modification of the Loan Documents and all
other matters in the foregoing Agreement, (ii) reaffirm the Continuing Guaranty,
dated June 30, 1995 and any other agreements, documents and instruments securing
or otherwise relating thereto ("Guarantor Documents"), (iii) acknowledge that
the Guarantor Documents continue in full force and effect, remain unchanged,
except as specifically modified hereby, and are valid, binding and enforceable
in accordance with their respective terms, (iv) agree that all references, if
any, in the Guarantor Documents to any of the Loan Documents are modified to
refer to those documents as modified by the Agreement, and (v) agree to be bound
by the release of Bank set forth in the Agreement.
Dated as of the date of the Agreement.
_________________________________________
David A. Schuff
_________________________________________
Nancy A. Schuff
CONSENT OF GUARANTOR(S)
The undersigned (i) consent to the modification of the Loan Documents and all
other matters in the foregoing Agreement, (ii) reaffirm the Continuing Guaranty,
dated June 30, 1995 and any other agreements, documents and instruments securing
or otherwise relating thereto ("Guarantor Documents"), (iii) acknowledge that
the Guarantor Documents continue in full force and effect, remain unchanged,
except as specifically modified hereby, and are valid, binding and enforceable
in accordance with their respective terms, (iv) agree that all references, if
any, in the Guarantor Documents to any of the Loan Documents are modified to
refer to those documents as modified by the Agreement, and (v) agree to be bound
by the release of Bank set forth in the Agreement.
Dated as of the date of the Agreement.
_________________________________________
Scott A. Schuff
<PAGE> 1
EXHIBIT 10.4
CONTINUING GUARANTY
TO: THE BANK ONE, ARIZONA, NA
1. For valuable consideration, the undersigned (hereinafter called
Guarantors) jointly and severally, unconditionally guarantee and promise to pay
to BANK ONE, ARIZONA, NA (hereinafter called Bank), or order, on demand, in
lawful money or the United States, any and all Indebtedness of 19TH
AVENUE/BUCHANAN LIMITED PARTNERSHIP, an Arizona limited partnership (hereinafter
called Borrowers) to Bank. The word "Indebtedness" is used herein in its most
comprehensive sense and includes any and all advances, debts, obligations and
liabilities of Borrowers, and any and all contracts, letters of credit or
commitments of Bank made for the benefit or at the request of Guarantors or
Borrowers, or any one or more of them, 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 Borrowers may be liable individually or
jointly with others, or whether recovery upon such Indebtedness may be, or
hereafter becomes, barred by any statute of limitations, or whether such
Indebtedness may be, or hereafter becomes, otherwise unenforceable.
2. The liability of Guarantors shall not exceed at any one time the
total of the principal sum of THREE MILLION TWENTY-TWO THOUSAND FOUR HUNDRED
EIGHTY-FIVE AND NO/100 Dollars ($3,022,485.00) plus all accrued and accruing
interest upon the said guaranteed principal Indebtedness as contracted and
agreed by Borrowers. This Guaranty shall bind and obligate each of the
undersigned, his heirs, legatees, devisees, personal representatives, successors
and assigns, with said Borrower, jointly and severally, for the payment of said
Indebtedness precisely as if the same had been contracted and was due and owing
by him in person. The obligations hereunder are joint and several and
independent of the obligations of Borrowers and a separate action or actions may
be brought and prosecuted against Guarantors whether action is brought against
Borrowers or whether Borrowers be joined in any such action or actions; and
Guarantors waived the benefit of any statute of limitations affecting their
liability hereunder or the enforcement thereof. Guarantors further waive any
action against the Borrowers or Guarantors required by any statute, upon notice.
3. No revocation hereof shall affect in any manner rights arising under
this Guaranty with respect to (a) liabilities which shall have been created,
contracted, assumed or incurred prior to actual receipt by the Bank of written
notice of such revocation; (b) liabilities which shall have been created,
contracted, assumed or incurred after actual receipt by Bank of such written
notice pursuant to any contract, letter of credit or commitment entered into by
the Bank prior to receipt of such notice, or (c) any of the aforementioned
liabilities arising out of or in any way related to the Indebtedness which shall
have been renewed, modified, extended, consolidated, amended or revised after
revocation of this Guaranty, any or all of which actions are contemplated and
hereby permitted by Guarantors, and this Guaranty shall continue in full force
and effect, and Bank shall have the rights herein provided for, as if no such
revocation had occurred. The sole effect of revocation hereof shall be to
exclude from this Guaranty liabilities and Indebtedness thereafter arising which
are unconnected with (a) liabilities and Indebtedness theretofore arising and
existing, or (b) transactions, contracts, letters of
<PAGE> 2
credit or commitments theretofore entered into or made, which are renewed
modified, extended, consolidated, amended or revised after such revocation. Any
such revocation of this Guaranty at any time or times by one or more of the
undersigned Guarantors shall not affect the liability hereunder of the remaining
Guarantors as to any future transactions or Indebtedness of the Borrowers, but
this Guaranty shall in all respects remain in force and effect as to such
Indebtedness and transactions. The death of any Guarantor shall not operate as a
revocation of liability hereunder of the estate of any such Guarantor as to
transactions entered into or Indebtedness created subsequent to such death until
actual receipt by Bank of written notice of the death of such Guarantor. Each of
the Guarantors severally waives notice of revocation given by any other
Guarantor or Guarantors. Any payment by Guarantors shall not reduce their
maximum obligation hereunder, unless written notice to that effect is actually
received by Bank at, or prior to, the time of such payment. Revocation of this
Guaranty shall not in any way affect the rights, duties, obligations or
liabilities of either Bank or Guarantors hereunder with respect to transactions
occurring or Indebtedness incurred prior to the effectiveness of such
revocation.
4. Guarantors authorize Bank, from time to time, without notice or
demand and without affecting their liability hereunder, to (a) renew,
compromise, extend, revise, accelerate or otherwise change the time for payment
of, or otherwise change the terms of, the Indebtedness or any part thereof,
including increase or decrease of the rate of interest thereon, before and after
any revocation of this Guaranty; (b) take and hold security for the payment of
this Guaranty or the Indebtedness guaranteed, and exchange, enforce, waive and
release any such security, or take additional security; (c) apply such security
and direct the order or manner of sale thereof as Bank, in its discretion, may
determine; and (d) release or substitute any or more of the endorsers or
Guarantors or acquire additional Guarantors. Bank may, without notice, assign
this Guaranty in whole or in part.
5. Guarantors waive any right to require Bank to (a) proceed against
Borrowers, Guarantors, or other guarantors; (b) proceed against or exhaust any
security held from Borrowers; or (c) pursue any other remedy in Banks power
whatsoever. Guarantors waive any defense arising by reason of any disability or
other defense of Borrowers or by reason of the cessation, from any cause
whatsoever, of the liability of Borrowers. Until all Indebtedness of Borrowers
to Bank shall have been paid in full, even though such Indebtedness is in excess
of Guarantors' liability hereunder, Guarantors shall have no right of
subrogation unless Bank, at its option, so elects, and hereby waive any right to
enforce any remedy which Bank now has, or may hereafter have, against Borrowers,
and hereby waive any benefit of, and an right to participate in, any security
now or hereafter held by Bank. Guarantors waive all presentments, demands for
performance, notices of non-performance, protests, notices of protest, notices
of dishonor and notices of acceptance of this Guaranty and of the existence,
creation, or incurring of new or additional Indebtedness. .
6. In addition to all liens upon, and the right of set-off against, the
monies, securities or other property of Guarantors given to Bank by law, Bank
Shall have a lien upon, and a right of set-off against, all monies, securities
and other property of Guarantors now and 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 set-off may be
exercised without demand
2
<PAGE> 3
upon, or notice to, Guarantors. No lien or right of set-off 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 set-off, or to enforce such lien, or by any delay in so
doing, and every right of set-off and lien shall continue in full force and
effect until such right of set-off or lien is specifically waived or released by
an instrument in writing executed by Bank.
7. Guarantors agree to pay a reasonable attorneys' fee and all other
costs and expenses which may be incurred by Bank in the enforcement of this
Guaranty.
8. Any married person who signs this Guaranty hereby expressly agrees
that recourse may be had against his/her separate property for all his/her
obligations under this Guaranty.
9. This Guaranty is exclusive and cumulative as to amounts and shall
not serve to revoke or alter any Continuing Guaranty previously delivered to
Bank or (unless otherwise specifically provided in writing at the date and
execution thereof) be revoked by any Guaranty subsequently delivered by Bank.
This Guaranty does not in any manner whatsoever limit the amount of any
borrowing heretofore or hereafter made under any other financing arrangement
(between Bank and Borrower.)
10. In all cases where there is but a single Guarantor, all words used
herein in the plural shall be deemed to have been used in the singular where the
context and construction so require; and when there is more than one Borrower
named herein, or when this Guaranty is executed by more than one Guarantor, the
word "Borrowers" and the word "Guarantors", respectively, shall mean all and any
one or more of them.
IN WITNESS WHEREOF the undersigned Guarantors have executed this
Guaranty this 22nd day of April, 1996.
SCHUFF STEEL COMPANY, an
Arizona corporation
By: _______________________________
Name: Scott A. Schuff
Its: President
3
<PAGE> 1
Exhibit 10.5
GUARANTY OF PAYMENT
DATE: April 22, 1997
PARTIES: GUARANTOR: SCHUFF STEEL COMPANY,
AN ARIZONA CORPORATION
GUARANTOR P.O. BOX 39670
Address: PHOENIX, ARIZONA 85069-9670
BANK: BANK ONE, ARIZONA, NA, a national banking
association.
BANK P. O. BOX 71, DEPT. AZ1-1178
ADDRESS: PHOENIX, ARIZONA 85001-0071
Attention: BRAD RICHARDS
AGREEMENT: For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Guarantor agrees for the benefit of Bank as
follows:
1. SCHEDULE OF TERMS.
Borrower: 19TH AVENUE/BUCHANAN LIMITED PARTNERSHIP,
an Arizona limited partnership.
Borrower Obligations:
Promissory note, dated of even date herewith, of
Borrower payable to Bank, in the original principal amount
of $999,999.00, as it may be amended, modified, extended,
renewed, restated, or supplemented from time to time.
2. DEFINITIONS. In this Guaranty, the following terms shall have the
following meanings:
"A.R.S." means Arizona Revised Statutes, as amended from time to time. Each
reference to any provision in A.R.S. shall be a reference to any successor or
replacement provision.
"BORROWER" shall have the meaning specified in SECTION 1.
"BORROWER OBLIGATIONS" means the following:
(i) Payment of principal, interest, costs, expenses, fees, and other
amounts under the promissory note(s) of Borrower payable to Bank described in
SECTION 1, as such principal amount may be increased from time to time by any
additional advances in excess of the original principal amount thereof or as the
result of any accrued and unpaid interest becoming principal under the Note; and
(ii) Payment of all other amounts payable from time to time by Borrower
under the Loan Documents.
"COLLATERAL" means any and all property, interests in property, and rights to
property from time to time securing any or all Obligations.
1
<PAGE> 2
"COMMITMENT" means any and all obligations of Bank from time to time to make
advances to Borrower, to issue letters of credit requested by Borrower, or to
make other financial accommodations for Borrower.
"DEFAULT RATE" means a rate per annum of interest equal to the sum of (i) four
percent (4%) per annum, and (ii) the highest rate per annum of interest
applicable from time to time to the principal amount of any promissory note
guaranteed hereby prior to a default or an event of default under such
promissory note.
"EVENT OF DEFAULT" means the occurrence of any default or condition or event
designated as a default, an event of default, or an Event of Default in any Loan
Document.
"GOVERNMENTAL AUTHORITY" means any government, any court, and any agency,
authority, body, bureau, department, or instrumentality of any government.
"GUARANTOR" and "GUARANTORS" mean, respectively, each Person that has executed
this Guaranty and, if this Guaranty has been executed by more than one Person,
all Persons that have executed this Guaranty.
"GUARANTOR COLLATERAL" means any property, interests in property, and rights to
property securing any or all Guarantor Obligations.
"GUARANTOR LOAN DOCUMENTS" means this Guaranty and any other Loan Documents
executed by any Guarantor.
"GUARANTOR OBLIGATIONS" means the obligations of Guarantor under the Guarantor
Loan Documents.
"GUARANTY" means this Guaranty, as it may be amended, modified, extended,
renewed, restated, and supplemented from time to time.
"LIEN OR ENCUMBRANCE" and "LIENS AND ENCUMBRANCES" mean, respectively, each and
all assignments as security, grants in trust, liens, mortgages, security
interests, other encumbrances, and other interests and rights from time to time
securing any or all of the Obligations.
"LOAN AGREEMENT" means the Loan Agreement, dated of even date herewith, between
Borrower and Bank, as it may be amended, modified, extended, renewed, restated,
or supplemented from time to time.
"LOAN DOCUMENTS" means this Guaranty and any and all other agreements,
documents, and instruments from time to time evidencing, guarantying, securing,
or otherwise relating to the Obligations (including, without limitation, any and
all deeds of trust, loan agreement, mortgages, promissory notes, security
agreements, and other guaranties), as they may be amended, modified, extended,
renewed, restated, and supplemented from time to time.
"LOAN PARTY" means Borrower, Guarantor, and each other Person that from time to
time is obligated to Bank under any Loan Document or grants any of the
Collateral.
"MATERIAL ADVERSE CHANGE" means any change in the assets, business, financial
condition, operations, prospects, or results of operations of Guarantor or any
other event or condition that in the reasonable opinion of Bank (i) could affect
the likelihood of performance by Guarantor of any of the Guarantor Obligations,
(ii) could affect the ability of Guarantor to perform any of the Guarantor
Obligations, (iii) could affect the legality, validity, or binding nature of any
of the Guarantor Obligations or any Lien or Encumbrance securing any of the
Guarantor Obligations, or (iv) could affect the priority of any Lien or
Encumbrance securing any of the Guarantor Obligations.
"OBLIGATIONS" means the obligations of the Loan Parties under the Loan
Documents, which includes the Borrower Obligations, the Guarantor Obligations,
and the obligations of the other Loan Parties under the Loan Documents.
2
<PAGE> 3
"PERSON" means a natural person, a partnership, a joint venture, an
unincorporated association, a limited liability company, a corporation, a trust,
any other legal entity, or any Governmental Authority.
3. GUARANTY. Guarantor unconditionally and irrevocably guarantees the full
payment and performance when due, by acceleration or otherwise, of each and all
Borrower Obligations and promises to pay and perform when due, by acceleration
or otherwise, each and all Borrower Obligations. Guarantor agrees that
immediately upon the failure in payment or performance when due of any or all
Borrower Obligations, Guarantor will pay to Bank the full amount of, or perform
in full, such Borrower Obligations. All payments under this Guaranty shall be
made to Bank in lawful money of the United States of America at the address of
Bank at the beginning of this Guaranty or such other location as Bank may
designate in writing. Any amount payable under this Guaranty not paid when due
and any judgment for such an amount and interest thereon shall bear interest at
the Default Rate from the due date or such judgment date, respectively, until
such amount and interest thereon are paid in full. Guarantor agrees to pay such
interest on demand. All Guarantor Obligations will be paid and performed by
Guarantor without counterclaim, deduction, defense, deferment, reduction, or
set-off.
4. GUARANTOR REPRESENTATIONS AND WARRANTIES.
4.1 CLOSING REPRESENTATIONS AND WARRANTIES. Guarantor represents
and warrants to Bank as of the date of this Agreement:
4.1.1 CORPORATE, LIMITED LIABILITY COMPANY, OR PARTNERSHIP
EXISTENCE AND AUTHORIZATION. If Guarantor is a corporation, a limited liability
company, or a partnership, Guarantor is validly existing, and in the case of a
corporation or a limited liability company is in good standing, under the laws
of the jurisdiction of its formation or organization and has the requisite power
and authority to execute, deliver, and perform the Guarantor Loan Documents. The
execution, delivery, and performance by Guarantor of the Guarantor Loan
Documents have been duly authorized by all requisite action by or on behalf of
Guarantor and will not conflict with, or result in a violation of or a default
under, the certificate of incorporation and bylaws, the limited liability
company operating agreement, or the partnership agreement of Guarantor, as the
case may be. If Guarantor is not formed or organized under the law of the State
of Arizona, Guarantor is qualified to do business as a foreign corporation,
limited liability company, or partnership, as the case may be, and in the case
of a corporation or limited liability company is in good standing, under the law
of the State of Arizona.
4.1.2 EXECUTION AND DELIVERY AND BINDING NATURE OF GUARANTOR
LOAN DOCUMENTS. The Guarantor Loan Documents have been duly executed and
delivered by or on behalf of Guarantor. The Guarantor Loan Documents are legal,
valid, and binding obligations of Guarantor, enforceable in accordance with
their terms against Guarantor, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization, or similar laws and by
equitable principles of general application.
4.1.3 ACCURATE INFORMATION. All information in any loan
application, financial statement, certificate, or other document, and all other
information previously delivered to Bank by or on behalf of Guarantor in
connection with this Guaranty is correct and complete, and there are no
omissions therefrom that result in any such information being incomplete,
incorrect, or misleading as of the date thereof. There has been no Material
Adverse Change as to Guarantor since the date of such information. All financial
statements heretofore delivered to Bank by Guarantor were prepared in accordance
with the requirements prescribed by Bank and accurately present the financial
condition and results of operations as at the dates thereof and for the periods
covered thereby.
4.1.4 LEGAL PROCEEDINGS; HEARINGS, INQUIRIES, AND
INVESTIGATIONS. Except as disclosed to Bank in writing prior to the date of this
Agreement, (i) no legal proceeding is pending or, to best knowledge of
Guarantor, threatened before any arbitrator, other private adjudicator, or
Governmental Authority to which Guarantor is a party or by which Guarantor or
any assets or property of Guarantor may be bound or affected that if resolved
adversely to Guarantor could result in a Material Adverse Change, and to the
best knowledge of Guarantor, there exist no facts
3
<PAGE> 4
that would form any basis for any of the foregoing, and (ii) no hearing,
inquiry, or investigation relating to Guarantor or any assets or property of
Guarantor is pending or, to the best knowledge of Guarantor, threatened by any
Governmental Authority.
4.1.5 TAXES. Guarantor has filed or caused to be filed all tax
returns (federal, state, or local) required to be filed by Guarantor and has
paid all taxes and other amounts shown thereon to be due (including, without
limitation, any interest or penalties).
4.1.6 INFORMATION ABOUT BORROWER AND TRANSACTION. Guarantor
understands the Borrower Obligations and the Guarantor Obligations and has had
access to information about the financial condition of Borrower and the ability
of Borrower to perform the Borrower Obligations.
4.1.7 INDUCEMENT. Guarantor is providing this Guaranty at the
request of Borrower in order to induce Bank to extend or continue financial
accommodations to Borrower.
4.2 REPRESENTATIONS AND WARRANTIES UPON DELIVERY OF FINANCIAL
STATEMENTS, DOCUMENTS, AND OTHER INFORMATION. Each delivery by Guarantor to Bank
of financial statements, other documents, or information after the date of this
Guaranty shall be a representation and warranty that such financial statements,
other documents, or information is correct and complete, that there are no
omissions therefrom that result in such financial statements, other documents,
or information being incomplete, incorrect, or misleading as of the date
thereof, and that such financial statements accurately present the financial
condition and results of operations of Guarantor as at the dates thereof and for
the periods covered thereby.
5. GUARANTOR COVENANTS. Until any Commitment terminates in full and until
the Obligations are paid and performed in full, Guarantor agrees that, unless
Bank otherwise agrees in writing in Bank's absolute and sole discretion:
5.1 CORPORATE, LIMITED LIABILITY COMPANY, OR PARTNERSHIP
EXISTENCE. If Guarantor is a corporation, a limited liability company, or a
partnership, Guarantor shall continue to be validly existing, and in the case of
a corporation or a limited liability company in good standing, under the law of
the jurisdiction of its organization or formation. If Guarantor is not formed or
organized under the laws of the State of Arizona, Guarantor shall continue to be
qualified to do business as a foreign corporation, limited liability company, or
partnership, as the case may be, and in the case of a corporation or limited
liability company to be in good standing, under the law of the State of Arizona.
5.2 INFORMATION AND STATEMENTS. Guarantor shall furnish to Bank:
5.2.1 FINANCIAL STATEMENTS. Within fifteen (15) days or such
longer period as Bank may agree in its absolute and sole discretion after each
request by Bank from time to time, a current balance sheet of Guarantor and such
other financial statements of Guarantor as are requested by Bank, all in
reasonable detail, prepared in accordance with the requirements specified by
Bank, containing the certifications specified by Bank and signed by the
Person(s) specified by Bank.
5.2.2 OTHER INFORMATION. Such other information concerning
Guarantor and the assets, business, financial condition, operations, property,
prospects, and results of operations of Guarantor as Bank reasonably requests
from time to time.
5.3 TAXES. Guarantor shall pay before delinquency all taxes,
assessments, and governmental charges and levies imposed upon Guarantor, upon
Guarantor's income or profits, or upon any property belonging to Guarantor.
4
<PAGE> 5
5.4 KEEPING INFORMED ABOUT BORROWER AND TRANSACTION.Guarantor will
keep himself informed concerning performance of the Borrower Obligations, the
financial condition of Borrower, and the ability of Borrower to perform the
Borrower Obligations.
5
<PAGE> 6
6. SPECIAL PROVISIONS.
6.1 NATURE OF GUARANTY. This Guaranty is absolute, continuing,
irrevocable, and unconditional. This Guaranty is a guaranty of payment and
performance when due and not of collection. This Guaranty shall be effective and
remain in full force and effect until any Commitment terminates, any letters of
credit issued by Bank for Borrower expire or are drawn in full, any drafts drawn
or drawn and accepted under any such letters of credit are paid in full, and all
Obligations are paid and performed in full, regardless of (i) the genuineness,
regularity, legality, validity, or enforceability of any or all of the Liens and
Encumbrances, the Loan Documents, or the Obligations, (ii) any law, regulation,
or rule (federal, state, or local) or any action by any Governmental Authority
discharging, reducing, varying the terms of payment, or otherwise modifying any
of the Obligations or any of the Liens and Encumbrances, or (iii) the death,
dissolution, or liquidation of any Loan Party.
6.2 ENFORCEMENT AGAINST GUARANTOR WITHOUT OTHER ACTION. Bank may
enforce the Guarantor Loan Documents against any Guarantor without first having
sought enforcement of any Loan Documents against Borrower, any other Guarantor,
any other Loan Parties, or any Collateral.
6.3 ENFORCEMENT AGAINST GUARANTOR COLLATERAL WITHOUT OTHER ACTION. Bank
may enforce any Guarantor Loan Documents against any Guarantor Collateral
without first having sought enforcement of any Loan Documents against Borrower,
any Guarantor, any other Loan Party, or any other Collateral.
6.4 EVENTS NOT AFFECTING GUARANTOR OBLIGATIONS OR LIENS AND
ENCUMBRANCES GRANTED BY GUARANTOR. The following shall not affect, impair, or
delay the enforcement of any or all Guarantor Obligations or any or all Liens
and Encumbrances granted by Guarantor, regardless of the impact upon any
contribution, exoneration, indemnification, reimbursement, subrogation, and
other rights of Guarantor:
6.4.1 The bankruptcy, death, disability, dissolution, incompetence,
insolvency, liquidation, or reorganization of Guarantor or any other Loan Party.
6.4.2 Any defense of any or all other Loan Parties to payment or
performance of any or all Obligations or enforcement of any or all Liens and
Encumbrances.
6.4.3 The discharge, modification of the terms of, reduction in the
amount of, or stay of enforcement of any or all Liens and Encumbrances or any or
all Obligations in any bankruptcy, insolvency, reorganization, or other legal
proceeding or by any law, ordinance, regulation, or rule (federal, state, or
local).
6.4.4 The cessation of liability of any or all other Loan Parties
for any or all Obligations.
6.4.5 Any claim or dispute by Borrower or any other Guarantor or
Loan Party concerning the occurrence of an Event of Default, performance of any
Obligations, or any other matter.
6.5 ACTS AND OMISSIONS OF BANK NOT AFFECTING GUARANTOR OBLIGATIONS OR
LIENS AND ENCUMBRANCES GRANTED BY GUARANTOR. Bank may do the following acts and
omissions from time to time in its absolute and sole discretion and in doing
such acts and omissions act in its absolute and sole discretion without notice
to or consent of Guarantor and with or without receiving payment or other value.
The following acts and omissions shall not affect, delay, or impair any or all
Guarantor Obligations or any or all Liens and Encumbrances granted by Guarantor,
regardless of the impact upon any contribution, exoneration, indemnification,
reimbursement, subrogation, and other rights of Guarantor:
6.5.1 Bank may obtain Collateral or additional Collateral.
6
<PAGE> 7
6.5.2 Bank may substitute for any or all Collateral, regardless of
whether the same type or greater or lesser value.
6.5.3 Bank may release any or all Collateral.
6.5.4 Bank may compromise, delay enforcement, fail to enforce,
release, settle, or waive any rights and remedies of Bank as to any or all
Collateral.
6.5.5 Except for any requirements provided by law that may not be
waived by Guarantor, Bank may sell or otherwise dispose of any Collateral in any
manner and order Bank determines in its absolute and sole discretion and
disposition may be for no value or for less than fair market value of the
Collateral in the absolute and sole discretion of Bank. With respect to any
Collateral that is personal property, Bank shall give Guarantor five (5) days'
prior written notice of any sale of other disposition, except for personal
property Collateral that is perishable, threatens to decline speedily in value,
is of a type customarily sold on a recognized market, or is cash, cash
equivalents, certificates of deposit or the like and except as to Bank's right
of set-off. Guarantor's sole right with respect to all Collateral shall be to
bid at a sale thereof in accordance with applicable law.
6.5.6 Bank may fail to perfect, fail to protect the priority of,
and fail to insure any or all Liens and Encumbrances.
6.5.7 Bank may fail to inspect, insure, maintain, preserve, or
protect any or all Collateral.
6.5.8 Bank may obtain additional obligors for any or all
Obligations.
6.5.9 Bank may increase or decrease any or all Obligations or
otherwise change the terms of any or all Obligations (including, without
limitation, increases or decreases in the interest rate, additional advances
within or in excess of any Commitment, increases or decreases in any Commitment,
changes in the maturity date of any or all Obligations, and changes in the
amount and timing of payments). Upon occurrence of an Event of Default, Bank may
declare all Obligations immediately due and payable or performable, whereupon
the Obligations shall be immediately due and payable or performable.
6.5.10 Bank may substitute for any or all Loan Parties, regardless
of the same creditworthiness.
6.5.11 Bank may release Borrower, any or all other Guarantors, and
other Loan Parties.
6.5.12 Bank may compromise, delay enforcement, fail to enforce,
release, settle, or waive any or all Obligations of Borrower, any or all other
Guarantors, and other Loan Parties or any or all rights and remedies of Bank
against Borrower, any or all other Guarantors, and other Loan Parties.
6.5.13 Bank may make advances, issue letters of credit, or grant
other financial accommodations for Borrower without requiring satisfaction of
all conditions precedent in the Loan Documents.
6.5.14 Bank may fail to file or pursue a claim in any bankruptcy,
insolvency, probate, reorganization, or other proceeding as to any or all Liens
and Encumbrances or any or all Obligations.
6.5.15 Bank may subordinate (i) any or all Liens and Encumbrances,
or (ii) any or all Obligations.
6.5.16 Bank may amend, modify, extend, renew, restate, supplement,
or terminate in whole or in part any or all Loan Documents.
7
<PAGE> 8
6.5.17 Bank may apply any amount received by Bank (including,
without limitation, payments, proceeds of collateral, and other amounts) on
account of any of liabilities or obligations of any Loan Party to Bank, whether
or not included in the Obligations, to payment of such of the liabilities or
obligations of such Loan Party to Bank as Bank may elect in its absolute and
sole discretion, whether or not then due.
6.5.18 Bank may take or fail to take any other action with respect
to any or all Loan Documents, any or all Obligations, any or all Loan Parties,
any or all Collateral, any or all Liens and Encumbrances, or any or all rights
and remedies of Bank.
6.5.19 Bank may assign any or all of its rights and delegate its
obligations under the Loan Documents, in whole or in part, (including, without
limitation, participation).
6.5.20 Bank may do any other acts and make any other omissions that
result in extinguishment of any or all Obligations and any or all Liens and
Encumbrances.
6.5.21 Bank may do any other act or make any other omission that
might otherwise constitute a legal or equitable discharge of, or defense by,
Guarantor.
6.6 GUARANTOR WAIVERS.
6.6.1 NOTE AND NOTICE WAIVERS. Guarantor waives, to the full extent
permitted by law, presentment, notice of dishonor, protest, notice of protest,
notice of intent to accelerate, notice of acceleration, notice of dishonor, and
all other notices or demands of any kind (including, without limitation, notice
of the acceptance by Bank of this Guaranty, notice of the existence, creation,
non-payment, or non-performance of any or all Obligations, and notice of the
acts or omissions described in SECTION 6.5), excepting only notices specifically
provided for in the Guarantor Loan Documents.
6.6.2 WAIVER OF ACTS AND OMISSIONS OF BANK. Guarantor waives any
defense to enforcement of the Guarantor Obligations or any Liens and
Encumbrances granted by Guarantor based on acts and omissions of Bank described
in SECTION 6.5.
6.6.3 WAIVER OF STATUTORY PROVISIONS. Guarantor waives any and all
rights and benefits under A.R.S. Sections 12-1641, 12-1642, 12-1643, 12-1644,
44-142, and 47-3606, 16 A.R.S. Rules of Civil Procedure, Rule 17(f), and any
other similar or replacement statutes or rules now or hereafter in effect and
any other statutes or rules now or hereafter in effect that purport to confer
specific rights upon, or make specific defenses or procedures available to,
guarantors.
6.6.4 WAIVER OF STATUTE OF LIMITATIONS. To the full extent
permitted by law, Guarantor waives any and all statutes of limitations as a
defense to any or all Obligations.
6.6.5 WAIVER OF LAW AND EQUITABLE PRINCIPLES CONFLICTING WITH THIS
GUARANTY.Guarantor waives any and all provisions of law and equitable principles
that conflict with this Guaranty.
6.6.6 WAIVER OF ANY OBLIGATION OF BANK TO INFORM GUARANTOR.
Guarantor waives any right to require Bank, and Bank shall have no obligation,
to provide to Guarantor any information concerning performance of the Borrower
Obligations, the ability of Borrower to perform the Borrower Obligations, or any
other matter, regardless of what information Bank may have from time to time.
6.6.7 WAIVER OF CONTRIBUTION, EXONERATION, INDEMNIFICATION,
REIMBURSEMENT, SUBROGATION, AND OTHER RIGHTS AGAINST BORROWER AND OTHER LOAN
PARTIES. Guarantor waives any and all present and future claims, remedies, and
rights of Guarantor against Borrower, any other Loan Party, the Collateral, and
any other property, interests in property, or rights to property of Borrower or
any other Loan Party (i) arising from any
8
<PAGE> 9
performance by Guarantor hereunder, (ii) arising from any application of any
Guarantor Collateral or any other property, interests in property, or rights to
property of Guarantor to payment or performance of the Obligations, or (iii)
otherwise arising in respect of the Guarantor Loan Documents, regardless of
whether such claims, remedies, and rights arise under any present or future
agreement, document, or instrument or are provided by any law, ordinance,
regulation, or rule (federal, state, or local)(including, without limitation,
(A) any and all rights of contribution, exoneration, indemnity, reimbursement,
and subrogation, and (B) any and all rights to participate in the rights and
remedies of Bank against Borrower, any other Loan Parties, and the Collateral).
7. SUBORDINATION. If from time to time Borrower shall have liabilities or
obligations to Guarantor, such liabilities and obligations and any and all
assignments as security, grants in trust, liens, mortgages, security interests,
other encumbrances, and other interests and rights securing such liabilities and
obligations shall at all times be fully subordinate with respect to (i)
assignment as security, grant in trust, lien, mortgage, security interest, other
encumbrance, and other interest and right (if any), (ii) time and right of
payment and performance, and (iii) rights against any collateral therefore (if
any), to payment and performance in full of the Obligations and the right of
Bank to realize upon any or all Collateral. Guarantor agrees that such
liabilities and obligations of Borrower to Guarantor shall not be secured by any
assignment as security, grant in trust, lien, mortgage, security interest, other
encumbrance or other interest or right in any property, interests in property,
or rights to property of Borrower and that Borrower shall not pay, and Guarantor
shall not receive, payments of any or all liabilities or obligations of Borrower
to Guarantor until after termination of any Commitment, any letters of credit
issued by Bank for Borrower expire or are drawn in full, any drafts drawn or
drawn and accepted under any such letters of credit are paid in full, and
payment and performance of the Obligations in full. If, notwithstanding the
foregoing, Guarantor receives any payment from Borrower, such payment shall be
held in trust by Guarantor for the benefit of Bank, shall be segregated from the
other funds of Guarantor, and shall forthwith be paid by Guarantor to Bank and
applied to payment of the Borrower Obligations, whether or not then due. To
secure the Obligations Guarantor grants to Bank a lien and security interest in
all liabilities and obligations of Borrower to Guarantor, in any assignments as
security, grants in trust, liens, mortgages, security interests, other
encumbrances, other interests or rights securing such liabilities and
obligations, and in all of Guarantor's right, title, and interest in and to any
payments, property, interests in property, or rights to property acquired or
received by Guarantor from Borrower in respect of any liabilities or obligations
of Borrower to Guarantor.
8. RIGHTS AND REMEDIES OF BANK. The rights and remedies of Bank shall be
cumulative and non-exclusive. Delay, discontinuance, or failure to exercise any
right or remedy of Bank shall not be a waiver thereof, of any other right or
remedy of Bank, or of the time of the essence provision. Exercise of any right
or remedy of Bank shall not cure or waive any Event of Default or invalidate any
act done in response to any Event of Default.
9. LIMIT OF LIABILITY OF BANK. In exercising rights and remedies, neither Bank
nor any stockholder, director, officer, employee, agent, or representative of
Bank shall have any liability for any injury to the assets, business,
operations, or property of Guarantor or any other liability to Guarantor, other
than for its own gross negligence or willful misconduct.
10. SURVIVAL. The representations, warranties, and covenants of Guarantor in the
Guarantor Loan Documents shall survive the execution and delivery of this
Guaranty.
11. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, WAIVER,
APPROVAL, CONSENT, ETC. The Guarantor Loan Documents contain the complete
understanding and agreement of Guarantor and Bank and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Guarantor Loan Documents may be changed,
discharged, supplemented, terminated, or waived except in writing signed by the
parties thereto. Delay or failure by Bank to insist on performance of any
obligation when due or compliance with any other term or condition in the
Guarantor Loan Documents shall not operate as a waiver thereof or of any other
obligation, term, or condition or of the time of the essence provision.
Acceptance of late payments or performance shall not be a waiver of the time of
the essence provision, the right of Bank to require that subsequent payments or
performance be made when due, or the right of
9
<PAGE> 10
Bank to declare an Event of Default if subsequent payments or performance are
not made when due. Any approval, consent, or statement that a matter is
satisfactory by Bank under the Guarantor Loan Documents must be in writing
executed by Bank and shall apply only to the Person(s) and facts specifically
set forth in the writing.
12. BINDING EFFECT. The Guarantor Loan Documents shall be binding upon Guarantor
and shall inure to the benefit of Bank and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees, and
beneficiaries of Guarantor, provided, however, that Guarantor may not delegate
any of its obligations under the Guarantor Loan Documents and any purported
delegation shall be void. Bank may from time to time in its absolute and sole
discretion assign it rights and delegate its obligations under the Loan
Documents, in whole or in part, without notice to or consent by Guarantor
(including, without limitation, participation). In addition to any greater or
lesser limitation provided by law, Guarantor shall not assert against any
assignee of Bank any claims or defenses Guarantor may have against Bank, except
claims and defenses, if any, arising under the Guarantor Loan Documents.
13. COSTS, EXPENSES, AND FEES. Guarantor agrees to pay on demand all external
and internal costs, expenses, and fees (including, without limitation, as
applicable, inside and outside attorneys, paralegals, and document clerks and
specialists, appraisal, appraisal review, environmental assessment,
environmental testing, environmental cleanup, other inspection, processing,
title, filing, and recording costs, expenses, and fees) of Bank (i) in the
negotiation, execution, and delivery of the Guarantor Loan Documents, (ii) in
enforcement of the Guarantor Loan Documents and exercise of the rights and
remedies of Bank, (iii) in defense of the legality, validity, binding nature,
and enforceability of the Guarantor Loan Documents and the perfection and
priority of the Liens and Encumbrances granted in the Guarantor Loan Documents,
(iv) in gaining possession of, holding, repairing, maintaining, preserving, and
protecting any Guarantor Collateral, (v) in selling or otherwise disposing of
any Guarantor Collateral, (vi) otherwise in relation to the Guarantor Loan
Documents, any Guarantor Collateral, or the rights and remedies of Bank under
the Guarantor Loan Documents or relating to the Guarantor Collateral, and (vii)
in preparing for the foregoing, whether or not any legal proceeding is brought
or other action is taken. Such costs, expenses, and fees shall include, without
limitation, all such costs, expenses, and fees incurred in connection with any
bankruptcy, receivership, replevin, or other court proceedings (whether at the
trial or appellate level). Guarantor agrees to pay interest on such costs,
expenses, and fees at the Default Rate from the date incurred by Bank until paid
in full.
14. SEVERABILITY.If any provision or any part of any provision of the Guarantor
Loan Documents is unenforceable, the enforceability of the other provisions or
the other provisions and the remainder of the subject provision, respectively,
shall not be affected and they shall remain in full force and effect.
15. CHOICE OF LAW. The Guarantor Loan Documents shall be governed by the laws of
the State of Arizona, without giving effect to conflict of laws principles. If,
notwithstanding this SECTION 15, at any time the law of any jurisdiction other
than the State of Arizona is determined to be applicable to this Guaranty, then
to the maximum extent permitted by law, Guarantor expressly waives any and all
benefits of the law and rules of such jurisdiction that conflict with any
provision of this Guaranty.
16. TIME OF THE ESSENCE. Time is of the essence with regard to each provision of
the Guarantor Loan Documents as to which time is a factor.
17. NOTICES AND DEMANDS. All demands or notices under the Guarantor Loan
Documents shall be in writing (including, without limitation, telecopy,
telegraphic, telex, or cable communication) and mailed, telecopied, telegraphed,
telexed, cabled, or delivered to the respective party hereto at the address
specified at the beginning of this Guaranty or such other address as shall have
been specified in a written notice. Any demand or notice mailed shall be mailed
first-class mail, postage-prepaid, return-receipt-requested and shall be
effective upon the earlier of (i) actual receipt by the addressee, and (ii) the
date shown on the return-receipt. Any demand or notice not mailed will be
effective upon the earlier of (i) actual receipt by the addressee, and (ii) the
time the receipt of the telecopy, telegram, telex, or cable is mechanically
confirmed.
10
<PAGE> 11
18. JOINT AND SEVERAL OBLIGATIONS.All obligations in any of the Guarantor Loan
Documents executed by more than one Person shall be the joint and several
obligations of each such Person. In each Guarantor Loan Document executed by
more than one Guarantor, each reference to Guarantor, Obligor, or Trustor shall
be a reference to each Person executing such Guarantor Loan Document
individually and all such Persons collectively.
19. COMMUNITY PROPERTY AND SEPARATE PROPERTY OF GUARANTOR. If this Guaranty is
executed by Persons who are married to each other, each such Person agrees that
(i) the Guarantor Loan Documents are made on behalf of the marital community of
each such Person and his or her spouse, and (ii) Bank shall have recourse
against the separate property of each such Person and the community property of
each such Person for satisfaction of the Guarantor Obligations.
20. BANK'S RIGHT OF SET-OFF. Guarantor grants to Bank (i) the right at any time
and from time to time after any Event of Default, in the absolute and sole
discretion of Bank and without demand or notice to Guarantor, to set-off and
apply deposits (whether certificates of deposit, demand, general, savings,
special, time, or other, and whether provisional or final) held and any other
liabilities or other obligations of Bank to Guarantor ("DEPOSITS, LIABILITIES,
AND OBLIGATIONS") against or to the Guarantor Obligations, regardless of whether
the Deposits, Liabilities, or Obligations are contingent, matured, or unmatured,
and (ii) a security interest in the Deposits, Liabilities, and Obligations to
secure the Guarantor Obligations. In addition, Guarantor grants to Bank the
right upon occurrence of an event that with notice, passage of time, or both
would be an Event of Default to segregate all Deposits, Liabilities, and
Obligations into an account or otherwise under the sole control of Bank.
21. INDEMNIFICATION OF BANK. Guarantor agrees to indemnify, hold harmless, and
on demand defend Bank and its shareholders, directors, officers, employees,
agents, and representatives for, from, and against any and all damages, losses,
liabilities, penalties, costs, and expenses (including, without limitation,
costs and expenses of litigation and attorneys' fees) arising from any claim or
demand in respect of the Guarantor Loan Documents or any Guarantor Collateral
and arising at any time, whether before or after termination of any Commitment,
any letters of credit issued by Bank for Borrower expire or are drawn in full,
any drafts drawn or drawn and accepted under any such letters of credit are paid
in full, and payment and performance of the Obligations in full. The obligations
of Guarantor and the rights of Bank under this SECTION 21 shall survive
termination of any Commitment, the expiration or drawing in full of any letters
of credit issued by Bank to Borrower, the payment in full of any drafts drawn or
drawn and accepted under any such letters of credit, and payment and performance
of the Obligations in full and shall remain in full force and effect without
termination.
22. RESCISSION OR RETURN OF PAYMENTS. If at any time or from time to time,
whether before or after termination of any Commitment, any letters of credit
issued by Bank for Borrower expire or are drawn in full, any drafts drawn or
drawn and accepted under any such letters of credit are paid in full, and
payment and performance of the Obligations in full, all or any part of any
amount received by Bank in payment of, or on account of, any Obligation is or
must be, or is claimed to be, avoided, rescinded, or returned by Bank to
Guarantor or any other Person for any reason whatsoever (including, without
limitation, bankruptcy, insolvency, or reorganization of Guarantor or any other
Person), such Obligation and any Liens and Encumbrances that secured such
Obligation at the time such avoided, rescinded, or returned payment was received
by Bank shall be deemed to have continued in existence or shall be reinstated,
as the case may be, all as though such payment had not been received.
23. NO CONSTRUCTION AGAINST BANK OR GUARANTOR. The Guarantor Loan Documents are
the result of negotiations between Guarantor and Bank. Accordingly, the
Guarantor Loan Documents shall not be construed for or against Guarantor or
Bank, regardless of which party drafted the Guarantor Loan Documents or any part
thereof.
24. HEADINGS. The headings at the beginning of each section of the Guarantor
Loan Documents are solely for convenience and are not part of the Guarantor Loan
Documents.
11
<PAGE> 12
25. NUMBER AND GENDER. In the Guarantor Loan Documents the singular shall
include the plural and vice versa and each gender shall include the other
genders.
DATED as of the date first above stated.
SCHUFF STEEL COMPANY,
an Arizona corporation
By:__________________________
Scott A. Schuff, President
12
<PAGE> 1
EXHIBIT 10.6
GUARANTY OF PAYMENT
DATE: January 31, 1997
PARTIES: GUARANTOR: SCHUFF STEEL COMPANY,
AN ARIZONA CORPORATION
GUARANTOR P.O. BOX 39670
Address: PHOENIX, ARIZONA 85069-9670
BANK: BANK ONE, ARIZONA, NA, a national banking
association.
BANK P. O. BOX 71, DEPT. AZ1-1178
ADDRESS: PHOENIX, ARIZONA 85001-0071
Attention: BRAD RICHARDS
AGREEMENT: For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Guarantor agrees for the benefit of Bank as
follows:
1. SCHEDULE OF TERMS.
Borrower: 19TH AVENUE/BUCHANAN LIMITED PARTNERSHIP,
an Arizona limited partnership.
Borrower Obligations:
Promissory note, dated of even date herewith, of Borrower
payable to Bank, in the original principal amount of
$2,210,000.00, as it may be amended, modified, extended, renewed,
restated, or supplemented from time to time.
2. DEFINITIONS. In this Guaranty, the following terms shall have the following
meanings:
"A.R.S." means Arizona Revised Statutes, as amended from time to time. Each
reference to any provision in A.R.S. shall be a reference to any successor or
replacement provision.
"BORROWER" shall have the meaning specified in SECTION 1.
"BORROWER OBLIGATIONS" means the following:
(i) Payment of principal, interest, costs, expenses, fees, and other amounts
under the promissory note(s) of Borrower payable to Bank described in SECTION 1,
as such principal amount may be increased from time to time by any additional
advances in excess of the original principal amount thereof or as the result of
any accrued and unpaid interest becoming principal under the Note; and
(ii) Payment of all other amounts payable from time to time by Borrower under
the Loan Documents.
"COLLATERAL" means any and all property, interests in property, and rights to
property from time to time securing any or all Obligations.
1
<PAGE> 2
"COMMITMENT" means any and all obligations of Bank from time to time to make
advances to Borrower, to issue letters of credit requested by Borrower, or to
make other financial accommodations for Borrower.
"DEFAULT RATE" means a rate per annum of interest equal to the sum of (i) four
percent (4%) per annum, and (ii) the highest rate per annum of interest
applicable from time to time to the principal amount of any promissory note
guaranteed hereby prior to a default or an event of default under such
promissory note.
"EVENT OF DEFAULT" means the occurrence of any default or condition or event
designated as a default, an event of default, or an Event of Default in any Loan
Document.
"GOVERNMENTAL AUTHORITY" means any government, any court, and any agency,
authority, body, bureau, department, or instrumentality of any government.
"GUARANTOR" and "GUARANTORS" mean, respectively, each Person that has executed
this Guaranty and, if this Guaranty has been executed by more than one Person,
all Persons that have executed this Guaranty.
"GUARANTOR COLLATERAL" means any property, interests in property, and rights to
property securing any or all Guarantor Obligations.
"GUARANTOR LOAN DOCUMENTS" means this Guaranty and any other Loan Documents
executed by any Guarantor.
"GUARANTOR OBLIGATIONS" means the obligations of Guarantor under the Guarantor
Loan Documents.
"GUARANTY" means this Guaranty, as it may be amended, modified, extended,
renewed, restated, and supplemented from time to time.
"LIEN OR ENCUMBRANCE" and "LIENS AND ENCUMBRANCES" mean, respectively, each and
all assignments as security, grants in trust, liens, mortgages, security
interests, other encumbrances, and other interests and rights from time to time
securing any or all of the Obligations.
"LOAN AGREEMENT" means the Loan Agreement, dated of even date herewith, between
Borrower and Bank, as it may be amended, modified, extended, renewed, restated,
or supplemented from time to time.
"LOAN DOCUMENTS" means this Guaranty and any and all other agreements,
documents, and instruments from time to time evidencing, guarantying, securing,
or otherwise relating to the Obligations (including, without limitation, any and
all deeds of trust, loan agreement, mortgages, promissory notes, security
agreements, and other guaranties), as they may be amended, modified, extended,
renewed, restated, and supplemented from time to time.
"LOAN PARTY" means Borrower, Guarantor, and each other Person that from time to
time is obligated to Bank under any Loan Document or grants any of the
Collateral.
"MATERIAL ADVERSE CHANGE" means any change in the assets, business, financial
condition, operations, prospects, or results of operations of Guarantor or any
other event or condition that in the reasonable opinion of Bank (i) could affect
the likelihood of performance by Guarantor of any of the Guarantor Obligations,
(ii) could affect the ability of Guarantor to perform any of the Guarantor
Obligations, (iii) could affect the legality, validity, or binding nature of any
of the Guarantor Obligations or any Lien or Encumbrance securing any of the
Guarantor Obligations, or (iv) could affect the priority of any Lien or
Encumbrance securing any of the Guarantor Obligations.
"OBLIGATIONS" means the obligations of the Loan Parties under the Loan
Documents, which includes the Borrower Obligations, the Guarantor Obligations,
and the obligations of the other Loan Parties under the Loan Documents.
2
<PAGE> 3
"PERSON" means a natural person, a partnership, a joint venture, an
unincorporated association, a limited liability company, a corporation, a trust,
any other legal entity, or any Governmental Authority.
3. GUARANTY. Guarantor unconditionally and irrevocably guarantees the full
payment and performance when due, by acceleration or otherwise, of each and all
Borrower Obligations and promises to pay and perform when due, by acceleration
or otherwise, each and all Borrower Obligations. Guarantor agrees that
immediately upon the failure in payment or performance when due of any or all
Borrower Obligations, Guarantor will pay to Bank the full amount of, or perform
in full, such Borrower Obligations. All payments under this Guaranty shall be
made to Bank in lawful money of the United States of America at the address of
Bank at the beginning of this Guaranty or such other location as Bank may
designate in writing. Any amount payable under this Guaranty not paid when due
and any judgment for such an amount and interest thereon shall bear interest at
the Default Rate from the due date or such judgment date, respectively, until
such amount and interest thereon are paid in full. Guarantor agrees to pay such
interest on demand. All Guarantor Obligations will be paid and performed by
Guarantor without counterclaim, deduction, defense, deferment, reduction, or
set-off.
4. GUARANTOR REPRESENTATIONS AND WARRANTIES.
4.1 CLOSING REPRESENTATIONS AND WARRANTIES. Guarantor represents and
warrants to Bank as of the date of this Agreement:
4.1.1 CORPORATE, LIMITED LIABILITY COMPANY, OR PARTNERSHIP EXISTENCE
AND AUTHORIZATION. If Guarantor is a corporation, a limited liability company,
or a partnership, Guarantor is validly existing, and in the case of a
corporation or a limited liability company is in good standing, under the laws
of the jurisdiction of its formation or organization and has the requisite power
and authority to execute, deliver, and perform the Guarantor Loan Documents. The
execution, delivery, and performance by Guarantor of the Guarantor Loan
Documents have been duly authorized by all requisite action by or on behalf of
Guarantor and will not conflict with, or result in a violation of or a default
under, the certificate of incorporation and bylaws, the limited liability
company operating agreement, or the partnership agreement of Guarantor, as the
case may be. If Guarantor is not formed or organized under the law of the State
of Arizona, Guarantor is qualified to do business as a foreign corporation,
limited liability company, or partnership, as the case may be, and in the case
of a corporation or limited liability company is in good standing, under the law
of the State of Arizona.
4.1.2 EXECUTION AND DELIVERY AND BINDING NATURE OF GUARANTOR LOAN
DOCUMENTS. The Guarantor Loan Documents have been duly executed and delivered by
or on behalf of Guarantor. The Guarantor Loan Documents are legal, valid, and
binding obligations of Guarantor, enforceable in accordance with their terms
against Guarantor, except as such enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization, or similar laws and by equitable
principles of general application.
4.1.3 ACCURATE INFORMATION. All information in any loan application,
financial statement, certificate, or other document, and all other information
previously delivered to Bank by or on behalf of Guarantor in connection with
this Guaranty is correct and complete, and there are no omissions therefrom that
result in any such information being incomplete, incorrect, or misleading as of
the date thereof. There has been no Material Adverse Change as to Guarantor
since the date of such information. All financial statements heretofore
delivered to Bank by Guarantor were prepared in accordance with the requirements
prescribed by Bank and accurately present the financial condition and results of
operations as at the dates thereof and for the periods covered thereby.
4.1.4 LEGAL PROCEEDINGS; HEARINGS, INQUIRIES, AND INVESTIGATIONS.
Except as disclosed to Bank in writing prior to the date of this Agreement, (i)
no legal proceeding is pending or, to best knowledge of Guarantor, threatened
before any arbitrator, other private adjudicator, or Governmental Authority to
which Guarantor is a party or by which Guarantor or any assets or property of
Guarantor may be bound or affected that if resolved adversely to Guarantor could
result in a Material Adverse Change, and to the best knowledge of Guarantor,
there exist no facts
3
<PAGE> 4
that would form any basis for any of the foregoing, and (ii) no hearing,
inquiry, or investigation relating to Guarantor or any assets or property of
Guarantor is pending or, to the best knowledge of Guarantor, threatened by any
Governmental Authority.
4.1.5 TAXES. Guarantor has filed or caused to be filed all tax returns
(federal, state, or local) required to be filed by Guarantor and has paid all
taxes and other amounts shown thereon to be due (including, without limitation,
any interest or penalties).
4.1.6 INFORMATION ABOUT BORROWER AND TRANSACTION. Guarantor understands
the Borrower Obligations and the Guarantor Obligations and has had access to
information about the financial condition of Borrower and the ability of
Borrower to perform the Borrower Obligations.
4.1.7 INDUCEMENT. Guarantor is providing this Guaranty at the request
of Borrower in order to induce Bank to extend or continue financial
accommodations to Borrower.
4.2 REPRESENTATIONS AND WARRANTIES UPON DELIVERY OF FINANCIAL
STATEMENTS, DOCUMENTS, AND OTHER INFORMATION. Each delivery by Guarantor to Bank
of financial statements, other documents, or information after the date of this
Guaranty shall be a representation and warranty that such financial statements,
other documents, or information is correct and complete, that there are no
omissions therefrom that result in such financial statements, other documents,
or information being incomplete, incorrect, or misleading as of the date
thereof, and that such financial statements accurately present the financial
condition and results of operations of Guarantor as at the dates thereof and for
the periods covered thereby.
5. GUARANTOR COVENANTS. Until any Commitment terminates in full and until the
Obligations are paid and performed in full, Guarantor agrees that, unless Bank
otherwise agrees in writing in Bank's absolute and sole discretion:
5.1 CORPORATE, LIMITED LIABILITY COMPANY, OR PARTNERSHIP EXISTENCE. If
Guarantor is a corporation, a limited liability company, or a partnership,
Guarantor shall continue to be validly existing, and in the case of a
corporation or a limited liability company in good standing, under the law of
the jurisdiction of its organization or formation. If Guarantor is not formed or
organized under the laws of the State of Arizona, Guarantor shall continue to be
qualified to do business as a foreign corporation, limited liability company, or
partnership, as the case may be, and in the case of a corporation or limited
liability company to be in good standing, under the law of the State of Arizona.
5.2 INFORMATION AND STATEMENTS. Guarantor shall furnish to Bank:
5.2.1 FINANCIAL STATEMENTS. Within fifteen (15) days or such longer
period as Bank may agree in its absolute and sole discretion after each request
by Bank from time to time, a current balance sheet of Guarantor and such other
financial statements of Guarantor as are requested by Bank, all in reasonable
detail, prepared in accordance with the requirements specified by Bank,
containing the certifications specified by Bank and signed by the Person(s)
specified by Bank.
5.2.2 OTHER INFORMATION. Such other information concerning Guarantor
and the assets, business, financial condition, operations, property, prospects,
and results of operations of Guarantor as Bank reasonably requests from time to
time.
5.3 TAXES. Guarantor shall pay before delinquency all taxes,
assessments, and governmental charges and levies imposed upon Guarantor, upon
Guarantor's income or profits, or upon any property belonging to Guarantor.
4
<PAGE> 5
5.4 KEEPING INFORMED ABOUT BORROWER AND TRANSACTION. Guarantor will
keep himself informed concerning performance of the Borrower Obligations, the
financial condition of Borrower, and the ability of Borrower to perform the
Borrower Obligations.
5
<PAGE> 6
6. SPECIAL PROVISIONS.
6.1 NATURE OF GUARANTY. This Guaranty is absolute, continuing,
irrevocable, and unconditional. This Guaranty is a guaranty of payment and
performance when due and not of collection. This Guaranty shall be effective and
remain in full force and effect until any Commitment terminates, any letters of
credit issued by Bank for Borrower expire or are drawn in full, any drafts drawn
or drawn and accepted under any such letters of credit are paid in full, and all
Obligations are paid and performed in full, regardless of (i) the genuineness,
regularity, legality, validity, or enforceability of any or all of the Liens and
Encumbrances, the Loan Documents, or the Obligations, (ii) any law, regulation,
or rule (federal, state, or local) or any action by any Governmental Authority
discharging, reducing, varying the terms of payment, or otherwise modifying any
of the Obligations or any of the Liens and Encumbrances, or (iii) the death,
dissolution, or liquidation of any Loan Party .
6.2 ENFORCEMENT AGAINST GUARANTOR WITHOUT OTHER ACTION . Bank may
enforce the Guarantor Loan Documents against any Guarantor without first having
sought enforcement of any Loan Documents against Borrower, any other Guarantor,
any other Loan Parties, or any Collateral.
6.3 ENFORCEMENT AGAINST GUARANTOR COLLATERAL WITHOUT OTHER ACTION. Bank
may enforce any Guarantor Loan Documents against any Guarantor Collateral
without first having sought enforcement of any Loan Documents against Borrower,
any Guarantor, any other Loan Party, or any other Collateral.
6.4 EVENTS NOT AFFECTING GUARANTOR OBLIGATIONS OR LIENS AND
ENCUMBRANCES GRANTED BY Guarantor. The following shall not affect, impair, or
delay the enforcement of any or all Guarantor Obligations or any or all Liens
and Encumbrances granted by Guarantor, regardless of the impact upon any
contribution, exoneration, indemnification, reimbursement, subrogation, and
other rights of Guarantor:
6.4.1 The bankruptcy, death, disability, dissolution, incompetence,
insolvency, liquidation, or reorganization of Guarantor or any other Loan Party.
6.4.2 Any defense of any or all other Loan Parties to payment or
performance of any or all Obligations or enforcement of any or all Liens and
Encumbrances.
6.4.3 The discharge, modification of the terms of, reduction in the
amount of, or stay of enforcement of any or all Liens and Encumbrances or any or
all Obligations in any bankruptcy, insolvency, reorganization, or other legal
proceeding or by any law, ordinance, regulation, or rule (federal, state, or
local).
6.4.4 The cessation of liability of any or all other Loan Parties for
any or all Obligations.
6.4.5 Any claim or dispute by Borrower or any other Guarantor or Loan
Party concerning the occurrence of an Event of Default, performance of any
Obligations, or any other matter.
6.5 ACTS AND OMISSIONS OF BANK NOT AFFECTING GUARANTOR OBLIGATIONS OR
LIENS AND ENCUMBRANCES GRANTED BY GUARANTOR. Bank may do the following acts and
omissions from time to time in its absolute and sole discretion and in doing
such acts and omissions act in its absolute and sole discretion without notice
to or consent of Guarantor and with or without receiving payment or other value.
The following acts and omissions shall not affect, delay, or impair any or all
Guarantor Obligations or any or all Liens and Encumbrances granted by Guarantor,
regardless of the impact upon any contribution, exoneration, indemnification,
reimbursement, subrogation, and other rights of Guarantor:
6.5.1 Bank may obtain Collateral or additional Collateral.
6
<PAGE> 7
6.5.2 Bank may substitute for any or all Collateral, regardless of
whether the same type or greater or lesser value.
6.5.3 Bank may release any or all Collateral.
6.5.4 Bank may compromise, delay enforcement, fail to enforce, release,
settle, or waive any rights and remedies of Bank as to any or all Collateral.
6.5.5 Except for any requirements provided by law that may not be
waived by Guarantor, Bank may sell or otherwise dispose of any Collateral in any
manner and order Bank determines in its absolute and sole discretion and
disposition may be for no value or for less than fair market value of the
Collateral in the absolute and sole discretion of Bank. With respect to any
Collateral that is personal property, Bank shall give Guarantor five (5) days'
prior written notice of any sale of other disposition, except for personal
property Collateral that is perishable, threatens to decline speedily in value,
is of a type customarily sold on a recognized market, or is cash, cash
equivalents, certificates of deposit or the like and except as to Bank's right
of set-off. Guarantor's sole right with respect to all Collateral shall be to
bid at a sale thereof in accordance with applicable law.
6.5.6 Bank may fail to perfect, fail to protect the priority of, and
fail to insure any or all Liens and Encumbrances.
6.5.7 Bank may fail to inspect, insure, maintain, preserve, or protect
any or all Collateral.
6.5.8 Bank may obtain additional obligors for any or all Obligations.
6.5.9 Bank may increase or decrease any or all Obligations or otherwise
change the terms of any or all Obligations (including, without limitation,
increases or decreases in the interest rate, additional advances within or in
excess of any Commitment, increases or decreases in any Commitment, changes in
the maturity date of any or all Obligations, and changes in the amount and
timing of payments). Upon occurrence of an Event of Default, Bank may declare
all Obligations immediately due and payable or performable, whereupon the
Obligations shall be immediately due and payable or performable.
6.5.10 Bank may substitute for any or all Loan Parties, regardless of
the same creditworthiness.
6.5.11 Bank may release Borrower, any or all other Guarantors, and
other Loan Parties.
6.5.12 Bank may compromise, delay enforcement, fail to enforce,
release, settle, or waive any or all Obligations of Borrower, any or all other
Guarantors, and other Loan Parties or any or all rights and remedies of Bank
against Borrower, any or all other Guarantors, and other Loan Parties.
6.5.13 Bank may make advances, issue letters of credit, or grant other
financial accommodations for Borrower without requiring satisfaction of all
conditions precedent in the Loan Documents.
6.5.14 Bank may fail to file or pursue a claim in any bankruptcy,
insolvency, probate, reorganization, or other proceeding as to any or all Liens
and Encumbrances or any or all Obligations.
6.5.15 Bank may subordinate (i) any or all Liens and Encumbrances, or
(ii) any or all Obligations.
6.5.16 Bank may amend, modify, extend, renew, restate, supplement, or
terminate in whole or in part any or all Loan Documents.
7
<PAGE> 8
6.5.17 Bank may apply any amount received by Bank (including, without
limitation, payments, proceeds of collateral, and other amounts) on account of
any of liabilities or obligations of any Loan Party to Bank, whether or not
included in the Obligations, to payment of such of the liabilities or
obligations of such Loan Party to Bank as Bank may elect in its absolute and
sole discretion, whether or not then due.
6.5.18 Bank may take or fail to take any other action with respect to
any or all Loan Documents, any or all Obligations, any or all Loan Parties, any
or all Collateral, any or all Liens and Encumbrances, or any or all rights and
remedies of Bank.
6.5.19 Bank may assign any or all of its rights and delegate its
obligations under the Loan Documents, in whole or in part, (including, without
limitation, participation).
6.5.20 Bank may do any other acts and make any other omissions that
result in extinguishment of any or all Obligations and any or all Liens and
Encumbrances.
6.5.21 Bank may do any other act or make any other omission that might
otherwise constitute a legal or equitable discharge of, or defense by,
Guarantor.
6.6 GUARANTOR WAIVERS.
6.6.1 NOTE AND NOTICE WAIVERS. Guarantor waives, to the full extent
permitted by law, presentment, notice of dishonor, protest, notice of protest,
notice of intent to accelerate, notice of acceleration, notice of dishonor, and
all other notices or demands of any kind (including, without limitation, notice
of the acceptance by Bank of this Guaranty, notice of the existence, creation,
non-payment, or non-performance of any or all Obligations, and notice of the
acts or omissions described in SECTION 6.5), excepting only notices specifically
provided for in the Guarantor Loan Documents.
6.6.2 WAIVER OF ACTS AND OMISSIONS OF BANK. Guarantor waives any
defense to enforcement of the Guarantor Obligations or any Liens and
Encumbrances granted by Guarantor based on acts and omissions of Bank described
in SECTION 6.5.
6.6.3 WAIVER OF STATUTORY PROVISIONS. Guarantor waives any and all
rights and benefits under A.R.S. Sections 12-1641, 12-1642, 12-1643, 12-1644,
44-142, and 47-3606, 16 A.R.S. Rules of Civil Procedure, Rule 17(f), and any
other similar or replacement statutes or rules now or hereafter in effect and
any other statutes or rules now or hereafter in effect that purport to confer
specific rights upon, or make specific defenses or procedures available to,
guarantors.
6.6.4 WAIVER OF STATUTE OF LIMITATIONS. To the full extent permitted by
law, Guarantor waives any and all statutes of limitations as a defense to any or
all Obligations.
6.6.5 WAIVER OF LAW AND EQUITABLE PRINCIPLES CONFLICTING WITH THIS
GUARANTY. Guarantor waives any and all provisions of law and equitable
principles that conflict with this Guaranty.
6.6.6 WAIVER OF ANY OBLIGATION OF BANK TO INFORM GUARANTOR. Guarantor
waives any right to require Bank, and Bank shall have no obligation, to provide
to Guarantor any information concerning performance of the Borrower Obligations,
the ability of Borrower to perform the Borrower Obligations, or any other
matter, regardless of what information Bank may have from time to time.
6.6.7 WAIVER OF CONTRIBUTION, EXONERATION, INDEMNIFICATION,
REIMBURSEMENT, SUBROGATION, AND OTHER RIGHTS AGAINST BORROWER AND OTHER LOAN
Parties. Guarantor waives any and all present and future claims, remedies, and
rights of Guarantor against Borrower, any other Loan Party, the Collateral, and
any other property, interests in property, or rights to property of Borrower or
any other Loan Party (i) arising from any
8
<PAGE> 9
performance by Guarantor hereunder, (ii) arising from any application of any
Guarantor Collateral or any other property, interests in property, or rights to
property of Guarantor to payment or performance of the Obligations, or (iii)
otherwise arising in respect of the Guarantor Loan Documents, regardless of
whether such claims, remedies, and rights arise under any present or future
agreement, document, or instrument or are provided by any law, ordinance,
regulation, or rule (federal, state, or local)(including, without limitation,
(A) any and all rights of contribution, exoneration, indemnity, reimbursement,
and subrogation, and (B) any and all rights to participate in the rights and
remedies of Bank against Borrower, any other Loan Parties, and the Collateral).
7. SUBORDINATION. If from time to time Borrower shall have liabilities or
obligations to Guarantor, such liabilities and obligations and any and all
assignments as security, grants in trust, liens, mortgages, security interests,
other encumbrances, and other interests and rights securing such liabilities and
obligations shall at all times be fully subordinate with respect to (i)
assignment as security, grant in trust, lien, mortgage, security interest, other
encumbrance, and other interest and right (if any), (ii) time and right of
payment and performance, and (iii) rights against any collateral therefore (if
any), to payment and performance in full of the Obligations and the right of
Bank to realize upon any or all Collateral. Guarantor agrees that such
liabilities and obligations of Borrower to Guarantor shall not be secured by any
assignment as security, grant in trust, lien, mortgage, security interest, other
encumbrance or other interest or right in any property, interests in property,
or rights to property of Borrower and that Borrower shall not pay, and Guarantor
shall not receive, payments of any or all liabilities or obligations of Borrower
to Guarantor until after termination of any Commitment, any letters of credit
issued by Bank for Borrower expire or are drawn in full, any drafts drawn or
drawn and accepted under any such letters of credit are paid in full, and
payment and performance of the Obligations in full. If, notwithstanding the
foregoing, Guarantor receives any payment from Borrower, such payment shall be
held in trust by Guarantor for the benefit of Bank, shall be segregated from the
other funds of Guarantor, and shall forthwith be paid by Guarantor to Bank and
applied to payment of the Borrower Obligations, whether or not then due. To
secure the Obligations Guarantor grants to Bank a lien and security interest in
all liabilities and obligations of Borrower to Guarantor, in any assignments as
security, grants in trust, liens, mortgages, security interests, other
encumbrances, other interests or rights securing such liabilities and
obligations, and in all of Guarantor's right, title, and interest in and to any
payments, property, interests in property, or rights to property acquired or
received by Guarantor from Borrower in respect of any liabilities or obligations
of Borrower to Guarantor.
8. RIGHTS AND REMEDIES OF BANK. The rights and remedies of Bank shall be
cumulative and non-exclusive. Delay, discontinuance, or failure to exercise any
right or remedy of Bank shall not be a waiver thereof, of any other right or
remedy of Bank, or of the time of the essence provision. Exercise of any right
or remedy of Bank shall not cure or waive any Event of Default or invalidate any
act done in response to any Event of Default.
9. LIMIT OF LIABILITY OF BANK. In exercising rights and remedies, neither Bank
nor any stockholder, director, officer, employee, agent, or representative of
Bank shall have any liability for any injury to the assets, business,
operations, or property of Guarantor or any other liability to Guarantor, other
than for its own gross negligence or willful misconduct.
10. SURVIVAL. The representations, warranties, and covenants of Guarantor in
the Guarantor Loan Documents shall survive the execution and delivery of this
Guaranty.
11. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, WAIVER,
APPROVAL, CONSENT, ETC. The Guarantor Loan Documents contain the complete
understanding and agreement of Guarantor and Bank and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Guarantor Loan Documents may be changed,
discharged, supplemented, terminated, or waived except in writing signed by the
parties thereto. Delay or failure by Bank to insist on performance of any
obligation when due or compliance with any other term or condition in the
Guarantor Loan Documents shall not operate as a waiver thereof or of any other
obligation, term, or condition or of the time of the essence provision.
Acceptance of late payments or performance shall not be a waiver of the time of
the essence provision, the right of Bank to require that subsequent payments or
performance be made when due, or the right of
9
<PAGE> 10
Bank to declare an Event of Default if subsequent payments or performance are
not made when due. Any approval, consent, or statement that a matter is
satisfactory by Bank under the Guarantor Loan Documents must be in writing
executed by Bank and shall apply only to the Person(s) and facts specifically
set forth in the writing.
12. BINDING EFFECT. The Guarantor Loan Documents shall be binding upon Guarantor
and shall inure to the benefit of Bank and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees, and
beneficiaries of Guarantor, provided, however, that Guarantor may not delegate
any of its obligations under the Guarantor Loan Documents and any purported
delegation shall be void. Bank may from time to time in its absolute and sole
discretion assign it rights and delegate its obligations under the Loan
Documents, in whole or in part, without notice to or consent by Guarantor
(including, without limitation, participation). In addition to any greater or
lesser limitation provided by law, Guarantor shall not assert against any
assignee of Bank any claims or defenses Guarantor may have against Bank, except
claims and defenses, if any, arising under the Guarantor Loan Documents.
13. COSTS, EXPENSES, AND FEES. Guarantor agrees to pay on demand all external
and internal costs, expenses, and fees (including, without limitation, as
applicable, inside and outside attorneys, paralegals, and document clerks and
specialists, appraisal, appraisal review, environmental assessment,
environmental testing, environmental cleanup, other inspection, processing,
title, filing, and recording costs, expenses, and fees) of Bank (i) in the
negotiation, execution, and delivery of the Guarantor Loan Documents, (ii) in
enforcement of the Guarantor Loan Documents and exercise of the rights and
remedies of Bank, (iii) in defense of the legality, validity, binding nature,
and enforceability of the Guarantor Loan Documents and the perfection and
priority of the Liens and Encumbrances granted in the Guarantor Loan Documents,
(iv) in gaining possession of, holding, repairing, maintaining, preserving, and
protecting any Guarantor Collateral, (v) in selling or otherwise disposing of
any Guarantor Collateral, (vi) otherwise in relation to the Guarantor Loan
Documents, any Guarantor Collateral, or the rights and remedies of Bank under
the Guarantor Loan Documents or relating to the Guarantor Collateral, and (vii)
in preparing for the foregoing, whether or not any legal proceeding is brought
or other action is taken. Such costs, expenses, and fees shall include, without
limitation, all such costs, expenses, and fees incurred in connection with any
bankruptcy, receivership, replevin, or other court proceedings (whether at the
trial or appellate level). Guarantor agrees to pay interest on such costs,
expenses, and fees at the Default Rate from the date incurred by Bank until paid
in full.
14. SEVERABILITY. If any provision or any part of any provision of the Guarantor
Loan Documents is unenforceable, the enforceability of the other provisions or
the other provisions and the remainder of the subject provision, respectively,
shall not be affected and they shall remain in full force and effect.
15. CHOICE OF LAW. The Guarantor Loan Documents shall be governed by the laws of
the State of Arizona, without giving effect to conflict of laws principles. If,
notwithstanding this SECTION 15, at any time the law of any jurisdiction other
than the State of Arizona is determined to be applicable to this Guaranty, then
to the maximum extent permitted by law, Guarantor expressly waives any and all
benefits of the law and rules of such jurisdiction that conflict with any
provision of this Guaranty.
16. TIME OF THE ESSENCE. Time is of the essence with regard to each provision of
the Guarantor Loan Documents as to which time is a factor.
17. NOTICES AND DEMANDS. All demands or notices under the Guarantor Loan
Documents shall be in writing (including, without limitation, telecopy,
telegraphic, telex, or cable communication) and mailed, telecopied, telegraphed,
telexed, cabled, or delivered to the respective party hereto at the address
specified at the beginning of this Guaranty or such other address as shall have
been specified in a written notice. Any demand or notice mailed shall be mailed
first-class mail, postage-prepaid, return-receipt-requested and shall be
effective upon the earlier of (i) actual receipt by the addressee, and (ii) the
date shown on the return-receipt. Any demand or notice not mailed will be
effective upon the earlier of (i) actual receipt by the addressee, and (ii) the
time the receipt of the telecopy, telegram, telex, or cable is mechanically
confirmed.
10
<PAGE> 11
18. JOINT AND SEVERAL OBLIGATIONS. All obligations in any of the Guarantor Loan
Documents executed by more than one Person shall be the joint and several
obligations of each such Person. In each Guarantor Loan Document executed by
more than one Guarantor, each reference to Guarantor, Obligor, or Trustor shall
be a reference to each Person executing such Guarantor Loan Document
individually and all such Persons collectively.
19. COMMUNITY PROPERTY AND SEPARATE PROPERTY OF GUARANTOR. If this Guaranty is
executed by Persons who are married to each other, each such Person agrees that
(i) the Guarantor Loan Documents are made on behalf of the marital community of
each such Person and his or her spouse, and (ii) Bank shall have recourse
against the separate property of each such Person and the community property of
each such Person for satisfaction of the Guarantor Obligations.
20. BANK'S RIGHT OF SET-OFF. Guarantor grants to Bank (i) the right at any time
and from time to time after any Event of Default, in the absolute and sole
discretion of Bank and without demand or notice to Guarantor, to set-off and
apply deposits (whether certificates of deposit, demand, general, savings,
special, time, or other, and whether provisional or final) held and any other
liabilities or other obligations of Bank to Guarantor ("DEPOSITS, LIABILITIES,
AND OBLIGATIONS") against or to the Guarantor Obligations, regardless of whether
the Deposits, Liabilities, or Obligations are contingent, matured, or unmatured,
and (ii) a security interest in the Deposits, Liabilities, and Obligations to
secure the Guarantor Obligations. In addition, Guarantor grants to Bank the
right upon occurrence of an event that with notice, passage of time, or both
would be an Event of Default to segregate all Deposits, Liabilities, and
Obligations into an account or otherwise under the sole control of Bank.
21. INDEMNIFICATION OF BANK. Guarantor agrees to indemnify, hold harmless, and
on demand defend Bank and its shareholders, directors, officers, employees,
agents, and representatives for, from, and against any and all damages, losses,
liabilities, penalties, costs, and expenses (including, without limitation,
costs and expenses of litigation and attorneys' fees) arising from any claim or
demand in respect of the Guarantor Loan Documents or any Guarantor Collateral
and arising at any time, whether before or after termination of any Commitment,
any letters of credit issued by Bank for Borrower expire or are drawn in full,
any drafts drawn or drawn and accepted under any such letters of credit are paid
in full, and payment and performance of the Obligations in full. The obligations
of Guarantor and the rights of Bank under this SECTION 21 shall survive
termination of any Commitment, the expiration or drawing in full of any letters
of credit issued by Bank to Borrower, the payment in full of any drafts drawn or
drawn and accepted under any such letters of credit, and payment and performance
of the Obligations in full and shall remain in full force and effect without
termination.
22. RESCISSION OR RETURN OF PAYMENTS. If at any time or from time to time,
whether before or after termination of any Commitment, any letters of credit
issued by Bank for Borrower expire or are drawn in full, any drafts drawn or
drawn and accepted under any such letters of credit are paid in full, and
payment and performance of the Obligations in full, all or any part of any
amount received by Bank in payment of, or on account of, any Obligation is or
must be, or is claimed to be, avoided, rescinded, or returned by Bank to
Guarantor or any other Person for any reason whatsoever (including, without
limitation, bankruptcy, insolvency, or reorganization of Guarantor or any other
Person), such Obligation and any Liens and Encumbrances that secured such
Obligation at the time such avoided, rescinded, or returned payment was received
by Bank shall be deemed to have continued in existence or shall be reinstated,
as the case may be, all as though such payment had not been received.
23. NO CONSTRUCTION AGAINST BANK OR GUARANTOR. The Guarantor Loan Documents are
the result of negotiations between Guarantor and Bank. Accordingly, the
Guarantor Loan Documents shall not be construed for or against Guarantor or
Bank, regardless of which party drafted the Guarantor Loan Documents or any part
thereof.
24. HEADINGS. The headings at the beginning of each section of the Guarantor
Loan Documents are solely for convenience and are not part of the Guarantor Loan
Documents.
11
<PAGE> 12
25. NUMBER AND GENDER. In the Guarantor Loan Documents the singular shall
include the plural and vice versa and each gender shall include the other
genders.
DATED as of the date first above stated.
SCHUFF STEEL COMPANY,
an Arizona corporation
By:__________________________
Scott A. Schuff, President
12
<PAGE> 1
EXHIBIT 10.7
PROMISSORY NOTE
$4,249,062.00 PHOENIX, ARIZONA
DATED: DECEMBER 31, 1989
FOR VALUE RECEIVED, SCHUFF STEEL COMPANY, an Arizona corporation
("Maker"), promises to pay to the order of 19th AVENUE/BUCHANAN LIMITED
PARTNERSHIP, an Arizona limited partnership ("Payee"), at 420 South 19th Avenue,
Phoenix, Arizona 85009 (or at such other place as the holder hereof may
designate), the principal sum of Four Million Two Hundred Forty Nine Thousand
Sixty Two Dollars ($4,249,062.00), together with interest computed as
hereinafter provided. Principal, interest and all other sums payable hereunder
are to be paid in lawful money of the United States of America.
IN CONSIDERATION of this promissory note, the payee has cancelled
and deemed to have been paid as of the date hereof the following promissory
notes of the maker:
1. Promissory Note dated June 26, 1986 in the original principal
amount of One Million Fifty Thousand Dollars
($1,050,000.00), the unpaid balance of which as of the date
hereof is $805,000.00.
2. Promissory Note dated March 8, 1988 in the original principal
amount of Three Million Five Hundred Thousand Dollars
($3,500,000.00), the unpaid balance of which as of the date
hereof is $3,444,062.00.
PAYMENTS: The aggregate principal outstanding under this Note shall
be payable in fifty three (53) initial monthly principal payments of Twelve
Thousand Thirty Seven Dollars ($12,037.00), based upon an assumed three hundred
fifty three (353) month amortization period, commencing on January 31, 1990 and
on the last day of each and every consecutive month thereafter until May 31,
1994 ("Maturity"), at which time all remaining unpaid principal and interest,
and all other amounts payable hereunder, shall be paid in full.
INTEREST: Interest under this Note shall be payable on the unpaid
balance outstanding at an annual rate of two and one-half (2-1/2) percentage
points above the interest rate announced by MeraBank, A Federal Savings Bank,
from time to time as its prime interest rate. Interest shall be payable monthly
commencing on January 31, 1990 and on the last day of each and every consecutive
month thereafter until Maturity, at which time all remaining unpaid principal
and interest, and all other amounts payable hereunder, shall be paid in full.
PREPAYMENT: Maker shall have the privilege of prepaying the unpaid
principal balance of this Note, or any portion thereof, together with accrued
interest thereon, at any time without premium or penalty.
<PAGE> 2
DEFAULT: If Maker defaults in timely payment of any installment of
interest due under this Note on the due date thereof, or if Maker defaults in
the repayment of the entire principal balance plus accrued interest, interest
shall then be computed on the entire unpaid principal balance of this Note plus
accrued interest at the rate of eighteen percent (18%) per annum for the period
from the date of default to the date of payment.
NON-WAIVER: Neither the failure or any delay on the part of the
holder of this Note to exercise any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or privilege preclude any other right, power or privilege.
PRESENTMENT, ETC.: Maker and any subsequent endorser or guarantor
hereof hereby waive presentment for payment, notice of nonpayment, notice of
protest, protest, and notice of dishonor.
NOTICES: Any notice which the holder of this note may desire or may
be required to give to Maker shall be given by certified or registered United
States mail, postage prepaid, return receipt requested, and addressed to Maker
at:
Schuff Steel Company
P.O. Box 39670
Phoenix, AZ 85069
Maker may change the address for notices by written notice to the holder hereof
delivered at the place for payment hereof.
COLLECTION EXPENSES: If this Note is not paid as agreed and the
holder hereof undertakes collection of the indebtedness evidenced hereby, Maker
agrees to pay all costs incurred by the holder in collecting the same, including
reasonable attorney's fees.
BINDING EFFECT: All the foregoing promises are the promises of Maker
and shall bind Maker, its successors and assigns.
TIME: Time is of the essence with regard to the terms of this Note.
ARIZONA LAW: This Note shall be construed in accordance with and
governed by the laws of the State of Arizona.
SCHUFF STEEL COMPANY,
an Arizona corporation
By: ______________________________
Its President
"MAKER"
<PAGE> 3
By its execution hereof, 19th Avenue/Buchanan Limited Partnership hereby
acknowledges satisfaction in full of that certain promissory note in the
original principal amount of One Million Fifty Thousand Dollars ($1,050,000.00)
dated June 26, 1986, and that certain promissory note in the original principal
amount of Three Million Five Hundred Thousand Dollars ($3,500,000.00) dated
March 8, 1988.
19th Avenue/Buchanan Limited Partnership
an Arizona limited partnership
"PAYEE"
By: ____________________________
General Partner
By: ____________________________
General Partner
<PAGE> 1
EXHIBIT 10.8
LEASE
FOR 420 S. 19TH AVENUE IN PHOENIX, ARIZONA
BETWEEN
19TH AVENUE/BUCHANAN LIMITED PARTNERSHIP (LANDLORD)
AND SCHUFF STEEL COMPANY (TENANT)
MARCH 1, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
<S> <C> <C>
ARTICLE 1. LEASED PREMISES...................................... - 1 -
1.1 Leased Premises............................................. - 1 -
ARTICLE 2. TERM................................................. - 1 -
2.1 Term of Lease............................................... - 1 -
2.2 Quiet Enjoyment............................................. - 1 -
2.3 Surrender of Leased Premises................................ - 1 -
2.4 Holding Over................................................ - 2 -
2.5 Abandonment................................................. - 2 -
ARTICLE 3. RENTALS AND OTHER TENANT CONTRIBUTIONS............... - 2 -
3.1 Minimum Rent................................................ - 2 -
3.2 Adjustment of Minimum Rent.................................. - 2 -
3.2.1 Computation of Adjusted Minimum Rent............... - 3 -
3.2.2 Use of Different Index............................. - 3 -
3.3 Payment of Rent............................................. - 3 -
3.4 Taxes....................................................... - 3 -
3.4.1 Rent Tax........................................... - 3 -
3.4.2 Personal Property Tax.............................. - 3 -
3.4.3 Real Property Tax.................................. - 3 -
3.5 Interest.................................................... - 4 -
3.6 Utilities Consumed on Leased Premises....................... - 4 -
ARTICLE 4. SECURITY............................................. - 4 -
4.1 Landlord's Lien............................................. - 4 -
4.2 Security in Addition to Other Remedies...................... - 5 -
ARTICLE 5. CONSTRUCTION, ALTERATIONS, MAINTENANCE AND
REPAIRS.............................................. - 5 -
5.1 Tenant's Duty to Repair..................................... - 5 -
5.2 Tenant's Alterations and Improvements to Leased Premises.... - 5 -
5.3 Furniture, Trade Fixtures and Equipment..................... - 6 -
5.4 Initial Installation and Improvements by Tenant............. - 6 -
5.5 Mechanic's Lien............................................. - 7 -
ARTICLE 6. USE OF LEASED PREMISES............................... - 8 -
6.1 Tenant's Use of Leased Premises............................. - 8 -
6.2 Conduct of Tenant's Operations.............................. - 8 -
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
6.3 Rights Reserved by Landlord................................. - 8 -
6.3.1 Easements.......................................... - 8 -
6.3.2 Inspection......................................... - 9 -
6.3.3 Presentation for Sale or Lease..................... - 9 -
ARTICLE 7. LIABILITY INSURANCE AND INDEMNIFICATION.............. - 9 -
7.1 Insurance................................................... - 9 -
7.2 Operations of Tenant........................................ - 10 -
7.3 Policy Requirements......................................... - 10 -
7.4 Failure to Procure Insurance................................ - 10 -
7.5.1 Indemnification.................................... - 10 -
7.5.2 Waiver of Claims................................... - 11 -
7.5.3 Notice of Claims or Suits.......................... - 11 -
ARTICLE 8. LOSS, DESTRUCTION OR TAKING OF LEASED
PREMISES............................................. - 11 -
8.1 Fire or Other Casualty...................................... - 11 -
8.2 Condemnation................................................ - 11 -
ARTICLE 9. ASSIGNMENT, SUBLETTING, MORTGAGING AND
SUBORDINATION........................................ - 12 -
9.1 Assignment and Subletting by Tenant......................... - 12 -
9.2 Assignment and Mortgaging by Landlord....................... - 13 -
9.3 Subordination............................................... - 13 -
9.4 Offset Statement............................................ - 13 -
ARTICLE 10. DEFAULT AND REMEDIES FOR DEFAULT..................... - 14 -
10.1 Events of Default........................................... - 14 -
10.1.1 Tenant Bankruptcy/Insolvency....................... - 14 -
10.1.2 Delinquency in Payment............................. - 14 -
10.1.3 Abandonment........................................ - 14 -
10.1.4 Failure to Perform Covenants....................... - 14 -
10.2 Remedies of Landlord for Default by Tenant.................. - 14 -
10.2.1 Landlord Cure...................................... - 15 -
10.2.2 Distrain........................................... - 15 -
10.2.3 Exercise General Lien.............................. - 15 -
10.2.4 Right of Re-Entry.................................. - 15 -
10.2.5 Termination of Lease............................... - 15 -
10.3 Non-Waiver of Remedies...................................... - 16 -
ARTICLE 11. GENERAL PROVISIONS................................... - 17 -
11.1 No Brokers.................................................. - 17 -
11.2 No Partnership.............................................. - 17 -
11.3 Successors and Assigns...................................... - 17 -
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C> <C>
11.4 Notices..................................................... - 17 -
11.5 Attorney's Fees............................................. - 17 -
11.6 Scope and Interpretation of this Agreement.................. - 18 -
11.6.1 Entire Agreement................................... - 18 -
11.6.2 Headings/Captions.................................. - 18 -
11.6.3 Gender and Interpretation of Terms and Provisions.. - 18 -
11.6.4 Time of Essence.................................... - 18 -
11.6.5 Impartial Construction............................. - 18 -
11.6.6 Governing Law...................................... - 19 -
11.6.7 Partial Invalidity................................. - 19 -
11.6.8 Amendment.......................................... - 19 -
11.7 Execution and Delivery of Lease............................. - 19 -
</TABLE>
(iii)
<PAGE> 5
LEASE
THIS LEASE is entered into as of the 1st day of March, 1997,
by and between 19th AVENUE/BUCHANAN LIMITED PARTNERSHIP, an Arizona limited
partnership ("Landlord"), and SCHUFF STEEL COMPANY, an Arizona corporation
("Tenant").
ARTICLE 1. LEASED PREMISES
1.1 Leased Premises. Landlord leases to Tenant the land and improvements
located at 420 S. 19th Avenue, Phoenix, Arizona, as more particularly
described on Exhibit "A" ("Leased Premises").
ARTICLE 2. TERM
2.1 Term of Lease. The term of this Lease shall be twenty (20) years
commencing on March 1, 1997 and ending on February 28, 2017.
2.2 Quiet Enjoyment. Landlord agrees that so long as the rent is being paid
in the manner and at the time prescribed and the covenants and
obligations of Tenant are being all and singularly kept, fulfilled and
performed, Tenant shall lawfully and peaceably have, hold, possess, use
and occupy and enjoy the Leased Premises so long as this Lease remains
in force without hindrance, disturbance or molestation from Landlord,
subject to the specific provisions of this Lease.
2.3 Surrender of Leased Premises. Upon any termination of this Lease,
whether by lapse of time, cancellation pursuant to an election provided
for herein, forfeiture, or otherwise, Tenant shall immediately
surrender possession of the Leased Premises and all buildings and
improvements on the same to Landlord in good and tenantable repair,
reasonable wear and damage from fire or other casualty or peril
excepted, and shall surrender all keys for the Leased Premises to
Landlord at the place then fixed for the payment of rent and shall
inform Landlord of all combinations of locks, safes and vaults, if any,
in the Leased Premises.
At any time during the ten (10) days before the termination date of
this Lease, Tenant, if not in default hereunder at such time, shall
have the right to remove, and at the end of the term, if directed to do
so by Landlord, shall remove from the Leased Premises all furniture,
furnishings, signs, and equipment then installed or in place in, on or
about the Leased Premises; provided, however, Tenant shall, and it
covenants and agrees to, make all repairs to the Leased Premises
required because of such removal. If any of such property shall remain
on the Leased Premises after the end of the term hereof, such property
shall be and become the property of Landlord without any claim therein
of Tenant. Landlord may direct Tenant to remove such property, in which
case Tenant
- 1 -
<PAGE> 6
agrees to do so, and to reimburse Landlord for any expense of removal
in the event Tenant shall fail to remove such property if and when
directed.
Upon termination of this Lease, Tenant shall peaceably surrender the
Leased Premises, including all fixtures and tenant improvements, in a
neat and broom clean condition, and Tenant shall repair any holes or
openings made by Tenant in the walls, roof or floor of the building,
remove any protuberance and perform any maintenance or repairs required
of Tenant by this Lease. If directed to do so by Landlord, Tenant shall
also remove any improvements, additions or alterations made to the
Leased Premises by Tenant even though such improvements by the terms of
this Lease become a part of the Leased Premises.
2.4 Holding Over. If Tenant, upon expiration or termination of this Lease,
either by lapse of time or otherwise, remains in possession of the
Leased Premises with Landlord's written consent but without a new lease
reduced to writing and duly executed, Tenant shall be deemed to be
occupying the Leased Premises as a tenant at will, subject to all the
covenants, conditions and agreements of this Lease. If Tenant remains
in possession without Landlord's written consent, Tenant shall be
deemed to be in wrongful holdover and shall be subject to all the
rights and remedies provided to Landlord under this Lease and the
applicable laws, including any forcible entry and detainer actions or
other eviction processes.
2.5 Abandonment. If Tenant, prior to the expiration or termination of this
Lease by lapse of time or otherwise, relinquishes possession of the
Leased Premises without Landlord's written consent, such relinquishment
shall be deemed to be an abandonment of the Leased Premises and an
event of default under this Lease.
ARTICLE 3. RENTALS AND OTHER TENANT CONTRIBUTIONS
3.1 Minimum Rent. Tenant shall pay to Landlord minimum annual rent as set
forth below, payable in advance in monthly installments as outlined
below ("Minimum Rent") on the first day of each calendar month, without
prior demand therefor:
<TABLE>
<CAPTION>
Lease Period Minimum Annual Rent Monthly Installment
<S> <C> <C> <C>
03/01/97 - 02/28/98 $295,333 $24,611
03/01/98 - 02/28/99 437,666 36,472
03/01/99 - 02/29/00 579,999 48,333
03/01/00 - 02/28/17 605,118 50,427
</TABLE>
3.2 Adjustment of Minimum Rent. The minimum annual rent is subject to
adjustment every five (5) years during the term of this Lease, with
each adjustment to commence on March 1 of the year of adjustment
("Adjusted Minimum Rent"). The Adjusted Minimum Rent shall be effective
as of March 1, 2002, March 1, 2007, and March 1,
- 2 -
<PAGE> 7
2012 during the term hereof, with the Adjusted Minimum Rent payable in
advance in equal monthly installments on the first day of each calendar
month thereafter, without prior demand therefor.
3.2.1 Computation of Adjusted Minimum Rent. The Adjusted Minimum
Rent shall be computed based on the increase in the Consumer
Price Index - U.S. City average - All Urban Consumers
("Index") as published by the United States Department of
Labor's Bureau of Labor Statistics over the base period index.
The base period index shall be the index for the calendar
month of December 1996. The base period index shall be
compared with the Index for the same calendar month for each
subsequent December in the year immediately preceding the
effective date of each adjustment (comparison month). If the
Index for any comparison month is higher than the base period
index, then the Minimum Rent for the next succeeding
adjustment period shall be increased by the identical
percentage commencing with the next succeeding March 1. In no
event shall the Minimum Rent be less than that the amount paid
immediately prior to any such adjustment.
3.2.2 Use of Different Index. If the Bureau discontinues the
publication of the Index, or publishes it less frequently, or
alters it in any manner, then Landlord shall adopt a
substitute index or substitute procedure which reasonably
reflects and monitors consumer prices.
3.3 Payment of Rent. Tenant shall, without prior notice or demand and
without any setoff or deduction whatsoever, pay all rentals and other
charges and render all statements herein prescribed at the Landlord's
address or to such other person or corporation, and at such other
place, as shall be designated by Landlord in writing at least ten (10)
days prior to the next ensuing rental payment date.
3.4 Taxes.
3.4.1 Rent Tax. Tenant shall pay as additional rent, any privilege
tax, sales tax, gross proceeds tax, rent tax or like tax (but
not including income tax), now or hereafter levied, assessed
or imposed by any federal, state, county or municipal
governmental authority, or any subdivision thereof, upon any
rent or other payments require to be paid under this Lease.
3.4.2 Personal Property Tax. Tenant shall pay before delinquent, as
additional rent, all personal property taxes and assessments
levied or assessed by any governmental authority against any
personal property or fixtures of Tenant in, on or about the
Leased Premises.
3.4.3 Real Property Tax. Tenant shall pay before delinquent,
exhibiting receipts to Landlord on demand, all real property
taxes and assessments levied or assessed against the Leased
Premises and improvements thereon, all water charges or
- 3 -
<PAGE> 8
assessments levied in connection with any improvements or
irrigation projects, or district or other taxes, assessments
or governmental charges of any kind levied or assessed against
the Leased Premises. Tenant shall have the right, in good
faith and at its sole and own cost and expense and in its own
name or in the name of Landlord, to protest or contest or seek
to have reviewed, reduced, equalized or abated any tax or
assessment by legal proceedings in such manner as it may deem
advisable. No protest, contest or other action, however, shall
be maintained by Tenant after the time limited for the payment
without penalty or interest of the tax or assessment unless
Tenant shall have first paid the amount of such tax or
assessment under protest or shall have procured a stay of
proceedings to enforce the collection thereof, and shall have
also provided for the payment thereof, together with all
penalties, interest, cost and expenses, by the deposit of a
bond in form approved by Landlord if required by law to
accomplish such stay.
3.5 Interest. Tenant covenants and agrees that all sums to be paid under
this Lease, if not paid when due, shall bear interest on the unpaid
portion thereof at the rate of eighteen (18%) per annum from the date
when due. If Landlord shall pay any monies, or incur any expenses in
correction of any violation of any covenant of Tenant herein set forth,
the amounts so paid, or, incurred shall, at Landlord's option and on
notice to Tenant, be considered additional rentals payable by Tenant
with the first installment of rental thereafter to become due and
payable, and may be collected or enforced as by law provided with
respect to rentals.
3.6 Utilities Consumed on Leased Premises. In addition to all rentals
herein specified, Tenant shall be responsible for and shall pay for all
utilities used or consumed in or upon the Leased Premises, and all
sewer charges, as and when the charges therefor shall become due and
payable, throughout the term of this Lease. Tenant shall make all
appropriate applications to the local utility companies and pay all
required deposits for meters and service for all utilities.
In the event any utility or utility service (such as water or sewage
disposal) are furnished to Tenant for which a lien could be filed
against the Leased Premises or any portion thereof, Tenant shall, at
Landlord's request, pay the cost thereof to Landlord as and when the
charges therefor become due and payable; otherwise, Tenant shall
deliver original receipted bills to Landlord within thirty (30) days
after the same are due and payable without interest or penalty.
In no event shall Landlord be liable for any interruption or failure in
the supply of any utilities to the Leased Premises.
ARTICLE 4. SECURITY
4.1 Landlord's Lien. Landlord shall have a general lien on the leasehold
estate hereby created and on all property kept or used on the Leased
Premises, whether such property
- 4 -
<PAGE> 9
is exempt from execution or not, to secure payment of any and all
monies then due or thereafter becoming due to Landlord under the terms
and conditions of this Lease, and to secure the prompt performance and
fulfillment by Tenant of each and every one of said terms and
conditions. The lien as provided for in this Paragraph 4.1 attaches as
of the date of execution hereof and shall remain in full force and
effect unless expressly waived by Landlord in writing.
4.2 Security in Addition to Other Remedies. The security given Landlord in
this Article 4 shall not limit, replace or obviate the remedies of
Landlord upon a default by Tenant as described in Article 10 below,
including the right of Landlord to re-enter the Leased Premises,
distrain for rent or pursue its general lien upon Tenant's property in
the Leased Premises described in Paragraph 4.1 above.
ARTICLE 5. CONSTRUCTION, ALTERATIONS, MAINTENANCE AND REPAIRS
5.1 Tenant's Duty to Repair. Landlord shall not be called upon to make any
improvements or repairs of any kind upon the Leased Premises and
appurtenances unless such repairs are necessitated by the misuse or
negligence of Landlord. Tenant shall keep and maintain in good order,
condition and repair (including any such replacement, periodic
painting, and restoration as is required for that purpose) the Leased
Premises and every part thereof and any and all appurtenances hereto
located. Any of the foregoing repairs required to be made by reason of
the negligence of Landlord shall be the responsibility of the Landlord
notwithstanding the provisions above contained in this paragraph.
If Tenant refuses or neglects to commence and to complete repairs or
maintenance required herein promptly and adequately, Landlord may, but
shall not be required to, make and complete said repairs, and Tenant
shall pay the cost thereof to Landlord as additional rent upon demand.
Except as provided in Paragraph 8.1 (Fire and Casualty damage) and
8.2 (Condemnation), Landlord shall not be obligated to repair, replace,
maintain or alter the Leased Premises, and Tenant waives all laws in
contravention thereof. With regard to repairs, Tenant expressly waives
any right pursuant to any law now existing or which may be effective
during the term hereof, to make repairs at Landlord's expense.
5.2 Tenant's Alterations and Improvements to Leased Premises. Tenant shall
not make or cause to be made any alterations, additions or improvements
to the building, or make any changes to the exterior of the building
without first obtaining Landlord's written approval and consent.
Tenant shall present to the Landlord plans and specifications for such
work at the time approval is sought. No addition, alteration, change or
improvement shall be made which
- 5 -
<PAGE> 10
will weaken the structural strength, lessen the value of, or change the
architectural appearance of any building or other construction.
Landlord may condition its approval of any additions or alterations by
Tenant on the requirement that Tenant or its contractor secure and bear
the cost of a labor and materials payment bond for the amount of the
proposed construction reflecting Landlord as an obligee.
All building materials and fixtures installed by Tenant shall be new or
completely reconditioned. All alterations, improvements, additions and
fixtures made or installed by Tenant as aforesaid shall remain upon the
Leased Premises at the expiration or earlier termination of this Lease
and shall become the property of Landlord, unless Landlord shall, prior
to the expiration or termination of this Lease, have given written
notice to Tenant to remove the same, in which event Tenant shall remove
the same and restore the Leased Premises to the same good order and
condition in which it was at the commencement of this Lease. Should
Tenant fail so to do, Landlord may do so, collecting, at Landlord's
option, the cost and expense thereof from the Tenant as additional
rent.
5.3 Furniture, Trade Fixtures and Equipment. Tenant shall not cut or drill
into, or secure any trade fixtures, apparatus or equipment of any kind
to any part of the Leased Premises without first obtaining the written
consent of Landlord. All furnishings, trade fixtures, equipment, and
machines installed by Tenant in the Leased Premises shall be new or
completely reconditioned and remain the property of Tenant subject to
Landlord's security interest as defined at Paragraph 4.1 above and
shall be removable at the expiration or earlier termination of this
Lease or any renewal or extension thereof, provided Tenant shall not at
such time be in default under any covenant or agreement contained in
this Lease; and provided further, that in the event of such removal,
Tenant shall promptly restore the Leased Premises to their original
order and condition. Any such equipment not removed at or prior to such
termination shall be and become the property of Landlord.
5.4 Initial Installation and Improvements by Tenant. Tenant shall submit to
Landlord complete architectural, electrical and mechanical plans and
specifications covering all work which Tenant proposes to do in the
Leased Premises including the fixturing thereof, whether such work is
to be done by Tenant or others. Such plans and specifications shall be
prepared in such detail as Landlord may require, and Tenant agrees not
to commence work upon any portion of the Leased Premises until Landlord
has approved such plans and specifications in writing. Landlord agrees
to act with reasonable promptness with respect to such plans and
specifications. Any changes in said plans or specifications must be
similarly approved by Landlord.
All of Tenant's work and installations shall be done in a first class,
workmanlike manner and in compliance with all laws, rules, regulations
and orders of all governmental
- 6 -
<PAGE> 11
authorities having jurisdiction thereof, and, in the performance of
Tenant's work, Tenant shall engage and employ only such labor as will
not cause any conflict or controversy with any labor organization
representing trades performing work for Landlord or others in the
Leased Premises.
Tenant shall, at Tenant's own expense, promptly remove from the Leased
Premises all trash and debris which may accumulate in connection with
Tenant's work in the Leased Premises.
Landlord shall have no liability or responsibility for loss of, or any
damage to fixtures, equipment or other property of Tenant so installed
or placed on the Leased Premises.
5.5 Mechanic's Lien. If Tenant makes any alterations or improvements in the
Leased Premises, Tenant must pay for them when made. Nothing in the
Lease shall be construed to authorize Tenant or any person dealing with
or under Tenant, to charge the rents of the Leased Premises, or the
property of which the Leased Premises form a part, or the interest of
Landlord in the estate of the Leased Premises, or any person under and
through whom Landlord has acquired its interest in the estate of the
Leased Premises, with a mechanic's lien or encumbrance of any kind, and
under no circumstances shall Tenant be construed to be the agent,
employee or representative of Landlord in the making of such
alterations or improvements to the Leased Premises, but, on the
contrary, the right or power to charge any lien, claim or encumbrance
of any kind against Landlord's rents or the Leased Premises or said
land is denied. So long as the laws of this state shall provide for the
filing of a statutory bond to eliminate the attachment of mechanic's or
materialmen's liens to real estate, Tenant shall require that its
contractor or itself shall take such steps as are provided by law for
the filing of said statutory bond prior to the initiation of any
construction. If a mechanic's or materialmen's lien is threatened by
any contractor or supplier, or in the event of the filing of a notice
of any such lien, Tenant will promptly take steps immediately to have
any such lien removed. If the lien is not removed within ten (10) days
from the date of written notice from Landlord, Landlord shall have the
right at Landlord's option to cause the lien to be discharged by record
of payment, deposit, bond or order of a court of competent jurisdiction
or otherwise, to pay any portion thereof and of the amounts so paid,
including attorney's fees and expenses connected therewith and interest
at the rate of eighteen percent (18%) per annum on any sums paid or
advanced, shall be deemed to be additional rent due from Tenant to
Landlord and shall be paid to Landlord immediately upon rendition to
Tenant of a bill therefor. Tenant will indemnify and save harmless
Landlord from and against all loss, claims, damages, costs or expenses
suffered by Landlord by reason of any repairs, installations or
improvement, made by Tenant.
Except as may be expressly provided in this Lease, nothing in this
Article 5 shall be construed to permit Tenant to place any materials
upon the Leased Premises or cause any labor or construction, or to make
any alterations, additions, replacements or substantial repairs, in or
about the Leased Premises. Landlord shall have the further right any
time,
- 7 -
<PAGE> 12
and from time to time, to post and maintain on the Leased Premises such
notices as Landlord deems necessary to protect the Leased Premises and
Landlord, from all liens of any nature whatsoever.
No mechanic's or materialmen's liens or mortgages, deeds of trust, or
other liens of any character whatsoever created or suffered by Tenant
shall in any way, or to any extent, affect the interest or rights of
Landlord in any buildings or other improvements on the Leased Premises,
or attach to or affect Landlord's title to or rights in the Leased
Premises.
ARTICLE 6. USE OF LEASED PREMISES
6.1 Tenant's Use of Leased Premises. Tenant shall use and occupy the Leased
Premises only for conducting its steel fabrication and erection
business and related operations and for no other purpose without
Landlord's prior written consent.
6.2 Conduct of Tenant's Operations. At all times throughout the Lease term,
Tenant shall:
6.2.1 Comply with any and all requirements of any of the constituted
public authorities, and with the terms of any state or federal
statue or local ordinance or regulation applicable to Tenant
or its use, safety, cleanliness or occupation of the Leased
Premises, and save Landlord harmless from penalties, fines,
costs, expenses or damages resulting from failure to do so.
6.2.2 Give to Landlord prompt written notice of any accident, fire
or damage occurring on or to the Leased Premises.
6.2.3 Conduct its business in the Leased Premises in all respects in
a dignified manner and in accordance with high standards of
store operation.
6.2.4 Comply with all reasonable rules and regulations of Landlord
in effect at the time of the execution of this Lease or at any
time or times, and from time to time, promulgated by Landlord,
which Landlord in its sole discretion shall deem necessary in
connection with the demised Leased Premises, the building of
which the demised Leased Premises are a part or the Shopping
Center, including both the operation of Tenant's business
during certain minimum days and hours and the installation of
such fire extinguishers, water buckets and other safety
equipment as Landlord may reasonably require.
6.3 Rights Reserved by Landlord.
6.3.1 Easements. Landlord expressly reserves all rights in and with
respect to the land hereby leased not inconsistent with
Tenant's use of the Leased Premises as provided in the Lease,
including (without in anyway limiting the generality of the
- 8 -
<PAGE> 13
foregoing) the rights of Landlord to enter upon the Leased
Premises and give easements to others for the purpose of
installing, using, maintaining, renewing and replacing such
overhead or underground water, gas, sewer and other pipe
lines, and telephone, electric, and power lines, cables and
conduits as Landlord may deem desirable in connection with the
development or use of any other property in the neighborhood
of the land hereby leased, whether owned by Landlord or not,
all of which pipelines, lines and conduits shall be buried to
a sufficient depth or raised to a sufficient height so as not
to interfere with the use or stability of the building or any
other improvements on the land hereby leased.
6.3.2 Inspection. Landlord reserves the right to, at all reasonable
times, by itself or its duly authorized agents, employees and
contractors to go upon and inspect the demised Leased Premises
and every part thereof, to enforce or carry out the provisions
of this Lease, to perform any defaulted obligation of Tenant
or for any other proper purposes.
6.3.3 Presentation for Sale or Lease. Landlord hereby reserves the
right during usual business hours to enter the Leased Premises
and to exhibit the same for purposes of sale, lease or
mortgage, and during the last six (6) months of the term of
this Lease, to exhibit the Leased Premises to any prospective
Tenant, and to display a "For Sale" sign at any time, and also
after notice from either party of intention to terminate this
Lease, or at any time within six (6) months prior to the
expiration of the Lease, a "For Rent" sign, or both "For Sale"
and "For Rent" signs, and all said signs shall be placed upon
such part of the Leased Premises as Landlord shall require,
except on doors leading into the Leased Premises. Prospective
purchasers or tenants authorized by Landlord may inspect the
Leased Premises at reasonable hours at any time.
ARTICLE 7. LIABILITY INSURANCE AND INDEMNIFICATION
7.1 Insurance. During the term of this Lease, Tenant, at Tenant's expense,
shall keep the building of which the Leased Premises are a part insured
against loss or damage by fire and the hazards covered by extended
coverage insurance in an amount equal to not less than the full
insurable value of such building. The policy or policies therefor shall
name Landlord as insured and shall be payable to Landlord. Tenant shall
not commit or permit any acts in or about the Leased Premises which may
in any way impair or invalidate such policy or policies of insurance
for the building.
Tenant shall be solely responsible for obtaining any fire or extended
coverage insurance for personal property and improvements of Tenant and
for all goods, commodities and materials stored by Tenant in or about
the Leased Premises. Tenant agrees that if any property owned by it and
located in the Leased Premises shall be damaged or destroyed, Landlord
shall not have any liability to Tenant, nor to any insurer of Tenant,
for or in respect of such damage or destruction, and Tenant shall
require all policies of risk
- 9 -
<PAGE> 14
insurance carried by it on its property in the Leased Premises to
contain or be endorsed with a provision in and by which the insurer
designated therein shall waive its right of subrogation against
Landlord.
7.2 Operations of Tenant. All operations conducted by Tenant shall be at
Tenant's sole risk. In addition, Tenant shall procure and keep in force
at its own expense public liability insurance and comprehensive general
liability insurance, including contractual liability insurance
sufficient to cover all phases and aspects of the operation and conduct
of its business, with minimum limits of $1,000,000 on account of bodily
injuries to or death of one person, and $3,000,000 on account of bodily
injuries to or death of more than one person as the result of any one
accident or disaster, and $1,000,000 on account of damage to property.
7.3 Policy Requirements. All insurance policies required of Tenant in this
Lease shall name as insured both Landlord and Tenant (and upon request,
any other party named by Landlord) and shall contain an express waiver
of any right of subrogation against Landlord and other named insureds
designated by Landlord. All policies shall be in such companies as are
authorized to write such coverage in Arizona, shall be acceptable to
Landlord and/or its lender (which shall be named as an additional
insured if requested in writing). Tenant will further deposit the
policy or policies of such insurance or certificates thereof, with
Landlord with evidence of payment of premium at all times commencing
with the date of this Lease. Each policy shall provide against
cancellation without thirty (30) days prior written notice to the named
insureds.
7.4 Failure to Procure Insurance. In the event Tenant shall fail to procure
insurance required under this Article 7 and fails to maintain such
insurance in force continuously during the term of this Lease, Landlord
shall be entitled to procure such insurance, and Tenant shall
immediately reimburse Landlord for such premium expense.
7.5 Indemnification and Waiver of Claims. Tenant indemnifies Landlord and
waives claims as follows:
7.5.1 Indemnification. Tenant will indemnify Landlord and save it
harmless from and against any and all claims, actions,
damages, liability and expense in connection with loss of
life, personal injury and/or damage to property occurring in
or about, or arising from or out of, the Leased Premises and
adjacent sidewalks and loading platforms or areas or
occasioned wholly or in part by any act or omission of Tenant,
its agents, contractors, customers or employees. Additionally,
Tenant agrees to indemnify and hold harmless Landlord with
respect to any claim, cause of action or proceeding, in law or
in equity, civil, criminal or administrative, asserted or
brought by any person, firm or corporation. Tenant agrees to
defend at its own cost and expense any lawsuit or proceeding
referred to above and to reimburse Landlord for any reasonable
expenses or damages, including reasonable attorney's fees,
incurred in any such proceeding, lawsuit,
- 10 -
<PAGE> 15
administrative action, or investigation commenced in whole or
in part by reason of said exclusive clause.
7.5.2 Waiver of Claims. Landlord and Landlord's agents, employees
and contractors shall not be liable for, and Tenant hereby
releases all claims for, damage to person and property
sustained by Tenant or any person claiming through Tenant
resulting from any theft, fire, accident, occurrence or
condition in or upon the Leased Premises or building of which
they shall be a part.
In the event the Leased Premises or its contents are damaged
or destroyed by fire or other insured casualty, the rights, if
any, of either party hereto against the other with respect to
such damage or destruction are waived; and all policies of
fire and/or extended coverage or other insurance covering the
Leased Premises or its contents shall contain a clause or
endorsement providing in substance that the insurance shall
not be prejudiced if the insureds have waived the right of
recovery from any person or persons prior to the date and time
of loss or damage, if any.
7.5.3 Notice of Claims or Suits. Tenant agrees to promptly notify
Landlord of any claim, action, proceeding or suit instituted
or threatened against Landlord. In the event Landlord is made
a party to any action for damages which Tenant has herewith
indemnified Landlord against, then Tenant shall pay all costs
and shall provide effective counsel in such litigation or
shall pay, at Landlord's option, the attorney fees and costs
incurred in connection with said litigation by Landlord.
ARTICLE 8. LOSS, DESTRUCTION OR TAKING OF LEASED PREMISES
8.1 Fire or Other Casualty. Tenant shall give to Landlord prompt written
notice of any accident, fire or damage occurring on or to the Leased
Premises and shall fully cooperate with Landlord in filing all
necessary proofs of claim with insurance companies. The proceeds of
such insurance applicable to the Leased Premises shall be paid to
Landlord and Landlord shall rebuild, repair or restore the Leased
Premises to the condition at the time immediately preceding the loss or
damage; provided, however, that Landlord may elect to retain such
insurance proceeds and shall not be required to rebuild, repair or
restore the Leased Premises, and this Lease shall be terminated, if
such damage or destruction occurs within the last year of the term of
this Lease, or if more than one-third (1/3) of the Leased Premises is
so damaged or destroyed. In the event of total destruction of the
Leased Premises, the rent shall abate during the period of rebuilding,
repair or restoration by Landlord, or, in the event of partial
destruction of the Leased Premises, the rent shall abate pro rata
during the period of rebuilding, repair or restoration by Lessor.
8.2 Condemnation. If title to all or any portion of the Leased Premises be
taken by a public or quasi-public authority under any statute or by
right of eminent domain of any
- 11 -
<PAGE> 16
governmental body, whether such loss or damage results from
condemnation of part or all of the Leased Premises, Tenant shall not be
entitled to participate or receive any part of the damages or award
except where said award shall provide for moving or other reimbursable
expenses for Tenant under applicable statute, in which event the latter
sum shall be received by Tenant, and except that portion of any award
allocated to the taking of Tenant's trade fixtures, equipment and
personal property, or to a loss of business by Tenant. None of the
awards or payments to Landlord shall be subject to any diminution or
apportionment on behalf of Tenant or otherwise.
If any power of eminent domain is exercised during the term of this
Lease, such exercise shall not void or impair this Lease unless the
amount of the Leased Premises so taken is such as to substantially and
materially impair the usefulness of the Leased Premises for the purpose
of which they are hereby demised, in which event either party may
cancel this Lease by notice to the other within sixty (60) days after
possession is taken, and the rental herein provided shall abate as of
the date possession is taken by the condemning authority.
If a portion of the Leased Premises shall be taken as herein provided
for public improvements or otherwise under the exercise of the right of
eminent domain and the Leased Premises shall continue to be reasonably
suitable for the use which is hereby authorized, then the rental herein
provided shall be reduced from the date of such taking in direct
proportion to the reduction in usefulness of the Leased Premises.
ARTICLE 9. ASSIGNMENT, SUBLETTING, MORTGAGING AND SUBORDINATION
9.1 Assignment and Subletting by Tenant. Tenant shall not convey, assign,
mortgage, pledge or encumber this Lease, in whole or in part, nor
sublet the whole or any part of the Leased Premises, or permit the use
of the whole or any part of the Leased Premises by any licensee or
concessionaire, without first obtaining the written consent of
Landlord. This prohibition shall be construed to include a prohibition
against any assignment or subletting by operation of law, assignment
for the benefit of creditors, voluntary or involuntary bankruptcy or
reorganization, or otherwise, without the prior written consent of
Landlord. Any assignment or sublease without Landlord's written consent
is in violation of this Lease and a default hereunder and, at the
option of Landlord, shall be voidable.
Landlord's consent or refusal to consent to any such subletting may be
based upon, but shall not be limited to, factors pertaining to (a) the
acceptability of the proposed subtenant to the Leased Premises, and (b)
the financial statement, credit and ability of any proposed subtenant
to meet the obligations, terms and conditions of this Lease.
The acceptance of any rental payments by Landlord from any alleged
assignee shall not constitute approval of the assignment of this Lease
by the Landlord, and the consent by
- 12 -
<PAGE> 17
Landlord to one assignment or subletting of the Leased Premises shall
not constitute a waiver of Landlord's rights hereunder.
Tenant shall pay to Landlord the sum of $500.00 as a Transfer Fee for
such written consent. In the event of any such assignment, subletting,
licensing or granting of a concession, made with the written consent of
the Landlord as aforesaid, Tenant will nevertheless remain liable for
the performance of all the terms, conditions, and covenants of this
Lease. Any permitted assignment or subletting shall be by agreement in
form and content acceptable to Landlord, and shall specify and require
that each subtenant or assignee acquiring this Lease by acceptance of
any sublease, assignment or transfer shall assume, be bound by, and be
obligated to perform the terms and conditions of its sublessor and
assignor under this Lease. A condition of such assignment or subletting
is the agreement of the parties that Landlord shall receive the full
and complete rental payment of subtenant or assignee, though such
payments may be in excess of the original rental between Landlord and
Tenant. It is the intent and understanding of the parties to this
Agreement that Tenant shall not receive any monetary benefit in excess
of the actual rental obligation of Tenant as agreed between the
original Tenant and Landlord through a sublease or assignment to a
third party. In the event of default of Tenant, Landlord, at Landlord's
sole option, may succeed to the position of Tenant as to any subtenant
or licensee of Tenant.
9.2 Assignment and Mortgaging by Landlord. The term "Landlord" as used in
this Lease means the owner of the Leased Premises. So long as all sums
held on Tenant's behalf in trust or escrow by Landlord are paid over to
any purchaser of said Leased Premises, Landlord shall be and is hereby
relieved of all covenants and obligations of Landlord hereunder after
the date of sale of the Leased Premises, and it shall be construed
without further agreement between the parties that the purchaser has
assumed and agreed to carry out any and all covenants and obligations
of Landlord hereunder from the date of such sale.
9.3 Subordination. This Lease shall, upon request by Landlord, be subject
and subordinate to any and all leases, mortgages or deeds of trust
hereinafter placed upon the Leased Premises, or any part thereof, and
to all future modifications, consolidations, replacements, extensions
and renewals of, and all amendments and supplements to said leases,
mortgages or deeds of trust. Notwithstanding such subordination as
aforesaid, this Lease, except as otherwise hereinafter provided, shall
not terminate or be divested by foreclosure or other default
proceedings under said leases, mortgages, deeds of trust, or
obligations secured thereby, and Tenant shall attorn to and recognize
the landlord, mortgagee, trustee, beneficiary or the purchaser at the
foreclosure sale in the event of such foreclosure or other default
proceeding, as Tenant's Landlord hereunder for the balance of the term
of this Lease, subject to all of the terms and provisions hereof.
9.4 Offset Statement. Tenant agrees to execute, acknowledge and deliver any
and all documents required to effectuate the provisions of this Article
9, and within ten (10) days
- 13 -
<PAGE> 18
after request therefor by Landlord or in the event that upon any sale,
assignment, lease or hypothecation of the Leased Premises and/or the
land thereunder by Landlord, an offset statement shall be required by
Tenant, Tenant agrees to deliver in recordable form a certificate (if
such be the case) that this Lease is in full force and effect and there
are no defenses or offsets thereto, or stating those claimed by Tenant,
and the dates to which rental or other sums have been paid in advance,
it being intended that any such statement delivered pursuant to this
Paragraph 9.4 may be relied upon by any prospective purchaser,
mortgagee, assignee or beneficiary. Tenant shall also deliver to any
prospective institutional lender of Landlord, upon Landlord's
reasonable request therefor, from time to time, Tenant's latest
financial statements and such specific subordination agreement on
Lender's form as may be required by Lender. Tenant acknowledges and
agrees that the promises to issue statements pursuant to this Paragraph
9.4 are a material consideration inducing Landlord to enter into this
Lease, and that the breach of such promise shall be deemed a material
breach of this Lease, and shall constitute a default hereunder.
ARTICLE 10. DEFAULT AND REMEDIES FOR DEFAULT
10.1 Events of Default. The occurrence of any of the following constitute an
event of default hereunder:
10.1.1 Tenant Bankruptcy/Insolvency. The filing of a petition by or
against Tenant for adjudication as a bankrupt or insolvent, or
for its reorganization or for the appointment of a receiver or
trustee of Tenant's property; an assignment by Tenant for the
benefit of creditors; or the taking of possession of the
property of Tenant by any governmental officer or agency
pursuant to statutory authority for the dissolution or
liquidation of Tenant.
10.1.2 Delinquency in Payment. Failure of Tenant to pay when due any
installment of rent hereunder or any other sum herein required
to be paid by Tenant, and the continuance of such nonpayment
for five (5) days after written notice from Landlord.
10.1.3 Abandonment. Abandonment of the Leased Premises by Tenant.
10.1.4 Failure to Perform Covenants. Tenant's failure to perform any
other covenant or condition of this Lease within twenty (20)
days after written notice and demand, unless the failure is of
such a character as to require more than twenty (20) days to
cure, in which event Tenant's failure to proceed diligently to
cure such failure shall constitute an event of default.
10.2 Remedies of Landlord for Default by Tenant. Upon the occurrence of an
event of default, Landlord shall have the right, then or at any time
thereafter, and while such
- 14 -
<PAGE> 19
event of default shall continue, and in addition to and not in lieu of
any other remedies, relief or rights available to Landlord at law or
equity or contained in this Lease, to do any of the following:
10.2.1 Landlord Cure. Landlord by itself or its authorized agents may
cure the default and charge Tenant for the costs of such cure,
which charge shall be due and payable as rental under this
Lease immediately upon written notice to Tenant.
10.2.2 Distrain. Landlord may distrain for rent due.
10.2.3 Exercise General Lien. Landlord may exercise its general lien
on the leasehold estate and all property in the Leased
Premises.
10.2.4 Right of Re-Entry. Landlord shall have the right to re-enter
the Leased Premises to assume and take possession of the whole
or any part thereof, and to remove all persons or personal
property by direct or summary action, or in a different type
of suit or proceeding, by force or otherwise, without being
deemed guilty of trespass or other actionable wrong by reason
thereof, and without being liable for the damages therefor or
in connection therewith, and, after demand made therefor,
Tenant or anyone in possession claiming under Tenant shall be
deemed guilty of unlawful detainer and subject to such summary
or other action as may be provided by law. Additionally,
Landlord may relet the Leased Premises as the agent for and in
the name of the Tenant, at any rental readily acceptable,
applying the proceeds first to the payment of such rent as the
same comes due, and toward the fulfillment of the other
covenants and agreements of Tenant herein contained, and the
balance, if any, shall be paid to Tenantl; and the Tenant
hereby agrees that if Landlord shall recover or take
possession of said Leased Premises as aforesaid and be unable
to relet and rent the same so as to realize a sum equal to the
rent hereby reserved, Tenant shall pay to Landlord any loss or
difference of rent for the remainder of the term.
10.2.5 Termination of Lease. Landlord, irrespective of the date on
which its right of re-entry shall have accrued or be
exercised, shall have the right, whether for rent or
possession or otherwise, to forfeit this Lease and terminate
the state of tenancy hereby created. This right to terminate
is exercisable by a written notice to Tenant, which written
notice may be part of a notice of default previously delivered
to Tenant, and, as such, may be conditioned upon Tenant's
failure to cure the default and the event of default. The
termination may be made effective as of the event of default
or thereafter, and, if not otherwise specified, will be deemed
to be effective immediately. Upon such termination and
forfeiture, Landlord
- 15 -
<PAGE> 20
shall be entitled to and may take immediate possession of the
Leased Premises, any other notice or demand being hereby
waived. Such termination does not, however, release Tenant
from liability for rentals then overdue or remaining under the
Lease but shall operate to accelerate the entire balance of
the term rental, which shall become immediately due and
payable by Tenant, along with all overdue rentals and charges.
10.3 Non-Waiver of Remedies. It is expressly agreed that neither the taking
of possession of the Leased Premises nor the institution of any
proceedings by way of unlawful detainer, ejectment, quiet title, or
otherwise, to secure possession of the Leased Premises, nor the
re-entry by Landlord with or without the institution of such
proceedings, nor the rerenting or subletting of the Leased Premises,
shall operate to terminate this Lease in whole or in part, nor of
itself constitute an exercise of Landlord's option to do so, but only
by the giving of the written notice specifically specifying termination
shall such termination be effected.
In the event Tenant breaches this Lease, or any covenant, term or
condition hereunder, and abandons the Leased Premises, this Lease shall
continue in force and effect for so long as the Landlord does not
terminate Tenant's right to possession, and Landlord may enforce all
rights and remedies of Landlord including, without limitation, the
right to recover rental as it becomes due hereunder. Acts of
maintenance or preservation or efforts to relet the Leased Premises, or
the appointment of a receiver upon the initiation of the Landlord to
protect the Landlord's interest under this Lease shall not constitute a
termination of Tenant's right to possession.
Waiver by Landlord of any default, breach or failure of Tenant under
this Lease shall not be construed as a wavier of any subsequent or
different default, breach or failure. In case of a breach by Tenant of
any of the covenants or undertakings of Tenant, Landlord nevertheless
may accept from Tenant any payments hereunder without in any way
waiving Landlord's right to exercise the remedies hereinbefore provided
for by reason of any other breach or lapse which was in existence at
the time such payment or payments were accepted by Landlord.
It is expressly understood that the enumeration herein of express
rights, options and privileges shall not limit Landlord nor deprive
Landlord of any other remedy or action or cause of action by reason of
any default of Tenant, including the right to recover from Tenant any
deficiency upon re-renting.
The specific remedies to which Landlord may resort under the terms of
this Lease are cumulative and are not intended to be exclusive of any
other remedies or means of redress to which they may be lawfully
entitled in case of any breach or threatened breach by either of them
or of any provisions of this Lease.
- 16 -
<PAGE> 21
ARTICLE 11. GENERAL PROVISIONS
11.1 No Brokers. Neither Landlord nor Tenant has employed a broker who has
or may have a legitimate claim to a commission arising from Tenant's
acceptance of the Lease.
11.2 No Partnership. Notwithstanding any other express or implied provision
of this Lease, it is understood that Landlord does not in any way or
propose a partnership or joint venture with Tenant in the conduct of
Tenant's business.
11.3 Successors and Assigns. All rights, obligations and liabilities herein
given to, or imposed upon, the respective parties hereto shall extend
to and bind the several and respective heirs, executors,
administrators, successors, sublessees, and assigns of said parties,
subject to the provisions of Article 9; provided, however, that the
liability of Landlord hereunder and any successor in interest and title
to the Leased Premises shall be limited to its interest in the Leased
Premises, and no other assets of the Landlord other than its interest
in the Leased Premises shall be affected by reason of any liability
which said Landlord or successor in interest may have under this Lease.
11.4 Notices. Wherever in this Lease it shall be required or permitted that
notice or demand be given or served by either party to this Lease to or
on the other, such notice or demand shall not be deemed to have been
duly given or served unless made in writing and either personally
delivered or forwarded by certified mail, return receipt requested,
postage prepaid, to the address for each party provided below. Such
addresses may be changed from time to time by either party by serving
notices as above provided. While Tenant is in possession of the Leased
Premises, notices to the Tenant may also be delivered or forwarded by
certified mail to the Leased Premises.
Address for Tenant: Schuff Steel Company
420 S. 19th Avenue
Phoenix, Arizona 85009
Address for Landlord: 19th Avenue/Buchanan Limited Partnership
420 S. 19th Avenue
Phoenix, Arizona 85009
11.5 Attorney's Fees. In the event that legal or arbitration proceedings are
brought or commenced to interpret or enforce the terms of this Lease,
the prevailing party shall be entitled to recover from the other party
all costs and expenses of such proceedings, including reasonable
attorneys' fees, whether or not any proceedings are prosecuted to
judgment.
- 17 -
<PAGE> 22
11.6 Scope and Interpretation of this Agreement.
11.6.1 Entire Agreement. This Lease shall be considered to be the
only agreement between the parties hereto pertaining to the
Leased Premises. It is understood that there are no oral
agreements between the parties hereto affecting this Lease,
and this Lease supersedes and cancels any and all previous
negotiations, arrangements, brochures, agreements and
understandings, if any, between the parties hereto or
displayed by Landlord to Tenant with respect to the subject
matter thereof, and none shall be used to interpret or
construe this Lease. It is further agreed by and between the
parties hereto that there shall be no modification or
amendment to this Lease, except as may be executed in writing
between the parties hereto. It is further understood by Tenant
that Landlord may not now, or in the future, own all of the
Leased Premises. Tenant agrees not to cancel its Lease,
reduce, abate, or offset rents, or pursue any other remedies
under this Lease, or at law or equity, with respect to
Landlord, for any violation, breach or default of this Lease
by virtue of any act or omission on, or with respect to,
property not owned by Landlord.
11.6.2 Headings/Captions. The headings or captions of Articles or
Paragraphs in this Lease are for convenience and reference
only and they in no way define, limit, or describe the scope
or intent of this Lease or the provisions of such Articles.
11.6.3 Gender and Interpretation of Terms and Provisions. As used in
this Lease and whenever required by the context thereof, each
number, both singular or plural, shall include all numbers,
and each gender shall include all genders. Landlord and
Tenant, as used in this Lease or in any other instrument
referred to in or made a part of this Lease, shall likewise
include both the singular and the plural, a corporation,
co-partnership, individual or person acting in any fiduciary
capacity as executor, administrator, trustee, or in any other
representative capacity. All covenants herein contained on the
part of Tenant shall be joint and several.
11.6.4 Time of Essence. Time is hereby expressly declared to be of
the essence of this Lease and of each and every covenant,
term, condition and provision hereof.
11.6.5 Impartial Construction. The language in all parts of this
Lease shall be in all cases construed as a whole according to
its fair meaning and not strictly for nor against either
Landlord or Tenant.
- 18 -
<PAGE> 23
11.6.6 Governing Law. The laws of the State in which the Leased
Premises are located shall govern the validity,
interpretation, performance and enforcement of this Lease.
11.6.7 Partial Invalidity. If any term covenant or condition of this
Lease or the application thereof to any person or circumstance
shall, to any extent, be invalid or unenforceable, the
remainder of this Lease, or the application of such term
covenant or condition to persons or circumstances other than
those as to which it is held invalid or unenforceable shall
not be affected thereby, and each term, covenant or condition
of this Lease shall be valid and be enforced to the fullest
extent permitted by law.
11.6.8 Amendment. Oral agreements in conflict with any of the terms
of this Lease shall be without force and effect, all
amendments to be in writing executed by the parties or their
respective successors in interest.
11.7 Execution and Delivery of Lease. The submission of this Lease for
examination does not constitute a reservation or option for the Leased
Premises. This Lease shall be executed in duplicate and shall become
effective as of the date first written only when an executed original
is delivered to each party.
IN WITNESS WHEREOF, Landlord and Tenant hereby execute this Lease, on
their own behalf or through their duly authorized representative.
LANDLORD:
19th AVENUE/BUCHANAN LIMITED PARTNERSHIP,
an Arizona limited partnership
By: /s/ Scott A. Schuff
----------------------------------
, General Partner
-----------------
TENANT:
SCHUFF STEEL COMPANY, an Arizona corporation
By: /s/ Scott A. Schuff
-------------------------------------
Scott A. Schuff, President
- 19 -
<PAGE> 24
STATE OF ARIZONA )
)ss.
COUNTY OF MARICOPA )
On this _____ day of ____________, 1997, ________________
______________________ who is known to me or satisfactorily proven to me to be
the person whose name is subscribed to this Lease, personally appeared before
me, a notary public, and acknowledged, that he/she executed this Lease on in the
capacity so indicated for the principal named.
IN WITNESS WHEREOF I hereunto set my hand and official seal.
----------------------------------
Notary Public
My Commission Expires:
- ----------------------
STATE OF ARIZONA )
)ss.
COUNTY OF MARICOPA )
On this _____ day of ____________, 1997, Scott A. Schuff, who is known
to me or satisfactorily proven to me to be the person whose name is subscribed
to this Lease, personally appeared before me, a notary public, and acknowledged,
that he executed this Lease on in the capacity so indicated for the principal
named.
IN WITNESS WHEREOF I hereunto set my hand and official seal.
----------------------------------
Notary Public
My Commission Expires:
- ----------------------
- 20 -
<PAGE> 25
EXHIBIT "A"
LEASE
420 S. 19TH AVENUE IN PHOENIX, ARIZONA
LEGAL DESCRIPTION
PARCEL NO. 1:
Lots 1 to 11 inclusive, WISE ADDITION, according to Book 5 of Maps, Page 27,
records of Maricopa County, Arizona; and
The West half of 18th Avenue abandoned by Resolution No. 12280 recorded in
Docket 6029, page 376, records of Maricopa County, Arizona, lying South of the
North line of said Lot 11 extended East and North of the South line of said Lot
11 extended East.
PARCEL NO. 2:
A strip of land 23 feet in width, situated in the Northwest quarter of the
Southwest quarter of Section 7, Township 1 North, Range 3 East of the Gila and
Salt River Base and Meridian, Maricopa County, Arizona, said strip of land
being bounded on the North by the Southerly line of the land described in
instrument recorded in Book 89 of Deeds, page 96, records of Maricopa County,
Arizona, bounded on the South by the North line of Lots 1 to 11 inclusive, WISE
ADDITION, according to Book 5 of Maps, Page 27, records of Maricopa County,
Arizona; and bounded on the East line of the Nineteenth Avenue as said East and
West lines are shown on the recorded map. (This is the 23 foot strip of land
adjacent to the North of Lots 1 to 11 inclusive, WISE ADDITION).
PARCEL NO. 3:
Lots 12, 13 and 14, WISE ADDITION, according to Book 5 of Maps, Page 27,
records of Maricopa County, Arizona; and the East half of 18th Avenue abandoned
by Resolution No. 12280 recorded in Docket 6029, page 376, records of Maricopa
County, Arizona, lying South of the North line of said Lot 12 extended West and
North of the South line of said Lot 12 extended West.
<PAGE> 26
EXHIBIT "A" CONTINUED
PARCEL NO. 4:
The West 716 feet of the following described property:
That portion of the Southeast quarter of Section 12, Township 1 North, Range 2
East of the Gila and Salt River Base and Meridian, Maricopa County, Arizona,
described as follows:
BEGINNING at a point 33 feet West of the Northeast corner of the Southeast
quarter of said Section 12; THENCE South parallel to and 33 feet West of the
East line of Section 12, a distance of 439 feet to the TRUE POINT OF BEGINNING;
THENCE West along the South line of the North 439 feet of the Southeast quarter
of said Section 12, a distance of 2277.7 feet, more or less, to a point on the
East line of the West 333 feet of said Southeast quarter of Section 12, as said
East line is established by Deed recorded in Docket 1953, page 405, records of
Maricopa County, Arizona;
THENCE South along the East line of the said West 333 feet a distance of 221.85
feet, more or less, to the North line of Lincoln Street as dedicated on the
plat of SELLWELL, according to Book 29 of Maps, Page 28, records of Maricopa
County, Arizona;
THENCE Easterly along the North line of Lincoln Street to a point 33 feet West
of the East line of said Section 12, being on the West line of 19th Avenue;
THENCE North along the West line of 19th Avenue, to the TRUE POINT OF BEGINNING;
EXCEPT an undivided 1/2 interest in the track and track equipment main spur
presently located on said land as set forth in instrument recorded in Docket
6905, page 181, records of Maricopa County, Arizona.
PARCEL NO. 5:
That part of the Southeast quarter of Section 12, Township 1 North, Range 2
East of the Gila and Salt River Base and Meridian, Maricopa County, Arizona,
described as follows:
BEGINNING at a point 60 feet South and 33 feet West of the Northeast corner of
the Southeast quarter of said Section 12, said point of beginning being on the
South property line of the 60 foot parcel of land conveyed by Deed recorded in
Book 89 of Deeds, page 170, records of Maricopa County, Arizona;
THENCE South 379.0 feet along the West line of 19th Avenue;
THENCE West 1499.34 feet;
THENCE North 379.0 feet to the South line of said land conveyed by Deed
recorded in Book 89 of Deeds, page 170, records of Maricopa County, Arizona;
<PAGE> 27
EXHIBIT "A" CONTINUED
THENCE East along said South line 1499.34 feet to the POINT OF BEGINNING.
PARCEL NO. 6:
The South 379.0 feet of the North 439.0 feet of the Southeast quarter of
Section 12, Township 1 North, Range 2 East of the Gila and Salt River Base and
Meridian, Maricopa County, Arizona;
EXCEPT the East 1532.34 feet; and
EXCEPT the West 333 feet thereof; and
EXCEPT an undivided 1/2 interest in the track and track equipment main spur
presently located on said land as set forth in instrument recorded in Docket
1219, page 584, records of Maricopa County, Arizona.
<PAGE> 1
Exhibit 10.9
LEASE
FOR 619 N. COOPER ROAD IN GILBERT, ARIZONA
BETWEEN
19TH AVENUE/BUCHANAN LIMITED PARTNERSHIP (LANDLORD)
AND B & K STEEL FABRICATIONS, INC. (TENANT)
MARCH 1, 1997
<PAGE> 2
LEASE
THIS LEASE is entered into as of the 1st day of March, 1997,
by and between 19th AVENUE/BUCHANAN LIMITED PARTNERSHIP, an Arizona limited
partnership ("Landlord"), and B & K STEEL FABRICATIONS, INC., an Arizona
corporation ("Tenant").
ARTICLE 1. LEASED PREMISES
1.1 Leased Premises. Landlord leases to Tenant the land and improvements
located at 619 N. Cooper Road, Gilbert, Arizona, as more particularly
described on Exhibit "A" ("Leased Premises").
ARTICLE 2. TERM
2.1 Term of Lease. The term of this Lease shall be twenty (20) years
commencing on March 1, 1997 and ending on February 28, 2017.
2.2 Quiet Enjoyment. Landlord agrees that so long as the rent is being paid
in the manner and at the time prescribed and the covenants and
obligations of Tenant are being all and singularly kept, fulfilled and
performed, Tenant shall lawfully and peaceably have, hold, possess, use
and occupy and enjoy the Leased Premises so long as this Lease remains
in force without hindrance, disturbance or molestation from Landlord,
subject to the specific provisions of this Lease.
2.3 Surrender of Leased Premises. Upon any termination of this Lease,
whether by lapse of time, cancellation pursuant to an election provided
for herein, forfeiture, or otherwise, Tenant shall immediately
surrender possession of the Leased Premises and all buildings and
improvements on the same to Landlord in good and tenantable repair,
reasonable wear and damage from fire or other casualty or peril
excepted, and shall surrender all keys for the Leased Premises to
Landlord at the place then fixed for the payment of rent and shall
inform Landlord of all combinations of locks, safes and vaults, if any,
in the Leased Premises.
At any time during the ten (10) days before the termination date of
this Lease, Tenant, if not in default hereunder at such time, shall
have the right to remove, and at the end of the term, if directed to do
so by Landlord, shall remove from the Leased Premises all furniture,
furnishings, signs, and equipment then installed or in place in, on or
about the Leased Premises; provided, however, Tenant shall, and it
covenants and agrees to, make all repairs to the Leased Premises
required because of such removal. If any of such property shall remain
on the Leased Premises after the end of the term hereof, such property
shall be and become the property of Landlord without any claim therein
of Tenant. Landlord may direct Tenant to remove such property, in which
case Tenant
- 1 -
<PAGE> 3
agrees to do so, and to reimburse Landlord for any expense of removal
in the event Tenant shall fail to remove such property if and when
directed.
Upon termination of this Lease, Tenant shall peaceably surrender the
Leased Premises, including all fixtures and tenant improvements, in a
neat and broom clean condition, and Tenant shall repair any holes or
openings made by Tenant in the walls, roof or floor of the building,
remove any protuberance and perform any maintenance or repairs required
of Tenant by this Lease. If directed to do so by Landlord, Tenant shall
also remove any improvements, additions or alterations made to the
Leased Premises by Tenant even though such improvements by the terms of
this Lease become a part of the Leased Premises.
2.4 Holding Over. If Tenant, upon expiration or termination of this Lease,
either by lapse of time or otherwise, remains in possession of the
Leased Premises with Landlord's written consent but without a new lease
reduced to writing and duly executed, Tenant shall be deemed to be
occupying the Leased Premises as a tenant at will, subject to all the
covenants, conditions and agreements of this Lease. If Tenant remains
in possession without Landlord's written consent, Tenant shall be
deemed to be in wrongful holdover and shall be subject to all the
rights and remedies provided to Landlord under this Lease and the
applicable laws, including any forcible entry and detainer actions or
other eviction processes.
2.5 Abandonment. If Tenant, prior to the expiration or termination of this
Lease by lapse of time or otherwise, relinquishes possession of the
Leased Premises without Landlord's written consent, such relinquishment
shall be deemed to be an abandonment of the Leased Premises and an
event of default under this Lease.
ARTICLE 3. RENTALS AND OTHER TENANT CONTRIBUTIONS
3.1 Minimum Rent. Tenant shall pay to Landlord minimum annual rent in the
amount of Three Hundred Forty Thousand Dollars ($340,000.00) per year,
payable in advance in equal monthly installments of Twenty-eight
Thousand Three Hundred Thirty-three Dollars ($28,333.00) ("Minimum
Rent") on the first day of each calendar month, without prior demand
therefor.
3.2 Adjustment of Minimum Rent. The minimum annual rent is subject to
adjustment every five (5) years during the term of this Lease, with
each adjustment to commence on March 1 of the year of adjustment
("Adjusted Minimum Rent"). The Adjusted Minimum Rent shall be effective
as of March 1, 2002, March 1, 2007, and March 1, 2012 during the term
hereof, with the Adjusted Minimum Rent payable in advance in equal
monthly installments on the first day of each calendar month
thereafter, without prior demand therefor.
- 2 -
<PAGE> 4
3.2.1 Computation of Adjusted Minimum Rent. The Adjusted Minimum
Rent shall be computed based on the increase in the Consumer
Price Index - U.S. City average - All Urban Consumers
("Index") as published by the United States Department of
Labor's Bureau of Labor Statistics over the base period index.
The base period index shall be the index for the calendar
month of December 1996. The base period index shall be
compared with the Index for the same calendar month for each
subsequent December in the year immediately preceding the
effective date of each adjustment (comparison month). If the
Index for any comparison month is higher than the base period
index, then the Minimum Rent for the next succeeding
adjustment period shall be increased by the identical
percentage commencing with the next succeeding March 1. In no
event shall the Minimum Rent be less than that the amount paid
immediately prior to any such adjustment.
3.2.2 Use of Different Index. If the Bureau discontinues the
publication of the Index, or publishes it less frequently, or
alters it in any manner, then Landlord shall adopt a
substitute index or substitute procedure which reasonably
reflects and monitors consumer prices.
3.3 Payment of Rent. Tenant shall, without prior notice or demand and
without any setoff or deduction whatsoever, pay all rentals and other
charges and render all statements herein prescribed at the Landlord's
address or to such other person or corporation, and at such other
place, as shall be designated by Landlord in writing at least ten (10)
days prior to the next ensuing rental payment date.
3.4 Taxes.
3.4.1 Rent Tax. Tenant shall pay as additional rent, any privilege
tax, sales tax, gross proceeds tax, rent tax or like tax (but
not including income tax), now or hereafter levied, assessed
or imposed by any federal, state, county or municipal
governmental authority, or any subdivision thereof, upon any
rent or other payments require to be paid under this Lease.
3.4.2 Personal Property Tax. Tenant shall pay before delinquent, as
additional rent, all personal property taxes and assessments
levied or assessed by any governmental authority against any
personal property or fixtures of Tenant in, on or about the
Leased Premises.
3.4.3 Real Property Tax. Tenant shall pay before delinquent,
exhibiting receipts to Landlord on demand, all real property
taxes and assessments levied or assessed against the Leased
Premises and improvements thereon, all water charges or
assessments levied in connection with any improvements or
irrigation projects, or district or other taxes, assessments
or governmental charges of any kind levied or assessed against
the Leased Premises. Tenant shall have the right, in good
faith
- 3 -
<PAGE> 5
and at its sole and own cost and expense and in its own name or in the
name of Landlord, to protest or contest or seek to have reviewed,
reduced, equalized or abated any tax or assessment by legal
proceedings in such manner as it may deem advisable. No protest,
contest or other action, however, shall be maintained by Tenant after
the time limited for the payment without penalty or interest of the
tax or assessment unless Tenant shall have first paid the amount of
such tax or assessment under protest or shall have procured a stay of
proceedings to enforce the collection thereof, and shall have also
provided for the payment thereof, together with all penalties,
interest, cost and expenses, by the deposit of a bond in form approved
by Landlord if required by law to accomplish such stay.
3.5 Interest. Tenant covenants and agrees that all sums to be paid under
this Lease, if not paid when due, shall bear interest on the unpaid
portion thereof at the rate of eighteen (18%) per annum from the date
when due. If Landlord shall pay any monies, or incur any expenses in
correction of any violation of any covenant of Tenant herein set forth,
the amounts so paid, or, incurred shall, at Landlord's option and on
notice to Tenant, be considered additional rentals payable by Tenant
with the first installment of rental thereafter to become due and
payable, and may be collected or enforced as by law provided with
respect to rentals.
3.6 Utilities Consumed on Leased Premises. In addition to all rentals
herein specified, Tenant shall be responsible for and shall pay for all
utilities used or consumed in or upon the Leased Premises, and all
sewer charges, as and when the charges therefor shall become due and
payable, throughout the term of this Lease. Tenant shall make all
appropriate applications to the local utility companies and pay all
required deposits for meters and service for all utilities.
In the event any utility or utility service (such as water or sewage
disposal) are furnished to Tenant for which a lien could be filed
against the Leased Premises or any portion thereof, Tenant shall, at
Landlord's request, pay the cost thereof to Landlord as and when the
charges therefor become due and payable; otherwise, Tenant shall
deliver original receipted bills to Landlord within thirty (30) days
after the same are due and payable without interest or penalty.
In no event shall Landlord be liable for any interruption or failure in
the supply of any utilities to the Leased Premises.
ARTICLE 4. SECURITY
4.1 Landlord's Lien. Landlord shall have a general lien on the leasehold
estate hereby created and on all property kept or used on the Leased
Premises, whether such property is exempt from execution or not, to
secure payment of any and all monies then due or thereafter becoming
due to Landlord under the terms and conditions of this Lease, and to
- 4 -
<PAGE> 6
secure the prompt performance and fulfillment by Tenant of each and
every one of said terms and conditions. The lien as provided for in
this Paragraph 4.1 attaches as of the date of execution hereof and
shall remain in full force and effect unless expressly waived by
Landlord in writing.
4.2 Security in Addition to Other Remedies. The security given Landlord in
this Article 10 shall not limit, replace or obviate the remedies of
Landlord upon a default by Tenant as described in Article below,
including the right of Landlord to re-enter the Leased Premises,
distrain for rent or pursue its general lien upon Tenant's property in
the Leased Premises described in Paragraph 4.1 above.
ARTICLE 5. CONSTRUCTION, ALTERATIONS, MAINTENANCE AND REPAIRS
5.1 Tenant's Duty to Repair. Landlord shall not be called upon to make any
improvements or repairs of any kind upon the Leased Premises and
appurtenances unless such repairs are necessitated by the misuse or
negligence of Landlord. Tenant shall keep and maintain in good order,
condition and repair (including any such replacement, periodic
painting, and restoration as is required for that purpose) the Leased
Premises and every part thereof and any and all appurtenances hereto
located. Any of the foregoing repairs required to be made by reason of
the negligence of Landlord shall be the responsibility of the Landlord
notwithstanding the provisions above contained in this paragraph.
If Tenant refuses or neglects to commence and to complete repairs or
maintenance required herein promptly and adequately, Landlord may, but
shall not be required to, make and complete said repairs, and Tenant
shall pay the cost thereof to Landlord as additional rent upon demand.
Except as provided in Paragraph 8.1 (Fire and Casualty damage) and 8.2
(Condemnation), Landlord shall not be obligated to repair, replace,
maintain or alter the Leased Premises, and Tenant waives all laws in
contravention thereof. With regard to repairs, Tenant expressly waives
any right pursuant to any law now existing or which may be effective
during the term hereof, to make repairs at Landlord's expense.
5.2 Tenant's Alterations and Improvements to Leased Premises. Tenant shall
not make or cause to be made any alterations, additions or improvements
to the building, or make any changes to the exterior of the building
without first obtaining Landlord's written approval and consent.
Tenant shall present to the Landlord plans and specifications for such
work at the time approval is sought. No addition, alteration, change or
improvement shall be made which will weaken the structural strength,
lessen the value of, or change the architectural appearance of any
building or other construction.
Landlord may condition its approval of any additions or alterations by
Tenant on the requirement that Tenant or its contractor secure and bear
the cost of a labor and materials
- 5 -
<PAGE> 7
payment bond for the amount of the proposed construction reflecting
Landlord as an obligee.
All building materials and fixtures installed by Tenant shall be new or
completely reconditioned. All alterations, improvements, additions and
fixtures made or installed by Tenant as aforesaid shall remain upon the
Leased Premises at the expiration or earlier termination of this Lease
and shall become the property of Landlord, unless Landlord shall, prior
to the expiration or termination of this Lease, have given written
notice to Tenant to remove the same, in which event Tenant shall remove
the same and restore the Leased Premises to the same good order and
condition in which it was at the commencement of this Lease. Should
Tenant fail so to do, Landlord may do so, collecting, at Landlord's
option, the cost and expense thereof from the Tenant as additional
rent.
5.3 Furniture, Trade Fixtures and Equipment. Tenant shall not cut or drill
into, or secure any trade fixtures, apparatus or equipment of any kind
to any part of the Leased Premises without first obtaining the written
consent of Landlord. All furnishings, trade fixtures, equipment, and
machines installed by Tenant in the Leased Premises shall be new or
completely reconditioned and remain the property of Tenant subject to
Landlord's security interest as defined at Paragraph 4.1 above and
shall be removable at the expiration or earlier termination of this
Lease or any renewal or extension thereof, provided Tenant shall not at
such time be in default under any covenant or agreement contained in
this Lease; and provided further, that in the event of such removal,
Tenant shall promptly restore the Leased Premises to their original
order and condition. Any such equipment not removed at or prior to such
termination shall be and become the property of Landlord.
5.4 Initial Installation and Improvements by Tenant. Tenant shall submit to
Landlord complete architectural, electrical and mechanical plans and
specifications covering all work which Tenant proposes to do in the
Leased Premises including the fixturing thereof, whether such work is
to be done by Tenant or others. Such plans and specifications shall be
prepared in such detail as Landlord may require, and Tenant agrees not
to commence work upon any portion of the Leased Premises until Landlord
has approved such plans and specifications in writing. Landlord agrees
to act with reasonable promptness with respect to such plans and
specifications. Any changes in said plans or specifications must be
similarly approved by Landlord.
All of Tenant's work and installations shall be done in a first class,
workmanlike manner and in compliance with all laws, rules, regulations
and orders of all governmental authorities having jurisdiction thereof,
and, in the performance of Tenant's work, Tenant shall engage and
employ only such labor as will not cause any conflict or controversy
with any labor organization representing trades performing work for
Landlord or others in the Leased Premises.
- 6 -
<PAGE> 8
Tenant shall, at Tenant's own expense, promptly remove from the Leased
Premises all trash and debris which may accumulate in connection with
Tenant's work in the Leased Premises.
Landlord shall have no liability or responsibility for loss of, or any
damage to fixtures, equipment or other property of Tenant so installed
or placed on the Leased Premises.
5.5 Mechanic's Lien. If Tenant makes any alterations or improvements in the
Leased Premises, Tenant must pay for them when made. Nothing in the
Lease shall be construed to authorize Tenant or any person dealing with
or under Tenant, to charge the rents of the Leased Premises, or the
property of which the Leased Premises form a part, or the interest of
Landlord in the estate of the Leased Premises, or any person under and
through whom Landlord has acquired its interest in the estate of the
Leased Premises, with a mechanic's lien or encumbrance of any kind, and
under no circumstances shall Tenant be construed to be the agent,
employee or representative of Landlord in the making of such
alterations or improvements to the Leased Premises, but, on the
contrary, the right or power to charge any lien, claim or encumbrance
of any kind against Landlord's rents or the Leased Premises or said
land is denied. So long as the laws of this state shall provide for the
filing of a statutory bond to eliminate the attachment of mechanic's or
materialmen's liens to real estate, Tenant shall require that its
contractor or itself shall take such steps as are provided by law for
the filing of said statutory bond prior to the initiation of any
construction. If a mechanic's or materialmen's lien is threatened by
any contractor or supplier, or in the event of the filing of a notice
of any such lien, Tenant will promptly take steps immediately to have
any such lien removed. If the lien is not removed within ten (10) days
from the date of written notice from Landlord, Landlord shall have the
right at Landlord's option to cause the lien to be discharged by record
of payment, deposit, bond or order of a court of competent jurisdiction
or otherwise, to pay any portion thereof and of the amounts so paid,
including attorney's fees and expenses connected therewith and interest
at the rate of eighteen percent (18%) per annum on any sums paid or
advanced, shall be deemed to be additional rent due from Tenant to
Landlord and shall be paid to Landlord immediately upon rendition to
Tenant of a bill therefor. Tenant will indemnify and save harmless
Landlord from and against all loss, claims, damages, costs or expenses
suffered by Landlord by reason of any repairs, installations or
improvement, made by Tenant.
Except as may be expressly provided in this Lease, nothing in this
Article 5 shall be construed to permit Tenant to place any materials
upon the Leased Premises or cause any labor or construction, or to make
any alterations, additions, replacements or substantial repairs, in or
about the Leased Premises. Landlord shall have the further right any
time, and from time to time, to post and maintain on the Leased
Premises such notices as Landlord deems necessary to protect the Leased
Premises and Landlord, from all liens of any nature whatsoever.
- 7 -
<PAGE> 9
No mechanic's or materialmen's liens or mortgages, deeds of trust, or
other liens of any character whatsoever created or suffered by Tenant
shall in any way, or to any extent, affect the interest or rights of
Landlord in any buildings or other improvements on the Leased Premises,
or attach to or affect Landlord's title to or rights in the Leased
Premises.
ARTICLE 6. USE OF LEASED PREMISES
6.1 Tenant's Use of Leased Premises. Tenant shall use and occupy the Leased
Premises only for conducting its steel fabrication and erection
business and related operations and for no other purpose without
Landlord's prior written consent.
6.2 Conduct of Tenant's Operations. At all times throughout the Lease term,
Tenant shall:
6.2.1 Comply with any and all requirements of any of the constituted
public authorities, and with the terms of any state or federal
statue or local ordinance or regulation applicable to Tenant
or its use, safety, cleanliness or occupation of the Leased
Premises, and save Landlord harmless from penalties, fines,
costs, expenses or damages resulting from failure to do so.
6.2.2 Give to Landlord prompt written notice of any accident, fire
or damage occurring on or to the Leased Premises.
6.2.3 Conduct its business in the Leased Premises in all respects in
a dignified manner and in accordance with high standards of
store operation.
(5) Comply with all reasonable rules and regulations of
Landlord in effect at the time of the execution of
this Lease or at any time or times, and from time to
time, promulgated by Landlord, which Landlord in its
sole discretion shall deem necessary in connection
with the demised Leased Premises, the building of
which the demised Leased Premises are a part or the
Shopping Center, including both the operation of
Tenant's business during certain minimum days and
hours and the installation of such fire
extinguishers, water buckets and other safety
equipment as Landlord may reasonably require.
6.3 Rights Reserved by Landlord.
6.3.1 Easements. Landlord expressly reserves all rights in and with
respect to the land hereby leased not inconsistent with
Tenant's use of the Leased Premises as provided in the Lease,
including (without in anyway limiting the generality of the
foregoing) the rights of Landlord to enter upon the Leased
Premises and give easements to others for the purpose of
installing, using, maintaining, renewing and replacing such
overhead or underground water, gas, sewer and other pipe
lines,
- 8 -
<PAGE> 10
and telephone, electric, and power lines, cables and conduits
as Landlord may deem desirable in connection with the
development or use of any other property in the neighborhood
of the land hereby leased, whether owned by Landlord or not,
all of which pipelines, lines and conduits shall be buried to
a sufficient depth or raised to a sufficient height so as not
to interfere with the use or stability of the building or any
other improvements on the land hereby leased.
6.3.2 Inspection. Landlord reserves the right to, at all reasonable
times, by itself or its duly authorized agents, employees and
contractors to go upon and inspect the demised Leased Premises
and every part thereof, to enforce or carry out the provisions
of this Lease, to perform any defaulted obligation of Tenant
or for any other proper purposes.
6.3.3 Presentation for Sale or Lease. Landlord hereby reserves the
right during usual business hours to enter the Leased Premises
and to exhibit the same for purposes of sale, lease or
mortgage, and during the last six (6) months of the term of
this Lease, to exhibit the Leased Premises to any prospective
Tenant, and to display a "For Sale" sign at any time, and also
after notice from either party of intention to terminate this
Lease, or at any time within six (6) months prior to the
expiration of the Lease, a "For Rent" sign, or both "For Sale"
and "For Rent" signs, and all said signs shall be placed upon
such part of the Leased Premises as Landlord shall require,
except on doors leading into the Leased Premises. Prospective
purchasers or tenants authorized by Landlord may inspect the
Leased Premises at reasonable hours at any time.
ARTICLE 7. LIABILITY INSURANCE AND INDEMNIFICATION
7.1 Insurance. During the term of this Lease, Tenant, at Tenant's expense,
shall keep the building of which the Leased Premises are a part insured
against loss or damage by fire and the hazards covered by extended
coverage insurance in an amount equal to not less than the full
insurable value of such building. The policy or policies therefor shall
name Landlord as insured and shall be payable to Landlord. Tenant shall
not commit or permit any acts in or about the Leased Premises which may
in any way impair or invalidate such policy or policies of insurance
for the building.
Tenant shall be solely responsible for obtaining any fire or extended
coverage insurance for personal property and improvements of Tenant and
for all goods, commodities and materials stored by Tenant in or about
the Leased Premises. Tenant agrees that if any property owned by it and
located in the Leased Premises shall be damaged or destroyed, Landlord
shall not have any liability to Tenant, nor to any insurer of Tenant,
for or in respect of such damage or destruction, and Tenant shall
require all policies of risk insurance carried by it on its property in
the Leased Premises to contain or be endorsed
- 9 -
<PAGE> 11
with a provision in and by which the insurer designated therein shall
waive its right of subrogation against Landlord.
7.2 Operations of Tenant. All operations conducted by Tenant shall be at
Tenant's sole risk. In addition, Tenant shall procure and keep in force
at its own expense public liability insurance and comprehensive general
liability insurance, including contractual liability insurance
sufficient to cover all phases and aspects of the operation and conduct
of its business, with minimum limits of $1,000,000 on account of bodily
injuries to or death of one person, and $3,000,000 on account of bodily
injuries to or death of more than one person as the result of any one
accident or disaster, and $1,000,000 on account of damage to property.
7.3 Policy Requirements. All insurance policies required of Tenant in this
Lease shall name as insured both Landlord and Tenant (and upon request,
any other party named by Landlord) and shall contain an express waiver
of any right of subrogation against Landlord and other named insureds
designated by Landlord. All policies shall be in such companies as are
authorized to write such coverage in Arizona, shall be acceptable to
Landlord and/or its lender (which shall be named as an additional
insured if requested in writing). Tenant will further deposit the
policy or policies of such insurance or certificates thereof, with
Landlord with evidence of payment of premium at all times commencing
with the date of this Lease. Each policy shall provide against
cancellation without thirty (30) days prior written notice to the named
insureds.
7.4 Failure to Procure Insurance. In the event Tenant shall fail to procure
insurance required under this Article 7 and fails to maintain such
insurance in force continuously during the term of this Lease, Landlord
shall be entitled to procure such insurance, and Tenant shall
immediately reimburse Landlord for such premium expense.
7.5 Indemnification and Waiver of Claims. Tenant indemnifies Landlord and
waives claims as follows:
7.5.1 Indemnification. Tenant will indemnify Landlord and save it
harmless from and against any and all claims, actions,
damages, liability and expense in connection with loss of
life, personal injury and/or damage to property occurring in
or about, or arising from or out of, the Leased Premises and
adjacent sidewalks and loading platforms or areas or
occasioned wholly or in part by any act or omission of Tenant,
its agents, contractors, customers or employees. Additionally,
Tenant agrees to indemnify and hold harmless Landlord with
respect to any claim, cause of action or proceeding, in law or
in equity, civil, criminal or administrative, asserted or
brought by any person, firm or corporation. Tenant agrees to
defend at its own cost and expense any lawsuit or proceeding
referred to above and to reimburse Landlord for any reasonable
expenses or damages, including reasonable
- 10 -
<PAGE> 12
attorney's fees, incurred in any such proceeding, lawsuit,
administrative action, or investigation commenced in whole or
in part by reason of said exclusive clause.
7.5.2 Waiver of Claims. Landlord and Landlord's agents, employees
and contractors shall not be liable for, and Tenant hereby
releases all claims for, damage to person and property
sustained by Tenant or any person claiming through Tenant
resulting from any theft, fire, accident, occurrence or
condition in or upon the Leased Premises or building of which
they shall be a part.
In the event the Leased Premises or its contents are
damaged or destroyed by fire or other insured
casualty, the rights, if any, of either party hereto
against the other with respect to such damage or
destruction are waived; and all policies of fire
and/or extended coverage or other insurance covering
the Leased Premises or its contents shall contain a
clause or endorsement providing in substance that the
insurance shall not be prejudiced if the insureds
have waived the right of recovery from any person or
persons prior to the date and time of loss or damage,
if any.
7.5.3 Notice of Claims or Suits. Tenant agrees to promptly notify
Landlord of any claim, action, proceeding or suit instituted
or threatened against Landlord. In the event Landlord is made
a party to any action for damages which Tenant has herewith
indemnified Landlord against, then Tenant shall pay all costs
and shall provide effective counsel in such litigation or
shall pay, at Landlord's option, the attorney fees and costs
incurred in connection with said litigation by Landlord.
ARTICLE 8. LOSS, DESTRUCTION OR TAKING OF LEASED PREMISES
8.1 Fire or Other Casualty. Tenant shall give to Landlord prompt written
notice of any accident, fire or damage occurring on or to the Leased
Premises and shall fully cooperate with Landlord in filing all
necessary proofs of claim with insurance companies. The proceeds of
such insurance applicable to the Leased Premises shall be paid to
Landlord and Landlord shall rebuild, repair or restore the Leased
Premises to the condition at the time immediately preceding the loss or
damage; provided, however, that Landlord may elect to retain such
insurance proceeds and shall not be required to rebuild, repair or
restore the Leased Premises, and this Lease shall be terminated, if
such damage or destruction occurs within the last year of the term of
this Lease, or if more than one-third (1/3) of the Leased Premises is
so damaged or destroyed. In the event of total destruction of the
Leased Premises, the rent shall abate during the period of rebuilding,
repair or restoration by Landlord, or, in the event of partial
destruction of the Leased Premises, the rent shall abate pro rata
during the period of rebuilding, repair or restoration by Lessor.
8.2 Condemnation. If title to all or any portion of the Leased Premises be
taken by a public or quasi-public authority under any statute or by
right of eminent domain of any
- 11 -
<PAGE> 13
governmental body, whether such loss or damage results from
condemnation of part or all of the Leased Premises, Tenant shall not be
entitled to participate or receive any part of the damages or award
except where said award shall provide for moving or other reimbursable
expenses for Tenant under applicable statute, in which event the latter
sum shall be received by Tenant, and except that portion of any award
allocated to the taking of Tenant's trade fixtures, equipment and
personal property, or to a loss of business by Tenant. None of the
awards or payments to Landlord shall be subject to any diminution or
apportionment on behalf of Tenant or otherwise.
If any power of eminent domain is exercised during the term of this
Lease, such exercise shall not void or impair this Lease unless the
amount of the Leased Premises so taken is such as to substantially and
materially impair the usefulness of the Leased Premises for the purpose
of which they are hereby demised, in which event either party may
cancel this Lease by notice to the other within sixty (60) days after
possession is taken, and the rental herein provided shall abate as of
the date possession is taken by the condemning authority.
If a portion of the Leased Premises shall be taken as herein provided
for public improvements or otherwise under the exercise of the right of
eminent domain and the Leased Premises shall continue to be reasonably
suitable for the use which is hereby authorized, then the rental herein
provided shall be reduced from the date of such taking in direct
proportion to the reduction in usefulness of the Leased Premises.
ARTICLE 9. ASSIGNMENT, SUBLETTING, MORTGAGING AND SUBORDINATION
9.1 Assignment and Subletting by Tenant. Tenant shall not convey, assign,
mortgage, pledge or encumber this Lease, in whole or in part, nor
sublet the whole or any part of the Leased Premises, or permit the use
of the whole or any part of the Leased Premises by any licensee or
concessionaire, without first obtaining the written consent of
Landlord. This prohibition shall be construed to include a prohibition
against any assignment or subletting by operation of law, assignment
for the benefit of creditors, voluntary or involuntary bankruptcy or
reorganization, or otherwise, without the prior written consent of
Landlord. Any assignment or sublease without Landlord's written consent
is in violation of this Lease and a default hereunder and, at the
option of Landlord, shall be voidable.
Landlord's consent or refusal to consent to any such subletting may be
based upon, but shall not be limited to, factors pertaining to (a) the
acceptability of the proposed subtenant to the Leased Premises, and (b)
the financial statement, credit and ability of any proposed subtenant
to meet the obligations, terms and conditions of this Lease.
The acceptance of any rental payments by Landlord from any alleged
assignee shall not constitute approval of the assignment of this Lease
by the Landlord, and the consent by Landlord to one assignment or
subletting of the Leased Premises shall not constitute a waiver of
Landlord's rights hereunder.
- 12 -
<PAGE> 14
Tenant shall pay to Landlord the sum of $500.00 as a Transfer Fee for
such written consent. In the event of any such assignment, subletting,
licensing or granting of a concession, made with the written consent of
the Landlord as aforesaid, Tenant will nevertheless remain liable for
the performance of all the terms, conditions, and covenants of this
Lease. Any permitted assignment or subletting shall be by agreement in
form and content acceptable to Landlord, and shall specify and require
that each subtenant or assignee acquiring this Lease by acceptance of
any sublease, assignment or transfer shall assume, be bound by, and be
obligated to perform the terms and conditions of its sublessor and
assignor under this Lease. A condition of such assignment or subletting
is the agreement of the parties that Landlord shall receive the full
and complete rental payment of subtenant or assignee, though such
payments may be in excess of the original rental between Landlord and
Tenant. It is the intent and understanding of the parties to this
Agreement that Tenant shall not receive any monetary benefit in excess
of the actual rental obligation of Tenant as agreed between the
original Tenant and Landlord through a sublease or assignment to a
third party. In the event of default of Tenant, Landlord, at Landlord's
sole option, may succeed to the position of Tenant as to any subtenant
or licensee of Tenant.
9.2 Assignment and Mortgaging by Landlord. The term "Landlord" as used in
this Lease means the owner of the Leased Premises. So long as all sums
held on Tenant's behalf in trust or escrow by Landlord are paid over to
any purchaser of said Leased Premises, Landlord shall be and is hereby
relieved of all covenants and obligations of Landlord hereunder after
the date of sale of the Leased Premises, and it shall be construed
without further agreement between the parties that the purchaser has
assumed and agreed to carry out any and all covenants and obligations
of Landlord hereunder from the date of such sale.
9.3 Subordination. This Lease shall, upon request by Landlord, be subject
and subordinate to any and all leases, mortgages or deeds of trust
hereinafter placed upon the Leased Premises, or any part thereof, and
to all future modifications, consolidations, replacements, extensions
and renewals of, and all amendments and supplements to said leases,
mortgages or deeds of trust. Notwithstanding such subordination as
aforesaid, this Lease, except as otherwise hereinafter provided, shall
not terminate or be divested by foreclosure or other default
proceedings under said leases, mortgages, deeds of trust, or
obligations secured thereby, and Tenant shall attorn to and recognize
the landlord, mortgagee, trustee, beneficiary or the purchaser at the
foreclosure sale in the event of such foreclosure or other default
proceeding, as Tenant's Landlord hereunder for the balance of the term
of this Lease, subject to all of the terms and provisions hereof.
9.4 Offset Statement. Tenant agrees to execute, acknowledge and deliver any
and all documents required to effectuate the provisions of this Article
9, and within ten (10) days after request therefor by Landlord or in
the event that upon any sale, assignment, lease or hypothecation of the
Leased Premises and/or the land thereunder by Landlord, an offset
- 13 -
<PAGE> 15
statement shall be required by Tenant, Tenant agrees to deliver in
recordable form a certificate (if such be the case) that this Lease is
in full force and effect and there are no defenses or offsets thereto,
or stating those claimed by Tenant, and the dates to which rental or
other sums have been paid in advance, it being intended that any such
statement delivered pursuant to this Paragraph 9.4 may be relied upon
by any prospective purchaser, mortgagee, assignee or beneficiary.
Tenant shall also deliver to any prospective institutional lender of
Landlord, upon Landlord's reasonable request therefor, from time to
time, Tenant's latest financial statements and such specific
subordination agreement on Lender's form as may be required by Lender.
Tenant acknowledges and agrees that the promises to issue statements
pursuant to this Paragraph 9.4 are a material consideration inducing
Landlord to enter into this Lease, and that the breach of such promise
shall be deemed a material breach of this Lease, and shall constitute a
default hereunder.
ARTICLE 10. DEFAULT AND REMEDIES FOR DEFAULT
10.1 Events of Default. The occurrence of any of the following constitute an
event of default hereunder:
10.1.1 Tenant Bankruptcy/Insolvency. The filing of a petition by or
against Tenant for adjudication as a bankrupt or insolvent, or
for its reorganization or for the appointment of a receiver or
trustee of Tenant's property; an assignment by Tenant for the
benefit of creditors; or the taking of possession of the
property of Tenant by any governmental officer or agency
pursuant to statutory authority for the dissolution or
liquidation of Tenant.
10.1.2 Delinquency in Payment. Failure of Tenant to pay when due any
installment of rent hereunder or any other sum herein required
to be paid by Tenant, and the continuance of such nonpayment
for five (5) days after written notice from Landlord.
10.1.3 Abandonment. Abandonment of the Leased Premises by Tenant.
10.1.4 Failure to Perform Covenants. Tenant's failure to perform any
other covenant or condition of this Lease within twenty (20)
days after written notice and demand, unless the failure is of
such a character as to require more than twenty (20) days to
cure, in which event Tenant's failure to proceed diligently to
cure such failure shall constitute an event of default.
10.2 Remedies of Landlord for Default by Tenant. Upon the occurrence of an
event of default, Landlord shall have the right, then or at any time
thereafter, and while such event of default shall continue, and in
addition to and not in lieu of any other remedies, relief or rights
available to Landlord at law or equity or contained in this Lease, to
do any of the following:
- 14 -
<PAGE> 16
10.2.1 Landlord Cure. Landlord by itself or its authorized agents may
cure the default and charge Tenant for the costs of such cure,
which charge shall be due and payable as rental under this
Lease immediately upon written notice to Tenant.
10.2.2 Distrain. Landlord may distrain for rent due.
10.2.3 Exercise General Lien. Landlord may exercise its general lien
on the leasehold estate and all property in the Leased
Premises.
10.2.4 Right of Re-Entry. Landlord shall have the right to re-enter
the Leased Premises to assume and take possession of the whole
or any part thereof, and to remove all persons or personal
property by direct or summary action, or in a different type
of suit or proceeding, by force or otherwise, without being
deemed guilty of trespass or other actionable wrong by reason
thereof, and without being liable for the damages therefor or
in connection therewith, and, after demand made therefor,
Tenant or anyone in possession claiming under Tenant shall be
deemed guilty of unlawful detainer and subject to such summary
or other action as may be provided by law. Additionally,
Landlord may relet the Leased Premises as the agent for and in
the name of the Tenant, at any rental readily acceptable,
applying the proceeds first to the payment of such rent as the
same comes due, and toward the fulfillment of the other
covenants and agreements of Tenant herein contained, and the
balance, if any, shall be paid to Tenantl; and the Tenant
hereby agrees that if Landlord shall recover or take
possession of said Leased Premises as aforesaid and be unable
to relet and rent the same so as to realize a sum equal to the
rent hereby reserved, Tenant shall pay to Landlord any loss or
difference of rent for the remainder of the term.
10.2.5 Termination of Lease. Landlord, irrespective of the date on
which its right of re-entry shall have accrued or be
exercised, shall have the right, whether for rent or
possession or otherwise, to forfeit this Lease and terminate
the state of tenancy hereby created. This right to terminate
is exercisable by a written notice to Tenant, which written
notice may be part of a notice of default previously delivered
to Tenant, and, as such, may be conditioned upon Tenant's
failure to cure the default and the event of default. The
termination may be made effective as of the event of default
or thereafter, and, if not otherwise specified, will be deemed
to be effective immediately. Upon such termination and
forfeiture, Landlord shall be entitled to and may take
immediate possession of the Leased Premises, any other notice
or demand being hereby waived. Such termination does not,
however, release Tenant from liability for rentals then
overdue or remaining under the Lease but shall operate to
accelerate the entire balance of the term rental, which shall
become immediately due and payable by Tenant, along with all
overdue rentals and charges.
- 15 -
<PAGE> 17
10.3 Non-Waiver of Remedies. It is expressly agreed that neither the taking
of possession of the Leased Premises nor the institution of any
proceedings by way of unlawful detainer, ejectment, quiet title, or
otherwise, to secure possession of the Leased Premises, nor the
re-entry by Landlord with or without the institution of such
proceedings, nor the rerenting or subletting of the Leased Premises,
shall operate to terminate this Lease in whole or in part, nor of
itself constitute an exercise of Landlord's option to do so, but only
by the giving of the written notice specifically specifying termination
shall such termination be effected.
In the event Tenant breaches this Lease, or any covenant, term or
condition hereunder, and abandons the Leased Premises, this Lease shall
continue in force and effect for so long as the Landlord does not
terminate Tenant's right to possession, and Landlord may enforce all
rights and remedies of Landlord including, without limitation, the
right to recover rental as it becomes due hereunder. Acts of
maintenance or preservation or efforts to relet the Leased Premises, or
the appointment of a receiver upon the initiation of the Landlord to
protect the Landlord's interest under this Lease shall not constitute a
termination of Tenant's right to possession.
Waiver by Landlord of any default, breach or failure of Tenant under
this Lease shall not be construed as a wavier of any subsequent or
different default, breach or failure. In case of a breach by Tenant of
any of the covenants or undertakings of Tenant, Landlord nevertheless
may accept from Tenant any payments hereunder without in any way
waiving Landlord's right to exercise the remedies hereinbefore provided
for by reason of any other breach or lapse which was in existence at
the time such payment or payments were accepted by Landlord.
It is expressly understood that the enumeration herein of express
rights, options and privileges shall not limit Landlord nor deprive
Landlord of any other remedy or action or cause of action by reason of
any default of Tenant, including the right to recover from Tenant any
deficiency upon re-renting.
The specific remedies to which Landlord may resort under the terms of
this Lease are cumulative and are not intended to be exclusive of any
other remedies or means of redress to which they may be lawfully
entitled in case of any breach or threatened breach by either of them
or of any provisions of this Lease.
ARTICLE 11. GENERAL PROVISIONS
11.1 No Brokers. Neither Landlord nor Tenant has employed a broker who has
or may have a legitimate claim to a commission arising from Tenant's
acceptance of the Lease.
- 16 -
<PAGE> 18
11.2 No Partnership. Notwithstanding any other express or implied provision
of this Lease, it is understood that Landlord does not in any way or
propose a partnership or joint venture with Tenant in the conduct of
Tenant's business.
11.3 Successors and Assigns. All rights, obligations and liabilities herein
given to, or imposed upon, the respective parties hereto shall extend
to and bind the several and respective heirs, executors,
administrators, successors, sublessees, and assigns of said parties,
subject to the provisions of Article 9; provided, however, that the
liability of Landlord hereunder and any successor in interest and title
to the Leased Premises shall be limited to its interest in the Leased
Premises, and no other assets of the Landlord other than its interest
in the Leased Premises shall be affected by reason of any liability
which said Landlord or successor in interest may have under this Lease.
11.4 Notices. Wherever in this Lease it shall be required or permitted that
notice or demand be given or served by either party to this Lease to or
on the other, such notice or demand shall not be deemed to have been
duly given or served unless made in writing and either personally
delivered or forwarded by certified mail, return receipt requested,
postage prepaid, to the address for each party provided below. Such
addresses may be changed from time to time by either party by serving
notices as above provided. While Tenant is in possession of the Leased
Premises, notices to the Tenant may also be delivered or forwarded by
certified mail to the Leased Premises.
Address for Tenant: B & K Steel Fabrications, Inc.
819 N. Cooper Road
Gilbert, Arizona 85233
Address for Landlord: 19th Avenue/Buchanan Limited Partnership
420 S. 19th Avenue
Phoenix, Arizona 85009
11.5 Attorney's Fees. In the event that legal or arbitration proceedings are
brought or commenced to interpret or enforce the terms of this Lease,
the prevailing party shall be entitled to recover from the other party
all costs and expenses of such proceedings, including reasonable
attorneys' fees, whether or not any proceedings are prosecuted to
judgment.
11.6 Scope and Interpretation of this Agreement.
11.6.1 Entire Agreement. This Lease shall be considered to be the
only agreement between the parties hereto pertaining to the
Leased Premises. It is understood that there are no oral
agreements between the parties hereto affecting this Lease,
and this Lease supersedes and cancels any and all previous
negotiations, arrangements, brochures, agreements and
understandings, if any, between the parties hereto or
- 17 -
<PAGE> 19
displayed by Landlord to Tenant with respect to the subject
matter thereof, and none shall be used to interpret or
construe this Lease. It is further agreed by and between the
parties hereto that there shall be no modification or
amendment to this Lease, except as may be executed in writing
between the parties hereto. It is further understood by Tenant
that Landlord may not now, or in the future, own all of the
Leased Premises. Tenant agrees not to cancel its Lease,
reduce, abate, or offset rents, or pursue any other remedies
under this Lease, or at law or equity, with respect to
Landlord, for any violation, breach or default of this Lease
by virtue of any act or omission on, or with respect to,
property not owned by Landlord.
11.6.2 Headings/Captions. The headings or captions of Articles or
Paragraphs in this Lease are for convenience and reference
only and they in no way define, limit, or describe the scope
or intent of this Lease or the provisions of such Articles.
11.6.3 Gender and Interpretation of Terms and Provisions. As used in
this Lease and whenever required by the context thereof, each
number, both singular or plural, shall include all numbers,
and each gender shall include all genders. Landlord and
Tenant, as used in this Lease or in any other instrument
referred to in or made a part of this Lease, shall likewise
include both the singular and the plural, a corporation,
co-partnership, individual or person acting in any fiduciary
capacity as executor, administrator, trustee, or in any other
representative capacity. All covenants herein contained on the
part of Tenant shall be joint and several.
11.6.4 Time of Essence. Time is hereby expressly declared to be of
the essence of this Lease and of each and every covenant,
term, condition and provision hereof.
11.6.5 Impartial Construction. The language in all parts of this
Lease shall be in all cases construed as a whole according to
its fair meaning and not strictly for nor against either
Landlord or Tenant.
11.6.6 Governing Law. The laws of the State in which the Leased
Premises are located shall govern the validity,
interpretation, performance and enforcement of this Lease.
11.6.7 Partial Invalidity. If any term covenant or condition of this
Lease or the application thereof to any person or circumstance
shall, to any extent, be invalid or unenforceable, the
remainder of this Lease, or the application of such term
covenant or condition to persons or circumstances other than
those as to which it is held invalid or unenforceable shall
not be affected thereby, and each term, covenant or condition
of this Lease shall be valid and be enforced to the fullest
extent permitted by law.
- 18 -
<PAGE> 20
11.6.8 Amendment. Oral agreements in conflict with any of the terms
of this Lease shall be without force and effect, all
amendments to be in writing executed by the parties or their
respective successors in interest.
11.7 Execution and Delivery of Lease. The submission of this Lease for
examination does not constitute a reservation or option for the Leased
Premises. This Lease shall be executed in duplicate and shall become
effective as of the date first written only when an executed original
is delivered to each party.
IN WITNESS WHEREOF, Landlord and Tenant hereby execute this Lease, on
their own behalf or through their duly authorized representative.
LANDLORD:
19th AVENUE/BUCHANAN LIMITED PARTNERSHIP,
an Arizona limited partnership
By: ____________________________________
_________________, General Partner
TENANT:
B & K STEEL FABRICATIONS, INC., an Arizona
corporation
By: ____________________________________
Scott A. Schuff, President
STATE OF ARIZONA )
)ss.
COUNTY OF MARICOPA )
On this _____ day of ____________, 1997, ________________
______________________ who is known to me or satisfactorily proven to me to be
the person whose name is subscribed to this Lease, personally appeared before
me, a notary public, and acknowledged, that he/she executed this Lease on in the
capacity so indicated for the principal named.
- 19 -
<PAGE> 21
IN WITNESS WHEREOF I hereunto set my hand and official seal.
----------------------------------
Notary Public
My Commission Expires:
- ----------------------
STATE OF ARIZONA )
)ss.
COUNTY OF MARICOPA )
On this _____ day of ____________, 1997, Scott A. Schuff, who is known
to me or satisfactorily proven to me to be the person whose name is subscribed
to this Lease, personally appeared before me, a notary public, and acknowledged,
that he executed this Lease on in the capacity so indicated for the principal
named.
IN WITNESS WHEREOF I hereunto set my hand and official seal.
----------------------------------
Notary Public
My Commission Expires:
- ----------------------
- 20 -
<PAGE> 22
EXHIBIT "A"
LEASE
619 N. COOPER ROAD IN GILBERT, ARIZONA
LEGAL DESCRIPTION
<PAGE> 23
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
<S> <C>
ARTICLE 1. LEASED PREMISES .................................................... - 1 -
1.1 Leased Premises.............................................. - 1 -
ARTICLE 2. TERM ............................................................... - 1 -
2.1 Term of Lease................................................ - 1 -
2.2 Quiet Enjoyment.............................................. - 1 -
2.3 Surrender of Leased Premises................................. - 1 -
2.4 Holding Over................................................. - 2 -
2.5 Abandonment.................................................. - 2 -
ARTICLE 3. RENTALS AND OTHER TENANT CONTRIBUTIONS ............................. - 2 -
3.1 Minimum Rent................................................. - 2 -
3.2 Adjustment of Minimum Rent................................... - 2 -
3.2.1 Computation of Adjusted Minimum Rent................ - 3 -
3.2.2 Use of Different Index.............................. - 3 -
3.3 Payment of Rent.............................................. - 3 -
3.4 Taxes........................................................ - 3 -
3.4.1 Rent Tax............................................ - 3 -
3.4.2 Personal Property Tax............................... - 3 -
3.4.3 Real Property Tax................................... - 3 -
3.5 Interest..................................................... - 4 -
3.6 Utilities Consumed on Leased Premises........................ - 4 -
ARTICLE 4. SECURITY ........................................................... - 4 -
4.1 Landlord's Lien.............................................. - 4 -
4.2 Security in Addition to Other Remedies....................... - 5 -
ARTICLE 5. CONSTRUCTION, ALTERATIONS, MAINTENANCE AND
REPAIRS...................................................... - 5 -
5.1 Tenant's Duty to Repair...................................... - 5 -
5.2 Tenant's Alterations and Improvements to Leased Premises..... - 5 -
5.3 Furniture, Trade Fixtures and Equipment...................... - 6 -
5.4 Initial Installation and Improvements by Tenant.............. - 6 -
5.5 Mechanic's Lien.............................................. - 7 -
ARTICLE 6. USE OF LEASED PREMISES ............................................. - 8 -
6.1 Tenant's Use of Leased Premises.............................. - 8 -
6.2 Conduct of Tenant's Operations............................... - 8 -
</TABLE>
(i)
<PAGE> 24
<TABLE>
<S> <C>
6.3 Rights Reserved by Landlord.................................. - 8 -
6.3.1 Easements........................................... - 8 -
6.3.2 Inspection.......................................... - 9 -
6.3.3 Presentation for Sale or Lease...................... - 9 -
ARTICLE 7. LIABILITY INSURANCE AND INDEMNIFICATION - 9 -
7.1 Insurance.................................................... - 9 -
7.2 Operations of Tenant......................................... - 10 -
7.3 Policy Requirements.......................................... - 10 -
7.4 Failure to Procure Insurance................................. - 10 -
7.5.1 Indemnification..................................... - 10 -
7.5.2 Waiver of Claims.................................... - 11 -
7.5.3 Notice of Claims or Suits........................... - 11 -
ARTICLE 8. LOSS, DESTRUCTION OR TAKING OF LEASED PREMISES ..................... - 11 -
8.1 Fire or Other Casualty....................................... - 11 -
8.2 Condemnation................................................. - 11 -
ARTICLE 9. ASSIGNMENT, SUBLETTING, MORTGAGING AND
SUBORDINATION................................................ - 12 -
9.1 Assignment and Subletting by Tenant.......................... - 12 -
9.2 Assignment and Mortgaging by Landlord........................ - 13 -
9.3 Subordination................................................ - 13 -
9.4 Offset Statement............................................. - 13 -
ARTICLE 10. DEFAULT AND REMEDIES FOR DEFAULT .................................. - 14 -
10.1 Events of Default............................................ - 14 -
10.1.1 Tenant Bankruptcy/Insolvency........................ - 14 -
10.1.2 Delinquency in Payment.............................. - 14 -
10.1.3 Abandonment......................................... - 14 -
10.1.4 Failure to Perform Covenants........................ - 14 -
10.2 Remedies of Landlord for Default by Tenant................... - 14 -
10.2.1 Landlord Cure....................................... - 15 -
10.2.2 Distrain............................................ - 15 -
10.2.4 Right of Re-Entry................................... - 15 -
10.2.5 Termination of Lease................................ - 15 -
10.3 Non-Waiver of Remedies....................................... - 16 -
ARTICLE 11. GENERAL PROVISIONS ................................................ - 16 -
11.1 No Brokers................................................... - 16 -
11.2 No Partnership............................................... - 17 -
11.3 Successors and Assigns....................................... - 17 -
11.4 Notices...................................................... - 17 -
</TABLE>
(ii)
<PAGE> 25
<TABLE>
<S> <C>
11.5 Attorney's Fees.............................................. - 17 -
11.6 Scope and Interpretation of this Agreement................... - 17 -
11.6.1 Entire Agreement.................................... - 17 -
11.6.2 Headings/Captions................................... - 18 -
11.6.3 Gender and Interpretation of Terms and Provisions... - 18 -
11.6.4 Time of Essence..................................... - 18 -
11.6.5 Impartial Construction.............................. - 18 -
11.6.6 Governing Law....................................... - 18 -
11.6.7 Partial Invalidity.................................. - 18 -
11.6.8 Amendment........................................... - 19 -
11.7 Execution and Delivery of Lease.............................. - 19 -
</TABLE>
(iii)
<PAGE> 1
Exhibit 10.10
LEASE
FOR 1841 W. BUCHANAN STREET IN PHOENIX, ARIZONA
BETWEEN
19TH AVENUE/BUCHANAN LIMITED PARTNERSHIP (LANDLORD)
AND SCHUFF STEEL COMPANY (TENANT)
MAY 1, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
<S> <C> <C>
ARTICLE 1. LEASED PREMISES.............................................. - 1 -
1.1 Leased Premises................................................... - 1 -
ARTICLE 2. TERM......................................................... - 1 -
2.1 Term of Lease..................................................... - 1 -
2.2 Quiet Enjoyment................................................... - 1 -
2.3 Surrender of Leased Premises...................................... - 1 -
2.4 Holding Over...................................................... - 2 -
2.5 Abandonment....................................................... - 2 -
ARTICLE 3. RENTALS AND OTHER TENANT CONTRIBUTIONS....................... - 2 -
3.1 Minimum Rent...................................................... - 2 -
3.2 Adjustment of Minimum Rent........................................ - 2 -
3.2.1 Computation of Adjusted Minimum Rent..................... - 3 -
3.2.2 Use of Different Index................................... - 3 -
3.3 Payment of Rent................................................... - 3 -
3.4 Taxes............................................................. - 3 -
3.4.1 Rent Tax................................................. - 3 -
3.4.2 Personal Property Tax.................................... - 3 -
3.4.3 Real Property Tax........................................ - 3 -
3.5 Interest.......................................................... - 4 -
3.6 Utilities Consumed on Leased Premises............................. - 4 -
ARTICLE 4. SECURITY..................................................... - 4 -
4.1 Landlord's Lien................................................... - 4 -
4.2 Security in Addition to Other Remedies............................ - 5 -
ARTICLE 5. CONSTRUCTION, ALTERATIONS, MAINTENANCE AND
REPAIRS...................................................... - 5 -
5.1 Tenant's Duty to Repair........................................... - 5 -
5.2 Tenant's Alterations and Improvements to Leased Premises.......... - 5 -
5.3 Furniture, Trade Fixtures and Equipment........................... - 6 -
5.4 Initial Installation and Improvements by Tenant................... - 6 -
5.5 Mechanic's Lien................................................... - 7 -
ARTICLE 6. USE OF LEASED PREMISES....................................... - 8 -
6.1 Tenant's Use of Leased Premises................................... - 8 -
6.2 Conduct of Tenant's Operations.................................... - 8 -
6.3 Rights Reserved by Landlord....................................... - 8 -
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
6.3.1 Easements................................................ - 8 -
6.3.2 Inspection............................................... - 9 -
6.3.3 Presentation for Sale or Lease........................... - 9 -
ARTICLE 7. LIABILITY INSURANCE AND INDEMNIFICATION...................... - 9 -
7.1 Insurance......................................................... - 9 -
7.2 Operations of Tenant.............................................. - 10 -
7.3 Policy Requirements............................................... - 10 -
7.4 Failure to Procure Insurance...................................... - 10 -
7.5.1 Indemnification.......................................... - 10 -
7.5.2 Waiver of Claims......................................... - 11 -
7.5.3 Notice of Claims or Suits................................ - 11 -
ARTICLE 8. LOSS, DESTRUCTION OR TAKING OF LEASED
PREMISES..................................................... - 11 -
8.1 Fire or Other Casualty............................................ - 11 -
8.2 Condemnation...................................................... - 11 -
ARTICLE 9. ASSIGNMENT, SUBLETTING, MORTGAGING AND
SUBORDINATION................................................ - 12 -
9.1 Assignment and Subletting by Tenant............................... - 12 -
9.2 Assignment and Mortgaging by Landlord............................. - 12 -
9.3 Subordination..................................................... - 12 -
9.4 Offset Statement.................................................. - 13 -
ARTICLE 10. DEFAULT AND REMEDIES FOR DEFAULT............................. - 13 -
10.1 Events of Default................................................. - 13 -
10.1.1 Tenant Bankruptcy/Insolvency............................. - 13 -
10.1.2 Delinquency in Payment................................... - 13 -
10.1.3 Abandonment.............................................. - 13 -
10.1.4 Failure to Perform Covenants............................. - 14 -
10.2 Remedies of Landlord for Default by Tenant........................ - 14 -
10.2.1 Landlord Cure............................................ - 14 -
10.2.2 Distrain................................................. - 14 -
10.2.3 Exercise General Lien.................................... - 14 -
10.2.4 Right of Re-Entry........................................ - 14 -
10.2.5 Termination of Lease..................................... - 14 -
10.3 Non-Waiver of Remedies............................................ - 15 -
ARTICLE 11. GENERAL PROVISIONS........................................... - 16 -
11.1 No Brokers........................................................ - 16 -
11.2 No Partnership.................................................... - 16 -
11.3 Successors and Assigns............................................ - 16 -
11.4 Notices........................................................... - 16 -
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C> <C>
11.5 Attorney's Fees................................................... - 17 -
11.6 Scope and Interpretation of this Agreement........................ - 17 -
11.6.1 Entire Agreement......................................... - 17 -
11.6.2 Headings/Captions........................................ - 17 -
11.6.3 Gender and Interpretation of Terms and Provisions........ - 17 -
11.6.4 Time of Essence.......................................... - 17 -
11.6.5 Impartial Construction................................... - 18 -
11.6.6 Governing Law............................................ - 18 -
11.6.7 Partial Invalidity....................................... - 18 -
11.6.8 Amendment................................................ - 18 -
11.7 Execution and Delivery of Lease................................... - 18 -
</TABLE>
(iii)
<PAGE> 5
LEASE
THIS LEASE is entered into as of the 1st day of May, 1997, by
and between 19th AVENUE/BUCHANAN LIMITED PARTNERSHIP, an Arizona limited
partnership ("Landlord"), and SCHUFF STEEL COMPANY, an Arizona corporation
("Tenant").
ARTICLE 1. LEASED PREMISES
1.1 Leased Premises. Landlord leases to Tenant the land and improvements
located at 1841 W. Buchanan Street, Phoenix, Arizona, as more
particularly described on Exhibit "A" ("Leased Premises").
ARTICLE 2. TERM
2.1 Term of Lease. The term of this Lease shall be twenty (20) years
commencing on May 1, 1997 and ending on April 30, 2017.
2.2 Quiet Enjoyment. Landlord agrees that so long as the rent is being paid
in the manner and at the time prescribed and the covenants and
obligations of Tenant are being all and singularly kept, fulfilled and
performed, Tenant shall lawfully and peaceably have, hold, possess, use
and occupy and enjoy the Leased Premises so long as this Lease remains
in force without hindrance, disturbance or molestation from Landlord,
subject to the specific provisions of this Lease.
2.3 Surrender of Leased Premises. Upon any termination of this Lease,
whether by lapse of time, cancellation pursuant to an election provided
for herein, forfeiture, or otherwise, Tenant shall immediately
surrender possession of the Leased Premises and all buildings and
improvements on the same to Landlord in good and tenantable repair,
reasonable wear and damage from fire or other casualty or peril
excepted, and shall surrender all keys for the Leased Premises to
Landlord at the place then fixed for the payment of rent and shall
inform Landlord of all combinations of locks, safes and vaults, if any,
in the Leased Premises.
At any time during the ten (10) days before the termination date of
this Lease, Tenant, if not in default hereunder at such time, shall
have the right to remove, and at the end of the term, if directed to do
so by Landlord, shall remove from the Leased Premises all furniture,
furnishings, signs, and equipment then installed or in place in, on or
about the Leased Premises; provided, however, Tenant shall, and it
covenants and agrees to, make all repairs to the Leased Premises
required because of such removal. If any of such property shall remain
on the Leased Premises after the end of the term hereof, such property
shall be and become the property of Landlord without any claim therein
of Tenant. Landlord may direct Tenant to remove such property, in which
case Tenant
- 1 -
<PAGE> 6
agrees to do so, and to reimburse Landlord for any expense of removal
in the event Tenant shall fail to remove such property if and when
directed.
Upon termination of this Lease, Tenant shall peaceably surrender the
Leased Premises, including all fixtures and tenant improvements, in a
neat and broom clean condition, and Tenant shall repair any holes or
openings made by Tenant in the walls, roof or floor of the building,
remove any protuberance and perform any maintenance or repairs required
of Tenant by this Lease. If directed to do so by Landlord, Tenant shall
also remove any improvements, additions or alterations made to the
Leased Premises by Tenant even though such improvements by the terms of
this Lease become a part of the Leased Premises.
2.4 Holding Over. If Tenant, upon expiration or termination of this Lease,
either by lapse of time or otherwise, remains in possession of the
Leased Premises with Landlord's written consent but without a new lease
reduced to writing and duly executed, Tenant shall be deemed to be
occupying the Leased Premises as a tenant at will, subject to all the
covenants, conditions and agreements of this Lease. If Tenant remains
in possession without Landlord's written consent, Tenant shall be
deemed to be in wrongful holdover and shall be subject to all the
rights and remedies provided to Landlord under this Lease and the
applicable laws, including any forcible entry and detainer actions or
other eviction processes.
2.5 Abandonment. If Tenant, prior to the expiration or termination of this
Lease by lapse of time or otherwise, relinquishes possession of the
Leased Premises without Landlord's written consent, such relinquishment
shall be deemed to be an abandonment of the Leased Premises and an
event of default under this Lease.
ARTICLE 3. RENTALS AND OTHER TENANT CONTRIBUTIONS
3.1 Minimum Rent. Tenant shall pay to Landlord minimum annual rent in the
amount of One Hundred Thirty-five Thousand Dollars ($135,000.00) per
year, payable in advance in equal monthly installments of Eleven
Thousand Two Hundred Fifty Dollars ($11,250.00) ("Minimum Rent") on the
first day of each calendar month, without prior demand therefor.
3.2 Adjustment of Minimum Rent. The minimum annual rent is subject to
adjustment every five (5) years during the term of this Lease, with
each adjustment to commence on May 1 of the year of adjustment
("Adjusted Minimum Rent"). The Adjusted Minimum Rent shall be effective
as of May 1, 2002, May 1, 2007, and May 1, 2012 during the term hereof,
with the Adjusted Minimum Rent payable in advance in equal monthly
installments on the first day of each calendar month thereafter,
without prior demand therefor.
- 2 -
<PAGE> 7
3.2.1 Computation of Adjusted Minimum Rent. The Adjusted Minimum
Rent shall be computed based on the increase in the Consumer
Price Index - U.S. City average - All Urban Consumers
("Index") as published by the United States Department of
Labor's Bureau of Labor Statistics over the base period index.
The base period index shall be the index for the calendar
month of March 1996. The base period index shall be compared
with the Index for the same calendar month for each subsequent
March in the year immediately preceding the effective date of
each adjustment (comparison month). If the Index for any
comparison month is higher than the base period index, then
the Minimum Rent for the next succeeding adjustment period
shall be increased by the identical percentage commencing with
the next succeeding May 1. In no event shall the Minimum Rent
be less than that the amount paid immediately prior to any
such adjustment.
3.2.2 Use of Different Index. If the Bureau discontinues the
publication of the Index, or publishes it less frequently, or
alters it in any manner, then Landlord shall adopt a
substitute index or substitute procedure which reasonably
reflects and monitors consumer prices.
3.3 Payment of Rent. Tenant shall, without prior notice or demand and
without any setoff or deduction whatsoever, pay all rentals and other
charges and render all statements herein prescribed at the Landlord's
address or to such other person or corporation, and at such other
place, as shall be designated by Landlord in writing at least ten (10)
days prior to the next ensuing rental payment date.
3.4 Taxes.
3.4.1 Rent Tax. Tenant shall pay as additional rent, any privilege
tax, sales tax, gross proceeds tax, rent tax or like tax (but
not including income tax), now or hereafter levied, assessed
or imposed by any federal, state, county or municipal
governmental authority, or any subdivision thereof, upon any
rent or other payments require to be paid under this Lease.
3.4.2 Personal Property Tax. Tenant shall pay before delinquent, as
additional rent, all personal property taxes and assessments
levied or assessed by any governmental authority against any
personal property or fixtures of Tenant in, on or about the
Leased Premises.
3.4.3 Real Property Tax. Tenant shall pay before delinquent,
exhibiting receipts to Landlord on demand, all real property
taxes and assessments levied or assessed against the Leased
Premises and improvements thereon, all water charges or
assessments levied in connection with any improvements or
irrigation projects, or district or other taxes, assessments
or governmental charges of any kind levied or assessed against
the Leased Premises. Tenant shall have the right, in good
faith and at its sole and own cost and expense and in its own
name or in the name
- 3 -
<PAGE> 8
of Landlord, to protest or contest or seek to have reviewed,
reduced, equalized or abated any tax or assessment by legal
proceedings in such manner as it may deem advisable. No
protest, contest or other action, however, shall be maintained
by Tenant after the time limited for the payment without
penalty or interest of the tax or assessment unless Tenant
shall have first paid the amount of such tax or assessment
under protest or shall have procured a stay of proceedings to
enforce the collection thereof, and shall have also provided
for the payment thereof, together with all penalties,
interest, cost and expenses, by the deposit of a bond in form
approved by Landlord if required by law to accomplish such
stay.
3.5 Interest. Tenant covenants and agrees that all sums to be paid under
this Lease, if not paid when due, shall bear interest on the unpaid
portion thereof at the rate of eighteen (18%) per annum from the date
when due. If Landlord shall pay any monies, or incur any expenses in
correction of any violation of any covenant of Tenant herein set forth,
the amounts so paid, or, incurred shall, at Landlord's option and on
notice to Tenant, be considered additional rentals payable by Tenant
with the first installment of rental thereafter to become due and
payable, and may be collected or enforced as by law provided with
respect to rentals.
3.6 Utilities Consumed on Leased Premises. In addition to all rentals
herein specified, Tenant shall be responsible for and shall pay for all
utilities used or consumed in or upon the Leased Premises, and all
sewer charges, as and when the charges therefor shall become due and
payable, throughout the term of this Lease. Tenant shall make all
appropriate applications to the local utility companies and pay all
required deposits for meters and service for all utilities.
In the event any utility or utility service (such as water or sewage
disposal) are furnished to Tenant for which a lien could be filed
against the Leased Premises or any portion thereof, Tenant shall, at
Landlord's request, pay the cost thereof to Landlord as and when the
charges therefor become due and payable; otherwise, Tenant shall
deliver original receipted bills to Landlord within thirty (30) days
after the same are due and payable without interest or penalty.
In no event shall Landlord be liable for any interruption or failure in
the supply of any utilities to the Leased Premises.
ARTICLE 4. SECURITY
4.1 Landlord's Lien. Landlord shall have a general lien on the leasehold
estate hereby created and on all property kept or used on the Leased
Premises, whether such property is exempt from execution or not, to
secure payment of any and all monies then due or thereafter becoming
due to Landlord under the terms and conditions of this Lease, and to
secure the prompt performance and fulfillment by Tenant of each and
every one of said terms and conditions. The lien as provided for in
this Paragraph 4.1 attaches as of
- 4 -
<PAGE> 9
the date of execution hereof and shall remain in full force and effect
unless expressly waived by Landlord in writing.
4.2 Security in Addition to Other Remedies. The security given Landlord in
this Article 4 shall not limit, replace or obviate the remedies of
Landlord upon a default by Tenant as described in Article 10 below,
including the right of Landlord to re-enter the Leased Premises,
distrain for rent or pursue its general lien upon Tenant's property in
the Leased Premises described in Paragraph 4.1 above.
ARTICLE 5. CONSTRUCTION, ALTERATIONS, MAINTENANCE AND REPAIRS
5.1 Tenant's Duty to Repair. Landlord shall not be called upon to make any
improvements or repairs of any kind upon the Leased Premises and
appurtenances unless such repairs are necessitated by the misuse or
negligence of Landlord. Tenant shall keep and maintain in good order,
condition and repair (including any such replacement, periodic
painting, and restoration as is required for that purpose) the Leased
Premises and every part thereof and any and all appurtenances hereto
located. Any of the foregoing repairs required to be made by reason of
the negligence of Landlord shall be the responsibility of the Landlord
notwithstanding the provisions above contained in this paragraph.
If Tenant refuses or neglects to commence and to complete repairs or
maintenance required herein promptly and adequately, Landlord may, but
shall not be required to, make and complete said repairs, and Tenant
shall pay the cost thereof to Landlord as additional rent upon demand.
Except as provided in Paragraph 8.1 (Fire and Casualty damage) and 8.2
(Condemnation), Landlord shall not be obligated to repair, replace,
maintain or alter the Leased Premises, and Tenant waives all laws in
contravention thereof. With regard to repairs, Tenant expressly waives
any right pursuant to any law now existing or which may be effective
during the term hereof, to make repairs at Landlord's expense.
5.2 Tenant's Alterations and Improvements to Leased Premises. Tenant shall
not make or cause to be made any alterations, additions or improvements
to the building, or make any changes to the exterior of the building
without first obtaining Landlord's written approval and consent.
Tenant shall present to the Landlord plans and specifications for such
work at the time approval is sought. No addition, alteration, change or
improvement shall be made which will weaken the structural strength,
lessen the value of, or change the architectural appearance of any
building or other construction.
Landlord may condition its approval of any additions or alterations by
Tenant on the requirement that Tenant or its contractor secure and bear
the cost of a labor and materials
- 5 -
<PAGE> 10
payment bond for the amount of the proposed construction reflecting
Landlord as an obligee.
All building materials and fixtures installed by Tenant shall be new or
completely reconditioned. All alterations, improvements, additions and
fixtures made or installed by Tenant as aforesaid shall remain upon the
Leased Premises at the expiration or earlier termination of this Lease
and shall become the property of Landlord, unless Landlord shall, prior
to the expiration or termination of this Lease, have given written
notice to Tenant to remove the same, in which event Tenant shall remove
the same and restore the Leased Premises to the same good order and
condition in which it was at the commencement of this Lease. Should
Tenant fail so to do, Landlord may do so, collecting, at Landlord's
option, the cost and expense thereof from the Tenant as additional
rent.
5.3 Furniture, Trade Fixtures and Equipment. Tenant shall not cut or drill
into, or secure any trade fixtures, apparatus or equipment of any kind
to any part of the Leased Premises without first obtaining the written
consent of Landlord. All furnishings, trade fixtures, equipment, and
machines installed by Tenant in the Leased Premises shall be new or
completely reconditioned and remain the property of Tenant subject to
Landlord's security interest as defined at Paragraph 4.1 above and
shall be removable at the expiration or earlier termination of this
Lease or any renewal or extension thereof, provided Tenant shall not
at such time be in default under any covenant or agreement contained
in this Lease; and provided further, that in the event of such
removal, Tenant shall promptly restore the Leased Premises to their
original order and condition. Any such equipment not removed at or
prior to such termination shall be and become the property of
Landlord.
5.4 Initial Installation and Improvements by Tenant. Tenant shall submit to
Landlord complete architectural, electrical and mechanical plans and
specifications covering all work which Tenant proposes to do in the
Leased Premises including the fixturing thereof, whether such work is
to be done by Tenant or others. Such plans and specifications shall be
prepared in such detail as Landlord may require, and Tenant agrees not
to commence work upon any portion of the Leased Premises until Landlord
has approved such plans and specifications in writing. Landlord agrees
to act with reasonable promptness with respect to such plans and
specifications. Any changes in said plans or specifications must be
similarly approved by Landlord.
All of Tenant's work and installations shall be done in a first class,
workmanlike manner and in compliance with all laws, rules, regulations
and orders of all governmental authorities having jurisdiction thereof,
and, in the performance of Tenant's work, Tenant shall engage and
employ only such labor as will not cause any conflict or controversy
with any labor organization representing trades performing work for
Landlord or others in the Leased Premises.
- 6 -
<PAGE> 11
Tenant shall, at Tenant's own expense, promptly remove from the Leased
Premises all trash and debris which may accumulate in connection with
Tenant's work in the Leased Premises.
Landlord shall have no liability or responsibility for loss of, or any
damage to fixtures, equipment or other property of Tenant so installed
or placed on the Leased Premises.
5.5 Mechanic's Lien. If Tenant makes any alterations or improvements in the
Leased Premises, Tenant must pay for them when made. Nothing in the
Lease shall be construed to authorize Tenant or any person dealing with
or under Tenant, to charge the rents of the Leased Premises, or the
property of which the Leased Premises form a part, or the interest of
Landlord in the estate of the Leased Premises, or any person under and
through whom Landlord has acquired its interest in the estate of the
Leased Premises, with a mechanic's lien or encumbrance of any kind, and
under no circumstances shall Tenant be construed to be the agent,
employee or representative of Landlord in the making of such
alterations or improvements to the Leased Premises, but, on the
contrary, the right or power to charge any lien, claim or encumbrance
of any kind against Landlord's rents or the Leased Premises or said
land is denied. So long as the laws of this state shall provide for the
filing of a statutory bond to eliminate the attachment of mechanic's or
materialmen's liens to real estate, Tenant shall require that its
contractor or itself shall take such steps as are provided by law for
the filing of said statutory bond prior to the initiation of any
construction. If a mechanic's or materialmen's lien is threatened by
any contractor or supplier, or in the event of the filing of a notice
of any such lien, Tenant will promptly take steps immediately to have
any such lien removed. If the lien is not removed within ten (10) days
from the date of written notice from Landlord, Landlord shall have the
right at Landlord's option to cause the lien to be discharged by record
of payment, deposit, bond or order of a court of competent jurisdiction
or otherwise, to pay any portion thereof and of the amounts so paid,
including attorney's fees and expenses connected therewith and interest
at the rate of eighteen percent (18%) per annum on any sums paid or
advanced, shall be deemed to be additional rent due from Tenant to
Landlord and shall be paid to Landlord immediately upon rendition to
Tenant of a bill therefor. Tenant will indemnify and save harmless
Landlord from and against all loss, claims, damages, costs or expenses
suffered by Landlord by reason of any repairs, installations or
improvement, made by Tenant.
Except as may be expressly provided in this Lease, nothing in this
Article 5 shall be construed to permit Tenant to place any materials
upon the Leased Premises or cause any labor or construction, or to make
any alterations, additions, replacements or substantial repairs, in or
about the Leased Premises. Landlord shall have the further right any
time, and from time to time, to post and maintain on the Leased
Premises such notices as Landlord deems necessary to protect the Leased
Premises and Landlord, from all liens of any nature whatsoever.
- 7 -
<PAGE> 12
No mechanic's or materialmen's liens or mortgages, deeds of trust, or
other liens of any character whatsoever created or suffered by Tenant
shall in any way, or to any extent, affect the interest or rights of
Landlord in any buildings or other improvements on the Leased Premises,
or attach to or affect Landlord's title to or rights in the Leased
Premises.
ARTICLE 6. USE OF LEASED PREMISES
6.1 Tenant's Use of Leased Premises. Tenant shall use and occupy the Leased
Premises only for conducting its steel fabrication and erection
business and related operations and for no other purpose without
Landlord's prior written consent.
6.2 Conduct of Tenant's Operations. At all times throughout the Lease term,
Tenant shall:
6.2.1 Comply with any and all requirements of any of the constituted
public authorities, and with the terms of any state or federal
statue or local ordinance or regulation applicable to Tenant
or its use, safety, cleanliness or occupation of the Leased
Premises, and save Landlord harmless from penalties, fines,
costs, expenses or damages resulting from failure to do so.
6.2.2 Give to Landlord prompt written notice of any accident, fire
or damage occurring on or to the Leased Premises.
6.2.3 Conduct its business in the Leased Premises in all respects in
a dignified manner and in accordance with high standards of
store operation.
(5) Comply with all reasonable rules and regulations of
Landlord in effect at the time of the execution of
this Lease or at any time or times, and from time to
time, promulgated by Landlord, which Landlord in its
sole discretion shall deem necessary in connection
with the demised Leased Premises, the building of
which the demised Leased Premises are a part or the
Shopping Center, including both the operation of
Tenant's business during certain minimum days and
hours and the installation of such fire
extinguishers, water buckets and other safety
equipment as Landlord may reasonably require.
6.3 Rights Reserved by Landlord.
6.3.1 Easements. Landlord expressly reserves all rights in and with
respect to the land hereby leased not inconsistent with
Tenant's use of the Leased Premises as provided in the Lease,
including (without in anyway limiting the generality of the
foregoing) the rights of Landlord to enter upon the Leased
Premises and give easements to others for the purpose of
installing, using, maintaining, renewing and replacing such
overhead or underground water, gas, sewer and other pipe
- 8 -
<PAGE> 13
lines, and telephone, electric, and power lines, cables and
conduits as Landlord may deem desirable in connection with the
development or use of any other property in the neighborhood
of the land hereby leased, whether owned by Landlord or not,
all of which pipelines, lines and conduits shall be buried to
a sufficient depth or raised to a sufficient height so as not
to interfere with the use or stability of the building or any
other improvements on the land hereby leased.
6.3.2 Inspection. Landlord reserves the right to, at all reasonable
times, by itself or its duly authorized agents, employees and
contractors to go upon and inspect the demised Leased Premises
and every part thereof, to enforce or carry out the provisions
of this Lease, to perform any defaulted obligation of Tenant
or for any other proper purposes.
6.3.3 Presentation for Sale or Lease. Landlord hereby reserves the
right during usual business hours to enter the Leased Premises
and to exhibit the same for purposes of sale, lease or
mortgage, and during the last six (6) months of the term of
this Lease, to exhibit the Leased Premises to any prospective
Tenant, and to display a "For Sale" sign at any time, and also
after notice from either party of intention to terminate this
Lease, or at any time within six (6) months prior to the
expiration of the Lease, a "For Rent" sign, or both "For Sale"
and "For Rent" signs, and all said signs shall be placed upon
such part of the Leased Premises as Landlord shall require,
except on doors leading into the Leased Premises. Prospective
purchasers or tenants authorized by Landlord may inspect the
Leased Premises at reasonable hours at any time.
ARTICLE 7. LIABILITY INSURANCE AND INDEMNIFICATION
7.1 Insurance. During the term of this Lease, Tenant, at Tenant's expense,
shall keep the building of which the Leased Premises are a part insured
against loss or damage by fire and the hazards covered by extended
coverage insurance in an amount equal to not less than the full
insurable value of such building. The policy or policies therefor shall
name Landlord as insured and shall be payable to Landlord. Tenant shall
not commit or permit any acts in or about the Leased Premises which may
in any way impair or invalidate such policy or policies of insurance
for the building.
Tenant shall be solely responsible for obtaining any fire or extended
coverage insurance for personal property and improvements of Tenant and
for all goods, commodities and materials stored by Tenant in or about
the Leased Premises. Tenant agrees that if any property owned by it and
located in the Leased Premises shall be damaged or destroyed, Landlord
shall not have any liability to Tenant, nor to any insurer of Tenant,
for or in respect of such damage or destruction, and Tenant shall
require all policies of risk insurance carried by it on its property in
the Leased Premises to contain or be endorsed with a provision in and
by which the insurer designated therein shall waive its right of
subrogation against Landlord.
- 9 -
<PAGE> 14
7.2 Operations of Tenant. All operations conducted by Tenant shall be at
Tenant's sole risk. In addition, Tenant shall procure and keep in force
at its own expense public liability insurance and comprehensive general
liability insurance, including contractual liability insurance
sufficient to cover all phases and aspects of the operation and conduct
of its business, with minimum limits of $1,000,000 on account of bodily
injuries to or death of one person, and $3,000,000 on account of bodily
injuries to or death of more than one person as the result of any one
accident or disaster, and $1,000,000 on account of damage to property.
7.3 Policy Requirements. All insurance policies required of Tenant in this
Lease shall name as insured both Landlord and Tenant (and upon request,
any other party named by Landlord) and shall contain an express waiver
of any right of subrogation against Landlord and other named insureds
designated by Landlord. All policies shall be in such companies as are
authorized to write such coverage in Arizona, shall be acceptable to
Landlord and/or its lender (which shall be named as an additional
insured if requested in writing). Tenant will further deposit the
policy or policies of such insurance or certificates thereof, with
Landlord with evidence of payment of premium at all times commencing
with the date of this Lease. Each policy shall provide against
cancellation without thirty (30) days prior written notice to the named
insureds.
7.4 Failure to Procure Insurance. In the event Tenant shall fail to procure
insurance required under this Article 7 and fails to maintain such
insurance in force continuously during the term of this Lease, Landlord
shall be entitled to procure such insurance, and Tenant shall
immediately reimburse Landlord for such premium expense.
7.5 Indemnification and Waiver of Claims. Tenant indemnifies Landlord and
waives claims as follows:
7.5.1 Indemnification. Tenant will indemnify Landlord and save it
harmless from and against any and all claims, actions,
damages, liability and expense in connection with loss of
life, personal injury and/or damage to property occurring in
or about, or arising from or out of, the Leased Premises and
adjacent sidewalks and loading platforms or areas or
occasioned wholly or in part by any act or omission of Tenant,
its agents, contractors, customers or employees. Additionally,
Tenant agrees to indemnify and hold harmless Landlord with
respect to any claim, cause of action or proceeding, in law or
in equity, civil, criminal or administrative, asserted or
brought by any person, firm or corporation. Tenant agrees to
defend at its own cost and expense any lawsuit or proceeding
referred to above and to reimburse Landlord for any reasonable
expenses or damages, including reasonable attorney's fees,
incurred in any such proceeding, lawsuit, administrative
action, or investigation commenced in whole or in part by
reason of said exclusive clause.
- 10 -
<PAGE> 15
7.5.2 Waiver of Claims. Landlord and Landlord's agents, employees
and contractors shall not be liable for, and Tenant hereby
releases all claims for, damage to person and property
sustained by Tenant or any person claiming through Tenant
resulting from any theft, fire, accident, occurrence or
condition in or upon the Leased Premises or building of which
they shall be a part.
In the event the Leased Premises or its contents are
damaged or destroyed by fire or other insured
casualty, the rights, if any, of either party hereto
against the other with respect to such damage or
destruction are waived; and all policies of fire
and/or extended coverage or other insurance covering
the Leased Premises or its contents shall contain a
clause or endorsement providing in substance that the
insurance shall not be prejudiced if the insureds
have waived the right of recovery from any person or
persons prior to the date and time of loss or damage,
if any.
7.5.3 Notice of Claims or Suits. Tenant agrees to promptly notify
Landlord of any claim, action, proceeding or suit instituted
or threatened against Landlord. In the event Landlord is made
a party to any action for damages which Tenant has herewith
indemnified Landlord against, then Tenant shall pay all costs
and shall provide effective counsel in such litigation or
shall pay, at Landlord's option, the attorney fees and costs
incurred in connection with said litigation by Landlord.
ARTICLE 8. LOSS, DESTRUCTION OR TAKING OF LEASED PREMISES
8.1 Fire or Other Casualty. Tenant shall give to Landlord prompt written
notice of any accident, fire or damage occurring on or to the Leased
Premises and shall fully cooperate with Landlord in filing all
necessary proofs of claim with insurance companies. The proceeds of
such insurance applicable to the Leased Premises shall be paid to
Landlord and Landlord shall rebuild, repair or restore the Leased
Premises to the condition at the time immediately preceding the loss or
damage; provided, however, that Landlord may elect to retain such
insurance proceeds and shall not be required to rebuild, repair or
restore the Leased Premises, and this Lease shall be terminated, if
such damage or destruction occurs within the last year of the term of
this Lease, or if more than one-third (1/3) of the Leased Premises is
so damaged or destroyed. In the event of total destruction of the
Leased Premises, the rent shall abate during the period of rebuilding,
repair or restoration by Landlord, or, in the event of partial
destruction of the Leased Premises, the rent shall abate pro rata
during the period of rebuilding, repair or restoration by Lessor.
8.2 Condemnation. If title to all or any portion of the Leased Premises be
taken by a public or quasi-public authority under any statute or by
right of eminent domain of any governmental body, whether such loss or
damage results from condemnation of part or all of the Leased Premises,
Tenant shall not be entitled to participate or receive any part of the
damages or award except where said award shall provide for moving or
other
- 11 -
<PAGE> 16
reimbursable expenses for Tenant under applicable statute, in which
event the latter sum shall be received by Tenant, and except that
portion of any award allocated to the taking of Tenant's trade
fixtures, equipment and personal property, or to a loss of business by
Tenant. None of the awards or payments to Landlord shall be subject to
any diminution or apportionment on behalf of Tenant or otherwise.
If any power of eminent domain is exercised during the term of this
Lease, such exercise shall not void or impair this Lease unless the
amount of the Leased Premises so taken is such as to substantially and
materially impair the usefulness of the Leased Premises for the purpose
of which they are hereby demised, in which event either party may
cancel this Lease by notice to the other within sixty (60) days after
possession is taken, and the rental herein provided shall abate as of
the date possession is taken by the condemning authority.
If a portion of the Leased Premises shall be taken as herein provided
for public improvements or otherwise under the exercise of the right of
eminent domain and the Leased Premises shall continue to be reasonably
suitable for the use which is hereby authorized, then the rental herein
provided shall be reduced from the date of such taking in direct
proportion to the reduction in usefulness of the Leased Premises.
ARTICLE 9. ASSIGNMENT, SUBLETTING, MORTGAGING AND SUBORDINATION
9.1 Assignment and Subletting by Tenant. Tenant may convey, assign,
mortgage, pledge or encumber this Lease, in whole or in part, and
sublet the whole or any part of the Leased Premises, or permit the use
of the whole or any part of the Leased Premises by any licensee or
concessionaire, without first obtaining the written consent of
Landlord.
9.2 Assignment and Mortgaging by Landlord. The term "Landlord" as used in
this Lease means the owner of the Leased Premises. So long as all sums
held on Tenant's behalf in trust or escrow by Landlord are paid over to
any purchaser of said Leased Premises, Landlord shall be and is hereby
relieved of all covenants and obligations of Landlord hereunder after
the date of sale of the Leased Premises, and it shall be construed
without further agreement between the parties that the purchaser has
assumed and agreed to carry out any and all covenants and obligations
of Landlord hereunder from the date of such sale.
9.3 Subordination. This Lease shall, upon request by Landlord, be subject
and subordinate to any and all leases, mortgages or deeds of trust
hereinafter placed upon the Leased Premises, or any part thereof, and
to all future modifications, consolidations, replacements, extensions
and renewals of, and all amendments and supplements to said leases,
mortgages or deeds of trust. Notwithstanding such subordination as
aforesaid, this Lease, except as otherwise hereinafter provided, shall
not terminate or be divested by foreclosure or other default
proceedings under said leases, mortgages, deeds of trust,
- 12 -
<PAGE> 17
or obligations secured thereby, and Tenant shall attorn to and
recognize the landlord, mortgagee, trustee, beneficiary or the
purchaser at the foreclosure sale in the event of such foreclosure or
other default proceeding, as Tenant's Landlord hereunder for the
balance of the term of this Lease, subject to all of the terms and
provisions hereof.
9.4 Offset Statement. Tenant agrees to execute, acknowledge and deliver any
and all documents required to effectuate the provisions of this Article
9, and within ten (10) days after request therefor by Landlord or in
the event that upon any sale, assignment, lease or hypothecation of the
Leased Premises and/or the land thereunder by Landlord, an offset
statement shall be required by Tenant, Tenant agrees to deliver in
recordable form a certificate (if such be the case) that this Lease is
in full force and effect and there are no defenses or offsets thereto,
or stating those claimed by Tenant, and the dates to which rental or
other sums have been paid in advance, it being intended that any such
statement delivered pursuant to this Paragraph 9.4 may be relied upon
by any prospective purchaser, mortgagee, assignee or beneficiary.
Tenant shall also deliver to any prospective institutional lender of
Landlord, upon Landlord's reasonable request therefor, from time to
time, Tenant's latest financial statements and such specific
subordination agreement on Lender's form as may be required by Lender.
Tenant acknowledges and agrees that the promises to issue statements
pursuant to this Paragraph 9.4 are a material consideration inducing
Landlord to enter into this Lease, and that the breach of such promise
shall be deemed a material breach of this Lease, and shall constitute a
default hereunder.
ARTICLE 10. DEFAULT AND REMEDIES FOR DEFAULT
10.1 Events of Default. The occurrence of any of the following constitute an
event of default hereunder:
10.1.1 Tenant Bankruptcy/Insolvency. The filing of a petition by or
against Tenant for adjudication as a bankrupt or insolvent, or
for its reorganization or for the appointment of a receiver or
trustee of Tenant's property; an assignment by Tenant for the
benefit of creditors; or the taking of possession of the
property of Tenant by any governmental officer or agency
pursuant to statutory authority for the dissolution or
liquidation of Tenant.
10.1.2 Delinquency in Payment. Failure of Tenant to pay when due any
installment of rent hereunder or any other sum herein required
to be paid by Tenant, and the continuance of such nonpayment
for five (5) days after written notice from Landlord.
10.1.3 Abandonment. Abandonment of the Leased Premises by Tenant.
- 13 -
<PAGE> 18
10.1.4 Failure to Perform Covenants. Tenant's failure to perform any
other covenant or condition of this Lease within twenty (20)
days after written notice and demand, unless the failure is of
such a character as to require more than twenty (20) days to
cure, in which event Tenant's failure to proceed diligently to
cure such failure shall constitute an event of default.
10.2 Remedies of Landlord for Default by Tenant. Upon the occurrence of an
event of default, Landlord shall have the right, then or at any time
thereafter, and while such event of default shall continue, and in
addition to and not in lieu of any other remedies, relief or rights
available to Landlord at law or equity or contained in this Lease, to
do any of the following:
10.2.1 Landlord Cure. Landlord by itself or its authorized agents may
cure the default and charge Tenant for the costs of such cure,
which charge shall be due and payable as rental under this
Lease immediately upon written notice to Tenant.
10.2.2 Distrain. Landlord may distrain for rent due.
10.2.3 Exercise General Lien. Landlord may exercise its general lien
on the leasehold estate and all property in the Leased
Premises.
10.2.4 Right of Re-Entry. Landlord shall have the right to re-enter
the Leased Premises to assume and take possession of the whole
or any part thereof, and to remove all persons or personal
property by direct or summary action, or in a different type
of suit or proceeding, by force or otherwise, without being
deemed guilty of trespass or other actionable wrong by reason
thereof, and without being liable for the damages therefor or
in connection therewith, and, after demand made therefor,
Tenant or anyone in possession claiming under Tenant shall be
deemed guilty of unlawful detainer and subject to such summary
or other action as may be provided by law. Additionally,
Landlord may relet the Leased Premises as the agent for and in
the name of the Tenant, at any rental readily acceptable,
applying the proceeds first to the payment of such rent as the
same comes due, and toward the fulfillment of the other
covenants and agreements of Tenant herein contained, and the
balance, if any, shall be paid to Tenant; and the Tenant
hereby agrees that if Landlord shall recover or take
possession of said Leased Premises as aforesaid and be unable
to relet and rent the same so as to realize a sum equal to the
rent hereby reserved, Tenant shall pay to Landlord any loss or
difference of rent for the remainder of the term.
10.2.5 Termination of Lease. Landlord, irrespective of the date on
which its right of re-entry shall have accrued or be
exercised, shall have the
- 14 -
<PAGE> 19
right, whether for rent or possession or otherwise, to forfeit
this Lease and terminate the state of tenancy hereby created.
This right to terminate is exercisable by a written notice to
Tenant, which written notice may be part of a notice of
default previously delivered to Tenant, and, as such, may be
conditioned upon Tenant's failure to cure the default and the
event of default. The termination may be made effective as of
the event of default or thereafter, and, if not otherwise
specified, will be deemed to be effective immediately. Upon
such termination and forfeiture, Landlord shall be entitled to
and may take immediate possession of the Leased Premises, any
other notice or demand being hereby waived. Such termination
does not, however, release Tenant from liability for rentals
then overdue or remaining under the Lease but shall operate to
accelerate the entire balance of the term rental, which shall
become immediately due and payable by Tenant, along with all
overdue rentals and charges.
10.3 Non-Waiver of Remedies. It is expressly agreed that neither the taking
of possession of the Leased Premises nor the institution of any
proceedings by way of unlawful detainer, ejectment, quiet title, or
otherwise, to secure possession of the Leased Premises, nor the
re-entry by Landlord with or without the institution of such
proceedings, nor the rerenting or subletting of the Leased Premises,
shall operate to terminate this Lease in whole or in part, nor of
itself constitute an exercise of Landlord's option to do so, but only
by the giving of the written notice specifically specifying termination
shall such termination be effected.
In the event Tenant breaches this Lease, or any covenant, term or
condition hereunder, and abandons the Leased Premises, this Lease shall
continue in force and effect for so long as the Landlord does not
terminate Tenant's right to possession, and Landlord may enforce all
rights and remedies of Landlord including, without limitation, the
right to recover rental as it becomes due hereunder. Acts of
maintenance or preservation or efforts to relet the Leased Premises, or
the appointment of a receiver upon the initiation of the Landlord to
protect the Landlord's interest under this Lease shall not constitute a
termination of Tenant's right to possession.
Waiver by Landlord of any default, breach or failure of Tenant under
this Lease shall not be construed as a wavier of any subsequent or
different default, breach or failure. In case of a breach by Tenant of
any of the covenants or undertakings of Tenant, Landlord nevertheless
may accept from Tenant any payments hereunder without in any way
waiving Landlord's right to exercise the remedies hereinbefore provided
for by reason of any other breach or lapse which was in existence at
the time such payment or payments were accepted by Landlord.
It is expressly understood that the enumeration herein of express
rights, options and privileges shall not limit Landlord nor deprive
Landlord of any other remedy or action
- 15 -
<PAGE> 20
or cause of action by reason of any default of Tenant, including the
right to recover from Tenant any deficiency upon re-renting.
The specific remedies to which Landlord may resort under the terms of
this Lease are cumulative and are not intended to be exclusive of any
other remedies or means of redress to which they may be lawfully
entitled in case of any breach or threatened breach by either of them
or of any provisions of this Lease.
ARTICLE 11. GENERAL PROVISIONS
11.1 No Brokers. Neither Landlord nor Tenant has employed a broker who has
or may have a legitimate claim to a commission arising from Tenant's
acceptance of the Lease.
11.2 No Partnership. Notwithstanding any other express or implied provision
of this Lease, it is understood that Landlord does not in any way or
propose a partnership or joint venture with Tenant in the conduct of
Tenant's business.
11.3 Successors and Assigns. All rights, obligations and liabilities herein
given to, or imposed upon, the respective parties hereto shall extend
to and bind the several and respective heirs, executors,
administrators, successors, sublessees, and assigns of said parties,
subject to the provisions of Article 9; provided, however, that the
liability of Landlord hereunder and any successor in interest and title
to the Leased Premises shall be limited to its interest in the Leased
Premises, and no other assets of the Landlord other than its interest
in the Leased Premises shall be affected by reason of any liability
which said Landlord or successor in interest may have under this Lease.
11.4 Notices. Wherever in this Lease it shall be required or permitted that
notice or demand be given or served by either party to this Lease to or
on the other, such notice or demand shall not be deemed to have been
duly given or served unless made in writing and either personally
delivered or forwarded by certified mail, return receipt requested,
postage prepaid, to the address for each party provided below. Such
addresses may be changed from time to time by either party by serving
notices as above provided. While Tenant is in possession of the Leased
Premises, notices to the Tenant may also be delivered or forwarded by
certified mail to the Leased Premises.
Address for Tenant: Schuff Steel Company
420 S. 19th Avenue
Phoenix, Arizona 85009
Address for Landlord: 19th Avenue/Buchanan Limited Partnership
420 S. 19th Avenue
Phoenix, Arizona 85009
- 16 -
<PAGE> 21
11.5 Attorney's Fees. In the event that legal or arbitration proceedings are
brought or commenced to interpret or enforce the terms of this Lease,
the prevailing party shall be entitled to recover from the other party
all costs and expenses of such proceedings, including reasonable
attorneys' fees, whether or not any proceedings are prosecuted to
judgment.
11.6 Scope and Interpretation of this Agreement.
11.6.1 Entire Agreement. This Lease shall be considered to be the
only agreement between the parties hereto pertaining to the
Leased Premises. It is understood that there are no oral
agreements between the parties hereto affecting this Lease,
and this Lease supersedes and cancels any and all previous
negotiations, arrangements, brochures, agreements and
understandings, if any, between the parties hereto or
displayed by Landlord to Tenant with respect to the subject
matter thereof, and none shall be used to interpret or
construe this Lease. It is further agreed by and between the
parties hereto that there shall be no modification or
amendment to this Lease, except as may be executed in writing
between the parties hereto. It is further understood by Tenant
that Landlord may not now, or in the future, own all of the
Leased Premises. Tenant agrees not to cancel its Lease,
reduce, abate, or offset rents, or pursue any other remedies
under this Lease, or at law or equity, with respect to
Landlord, for any violation, breach or default of this Lease
by virtue of any act or omission on, or with respect to,
property not owned by Landlord.
11.6.2 Headings/Captions. The headings or captions of Articles or
Paragraphs in this Lease are for convenience and reference
only and they in no way define, limit, or describe the scope
or intent of this Lease or the provisions of such Articles.
11.6.3 Gender and Interpretation of Terms and Provisions. As used in
this Lease and whenever required by the context thereof, each
number, both singular or plural, shall include all numbers,
and each gender shall include all genders. Landlord and
Tenant, as used in this Lease or in any other instrument
referred to in or made a part of this Lease, shall likewise
include both the singular and the plural, a corporation,
co-partnership, individual or person acting in any fiduciary
capacity as executor, administrator, trustee, or in any other
representative capacity. All covenants herein contained on the
part of Tenant shall be joint and several.
11.6.4 Time of Essence. Time is hereby expressly declared to be of
the essence of this Lease and of each and every covenant,
term, condition and provision hereof.
- 17 -
<PAGE> 22
11.6.5 Impartial Construction. The language in all parts of this
Lease shall be in all cases construed as a whole according to
its fair meaning and not strictly for nor against either
Landlord or Tenant.
11.6.6 Governing Law. The laws of the State in which the Leased
Premises are located shall govern the validity,
interpretation, performance and enforcement of this Lease.
11.6.7 Partial Invalidity. If any term covenant or condition of this
Lease or the application thereof to any person or circumstance
shall, to any extent, be invalid or unenforceable, the
remainder of this Lease, or the application of such term
covenant or condition to persons or circumstances other than
those as to which it is held invalid or unenforceable shall
not be affected thereby, and each term, covenant or condition
of this Lease shall be valid and be enforced to the fullest
extent permitted by law.
11.6.8 Amendment. Oral agreements in conflict with any of the terms
of this Lease shall be without force and effect, all
amendments to be in writing executed by the parties or their
respective successors in interest.
11.7 Execution and Delivery of Lease. The submission of this Lease for
examination does not constitute a reservation or option for the Leased
Premises. This Lease shall be executed in duplicate and shall become
effective as of the date first written only when an executed original
is delivered to each party.
IN WITNESS WHEREOF, Landlord and Tenant hereby execute this Lease, on
their own behalf or through their duly authorized representative.
LANDLORD:
19th AVENUE/BUCHANAN LIMITED PARTNERSHIP,
an Arizona limited partnership
By: /s/Scott A. Schuff
____________________________________
_________________, General Partner
TENANT:
SCHUFF STEEL COMPANY, an Arizona corporation
By: /s/Scott A. Schuff
____________________________________
Scott A. Schuff, President
- 18 -
<PAGE> 23
STATE OF ARIZONA )
)ss.
COUNTY OF MARICOPA )
On this _____ day of ____________, 1997, ________________
______________________ who is known to me or satisfactorily proven to me to be
the person whose name is subscribed to this Lease, personally appeared before
me, a notary public, and acknowledged, that he/she executed this Lease on in the
capacity so indicated for the principal named.
IN WITNESS WHEREOF I hereunto set my hand and official seal.
----------------------------------
Notary Public
My Commission Expires:
- -----------------------
STATE OF ARIZONA )
)ss.
COUNTY OF MARICOPA )
On this _____ day of ____________, 1997, Scott A. Schuff, who is known
to me or satisfactorily proven to me to be the person whose name is subscribed
to this Lease, personally appeared before me, a notary public, and acknowledged,
that he executed this Lease on in the capacity so indicated for the principal
named.
IN WITNESS WHEREOF I hereunto set my hand and official seal.
----------------------------------
Notary Public
My Commission Expires:
- ----------------------
- 19 -
<PAGE> 24
EXHIBIT "A"
LEASE
1841 W. BUCHANAN STREET IN PHOENIX, ARIZONA
LEGAL DESCRIPTION
Lots 25 to 29, inclusive and 51 to 54, inclusive, WISE ADDITION, according to
Book 5 of Maps, page 27, records of Maricopa County, Arizona; AND
The North half of that part of the alley shown on plat of said WISE ADDITION,
abandoned by Resolution No. 15516, recorded in Docket 14849, page 1190, lying
East of the East line of the West 7 feet of said Lot 25 extended South and
West of the East line of Lot 29 extended South; AND
The South half of that part of the alley shown on plat of said WISE ADDITION,
abandoned by Resolution No. 1516 recorded in Docket 14849, page 1190 lying East
of the West line of said Lot 51 extended North and West of the West line of the
East 26 feet of said Lot 54 extended North;
EXCEPT that part of Lot 54 described as follows:
BEGINNING at the Northeast corner of said Lot 54;
Thence West along the North line of said Lot 54 to the West line of the East
26 feet thereof;
Thence South along the West line of the East 26 feet of said Lot 54 a
distance of 24 feet;
Thence Southeasterly to the intersection of the West line of the East 20 feet
of said Lot 54 with the South line of the North 64 feet of said Lot 54;
Thence South along said West line to the South line of said Lot 54;
Thence East along said South line to the Southeast corner of said Lot 54;
Thence to the POINT OF BEGINNING.
<PAGE> 1
Exhibit 10.11
SCHUFF STEEL COMPANY
SUPPLEMENTAL RETIREMENT AND
DEFERRED COMPENSATION PLAN
Effective as of January 1, 1996
<PAGE> 2
SCHUFF STEEL COMPANY
SUPPLEMENTAL RETIREMENT AND
DEFERRED COMPENSATION PLAN
Effective as of January 1, 1996
RECITALS
This Schuff Steel Company Supplemental Retirement and Deferred
Compensation Plan (the "Plan") is adopted by Schuff Steel Company (the
"Employer") for certain of its executive employees. The purpose of the Plan is
to provide those employees with supplement retirement income in order to provide
termination of employment and related benefits taxable pursuant to Section 451
of the Internal Revenue Code of 1986, as amended (the "Code"). The Plan is
intended to be a "top-hat" plan (i.e., an unfunded deferred compensation plan
maintained for a select group of management or highly compensated employees)
under Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement
Income Security Act of 1974 ("ERISA").
Accordingly, the following Plan is adopted.
ARTICLE I. - DEFINITIONS
1.1 ACCOUNT means the cumulative balance credited to a Participant's
or Beneficiary's Plan account, including contributions and the allocable share
of income, gains, and losses from Plan investments and forfeitures. A
Participant's or Beneficiary's Account shall be determined as of the close of
the last day of each Plan Quarter and any other date that the Employer, in its
sole discretion, designates as a date of reference.
1.2 BENEFICIARY means any person or persons so designated in
accordance with the provisions of Article VII.
- 1 -
<PAGE> 3
1.3 CODE means the Internal Revenue Code of 1986 and the regulations
thereunder, as amended from time to time.
1.4 EFFECTIVE DATE means the effective date of the Plan, which shall
be January 1, 1996.
1.5 ELIGIBLE EMPLOYEE means, for any Plan Year (or applicable
portion thereof), a person employed by the Employer who is determined by the
Employer to be a member of a select group of management or highly compensated
employees and who is designated by the Employer to be an Eligible Employee under
the Plan. By each November 1, the Employer shall notify those individuals, if
any, who will be Eligible Employees for the next Plan Year. If the Employer
determines that an individual becomes an Eligible Employee during a Plan Year,
the Employer shall notify such individual of its determination and of the date
during the Plan Year on which the individual shall first become an Eligible
Employee. After an employee has been selected to become an Eligible Employee,
such employee shall remain an Eligible Employee until his or her employment with
the Employer is terminated for any reason.
As of the first Plan Year, the following persons employed by the Employer are
hereby designated by the Employer to be Eligible Employees under the Plan:
See Addendum A attached hereto and made a part hereof.
1.6 EMPLOYER means Schuff Steel Company and its successors and
assigns unless otherwise herein provided, or any other corporation or business
organization which, with the consent of Schuff Steel Company, or its successors
or assigns, assumes the Employer's obligations hereunder, or any other
corporation or business organization which agrees, with the consent of Schuff
Steel Company, to become a party to the Plan.
- 2 -
<PAGE> 4
1.7 ENTRY DATE with respect to an individual, who becomes an
Eligible Employee, means the date selected by the Employer in its sole
discretion.
1.8 FORFEITURE means the amount of any non-vested portion of a
Participant's Account which is reallocated to the Accounts of other
Participants.
1.9 INVESTMENT COMMITTEE means the Investment Committee, as defined
in Paragraph 10.2 herein.
1.10 NET PROFITS means the Employer's net profits for the taxable
year of the Employer (coinciding with or within which the Plan Year ends) as
calculated at the end of the taxable year, in accordance with the Employer's
regular accounting practices, after federal and state income taxes (calculated
at the highest applicable marginal individual federal and state rates then in
effect).
1.11 NORMAL RETIREMENT AGE means the time at which the Participant
attains sixty-five (65) years of age.
1.12 PARTICIPANT means any person so designated in accordance with
the provisions of Article II, including, where appropriate according to the
context of the Plan, any former employee who is or may become (or whose
Beneficiaries may become) eligible to receive a benefit under the Plan.
1.13 PLAN means the Schuff Steel Company Supplemental Retirement and
Deferred Compensation Plan, as amended from time to time.
1.14 PLAN YEAR means the consecutive twelve (12) month period
commencing on January 1 and ending on December 31 of each year during which the
Plan is in effect.
- 3 -
<PAGE> 5
1.15 PLAN QUARTER means the three (3) month periods ending on March
31, June 30, September 30 and December 31 of each Plan Year.
1.16 RETIREMENT means the termination of employment of an Eligible
Employee who has attained at least the Normal Retirement Age. An Eligible
Employee may work beyond Normal Retirement Age, in which case Employer
contributions and forfeitures shall continue to be allocated to the Account of
such Eligible Employee.
1.17 TOTAL AND PERMANENT DISABILITY shall refer to the Participant
suffering from a physical or mental condition as determined by the Employer,
based upon appropriate medical reports and examinations, which may be expected
to result in death or be of long and indefinite duration and which renders the
Participant unable to perform any substantial gainful activity.
1.18 TRUST means the trust established pursuant to the Plan.
1.19 TRUST FUND consists of the Employer contributions held by the
Trustee and any income, losses, appreciation, or depreciation thereon, including
both common funds and separate funds as said terms are utilized in Paragraph
4.2.
1.20 TRUSTEE means the trustee named in the agreement establishing
the Trust and such successor and/or additional trustees as may be named pursuant
to the terms of the agreement establishing the Trust.
ARTICLE II. - ELIGIBILITY AND PARTICIPATION
2.1 REQUIREMENTS. Every Eligible Employee on the Effective Date
shall become a Participant on the Effective Date. Every other Eligible Employee
shall be eligible to become a Participant on the first Entry Date occurring on
or after the date on which he or she
- 4 -
<PAGE> 6
becomes an Eligible Employee. No individual shall become a Participant, however,
if he or she is not an Eligible Employee on the date his or her participation is
to begin.
Participation in the Plan is voluntary. In order to participate, an
otherwise Eligible Employee must make written application in such manner as may
be required by the Employer.
Nothing contained herein shall be construed as a promise or guaranty
by the Employer to any Eligible Employee of continuous employment and each
Eligible Employee shall be deemed an "Employee at Will".
2.2 RE-EMPLOYMENT. If a Participant whose employment with the
Employer has been terminated is re-employed, he or she shall become a
Participant in accordance with the provisions of Paragraph 2.1.
ARTICLE III. - CONTRIBUTIONS TO THE TRUST
3.1 EMPLOYER CONTRIBUTIONS. In accordance with rules established by
the Employer, the Employer shall make a contribution to the Trust from its Net
Profits beginning with the first Plan Year ending on or after the Effective Date
of the Plan. The amount of the contribution shall equal ten percent (10%) of the
Employer's Net Profits for the taxable year of the Employer coinciding with or
within which the Plan Year ends. The amount of the contribution shall be paid to
the Trustee on or before the time required by law for filing the Employer's
federal income tax return (including extensions) for the year with respect to
which the contribution is made.
3.2 MANNER OF ALLOCATION. All contributions by the Employer for any
Plan Year, and all Forfeitures, if any, during such year, shall be allocated as
of the last day of such Plan Year to the Account of each individual Participant,
who is an Eligible Employee on such date
- 5 -
<PAGE> 7
(except an Eligible Employee who terminated employment before the last day of
the Plan Year on account of death, Retirement or Total and Permanent
Disability), as follows:
(a) First, all Forfeitures shall be allocated equally among
Participants' Accounts;
(b) Second, fifty percent (50%) of the contributions shall be
allocated equally among the Participants' Accounts; and
(c) Then the balance of the contributions, less the amount
allocated under Paragraph 3.2(b) above, shall be allocated among
Participants' Accounts in such proportions as determined by the Employer,
in its sole discretion.
3.3 PERMISSIBLE TYPES OF EMPLOYER CONTRIBUTIONS. Payments on account
of the contributions due from the Employer for any year may be made in cash or
in kind.
3.4 LOANS TO PARTICIPANTS. Loans may not be made to any Participant
of the Plan.
ARTICLE IV. - ADMINISTRATION OF ACCOUNTS
4.1 INVESTMENTS. The amounts allocated to the Participant Accounts
shall be invested by the Trustee in accordance with either the directions of the
Investment Committee or the provisions of the Trust Agreement (as the case may
be).
4.2 INVESTMENT IN SINGLE FUND AND REASONABLE RULES. The Trustee may
cause all contributions made to it by the Employer and the income therefrom,
without distinction between principal and income, to be held and administered as
a single fund, in which event the Trustee shall not separately invest any share
of any Participant. The Trustee may adopt reasonable rules for the
administration of such common fund and for the determination of the
- 6 -
<PAGE> 8
proportionate interest of each Participant in the fund. In the alternative, the
Trustee may cause contributions made by the Employer and the income therefrom to
be invested in separate shares for any and all Participants, in which event
reasonable rules for the administration of such separate funds shall be adopted
by the Trustee.
4.3 VALUATION OF ASSETS AND ALLOCATION OF CHANGES. The common fund
assets of the Trust Fund will be valued as of the close of the last day of each
Plan Quarter at their fair market value and the Account of each Participant
shall be adjusted for any net appreciation or net depreciation in the assets of
the common fund portion of the Trust Fund and any net income or loss of the
common fund portion of the Trust Fund for such quarter, with each common fund
portion of the Account being credited or charged in the ratio that the amount of
the Account (as of the close of the last day of the Plan Quarter) bears to the
total (as of the close of the last day of the Plan Quarter) of all remaining
common fund portions of the Accounts. For purposes of such adjustment of
Accounts, any contribution made by the Employer with respect to a Plan Year or
by the Employer during the Plan Quarter shall be considered as having been made
immediately after such valuation and adjustment. In addition to the valuations
required by the first sentence of this Paragraph 4.3, the assets of the Trust
Fund may be valued at such other times during the Plan Year as either the
Trustee or the Investment Committee deems appropriate.
4.4 ACCOUNTING FOR DISTRIBUTIONS. As of the date of any distribution
hereunder, the distribution to a Participant or his or her Beneficiary or
Beneficiaries shall be charged to such Participant's Account.
- 7 -
<PAGE> 9
4.5 SEPARATE ACCOUNTS. A separate account under the Plan shall be
established and maintained by the Employer to reflect the Account for each
Participant and to show separately the deemed earnings and losses credited or
debited to such Account.
ARTICLE V. - VESTING
5.1 ACCOUNT VESTING ON DEATH, RETIREMENT OR TOTAL AND PERMANENT
DISABILITY. If a Participant's employment is terminated due to death,
Retirement, or Total and Permanent Disability, one hundred percent (100%) of
such Participant's Account shall vest in the Participant (or in his or her
Beneficiary, as the case may be), and shall be distributed or set aside in
accordance with the provisions of Article VI.
5.2 ACCOUNT VESTING ON TERMINATION. If a Participant's employment is
terminated for any other reason other than death, Retirement, or Total and
Permanent Disability, the following percentages of the Participant's Account
shall vest in the Participant and shall be distributed to or set aside for such
Participant in accordance with the provisions of Article VI:
<TABLE>
<CAPTION>
Total Service for Vesting Vested Percentage of Participant's Account
------------------------- ------------------------------------------
<S> <C>
Less than 1 year 0%
1 Year 10%
2 Years 20%
3 Years 30%
4 Years 40%
5 Years 50%
6 Years 60%
7 Years 70%
8 Years 80%
9 Years 90%
10 Years or more 100%
</TABLE>
For purposes of this Paragraph 5.2, a "Service for Vesting" shall
mean a Plan Year during which the Eligible Employee completes not less than one
thousand (1,000) hours of service.
- 8 -
<PAGE> 10
Further, for purposes of this Paragraph 5.2, service will be determined on the
basis of months employed and an Eligible Employee will be credited with one
hundred (100) hours of service for each month (or portion of a month) such
Eligible Employee was employed by the Employer.
5.3 FORFEITURE TO EMPLOYER FOR CERTAIN ACTS. Notwithstanding
anything contained in this Plan or the Trust to the contrary, including but not
limited to the provisions of Paragraphs 1.15, 3.1, 3.2, 3.2(c), 1.15, 3.1, 3.2,
3.2(c),5.1 and 5.2, a Participant shall forfeit to the Employer any and all
amounts accrued in such Participant's Account if he or she commits any criminal
act or willful or malicious act which damages the Employer or any of its
employees. In this event, a forfeiture shall not be allocated to the remaining
Participants, and shall be made directly to the Employer.
5.4 CHANGE IN CONTROL. If a Change of Control of the Employer
occurs, one hundred percent (100%) of each Participant's Account shall vest in
each respective Participant and each Participant's Account as of the date of the
Change of Control shall be valued and distributed to or set aside for such
Participant in accordance with the provisions of Article VI. For purposes of
this Paragraph 5.4, a "Change of Control" shall occur when there has been a sale
of substantially all of the assets of the Employer or any person (other than
DAVID A. SCHUFF or a descendant of DAVID A. SCHUFF) obtains ownership or voting
power with respect to or greater than seventy-five percent (75%) of the
aggregate value or voting power, as applicable, of the Employer's capital stock.
ARTICLE VI. - DISTRIBUTION OF BENEFITS
6.1 AMOUNT. A Participant (or his or her Beneficiary) shall become
entitled to receive a distribution in an aggregate amount equal to the vested
portion of the Participant's
- 9 -
<PAGE> 11
Account, on the last day of the Plan Quarter immediately preceding the date of
Participant's termination of employment. Any payment due hereunder from the
Trust which is not paid by the Trust will be paid by the Employer from its
general assets in which case the Employer will be reimbursed by the Trust within
a reasonable period of time as soon as administratively feasible.
6.2 METHOD OF PAYMENT.
(a) Cash Payments. All payments under the Plan shall be made
in cash or in kind, pursuant to the election of a Participant.
(b) Paragraph 5.1 and 5.4 Distributions. In the event a
Participant becomes entitled to benefits under Paragraph 5.1, an aggregate
amount equal to the Participant's Account will be paid by the Trust or the
Employer, as provided by Paragraphs 6.1 and 8.1, in a lump sum, on or
before thirty (30) days following the date of Participant's termination of
employment, or in annual installments made over a period selected by the
Participant, or in the form of an annuity for the life of the Participant
(or the joint lives of the Participant and his or her spouse) of
actuarially equivalent value to the Participant's lump sum benefit, as
selected by the Participant prior to his or her termination of employment.
If a Participant fails to designate properly the manner of payment of the
Participant's benefit under the Plan, such payment will be distributed in
a lump sum within thirty (30) days following the Participant's
termination.
In the case of distributions to a Participant or his or her
Beneficiary by virtue of an entitlement pursuant to Paragraph 5.4, an
aggregate amount equal to the Participant's Account will be paid by the
Trust or the Employer, as provided by Paragraphs 6.1 and 8.1, in a lump
sum.
- 10 -
<PAGE> 12
If the whole or any part of a distribution hereunder is to be
made in installments, the total to be so paid shall continue to be deemed
to be invested under such procedures as the Employer may establish, in
which case, any deemed income, gain, or loss attributable thereto shall be
reflected in the installment payments, in such equitable manner as the
Employer shall determine.
(c) Paragraph 5.2 Distributions. In the event a Participant
becomes entitled to benefits under Paragraph 5.2 by reason of a voluntary
termination of employment, (i.e. resignation) then an amount equal to
twenty-five percent (25%) of the Participant's Account will be paid by the
Trust or the Employer as provided in Paragraphs 6.1 and 8.1, in a lump sum
on or before thirty (30) days following the date of Participant's
termination of employment and the remaining balance of the Participant's
Account will be paid in three (3) equal annual installments beginning on
the one (1) year anniversary of the initial payment required hereunder and
continuing on the next two (2) successive one (1) year anniversaries
thereafter. The undistributable portion of the amount payable hereunder
shall continue to be invested under such procedures as the Employer may
establish, in which case, any deemed income, gain, or loss attributable
thereto shall be reflected in the installment payments, in such equitable
manner as the Employer shall determine.
6.3 DEATH BENEFITS. If a Participant dies before terminating his or
her employment with the Employer and before the commencement of distributions to
the Participant hereunder, the entire value of the Participant's Account shall
be paid, as provided in Paragraph 6.2(b), to the person or persons designated in
accordance with Paragraph 7.1.
Upon the death of a Participant after distributions hereunder have
begun but before he or she has received all distributions to which he or she is
entitled under the Plan, the remaining
- 11 -
<PAGE> 13
distributions shall be paid to the person or persons designated in accordance
with Paragraph 7.1, in the manner in which such distributions were payable to
the Participant.
6.4 WAIVER. Each Eligible Employee acknowledges that computation of
benefits to which he or she may be entitled upon termination of his or her
employment hereunder may take considerable time, particularly in the event that
appraisals may be necessary. Accordingly, each Eligible Employee hereby
expressly waives the statutory requirements of A.R.S. Section 23-353A which
requires an employer to pay wages due an employee by the end of the next regular
pay period or within three (3) working days, if sooner, and the statutory
requirements of A.R.S. Section 23-355 which allows an employee to seek treble
the amount of unpaid wages in a civil action against an employer for unpaid
wages due an employee.
ARTICLE VII. - BENEFICIARIES; PARTICIPANT DATA
7.1 DESIGNATION OF BENEFICIARIES. Each Participant from time to time
may designate any person or persons (who may be named contingently or
successively) to receive such distributions as may be payable under the Plan
upon or after the Participant's death, and such designation may be changed from
time to time by the Participant by filing a new designation. Each designation
will revoke all prior designations by the same Participant, shall be in a form
prescribed by the Employer, and will be effective only when filed in writing
with the Employer during the Participant's lifetime.
In the absence of a valid beneficiary designation, or if, at the
time any distribution is due to a Beneficiary, there is no living Beneficiary
validly named by the Participant, the Employer shall pay any such distribution
to the Participant's spouse, if then living, but otherwise to the Participant's
then living descendants, if any, per stirpes by right of representation, but, if
none, to the
- 12 -
<PAGE> 14
Participant's estate. In determining the existence or identity of anyone
entitled to a distribution hereunder, the Employer may rely conclusively upon
information supplied by the Participant's personal representative, executor, or
administrator. If a question arises as to the existence or identity of anyone
entitled to receive a distribution, or if a dispute arises with respect to any
such distribution, then, notwithstanding the foregoing, the Employer, in its
sole discretion, may distribute such payment to the Participant's estate without
liability for any tax or other consequences which might flow therefrom, or may
take such other action as the Employer deems to be appropriate.
7.2 INFORMATION TO BE FURNISHED BY PARTICIPANTS AND BENEFICIARIES;
INABILITY TO LOCATE PARTICIPANTS OR BENEFICIARIES. Any communication, statement,
or notice addressed to a Participant or to a Beneficiary at his or her last post
office address as shown on the Employer's records shall be binding on the
Participant or Beneficiary for all purposes of the Plan. The Employer shall not
be obligated to search for any Participant or Beneficiary beyond the sending of
a certified letter to such last known address. If the Employer notifies any
Participant or Beneficiary that he or she is entitled to an amount under the
Plan and the Participant or Beneficiary fails to claim such amount or make his
or her location known to the Employer within three (3) years thereafter, then,
except as otherwise required by law, if the location of the spouse of the
Participant or one or more of the issue of the Participant is known to the
Employer, the Employer may direct distribution of such amount to the spouse or
any one or more or all of such issue, and in such proportions as the Employer,
in its sole discretion, determines. If the location of none of the foregoing
persons can be determined, the Employer shall have the right, in its sole
discretion, to direct that the amount payable shall be deemed to be a
Forfeiture, except that the dollar amount of the Forfeiture, unadjusted for
deemed gains or losses in the interim, shall be
- 13 -
<PAGE> 15
paid by the Employer if a claim for the benefit subsequently is made by the
Participant or the Beneficiary to whom it was payable within one (1) year of
such Forfeiture. If a benefit payable to an unlocated Participant or Beneficiary
is subject to escheat pursuant to applicable state law, the Employer shall not
be liable to any person for any payment made in accordance with such law.
ARTICLE VIII. - COVENANTS OF ELIGIBLE EMPLOYEE
8.1 NONCOMPETITION. To induce the Employer to adopt this Plan, each
Eligible Employee hereby covenants that during the term of employment and for a
period of thirty-six (36) months after Eligible Employee's termination of
employment with Employer for reasons of employee dishonesty, fraud, wilful
misconduct, criminal conduct, resignation or voluntary cessation of work, each
Eligible Employee will not, either separately, jointly or in association with
others, anywhere within that portion of the United States situated west of the
Mississippi River, establish, engage in, or become interested in, directly or
indirectly, as employee, owner, partner, member, shareholder, guarantor, lender,
consultant, agent, or otherwise, or furnish any information to, work for, or
assist in any manner any person or entity in competing with Employer or any
affiliate of Employer in the business of steel fabrication, erection or detail.
The terms "partner, member, stockholder, co-venturer, lender, provider of
capital, employee, associate or any similar party" shall include, but shall not
be limited to, any person or entity doing business with Employer or any
affiliate of Employer at the time of, or who has done business with Employer or
any affiliate of Employer during the one (1) year period immediately preceding,
Eligible Employee's termination of employment.
8.2 NON-DISCLOSURE. Each Eligible Employee covenants that he will
not divulge to any competitor, or potential competitor, any of the merchandising
or marketing
- 14 -
<PAGE> 16
techniques, business affairs, business relationship lists, policies, plans,
finances, trade practices, trade secrets, methods, ideas and developments,
software, research techniques, systems or similar information of Employer, with
which Eligible Employee became acquainted during the time Eligible Employee was
associated with Employer.
8.3 DISCLOSURE. Each Eligible Employee shall disclose promptly to
Employer any and all knowledge of intellectual properties conceived or made by
an Eligible Employee during the term of this Agreement and related to the
business or activities of Employer or any of its affiliates, and hereby assigns
and agrees to execute any instrument or assignment necessary hereafter in order
to assign all of Eligible Employee's interest therein to Employer. The
obligations of an Eligible Employee pursuant to this Paragraph 8.3 shall
continue beyond the termination of Employment with respect to intellectual
properties conceived or made by an Eligible Employee during his employment and
shall be binding upon an Eligible Employee's assigns, executors, administrators
and/or legal representatives.
8.4 REMEDIES. It is understood by the parties that the covenants
herein contained are for the protection of confidential business information and
business relationships of Employer which are a valuable property right, and that
a breach of any covenant contained in this Agreement would cause substantial
damage to Employer. The parties further agree that damages at law would be an
inadequate remedy for the breach of any of Employee's covenants and that, in
addition to any and all other remedies to which Employer would otherwise be
entitled, Employer shall be entitled to injunctive relief with respect thereto.
Notwithstanding anything contained in this Plan to the contrary, an Employee's
liability for damages to Employer and the Plan by reason of a
- 15 -
<PAGE> 17
breach of Paragraph 6.1, 8,1, shall not exceed the total amount paid or to be
paid Employee under Articles V and VI and above.
8.5 ENFORCEMENT. Each Eligible Employee and Employer intend that the
covenants of Article VIII shall be deemed a series of separate covenants, one
for each county of each and every state included within the geographical area,
and one for each month of the period specified above. If, in any judicial
proceeding, a court shall refuse to enforce any of such covenants, then such
unenforceable covenants shall be deemed eliminated from the provisions hereof
for the purpose of such proceedings to the extent necessary to permit the
remaining separate covenants to be enforced in such proceedings. If, in any
judicial proceeding, a court shall refuse to enforce any one or more of such
separate covenants because the total time and/or geographical area thereof is
deemed to be excessive or unreasonable, then it is the intent of the parties
hereto that such covenants, which would otherwise be unenforceable due to such
excessive or unreasonable period of time, be enforced for such lesser period of
time and/or geographical area as shall be deemed reasonable and not excessive by
such court.
ARTICLE IX. - THE TRUST
9.1 ESTABLISHMENT OF TRUST. The Employer shall establish the Trust
with the Trustee, pursuant to such terms and conditions as are set forth in the
Trust Agreement attached as Exhibit "A", to be entered into between the Employer
and the Trustee. The Trust is intended to be treated as a "grantor" trust under
the Code, and the establishment of the Trust is not intended to cause
Participants to realize current income on amounts contributed thereto, and the
Trust shall be so interpreted.
ARTICLE X. - ADMINISTRATION
- 16 -
<PAGE> 18
10.1 ADMINISTRATIVE AUTHORITY. Except as otherwise specifically
provided herein, the Employer shall have the sole responsibility for and the
sole control of the operation and administration of the Plan, and shall have the
power and authority to take all action and to make all decisions and
interpretations which may be necessary or appropriate in order to administer and
operate the Plan, including, without limiting the generality of the foregoing,
the power, duty, and responsibility to:
(a) Resolve and determine all disputes or questions arising
under the Plan, including the power to determine the rights of Eligible
Employees, Participants, and Beneficiaries, and their respective benefits,
and to remedy any ambiguities, inconsistencies, or omissions in the Plan.
(b) Adopt such rules of procedure and regulations as in its
opinion may be necessary for the proper and efficient administration of
the Plan and as are consistent with the Plan.
(c) Implement the Plan in accordance with its terms and the
rules and regulations adopted as above.
(d) Make determinations with respect to the eligibility of any
Eligible Employee as a Participant and make determinations concerning the
crediting and distribution of Plan Accounts.
(e) Appoint any persons or firms, or otherwise act to secure
specialized advice or assistance, as it deems necessary or desirable in
connection with the administration and operation of the Plan. The Employer
shall be entitled to rely conclusively upon, and shall be fully protected
in any action or omission taken by it in good faith reliance upon, the
- 17 -
<PAGE> 19
advice or opinion of such firms or persons. The Employer shall have the
power and authority to delegate from time to time by written instrument
all or any part of its duties, powers, or responsibilities under the Plan,
both ministerial and discretionary, as it deems appropriate, to any person
or committee, and in the same manner to revoke any such delegation of
duties, powers, or responsibilities. Any action of such person or
committee in the exercise of such delegated duties, powers, or
responsibilities shall have the same force and effect for all purposes
hereunder as if such action had been taken by the Employer. Further, the
Employer may authorize one or more persons to execute any certificate or
document on behalf of the Employer, in which event any person notified by
the Employer of such authorization shall be entitled to accept and
conclusively rely upon any such certificate or document executed by such
person as representing action by the Employer until such third person
shall have been notified of the revocation of such authority.
10.2 INVESTMENT COMMITTEE.
(a) The Trust Fund shall be invested by the Trustee as
directed by an Investment Committee, which shall consist of the President
of the Employer and three (3) Participants appointed by a majority of all
Participants, who shall signify in writing their acceptance of such
appointment. Any member of the Investment Committee may resign upon giving
written notice to the Participants. Each appointee (other than the
President of the Employer) shall hold office at the pleasure of the
Participants. Vacancies arising in the Investment Committee from death,
resignation or otherwise, shall be filled by the Participants, but the
Investment Committee may act notwithstanding the existence of the
vacancies so long as there is at least one (1) member of the Investment
Committee.
- 18 -
<PAGE> 20
At any time the Board of Directors of the Employer may adopt
the resolution abolishing the Investment Committee and assigning all of
the duties of the Investment Committee to the Trustee; such resolution
shall be effective as soon as it is communicated in writing to both the
Investment Committee and the Trustee, or at such other subsequent
effective date as provided in the resolution. Whenever such a resolution
is effective as to the Plan, the term "Trustee" shall be deemed to replace
the term "Investment Committee." Such a resolution may be rescinded by the
Board of Directors of the Employer and shall be effective as soon as it is
communicated in writing to the Trustee, or shall be effective at such
later date as provided in the resolution.
(b) The Investment Committee shall not take any action nor
direct the Trustee to take any action that would result in benefitting one
Participant or a group of Participants at the expense of another, or
discriminating between Participants similarly situated, or applying
different rules to a substantially similar set of facts.
(c) The Investment Committee shall act by a majority (or by
all members if there be only one or two members) of members constituting
the Investment Committee at the time of such action, and such action may
be taken either by vote at a meeting or in writing without a meeting.
(d) Except as otherwise provided in the Plan, the Investment
Committee shall have control of the investment of the Trust Fund of the
Plan including the common and separate portions thereof, with all powers
necessary to enable it to carry out its duties in that respect. The
Investment Committee shall have the right, exercisable at any time by
delivery to the Trustee of an instrument in writing, to instruct or direct
the Trustee with respect to the
- 19 -
<PAGE> 21
investment of the Trust Fund. The Investment Committee may inspect the
records of the Employer or Trustee whenever such inspection may be
reasonably necessary in order to determine any fact pertinent to the
performance of the duties of the Investment Committee. The Investment
Committee, however, shall not be required to make any inspection, but may,
in good faith, rely upon any statement of the Trustee or Employer or any
of its officers or employees.
(e) The members of the Investment Committee shall serve
without compensation for their services.
10.3 MUTUAL EXCLUSION OF RESPONSIBILITY. Neither the Trustee nor
the Employer shall be obligated to inquire into or be responsible for any act or
failure to act, or the authority therefor, on the part of the other.
10.4 UNIFORMITY OF DISCRETIONARY ACTS. Whenever in the
administration or operation of the Plan discretionary actions by the Employer
are required or permitted, such actions shall be consistently and uniformly
applied to all persons similarly situated, and no such action shall be taken
which shall discriminate in favor of any particular person or group of persons.
10.5 LITIGATION. Except as may be otherwise required by law, in any
action or judicial proceeding affecting the Plan, no Participant or Beneficiary
shall be entitled to any notice or service of process, and any final judgment
entered in such action shall be binding on all persons interested in, or
claiming under, the Plan.
10.6 PAYMENT OF ADMINISTRATION EXPENSES. All expenses incurred in
the administration and operation of the Plan and the Trust, excluding any taxes
payable by the
- 20 -
<PAGE> 22
Employer or its shareholders in respect of the Plan or Trust, shall be paid by
the Employer. The Plan or Trust shall reimburse the Employer for any taxes
attributable to the earnings of the Trust. Such reimbursement shall be an amount
equal to the combined federal and state income taxes attributable to Trust
earnings, computed at the highest applicable marginal individual federal and
state tax rates in effect for the Plan Year coinciding with or within which the
taxable year of the Employer ends.
10.7 CLAIMS PROCEDURE. Any person claiming a benefit under the Plan
(a "Claimant") shall present the claim, in writing, to the Employer, and the
Employer shall respond in writing. If the claim is denied, the written notice of
denial shall state, in a manner calculated to be understood by the Claimant: or;
(a) The specific reason or reasons for the denial, with
specific references to the Plan provisions on which the denial is based;
(b) A description of any additional material or information
necessary for the Claimant to perfect his or her claim and an explanation
of why such material or information is necessary; and
(c) An explanation of the Plan's claims review procedure.
The written notice denying or granting the Claimant's claim shall be
provided to the Claimant within ninety (90) days after the Employer's receipt of
the claim, unless special circumstances require an extension of time for
processing the claim. If such an extension is required, written notice of the
extension shall be furnished by the Employer to the Claimant within the initial
ninety (90) day period and in no event shall such an extension exceed a period
of ninety (90) days from the end of the initial ninety (90) day period. Any
extension notice shall indicate the special circumstances requiring the
extension and the date on which the Employer expects to render a
- 21 -
<PAGE> 23
decision on the claim. Any claim not granted or denied within the period noted
above shall be deemed to have been denied.
Any Claimant whose claim is denied, or deemed to have been denied
under the preceding sentence (or such Claimant's authorized representative),
may, within sixty (60) days after the Claimant's receipt of notice of the
denial, or after the date of the deemed denial, request a review of the denial
by notice given, in writing, to the Employer. Upon such a request for review,
the claim shall be reviewed by the Employer (or its designated representative),
which may, but shall not be required to, grant the Claimant a hearing. In
connection with the review, the Claimant may have representation, may examine
pertinent documents, and may submit issues and comments in writing.
The decision on review normally shall be made within sixty (60) days
of the Employer's receipt of the request for review. If an extension of time is
required due to special circumstances, the Claimant shall be notified, in
writing, by the Employer, and the time limit for the decision on review shall be
extended to one hundred twenty (120) days. The decision on review shall be in
writing and shall state, in a manner calculated to be understood by the
Claimant, the specific reasons for the decision and shall include references to
the relevant Plan provisions on which the decision is based. The written
decision on review shall be given to the Claimant within the sixty (60) day (or,
if applicable, the one hundred twenty (120) day) time limit discussed above. If
the decision on review is not communicated to the Claimant within the sixty (60)
day (or, if applicable, the one hundred twenty (120) day) period discussed
above, the claim shall be deemed to have been denied upon review. All decisions
on review shall be final and binding with respect to all concerned parties.
- 22 -
<PAGE> 24
ARTICLE XI. - AMENDMENT
11.1 RIGHT TO AMEND. The Employer, by written instrument executed by
the Employer, shall have the right to amend the Plan, at any time and with
respect to any provisions hereof, and all parties hereto or claiming any
interest hereunder shall be bound by such amendment; provided, however, that no
such amendment shall deprive a Participant or a Beneficiary of a right accrued
hereunder prior to the date of the amendment.
11.2 AMENDMENTS TO ENSURE PROPER CHARACTERIZATION OF PLAN.
Notwithstanding the provisions of Paragraph 11.1, the Plan and the Trust
Agreement may be amended by the Employer at any time, retroactively if required,
if found necessary, in the opinion of the Employer, in order to ensure that the
Plan is characterized as "top-hat" plan of deferred compensation maintained for
a select group of management or highly compensated employees as described under
ERISA Sections 201(2), 301(a)(3), and 401(a)(1), and to conform the Plan to the
provisions and requirements of any applicable law (including ERISA and the
Code). No such amendment shall be considered prejudicial to any interest of a
Participant or a Beneficiary hereunder.
ARTICLE XII. - TERMINATION
12.1 EMPLOYER'S RIGHT TO TERMINATE OR SUSPEND PLAN. The Employer
reserves the right, at any time, to terminate the Plan and/or its obligation to
make further contributions. The Employer also reserves the right, at any time,
to suspend its obligation to make further contributions for a fixed or
indeterminate period of time.
12.2 AUTOMATIC TERMINATION OF PLAN. The Plan, but not the Trust,
automatically shall terminate upon the dissolution of the Employer, or upon its
merger into or
- 23 -
<PAGE> 25
consolidation with any other corporation or business organization, if there is a
failure by the surviving corporation or business organization to adopt
specifically and agree to continue the Plan.
12.3 SUSPENSION OF CONTRIBUTIONS. In the event of a suspension of
the Employer contributions, the Employer shall continue the remaining aspects of
the Plan during the period of the suspension.
12.4 ALLOCATION AND DISTRIBUTION. This Paragraph 12.4 shall become
operative upon a complete termination of the Plan. The provisions of this
Paragraph 12.4 also shall become operative in the event of a partial termination
of the Plan, as determined by the Employer, but only with respect to that
portion of the Plan attributable to the Participants to whom the partial
termination is applicable. Upon the effective date of any such event,
notwithstanding any other provisions of the Plan, no persons who were not
theretofore Participants shall be eligible to become Participants, the value of
the interest of all Participants and Beneficiaries shall be determined and
become 100% vested and, after deduction of estimated expenses in liquidating
and, if applicable, paying Plan benefits, paid to them as soon as is practicable
after such termination.
12.5 SUCCESSOR TO EMPLOYER. Any corporation or other business
organization which is a successor to the Employer by reason of a consolidation,
merger, or purchase of substantially all of the assets of the Employer shall
have the right to become a party to the Plan by adopting the same by resolution
of the entity's board of directors or other appropriate governing body. If,
within ninety (90) days from the effective date of such consolidation, merger,
or sale of assets, such new entity does not become a party hereto, as above
provided, the Plan automatically shall be terminated, and the provisions of
Paragraph 12.4 shall become operative.
- 24 -
<PAGE> 26
ARTICLE XIII. - MISCELLANEOUS
13.1 LIMITATIONS ON LIABILITY OF EMPLOYER. Neither the establishment
of the Plan nor any modification thereof, nor the creation of any account under
the Plan, nor the payment of any benefits under the Plan shall be construed as
giving to any Participant or other person any legal or equitable right against
the Employer, or any officer or employer thereof except as provided by law or by
any Plan provision. The Employer does not in any way guarantee any Participant's
Account from loss or depreciation, whether caused by poor investment performance
of an investment or the inability to realize upon an investment due to an
insolvency affecting an investment vehicle or any other reason. In no event
shall the Employer, or any successor, employee, officer, director, or
stockholder of the Employer, be liable to any person on account of any claim
arising by reason of the provisions of the Plan or of any instrument or
instruments implementing its provisions, or for the failure of any Participant,
Beneficiary, or other person to be entitled to any particular tax consequences
with respect to the Plan, or any credit or distribution hereunder.
13.2 CONSTRUCTION. If any provision of the Plan is held to be
illegal or void, such illegality or invalidity shall not affect the remaining
provisions of the Plan, but shall be fully severable, and the Plan shall be
construed and enforced as if said illegal or invalid provision had never been
inserted herein. For all purposes of the Plan, where the context admits, the
singular shall include the plural, and the plural shall include the singular.
Headings of Articles and Paragraphs herein are inserted only for convenience of
reference and are not to be considered in the construction of the Plan. The laws
of the State of Arizona shall govern, control, and determine all questions of
law arising with respect to the Plan and the interpretation and validity of its
respective provisions, except where those laws are preempted by the laws of the
United States. Participation under the Plan
- 25 -
<PAGE> 27
will not give any Participant the right to be retained in the service of the
Employer nor any right or claim to any benefit under the Plan unless such right
or claim has specifically accrued hereunder.
The Plan is intended to be and at all times shall be interpreted and
administered so as to qualify as an unfunded deferred compensation plan, and no
provision of the Plan shall be interpreted so as to give any individual any
right in any assets of the Employer which right is greater than the rights of a
general unsecured creditor of the Employer.
13.3 SPENDTHRIFT PROVISION. No amount payable to a Participant or a
Beneficiary under the Plan will, except as otherwise specifically provided by
law, be subject in any manner to anticipation, alienation, attachment,
garnishment, sale, transfer, assignment (either at law or in equity), levy,
execution, pledge, encumbrance, charge, or any other legal or equitable process,
and any attempt to do so will be void; nor will any benefit be in any manner
liable for or subject to the debts, contracts, liabilities, engagements, or
torts of the person entitled thereto. Further, (i) the withholding of taxes from
Plan benefit payments, (ii) the recovery under the Plan of overpayments of
benefits previously made to a Participant or Beneficiary, (iii) if applicable,
the transfer of benefit rights from the Plan to another plan, or (iv) the direct
deposit of benefit payments to an account in a banking institution (if not
actually part of an arrangement constituting an assignment or alienation) shall
not be construed as an assignment or alienation.
In the event that any Participant's or Beneficiary's benefits
hereunder are garnished or attached by order of any court, the Employer may
bring an action or a declaratory judgment in a court of competent jurisdiction
to determine the proper recipient of the benefits to be paid under the Plan.
During the pendency of said action, any benefits that become payable shall be
held as credits to the Participant's or Beneficiary's Account or, if the
Employer prefers, paid into the court as they
- 26 -
<PAGE> 28
become payable, to be distributed by the court to the recipient as the court
deems proper at the close of said action.
- 27 -
<PAGE> 29
IN WITNESS WHEREOF, the Employer has caused the Plan to be executed
effective as of the 1st day of January, 1996.
SCHUFF STEEL COMPANY, an Arizona
corporation
By: __________________________________
Its: ____________________________
- 28 -
<PAGE> 30
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C>
RECITALS............................................................. - 1 -
I. - DEFINITIONS................................................... - 1 -
1.1 ACCOUNT................................................. - 1 -
1.2 BENEFICIARY............................................. - 1 -
1.3 CODE.................................................... - 2 -
1.4 EFFECTIVE DATE.......................................... - 2 -
1.5 ELIGIBLE EMPLOYEE....................................... - 2 -
1.6 EMPLOYER................................................ - 2 -
1.7 ENTRY DATE.............................................. - 3 -
1.8 FORFEITURE.............................................. - 3 -
1.9 INVESTMENT COMMITTEE.................................... - 3 -
1.10 NET PROFITS............................................. - 3 -
1.11 NORMAL RETIREMENT AGE................................... - 3 -
1.12 PARTICIPANT............................................. - 3 -
1.13 PLAN.................................................... - 3 -
1.14 PLAN YEAR............................................... - 3 -
1.15 PLAN QUARTER............................................ - 4 -
1.16 RETIREMENT.............................................. - 4 -
1.17 TOTAL AND PERMANENT DISABILITY.......................... - 4 -
1.18 TRUST................................................... - 4 -
1.19 TRUST FUND.............................................. - 4 -
1.20 TRUSTEE................................................. - 4 -
II . - ELIGIBILITY AND PARTICIPATION................................. - 4 -
2.1 REQUIREMENTS............................................ - 4 -
2.2 RE-EMPLOYMENT........................................... - 5 -
III. - CONTRIBUTIONS TO THE TRUST.................................... - 5 -
3.1 EMPLOYER CONTRIBUTIONS.................................. - 5 -
3.2 MANNER OF ALLOCATION.................................... - 5 -
3.3 PERMISSIBLE TYPES OF EMPLOYER CONTRIBUTIONS............. - 6 -
3.4 LOANS TO PARTICIPANTS................................... - 6 -
IV. - ADMINISTRATION OF ACCOUNTS.................................... - 6 -
4.1 INVESTMENTS............................................. - 6 -
4.2 INVESTMENT IN SINGLE FUND AND REASONABLE RULES.......... - 6 -
</TABLE>
(i)
<PAGE> 31
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
4.3 VALUATION OF ASSETS AND ALLOCATION OF CHANGES............ - 7 -
4.4 ACCOUNTING FOR DISTRIBUTIONS............................. - 7 -
4.5 SEPARATE ACCOUNTS........................................ - 8 -
V. - VESTING........................................................ - 8 -
5.1 ACCOUNT VESTING ON DEATH, RETIREMENT OR TOTAL AND
PERMANENT DISABILITY..................................... - 8 -
5.2 ACCOUNT VESTING ON TERMINATION........................... - 8 -
5.3 FORFEITURE TO EMPLOYER FOR CERTAIN ACTS.................. - 9 -
5.4 CHANGE IN CONTROL........................................ - 9 -
VI. - DISTRIBUTION OF BENEFITS....................................... - 10 -
6.1 AMOUNT................................................... - 10 -
6.2 METHOD OF PAYMENT........................................ - 10 -
(a) Cash Payments............................................ - 10 -
6.3 DEATH BENEFITS........................................... - 12 -
6.4 WAIVER................................................... - 12 -
VII. - BENEFICIARIES; PARTICIPANT DATA................................ - 12 -
7.1 DESIGNATION OF BENEFICIARIES............................. - 12 -
7.2 INFORMATION TO BE FURNISHED BY PARTICIPANTS AND
BENEFICIARIES; INABILITY TO LOCATE PARTICIPANTS OR
BENEFICIARIES............................................ - 13 -
VIII. - COVENANTS OF ELIGIBLE EMPLOYEE................................. - 14 -
8.1 NONCOMPETITION........................................... - 14 -
8.2 NON-DISCLOSURE........................................... - 15 -
8.3 DISCLOSURE............................................... - 15 -
8.4 REMEDIES................................................. - 16 -
8.5 ENFORCEMENT.............................................. - 16 -
IX. - THE TRUST...................................................... - 17 -
9.1 ESTABLISHMENT OF TRUST................................... - 17 -
X. - ADMINISTRATION................................................. - 17 -
10.1 ADMINISTRATIVE AUTHORITY................................. - 17 -
</TABLE>
(ii)
<PAGE> 32
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
10.2 INVESTMENT COMMITTEE.................................... - 19 -
10.3 MUTUAL EXCLUSION OF RESPONSIBILITY...................... - 20 -
10.4 UNIFORMITY OF DISCRETIONARY ACTS........................ - 21 -
10.5 LITIGATION.............................................. - 21 -
10.6 PAYMENT OF ADMINISTRATION EXPENSES...................... - 21 -
10.7 CLAIMS PROCEDURE........................................ - 21 -
XI. - AMENDMENT..................................................... - 23 -
11.1 RIGHT TO AMEND.......................................... - 23 -
11.2 AMENDMENTS TO ENSURE PROPER CHARACTERIZATION OF PLAN.... - 23 -
XII. - TERMINATION................................................... - 24 -
12.1 EMPLOYER'S RIGHT TO TERMINATE OR SUSPEND PLAN........... - 24 -
12.2 AUTOMATIC TERMINATION OF PLAN........................... - 24 -
12.3 SUSPENSION OF CONTRIBUTIONS............................. - 24 -
12.4 ALLOCATION AND DISTRIBUTION............................. - 24 -
12.5 SUCCESSOR TO EMPLOYER................................... - 25 -
XIII. - MISCELLANEOUS................................................. - 25 -
13.1 LIMITATIONS ON LIABILITY OF EMPLOYER.................... - 25 -
13.2 CONSTRUCTION............................................ - 26 -
13.3 SPENDTHRIFT PROVISION................................... - 27 -
</TABLE>
(iii)
<PAGE> 33
EXHIBIT "A"
SCHUFF STEEL COMPANY
SUPPLEMENTAL RETIREMENT AND
DEFERRED COMPENSATION PLAN
TRUST AGREEMENT
<PAGE> 34
SCHUFF STEEL COMPANY
SUPPLEMENTAL RETIREMENT AND
DEFERRED COMPENSATION PLAN
TRUST AGREEMENT
RECITALS
THIS TRUST AGREEMENT is made and entered into effective as of
the 1st day of January, 1996 by and between SCHUFF STEEL COMPANY (the
"Employer"), which sponsors the SCHUFF STEEL COMPANY SUPPLEMENTAL RETIREMENT AND
DEFERRED COMPENSATION PLAN (the "Plan"), and SCOTT SCHUFF (the "Trustee").
The Plan provides for the Employer to pay all Plan benefits
from its general revenues and assets. The Employer wishes to establish a trust
fund for the purpose of providing a source from which to pay certain benefits
under the Plan, such trust fund being subject to the claims of the Employer's
creditors in the event of the Employer's bankruptcy or insolvency. Contributions
to the trust fund shall be held by the Trustee and invested, reinvested and
distributed in accordance with the provisions of this Trust Agreement.
The Trust established by this Trust Agreement is intended to
be a "grantor trust," with the result that the corpus and income of the Trust
are treated for tax purposes as assets and income of the Employer.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the Employer and the Trustee, intending to be legally bound,
declare and agree as follows:
- 1 -
<PAGE> 35
ARTICLE I. - ESTABLISHMENT OF TRUST
1.1 TRUST DEPOSITS. The Employer shall deposit with the
Trustee, in trust (the "Trust"), certain funds, which shall be held,
administered and distributed by the Trustee as provided in this Trust Agreement.
1.2 IRREVOCABILITY. The Trust shall be revocable by the
Employer until the occurrence of a Change of Control, at which time the Trust
shall become irrevocable. For purposes hereof, a "Change of Control" shall be
deemed to occur when there is a sale of substantially all of the assets of the
Employer or when any person (other than David A. Schuff or a descendant of David
A. Schuff) acquires, directly or indirectly, greater than seventy-five percent
(75%) of the aggregate voting power over Schuff Steel Company's voting stock.
1.3 GRANTOR TRUST. The Trust is intended to be a grantor
trust, of which the Employer is the grantor, within the meaning of sub-part E,
part 1, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of
1986, as amended, and shall be construed accordingly.
1.4 PLAN ASSETS. The principal of the Trust, and any earnings
thereon, shall be held separate and apart from other funds of the Employer and
shall be used exclusively for the uses and purposes of the Plan and general
creditors of the Employer as herein set forth. The Plan Participants and their
Beneficiaries shall have no preferred claim on, or any beneficial ownership
interest in, any assets of the Trust. Any rights created under the Plan, and
this Trust Agreement, shall be mere unsecured contractual rights of Plan
Participants and Beneficiaries against the Employer. Any assets held by the
Trust will be subject to the claims of the Employer's general creditors under
federal and state law in the event of Insolvency, as defined herein.
- 2 -
<PAGE> 36
1.5 ACCEPTANCE OF TRUST. The Trustee accepts the Trust
established under the Trust Agreement on the terms and subject to the provisions
set forth herein, and it agrees to discharge and perform fully and faithfully
all of the duties and obligations imposed upon it under this Trust Agreement.
ARTICLE II. - PLAN AS PART OF TRUST AGREEMENT
2.1 INCORPORATION BY REFERENCE. The Plan is expressly
incorporated herein and made a part hereof with the same force and effect as if
the Plan had been fully set forth herein. A copy of the Plan has been delivered
to the Trustee. All capitalized terms defined in the Plan shall have the same
meanings when used herein unless expressly provided to the contrary herein. The
Employer shall deliver to the Trustee copies of all amendments to the Plan made
after the date of this Trust Agreement.
2.2 BENEFIT PROVISIONS. The terms of the Plan shall govern the
amount, form and timing of benefit payments under the Plan to which a Plan
Participant or Beneficiary is entitled.
2.3 AMENDMENT OF PLAN. The incorporation of the Plan into this
Trust Agreement shall not affect the provisions of the Plan concerning the
amendment or termination thereof.
ARTICLE III. - PAYMENTS TO PLAN PARTICIPANTS AND BENEFICIARIES
3.1 PAYMENT DIRECTION AND TAXES. The Employer shall deliver to
the Trustee a statement (the "Payment Direction") that indicates the amounts
payable (net of payroll taxes and withholding) in respect to any Plan
Participant who becomes entitled to receive a distribution from the Plan (or his
or her Beneficiaries), which distribution is a benefit for which the
- 3 -
<PAGE> 37
Employer has made contributions to the Trust, and that provides the time for the
payment of such amounts. Except as otherwise provided herein, the Trustee shall
make payments to a Plan Participant or his or her Beneficiaries in accordance
with such Payment Direction. The Employer shall make provision for the reporting
and withholding of any federal, state or local taxes that may be required to be
withheld with respect to the payment of benefits pursuant to the terms of the
Plan and shall remit such amounts withheld to the appropriate taxing
authorities.
3.2 ENTITLEMENT TO BENEFITS. The entitlement of a Plan
Participant or his or her Beneficiaries to benefits under the Plan shall be as
set forth in the Plan, and any claim for such benefits shall be considered and
reviewed under the procedures set out in the Plan.
3.3 PAYMENTS BY EMPLOYER. The Employer may make payment of
benefits directly to the Plan Participant or his or her Beneficiaries as they
become due under the terms of the Plan. The Employer shall notify the Trustee of
its decision to make payment of benefits directly prior to the time amounts are
payable to a Plan Participant or his or her Beneficiaries.
ARTICLE IV. - TRUSTEE RESPONSIBILITY WHEN EMPLOYER IS INSOLVENT
4.1 CESSATION OF PAYMENTS ON EMPLOYER INSOLVENCY. The Trustee
shall cease payment of benefits to the Plan Participant or his or her
Beneficiaries if the Employer is Insolvent. The Employer shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) the Employer is unable
to pay its debts as they become due, or (ii) the Employer is subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.
4.2 CLAIMS OF CREDITORS. At all times during the continuance
of this Trust, the principal and income of the Trust shall be subject to claims
of general creditors of the Employer under federal and state law as set forth
below.
-4-
<PAGE> 38
(a) The Board of Directors and the chief executive officer of
the Employer shall have the duty to inform the Trustee in writing of
the Employer's Insolvency. If a person claiming to be a creditor of the
Employer alleges in writing to the Trustee that the Employer has become
Insolvent, the Trustee shall determine whether the Employer is
Insolvent and, pending such determination, the Trustee shall
discontinue payment of benefits to Plan Participants and Beneficiaries.
(b) Unless the Trustee has actual knowledge of the Employer's
Insolvency, or has received notice from the Employer or a person
claiming to be a creditor alleging that the Employer is Insolvent, the
Trustee shall have no duty to inquire whether the Employer is
Insolvent. The Trustee may in all events rely on such evidence
concerning the Employer's solvency as may be furnished to the Trustee
and that provides the Trustee with a reasonable basis for making a
determination concerning the Employer's solvency.
(c) If at any time the Trustee has determined that the
Employer is Insolvent, the Trustee shall discontinue payments to Plan
Participants and Beneficiaries and shall hold the assets of the Trust
for the benefit of the Employer's general creditors. Nothing in this
Trust Agreement shall in any way diminish any rights of any Plan
Participant or Beneficiary to pursue his or her rights as a general
creditor of the Employer with respect to benefits due under the Plan or
otherwise.
(d) The Trustee shall resume the payment of benefits to the
Plan Participants and Beneficiaries in accordance with the terms of
this Trust Agreement only after the Trustee has determined that the
Employer is not Insolvent (or is no longer Insolvent).
- 5 -
<PAGE> 39
(e) Except as provided herein and in Paragraph 12.2, the
Employer shall have no right or power to direct the Trustee to return
to the Employer or to divert to others any of the Trust assets before
all payments of benefits have been made to all Plan Participants and
Beneficiaries (or to the Employer, in the case of a Forfeiture of a
Participant's benefit upon a termination of employment which results in
a Forfeiture under the terms of the Plan or the inability to locate a
payee under the terms of the Plan) pursuant to the terms of the Plan.
ARTICLE V. - INVESTMENT AUTHORITY
5.1 TRUSTEE AUTHORITY. All rights associated with assets of
the Trust shall be exercised by the Trustee or the Investment Committee
appointed pursuant to Paragraph 10.2 of the Plan (as the case may be), and shall
in no event be exercisable by or rest with the Plan Participant or the Employer.
The Trustee shall have the following powers with respect to any and all monies,
securities and other assets at any time held by it and constituting part or all
of the Trust, such powers, subject to Paragraph 5.2, to be exercised by it in
its sole discretion or as directed by the Investment Committee (as the case may
be):
(a) To purchase or subscribe for and invest in any
securities, but not including any securities of the Trustee or any
affiliate of the Trustee, and to retain any such securities in the
Trust. Without in any way intending to limit the generality of the
foregoing, the said term "securities" shall be deemed to include common
and preferred stocks, mortgages, debentures, bonds, notes or other
evidences of indebtedness, and other forms of securities, including
those issued by the Employer; provided, however, that no stock,
- 6 -
<PAGE> 40
securities or evidence of indebtedness of the Employer or its employees
shall be acquired by or held unless the Trustee is so directed by the
Investment Committee.
(b) To sell, transfer and convey for cash or on credit,
convert, redeem, exchange for other securities, or otherwise to dispose
of any securities at any time held by it.
(c) To exercise any conversion privilege and/or subscription
right available in connection with any securities at any time held by
it; to oppose or to consent to the reorganization, consolidation,
merger, or readjustment of the finances of any corporation, company or
association or to the sale, mortgage, pledge or lease of the property
of any corporation, company or association or to the sale, mortgage,
pledge or lease of the property of any corporation, company or
association, any of the securities which may at any time be held by it,
and to do any act with reference thereto, including the exercise of
options, the making of agreements or subscriptions and the payment of
expenses, assessments or subscriptions, which may be deemed necessary
or advisable in connection therewith and to hold and retain any
securities which it may so acquire.
(d) To vote, personally or by general or limited proxy, any
securities which may be held by it at any time and, similarly, to
exercise, personally or by general or limited proxy, any right
appurtenant to any securities held by it at any time.
(e) To register any securities held by it hereunder in its own
name or in the name of a nominee, or in any form permitting title to
pass by delivery, providing the records of the Trustee shall clearly
indicate the ownership of any asset of the Trust.
- 7 -
<PAGE> 41
(f) To make, execute and deliver any and all mortgages,
contracts, consents, waivers, releases or other instruments in writing
necessary or proper for the accomplishment of any of the foregoing
powers.
(g) To invest and reinvest all or any portion of the Trust
in units of participation in one or more common, collective or
commingled trust funds that may be established and maintained by the
Trustee. Any such common, collective or commingled trust fund may be
specifically designated for investment in guaranteed investment
contracts.
(h) To invest any part or all of the Trust (including cash
balances) in certificates of deposit, demand or time deposits, savings
accounts, money market accounts or similar investments, which bear a
reasonable rate of interest.
5.2 INVESTMENT COMMITTEE AUTHORITY. The Investment Committee
shall have the right at any time, and from time to time in its sole discretion,
to direct the Trustee as to the investment of the Trust Fund. This right is
exercisable by the Investment Committee in a fiduciary capacity without the
approval or consent of the Trustee. In addition, the Investment Committee may,
from time to time and in its sole discretion, provide an investment and/or asset
allocation policy which the Trustee shall follow when making investment
decisions hereunder.
5.3 INDEMNIFICATION. If the Trustee invests any or all of the
Trust Fund pursuant to the directions of the Investment Committee, the Employer
agrees to indemnify and hold harmless the Trustee from any claim of loss to the
Trust Fund arising out of the Trustee's compliance with the Investment
Committee's investment directions.
ARTICLE VI. - DISPOSITION OF INCOME
- 8 -
<PAGE> 42
6.1 DISPOSITION OF INCOME. During the term of this Trust, all
income received by the Trust shall be accumulated and reinvested.
ARTICLE VII. - ACCOUNTING BY TRUSTEE
7.1 ACCOUNTING BY TRUSTEE. The Trustee shall keep accurate and
detailed records of all investments, receipts, disbursements, and all other
transactions required to be made, including such specific records as shall be
agreed upon in writing between the Employer and the Trustee. Within ninety (90)
days following the close of each calendar year and within ninety (90) days after
the removal or resignation of the Trustee, the Trustee shall deliver to the
Employer a written account of its administration of the Trust during such year
or during the period from the close of the last preceding year to the date of
such removal or resignation, setting forth all investments, receipts,
disbursements and other transactions effected by it, including a description of
all securities and investments purchased and sold with the cost or net proceeds
of such purchases or sales (accrued interest paid or receivable being shown
separately), and showing all cash, securities and other property held in the
Trust at the end of such year or as of the date of such removal or resignation,
as the case may be.
ARTICLE VIII. - RESPONSIBILITY OF THE TRUSTEE
8.1 PRUDENT PERSON. The Trustee shall act with the care,
skill, prudence and diligence under the circumstances then prevailing that a
prudent person acting in like capacity and familiar with such matters would use
in the conduct of an enterprise of a like character and with like aims;
provided, however, that the Trustee shall incur no liability to any person for
any action taken pursuant to a direction, request or approval given by either
the Employer or the Investment Committee which is contemplated by, and in
conformity with the terms of the Plan or this Trust and
- 9 -
<PAGE> 43
is given in writing by the Employer or the Investment Committee. In the event of
a dispute between the Employer and a party, the Trustee may apply to a court of
competent jurisdiction to resolve the dispute.
8.2 TRUSTEE INDEMNIFICATION. If the Trustee undertakes or
defends any litigation arising in connection with this Trust (except an action
by the Employer or any Plan Participant or Beneficiary for the Trustee's breach
of duty hereunder), the Employer agrees to indemnify the Trustee against the
Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments. If the Employer does not pay such costs, expenses and liabilities
in a reasonable and timely manner, the Trustee may obtain payment from the
Trust.
8.3 LEGAL COUNSEL. The Trustee may consult with legal counsel
with respect to any of its duties or obligations hereunder.
8.4 HIRING AGENTS. The Trustee may hire agents, accountants,
actuaries, attorneys, investment advisors, financial consultants or other
professionals to assist it in performing any of its duties or obligations
hereunder.
8.5 TRUSTEE POWERS. The Trustee shall have, without exclusion,
all powers conferred on trustees by applicable law, unless expressly provided
otherwise herein; provided, however, that if an insurance policy is held as an
asset of the Trust, the Trustee shall have no power to name a beneficiary of the
policy other than the Trust, to assign the policy (as distinct from conversion
of the policy to a different form) other than to a successor trustee, or to loan
to any person the proceeds of any borrowing against such policy.
- 10 -
<PAGE> 44
8.6 LIMITATION ON POWERS. Notwithstanding any powers granted
to the Trustee pursuant to this Trust Agreement or to applicable law, the
Trustee shall not have any power that could give this Trust the objective of
carrying on a business and dividing the gains therefrom, within the meaning of
Section 301.7701-2 of the Procedure and Administrative Regulations promulgated
pursuant to the Internal Revenue Code.
ARTICLE IX. - FEES AND EXPENSES OF THE TRUSTEE
9.1 TRUSTEE EXPENSES AND FEES. The Employer shall pay all
expenses of administering the Plan and the Trust and all fees and expenses with
respect to which the Trustee is entitled to compensation or reimbursement. If
not so paid, the fees and expenses shall be paid from the Trust.
ARTICLE X. - RESIGNATION AND REMOVAL OF THE TRUSTEE
10.1 TRUSTEE RESIGNATION. The Trustee may resign at any time
by written notice to the Employer, which shall be effective thirty (30) days
after receipt of such notice unless the Employer and the Trustee agree
otherwise.
10.2 TRUSTEE REMOVAL. The Trustee may be removed by the
Employer, on thirty (30) days notice or upon shorter notice accepted by the
Trustee.
10.3 TRANSFER OF ASSETS. Upon resignation or removal of the
Trustee and appointment of a successor trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be completed within
sixty (60) days after receipt of the notice of resignation, removal or transfer,
unless the Employer extends the time limit.
10.4 APPOINTMENT OF SUCCESSOR. If the Trustee resigns or is
removed, a successor shall be appointed, in accordance with the following
section, by the effective date of
- 11 -
<PAGE> 45
resignation or removal. If no such appointment has been made, the Trustee may
apply to a court of competent jurisdiction for appointment of a successor or for
instructions. All expenses of the Trustee in connection with the proceeding
shall be allowed as administrative expenses of the Trust.
ARTICLE XI. - APPOINTMENT OF SUCCESSOR
11.1 APPOINTMENT OF SUCCESSOR. If the Trustee resigns or is
removed in accordance with Paragraph 10.1 or 10.2 hereof, the Employer may
appoint any third party, as a successor to replace the Trustee upon resignation
or removal. The appointment shall be effective when accepted in writing by the
new trustee, who shall have all of the rights and powers of the former trustee.
The former trustee shall execute any instrument necessary or reasonably
requested by the Employer or the successor trustee to evidence the transfer.
ARTICLE XII. - AMENDMENT OR TERMINATION
12.1 AMENDMENT. This Trust Agreement may be amended by a
written instrument executed by the Trustee and the Employer. Notwithstanding the
foregoing, no such amendment shall conflict with the terms of the Plan, shall
cause funds of the Trust to be diverted other than to purposes of payment of
Plan benefits (except in the case of Insolvency) or otherwise as provided
hereunder or shall make the Trust revocable after it has become irrevocable in
accordance herewith.
12.2 TERMINATION. The Trust shall not terminate until the date
on which all Plan Participants and Beneficiaries are no longer entitled to
benefits pursuant to the terms of the Plan. Upon termination of the Trust, any
assets remaining in the Trust shall be returned to the Employer.
ARTICLE XIII. - MISCELLANEOUS
- 12 -
<PAGE> 46
13.1 VALIDITY OF PROVISIONS. Any provision of this Trust
Agreement prohibited by law shall be ineffective to the extent of any such
prohibition, without invalidating the remaining provisions hereof.
13.2 NO ASSIGNMENT OF BENEFITS. Benefits payable to a Plan
Participant and his or her Beneficiaries under this Trust Agreement may not be
anticipated, assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy, execution or other
legal or equitable process.
13.3 GOVERNING LAW. This Trust Agreement shall be governed by
and construed in accordance with the laws of the State of Arizona.
ARTICLE XIV. - EFFECTIVE DATE
14.1 EFFECTIVE DATE. The effective date of this Trust
Agreement is January 1, 1996.
IN WITNESS WHEREOF, this Trust Agreement has been duly
executed effective as of the day and year first above written.
EMPLOYER:
SCHUFF STEEL COMPANY, an Arizona
corporation
By: __________________________________
DAVID A. SCHUFF
Its: President
TRUSTEE:
By: __________________________________
SCOTT SCHUFF
- 13 -
<PAGE> 47
TABLE OF CONTENTS
Article Page
- ------- ----
RECITALS .............................................................. - 1 -
I. - ESTABLISHMENT OF TRUST............................................ - 2 -
1.1 TRUST DEPOSITS....................................... - 2 -
1.2 IRREVOCABILITY....................................... - 2 -
1.3 GRANTOR TRUST........................................ - 2 -
1.4 PLAN ASSETS.......................................... - 2 -
1.5 ACCEPTANCE OF TRUST.................................. - 3 -
II. - PLAN AS PART OF TRUST AGREEMENT.................................. - 3 -
2.1 INCORPORATION BY REFERENCE........................... - 3 -
2.2 BENEFIT PROVISIONS................................... - 3 -
2.3 AMENDMENT OF PLAN.................................... - 3 -
III. - PAYMENTS TO PLAN PARTICIPANTS AND BENEFICIARIES................. - 3 -
3.1 PAYMENT DIRECTION AND TAXES.......................... - 3 -
3.2 ENTITLEMENT TO BENEFITS.............................. - 4 -
3.3 PAYMENTS BY EMPLOYER................................. - 4 -
IV. - TRUSTEE RESPONSIBILITY WHEN EMPLOYER IS INSOLVENT................ - 4 -
4.1 CESSATION OF PAYMENTS ON EMPLOYER INSOLVENCY......... - 4 -
4.2 CLAIMS OF CREDITORS.................................. - 5 -
V. - INVESTMENT AUTHORITY.............................................. - 6 -
5.1 TRUSTEE AUTHORITY.................................... - 6 -
5.2 INVESTMENT COMMITTEE AUTHORITY....................... - 8 -
5.3 INDEMNIFICATION...................................... - 9 -
VI. - DISPOSITION OF INCOME............................................ - 9 -
6.1 DISPOSITION OF INCOME................................ - 9 -
VII. - ACCOUNTING BY TRUSTEE........................................... - 9 -
7.1 ACCOUNTING BY TRUSTEE................................ - 9 -
VIII. - RESPONSIBILITY OF THE TRUSTEE................................. - 10 -
8.1 PRUDENT PERSON...................................... - 10 -
8.2 TRUSTEE INDEMNIFICATION............................. - 10 -
(i)
<PAGE> 48
TABLE OF CONTENTS
(continued)
ARTICLE PAGE
- ------- ----
8.3 LEGAL COUNSEL....................................... - 10 -
8.4 HIRING AGENTS....................................... - 10 -
8.5 TRUSTEE POWERS...................................... - 11 -
8.6 LIMITATION ON POWERS................................ - 11 -
IX. - FEES AND EXPENSES OF THE TRUSTEE................................ - 11 -
9.1 TRUSTEE EXPENSES AND FEES........................... - 11 -
X. - RESIGNATION AND REMOVAL OF THE TRUSTEE........................... - 11 -
10.1 TRUSTEE RESIGNATION.................................... - 11 -
10.2 TRUSTEE REMOVAL........................................ - 11 -
10.3 TRANSFER OF ASSETS..................................... - 12 -
10.4 APPOINTMENT OF SUCCESSOR............................... - 12 -
XI. - APPOINTMENT OF SUCCESSOR........................................ - 12 -
11.1 APPOINTMENT OF SUCCESSOR............................... - 12 -
XII. - AMENDMENT OR TERMINATION....................................... - 12 -
12.1 AMENDMENT.............................................. - 12 -
12.2 TERMINATION............................................ - 13 -
XIII. - MISCELLANEOUS................................................. - 13 -
13.1 VALIDITY OF PROVISIONS................................. - 13 -
13.2 NO ASSIGNMENT OF BENEFITS.............................. - 13 -
13.3 GOVERNING LAW.......................................... - 13 -
XIV. - EFFECTIVE DATE................................................. - 13 -
14.1 EFFECTIVE DATE......................................... - 13 -
(ii)
<PAGE> 49
ADDENDUM A
Leslie R. Dias
Don T. Engler
Randy T. Eskelson
Scott Esmeier
Richard M. Hampton
Forrest Paysnoe
Donald T. Pekau
Dennis F. Randall
Michael T. Wittig
Kenneth F. Zylstra
<PAGE> 1
EXHIBIT 10.12(a)
SCHUFF STEEL COMPANY
1997 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN. The purpose of this 1997 Stock Option Plan, as
amended (the "Plan"), of Schuff Steel Company, an Arizona corporation
("Company"), is to provide the Company with a means of attracting and retaining
the services of highly motivated and qualified directors and key personnel. The
Plan is intended to advance the interests of the Company by affording to
directors and key employees, upon whose skill, judgment, initiative and efforts
the Company is largely dependent for the successful conduct of its business, an
opportunity for investment in the Company and the incentives inherent in stock
ownership in the Company. In addition, the Plan contemplates the opportunity for
investment in the Company by employees of companies that do business with the
Company. For purposes of this Plan, the term Company shall include subsidiaries,
if any, of the Company.
2. LEGAL COMPLIANCE. It is the intent of the Plan that all options
granted under it ("Options") shall be either "Incentive Stock Options" ("ISOs"),
as such term is defined in Section 422 of the Internal Revenue Code of 1986, as
amended ("Code"), or non-qualified stock options ("NQOs"); provided, however,
ISOs shall be granted only to employees of the Company. An Option shall be
identified as an ISO or an NQO in writing in the document or documents
evidencing the grant of the Option. All Options that are not so identified as
ISOs are intended to be NQOs. In addition, the Plan provides for the grant of
NQOs to employees of companies that do business with the Company. It is the
further intent of the Plan that it conform in all respects with the requirements
of Rule 16b-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended ("Rule 16b-3"). To the extent that any aspect
of the Plan or its administration shall at any time be viewed as inconsistent
with the requirements of Rule 16b-3 or, in connection with ISOs, the Code, such
aspect shall be deemed to be modified, deleted or otherwise changed as necessary
to ensure continued compliance with such provisions.
3. ADMINISTRATION OF THE PLAN.
3.1 PLAN COMMITTEE. The Plan shall be administered by the Board
of Directors (the "Board") until such time as the board appoints a committee
("Committee"). The members of the Committee shall be appointed from time to time
by the Board and shall consist of not less than two (2) persons, each of whom
shall qualify as a "non-employee director" under Rule 16b-3. Such persons shall
be directors of the Company. All references herein to the "Committee" shall
include the Board prior to the time that a Committee is appointed or at any time
thereafter that the Board is authorized to act in accordance with this Plan.
3.2 GRANTS OF OPTIONS BY THE COMMITTEE. In accordance with the
provisions of the Plan, the Committee, by resolution, shall select those
eligible persons to whom Options shall be granted ("Optionees"); shall determine
the time or times at which each Option shall be granted, whether an Option is an
ISO or an NQO and the number of shares to be subject to each Option; and shall
fix the time and manner in which the Option may be exercised, the Option
exercise
<PAGE> 2
price, and the Option period. The Committee shall determine the form of option
agreement to evidence the foregoing terms and conditions of each Option, which
need not be identical, in the form provided for in SECTION 7. Such option
agreement may include such other provisions as the Committee may deem necessary
or desirable consistent with the Plan, the Code and Rule 16b-3.
3.3 COMMITTEE PROCEDURES. The Committee from time to time may
adopt such rules and regulations for carrying out the purposes of the Plan as it
may deem proper and in the best interests of the Company. The Committee shall
keep minutes of its meetings and records of its actions. A majority of the
members of the Committee shall constitute a quorum for the transaction of any
business by the Committee. The Committee may act at any time by an affirmative
vote of a majority of those members voting. Such vote may be taken at a meeting
(which may be conducted in person or by any telecommunication medium) or by
written consent of Committee members without a meeting.
3.4 FINALITY OF COMMITTEE ACTION. The Committee shall resolve all
questions arising under the Plan and option agreements entered into pursuant to
the Plan. Each determination, interpretation, or other action made or taken by
the Committee shall be final and conclusive and binding on all persons,
including, without limitation, the Company, its shareholders, the Committee and
each of the members of the Committee, and the directors, officers and employees
of the Company, including Optionees and their respective successors in interest.
3.5 NON-LIABILITY OF COMMITTEE MEMBERS. No Committee member shall
be liable for any action or determination made by him or her in good faith with
respect to the Plan or any Option granted under it.
4. BOARD POWER TO AMEND, SUSPEND, OR TERMINATE THE PLAN. The Board may,
from time to time, make such changes in or additions to the Plan as it may deem
proper and in the best interests of the Company and its shareholders. The Board
may also suspend or terminate the Plan at any time, without notice, and in its
sole discretion. Notwithstanding the foregoing, no such change, addition,
suspension, or termination by the Board shall (i) materially impair any Option
previously granted under the Plan without the express written consent of the
optionee; or (ii) be undertaken without shareholder approval if such shareholder
approval is required by applicable law or regulation.
5. SHARES SUBJECT TO THE PLAN. For purposes of the Plan, the Committee
is authorized to grant Options for up to 600,000 shares of the Company's common
stock ("Common Stock"), or the number and kind of shares of stock or other
securities which, in accordance with SECTION 13, shall be substituted for such
shares of Common Stock or to which such shares shall be adjusted. The Committee
is authorized to grant Options under the Plan with respect to such shares. Any
or all unsold shares subject to an Option which for any reason expires or
otherwise terminates (excluding shares returned to the Company in payment of the
exercise price for additional shares) may again be made subject to grant under
the Plan.
2
<PAGE> 3
6. OPTIONEES. Options shall be granted only to officers, directors or
key employees of the Company or employees of companies that do business with the
Company designated by the Committee from time to time as Optionees. Any Optionee
may hold more than one option to purchase Common Stock, whether such option is
an Option held pursuant to the Plan or otherwise. An Optionee who is an employee
of the Company ("Employee Optionee") and who holds an Option must remain a
continuous full or part-time employee of the Company from the time of grant of
the Option to him until the time of its exercise, except as provided in SECTION
10.3.
7. GRANTS OF OPTIONS. The Committee shall have the sole discretion to
grant Options under the Plan and to determine whether any Option shall be an ISO
or an NQO, except that any Options granted to members of the Committee shall be
granted by the Board. The terms and conditions of Options granted under the Plan
may differ from one another as the Committee, in its absolute discretion, shall
determine as long as all Options granted under the Plan satisfy the requirements
of the Plan. Upon determination by the Committee that an Option is to be granted
to an Optionee, a written option agreement evidencing such Option shall be given
to the Optionee, specifying the number of shares subject to the Option, the
Option exercise price, whether the Option is an ISO or an NQO, and the other
individual terms and conditions of such Option. Such option agreement may
incorporate generally applicable provisions from the Plan, a copy of which shall
be provided to all Optionees at the time of their initial grants under the Plan
or within a reasonable period of time thereafter. The Option shall be deemed
granted as of the date specified in the grant resolution of the Committee, and
the option agreement shall be dated as of the date of such resolution.
Notwithstanding the foregoing, unless the Committee consists solely of
non-employee directors under Rule 16b-3, any Option granted to an executive
officer, director or 10% beneficial owner for purposes of Section 16 of the
Securities Exchange Act of 1934, as amended ("Section 16 of the 1934 Act"),
shall either be (a) conditioned upon the Optionee's agreement not to sell the
shares of Common Stock underlying the Option for at least six (6) months after
the date of grant or (b) approved by the entire Board or by the shareholders of
the Company. Notwithstanding the above and subject to adjustment as provided in
Section 13, the number of shares subject to options that may be granted to any
one Optionee under this Plan shall be limited to 300,000.
8. OPTION EXERCISE PRICE. The price per share to be paid by the Optionee
at the time an ISO is exercised shall not be less than one hundred percent
(100%) of the Fair Market Value (as hereinafter defined) of one share of the
optioned Common Stock on the date on which the Option is granted. No ISO may be
granted under the Plan to any person who, at the time of such grant, owns
(within the meaning of Section 424(d) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or of any parent thereof, unless the exercise price of such ISO is
at least equal to one hundred and ten percent (110%) of Fair Market Value on the
date of grant. The price per share to be paid by the Optionee at the time an NQO
is exercised shall be determined by the Committee. For purposes of the Plan, the
"Fair Market Value" of a share of the Company's Common Stock as of a given date
shall be: (i) the closing price of a share of the Company's Common Stock on the
principal exchange on which shares of the Company's Common Stock are then
trading, if any, on the day immediately preceding such date, or, if shares were
not traded on such date, then on the next preceding trading day during which a
sale occurred; or (ii) if the Company's Common Stock is not traded on an
exchange but is quoted on Nasdaq or a successor quotation system, (1) the last
sales price (if the Common Stock is then
3
<PAGE> 4
listed as a National Market Issue under the Nasdaq National Market System) or
(2) the closing representative bid price (in all other cases) for the Common
Stock on the day immediately preceding such date as reported by Nasdaq or such
successor quotation system; or (iii) if the Company's Common Stock is not
publicly traded on an exchange and not quoted on Nasdaq or a successor quotation
system, the closing bid price for the Common Stock on such date as determined in
good faith by the Committee; or (iv) if the Company's Common Stock is not
publicly traded, the fair market value established by the Committee acting in
good faith. In addition, with respect to any ISO, the Fair Market Value on any
given date shall be determined in a manner consistent with any regulations
issued by the Secretary of the Treasury for the purpose of determining fair
market value of securities subject to an ISO plan under the Code.
9. CEILING OF ISO GRANTS. The aggregate Fair Market Value (determined at
the time any ISO is granted) of the Common Stock with respect to which an
Optionee's ISOs, together with incentive stock options granted under any other
plan of the Company and any parent, are exercisable for the first time by such
Optionee during any calendar year shall not exceed $100,000. If an Optionee
holds such incentive stock options that become first exercisable (including as a
result of acceleration of exercisability under the Plan) in any one year for
shares having a Fair Market Value at the date of grant in excess of $100,000,
then the most recently granted of such ISOs, to the extent that they are
exercisable for shares having an aggregate Fair Market Value in excess of such
limit, shall be deemed to be NQOs. In addition, the maximum number of shares
under this Plan available for grant as ISOs shall be 600,000.
10. DURATION, EXERCISABILITY, AND TERMINATION OF OPTIONS.
10.1 OPTION PERIOD. The option period shall be determined by the
Committee with respect to each Option granted. In no event, however, may the
option period exceed ten (10) years from the date on which the Option is
granted, or five (5) years in the case of a grant of an ISO to an Optionee who
is a ten percent (10%) shareholder at the date on which the Option is granted as
described in SECTION 8.
10.2 EXERCISABILITY OF OPTIONS. Each Option shall be exercisable
in whole or in consecutive installments, cumulative or otherwise, during its
term as determined in the discretion of the Committee; provided, however, that
no Option shall be exercised or exercisable prior to five (5) years from the
date of grant unless the Company shall have consummated an initial public
offering of the Company's Common Stock pursuant to an effective registration
statement under the Securities Act of 1933, as amended (an "IPO") prior to the
expiration of such five (5) year period.
10.3 TERMINATION OF OPTIONS DUE TO TERMINATION OF EMPLOYMENT,
DISABILITY, OR DEATH OF OPTIONEE. All Options granted under the Plan to any
Employee Optionee shall terminate and may no longer be exercised if the Employee
Optionee ceases, at any time during the period between the grant of the Option
and its exercise, to be an employee of the Company; provided, however, that the
Committee may, in the exercise of its discretion, extend the date to exercise
any Option to a date that extends beyond the date the Optionee terminates
employment with the Company. Notwithstanding the foregoing, (i) if the Employee
Optionee's employment terminates due to disability (as defined in Section
22(e)(3) of the Code and subject to such proof of
4
<PAGE> 5
disability as the Committee may require), such Option may be exercised by the
Employee Optionee (or by his guardian(s), or conservator(s), or other legal
representative(s)) before the earlier of the expiration of twelve (12) months
after such termination or the expiration of the Option (to the extent that the
Option was exercisable by him on the date of the termination of his employment);
or (ii) in the event of the Employee Optionee's death, an Option exercisable by
him at the date of his death shall be exercisable by his legal
representative(s), legatee(s), or heir(s), or by his beneficiary or
beneficiaries so designated by him, as the case may be, within the earlier of
twelve (12) months after his death or the expiration of the Option (to the
extent that the Option was exercisable by him on the date of his death).
11. MANNER OF OPTION EXERCISE; RIGHTS AND OBLIGATIONS OF OPTIONEES.
11.1 WRITTEN NOTICE OF EXERCISE. An Optionee may elect to
exercise an Option in whole or in part, from time to time, subject to the terms
and conditions contained in the Plan and in the agreement evidencing such
Option, by giving written notice of exercise to the Company at its principal
executive office.
11.2 CASH PAYMENT FOR OPTIONED SHARES. If an Option is exercised
for cash, such notice shall be accompanied by a cashier's or personal check, or
money order, made payable to the Company for the full exercise price of the
shares purchased.
11.3 STOCK SWAP FEATURE. At the time of the Option exercise, and
subject to the discretion of the Committee to accept payment in cash only, the
Optionee may determine whether the total purchase price of the shares to be
purchased shall be paid solely in cash or by transfer from the Optionee to the
Company of previously acquired shares of Common Stock, or by a combination
thereof. If the Optionee elects to pay the total purchase price in whole or in
part with previously acquired shares of Common Stock, the value of such shares
shall be equal to their Fair Market Value on the date of exercise, determined by
the Committee in the same manner used for determining Fair Market Value at the
time of grant for purposes of SECTION 8.
11.4 INVESTMENT REPRESENTATION FOR NON-REGISTERED SHARES AND
LEGALITY OF ISSUANCE. The receipt of shares of Common Stock upon the exercise of
an Option shall be conditioned upon the Optionee (or any other person who
exercises the Option on his or her behalf as permitted by SECTION 10.3)
providing to the Committee a written representation that, at the time of such
exercise, it is the intent of such person(s) to acquire the shares for
investment only and not with a view toward distribution. The certificate for
unregistered shares issued for investment shall be restricted by the Company as
to transfer unless the Company receives an opinion of counsel satisfactory to
the Company to the effect that such restriction is not necessary under then
pertaining law. The providing of such representation and such restrictions on
transfer shall not, however, be required upon any person's receipt of shares of
Common Stock under the Plan in the event that, at the time of grant of the
Option relating to such receipt or upon such receipt, whichever is the
appropriate measure under applicable federal or state securities laws, the
shares subject to the Option shall be (i) covered by an effective and current
registration statement under the Securities Act of 1933, as amended, and (ii)
either qualified or exempt from qualification under applicable state securities
laws. The Company shall, however, under no circumstances be required to sell or
issue
5
<PAGE> 6
any shares under the Plan if, in the opinion of the Committee, (i) the issuance
of such shares would constitute a violation by the Optionee or the Company of
any applicable law or regulation of any governmental authority, or (ii) the
consent or approval of any governmental body is necessary or desirable as a
condition of, or in connection with, the issuance of such shares.
11.5 SHAREHOLDER RIGHTS OF OPTIONEE. Upon exercise, the Optionee
(or any other person who exercises the Option on his behalf as permitted by
SECTION 10.3) shall be recorded on the books of the Company as the owner of the
shares, and the Company shall deliver to such record owner one or more duly
issued stock certificates evidencing such ownership. No person shall have any
rights as a shareholder with respect to any shares of Common Stock covered by an
Option granted pursuant to the Plan until such person shall have become the
holder of record of such shares. Except as provided in SECTION 13, no
adjustments shall be made for cash dividends or other distributions or other
rights as to which there is a record date preceding the date such person becomes
the holder of record of such shares.
11.6 HOLDING PERIODS FOR TAX PURPOSES. The Plan does not provide
that an Optionee must hold shares of Common Stock acquired under the Plan for
any minimum period of time. Optionees are urged to consult with their own tax
advisors with respect to the tax consequences to them of their individual
participation in the Plan.
12. SUCCESSIVE GRANTS. Successive grants of Options may be made to any
Optionee under the Plan.
13. ADJUSTMENTS.
(a) Except as provided herein, if the outstanding Common Stock
shall be hereafter increased or decreased, or changed into or exchanged for a
different number or kind of shares or other securities of the Company or of
another corporation, by reason of a recapitalization, reclassification,
reorganization, merger, consolidation, share exchange, or other business
combination in which the Company is the surviving parent corporation, stock
split-up, combination of shares, or dividend or other distribution payable in
capital stock or rights to acquire capital stock, appropriate adjustment shall
be made by the Committee in the number and kind of shares for which options may
be granted under the Plan. In addition, the Committee shall make appropriate
adjustment in the number and kind of shares as to which outstanding and
unexercised options shall be exercisable, to the end that the proportionate
interest of the holder of the option shall, to the extent practicable, be
maintained as before the occurrence of such event. Such adjustment in
outstanding options shall be made without change in the total price applicable
to the unexercised portion of the option but with a corresponding adjustment in
the exercise price per share.
(b) In the event of the dissolution or liquidation of the
Company, any outstanding and unexercised options shall terminate as of a future
date to be fixed by the Committee; provided, however, that the Committee shall
accelerate the exercisability of such options and shall give each Optionee at
least 30 days to exercise such options prior to their termination.
(c) In the event of a Reorganization (as hereinafter defined),
then,
6
<PAGE> 7
(i) If there is no plan or agreement with respect to the
Reorganization ("Reorganization Agreement"), or if the Reorganization Agreement
does not specifically provide for the adjustment, change, conversion, or
exchange of the outstanding and unexercised options for cash or other property
or securities of another corporation, then any outstanding and unexercised
options shall terminate as of a future date to be fixed by the Committee;
provided, however, that the Committee shall accelerate the exercisability of
such options and shall give each Optionee at least 30 days to exercise such
options prior to their termination; or
(ii) If there is a Reorganization Agreement, and the
Reorganization Agreement specifically provides for the adjustment, change,
conversion, or exchange of the outstanding and unexercised options for cash or
other property or securities of another corporation, then the Committee shall
adjust the shares under such outstanding and unexercised options, and shall
adjust the shares remaining under the Plan which are then available for the
issuance of options under the Plan if the Reorganization Agreement makes
specific provisions therefor, in a manner not inconsistent with the provisions
of the Reorganization Agreement for the adjustment, change, conversion, or
exchange of such options and shares.
(d) The term "Reorganization" as used in this SECTION 13 shall
mean any reorganization, merger, consolidation, share exchange, or other
business combination pursuant to which the Company is not the surviving parent
corporation after the effective date of the Reorganization, or any sale or
lease of all or substantially all of the assets of the Company.
(e) The Committee shall provide to each optionee then holding an
outstanding and unexercised option not less than thirty (30) calendar days'
advanced written notice of any date fixed by the Committee pursuant to this
SECTION 13 and of the terms of any Reorganization Agreement providing for the
adjustment, change, conversion, or exchange of outstanding and unexercised
options.
Any adjustment to any outstanding ISO pursuant to this
SECTION 13, if made by reason of a transaction described in Section 424(a) of
the Code, shall be made so as to conform to the requirements of that Section and
the regulations thereunder. If any other transaction described in Section 424(a)
of the Code affects the Common Stock subject to any unexercised ISO theretofore
granted under the Plan (hereinafter for purposes of this SECTION 13 referred to
as the "old option"), the Board of Directors of the Company or of any surviving
or acquiring corporation may take such action as it deems appropriate, in
conformity with the requirements of that Code Section and the regulations
thereunder, to substitute a new option for the old option, in order to make the
new option, as nearly as may be practicable, equivalent to the old option, or to
assume the old option.
(f) All adjustments and determinations under this SECTION 13
shall be made by the Committee in good faith in its sole discretion.
14. CONTINUED EMPLOYMENT. Neither the creation of the Plan nor the
granting of Option(s) under it shall be deemed to create a right in an Employee
Optionee to continued employment with the Company, and each such Employee
Optionee shall be and shall remain subject to discharge by the Company as though
the Plan had never come into existence.
7
<PAGE> 8
15. TAX WITHHOLDING. The exercise of any Option granted under the Plan
is subject to the condition that if at any time the Company shall determine, in
its discretion, that the satisfaction of withholding tax or other withholding
liabilities under any federal, state or local law is necessary or desirable as a
condition of, or in connection with, such exercise or a later lapsing of time or
restrictions on or disposition of the shares of Common Stock received upon such
exercise, then in such event, the exercise of the Option shall not be effective
unless such withholding shall have been effected or obtained in a manner
acceptable to the Company. When an Optionee is required to pay to the Company an
amount required to be withheld under applicable income tax laws in connection
with the exercise of any Option, the Committee may require the Optionee to
satisfy the obligation, in whole or in part, by withholding shares of Common
Stock having a value equal to the amount required to be withheld. The value of
the Common Stock withheld pursuant to the election shall be determined by the
Committee, in accordance with the criteria set forth in SECTION 8, with
reference to the date the amount of tax to be withheld is determined. The
Optionee shall pay to the Company in cash any amount required to be withheld
that would otherwise result in the withholding of a fractional share.
16. TERM OF PLAN.
16.1 EFFECTIVE DATE. Subject to shareholder approval, the Plan
shall become effective as of February 5, 1997.
16.2 TERMINATION DATE. Except as to options granted and
outstanding under the Plan prior to such time, the Plan shall terminate at
midnight on February 4, 2007, and no Option shall be granted after that time.
Options then outstanding may continue to be exercised in accordance with their
terms. The Plan may be suspended or terminated at any earlier time by the Board
within the limitations set forth in SECTION 4.
17. LIMITS ON TRANSFER. No right or interest of any Optionee in any
Option awarded under this Plan may be pledged, encumbered, or hypothecated to or
in favor of any party other than the Company, or shall be subject to any lien,
obligation, or liability of such Optionee to any other party other than the
Company. Except as otherwise provided by the Committee at the time of grant or
thereafter, no Option shall be assignable or transferable by an Optionee other
than by will or the laws of descent and distribution.
18. NON-EXCLUSIVITY OF THE PLAN. Nothing contained in the Plan is
intended to amend, modify, or rescind any previously approved compensation
plans, programs or options entered into by the Company. This Plan shall be
construed to be in addition to and independent of any and all such other
arrangements. Neither the adoption of the Plan by the Board nor the submission
of the Plan to the shareholders of the Company for approval shall be construed
as creating any limitations on the power or authority of the Board to adopt,
with or without shareholder approval, such additional or other compensation
arrangements as the Board may from time to time deem desirable.
19. GOVERNING LAW. The Plan and all rights and obligations under it
shall be construed and enforced in accordance with the laws of the State of
Arizona.
8
<PAGE> 1
EXHIBIT 10.12(b)
INCENTIVE STOCK OPTION AGREEMENT
This Incentive Stock Option Agreement is made as of this ___ day
of ________, ____ (which date is hereinafter referred to as the "Date of Grant")
by and among SCHUFF STEEL COMPANY, an Arizona corporation (hereinafter referred
to as the "Company"), and ___________________ (hereinafter referred to as
"Employee"). If Employee is presently or subsequently becomes employed by a
subsidiary of the Company, the term "Company" shall be deemed to refer
collectively to Schuff Steel Company, and the subsidiary or subsidiaries which
employ the Employee.
RECITALS
A. The Company has adopted the Schuff Steel Company 1997 Stock Option
Plan, as amended (the "Plan"), as an incentive to attract and retain key
employees, officers and directors whose services are considered unusually
valuable by providing an opportunity to have a proprietary interest in the
success of the Company; and
B. The Company's Board of Directors (the "Board") believes that the
granting of the Option herein described to Employee is consistent with the
stated purposes for which the Plan was adopted;
NOW, THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and Employee agree
as follows:
1. Grant of Option. The Company hereby grants to the Employee the right
and option (hereinafter referred to as the "Option") to purchase an aggregate of
___________________________ shares (such number being subject to adjustment as
provided in Section 13 of the Plan) of the common stock of the Company (the
"Stock") on the terms and conditions set forth herein and in the Plan. This
Option may be exercised in whole or in part and from time to time as
hereinafter provided.
The Option granted under this Agreement is intended to qualify as an
"incentive stock option" under Section 422 of the Internal Revenue Code of 1986,
as amended.
2. Vesting. All of the Options granted hereunder shall vest sixty (60)
months after the Date of Grant, except that, in the event the Company
consummates an IPO (as defined in the Plan) prior to the expiration of such
sixty (60) month period, the Options shall vest as follows:
(a) _______ shares shall vest twelve (12) months after the Date
of Grant;
(b) _______ shares shall vest twenty-four (24) months after the
Date of Grant;
<PAGE> 2
(c) _______ shares shall vest thirty-six (36) months after the
Date of Grant;
(d) _______ shares shall vest forty-eight (48) months after the
Date of Grant; and
(e) ________ shares shall vest sixty (60) months after the Date
of Grant.
3. Purchase Price. The price at which the Employee shall be entitled to
purchase the Stock covered by the Option shall be $_________ per share (the Fair
Market Value on the Date of Grant).
4. Term of Option. The Option hereby granted shall be and remain in
force and effect for a period of ten (10) years from the Date of Grant, through
and including the normal close of business of the Company on ________ __, ____
(hereinafter referred to as the "Expiration Date") subject to earlier
termination as provided herein or in the Plan.
5. Exercise of Option. The Option may be exercised by Employee as to all
or any part of the shares of the Stock then vested. The Option shall be
exercised by Employee by delivery to the Company of written notice of exercise
and payment of the purchase price as provided in Sections 7 and 8 hereof.
6. Individual Dollar Limitation. The aggregate Fair Market Value (as
defined in the Plan) of all shares of Stock with respect to which the Option is
first exercisable by the Employee in any calendar year may not exceed $100,000.
To the extent such limitation is for any reason exceeded, the amount in excess
of $100,000 shall be deemed to not qualify as Incentive Stock Options.
7. Method of Exercising Option. Subject to the terms and conditions of
this option agreement, the Option may be exercised by timely delivery to the
Company of written notice, which notice shall be effective on the date received
by the Company (the "Effective Date"). The notice shall state Employee's
election to exercise the Option, the number of shares in respect of which an
election to exercise has been made, the method of payment elected (see Section 8
hereof), the exact name or names in which the shares of Stock will be registered
and the Social Security number of Employee. Such notice shall be signed by the
Employee and shall be accompanied by payment of the purchase price of such
shares of Stock. In the event the Option shall be exercised by a person or
persons other than Employee pursuant to the terms of this option agreement or
the Plan, such notice shall be signed by such other person or persons and shall
be accompanied by proof acceptable to the Company of the legal right of such
person or persons to exercise the Option. All shares of Stock delivered by the
Company upon exercise of the Option as provided herein shall be fully paid and
nonassessable upon delivery.
-2-
<PAGE> 3
8. Method of Payment for Options. Payment for shares purchased upon the
exercise of the Option shall be made by the Employee in cash or such other
method permitted by the Board or the Committee in its sole discretion, including
(i) tendering shares, (ii) authorizing a third party to sell the shares (or a
sufficient portion thereof) acquired upon exercise of a stock option and
assigning the delivery to the Company of a sufficient amount of the sale
proceeds to pay for all the shares acquired through such exercise, or (iii) any
combination of the above.
9. Confidentiality and Nondisclosure Agreement.
(a) Employee hereby acknowledges and agrees that in the course of
Employee's employment with the Company, Employee has and will become
acquainted with Company Confidential Information (as defined in
subsection (b) of this Section 9), and that Company Confidential
Information has been developed at great expense to the Company, is
proprietary to the Company, and is and shall remain the exclusive
property of the Company. Accordingly, for and in consideration for the
Options granted hereunder, and other good and valuable consideration,
Employee hereby agrees that (i) Employee will not, without the express
written consent of the Company, during Employee's employment with the
Company or at any time thereafter (or until such time as Company
Confidential Information becomes generally known, or readily
ascertainable by proper means, by persons unrelated to the Company),
disclose to others, copy, make any use of, or remove from the Company's
premises any Company Confidential Information, except as Employee's
duties for the Company may specifically require; (ii) in the event of
dispute or litigation, Employee shall have the burden of proof by clear
and convincing evidence that the Company Confidential Information has
become generally known, or readily ascertainable by proper means, by
persons unrelated to the Company; and (iii) upon termination of
employment, Employee shall promptly deliver to the Company the originals
and all copies of any and all materials, documents, notes, manuals, or
lists containing or embodying Company Confidential Information, or
relating directly or indirectly to the Company's business, in the
possession or control of the Employee. In the event Employee violates
this Section 9, the Options granted to Employee hereunder shall lapse
immediately upon and at the time of such violation, regardless of
whether Company shall then have knowledge of such violation or whether
Employee's employment shall have then been terminated.
(b) For purposes of this Section 9, "Company Confidential
Information" shall include, without limitation, the following
information which is the confidential, proprietary information, and
trade secrets of the Company: (i) customer lists, consultant lists, and
customer information as compiled by the Company, including customer
orders, product or service usage, product or service volumes, pricing,
customer technology, sale and contract terms and conditions, contract
expirations, and other compiled customer information; (ii) the Company's
own internal practices and procedures; (iii) the Company's financial
condition and financial results of operation to the extent not generally
made available to the public; (iv) supply of materials information,
including sources and costs; (v) information relating to designs,
formulas, developmental or experimental work, know-how, products,
processes, computer programs, source codes, data bases, designs,
-3-
<PAGE> 4
schematics, inventions, creations, original works of authorship, or
other subject matter related to the Company's business, research and
development, strategic planning, manufacturing, engineering, fabrication
or erection operations, purchasing, finance, marketing, promotion,
distribution, licensing, and selling activities, whether now existing,
or acquired, developed, or made available anytime in the future to the
Company; (vi) all information which Employee has a reasonable basis to
consider confidential or which is treated by the Company as
confidential; and (vii) any and all information having independent
economic value to the Company that is not generally known to, and not
readily ascertainable by proper means by, persons who can obtain
economic value from its disclosure or use. Employee acknowledges that
such information is Company Confidential Information whether disclosed
to or learned by Employee or originated by Employee during employment by
the Company. In case of doubt, all information about the Company shall
be presumed to be confidential.
(c) Employee agrees that damages cannot compensate Company in the
event of a violation of this Section 9 and that, if such violation
should occur, injunctive relief shall be essential for the protection of
Company and its successors and assigns. Accordingly, Employee hereby
covenants and agrees that, in the event any of the provisions of this
Section 9 shall be violated or breached, Company shall be entitled to
obtain injunctive relief against the party or parties violating such
covenants, without bond but upon due notice, in addition to such further
or other relief as may be available at equity or law. Obtainment of such
an injunction by Company shall not be considered an election of remedies
or a waiver of any right to assert any other remedies which Company has
at law or in equity. No waiver of any breach or violation hereof shall
be implied from forbearance or failure by Company to take action
thereof.
(d) Employee hereby agrees that upon the commencement by Employee
of employment with any third party during the period in which the terms
of this Section 9 are in effect, Employee shall promptly disclose to
each such new employer the terms of this Section 9. Employee further
agrees and authorizes the Company to notify others, including customers
of the Company and any such future employers of Employee, of the terms
of this Section 9 and of Employee's obligations hereunder.
(e) The provisions of this Section 9 shall survive any
termination of this Agreement or of Employee's employment with the
Company.
10. Termination of Employment. In the event that Employee is terminated
as an employee of the Company for any reason other than as a result of
Employee's disability (which shall be subject to Section 11 below), then the
Option granted hereunder shall terminate and shall no longer be exercisable,
unless the Committee in its sole and absolute discretion, and without any
obligation to do so, determines to extend the date to exercise any Option or
portion thereof to a date that is within three (3) months after the date of
termination, but only to the extent that Employee was entitled to exercise the
Option at the date of termination, and provided that in no event shall the
Option, or any part thereof, be exercisable after the Expiration Date.
-4-
<PAGE> 5
11. Death or Disability of Employee. In the event of the termination of
Employee's employment with Company as a result of the death or disability (as
defined in the Plan) of Employee within a period during which the Option, or any
part thereof, could have been exercised by Employee (the "Option Period"), the
Option shall lapse unless it is exercised within the Option Period or within
twelve (12) months after the date of such termination by reason of Employee's
disability by Employee or any person authorized to act on Employee's behalf, or
within twelve (12) months after the date of Employee's death by Employee's legal
representative or representatives or by the person or persons entitled to do so
under Employee's last will and testament or if Employee fails to make a
testamentary disposition of such Option or shall die intestate, by the person or
persons entitled to receive such Option under the applicable laws of descent and
distribution. An Option may be exercised following the death or disability of
the Employee only if the Option was exercisable by the Employee immediately
prior to his or her death or disability. In no event shall the Option, or any
part thereof, be exercisable after the Expiration Date. The Board or the
Committee shall have the right to require evidence satisfactory to it of the
rights of any person or persons seeking to exercise the Option under this
Section 11 to exercise the Option, and whether or not the Employee has suffered
a disability within the meaning of this Section 11 shall be determined by the
Board or the Committee.
12. Nontransferability. The Option granted by this option agreement
shall be exercisable only during the term of the Option provided in Section 4
hereof and, except as provided in Sections 10 and 11 above, only by Employee
during his lifetime and while an Employee of the Company. The Option granted by
this option agreement shall be subject to the restrictions on transfer as set
forth in Section 17 of the Plan and Section 14 hereof.
13. Delivery of Shares. No shares of Stock shall be delivered upon
exercise of the Option until (i) the purchase price shall have been paid in full
in the manner herein provided; (ii) applicable taxes required to be withheld
have been paid or withheld in full; (iii) approval of any governmental authority
required in connection with the Option, or the issuance of shares thereunder,
has been received by the Company; and (iv) if required by the Board or the
Committee, Employee has delivered to the Board or the Committee an Investment
Letter in form and content satisfactory to the Company as provided in Section 14
hereof.
14. Securities Act. The Company shall have the right, but not the
obligation, to cause the shares of Stock issuable upon exercise of the Option to
be registered under the appropriate rules and regulations of the Securities and
Exchange Commission. The Company shall not be required to deliver any shares of
Stock pursuant to the exercise of all or any part of the Option if, in the
opinion of counsel for the Company, such issuance would violate the Securities
Act of 1933 or any other applicable federal or state securities laws or
regulations. The Board or the Committee may require that Employee, prior to the
issuance of any such shares pursuant to exercise of the Option, sign and deliver
to the Company a written statement ("Investment Letter") stating (i) that
Employee is purchasing the shares for investment and not with a view to the sale
or distribution thereof; (ii) that Employee will not sell any shares received
upon exercise of the Option or any other shares of the Company that Employee may
then own or thereafter acquire except either (a) through a broker on a national
securities exchange or (b) with the prior written
-5-
<PAGE> 6
approval of the Company; and (iii) containing such other terms and conditions as
counsel for the Company may reasonably require to assure compliance with the
Securities Act of 1933 or other applicable federal or state securities laws and
regulations. Such Investment Letter shall be in form and content acceptable to
the Board or the Committee in its sole discretion. If shares of Stock or other
securities issuable pursuant to the exercise of the Option have not been
registered under the Securities Act of 1933 or other applicable federal or state
securities laws or regulations, such shares shall bear a legend restricting the
transferability thereof, such legend to be substantially in the following form:
"The shares represented by this certificate have not been
registered or qualified under federal or state securities laws.
The shares may not be offered for sale, sold, pledged or
otherwise disposed of unless so registered or qualified, unless
an exemption exists or unless such disposition is not subject to
the federal or state securities laws, and the availability of any
exemption or the inapplicability of such securities laws must be
established by an opinion of counsel, which opinion and counsel
shall both be reasonably satisfactory to the Company."
15. Federal and State Taxes. Upon exercise of the Option, or any part
thereof, the Employee may incur certain liabilities for federal, state or local
taxes and the Company may be required by law to withhold such taxes for payment
to taxing authorities. Upon determination by the Company of the amount of taxes
required to be withheld, if any, with respect to the shares to be issued
pursuant to the exercise of the Option, Employee shall pay all Federal state and
local tax withholding requirements, including by having the Company withhold
Stock having a Fair Market Value on the date that tax is to be determined equal
to the tax otherwise required to be withheld.
16. Definitions; Copy of Plan. To the extent not specifically provided
herein, all capitalized terms used in this option agreement shall have the same
meanings given to them in the Plan. By the execution of this Agreement, Employee
acknowledges receipt of a copy of the Plan.
17. Administration. This option agreement shall at all times be subject
to the terms and conditions of the Plan and the Plan shall in all respects be
administered by the Board or by the Committee in accordance with the terms of
and as provided in the Plan. The Board or the Committee, as appropriate, shall
have sole and complete discretion with respect to all matters reserved to it by
the Plan and decisions of the majority of the Board or the Committee with
respect thereto and to this option agreement shall be final and binding upon
Employee and the Company. In the event of any conflict between the terms and
conditions of this option agreement and the Plan, the provisions of the Plan
shall control.
18. Obligation to Exercise. Employee shall have no obligation to
exercise any option granted by this Agreement.
-6-
<PAGE> 7
19. Notice of Sale. In the event Employee disposes of any shares of
Stock acquired upon exercise of an Option by sale or exchange either (a) within
two (2) years after the Date of Grant of the Option or (b) within one (1) year
after the acquisition of such shares of Stock, Employee shall notify the Company
of such disposition and of the amount realized upon such disposition.
20. Governing Law. This option agreement shall be interpreted and
administered under the laws of the State of Arizona without regard to conflict
of law principles.
21. Amendments. This option agreement may be amended only by a written
agreement executed by the Company and Employee. The Company and Employee
acknowledge that changes in federal tax laws enacted subsequent to the Date of
Grant, and applicable to stock options, may provide for tax benefits to the
Company or Employee. In any such event, the Company and Employee agree that this
option agreement may be amended as necessary to secure for the Company and
Employee any benefits that may result from such legislation. Any such amendment
shall be made only upon the mutual consent of the parties, which consent (of
either party) may be withheld for any reason.
IN WITNESS WHEREOF, the Company has caused this option agreement to be
duly executed and Employee has hereunto set his or her hand as of the date first
written above.
SCHUFF STEEL COMPANY
By_______________________________
Its____________________________
_________________________________
Employee
-7-
<PAGE> 1
EXHIBIT 10.12(c)
NON-QUALIFIED STOCK OPTION AGREEMENT
This Non-Qualified Stock Option Agreement is made as of this ____
day of ___________, ____ (which date is hereinafter referred to as the "Date of
Grant") by and among SCHUFF STEEL COMPANY, an Arizona corporation (hereinafter
referred to as the "Company") and _________________ (hereinafter referred to as
"Employee"). If Employee is presently or subsequently becomes employed by a
subsidiary of the Company, the term "Company" shall be deemed to refer
collectively to Schuff Steel Company and the subsidiary or subsidiaries which
employ the Employee.
RECITALS
A. The Company has adopted the Schuff Steel Company 1997 Stock Option
Plan, as amended, (the "Plan"), as an incentive to attract and retain key
employees, consultants, officers and directors whose services are considered
unusually valuable by providing an opportunity to have a proprietary interest in
the success of the Company; and
B. The Company's Board of Directors (the "Board") or a committee thereof
designated to administer the Plan (the "Committee") believes that the granting
of the Option herein described to Employee is consistent with the stated
purposes for which the Plan was adopted;
NOW, THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and Employee agree
as follows:
1. Grant of Option. The Company hereby grants to Employee the right and
option (hereinafter referred to as the "Option") to purchase an aggregate of
_______ shares (such number being subject to adjustment as provided in Section
13 of the Plan) of the common stock of the Company (the "Stock") on the terms
and conditions set forth herein and in the Plan. This Option may be exercised in
whole or in part and from time to time as hereinafter provided.
2. Vesting. All of the Options granted hereunder shall vest sixty (60)
months after the Date of Grant, except that, in the event the Company
consummates an IPO (as defined in the Plan) prior to the expiration of such
sixty (60) month period, the Options shall vest as follows:
(a) ___________ shares shall vest twelve (12) months after the
Date of Grant;
(b) ___________ shares shall vest twenty-four (24) months after
the Date of Grant;
(c) ___________ shares shall vest thirty-six (36) months after
the Date of Grant;
<PAGE> 2
(d) ___________ shares shall vest forty-eight (48) months after
the Date of Grant; and
(e) ___________ shares shall vest sixty (60) months after the
Date of Grant.
3. Purchase Price. The price at which Employee shall be entitled to
purchase the Stock covered by the Option shall be $______ per share (the Fair
Market Value on the Date of Grant).
4. Term of Option. The Option hereby granted shall be and remain in
force and effect for a period of ( ) years from the Date of Grant, through
and including the normal close of business of the Company on _________
(hereinafter referred to as the "Expiration Date"), subject to earlier
termination as provided herein or in the Plan.
5. Exercise of Option. The Option may be exercised by Employee as to all
or any part of the shares of the Stock then vested. The Option shall be
exercised by delivery to the Company of written notice of exercise and payment
of the purchase price as provided in Sections 6 and 7 hereof.
6. Method of Exercising Option. Subject to the terms and conditions of
this option agreement, the Option may be exercised by timely delivery to the
Company of written notice, which notice shall be effective on the date received
by the Company (the "Effective Date"). The notice shall state Employee's
election to exercise the Option, the number of shares in respect of which an
election to exercise has been made, the method of payment elected (see Section 7
hereof), the exact name or names in which the shares of stock will be registered
and the Social Security number of Employee. Such notice shall be signed by the
Employee and shall be accompanied by payment of the purchase price of such
shares of Stock. In the event the Option shall be exercised by a person or
persons other than Employee pursuant to Section 10 hereof, such notice shall be
signed by such other person or persons and shall be accompanied by proof
acceptable to the Company of the legal right of such person or persons to
exercise the Option. All shares delivered by the Company upon exercise of the
Option as provided herein shall be fully paid and nonassessable upon delivery.
7. Method of Payment for Options. Payment for shares purchased upon the
exercise of the Option shall be made by the Employee in cash or such other
method permitted by the Board or the Committee in its sole discretion, including
(i) tendering shares, (ii) authorizing a third party to sell the shares (or a
sufficient portion thereof) acquired upon exercise of a stock option and
assigning the delivery to the Company of a sufficient amount of the sale
proceeds to pay for all the shares acquired through such exercise, or (iii) any
combination of the above.
2
<PAGE> 3
8. Confidentiality and Nondisclosure Agreement.
(a) Employee hereby acknowledges and agrees that in the course of
Employee's employment with the Company, Employee has and will become
acquainted with Company Confidential Information (as defined in
subsection (b) of this Section 8), and that Company Confidential
Information has been developed at great expense to the Company, is
proprietary to the Company, and is and shall remain the exclusive
property of the Company. Accordingly, for and in consideration for the
Options granted hereunder, and other good and valuable consideration,
Employee hereby agrees that (i) Employee will not, without the express
written consent of the Company, during Employee's employment with the
Company or at any time thereafter (or until such time as Company
Confidential Information becomes generally known, or readily
ascertainable by proper means, by persons unrelated to the Company),
disclose to others, copy, make any use of, or remove from the Company's
premises any Company Confidential Information, except as Employee's
duties for the Company may specifically require; (ii) in the event of
dispute or litigation, Employee shall have the burden of proof by clear
and convincing evidence that the Company Confidential Information has
become generally known, or readily ascertainable by proper means, by
persons unrelated to the Company; and (iii) upon termination of
employment, Employee shall promptly deliver to the Company the originals
and all copies of any and all materials, documents, notes, manuals, or
lists containing or embodying Company Confidential Information, or
relating directly or indirectly to the Company's business, in the
possession or control of the Employee. In the event Employee violates
this Section 8, the Option granted to Employee hereunder shall lapse
immediately upon and at the time of such violation, regardless of
whether Company shall then have knowledge of such violation or whether
Employee's employment shall have then been terminated.
(b) For purposes of this Section 8, "Company Confidential
Information" shall include, without limitation, the following
information which is the confidential, proprietary information, and
trade secrets of the Company: (i) customer lists, consultant lists, and
customer information as compiled by the Company, including customer
orders, product or service usage, product or service volumes, pricing,
customer technology, sale and contract terms and conditions, contract
expirations, and other compiled customer information; (ii) the Company's
own internal practices and procedures; (iii) the Company's financial
condition and financial results of operation to the extent not generally
made available to the public; (iv) supply of materials information,
including sources and costs; (v) information relating to designs,
formulas, developmental or experimental work, know-how, products,
processes, computer programs, source codes, data bases, designs,
schematics, inventions, creations, original works of authorship, or
other subject matter related to the Company's business, research and
development, strategic planning, manufacturing, engineering, fabrication
or erection operations, purchasing, finance, marketing, promotion,
distribution, licensing, and selling activities, whether now existing,
or acquired, developed, or made available anytime in the future to the
Company; (vi) all
3
<PAGE> 4
information which Employee has a reasonable basis to consider
confidential or which is treated by the Company as confidential; and
(vii) any and all information having independent economic value to the
Company that is not generally known to, and not readily ascertainable by
proper means by, persons who can obtain economic value from its
disclosure or use. Employee acknowledges that such information is
Company Confidential Information whether disclosed to or learned by
Employee or originated by Employee during employment by the Company. In
case of doubt, all information about the Company shall be presumed to be
confidential.
(c) Employee agrees that damages cannot compensate Company in the
event of a violation of this Section 8 and that, if such violation
should occur, injunctive relief shall be essential for the protection of
Company and its successors and assigns. Accordingly, Employee hereby
covenants and agrees that, in the event any of the provisions of this
Section 8 shall be violated or breached, Company shall be entitled to
obtain injunctive relief against the party or parties violating such
covenants, without bond but upon due notice, in addition to such further
or other relief as may be available at equity or law. Obtainment of such
an injunction by Company shall not be considered an election of remedies
or a waiver of any right to assert any other remedies which Company has
at law or in equity. No waiver of any breach or violation hereof shall
be implied from forbearance or failure by Company to take action
thereof.
(d) Employee hereby agrees that upon the commencement by Employee
of employment with any third party during the period in which the terms
of this Section 8 are in effect, Employee shall promptly disclose to
each such new employer the terms of this Section 8. Employee further
agrees and authorizes the Company to notify others, including customers
of the Company and any such future employers of Employee, of the terms
of this Section 8 and of Employee's obligations hereunder.
(e) The provisions of this Section 8 shall survive any
termination of this option agreement or of Employee's employment with
the Company.
9. Termination of Employment. In the event that Employee is terminated
as an employee of or consultant to the Company for any reason other than as a
result of Employee's disability (which shall be subject to Section 10 below),
then the Option granted hereunder shall terminate and shall no longer be
exercisable, unless the Committee in its sole and absolute discretion, and
without any obligation to do so, determines to extend the date to exercise any
Option or portion thereof to a date that is within three (3) months after the
date of termination, but only to the extent that Employee was entitled to
exercise the Option at the date of termination, and provided that in no event
shall the Option, or any part thereof, be exercisable after the Expiration Date.
4
<PAGE> 5
10. Death or Disability of Employee. In the event of the termination of
Employee's employment with Company as a result of the death or disability (as
defined in the Plan) of Employee within a period during which the Option, or any
part thereof, could have been exercised by Employee (the "Option Period"), the
Option shall lapse unless it is exercised within the Option Period or within
twelve (12) months after the date of such termination by reason of Employee's
disability by Employee or any person authorized to act on Employee's behalf, or
within twelve (12) months after the date of Employee's death by Employee's legal
representative or representatives or by the person or persons entitled to do so
under Employee's last will and testament or if Employee fails to make a
testamentary disposition of such Option or shall die intestate, by the person or
persons entitled to receive such Option under the applicable laws of descent and
distribution. An Option may be exercised following the death or disability of
the Employee only if the Option was exercisable by the Employee immediately
prior to his or her death or disability. In no event shall the Option, or any
part thereof, be exercisable after the Expiration Date. The Board or the
Committee shall have the right to require evidence satisfactory to it of the
rights of any person or persons seeking to exercise the Option under this
Section 10 to exercise the Option, and whether or not the Employee has suffered
a disability within the meaning of this Section 10 shall be determined by the
Board or the Committee.
11. Nontransferability. The Option granted by this option agreement
shall be exercisable only during the term of the Option provided in Section 4
hereof and, except as provided in Sections 9 and 10 above, only by Employee
during his lifetime and while an employee of or consultant to the Company. The
Option granted by this option agreement shall be subject to the restrictions on
transfer as set forth in Section 17 of the Plan and Section 13 hereof.
12. Delivery of Shares. No shares of Stock shall be delivered upon
exercise of the Option until (i) the purchase price shall have been paid in full
in the manner herein provided; (ii) applicable taxes required to be withheld
have been paid or withheld in full; (iii) approval of any governmental authority
required in connection with the Option, or the issuance of shares thereunder,
has been received by the Company; and (iv) if required by the Committee,
Employee has delivered to the Committee an Investment Letter in form and content
satisfactory to the Company as provided in Section 13 hereof.
13. Securities Act. The Company shall have the right, but not the
obligation, to cause the shares of Stock issuable upon exercise of the Option to
be registered under the appropriate rules and regulations of the Securities and
Exchange Commission. The Company shall not be required to deliver any shares of
Stock pursuant to the exercise of all or any part of the Option if, in the
opinion of counsel for the Company, such issuance would violate the Securities
Act of 1933 or any other applicable federal or state securities laws or
regulations. The Company may require that Employee, prior to the issuance of any
such shares pursuant to exercise of the Option, sign and deliver to the Company
a written statement ("Investment Letter") stating (i) that Employee is
purchasing the shares for investment and not with a view to the sale or
distribution thereof; (ii) that Employee will not sell any shares received upon
exercise of the Option or any other shares of the Company that Employee may then
own or thereafter acquire except either (a)
5
<PAGE> 6
through a broker on a national securities exchange or (b) with the prior written
approval of the Company; and (iii) containing such other terms and conditions as
counsel for the Company may reasonably require to assure compliance with the
Securities Act of 1933 or other applicable federal or state securities laws and
regulations. Such Investment Letter shall be in form and content acceptable to
the Company in its sole discretion. If shares of Stock or other securities
issuable pursuant to the exercise of the Option have not been registered under
the Securities Act of 1933 or other applicable federal or state securities laws
or regulations, such shares shall bear a legend restricting the transferability
thereof, such legend to be substantially in the following form:
"The shares represented by this certificate have not been
registered or qualified under federal or state securities laws.
The shares may not be offered for sale, sold, pledged or
otherwise disposed of unless so registered or qualified, unless
an exemption exists or unless such disposition is not subject to
the federal or state securities laws, and the availability of any
exemption or the inapplicability of such securities laws must be
established by an opinion of counsel, which opinion and counsel
shall both be reasonably satisfactory to the Company."
14. Federal and State Taxes. Upon exercise of the Option, or any part
thereof, the Employee may incur certain liabilities for federal, state or local
taxes and the Company may be required by law to withhold such taxes for payment
to taxing authorities. Upon determination by the Company of the amount of taxes
required to be withheld, if any, with respect to the shares to be issued
pursuant to the exercise of the Option, Employee shall pay all Federal, state
and local tax withholding requirements, including by having the Company withhold
Stock having a Fair Market Value on the date that tax is to be determined equal
to the tax otherwise required to be withheld.
15. Definitions; Copy of Plan. To the extent not specifically provided
herein, all capitalized terms used in this option agreement shall have the same
meanings given to them in the Plan. By the execution of this Agreement, Employee
acknowledges receipt of a copy of the Plan.
16. Administration. This option agreement shall at all times be subject
to the terms and conditions of the Plan and the Plan shall in all respects be
administered by the Board or by the Committee in accordance with the terms of
and as provided in the Plan. The Board or the Committee, as appropriate, shall
have sole and complete discretion with respect to all matters reserved to it by
the Plan and decisions of the majority of the Board or the Committee with
respect thereto and to this option agreement shall be final and binding upon
Employee and the Company. In the event of any conflict between the terms and
conditions of this option agreement and the Plan, the provisions of the Plan
shall control.
17. Obligation to Exercise. Employee shall have no obligation to
exercise any option granted by this Agreement.
6
<PAGE> 7
18. Governing Law. This option agreement shall be interpreted and
administered under the laws of the State of Arizona without regard to conflict
of law principles.
19. Amendments. This option agreement shall be subject to the terms and
conditions set forth in the Plan and may be amended only by a written agreement
executed by the Company and Employee. The Company and Employee acknowledge that
changes in federal tax laws enacted subsequent to the Date of Grant, and
applicable to stock options, may provide for tax benefits to the Company or
Employee. In any such event, the Company and Employee agree that this option
agreement may be amended as necessary to secure for the Company and Employee any
benefits that may result from such legislation. Any such amendment shall be made
only upon the mutual consent of the parties, which consent (of either party) may
be withheld for any reason.
IN WITNESS WHEREOF, the Company has caused this option agreement to be
duly executed and Employee has hereunto set his hand as of the date first
written above.
SCHUFF STEEL COMPANY
By:____________________________________
Its:___________________________________
EMPLOYEE
_______________________________________
7
<PAGE> 1
Exhibit 11
STATEMENT RE: COMPUTATION OF PRO FORMA NET INCOME PER SHARE
SCHUFF STEEL COMPANY
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, March 31,
------------------------------ ------------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Historical weighted average shares outstanding(1)................... 5,000 5,000 5,000 5,000 5,125
Common share options issued within twelve months of the planned
initial public offering(2)........................................ 188 188 188 188 63
------ ------ ------ ------ ------
Weighted average shares outstanding................................. 5,188 5,188 5,188 5,188 5,188
====== ====== ====== ====== ======
Pro forma net income................................................ $2,259 $1,470 $6,030 $ 325 $1,062
====== ====== ====== ====== ======
Pro forma net income per share...................................... $ 0.44 $ 0.28 $ 1.16 $ 0.06 $ 0.20
====== ====== ====== ====== ======
</TABLE>
- ---------------
(1) Common stock equivalents, which were dilutive, were included in the
computation of weighted average number of shares outstanding from the date
of grant.
(2) These items are treated as common stock equivalents from inception since
they were issued at prices below the expected initial public offering price
of the Company's common shares during the twelve month period immediately
preceding the offering, and are computed using the treasury stock method
assuming an estimated initial public offering price of $11.00 per share.
<PAGE> 1
Exhibit 21
List of Subsidiaries
B & K Steel Fabrications, Inc., an Arizona corporation
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
"Selected Consolidated Financial and Operating Data," and to the use of our
report dated March 21, 1997, except for Note 13 as to which the date is May 8,
1997, in the Registration Statement (Form S-1) and related Prospectus of Schuff
Steel Company for the registration of 2,530,000 shares of its common stock.
ERNST & YOUNG LLP
Phoenix, Arizona
May 8, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<EXCHANGE-RATE> 1 1
<CASH> 9,502 7,646
<SECURITIES> 0 0
<RECEIVABLES> 16,885 18,654
<ALLOWANCES> 0 0
<INVENTORY> 11,311 14,164
<CURRENT-ASSETS> 38,747 42,300
<PP&E> 14,274 15,253
<DEPRECIATION> 9,158 9,495
<TOTAL-ASSETS> 43,969 48,160
<CURRENT-LIABILITIES> 30,271 33,702
<BONDS> 2,753 2,777
0 0
0 0
<COMMON> 5 5
<OTHER-SE> 10,677 11,431
<TOTAL-LIABILITY-AND-EQUITY> 43,969 48,160
<SALES> 103,912 25,507
<TOTAL-REVENUES> 103,912 25,507
<CGS> 86,998 21,655
<TOTAL-COSTS> 86,998 21,655
<OTHER-EXPENSES> 6,715 2,081
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 452 95
<INCOME-PRETAX> 10,050 1,772
<INCOME-TAX> 4,020 710
<INCOME-CONTINUING> 6,030 1,062
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6,030 1,062
<EPS-PRIMARY> 1.16 0.20
<EPS-DILUTED> 1.16 0.20
</TABLE>
<PAGE> 1
EXHIBIT 99.1
CONSENT OF DIRECTOR-NOMINEE
The undersigned hereby consents to being named as a director-nominee in the
Registration Statement on Form S-1 of Schuff Steel Company to be filed with the
Securities and Exchange Commission on or about April 30, 1997.
By: /s/ EDWARD M. CARSON
--------------------------------
Name: Edward M. Carson
<PAGE> 1
EXHIBIT 99.2
CONSENT OF DIRECTOR-NOMINEE
The undersigned hereby consents to being named as a director-nominee in the
Registration Statement on Form S-1 of Schuff Steel Company to be filed with the
Securities and Exchange Commission on or about April 30, 1997.
By: /s/ H. WILSON SUNDT
--------------------------------
Name: H. Wilson Sundt
<PAGE> 1
EXHIBIT 99.3
CONSENT OF DIRECTOR-NOMINEE
The undersigned hereby consents to being named as a director-nominee in the
Registration Statement on Form S-1 of Schuff Steel Company to be filed with the
Securities and Exchange Commission on or about April 30, 1997.
By: /s/ DENNIS DECONCINI
-------------------------------
Name: Dennis DeConcini
<PAGE> 1
EXHIBIT 99.4
CONSENT OF DIRECTOR-NOMINEE
The undersigned hereby consents to being named as a director-nominee in the
Registration Statement on Form S-1 of Schuff Steel Company to be filed with the
Securities and Exchange Commission on or about April 30, 1997.
By: /s/ KENNETH F. ZYLSTRA
--------------------------------
Name: Kenneth F. Zylstra
<PAGE> 1
EXHIBIT 99.5
CONSENT OF DIRECTOR-NOMINEE
The undersigned hereby consents to being named as a director-nominee in the
Registration Statement on Form S-1 of Schuff Steel Company to be filed with the
Securities and Exchange Commission on or about April 30, 1997.
By: /s/ DENNIS RANDALL
-------------------------------
Name: Dennis Randall
