PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT is made and entered into this 26th
day of January, 2001 by and between Xxxxxx X. Xxxxxx, an individual ("Pledgor")
and Headwaters Incorporated, a Delaware corporation ("Secured Party").
RECITALS
Pledgor has delivered to Secured Party Pledgor's Promissory Note (the
"Note") of even date in the original principal amount of $1,750,000.00. Pledgor
has agreed to grant Secured Party a security interest in certain collateral
described below to secure the Note.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, the covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound,
the parties hereto agree as follows:
1. Pledge of Securities.
(a) Pledgor hereby pledges, assigns and delivers to Secured
Party and grants to Secured Party a security interest in 10,000 common shares of
Xxxxxx Holdings, Inc. (the "Corporation"), together with all proceeds and
substitutions of any thereof, all cash, stock and other monies and property paid
thereon, all rights to subscribe for securities declared or granted in
connection therewith, and all other cash and non-cash proceeds of the foregoing
(all hereinafter called the "Pledged Collateral"), as security for the prompt
repayment of the Note (collectively, the "Secured Indebtedness"). The term
Pledged Collateral shall also include any securities, instruments or
distributions of any kind issuable, issued or received by Pledgor upon
conversion of, in respect of, on account of, or in exchange or substitution for
any other Pledged Collateral, including, but not limited to, those arising from
a stock dividend, stock split, reclassification, reorganization, merger,
consolidation, sale of assets or other exchange of securities or any dividends
or other distributions of any kind upon or with respect to the Pledged
Collateral.
(b) Contemporaneously with the execution of this Agreement,
the certificate or certificates for the securities included in the Pledged
Collateral, duly endorsed in blank by Pledgor with signature guaranteed or
accompanied by an instrument of assignment duly executed in blank by Pledgor
with signature guarantee, have been delivered to Secured Party. Secured Party
may hold such certificate(s) for disposition pursuant to this Agreement without
transfer into its name or it may at any time cause such certificate(s) to be
transferred into its own name with or without notation of Pledgor's beneficial
interest therein.
(c) Pledgor warrants and represents to Secured Party that the
Pledged Collateral represents 100% of the issued and outstanding capital stock
of the Corporation.
2. Covenants. Pledgor hereby covenants that, until all of the Secured
Indebtedness has been satisfied in full, he will not sell, convey or otherwise
dispose of any of the
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Pledged Collateral or any interest therein or create, incur or permit to exist
any pledge, mortgage, lien, charge or encumbrance or any security interest
whatsoever in or with respect to any of the Pledged Collateral other than that
created hereby.
3. Voting Prior to Default. Unless an Event of Default hereunder shall
have occurred and be continuing, Pledgor shall be entitled to exercise any
voting rights with respect to the Pledged Collateral and to give consents,
waivers and ratifications in respect thereof, provided that no vote shall be
cast or consent, waiver or ratification given or action taken which would be
inconsistent with any of the terms of this Agreement, or which would constitute
or create any violation of any of such terms.
4. Events of Default. Each of the following shall constitute an event
of default ("Event of Default") hereunder:
(a) The occurrence of an event of default under the Note; or
(b) Failure by Pledgor to observe or perform any of the
provisions of this Agreement and such failure shall continue unremedied for a
period of 30 days after the Secured Party shall give notice to Pledgor of such
failure.
5. Secured Party's Remedies Upon Default.
(a) Upon the occurrence of an Event of Default, Secured Party
shall have the right to exercise all such rights as a secured party under the
Uniform Commercial Code of Utah (the "U.C.C.") as he, in his sole judgment,
shall deem necessary or appropriate, without demand of performance or other
demand, advertisement, or notice of any kind (except the notice specified below
of time and place of public or private sale) to or upon Pledgor or any other
person (all of which are to the extent permitted by law, hereby expressly waived
by Pledgor), including the right to sell all or any part of the Pledged
Collateral at one or more public or private sales at any exchange, through any
interdealer quotation system; and any such sale or sales may be made for cash,
upon credit, or for future delivery, and in connection therewith, Secured Party
may grant options, provided that any such terms or options shall, in the best
judgment of Secured Party, be extended only in order to obtain the best possible
price. Secured Party need not give more than five days notice of the time and
place of any public sale or of the time after which a private sale or other
disposition of the Pledged Collateral may take place, which notice Pledgor
hereby deems reasonable.
(b) Pledgor recognizes that Secured Party may be unable to
effect a public sale of all or a part of the Pledged Collateral by reason of
certain prohibitions contained in the Securities Act of 1933, as amended (the
"Act"), so that Secured Party may be compelled to resort to one or more private
sales to a restricted group of purchasers who will be obliged to agree, among
other things, to acquire the Pledged Collateral for their own account, for
investment and without a view to the distribution or resale thereof. Pledgor
understands that private sales so made may be at prices and on other terms less
favorable to the seller than if the Pledged Collateral were sold at public
sales, and agrees that Secured Party has no obligation to delay the sale of any
of the Pledged Collateral for the period necessary to register such securities
for sale under the Act. Pledgor agrees that private sales made under the
foregoing circumstances shall be deemed to have been made in a commercially
reasonable manner. On any sale of the Pledged Collateral, Secured Party is
hereby authorized to comply with any limitation or restriction, compliance with
which is necessary, in the
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view of Secured Party's counsel, in order to avoid any violation of applicable
law or in order to obtain any required approval of the purchaser by any
applicable governmental authority.
(c) After the sale of any of the Pledged Collateral, Secured
Party may deduct all reasonable legal and other expenses and attorney's fees for
preserving, collecting, selling and delivering the Pledged Collateral and for
enforcing his rights with respect to the Note and shall apply the residue of the
proceeds to, or hold it as a reserve against, the amount owing under the Note in
such manner as Secured Party in his sole discretion shall determine, and shall
pay the balance, if any, to Pledgor in proportion to his respective interests in
the Pledged Collateral. To facilitate the exercise of Secured Party's remedies
following an Event of Default, Pledgor hereby appoints Secured Party as his
attorney-in-fact to collect and receive all payments in respect of the Pledged
Collateral, and to endorse the name of Pledgor thereto for such purpose, and to
apply such receipts to the amount owed under the Note and to execute on behalf
of Pledgor all financing statements and other documents necessary to perfect and
maintain Secured Party's security interest in the Pledged Collateral. The
remedies provided herein in favor of Secured Party shall not be deemed
exclusive, but shall be cumulative, and shall be in addition to all other legal
and equitable remedies which Secured Party may have, and no delay on the part of
Secured Party in exercising any of his powers or rights, or any partial or
single exercise thereof, shall constitute a waiver thereof.
6. Release of Pledged Collateral. When the Note has been paid in full,
Secured Party will return to Pledgor the Pledged Collateral.
7. Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if delivered, telegraphed or
mailed by certified or registered mail:
To Secured Party:
Headwaters, Incorporated
00000 X. Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
To Pledgor:
Xxxxxx X. Xxxxxx
0000 X. Xxxxxxxx Xxxx
Xxxx, XX 00000
8. Miscellaneous.
(a) Other than the exercise of reasonable care to assure the safe
physical custody of the Pledged Collateral while held by Secured Party
hereunder, Secured Party shall have no duty or liability, including without
limitation, any obligation or duty to collect any sums due in respect thereof or
to protect or preserve any rights against prior parties or any other rights
pertaining thereto and shall be relieved of all responsibility for the Pledged
Collateral upon surrendering it or tendering surrender of it to Pledgor.
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(b) Pledgor, at his expense, will execute, acknowledge and
deliver all such instruments in form satisfactory to Secured Party and take all
such action as Secured Party from time to time may reasonably require in order
further to effectuate the purposes of this Agreement and to carry out the terms
hereof.
(c) This Agreement shall inure to the benefit of and shall be
binding upon the heirs, personal representatives and successors of the parties
hereto.
(d) This Agreement and the rights and obligations hereunder
shall be construed in accordance with and governed by the laws of the State of
Utah without regard to principles of conflicts of law.
(e) The paragraph headings used herein are for convenience
only and do not affect or modify the terms and conditions hereof.
(f) If any provision hereof is found by a court of competent
jurisdiction to be prohibited or unenforceable, it shall be ineffective only to
the extent of such prohibition or unenforceability, and such prohibition or
unenforceability shall not invalidate the balance of such provision to the
extent it is not prohibited or enforceable, nor invalidate the other provisions
hereof.
(g) This Agreement, together with the Note Restructure
Agreement, Restructured Note, Xxxxxx Holdings, Inc.'s Guaranty, and Xxxxxx
Holdings, Inc.'s Stock Pledge and Security Agreement (together, the "Transaction
Documents") contain all covenants, terms, provisions, and agreements between the
parties hereto or thereto relating to the subject matter of the Transaction
Documents. No prior agreement with respect to the same shall be of any force or
effect, and no covenant, term, provision, or agreement of any Transaction
Document may be modified except in a writing executed by all parties to the
Transaction Documents.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
/s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx
HEADWATERS INCORPORATED
By: /s/ Xxxxxx X. Xxxxxxx
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