Exhibit 10.4


 


PENHALL COMPANY


 


PENHALL INVESTMENTS, INC.


 


BOB MACK COMPANY


 


CAPITOL DRILLING SUPPLIES, INC.


 


PENHALL LEASING


 


(“GUARANTORS”)


 


AND


 


DEUTSCHE BANK TRUST COMPANY AMERICAS,

AS AGENT


 










 


GUARANTY AGREEMENT


 










 





















 


TABLE OF CONTENTS


 


	
  1.

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  THE
  GUARANTY

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Guaranty of Guaranteed Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2

  	
  Demand by Agent or Lenders

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
  Enforcement of Guaranty

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.4

  	
  Waiver

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.5

  	
  Benefit of Guaranty

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.6

  	
  Modification of Guaranteed Obligations, Etc.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.7

  	
  Reinstatement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.8

  	
  Deferral of Subrogation, Etc.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.9

  	
  Election of Remedies

  	
   

  
	
   

  	
   

  	
   

  
	
  3.

  	
  DELIVERIES

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  5.

  	
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  6.

  	
  FURTHER
  ASSURANCES

  	
   

  
	
   

  	
   

  	
   

  
	
  7.

  	
  PAYMENTS FREE AND CLEAR OF TAXES

  	
   

  
	
   

  	
   

  	
   

  
	
  8.

  	
  RIGHT
  OF SET-OFF

  	
   

  
	
   

  	
   

  	
   

  
	
  9.

  	
  SUBORDINATION OF INTERCOMPANY DEBT

  	
   

  
	
   

  	
   

  	
   

  
	
  10.

  	
  OTHER
  TERMS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Entire Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.2

  	
  Headings

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.3

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.4

  	
  Notices

  	
   

  



 


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  10.5

  	
  Successors and Assigns

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.6

  	
  No Waiver; Cumulative Remedies; Amendments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.7

  	
  Termination

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.8

  	
  Counterparts; Effectiveness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.9

  	
  Consent to Jurisdiction

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.10

  	
  Waiver of Jury Trial

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.11

  	
  Limitation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.12

  	
  Intercreditor Arrangement

  	
   

  



 


ii





















 


SUBSIDIARY GUARANTY


 


THIS
SUBSIDIARY GUARANTY, dated as of November 1, 2005 (this “Guaranty”) by
and among PENHALL COMPANY, a California corporation, PENHALL INVESTMENTS, INC.,
a California corporation, BOB MACK CO, INC., a California corporation, CAPITOL
DRILLING SUPPLIES, INC., an Indiana corporation, PENHALL LEASING, L.L.C., a
California single member limited liability company (collectively, the “Guarantors”),
and DEUTSCHE BANK TRUST COMPANY AMERICAS, a Delaware corporation, as Agent (in
such capacity, “Agent”) for itself and the lenders from time to
time party to the Credit Agreement as defined below (“Lenders”).


 


WHEREAS:


 


(A)          Pursuant
to that certain Second Lien Term Loan Agreement dated as of the date hereof
(including all annexes, exhibits and schedules thereto, and as from time to
time amended, restated, supplemented or otherwise modified, the “Credit
Agreement”) by and among PENHALL INTERNATIONAL CORP., an Arizona
corporation (“Borrower”), the financial institutions party thereto from
time to time as Lenders, and Deutsche Bank Trust Company Americas as Agent and
Deutsche Bank Securities Inc. as Lead Arranger and Book Runner, pursuant to
which, among other things, Lenders have agreed to make a certain credit
facility available to Borrower upon the terms and subject to the conditions
specified in the Credit Agreement;


 


(B)          Borrower
wishes to borrow certain Loans;


 


(C)          Guarantors
will benefit from the making of the Loans as provided for in the Credit
Agreement; and


 


(D)          in
order to induce Lenders to make the Loans as provided for in the Credit
Agreement, each Guarantor has agreed to guarantee payment of the Obligations;


 


NOW,
THEREFORE, in consideration of the premises and the
covenants hereinafter contained, and to induce Lenders to make the Loans to be
made and incurred by Lenders under the Credit Agreement, it is agreed as follows:


 


1.                                      DEFINITIONS


 


Capitalized
terms used herein shall have the meanings assigned to them in the Credit
Agreement and Annex A thereto, unless otherwise defined herein.


 


References to
this “Guaranty” shall mean this Guaranty, including all amendments,
modifications and supplements and any annexes, exhibits and schedules to any of
the foregoing, and shall refer to this Guaranty as the same may be in effect at
the time such reference becomes operative.


 





















 


2.                                      THE GUARANTY


 


2.1                               Guaranty
of Guaranteed Obligations


 


Each Guarantor
hereby, jointly and severally, absolutely, unconditionally and irrevocably
guarantees to Agent for the ratable benefit of the Lenders and their respective
successors, endorsees, transferees and assigns, the prompt payment (whether at
stated maturity, by acceleration or otherwise) and performance of the
Obligations (collectively, the “Guaranteed Obligations”).  Each Guarantor agrees that this Guaranty is a
guaranty of payment and performance and not of collection, and that its
obligations under this Guaranty shall be primary, absolute and unconditional,
irrespective of, and unaffected by:


 


(a)           the
genuineness, validity, regularity, enforceability or any future amendment of,
or change in, this Guaranty, any other Loan Document or any other agreement,
document or instrument to which any Credit Party is or may become a party;


 


(b)           the
absence of any action to enforce this Guaranty or any other Loan Document or
the waiver or consent by Agent and/or Lenders with respect to any of the provisions
thereof;


 


(c)           the
existence, value or condition of, or failure to perfect Agent’s Lien against,
any Collateral for the Guaranteed Obligations or any action, or the absence of
any action, by Agent in respect thereof (including, without limitation, the
release of any such security);


 


(d)           the
insolvency of any Credit Party; or


 


(e)           any
other action or circumstances which might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor,


 


it being
agreed by each Guarantor that its obligations under this Guaranty shall not be
discharged until the payment in full in cash of the Obligations.  Each Guarantor shall be regarded, and shall
be in the same position, as principal debtor with respect to the Guaranteed
Obligations.  Each Guarantor agrees that
any notice or directive given at any time to Agent which is inconsistent with
the waiver in the immediately preceding sentence shall be null and void and may
be ignored by Agent and Lenders and, in addition, may not be pleaded or
introduced as evidence in any litigation relating to this Guaranty for the
reason that such pleading or introduction would be at variance with the written
terms of this Guaranty, unless Agent and Lenders have specifically agreed
otherwise in writing.  It is agreed among
Guarantors, Agent and Lenders that the foregoing waivers are of the essence of
the transaction contemplated by the Loan Documents and that, but for this
Guaranty and such waivers, Agent and Lenders would decline to enter into the Credit
Agreement.


 


2.2                               Demand
by Agent or Lenders


 


In addition to
the terms of the Guaranty set forth in Section 2.1 hereof, and in
no manner imposing any limitation on such terms, it is expressly understood and
agreed that, if, at


 


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any time, the outstanding principal amount of
the Guaranteed Obligations under the Credit Agreement (including all accrued
interest thereon) is declared to be immediately due and payable, then
Guarantors shall without demand, pay to the holders of the Guaranteed Obligations
the entire outstanding Guaranteed Obligations due and owing to such
holders.  Payment by the Guarantors shall
be made to Agent in immediately available funds to an account, designated by
Agent or at the address set forth herein for the giving of notice to Agent or
at any other address that may be specified in writing from time to time by
Agent, and shall be credited and applied to the Guaranteed Obligations.


 


2.3                               Enforcement
of Guaranty


 


In no event
shall Agent have any obligation (although it is entitled, at its option) to
proceed against the Borrower or any other Credit Party or any Collateral
pledged to secure Guaranteed Obligations before seeking satisfaction from
Guarantors, and Agent may proceed, prior or subsequent to, or simultaneously
with, the enforcement of Agent’s rights hereunder, subject to the terms of the
Intercreditor Agreement, to exercise any right or remedy which it may have
against any Collateral, as a result of any Lien it may have as security for all
or any portion of the Guaranteed Obligations.


 


2.4                               Waiver


 


In addition to
the waivers contained in Section 2.1 hereof, each Guarantor waives
and agrees that it shall not at any time insist upon, plead or in any manner
whatsoever claim or take the benefit or advantage of, any appraisal, valuation,
stay, extension, marshaling of assets or redemption laws, or exemption, whether
now or at any time hereafter in force, which may delay, prevent or otherwise
affect the performance by each Guarantor of its Guaranteed Obligations under,
or the enforcement by Agent or Lenders of, this Guaranty.  Each Guarantor hereby waives diligence,
presentment and demand (whether for non-payment or protest or of acceptance,
maturity, extension of time, change in nature or form of the Guaranteed
Obligations, acceptance of further security, release of further security,
composition or agreement arrived at as to the amount of, or the terms of, the
Guaranteed Obligations, notice of adverse change in the Borrower’s financial condition
or any other fact which might increase the risk to Guarantors) with
respect to any of the Guaranteed Obligations or all other demands whatsoever
and, to the fullest extent permitted by law, waives the benefit of all
provisions of law which are or might be in conflict with the terms of this
Guaranty.  Each Guarantor represents,
warrants and agrees that, as of the date of this Guaranty, its obligations under
this Guaranty are not subject to any offsets or defenses against Agent or
Lenders or any Credit Party of any kind. 
Each Guarantor further agrees that its obligations under this Guaranty
shall not be subject to any counterclaims, offsets or defenses against Agent or
any Lender or against any Credit Party of any kind which may arise in the
future, except as may be provided or permitted by the Credit Agreement.


 


2.5                               Benefit
of Guaranty


 


The provisions
of this Guaranty are for the benefit of Agent and Lenders and their respective
successors, transferees, endorsees and assigns, and nothing herein contained
shall impair, as between any Credit Party and Agent or Lenders, the obligations
of any Credit Party under the Loan Documents. 
In the event all or any part of the Guaranteed Obligations are transferred,


 


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indorsed or assigned by Agent or any Lender
to any Person or Persons, any reference to “Agent” or “Lender”
herein shall be deemed to refer equally to such Person or Persons.


 


2.6                               Modification
of Guaranteed Obligations, Etc


 


Each Guarantor
hereby acknowledges and agrees that Agent and Lenders may at any time or from
time to time, with or without the consent of, or notice to Guarantors:


 


(a)           change
or extend the manner, place or terms of payment of, or renew or alter all or
any portion of, the Guaranteed Obligations;


 


(b)           take
any action under or in respect of the Loan Documents in the exercise of any
remedy, power or privilege contained therein or available to it at law, equity
or otherwise, or waive or refrain from exercising any such remedies, powers or
privileges;


 


(c)           amend
or modify, in any manner whatsoever, the Loan Documents;


 


(d)           extend
or waive the time for any Credit Party’s performance of, or compliance with,
any term, covenant or agreement on its part to be performed or observed under
the Loan Documents, or waive such performance or compliance or consent to a
failure of, or departure from, such performance or compliance;


 


(e)           subject
to the Intercreditor Agreement, take and hold Collateral for the payment of the
Guaranteed Obligations guaranteed hereby or sell, exchange, release, dispose
of, or otherwise deal with, any property pledged, mortgaged or conveyed, or in
which Agent or Lenders have been granted a Lien, to secure any Obligations;


 


(f)            release
anyone who may be liable in any manner for the payment of any amounts owed by
Guarantors or any Credit Party to Agent or any Lender;


 


(g)           modify
or terminate the terms of any intercreditor or subordination agreement pursuant
to which claims of other creditors of Guarantors or any Credit Party are subordinated
to the claims of Agent and Lenders; and/or


 


(h)           apply
any sums by whomever paid or however realized to any amounts owing by Guarantors
or any Credit Party to Agent or any Lender in such manner as Agent or any
Lender shall determine in its discretion,


 


and Agent and
Lenders shall not incur any liability to Guarantors as a result thereof, and no
such action shall impair or release the Guaranteed Obligations of Guarantors under
this Guaranty.


 


2.7                               Reinstatement


 


This Guaranty
shall remain in full force and effect and continue to be effective should any
petition be filed by or against any Credit Party or Guarantor for liquidation
or reorganization, should any Credit Party or Guarantor become insolvent or
make an assignment for the benefit of creditors or should a receiver or trustee
be appointed for all or any significant part of such Credit Party’s or
Guarantor’s assets, and shall continue to be effective or be reinstated, as


 


4





















 


the case may be, if at any time payment and
performance of the Guaranteed Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored
or returned by Agent or any Lender, whether as a “voidable preference”, “fraudulent
conveyance”, or otherwise, all as though such payment or performance had not
been made.  In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Guaranteed Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.


 


2.8                               Deferral
of Subrogation, Etc.


 


Notwithstanding
anything to the contrary in this Guaranty, or in any other Loan Document, each Guarantor
hereby:


 


(a)           expressly
and irrevocably waives, on behalf of itself and its successors and assigns
(including any surety) until the Maturity Date or the payment in full of
the Obligations, any and all rights at law or in equity to subrogation, to
reimbursement, to exoneration, to contribution, to indemnification, to set off
or to any other rights that could accrue to a surety against a principal, to each
Guarantor against a principal, to each Guarantor against a maker or obligor, to
an accommodation party against the party accommodated, to a holder or transferee
against a maker, or to the holder of any claim against any Person, and which any
Guarantor may have or hereafter acquire against any Credit Party in connection
with or as a result of such Guarantor’s execution, delivery and/or performance
of this Guaranty, or any other documents relating to the Obligations to which any
Guarantor is a party or otherwise; and


 


(b)           acknowledges
and agrees that this waiver is intended to benefit Agent and Lenders and shall
not limit or otherwise effect each Guarantor’s liability hereunder or the
enforceability of this Guaranty, and that Agent, Lenders and their respective
successors and assigns are intended third party beneficiaries of the waivers
and agreements set forth in this Section 2.8 and their rights under
this Section 2.8 shall survive payment in full of the Guaranteed
Obligations.  The foregoing waiver shall
not be deemed to limit or prohibit the payment of indebtedness or other
obligations of Guarantors to any Credit Party or other Person which is incurred
in the ordinary course of business and which is otherwise permitted under the Credit
Agreement or this Guaranty.


 


2.9                               Election
of Remedies


 


Subject to the
Intercreditor Agreement, if Agent may, under applicable law, proceed to realize
benefits under any of the Loan Documents giving Agent or Lenders a Lien upon
any Collateral owned by any Credit Party, either by judicial foreclosure or by
non-judicial sale or enforcement, Agent may, at its sole option, determine
which of such remedies or rights it may pursue without affecting any of such
rights and remedies under this Guaranty. 
If, in the exercise of any of its rights and remedies, Agent shall
forfeit any of its rights or remedies, including its right to enter a
deficiency judgment against any Credit Party, whether because of any applicable
laws pertaining to “election of remedies” or the like, each Guarantor hereby
consents to such action by Agent and waives any claim based upon such action,
even if such action by Agent shall result in a full or partial loss of any
rights of subrogation which such Guarantor might otherwise


 


5





















 


have had but for such action by Agent.  Any election of remedies which results in the
denial or impairment of the right of Agent to seek a deficiency judgment
against any Credit Party shall not impair any Guarantor’s obligation to pay the
full amount of the Guaranteed Obligations. 
In the event Agent shall bid at any foreclosure or trustee’s sale or at
any private sale permitted by law or the Loan Documents, Agent may bid all or
less than the amount of the Guaranteed Obligations and the amount of such bid
need not be paid by Agent but shall be credited against the Guaranteed
Obligations.  The amount of the
successful bid at any such sale shall be conclusively deemed to be the fair
market value of the collateral and the difference between such bid amount and
the remaining balance of the Guaranteed Obligations shall be conclusively
deemed to be the amount of the Guaranteed Obligations guaranteed under this Guaranty,
notwithstanding that any present or future law or court decision or ruling may
have the effect of reducing the amount of any deficiency claim to which Agent
and Lenders might otherwise be entitled but for such bidding at any such sale.


 


3.                                      DELIVERIES


 


In a form
satisfactory to Agent, each Guarantor shall deliver to Agent (with sufficient
copies for each Lender), concurrently with the execution of this Guaranty and
the Credit Agreement, the Loan Documents and other instruments, certificates
and documents as are required to be delivered by each Guarantor to Agent under
the Credit Agreement, to the extent not otherwise delivered thereunder.


 


4.                                      REPRESENTATIONS AND WARRANTIES


 


To induce
Lenders to make the Loans under the Credit Agreement, each Guarantor makes and
agrees to comply with the representations and warranties as to such Guarantor contained
in the Credit Agreement, each of which is incorporated herein by reference, and
all of which shall be deemed to be made on the date of each borrowing by the
Borrower under the Credit Agreement on and as of the date of such borrowing as
though made hereunder on and as of such date.


 


5.                                      COVENANTS


 


Each Guarantor
covenants and agrees that, so long as any part of the Guaranteed Obligations
shall remain unpaid, such Guarantor will perform and observe, and cause each of
its Subsidiaries to perform and observe, all of the terms, covenants and
agreements set forth in the Loan Documents on its or their part to be performed
or observed or that the Borrower has agreed to cause such Guarantor or such
Subsidiaries to perform or observe.


 


6.                                      FURTHER ASSURANCES


 


Each Guarantor
agrees, upon the written request of Agent or any Lender, to execute and deliver
to Agent or such Lender, from time to time, any additional instruments or
documents reasonably considered necessary by Agent or such Lender to cause this
Guaranty to be, become or remain valid and effective in accordance with its
terms.


 


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7.                                      PAYMENTS FREE AND CLEAR OF TAXES


 


Any and all
payments by any Guarantor under this Guaranty or any other Loan Document shall
be made, in accordance with the terms of the Credit Agreement, free and clear
of and without deduction for any and all present or future Taxes.


 


8.                                      RIGHT OF SET-OFF


 


Subject to the
Intercreditor Agreement, upon (a) the occurrence and during the
continuance of any Event of Default and (b) the occurrence of an
acceleration pursuant to the provisions of Section 6.2, Agent and
each Lender and each of their respective Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by Agent,
such Lender or such Affiliate to or for the credit or the account of any
Guarantor against any and all of the Obligations of such Guarantor now or
hereafter existing under the Loan Documents, irrespective of whether Agent or
such Lender shall have made any demand under this Guaranty or any other Loan
Document and although such Obligations may be unmatured.  Agent and each Lender agrees promptly to
notify such Guarantor after any such set-off and application; provided, however,
that the failure to give such notice shall not affect the validity of such
set-off and application.  The rights of
Agent and each Lender and their respective Affiliates under this Section are
in addition to other rights and remedies (including, without limitation, other
rights of set-off) that Agent, such Lender and their respective Affiliates may
have.


 


9.                                      SUBORDINATION OF INTERCOMPANY DEBT


 


Each Guarantor
hereby consents to the subordination provisions of Intercompany Debt provided
in Section 9.22 of the Credit Agreement.


 


10.                               OTHER TERMS


 


10.1        Entire Agreement


 


This Guaranty,
the Credit Agreement, the Notes and the other Loan Documents embody the entire
agreement among the parties hereto and supersede all prior commitments,
agreements, representations, and understandings, whether oral or written,
relating to the subject matter hereof, and may not be contradicted or varied by
evidence of prior, contemporaneous, or subsequent oral agreements or
discussions of the parties hereto.


 


10.2        Headings


 


Section and
subsection headings are included herein for convenience of reference only
and shall not constitute a part of this Guaranty for any other purposes or be
given substantive effect.


 


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10.3        Severability


 


The
invalidity, illegality, or unenforceability in any jurisdiction of any
provision of this Guaranty shall not affect or impair the remaining provisions
of this Guaranty.


 


10.4        Notices


 


Any notice or
other communication required shall be in writing addressed to the respective
party as set forth below and may be personally served, telecopied, sent by
overnight courier service or U.S. mail and shall be deemed to have been
given:  (a) if delivered in person,
when delivered; (b) if delivered by fax, on the date of transmission if
transmitted on a Business Day before 4:00 p.m. New York Time; (c) if delivered by overnight courier, one (1) Business
Day after delivery to the courier properly addressed; or (d) if delivered
by U.S. mail, four (4) Business Days after deposit with postage prepaid
and properly addressed.


 


Notices shall
be addressed as follows:


 


(a)           If
to Agent, at:


 


Deutsche Bank Trust Company Americas

Global Credit Products

Leveraged Loan Portfolio


60 Wall Street, NYC60-1104


New York, NY 10005-2858

Attention:  Omayra Laucella

Telephone No.:  (212) 250-6106

Telecopier No.:  (212) 797-5690


 


with copies to:


 


Cahill Gordon & Reindel LLP

80 Pine St.

New York, NY  10005

Attention:  William M. Hartnett, Esq.


Facsimile:  (212) 269-5420

Telephone No.:  (212) 701-3847


 


(b)           If
to any Lender, at the address of such Lender specified in the Credit Agreement;


 


(c)           If
to any Guarantor at:


 


c/o Penhall Company


1801 W. Penhall Way


Anaheim, California 92801


Attention:  Chief Financial
Officer


 


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Telephone No.:  (714) 578-3211

Telecopier No.:  (714) 778-5638


 


10.5        Successors and
Assigns


 


This Guaranty
and all obligations of each Guarantor hereunder shall be binding upon the
successors and assigns of each Guarantor (including a debtor-in-possession on
behalf of each Guarantor) and shall, together with the rights and remedies
of Agent, for itself and for the benefit of Lenders, hereunder, inure to the
benefit of Agent and Lenders, all future holders of any instrument evidencing
any of the Obligations and their respective successors and assigns.  No sales of participations, other sales,
assignments, transfers or other dispositions of any agreement governing or
instrument evidencing the Obligations or any portion thereof or interest
therein shall in any manner affect the rights of Agent and Lenders
hereunder.  Each Guarantor may not
assign, sell, hypothecate or otherwise transfer any interest in or obligation
under this Guaranty.


 


10.6        No Waiver;
Cumulative Remedies; Amendments


 


Neither Agent
nor any Lender shall by any act, delay, omission or otherwise be deemed to have
waived any of its rights or remedies hereunder, and no waiver shall be valid
unless in writing, signed by Agent and then only to the extent therein set
forth.  A waiver by Agent, for itself and
the ratable benefit of Lenders, of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which Agent
would otherwise have had on any future occasion.  No failure to exercise nor any delay in exercising,
on the part of Agent or any Lender, any right, power or privilege hereunder,
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege.  The rights and remedies hereunder provided
are cumulative and may be exercised singly or concurrently, and are not
exclusive of any rights and remedies provided by law.  None of the terms or provisions of this
Guaranty may be waived, altered, modified, supplemented or amended except by an
instrument in writing, duly executed by Agent and each Guarantor.


 


10.7        Termination


 


This Guaranty
is a continuing guaranty and shall remain in full force and effect until the
payment in full in cash of the Obligations. 
Upon the earlier of the Maturity Date and the payment in full of the
Obligations, Agent shall deliver to Guarantors such documents as Guarantors may
reasonably request to evidence such termination.


 


10.8        Counterparts;
Effectiveness


 


This Guaranty and
any amendments, waivers, consents or supplements may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all of
which counterparts together shall constitute but one in the same
instrument.  This Guaranty shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto.


 


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10.9        Consent to
Jurisdiction


 


(a)           THIS
GUARANTY AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNATIONAL LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES WHICH SHALL BE
DEEMED NOT TO INCLUDE SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW.


 


(b)           EACH
GUARANTOR HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN NEW YORK COUNTY, STATE OF NEW YORK AND IRREVOCABLY AGREES THAT,
SUBJECT TO AGENT’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS GUARANTY OR ANY OF THE
OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.  EACH GUARANTOR EXPRESSLY SUBMITS AND CONSENTS
TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE OF FORUM NON
CONVENIENS.  EACH GUARANTOR HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE UPON EACH GUARANTOR
BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH GUARANTOR,
AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO
MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.  IN ANY
LITIGATION, TRIAL, ARBITRATION OR OTHER DISPUTE RESOLUTION PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, ALL DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS OF SUCH GUARANTOR
OR ANY OF ITS AFFILIATES SHALL BE DEEMED TO BE EMPLOYEES OR MANAGING AGENTS OF SUCH
GUARANTOR FOR PURPOSES OF ALL APPLICABLE
LAW OR COURT RULES REGARDING THE PRODUCTION OF WITNESSES BY NOTICE FOR
TESTIMONY (WHETHER IN A DEPOSITION, AT TRIAL OR OTHERWISE).  EACH GUARANTOR AGREES THAT AGENT’S OR ANY
LENDER’S COUNSEL IN ANY SUCH DISPUTE RESOLUTION PROCEEDING MAY EXAMINE ANY
OF THESE INDIVIDUALS AS IF UNDER CROSS-EXAMINATION AND THAT ANY DISCOVERY
DEPOSITION OF ANY OF THEM MAY BE USED IN THAT PROCEEDING AS IF IT WERE AN
EVIDENCE DEPOSITION.  EACH GUARANTOR IN
ANY EVENT WILL USE ALL COMMERCIALLY REASONABLE EFFORTS TO PRODUCE IN ANY SUCH
DISPUTE RESOLUTION PROCEEDING, AT THE TIME AND IN THE MANNER REQUESTED BY AGENT
OR ANY LENDER, ALL PERSONS, DOCUMENTS (WHETHER IN TANGIBLE, ELECTRONIC OR OTHER
FORM) OR OTHER THINGS UNDER THEIR CONTROL AND RELATING TO THE DISPUTE.


 


10.10      Waiver of Jury Trial


 


EACH GUARANTOR HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY AND THE
OTHER LOAN DOCUMENTS.  EACH GUARANTOR ACKNOWLEDGES THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER


 


10





















 


INTO A BUSINESS RELATIONSHIP, THAT AGENT HAS
RELIED ON THE WAIVER IN ENTERING INTO THIS GUARANTY AND THE OTHER LOAN
DOCUMENTS AND WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE
DEALINGS.  EACH GUARANTOR WARRANTS AND REPRESENTS THAT SUCH GUARANTOR HAS HAD
THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT SUCH
GUARANTOR KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.


 


10.11      Limitation


 


Notwithstanding
any provision herein contained to the contrary, Guarantors’ liability under this Guaranty shall be limited to an amount not to
exceed as of any date of determination the amount that could be claimed by
Agent and Lenders from Guarantors under this Guaranty without rendering such
claim voidable or avoidable under Section 548 of Chapter 11 of the
Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act,
Uniform Fraudulent Conveyance Act or similar statute or common law.


 


10.12      Intercreditor
Arrangement


 


Notwithstanding
anything herein to the contrary, each Guarantor acknowledges that the lien and
security interest granted to the Agent pursuant to the Collateral Documents and
the exercise of any right or remedy by the Agent thereunder are subject to the
provisions of the Intercreditor Agreement. 
In the event of any conflict between the terms of the Intercreditor Agreement
and the terms of the Loan Documents, the terms of the Intercreditor Agreement
shall govern and control


 


[SIGNATURE PAGE FOLLOWS]


 


11





















 


IN WITNESS
WHEREOF, the parties hereto have executed and
delivered this Guaranty as of the date first above written.


 


	
   

  	
  PENHALL
  COMPANY,

  
	
   

  	
  as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey
  E. Platt

  
	
   

  	
   

  	
  Name:
  Jeffrey E. Platt

  
	
   

  	
   

  	
  Title: Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PENHALL
  INVESTMENTS, INC.,

  
	
   

  	
  as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey
  E. Platt

  
	
   

  	
   

  	
  Name:
  Jeffrey E. Platt

  
	
   

  	
   

  	
  Title: Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BOB MACK
  COMPANY,

  
	
   

  	
  as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey
  E. Platt

  
	
   

  	
   

  	
  Name:
  Jeffrey E. Platt

  
	
   

  	
   

  	
  Title: Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CAPITOL
  DRILLING SUPPLIES, INC.,

  
	
   

  	
  as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey
  E. Platt

  
	
   

  	
   

  	
  Name:
  Jeffrey E. Platt

  
	
   

  	
   

  	
  Title: Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PENHALL
  LEASING,

  
	
   

  	
  as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey
  E. Platt

  
	
   

  	
   

  	
  Name:
  Jeffrey E. Platt

  
	
   

  	
   

  	
  Title: Vice
  President

  



 


[SIGNATURE PAGE TO PENHALL GUARANTY]


 





















 


	
   

  	
  DEUTSCHE
  BANK TRUST COMPANY AMERICAS,

  
	
   

  	
  as Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Omayra
  Laucella

  
	
   

  	
   

  	
  Name: Omayra
  Laucella

  
	
   

  	
   

  	
  Title: Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Evelyn
  Lazala

  
	
   

  	
   

  	
  Name: Evelyn
  Lazala

  
	
   

  	
   

  	
  Title: Vice
  President

  



 


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