UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly report pursuant to section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the quarter ended June 30, 1995 Commission file
number 0-13875
LANCER CORPORATION
(Exact name of registrant as specified in its charter)
Texas 74-1591073
(State or other jurisdiction of (IRS employer
incorporation or organization) identification no.)
235 West Turbo, San Antonio, Texas 78216
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (210)
344-3071
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 14(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the
issuers of classes of common stock, as of the latest
practicable date.
Shares outstanding as of
Title August 8, 1995
Common stock, par value 3,866,191
$.01 per share
Part I - Financial Information
Item 1 - Financial Statements
<TABLE>
LANCER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $ 1,750,006 $ 2,102,390
Receivables:
Trade accounts and notes 15,170,232 9,152,033
Refundable income taxes - 342,981
Other 285,957 455,811
15,456,189 9,950,825
Less allowance for doubtful accounts 85,000 85,000
Net receivables 15,371,189 9,865,825
Inventories (note 2) 16,447,632 20,318,073
Prepaid expenses 224,137 54,827
Total current assets 33,792,964 32,341,115
Property, plant and equipment, at
cost:
Machinery and equipment 12,355,096 12,093,915
Tools and dies 5,883,389 5,189,667
Leaseholds, office equipment and
vehicles 4,386,429 3,830,330
Buildings 7,520,576 6,522,429
Land 977,888 656,740
Construction in Progress 723,278 -
31,846,656 28,293,081
Less accumulated depreciation
and amortization (15,950,479) (15,051,379)
Net property, plant and equip. 15,896,177 13,241,702
Long-term receivables 555,823 538,312
Deferred charges and other assets,
at cost, less applicable amortization 333,556 775,075
$ 50,578,520 $ 46,896,204
<FN>
See accompanying notes to consolidated financial statements.
Part I - Financial Information
Item 1 - Financial Statements
</TABLE>
<TABLE>
LANCER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
<CAPTION>
June 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
Liabilities and Shareholders
Equity
Current Liabilities:
Accounts payable $ 4,969,018 $ 4,899,550
Current installments of long-
term debt 2,027,254 1,408,663
Line of credit with bank (note 3) 6,200,000 6,000,000
Accrued expenses and other
liabilities 2,733,260 2,655,113
Income taxes payable 440,919 -
Total current liabilities 16,370,451 14,963,326
Other long-term liability 640,000 520,000
Deferred income taxes 990,664 1,096,961
Long-term debt, excluding current
installments (note 3) 3,372,971 3,397,174
Total liabilities 21,374,086 19,977,461
Shareholders equity (note 4):
Preferred Stock:
Without par value; 5,000,000 shares
authorized; none issued - -
Common Stock:
$.01 par value; 10,000,000 shares
authorized; 3,862,302 and
3,861,906 issued and outstanding
in 1995 and 1994, respectively 38,623 38,619
Additional paid-in capital 9,799,842 9,797,734
Retained earnings 19,365,969 17,082,390
Total shareholders equity 29,204,434 26,918,743
$ 50,578,520 $ 46,896,204
</TABLE>
[FN]
See accompanying notes to consolidated financial statements.
Part I - Financial Information
Item 1 - Financial Statements
<TABLE>
LANCER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $ 21,312,939 $ 18,633,240 $ 41,654,156 $ 34,787,872
Cost of sales 17,050,352 14,943,858 33,523,325 27,899,873
Gross profit 4,262,587 3,689,382 8,130,831 6,887,999
Selling, general and
administrative expenses 2,355,053 2,105,440 4,989,199 4,249,522
Operating income 1,907,534 1,583,942 3,141,632 2,638,477
Other (expense) income:
Interest expense (297,609) (178,405) (518,923) (349,773)
Interest and other income 451,579 114,926 994,969 542,709
153,970 (63,479) 476,046 192,936
Earnings before income 2,061,504 1,520,463 3,617,678 2,831,413
taxes
Income tax expense
(benefit):
Current 727,023 608,258 1,440,396 1,141,060
Deferred 20,078 (34,737) (106,297) (64,686)
747,101 573,521 1,334,099 1,076,374
Net earnings $ 1,314,403 $ 946,942 $ 2,283,579 $ 1,755,039
Weighted avg common shares 3,984,182 3,684,591 3,981,931 3,679,574
Net earnings per com shares $ .33 $ 0.26 $ .57 $ 0.48
</TABLE>
[FN]
See accompanying notes to consolidated financial statements.
Part I - Financial Information
Item 1 - Financial Statements
<TABLE>
LANCER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended
June 30, June 30,
1995 1994
<S> <C> <C>
Cash flow from operating activities:
Net earnings $ 2,283,579 $ 1,755,039
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 1,085,095 959,321
Loss (gain) on sale and disposal of assets 12,173 15,829
Increase in receivables (5,865,856) (3,183,428)
Decrease in refundable income taxes 342,981 -
Increase in prepaid expenses (169,310) (145,322)
Decrease in inventories 3,870,441 229,679
Decrease in other assets 424,266 14,803
Increase in accounts payable 69,468 1,161,027
Increase in accrued expenses 78,147 784,733
Increase(decrease) in income taxes payable 440,919 (16,468)
Decrease in deferred income taxes (106,297) (64,686)
Increase in other long-term liabilities 120,000 30,000
Net cash provided by operating activities 2,585,606 1,540,527
Cash flow from investing activities:
Proceeds from sale of assets 14,601 4,700
Acquisition of property, plant, and equip. (3,749,091) (1,660,959)
Investment in common stock - (150,000)
Net cash used in investing activities (3,734,490) (1,806,259)
Cash flow from financing activities:
Net borrowings on line of credit agreement 200,000 500,000
Proceeds from issuance of long-term debt 1,524,000 221,480
Retirement of long-term debt (929,612) (738,939)
Proceeds from exercise of stock options 2,112 110,142
Net cash provided by financing activities 796,500 92,683
Net decrease in cash (352,384) (173,049)
Cash at beginning of year 2,102,390 1,353,167
Cash at end of period $ 1,750,006 $ 1,180,118
</TABLE>
See accompanying notes to consolidated financial statements.
Item 1 - Financial Statements
LANCER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
All adjustments (consisting of normal recurring adjustments)
have been made which are necessary for a fair presentation
of financial position and results of operations. All
intercompany balances and transactions have been eliminated
in consolidation. It is suggested that the consolidated
financial statements be read in conjunction with the
consolidated financial statements and notes thereto included
in the December 31, 1994 Annual Report on Form 10-K.
Earnings per share are based on the weighted average number
of common and common equivalent (dilutive stock options)
shares outstanding each period. Fully diluted earnings per
share would not be different than earnings per common and
common equivalent share.
2. Inventory Components
The Company uses the gross profit method to determine cost
of sales and inventory for interim periods. Inventory
components are estimated based on historical relationships
as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
<S> <C> <C>
Finished Goods $ 5,287,491 $ 6,531,738
Work in process 10,166,056 12,558,323
Raw material and 994,085 1,228,012
supplies
$ 16,447,632 $ 20,318,073
</TABLE>
3. Long-term Debt and Line of Credit
One of the Companys wholly-owned subsidiaries entered into a
loan agreement dated August 1, 1995, with the Companys
primary lender to provide $2.5 million of term debt to
finance the expansion of its production facilities in
Mexico. This new facility will bear interest based upon the
banks prime rate, is subject to an seven-year amortization
schedule and is due and payable in full on January 15, 1999.
The Company has also entered into a separate agreement with
its lender to guarantee the subsidiarys performance under
the loan agreement.
On August 1, 1995, the Company replaced its prior $8.0
million working capital revolving line of credit with a
$10.0 million working capital revolving line of credit (the
Credit Facility) from its primary lender. The terms of
the Credit Facility are substantially the same as the terms
of the prior line of credit, with the interest rate being
based upon either London Interbank Offered Rates (LIBOR) or
upon, and fluctuating with, the lenders prime rate. Under
the Credit Facility, the Company will be able to borrow up
to a certain percentage of its eligible accounts receivable
and inventory, provided it maintains certain financial
ratios and complies with certain covenants.
4. Stock Dividends
On May 26, 1995, the Companys Board of Directors authorized
a three-for-two stock split effected in the form of a
dividend to be distributed on July 11, 1995 to shareholders
of record as of June 27, 1995. Shareholders equity has been
restated to give retroactive recognition to the stock split
for all prior periods presented by reclassifying from
additional paid-in capital to common stock the par value of
the additional shares arising from the stock dividend. In
addition, all references in the financial statements to
number of shares, per share amounts, stock option data and
market prices of the Companys common stock have been
restated.
Part I - Financial Information
Item 2 - Managements Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Comparison of the Three-Month Periods Ended June 30, 1995 and 1994
Net sales for the quarter ended June 30, 1995, increased by
$2.7 million, or 14.4%, to $21.3 million from $18.6 million
for the same period last year. This increase reflects a
general increase in demand for most of the Companys product
lines with particular emphasis on mechanically cooled, ice-
cooled and citrus dispensers. International sales amounted
to $7.6 million, or 35.6% of net sales, for the quarter
ended June 30, 1995, an increase of $2.7 million, or 55.1%,
from $4.9 million, or 26.5% of net sales, for the same
period last year.
Due to the increase in sales, the gross profit recognized
for the second quarter of 1995 increased by $573 thousand,
or 15.5%, to $4.3 million from $3.7 million for the same
quarter last year, while gross margin for the period
(represented as a percentage of net sales) increased to
20.0% from 19.8% in the same period of 1994. These
increases are primarily due to increased sales and
manufacturing process improvements; however, they were
tempered by corresponding increases in the prices of certain
key raw materials.
Selling, general and administrative costs during the quarter
ended June 30, 1995, increased by $250 thousand, or 11.9%,
to $2.4 million from $2.1 million for the same quarter last
year. This increase reflects higher selling and engineering
research and development expenses, which were partially
offset by reduced employee health care costs.
Interest expense for the three months ended June 30, 1995
increased $119 thousand, or 66.8%, to $298 thousand from
$178 thousand for the same period last year, reflecting
higher average bank debt in 1995 associated with the
purchase of land and facilities to support the Companys
operations in Piedras Negras, Coahuila, Mexico.
Other income for the three months ended June 30, 1995
increased by $337 thousand, or 292.9%, from $115 thousand
for the same period in 1994, due primarily from an increase
in commissions earned under a sales representative agreement
for the sale of beverage coolers.
Income tax expense for the three months ended June 30, 1995,
increased by 30.3%, to $747 thousand from $574 thousand for
the same period in 1994. This increase is directly related
to the increase in earnings.
Net earnings for the three months ended June 30, 1995,
increased by $367 thousand, or 38.8%, to $1.3 million ($0.33
per share) from $947 thousand ($0.26 per share) for the same
period in 1994. This increase was primarily due to improved
gross margins and higher interest and other income.
Comparison of the Six-Month Periods Ended June 30, 1995 and 1994
Net sales for the six-month period ended June 30, 1995,
increased by $6.9 million, or 19.7%, to $41.7 million from
$34.8 million for the same period in 1994. This increase
reflects a general increase in demand for all product lines,
particularly dispensers of all types, as noted above.
International sales amounted to $13.2 million, or 31.6% of
net sales, for the six months ended June 30, 1995, an
increase of $2.8 million, or 26.9%, from $10.4 million, or
29.8% of net sales, for the same period last year.
Gross profit for the six months ended June 30, 1995
increased by $1.2 million, or 18.0%, to $8.1 million from
$6.9 million for the same period in 1994, while gross margin
for the period (represented as a percentage of net sales)
decreased slightly to 19.5% from 19.8% in the same period in
1994 reflecting the impact of key raw material price
increases.
Selling, general and administrative expenses for the six-
month period ended June 30, 1995, increased by $740
thousand, or 17.4%, to $5.0 million from $4.3 million for
the same period in 1994. This increase was due primarily to
higher selling and engineering research and development
expenses.
Interest expense for the first six months of 1995 increased
by $169 thousand, or 48.4%, to $519 thousand from $350
thousand for the same period last year. This increase
resulted from the increase in average bank debt resulting
from the purchase of land and facilities in Mexico.
Interest and other income for the six months ended June 30,
1995, increased by $452 thousand, or 83.3%, to $995
thousand from $543 thousand for the same period in 1994.
This increase was due primarily to commissions the Company
was paid under a sales representative agreement entered into
in 1993 for the sale of beverage coolers. The agreement is
terminable by either party upon 30 days written notice.
Income tax expense for the six months ended June 30, 1995,
increased by 24.0%, to $1.3 million from $1.1 million for
the same period in 1994. This increase was primarily due to
increased earnings.
Net earnings for the six months ended June 30, 1995,
increased by $529 thousand, or 30.1%, to $2.3 million ($0.57
per share) from $1.8 million ($0.48 per share) for the same
period in 1994. The increase was primarily due to the
improvement in gross margin and the increase in interest and
other income.
Liquidity and Capital Resources
Cash from Operations for the six months ended June 30, 1995,
was $2.6 million compared to $1.5 million for the same
period in the prior year. Cash from Operations during the
first six months of 1995, along with cash on hand and $1.7
million in new borrowings, was used to acquire additional
machinery and equipment for $1.5 million, purchase Company
occupied buildings and land, which had previously been
leased, to support its Maquiladora operations in Mexico for
$1.3 million, fund construction of a new building in Mexico
for $723 thousand, and repay $930 thousand of long-term
debt.
On August 1, 1995, the Company replaced its prior $8.0
million working capital revolving line of credit with a
$10.0 million working capital revolving line of credit (the
Credit Facility) from its primary lender. The terms of the
Credit Facility are substantially the same as the terms of
the prior line of credit, with the interest rate being based
upon either London Interbank Offered Rates (LIBOR) or upon,
and fluctuating with, the lenders prime rate. Under the
Credit Facility, the Company will be able to borrow up to a
certain percentage of its eligible accounts receivable and
inventory, provided it maintains certain financial ratios
and complies with certain covenants. As of June 30, 1995,
the Company had outstanding borrowings of $6.2 million under
the Credit Facility and the interest rate was 8.75%. All
borrowings under the Credit Facility become due and payable
in full on July 31, 1996.
One of the Companys wholly-owned subsidiaries entered into a
loan agreement dated August 1, 1995, with the Companys
primary lender to provide $2.5 million of term debt to
finance the expansion of its production facilities in
Mexico. This new facility will bear interest based upon the
banks prime rate, is subject to an seven-year amortization
schedule and is due and payable in full on January 15, 1999.
The Company has also entered into a separate agreement with
its lender to guarantee the subsidiarys performance under
the loan agreement.
Part II - Other Information
Item 1. Legal Proceedings
The Company is a party to various lawsuits and claims
generally incidental to its business. In the opinion of
management and independent legal counsel, the ultimate
disposition of these matters is not expected to have a
significant adverse effect on the Companys financial
position or results of operations.
Item 5. Other Information
Effective August 4, 1995, Mr. Dennis D. Stout has resigned
as Chief Financial Officer and Treasurer of the Company.
Mr. Stout will continue as the Companys Director of Cost
Management. Effective August 7, 1995, Mr. John P. Herbots
has been appointed Chief Financial Officer and Treasurer of
the Company. Mr. Herbots will continue in office as Vice
President of Finance and Administration.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 1 - Seventh Amendment to Loan Agreement and Loan Documents
Exhibit 2 - Revolving Promissory Note
Exhibit 3 - Guaranty Agreement
Exhibit 4 - Nueva Distribuidora Lancermex S.A. de C.V. Promissory Note
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the fiscal
quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
LANCER CORPORATION
(Registrant)
August 11, 1995 By:
George F. Schroeder
President and CEO
August 11, 1995 By:
John P. Herbots
Chief Financial Officer
148892.1
SEVENTH AMENDMENT TO LOAN AGREEMENT
AND LOAN DOCUMENTS
This Seventh Amendment to Loan Agreement and Loan Documents
(the "Agreement") is among LANCER CORPORATION, a Texas
corporation (the "Borrower"), LANCER INTERNATIONAL SALES, INC., a
Texas corporation ("Lancer International") and FIRST INTERSTATE
BANK OF TEXAS, N.A. (the "Lender").
R E C I T A L S
WHEREAS, the Borrower and the Lender entered into a Loan
Agreement dated July 24, 1991 (the "Original Loan Agreement"),
the terms and provisions of which Original Loan Agreement are
incorporated in this Agreement by this reference for all
purposes;
WHEREAS, the Borrower and the Lender amended the Original
Loan Agreement in an Amendment to Loan Agreement and Loan
Documents (the "First Amendment") dated effective May 15, 1992,
in a Second Amendment to Loan Agreement and Loan Documents dated
effective May 15, 1993 (the "Second Amendment"), in a Third
Amendment to Loan Agreement and Loan Documents dated effective
April 8, 1994 (the "Third Amendment"), in a Fourth Amendment to
Loan Agreement and Loan Documents dated effective July 29, 1994
(the "Fourth Amendment"), in a Fifth Amendment to Loan Agreement
and Loan Documents dated effective November 8, 1994 (the "Fifth
Amendment") and most recently in a Sixth Amendment to Loan
Agreement and Loan Documents dated effective June 30, 1995 (the
"Sixth Amendment") the terms and provisions of which First
Amendment, Second Amendment, Third Amendment, Fourth Amendment,
Fifth Amendment and Sixth Amendment are incorporated into this
Agreement by this reference for all purposes (all subsequent
references to the Original Loan Agreement, as modified by the
First Amendment, the Second Amendment, the Third Amendment, the
Fourth Amendment, the Fifth Amendment, the Sixth Amendment and
this Agreement being collectively referred to herein as the "Loan
Agreement");
WHEREAS, the Loan Agreement concerns all of the Loans from
the Lender to the Borrower, including specifically, an existing
Revolving Note in the principal sum of $8,000,000.00;
WHEREAS, the Loans are secured by the Collateral described
in the Loan Documents, which Loan Documents include, without
limitation, a Security Agreement dated July 24, 1991, executed by
the Borrower in favor of the Lender, which covers, in part, the
Borrower's Inventory and Accounts, and a Security Agreement dated
effective May 15, 1992, executed by Lancer International in favor
of the Lender, which covers, in part, Lancer International's
Inventory and Accounts;
WHEREAS, the Borrower has requested that the Lender renew
and extend the Revolving Note and increase the Revolving Note to
$10,000,000.00, all in accordance with the terms stated in this
Agreement;
WHEREAS, the Borrower and the Lender desire, as evidenced by
this Agreement, to make certain amendments to the Loan Agreement
and to ratify the continued force and effect of the Loan
Documents;
NOW, THEREFORE, in consideration of the financial
accommodations extended to the Borrower by the Lender and other
good and valuable consideration, the receipt and sufficiency of
which are acknowledged by the undersigned, the Borrower, the
Subsidiaries and the Lender agree as follows:
1. The first sentence of Section 1.1 of the Original Loan
Agreement is restated as follows:
1.1. Description of the Loans. Subject to the
terms and conditions of this Agreement and in reliance
upon the representations and warranties made by the
Borrower, the Lender agrees (a) to make available to
the Borrower (i) a $10,000.000.00 revolving credit as
evidenced by a revolving promissory note (the
"Revolving Note") in substantially the form attached
hereto as Exhibit "A" and (ii) a $2,000,000.00 term
credit as evidenced by a promissory note (the "Term
Note") in the form attached hereto as Exhibit "E", and
(b) to make available to Nueva Distribuidora Lancermex
S.A. de C.V. a $2,500,000.00 term credit as evidenced
by a promissory note (the "Lancermex Note") in
substantially the form attached hereto as Exhibit "F".
2. The following Section 1.2. of the Original Loan
Agreement is restated as follows:
1.2. Borrowing Base under the Revolving Note.
Advances on the Revolving Note will be limited to an
amount equal to the lesser of (a) the sum of (i) eighty
percent (80%) of the Borrower's Eligible Accounts and
(ii) thirty percent (30%) of the Borrower's Inventory,
or (b) $10,000,000.00 (the "Borrowing Base"); provided,
however, for purposes of calculating the Borrowing Base
the amount drawn on the Borrower's Inventory shall not
exceed $5,000,000.00 and the amount attributable to
foreign Accounts shall not exceed $2,500,000.00. As
used in the prior sentence, the term "Eligible
Accounts" shall mean all Accounts, except for Accounts
owed by Subsidiaries or Affiliates of the Borrower,
contra Accounts, those which remain unpaid after ninety
(90) days from the date of invoice, those owed by any
Account Debtor if more than twenty-five percent (25%)
of such Account Debtor's Account remains unpaid after
ninety (90) days from the date of invoice, those owed
by any Account Debtor other than Coca-Cola to the
extent such Account Debtor's Account exceeds ten
percent (10%) of all Accounts, those of the U.S.
government and its agencies which are subject to the
Assignment of Claims Act, those from any foreign
Account Debtor to the extent such foreign Account
Debtor's Account exceeds $1,200,000.00, and those from
foreign Account Debtors that are not Coca-Cola bottlers
or entities in which Coca-Cola has at least a twenty-
five percent (25%) ownership stake, excluding from this
last exception only those foreign Account Debtors whose
Accounts are secured by letters of credit acceptable to
the Lender and those insured under the First Interstate
Foreign Assurance Export Program or other comparable
program approved in advance and in writing by the
Lender. Upon request by the Lender, and in any event
within forty-five (45) days after the end of each
calendar month, the Borrower shall furnish the Lender
with a Borrowing Base Certificate substantially in the
form of Exhibit "B". The Lender may determine and
redetermine the Borrowing Base as often as daily. Each
determination of the Borrowing Base shall be made by
the Lender in its sole discretion and as a matter of
its own judgment.
3. The Borrower reaffirms the representations and
warranties contained in Section 3 of the Loan Agreement and
confirms that said representations and warranties are true and
correct as of the effective date of this Agreement.
4. Section 5.10 of the Original Loan Agreement is restated
as follows:
5.10. Capital Expenditures: Make capital
expenditures in excess of $4,000,000.00 in any calendar
year, net after deducting the cash proceeds received by
the Borrower from sales of capital equipment during the
same calendar year.
5. Pursuant to Sections 5.1 and 5.2 of the Loan Agreement,
the Lender grants its consent to the Borrower's incurring (i) up
to $3,000,000.00 of purchase money financing for equipment or
fixtures, (ii) long term indebtedness secured solely by the
Borrower's real estate and (iii) existing CIT equipment financing
and the associated liens securing said CIT indebtedness.
6. Subpart (a) under Section 6.1 of the Original Loan
Agreement is restated as follows:
(a) The Borrower or Nueva Distribuidora Lancermex
S.A. de C.V. fail to pay any principal of or interest
on the Loans or any fee or any other obligation
hereunder as and when due;
7. The Loan Documents secure, in addition to the Revolving
Note, the Term Note described in this Agreement. However, the
Lender specifically agrees that except for the Borrower's
Guaranty Agreement concerning the Lancermex Note, the Lancermex
Note is unsecured.
8. Lancer International and Lancer Limited join in the
execution of this Agreement to evidence their consent to the
terms hereof and their ratification of their obligation to
guarantee repayment of the Revolving Note executed by the
Borrower, pursuant to separate Guaranty Agreements dated June 30,
1995.
9. The Borrower ratifies, affirms, acknowledges and agrees
that the Loan Documents, and each and every document and
instrument which secures payment of the Loans, represent the
valid, enforceable, and collectible obligations of the parties
thereto and further acknowledge that there are no existing
claims, defenses, whether personal or otherwise, or rights of set-
off whatsoever with respect to any of the instruments or
documents described specifically or by reference in this
Agreement, and the Borrower further acknowledges and represents
that no event has occurred and no condition exists which would
constitute a Default under the Loan Agreement either with or
without notice or lapse of time.
10. The Loan Documents and all other documents and
instruments executed in connection with the Loans shall be
governed and construed according to the laws of the State of
Texas from time to time in effect, except to the extent United
States federal law preempts Texas law.
11. This Agreement shall be binding upon and inure to the
benefit of the Lender, the Borrower and the Subsidiaries and
their respective heirs, successors and assigns.
12. Agreement for Binding Arbitration. The parties agree to
be bound by the terms and provisions of the current Arbitration
Program of First Interstate Bank of Texas, N.A., which is
incorporated by reference herein and is acknowledged as received
by the parties, pursuant to which any and all disputes shall be
resolved by mandatory binding arbitration upon the request of
either party.
EXECUTED in multiple counterparts effective as of August 1,
1995.
LANCER CORPORATION, a Texas
corporation
By: John P. Herbots
Name: John P. Herbots
Title: Vice President Finance
LANCER INTERNATIONAL SALES, INC.,
a Texas corporation
By: John P. Herbots
Name: John P. Herbots
Title: Vice President Finance
LANCER LIMITED
By: George F. Schroeder
Name: George F. Schroeder
Title: President
FIRST INTERSTATE BANK OF TEXAS,
N.A.
By: Scott Adams
Name: Scott Adams
Title: Asst. Vice President
1093-39
EXHIBIT "A"
REVOLVING PROMISSORY NOTE
$10,000,000.00 August 1, 1995
For value received, LANCER CORPORATION, a Texas corporation
(the "Makers," whether one or more), promise to pay to the order
of FIRST INTERSTATE BANK OF TEXAS, N.A., a national banking
association (the "Payee"), at 700 N. St. Mary's Street, Suite
300, San Antonio, Bexar County, Texas 78205, or such other
location as the Payee designates to the Makers in writing, the
principal sum of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00),
or the outstanding principal amount advanced hereunder, whichever
is less, in legal and lawful money of the United States of
America, with interest thereon as hereinafter specified.
TERMS OF PAYMENT:
Interest only shall be due and payable in installments
commencing on August 15, 1995, and continuing regularly
thereafter on the same day of each calendar month until June 15,
1996 (the "Maturity Date"), when the entire amount of this Note,
principal and interest then remaining unpaid, shall be due and
payable.
The principal sum of this Note represents a revolving
credit, all or any part of which may be advanced to the Makers,
repaid by the Makers and re-advanced to the Makers, without the
necessity for the execution of any other instruments, at any time
prior to the earlier of (i) the date on which demand for payment
is made hereunder or (ii) the Maturity Date; provided, however
that the unpaid principal balance of this Note shall never exceed
the sum of $10,000,000.00. All advances and all payments made on
account of this Note shall be recorded by the Payee, whose
records shall be deemed correct absent manifest error. In no
event shall the provisions of Article 5069-15.01, et seq.,
Vernon's Texas Civil Statutes, 1925, as amended (which regulates
certain revolving loan accounts and revolving tri-party accounts)
apply to the loan evidenced by this Note.
PAYMENT ON NON-BUSINESS DAYS:
If any payment hereunder falls due on a Saturday, Sunday or
public holiday on which commercial banks in San Antonio, Texas
are permitted or required by law to be closed, the time for such
payment shall be extended to the next day on which the Payee is
open for business, and such extension of time shall be included
in the calculation of interest accruing and payable hereunder.
RATE OF INTEREST:
From the date hereof until maturity, interest (calculated on
the basis of a year of 360 days for the actual number of days
elapsed) shall accrue on the unpaid principal balance of the Note
at a rate (or rates) per annum equal to (a) the Prime Rate; or
(b) a fixed rate equal to the sum of (i) the average of London
Interbank Offered Rates (LIBOR) quoted for deposits with a
maturity corresponding to the pertinent Interest Period under the
title "Money Rates" in The Wall Street Journal issue published on
(or closest to) the date of the rate of interest on this Note is
to be determined, plus (ii) 1.75% ("Adjusted LIBOR"). Each
determination of the Prime Rate and Adjusted LIBOR made by the
Payee in accordance with this Note shall be conclusive except in
the case of manifest error. After maturity (whether by
acceleration or otherwise) until paid, interest shall accrue on
the matured principal and accrued, but unpaid, interest on this
Note at a rate per annum equal to the Maximum Lawful Rate.
Each advance requested under this Note (the "Advance
Request") shall include the following information:
1. the amount of the Advance Request;
2. the Makers' interest rate choice (Prime Rate or
Adjusted LIBOR) and, if the choice is Adjusted LIBOR,
the Interest Period (hereinafter defined); and
3. any other information required under the Loan
Agreement (hereinafter defined).
As used herein, the term "Interest Period" shall mean a one
month, two month or three month period chosen by the Makers and
specified in each Advance Request. Each Advance Request shall be
made by telephone or in writing not later than 12:00 Noon, local
time, San Antonio, Texas, on the date the Makers desire for funds
to be advanced under this Note. In the event the Advance Request
is made by telephone, written confirmation of such Advance
Request will be sent to the Payee within five (5) business days
following such Advance Request.
If the Makers make no interest rate choice with any Advance
Request, the Makers shall be deemed to have made an Advance
Request at the Prime Rate until such time as a new Advance
Request is made (or this Note matures). The Makers and the Payee
contemplate that different rate options may be in effect
simultaneously under this Note.
Any Advance Request for an Adjusted LIBOR rate of interest
shall be subject to the following special provisions:
(a) The Adjusted LIBOR rate of interest shall commence
on the date the requested funds are advanced and shall
remain in effect for the Interest Period specified in
the pertinent Advance Request, or until this Note
matures, whichever is earlier;
(b) If any Interest Period would otherwise expire on a
day which is not a banking day in San Antonio, London
and New York City ("Business Day"), such Interest
Period shall expire on the next succeeding Business
Day;
(c) No Interest Period shall extend beyond the
Maturity Date; and
(d) No more than eight Interest Periods shall be in
existence under this Note at any one time.
As used herein, the term "Prime Rate," shall mean that rate
of interest equal on any given day to the rate of interest most
recently established by the Payee as its prime rate and entered
as such in its records, whether or not such rate is otherwise
published. The Prime Rate will automatically fluctuate upward
and downward, without special notice to the Makers or any other
person. THE PRIME RATE MAY NOT BE THE BEST OR LOWEST RATE OR A
FAVORED RATE OF INTEREST, AND ANY REPRESENTATION OR WARRANTY IN
THAT REGARD IS EXPRESSLY DISCLAIMED.
As used herein, the term "Maximum Lawful Rate" shall mean
the greater of (i) the highest non-usurious rate of interest
permitted by applicable United States law, or (ii) a rate per
annum equal to the indicated rate ceiling determined weekly in
accordance with the computation specified in Article 5069-1.04,
Vernon's Texas Civil Statutes, 1925, as amended, as such
indicated rate ceiling is in effect from time to time, but in no
event greater than twenty-eight percent (28%) per annum. Unless
precluded by law, changes in the Maximum Lawful Rate created by
statute or governmental action during the term of this Note shall
be immediately applicable to this Note on the effective date of
such changes. In the event that no Maximum Lawful Rate exists,
then the term "Maximum Lawful Rate" shall be deemed to mean a
rate per annum equal to the Prime Rate, plus five percent
(5.00%).
Notwithstanding the foregoing, if, at any time, the rate of
interest applicable to this Note (but for the limitation thereof
to the Maximum Lawful Rate) exceeds the Maximum Lawful Rate, the
rate of interest to accrue on this Note shall be limited to the
Maximum Lawful Rate, but any subsequent reductions in such rate
of interest applicable to this Note (but for the limitation
thereof to the Maximum Lawful Rate) shall not reduce the rate of
interest to accrue on this Note below the Maximum Lawful Rate
until the total amount of interest which would have accrued if a
varying rate per annum equal to the rate of interest applicable
to this Note (but for the limitation thereof to the Maximum
Lawful Rate) had at all times been in effect.
PREPAYMENT:
Except for those portions of the Note bearing interest at
Adjusted LIBOR (which may not be voluntarily prepaid until the
end of the pertinent Interest Period), the Makers reserve the
right to prepay this Note in any amount at any time prior to
maturity without penalty. Interest shall be calculated on the
unpaid principal to the date of any prepayment and any such
prepayment shall be applied first toward the payment of accrued
interest and next to the principal installments of this Note in
the inverse order of maturity.
SECURITY FOR PAYMENT:
Payment of this Note is secured by, and this Note is
entitled to the benefits of, all security agreements,
assignments, deeds of trust, mortgages and lien instruments
executed by the Makers (or any of them), or other similar
instruments, guaranties, endorsements or other agreements,
executed by any other person or entity (the "Collateral
Agreements," whether one or more) to secure, guarantee or
otherwise provide for the payment hereof, in favor of or for the
benefit of the Payee, including any previously executed and any
now or hereafter executed. Without limiting the foregoing, the
Collateral Agreements include a Security Agreement dated July 24,
1991, executed by the Makers, as debtors, for the benefit of the
Payee, as secured party.
USE OF PROCEEDS:
This Note represents funds advanced and to be advanced to
the Makers at the Makers' special instance and request to finance
working capital requirements, the receipt of a portion of which
is hereby acknowledged. This Note is given pursuant to the terms
of a Loan Agreement dated July 24, 1991, as most recently amended
by a Seventh Amendment to Loan Agreement and Loan Documents dated
of even date herewith between the Makers and the Payee.
REPRESENTATIONS AND WARRANTIES:
LANCER CORPORATION, a Texas corporation expressly represents
and warrants to the Payee that it is a corporation duly organized
and existing in good standing under the laws of the State of
Texas; that it possesses full power and authority to conduct its
business as now conducted and as presently proposed to be
conducted; that the execution and delivery of this Note will not
contravene any provisions of its articles of incorporation or by-
laws; that the officer executing this Note is the legally
elected, qualified and acting officer of said corporation and is
expressly authorized to execute this Note by resolution of the
board of directors of said corporation.
LIMITATION OF INTEREST:
All agreements and transactions among the Makers and the
Payee, whether now existing or hereafter arising, whether
contained herein or in any other instrument, and whether written
or oral, are hereby expressly limited so that in no contingency
or event whatsoever, whether by reason of acceleration of the
maturity hereof, late payment, prepayment, or otherwise, shall
the amount of interest contracted for, charged or received by the
Payee from the Makers for the use, forbearance, or detention of
the principal indebtedness or interest hereof, which remains
unpaid from time to time, exceed the Maximum Lawful Rate, it
particularly being the intention of the parties hereto to conform
strictly to the applicable usury laws of the State of Texas (or
applicable United States law to the extent that it permits the
Payee to contract for, charge or receive a greater amount of
interest than under Texas law). Any interest payable hereunder
or under any other instrument relating to the indebtedness
evidenced hereby that is in excess of the Maximum Lawful Rate,
shall, in the event of acceleration of maturity, late payment,
prepayment, or otherwise, be applied to a reduction of the
unrepaid indebtedness hereunder and not to the payment of
interest, or if such excessive interest exceeds the unpaid
balance of such unrepaid indebtedness, such excess shall be
refunded to the Makers. To the extent not prohibited by
applicable law, determination of the Maximum Lawful Rate shall at
all times be made by amortizing, prorating, allocating and
spreading in equal parts during the full term of this loan, all
interest at any time contracted for, charged or received from the
Makers in connection with this loan, so that the actual rate of
interest on account of such indebtedness is uniform throughout
the term thereof.
SUCCESSORS AND ASSIGNS:
As used herein, the term "Payee" shall include the
successors and assigns of the Payee and any subsequent owner and
holder of this Note, and the term "Makers" shall include co-
makers, endorsers, guarantors, sureties and their respective
successors and assigns.
DEFAULT AND COLLECTION:
It is expressly provided that, upon default in the punctual
payment of this Note, or any part hereof, principal or interest,
as the same shall become due and payable, or upon default in the
performance of or compliance with any of the terms of any of the
Collateral Agreements, or if the Payee deems the Payee insecure,
either because the prospect of timely payment of this Note
becomes impaired, or because the prospect of timely performance
of any of the Collateral Agreements becomes impaired, at the
option of the Payee, the entire indebtedness evidenced hereby
shall be matured, and in the event default is made in the prompt
payment of this Note when due or declared due, and the same is
placed in the hands of an attorney for collection, or suit is
brought on the same, or the same is collected through probate,
bankruptcy or other judicial proceedings, then the Makers jointly
and severally agree and promise to pay all reasonable attorney's
fees, court costs and collection costs incurred by the Payee.
WAIVERS AND CONSENTS:
Each of the Makers waives presentment for payment, notice of
intent to accelerate, notice of acceleration, protest and notice
of protest, dishonor and diligence in collecting and the bringing
of suit against any other party, and agrees to all renewals,
extensions, partial payments, releases and substitutions of
security, in whole or in part, with or without notice, before or
after maturity. The Payee may remedy any default, without
waiving the same, or may waive any default without waiving any
prior or subsequent default.
GOVERNING LAWS AND VENUE:
This Note is governed by and is to be construed and enforced
in accordance with the laws of the State of Texas and of the
United States. The Makers agree and consent to the jurisdiction
of the District Courts of Bexar County, Texas, and of the United
States District Court for the Western District Texas (San Antonio
Division) and acknowledge that such courts shall constitute
proper and convenient forums for the resolution of any actions
among the Makers and the Payee with respect to the subject matter
hereof, and agree that such courts shall be the exclusive forums
for the resolution of any actions among the Makers and the Payee
with respect to the subject matter hereof.
AGREEMENT FOR BINDING ARBITRATION:
The parties agree to be bound by the terms and provisions of
the current Arbitration Program of First Interstate Bank of
Texas, N.A., which is incorporated by reference herein and is
acknowledged as received by the parties, pursuant to which any
and all disputes shall be resolved by mandatory binding
arbitration upon the request of either party.
LANCER CORPORATION, a Texas
corporation
By:________________________________
Name:______________________________
Title:_____________________________
102621.1
EXHIBIT "B"
BORROWING BASE CERTIFICATE
The undersigned, the __________________ of LANCER
CORPORATION, a Texas corporation (the "Borrower") hereby
certifies pursuant to the Loan Agreement dated July 24, 1991, as
amended by instruments dated effective May 15, 1992, May 15,
1993, April 8, 1994, July 29, 1994, November 8, 1994, June 30,
1995 and August 1, 1995, respectively, between the Borrower,
Lancer International Sales, Inc. and FIRST INTERSTATE BANK OF
TEXAS, N.A. (the "Lender"), that:
(a) The representations and warranties contained in the
Agreement are correct as of the date hereof (except to the extent
that such representations and warranties relate solely to an
earlier date);
(b) No event has occurred and is continuing, or will result
from any requested advance from the Lender, which constitutes a
breach of the Agreement;
(c) Cash Flow Coverage Ratio: _____________
(not less than 1.50);
(d) Working Capital: $_____________
(not less than $9,500,00.00);
(e) Debt to Net Worth Ratio: _____________
(not greater than 1.30);
(f) Minimum Net Worth: $_____________
(not less than $21,000,000.00);
(g) The total amount of the requested advance is $______; and
(h) The requested funding date of the advance is ____, 199__.
Calculation of Borrowing Base:
Total Accounts:
$________________
Eligible Accounts:
$________________
(i) Eighty percent (80%) of
Eligible Accounts: $_________
Inventory $_____________
(ii) Thirty percent (30%) of
Inventory (not to
exceed $5,000,000.00) $______
Borrowing Base (Sum of (i) and
(ii): $_____________
Unpaid principal balance of Revolving Note: $(___________)
Amount Available: $_____________
EXECUTED effective as of _________________, 199___.
LANCER CORPORATION,
a Texas corporation
By:________________________________
Name:______________________________
Title:_____________________________
EXHIBIT "F"
PROMISSORY NOTE
$2,500,000.00 August 1, 1995
For value received, NUEVA DISTRIBUIDORA LANCERMEX S.A. de
C.V. (the "Makers," whether one or more), unconditionally promise
to pay to the order of FIRST INTERSTATE BANK OF TEXAS, N.A., a
national banking association (the "Payee"), at 700 N. St. Mary's,
Suite 300, San Antonio, Bexar County, Texas 78205, or such other
location as the Payee designates to the Makers in writing, the
principal sum of TWO MILLION FIVE HUNDRED THOUSAND AND NO/100
DOLLARS ($2,500,000.00), or the outstanding principal amount
advanced hereunder, whichever is less, in legal and lawful money
of the United States of America, with interest thereon as
hereinafter specified.
TERMS OF PAYMENT:
Interest only shall be due and payable in installments
commencing on August 15, 1995, and continuing regularly
thereafter on the same day of each calendar month through January
15, 1996; thereafter, principal and interest shall be due and
payable in installments, commencing on February 15, 1996, and
continuing regularly thereafter on the same day of each calendar
month until January 15, 1999, when the entire amount of this
Note, principal and interest then remaining unpaid, shall be due
and payable. Interest shall be calculated on the unpaid
principal to the date each installment is paid, and the payment
made shall be credited to the discharge of the interest accrued,
the reduction of principal, and other authorized charges, if any,
in such manner and order as the Payee shall determine in its sole
discretion.
Commencing on February 15, 1996, unless and until changed as
provided herein, each installment on this Note will be in the
amount of $39,591.21. The installments may be adjusted from time
to time by the Payee to reflect changes in the interest rate as
provided herein, so that the installments shall at all times be
not less than an amount which would fully pay the unpaid balance
of this Note, both as to principal and interest, on a seven-year
level amortization basis from January 15, 1996, with any unpaid
balance of this Note being due and payable as provided herein.
PAYMENT ON NON-BUSINESS DAYS:
If any payment hereunder falls due on a Saturday, Sunday or
public holiday on which commercial banks in San Antonio, Texas
are permitted or required by law to be closed, the time for such
payment shall be extended to the next day on which the Payee is
open for business, and such extension of time shall be included
in the calculation of interest accruing and payable hereunder.
RATE OF INTEREST:
From the date hereof until maturity, interest (calculated on
the basis of a year of 360 days for the actual number of days
elapsed) shall accrue on the unpaid principal balance of this
Note at a rate per annum equal to the lesser of (i) the Prime
Rate minus one-fourth of one percent (0.25%) or (ii) the Maximum
Lawful Rate. After maturity (whether by acceleration or
otherwise) until paid, interest shall accrue on the matured
principal and accrued, but unpaid, interest on this Note at the
Maximum Lawful Rate. The interest rate shall be adjusted
concurrently with changes in the Prime Rate without notice to the
Makers.
As used herein, the term "Prime Rate," shall mean that rate
of interest equal on any given day to the rate of interest most
recently established by the Payee as its prime rate and entered
as such in its records, whether or not such rate is otherwise
published. The Prime Rate will automatically fluctuate upward
and downward, without special notice to the Makers or any other
person. THE PRIME RATE MAY NOT BE THE BEST OR LOWEST RATE OR A
FAVORED RATE OF INTEREST, AND ANY REPRESENTATION OR WARRANTY IN
THAT REGARD IS EXPRESSLY DISCLAIMED.
As used herein, the term "Maximum Lawful Rate" shall mean
the greater of (i) the highest non-usurious rate of interest
permitted by applicable United States law, or (ii) a rate per
annum equal to the indicated rate ceiling determined weekly in
accordance with the computation specified in Article 5069-1.04,
Vernon's Texas Civil Statutes, 1925, as amended, as such
indicated rate ceiling is in effect from time to time, but in no
event greater than twenty-eight percent (28%) per annum. Unless
precluded by law, changes in the Maximum Lawful Rate created by
statute or governmental action during the term of this Note shall
be immediately applicable to this Note on the effective date of
such changes. In the event that no Maximum Lawful Rate exists,
then the term "Maximum Lawful Rate" shall be deemed to mean a
rate per annum equal to the Prime Rate, plus five percent
(5.00%).
Notwithstanding the foregoing, if, at any time, the rate of
interest applicable to this Note (but for the limitation thereof
to the Maximum Lawful Rate) exceeds the Maximum Lawful Rate, the
rate of interest to accrue on this Note shall be limited to the
Maximum Lawful Rate, but any subsequent reductions in such rate
of interest applicable to this Note (but for the limitation
thereof to the Maximum Lawful Rate) shall not reduce the rate of
interest to accrue on this Note below the Maximum Lawful Rate
until the total amount of interest which would have accrued if a
varying rate per annum equal to the rate of interest applicable
to this Note (but for the limitation thereof to the Maximum
Lawful Rate) had at all times been in effect.
PREPAYMENT:
The Makers reserve the right to prepay this Note in any
amount at any time prior to maturity without penalty. Interest
shall be calculated on the unpaid principal to the date of any
prepayment and any such prepayment shall be applied first toward
the payment of accrued interest and next to the principal
installments of this Note in the inverse order of maturity.
USE OF PROCEEDS:
This Note represents funds advanced to the Makers at the
Makers' special instance and request and used in the payment of a
portion of the purchase price and expansion of a maquila plant.
LIMITATION OF INTEREST:
All agreements and transactions among the Makers and the
Payee, whether now existing or hereafter arising, whether
contained herein or in any other instrument, and whether written
or oral, are hereby expressly limited so that in no contingency
or event whatsoever, whether by reason of acceleration of the
maturity hereof, late payment, prepayment, or otherwise, shall
the amount of interest contracted for, charged or received by the
Payee from the Makers for the use, forbearance, or detention of
the principal indebtedness or interest hereof, which remains
unpaid from time to time, exceed the Maximum Lawful Rate, it
particularly being the intention of the parties hereto to conform
strictly to the applicable usury laws of the State of Texas (or
applicable United States law to the extent that it permits the
Payee to contract for, charge or receive a greater amount of
interest than under Texas law). Any interest payable hereunder
or under any other instrument relating to the indebtedness
evidenced hereby that is in excess of the Maximum Lawful Rate,
shall, in the event of acceleration of maturity, late payment,
prepayment, or otherwise, be applied to a reduction of the
unrepaid indebtedness hereunder and not to the payment of
interest, or if such excessive interest exceeds the unpaid
balance of such unrepaid indebtedness, such excess shall be
refunded to the Makers. To the extent not prohibited by
applicable law, determination of the Maximum Lawful Rate shall at
all times be made by amortizing, prorating, allocating and
spreading in equal parts during the full term of this loan, all
interest at any time contracted for, charged or received from the
Makers in connection with this loan, so that the actual rate of
interest on account of such indebtedness is uniform throughout
the term thereof.
SUCCESSORS AND ASSIGNS:
As used herein, the term "Payee" shall include the
successors and assigns of the Payee and any subsequent owner and
holder of this Note, and the term "Makers" shall include co-
makers, endorsers, guarantors, sureties and their respective
successors and assigns.
DEFAULT AND COLLECTION:
It is expressly provided that, upon default in the punctual
payment of this Note, or any part hereof, principal or interest,
as the same shall become due and payable, or if the Payee deems
the Payee insecure because the prospect of timely payment of this
Note becomes impaired, at the option of the Payee, the entire
indebtedness evidenced hereby shall be matured, and in the event
default is made in the prompt payment of this Note when due or
declared due, and the same is placed in the hands of an attorney
for collection, or suit is brought on the same, or the same is
collected through probate, bankruptcy or other judicial
proceedings, then the Makers jointly and severally agree and
promise to pay all reasonable attorney's fees, court costs and
collection costs incurred by the Payee.
WAIVERS AND CONSENTS:
Each of the Makers waives presentment for payment, notice of
intent to accelerate, notice of acceleration, protest and notice
of protest, dishonor and diligence in collecting and the bringing
of suit against any other party, and agrees to all renewals,
extensions, partial payments, releases and substitutions of
security, in whole or in part, with or without notice, before or
after maturity. The Payee may remedy any default, without
waiving the same, or may waive any default without waiving any
prior or subsequent default.
GOVERNING LAWS AND VENUE:
This Note shall be governed by, and construed in accordance
with, the laws of the State of Texas and the United States of
America, without giving effect to the principles of choice of
laws thereof; provided, however, that in connection with any
legal action or proceeding (other than an action or proceeding to
enforce a judgment obtained in another jurisdiction) brought by
the Payee in any courts of Mexico or any political subdivision
thereof, this Note shall be deemed to be an instrument made under
the laws of Mexico and for such purposes shall be governed by,
and construed in accordance with, the laws of Mexico, and if any
provision of this Note is invalid, legally ineffective, or
contrary to the laws of Mexico, it shall be excised and all other
parts of this Note shall remain in effect and binding.
The Makers hereby irrevocably submit to the jurisdiction of
any competent court of the City of Piedras Negras, State of
Coahulia, Mexico, or of the Federal District, Mexico, or of the
United States District Court for the Western District of Texas
(San Antonio Division), United States of America, or the District
Courts of the State of Texas sitting in the County of Bexar,
State of Texas, United States of America, as the Payee may elect,
in any action or proceeding arising out of or relating to this
Note, and the Makers hereby irrevocably agree that claims with
respect to such action or proceeding may be held and determined
in any of such courts. The Makers irrevocably waive, to the
fullest extent permitted by law, any objection which the Makers
may now or hereafter have to the laying of venue of any suit,
action or proceeding with respect to this Note brought in any
court aforementioned, and the Makers further irrevocably waive
any claim that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum. The Makers
hereby expressly waive all rights of any other jurisdiction which
it may now or hereafter have by reason of its present or
subsequent domiciles.
AGREEMENT FOR BINDING ARBITRATION:
The parties agree to be bound by the terms and provisions of
the current Arbitration Program of First Interstate Bank of
Texas, N.A., which is incorporated by reference herein and is
acknowledged as received by the parties, pursuant to which any
and all disputes shall be resolved by mandatory binding
arbitration upon the request of either party.
EXECUTED in San Antonio, Bexar County, Texas on the date
first stated above.
NUEVA DISTRIBUIDORA LANCERMEX S.A.
de C.V.
By:________________________________
Name:______________________________
Title:_____________________________
146196.1
REVOLVING PROMISSORY NOTE
$10,000,000.00 August 1, 1995
For value received, LANCER CORPORATION, a Texas corporation
(the "Makers," whether one or more), promise to pay to the order
of FIRST INTERSTATE BANK OF TEXAS, N.A., a national banking
association (the "Payee"), at 700 N. St. Mary's Street, Suite
300, San Antonio, Bexar County, Texas 78205, or such other
location as the Payee designates to the Makers in writing, the
principal sum of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00),
or the outstanding principal amount advanced hereunder, whichever
is less, in legal and lawful money of the United States of
America, with interest thereon as hereinafter specified.
TERMS OF PAYMENT:
Interest only shall be due and payable in installments
commencing on August 15, 1995, and continuing regularly
thereafter on the same day of each calendar month until June 15,
1996 (the "Maturity Date"), when the entire amount of this Note,
principal and interest then remaining unpaid, shall be due and
payable.
The principal sum of this Note represents a revolving
credit, all or any part of which may be advanced to the Makers,
repaid by the Makers and re-advanced to the Makers, without the
necessity for the execution of any other instruments, at any time
prior to the earlier of (i) the date on which demand for payment
is made hereunder or (ii) the Maturity Date; provided, however
that the unpaid principal balance of this Note shall never exceed
the sum of $10,000,000.00. All advances and all payments made on
account of this Note shall be recorded by the Payee, whose
records shall be deemed correct absent manifest error. In no
event shall the provisions of Article 5069-15.01, et seq.,
Vernon's Texas Civil Statutes, 1925, as amended (which regulates
certain revolving loan accounts and revolving tri-party accounts)
apply to the loan evidenced by this Note.
PAYMENT ON NON-BUSINESS DAYS:
If any payment hereunder falls due on a Saturday, Sunday or
public holiday on which commercial banks in San Antonio, Texas
are permitted or required by law to be closed, the time for such
payment shall be extended to the next day on which the Payee is
open for business, and such extension of time shall be included
in the calculation of interest accruing and payable hereunder.
RATE OF INTEREST:
From the date hereof until maturity, interest (calculated on
the basis of a year of 360 days for the actual number of days
elapsed) shall accrue on the unpaid principal balance of the Note
at a rate (or rates) per annum equal to (a) the Prime Rate; or
(b) a fixed rate equal to the sum of (i) the average of London
Interbank Offered Rates (LIBOR) quoted for deposits with a
maturity corresponding to the pertinent Interest Period under the
title "Money Rates" in The Wall Street Journal issue published on
(or closest to) the date of the rate of interest on this Note is
to be determined, plus (ii) 1.80% ("Adjusted LIBOR"). Each
determination of the Prime Rate and Adjusted LIBOR made by the
Payee in accordance with this Note shall be conclusive except in
the case of manifest error. After maturity (whether by
acceleration or otherwise) until paid, interest shall accrue on
the matured principal and accrued, but unpaid, interest on this
Note at a rate per annum equal to the Maximum Lawful Rate.
Each advance requested under this Note (the "Advance
Request") shall include the following information:
1. the amount of the Advance Request;
2. the Makers' interest rate choice (Prime Rate or
Adjusted LIBOR) and, if the choice is Adjusted LIBOR,
the Interest Period (hereinafter defined); and
3. any other information required under the Loan
Agreement (hereinafter defined).
As used herein, the term "Interest Period" shall mean a one
month, two month or three month period chosen by the Makers and
specified in each Advance Request. Each Advance Request shall be
made by telephone or in writing not later than 12:00 Noon, local
time, San Antonio, Texas, on the date the Makers desire for funds
to be advanced under this Note. In the event the Advance Request
is made by telephone, written confirmation of such Advance
Request will be sent to the Payee within five (5) business days
following such Advance Request.
If the Makers make no interest rate choice with any Advance
Request, the Makers shall be deemed to have made an Advance
Request at the Prime Rate until such time as a new Advance
Request is made (or this Note matures). The Makers and the Payee
contemplate that different rate options may be in effect
simultaneously under this Note.
Any Advance Request for an Adjusted LIBOR rate of interest
shall be subject to the following special provisions:
(a) The Adjusted LIBOR rate of interest shall commence
on the date the requested funds are advanced and shall
remain in effect for the Interest Period specified in
the pertinent Advance Request, or until this Note
matures, whichever is earlier;
(b) If any Interest Period would otherwise expire on a
day which is not a banking day in San Antonio, London
and New York City ("Business Day"), such Interest
Period shall expire on the next succeeding Business
Day;
(c) No Interest Period shall extend beyond the
Maturity Date; and
(d) No more than eight Interest Periods shall be in
existence under this Note at any one time.
As used herein, the term "Prime Rate," shall mean that rate
of interest equal on any given day to the rate of interest most
recently established by the Payee as its prime rate and entered
as such in its records, whether or not such rate is otherwise
published. The Prime Rate will automatically fluctuate upward
and downward, without special notice to the Makers or any other
person. THE PRIME RATE MAY NOT BE THE BEST OR LOWEST RATE OR A
FAVORED RATE OF INTEREST, AND ANY REPRESENTATION OR WARRANTY IN
THAT REGARD IS EXPRESSLY DISCLAIMED.
As used herein, the term "Maximum Lawful Rate" shall mean
the greater of (i) the highest non-usurious rate of interest
permitted by applicable United States law, or (ii) a rate per
annum equal to the indicated rate ceiling determined weekly in
accordance with the computation specified in Article 5069-1.04,
Vernon's Texas Civil Statutes, 1925, as amended, as such
indicated rate ceiling is in effect from time to time, but in no
event greater than twenty-eight percent (28%) per annum. Unless
precluded by law, changes in the Maximum Lawful Rate created by
statute or governmental action during the term of this Note shall
be immediately applicable to this Note on the effective date of
such changes. In the event that no Maximum Lawful Rate exists,
then the term "Maximum Lawful Rate" shall be deemed to mean a
rate per annum equal to the Prime Rate, plus five percent
(5.00%).
Notwithstanding the foregoing, if, at any time, the rate of
interest applicable to this Note (but for the limitation thereof
to the Maximum Lawful Rate) exceeds the Maximum Lawful Rate, the
rate of interest to accrue on this Note shall be limited to the
Maximum Lawful Rate, but any subsequent reductions in such rate
of interest applicable to this Note (but for the limitation
thereof to the Maximum Lawful Rate) shall not reduce the rate of
interest to accrue on this Note below the Maximum Lawful Rate
until the total amount of interest which would have accrued if a
varying rate per annum equal to the rate of interest applicable
to this Note (but for the limitation thereof to the Maximum
Lawful Rate) had at all times been in effect.
PREPAYMENT:
Except for those portions of the Note bearing interest at
Adjusted LIBOR (which may not be voluntarily prepaid until the
end of the pertinent Interest Period), the Makers reserve the
right to prepay this Note in any amount at any time prior to
maturity without penalty. Interest shall be calculated on the
unpaid principal to the date of any prepayment and any such
prepayment shall be applied first toward the payment of accrued
interest and next to the principal installments of this Note in
the inverse order of maturity.
SECURITY FOR PAYMENT:
Payment of this Note is secured by, and this Note is
entitled to the benefits of, all security agreements,
assignments, deeds of trust, mortgages and lien instruments
executed by the Makers (or any of them), or other similar
instruments, guaranties, endorsements or other agreements,
executed by any other person or entity (the "Collateral
Agreements," whether one or more) to secure, guarantee or
otherwise provide for the payment hereof, in favor of or for the
benefit of the Payee, including any previously executed and any
now or hereafter executed. Without limiting the foregoing, the
Collateral Agreements include a Security Agreement dated July 24,
1991, executed by the Makers, as debtors, for the benefit of the
Payee, as secured party.
USE OF PROCEEDS:
This Note represents funds advanced and to be advanced to
the Makers at the Makers' special instance and request to finance
working capital requirements, the receipt of a portion of which
is hereby acknowledged. This Note is given pursuant to the terms
of a Loan Agreement dated July 24, 1991, as most recently amended
by a Seventh Amendment to Loan Agreement and Loan Documents dated
of even date herewith between the Makers and the Payee.
REPRESENTATIONS AND WARRANTIES:
LANCER CORPORATION, a Texas corporation expressly represents
and warrants to the Payee that it is a corporation duly organized
and existing in good standing under the laws of the State of
Texas; that it possesses full power and authority to conduct its
business as now conducted and as presently proposed to be
conducted; that the execution and delivery of this Note will not
contravene any provisions of its articles of incorporation or by-
laws; that the officer executing this Note is the legally
elected, qualified and acting officer of said corporation and is
expressly authorized to execute this Note by resolution of the
board of directors of said corporation.
LIMITATION OF INTEREST:
All agreements and transactions among the Makers and the
Payee, whether now existing or hereafter arising, whether
contained herein or in any other instrument, and whether written
or oral, are hereby expressly limited so that in no contingency
or event whatsoever, whether by reason of acceleration of the
maturity hereof, late payment, prepayment, or otherwise, shall
the amount of interest contracted for, charged or received by the
Payee from the Makers for the use, forbearance, or detention of
the principal indebtedness or interest hereof, which remains
unpaid from time to time, exceed the Maximum Lawful Rate, it
particularly being the intention of the parties hereto to conform
strictly to the applicable usury laws of the State of Texas (or
applicable United States law to the extent that it permits the
Payee to contract for, charge or receive a greater amount of
interest than under Texas law). Any interest payable hereunder
or under any other instrument relating to the indebtedness
evidenced hereby that is in excess of the Maximum Lawful Rate,
shall, in the event of acceleration of maturity, late payment,
prepayment, or otherwise, be applied to a reduction of the
unrepaid indebtedness hereunder and not to the payment of
interest, or if such excessive interest exceeds the unpaid
balance of such unrepaid indebtedness, such excess shall be
refunded to the Makers. To the extent not prohibited by
applicable law, determination of the Maximum Lawful Rate shall at
all times be made by amortizing, prorating, allocating and
spreading in equal parts during the full term of this loan, all
interest at any time contracted for, charged or received from the
Makers in connection with this loan, so that the actual rate of
interest on account of such indebtedness is uniform throughout
the term thereof.
SUCCESSORS AND ASSIGNS:
As used herein, the term "Payee" shall include the
successors and assigns of the Payee and any subsequent owner and
holder of this Note, and the term "Makers" shall include co-
makers, endorsers, guarantors, sureties and their respective
successors and assigns.
DEFAULT AND COLLECTION:
It is expressly provided that, upon default in the punctual
payment of this Note, or any part hereof, principal or interest,
as the same shall become due and payable, or upon default in the
performance of or compliance with any of the terms of any of the
Collateral Agreements, or if the Payee deems the Payee insecure,
either because the prospect of timely payment of this Note
becomes impaired, or because the prospect of timely performance
of any of the Collateral Agreements becomes impaired, at the
option of the Payee, the entire indebtedness evidenced hereby
shall be matured, and in the event default is made in the prompt
payment of this Note when due or declared due, and the same is
placed in the hands of an attorney for collection, or suit is
brought on the same, or the same is collected through probate,
bankruptcy or other judicial proceedings, then the Makers jointly
and severally agree and promise to pay all reasonable attorney's
fees, court costs and collection costs incurred by the Payee.
WAIVERS AND CONSENTS:
Each of the Makers waives presentment for payment, notice of
intent to accelerate, notice of acceleration, protest and notice
of protest, dishonor and diligence in collecting and the bringing
of suit against any other party, and agrees to all renewals,
extensions, partial payments, releases and substitutions of
security, in whole or in part, with or without notice, before or
after maturity. The Payee may remedy any default, without
waiving the same, or may waive any default without waiving any
prior or subsequent default.
GOVERNING LAWS AND VENUE:
This Note is governed by and is to be construed and enforced
in accordance with the laws of the State of Texas and of the
United States. The Makers agree and consent to the jurisdiction
of the District Courts of Bexar County, Texas, and of the United
States District Court for the Western District Texas (San Antonio
Division) and acknowledge that such courts shall constitute
proper and convenient forums for the resolution of any actions
among the Makers and the Payee with respect to the subject matter
hereof, and agree that such courts shall be the exclusive forums
for the resolution of any actions among the Makers and the Payee
with respect to the subject matter hereof.
AGREEMENT FOR BINDING ARBITRATION:
The parties agree to be bound by the terms and provisions of
the current Arbitration Program of First Interstate Bank of
Texas, N.A., which is incorporated by reference herein and is
acknowledged as received by the parties, pursuant to which any
and all disputes shall be resolved by mandatory binding
arbitration upon the request of either party.
LANCER CORPORATION, a Texas
corporation
By: John P. Herbots
Name: John P. Herbots
Title: Vice President Finance
102621.1
NOTICE AND ACKNOWLEDGMENT
FIRST INTERSTATE BANK OF TEXAS, N.A. OF NO ORAL AGREEMENTS
This agreement (this "Agreement") is made and entered into by and
among the undersigned executed effective August 1, 1995.
Definitions:
As used in this Agreement, the following terms shall have the
following meanings:
Parties-The undersigned persons and entities.
Note-That certain revolving promissory note dated effective
July ___, 1995 in the amount of $10,000,000.00 executed by
LANCER CORPORATION, a Texas corporation.
Loan Documents-This Agreement and any and all promissory
notes (including, without limitation, the Note), loan
agreements, deeds of trust, builder's and mechanic's lien
contracts, security agreements, assignments, pledges,
owner's consent to pledges, letters of credit, guarantees,
and all other loan documents executed in connection with or
otherwise relating to This Loan.
This Loan-The transaction comprised of the extension of
credit and all related agreements and accommodations by or
among any of the Parties evidenced by or contained in any of
the Loan Documents.
Agreements:
In consideration of the extension of This Loan, and for other
good and valuable consideration, the receipt and sufficiency of
which are acknowledged by each of the Parties, the Parties (i)
agree that each Party's execution of this Agreement constitutes
acknowledgment that such Party has read and understands this
Agreement, and that it is intended to be a part of and is
incorporated by reference into each of the Loan Documents; (ii)
acknowledge receipt of the following Notice; and (iii) to the
extent allowed by law, agree to be bound by the terms of this
Agreement and the Notice:
NOTICE: THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING
TO THIS LOAN CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PAR
TIES RELATING TO THIS LOAN.
Executed as of the date first above stated.
DEBTOR OR OBLIGOR: LENDER:
LANCER CORPORATION, a Texas FIRST INTERSTATE BANK OF
corp. TEXAS, N.A.
By: John Herbots By: Scott Adam
Name: John Herbots Name: Scott Adam
Title: Vice President Finance Title: Asst. Vice President
LANCER INTERNATIONAL SALES, INC.
By: John Herbots
Name: John Herbots
Title: Vice President Finance
LANCER LIMITED
By: George F. Schroeder
Name: George F. Schroeder
Title: President
THE STATE OF TEXAS
COUNTY OF BEXAR
This instrument was acknowledged before me on the 3rd day of
August, 1995, by Scott Adams, Assistant Vice President, of FIRST
INTERSTATE BANK OF TEXAS, N. A., a national banking association,
on behalf of said association.
Charlene L. Webster
Notary Public, State of Texas
THE STATE OF TEXAS
THE COUNTY OF BEXAR
This instrument was acknowledged before me on the 2nd day of
August, 1995, by John Herbots, Vice President Finance, of LANCER
CORPORATION, a Texas corporation, a Texas corporation, on behalf
of said corporation.
Jo Anna Gonzales
Notary Public, State of Texas
THE STATE OF TEXAS
THE COUNTY OF BEXAR
This instrument was acknowledged before me on the 2nd day of
August, 1995, by John P. Herbots, Vice President Finance, of
LANCER INTERNATIONAL SALES, INC., a Texas corporation, on behalf
of said corporation.
Jo Anna Gonzales
Notary Public, State of Texas
THE STATE OF TEXAS
THE COUNTY OF BEXAR
This instrument was acknowledged before me on the 2nd day of
August, 1995, by George F. Schroeder, President, of LANCER
LIMITED, on behalf of said Corporation.
Jo Anna Gonzales
Notary Public, State of Texas
1093-39
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,750
<SECURITIES> 0
<RECEIVABLES> 15,456
<ALLOWANCES> 85
<INVENTORY> 16,448
<CURRENT-ASSETS> 33,793
<PP&E> 31,847
<DEPRECIATION> 15,950
<TOTAL-ASSETS> 50,579
<CURRENT-LIABILITIES> 16,370
<BONDS> 0
<COMMON> 39
0
0
<OTHER-SE> 29,166
<TOTAL-LIABILITY-AND-EQUITY> 50,579
<SALES> 41,654
<TOTAL-REVENUES> 42,649
<CGS> 33,523
<TOTAL-COSTS> 38,512
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 519
<INCOME-PRETAX> 3,618
<INCOME-TAX> 1,334
<INCOME-CONTINUING> 2,284
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</TABLE>
GUARANTY AGREEMENT
For and in consideration of the sum of TEN AND NO/100
DOLLARS ($10.00) and other good and valuable consideration
in hand paid to the undersigned, LANCER CORPORATION, a Texas
corporation (the Guarantor), the receipt and sufficiency
of which considerations are hereby acknowledged, and for the
purpose of enabling NUEVA DISTRIBUIDORA LANCERMEX S.A. de
C.V. (the Debtor), to obtain credit or other financial
accommodations from FIRST INTERSTATE BANK OF TEXAS, N.A., a
national banking association, in San Antonio, Bexar County,
Texas (the Lender), and the benefits thereby received by
the Guarantor, the Guarantor hereby jointly and severally
(with all other guarantors, if any, and the Debtor) and
unconditionally guarantees the prompt payment when due of
the Obligations as defined below.
The Obligations consist of:
1. The indebtedness represented by that certain
revolving promissory note ( the Note)
dated of even date herewith, in the principal amount of
$2,500,000.00, executed by the Debtor
and payable to the order of the Lender, bearing
interest and being payable as therein provided;
2. All renewals, extensions and rearrangements of the
Note;
3. All interest and costs of collection owing and
that may become owing thereon or in connection
therewith;
4. All indebtedness and liabilities of the Debtor to
the Lender now existing or hereafter arising , whether
fixed or contingent, liquidated or unliquidated, direct
or indirect, and whether created under or evidenced by
note, application, commitment, endorsement, agreement,
overdraft of depository account, or otherwise; and
5. The Lenders court costs and reasonable attorneys
fees if the foregoing are not paid by the Guarantor on
demand when due or if the Guaranty Agreement is
enforced by suit or through probate, bankruptcy, or
other judicial proceedings. All amounts becoming
payable hereunder to the Lender under this Guaranty
Agreement shall be payable at the Lenders principal
office in San Antonio, Bexar County, Texas.
The Guarantor hereby waives (a) any notice of
acceptance of this guaranty by the Lender; (b) any
notice of the creation, advancement, increase,
existence, extension, renewal, or rearrangement of the
Obligations or any part thereof; (c) any indulgence
with respect to the Obligations (or any part thereof)
and with respect to any nonpayment thereof; (d) grace,
demand, protest, presentment, notice of demand, notice
of intent to accelerate, notice of acceleration, notice
of protest, or notice of presentment, and all other
notices, whether similar or dissimilar, with respect to
the Obligations; and (e) notice of the amount of the
Obligations outstanding at any time. The Lender at its
option may, at any time and without notice to or
further consent by the Guarantor, accelerate, extend,
or renew the maturity of the Obligations or any part
thereof and may grant any other indulgence with
respect thereto. Neither the Lenders rights nor the
Guarantors obligations and liabilities will be
affected or impaired in any manner by (i) any renewal,
extension, or rearrangement of (or any other indulgence
with respect to) the Obligations or any part thereof;
(ii) any release, withdrawal or subordination of, or
substitution for, any security or other guaranty now or
hereafter held by the Lender for payment of the
Obligations or any part thereof; (iii) any release of
the Debtor or any other person primarily or secondarily
liable on the Obligations or any part thereof
(including any maker, endorser, guarantor, or surety);
(iv) any delay in enforcing payment of the Obligations
or any part thereof; or (v) any delay, omission, lack
of diligence, or lack of care in exercising any right
or power with respect to the Obligations or any
security therefor or guaranty thereof. Lender shall not
be required as a condition of enforcing the Guarantors
liabilities and obligations hereunder requiring payment
by the Guarantor hereunder to: (a) obtain or assert a
claim for judgment against the Debtor for the
Obligations or any part thereof; (b) collect or attempt
to collect all or any part of the Obligations from the
Debtor or any other person or from any other source;
(c) foreclose against or seek to realize upon any
security now or hereafter existing for the Obligations
or any part thereof; (d) assert any other right or
remedy to which the Lender is or may be entitled in
connection with the Obligations (or any part thereof)
or any security therefor or other guaranty thereof; or
(e) assertor file any claim against the assets or
estate of the Debtor or other person liable for the
Obligations or any part thereof.
The Guarantor expressly waives any right to the
benefit of (or to require or control application of)
any security or the proceeds thereof now existing or
hereafter obtained by the Lender as security for the
Obligations or any part thereof. The Lender need not
apply to any of the Obligations any monies, payments,
or other property at any time received by, paid to, or
in the possession of the Lender, except as the Lender
determines in its sole discretion.
The Guarantor will be and remain fully liable
under this Guaranty Agreement, as provided herein, even
if the Debtor may not be liable for any part of the
Obligations (a) because the Debtors indebtedness now
or at any time hereafter exceeds the amount or type
permitted by law; (b) because such Obligation was ultra
vires; (c) because any person creating or guaranteeing
the same acted without authority; or (d) because of the
Debtors lack of capacity, bankruptcy, insolvency or
dissolution such as to render the Obligations void,
unenforceable or uncollectible as against the Debtor.
Nothing herein, however, shall be deemed to admit or
deny the existence of any right of the Guarantor to any
offset, reduction, or abatement of Guarantors
Obligations hereunder by reason of any claim, right or
cause of action (or any realization thereon), if any,
of Guarantor or the Debtor against the Lender for any
reason.
Any notice or demand to the Guarantor hereunder or
in connection herewith must be in writing and may be
given (and will conclusively be deemed and considered
to have been given and received by the deposit of such
notice in the United Stated mails, postage prepaid and
addressed to the Guarantor at its address shown herein.
Nonetheless, actual notice will always be effective, no
matter how given or received. The last preceding
sentence will never be construed to affect or impair
any waiver of notice or demand herein provided or to
require the giving of notice or demand to or upon the
Guarantor in any situation of for any reason. Nothing
herein may be construed to cancel, amend, discharge, or
limit any other guaranty or similar undertaking by or
obligation of the Guarantor in favor of the Lender.
This Guaranty is a continuing guaranty. It will
continue to be effective (or shall be reinstated, as
the case may be) without notice or further act if, at
any time, any payment of any of the Obligations is
rescinded or must otherwise be returned by the Lender
upon or in connection with the insolvency, bankruptcy
or reorganization of the Debtor, any other Guarantor or
otherwise, all as though such payment had never been
made to the Lender. Without impairing the Lenders
right to demand and collect the balance of the
Obligations from the Guarantor, the Lender may compound
with any one or more guarantors for such amount as it
may see fit and may release any guarantor from all
further liability to the Lender for such Obligations.
Such compounding and release will not in any manner
impair the rights of each guarantor as against any
other guarantor or the rights of Lender against any
other guarantor.
The Guarantor hereby agrees that any and all
indebtedness now and hereafter owed or owing by the
Debtor to the Guarantor shall be and remain subordinate
in payment to all of the Obligations. Should the
Guarantor receive any payment on account of any of said
subordinated indebtedness (or by reason of any security
therefor), the Guarantor shall hold the amount received
in trust for the benefit of the Lender and, upon
Lenders demand, shall remit same to Lender for
application on the Obligations. No Guarantor will
exercise any right it may acquire by way of subrogation
under this of the Guaranty, by payment made hereunder
or otherwise, until all of the Obligations have been
paid in full. If any amount shall be paid to the
Guarantor on account of such subrogation rights at any
time when any Obligations remain outstanding, such
amount shall be held in trust for the benefit of the
Lender and shall forthwith be paid to the Lender to be
credited and applied upon the Obligations, whether same
or any portion thereof are then due. The Guarantor
hereby waives all rights to which the Guarantor may be
(or might otherwise become) entitled pursuant to
Sections 34.02 and 34.03 of the Texas Business and
Commerce Code as in effect from time to time, except
the Guarantor shall be entitled to any applicable right
of subrogation after the full and final payment of the
Obligations.
This Guaranty Agreement will be transferable and
negotiable by the Lender, with the same force and
effect and to the same extent that the Obligations are
transferable. On the Lenders assignment or transfer
of any of the Obligations hereby guaranteed, the legal
holder or owner of the Obligations (or part thereof or
interest therein thus transferred or assigned by the
Lender) will also , unless provided otherwise by the
Lender in its assignment, have and may exercise all
rights granted to the Lender under this Guaranty
Agreement to the extent of the part of or interest in
the Obligations thus assigned or transferred to said
person. The Guarantor hereby expressly waives notice
of transfer or assignment of the Obligations (or any
part thereof) or the rights of the Lender hereunder.
Anything in this paragraph to the contrary
notwithstanding, all Obligations to the Lender will be
paid in full first, before any assignee receives any
benefits of the Guaranty agreement.
This Guaranty Agreement is governed by the law of
the State of Texas, except as Federal law may apply.
The Guarantor agrees and consents to the jurisdiction
of the County and District Courts of Bexar County,
Texas and of the United States District Court for the
Western District of Texas (San Antonio Division), and
acknowledges that such courts shall constitute proper
and convenient forums with respect to the subject
matter hereof, and further agree that such courts shall
be the sole and exclusive forums for the regulation of
any actions between the Guarantor and Lender with
respect to the subject matter hereof.
This Guaranty Agreement and the Guarantors
obligations hereunder will be binding on the Guarantor
and the Guarantors heirs, legal representatives,
personal representative, executors, administrators and
successors.
As used in this Guaranty Agreement and as required
by the context, each number (singular and plural)
includes all numbers, each gender includes all genders
and, unless the context requires otherwise, the words
person and party include person, corporation,
firm, limited partnership, joint venture,
association or other entity.
EXECUTED effective August 1, 1995.
LANCER CORPORATION, a Texas
corporation
By: John Herbots
Name: John Herbots
Title: Vice President Finance
Address:
235 W. Turbo
San Antonio, Texas 78216
4
PROMISSORY NOTE
$2,500,000.00 August 1, 1995
For value received, NUEVA DISTRIBUIDORA LANCERMEX S.A. de
C.V. (the "Makers," whether one or more), unconditionally promise
to pay to the order of FIRST INTERSTATE BANK OF TEXAS, N.A., a
national banking association (the "Payee"), at 700 N. St. Mary's,
Suite 300, San Antonio, Bexar County, Texas 78205, or such other
location as the Payee designates to the Makers in writing, the
principal sum of TWO MILLION FIVE HUNDRED THOUSAND AND NO/100
DOLLARS ($2,500,000.00), or the outstanding principal amount
advanced hereunder, whichever is less, in legal and lawful money
of the United States of America, with interest thereon as
hereinafter specified.
TERMS OF PAYMENT:
Interest only shall be due and payable in installments
commencing on August 15, 1995, and continuing regularly
thereafter on the same day of each calendar month through January
15, 1996; thereafter, principal and interest shall be due and
payable in installments, commencing on February 15, 1996, and
continuing regularly thereafter on the same day of each calendar
month until January 15, 1999, when the entire amount of this
Note, principal and interest then remaining unpaid, shall be due
and payable. Interest shall be calculated on the unpaid
principal to the date each installment is paid, and the payment
made shall be credited to the discharge of the interest accrued,
the reduction of principal, and other authorized charges, if any,
in such manner and order as the Payee shall determine in its sole
discretion.
Commencing on February 15, 1996, unless and until changed as
provided herein, each installment on this Note will be in the
amount of $39,591.21. The installments may be adjusted from time
to time by the Payee to reflect changes in the interest rate as
provided herein, so that the installments shall at all times be
not less than an amount which would fully pay the unpaid balance
of this Note, both as to principal and interest, on a seven-year
level amortization basis from January 15, 1996, with any unpaid
balance of this Note being due and payable as provided herein.
PAYMENT ON NON-BUSINESS DAYS:
If any payment hereunder falls due on a Saturday, Sunday or
public holiday on which commercial banks in San Antonio, Texas
are permitted or required by law to be closed, the time for such
payment shall be extended to the next day on which the Payee is
open for business, and such extension of time shall be included
in the calculation of interest accruing and payable hereunder.
RATE OF INTEREST:
From the date hereof until maturity, interest (calculated on
the basis of a year of 360 days for the actual number of days
elapsed) shall accrue on the unpaid principal balance of this
Note at a rate per annum equal to the lesser of (i) the Prime
Rate minus one-fourth of one percent (0.25%) or (ii) the Maximum
Lawful Rate. After maturity (whether by acceleration or
otherwise) until paid, interest shall accrue on the matured
principal and accrued, but unpaid, interest on this Note at the
Maximum Lawful Rate. The interest rate shall be adjusted
concurrently with changes in the Prime Rate without notice to the
Makers.
As used herein, the term "Prime Rate," shall mean that rate
of interest equal on any given day to the rate of interest most
recently established by the Payee as its prime rate and entered
as such in its records, whether or not such rate is otherwise
published. The Prime Rate will automatically fluctuate upward
and downward, without special notice to the Makers or any other
person. THE PRIME RATE MAY NOT BE THE BEST OR LOWEST RATE OR A
FAVORED RATE OF INTEREST, AND ANY REPRESENTATION OR WARRANTY IN
THAT REGARD IS EXPRESSLY DISCLAIMED.
As used herein, the term "Maximum Lawful Rate" shall mean
the greater of (i) the highest non-usurious rate of interest
permitted by applicable United States law, or (ii) a rate per
annum equal to the indicated rate ceiling determined weekly in
accordance with the computation specified in Article 5069-1.04,
Vernon's Texas Civil Statutes, 1925, as amended, as such
indicated rate ceiling is in effect from time to time, but in no
event greater than twenty-eight percent (28%) per annum. Unless
precluded by law, changes in the Maximum Lawful Rate created by
statute or governmental action during the term of this Note shall
be immediately applicable to this Note on the effective date of
such changes. In the event that no Maximum Lawful Rate exists,
then the term "Maximum Lawful Rate" shall be deemed to mean a
rate per annum equal to the Prime Rate, plus five percent
(5.00%).
Notwithstanding the foregoing, if, at any time, the rate of
interest applicable to this Note (but for the limitation thereof
to the Maximum Lawful Rate) exceeds the Maximum Lawful Rate, the
rate of interest to accrue on this Note shall be limited to the
Maximum Lawful Rate, but any subsequent reductions in such rate
of interest applicable to this Note (but for the limitation
thereof to the Maximum Lawful Rate) shall not reduce the rate of
interest to accrue on this Note below the Maximum Lawful Rate
until the total amount of interest which would have accrued if a
varying rate per annum equal to the rate of interest applicable
to this Note (but for the limitation thereof to the Maximum
Lawful Rate) had at all times been in effect.
PREPAYMENT:
The Makers reserve the right to prepay this Note in any
amount at any time prior to maturity without penalty. Interest
shall be calculated on the unpaid principal to the date of any
prepayment and any such prepayment shall be applied first toward
the payment of accrued interest and next to the principal
installments of this Note in the inverse order of maturity.
USE OF PROCEEDS:
This Note represents funds advanced to the Makers at the
Makers' special instance and request and used in the payment of a
portion of the purchase price and expansion of a maquila plant.
LIMITATION OF INTEREST:
All agreements and transactions among the Makers and the
Payee, whether now existing or hereafter arising, whether
contained herein or in any other instrument, and whether written
or oral, are hereby expressly limited so that in no contingency
or event whatsoever, whether by reason of acceleration of the
maturity hereof, late payment, prepayment, or otherwise, shall
the amount of interest contracted for, charged or received by the
Payee from the Makers for the use, forbearance, or detention of
the principal indebtedness or interest hereof, which remains
unpaid from time to time, exceed the Maximum Lawful Rate, it
particularly being the intention of the parties hereto to conform
strictly to the applicable usury laws of the State of Texas (or
applicable United States law to the extent that it permits the
Payee to contract for, charge or receive a greater amount of
interest than under Texas law). Any interest payable hereunder
or under any other instrument relating to the indebtedness
evidenced hereby that is in excess of the Maximum Lawful Rate,
shall, in the event of acceleration of maturity, late payment,
prepayment, or otherwise, be applied to a reduction of the
unrepaid indebtedness hereunder and not to the payment of
interest, or if such excessive interest exceeds the unpaid
balance of such unrepaid indebtedness, such excess shall be
refunded to the Makers. To the extent not prohibited by
applicable law, determination of the Maximum Lawful Rate shall at
all times be made by amortizing, prorating, allocating and
spreading in equal parts during the full term of this loan, all
interest at any time contracted for, charged or received from the
Makers in connection with this loan, so that the actual rate of
interest on account of such indebtedness is uniform throughout
the term thereof.
SUCCESSORS AND ASSIGNS:
As used herein, the term "Payee" shall include the
successors and assigns of the Payee and any subsequent owner and
holder of this Note, and the term "Makers" shall include co-
makers, endorsers, guarantors, sureties and their respective
successors and assigns.
DEFAULT AND COLLECTION:
It is expressly provided that, upon default in the punctual
payment of this Note, or any part hereof, principal or interest,
as the same shall become due and payable, or if the Payee deems
the Payee insecure because the prospect of timely payment of this
Note becomes impaired, at the option of the Payee, the entire
indebtedness evidenced hereby shall be matured, and in the event
default is made in the prompt payment of this Note when due or
declared due, and the same is placed in the hands of an attorney
for collection, or suit is brought on the same, or the same is
collected through probate, bankruptcy or other judicial
proceedings, then the Makers jointly and severally agree and
promise to pay all reasonable attorney's fees, court costs and
collection costs incurred by the Payee.
WAIVERS AND CONSENTS:
Each of the Makers waives presentment for payment, notice of
intent to accelerate, notice of acceleration, protest and notice
of protest, dishonor and diligence in collecting and the bringing
of suit against any other party, and agrees to all renewals,
extensions, partial payments, releases and substitutions of
security, in whole or in part, with or without notice, before or
after maturity. The Payee may remedy any default, without
waiving the same, or may waive any default without waiving any
prior or subsequent default.
GOVERNING LAWS AND VENUE:
This Note shall be governed by, and construed in accordance
with, the laws of the State of Texas and the United States of
America, without giving effect to the principles of choice of
laws thereof; provided, however, that in connection with any
legal action or proceeding (other than an action or proceeding to
enforce a judgment obtained in another jurisdiction) brought by
the Payee in any courts of Mexico or any political subdivision
thereof, this Note shall be deemed to be an instrument made under
the laws of Mexico and for such purposes shall be governed by,
and construed in accordance with, the laws of Mexico, and if any
provision of this Note is invalid, legally ineffective, or
contrary to the laws of Mexico, it shall be excised and all other
parts of this Note shall remain in effect and binding.
The Makers hereby irrevocably submit to the jurisdiction of
any competent court of the City of Piedras Negras, State of
Coahulia, Mexico, or of the Federal District, Mexico, or of the
United States District Court for the Western District of Texas
(San Antonio Division), United States of America, or the District
Courts of the State of Texas sitting in the County of Bexar,
State of Texas, United States of America, as the Payee may elect,
in any action or proceeding arising out of or relating to this
Note, and the Makers hereby irrevocably agree that claims with
respect to such action or proceeding may be held and determined
in any of such courts. The Makers irrevocably waive, to the
fullest extent permitted by law, any objection which the Makers
may now or hereafter have to the laying of venue of any suit,
action or proceeding with respect to this Note brought in any
court aforementioned, and the Makers further irrevocably waive
any claim that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum. The Makers
hereby expressly waive all rights of any other jurisdiction which
it may now or hereafter have by reason of its present or
subsequent domiciles.
AGREEMENT FOR BINDING ARBITRATION:
The parties agree to be bound by the terms and provisions of
the current Arbitration Program of First Interstate Bank of
Texas, N.A., which is incorporated by reference herein and is
acknowledged as received by the parties, pursuant to which any
and all disputes shall be resolved by mandatory binding
arbitration upon the request of either party.
EXECUTED in San Antonio, Bexar County, Texas on the date
first stated above.
NUEVA DISTRIBUIDORA LANCERMEX S.A.
de C.V.
By: George F. Schroeder
Name: George F. Schroeder
Title: President
146196.1
