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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 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 W. TURBO, SAN ANTONIO, TEXAS 78216
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (210) 344-3071
Securities registered pursuant to Section 12 (b) of the Act:
NONE
Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the registrant's common stock, par value $.01 per
share, as of March 22, 1996, held by non-affiliates of the registrant was
approximately $27,536,032 based on the closing sale price. For purposes of
this computation, all executive officers, directors and 5% beneficial owners of
the registrant are deemed to be affiliates. Such determination should not be
deemed to be an admission that such officers, directors or 5% beneficial owners
are, in fact, affiliates of the Company.
The number of shares of the registrant's common stock outstanding as of March
22, 1996, was 3,874,033.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission (the "Commission") not later than 120 days
after the end of the fiscal year covered by this report and prepared for the
1996 annual meeting of shareholders are incorporated by reference into Part III
of this report.
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PART I
ITEM 1. BUSINESS
GENERAL
Lancer designs, engineers, manufactures and markets fountain soft drink
dispensing systems, citrus beverage dispensing systems, and other equipment for
use in the food service and beverage industry. These products are sold by
Company personnel and through independent distributors and agents principally
to major soft drink companies (primarily The Coca-Cola Company), bottlers,
equipment distributors and food service chains for use in various food and
beverage operations. The Company is a vertically integrated manufacturer whose
tooling, production, assembly and testing capabilities enable it to fabricate a
substantial portion of the components used in Company products. In addition,
the Company is an innovator of new products in the beverage dispensing industry
and has a large technical staff supported by state-of-the-art engineering
facilities to develop these new products and to enhance existing product lines
in response to changing industry requirements and specific customer demands.
The Company was incorporated in Texas on December 18, 1967, and initially
manufactured parts for beverage dispensing equipment. The Company designed,
engineered, manufactured and marketed its first mechanically cooled soft drink
dispensing system in 1971. Since that time, the Company has expanded its
engineering and production facilities and developed new products, including
various configurations of the Company's mechanically and ice cooled beverage
dispensing systems, syrup pumps, carbonators and other related equipment,
accessories and parts.
STRATEGY
The Company's strategy is to increase sales through (i) its continued emphasis
on developing and manufacturing technologically superior, reliable, quality
products, (ii) the development of new and enhanced products in anticipation of
market demand and (iii) emphasis on establishing a strategic international
manufacturing and distribution network to enhance customer service world wide.
Following this strategy, the Company acquired 100% of the stock of Glenn Pleass
Holdings Pty. Ltd. ("GPH"), an Australian based manufacturer and distributor of
beverage dispensing systems. The acquisition has positioned the Company to
take advantage of the potential benefits of the large Pacific and Asian
markets. Management plans to merge the two companies' complementary product
lines, enhance the Company's ability to provide technical leadership in the
Pacific Rim region, and capitalize on GPH's reputation for providing quality
products.
The Company also expanded its manufacturing capacity in Mexico with the
construction of approximately 66,000 square feet of additional manufacturing
space.
THE BEVERAGE DISPENSING INDUSTRY
The manufacture of soft drink and citrus dispensing systems and other related
equipment is a rapidly changing industry. Technological changes and
improvements continue to be manifested in the development, manufacture and
introduction of new products and processes. Manufacturers of such beverage
dispensing systems generally sell most of their products to one or more major
soft drink companies, licensed bottlers, equipment distributors and food
service chains. In order to facilitate sales of their beverage products to
end-users, soft drink companies and their affiliates, in turn, sell or lease
the dispensing systems to restaurants, convenience stores, concessionaires and
other food and beverage operators. Soft drink companies generally recommend
that their affiliates purchase beverage dispensing systems from approved
manufacturers. Manufacturers of beverage dispensing systems therefore seek to
have their products approved by as many soft drink companies as possible and
informal, long-term relationships between certain manufacturers and soft drink
companies have become the norm in the industry.
PRODUCTS
The Company's products can be divided into three major categories: (i) soft
drink and citrus dispensing systems; (ii) post-mix dispensing valves; and (iii)
other related products, including carbonators, refurbished products, syrup
pumps and related accessories, ice dispensers, ice baggers, beer dispensers,
carbonator fittings and other miscellaneous parts and equipment for various
dispensing systems.
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Beverage Dispensing Systems
The Company manufactures and sells a broad range of mechanically cooled and ice
cooled soft drink and citrus dispensing systems. These systems are non-coin
operated. The type of equipment and configuration of each model varies
according to intended use and, to some extent, specific customer needs. The
Company's mechanically cooled dispensing systems chill beverages as they run
through stainless steel tubing inside a self-contained refrigeration unit. In
the Company's ice cooled dispensing systems, the beverage is cooled as it runs
through stainless steel tubing encased in an aluminum cold plate which serves
as the heat transfer element when covered with ice. Additionally, the Company
manufactures both post-mix and pre-mix dispensing equipment for each of the
mechanically cooled and ice cooled systems.
The Company also manufactures and markets a self-contained, mechanically cooled
citrus dispensing system for countertop use. This product has either two or
three dispensing valves and electronic controls to preset mix ratios for
different flavored juice concentrates. Under an agreement with The Coca-Cola
Company, the citrus dispenser may be sold only to The Coca-Cola Company, Minute
Maid, a division of The Coca-Cola Company, or its designated agents.
The prices of the Company's dispensing systems vary depending on dispensing
capacity, number of drink selections, speed of beverage flow and other customer
requirements. Sales of dispensing systems for the years ended December 31,
1995, 1994 and 1993 accounted for approximately 55%, 49% and 50% of total net
sales, respectively.
Post-Mix Dispensing Valves
The Company manufactures and sells post-mix dispensing valves which mix syrup
and water at a preset ratio. The valves were developed in 1985 in conjunction
with The Coca-Cola Company. They are designed to be interchangeable with
existing post-mix valves used with Coca-Cola products. The Company
manufactures accessories for the valves, including push-button activation,
water-only dispensing mechanisms, portion controls and other automatically
activated valve controls. The valves, which have been designated by the The
Coca-Cola Company as the standard valve for the domestic U.S. market, are used
on all Lancer dispensers and are sold to other manufacturers of Coca-Cola
dispensing equipment. For the years ended December 31, 1995, 1994 and 1993,
the Lancer post-mix valve accounted for approximately 20%, 23% and 25% of total
net sales, respectively.
Other Related Products and Services
The Company manufactures a carbonator which produces carbonated water for use
in beverage systems. For the years ended December 31, 1995, 1994 and 1993,
sales of carbonators accounted for approximately 1%, 4%, and 2% of total net
sales, respectively. The Company has redesigned its line of carbonators and
anticipates that future sales will increase accordingly. During 1994, the
Company began manufacturing ice bagger machines under an exclusive agreement
with Packaged Ice, Inc. Sales of ice bagger machines for the years ended
December 31, 1995 and 1994 totaled $846,000 and $1,790,000, respectively.
There were no such sales in 1993.
The Company also refurbishes, for a fee, various dispensing systems and sells
replacement parts in connection with such refurbishments. For the years ended
December 31, 1995, 1994 and 1993, revenues generated from these services
accounted for approximately 5%, 4% and 5% of total net sales, respectively.
Other products manufactured by the Company include syrup pumps, two models of
an ice beverage dispenser for self service operation, stainless steel and brass
fittings, carbon dioxide regulator components, mounting bracket assemblies,
disconnect sockets used on five-gallon syrup tanks, quality control testing
equipment, recirculating beer equipment and accessories, refrigeration units,
plastic tubing, water filtering systems, and a variety of other products, parts
and accessories for use with beverage dispensing systems.
PRODUCT RESEARCH AND DEVELOPMENT
In order to maintain its competitive position, the Company continuously seeks
to improve and enhance its line of existing beverage dispensing systems and
equipment and develops new products to meet the demands of the food and
beverage industry. Some projects are originated by Company personnel while
others are initiated by customers. The Company has, from time to time, entered
into agreements with customers to design and develop new products. For the
years ended December 31, 1995, 1994 and 1993, Company-sponsored research and
development expenses were $737,000, $695,000 and $814,000, respectively.
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PRODUCTION, INVENTORY AND RAW MATERIALS
In order to maintain its demanding quality standards, the Company manufactures
many of the plastic components, as well as, other parts used in its products.
The Company maintains complete tool and die, and mold departments which produce
and maintain the necessary tools and molds to manufacture these components.
The manufacture of major products generally involves a tooling process using
metal dies, fixtures and thermal plastic injection molds. Vertically
integrated manufacturing processes are utilized including steel and plastic
welding, polishing, painting, tube bending, metal turning, and stamping and
assembling of printed circuit boards and wire harnesses.
Substantially all raw materials and parts not manufactured internally are
readily available from other commercial sources. The Company has not
experienced any significant shortages in the supply of its raw materials and
parts over the past several years. However, shortages can occur from time to
time and may delay or limit the manufacture of the Company's products and,
thus, adversely affect the Company's operations. The Company does not
stockpile large amounts of such raw materials and parts, but attempts to
control its inventory through extrapolation of historical production
requirements and its specific knowledge of the market. In addition, the
Company is able to occasionally manufacture parts that may not be available in
desired quantities when needed. However, there can be no assurances that these
measures will be entirely successful or that disruptive shortages will not
occur in the future.
BACKLOG
The Company's manufacturing operations are conducted on a production-run basis
against actual and forecasted customer demand. The number of periodic
production runs varies from product to product based on such customer demand,
time involved in the manufacturing process and cost of production. The Company
had a continuous backlog of orders during 1995 equal to approximately seven
weeks of average sales volume. The Company's backlog of unfilled orders was
approximately $10.2 million, $7.1 million and $5.9 million at December 31,
1995, 1994 and 1993, respectively. It is anticipated that all backlog orders
will be filled within the current year.
MARKETING AND CUSTOMERS
The Company's products are marketed on a wholesale basis in the United States
through a network of independent distributors and salaried sales
representatives. The principal purchasers of Company products are major soft
drink companies, bottlers, beverage equipment dealers, food service chains and
national chains of convenience stores.
Substantially all of the Company's sales are derived from, or influenced by,
The Coca-Cola Company. Direct sales to The Coca-Cola Company, the Company's
largest customer, accounted for approximately 59%, 64% and 58% of the Company's
total net sales for the years ended December 31, 1995, 1994 and 1993,
respectively. No long-term contract exists between the Company and The
Coca-Cola Company or any of its other customers. Consequently, The Coca-Cola
Company has the ability to adversely affect, directly or indirectly, the volume
and price of the products sold by the Company. While the Company does not
anticipate a loss or reduction in its business with The Coca-Cola Company or
the imposition of significant price constraints based upon the Company's
historical and current relations as a preferred supplier to The Coca-Cola
Company, any such occurrence would have a material adverse impact on the
Company's financial position and its results of operations.
The Company and The Coca-Cola Company have entered into a master development
agreement which governs development of various products. Products that are
developed pursuant to this agreement may only be sold to The Coca-Cola Company
or its designated agents. The agreement generally provides that The Coca-Cola
Company will also retain the rights to any tooling it pays for and any
resulting patents. The Company is obligated under the development agreement to
make available its manufacturing capabilities for the benefit of The Coca-Cola
Company as they relate to and are required for selected projects. The Company
supplies engineering, research and development personnel; designs, develops and
creates prototypes; and obtains either an exclusive or a non-exclusive license
to manufacture and market the resulting products. Generally, the Company
warrants all such products for one year. The Coca-Cola Company may terminate
the development agreement, subject to certain conditions.
Additionally, the Company and The Coca-Cola Company have entered into certain
warehousing agreements under which the Company warehouses new and used products
owned by The Coca-Cola Company, as well as agreements which provide for the
refurbishment of used dispensing equipment owned by The Coca-Cola Company.
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EXPORT SALES
The Company's export sales are initially conducted through the Company's
Domestic International Sales Corporation ("DISC"), a wholly-owned subsidiary,
which in turn sells the Company's products through wholly-owned subsidiaries in
Mexico, Australia, and the United Kingdom, a Company-operated distribution
center in Moscow, Russia, the international divisions of major U.S. soft drink
companies, and licensees in Brazil and Colombia. At present, the Company
concentrates its export sales efforts in Latin America, the Far East and
Europe.
For the years ended December 31, 1995, 1994 and 1993, the Company's total net
sales derived from sales to customers in foreign countries were approximately
35%, 29% and 39%, respectively. The Company's foreign sales and operations
could be adversely affected by foreign currency fluctuations, exchange
controls, tax policies and other political and economic events, such as the
expropriation and deterioration of foreign economies. The Company attempts to
limit such risks; however, there can be no assurance that these efforts will be
successful.
COMPETITION
The business of manufacturing and marketing beverage dispensing systems and
related equipment is characterized by rapidly changing technology and is highly
competitive based primarily upon product suitability, reliability,
technological development and expertise, price, product warranty and delivery
time. In addition, the Company frequently competes with companies having
substantially greater financial resources than the Company. The Company has
been able to compete successfully in the past, and believes it will be able to
do so in the future, partly as a result of its current status as a preferred
supplier to The Coca-Cola Company. The Company has also implemented a number
of counter-cyclical and product diversification measures which should enhance
its relative position in an expanding global market.
EMPLOYEES
As of December 31, 1995, the Company had 1,143 full-time employees of whom 62
were engaged in engineering and technical support, 969 in manufacturing, 57 in
marketing and sales and 55 in general management and administrative positions.
While the majority of the employees work at the Company's facilities in San
Antonio, Texas, 359 employees work at the Company's maquiladora and related
companies located in Piedras Negras, Mexico and 61 employees worked at the
Company's Australian plant. Certain sales representatives are located in
various parts of the U.S., Mexico, Europe and the Far East. None of the U.S.
employees are represented by a union or subject to collective bargaining
agreements. Substantially all full-time United States employees are eligible
to participate in the Company's employee profit sharing plan and various other
benefit programs.
INTELLECTUAL PROPERTY
The Company presently owns 28 United States patents and numerous corresponding
foreign patents. It has 10 pending U.S. patent applications and corresponding
foreign patent applications. The Company's products covered by patents or
pending patent applications include food, beverage and ice beverage dispensing
equipment and components. Management does not believe the expiration of such
patents will have a significant adverse impact on continuing operations.
The Company constantly seeks to improve its products and to obtain patents on
these improvements. As a result, the Company believes its patent portfolio
will expand, thereby minimizing its reliance on any one particular patent. The
Company also believes its competitive position is enhanced by its existing
patents and that any future patents will continue to enhance this position.
However, there can be no assurance that the Company's existing or future
patents will continue to provide a competitive advantage, nor can there be any
assurance that the Company's competitors will not produce non-infringing
competing products.
In addition to Company owned patents, Lancer has assigned numerous patents to
the Company's customers, in particular The Coca-Cola Company. These patents
are the result of special development projects between Lancer and its
customers. These projects are typically paid for by the customer, with Lancer
either retaining licenses to manufacture the products covered by these patents
for the customer, or granting such licenses to the customer.
In addition to the foregoing, Lancer occasionally acquires exclusive
manufacturing rights under several other patents for derivative and
complementary products, which are controlled by third parties.
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The name "Lancer" is the federally registered trademark of the Company. It is
also registered in many foreign countries. In certain instances, the Company
grants a non-exclusive license to its distributors, especially foreign, to use
the trademark subject to control by the Company.
ENVIRONMENTAL MATTERS
The Company's operations are subject to various federal, state and local laws
and regulations relating to the protection of the environment, which have
become increasingly stringent. These environmental laws and regulations, which
are implemented principally in the U.S. by the Environmental Protection Agency
and comparable state agencies, govern the management of hazardous waste, the
discharge of pollutants into the air and into surface and ground water, and the
manufacture and disposal of certain substances. For example, pursuant to the
Federal Clean Air Act Amendment of 1990, the Company was prohibited as of
December 31, 1995 from using chlorofluorocarbons (CFC's), a compound used in
most refrigeration systems, in its products. As a result, the Company
converted its products to non-CFC refrigerants, which conversion did not have a
material adverse effect upon the Company's operations.
There are no material environmental claims pending or, to the Company's
knowledge, threatened against the Company. The Company also believes that its
operations are in material compliance with current U.S. and state laws and
regulations. The Company estimates that any expenses incurred in maintaining
compliance with current laws and regulations will not have a material effect on
the Company's earnings or capital expenditures. However, the Company can
provide no assurances that the current regulatory requirements will not change,
or that currently unforeseen environmental incidents will not occur, or that
past non-compliance with environmental laws will not be discovered on the
Company's properties.
ITEM 2. PROPERTIES
The Company's primary manufacturing and administrative facilities are located
in several buildings in San Antonio, Texas, totaling 498,538 square feet,
including three buildings owned by Lancer amounting to approximately 144,000
square feet of space, the largest of which is located on a 40-acre tract of
land in the southeast sector of San Antonio. The Company also owns and
operates facilities located in Piedras Negras, Mexico that consist of 127,495
square feet, leases a 4,000 square foot sales office in Monterrey, Mexico, and
leases a 38,284 square foot plant in Beverley, South Australia, a suburb of
Adelaide. Facilities under lease account for 405,806 square feet of space.
The Company also owns a building in Chicago, Illinois, with approximately
47,000 square feet of space, of which a major portion is currently leased to
outside tenants.
In March 1995, the Company purchased the property and buildings it had been
leasing in Piedras Negras, Mexico in order to ensure the continued availability
of the Mexico plant prior to lease expiration. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
Total net rent expense for 1995 was $712,000. Included in total rent expense
is $89,000 of rent expense for certain properties that are leased from a
partnership controlled by certain shareholders. See Note 5 of Notes to
Consolidated Financial Statements and "Certain Relationships and Related
Transactions" for more information.
Each facility is used to its fullest extent and has been designed to
accommodate a particular manufacturing or administrative purpose. The Company
has taken steps to consolidate operations and to provide additional space for
future expansion.
ITEM 3. LEGAL PROCEEDINGS
There are no claims or legal actions pending against the Company other than
claims arising in the ordinary course of business. The Company believes these
claims, taking into account reserves and applicable insurance, will not have a
material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to the security holders for a vote by proxy or
otherwise during the fourth quarter of the year ended December 31, 1995.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is currently traded on the American Stock Exchange
("ASE") under the symbol "LAN." The following table sets forth the range of
high and low market price as reported by the ASE for the periods indicated.
Market Price For Common Stock
<TABLE>
<CAPTION>
1995 1994
---------------------- ----------------------
Quarter High Low High Low
- --------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
First $ 12.33 $ 10.25 $ 13.75 $ 9.50
Second 13.58 10.83 15.25 11.33
Third 15.88 14.00 14.00 10.92
Fourth 16.00 13.00 13.00 10.75
</TABLE>
On March 22, 1996, the closing price of the Company's common stock, as reported
by the ASE, was $16.00 per share. On that date, there were 123 holders of
record of the Company's common stock, not including shares held by brokers and
nominees. The Company has not declared a dividend on the common stock to date.
It is a general policy of the Company to retain future earnings to support
future growth.
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
- ----------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Operating Data:
Net sales $ 75,912 $ 70,900 $ 56,661 $ 44,729 $ 35,585
Gross profit 16,075 14,193 10,482 7,891 6,558
Selling, general and
administrative expenses (9,880) (9,239) (7,157) (6,409) (4,675)
Operating income 6,195 4,954 3,325 1,482 1,883
Interest expense (981) (755) (795) (884) (1,416)
Interest and other income, net 1,489 354 1,060 911 501
Earnings before income taxes
and extraordinary item 6,703 4,553 3,590 1,509 968
Income tax expense 2,612 1,602 1,416 451 275
Net earnings 4,091 2,951 2,174 1,465 693
Net earnings per share* 1.02 0.78 0.61 0.41 0.20
Weighted average number of common
and common equivalent shares* 3,992 3,783 3,592 3,532 3,491
</TABLE>
*Per share amounts have been restated to
reflect a three-for-two Stock dividend effective July 11, 1995
<TABLE>
<CAPTION>
As of December 31,
- ----------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets $ 57,944 $ 46,896 $ 38,902 $ 37,762 $ 35,817
Short-term debt 8,448 7,409 7,159 6,522 7,122
Long-term debt, less
current installments 5,398 3,397 2,575 3,589 5,924
Shareholders' equity 31,065 26,919 20,325 17,923 16,458
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in connection with the Company's
Consolidated Financial Statements, related notes and other financial
information included elsewhere in this filing.
RESULTS OF OPERATIONS
Overview
The following table presents, as a percentage of net sales, certain financial
data for the Company for the periods indicated.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 %
Cost of sales 78.8 80.0 81.5
Gross profit 21.2 20.0 18.5
Selling, general and
administrative expenses 13.0 13.0 12.6
Operating income 8.2 7.0 5.9
Interest expense (1.3) (1.1) (1.4)
Interest and other income, net 1.9 0.5 1.8
Earnings before income taxes
and extraordinary item 8.8 6.4 6.3
Income tax expense 3.4 2.3 2.5
Net earnings 5.4 4.1 3.8
</TABLE>
Comparison of the Years Ended December 31, 1995 and December 31, 1994
Net sales for the year ended December 31, 1995, increased by $5.0 million, or
7.1%, to $75.9 million from $70.9 million for the prior year. This increase
primarily reflects higher sales in a number of the Company's major product
lines: $4.1 million, or 39.0%, in citrus dispensers, $1.1 million, or 13.9%, in
ice cooled dispensers, $1.2 million, or 7.4%, in mechanically cooled
dispensers, $1.1 million, or 44.2%, in remanufacturing services, and $0.8
million, or 6.1%, in spare parts and related accessories. These increases
were partially offset by decreases of $1.4 million, or 8.6%, in post-mix
dispensing valves, and $1.9 million, or 63.3%, in carbonators. International
sales accounted for 35.0% of the net sales for the year ended December 31, 1995,
as compared to 29.0% for the prior year.
Gross profit for the year ended December 31, 1995 increased by $1.9 million, or
13.3%, to $16.1 million from $14.2 million for the prior year, due to an
improvement in manufacturing gross margin to 21.2% in 1995 from 20.0% in 1994.
This improvement reflects product mix changes and lower manufacturing and
support costs. In 1995 the Company continued to benefit from further
reductions in labor costs as a result of moving additional assembly and
manufacturing operations to its maquiladora plant in Piedras Negras, Mexico.
Selling, general and administrative expenses for the year ended December 31,
1995, increased by approximately $0.7 million, or 6.9%, to $9.9 million from
$9.2 million for the prior year. This increase reflected additional
engineering costs for new product development and technical support, increased
selling expenses to sustain a higher level of sales and higher variable costs
related to those sales.
Interest expense for the year ended December 31, 1995, increased approximately
$226,000, or 30.0%, to $981,000 from $755,000 for the prior year. This
increase resulted from increased average borrowings, due primarily to funding
requirements for construction of the Company's expanded facilities in Mexico.
Interest and other income for the year ended December 31, 1995, increased by
approximately $1.1 million, or 321.2%, to $1.5 million from $354,000 for the
prior year. The increase was due primarily to increased sales
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commissions of $716,000 related to sales of beverage coolers and an increase of
$50,000 in warehousing cost reimbursements from The Coca-Cola Company.
Income tax expense for the year ended December 31, 1995, increased by
approximately $1.0 million, or 63.1%, to $2.6 million from $1.6 million for
the same period in 1994. This increase was due to a 47.2% increase in pre-tax
earnings and higher state and other income taxes.
Net earnings for the year ended December 31, 1995, increased by approximately
$1.1 million, or 38.7%, to $4.1 million ($1.02 per share) from $3.0 million
($.78 per share) for the prior year. This increase was due primarily to
increased net sales, an improvement in operating income and an increase in
other income.
Comparison of the Years Ended December 31, 1994 and December 31, 1993
Net sales for the year ended December 31, 1994, increased by $14.2 million, or
25.1%, to $70.9 million from $56.7 million for the prior year. This increase
resulted primarily from higher sales in a number of the Company's major product
lines: $4.5 million, or 75.1%, in citrus dispensers, $5.0 million, or 151.5%,
in ice cooled dispensers; $2.4 million, or 16.7% in post-mix dispensing valves,
and $1.8 million, or 154.1% in carbonators. In addition to increased sales in
these established product lines during 1994, the Company began manufacturing an
ice packaging unit which generated $1.8 million in added sales. These
increases were somewhat offset by decreased sales of $2.7 million, or 14.0%, of
mechanically cooled dispensers in the international market. International
sales accounted for 29.0% of the net sales for the year ended December 31,
1994, as compared to 39.0% for the prior year.
Gross profit for the year ended December 31, 1994, increased by $3.7 million,
or 35.4%, to $14.2 million from $10.5 million for the prior year, while the
gross margin for the year ended December 31, 1994, increased to 20.0% in 1994
from 18.5% in the prior year. These improvements reflected improved inventory
turns and lower manufacturing and support costs as a percentage of net sales.
In addition, manufacturing costs in 1994 were not adversely impacted by an
inventory writedown as they were in 1993 when the Company recorded a $1.3
million charge against earnings for inventory obsolescence.
Selling, general and administrative expenses for the year ended December 31,
1994, increased by approximately $2.0 million, or 29.1%, to $9.2 million from
$7.2 million for the prior year. This increase reflected additional
engineering costs for new product development and technical support, increased
selling expenses to sustain increased sales and higher variable costs related
to those sales.
Interest expense for the year ended December 31, 1994, decreased approximately
$40,000, or 5.0%, to $755,000 from $795,000 for the prior year. This decrease
resulted from reduced average borrowings.
Interest and other income, net for the year ended December 31, 1994, decreased
by approximately $0.7 million, or 66.6%, to $0.4 million from $1.1 million for
the prior year. The decrease was due primarily to a $306,000 foreign currency
exchange loss related to the Mexican operations as a result of the Mexican peso
devaluation, and reduced sales commissions of $278,000 related to sales of
beverage coolers.
Income tax expense for the year ended December 31, 1994, increased by
approximately $0.2 million, or 13.1%, to $1.6 million from $1.4 million for the
same period in 1993. This increase was due to an improvement in pre-tax
earnings.
Net earnings for the year ended December 31, 1994, increased by approximately
$0.8 million, or 35.7%, to $3.0 million ($.78 per share) from $2.2 million
($.61 per share) for the prior year. This increase was due primarily to
increased net sales and operating income.
LIQUIDITY AND CAPITAL RESOURCES
Over the last three fiscal years, the Company has relied primarily upon net
cash provided by operating activities ("Cash from Operations") and debt
borrowings to (i) provide working capital and (ii) finance the acquisition of
property, plant and equipment.
As reflected in the consolidated statements of cash flows, cash provided by
operations for the year ended December 31, 1995, was approximately $7.1
million, compared to cash used in operations of $0.9 million in the prior
year.
8
<PAGE> 10
The primary sources of cash were net earnings and increases in depreciation and
deferred revenue and a decrease in inventories.
In August 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 the London Interbank
Offered Rates ("LIBOR") or upon, and fluctuating with, the lender's prime rate.
Under the Credit Facility, the Company will be able to borrow up to a certain
percentage of its eligible accounts receivable and inventories, provided it
maintains certain financial ratios and complies with certain covenants. The
Company is either in compliance with all such covenants or has obtained waivers
from its primary lender.
As of December 31, 1995, the Company had outstanding borrowings of $7.0 million
under the Credit Facility bearing interest at 8.5%. All borrowings under the
Credit Facility become due and payable in full on June 15, 1996. The Company
has not yet entered into negotiations with its lender; however, the Company
expects to extend or replace the Credit Facility prior to the expiration date.
During the first quarter of 1995, the Company purchased the property and
buildings it had been leasing in Piedras Negras, Mexico (the "Mexico plant")
for $1.1 million in order to ensure the continued availability of the Mexico
plant to the Company after 1996, when the Company's lease of the Mexico plant
was scheduled to expire. The Company also expanded its capacity in Mexico with
the construction of a manufacturing facility of approximately 66,000 square
feet. In August 1995, the Company entered into a loan agreement with its
primary lender to provide up to $2.5 million of term debt to finance the
expansion of these facilities. Actual advances on the note totaled $1.9
million. This new loan, which bears interest at the bank's prime rate less
.25%, is subject to a seven-year amortization schedule and is due and payable
in full on January 15, 1999.
In December 1995, the Company acquired 100% of the stock of Glenn Pleass
Holdings Pty. Ltd. ("GPH"), an Australian based manufacturer and distributor of
beverage dispensing systems. The purchase price of GPH was $5.2 million, of
which the Company paid $3.5 million in cash and assumed liabilities of $1.7
million. Funding for the transaction was provided by internally generated cash
and borrowings from the Company's Credit Facility.
In 1996, management intends to spend approximately $8.0 million to continue to
expand its production facilities at its plants in San Antonio and Mexico and its
offices in San Antonio. Management believes this expansion will enable the
Company to increase its production capabilities to meet anticipated market
demand and will facilitate additional cost savings in selling, general and
administrative expenses by allowing it to consolidate administrative functions.
Management intends to finance the expansion and consolidation out of cash from
operations, the Credit Facility and additional secured financing, if available,
on terms acceptable to the Company.
INFLATION
Management believes inflation has not had a significant impact on its business
or operations.
SEASONALITY
The Company's net sales in the fourth quarter of its fiscal years historically
have been subject to seasonal changes primarily as a result of the reduced
funds available in the capital expenditure budgets of Lancer's customers.
ACCOUNTING MATTERS
The Company established a DISC in 1979 in order to defer federal income taxes
on its foreign sales. In late 1984, the Internal Revenue Code (the "Code") was
amended to limit the benefits of a DISC, primarily by imposing an interest
charge on the accumulated deferred federal income taxes of a DISC. At the same
time, the Code was amended to permit the creation of a Foreign Sales
Corporation ("FSC"). Under the Code, as amended, a portion of a FSC's income
is subject to federal income taxes, while a portion is permanently exempt from
federal income taxes. As a result, at some point, the interest charge the
Company incurs on the deferred federal income taxes of its DISC will equal or
exceed the taxes it would have incurred had it operated a FSC. Since the
Company cannot maintain the DISC and FSC at the same time under current tax
regulations, the Company may elect to convert the DISC to a FSC sometime in the
future. In the event of such a conversion, the Company will be required to
provide for federal income taxes on the $2.4 million of undistributed earnings
of the DISC, for which federal income taxes had not previously been provided,
in the year of conversion. If the DISC had been converted on December 31,1995,
9
<PAGE> 11
it would have resulted in a reduction of approximately $801,000 in the Company's
net earnings. The Company will be able to pay such federal income taxes over a
ten-year period; thus the Company does not anticipate that payments of such
federal income taxes will significantly affect the Company's cash from
operations.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The
Statement, which is effective for fiscal years beginning after December 15,
1995, requires that an entity evaluate long-lived assets and certain other
identifiable intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. An impairment loss meeting the recognition criteria is to be
measured as the amount by which the carrying amount for financial reporting
purposes exceeds the fair value of the asset. The Company plans to adopt this
Statement in 1996 and does not expect adoption of the Statement to have a
material effect, if any, on the Company's financial position or results of
operations.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which requires adoption of the
disclosure provisions no later than fiscal years beginning after December 15,
1995. Companies are permitted to continue to account for such transactions
under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees," but will be required to disclose in a note to the financial
statements pro forma net earnings and earnings per share as if the company had
applied the new method of accounting, as outlined in SFAS No. 123. Although
the Company has not yet determined the effect the new standard will have on net
earnings and earnings per share, should it elect to make such a change, it does
not anticipate the implementation of SFAS No. 123 will have a material adverse
impact on the Company's financial position or results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Index to Consolidated Financial Statements and Schedule" included herein
for information required for Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the caption "Election of Directors" in the
Company's proxy statement for its May 23, 1996 Annual Meeting of Shareholders,
which is to be filed with the Commission, describes the directors of the
Company as required in response to this item and is incorporated herein by
reference.
The following table sets forth certain information concerning the executive
officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Alfred A. Schroeder 59 Chairman of the Board
George F. Schroeder 56 President, Chief Executive Officer and Director
John P. Herbots 48 Vice President Finance & Administration and Director
Walter J. Biegler 54 Director
Jean M. Braley 66 Director
Robert A. Shuey, III 42 Director
Michael E. Smith 55 Director
Charles W. Thomas 42 Vice President of Marketing
Robert W. Abbott 57 Vice President International Sales
Jose A. Canales, Jr. 50 Vice President Latin American Sales
James R. Sprinkle 49 Vice President Domestic Sales
Samuel Durham 47 Vice President Engineering
Michael U. Raymondi 49 Vice President Operations
</TABLE>
10
<PAGE> 12
Mr. Alfred A. Schroeder was a co-founder of the Company and has served as
Chairman of the Board of Directors of the Company since its inception in 1967.
His primary responsibilities include conceptual engineering design, new product
development and corporate planning. He is the brother of George F. Schroeder,
and is also a partner in Lancer Properties. See "Certain Relationships and
Related Transactions".
Mr. George F. Schroeder was a co-founder of the Company and has served as Chief
Executive Officer, President and a director of the Company since 1967. His
primary responsibilities include strategic planning, marketing, overall
production management and corporate administration. He is the brother of
Alfred A. Schroeder, and is also a partner in Lancer Properties. See "Certain
Relationships and Related Transactions".
Mr. John P. Herbots joined the Company as Vice President of Finance and
Administration in February 1995. On August 7, 1995, Mr. Herbots was appointed
Chief Financial Officer and Treasurer. Prior to joining Lancer, Mr. Herbots
was Executive Vice President of MK Rail Corporation and from 1990 until 1992,
served as Vice President and Chief Financial Officer for Morrison Knudsen
Corporation's Rail Systems Group. Prior to that he was Vice President and CFO
of Avline Leasing Corporation for one year, of Lancer Corporation for one year
and of Fairchild Aircraft Corporation for four years. Mr. Herbots was elected
to the Board of Directors in May 1995.
Mr. Walter J. Biegler has served as a director of the Company since 1985. He
has held the position of Chief Financial Officer of Periodical Management
Group, Inc., a San Antonio, Texas concern which distributes periodicals, books
and specialty items in the Southwestern and Central portions of the United
States, Mexico and the Virgin Islands, since November 1991. Prior to November
1991, he served as the Chief Financial Officer and Senior Vice
President-Finance of La Quinta Motor Inns, Inc. of San Antonio, Texas, a
national hotel chain.
Ms. Jean M. Braley has served as a director of the Company since 1976. She
served as Secretary of the Company from 1982 to 1985. Ms. Braley is currently
and has been involved for the last ten years in personal investments as her
principal occupation. She is also a partner in Lancer Properties. See "Certain
Relationships and Related Transactions".
Mr. Robert A. Shuey, III has served as a director of the Company since 1985.
Mr. Shuey is a principal shareholder and Vice President of La Jolla Securities
Corporation, an investment banking firm, was employed by Dillon-Gage
Securities, Inc., from 1994 to 1995, and prior to that held the position of
Senior Vice President, Corporate Finance, of Dickinson & Company, a brokerage
firm, during 1993. From 1987 to 1993, Mr. Shuey was a Managing Partner of
Empennage Partners, Inc., a merchant banking concern.
Mr. Michael E. Smith has served as a director of the Company since 1985. Mr.
Smith is presently a principal shareholder and Vice President of Bailey-Gosling
Associates, Inc., an insurance brokerage firm. He has been employed by the
same firm since 1968. Mr. Smith has been the Company's insurance broker since
1981.
Mr. Charles W. Thomas joined the Company as Vice President of Marketing on
February 12, 1996. Prior to joining Lancer, Mr. Thomas was employed, since
1981, by Coca-Cola Foods, a Division of The Coca-Cola Company. While at
Coca-Cola Foods, Mr. Thomas held positions as Director of Marketing, Director
of Field Sales and Director of Technical Development.
Mr. Robert W. Abbott has been employed by the Company since 1974. Mr. Abbott
is primarily responsible for marketing Lancer products and has held the
position of Vice President International Sales since 1976. Prior to his
employment by Lancer, Mr. Abbott was employed by The Coca-Cola Company.
Mr. Jose A. Canales, Jr., joined the Company as Vice President Latin American
Sales in August 1995. Prior to joining Lancer, Mr. Canales was the
International Sales Manager for Pioneer Flour Mills in San Antonio. From 1982
to 1993 he held various management positions within the Latin American steel
industry with Trade Arbed of Luxembourg, Fundidora in Mexico and Huntco Steel
in the United States. From 1972 to 1982 he represented W. W. Grainger within
Mexico and Latin America.
Mr. James R. Sprinkle joined the Company in April 1984 as Director of National
Accounts. Mr. Sprinkle assumed the responsibilities of Vice President Domestic
Sales in May 1993. Prior to his employment by Lancer, Mr. Sprinkle was
employed by The Coca-Cola Company.
Mr. Samuel Durham joined the Company in June 1979 and he has held the position
of Vice President Engineering since May 1993. He is primarily responsible for
coordinating new product design through its introduction into the
11
<PAGE> 13
market and works directly with the engineering department of the Company's
primary customer. Before joining the Company, Mr. Durham was employed by
Polyvend, a manufacturer of vending equipment.
Mr. Michael U. Raymondi joined the Company as Vice President of Operations in
August 1994. Prior to joining Lancer, Mr. Raymondi was employed by Minnesota
Rubber, a rubber and plastics products company, as General Manager for three
years. Prior to that, Mr. Raymondi was employed by National O-Ring as Plant
Manager for five years.
All directors of the Company are elected annually. The executive officers are
elected annually by and serve at the discretion of the Company's Board of
Directors. The Board of Directors of the Company currently maintains an Audit
Committee, a Compensation Committee and a Stock Option Committee. The members
of the Audit Committee are Walter J. Biegler, Robert A. Shuey, III, and
Michael E. Smith. The Audit Committee met once in 1995. The members of the
Compensation Committee are Walter J. Biegler, Robert A. Shuey, III, and Michael
E. Smith. No member of the Compensation Committee is an executive officer of
the Company. The Compensation Committee met once in 1995. The members of the
Stock Option Committee are Walter A. Biegler, Robert A. Shuey, III, and Michael
E. Smith. The Stock Option Committee met twice in 1995.
The members of the Board of Directors, who are not full-time employees of the
Company, are compensated at the rate of $8,000 per year.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Compensation and Certain
Transactions" in the Company's proxy statement for its May 23, 1996 Annual
Meeting of Shareholders, which is to be filed with the Commission, sets forth
information regarding executive compensation and certain transactions as
required in response to this item and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information set forth under the captions "Principal Shareholders" and
"Election of Directors" in the Company's proxy statement for its May 23, 1996
Annual Meeting of Shareholders, which is to be filed with the Commission,
describes the security ownership of certain beneficial owners and management as
required in response to this item and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Relationships and Related
Transactions" in the Company's proxy statement for its May 23, 1996 Annual
Meeting of Shareholders, which is to be filed with the Commission, sets forth
information regarding certain relationships and related transactions as
required in response to this item and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. The following documents are filed as part of this Annual Report on Form
10-K:
(1) Financial statements:
The financial statements filed as a part of this report are listed in the
"Index to Consolidated Financial Statements and Schedule" referenced in
Item 8.
(2) Financial statement schedule:
The financial statement schedule filed as a part of this report is listed
in the "Index to Consolidated Financial Statements and Schedule"
referenced in Item 8.
(3) Exhibits:
12
<PAGE> 14
<TABLE>
<S> <C>
3.1* Registrants Articles of Incorporation and amendments thereto
3.2* Bylaws of the Registrant.
4.1* Specimen Common Stock Certificate, $0.01 par value, of
Registrant
10.1* Lancer Corporation Profit Sharing Plan
10.2* 1992 Non-Statutory Stock Option Plan
10.3* 1987 Incentive Stock Option Plan.
10.4* Master Development Agreement, dated January 12, 1984, between
Lancer Corporation and The Coca-Cola Company
10.5* Net Lease Agreement, dated July 1, 1974, between Lancer
Corporation and Lancer Properties dated as of June 3, 1977.
10.6* Loan Agreement, dated as of July 24, 1991, between Lancer
Corporation and First Interstate Bank.
10.7* Security Agreement, dated as of July 24, 1991, between Lancer
Corporation and First Interstate Bank of Texas
10.8* Fourth Amendment to Loan Agreement and Loan Documents, dated as
of July 29, 1994, between Lancer Corporation and First
Interstate Bank.
10.9* Modification of Deeds of Trust, dated as of May 15, 1993, for
the benefit of First Interstate Bank, as modified by the Second
Modification of Deeds of Trust, dated as of April 8, 1994, and
the Third Modification of Deeds of Trust, dated as of July 29,
1994.
10.10* Form of Guaranty Agreement, dated July 29, 1994, executed by
each of the subsidiaries of Lancer Corporation in favor of
First Interstate Bank of Texas.
10.11* Master Security Agreement, dated as of July 28, 1992, between
Lancer Corporation and CIT Group/Equipment Financing, Inc.
10.12* Agreement for Purchase and Sale of Assets and Business
(Vaculator division), dated August 5, 1993, between Lancer
Corporation and Newco Enterprises, Inc.
10.13* Development and Manufacturing Agreement, dated April 13, 1993,
between Lancer Corporation and Packaged Ice, Inc.
10.14* Manufacturer's Representation Agreement, dated June 1993,
between Lancer Corporation and Middleby Marshall Inc., doing
business as Victory - A Middleby Company.
10.15* Form of Notice of Grant of Stock Option under the 1987
Incentive Stock Option Plan.
10.16* Form of Nonstatutory Stock Option Agreement under the 1992
Non-Statutory Stock Option Plan.
10.17** Schedule No. 5, dated February 18, 1994 to Master Security
Agreement between Lancer Corporation and CIT Group/Equipment
10.18** Schedule No. 6, dated May 24, 1994 to Master Security Agreement
between Lancer Corporation and CIT Group/Equipment Financing,
Inc.
10.19** Revolving Promissory Note, dated as of July 29, 1994 between
Lancer Corporation and First Interstate Bank of Texas, N.A.
10.20** Schedule No. 7, dated November 1, 1994 to Master Security
Agreement between Lancer Corporation and CIT Group/Equipment
Financing, Inc.
10.21 Fifth Amendment to Loan Agreement and Loan Documents, dated
November 8, 1994, between Lancer Corporation and First
Interstate Bank.
10.22 Sixth Amendmendment to Loan Agreement and Loan Documents, dated
July 6, 1995, between Lancer Corporation and First Interstate
Bank.
10.23*** Seventh Amendment to Loan Agreement and Loan Documents, dated
August 1, 1995, between Lancer Corporation and First Interstate
Bank.
10.24 Eighth Amendment to Loan Agreement and Loan Documents, dated
December 29, 1995, between Lancer Corporation and First
Interstate Bank.
21.1 List of Significant Subsidiaries of the Registrant.
23.1 Consent of KPMG Peat Marwick LLP.
</TABLE>
* These exhibits are incorporated by reference to the same Exhibit to the
Registrant's Registration Statement No. 33-82434 filed on Form S-1 with
the Securities and Exchange Commission (the "Commission") on August 5,
1994, as amended by Amendment No.1 to Form S-1 Registration Statement
with the Commission on August 23, 1994.
** These exhibits are incorporated by reference to the same Exhibit to the
Registrant's Form 10-K for the year ended December 31, 1994.
*** These exhibits are incorporated by reference to the Exhibit to the
Registrant's Form 10-Q for the quarter ended June 30, 1995.
13
<PAGE> 15
(b) Reports on Form 8-K:
The Company has filed reports on Form 8-K for a change in Chief Financial
Officer and for the acquisition of a subsidiary company during the fiscal year
ended December 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
March 28, 1996
LANCER CORPORATION
by: /s/ George F. Schroeder
George F. Schroeder
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ ALFRED A. SCHROEDER Chairman of the Board March 28, 1996
Alfred A. Schroeder Date
/s/ GEORGE F. SCHROEDER President and Director March 28, 1996
George F. Schroeder (principal executive officer) Date
/s/ JOHN P. HERBOTS Vice President Finance & Administration and Director March 28, 1996
John P. Herbots (principal financial and accounting officer) Date
/s/ WALTER J. BIEGLER Director March 28, 1996
Walter J. Biegler Date
/s/ JEAN M. BRALEY Director March 28, 1996
Jean M. Braley Date
/s/ ROBERT A. SHUEY, III Director March 28, 1996
Robert A. Shuey, III Date
/s/ MICHAEL E. SMITH Director March 28, 1996
Michael E. Smith Date
</TABLE>
14
<PAGE> 16
LANCER CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<S> <C>
Independent Auditors' Report F-2
Consolidated Balance Sheets as of December 31, 1995 and 1994 F-3
Consolidated Statements of Income for each of the years in the three-year period
ended December 31, 1995 F-5
Consolidated Statements of Shareholders' Equity for each of the years in the
three-year period ended December 31, 1995 F-6
Consolidated Statements of Cash Flows for each of the years in the
three-year period ended December 31, 1995 F-7
Notes to Consolidated Financial Statements F-8
Schedule for the years ended December 31, 1995, 1994 and 1993
II-Reserve account F-17
</TABLE>
All other schedules for which provision is made in the applicable rules and
regulations of the Securities and Exchange Commission have been omitted as the
schedules are not required under the related instructions, are not applicable,
or the information required thereby is set forth in the consolidated financial
statements or notes thereto.
F-1
<PAGE> 17
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Lancer Corporation:
We have audited the consolidated financial statements of Lancer Corporation and
subsidiaries as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we also have audited the
consolidated financial statement schedule as listed in the accompanying index.
These consolidated financial statements and consolidated financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and consolidated financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lancer Corporation
and subsidiaries as of December 31, 1995 and 1994 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles. Also in our opinion, the related consolidated financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG Peat Marwick LLP
San Antonio, Texas
February 29, 1996
F-2
<PAGE> 18
LANCER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
------------------- -------------------
<S> <C> <C>
Current assets:
Cash $ 754,352 $ 2,102,390
------------------- -------------------
Receivables (note 3):
Trade accounts and notes 14,431,531 9,152,033
Refundable income taxes - 342,981
Other 272,214 455,811
------------------- -------------------
14,703,745 9,950,825
Less allowance for doubtful accounts (85,000) (85,000)
------------------- -------------------
Net receivables 14,618,745 9,865,825
------------------- -------------------
Inventories (note 3):
Raw materials and supplies 3,490,396 1,228,012
Work in process 11,982,620 12,558,323
Finished goods 4,558,742 6,531,738
------------------- -------------------
Total inventories 20,031,758 20,318,073
Prepaid expenses ($56,698 and $51,707 due
from affiliates, respectively) (note 5) 146,776 54,827
------------------- -------------------
Total current assets 35,551,631 32,341,115
------------------- -------------------
Property, plant and equipment, at cost (note 3):
Land 977,888 656,740
Buildings 7,950,514 6,522,429
Machinery and equipment 13,255,089 12,093,915
Tools and dies 7,927,246 5,189,667
Leaseholds, office equipment and vehicles 4,969,712 3,830,330
Construction in progress 1,361,906 -
------------------- -------------------
36,442,355 28,293,081
Less accumulated depreciation and amortization (17,242,089) (15,051,379)
------------------- -------------------
Net property, plant and equipment 19,200,266 13,241,702
------------------- -------------------
Long-term receivables ($251,764 and $138,327 due
from affiliates, respectively) (note 6) 512,388 538,312
Intangibles and other assets, at cost, less
accumulated amortization (note 5) 2,679,578 775,075
------------------- -------------------
$ 57,943,863 $ 46,896,204
=================== ===================
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 19
LANCER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
December 31, 1995 and 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
------------------ -------------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 5,645,063 $ 4,899,550
Current installments of long-term debt (note 3) 1,448,093 1,408,663
Line of credit with bank (note 3) 7,000,000 6,000,000
Deferred revenue 815,901 602,602
Accrued expenses and other liabilities (note 9) 2,882,886 2,044,188
Income taxes payable (note 2) 487,395 -
------------------ -------------------
Total current liabilities 18,279,338 14,955,003
Deferred income taxes (note 2) 996,409 1,096,961
Other long-term liabilities (note 4) 700,000 520,000
Long-term debt, excluding current installments (note 3) 5,397,574 3,397,174
Deferred revenue 1,505,600 8,323
------------------ -------------------
Total liabilities 26,878,921 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; 3,872,221 and 3,861,906
issued and outstanding in 1995 and 1994, respectively 38,722 25,746
Additional paid-in capital 9,852,713 9,810,607
Retained earnings 21,173,507 17,082,390
Commitments and contingencies (notes 5 and 10) - -
------------------ -------------------
Total shareholders' equity 31,064,942 26,918,743
------------------ -------------------
$ 57,943,863 $ 46,896,204
================== ===================
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 20
LANCER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------- -------------- --------------
<S> <C> <C> <C>
Net sales $ 75,912,289 $ 70,899,829 $ 56,660,635
Cost of sales 59,836,951 56,706,572 46,178,971
------------- -------------- --------------
Gross profit 16,075,338 14,193,257 10,481,664
Selling, general and administrative expenses 9,880,172 9,238,922 7,156,950
------------- -------------- --------------
Operating income 6,195,166 4,954,335 3,324,714
------------- -------------- --------------
Other income (expense):
Interest expense (981,153) (755,485) (794,580)
Interest and other income, net 1,489,309 353,600 1,059,590
------------- -------------- --------------
508,156 (401,885) 265,010
------------- -------------- --------------
Earnings before income taxes 6,703,322 4,552,450 3,589,724
------------- -------------- --------------
Income taxes expense (benefit) (note 2):
Current 2,446,959 1,637,930 1,448,865
Deferred 165,246 (36,034) (33,010)
------------- -------------- --------------
2,612,205 1,601,896 1,415,855
------------- -------------- --------------
Net earnings $ 4,091,117 $ 2,950,554 $ 2,173,869
============= ============== ==============
Weighted average common and
common equivalent shares 3,992,360 3,782,799 3,592,176
============= ============== ==============
Net earnings per share $ 1.02 $ 0.78 $ 0.61
============= ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 21
LANCER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Retained Shareholders'
Stock Capital Earnings Equity
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Balance December 31, 1992 $ 23,273 $ 5,941,507 $ 11,957,967 $ 17,922,747
Net earnings - - 2,173,869 2,173,869
Exercise of 52,278 stock
options, including tax
benefit of $65,595 349 228,000 - 228,349
----------- ------------ ------------ ------------
Balance December 31, 1993 23,622 6,169,507 14,131,836 20,324,965
Net earnings - - 2,950,554 2,950,554
Issuance of 300,000 shares
of common stock, net of
offering expenses 2,000 3,531,083 - 3,533,083
Exercise of 18,664 stock
options, including tax
benefit of $43,003 124 110,017 - 110,141
----------- ------------ ------------ ------------
Balance December 31, 1994 25,746 9,810,607 17,082,390 26,918,743
Net earnings - - 4,091,117 4,091,117
Exercise of 10,332 stock
options 89 54,993 - 55,082
Three-for-two stock dividend 12,887 (12,887) - -
----------- ------------ ------------ ------------
Balance December 31, 1995 $ 38,722 $ 9,852,713 $ 21,173,507 $ 31,064,942
=========== ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 22
LANCER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Cash flow from operating activities:
Net earnings $ 4,091,117 $ 2,950,554 $ 2,173,869
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Depreciation and amortization 2,152,169 1,843,177 1,613,346
Loss on sale and disposal of assets 13,985 28,679 18,829
Change in assets and liabilities, net of effects
from purchase of subsidiary:
(Increase) decrease in receivables (3,872,837) 218,488 (1,952,732)
(Increase) decrease in prepaid expenses (23,969) (4,522) 81,948
Decrease (increase) in inventories 2,283,927 (5,783,544) 1,602,145
Decrease (increase) in other assets 425,019 (143,666) 10,507
Decrease in accounts payable 094,867) (356,526) (1,049,038)
Increase (decrease) in accrued expenses 601,787 (32,771) 196,009
Increase in deferred revenue 1,710,576 610,925 -
Increase (decrease) in income taxes payable 760,293 (359,449) (119,995)
Decrease in deferred Federal income taxes (100,552) (36,034) (33,010)
Increase in other long-term liabilities 180,000 160,000 120,000
------------- ------------- -------------
Net cash provided (used) by operating activities 7,126,648 (904,689) 2,661,878
------------- ------------- -------------
Cash flow from investing activities:
Proceeds from sale of assets 20,166 31,595 142,486
Acquisition of property, plant and equipment (7,861,164) (2,942,641) (2,035,294)
Acquisition of subsidiary company (3,503,600) - -
Investment in common stock (225,000) (150,000) -
------------- ------------- -------------
Net cash used in investing activities (11,569,598) (3,061,046) (1,892,808)
------------- ------------- -------------
Cash flow from financing activities:
Net borrowings under line of credit agreements 1,000,000 700,000 450,000
Proceeds from issuance of long-term debt 6,929,000 5,035,072 970,332
Retirement of long-term debt (4,889,170) (4,663,338) (1,797,340)
Proceeds from issuance of common stock - 3,533,083 -
Proceeds from exercise of stock options 55,082 110,141 228,349
------------- ------------- -------------
Net cash provided (used) by financing activities 3,094,912 4,714,958 (148,659)
------------- ------------- -------------
Net (decrease) increase in cash (1,348,038) 749,223 620,411
Cash at beginning of year 2,102,390 1,353,167 732,756
------------- ------------- -------------
Cash at end of period $ 754,352 $ 2,102,390 $ 1,353,167
============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 23
LANCER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General and Principles of Consolidation
The consolidated financial statements include the accounts of Lancer
Corporation (the "Company"), its wholly-owned subsidiaries, Lancer
International Sales, Inc. (DISC), Lancer Ltd., Glenn Pleass Holdings Pty. Ltd.,
Industrias Lancermex, S.A. de C.V., Nueva Distribuidora Lancermex, S.A. de C.V.
and Servicios Lancermex, S.A. de C.V. All intercompany balances and
transactions are eliminated in consolidation.
The Company designs, engineers, manufactures and markets fountain soft drink
and other beverage dispensing systems and related equipment for use in the food
service and beverage industry.
The DISC is a qualified Interest-Charge Domestic International Sales
Corporation, which markets the Company's products internationally. The DISC is
a wholly-owned subsidiary created to operate under Federal income tax
regulations.
Lancer Ltd. is a wholly-owned subsidiary incorporated to market and distribute
the Company's products to the European Union and certain other foreign
countries.
Glenn Pleass Holdings Pty. Ltd. is a wholly-owned subsidiary which manufactures
and distributes the Company's products in Australia and surrounding Pacific Rim
countries.
Industrias Lancermex, S.A. de C.V. is a wholly-owned subsidiary incorporated to
assemble the Company's products and components in Mexico. Industrias
Lancermex, S.A. de C.V. is a maquiladora plant operating under both U.S. and
Mexican customs laws.
Nueva Distribuidora Lancermex, S.A. de C.V. is a wholly-owned subsidiary
incorporated to market and distribute the Company's products in Mexico. This
company has no employees but receives services and support from Servicios
Lancermex, S.A. de C.V.
Servicios Lancermex, S.A. de C.V. is a wholly-owned subsidiary incorporated to
provide all of the services required by Nueva Distribuidora Lancermex, S.A. de
C.V.
Inventories
Inventories are stated at the lower of cost or market on a first-in, first-out
basis (average cost as to raw materials and supplies) or market (net realizable
value).
Certain items in inventory have become obsolete due to technological advances
and discontinuation of products. The Company has taken these items into
consideration in valuing the inventory.
Property, Plant and Equipment
Depreciation on property, plant and equipment and amortization of leasehold
improvements are provided on a straight-line basis over the shorter of the
lease term or estimated useful lives ranging from 3 to 30 years.
Maintenance, repair and purchases of small tools and dies are expensed as
incurred.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
The Statement, which is effective for fiscal years beginning after December 15,
1995, requires that an entity evaluate long-lived assets and certain other
identifiable intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. An impairment loss meeting the recognition criteria is to be
measured as the amount by which the carrying amount for financial reporting
purposes
F-8
<PAGE> 24
LANCER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
exceeds the fair value of the asset. The Company plans to adopt this Statement
in 1996 and does not expect adoption of the Statement to have a material
effect, if any, on the Company's financial position or results of operations.
Intangibles and Other Assets
Intangibles and other assets consist principally of patents, goodwill, and
long-term investments in the common stock of other companies. Patents are
amortized over the estimated useful lives of the respective assets using the
straight-line method. Goodwill, or the cost of investment in excess of the net
assets of the business acquired during 1995, is being amortized using the
straight-line method over thirty years. The Company continually reviews
whether subsequent events and circumstances have occurred that indicate that
the remaining estimated useful life of goodwill may warrant revision or that
the remaining balance of goodwill may not be recoverable. If events and
circumstances indicate that goodwill related to the business should be reviewed
for possible impairment, the Company uses projections to assess whether future
operating earnings of the business on a non-discounted basis are likely to
exceed the goodwill amortization over the remaining life of the goodwill, to
determine whether a writedown of goodwill to recoverable value (as determined
by the same projections) is appropriate.
Earnings per Common and Common Equivalent Share
Earnings per common 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.
During 1995, the Company had a three-for-two stock split effected in the form
of a dividend. All references in the consolidated financial statements to
number of shares, per share amounts, stock option data and market prices of the
Company's common stock have been restated to give effect to the stock split.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which requires adoption of the
disclosure provisions no later than fiscal years beginning after December 15,
1995. Companies are permitted to continue to account for such transactions
under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees," but will be required to disclose in a note to the financial
statements pro forma net earnings and earnings per share as if the Company had
applied the new method of accounting, as outlined in SFAS No. 123. Although
the Company has not yet determined the effect the new standard will have on net
earnings and earnings per share should it elect to make such a change, it does
not anticipate the implementation of SFAS No. 123 will have a material adverse
impact on the Company's financial position or results of operations.
Revenue Recognition
Revenue is recognized in accordance with the following methods:
(a) At time of shipment for all products except for those sold under
agreements described in (b);
(b) As produced, for certain products manufactured and warehoused under
production and warehousing agreements with two customers,
principally The Coca-Cola Company, which is the Company's largest
single customer.
The Company has entered into an agreement with its major customer to receive
partial reimbursement for research and development. The reimbursement is
offset against cost on a percentage of completion basis. In addition, the
Company has agreed to provide exclusive rights for use of certain tools to its
major customer. These tools are included in fixed assets and are depreciated
over the life of the asset. The corresponding license and maintenance fees are
recorded as deferred revenue and recognized over the life of the agreement
which approximates the life of the corresponding asset.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred amounts
F-9
<PAGE> 25
LANCER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
are measured using enacted tax rates expected to apply to taxable earnings in
the year those temporary differences are expected to be recovered or settled.
No Federal income taxes have been provided on the undistributed earnings of the
DISC ($2,357,000 at December 31, 1992) since the tax laws allow for the
indefinite deferral of a portion of the earnings of such entities. Effective
January 1, 1993, in accordance with SFAS No. 109, the Company began to provide
Federal income taxes on the undistributed earnings of the DISC, which had the
effect of increasing the Company's effective tax rate.
Research and Development
Research and development costs are expensed as incurred and totaled
approximately $737,000, $695,000 and $814,000 for the years ended December 31,
1995, 1994 and 1993, respectively.
Foreign Currency Translation
The Company has foreign subsidiaries located in Australia, Mexico and the
United Kingdom. Foreign subsidiary income and expenses are translated into
United States dollars at the average rates of exchange prevailing during the
year. The assets and liabilities are translated into United States dollars at
the rates of exchange on either the balance sheet date, or on the transaction
date based upon the functional currency unit. The related translation
adjustments are accumulated as a separate component of shareholders' equity.
Foreign currency translation gains and losses (transactions denominated in a
currency other than the entity's functional currency) are recorded in income as
they occur. For the years ended December 31, 1995 and 1994 the Company
recognized foreign translation losses of $87,000 and $306,000, respectively,
and recognized a gain of $51,000 for the year ended December 31, 1993. The
Company included such losses and gain in "interest and other income, net" in
the accompanying consolidated statements of income.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications
Certain amounts in the consolidated financial statements for prior years have
been reclassified to conform with the current year's presentation.
2. INCOME TAXES
The actual tax expense differs from the "expected" tax expense (benefit)
(computed by applying the U.S. Federal corporate rate of 34% to earnings before
income taxes) as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Computed "expected" tax expense $ 2,279,130 $ 1,547,833 $ 1,220,506
Increase (decrease) in taxes resulting from:
Effect of nondeductible foreign losses 93,364 54,705 603
Effect of nondeductible expenses 52,772 31,433 16,442
Other, net (1,885) (86,496) 63,454
State, net of Federal benefit 181,907 54,421 88,048
------------- ------------- -------------
Domestic 2,605,288 1,601,896 1,389,053
Foreign 6,917 - 26,802
------------- ------------- -------------
$ 2,612,205 $ 1,601,896 $ 1,415,855
============= ============= =============
</TABLE>
F-10
<PAGE> 26
LANCER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Temporary differences between the financial statement carrying amounts and tax
bases of assets and liabilities that give rise to significant portions of the
net deferred tax liability relate to the following:
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Plant and equipment, principally due to
differences in depreciation $ 1,150,146 $ 1,211,426 $ 1,216,669
Income of the DISC 549,330 355,005 148,154
Other, net (primarily accruals) (703,067) (469,470) (231,858)
------------- ------------- -------------
Net deferred tax liability $ 996,409 $ 1,096,961 $ 1,132,965
============= ============= =============
</TABLE>
Actual net income taxes paid were $1,920,000, $2,115,000 and $1,343,000 for
1995, 1994 and 1993, respectively.
3. LONG-TERM DEBT AND LINE OF CREDIT WITH BANK
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Note payable to bank, due in equal monthly
principal installments plus interest at 7.75%
through December 31, 1999; secured by equipment. $ 5,000,000 $ -
Note payable to bank, due in monthly installments
plus interest at prime less .25% (8.25% at
December 31, 1995) through January 15, 1999;
unsecured. 1,845,667 -
Note payable to bank, due in equal monthly
principal installments plus interest at 1.0%
over prime through July 1, 1995; secured by real
estate. - 388,889
Note payable to major industrial credit company due
in equal monthly installments plus interest at a
fixed rate of 8.9% through October 1998; secured
by equipment. - 4,416,948
------------ ------------
6,845,667 4,805,837
Less current installments of long-term debt 1,448,093 1,408,663
------------ ------------
$ 5,397,574 $ 3,397,174
============ ============
</TABLE>
In December 1995, the Company refinanced its equipment note with a $5,000,000
term loan with a fixed interest rate of 7.75%. The proceeds in excess of the
$3,485,000 due were funded in cash to the Company at closing.
During 1995, the Company negotiated a real estate loan for advances not to
exceed $2,500,000 to finance the expansion of its Mexican operations. Total
advances were $1,929,000. The note is subject to interest at the lender's
prime rate less .25% (8.25% at December 31, 1995).
F-11
<PAGE> 27
LANCER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Annual maturities on long-term debt outstanding at December 31, 1995 are as
follows:
<TABLE>
<S> <C>
1996 $ 1,448,093
1997 1,593,553
1998 1,714,162
1999 2,089,859
--------------
$ 6,845,667
==============
</TABLE>
In August 1995, the Company renewed and increased its working capital facility
to $10,000,000 from $8,000,000. The terms of the working capital facility are
substantially the same as the 1994 facility. Borrowings under the line of
credit are based upon certain percentages of accounts receivable and
inventories. Advances bear interest based upon either London Interbank Offered
Rates ("LIBOR") or upon, and fluctuating with, the lender's prime rate. The
blended rate at December 31, 1995 was 7.8%. Amounts outstanding at December
31, 1995 and 1994 were $7,000,000 and $6,000,000, respectively. The line of
credit matures June 15, 1996.
The notes payable and the line of credit require that the Company maintain
certain financial ratios and other covenants. The Company is either in
compliance with respect to these financial ratios and covenants, or has
obtained waivers from its lender.
Actual interest paid was $964,000, $763,000 and $792,000 in 1995, 1994 and
1993, respectively.
4. EMPLOYEE BENEFIT PLANS
Common Stock Options
The 1987 Incentive Stock Option Plan (the 1987 Plan) provides for the issuance
of up to 150,000 shares of common stock. Options are exercisable in
incremental amounts up to five years from date of grant. At December 31, 1995,
the 1987 Plan had 1,320 shares available to be granted. In December 1991, the
Board of Directors approved the 1992 Nonstatutory Stock Option Plan (the 1992
Plan) which provided for the issuance of up to 172,500 shares of common stock
all of which have been issued. Options granted under the 1992 Plan are
exercisable at the date of grant and terminate at the earlier of ten years or
termination of employment. The exercise price of the options under either the
1987 or the 1992 Plans must be at least equal to fair market value at the date
of grant.
A summary of transactions for all options follows:
<TABLE>
<CAPTION>
Common Stock Option Price
------------ --------------
<S> <C> <C>
Outstanding at December 31, 1992 185,250 $ 2.92 - 4.83
Granted 120,000 5.33 - 5.87
Exercised (52,278) 3.25 - 5.33
Expired (270) 5.33
------------ --------------
Outstanding at December 31, 1993 252,702 2.92 - 5.87
Granted 12,000 11.17
Exercised (18,664) 2.92 - 5.33
------------ --------------
Outstanding at December 31, 1994 246,038 2.92 - 11.17
Granted 9,033 11.09 - 14.13
Canceled (4,833) 5.33 - 11.17
Exercised (10,332) 5.33
------------ --------------
Outstanding at December 31, 1995 239,906 $ 2.92 - 14.13
============ ==============
</TABLE>
F-12
<PAGE> 28
LANCER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A summary of exercisable options follows:
<TABLE>
<CAPTION>
Common Stock Option Price
------------ --------------
<S> <C> <C> <C>
1993 156,918 $ 2.92 - 5.87
============ ==============
1994 164,561 2.92 - 11.17
============ ==============
1995 178,816 2.92 - 14.13
============ ==============
</TABLE>
Self-Insured Hospitalization Plan
The Company maintains a self-insurance program for major medical and
hospitalization coverage for employees and their dependents which is partially
funded by payroll deductions. The Company has a maximum liability of $75,000
per employee/dependent per year. Amounts in excess of the stated maximum are
covered under a separate policy provided by an insurance company. The total
amount expensed under the self-insurance major medical program, net of employee
contributions, was $478,000, $695,000 and $274,000 in 1995, 1994 and 1993,
respectively.
Workers' Compensation Coverage
The Company is self-insured for all workers' compensation claims submitted by
employees for on-the-job injuries. The Company has provided for incurred and
expected costs of workers' compensation coverage in the accompanying
consolidated balance sheets. For the years ended December 31, 1995, 1994 and
1993 the total amount expensed for workers' compensation coverage was $479,000,
$525,000 and $495,000, respectively.
In an effort to provide for catastrophic events, the Company carries an excess
indemnity policy for workers' compensation claims. All claims paid under the
policy are subject to a deductible to be paid by the Company. The Company has
recorded an accrual for workers' compensation claims, a portion of which has
been classified as an other long-term liability based on the expected long-term
nature of its payout. Based upon the Company's past experience, management
believes that the Company has adequately provided for potential losses.
However, multiple occurrences of serious injuries to employees could have a
material adverse effect on the Company's financial position or its results of
operations.
Employee Profit Sharing Plan
The Company has established an employee profit sharing and 401(k) plan, which
covers substantially all United States employees who meet the eligibility
requirements. Participants may elect to contribute up to 15% of their annual
wages, subject to certain IRS limitations. The Company matches employee 401(k)
contributions to the plan at a rate of $0.10 per each $1.00 of employee
contribution up to 3% of annual compensation. In addition, the Company, at
the discretion of the Board of Directors, may make profit sharing contributions
to the plan. The accompanying consolidated statements of income for the years
ended December 31, 1995, 1994 and 1993 include Company contributions to the
plan of $359,000, $270,000 and $185,000, respectively.
5. LEASES
The Company leases a building, in which a portion of its manufacturing
facilities are located, under an operating lease from a partnership controlled
by certain shareholders. The lease agreement provides for monthly rental
payments of $6,600 through 1998, and the payment of real estate taxes,
insurance and maintenance expenses. In addition, the Company leases property
adjacent to the building from the partnership on a month to month basis. In
conjunction with a 1992 debt refinancing, the Company advanced $220,000 to this
partnership. Repayment of this advance will be made through a reduction of
lease payments otherwise due between the Company and the partnership and
includes an interest charge at a rate of 9.25% per annum on the outstanding
balance of the advance. Included in other assets and prepaid expenses in the
accompanying consolidated balance sheets is $61,000 in 1995 and $113,000 in
1994 remaining due from the partnership for this advance. Improvements to
these properties, paid by the Company, have been recorded as
F-13
<PAGE> 29
LANCER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
an offset against the lease payments. At December 31, 1995, future minimum
lease payments required under all non-cancelable operating leases are as
follows:
<TABLE>
<S> <C>
1996 $ 852,440
1997 778,477
1998 455,565
1999 105,840
------------
Total minimum lease payments $ 2,192,322
============
</TABLE>
Total rental expense was $712,000, $776,000 and $761,000 in 1995, 1994 and
1993, respectively.
The Company, as lessor, leases a major portion of its building located in
Chicago, Illinois. At December 31, 1995, minimum future rentals on
non-cancelable leases totaled $86,000. Rental income related to this property
was $73,000, $65,000 and $65,000 in 1995, 1994 and 1993, respectively. Rental
income related to the warehousing agreements with The Coca-Cola Company totaled
$310,000, $259,000 and $310,000 in 1995, 1994 and 1993, respectively, and such
amounts are included in "interest and other income, net" in the accompanying
consolidated statements of income.
6. LONG-TERM RECEIVABLES
Long-term receivables are interest bearing and include $252,000 and $138,000
due from officers for the years ended December 31, 1995 and 1994, respectively.
In August 1993, the Company sold the inventory and equipment related to its
coffee brewer manufacturing operation. The sale price was $612,000 (net of
discount of $130,000), which approximated net book value. No gain or loss was
recognized on this sale. The Company financed the sale price through
non-interest bearing notes due over seventy-two months beginning February 1994.
The note receivable balances were $426,000 and $564,000 at December 31, 1995
and 1994, respectively.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
During 1995 the Company adopted SFAS No. 107, "Disclosures About Fair Value of
Financial Instruments," and SFAS No. 119, "Disclosure About Derivative
Financial Instruments and Fair Value of Financial Instruments." These
Statements require certain disclosures about the fair value of financial
instruments, including derivative financial instruments, for which it is
practicable to estimate fair value.
The following methods and assumptions were used to estimate the fair market
value of each class of financial instrument for which it is practicable to
estimate that value.
Cash, Trade Receivables, and Trade Payables
The carrying amounts of the Company's trade receivables and trade payables
approximate market value.
Notes Receivable
The carrying amount of the Company's notes receivable approximates fair market
value estimated based on the actual interest rates paid on the interest bearing
notes and imputed rate used to determine the recorded value of the non-interest
bearing notes.
Long-Term Debt
The carrying amount of the Company's long-term and short-term debt approximates
market value since rates on the long-term agreement were set at December 29,
1995, and the rates on the other debt agreements are variable and are set
periodically based on current rates during the year.
F-14
<PAGE> 30
LANCER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. ACQUISITION OF SUBSIDIARY
In December 1995, the Company acquired 100% of the stock of Glenn Pleass
Holdings Pty. Ltd. ("GPH") for $3.5 million. GPH is an Australian based
manufacturer and distributor of beverage dispensing systems. The acquisition
was recorded in accordance with the purchase method of accounting and, as such,
the Company recognized the excess cost of the assets acquired over the
estimated fair value of such assets, or $2.0 million, as goodwill which is
being amortized over thirty years. Results of operations are included in the
Company's consolidated statement of income from the date of acquisition.
Details of the business acquired in the purchase transaction are as follows (in
thousands):
<TABLE>
<CAPTION>
1995
------------
<S> <C>
Fair value of assets acquired, including goodwill $ 5,248
Liabilities assumed (1,744)
------------
Net cash paid for the acquisition $ 3,504
============
</TABLE>
Assuming the sale was consummated as of the beginning of the current and prior
fiscal years, pro forma operating results of the Company would be as follows
(in thousands except for per share data):
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Net Sales $ 83,898 $ 77,913
Net earnings 3,927 3,312
Net earnings per share 0.98 0.88
Number of shares used in calculation 3,992 3,783
</TABLE>
9. SUPPLEMENTAL BALANCE SHEET AND INCOME STATEMENT INFORMATION
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
As of December 31,
--------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Payroll and related expenses $ 1,238 $ 842
Commissions 465 301
Workers' compensation accrual - current 300 300
Property taxes 255 119
Health insurance 122 260
Interest 122 106
Other 380 116
------------ ------------
$ 2,883 $ 2,044
============ ============
</TABLE>
F-15
<PAGE> 31
LANCER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (Continued)
The following provides information regarding net sales to major customers,
domestically and internationally (in thousands):
<TABLE>
<CAPTION>
Percent of Percent of Percent of
1995 Net Sales 1994 Net Sales 1993 Net Sales
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
United States:
The Coca-Cola Company $ 38,588 51% $ 32,150 45% $ 23,492 42%
Other 10,672 14% 17,863 26% 11,207 19%
-------- --- -------- --- -------- ---
49,260 65% 50,013 71% 34,699 61%
-------- --- -------- --- -------- ---
Export:
The Coca-Cola Company 6,291 8% 13,599 19% 9,187 16%
Other 20,361 27% 7,288 10% 12,775 23%
-------- --- -------- --- -------- ---
26,652 35% 20,887 29% 21,962 39%
-------- --- -------- --- -------- ---
$ 75,912 100% $ 70,900 100% $ 56,661 100%
======== ==== ======== ==== ======== ====
</TABLE>
The Company's foreign operations consist of that of its wholly-owned
subsidiaries Industrias Lancermex, S.A. de C.V., Nueva Distribuidora Lancermex,
S.A. de C.V., Servicios Lancermex, S.A. de C.V., Glenn Pleass Holdings Pty.
Ltd., and Lancer Ltd., whose sales and net earnings represent less than 10% of
consolidated amounts. Additionally, no customer nor geographic area accounted
for more than 10% of total net sales, except as noted.
In addition to sales made directly to The Coca-Cola Company, Lancer also had
sales of parts, components and equipment which, due to the proprietary nature
of these products, are significantly influenced by The Coca-Cola Company. Any
disruption or change in the relationship with The Coca-Cola Company could have
a material adverse effect on the results of operations of the Company.
Management believes that gross profit on export sales is not materially
different from that on domestic sales.
10. CONTINGENCIES
The Company is a party to various lawsuits and claims generally incidental to
its business. The ultimate disposition of these matters is not expected to
have a significant adverse effect on the Company's financial position or
results of operations.
F-16
<PAGE> 32
LANCER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (Continued)
11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The Company uses the gross profit method to determine cost of sales and
estimates the inventory components for interim periods after considering
various factors including historical percentages and price increases. The
following table reflects the quarterly results for 1995 and 1994 (in thousands
except for per share data):
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------
1995 March June September December
- ---- 31 30 30 31
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales $ 20,341 $ 21,313 $ 17,376 $ 16,882
Gross Profit 3,868 4,263 3,675 4,269
Net earnings 969 1,314 814 994
Net earnings per share 0.24 0.33 0.20 0.25
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------
1994 March June September December
- ---- 31 30 30 31
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales $ 16,155 $ 18,633 $ 19,340 $ 16,772
Gross Profit 3,199 3,689 3,629 3,676
Net earnings 808 947 959 236
Net earnings per share 0.22 0.25 0.25 0.06
</TABLE>
The Company's net sales in the fourth quarter of its fiscal years historically
have been subject to seasonal changes primarily as a result of the reduced
funding available in the capital expenditure budgets of Lancer's customers.
F-17
<PAGE> 33
LANCER CORPORATION AND SUBSIDIARIES
SCHEDULE II
RESERVE ACCOUNT
<TABLE>
<CAPTION>
Balance at Additions
Beginning of Charged to Deductions Balance at
Description Year Expense from Account End of Year
- ------------------------------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
December 31, 1995 $ 85,000 $ 2,083 $ 2,083 $ 85,000
December 31, 1994 85,000 106,121 106,121 85,000
December 31, 1993 85,000 73,244 73,244 85,000
- -----------------------------------------------------------------------------------------------------------
</TABLE>
F-18
<PAGE> 34
EXHIBIT INDEX
10.21 Fifth Amendment to Loan Agreement and Loan Documents, dated
November 8, 1994, between Lancer Corporation and First
Interstate Bank.
10.22 Sixth Amendmendment to Loan Agreement and Loan Documents, dated
July 6, 1995, between Lancer Corporation and First Interstate
Bank.
10.24 Eighth Amendment to Loan Agreement and Loan Documents, dated
December 29, 1995, between Lancer Corporation and First
Interstate Bank.
21.1 List of Significant Subsidiaries of the Registrant.
23.1 Consent of KPMG Peat Marwick LLP.
27 Financial Data Schedule
<PAGE> 1
FIFTH AMENDMENT TO LOAN AGREEMENT
AND LOAN DOCUMENTS
This Fifth 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"), and most recently in a Fourth
Amendment to Loan Agreement and Loan Documents dated effective July 29, 1994
(the "Fourth Amendment") the terms and provisions of which First Amendment,
Second Amendment, Third Amendment and Fourth 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 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, a Revolving Note in the original
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, and the Deeds of Trust described in a Fourth Modification of
Deeds of Trust dated of even date herewith;
WHEREAS, the Borrower has requested that the Lender make a new
$1,000,000.00 term loan available to an affiliate of the Borrower, Nueva
Distribuidora Lancermex S.A. de C.V., all in accordance with the terms stated
in this agreement;
1
<PAGE> 2
WHEREAS, the Borrower and the Lender desire, as evidenced by this
Agreement, to make certain amendments to the Loan Agreement and to the Loan
Documents 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 to make available to the Borrower an
$8,000.000.00 revolving credit as evidenced by a revolving
promissory note (the "Revolving Note") in substantially the
form attached hereto as Exhibit "A" and to make available to
Nueva Distribuidora Lancermex S.A. de C.V. a $1,000,000.00
term credit as evidenced by a promissory note (the "Term
Note") in substantially the form attached hereto as Exhibit
"E". All loans from the Lender to the Borrower and to the
Borrowers affiliate, Nueva Distribuidora Lancermex S.A. de
C.V., whether now existing or hereafter arising, will be
referred to herein collectively as the "Loans".
2. The following Section 3.7 of the Original Loan Agreement is
restated as follows:
3.7. Subsidiaries. The Borrower has no subsidiaries except
LANCER INTERNATIONAL, LANCER LIMITED, INDUSTRIAS LANCERMEX
S.A. de C.V., SERVICIOS LANCERMEX S.A. de C.V., formerly known
as Distribuidora Lancermex S.A. de C.V. and NUEVA
DISTRIBUIDORA LANCERMEX S.A. de C.V.
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 4.14 of the Original Loan Agreement is restated as
follows:
4.14. Maintain Life Insurance. Maintain in force a
$5,000,000.00 policy of insurance on the life of George
Schroeder, which policy shall be pledged to secure the Loans.
2
<PAGE> 3
5. The Loan Documents secure, in addition to the Revolving Note,
the Term Note described in this Agreement.
6. 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, as described in this
agreement, pursuant to separate Guaranty Agreements, each
dated on or about May 19, 1992.
7. The Lender releases Industrias Lancermex S.A. de C.V. and
Servicios Lancermex S.A. de C.V., formerly known as
Distribuidora Lancermex. S.A. de C.V., from their obligations
to guarantee repayment of the Loans, pursuant to the terms of
separate Guaranty Agreements, each dated on or about May 19,
1992.
8. 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.
9. This Agreement in no way acts as a release or a relinquishment
of the liens, security interests and rights (the "Liens")
securing payment of the Loans, including without limitation,
the security interests created by the security agreements
specifically referenced in this Agreement. The Borrower and
Lancer International renews, extends and ratifies all of said
Liens.
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. Arbitration. This Agreement and the other Loan Documents
shall be subject to the terms and conditions of the
Arbitration Program as described on Exhibit "D" attached
hereto and incorporated herein by this reference for all
pertinent purposes.
3
<PAGE> 4
EXECUTED in multiple counterparts effective as of November 8, 1994.
LANCER CORPORATION, A TEXAS
CORPORATION
By: /s/ Dennis Stout
-------------------------------
Name: Dennis Stout
-----------------------------
Title: Dennis Stout
----------------------------
LANCER INTERNATIONAL SALES, INC.,
A TEXAS CORPORATION
By: /s/ George F. Schroeder
-------------------------------
Name: George F. Schroeder
-----------------------------
Title: President
-----------------------------
FIRST INTERSTATE BANK OF TEXAS, N.A.
By: /s/ George F. Schroeder
-------------------------------
Name: George F. Schroeder
-----------------------------
Title: President
-----------------------------
4
<PAGE> 5
AGREED:
LANCER LIMITED
By: /s/ George F. Schroeder
----------------------------
Name: George F. Schroeder
--------------------------
Title: President
---------------------------
NUEVA DISTRIBUIDORA LANCERMEX S.A. DE C.V.
By: /s/ George F. Schroeder
----------------------------
Name: George F. Schroeder
--------------------------
Title: President
--------------------------
1093-39
5
<PAGE> 1
SIXTH AMENDMENT TO LOAN AGREEMENT
AND LOAN DOCUMENTS
This Sixth 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") and most recently in a Fifth Amendment to Loan Agreement and Loan
Documents dated effective November 8, 1994 (the "Fifth Amendment") the terms
and provisions of which First Amendment, Second Amendment, Third Amendment,
Fourth Amendment and Fifth 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 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
1
<PAGE> 2
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 $1,000,000.00 term credit as
evidenced by a promissory note and a modification agreement
(collectively) 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) twenty percent (20%) 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 $4,000,000.00 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. The Current Ratio covenant in Section 4 of the Loan
Agreement is deleted and replaced with the following
Cash Flow Coverage Ratio:
4.7. Cash Flow Coverage Ratio. Maintain a Cash Flow Coverage
Ratio of not less than 1.50 to 1.0, where "Cash Flow Coverage
Ratio" means the ratio of (a) net income plus non-cash expense
less non-cash income plus interest expense to (b) scheduled
principal payments plus interest expense plus dividends. This
Cash Flow Coverage Ratio shall be tested quarter-annually and
calculated on the basis of the most recent four (4) quarterly
accounting periods.
5. The following affirmative covenant in Section 4 of
the Loan Agreement is restated as follows:
Section 4.11 Net Worth. Maintain Net Worth of not less than
$21,000,0000.00.
6. The following negative covenant in Section 5 of the
Loan Agreement is restated as follows:
Section 5.5 Redemption, Dividends and Distributions. At any
time (a) redeem, retire or otherwise acquire, directly or indirectly, any
shares of its capital stock; (b) except for cash
2
<PAGE> 3
dividends which do not cause a breach of any other covenant in
this Agreement, make any distribution of any Property to
stockholders as such; (c) substantially increase any salaries,
bonuses or other compensation to any officers, directors or
employees of the Borrower in excess of the current levels of
such compensation.
7. The borrower has executed certain deeds of trust more
particularly described in a Fourth Modification of Deeds of
Trust dated November 8, 1994. While the liens against the
real estate described in the Fourth Modification of Deeds of
Trust have previously secured all indebtedness of the Borrower
and Nueva Distribuidora Lancermex S.A. de C.V., the Lender has
agreed to release said liens insofar as they secure the
indebtedness represented by the Revolving Note described in
this Agreement. Upon request by the Borrower, the Lender
shall execute an appropriate instrument for recording in the
Real Property Records of Bexar County, Texas to evidence this
specific release of such liens as they pertain to the
Revolving Note only.
8. Except as specified in Section 7 hereof, the Loan
Documents secure, in addition to the Revolving Note,
the Term Note and the Lancermex Note described in
this Agreement.
9. Lancer International and Lancer Limited join in the
execution of this Agreement to evidence their consent
to, and agreement with, the terms hereof.
10. 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.
11. Except as specified in Section 7 hereof, this
Agreement in no way acts as a release or a relinquishment of
the liens, security interests and rights (the "Liens")
securing payment of the Loans, including without limitation,
the security interests created by the security agreements
specifically referenced in this Agreement. The Borrower and
Lancer International renews, extends and ratifies all of said
Liens.
12. 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.
13. 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.
14. Arbitration. This Agreement and the other Loan
Documents shall be subject to the terms and conditions of the
Arbitration Program as described on EXHIBIT "D" attached
hereto and incorporated herein by this reference for all
pertinent purposes.
EXECUTED in multiple counterparts effective as of July 6, 1995.
LANCER CORPORATION, A TEXAS
CORPORATION
By: /s/John P. Herbots
Name: John P. Herbots
Title: Vice President Finance
3
<PAGE> 4
LANCER INTERNATIONAL SALES, INC.,
A TEXAS CORPORATION
By: /s/George F. Schroeder
Name: George F. Schroeder
Title: President
LANCER LIMITED
By: /s/George F. Schroeder
Name: George F. Schroeder
Title: Director
FIRST INTERSTATE BANK OF TEXAS, N.A.
By: /s/Scott Adams
Name: Scott Adams
Title: Asst. Vice President
1093-39
4
<PAGE> 5
EXHIBIT "A"
REVOLVING PROMISSORY NOTE
$10,000,000.00 June 30, 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
July 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) two and one-half
percent (2.5%) ("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.
5
<PAGE> 6
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
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<PAGE> 7
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 Sixth 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.
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<PAGE> 8
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.
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<PAGE> 9
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.
ARBITRATION PROGRAMS:
This Note and the Collateral Agreements shall be subject to the terms
and conditions of the Arbitration Program as described on Exhibit "A" attached
hereto and made a part hereof for all pertinent purposes.
LANCER CORPORATION, a Texas
corporation
By:________________________________
Name:______________________________
Title:_____________________________
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<PAGE> 10
EXHIBIT "D"
ARBITRATION PROGRAM.
BINDING ARBITRATION. Upon the request of any party, whether made
before or after the institution of any legal proceeding, any action, dispute,
claim, or controversy of any kind (e.g., whether in contract or in tort,
statutory or common law, legal or equitable) now existing or hereafter arising
between the parties in any way arising out of, pertaining to or in connection
with (1) the agreement, document or instrument to which this Arbitration
Program is attached or in which it is referred to or any related agreements,
documents, or instruments (the "Documents"); (2) all past and present loans,
credits, accounts, deposit accounts (whether demand deposits or time deposits),
safe deposit boxes, safekeeping agreements, guarantees, letters of credit,
goods or services, or other transactions, contracts or agreements; (3) any
incidents, omissions, acts, practices, or occurrences causing injury to either
party whereby the other party or its agents, employees or representatives may
be liable, in whole or in part; or (4) any aspect of the past or present
relationships of the parties, shall be resolved by binding arbitration in
accordance with the terms of this Arbitration Program. The foregoing matters
shall be referred to as a "Dispute." Any party to this Arbitration Program
may, by summary proceedings (e.g., a plea in abatement or motion to stay
further proceedings), bring an action in court to compel arbitration of any
Disputes.
GOVERNING RULES. All Disputes between the parties shall be resolved
by binding arbitration administered by the American Arbitration Association
(the "AAA") in accordance with the terms of this Arbitration Program, the
Commercial Arbitration Rules of the AAA, and, to the maximum extent applicable,
the Federal Arbitration Act (Title 9 of the United States Code). In the event
of any inconsistency between this Arbitration Program and such statute and
rules, this Arbitration Program shall control. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction;
provided, however, that nothing contained herein shall be deemed to be a waiver
by any party that is a bank of the protections afforded to it under 12 U.S.C.
Section 91 or Texas Banking Code art. 342-609.
NO WAIVER: PRESERVATION OF REMEDIES. No provision of, nor the
exercise of any rights under, this Arbitration Program shall limit the right of
any party to employ other remedies, including, without limitation (1)
foreclosing against any real or personal property collateral or other security
by the exercise of a power of sale under a deed of trust, mortgage, or other
security agreement or instrument, or applicable law; (2) exercising self-help
remedies (including set-off rights); or (3) obtaining provisional or ancillary
remedies such as injunctive relief, sequestration, attachment, garnishment, or
the appointment of a receiver from a court having jurisdiction before, during,
or after the pendency of any arbitration. The institution and maintenance of
an action for judicial relief or pursuit of provisional or ancillary remedies
or exercise of self-help remedies shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the Dispute to arbitration nor
render inapplicable the compulsory arbitration provisions hereof. Without
limitation of the foregoing, the parties shall be entitled to the benefits of
each and all of the remedies and assistance provided for by applicable law.
In Disputes involving indebtedness or other monetary obligations, each
party agrees that the other party may proceed against all liable persons,
jointly and severally, or against one or more of them, less than all, without
impairing rights against other liable persons. Nor shall a party be required
to join the principal obligor or any other liable persons (e.g., sureties or
guarantors) in any proceeding against a particular person. A party may release
or settle with one or more liable persons as the party deems fit without
releasing or impairing rights to proceed against any persons not so released.
STATUTE OF LIMITATION. All statutes of limitation that would
otherwise be applicable shall apply to any arbitration proceeding.
SCOPE OF AWARD: MODIFICATION OR VACATION OF AWARD: QUALIFICATIONS.
The arbitrators shall resolve all Disputes in accordance with the applicable
substantive law. Any arbitrators shall be practicing attorneys licensed to
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practice law in the State of Texas and shall be knowledgeable in the subject
matter of the Dispute. With respect to a Dispute in which the claim or amount
in controversy does not exceed $1 million, a single arbitrator (who shall have
authority to render a maximum award of $1 million, including all damages of any
kind and costs, fees and the like) shall be chosen and shall decide the
Dispute.
With respect to a Dispute in which the claim or amount in controversy
exceeds $1 million, the Dispute shall be decided by a majority vote of three
(3) arbitrators. The arbitrators may grant any remedy or relief that the
arbitrators deem just and equitable and within the scope of this Arbitration
Program. The arbitrators may also grant such ancillary relief as is necessary
to make effective the award. In all arbitration proceedings in which the
amount in controversy exceeds $1 million in the aggregate, the arbitrators
shall make specific, written findings of fact and conclusions of law. IN all
arbitration proceedings in which the amount in controversy exceeds $1 million,
in the aggregate, the parties shall have, in addition to the limited statutory
right to seek vacation of modification of an award pursuant to applicable law,
the right to seek vacation or modification of any award that is based in whole
or in part on an incorrect ruling of law; provided, however, that any such
application for vacation or modification of an award based on an incorrect
ruling of law must be filed in a court having jurisdiction over the Dispute
within fifteen (15) days from the date the award is rendered. The arbitrators'
findings of fact shall be binding on all parties and shall not be subject to
further review except as otherwise allowed by applicable law.
OTHER MATTERS AND MISCELLANEOUS. To the maximum extent practicable,
an arbitration proceeding hereunder shall be concluded within 180 days of the
filing of the Dispute with the AAA. Arbitration proceedings hereunder shall be
conducted at one of the following locations in the State of Texas agreed to in
writing by the parties or, in the absence of such agreement, selected by the
AAA: (1) Austin; (2) Dallas; (3) Forth Worth; (4) Houston; or (5) San Antonio.
Arbitrators shall be empowered to impose sanctions and to take such other
actions as the arbitrators deem necessary to the same extent a judge could do
pursuant to the Federal Rules of Civil Procedure, the Texas Rules of Civil
Procedure, and applicable law.
This Arbitration Program constitutes the entire agreement of the
parties with respect to its subject matter and supersedes all prior
discussions, arrangements, negotiations, and other communications on dispute
resolution. The provisions of this Arbitration Program shall survive any
termination, amendment, or expiration of the Documents, unless the parties
otherwise expressly agree in writing. To the extent permitted by applicable
law, the arbitrator shall have the power to award recovery of all costs and
fees (including attorneys' fees, administrative fees, and arbitrators' fees) to
the prevailing party.
This Arbitration Program may be amended, changed, or modified only by
the express provisions of a writing which specifically refers to this
Arbitration Program and which is signed by all the parties hereto. If any
term, covenant, condition or provision of this Arbitration Program is found to
be unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceability shall not affect the legality, validity or enforceability of
the remaining parts of this Arbitration Program, and all such remaining parts
hereof shall be valid and enforceable and have full force and effect as if the
illegal, invalid or unenforceable part had not be included.
The captions or headings in this Arbitration Program are for
convenience of reference only and are not intended to constitute any part of
the body or text of this Arbitration Program. Each party agrees to keep all
Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
parties or by applicable law or regulation.
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EXHIBIT "E"
2297325
RENEWAL AND EXTENSION
OF
NOTE AND DEED OF TRUST
THE STATE OF TEXAS }
} WITNESSETH:
COUNTY OF BEXAR }
THAT LANCER CORPORATION, a Texas corporation (the "Debtors," whether
one or more), whose address is 235 W. Turbo, San Antonio, Texas 78216, are
indebted unto FIRST INTERSTATE BANK OF TEXAS, N.A. (the "Lender"), as evidenced
by that Deed of Trust Note of the Debtors payable to the order of the First
Republic Bank San Antonio, N.A., in the original principal amount of
$9,000,000.00, dated October 16, 1987 (the "Note"), which obligation is
secured, in part, by the lien of a deed of trust of even date therewith (the
"Deed of Trust"), duly recorded in Volume 4159, Page 415, of the Official
Public Records of Bexar County, Texas; which Note and Deed of Trust have been
transferred to the Lender by instrument duly recorded in the Real Property
Records of Bexar County, Texas; said Note and lien having been previously
renewed, extended and rearranged, but not extinguished, by instruments executed
and filed from time to time, the most recent of which having been recorded at
Volume 5128, Page 1644, of the Real Property Records of Bexar County, Texas,
and to which reference is hereby made (all liens and security interests
securing the Note being hereinafter sometimes referred to as the "Liens"), on
and affecting the real estate in Bexar County, Texas (the "Real Estate")
Described as follows:
Lot 1, Block 1, FOSTER RIDGE, UNIT 1, Bexar County, Texas, according
to plat thereof recorded in Volume 9517, Pages 80-83, Deed and Plat Records
of Bexar County, Texas;
WHEREAS, the Debtors desire to renew, extend and rearrange the time or
manner of payment of the Note and to extend and carry forward the Liens on the
Real Estate and on the other property and assets subject thereto in full force
and effect, and in consideration of the premises and undertakings herein
stated, and at the request of the Debtors, the Lender has agreed to renew,
extend and rearrange the time and manner of payment of the Note as hereafter
provided:
NOW, THEREFORE, the Debtors and the Lender hereby agree as follows:
1. As of the date this instrument is executed, the Debtors are
indebted to the Lender in the amount of $2,000,000.00 of principal under the
Note.
2. The terms of payment of all indebtedness outstanding under the
Note are hereby rearranged, modified and renewed as follows:
Principal on the Note shall be due and payable in installments of
$55,555.56 each, plus interest accrued on the unpaid principal to the date each
such installment is paid, commencing on August 31, 1992, and continuing
regularly thereafter on the same day of each calendar month (or on the last day
of the month in the event any calendar month has no such date) until July 31,
1995, when the entire amount of the Note, principal and interest then remaining
unpaid, shall be due and payable. Each payment 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 Lender shall
determine in its sole discretion.
3. From the effective 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
per annum
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equal to the lesser of (I) the Prime Rate (as hereinafter defined) plus one
percent (1.00% 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 the Note at a rate per annum
equal to the lesser of (I) the Prime Rate plus three percent (3.00% or (ii) the
Maximum Lawful Rate. The interest rate shall be adjusted concurrently with
changes in the Prime Rate without notice to the Debtors.
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 Lender 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
Debtors 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.
The term "Maximum Lawful Rate," as used herein, 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 (28.00%) per annum. Unless precluded by law, changes in
the Maximum Lawful Rate created by statute or governmental action during the
term of the Note shall be immediately applicable to the Note on the effective
date of such changes.
If the Maximum Lawful Rate is increased by statute or other
governmental action subsequent to the date hereof, then the Debtors agree that
the new Maximum Lawful Rate will be applicable hereto from the effective date
of the new Maximum Lawful Rate, unless such application is precluded by the
statute or governmental action or by the general law of the jurisdiction
governing the transaction evidenced hereby. 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 five percent (5%) greater than the Prime Rate.
4. To the extent not prohibited by law, the Debtors will pay, or
reimburse the Lender for, all reasonable costs and expenses, of every
character, incurred or expended from time to time (including, but not limited
to, the fees and expenses of counsel for the Lender) in connection with the
negotiation, preparation, execution, filing, recording, refiling and
re-recording of this instrument, the Deed of Trust and all related financing
statements and the making, servicing and collection of the debt secured hereby;
any and all stamp, mortgage and recording taxes; the costs of any title
insurance or lien insurance purchased by the Lender in connection herewith; all
reasonable costs of negotiation, preparation, execution and delivery of any and
all amendments, modifications, supplements, consents, waivers or other
documents or writings relating to the transactions contemplated by this
instrument; and all reasonable costs (including attorney's fees) of reviewing
title opinions and security opinions relating to the debt described in this
instrument. The Debtors will reimburse the Lender for all reasonable amounts
expended by the Lender to satisfy any obligation of the Debtors under this
instrument or the Deed of Trust or to protect the Real Estate. In addition,
whether or not a default shall have occurred, the Debtors will pay, or
reimburse the Lender for, all reasonable costs and expenses, of every character
incurred or expended from time to time in connection with the protection of the
Real Estate, the exercise by the Lender of any of its rights and remedies
hereunder or at law, including, but not limited to, insurance premiums, Uniform
Commercial Code search fees, fees incident to title searches and reports,
investigation costs, escrow fees, attorneys' fees, legal expenses, court costs,
fees of governmental authorities, and all reasonable fees and expenses incurred
in connection with the marshalling, guarding, management, operation, removal,
maintenance, cleanup, storage, auction and liquidation of the Real Estate. Any
amount to be paid or reimbursed by the Debtors to the Lender shall be a demand
obligation owing by the Debtors to the Lender and, to the extent not prohibited
by law, shall bear interest from the date of expenditure by the Lender until
paid at the rate of eighteen percent (18%) per annum.
5. The Liens are extended and renewed until the indebtedness
represented by the Note (together with all other indebtedness secured by the
Liens) as so extended has been fully and finally paid. Nothing herein shall
affect or impair the Note or the Liens, except to the extent herein expressly
rearranged and extended; all terms and provisions of the
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Note and of the instrument or instruments creating or fixing the Liens shall be
and remain in full force and effect as therein written (except to the extent
specifically modified hereby); and the Liens shall not in any manner be waived;
the purposes of this instrument being simply to extend and rearrange the time
or manner of payment of the Note and to carry forward all the Liens, which are
acknowledged by the Debtors to be valid and subsisting, except as otherwise
expressly provided herein.
6. Without limiting any provision of the Note, payment of the
Note is secured by, and the Note as affected hereby is entitled to the benefits
of, all security agreements, collateral assignments, deeds of trust, mortgages
and lien instruments executed by the Debtors, heretofore or hereafter executed
in favor of, or for the benefit of, the Lender or other holder of the Note.
7. All agreements and transactions between the Debtors and the
Lender, 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, prepayment, late payment, demand for
prepayment or otherwise, shall the amount contracted for, charged or received
by the Lender from the Debtors for the use, forbearance or detention of the
principal indebtedness or interest hereof, which remains unpaid from time to
time, exceed the maximum amount permissible under applicable law, it
particularly being the intention of the parties hereto to conform strictly to
the applicable laws of usury. Any interest payable hereunder or under any
other instrument relating to the loan evidenced hereby that is in excess of the
legal maximum, shall, in the event of acceleration of maturity, prepayment,
late payment, demand for prepayment or otherwise, be automatically, as of the
date of such acceleration, prepayment, demand or otherwise, applied to a
reduction of the principal indebtedness hereof and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of such
principal, such excess shall be refunded to the Debtors. To the extent not
prohibited by law, determination of the legal maximum amount of interest shall
at all times be made by amortizing, prorating, allocating and spreading in
equal parts during the period of the full stated term of the loan, all interest
at any time contracted for, charged or received from the Debtors in connection
with the loan, so that the actual rate of interest on account of such
indebtedness is uniform throughout the term hereof.
8. If any payment in respect of the Note or the Deed of Trust
falls due on a Saturday, Sunday or public holiday on which the Lender is
authorized or required by law to be closed, the due date for such payment shall
be extended to the first day on which the Lender shall be open for business,
and such extension of time shall be included in the computation of interest
with respect to such payment.
9. As amended and affected hereby, the Note, the Deed of Trust
and the Liens remain in full force and effect. This Renewal and Extension
shall be governed by and construed and enforced in accordance with the laws of
the State of Texas.
10. Arbitration. This Agreement and the other Loan Documents
shall be subject to the terms and conditions of the Arbitration Program as
described on Exhibit "A" attached hereto and incorporated herein by this
reference for all pertinent purposes.
11. To the extent allowed by law, the parties hereto agree to be
bound by the terms of the following notice:
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.
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<PAGE> 15
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THIS
LOAN.
EXECUTED this the _____ day of July, 1992.
LANCER CORPORATION, A TEXAS
CORPORATION
BY:_______________________
NAME:_____________________
TITLE:____________________
"DEBTORS"
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AGREED TO AND ACCEPTED:
FIRST INTERSTATE BANK OF TEXAS, N.A.
BY:______________________
NAME:____________________
TITLE:___________________
"LENDER"
1992, by _______________________, _________________ of LANCER CORPORATION, a
Texas corporation, on behalf of said corporation.
___________________________________
Notary Public, State of Texas
THE STATE OF TEXAS Section
COUNTY OF BEXAR Section
This instrument was acknowledged before me on the _____ day of July, 1992, by
___________________________________, ____________________________ of FIRST
INTERSTATE BANK OF TEXAS, N.A., a national banking association, on behalf of
said association.
___________________________________
Notary Public, State of Texas
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AFTER RECORDING RETURN TO:
First Interstate Bank of Texas, N.A.
One Riverwalk Place
700 N. St. Mary's Street, Suite 300
San Antonio, Texas 78205
17
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EXHIBIT "F"
MODIFICATION AGREEMENT
THE STATE OF TEXAS }
}
COUNTY OF BEXAR }
This Modification Agreement (the "Agreement") is between NUEVA
DISTRIBUIDORA LANCERMEX S.A. de C.V. (the "Borrower," whether one or more),
LANCER CORPORATION, a Texas corporation (the "Grantor") and FIRST INTERSTATE
BANK OF TEXAS, N.A., a national association (the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower is legally obligated to pay that certain
promissory note (the "Note") in the original principal sum of $1,000,000.00,
dated November 8, 1994, executed by the Borrower, payable to the order of the
Lender, more fully described in a Fourth Modification of Deeds of Trust (the
"Fourth Modification"), executed by the Grantor and duly recorded in the Real
Property Records of Bexar County, Texas, the Note being secured by the liens
therein created or mentioned against all of that real property (the "Property")
described as follows:
TRACT 1: Lot 1, Block 1, FOSTER RIDGE, UNIT 1, Bexar County, Texas,
according to the map or plat thereof recorded in Volume 9517, Pages 80-83, Deed
and Plat Records of Bexar County, Texas; and
TRACT 2: Lot 2, Block 1, FOSTER RIDGE, UNIT 1, Bexar County, Texas,
according to the map or plat thereof recorded in Volume 9517, Pages 80-83, Deed
and Plat Records of Bexar County, Texas;
WHEREAS, the Borrower now desires to modify certain terms of the Note,
and the Grantor desires to extend and carry forward said liens on the Property;
and
WHEREAS, the Lender, the legal owner and holder of the Note and of the
liens securing the same, at the request of the Borrower and the Grantor, has
agreed to modify the terms of the Notes as hereinafter provided.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is acknowledged,
the parties agree as follows:
1. The Note shall be due and payable as follows:
Interest only shall be due and payable in installments commencing on May
15, 1995, and continuing regularly thereafter on the same day of each calendar
month until July 31, 1995, when the entire amount of the Note, principal and
interest then remaining unpaid, shall be due and payable.
2. The Borrower and the Grantor ratify and confirm the liens on
the Property until the indebtedness described in the Fourth Modification,
including the Note as so modified, has been fully paid, and agrees that such
modification shall in no manner affect or impair the Note or the liens securing
the same and that said liens shall not in any manner be waived, the purpose of
this instrument being simply to modify the amount, time, or manner of payment
of the Note and to carry forward all liens securing the same, which the
Borrower and the Grantor hereby acknowledge to be valid and subsisting.
18
<PAGE> 19
3. The Borrower, the Grantor and each guarantor, surety, and
endorser waives grace, demand, presentment, and all notices, including notice
of dishonor, notice of intent to accelerate, notice acceleration, protest, and
notice of default; and agrees that waiver of any default will not constitute
waiver of any prior subsequent default.
4. To the extent not prohibited by law, the Borrower and the
Grantor will pay, or reimburse the Lender for all reasonable costs and
expenses, of every character, incurred or expended from time to time
(including, but not limited to, the fees and expenses of counsel for the
Lender) in connection with the negotiation, preparation, execution, filing,
recording, refiling and re-recording of this instrument, the Fourth
Modification and all related financing statements and the making, servicing and
collection of the debt secured hereby; any and all stamp, mortgage and
recording taxes; the costs of any title insurance or lien insurance purchased
by the Lender in connection herewith; all reasonable costs of negotiation,
preparation, execution and delivery of any and all amendments, modifications,
supplements, consents, waivers or other documents or writings relating to the
transactions contemplated by this instrument; and all reasonable costs
(including attorneys' fees) of reviewing title opinions and security opinions
relating to the debt described in this instrument. The Borrower and the
Grantor will reimburse the Lender for all reasonable amounts expended by the
Lender to satisfy any obligation of the Borrower or the Grantor under this
instrument or the Fourth Modification or to protect the Property. In addition,
whether or not a default shall have occurred, the Borrower and the Grantor will
pay, or reimburse the Lender for, all reasonable costs and expenses, of every
character incurred or expended from time to time in connection with the
protection of the Property, the exercise by the Lender of any of its rights and
remedies hereunder or at law, including, but not limited to, insurance
premiums, Uniform Commercial Code search fees, fees incident to title searches
and reports, investigation costs, escrow fees, attorneys' fees, legal expenses,
court costs, fees of governmental authorities, and all reasonable fees and
expenses incurred in connection with the marshalling, guarding, management,
operation, removal, maintenance, cleanup, storage, auction and liquidation of
the Property. Any amount to be paid or reimbursed by the Borrower or the
Grantor to the Lender shall be a demand obligation and, to the extent not
prohibited by law, shall bear interest from the date of expenditure by the
Lender until paid at the rate of eighteen percent (18%) per annum.
5. All agreements and transactions between the Borrower and the
Lender, 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, prepayment, late payment, demand for
prepayment or otherwise, shall the amount contracted for, charged or received
by the Lender from the Borrower for the use, forbearance or detention of the
principal indebtedness or interest hereof, which remains unpaid from time to
time, exceed the maximum amount permissible under applicable law, it
particularly being the intention of the parties hereto to conform strictly to
the applicable laws of usury. Any interest payable hereunder or under any
other instrument relating to the loan evidenced hereby that is in excess of the
legal maximum, shall, in the event of acceleration of maturity, prepayment,
late payment, demand for prepayment or otherwise, be automatically, as of the
date of such acceleration, prepayment, demand or otherwise, applied to a
reduction of the principal indebtedness hereof and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of such
principal, such excess shall be refunded to the Borrower. To the extent not
prohibited by law, determination of the legal maximum amount of interest shall
at all times be made by amortizing, prorating, allocating and spreading in
equal parts during the period of the full stated term of the loan, all interest
at any time contracted for, charged or received from the Borrower in connection
with the loan, so that the actual rate of interest on account of such
indebtedness is uniform throughout the term hereof.
6. The Borrower and the Grantor agree that all terms and
provisions of the Note and of the instrument or instruments creating or fixing
the liens securing the same shall be and remain in full force and effect as
therein written, except as otherwise expressly provided herein.
NOTICE TO MAKERS (BORROWER): THIS LOAN IS PAYABLE IN FULL ON DEMAND OR AT
MATURITY. AT MATURITY OR IF PAYMENT IS DEMANDED, YOU MUST REPAY THE ENTIRE
PRINCIPAL BALANCE OF THE LOAN AND UNPAID INTEREST THEN DUE. THE LENDER IS
UNDER NO OBLIGATION TO REFINANCE THE LOAN AT THAT TIME. YOU WILL, THEREFORE,
BE REQUIRED TO MAKE PAYMENT OUT OF OTHER ASSETS YOU MAY OWN, OR YOU WILL HAVE
TO FIND A LENDER, WHICH MAY BE
19
<PAGE> 20
THE LENDER YOU HAVE THIS LOAN WITH, WILLING TO LEND YOU THE MONEY. IF YOU
REFINANCE THIS LOAN AT MATURITY, YOU MAY HAVE TO PAY SOME OR ALL OF THE CLOSING
COSTS NORMALLY ASSOCIATED WITH A NEW LOAN EVEN IF YOU OBTAIN REFINANCING FROM
THE SAME LENDER.
EXECUTED this the _____ day of June, 1995, to be effective as of May
15, 1995.
NUEVA DISTRIBUIDORA LANCERMEX S.A. de C.V.
By:_____________________________
Name:___________________________
Title:__________________________
"Borrower"
AGREED:
LANCER CORPORATION, a Texas
corporation
By:_____________________________
Name:___________________________
Title:__________________________
AGREED TO AND ACCEPTED:
FIRST INTERSTATE BANK OF TEXAS, N.A.,
a national banking association
By:_____________________________
Name:___________________________
Title:__________________________
"Lender"
20
<PAGE> 21
THE STATE OF TEXAS }
}
COUNTY OF BEXAR }
This instrument was acknowledged before me on the ______ day of June,
1995, by ________________________________________________________,
__________________________________________ of NUEVA DISTRIBUIDORA LANCERMEX
S.A. de C.V.
___________________________________
Notary Public, State of Texas
THE STATE OF TEXAS }
}
COUNTY OF BEXAR }
This instrument was acknowledged before me on the ______ day of June,
1995, by ________________________________________________________,
______________________________ of LANCER CORPORATION, a Texas corporation, on
behalf of said corporation.
___________________________________
Notary Public, State of Texas
THE STATE OF TEXAS }
}
COUNTY OF BEXAR }
This instrument was acknowledged before me on the ______ day of June,
1995, by ______________________________________, ______________________________
of FIRST INTERSTATE BANK OF TEXAS, N.A., a national banking association, on
behalf of said association.
___________________________________
Notary Public, State of Texas
21
<PAGE> 22
AFTER RECORDING RETURN TO:
First Interstate Bank of Texas, N.A.
One Riverwalk Place
700 N. St. Mary's Street, Suite 300
San Antonio, Texas 78205
Attention: Mr. Scott Adams
Client and Matter Nos.: 1093-39
22
<PAGE> 23
PROMISSORY NOTE
$1,000,000.00 November 8, 1994
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 ONE MILLION AND NO/100 DOLLARS ($1,000,000.00), 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:
Principal shall be due and payable in installments of $83,333.34 each,
plus interest accrued on the unpaid principal to the date each such installment
is paid, commencing on April 15, 1995, and continuing regularly thereafter on
the same day of each calendar month until March 15, 1996, when the entire
amount of this Note, principal and interest then remaining unpaid, shall be due
and payable. Each payment 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.
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
23
<PAGE> 24
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.
24
<PAGE> 25
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.
25
<PAGE> 26
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.
26
<PAGE> 27
EXECUTED in San Antonio, Bexar County, Texas on the date first stated
above.
NUEVA DISTRIBUIDORA LANCERMEX S.A.
de C.V.
By:________________________________
Name:______________________________
Title:_____________________________
111845.1
<PAGE> 1
EIGHTH AMENDMENT TO LOAN AGREEMENT
AND LOAN DOCUMENTS
This Eighth 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"),
LANCER LIMITED ("Lancer Limited") 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"), in a Sixth Amendment to
Loan Agreement and Loan Documents dated effective June 30, 1995 (the "Sixth
Amendment") and most recently in a Seventh Amendment to Loan Agreement and Loan
Documents dated effective August 1, 1995 (the "Seventh Amendment"), the terms
and provisions of which First Amendment, Second Amendment, Third Amendment,
Fourth Amendment, Fifth Amendment, Sixth Amendment and Seventh 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, the Seventh Amendment and this Agreement
being collectively referred to herein as the "Loan Agreement");
<PAGE> 2
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 $10,000,000.00;
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 make a new
$5,000,000.00 term loan available to the Borrower, 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 $5,000,000.00
term credit as evidenced by a promissory note (the "Term
Note") in the form attached hereto as Exhibit "E", and
2
<PAGE> 3
(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. Exhibit "E" attached to the Loan Agreement is replaced by
Exhibit "E" attached to this Agreement.
3. The Term Note described in this Agreement is secured by a new
Security Agreement dated of even date with this Agreement
covering the Borrower's Equipment. However, the other Loan
Documents do not secure the Term Note described in this
Agreement and the security interests created by the new
Security Agreement described in the prior sentence do not
secure any of the Loans, except for the Term Note described in
this Agreement.
4. 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.
5. Section 4.14 of the Original Loan Agreement, which concerns
life insurance on George Schroeder, is deleted.
6. 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
3
<PAGE> 4
Default under the Loan Agreement either with or without notice
or lapse of time.
7. 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.
8. 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.
9. 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 December 29th, 1995.
LANCER CORPORATION, A TEXAS
CORPORATION
By: /s/ JOHN P. HERBOTS
________________________________
Name: John P. Herbots
______________________________
Title: Vice President of Finance
_____________________________
4
<PAGE> 5
LANCER INTERNATIONAL SALES, INC.,
A TEXAS CORPORATION
By: /s/ JOHN P. HERBOTS
________________________________
Name: John P. Herbots
______________________________
Title: Vice President of Finance
______________________________
LANCER LIMITED
By: /s/ STONEWALL J. FISCHER, III
________________________________
Name: Stonewall J. Fischer, III
______________________________
Title: Director & Secretary
______________________________
FIRST INTERSTATE BANK OF TEXAS, N.A.
By: /s/ WILLIAM B. HUDSON
_________________________________
Name: William B. Hudson
______________________________
Title: Senior Vice President
______________________________
5
<PAGE> 6
PROMISSORY NOTE
$5,000,000.00 December 29, 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, 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
FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00) in legal and lawful money of
the United States of America, with interest thereon from the date hereof until
paid at the rate of seven and three-quarters percent (7.75%) per annum
(calculated on the basis of a year of 360 days for the actual number of days
elapsed), the interest being payable as hereinafter specified. Matured unpaid
principal and accrued, matured, unpaid interest shall bear interest from the
date ten (10) days after maturity (whether by acceleration or otherwise) until
paid at the rate of eighteen percent (18%) per annum, but in no event greater
than the Maximum Lawful Rate. The term "Maximum Lawful Rate," as used herein,
means the greater of (i) the highest rate permitted by applicable United States
law, or (ii) a rate per annum equal to the indicated rate ceiling determined in
accordance with the computation specified in Article 5069-1.04(a) (1),
Vernon's Texas Civil Statutes, 1925, as amended, as such indicated rate ceiling
is in effect from time to time during the term hereof, subject to the
provisions of Article 5069-1.04(b), Vernon's Texas Civil Statutes, 1925, as
amended.
TERMS OF PAYMENT:
Principal and interest shall be due and payable in installments of
$121,478.71 each, commencing on January 31, 1996, and continuing regularly
thereafter on the last day of each calendar month until December 31, 1999, when
the entire amount of this Note, principal and accrued 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 each such payment 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.
<PAGE> 7
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.
PREPAYMENT:
During the first two (2) calendar years following the date of this
Note, the Makers shall be entitled to make prepayments of principal on this
Note only upon payment of a prepayment premium in an amount equal to one
percent (1%) of the amount of the principal prepayment. Thereafter, the Makers
shall have 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.
2
<PAGE> 8
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 of even date herewith executed by the Makers, as
debtor, in favor of the Payee, as secured party, covering certain equipment of
the Makers.
USE OF PROCEEDS:
A portion of the proceeds of this Note is being used to refinance
other indebtedness owed to CIT Group by the Makers and the remainder of such
proceeds will be advanced to the Makers at the Makers' special instance and
request for the purpose of providing additional working capital.
REPRESENTATIONS AND WARRANTIES:
LANCER 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.
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<PAGE> 9
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.
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<PAGE> 10
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.
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<PAGE> 11
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
of 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.
ARBITRATION PROGRAM:
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: /s/ John P. Herbots
________________________________
Name: John P. Herbots
______________________________
Title: Vice President of Finance
_____________________________
<PAGE> 12
SECURITY AGREEMENT
PART I. PREAMBLE
Section 1.01. Security Agreement. This Security Agreement (this
"Agreement"), dated as of December 29th, 1995, is by and between LANCER
CORPORATION, A TEXAS CORPORATION (the "Debtor"), whose address is 235 W. Turbo,
San Antonio, Texas 78216 and FIRST INTERSTATE BANK OF TEXAS, N.A., A NATIONAL
BANKING ASSOCIATION (the "Secured Party") whose address is 700 N. St. Mary's,
Suite 300, San Antonio, Texas 78205.
Section 1.02. Loan Agreement. This Agreement is made in accordance
with the Eighth Amendment to Loan Agreement and Loan Documents (the "Eighth
Amendment") dated of even date herewith between the Debtor and the Secured
Party (said Eighth Amendment and the Original Loan Agreement referred to
therein, as amended, being hereinafter referred to collectively as the "Loan
Agreement"). To the extent applicable and not in conflict herewith, each and
every term, definition, condition, covenant, warranty, and representation
contained in the Loan Agreement is hereby incorporated into this Agreement by
reference as if fully stated herein.
PART II. SECURITY INTEREST
Section 2.01. Grant of Security Interest. For good and valuable
consideration, the receipt of which is acknowledged, the Debtor hereby grants
to the Secured Party a security interest in the Collateral described in Part
III below to secure the payment of the obligations and indebtedness (the
"Indebtedness") described in Part IV below.
Section 2.02. Continuing Force of Security Interest. The security
interest created by this Agreement may secure future advances or a revolving
credit. The fact that from time to time the Debtor may have paid all principal
and interest of the Indebtedness will not, without the Secured Party's written
consent, discharge or affect the force and effect of this Agreement (or the
security interest created by this Agreement) as to subsequent advances.
PART III. COLLATERAL
<PAGE> 13
Section 3.01. Collateral. To secure the payment when due of any and
all Indebtedness, the Debtor hereby grants to the Secured Party a security
interest in the following, whether now owned by the Debtor, whether hereafter
acquired by the Debtor, whether now existing, or whether arising or created
hereafter (herein collectively referred to as the "Collateral"):
a) All equipment, machinery, furnishings, furniture, appliances
and accessories;
b) All accessions or appurtenances to any of the foregoing;
c) All improvements, extensions, alterations, substitutions,
replacements, renewals, and rights belonging or in any way appertaining to all
or any part of the foregoing or acquired for use in connection therewith;
d) All right, title, and interest of the Debtor to and under all
leases or agreements now existing or hereafter entered into for the use,
occupancy, or sale of the whole or any part of the foregoing;
e) All proceeds payable or to be payable under each policy of
insurance relating to the whole or any part of the foregoing;
f) All proceeds arising from the taking, conveyance, or sale of
all or any part of the foregoing (or any interest therein or right accruing
thereto) as a result of (or in lieu or anticipation of) any public or
quasi-public use under any law or the exercise of the right of appropriation,
confiscation, condemnation, or eminent domain; and
g) Without limiting any description of the foregoing, all
products and proceeds thereof.
In no event shall the assets of GLENN PLEASS HOLDINGS, PTY., LTD. or its
subsidiaries be encumbered by this Agreement. Furthermore, in the event the
Secured Party consents to future acquisitions by the Debtor, this Security
Agreement shall not encumber any of the assets of any new foreign subsidiaries
acquired by the Debtor.
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<PAGE> 14
Section 3.02. After-Acquired Collateral. All property acquired by
the Debtor after the date of this Agreement that by the terms hereof is
required or intended to be subjected to the security interest granted or
renewed by this Agreement will, immediately upon the acquisition thereof and
without further mortgage, conveyance, or assignment, become subject to the
security interest created by this Agreement as fully as though now owned by the
Debtor and specifically described herein. Nevertheless, the Debtor will do all
such further acts and will execute, acknowledge, and deliver all such further
conveyances, mortgages, financing statements, and assurances as the Secured
Party reasonably requires for accomplishing the purposes of this Agreement,
including delivery of Collateral to the Secured Party's possession.
Section 3.03. Sale of Collateral. The inclusion of proceeds as part
of the Collateral does not authorize the Debtor to sell any of the Collateral
without the Secured Party's prior written consent.
Section 3.04 Partial Releases of New Equipment. So long as no
Event of Default has occurred which remains uncured, the Debtor may, on a
quarterly basis, forward a list of new equipment acquired since the date of
this Agreement to the Secured Party, and the Secured Party shall release its
security interests in said new equipment and, at the Debtor's expense, file a
partial release covering such new equipment with the Texas Secretary of State's
Office.
PART IV. DEBTOR'S PAYMENT OBLIGATIONS
Section 4.01. Promise To Pay. The Debtor will pay the Secured Party,
in accordance with the terms of such Indebtedness and the terms of this
Agreement, all sums that may become due pursuant to the Indebtedness and all
renewals, rearrangements, or extensions of any such Indebtedness. The Debtor
will pay the Secured Party on demand the entire unpaid Indebtedness, whether
created or incurred pursuant to this Agreement or otherwise, upon the
occurrence of an Event of Default (as defined in Part VI hereof).
Section 4.02. Indebtedness. The Indebtedness is:
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<PAGE> 15
a) The indebtedness represented by a promissory note
(the "Note") dated of even date herewith in the original principal
amount of $5,000,000.00, executed by the Debtor and payable to the
order of the Secured Party;
b) Any and all advances made under this Agreement by the
Secured Party on behalf of the Debtor; and
c) All renewals, rearrangements, or extensions of all or
any part of the foregoing.
Section 4.03. Proceeds of Collateral. The Debtor will report fully
and faithfully to the Secured Party regarding the collateral and all proceeds
of the Collateral and, upon request by the Secured Party, will pay or turn over
promptly (in the form received by the Debtor, whether cash, negotiable
instruments, drafts, assigned accounts, chattel paper, or otherwise) all
proceeds from any disposition of the Collateral, to be applied to the
Indebtedness, subject to final payment or collection if other than cash.
Application of such proceeds to the Indebtedness will be in the sole discretion
of the Secured Party, provided such application of proceeds is made by the
Secured Party in a reasonable manner.
Section 4.04. Secured Party's Expenses. To the extent not prohibited
by law, the Debtor will pay, or reimburse the Secured Party for, all costs and
expenses, of every character, incurred or expended from time to time
(including, but not limited to, the fees and expenses of counsel for the
Secured Party), in connection with the negotiation, preparation, execution,
filing, recording, refiling and re-recording of this Agreement and all related
financing statements and the making, servicing and collection of the debt
secured hereby; any and all stamp, mortgage and recording taxes; the costs of
any title insurance or lien insurance purchased by the Secured Party to
connection herewith; all costs of negotiation, preparation, execution and
delivery of any and all amendments, modifications, supplements, consents,
waivers or other documents or writings relating to the transactions
contemplated by this Agreement; and all costs (including attorneys fees) of
reviewing the title opinions and security opinions relating to the debt secured
hereby. The Debtor will reimburse the Secured Party
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<PAGE> 16
for all amounts expended by the Secured Party to satisfy any obligation of the
Debtor under this Agreement or to protect the Collateral. In addition, whether
or not a default shall have occurred, the Debtor will pay, or reimburse the
Secured Party for, all costs and expenses, of every character incurred or
expended from time to time in connection with the evaluation, monitoring,
administration and protection of the Collateral, the exercise by the Secured
Party of any of its rights and remedies hereunder or at law, including, but not
limited to, all appraisal fees, consulting fees, brokerage fees and
commissions, insurance premiums, Uniform Commercial Code search fees, fees
incident to title searches and reports, investigation costs, escrow fees,
attorneys' fees, legal expenses, fees of auditors and accountants, court costs,
fees of governmental authorities, auctioneer fees and expenses, and all fees
and expenses incurred in connection with the marshalling, guarding, management,
operation, removal, maintenance, cleanup, storage, auction and liquidation of
the Collateral. Any amount to be paid or reimbursed by the Debtor to the
Secured Party shall be a demand obligation owing by the Debtor to the Secured
Party and, to the extent not prohibited by law, shall bear interest from the
date of expenditure by the Secured Party until paid at the same rate provided
for past-due principal and interest in the Note.
PART V. REPRESENTATIONS, WARRANTIES, AND AGREEMENTS
Section 5.01. Assumed Names. The Debtor represents and warrants to
the Secured Party that it now owns and has always owned all its property in,
and now operates and has always operated solely under, the name "Lancer
Corporation" and no other name.
Section 5.02. No Other Lien or Claims. The Debtor represents and
warrants to the Secured Party that no financing statement, collateral transfer
or assignment, or any other instrument of encumbrance covering all or any part
of the Collateral or its proceeds is on file in any public office, and there
exists no adverse claims, defense, default, lien, security interest, or
encumbrance with respect to the Collateral.
Section 5.03. Debtor's Office. The Debtor represents and warrants to
the Secured Party that it maintains its chief
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<PAGE> 17
executive office at 235 W. Turbo, San Antonio, Bexar County, Texas 78216. The
Debtor will promptly notify the Secured Party in writing of any addition to,
change in, or discontinuance of the location of such chief executive office.
Section 5.04. Location of Collateral. All the Collateral will be
kept, at the Debtor's risk of loss, at the address shown in Section 5.03 herein
or at such other locations as have been previously disclosed to the Secured
Party. The Secured Party may inspect the Collateral at any time. Except as
may be required in the ordinary course of the Debtor's business, the Collateral
will not be removed from such location unless the Debtor notifies the Secured
Party in writing and the Secured Party consents in writing in advance of its
removal to another location.
Section 5.05. Use of Collateral. Until default, the Debtor may use
the Collateral in any lawful manner not inconsistent with this Agreement or
with the terms or conditions of any policy of insurance thereon. The Secured
Party's security interest will attach to all proceeds of sales and other
dispositions of the Collateral. The Debtor will not sell, lend, rent, lease,
or otherwise dispose of the Collateral or any interest therein except as
authorized in this Agreement or in writing in advance by the Secured Party or
as may be required in the ordinary course of the Debtor's business.
Section 5.06. Taxes, Liens, Etcetera. The Debtor will pay prior to
delinquency all taxes, charges, liens, and assessments against all or any of
the Collateral, except for those which the Debtor is diligently contesting in
good faith. Should the Debtor fail to do so, the Secured Party at its option
may pay any of them and will be the sole judge of the legality or validity
thereof and the amount necessary to discharge the same. Such payment will
become part of the Indebtedness and will be paid to the Secured Party by the
Debtor immediately and without demand, with interest thereon, at the Past Due
Rate, from the date incurred by the Secured Party until the date reimbursed.
The Debtor will defend the Collateral and its proceeds against the claims and
demands of all persons.
Section 5.07. Insurance. The Debtor will maintain insurance at all
times with respect to all Collateral against risk of fire,
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<PAGE> 18
risk of theft, and such other risks as the Secured Party may require, including
extended coverage. Such insurance policies will contain a standard mortgagee's
endorsement providing for payment to the Secured Party of any loss of or damage
to the Collateral. All policies of insurance will provide that the insurer
will give the Secured Party written notice of cancellation at least thirty days
before cancelling such insurance or before such insurance expires. The Debtor
will furnish the Secured Party evidence of compliance with the foregoing
insurance provisions at any time the Secured Party may request it. The Secured
Party may act as attorney-in-fact for the Debtor in obtaining, adjusting,
settling, and cancelling such insurance and in endorsing any draft drawn by
insurers of the Collateral. The Secured Party may apply any proceeds of such
insurance that it may receive in payment on account of the Indebtedness,
whether due or not.
Section 5.08. Protection of Security Interest. At its own expense,
the Debtor will do, make, procure, execute, and deliver all acts, things,
writings, and assurances as the Secured Party may at any time request to
protect, assure, or enforce the Secured Party's interests, rights, and remedies
created by, provided in, or emanating from this Agreement. The Debtor will
sign and execute (alone or with the Secured Party) any financing statement or
other writing, will procure any document, and will pay all connected costs
necessary to protect the security interest under this Agreement against the
rights or interests of third persons.
Section 5.09. Separation of Proceeds. The Debtor will at all times
keep the proceeds of the Collateral separate and distinct from other property
of the Debtor and will keep accurate and complete records of the Collateral and
its proceeds.
Section 5.10. Title to Collateral. The Debtor represents and
warrants to the Secured Party (1) that the Debtor is the legal and beneficial
owner of, has good and marketable title to, the Collateral and (2) that the
Debtor has the right to transfer all interest therein.
Section 5.11. Security Agreement As Financing Statement. The Secured
Party may file this Agreement with the Texas Secretary of State or any other
public official or in any public record. A carbon, photographic, or other
reproduction of this Agreement or
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<PAGE> 19
of any financing statement covering all or any part of the Collateral will be
sufficient as a financing statement.
Section 5.12. Waiver of Notice. Except as otherwise provided in this
Agreement or by law, the Debtor hereby waives demand, protest, notice of intent
to accelerate, notice of acceleration, notice of any action taken by the
Secured Party in connection with the Indebtedness, and all other notices.
Section 5.13. Action Affecting Indebtedness or Collateral. No
renewal, extension (whether an extension of the time of payment or otherwise),
rearrangement, or modification of all or any of the Indebtedness, no release of
the Debtor as to all or any of the Indebtedness, and no delay or omission in
exercising any right or power with respect to all or any of the Indebtedness or
with respect hereto will in any manner impair or affect the Secured Party's
rights hereunder. The Debtor hereby consents to (1) any indulgence of the
Secured Party, (2) any substitution for, exchange of, or release of the
Collateral, in whole or in part, and (3) the addition or release of any person
liable on the Indebtedness or the Collateral.
PART VI. EVENTS OF DEFAULT
Section 6.01. Events of Default. The occurrence of any Event of
Default under the Loan Agreement shall constitute an Event of Default under
this Agreement.
PART VII. SECURED PARTY'S RIGHTS AND REMEDIES
REGARDLESS OF DEFAULT
Section 7.01. Assignment of Secured Party's Rights. The Secured
Party may from time to time assign this Agreement, the Secured Party's rights
hereunder, or all or any part of the Indebtedness. In any such case, the
assignee will be entitled to all rights, privileges, and remedies granted to
the Secured Party by this Agreement, and the Debtor will not assert against the
assignee any claim or defense it may have against the Secured Party, except
those granted in this Agreement.
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Section 7.02. Inspection of Collateral. The Secured Party may enter
upon the Debtor's premises at any reasonable time to inspect the Collateral and
the Debtor's books and records pertaining to the Collateral, and the Debtor
will assist the Secured Party in making any such inspection.
Section 7.03. Protection and Preservation of Collateral. At its
option, the Secured Party (1) may discharge taxes, liens, security interests,
or other encumbrances at any time levied or placed on the Collateral; (2) may
pay for the insurance on the Collateral; and (3) may pay for the maintenance
and preservation of the Collateral. The Debtor will reimburse the Secured
Party on demand for any payment made or expense incurred by the Secured Party
pursuant to the foregoing authorization, plus interest thereon at the Past Due
Rate.
Section 7.04. Call for Additional Collateral. If the Secured Party
should at any time be of the opinion that the Collateral is not sufficient
security for the Indebtedness or that the Collateral has declined or may
decline in value, or should the Secured Party in good faith believe that the
prospect of payment or performance of the Debtor's obligations to the Secured
Party is impaired, then the Secured Party may call for additional collateral
satisfactory to Secured Party and the Debtor will furnish such additional
security forthwith. The call for additional security must be in writing and
sent via the United States Postal Service, certified mail, return receipt
requested, addressed to the Debtor's address recited in Section 5.03 hereof. If
the Secured Party makes such call for additional collateral and the Debtor
fails to furnish such additional security within fifteen (15) days after such
call is sent, then the Secured Party may declare the Debtor to be in default
under this Agreement.
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PART VIII. SECURED PARTY'S RIGHTS AND REMEDIES
IN EVENT OF DEFAULT
Section 8.01. Acceleration, Repossession, and Sale. On the
occurrence of an Event of Default or at any time thereafter, the Secured Party
may declare all or any part of the Indebtedness to be immediately due and
payable and will have the rights and remedies of a secured party under the
Texas Business and Commerce Code, including (but not necessarily limited to)
the right to take possession of and sell, lease, or otherwise dispose of any or
all of the Collateral in a commercially reasonable manner. For that purpose the
Secured Party may enter upon any premises where the Collateral or any part
thereof may be situated and may remove the Collateral therefrom.
Section 8.02. Assembly of Collateral. The Secured Party may require
the Debtor to assemble the Collateral and make it available to the Secured
Party at a place to be designated by the Secured Party that is reasonably
convenient to both parties.
Section 8.03. Notice of Sale. On the occurrence of an Event of
Default or at any time thereafter, the Secured Party may, in its discretion,
sell for cash and assign and deliver all or any part of the Collateral then
covered by this Agreement in a commercially reasonable manner at public or
private sale without notice or advertisement other than as required by the
Texas Business and Commerce Code or may cause all or a part of the Collateral
to be sold at judicial sale after judgment in any court of competent
jurisdiction. Unless the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market, the
Secured Party will send the Debtor reasonable notice of (1) the time and place
of any public sale thereof or (2) the time after which any private sale or
other disposition thereof is to be made. The requirement of sending reasonable
notice will be met if such notice is mailed, postage prepaid, to the Debtor at
the address stated in Section 5.03 hereof at least ten calendar days before the
time of the sale or disposition.
Section 8.04. Expenses of Repossession or Sale. Expenses of
retaking, holding, preparing for sale, selling, or the like will include the
Secured Party's reasonable attorney's fees and legal
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<PAGE> 22
expenses. On demand the Debtor will pay such expenses, plus interest thereon
at the Past Due Rate. The Debtor will remain liable for any deficiency
remaining on the Indebtedness after disposition of the Collateral.
Section 8.05. Power of Attorney. In protecting, exercising or
assuring its interests, rights and remedies under this Agreement, the Secured
Party may execute, sign, endorse, transfer, or deliver, on behalf of and in the
Debtor's name, as the Debtor's attorney-in-fact, all notes, checks, drafts, or
other instruments for the payment of money and all receipts, certificates of
origin, applications for certificates of title, or any other documents
necessary to evidence, perfect, or realize upon any of the Collateral or
proceeds thereof. This Power of Attorney is in addition to the authority
granted by the Debtor to the Secured Party in Section 5.08 hereof and shall be
deemed to be coupled with an interest and shall be irrevocable.
Section 8.06. Compromise and Settlement. On the occurrence of an
Event of Default or at any time thereafter, the Secured Party may demand, sue
for, collect, or make any compromise or settlement with reference to the
Collateral as the Secured Party chooses in its sole discretion.
PART IX. ADDITIONAL AGREEMENTS
Section 9.01. Gender and Number. In this Agreement the masculine
will be construed as feminine or neuter, and the singular as plural, as the
occasion may require.
Section 9.02. Parties Bound. "Secured Party" and "Debtor," as used
in this Agreement, include any successor, representative, receiver, trustee,
custodian, or assign of any of such parties.
Section 9.03. Captions. The part and section captions appearing in
this Agreement are for convenience only and will not be given any substantive
meaning or significance whatever in construing the terms and provisions of this
Agreement.
Section 9.04. Other Defined Terms. Any term that is used in this
Agreement that is defined in Chapters 1-9 of the Texas
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Business and Commerce Code (the Texas enactment of the Uniform Commercial Code)
is used with the meaning as defined in such chapters.
Section 9.05. Governing Law. This Agreement will be governed by the
law of the State of Texas in force as of the effective date of this Agreement.
Section 9.06. Cumulation of Remedies. The Secured Party's remedies
under this Agreement are cumulative. The exercise of any one or more of the
remedies provided in this Agreement will not be construed as waiving any other
remedy of the Secured Party. The Secured Party may exercise any two or more
remedies (whether existing under this Agreement, by law, or otherwise)
simultaneously or sequentially.
Section 9.07. Severability. If any one or more of the provisions
contained in this Agreement is for any reason held invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
will not affect any other provision of this Agreement.
Section 9.08. Counterpart Copies. This Agreement may be executed in
multiple counterparts, each of which will be deemed an original and all of
which, taken together, will constitute but one agreement. It will not be
necessary that any single counterpart hereof be executed by all parties hereto
so long as the Debtor and the Secured Party have each executed a counterpart
hereof.
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EXECUTED effective on the date first mentioned above.
LANCER CORPORATION, a Texas corporation
By: /s/ JOHN P. HERBOTS
__________________________________
Name: John P. Herbots
________________________________
Title: Vice President of Finance
_______________________________
"Debtor"
FIRST INTERSTATE BANK OF TEXAS, N.A.
By: /s/ WILLIAM B. HUDSON
__________________________________
Name: William B. Hudson
________________________________
Title: Senior Vice President
"Secured Party"
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<PAGE> 25
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 INTERNATIONAL SALES, INC., A TEXAS CORPORATION (the "Guarantor"), the
receipt and sufficiency of which considerations are hereby acknowledged, and
for the purpose of enabling LANCER CORPORATION, A TEXAS CORPORATION (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
promissory note of the Debtor (the "Note") dated of even date
herewith, in the principal amount of $5,000,000.00, payable to the
order of the Lender, bearing interest and being payable as therein
provided, which Note is more fully described in a Security Agreement
of even date therewith, executed by the Debtor for the benefit of the
Lender;
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 Lender's court costs and reasonable attorney's
fees if the foregoing are not paid by the Guarantor on demand when due
or if this Guaranty Agreement is enforced by suit or through probate,
bankruptcy, or other judicial proceedings.
<PAGE> 26
All amounts becoming payable hereunder to the Lender under this
Guaranty Agreement shall be payable at the Lender's 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 Lender's rights nor the Guarantor's 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 Guarantor's 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
2
<PAGE> 27
Obligations (or any part thereof) or any security therefor or other guaranty
thereof; or (e) assert or 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 Debtor's 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 Debtor's 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 Guarantor's 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 States 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 or for any reason. Nothing herein may be construed to cancel, amend,
3
<PAGE> 28
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 Lender's 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 or
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 Lender's 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 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.
4
<PAGE> 29
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 Lender's 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 this 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 the Lender with respect to the subject
matter hereof.
This Guaranty Agreement and the Guarantor's obligations hereunder will
be binding on the Guarantor and the Guarantor's 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," "partnership," "limited
partnership," "joint venture," "association" or other entity.
The parties agree to be bound by the terms and provisions of the
current Arbitration Program of First Interstate Bank of Texas,
5
<PAGE> 30
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 this 29th day of December, 1995.
LANCER INTERNATIONAL SALES,
INC., a Texas corporation
By: /s/ JOHN P. HERBOTS
__________________________________
Name: John P. Herbots
________________________________
Title: Vice President
_______________________________
Address:
235 W. Turbo
______________________________
San Antonio, TX 78216
______________________________
6
<PAGE> 31
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 INTERNATIONAL SALES, INC., A TEXAS CORPORATION (the "Guarantor"), the
receipt and sufficiency of which considerations are hereby acknowledged, and
for the purpose of enabling LANCER CORPORATION, A TEXAS CORPORATION (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
promissory note of the Debtor (the "Note") dated of even date
herewith, in the principal amount of $5,000,000.00, payable to the
order of the Lender, bearing interest and being payable as therein
provided, which Note is more fully described in a Security Agreement
of even date therewith, executed by the Debtor for the benefit of the
Lender;
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 Lender's court costs and reasonable attorney's
fees if the foregoing are not paid by the Guarantor on demand when due
or if this Guaranty Agreement is enforced by suit or through probate,
bankruptcy, or other judicial proceedings.
<PAGE> 32
All amounts becoming payable hereunder to the Lender under this
Guaranty Agreement shall be payable at the Lender's 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 Lender's rights nor the Guarantor's 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 Guarantor's 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
2
<PAGE> 33
Obligations (or any part thereof) or any security therefor or other guaranty
thereof; or (e) assert or 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 Debtor's 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 Debtor's 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 Guarantor's 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 States 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 or for any reason. Nothing herein may be construed to cancel, amend,
3
<PAGE> 34
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 Lender's 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 or
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 Lender's 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 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.
4
<PAGE> 35
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 Lender's 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 this 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 the Lender with respect to the subject
matter hereof.
This Guaranty Agreement and the Guarantor's obligations hereunder will
be binding on the Guarantor and the Guarantor's 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," "partnership," "limited
partnership," "joint venture," "association" or other entity.
The parties agree to be bound by the terms and provisions of the
current Arbitration Program of First Interstate Bank of Texas, N.A.,
5
<PAGE> 36
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 this _______ day of December, 1995.
LANCER LIMITED
By:
__________________________________
Name:
________________________________
Title:
_______________________________
Address:
______________________________
______________________________
6
<PAGE> 37
CERTIFICATE OF
RESOLUTIONS AND INCUMBENCY
I, John P. Herbots, Secretary of LANCER INTERNATIONAL SALES, INC., a
Texas corporation (the "Corporation"), hereby certify that:
1. The following resolutions were duly and unanimously adopted on
the 29th day of December, 1995, by the unanimous written consent of all of the
members of the Board of Directors of the Corporation, and none of such
resolutions have been amended, modified, or repealed in any respect, and all of
such resolutions are in full force and effect on the date hereof:
RESOLVED, that the Corporation guarantee a loan to LANCER
CORPORATION (the "Borrower") from FIRST INTERSTATE BANK OF TEXAS, N.A.
(the "Lender") in the face amount of $5,000,000.00, secured, in part,
by the Borrower's equipment;
RESOLVED, that the President or any Vice President of the
Corporation be, and he or she is hereby, authorized, empowered, and
directed to execute, acknowledge, and deliver for and on behalf and in
the name of the Corporation an eighth amendment to loan agreement and
such assignments, promissory notes, deeds of trust, financing
statements, security agreements, guaranties and instruments,
containing such terms and conditions as the President or any Vice
President of the Corporation may, in his or her sole discretion, deem
necessary or desirable, his or her approval thereof to be conclusively
presumed by his or her execution thereof, and that the attestation by
the Secretary of the Corporation and the affixation of the seal of the
Corporation shall not be necessary;
RESOLVED, that any and all transactions by any of the officers
or representatives of the Corporation, in its name and for its
account, with the Lender prior to the adoption of these resolutions
be, and they are hereby, ratified and approved for all purposes;
RESOLVED, that the officers of the Corporation be and they
hereby are authorized to take such steps, to
<PAGE> 38
do such other acts and things, to execute such letters, certificates,
affidavits, agreements, papers and instruments as in their judgment
may be necessary or appropriate or desirable in order to consummate
the transactions referred to in the preceding resolutions;
RESOLVED, that the Board of Directors of the Corporation finds
that the transactions authorized by these resolutions shall directly
or indirectly benefit the Corporation; and
RESOLVED, that the foregoing powers and authority shall
continue in full force and effect until written notice of revocation
has been given the Lender and the Lender has acknowledged receipt
thereof.
2. The following named individuals are duly elected officers of
the Corporation holding the offices set forth opposite their respective names
as of the date hereof, the signatures set opposite the respective names and
titles of said officers are their true, authentic signatures, and the seal
affixed hereto is the authentic seal of the Corporation:
<TABLE>
<CAPTION>
______________________________________________________________________________
NAME TITLE SIGNATURE
______________________________________________________________________________
<S> <C> <C>
George F. Schroeder President /s/ George F. Schroeder
_______________________
______________________________________________________________________________
John P. Herbots Vice President,
Secretary and
Treasurer /s/ John P. Herbots
_______________________
______________________________________________________________________________
</TABLE>
2
<PAGE> 39
IN WITNESS WHEREOF, I have duly executed this Certificate this 4th
day of January, 1996.
(CORPORATE SEAL)
/s/ JOHN P. HERBOTS
__________________________________
John P. Herbots, Secretary
I, George F. Schroeder, President of the Corporation, do hereby
certify that John P. Herbots is the duly elected and acting Secretary of the
Corporation. I further certify that the signature as set forth above is his
correct signature.
IN WITNESS WHEREOF, I have duly executed this Certificate this 4th
day of January, 1996.
/s/ GEORGE F. SCHROEDE
__________________________________
George F. Schroeder, President
THE STATE OF TEXAS )
)
COUNTY OF BEXAR )
This instrument was acknowledged before me on the 4th day of January,
1996, by John P. Herbots, Secretary of LANCER INTERNATIONAL SALES, INC. and
George F. Schroeder, President of LANCER INTERNATIONAL SALES, INC., a Texas
corporation, on behalf of said corporation.
/s/ STONEWALL J. FISCHER, III
_________________________________
Stonewall J. Fischer, III
Notary Public, State of Texas
3
<PAGE> 40
CERTIFICATE OF
RESOLUTIONS AND INCUMBENCY
I, John P. Herbots, Secretary of LANCER CORPORATION, A
TEXAS CORPORATION (the "Corporation"), hereby certify that:
1. The following resolutions were duly and unanimously adopted on
the 29th day of December, 1995, by the unanimous written consent of all of the
members of the Board of Directors of the Corporation, and none of such
resolutions have been amended, modified, or repealed in any respect, and all of
such resolutions are in full force and effect on the date hereof:
RESOLVED, that the Corporation borrow from from FIRST
INTERSTATE BANK OF TEXAS, N.A. (the "Lender") the sum of
$5,000,000.00, secured by a Security Agreement executed by the
Corporation, as debtor, for the benefit of the Lender, as secured
party;
RESOLVED, that John P. Herbots, Vice President Finance be, and
he is hereby, authorized, empowered, and directed to execute,
acknowledge, and deliver for and on behalf and in the name of the
Corporation an eighth amendment to loan agreement and loan documents
and such assignments, promissory notes, deeds of trust and
modifications of deeds of trust, financing statements, security
agreements, guaranties and instruments, containing such terms and
conditions as he may, in his sole discretion, deem necessary or
desirable, his approval thereof to be conclusively presumed by his
execution thereof, and that the attestation by the Secretary of the
Corporation and the affixation of the seal of the Corporation shall not
be necessary;
RESOLVED, that any and all transactions by any of the officers
or representatives of the Corporation, in its name and for its
account, with the Lender prior to the adoption of these resolutions
be, and they are hereby, ratified and approved for all purposes;
<PAGE> 41
RESOLVED, that the officers of the Corporation be and they
hereby are authorized to take such steps, to do such other acts and
things, to execute such letters, certificates, affidavits, agreements,
papers and instruments as in their judgment may be necessary or
appropriate or desirable in order to consummate the transactions
referred to in the preceding resolutions;
RESOLVED, that the Board of Directors of the Corporation finds
that the transactions authorized by these resolutions shall directly
or indirectly benefit the Corporation; and
RESOLVED, that the foregoing powers and authority shall
continue in full force and effect until written notice of revocation
has been given the Lender and the Lender has acknowledged receipt
thereof.
2
<PAGE> 42
IN WITNESS WHEREOF, I have duly executed this Certificate this 29th
day of December, 1995.
(CORPORATE SEAL)
/s/ JOHN P. HERBOTS
_________________________________
John P. Herbots, Secretary
THE STATE OF TEXAS )
)
COUNTY OF BEXAR )
This instrument was acknowledged before me on the 29thday of
December, 1995, by John P. Herbots, Secretary of LANCER CORPORATION and George
F. Schroeder, President of LANCER CORPORATION, a Texas corporation, on behalf
of said corporation.
STONEWALL J. FISHER, III
__________________________________
Notary Public, State of Texas
3
<PAGE> 1
EXHIBIT 21.1
LANCER CORPORATION
LIST OF SIGNIFICANT SUBSIDIARIES
Lancer International Sales, Inc.
San Antonio, Texas
Glenn Pleass Holdings Pty. Ltd.
Beverly, South Australia, Australia
Industrias Lancermex, S.A. de C.V.
Piedras Negras, Coahuila, Mexico
Nueva Distribuidora Lancermex, S.A. de C.V.
Piedras Negras, Coahuila, Mexico
Servicios Lancermex, S.A. de C.V.
Piedras Negras, Coahuila, Mexico
Lancer Limited
Ruislip, Middlesex, United Kingdom
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Lancer Corporation:
We consent to incorporation by reference in the registration statement (No.
33-55776) on Form S-1 of Lancer Corporation of our report dated February 29,
1996, relating to the consolidated balance sheets of Lancer Corporation and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1995, and related consolidated
financial statement schedule, which report appears in the December 31, 1995
annual report on Form 10-K of Lancer Corporation.
KPMG Peat Marwick LLP
San Antonio, Texas
March 28, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME FOUND ON PAGES
F-3 - F-5 OF THE COMPANY'S 10-K, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000768162
<NAME> LANCER CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 754
<SECURITIES> 0
<RECEIVABLES> 14,619
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0
0
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</TABLE>
