SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the quarterly period ended: March 31, 2000 Commission File Number: 0-19589
-------------- -------
ARGUSS HOLDINGS, INC.
----------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 02-0413153
- --------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification Number)
One Church Street, Suite 302, Rockville, Maryland 20850
- ------------------------------------------------- -----------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 301-315-0027
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:
--- ---
As of May 4, 2000, there were 13,346,750 shares of Common Stock, $ .01 par value
per share, outstanding.
<PAGE>
ARGUSS HOLDINGS, INC.
INDEX
Part I - Financial Information: Page
----
Item 1 - Financial Statements
Consolidated Balance Sheets -
March 31, 2000 (Unaudited) and December 31, 1999 3
Consolidated Statements of Operations (Unaudited)-
Three Months Ended March 31, 2000 and March 31, 1999 4
Consolidated Statements of Cash Flows (Unaudited)-
Three Months Ended March 31, 2000 and March 31, 1999 5
Notes to Consolidated Financial Statements
(Unaudited) 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3 - Quantitative and Qualitative Disclosure about Market Risk 14
Part II - Other Information 15
Items 1 through 6
Signatures
Exhibits
2
<PAGE>
ARGUSS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2000 Dec. 31, 1999
-------------- -------------
Assets (Unaudited)
Current assets:
Cash $ 386,000 $ 5,498,000
Restricted cash from customer advances 175,000 1,752,000
Accounts receivable trade, net of allowance
for doubtful accounts of $112,000 and
$263,000 in 2000 and 1999, respectively 45,681,000 37,775,000
Costs and earnings in excess of billings 14,470,000 6,825,000
Inventories 5,165,000 4,534,000
Other current assets 2,343,000 1,732,000
Deferred income taxes 1,829,000 1,829,000
------------ ------------
Total current assets 70,049,000 59,945,000
Property, plant and equipment, net 37,614,000 37,048,000
Goodwill, net 106,565,000 102,208,000
------------ ------------
$214,228,000 $199,201,000
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 7,314,000 $ 7,340,000
Short-term borrowings 45,462,000 35,000,000
Accounts payable 20,955,000 18,551,000
Customer advances -- 1,201,000
Accrued expenses and other liabilities 11,446,000 9,496,000
Due to former shareholders of acquired companies -- 650,000
------------ ------------
Total current liabilities 85,177,000 72,238,000
------------ ------------
Long-term debt, excluding current portion 17,718,000 19,423,000
Deferred income taxes 4,425,000 4,425,000
------------ ------------
Total liabilities 107,320,000 96,086,000
------------ ------------
Stockholders' equity:
Common stock $.01 par value 133,000 130,000
Additional paid-in capital 96,241,000 92,598,000
Common stock issuable to former shareholders
of acquired companies -- 500,000
Retained earnings 10,534,000 9,887,000
------------ ------------
Total stockholders' equity 106,908,000 103,115,000
------------ ------------
$214,228,000 $199,201,000
============ ============
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
ARGUSS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31:
2000 1999
---- ----
Net sales $ 55,044,000 $ 41,735,000
Cost of sales, excluding depreciation 42,948,000 33,062,000
------------ ------------
Gross profit, excluding depreciation 12,096,000 8,673,000
Selling, general and administrative expenses 5,110,000 3,796,000
Depreciation 2,366,000 1,951,000
Goodwill amortization 1,427,000 948,000
Engineering and development expenses 236,000 328,000
------------ ------------
Operating income 2,957,000 1,650,000
------------ ------------
Other income (expense):
Interest income and other 202,000 33,000
Interest expense (1,227,000) (906,000)
------------ ------------
Income before income taxes 1,932,000 777,000
Income taxes 1,285,000 676,000
------------ ------------
Net Income $ 647,000 $ 101,000
============ ============
Earnings per common share:
- basic: $.05 $.01
==== ====
- diluted: $.05 $.01
==== ====
Weighted average shares outstanding:
- basic 13,123,000 11,657,000
============ ============
- diluted 13,549,000 12,668,000
============ ============
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
ARGUSS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31:
2000 1999
---- ----
Cash flows from operating activities:
Net income $ 647,000 $ 101,000
Adjustments to reconcile net income to net
Cash provided by (used in) operating
activities:
Depreciation 2,366,000 1,951,000
Goodwill amortization 1,427,000 948,000
Non cash stock compensation 4,000 --
Changes in assets and liabilities:
Accounts receivable (6,743,000) 3,312,000
Costs and earnings in excess of billings (6,809,000) (6,969,000)
Inventories (623,000) (899,000)
Other current assets (572,000) (568,000)
Accounts payable 2,086,000 1,685,000
Billings in excess of costs and earnings -- (709,000)
Accrued expenses and other liabilities 1,351,000 631,000
------------ ------------
Net cash used in operating activities (6,866,000) (517,000)
------------ ------------
Cash flows from investing activities:
Additions to property, plant and equipment (2,474,000) (3,641,000)
Additional payment to former shareholders
of acquired companies (634,000) (7,604,000)
Purchase of telecom services companies, net (4,064,000) --
------------ ------------
Net cash used in investing activities (7,172,000) (11,245,000)
------------ ------------
Cash flows from financing activities:
Proceeds from lines of credit 10,330,000 13,344,000
Net repayments of lines of credit (1,732,000) (2,030,000)
Issuance of common stock 328,000 294,000
------------ ------------
Net cash provided by financing activities 8,926,000 11,608,000
------------ ------------
Net decrease in cash (5,112,000) (154,000)
------------ ------------
Cash at beginning of period 5,498,000 1,819,000
------------ ------------
Cash at end of period $ 386,000 $ 1,665,000
============ ============
(continued)
5
<PAGE>
ARGUSS HOLDINGS, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS (CONTINUED)
Three Months Ended March 31:
2000 1999
---- ----
Supplemental disclosures of cash paid for:
Interest $ 1,343,000 $ 895,000
Corporate income taxes 1,447,000 297,000
Supplemental disclosure of
investing and financing activities:
Fair value of assets acquired:
Accounts receivable $ 1,163,000
Other current assets 499,000
Inventory 8,000
Property and equipment 458,000
-----------
Total non cash assets 2,128,000
Liabilities (938,000)
Long-term debt (27,000)
-----------
Net non cash assets acquired 1,163,000
Cash acquired --
-----------
Fair value of net assets acquired 1,163,000
Excess of costs over fair value
of net assets acquired 6,211,000
-----------
Purchase price $ 7,374,000
===========
Common stock issued $ 3,310,000
Cash paid 4,064,000
Cash acquired --
-----------
Purchase price $ 7,374,000
===========
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
ARGUSS HOLDINGS, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
A) Organization
------------
The Company conducts its operations through its wholly owned subsidiaries,
Arguss Communications Group, Inc. ("ACG") and Conceptronic, Inc.
("Conceptronic"). ACG is a leading provider of telecommunications infrastructure
services including project management, design, engineering, construction and
maintenance for Internet, telecommunications and broadband service providers.
Conceptronic manufactures and sells highly advanced, computer-controlled
equipment used in the surface mount electronics circuit assembly industry
("SMT").
B) Basis for Presentation
----------------------
As permitted by the rules of the Securities and Exchange Commission (the
"Commission") applicable to quarterly reports on Form 10-Q, these notes are
condensed and do not contain all disclosures required by generally accepted
accounting principles. Reference should be made to the financial statements and
related notes included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999, filed with the Commission on March 16, 2000.
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments considered necessary to present fairly the
financial position of the Company as of March 31, 2000 and the results of
operations and cash flows for the periods presented. The Company prepares its
interim financial information using the same accounting principles as it does
for its annual financial statements.
The Company's telecom services operations are expected to have seasonally
weaker results in the first and fourth quarters of the year, and may produce
stronger results in the second and third quarters. This seasonality is primarily
due to the effect of winter weather on outside plant activities in the northern
areas served by ACG, as well as reduced daylight hours and customer budgetary
constraints. Certain customers tend to complete budgeted capital expenditures
before the end of the year, and postpone additional expenditures until the
subsequent fiscal period.
Certain amounts in the 1999 financial statements have been reclassified for
comparability with the 2000 presentation.
C) Goodwill
--------
Goodwill is calculated using a twenty-year amortization period. The Company
continually evaluates whether events or circumstances have occurred that
indicate that the remaining useful life of goodwill may warrant revision or that
the remaining balance may not be recoverable. When factors indicate that
goodwill should be evaluated for possible impairment, the Company uses the
estimated undiscounted cash flow of the business enterprise over the remaining
life of the asset in determining whether the asset is recoverable.
D) Earnings per Share
------------------
Basic earnings per common share are computed by dividing net income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per common share reflect the
maximum dilution that would have resulted from the exercise of stock options and
warrants and contingently issuable shares. Diluted earnings per common share are
computed by dividing net income by the weighted average number of common shares
and all dilutive securities.
7
<PAGE>
<TABLE>
<CAPTION>
For the Three Months Ended March 31:
2000 1999
---- ----
Income Net Income Net
per Share Shares Income per Share Shares Income
--------- ------ ------ --------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basic $.05 13,123,000 $647,000 $.01 11,657,000 $101,000
Effect of stock options
and warrants -- 426,000 -- -- 609,000 --
Effect of additional shares
to be issued for purchase
of telecom services
company -- -- -- -- 402,000 --
---- ---------- -------- ---- ---------- --------
Diluted $.05 13,549,000 $647,000 $.01 12,668,000 $101,000
==== ========== ======== ==== ========== ========
</TABLE>
E) Contract Accounting
-------------------
The retainage included in accounts receivable, representing amounts
withheld by contract with respect to ACG accounts receivable, was $4,540,000 and
$3,973,000 at March 31, 2000 and December 31, 1999, respectively. The Company
expects to collect substantially all the retainage within one year.
March 31, December 31,
2000 1999
------------ ------------
Costs incurred on uncompleted contracts $ 52,781,000 $ 90,798,000
Estimated earnings 6,766,000 15,338,000
------------ ------------
59,547,000 106,136,000
Less: Billings to date 45,077,000 99,311,000
------------ ------------
$ 14,470,000 $ 6,825,000
============ ============
Included in accompanying balance sheets
under the following caption:
Costs and earnings in excess of billings $ 14,470,000 $ 6,825,000
============ ============
F) Acquisitions
------------
The Company, through ACG, actively pursues acquisitions in the telecom
infrastructure services industry. During the first three months of 2000, the
Company made one acquisition. The purchase price was approximately $4.1 million
in cash and 257,000 shares of the Company's common stock, plus the assumption of
debt. The acquisition was accounted for as a purchase, and the results of
operations of the acquired company are included in the consolidated results of
the Company from effective date of the acquisition. Approximately $6.2 million
of goodwill was recorded by the Company in connection with the acquisition,
which reflects the adjustments necessary to allocate the individual purchase
price to the fair value of assets acquired and liabilities assumed. During the
first three months of 2000, the Company also made an additional payment to
former shareholders of an acquired telecom services company of approximately
$634,000 in cash and 1,000 shares of the Company's common stock in accordance
with the provisions of the purchase agreement.
G) Segment Information
-------------------
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" establishes standards for reporting information about operating
segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services and
geographic areas. Operating segments are defined as components of an enterprise
about which separate financial information is available that is evaluated
regularly by the chief operating decision maker, or decision making group, in
deciding how to allocate resources and assessing performance.
8
<PAGE>
The Company's two reportable segments are telecom services and
manufacturing. The Company conducts its operations through its wholly owned
subsidiaries, Arguss Communications Group, Inc. ("ACG") and Conceptronic, Inc.
("Conceptronic"). ACG is a leading provider of telecommunications infrastructure
services including project management, design, engineering, construction and
maintenance for Internet, telecommunications and broadband service providers.
Conceptronic manufactures and sells highly advanced, computer-controlled
equipment used in the surface mount electronics circuit assembly industry
("SMT").
Because the telecom system projects are fully integrated undertakings, the
Company does not capture individually each component of the service functions
performed for revenue reporting purposes. The manufacturing segment manufactures
and sells highly advanced, computer-controlled equipment used in the SMT circuit
assembly industry. The "All Other" column includes the Company's corporate and
unallocated expenses.
The Company's reportable segments are organized in separate business units
with different management, technology and services. The respective segments
account for their respective businesses using the same accounting policies used
in the consolidated financial statements. Summarized financial information
concerning the Company's reportable segments net of inter-company transactions
is shown in the following table.
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 2000
--------------
Telecom
Services Manufacturing All Other Total
-------- ------------- --------- -----
<S> <C> <C> <C> <C>
External sales $ 49,570,000 $ 5,474,000 -- $ 55,044,000
Cost of sales, excluding
depreciation 38,702,000 4,246,000 -- 42,948,000
------------- ------------- ------------- -------------
Gross profit, excluding
depreciation 10,868,000 1,228,000 -- 12,096,000
Operating expenses,
excluding depreciation 3,768,000 1,340,000 (2,000) 5,106,000
Goodwill amortization 1,427,000 -- -- 1,427,000
Depreciation 2,324,000 40,000 2,000 2,366,000
Engineering and development -- 236,000 -- 236,000
Non cash compensation expense 3,000 -- 1,000 4,000
Interest and other income 200,000 2,000 -- 202,000
Interest expense (1,160,000) (67,000) -- (1,227,000)
------------- ------------- ------------- -------------
Pretax income (loss) $ 2,386,000 ($ 453,000) ($ 1,000) $ 1,932,000
============= ============= ============= =============
Capital expenditures $ 2,469,000 $ 3,000 $ 2,000 $ 2,474,000
============= ============= ============= =============
Property, plant and equipment, net $ 36,356,000 $ 1,237,000 $ 21,000 $ 37,614,000
============= ============= ============= =============
Total assets $ 200,302,000 $ 11,394,000 $ 2,532,000 $ 214,228,000
============= ============= ============= =============
Total liabilities $ 89,883,000 $ 9,200,000 $ 8,237,000 $ 107,320,000
============= ============= ============= =============
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1999
--------------
Telecom
Services Manufacturing All Other Total
-------- ------------- --------- -----
<S> <C> <C> <C> <C>
External sales $ 37,806,000 $ 3,929,000 -- $ 41,735,000
Cost of sales, excluding
depreciation 30,581,000 2,481,000 -- 33,062,000
------------- ------------- ------------- -------------
Gross profit, excluding
depreciation 7,225,000 1,448,000 -- 8,673,000
Operating expenses,
excluding depreciation 2,644,000 1,111,000 41,000 3,796,000
Goodwill amortization 948,000 -- -- 948,000
Depreciation 1,898,000 53,000 -- 1,951,000
Engineering and development -- 328,000 -- 328,000
Interest and other income 23,000 -- 10,000 33,000
Interest expense (854,000) (48,000) (4,000) (906,000)
------------- ------------- ------------- -------------
Pretax income (loss) $ 904,000 ($ 92,000) ($ 35,000) $ 777,000
============= ============= ============= =============
Capital expenditures $ 3,639,000 $ 2,000 -- $ 3,641,000
============= ============= ============= =============
Property, plant and equipment, net $ 31,571,000 $ 1,238,000 $ 25,000 $ 32,834,000
============= ============= ============= =============
Total assets $ 145,508,000 $ 9,985,000 $ 2,884,000 $ 158,377,000
============= ============= ============= =============
Total liabilities $ 68,332,000 $ 5,072,000 $ 7,302,000 $ 80,706,000
============= ============= ============= =============
</TABLE>
H) BANK FINANCING
In March 2000, the Company increased its availability under credit
facilities with banks. The Company expanded the revolving credit facility to
$120 million from $70 million. The Company continues to pledge the capital stock
of its wholly owned subsidiaries and the majority of the Company's assets to
secure the credit facility. The Company intends to use the credit facility to
provide working capital to finance acquisitions, the purchase of capital assets
and for other corporate purposes. The credit facility also contains a $30
million, in original notional amount, amortizing five-year term facility. Under
the provisions of the credit agreement, borrowings are limited to a multiple of
the Company's adjusted EBITDA. Amounts borrowed under the line bear interest
either as a relationship to the London Interbank Offered Rate ("LIBOR"), plus
1.25% to 2.25%, or to the Prime Rate plus up to 1.00%, as determined by the
ratio of the Company's total funded debt to EBITDA. The Company also incurs a
commitment fee on the unused portion of the loan at a rate of up to 0.50%, as
determined by the ratio of the Company's total funded debt to EBITDA. The
revolving line of credit has an initial term, maturing on March 19, 2003, and is
renewable for up to one additional year.
In the ordinary course of business, the Company is exposed to floating
interest rate risk. In March 1999, the Company terminated interest rate swaps
entered into as a hedge against variable-term loan interest rate risk. The
aggregate loss of approximately $330,000 on termination of the interest rate
swaps is being amortized over the remaining life of the related term loan that
was hedged.
To hedge the variable-term loan interest rate risk for $30 million in
original notional amount, five-year, term financing facility, the Company has
entered into an interest rate swap pursuant to which it pays fixed interest at a
rate of 5.78% and receives variable interest on the same notional amount. At
March 31, 2000, the market value of the swap, which expires with the maturity of
the debt on March 1, 2004, was approximately $316,000. During the three months
ended March 31, 2000, the Company's receipts under the interest rate swap
aggregated approximately $20,000.
10
<PAGE>
ARGUSS HOLDINGS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company conducts its operations through its wholly owned subsidiaries,
Arguss Communications Group, Inc. ("ACG") and Conceptronic, Inc.
("Conceptronic"). ACG is a leading provider of telecommunications infrastructure
services including project management, design, engineering, construction and
maintenance for Internet, telecommunications and broadband service providers.
Conceptronic manufactures and sells highly advanced, computer-controlled
equipment used in the surface mount electronics circuit assembly industry
("SMT").
THREE MONTHS ENDED MARCH 31, 2000, COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
The Company had consolidated earnings before interest, taxes, depreciation,
amortization and non cash stock compensation (EBITDA) of $6,956,000 for the
three months ended March 31, 2000, compared to $4,582,000 for the same period
one year ago. For the three months ended March 31, 2000, EBITDA, as a percentage
of consolidated net sales (EBITDA margin), was 12.6%, compared to 11.0% for the
comparable period in 1999. ACG had EBITDA of $7,299,000 for the three months
ended March 31, 2000, compared to $4,605,000 for the same period in 2000. ACG
achieved an EBITDA margin of 14.7% for the three months ended March 31, 2000 and
12.2% for the three months ended March 31, 1999. ACG's strong EBITDA margin
performance was combined with continued strong revenue growth and improved gross
margin results as discussed below.
The Company had consolidated net income of $647,000 for the three months
ended March 31, 2000, compared to $101,000 for the three months ended March 31,
1999. The Company's results were favorably impacted by the maturation of telecom
services projects started in Portland, OR and Denver, CO.
Consolidated net sales for the three months ended March 31, 2000 were
approximately $55,044,000, compared to approximately $41,735,000 for the three
months ended March 31, 1999, an increase of 32% due, in part, to acquisitions.
Operations owned for at least one year had a net sales increase of $9,950,000 or
24% for the three months ended March 31, 2000.
Consolidated gross profit margin, excluding depreciation, was 22% of sales
for the three months ended March 31, 2000, compared to 21% for the three months
ended March 31, 1999. The improvement in margins is due to ACG, whose Denver, CO
project achieved greater sales volume and margins for the three months ended
March 31, 2000 as it has matured.
Consolidated selling, general and administrative expenses for the three
months ended March 31, 2000 were $5,110,000, compared to $3,796,000 for the
three months ended March 31, 1999 or 9% of net sales in both years. The increase
in expense is consistent with revenue growth.
Depreciation expense increased to $2,366,000 for the three months ended
March 31, 2000, compared to $1,951,000 for the three months ended March 31, 1999
due primarily to ACG which made significant equipment acquisitions during
calendar year 1999, and during the three months ended March 31, 2000. The
equipment is depreciated over sixty months. Depreciation expense from companies
acquired after March 31, 1999 was $54,000 during the three months ended March
31, 2000.
Goodwill amortization, which is calculated using a twenty-year amortization
period, increased to $1,427,000 from $948,000 from the comparable period one
year ago due primarily to an additional payment made to former shareholders of
an acquired company made in November 1999. The additional payment earned under
the terms of the purchase agreement was approximately $23 million and was
recorded as an increase in goodwill. The increased goodwill, amortized over the
remaining amortization period, increased goodwill amortization during the three
months ended March 31, 2000 by $283,000. The Company also recorded approximately
$8 million in additional goodwill during the three months ended December 31,
1999 related to an acquisition. Amortization expense of the goodwill related to
this acquisition was $101,000 for the three months ended March 31, 2000.
11
<PAGE>
Interest expense for the three months ended March 31, 2000 was $1,227,000,
compared to $906,000 for the comparable period in 1999. The ACG interest expense
increased for the three months ended March 31, 2000, due primarily to the
purchase of, and additional payments to, telecom service companies which were
partially financed through bank lines of credit and due to increased use of
financing lines for the capital assets purchased in support of ACG's revenue
growth. Higher interest rates related to the revolving credit line during the
three months ended March 31, 2000, compared to the three months ended March 31,
1999 also contributed to higher interest expense. (See discussion of expanded
bank credit facilities in LIQUIDITY AND CAPITAL RESOURCES.)
Income tax expense was $1,285,000 for the three months ended March 31,
2000, compared to $676,000 in income tax expense for the three months ended
March 31, 1999. The effective income tax rate was 67% and 87% for the three
months ended March 31, 2000 and 1999, respectively. Goodwill amortization, which
is nondeductible for income tax purposes, impacts the effective income tax rate
creating an unusual relationship of the expected effective tax rate to pretax
income. During the three months ended March 31, 2000, the Company utilized a 38%
effective income tax rate prior to giving effect to the impact of nondeductible
goodwill amortization on pretax income, compared to a 39% estimated tax rate in
the comparable period of one year ago.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operations for the three months ended March 31, 2000 was
$6,866,000 compared with $517,000 for the three months ended December 31, 1999.
The increase in cash used in operating activities is due to the increased
revenue generated by a greater volume of ACG projects that caused an increase in
accounts receivable and costs and earnings in excess of billings. In addition,
ACG improved its timely collection of accounts receivable during 1999. ACG
collected many of its 1998 receivables in the three months ended March 31, 1999.
Net cash used for investing activities for the three months ended March 31,
2000 was $7,172,000, compared to $11,245,000 in the comparable period of 1999.
Of the 2000 investing activities, $4,064,000 was used to make acquisitions
compared to none in 1999 when no acquisitions were made. In 2000, pursuant to
the provisions of the purchase agreements, $634,000 was paid to former
shareholders of acquired companies, compared to $7,604,000 in 1999. In 2000,
$2,474,000 was spent on capital equipment acquisitions compared to $3,641,000 in
1999. The decrease from 1999 reflects timing differences in the capital asset
purchases. The Company has budgeted a similar level of expenditure for 2000 as
for 1999, when the Company had approximately $13.5 million in capital
expenditures.
Net cash provided by financing activities was $8,296,000 for the three
months ended March 31, 2000, compared to net cash provided by financing
activities of $11,608,000 for the comparable period in 1999. The financing
activity in 2000 reflects that the proceeds from the Company's credit line in
1999 to pay former shareholders of acquired companies was greater than amounts
paid in 2000.
In March 2000, the Company increased its availability under credit
facilities with banks. The Company expanded the revolving credit facility to
$120 million from $70 million. The Company continues to pledge the capital stock
of its wholly owned subsidiaries and the majority of the Company's assets to
secure the credit facility. The Company intends to use the credit facility to
provide working capital to finance acquisitions and the purchase of capital
assets and for other corporate purposes. The credit facility also contains a $30
million, in original notional amount, amortizing five-year term facility. Under
the provisions of the credit agreement, borrowings are limited to a multiple of
the Company's adjusted EBITDA. Amounts borrowed under the line bear interest
either as a relationship to the London Interbank Offered Rate ("LIBOR"), plus
1.25% to 2.25%, or to the Prime Rate plus up to 1.00%, as determined by the
ratio of the Company's total funded debt to EBITDA. The Company also incurs a
commitment fee on the unused portion of the loan at a rate of up to 0.50%, as
determined by the ratio of the Company's total funded debt to EBITDA. The
revolving line of credit has an initial term, maturing on March 19, 2003, and is
renewable for up to one additional year.
To hedge the variable-term loan interest rate risk for $30 million in
original notional amount, five-year, term financing facility, the Company has
entered into an interest rate swap pursuant to which it pays fixed interest at a
rate of 5.78% and receives variable interest on the same notional amount. At
March 31, 2000, the market value of the swap, which expires with the maturity of
the debt on March 1, 2004, was approximately $316,000. During the three months
ended March 31, 2000, the Company's receipts under the interest rate swap
aggregated approximately $20,000.
12
<PAGE>
At March 31, 2000 the Company has entered into three letters of intent to
purchase telecommunications services companies. The aggregate purchase price of
these three acquisitions will be approximately $60,000,000, plus the assumption
of debt. Half of that amount, or $30,000,000, will be paid in cash and half will
be satisfied by issuance of the Company's common stock. The Company will finance
the cash portion of the purchase price utilizing the existing lines of credit.
The Company expects to close these purchases by the end of the second quarter
2000. At March 31, 2000, the Company had $76,000,000 available under its
existing credit facility.
The Company's telecom services operations are expected to have seasonally
weaker results in the first and fourth quarters of the year, and may produce
stronger results in the second and third quarters. This seasonality is primarily
due to the effect of winter weather on outside plant activities in the northern
areas served by ACG, as well as reduced daylight hours and customer budgetary
constraints. Certain customers tend to complete budgeted capital expenditures
before the end of the year, and are slow to return to expected production levels
in the first quarter of the subsequent fiscal period.
YEAR 2000 DATE CONVERSION
The Year 2000 issue relates to the inability of certain computer software
programs to properly recognize and process date-sensitive information relative
to the year 2000 and beyond. Without corrective measures, this issue could cause
computer applications to fail or to create erroneous results. Incomplete or
untimely resolution of the Year 2000 issue by the Company or by its key vendors,
customers suppliers or by other third parties could have a materially adverse
impact on the Company's business, operations or financial condition in the
future.
To date, the Company has not experienced any material Year 2000 issues and
has been informed by our material suppliers and vendors that they have also not
experienced material Year 2000 issues. The Company has not spent a material
amount on Year 2000 compliance issues. Most expenses have related to the
operating costs associated with time spent by employees and consultants in the
evaluation and implementation process and Year 2000 compliance matters
generally.
FORWARD LOOKING STATEMENTS
Statements made in the quarterly report that are not historical or current
facts are "forward-looking statements" made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Investors
are cautioned that actual results may differ substantially from such
forward-looking statements. Forward looking statements may be subject to certain
risks and uncertainties, including -- but not limited to -- continued acceptance
of the Company's products and services in the marketplace, uncertainties
surrounding new acquisitions, floating rate debt, risks of the construction
industry, including weather and an inability to plan and schedule activity
levels, doing business overseas and risks inherent in concentration of business
in certain customers. All of these risks are detailed from time to time in the
Company's filings with the Securities and Exchange Commission. Accordingly, the
actual results of the Company could differ materially from such forward-looking
statements.
13
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the ordinary course of business, the Company is exposed to interest rate
risk. To reduce variable-term loan interest rate risk, the Company has entered
into an interest rate swap in the same notional amount, term and interest rate
relationship to LIBOR as the Company's $24,750,000 variable rate term loan.
Arguss pays a fixed interest rate of 5.78% pursuant to the interest rate swap.
The Company continues to incur interest expense for the bank's applicable
margins ranging from 1.25% to 2.25% above LIBOR as determined by the ratio of
the Company's total funded debt to EBITDA.
Interest rate swaps are entered into as a hedge of underlying debt
instruments to effectively change the characteristics of the interest rate
without actually changing the debt instrument. For fixed rate debt, interest
rate changes affect the fair value, but do not impact earnings or cash flow.
Conversely, for floating rate debt, interest rate changes generally do not
affect the fair market value, but do impact future earnings and cash flow. A one
percentage point decrease in interest rates would decrease the fair value of
interest rate swaps by approximately $316,000. The earnings and cash flow impact
for the next year resulting from a one percentage point increase in interest
rates would be neutral because of the cash flow received from the swaps. All of
the principal of the variable rate debt subject to the interest rate swap would
be repaid over the next four years thereby diminishing the impact of market
valuations on hedges.
14
<PAGE>
ARGUSS HOLDINGS, INC.
PART II
Other Information
Items 1, 2, 3, 4 and 5: Not Applicable.
Item 6: Exhibits and Reports on form 8-K
10(x) Amendment and Restated Credit Agreement dated as of March 22, 2000
among Arguss Holdings, Inc., Crestar Bank, Fleet Bank, N.A., Keybank,
National Association, Union Bank of California, N.A., National City
Bank and Bank of America, NA, as agent, and Bank of America
Securities, LLC, as syndication agent and manager, and related
promissory notes, pledge agreements and security agreements.
(a) 27 Financial Data Schedule
(b) Reports on Form 8-K
None.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Arguss Holdings, Inc.
May 4, 2000 By: /s/ Rainer H. Bosselmann
-----------------------------------------
Rainer H. Bosselmann
Chief Executive Officer
May 4, 2000 By: /s/ Arthur F. Trudel
-----------------------------------------
Arthur F. Trudel
Principal Financial Officer and
Principal Accounting Officer
16
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Agreement") is made this
22nd day of March, 2000, by and among ARGUSS HOLDINGS, INC., a Delaware
corporation with its principal office at One Church Street, Suite 302,
Rockville, Maryland 20850 (the "Borrower"), each of the Lenders named herein on
the signature pages hereof (the "Lenders" and each individually, a "Lender"),
BANK OF AMERICA, N.A., a national banking association (successor by merger to
NationsBank, N.A.), as agent for the Lenders (in such capacity, the "Agent"),
and BANC OF AMERICA SECURITIES LLC (successor by merger to NationsBanc
Montgomery Securities LLC) ("BAS"), as the Syndication agent and arranger.
A. The Borrower, the Lenders, the Agent and BAS are parties to a Credit
Agreement dated as of March 19, 1999 (said Credit Agreement, as thereafter
amended from time to time, the "Credit Agreement") All capitalized terms used
herein and not otherwise defined have the meanings given to such terms in the
Credit Agreement.
B. The Borrower has requested that the Lenders increase the maximum
principal amount available under the Revolving Loans from Seventy Million
Dollars ($70,000,000) to One Hundred Twenty Million Dollars ($120,000,000) and
that the Lenders, the Agent and BAS amend the Credit Agreement to reflect such
increase and make such other amendments to the Credit Agreement as more
particularly described herein, and the Lenders, the Agent and BAS have agreed,
on the condition, among others, that this Agreement be executed and delivered by
the Borrower.
<PAGE>
NOW THEREFORE, in consideration of the premises, the mutual agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Lenders, the
Agent and BAS hereby agree as follows:
1. RECITALS. The parties hereto acknowledge and agree that the above
Recitals are true and correct in all respect and that the same are incorporated
herein and made a part hereof by reference.
2. DEFINITIONS. From and after the effective date hereof, the following
definitions set forth in Section 1.1 of the Credit Agreement are hereby amended
and restated in their entirety as follows:
"Aggregate Revolving Commitments" means the sum of the Revolving
Commitments, which is, One Hundred Twenty Million Dollars ($120,000,000).
"Applicable Lending Office" means, for each Lender and for each Type
of Loan, the "Lending Office" of such Lender (or of an Affiliate of such
Lender) designated for such Type of Loan on Schedule A-1 attached hereto or
such other office of such Lender (or an Affiliate of such Lender) as such
Lender may from time to time specify to the Agent and the Borrower by
written notice in accordance with the terms hereof as the office by which
its Loans of such Type are to be made and maintained.
"Commitment" means each Lender's individual obligation to make
Revolving Loans and the Term Loan in a principal amount not to exceed the
dollar amounts shown opposite its name on Schedule A-1 attached hereto, as
such amount may be reduced from time to time pursuant to Sections 2.7, 2.13
and 11.3(a).
"Revolving Commitment Percentage" means the percentage that the
Revolving Commitment of each Lender bears to the Aggregate Revolving
Commitments, which percentage is shown opposite the name of such Lender on
Schedule A-1 attached hereto, as such percentage may be adjusted from time
to time as provided in Sections 2.13 and 11.3(a).
"Term Commitment Percentage" means the percentage that the Term
Commitment of each Lender bears to the Aggregate Term Commitments, which
percentage is shown opposite the name of such Lender on Schedule A-1
attached hereto, as such percentage may be adjusted from time to time as
provided in Section 11.3(a).
2
<PAGE>
3. NOTICES. From and after the effective date hereof, any notice required
to be given to any Lender pursuant to the Credit Agreement shall be given to
such Lender at the address set forth on Schedule A-1 attached hereto as the
Address for Notices for such Lender.
4. PERMITTED ACQUISITIONS. From and after the effective date hereof Section
2.5(a)(vi) of the Credit Agreement is hereby amended and restated in its
entirety as follows:
(vi) The Permitted Acquisition Price shall not (A) exceed
twenty five percent (25%) of the Borrower's Consolidated Net Worth as shown
on the most recent Financial Statements required to be delivered to the
Lenders pursuant to Sections 6.1(a) and (b), or (B) cause the aggregate
Permitted Acquisition Price for all such Acquisitions to exceed the lesser
of (aa) Fifty Million Dollars ($50,000,000) in any twelve (12) month period
(excluding the Permitted Acquisition Price of any such Acquisitions which
are expressly approved by the Required Lenders during such period), or (bb)
fifty percent (50%) of the Borrower's Consolidated Net Worth in any fiscal
year as shown on the most recent Financial Statements required to be
delivered to the Lenders pursuant to Sections 6.1(a) and (b). The parties
hereto acknowledge that for purposes of subparagraph B(aa) above, the date
of this Agreement shall constitute the beginning of a new twelve month
period and no previous Acquisitions shall be counted towards the limit set
forth in subparagraph B(aa) above.
5. FUNDED DEBT. From and after the effective date hereof, Section 7.1 of
the Credit Agreement is hereby amended and restated in its entirety as follows:
Section 7.1 FUNDED DEBT. Create, incur, assume or suffer to exist or
permit any Subsidiary to create, incur, assume or suffer to exist any
Funded Debt except:
(a) Funded Debt of the Borrower or the Subsidiaries under this
Agreement or the Notes;
(b) Funded Debt of the Borrower and each Subsidiary subordinated
on terms satisfactory to the Required Lenders to the Borrower's and each
Subsidiary's respective obligations under the Notes and the Loan Documents;
(c) Funded Debt of the Borrower and each Subsidiary secured by
Liens permitted by Section 7.2 (e) not to exceed One Million Dollars
($1,000,000) in the aggregate;
3
<PAGE>
(d) Funded Debt or other obligations incurred in connection with
Earn Out Provisions;
(e) Funded Debt incurred in connection with Capitalized Lease
Obligations, but not to exceed Two Million Five Hundred Thousand Dollars
($2,500,000) in the aggregate;
(f) Funded Debt secured by one or more mortgage(s) or deed(s) of
trust on real property of the Borrower or any Subsidiary in an amount not
to exceed Five Million Dollars ($5,000,000) in the aggregate;
(g) Funded Debt listed on SCHEDULE 7.1 attached hereto;
(h) Up to Five Million Dollars ($5,000,000) in the aggregate of
any Funded Debt (other than the Funded Debt referred to in Sections
7.1(a)-(g) above) assumed in connection with any Permitted Acquisition and
which has been or will be, paid or refinanced within six (6) months from
the date of the closing of the Permitted Acquisition by a Revolving Loan;
(i) Additional Funded Debt, including, but not limited to Funded
Debt incurred by the Borrower arising out of any swap agreement (as defined
in 11 U.S.C. 101) or under any foreign exchange contracts on a mark to
market basis, in an amount when combined with the Funded Debt referred to
in Sections 7.1 (b) - (h) above) does not exceed Ten Million Dollars
($10,000,000) in the aggregate; and
(j) Funded Debt incurred in connection with certain consignment
Inventory from TCI.
6. PROPOSED ACQUISITIONS. The parties hereto acknowledge and agree that the
Permitted Acquisition Price for the proposed acquisitions of Precision Valley
Communications Corp., Renegade Construction Corp. and U.S. Communications Corp.
by an Acquisition Company shall not be counted towards the limitation on
Permitted Acquisition Price set forth in Section 2.4(a)(vi) of the Credit
Agreement as amended herein.
7. EXTENSION OF REVOLVING COMMITMENT TERMINATION DATE. The Parties hereto
acknowledge and agree that pursuant to Section 2.13 of the Credit Agreement each
of the Lenders has agreed to extend the Revolving Commitment Termination Date
for an additional term of one (1) year.
4
<PAGE>
8. LOAN FEE. In consideration of the Lenders' agreement to increase the
Aggregate Revolving Commitments, the Borrower agrees to pay the Lenders at the
time of the execution of this agreement, a loan fee in the amount of One Hundred
Twenty Five Thousand Dollars ($125,000), which fee shall be considered earned
when paid and is not refundable, to be paid to the respective Lenders and in the
amounts set forth in the invitation letter from the Agent to the Borrower.
9. CONDITIONS PRECEDENT. This Agreement shall become effective on the date
the Agent receives the following, each of which shall be satisfactory in form
and substance to the Agent, BAS and the Lenders:
(a) An Amended and Restated Revolving Credit Note issued and delivered
by the Borrower to Bank of America, N.A. in the form of EXHIBIT A attached
hereto and incorporated herein by reference, payable to the order of Bank of
America, N.A. in the maximum principal amount of Thirty Six Million Five Hundred
Thousand Dollars ($36,500,000) (the "Bank of America Replacement Note").
(b) An Amended and Restated Revolving Credit Note issued and delivered
by the Borrower to Crestar Bank in the form of EXHIBIT B attached hereto and
incorporated herein by reference, payable to the order of Crestar Bank in the
maximum principal amount of Thirteen Million Two Hundred Thousand Dollars
($13,200,000) (the "Crestar Bank Replacement Note").
(c) An Amended and Restated Revolving Credit Note issued and delivered
by the Borrower to Fleet Bank, N.A. in the form of EXHIBIT C attached hereto and
incorporated herein by reference, payable to the order of Fleet Bank, N.A. in
5
<PAGE>
the maximum principal amount of Thirteen Million Two Hundred Thousand Dollars
($13,200,0000) (the "Fleet Bank Replacement Note").
(d) An Amended and Restated Revolving Credit Note issued and delivered
by the Borrower to Keybank, National Association in the form of EXHIBIT D
attached hereto and incorporated herein by reference, payable to the order of
Keybank, National Association in the maximum principal amount of Twenty Four
Million Dollars ($24,000,000) (the "Keybank Replacement Note").
(e) An Amended and Restated Revolving Credit Note issued and delivered
by the Borrower to Union Bank of California, N.A. in the form of EXHIBIT E
attached hereto and incorporated herein by reference, payable to the order of
Union Bank of California, N.A. in the maximum principal amount of Twenty Million
Four Hundred Thousand Dollars ($20,400,000) (the "Union Bank Replacement Note").
(f) An Amended and Restated Revolving Credit Note issued and delivered
by the Borrower to National City Bank in the form of EXHIBIT F attached hereto
and incorporated herein by reference, payable to the order of National City Bank
in the maximum principal amount of Twelve Million Seven Hundred Thousand Dollars
($12,700,000) (the "National City Bank Replacement Note").
(g) Proof that the Borrower has paid all costs and expenses to the Agent
in connection with this Agreement, including but not limited to the Agent's
reasonable attorney's fees; and
(h) Such other information, instruments, opinions, documents,
certificates and reports as the Agent, BAS or the Lenders may deem necessary.
6
<PAGE>
10. COUNTERPARTS. This Agreement may be executed in any number of duplicate
originals or counterparts, each of which duplicate original or counterpart shall
be deemed to be an original and all taken together shall constitute one and the
same instrument.
11. LOAN DOCUMENTS; GOVERNING LAW; ETC. This Agreement is one of the Loan
Documents defined in the Credit Agreement and shall be governed and construed in
accordance with the laws of the State of Maryland. The headings and captions in
this Agreement are for the convenience of the parties only and are not a part of
this Agreement.
12. ACKNOWLEDGMENTS. The Borrower hereby confirms to the Agent, the
Lenders' and BAS the enforceability and validity of each of the Loan Documents.
In addition, the Borrower hereby agrees to the execution and delivery of this
Agreement and the terms and provisions, covenants or agreements contained in
this Agreement shall not in any manner release, impair, lessen, modify, waive or
otherwise limit the liability and obligations of the Borrower under the terms of
any of the Loan Documents, except as otherwise specifically set forth in this
Agreement. The Borrower issues, ratifies and confirms the representations,
warranties and covenants contained in the Loan Documents.
13. MODIFICATIONS. This Agreement may not be supplemented, changed, waived,
discharged, terminated, modified or amended, except by written instrument
executed by the parties.
14. FULL FORCE AND EFFECT. Except as expressly set forth above, the
provisions of the Credit Agreement shall continue in full force and effect and
are hereby ratified and confirmed. A default under this Agreement shall be a
default under the Credit Agreement.
[SIGNATURES BEGIN ON NEXT PAGE]
7
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Agreement to be duly
executed as of the date first above written by its duly authorized officer and
the Agent, BAS and each Lender have caused it to be executed by their duly
authorized officers.
WITNESS/ATTEST: ARGUSS HOLDINGS, INC.
By /s/ Arthur Trudel
- ----------------------------- -------------------------------
Name: Arthur Trudel
Title: Chief Financial Officer
8
<PAGE>
WITNESS: BANK OF AMERICA, N.A.
as Agent
By: /s/ Elizabeth P. Shore
- ----------------------------- -------------------------------
Name: Elizabeth P. Shore
Title: Senior Vice President
9
<PAGE>
WITNESS: BANC OF AMERICA SECURITIES LLC
as syndication agent and arranger
By: /s/ Terrance Katon
- ----------------------------- -------------------------------
Name: Terrance Katon
Title: Principal
10
<PAGE>
WITNESS: BANK OF AMERICA, N.A.
6610 Rockledge Drive, Suite 300
Bethesda, Maryland 20817
By: /s/ Elizabeth P. Shore
- ----------------------------- -------------------------------
Name: Elizabeth P. Shore
Title: Senior Vice President
11
<PAGE>
WITNESS: CRESTAR BANK
1445 New York Avenue, N.W.
Washington, D.C. 20005
By: /s/ Diane E. Bauman
- ----------------------------- -------------------------------
Name: Diane E. Bauman
Title: Vice President
12
<PAGE>
WITNESS: FLEET BANK, N.A.
1185 Avenue of the Americas
New York, New York 10036
By: /s/ Thomas J. Levy
- ----------------------------- -------------------------------
Name: Thomas J. Levy
Title: Vice President
13
<PAGE>
WITNESS: KEYBANK, NATIONAL ASSOCIATION
1 Canal Plaza
Portland, Maine 04101
By: /s/ Noel B. Graydon
- ----------------------------- -------------------------------
Name: Noel B. Graydon
Title: Senior Vice President
14
<PAGE>
WITNESS: UNION BANK OF CALIFORNIA, N.A.
445 South Figueroa Street, 18th Floor
Los Angeles, California 90071
By: /s/ J. Scott Jessup
- ----------------------------- -------------------------------
Name: J. Scott Jessup
Title: Vice President
15
<PAGE>
WITNESS: NATIONAL CITY BANK
1900 East 9th Street, Loc 2077
Cleveland, Ohio 44114
By: /s/ Barry Robinson
- ----------------------------- -------------------------------
Name: Barry Robinson
Title: Assistant Vice President
16
<PAGE>
SCHEDULE A-1
Type of Amount of Commitment
Loan Commitment Percentage
- ------- ---------- ----------
Term $9,000,000 30%
Revolving $36,500,000 30.417%
- --------------------------
Lending Office for Eurodollar Loans:
(Term Loan and Revolving Loans) BANK OF AMERICA, N.A.
6610 Rockledge Drive, Suite 300
Bethesda, Maryland 20817
Lending Office for Base Rate Loans:
(Term Loan and Revolving Loans) BANK OF AMERICA, N.A.
6610 Rockledge Drive, Suite 300
Bethesda, Maryland 20817
Address for Notices: BANK OF AMERICA, N.A.
6610 Rockledge Drive, Suite 300
Bethesda, Maryland 20817
Attn: Ms. Maria Manos Reed
Senior Vice President
(301) 493-7072
<PAGE>
Type of Amount of Commitment
Loan Commitment Percentage
- ------- ---------- ----------
Term $3,300,000 11%
Revolving $13,200,000 11%
- --------------------------
Lending Office for Eurodollar Loans:
(Term Loan and Revolving Loans) CRESTAR BANK
1445 New York Avenue, N.W.
Washington, D.C. 20005
Lending Office for Base Rate Loans:
(Term Loan and Revolving Loans) CRESTAR BANK
1445 New York Avenue, N.W.
Washington, D.C. 20005
Address for Notices: CRESTAR BANK
1445 New York Avenue, N.W.
Washington, D.C. 20005
Attn: Hathi Simmelink
(202) 879-6331
<PAGE>
Type of Amount of Commitment
Loan Commitment Percentage
- ------- ---------- ----------
Term $3,300,000 11%
Revolving $13,200,000 11%
- --------------------------
Lending Office for Eurodollar Loans:
(Term Loan and Revolving Loans) FLEET BANK, N.A.
1185 Avenue of the Americas
New York, New York 10036
Lending Office for Base Rate Loans:
(Term Loan and Revolving Loans) FLEET BANK, N.A.
1185 Avenue of the Americas
New York, New York 10036
Address for Notices: FLEET BANK, N.A.
1185 Avenue of the Americas
New York, New York 10036
Attn: Ms. Delores Jones
(212) 819-5751
<PAGE>
Type of Amount of Commitment
Loan Commitment Percentage
- ------- ---------- ----------
Term $6,000,000 20%
Revolving $24,000,000 20%
- --------------------------
Lending Office for Eurodollar Loans:
(Term Loan and Revolving Loans) KEYBANK, NATIONAL ASSOCIATION
1 Canal Plaza
Portland, Maine 04101
Lending Office for Base Rate Loans:
(Term Loan and Revolving Loans) KEYBANK, NATIONAL ASSOCIATION
1 Canal Plaza
Portland, Maine 04101
Address for Notices: KEYBANK, NATIONAL ASSOCIATION
1 Canal Plaza
Portland, Maine 04101
Attn: Ms. Missy Cookson
(207) 874-7021
<PAGE>
Type of Amount of Commitment
Loan Commitment Percentage
- ------- ---------- ----------
Term $5,100,000 17%
Revolving $20,400,000 17%
- --------------------------
Lending Office for Eurodollar Loans:
(Term Loan and Revolving Loans) UNION BANK OF CALIFORNIA, N.A.
445 South Figueroa Street, 18th Floor
Los Angeles, California 90071
Lending Office for Base Rate Loans:
(Term Loan and Revolving Loans) UNION BANK OF CALIFORNIA, N.A.
445 South Figueroa Street, 18th Floor
Los Angeles, California 90071
Address for Notices: UNION BANK OF CALIFORNIA, N.A.
445 South Figueroa Street, 18th Floor
Los Angeles, California 90071
Attn: Mr. Scott Jessup
(213) 236-4023
<PAGE>
Type of Amount of Commitment
Loan Commitment Percentage
- ------- ---------- ----------
Term $3,300,000 11%
Revolving $12,700,000 10.583%
- --------------------------
Lending Office for Eurodollar Loans:
(Term Loan and Revolving Loans) NATIONAL CITY BANK
1900 East 9th Street, Loc 2077
Cleveland, Ohio 44114
Lending Office for Base Rate Loans:
(Term Loan and Revolving Loans) NATIONAL CITY BANK
1900 East 9th Street, Loc 2077
Cleveland, Ohio 44114
Address for Notices: NATIONAL CITY BANK
1900 East 9th Street, Loc 2077
Cleveland, Ohio 44114
Attn: Ms. Kelly Moyer
(216) 575-9322
<PAGE>
CONSENT
Pursuant to the terms and provisions of the attached First Amendment to
Credit Agreement (the "Amendment"), by and between the Borrower, the Lender's
named in the signature pages therein (the "Lenders" and each individually a
"Lender"), Bank of America, N.A., as agent for the Lenders (the "Agent") and
Banc of America Securities LLC ("BAS"), as the syndication agent and arranger,
the parties thereto have agreed to modify certain provisions of the Credit
Agreement as set forth therein. The Lenders, the Agent and BAS have advised the
Borrower and Arguss Communications Group, Inc., a Delaware corporation ("ACG"),
Arguss Services Corp., a Delaware corporation ("ASC") and Conceptronic, Inc., a
Delaware corporation ("Conceptronic") (each a "Guarantor" and collectively, the
"Guarantors") they would not agree to modify the terms of the Credit Agreement
without the Guarantors' consent and agreement to the matters hereinbelow set
forth.
NOW THEREFORE, in consideration of, and a material inducement to, the
Lenders, the Agent and BAS modifying the Credit Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Guarantors hereby consent and agree as follows:
1. CONSENT. The Guarantors expressly hereby consent to the modification of
the Credit Agreement and hereby acknowledge and consent to the terms and
provisions of the Amendment.
2. ACG'S RATIFICATION OF GUARANTY. ACG hereby expressly ratifies and
reconfirms all of the terms and provisions of that certain Guaranty Agreement
dated as of March 19, 1999 (the "ACG Guaranty") in favor of the Agent, as agent
for the Lenders, and acknowledges, approves, ratifies and reconfirms its
liability as a guarantor of the Guaranteed Obligations (as such term is defined
in the ACG Guaranty) and further agrees that the Agent's action in requiring its
consent to the modification of the Credit Agreement shall not constitute a
waiver of the Agent's right pursuant to the terms of the ACG Guaranty or any of
the other Loan Documents to renew, extend, increase the principal amount or
otherwise modify the Loans or amend, restate, substitute or otherwise modify the
Credit Agreement or any of the other Loan Documents without ACG's prior consent
and without affecting ACG's liability therefore. ACG represents and warrants to
the Agent that it has no defense to the enforcement of the ACG Guaranty in
accordance with its terms as modified hereby as it applies to the Credit
Agreement, as amended or any of the Loan Documents.
3. ASC'S RATIFICATION OF GUARANTY. ASC hereby expressly ratifies and
reconfirms all of the terms and provisions of that certain Guaranty Agreement
dated as of March 19, 1999 (the "ASC Guaranty") in favor of the Agent, as agent
for the Lenders, and acknowledges, approves, ratifies and reconfirms its
liability as a guarantor of the Guaranteed Obligations (as such term is defined
in the ASC Guaranty) and further agrees that the Agent's action in requiring its
consent to the modification of the Credit Agreement shall not constitute a
waiver of the Agent's right pursuant to the terms of the ASC Guaranty or any of
<PAGE>
the other Loan Documents to renew, extend, increase the principal amount or
otherwise modify the Loans or amend, restate, substitute or otherwise modify the
Credit Agreement or any of the other Loan Documents without ASC's prior consent
and without affecting ASC's liability therefore. ASC represents and warrants to
the Agent that it has no defense to the enforcement of the ASC Guaranty in
accordance with its terms as modified hereby as it applies to the Credit
Agreement, as amended or any of the Loan Documents.
4. CONCEPTRONIC'S RATIFICATION OF GUARANTY. Conceptronic hereby expressly
ratifies and reconfirms all of the terms and provisions of that certain Guaranty
Agreement dated as of March 19, 1999 (the "Conceptronic Guaranty") in favor of
the Agent, as agent for the Lenders, and acknowledges, approves, ratifies and
reconfirms its liability as a guarantor of the Guaranteed Obligations (as such
term is defined in the Conceptronic Guaranty) and further agrees that the
Agent's action in requiring its consent to the modification of the Credit
Agreement shall not constitute a waiver of the Agent's right pursuant to the
terms of the Conceptronic Guaranty or any of the other Loan Documents to renew,
extend, increase the principal amount or otherwise modify the Loans or amend,
restate, substitute or otherwise modify the Credit Agreement or any of the other
Loan Documents without Conceptronic's prior consent and without affecting
Conceptronic's liability therefore. Conceptronic represents and warrants to the
Agent that it has no defense to the enforcement of the Conceptronic Guaranty in
accordance with its terms as modified hereby as it applies to the Credit
Agreement, as amended or any of the Loan Documents.
5. APPLICABLE LAW. This Consent shall be governed by, and construed in
accordance with, the laws of the State of Maryland.
6. HEADINGS. The headings used herein are for purposes of convenience only
and should not be used in construing provisions hereof.
7. DEFINED TERMS. All defined terms used in this Consent and not defined
herein shall have the meaning given to such terms in the Credit Agreement.
[SIGNATURES BEGIN ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
caused this Consent to be executed by their duly authorized officers under seal,
on the day and year first written.
WITNESS/ATTEST: ARGUSS COMMUNICATIONS GROUP, INC.
By: /s/ Arthur Trudel (SEAL)
- ----------------------------- ---------------------------------
Name: Arthur Trudel
Title: Vice President
WITNESS/ATTEST: ARGUSS SERVICES CORP.
By: /s/ Arthur Trudel (SEAL)
- ----------------------------- ---------------------------------
Name: Arthur Trudel
Title: Vice President
WITNESS/ATTEST: CONCEPTRONIC, INC.
By: /s/ Arthur Trudel (SEAL)
- ----------------------------- ---------------------------------
Name: Arthur Trudel
Title: Vice President
<PAGE>
EXHIBIT A
AMENDED AND RESTATED REVOLVING CREDIT NOTE
------------------------------------------
$36,500,000 March 22, 2000
FOR VALUE RECEIVED, ARGUSS HOLDINGS, INC. (the "Borrower") hereby promises
to pay to the order of BANK OF AMERICA, N.A. (the "Lender") at the office of
BANK OF AMERICA, N.A. (the "Agent"), or at such other place as may be designated
by the Agent, for the account of the Applicable Lending Office of the Lender, in
lawful money of the United States of America, and in immediately available
funds, (i) on each Interest Payment Date, the unpaid principal amount
outstanding of each Eurodollar Loan and each Base Rate Loan (ii) on the
Revolving Commitment Termination Date, the principal sum of Thirty Six Million
Five Hundred Thousand Dollars ($36,500,000), or the aggregate unpaid principal
amount outstanding of all Revolving Loans made by the Lender to the Borrower
pursuant to the Credit Agreement (as hereinafter defined), whichever is less,
and, prior to maturity, to pay interest from the date hereof on said principal
sum, or the outstanding balance thereof, whichever is less, in like money and
funds, at said office on the date or dates and at the rates or rates provided
for in the Credit Agreement.
The Lender has been authorized by the Borrower to record on the SCHEDULE
attached to this Note the amount and date of each Revolving Loan made by the
Lender, and the date and amount of each payment of principal thereof received by
the Lender, PROVIDED that the failure by the Lender to make any such endorsement
or any error therein shall not affect the obligations of the Borrower hereunder.
This Note is the Bank of America Replacement Note described in that certain
First Amendment to Credit Agreement of even date herewith by and among, the
Borrower, the Lender, the other Lenders named therein, BAS, and the Agent, (the
"First Amendment"), which First Amendment amends that certain Credit Agreement
dated March 19, 1999 by and among the Borrower, the Lender, the other Lenders
named therein, BAS and the Agent (as from time to time may be amended, modified,
supplemented, renewed or extended the "Credit Agreement"), and this Note is one
of the Revolving Credit Notes referred to in and entitled to the benefit of the
Credit Agreement. Capitalized terms used herein but not defined herein shall
have the meanings ascribed to such terms in the Credit Agreement. This Note
amends, restates and increases in its entirety that certain Revolving Credit
Note dated March 19, 1999 from the Borrower to the Lender, in the maximum
principal amount of Twenty One Million Dollars ($21,000,000) (the "Original
Note"). It is expressly agreed that the indebtedness evidenced by the Original
Note has not been extinguished or discharged by this Note, provided, however,
that the full amount due to the Lender pursuant to the Original Note and this
Note combined shall be the amount due to the Lender from the Borrower.
<PAGE>
Upon the occurrence of an Event of Default, the principal hereof and
accrued interest hereon may become, or may be declared to be, forthwith due and
payable in the manner, upon the conditions and with the effect provided in the
Credit Agreement.
In addition and not in limitation of the foregoing the Borrower agrees to
pay all reasonable costs and expenses incurred in the collection of this Note,
including reasonable attorneys' fees if this Note is collected by or through an
attorney at law, or in bankruptcy, receivership, or other court proceeding.
Reference is made to Section 2.10 of the Credit Agreement for provisions
relating to the prepayment hereof.
The Borrower hereby waives presentment, demand, notice of dishonor,
protest, and all other notices whatever.
This Note shall be governed by, and construed in accordance with, the laws
of the State of Maryland.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its
duly authorized officer as of the date first above written.
WITNESS/ATTEST: ARGUSS HOLDINGS, INC.
/s/ Haywood Miller By: /s/ Arthur Trudel
- ----------------------------- -------------------------------
Haywood Miller, Secretary Name: Arthur Trudel
- -------------- -----------------------
Title: Chief Financial Officer
-----------------------
- 2 -
<PAGE>
SCHEDULE TO REVOLVING CREDIT NOTE
Principal Type of Interest Amount &
Date of Loan Amount Loan Period Date Repaid
- ------------ ------ ----- ------ -----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT B
AMENDED AND RESTATED REVOLVING CREDIT NOTE
------------------------------------------
$13,200,000 March 22, 2000
FOR VALUE RECEIVED, ARGUSS HOLDINGS, INC. (the "Borrower") hereby promises
to pay to the order of CRESTAR BANK (the "Lender") at the office of BANK OF
AMERICA, N.A. (the "Agent"), or at such other place as may be designated by the
Agent, for the account of the Applicable Lending Office of the Lender, in lawful
money of the United States of America, and in immediately available funds, (i)
on each Interest Payment Date, the unpaid principal amount outstanding of each
Eurodollar Loan and each Base Rate Loan (ii) on the Revolving Commitment
Termination Date, the principal sum of Thirteen Million Two Hundred Thousand
Dollars ($13,200,000), or the aggregate unpaid principal amount outstanding of
all Revolving Loans made by the Lender to the Borrower pursuant to the Credit
Agreement (as hereinafter defined), whichever is less, and, prior to maturity,
to pay interest from the date hereof on said principal sum, or the outstanding
balance thereof, whichever is less, in like money and funds, at said office on
the date or dates and at the rates or rates provided for in the Credit
Agreement.
The Lender has been authorized by the Borrower to record on the SCHEDULE
attached to this Note the amount and date of each Revolving Loan made by the
Lender, and the date and amount of each payment of principal thereof received by
the Lender, PROVIDED that the failure by the Lender to make any such endorsement
or any error therein shall not affect the obligations of the Borrower hereunder.
This Note is the Crestar Bank Replacement Note described in that certain
First Amendment to Credit Agreement of even date herewith by and among, the
Borrower, the Lender, the other Lenders named therein, BAS, and the Agent, (the
"First Amendment"), which First Amendment amends that certain Credit Agreement
dated March 19, 1999 by and among the Borrower, the Lender, the other Lenders
named therein, BAS and the Agent (as from time to time may be amended, modified,
supplemented, renewed or extended the "Credit Agreement"), and this Note is one
of the Revolving Credit Notes referred to in and entitled to the benefit of the
Credit Agreement. Capitalized terms used herein but not defined herein shall
have the meanings ascribed to such terms in the Credit Agreement. This Note
amends, restates and increases in its entirety that certain Revolving Credit
Note dated March 19, 1999 from the Borrower to the Lender, in the maximum
principal amount of Seven Million Seven Hundred Thousand Dollars ($7,700,000)
(the "Original Note"). It is expressly agreed that the indebtedness evidenced by
the Original Note has not been extinguished or discharged by this Note,
provided, however, that the full amount due to the Lender pursuant to the
Original Note and this Note combined shall be the amount due to the Lender from
the Borrower.
Upon the occurrence of an Event of Default, the principal hereof and
accrued interest hereon may become, or may be declared to be, forthwith due and
payable in the manner, upon the conditions and with the effect provided in the
Credit Agreement.
<PAGE>
In addition and not in limitation of the foregoing the Borrower agrees to
pay all reasonable costs and expenses incurred in the collection of this Note,
including reasonable attorneys' fees if this Note is collected by or through an
attorney at law, or in bankruptcy, receivership, or other court proceeding.
Reference is made to Section 2.10 of the Credit Agreement for provisions
relating to the prepayment hereof.
The Borrower hereby waives presentment, demand, notice of dishonor,
protest, and all other notices whatever.
This Note shall be governed by, and construed in accordance with, the laws
of the State of Maryland.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its
duly authorized officer as of the date first above written.
WITNESS/ATTEST: ARGUSS HOLDINGS, INC.
/s/ Haywood Miller By: /s/ Arthur Trudel
- ----------------------------- -------------------------------
Haywood Miller, Secretary Name: Arthur Trudel
- -------------- -----------------------
Title: Chief Financial Officer
-----------------------
- 2 -
<PAGE>
SCHEDULE TO REVOLVING CREDIT NOTE
Principal Type of Interest Amount &
Date of Loan Amount Loan Period Date Repaid
- ------------ ------ ----- ------ -----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT C
AMENDED AND RESTATED REVOLVING CREDIT NOTE
------------------------------------------
$13,200,000 March 22, 2000
FOR VALUE RECEIVED, ARGUSS HOLDINGS, INC. (the "Borrower") hereby promises
to pay to the order of FLEET BANK, N.A. (the "Lender") at the office of BANK OF
AMERICA, N.A. (the "Agent"), or at such other place as may be designated by the
Agent, for the account of the Applicable Lending Office of the Lender, in lawful
money of the United States of America, and in immediately available funds, (i)
on each Interest Payment Date, the unpaid principal amount outstanding of each
Eurodollar Loan and each Base Rate Loan (ii) on the Revolving Commitment
Termination Date, the principal sum of Thirteen Million Two Hundred Thousand
Dollars ($13,200,000), or the aggregate unpaid principal amount outstanding of
all Revolving Loans made by the Lender to the Borrower pursuant to the Credit
Agreement (as hereinafter defined), whichever is less, and, prior to maturity,
to pay interest from the date hereof on said principal sum, or the outstanding
balance thereof, whichever is less, in like money and funds, at said office on
the date or dates and at the rates or rates provided for in the Credit
Agreement.
The Lender has been authorized by the Borrower to record on the SCHEDULE
attached to this Note the amount and date of each Revolving Loan made by the
Lender, and the date and amount of each payment of principal thereof received by
the Lender, PROVIDED that the failure by the Lender to make any such endorsement
or any error therein shall not affect the obligations of the Borrower hereunder.
This Note is the Fleet Bank Replacement Note described in that certain
First Amendment to Credit Agreement of even date herewith by and among, the
Borrower, the Lender, the other Lenders named therein, BAS, and the Agent, (the
"First Amendment"), which First Amendment amends that certain Credit Agreement
dated March 19, 1999 by and among the Borrower, the Lender, the other Lenders
named therein, BAS and the Agent (as from time to time may be amended, modified,
supplemented, renewed or extended the "Credit Agreement"), and this Note is one
of the Revolving Credit Notes referred to in and entitled to the benefit of the
Credit Agreement. Capitalized terms used herein but not defined herein shall
have the meanings ascribed to such terms in the Credit Agreement. This Note
amends, restates and increases in its entirety that certain Revolving Credit
Note dated March 19, 1999 from the Borrower to the Lender, in the maximum
principal amount of Seven Million Seven Hundred Thousand Dollars ($7,700,000)
(the "Original Note"). It is expressly agreed that the indebtedness evidenced by
the Original Note has not been extinguished or discharged by this Note,
provided, however, that the full amount due to the Lender pursuant to the
Original Note and this Note combined shall be the amount due to the Lender from
the Borrower.
Upon the occurrence of an Event of Default, the principal hereof and
accrued interest hereon may become, or may be declared to be, forthwith due and
payable in the manner, upon the conditions and with the effect provided in the
Credit Agreement.
<PAGE>
In addition and not in limitation of the foregoing the Borrower agrees to
pay all reasonable costs and expenses incurred in the collection of this Note,
including reasonable attorneys' fees if this Note is collected by or through an
attorney at law, or in bankruptcy, receivership, or other court proceeding.
Reference is made to Section 2.10 of the Credit Agreement for provisions
relating to the prepayment hereof.
The Borrower hereby waives presentment, demand, notice of dishonor,
protest, and all other notices whatever.
This Note shall be governed by, and construed in accordance with, the laws
of the State of Maryland.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its
duly authorized officer as of the date first above written.
WITNESS/ATTEST: ARGUSS HOLDINGS, INC.
/s/ Haywood Miller By: /s/ Arthur Trudel
- ----------------------------- -------------------------------
Haywood Miller, Secretary Name: Arthur Trudel
- -------------- -----------------------
Title: Chief Financial Officer
-----------------------
- 2 -
<PAGE>
SCHEDULE TO REVOLVING CREDIT NOTE
Principal Type of Interest Amount &
Date of Loan Amount Loan Period Date Repaid
- ------------ ------ ----- ------ -----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT D
AMENDED AND RESTATED REVOLVING CREDIT NOTE
------------------------------------------
$24,000,000 March 22, 2000
FOR VALUE RECEIVED, ARGUSS HOLDINGS, INC. (the "Borrower") hereby promises
to pay to the order of KEYBANK, NATIONAL ASSOCIATION (the "Lender") at the
office of BANK OF AMERICA, N.A. (the "Agent"), or at such other place as may be
designated by the Agent, for the account of the Applicable Lending Office of the
Lender, in lawful money of the United States of America, and in immediately
available funds, (i) on each Interest Payment Date, the unpaid principal amount
outstanding of each Eurodollar Loan and each Base Rate Loan (ii) on the
Revolving Commitment Termination Date, the principal sum of Twenty Four Million
Dollars ($24,000,000), or the aggregate unpaid principal amount outstanding of
all Revolving Loans made by the Lender to the Borrower pursuant to the Credit
Agreement (as hereinafter defined), whichever is less, and, prior to maturity,
to pay interest from the date hereof on said principal sum, or the outstanding
balance thereof, whichever is less, in like money and funds, at said office on
the date or dates and at the rates or rates provided for in the Credit
Agreement.
The Lender has been authorized by the Borrower to record on the SCHEDULE
attached to this Note the amount and date of each Revolving Loan made by the
Lender, and the date and amount of each payment of principal thereof received by
the Lender, PROVIDED that the failure by the Lender to make any such endorsement
or any error therein shall not affect the obligations of the Borrower hereunder.
This Note is the Keybank Replacement Note described in that certain First
Amendment to Credit Agreement of even date herewith by and among, the Borrower,
the Lender, the other Lenders named therein, BAS, and the Agent, (the "First
Amendment"), which First Amendment amends that certain Credit Agreement dated
March 19, 1999 by and among the Borrower, the Lender, the other Lenders named
therein, BAS and the Agent (as from time to time may be amended, modified,
supplemented, renewed or extended the "Credit Agreement"), and this Note is one
of the Revolving Credit Notes referred to in and entitled to the benefit of the
Credit Agreement. Capitalized terms used herein but not defined herein shall
have the meanings ascribed to such terms in the Credit Agreement. This Note
amends, restates and increases in its entirety that certain Revolving Credit
Note dated March 19, 1999 from the Borrower to the Lender, in the maximum
principal amount of Fourteen Million Dollars ($14,000,000) (the "Original
Note"). It is expressly agreed that the indebtedness evidenced by the Original
Note has not been extinguished or discharged by this Note, provided, however,
that the full amount due to the Lender pursuant to the Original Note and this
Note combined shall be the amount due to the Lender from the Borrower.
Upon the occurrence of an Event of Default, the principal hereof and
accrued interest hereon may become, or may be declared to be, forthwith due and
payable in the manner, upon the conditions and with the effect provided in the
Credit Agreement.
<PAGE>
In addition and not in limitation of the foregoing the Borrower agrees to
pay all reasonable costs and expenses incurred in the collection of this Note,
including reasonable attorneys' fees if this Note is collected by or through an
attorney at law, or in bankruptcy, receivership, or other court proceeding.
Reference is made to Section 2.10 of the Credit Agreement for provisions
relating to the prepayment hereof.
The Borrower hereby waives presentment, demand, notice of dishonor,
protest, and all other notices whatever.
This Note shall be governed by, and construed in accordance with, the laws
of the State of Maryland.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its
duly authorized officer as of the date first above written.
WITNESS/ATTEST: ARGUSS HOLDINGS, INC.
/s/ Haywood Miller By: /s/ Arthur Trudel
- ----------------------------- -------------------------------
Haywood Miller, Secretary Name: Arthur Trudel
- -------------- -----------------------
Title: Chief Financial Officer
-----------------------
- 2 -
<PAGE>
SCHEDULE TO REVOLVING CREDIT NOTE
Principal Type of Interest Amount &
Date of Loan Amount Loan Period Date Repaid
- ------------ ------ ----- ------ -----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT E
AMENDED AND RESTATED REVOLVING CREDIT NOTE
------------------------------------------
$20,400,000 March 22, 2000
FOR VALUE RECEIVED, ARGUSS HOLDINGS, INC. (the "Borrower") hereby promises
to pay to the order of UNION BANK OF CALIFORNIA, N.A. (the "Lender") at the
office of BANK OF AMERICA, N.A. (the "Agent"), or at such other place as may be
designated by the Agent, for the account of the Applicable Lending Office of the
Lender, in lawful money of the United States of America, and in immediately
available funds, (i) on each Interest Payment Date, the unpaid principal amount
outstanding of each Eurodollar Loan and each Base Rate Loan (ii) on the
Revolving Commitment Termination Date, the principal sum of Twenty Million Four
Hundred Thousand Dollars ($20,400,000), or the aggregate unpaid principal amount
outstanding of all Revolving Loans made by the Lender to the Borrower pursuant
to the Credit Agreement (as hereinafter defined), whichever is less, and, prior
to maturity, to pay interest from the date hereof on said principal sum, or the
outstanding balance thereof, whichever is less, in like money and funds, at said
office on the date or dates and at the rates or rates provided for in the Credit
Agreement.
The Lender has been authorized by the Borrower to record on the SCHEDULE
attached to this Note the amount and date of each Revolving Loan made by the
Lender, and the date and amount of each payment of principal thereof received by
the Lender, PROVIDED that the failure by the Lender to make any such endorsement
or any error therein shall not affect the obligations of the Borrower hereunder.
This Note is the Union Bank Replacement Note described in that certain
First Amendment to Credit Agreement of even date herewith by and among, the
Borrower, the Lender, the other Lenders named therein, BAS, and the Agent, (the
"First Amendment"), which First Amendment amends that certain Credit Agreement
dated March 19, 1999 by and among the Borrower, the Lender, the other Lenders
named therein, BAS and the Agent (as from time to time may be amended, modified,
supplemented, renewed or extended the "Credit Agreement"), and this Note is one
of the Revolving Credit Notes referred to in and entitled to the benefit of the
Credit Agreement. Capitalized terms used herein but not defined herein shall
have the meanings ascribed to such terms in the Credit Agreement. This Note
amends, restates and increases in its entirety that certain Revolving Credit
Note dated March 19, 1999 from the Borrower to the Lender, in the maximum
principal amount of Eleven Million Nine Hundred Thousand Dollars ($11,900,000)
(the "Original Note"). It is expressly agreed that the indebtedness evidenced by
the Original Note has not been extinguished or discharged by this Note,
provided, however, that the full amount due to the Lender pursuant to the
Original Note and this Note combined shall be the amount due to the Lender from
the Borrower.
Upon the occurrence of an Event of Default, the principal hereof and
accrued interest hereon may become, or may be declared to be, forthwith due and
payable in the manner, upon the conditions and with the effect provided in the
Credit Agreement.
<PAGE>
In addition and not in limitation of the foregoing the Borrower agrees to
pay all reasonable costs and expenses incurred in the collection of this Note,
including reasonable attorneys' fees if this Note is collected by or through an
attorney at law, or in bankruptcy, receivership, or other court proceeding.
Reference is made to Section 2.10 of the Credit Agreement for provisions
relating to the prepayment hereof.
The Borrower hereby waives presentment, demand, notice of dishonor,
protest, and all other notices whatever.
This Note shall be governed by, and construed in accordance with, the laws
of the State of Maryland.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its
duly authorized officer as of the date first above written.
WITNESS/ATTEST: ARGUSS HOLDINGS, INC.
/s/ Haywood Miller By: /s/ Arthur Trudel
- ----------------------------- -------------------------------
Haywood Miller, Secretary Name: Arthur Trudel
- -------------- -----------------------
Title: Chief Financial Officer
-----------------------
- 2 -
<PAGE>
SCHEDULE TO REVOLVING CREDIT NOTE
Principal Type of Interest Amount &
Date of Loan Amount Loan Period Date Repaid
- ------------ ------ ----- ------ -----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT F
AMENDED AND RESTATED REVOLVING CREDIT NOTE
------------------------------------------
$12,700,000 March 22, 2000
FOR VALUE RECEIVED, ARGUSS HOLDINGS, INC. (the "Borrower") hereby promises
to pay to the order of NATIONAL CITY BANK (the "Lender") at the office of BANK
OF AMERICA, N.A. (the "Agent"), or at such other place as may be designated by
the Agent, for the account of the Applicable Lending Office of the Lender, in
lawful money of the United States of America, and in immediately available
funds, (i) on each Interest Payment Date, the unpaid principal amount
outstanding of each Eurodollar Loan and each Base Rate Loan (ii) on the
Revolving Commitment Termination Date, the principal sum of Twelve Million Seven
Hundred Thousand Dollars ($12,700,000), or the aggregate unpaid principal amount
outstanding of all Revolving Loans made by the Lender to the Borrower pursuant
to the Credit Agreement (as hereinafter defined), whichever is less, and, prior
to maturity, to pay interest from the date hereof on said principal sum, or the
outstanding balance thereof, whichever is less, in like money and funds, at said
office on the date or dates and at the rates or rates provided for in the Credit
Agreement.
The Lender has been authorized by the Borrower to record on the SCHEDULE
attached to this Note the amount and date of each Revolving Loan made by the
Lender, and the date and amount of each payment of principal thereof received by
the Lender, PROVIDED that the failure by the Lender to make any such endorsement
or any error therein shall not affect the obligations of the Borrower hereunder.
This Note is the National City Bank Replacement Note described in that
certain First Amendment to Credit Agreement of even date herewith by and among,
the Borrower, the Lender, the other Lenders named therein, BAS, and the Agent,
(the "First Amendment"), which First Amendment amends that certain Credit
Agreement dated March 19, 1999 by and among the Borrower, the Lender, the other
Lenders named therein, BAS and the Agent (as from time to time may be amended,
modified, supplemented, renewed or extended the "Credit Agreement"), and this
Note is one of the Revolving Credit Notes referred to in and entitled to the
benefit of the Credit Agreement. Capitalized terms used herein but not defined
herein shall have the meanings ascribed to such terms in the Credit Agreement.
This Note amends, restates and increases in its entirety that certain Revolving
Credit Note dated March 19, 1999 from the Borrower to the Lender, in the maximum
principal amount of Seven Million Seven Hundred Thousand Dollars ($7,700,000)
(the "Original Note"). It is expressly agreed that the indebtedness evidenced by
the Original Note has not been extinguished or discharged by this Note,
provided, however, that the full amount due to the Lender pursuant to the
Original Note and this Note combined shall be the amount due to the Lender from
the Borrower.
Upon the occurrence of an Event of Default, the principal hereof and
accrued interest hereon may become, or may be declared to be, forthwith due and
payable in the manner, upon the conditions and with the effect provided in the
Credit Agreement.
<PAGE>
In addition and not in limitation of the foregoing the Borrower agrees to
pay all reasonable costs and expenses incurred in the collection of this Note,
including reasonable attorneys' fees if this Note is collected by or through an
attorney at law, or in bankruptcy, receivership, or other court proceeding.
Reference is made to Section 2.10 of the Credit Agreement for provisions
relating to the prepayment hereof.
The Borrower hereby waives presentment, demand, notice of dishonor,
protest, and all other notices whatever.
This Note shall be governed by, and construed in accordance with, the laws
of the State of Maryland.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its
duly authorized officer as of the date first above written.
WITNESS/ATTEST: ARGUSS HOLDINGS, INC.
/s/ Haywood Miller By: /s/ Arthur Trudel
- ----------------------------- -------------------------------
Haywood Miller, Secretary Name: Arthur Trudel
- -------------- -----------------------
Title: Chief Financial Officer
-----------------------
- 2 -
<PAGE>
SCHEDULE TO REVOLVING CREDIT NOTE
Principal Type of Interest Amount &
Date of Loan Amount Loan Period Date Repaid
- ------------ ------ ----- ------ -----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SECURITIES
AND EXCHANGE COMMISSION FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> $386,000
<SECURITIES> 0
<RECEIVABLES> 45,681,000
<ALLOWANCES> 0
<INVENTORY> 5,165,000
<CURRENT-ASSETS> 70,049,000
<PP&E> 37,614,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 214,228,000
<CURRENT-LIABILITIES> 85,177,000
<BONDS> 0
0
0
<COMMON> 96,374,000
<OTHER-SE> 10,534,000
<TOTAL-LIABILITY-AND-EQUITY> 214,228,000
<SALES> 55,044,000
<TOTAL-REVENUES> 55,044,000
<CGS> 42,948,000
<TOTAL-COSTS> 42,948,000
<OTHER-EXPENSES> 9,139,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,227,000
<INCOME-PRETAX> 1,932,000
<INCOME-TAX> 1,285,000
<INCOME-CONTINUING> 647,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 647,000
<EPS-BASIC> .05
<EPS-DILUTED> .05
</TABLE>
