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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended: February 29, 2000
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-2733
AZTEC MANUFACTURING CO.
(Exact name of registrant as specified in its charter)
TEXAS 75-0948250
(State of incorporation) (I.R.S. Employer Identification Number)
400 North Tarrant
Crowley, Texas 76036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 297-4361
Securities registered pursuant to section 12(b) of the act:
Title of Each Class Name of Exchange on Which Registered
------------------- ------------------------------------
Common Stock, $1.00 par value New York Stock Exchange
Securities registered pursuant to section 12(g) of the act: None
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 ___
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
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The aggregate market value of Common Stock held by non-affiliates on May 10,
2000, was approximately $63,800,000. As of May 10, 2000, there were 4,812,981
shares of Aztec Manufacturing Co. Common Stock $1.00 par value outstanding.
Documents Incorporated By Reference
Part III incorporates information by reference from the Proxy Statement for the
2000 Annual Meeting of Shareholders of Registrant.
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PART I
Item 1. Business
Aztec Manufacturing Co. ("Aztec" or the "Company") was established in 1956 and
incorporated under the laws of the State of Texas. The Company is an electrical
equipment and components manufacturer serving the global growth markets of power
generation, power transmission and distribution, and industrial markets as well
as a leading provider of hot dip galvanizing services to the steel fabrication
market nationwide.
The Company offers a broad range of products and services through two distinct
business segments, Manufactured Products Segment and Services Segment.
Manufactured Products Segment
The Manufactured Products Segment provides highly engineered specialty
electrical components and tubular products to the power generation, power
transmission and distribution, petrochemical, and general industrial markets.
The Company markets and sells it's products through multiple subsidiaries
located throughout the United States. The Company diversified this segment in
1990 by acquiring niche companies that supply components to the power
generation, transmission and distribution and industrial markets. The Company's
first product entry was specialty lighting products for severe and hazardous
duty applications which are marketed through Rig-A-Lite Partnership LTD.,
acquired in 1990. The next product introduced is marketed through The Calvert
Co., which also was acquired in 1990. This product consists of custom designed
electrical distribution systems in the form of bar and isolated phase bus duct
products that are used to distribute electrical power to or from various
electrical apparatuses and are sold to the power generation industry. This
segment also designs and provides factory-fabricated electrical power
distribution centers for the industrial and power generation industries through
Atkinson Industries, Inc., which was acquired in 1993. The Company's latest
addition to this segment is a compressed gas insulated transmission bus duct
product manufactured and marketed through CGIT Westboro, Inc., which was
acquired in 1999. This product provides a compact, reliable and economical
alternative to conventional cable systems and overhead lines for power
distribution. Also provided by this segment are tubular products used for
petrochemical and industrial applications. The principal markets for tubular
products are the petroleum and automotive industries. The market for the
Company's Manufactured Products segment is highly competitive and consists of a
few large national companies, as well as numerous small independents.
Competition is based primarily on product quality, range of product line, price
and service. The Company believes that it can compete favorably with regard to
each of these factors. Copper, aluminum and steel are the primary raw materials
used in this segment and are readily available. This segment's products are sold
though manufacturers' representatives and its internal sales force. This segment
is not dependent on any single customer or limited number of customers for
sales, and the loss of any single customer would not have a material adverse
effect on consolidated revenues of the Company. Backlog of orders was
approximately $31.2 million at February 29, 2000, $18.2 million at February 28,
1999, and $19.9 million at February 28, 1998. All of the year-end backlog should
be delivered in the next 18 months. Orders included in the backlog are
represented by contracts and purchase orders that the company believes to be
firm. Total employment in this segment is 419 persons.
Services Segment
The Services Segment provides hot dip galvanizing services to the steel
fabrication industry through facilities located throughout the South and
Southwest. The eleven galvanizing plants of the Company are located in Texas,
Louisiana, Alabama, Mississippi, Arkansas, and Arizona. Hot dip galvanizing
provides corrosion protection of fabricated steel for extended periods up to 50
years. Galvanizing is a highly competitive business and the Company competes
with other independent galvanizing companies, captive galvanizing facilities
operated by manufacturers, and alternate forms of corrosion protection such as
paint. The Company is limited, to some extent, in its galvanizing market to
areas within a close proximity of its existing locations due to freight cost.
Zinc, the principal raw material used in the galvanizing process, is readily
available, but has volatile pricing. The Company manages its exposure to
commodity pricing of zinc by utilizing contracts with zinc suppliers that
include protective caps to guard against
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rising commodity prices. This segment typically serves fabricators and/or
manufacturers involved in the highway construction, electrical utility,
transportation, water treatment, agriculture, petrochemical and chemical, pulp
and paper, and numerous OEM's. The market in general is broken into two major
categories, being large structural steel projects and custom fabrication. This
segment is not dependent on any single customer or limited number of customers
for sales, and the loss of any customer would not have a material adverse effect
on consolidated revenues of the Company. The backlog of galvanizing orders
generally is nominal due to the short time requirement involved in the process.
Total employment in this segment is 441 persons.
General
The Company does not have a material portion of business that may be subject to
renegotiations of profits or termination of contracts or subcontracts at the
election of the government. There were no material amounts spent on research and
development activities during the proceeding three fiscal years.
Environmental
In the course of its galvanizing operations, the Company is subject to
occasional governmental proceedings and orders pertaining to noise, air
emissions and water discharges into the environment. As part of its continuing
environmental program, the Company has complied with such proceedings and orders
without any materially adverse effect on its business.
The Company provides for costs related to contingencies when a loss is probable
and the amount is reasonably determinable. It is the opinion of management,
based on past experience, that the ultimate resolution of these contingencies,
to the extent not previously provided for, will not have a materially adverse
effect on the Company.
Executive Officers of the Registrant
<TABLE>
<CAPTION>
Business Experience for Past
Name Age Five Years; Position or Office with Registrant Held Since
- ------------------ --- ---------------------------------------------- ----------
<S> <C> <C> <C>
L. C. Martin 74 Chairman and Chief Executive Officer 1958
David H. Dingus 52 President and Chief Operating Officer 1998
President and Chief Executive Officer of Reedrill Corp 1989-1998
Dana L. Perry 51 Vice President of Finance, Chief Financial Officer, Asst. Sec. 1992
Fred L. Wright, Jr. 59 Senior Vice President/Services Segment 1992
</TABLE>
Each executive officer was elected by the Board of Directors to hold office
until the next Annual Meeting or until his successor is elected. There are no
family relationships between Executive Officers of the Registrant.
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Item 2. Properties
The following table sets forth information about the Company's principal
facilities owned on February 29, 2000:
<TABLE>
<CAPTION>
Buildings/
Location Land/Acres Sq. Footage Segment/Occupant
- -------- ---------- ----------- ----------------
<S> <C> <C> <C>
Crowley, Texas 152.0 7,800 Corporate Office
25,600 Services
193,200 Manufactured Products
Houston, Texas 8.7 25,800 Services
37.0 36,000 Manufactured Products
5.4 67,400 Manufactured Products
Waskom, Texas 10.6 30,400 Services
Beaumont, Texas 12.9 33,700 Services
Moss Point, Mississippi 13.5 16,000 Services
Jackson, Mississippi 5.6 22,800 Services
5.1 36,200 Manufactured Products
Pittsburg, Kansas 15.3 86,000 Manufactured Products
Citronelle, Alabama 10.8 34,000 Services
Goodyear, Arizona 11.75 36,800 Services
Prairie Grove, Arkansas 11.5 34,000 Services
Belle Chasse, Louisiana 9.5 34,000 Services
Port Allen, Louisiana 22.2 48,700 Services
Westborough, Massachusetts - (Leased) 36,400 Manufactured Products
</TABLE>
Item 3. Legal Proceedings
Environmental Proceedings
In the course of its galvanizing operations, the Company is subject to
occasional governmental proceedings and orders pertaining to noise, air
emissions, and water discharges into the environment. The Company has complied
with such proceedings and orders without any materially adverse effect on its
business.
The registrant is not a party to, nor is its property the subject of, any
material pending legal proceedings. The registrant is involved in ordinary
routine litigation incidental to business. For additional information relating
to contingencies, see Note 13 of Notes to Consolidated Financial Statements on
page 29 of the Registrant's 2000 Form 10-K.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fourth quarter of the fiscal year ended
February 29, 2000, to a vote of security holders through the solicitation of
proxies or otherwise.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The common stock, $1.00 par value, of Registrant ("Common Stock") is traded on
the New York Stock Exchange and its symbol is AZZ. The Company was listed on the
New York Stock Exchange and started trading on March 20, 1997. Prior to that
date, the Company's stock traded on the NASDAQ National Market.
The following table sets forth the high and low sales prices of the Company's
Common Stock on the New York Stock Exchange on a quarterly basis and dividends
declared during the period indicated.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Quarter Ended Quarter Ended Quarter Ended Quarter Ended
May 31, August 31, November 30, February 29/28,
- ----------------------------------------------------------------------------------------------------------------------
Per Share 1999 1998 1999 1998 1999 1998 2000 1999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High $10.563 $15.500 $13.250 $13.438 $12.125 $10.000 $12.250 $10.625
- ----------------------------------------------------------------------------------------------------------------------
Low $7.813 $12.375 $9.500 $8.750 $9.375 $6.625 $9.125 $8.250
- ----------------------------------------------------------------------------------------------------------------------
Dividends
Declared - - - - - - $0.160 $0.120
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Effective January 7, 1999, the Board of Directors approved a stock rights plan,
which authorized and declared a dividend distribution of one right for each
share of common stock outstanding at the close of business on February 4, 1999.
The rights are exercisable at an initial exercise price of $60, subject to
certain adjustments as defined in the agreement, if a person or group acquires
15% or more of the Company's common stock or announces a tender offer that would
result in ownership of 15% or more of the common stock. Alternatively, the
rights may be redeemed at one cent per right at any time before a 15% position
has been acquired. The rights expire on January 7, 2009.
The approximate number of holders of record of common stock of Registrant at May
10, 2000 was 890.
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Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Fiscal Year
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2000(a) 1999 1998(d) 1997 1996(f)
--------------- ---------------- --------------- ---------------- ---------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Summary of operations:
Net sales $92,544 $80,922 $75,479 $57,703 $49,184
Net income 6,593 (b) 4,874 (e) 7,220 4,328 2,582
Earnings per share:
Basic earnings per common share $1.39 (b) $.87 (e) $1.21 $ .75 $ .46
Diluted earnings per common share 1.38 (b) .86 (e) 1.19 .74 .45
Total assets $84,804 $58,399 $57,902 $45,995 $42,621
Long-term debt 31,075 20,266 11,321 7,527 9,516
Total liabilities 51,783 31,514 23,582 17,421 19,461
Shareholders' equity 33,021 (c) 26,885 34,320 28,573 23,160
Working capital 15,128 15,033 16,731 12,220 7,879
EBITDA $16,994 $12,413 $13,682 $10,691 $7,407
Cash provided by operations 13,833 8,774 2,698 6,821 9,103
Capital expenditures 4,152 6,992 3,395 2,037 3,434
Depreciation & Amortization 4,770 3,630 3,035 2,664 2,227
Cash dividend per common share $.16 $.12 $.10 $.06 $.03
Weighted average shares outstanding 4,753 5,614 5,968 5,761 5,634
</TABLE>
(a) Includes the acquisition of two subsidiaries in September 1999 and February
2000.
(b) Includes the a pretax charge of $914,000 (or 10 cents per share) for the
liquidation and write-down of tubular goods inventories.
(c) Includes the repurchase of approximately 1.2 million shares of the
Company's common stock at a cost of $11.9 million.
(d) Includes the acquisition of three subsidiaries in March 1997, December
1997, and February 1998.
(e) Includes a one time tax benefit of approximately $1,076,000 (or 18 cents
per share).
(f) Includes the acquisition of a subsidiary in February 1996.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Aztec Manufacturing Co. (the "Company") focuses on two distinct segments,
Manufactured Products Segment and Services Segment. The Manufactured Products
Segment serves the power generation, transmission and distribution markets and
on a limited basis the tubular products market. The Services Segment consists of
eleven hot dip galvanizing facilities located throughout the South and Southwest
that service the steel fabrication industry.
Management believes that the following commentary appropriately discusses and
analyzes the comparative results of operations and the financial conditions of
the Company for the periods covered.
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General
For the fiscal year-ended February 29, 2000, the Company recorded record
revenues of $92.5 million compared to the prior year's revenues of $80.9
million. Approximately 56% of the Company's revenues were generated from the
Manufactured Products Segment and approximately 44% were generated from the
Service Segment. Net income for fiscal 2000 was $6.6 million compared to $4.9
million in the prior fiscal year. Net income as a percent of sales improved to
7.1% compared to 6% in the prior year, an increase of 18.3%. Earnings per share
increased by 60% to $1.38 per share for fiscal 2000 compared to 86 cents per
share in the prior fiscal year, on a diluted basis. The Company's repurchases of
approximately 1.2 million shares of the Company's common stock in fiscal 1999
are reflected in fiscal 2000 earnings per share calculations and had a minimal
effect on fiscal 1999 calculations.
A discussion concerning effects of new accounting standards can be found in note
1 of Notes to Consolidated Financial Statements.
Results of Operations
Year ended February 29, 2000 (2000) compared with year ended February 28, 1999
(1999)
Revenues
The Company's consolidated net revenues for fiscal 2000 grew by $11.6 million or
14% over the prior year.
The Manufactured Products Segment produces highly engineered specialty products
supplied to the power generation, transmission and distribution, petrochemical
markets, and general industry. The Company's electrical products are offered
though the operations of The Calvert Co., CGIT Westboro, Inc., Atkinson
Industries Inc., and Rig-A-Lite Partnership LTD. Aztec's tubular products are
supplied to the petroleum and automotive industries.
The Manufactured Products Segment recorded record revenues for fiscal 2000 of
$51.4 million, an increase of 10.9% over the prior year-end results of $46.4
million. These results were aided by the acquisition of CGIT Westboro, Inc. on
September 1, 1999. The Manufactured Products Segment exited fiscal 2000 with a
record backlog of $31.2 million, up 71% from the prior years backlog of $18.2
million.
Revenues for this segment's bar and isolated phase products were up for fiscal
2000 compared to 1999. Deregulation and the increased industry capacity required
to meet future power demand needs has benefited this product line. The Company
is currently completing an expansion project that will significantly add to the
capacity for production of this product.
The Company entered the compressed gas insulated transmission bus duct business
with the acquisition of CGIT Westboro, Inc. ("CGIT") on September 1, 1999. At
the time of this acquisition, the Company had anticipated securing a large order
that would have significantly expanded CGIT's backlog, which did not
materialize. Backlog at the end of the year was $2.2 million, below what is
required to effectively operate the facility since this business is project
driven and requires long lead times. The Company is still confident that for the
long term this product is a good strategic fit.
Fiscal 2000 revenues for electrical enclosure products increased compared to
fiscal 1999. Backlog for this product is at a record level due to extremely high
booking levels in the last six months of fiscal 2000.
Revenues for specialty lighting products were basically flat for fiscal 2000
compared to the prior year. The acceptance of our new retail lighting products
in the last half of the year was very encouraging. Bookings and revenues in the
last half of fiscal 2000 were significantly above the same period in the prior
year.
Revenues for tubular products were down for fiscal 2000 compared to fiscal 1999.
Diversification strategies that were implemented over the past year are now
having positive effects and the contribution made by non-petroleum products is
encouraging. Aztec believes that the growth that is occurring in the power
generation markets will have a
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positive effect in the small diameter tubing produced by the Company due to the
extensive use of gas powered generators. However over the long term, tubular
products will continue to represent a diminishing portion of the Manufactured
Products Segments revenues.
The Company's Service Segment, which is made up of eleven hot dip galvanizing
facilities, generated record revenues of $41.1 million, a 19% increase over the
prior year's revenues of $34.5 million. The acquisition of Westside Galvanizing,
Inc. on January 31, 2000, had little impact on the current year, but should be a
significant contributor in fiscal 2001. The Services Segment continued to
benefit from the overall expansion of the domestic economy.
Operating Income
The Company's consolidated operating income (see note 12 to Notes to
Consolidated Financial Statements) increased $4.7 million or 39% in fiscal 2000
as compared to fiscal 1999. The Company's improved operating results for the
fiscal year just ended is a direct result of improved volumes and expanding
margins in both segments of the Company's businesses.
In the Manufactured Products Segment, operating income for fiscal 2000 increased
to $7 million, up 60% from $4.4 million in fiscal 1999. Operating margin in this
segment improved for fiscal 2000 to 14%, a 44% increase from the prior years
operating margin of 9%. Operating efficiencies, favorable product mix, and the
dynamic market environment in which the Company operates contributed to a record
year in this segment.
Operating income from bar and isolated phase products was up for fiscal 2000
compared to fiscal 1999. Substantial increases in backlog, favorable product
mix, design changes, and improved operating efficiencies lead to these improved
results.
CGIT acquired on September 1, 1999 contributed a minimum amount to operating
income for fiscal 2000. There is a worldwide excess of capacity at the present
time for the production of its products. However, the Company anticipates that
as the worldwide market improves, this product line should become a contributor
to operating income.
Fiscal 2000 operating income for factory fabricated modular power distribution
enclosures increased compared to fiscal 1999. A shift in product mix as well as
an expansion project completed in early fiscal 2000 which led to improved
operating efficiencies had dramatic positive impacts on operating margin.
Operating income for specialty lighting products was down for fiscal 2000 as
compared to fiscal 1999. Continued pricing pressures in the markets served as
well as design and tooling cost associated with new retail lighting products
contributed to this decrease.
While an operating loss was recorded for tubular products for fiscal 2000,
profitability was achieved in the fourth quarter. With product diversification
and increasing demand for small diameter tubular products, this improving trend
should continue into fiscal 2001.
In the Services Segment, operating income increased 27% to $9.5 million for
fiscal 2000 from $7.5 million for the prior year. Operating margin improved to
23.2% for fiscal 2000 from 21.6% for fiscal 1999. Operations benefited from
stable zinc markets and improved operating efficiencies as well as the continued
overall expansion of the domestic economy. The acquisition of Westside
Galvanizing, Inc. had little impact on the current fiscal year, but should have
a positive impact on fiscal 2001.
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General Corporate Expenses
General corporate expenses for fiscal 2000 were $4.3 million, up 38% from fiscal
1999. As a percent of sales, general corporate expenses were 4.6% for fiscal
2000 compared to 3.9% in the prior year. This increase was attributed to higher
employee benefits and profit sharing expenses as well as higher expenses for
professional services primarily associated with acquisitions.
Interest expense for fiscal 2000 was $1.7 million, up 70% or $692,000 from
fiscal 1999. This increase was due to larger outstanding loan balances during
fiscal 2000 associated with the acquisitions made during the year as well as the
repurchase of 1.2 million shares of the Company's common stock in the last
quarter of fiscal 1999.
Other income and expense was made up of scrap sales and other (income) expense
items not specifically identifiable to a segment.
Year ended February 28, 1999 (1999) compared with year ended February 28, 1998
(1998)
Revenues
Aztec's consolidated net revenues for 1999 grew by $5.4 million or 7% over 1998.
Revenues from the Company's Manufactured Products Segment were up $1.5 million
or 3% for fiscal 1999 as compared to 1998. Total backlog for this segment was
$18.2 million at the end of fiscal 1999 compared to $19.9 million in fiscal
1998.
Revenues for bar and isolated phase products were down for fiscal 1999 as
compared to fiscal 1998. The down turn experienced during the second half of
fiscal 1999 was a direct result of the turmoil in the Asian and Latin American
markets served. Over 80% of bus related revenues for fiscal 1999 and 1998 were
generated from these overseas markets. Backlog for this product was at a record
level at the end of fiscal 1999.
Revenues for this segments electrical enclosure products were up for fiscal 1999
as compared to fiscal 1998. This increase came primarily from the manufacture of
factory fabricated modular power distribution enclosures.
Revenues for specialty lighting products were down for fiscal 1999 as compared
fiscal 1998. The down turn was attributed to the severe decline experienced in
the petroleum related business and the unfavorable impact on international
business brought on by the economic crisis in their served geographic markets.
Revenues generated from tubular products were up for fiscal 1999 as compared to
1998. This product line has been severely impacted by the volatility in the
petroleum industry. Due to deteriorating oil prices, the Company liquidated a
significant portion of its inventories of tubular products in the last half of
fiscal 1999. These inventory liquidations increased revenues for the year but
sales were made at deep discounts. Tubular products continue to represent a
diminishing portion of Manufactured Products Segment revenues.
Revenues in the Services Segment, which were made up of the Company's ten hot
dip galvanizing facilities owned during fiscal 1999, were up 13% or $4 million
for fiscal 1999 as compared to fiscal 1998. This was due to a 4% increase in
revenues at the previously existing nine facilities and the acquisition of
International Galvanizers in late fiscal 1998. International Galvanizers
contributed $3.4 million in revenues for its first full year of operations.
Operating Income
Aztec's consolidated operating income (see Note 12 of Notes to Consolidated
Financial Statements) decreased $1.6 million or 12% for fiscal 1999 as compared
to fiscal 1998. Consolidated operating income for fiscal 1999 was negatively
impacted by a pretax charge of $914,000 associated with liquidations of tubular
inventories and inventory write-downs in the Company's Manufactured Products
Segment.
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Operating income in the Manufactured Products Segment was down 37% or $2.5
million for fiscal 1999 as compared to 1998.
Operating income for bar and isolated phase products was down for fiscal 1999 as
compared to fiscal 1998. Again, this down turn was due to competitive pricing
pressures associated with the turmoil in the Asian and Latin American markets it
serves.
Fiscal 1999 operating income for enclosure products was up, which corresponded
with increased revenues for the year as well as reflecting increased
efficiencies associated with its plant expansion.
Operating income for specialty lighting products for fiscal 1999 was down as
compared to fiscal 1998. This down turn was due to competitive pricing pressures
in the markets it serves.
Tubular products showed a loss for fiscal 1999 as compared to an operating
income for fiscal 1998. This loss was primarily associated with the down turn in
the petroleum markets it serves leading to the liquidation and write-down of
inventories.
The Services Segment's operating income increased 14% for fiscal 1999 compared
to fiscal 1998. Operating income in this segment's nine previously existing
facilities was up 12% due to increased volumes and production efficiencies.
Newly acquired International Galvanizers contributed $268,000 in operating
income in fiscal 1999.
General Corporate Expense
General corporate expenses for fiscal 1999 decreased by 6% from fiscal 1998 due
to lower profit sharing expenses associated with lower profits for the year.
Interest expense for fiscal 1999, as compared to fiscal 1998, was up 33% or
$245,000. This increase was due to larger outstanding loan balances during the
last half of fiscal 1999 associated with the repurchase of 1.2 million shares of
the Company's common stock at a cost of $11.9 million.
Other income and expense was made up of scrap sales and other (income) expense
items not specifically identifiable to a segment.
Liquidity and Capital Resources
The Company has historically met its liquidity and capital resource needs
through a combination of cash flow from operating activities and bank
borrowings. The Company's cash requirements are generally for operating
activities, acquisitions, capital improvements, debt repayment and dividend
payments. The Company believes that working capital, borrowing capabilities, and
the funds generated from operations should be sufficient to finance anticipated
operational requirements, internal growth, and possible future acquisitions.
The Company's operating activities generated cash flow of approximately $13.8
million, $8.8 million, and $2.7 million during fiscal 2000, 1999, and 1998,
respectively. Cash flows provided by operations in fiscal 2000 included net
income in the amount of $6.6 million, depreciation and amortization in the
amount of $4.8 million, and net changes in operating assets and liabilities and
other in the amount $2.6 million.
Through the use of cash flows and bank debt, the Company made $4.2 million in
capital improvements, primarily in the Services Segment. Also $21.1 million was
utilized for acquisitions associated to the Manufactured Products and Services
Segments. Other major uses of cash during fiscal 2000 included the repayment of
long term debt in the amount of $7.3 million and payment of cash dividends in
the amount of $567,000.
The Company has a credit facility with a bank that provides for a $20 million
revolving line of credit, a $10 million term note, and a $17.5 million term
note. At the end of fiscal 2000, the Company had $9.5 million outstanding under
the revolving line of credit and $25.7 million outstanding under the two term
facilities. At February 29, 2000, the
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Company has approximately $8.8 million available under the revolving credit
facility. The Company utilizes interest rate swap agreements to protect against
volatile interest rates. At the end of fiscal 2000, the Company had in place an
interest rate swap agreement on $8.5 million of its term debt. The Company
entered into a second interest rate swap agreement in early fiscal 2001 on an
additional $10 million of its term debt.
The Company's current ratio was 1.76 to 1 at the end of fiscal 2000, and
shareholders' equity grew 22.8% to $33 million ($6.95 per share). Due to the
Company's acquisition activity during the year, net total debt increased for
fiscal 2000 by $12 million. Long term debt as a percent of shareholders' equity
was 94% compared to 75% in the prior year.
Inflation has not had a significant impact on the Company's operations in recent
years; however, the Company attempts to recover any cost increases through
improvements to its manufacturing processes and through increases in price where
competitively feasible.
Year 2000 Compliance
In prior years, the Company discussed the nature and progress of its plans to
become year 2000 ready. In late 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the year 2000 date change. The Company spent
an immaterial amount during 1999 in connection with remediation of its systems.
The Company is not aware of any material problems resulting from year 2000
issues, either with its products, its internal systems, or the products and
services of third parties. The Company will continue to monitor its mission
critical computer applications and those of its suppliers and vendors throughout
fiscal 2001 to insure that any latent year 2000 matters that may arise are
addressed promptly.
Forward Looking Statements
This Report contains, and from time to time the Company or certain of its
representatives may make, "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements are generally
identified by the use of words such as "anticipate," "expect," "estimate,"
"intend," "should," "may," "believe," and terms with similar meanings. Although
the Company believes that the current views and expectations reflected in these
forward-looking statements are reasonable, those views and expectations, and the
related statements, are inherently subject to risks, uncertainties, and other
factors, many of which are not under the Company's control. Those risks,
uncertainties, and other factors could cause the actual results to differ
materially from these in the forward-looking statements. Those risks,
uncertainties, and factors include, but are not limited to, many of the matters
described in this Report: change in demand, prices and raw material cost,
including zinc which is used in the hot dip galvanizing process; changes in the
economic conditions of the various markets the Company serves, foreign and
domestic, including the market price for oil and natural gas; acquisition
opportunities, adequacy of financing, and availability of experienced management
employees to implement the Company's growth strategy; and customer demand and
response to products and services offered by the Company. The Company expressly
disclaims any obligations to release publicly any updates or revisions to these
forward-looking statements to reflect any change in its views or expectations.
11
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk relating to the Company's operations results primarily from changes
in interest rates and commodity prices. The Company has only limited involvement
with derivative financial instruments and does not use them for trading purposes
and is not a party to any leveraged derivatives.
The Company manages its exposures to changes in interest rates by optimizing the
use of variable and fixed rate debt. The Company had approximately $26.8 million
of variable rate borrowings at February 29, 2000. In February 1999 and April
2000 the Company entered into interest rate protection agreements with its
lender to modify the interest characteristics on approximately $18.5 million of
long term debt from a variable rate to a fixed rate. The Company believes it has
adequately protected itself from increased cost under its financial
arrangements.
The Company manages its exposures to commodity prices, primarily zinc used in
its Services Segment, by utilizing contracts with its zinc suppliers that
include protective caps to guard against rising commodity prices. Management
believes these contractual agreements ensure adequate supplies and guard against
exposure to commodity price swings.
The Company does not believe that a hypothetical change of 10% of the interest
rate currently in effect or a change of 10% of commodity prices would have a
significant effect on the Company's results of operations, financial position,
or cash flows.
12
<PAGE>
Item 8. Financial Statements and Supplementary Data
The Report of Independent Public Accountants, Financial Statements and Notes to
Financial Statements follow.
Report of Ernst & Young LLP, Independent Auditors
Board of Directors and Shareholders
Aztec Manufacturing Co.
We have audited the accompanying consolidated balance sheets of Aztec
Manufacturing Co. as of February 29, 2000 and February 28, 1999, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended February 29, 2000. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Aztec
Manufacturing Co. at February 29, 2000 and February 28, 1999, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended February 29, 2000, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
Fort Worth, Texas
March 31, 2000
13
<PAGE>
AZTEC MANUFACTURING CO. CONSOLIDATED BALANCE SHEETS
February 29, 2000 and February 28, 1999
<TABLE>
<CAPTION>
Assets 2000 1999
- ------ ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,328,139 $ 800,183
Accounts receivable, net of allowance for doubtful accounts of
$586,900 in 2000 and $428,300 in 1999 19,571,111 13,465,633
Income taxes receivable - 7,004
Inventories 12,553,318 11,191,363
Costs and estimated earnings in excess of billings on
uncompleted contracts 487,235 -
Deferred income taxes 635,673 -
Prepaid expenses and other 382,047 323,176
------------ ------------
Total current assets 34,957,523 25,787,359
Long-term investments 200,000 200,000
Property, plant, and equipment, at cost:
Land 2,027,431 1,827,431
Buildings and structures 18,923,650 17,194,254
Machinery and equipment 22,424,399 17,795,993
Furniture and fixtures 2,173,714 1,609,601
Automotive equipment 1,620,329 1,207,593
Construction in progress 1,072,380 225,179
------------ ------------
48,241,903 39,860,051
Less accumulated depreciation (19,971,944) (16,781,171)
------------ ------------
Net property, plant, and equipment 28,269,959 23,078,880
Costs in excess of fair value of assets purchased, less accumulated
amortization of $2,838,000 in 2000 and $2,028,000 in 1999 20,792,683 8,828,920
Other assets 583,576 503,802
------------ ------------
$ 84,803,741 $ 58,398,961
============ ============
</TABLE>
See accompanying notes.
14
<PAGE>
AZTEC MANUFACTURING CO. CONSOLIDATED BALANCE SHEETS (Continued)
February 29, 2000 and February 28, 1999
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity 2000 1999
- ------------------------------------ ------------ ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 7,302,699 $ 3,826,238
Income tax payable 229,399 -
Accrued salaries and wages 1,879,761 903,145
Other accrued liabilities 5,644,222 2,889,451
Billings in excess of costs and estimated earnings on
uncompleted contracts 405,435 -
Long-term debt due within one year 4,367,731 3,135,238
------------ ------------
Total current liabilities 19,829,247 10,754,072
Long-term debt due after one year 31,075,272 20,266,266
Deferred income taxes 878,500 493,173
Shareholders' equity:
Common stock, $1 par value; 25,000,000 shares authorized; 6,304,580
shares issued at Feb. 29, 2000 and at Feb. 28, 1999 6,304,580 6,304,580
Capital in excess of par value 11,113,565 11,422,536
Retained earnings 29,559,646 23,736,974
Less common stock held in treasury, at cost (1,503,024 shares
at Feb. 29, 2000 and 1,569,822 shares at Feb. 28, 1999) (13,957,069) (14,578,640)
------------ ------------
Total shareholders' equity 33,020,722 26,885,450
------------ ------------
$ 84,803,741 $ 58,398,961
============ ============
</TABLE>
See accompanying notes.
15
<PAGE>
AZTEC MANUFACTURING CO. CONSOLIDATED STATEMENTS OF INCOME
Years ended February 29, 2000, February 28, 1999 and February 28, 1998
<TABLE>
<CAPTION>
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 92,544,434 $ 80,922,415 $ 75,479,456
Costs and expenses:
Cost of sales 68,030,479 62,525,479 55,993,665
Selling, general, and administrative 12,307,958 9,709,627 9,570,337
Net (gain) loss on sale of property, plant and
equipment (44,851) (2,161) 35,469
Interest expense 1,674,434 982,275 737,391
Other (income) expense, net 27,229 (93,200) (766,850)
------------ ------------ ------------
81,995,249 73,122,020 65,570,012
------------ ------------ ------------
Income before income taxes 10,549,185 7,800,395 9,909,444
Income tax expense 3,955,945 2,926,000 2,689,652
------------ ------------ ------------
Net income $ 6,593,240 $ 4,874,395 $ 7,219,792
============ ============ ============
Earnings per common share:
Basic $ 1.39 $ .87 $ 1.21
============ ============ ============
Diluted $ 1.38 $ .86 $ 1.19
============ ============ ============
</TABLE>
See accompanying notes.
16
<PAGE>
AZTEC MANUFACTURING CO. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended February 29, 2000, February 28, 1999 and February 28, 1998
<TABLE>
<CAPTION>
Common Stock Capital in
---------------------------
Excess of Retained Treasury
Shares Amount Par Value Earnings Stock
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at February 28, 1997 6,145,009 $ 6,145,009 $ 10,351,523 $ 12,802,931 ($ 726,131)
Exercise of stock options 159,571 159,571 1,051,438 - -
Purchase of treasury stock
(150,000 shares) - - - - (2,091,081)
Cash dividends declared - - - (593,272) -
Net income - - - 7,219,792 -
------------ ------------ ------------ ------------ ------------
Balance at February 28, 1998 6,304,580 6,304,580 11,402,961 19,429,451 (2,817,212)
Exercise of stock options - - 19,575 - -
Purchase of treasury stock
(1,200,030 shares) - - - - (11,859,792)
Cash dividends declared - - - (566,872) -
Net income - - - 4,874,395 -
------------ ------------ ------------ ------------ ------------
Balance at February 28, 1999 6,304,580 6,304,580 11,422,536 23,736,974 (14,578,640)
Exercise of stock options - - (308,971) - 621,571
Cash dividends declared - - - (770,568)
Net income - - - 6,593,240 -
------------ ------------ ------------ ------------ ------------
Balance at February 29, 2000 6,304,580 $ 6,304,580 $ 11,113,565 $ 29,559,646 ($13,957,069)
============ ============ ============ ============ ============
</TABLE>
See accompanying notes.
17
<PAGE>
AZTEC MANUFACTURING CO. CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended February 29, 2000, February 28, 1999 and February 28, 1998
<TABLE>
<CAPTION>
2000 1999 1998
------------------ ------------------- ------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $6,593,240 $4,874,395 $ 7,219,792
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 3,711,319 3,014,359 2,449,906
Amortization 1,059,046 615,891 585,389
Provision for doubtful accounts 298,487 132,107 138,883
Deferred income tax (benefit) expense (380,599) (79,306) 79,791
Net (gain) loss on sale of property, plant and equipment (44,851) (2,161) 35,469
------------------ ------------------- ------------------
11,236,642 8,555,285 10,509,230
Effects of changes in operating assets and liabilities, net of
acquisition of subsidiaries:
Accounts receivable (4,171,042) (529,056) (2,475,504)
Inventories 285,279 3,037,378 (7,186,887)
Prepaid expenses and other 15,520 (72,440) (37,037)
Other assets (121,852) (29,497) (33,507)
Net change in billings related to costs and estimated
earnings on uncompleted contracts 1,811,061 - -
Accounts payable 2,565,852 (1,485,953) 2,472,083
Accrued salaries and wages 689,537 (182,535) 225,059
Other accrued liabilities and income taxes 1,522,436 (519,334) (775,843)
------------------ ------------------- ------------------
Net cash provided by operating activities 13,833,433 8,773,848 2,697,594
Cash flows from investing activities:
Proceeds from the sale of property, plant and equipment 252,429 168,854 104,979
Purchases of property, plant and equipment (4,152,446) (6,992,063) (3,395,402)
Acquisition of subsidiaries, net of cash acquired (21,133,219) (5,528) (6,783,392)
Proceeds from the sale of long-term investments - 100,000 -
------------------ ------------------- ------------------
Net cash used in investing activities (25,033,236) (6,728,737) (10,073,815)
</TABLE>
18
<PAGE>
AZTEC MANUFACTURING CO. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years ended February 29, 2000, February 28, 1999 and February 28, 1998
<TABLE>
<CAPTION>
2000 1999 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from revolving loan 12,147,000 12,200,000 5,550,000
Proceeds from long-term debt 17,500,000 10,000,000 -
Payments on revolving loan (10,397,000) (10,000,000) -
Payments on long-term debt (7,267,969) (1,875,715) (1,756,668)
Cash dividends paid (566,872) (593,272) (354,847)
Proceeds from exercise of stock options 312,600 117,939 1,211,009
Purchase of treasury stock - (11,859,792) (2,091,081)
----------------- ----------------- -----------------
Net cash (used in) provided by financing activities 11,727,759 (2,010,840) 2,558,413
----------------- ----------------- -----------------
Net (decrease) increase in cash and cash equivalents 527,956 34,271 (4,817,808)
Cash and cash equivalents at beginning of year 800,183 765,912 5,583,720
----------------- ----------------- -----------------
Cash and cash equivalents at end of year $ 1,328,139 $ 800,183 $ 765,912
================= ================= =================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 1,567,453 $ 940,588 $ 733,796
Income taxes $ 4,041,852 $ 2,910,713 $ 3,766,345
</TABLE>
See accompanying notes.
19
<PAGE>
Notes To Consolidated Financial Statements
1. Summary of significant accounting policies
Organization--Aztec--Manufacturing Co. (the "Company") operates primarily
------------
in the United States. Information about the Company's operations by
segment are included in Note 12 to the consolidated financial statements.
Basis of consolidation--The consolidated financial statements include the
----------------------
accounts of Aztec Manufacturing Company and its wholly-owned subsidiaries
and partnerships. All significant inter-company accounts and transactions
have been eliminated in consolidation.
Use of estimates--The preparation of the financial statements in conformity
----------------
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Concentrations of credit risk--Financial instruments that potentially
-----------------------------
subject the Company to significant concentrations of credit risk consist
principally of cash and cash equivalents and trade accounts receivable.
The Company maintains cash and cash equivalents with various financial
institutions. These financial institutions are located throughout the
United States and Company policy is designed to limit exposure to any one
institution. The Company performs periodic evaluations of the relative
credit standing of those financial institutions that are considered in the
Company's banking relationships. The Company has not experienced any losses
in such accounts and believes it is not exposed to any significant credit
risk on cash and cash equivalents.
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the Company's diversity by virtue of two operating segments,
the number of customers, and the absence of a concentration of trade
accounts receivable in a small number of customers. The Company's net
credit losses in 2000, 1999 and 1998 were approximately $168,000, $127,000
and $102,000, respectively. Collateral is usually not required from
customers as a condition of sale.
Revenue recognition--The Company recognizes revenue from product sales upon
-------------------
shipment or based upon the percentage-of-completion method of accounting as
contract services are performed. The extent of progress for revenue
recognized using the percentage-of-completion method is measured by the
ratio of contract costs incurred to date to estimated total contract costs
at completion. Costs and estimated earnings in excess of related billings
on uncompleted contracts are recorded as current assets and billings in
excess of costs and estimated earnings on uncompleted contracts are
recorded as current liabilities.
Contract costs include all direct material and labor, and certain indirect
costs. Selling, general and administrative costs are charged to expense as
incurred. Provisions for estimated losses, if any, on uncompleted contracts
are made in the period in which such losses are estimable.
Cash and cash equivalents--For purposes of reporting cash flows, cash and
-------------------------
cash equivalents include cash on hand, deposits with banks and all highly
liquid investments with an original maturity of three months or less.
Inventories--Inventories are stated at the lower of cost or market. Cost is
-----------
determined principally using a weighted-average method for the Manufactured
Products segment and first-in-first-out (FIFO) method for the Services
segment.
20
<PAGE>
Notes To Consolidated Finacial Statements
1. Summary of significant accounting policies (continued)
Property, plant and equipment--For financial reporting purposes,
-----------------------------
depreciation is computed by the straight-line method over the estimated
useful lives of the related assets as follows:
Buildings and structures 10-25 years
Machinery and equipment 3-15 years
Furniture and fixtures 3-15 years
Automotive equipment 3 years
Maintenance and repairs are charged to expense as incurred; renewals and
betterments are capitalized.
Intangible assets and costs in excess of fair value of assets acquired
----------------------------------------------------------------------
("goodwill")--Intangible assets include purchased intangibles primarily
------------
comprised of customer lists, engineering drawings and non-compete
agreements. Such intangible assets and goodwill are being amortized using
the straight-line method over the estimated useful lives of the assets
ranging from 5 to 40 years.
Impairment of long-lived assets --The Company reviews long-lived assets and
-------------------------------
certain identifiable intangibles for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset is impaired.
Recoverability of assets to be held and used is measured by a comparison of
the carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired, the
impairment recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Management
assesses whether there has been an impairment of goodwill by considering
factors such as expected future operating income, current operating results
and other economic factors.
Income Taxes--Income tax expense is based on the liability method. Under
------------
this method of accounting, deferred tax assets and liabilities are
recognized based on differences between financial statement and income tax
bases of assets and liabilities using presently enacted tax rates and laws.
Stock-based compensation--The Company grants stock options for a fixed
------------------------
number of shares to employees and directors with an exercise price equal to
the fair value of the shares at the date of grant. The Company has elected
to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB 25), and related interpretations in accounting
for employee stock options. Under APB 25, because the exercise price of the
Company's employee and director stock options equal the market price of the
underlying stock on the date of grant, no compensation expense is
recognized.
Financial Instruments--The Company's financial instruments consist of cash
---------------------
and cash equivalents, accounts receivables, long term investments, and long
term debt. The fair value of financial instruments is determined by
reference to various market data and other valuation techniques as
appropriate. Unless otherwise disclosed, the fair value of financial
instruments approximate their recorded values. The Company utilizes
financial instruments to manage interest rate risk associated with portions
of its long-term debt.
Reclassifications--Certain reclassifications have been made in the prior
-----------------
year's consolidated financial statements to conform to the fiscal 2000
presentation.
Pending Adoption of Accounting Standards
----------------------------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which, as amended is required to be
adopted by the Company in fiscal 2002. The Company is in the process of
evaluating the effect of implementing this new standard. The Company's
management does not anticipate that the adoption of the new statement will
have a significant effect on earnings or the financial position of the
Company.
21
<PAGE>
Notes To Consolidated Finacial Statements
Notes To Consolidated Financial Statements
2. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
2000 1999
----------------- ----------------
(In thousands)
<S> <C> <C>
Raw materials $ 9,471 $ 7,491
Work-in-process 2,198 1,001
Finished goods 1,432 2,884
----------------- ----------------
13,101 11,376
Less reserve for obsolete and slow-moving inventory 548 185
----------------- ----------------
$12,553 $11,191
================= ================
</TABLE>
3. Costs and Estimated Earnings on Uncompleted Contracts
Costs and estimated earnings on uncompleted contracts at February 29,
2000 consist of the following (in thousands):
<TABLE>
<CAPTION>
2000
------------------
(In thousands)
<S> <C>
Costs incurred on uncompleted contracts $11,259
Estimated earnings 3,676
------------------
14,935
Less billings to date 14,853
------------------
$ 82
==================
</TABLE>
The amounts noted above are included in the accompanying balance sheet
under the following captions (in thousands):
<TABLE>
<CAPTION>
2000
------------------
(In thousands)
<S> <C>
Cost and estimated earnings in excess of billings
on uncompleted contracts $ 487
Billings in excess of costs and estimated earnings
on uncompleted contracts (405)
------------------
$ 82
==================
</TABLE>
4. Other accrued liabilities
Other accrued liabilities consist of the following:
<TABLE>
<CAPTION>
2000 1999
----------------- ----------------
(In thousands)
<S> <C> <C>
Accrued warranty $ 1,409 $ 71
Accrued common stock dividend 771 567
Accrued profit sharing 1,050 784
Other 2,414 1,467
----------------- ----------------
$ 5,644 $ 2,889
================= ================
</TABLE>
22
<PAGE>
Notes To Consolidated Financial Statements
5. Long-term investments
The Company's long-term investments represent investments in tax-free
municipal bonds maturing in July and August 2001 and carry interest at
rates ranging from 5.1% to 5.5%. The investments were purchased and are
being held to secure the Company's outstanding letters of credit with a
bank.
6. Employee benefit plans
The Company has a trusteed profit sharing plan covering substantially all
of its employees. Under the provisions of the plan, the Company contributes
amounts as authorized by the Board of Directors. Contributions to the
profit sharing plan amounted to $1,050,000 for 2000, $784,000 for 1999 and
$992,000 for 1998.
7. Income taxes
Deferred federal and state income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
income tax purposes. Significant components of the Company's net deferred
income tax liability are as follows:
<TABLE>
<CAPTION>
2000 1999
----------------- ----------------
(In thousands)
<S> <C> <C>
Deferred tax liabilities:
Depreciation methods and property basis differences $ 1,160 $ 944
Other assets 181 155
----------------- ----------------
Total deferred income tax liabilities 1,341 1,099
Deferred tax assets:
Employee related items 247 199
Reserve for inventory 201 66
Reserve for warranty 205 24
Reserve for doubtful accounts 214 167
Other 231 150
----------------- ----------------
Total deferred tax assets 1,098 606
----------------- ----------------
Net deferred tax liability $ 243 $ 493
================= ================
</TABLE>
The provision for income taxes consists of:
<TABLE>
<CAPTION>
2000 1999 1998
---------------- ----------------- ----------------
(In thousands)
<S> <C> <C> <C>
Federal:
Current $3,835 $2,679 $2,229
Deferred (345) (72) 72
State:
Current 502 326 381
Deferred (36) (7) 8
---------------- ----------------- ----------------
$3,956 $2,926 $2,690
================ ================= ================
</TABLE>
23
<PAGE>
Notes To Consolidated Financial Statements
7. Income taxes (continued)
A reconciliation from the federal statutory tax rate to the effective
tax is as follows:
<TABLE>
<CAPTION>
2000 1999 1998
------------- ------------ ------------
<S> <C> <C> <C>
Statutory tax rate 34.0% 34.0% 34.0 %
Expenses not deductible for tax purposes 0.7 1.3 1.1
State income taxes, net of federal income tax benefit 3.1 2.8 2.5
Stock options exercised 0 0 (7.5)
Other (0.3) (0.6) (3.0)
------------- ------------ ------------
Effective tax rate 37.5% 37.5% 27.1%
============= ============ ============
</TABLE>
8. Earnings per share
Basic earnings per share is based on the month-end average number of shares
outstanding during each year. Diluted earnings per share were similarly
computed but have been adjusted for the dilutive effect of the weighted-
average number of stock options outstanding. Cash dividends paid (or
declared) per share are $.16 in 2000, $.12 in 1999 and $.10 in 1998.
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
2000 1999 1998
---------------- --------------- ----------------
(In thousands, except share and per share amounts)
<S> <C> <C> <C>
Numerator:
Net income for basic and diluted
earnings per common share $ 6,593 $ 4,874 $ 7,220
================ ================ ================
Denominator:
Denominator for basic earnings
per common share -
weighted-average shares 4,753,243 5,614,026 5,967,610
Effect of dilutive securities:
Stock options 21,711 37,298 124,634
---------------- ---------------- ----------------
Denominator for diluted earnings
per common share - adjusted
weighted-average shares 4,774,954 5,651,324 6,092,244
================ ================ ================
Basic earnings per common share $ 1.39 $ .87 $1.21
======= ====== =====
Diluted earnings per common share $ 1.38 $ .86 $1.19
======= ====== =====
</TABLE>
Stock options for which the exercise price was greater than the average
market price of common shares were not included in the computation of
diluted earnings per share as the effect would be anti-dilutive. At the end
of fiscal years 2000, 1999 and 1998, there were 229,487, 248,468 and
262,763 stock options, respectively, outstanding with exercise prices
greater than the average market price of common shares.
24
<PAGE>
Notes To Consolidated Finacial Statements
9. Stock options and other shareholder matters
The Company has three Incentive Stock Option Plans for its employees. The
maximum number of shares that may be issued under each of the plans is
750,000, 322,977 and 525,000 shares respectively. At February 29, 2000,
options outstanding under these plans amounted to 298,973 of which 263,108
options are exercisable at prices (equal to the market price at the date of
grant) ranging from $4.44 to $11.13 per share. Options under these plans
vest from immediately upon issuance to ratably over a period of five years
and expire at various dates through February 2005. Included in these
outstanding options are 138,851 options granted in fiscal 2000 with an
exercise price of $10.12, which vest immediately after an employee has
completed one year of service with the Company.
The Company also has three Non-statutory Stock Option Plans for the
independent directors of the Company. The maximum number of shares that may
be issued under each of the plans is 250,000, 115,762 and 157,500 shares.
At February 29, 2000, options granted and outstanding under these plans
amounted to 123,012 of which 86,612 options are vested and exercisable at
prices ranging from $3.69 to $16.88 per share. Options under these plans
vest ratably over a five year period and expire at various dates through
July 2008.
In February 2000, the Company entered into an agreement with a company to
issue 70,000 stock options in exchange for services received and to be
received. A majority of these options vest over a period of eighteen months
contingent upon the achievement of certain performance measures. These
options expire in February 2005.
A summary of the Company's stock option activity and related information is
as follows:
<TABLE>
<CAPTION>
2000 1999 1998
-------------------------- -------------------------- --------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
---------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 369,453 $ 9.18 307,073 $ 8.90 200,420 $ 4.42
Granted 207,561 10.12 80,000 10.84 266,224 11.48
Exercised (66,798) 4.68 (12,570) 9.38 (159,571) 7.59
Forfeited (18,231) 10.51 (5,050) 17.74 - -
---------- ------------ ----------- ----------- ----------- -----------
Outstanding at end of year 491,985 $ 10.14 369,453 $ 9.18 307,073 $ 8.90
========== ============ =========== =========== =========== ===========
Exercisable at end of year 370,720 $10.01 304,853 $ 8.76 288,173 $ 8.72
========== ============ =========== =========== =========== ===========
Weighted average fair value
during the years
indicated of options
granted during such
year indicated $ 3.35 $ 4.80 $ 3.21
============ =========== ===========
</TABLE>
The following table summarizes additional information about stock options
outstanding at February 29, 2000.
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Average Average Shares Average
Range of Remaining Exercise Currently Exercise
Exercise Prices Total Shares Life Price Exercisable Price
---------------------- ------------- ---------------- --------------- ------------------- ----------------
<S> <C> <C> <C> <C> <C>
$3.69-$5.25 45,937 2.5 $ 4.22 43,837 $ 4.18
$8.88-$11.13 435,548 4.5 $10.60 322,683 $10.71
$16.88 10,500 7.7 $16.88 4,200 $16.88
</TABLE>
25
<PAGE>
Notes To Consolidated Finacial Statements
9. Stock options and other shareholder matters (continued)
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock Based Compensation," requires the disclosure of pro forma net income
and income per share of common stock computed as if the Company had
accounted for its stock options granted subsequent to February 28, 1995
under the fair value method set forth in SFAS 123. The fair value of stock
options granted was estimated at the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions: a
risk-free interest rate ranging from 5.8% to 6.5%, a dividend yield ranging
from 1% to 1.25% and a volatility factor ranging from .445 to .498. In
addition, the fair value of these options was estimated based on an
expected life ranging from 1 1/2 years to 5 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions, including the
expected stock price volatility. Because the Company's stock options have
characteristics significantly different from those described above, and
because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion the existing models do not
necessarily provide a reliable single measure of fair value for the
Company's stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense on a straight-line basis over the option's
vesting period as adjusted for estimated forfeitures. The Company's pro
forma information for fiscal 2000, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
2000 1999 1998
------------- ----------- -----------
(In thousands except per share amounts)
<S> <C> <C> <C>
Pro forma net income $6,146 $4,833 $6,445
Pro forma earnings per common share:
Basic $1.30 $.86 $1.08
Diluted $1.29 $.86 $1.06
</TABLE>
As of February 29, 2000, the Company has approximately 18,695,420 shares
reserved for future issuance under the stock option plans and shareholder
rights plan.
Effective January 7, 1999, the Board of Directors approved a stock rights
plan, which authorized and declared a dividend distribution of one right
for each share of common stock outstanding at the close of business on
February 4, 1999. The rights are exercisable at an initial exercise price
of $60, subject to certain adjustments as defined in the agreement, if a
person or group acquires 15% or more of the Company's common stock or
announces a tender offer that would result in ownership of 15% or more of
the common stock. Alternatively, the rights may be redeemed at one cent per
right at any time before a 15% position has been acquired. The rights
expire on January 7, 2009.
26
<PAGE>
Notes To Consolidated Finacial Statements
10. Long-term debt
The Company has a credit facility with a bank which provides a $20 million
revolving line of credit, a $17.5 million New Term Note A and a $10 million
Term Note B.
<TABLE>
<CAPTION>
Long-term debt consists of the following: 2000 1999
----------------- ----------------
(In thousands)
<S> <C> <C>
Term Note A payable to bank $ - $ 5,555
New Term Note A payable to bank, due in monthly
installments of $239,726 through February 2006
(interest at 7.2% on February 29, 2000) 17,260 -
Term Note B payable to bank, due in monthly installments of
$119,048 through February 2006, (interest at a fixed
rate of 6.8% for the term of the note) 8,452 9,881
Revolving line of credit with bank, due July 2002 (interest
at 7.2% on February 29, 2000) 9,500 7,750
Industrial Revenue Bonds, due in December 2003, payable in
monthly installments (interest at 5.75% on February 29,
2000) 175 215
Other 56 -
----------------- ----------------
35,443 23,401
Less amount due within one year 4,368 3,135
----------------- ----------------
$ 31,075 $ 20,266
================= ================
</TABLE>
The Company's credit facility and industrial revenue bonds are subject to
loan agreements which require the Company to comply with various financial
covenants including minimum requirements with regard to tangible net worth,
funded debt to EBITDA, dividend payments, capital expenditures and cash
flows. The Company is in compliance with these covenants as of February 29,
2000. The Company's long-term debt is secured by receivables, inventory,
equipment, and fixtures. Under the terms of the credit facility,
borrowing's on the revolving line of credit are subject to a borrowing base
calculation which is limited to 80% of certain trade accounts receivable
and a range of 50% to 60% of certain raw materials and finished good
inventories and is reduced by the balance of outstanding letters of credit
which may not exceed $2 million at any one time. At February 29, 2000, the
Company has approximately $8,758,000 after deducting for $462,000 of
outstanding letters of credit available under the revolving credit
facility.
In order to reduce interest rate risk, the Company in February 1999 entered
into an interest rate protection agreement through the bank (the Swap
Agreement) to modify the interest characteristics of the $10 million Term
Note B from a variable rate to a fixed rate. The Swap Agreement involves
the exchange of interest obligations over the life of the Term Note B
whereby the Company receives a fixed rate of 6.8% in exchange for a
variable 30-day LIBOR rate plus 1.25% (7.2% at February 29, 2000) which is
the stated interest rate under the Term Note B agreement. Management
intends to hold the Swap Agreement until maturity in March 2006. The
Company has incurred $16,000 of additional interest expense related to this
Swap Agreement for the year ended February 29, 2000. The fair value of the
Swap Agreement is approximately $233,000 at February 29, 2000.
Maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
2001 $ 4,368
2002 4,355
2003 13,859
2004 4,362
2005 4,313
Thereafter 4,186
----------------
$35,443
================
</TABLE>
27
<PAGE>
Notes To Consolidated Finacial Statements
11. Quarterly financial information, unaudited (in thousands, except per share
amounts)
<TABLE>
<CAPTION>
Quarters Ended
May 31, August 31, November 30, February 29,
1999 1999 1999 2000
-------------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C>
2000
----
Net sales $20,670 $20,986 $24,654 $26,234
Gross profit 5,354 5,462 6,806 6,892
Net income 1,411 1,567 1,806 1,809
Basic earnings per common share .30 .33 .38 .38
Diluted earnings per common share .30 .33 .37 .38
<CAPTION>
Quarters Ended
May 31, August 31, November 30, February 28,
1998 1998 1998 1999
--------------- ------------- ---------------- ---------------
<S> <C> <C> <C> <C>
1999
----
Net sales $20,729 $20,721 $19,414 $20,058
Gross profit 5,311 4,965 4,426 3,695
Net income 1,576 1,445 1,149 704
Basic earnings per common share .27 .25 .21 (a) .14
Diluted earnings per common share .26 .25 .21 (a) .14
</TABLE>
(a) Included a pretax charge of $914,000 (or 10 cents per share)
for the liquidation and write-down of tubular goods
inventories.
12. Operating segments
The Company has two reportable segments as defined by the Financial
Accounting Standards Board No. 131, "Disclosures about Segments of an
Enterprise and Related Information": (1) Manufactured Products and (2)
Services. The Manufactured Products segment provides highly engineered
specialty components and tubular products to the power generation, power
transmission and distribution, petrochemical, and general industrial
markets. The Services segment provides hot dip galvanizing services to the
steel fabrication industry through facilities located throughout the south
and southwest.
Statement No. 131 modified existing standards for reporting information
about operating segments in annual financial statements and requires
selected information about operating segments in interim financial reports
issued to stockholders. 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 in assessing
performance. The segments follow the same accounting policies as described
in the summary of significant accounting policies (see Note 1). Information
regarding operations and assets by segment is as follows:
28
<PAGE>
Notes To Consolidated Financial Statements
12. Operating Segments (continued)
<TABLE>
<CAPTION>
2000 1999 1998
---------------- ----------------- ----------------
(In thousands)
<S> <C> <C> <C>
Net sales:
Manufactured Products $51,459 $46,400 $44,940
Services 41,085 34,522 30,539
---------------- ----------------- ----------------
$92,544 $80,922 $75,479
================ ================= ================
Operating income (a):
Manufactured Products $ 7,004 $ 4,380 $ 6,904
Services 9,519 7,474 6,543
----------------- ----------------- ----------------
16,523 11,854 13,447
General corporate expenses 4,292 3,119 3,316
Interest expense 1,674 982 737
Other (income) expense, net (b) 8 (47) (515)
----------------- ----------------- ----------------
5,974 4,054 3,538
----------------- ----------------- ----------------
Income before income taxes $10,549 $ 7,800 $ 9,909
================= ================= ================
Depreciation and amortization:
Manufactured Products $ 1,910 $ 1,152 $ 994
Services 2,745 2,358 1,941
Corporate 115 120 100
----------------- ----------------- ----------------
$ 4,770 $ 3,630 $ 3,035
================= ================= ================
Expenditures for acquisitions, net of cash,
and property, plant and equipment:
Manufactured Products $ 9,508 $ 3,556 $ 2,372
Services 15,580 3,312 7,751
Corporate 198 130 56
------------------ ---------------- ----------------
$25,286 $ 6,998 $10,179
================== ================ ================
Total assets:
Manufactured Products $43,184 $28,994 $29,877
Services 39,152 27,235 25,916
Corporate 2,468 2,170 2,109
------------------ ---------------- ----------------
$84,804 $58,399 $57,902
================== ================ ================
</TABLE>
(a) Operating income consists of net sales less cost of sales, specifically
identifiable general and administrative expenses and selling expenses.
(b) Other (income) expense, net includes gains and losses on sale of property,
plant and equipment and other (income) expense not specifically
identifiable to a segment.
29
<PAGE>
Notes To Consolidated Financial Statements
13. Commitments and contingencies
Leases
The Company leases various facilities under non-cancelable operating
leases with an initial term in excess of one year. As of February 29,
2000, the future minimum payments required under these operating leases
are summarized as follows:
Operating
Leases
------------------
(In thousands)
2001 $ 258
2002 266
2003 275
2004 275
2005 229
------------------
Total $1,303
==================
Rental expense for real estate and personal property was approximately
$800,000, $369,000 and $148,000 for the years ended February 29, 2000,
February 28, 1999 and 1998, respectively.
Litigation and Environmental Contingencies
The Company is subject to various environmental protection reviews by
state and federal government agencies and has been identified as a
potential responsible party in certain investigations conducted by these
agencies. The Company did not expense any significant amounts related to
environmental liabilities in 2000, 1999 or 1998. The ultimate liability,
if any, which might result from such reviews or additional clean-up and
remediation expenses cannot presently be determined; however, as a result
of an internal analysis and prior clean-up efforts, management believes
the results will not have a material impact on the Company and that the
recorded reserves for estimated losses are adequate.
In order to maintain permits to operate certain of the Company's
facilities, future capital expenditures for equipment may be required to
meet new or existing environmental regulations.
The Company is involved from time to time in various suits and claims
arising in the normal course of business. In management's opinion, the
ultimate resolution of these matters will not have a material effect on
the Company's financial position or results of operations.
14. Acquisitions
In fiscal year 2000, the Company purchased two businesses. The total
purchase price, net of cash acquired, for these two businesses was
approximately $13 million and $10.6 million, respectively, and comprised
of cash paid of $10.9 million and $9.9 million and liabilities assumed of
$2.1 million and $752,000, respectively. The assets purchased were
recorded at estimated fair value and the costs in excess of fair value
for these acquisitions of approximately $7.3 million and $5.7 million
were recorded as goodwill. Pursuant to the provisions of the purchase
agreement for one of the acquisitions, in the event the acquired
business' revenue is below $12.4 million for calendar year 2000, the
Company is to receive from the seller purchase price refunds equal to 11%
of the amount by which revenue for calendar year 2000 is below $12.4
million.
30
<PAGE>
Notes To Consolidated Financial Statements
14. Acquisitions (continued)
These acquisitions were accounted for under the purchase method of
accounting. The excess of costs over fair value for these two
acquisitions is being amortized over a period of 15 and 20 years,
respectively. Operations applicable to acquired businesses are included
in the accompanying Consolidated Statements of Income from their
respective dates of acquisitions. The pro forma consolidated results of
operations for the years ended February 29, 2000 and February 28, 1999,
assuming the acquisitions had been consummated as of March 1, 1999 and
March 1, 1998 are as follows:
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
2000 1999
---------------- ----------------
(In thousands)
<S> <C> <C>
Net Sales $104,787 $100,789
Net Income $ 6,048 $ 4,819
Earnings per common share:
Basic $1.27 $.86
Diluted $1.27 $.85
</TABLE>
In fiscal year 1998, the Company purchased substantially all of the
assets of three businesses for approximately $3.9 million, $1.7 million
and $1.2 million in cash, respectively. The assets purchased were
recorded at estimated fair value; the costs in excess of fair value for
these acquisition of approximately $2.8 million, $350,000 and $190,000,
respectively, were recorded as goodwill. In connection with two of these
acquisitions, the Company paid the selling shareholders $250,000 and
$50,000, respectively, pursuant to an agreement not to compete. All
acquisitions in fiscal year 1998 were accounted for under the purchase
method of accounting. Operations applicable to acquired businesses in
1998, which are immaterial to the consolidated operations of the Company,
are included in the accompanying Consolidated Statements of Income from
their respective dates of acquisition. The excess of costs over fair
value for these acquisitions is being amortized over a period of 15
years.
31
<PAGE>
SCHEDULE II
Aztec Manufacturing Co.
Valuation and Qualifying Accounts and Reserves
(in thousands)
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------------
Allowance for Doubtful Accounts February 28, February 28, February 29,
1998 1999 2000
-------------- -------------- --------------
<S> <C> <C> <C>
Balance at beginning of year $ 386 $ 423 $ 428
Additions charged to income 139 132 298
Additions from acquisitions 0 0 28
Balances written off, net of recoveries (102) (127) (167)
----------- ----------- ----------
Balance at end of year $ 423 $ 428 $ 587
=========== =========== ==========
</TABLE>
32
<PAGE>
Item 9. Disagreements on Accounting and Financial Disclosure
No changes in accountants or disagreements with accountants on accounting and/or
financial disclosure have arisen.
PART III
Item 10. Directors and Executive Officers
The information required by this item with regard to executive officers is
included in Part I, Item 1 of this report under the heading "Executive Officers
of the Registrant."
The other information required by this item is incorporated herein by reference
to the Registrant's Proxy Statement for the 2000 Annual Meeting of Shareholders.
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference to the
Registrant's Proxy Statement for the 2000 Annual Meeting of Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein by reference to the
Registrant's Proxy Statement for the 2000 Annual Meeting of Shareholders.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated herein by reference to the
Registrant's Proxy Statement for the 2000 Annual Meeting of Shareholders.
33
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors 13
Consolidated Balance Sheets as of February 29, 2000 and February 28, 1999 14-15
Consolidated Statements of Income for the years ended 16
February 29, 2000, February 28, 1999, and February 28, 1998
Consolidated Statements of Shareholders' Equity for the years ended 17
February 29, 2000, February 28, 1999, and February 28, 1998
Consolidated Statements of Cash Flows for the years ended 18-19
February 29, 2000, February 28, 1999, and February 28, 1998
Notes to Consolidated Financial Statements 20-31
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts and Reserves 32
</TABLE>
Schedules and compliance information other than those referred to above have
been omitted since the required information is not present or is not present in
amounts sufficient to require submission of the schedule, or because the
information required is included in the consolidated financial statements and
the notes thereto.
3. Exhibits
The following exhibits are filed as a part of this report:
3(1) - Articles of Incorporation, and all amendments thereto (incorporated by
reference to the Annual Report on Form 10-K filed by Registrant for the fiscal
year ended February 28, 1981).
3(2) - Articles of Amendment to the Article of Incorporation of the Registrant
dated June 30, 1988.*
3(3) - Articles of Amendment to the Articles of Incorporation of the Registrant
dated October 25, 1999.*
3(4) - Bylaws adopted by the Board of Directors of Registrant on May 11, 1999.
(Incorporated by reference to Exhibit 3(c) of Registrants From 10-K for the
fiscal year ended February 28, 1999).
10(1) - 1986 Incentive Stock Option Plan of Aztec Manufacturing Co.
(incorporated by reference to the Annual Report on Form 10-K filed by Registrant
for the fiscal year ended February 28, 1986).
10(2) - Change In Control Agreement between Registrant and Mr. L.C. Martin
dated March 1, 1986 (incorporated by reference to Exhibit 10e of the Annual
Report on Form 10-K filed by Registrant for the fiscal year ended February 28,
1987).
10(3) - Amendment No. 1 dated May 15, 1992 to the Change in Control Agreement
dated April 25, 1986 (incorporated by reference to Exhibit 10f of the Annual
Report on Form 10-K filed by Registrant for fiscal year ended
February 28, 1999).
10(4) - 1988 Nonstatutory Stock Option Plan of Aztec Manufacturing Co.
(incorporated by reference to Exhibit 10g of the Annual Report on Form 10-K
filed by Registrant for the fiscal year ended February 29, 1988).
34
<PAGE>
10(5) - 1991 Incentive Stock Option Plan of Aztec Manufacturing Co.
(incorporated by reference to Exhibit 10h of the Annual Report on Form 10-K
filed by Registrant for the fiscal year ended February 28, 1991).
10(6) - 1991 Nonstatutory Stock Option Plan of Aztec Manufacturing Co.
(incorporated by reference to Exhibit 10i of the Annual Report on Form 10-K
filed by Registrant for the fiscal year ended February 28, 1991).
10(7) - Buy-Sell and Termination Agreement between Registrant and Mr. L.C.
Martin dated January 27, 1994 (incorporated by reference to Exhibit 10j of the
Annual Report on Form 10-K filed by Registrant for the fiscal year ended
February 28, 1994).
10(8) - 1998 Incentive Stock Option plan of Aztec Manufacturing Co.
(incorporated by reference to Exhibit 10k of the Annual Report on Form 10-K
filed by Registrant for the fiscal year ended February 28, 1998).
10(9) - 1998 Nonstatutory Stock Option plan of Aztec Manufacturing Co.
(incorporated by reference to Exhibit 10l of the Annual Report on Form 10-K
filed by Registrant for the fiscal year ended February 28, 1998).
10(10) - 1997 Nonstatutory Stock Option Grants of Aztec Manufacturing Co.
(incorporated by reference to Exhibit 10m of the Annual Report on Form 10-K
filed by Registrant for the fiscal year ended February 28, 1998).
10(11) - Aztec Manufacturing Co. Employee Plan and Trust as amended and restated
as of December 1, 1999 (incorporated by reference to Form S-8 Registration
Statement Number 333-92377 filed on December 8, 1999).
10(12) - 1999 Independent Director Share Ownership Plan (incorporated by
reference to Form S-8 Registration Statement Number 333-31716 filed on March 3,
2000).
10(13) - Business Loan Agreement between Registrant and Bank of America, Texas,
N.A., dated June 28, 1996.*
10(14) - First Amendment to Business Loan Agreement between Registrant and Bank
of America, Texas, N.A., dated February 12, 1997.*
10(15) - Second Amendment to Business Loan Agreement between Registrant and Bank
of America, Texas, N.A., dated October 16, 1997.*
10(16) - Third Amendment to Business Loan Agreement between Registrant and Bank
of America, Texas, N.A., dated December 26, 1997.*
10(17) - Fourth Amendment to Business Loan Agreement between Registrant and Bank
of America, Texas, N.A., dated August 21, 1998.*
10(18) - Fifth Amendment to Business Loan Agreement between Registrant and Bank
of America, Texas, N.A., dated January 14, 1999.*
10(19) - Sixth Amendment to Business Loan Agreement between Registrant and Bank
of America, Texas, N.A., dated February 3, 1999.*
10(20) - Seventh Amendment to Business Loan Agreement between Registrant and
Bank of America, Texas, N.A., dated August 26, 1999.*
10(21) - Eight Amendment to Business Loan Agreement between Registrant and Bank
of America, Texas, N.A., dated January 31, 2000.*
35
<PAGE>
21 - Subsidiaries of Registrant*.
23 - Consent of Ernst & Young LLP*.
24 - Power of Attorney*.
27 - Financial Data Schedule*
______________
*Filed herewith.
(b) Reports on Form 8-K
The Registrant filed reports on Form 8-K dated September 15, 1999 and Form 8-K/A
dated November 15, 1999, relating to the acquisition of CGIT Westboro, Inc.
36
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
AZTEC MANUFACTURING CO.
(Registrant)
Date: 5/25/2000 By: /s/ L.C. Martin
--------------------------- ----------------------------------
L.C. Martin, Principal Executive
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant and in
the capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ L.C. Martin /s/ Dana L. Perry
- --------------------------------------------- ----------------------------------------------
L.C. Martin, Principal Executive Dana L. Perry, Principal Accounting Officer,
Officer and Director Principal Financial Officer, and Director
David H. Dingus* /s/ Sam Rosen
- --------------------------------------------- ----------------------------------------------
David H. Dingus, President, Chief Operating Sam Rosen, Director
Officer and Director
Robert H. Johnson* R.J. Schumacher*
- --------------------------------------------- ----------------------------------------------
Robert H. Johnson, Director R.J. Schumacher, Director
Martin C. Bowen* Dr. H. Kirk Downey*
- --------------------------------------------- ----------------------------------------------
Martin C. Bowen, Director Dr. H. Kirk Downey, Director
W.C. Walker* Kevern R. Joyce*
- ---------------------------------------------- ----------------------------------------------
W.C. Walker, Director Kevern R. Joyce, Director
/s/ L.C. Martin
- ----------------------------------------------
L.C. Martin, Attorney-in-Fact
</TABLE>
37
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Description Numbered Page
------- ----------- -------------
<S> <C> <C>
3(1) Articles of Incorporation, and all amendments thereto (incorporated by
reference to the Annual Report on Form 10-K filed by Registrant for the
fiscal year February 28, 1981). _____________
3(2) Articles of Amendment to the Article of Incorporation of the Registrant dated
June 30, 1988.* _____________
3(3) Articles of Amendment to the Articles of Incorporation of the Registrant dated
October 25, 1999.* _____________
3(4) Bylaws adopted by the Board of Directors of Registrant on May 11, 1999.
(Incorporated by reference to Exhibit 3(c) of Registrants From 10-K for the
fiscal year ended February 28, 1999). _____________
10(1) 1986 Incentive Stock Option Plan of Registrant (incorporated by reference to
the Annual Report on Form 10-K filed by Registrant for the fiscal year ended
February 28, 1986). _____________
10(2) Change in Control Agreement between Registrant and Mr. L.C. Martin dated March 1,
1986 (incorporated by reference to Exhibit 10f of the Annual Report on Form 10-K
filed by Registrant for the fiscal year ended February 29, 1987). _____________
10(3) Amendment No. 1 dated May 15, 1992 to the Change in Control Agreement dated April
25, 1986 (incorporated by reference to Exhibit 10f of the Annual Report on
Form 10-K filed by Registrant for fiscal year ended February 28, 1999). _____________
10(4) 1988 Nonstatutory Stock Option Plan of Aztec Manufacturing Co. (incorporated by
reference to Exhibit 10g of the Annual Report on Form 10-K filed by Registrant for
the fiscal year ended February 29, 1988). _____________
10(5) 1991 Incentive Stock Option Plan of Aztec Manufacturing Co. (incorporated by
reference to Exhibit 10h of the Annual Report on Form 10-K filed by Registrant
for the fiscal year ended February 28, 1991). _____________
10(6) 1991 Nonstatutory Stock Option Plan of Aztec Manufacturing Co. (incorporated by
reference to Exhibit 10i of the Annual Report on Form 10-K filed by Registrant
for the fiscal year ended February 28, 1991). _____________
10(7) Buy-Sell and Termination Agreement between Registrant and Mr. L.C. Martin dated
January 27, 1994 (incorporated by reference to Exhibit 10j of the Annual Report
on Form 10-K filed by Registrant for the fiscal year ended February 28, 1994). _____________
10(8) 1998 Incentive Stock Option Plan of Aztec Manufacturing Co. (incorporated by
reference to Exhibit 10k of the Annual Report on Form 10-K filed by Registrant
for the fiscal year ended February 28, 1998). _____________
10(9) 1998 Nonstatutory Stock Option Plan of Aztec Manufacturing Co. (incorporated by
reference to Exhibit 10l of the Annual Report on Form 10-K filed by Registrant
for the fiscal year ended February 28, 1998). _____________
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Sequentially
Exhibit Description Numbered Page
------- ----------- -------------
<S> <C> <C>
10(10) 1997 Nonstatutory Stock Option Grants of Aztec Manufacturing Co. (incorporated
by reference to Exhibit 10m of the Annual Report on Form 10-K filed by Registrant
for the fiscal year ended February 28, 1998). _____________
10(11) Aztec Manufacturing Co. Employee Plan and Trust as amended and restated as of
December 1, 1999 (incorporated by reference to Form S-8 Registration Statement
Number 333-92377 filed on December 8, 1999). _____________
10(12) 1999 Independent Director Share Ownership Plan (incorporated by reference to
Form S-8 Registration Statement Number 333-31716 filed on March 3, 2000). _____________
10(13) Business Loan Agreement between Registrant and Bank of America, Texas, N.A.,
dated June 28, 1996.* _____________
10(14) First Amendment to Business Loan Agreement between Registrant and Bank of
America, Texas, N.A., dated February 12, 1997.* _____________
10(15) Second Amendment to Business Loan Agreement between Registrant and Bank of
America, Texas, N.A., dated October 16, 1997.* _____________
10(16) Third Amendment to Business Loan Agreement between Registrant and Bank of
America, Texas, N.A., dated December 26, 1997.* _____________
10(17) Fourth Amendment to Business Loan Agreement between Registrant and Bank of
America, Texas, N.A., dated August 21, 1998.* _____________
10(18) Fifth Amendment to Business Loan Agreement between Registrant and Bank of
America, Texas, N.A., dated January 14, 1999.* _____________
10(19) Sixth Amendment to Business Loan Agreement between Registrant and Bank of
America, Texas, N.A., dated February 3, 1999.* _____________
10(20) Seventh Amendment to Business Loan Agreement between Registrant and Bank of
America, Texas, N.A., dated August 26, 1999.* _____________
10(21) Eight Amendment to Business Loan Agreement between Registrant and Bank of
America, Texas, N.A., dated January 31, 2000.* _____________
21 Subsidiaries of Registrant.* _____________
23 Consent of Ernst & Young LLP.* _____________
24 Power of Attorney.* _____________
27 Financial Date Schedule* _____________
</TABLE>
__________________
* Filed herewith
39
<PAGE>
Exhibit 3(2)
Articles of Amendment to the Article of Incorporation
of the Registrant dated June 30, 1988
<PAGE>
Exhibit 3.2
ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF
AZTEC MANUFACTURING CO.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
ARTICLE 1. The name of the corporation is Aztec Manufacturing Co.
ARTICLE 2. The following amendment to the Articles of Incorporation was
adopted by the shareholders of the corporation on June 17, 1988 for the purpose
of eliminating personal monetary liability of directors in certain
circumstances. The amendment is an addition to the Articles of Incorporation and
the full text of the addition is as follows:
"ARTICLE 11. LIMITATION OF DIRECTOR LIABILITY.
To the fullest extent permitted by applicable law, no director of this
Company shall be liable to this Company, or its shareholders, for monetary
damages for an act or omission in such director's capacity as a director of
this Company, except that this provision does not eliminate or limit the
liability of a director of this Company for:
1. a breach of such director's duty of loyalty to this Company or
its shareholders;
2. an act or omission not in good faith or that involves intentional
misconduct or a knowing violation of the law;
3. a transaction from which such director received an improper
benefit, whether or not the benefit resulted from an action taken
within the scope of such director's office;
4. an act or omission for which the liability of such director is
expressly provided for by statute; or
5. an act related to an unlawful stock repurchase or payment of a
dividend.
-1-
<PAGE>
The foregoing provisions shall not eliminate or limit the liability of
a director for any act or omission occurring prior to the addition of this
Article to the Company's Articles of Incorporation. Any repeal or amendment
of this Article by the shareholders of this Company shall be prospective
only, and shall not adversely affect any limitation on the personal
liability of a director of this Company existing at the time of such repeal
or amendment. In addition to the circumstances in which a director of this
Company is not personally liable as set forth in the foregoing provisions,
a director shall not be liable to the fullest extent permitted by any
amendment to the Texas Miscellaneous Corporation Laws Act or the Texas
Business Corporation Act hereafter enacted that further limits the
liability of a director."
ARTICLE 3. The number of shares of the corporation outstanding at the time
of such adoption was 5,086,233, each of which was entitled to vote on the
amendment.
ARTICLE 4. The number of shares represented at the meeting, in person or by
proxy, was 3,831,896 shares. The number of shares voted FOR such amendment was
3,707,559 shares; and the number of shares voted AGAINST such amendment was
113,138 shares.
DATED June 24, 1988.
AZTEC MANUFACTURING CO.
By /s/ L. C. Martin
-----------------------
L. C. Martin
Its President
-2-
<PAGE>
Exhibit 3(3)
Articles of Amendment to the Articles of Incorporation
of the Registrant dated October 25, 1999
<PAGE>
Exhibit 3.3
ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF
AZTEC MANUFACTURING CO.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
ARTICLE 1. The name of the corporation is Aztec Manufacturing Co.
ARTICLE 2. The following amendment to the Articles of Incorporation, as
amended, was adopted by the shareholders of the corporation on July 13, 1999 for
the purpose of providing for indemnification of directors, advisory directors
and officers of the Company when they are made or threatened to be made a
defendant or respondent in any action, suit or proceeding by reason of the fact
that he or she is or was a director, advisory director or officer of the
Company. The proposed new article would also permit the company to advance, pay
or reimburse expenses in connection with any such action, as permitted by law.
The amendment is an addition to the Articles of Incorporation, as amended, and
the full text of the addition is as follows.
"ARTICLE 12. INDEMNIFICATION; INSURANCE. The Corporation
shall indemnity to the full extent permitted by law any
person who is made or threatened to be made a defendant or
respondent in any action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, or in
any appeal in such an action, suit or proceeding, by reason
of the fact that he or she is or was a Director, advisory
director or officer of the Corporation or of any other
company at the request of the Corporation or is or was
serving at the Corporation's request as an officer, managing
partner or in any other position of authority in the
operation of a partnership, limited partnership or joint
venture in which the Corporation has or had a substantial
direct or indirect interest (collectively referred to
hereinafter as "Indemnified Persons"), against all expenses
(including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such
Indemnified Persons in connection with any such action, suit
or proceeding. The Corporation shall advance pay and
reimburse (as applicable) expenses to Indemnified Persons to
the full extent permitted by law. The Corporation may, to the
extent permitted by law, purchase and maintain insurance,
create a trust fund, establish any form of self-insurance,
secure its indemnity obligation by grant of a security
interest or other lien on the assets of the Corporation,
establish a letter of credit, guaranty or surety arrangement,
or other arrangement on behalf of Indemnified Persons against
any liability asserted against such persons in their
capacities as described above, whether or not the Corporation
would have the power to indemnify such Indemnified Persons
against such liability. No amendment to or rescission of this
<PAGE>
Article shall affect the rights of any of the Indemnified
Persons to indemnification or the advancement, payment or
reimbursement of expenses required by this article growing
out of any act, transaction, event or circumstance which
occurred before such amendment or rescission."
ARTICLE 3. The number of shares of the corporation outstanding on the
record date for determination of shares entitled to vote on such amendment was
4,741,270, each of which was entitled to vote on the amendment.
ARTICLE 4. The number of shares represented at the meeting, in person or by
proxy, was 4,086,283 shares. The number of shares voted FOR such amendment was
3,979,234 shares; and the number of shares voted AGAINST such amendment was
75,135 shares.
DATED: October ____, 1999.
AZTEC MANUFACTURING CO.
By: /s/ L.C. Martin
--------------------------------------
L.C. Martin
Chairman of the Board and
Chief Executive Officer
<PAGE>
EXHIBIT 10(13)
Business Loan Agreement between Registrant
and Bank of America, Texas, N.A., dated June 28, 1996
<PAGE>
================================================================================
BUSINESS LOAN AGREEMENT
(RECEIVABLES AND INVENTORY)
between
BANK OF AMERICA, TEXAS, N.A.
and
AZTEC MANUFACTURING CO.
dated
28 June 1996
================================================================================
<PAGE>
TABLES OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS......................................................................................... 1
2. LOAN AMOUNTS AND TERMS.............................................................................. 4
2.1 Line of Credit Amount............................................................. 4
2.2 Availability Period............................................................... 4
2.3 Conditions to Each Extension of Credit............................................ 4
2.4 Repayment Terms................................................................... 4
2.5 Letters of Credit................................................................. 4
2.6 Term Loan......................................................................... 5
2.7 Availability Period............................................................... 5
2.8 Purpose........................................................................... 5
2.9 Term Loan Repayment Terms; Prepayment............................................. 5
2.10 Interest Rate..................................................................... 6
2.11 Optional Interest Rates; Payment of Interest...................................... 6
2.12 Additional Costs; Acknowledgment of Prepayment Fees............................... 7
2.13 Long Term Rate.................................................................... 7
2.14 Libor Rate........................................................................ 8
3. FEES, EXPENSES AND DEPOSITS......................................................................... 10
3.2 Expenses.......................................................................... 10
3.3 Deposits Accounts................................................................. 10
3.4 No Excess Fees.................................................................... 11
4. COLLATERAL.......................................................................................... 11
4.1 Personal Property................................................................. 11
4.2 Personal Property Supporting Guaranty............................................. 11
4.3 Additional Property Upon Default.................................................. 11
5. DISBURSEMENTS, PAYMENTS AND COSTS................................................................... 12
5.1 Requests for Credit............................................................... 12
5.2 Disbursements and Payments........................................................ 12
5.3 Direct Debit (Pre-Billing)........................................................ 12
5.4 Banking Days...................................................................... 13
5.5 Taxes............................................................................. 13
5.6 Additional Costs.................................................................. 13
5.7 Interest Calculation.............................................................. 14
5.8 Default Rate...................................................................... 14
5.9 Overdrafts........................................................................ 14
6. CONDITIONS.......................................................................................... 14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
6.1 Authorizations.................................................................... 14
6.2 Security Agreements............................................................... 14
6.3 Evidence of Priority.............................................................. 14
6.4 Consent to Removal................................................................ 14
6.5 Insurance......................................................................... 15
6.6 Environmental Questionnaire....................................................... 15
6.7 Guaranty.......................................................................... 15
6.8 Legal Opinion..................................................................... 15
6.9 Existence, Good Standing, and Foreign Qualification............................... 15
6.10 Other Items....................................................................... 15
7. REPRESENTATIONS AND WARRANTIES...................................................................... 15
7.1 Organization of Borrower.......................................................... 15
7.2 Authorization..................................................................... 15
7.3 Enforceable Agreement............................................................. 15
7.4 Good Standing..................................................................... 15
7.5 No Conflicts...................................................................... 16
7.6 Financial Information............................................................. 16
7.7 Lawsuits.......................................................................... 16
7.8 Collateral........................................................................ 16
7.9 Permits, Franchises............................................................... 16
7.10 Other Obligations................................................................. 16
7.11 Income Tax Returns................................................................ 16
7.12 No Event of Default............................................................... 16
7.13 Merchantable Inventory............................................................ 16
7.14 ERISA Plans....................................................................... 17
8. COVENANTS........................................................................................... 18
8.1 Use of Proceeds................................................................... 18
8.2 Financial Information............................................................. 18
8.3 Quick Ratio....................................................................... 19
8.4 Tangible Net Worth................................................................ 19
8.5 Debt to Tangible Net Worth........................................................ 19
8.6 Cash Flow Ratio................................................................... 19
8.7 Other Debts....................................................................... 19
8.8 Other Liens....................................................................... 20
8.9 Capital Expenditures.............................................................. 20
8.10 Dividends......................................................................... 20
8.11 Treasury Stock.................................................................... 20
8.12 Loans to Officers................................................................. 20
8.13 Notices to Bank................................................................... 21
8.14 Books and Records................................................................. 21
8.15 Audits............................................................................ 21
8.16 Compliance with Laws.............................................................. 21
8.17 Maintenance of Properties......................................................... 21
8.18 Preservation of Rights............................................................ 21
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
8.19 Perfection of Liens............................................................... 21
8.20 Cooperation....................................................................... 21
8.21 Insurance......................................................................... 21
(a) Insurance Covering Collateral.................................... 21
(b) General Business Insurance....................................... 22
(c) Evidence of Insurance............................................ 22
8.22 Additional Negative Covenants..................................................... 22
8.23 ERISA Plans....................................................................... 23
9. HAZARDOUS WASTE INDEMNIFICATION..................................................................... 23
9.1 .................................................................................. 23
INDEMNIFICATION..................................................................................... 23
9.2 Representation and Warranty Regarding Hazardous Substances........................ 24
9.3 Compliance Regarding Hazardous Substances......................................... 24
9.4 Notices Regarding Hazardous Substances............................................ 24
9.5 Site Visits, Observations and Testing............................................. 24
9.6 Continuation of Indemnity......................................................... 25
10. DEFAULT............................................................................................. 25
10.1 Failure to Pay.................................................................... 25
10.2 Lien Priority..................................................................... 25
10.3 False Information................................................................. 25
10.4 Bankruptcy........................................................................ 26
10.5 Receivers......................................................................... 26
10.6 Lawsuits.......................................................................... 26
10.7 Judgments......................................................................... 26
10.8 Government Action................................................................. 26
10.9 Material Adverse Change........................................................... 26
10.10 Cross-default..................................................................... 26
10.11 Default under Guaranty or Subordination Agreement................................. 26
10.12 Other Bank Agreements............................................................. 26
10.13 ERISA Plans....................................................................... 26
10.14 Other Breach Under Agreement...................................................... 27
10.15 Change of Control................................................................. 27
10.16 Change in Management.............................................................. 27
11. ENFORCING THIS AGREEMENT; MISCELLANEOUS............................................................. 27
11.1 GAAP.............................................................................. 27
11.2 Governing Law..................................................................... 27
11.3 Successors and Assigns............................................................ 27
11.4 ARBITRATION....................................................................... 27
11.5 Severability; Waivers............................................................. 29
11.6 Costs............................................................................. 29
11.7 Attorneys' Fees................................................................... 29
11.8 Indemnification................................................................... 29
11.9 Notices........................................................................... 29
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
11.10 Headings.......................................................................... 29
11.11 Counterparts...................................................................... 29
11.12 Usury Laws........................................................................ 30
11.13 NO ORAL AGREEMENTS................................................................ 30
</TABLE>
iv
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit A Borrowing Certificate
Exhibit B Borrowing Base Certificate
INDEX TO SCHEDULES
------------------
Schedule 7.8 Liens encumbering Collateral
Schedule 8.7 Existing Debt
Schedule 8.8 Existing Liens
vii
<PAGE>
BUSINESS LOAN AGREEMENT
(RECEIVABLES AND INVENTORY)
This Agreement ("Agreement") dated as of June 28, 1996, is between Bank of
---------
America, Texas, N.A. (the "Bank") and Aztec Manufacturing Co. (the "Borrower").
---- --------
1. DEFINITIONS
In addition to the terms which are defined elsewhere in this Agreement, the
following terms have the meanings indicated for the purposes of this Agreement:
1.1 "Borrowing Base" means the lesser of:
--------------
(1) Ten Million Dollars ($10,000,000.00), or
(2) the sum of:
(1) Eighty percent (80%) of the balance due on Acceptable
Receivables, plus
(2) Fifty percent (50%) of the value of Acceptable Inventory
consisting of raw materials (excluding the inventory of zinc) and
finished goods; plus
(3) Sixty percent (60%) of the value of Acceptable Inventory
consisting of raw zinc.
In determining the value of Acceptable Inventory to be included in the Borrowing
Base, the Bank will use the lowest of (i) a Pledging Party's cost as determined
in accordance with generally accepted accounting principles applied on a
consistent basis, (ii) a Pledging Party's estimated market value, or (iii) the
Bank's independent determination of the resale value of such inventory in such
quantities and on such terms as the Bank deems appropriate.
1.2 "Acceptable Receivable" means an account receivable which satisfies
---------------------
the following requirements:
(1) The account has resulted from the sale of goods or the performance
of services by a Pledging Party in the ordinary course of the Pledging
Party's business.
(2) There are no conditions which must be satisfied before the
Pledging Party is entitled to receive payment of the account. Accounts
arising from COD sales, consignments or guaranteed sales are not
acceptable.
Page 1
<PAGE>
(3) The debtor upon the account does not claim any defense to payment
and has not asserted any counterclaims against the Pledging Party.
(4) The account represents a genuine obligation of the debtor for
goods sold and accepted by the debtor, or for services performed for and
accepted by the debtor.
(5) The Pledging Party has sent an invoice to the debtor in the
amount of the account.
(6) The account is owned by the Pledging Party free of any title
defects or any liens or interests of others except the security interest in
favor of the Bank.
(7) The debtor upon the account is not any of the following:
(1) an employee, affiliate, parent or subsidiary of any Pledging
Party, or an entity which has common officers or directors with any
Pledging Party.
(2) the United States government or any agency or department of
the United States government unless the Bank agrees in writing to
accept the account and the Pledging Party complies with the procedures
in the Federal Assignment of Claims Act of 1940 with respect to the
account.
(3) any state, county, city, town or municipality unless no law
or contractual provision exists restricting the applicable Pledging
Party's right to assign the applicable account or the applicable
Pledging Party has complied with the requirements of such law or
contractual provision permitting the assignment to the Bank.
(4) any person or entity located in a foreign country unless the
account is supported by a letter of credit issued by a bank acceptable
to the Bank.
(5) any person or entity to whom the Pledging Party is obligated
for goods purchased by the Pledging Party or for services performed
for the Pledging Party. This will not exclude accounts upon which any
such debtor is obligated to the extent that the accounts exceed the
amount of the Pledging Party's obligation to such debtor.
(8) The account is not in default. An account will be considered in
default if any of the following occur:
Page 2
<PAGE>
(1) The account is not paid within the ninety (90) day period
starting on its invoice date;
(2) The debtor obligated upon the account suspends business,
makes a general assignment for the benefit of creditors, or fails to
pay its debts generally as they come due; or
(3) Any petition is filed by or against the debtor obligated upon
the account under any bankruptcy law or any other law or laws for the
relief of debtors;
(9) The account, when added to all other accounts that are obligations
of the same debtor, does not cause that debtor's total obligations to all
Pledging Parties to exceed 20% of the balance due on all of the Pledging
Parties accounts, but if it does cause the debtor's total obligations to
the Pledging Parties to exceed such 20%, only the amount of excess shall be
excluded from the "Acceptable Receivables".
----------------------
(10) The account is not the obligation of a debtor who is in default
(as defined above) on 25% or more of the accounts upon which such debtor is
obligated, such 25% calculated based on the dollar amount of all such
accounts.
(11) The account does not arise from the sale of goods which remain in
a Pledging Party's possession or under a Pledging Party's control.
(12) The account does not arise from the sale of minerals (including
oil and gas) at the wellhead or minehead.
(13) The account is not evidenced by a promissory note or chattel
paper.
1.3 "Acceptable Inventory" means inventory which satisfies the following
--------------------
requirements:
(1) The inventory is owned by a Pledging Party free of any title
defects or any liens or interests of others except the security interest in
favor of the Bank.
(2) The inventory is permanently located at locations which a Pledging
Party has disclosed to the Bank and which are acceptable to the Bank. If
the inventory is covered by a negotiable document of title (such as a
warehouse receipt) that document must be delivered to the Bank. Inventory
which is in transit is not acceptable unless it is covered by a commercial
letter of credit and the seller of the inventory is required to present
shipping or title documents as a condition to obtaining payment.
Page 3
<PAGE>
(3) The inventory is held for sale in the ordinary course of a
Pledging Party business and is of good and merchantable quality. Inventory
which is obsolete, unsalable, damaged, defective or discontinued or which
has been returned by the buyer, is not acceptable. Display items and
packing and shipping materials are not acceptable.
(4) The inventory is not placed on consignment.
(5) The inventory is otherwise acceptable to the Bank.
1.4 "Pledging Party" means Borrower and each of its subsidiaries who has
--------------
executed a security agreement in favor of Bank pledging to the Bank such
subsidiaries accounts, inventory, equipment and other related assets.
2. LOAN AMOUNTS AND TERMS
2.1 Line of Credit Amount.
---------------------
(1) During the availability period described below, the Bank will
provide a line of credit to the Borrower. The amount of the line of credit
is equal to the amount of the Borrowing Base.
(2) This is a revolving line of credit for advances with a within line
facility for letters of credit. During the availability period, the
Borrower may repay principal amounts and reborrow them.
(3) Each advance must be for at least One Hundred Thousand Dollars
($100,000.00) or an integral multiple thereof, or for the amount of the
remaining available line of credit, if less.
(4) The Borrower agrees not to permit the outstanding principal
balance of the line of credit plus the outstanding amounts of any letters
of credit, including amounts drawn on letters of credit and not yet
reimbursed, to exceed the Borrowing Base. If on any day such outstandings
exceed the Borrowing Base, then within five (5) days of such day the
Borrower will pay the excess to the Bank. The Bank may apply payments
received from the Borrower under this Paragraph to the obligations of the
Borrower to the Bank in the order and the manner as the Bank, in its
discretion, may determine.
2.2 Availability Period. The line of credit is available between the date
-------------------
of this Agreement and July 1, 1999 (the "Expiration Date") unless the Borrower
---------------
is in default.
2.3 Conditions to Each Extension of Credit. Before each extension of
--------------------------------------
credit under the line of credit, including the first, the Borrower will deliver
a Borrowing Certificate in the form of Exhibit A hereto completed in a manner
satisfactory to the Bank by
Page 4
<PAGE>
telecopy at the telecopy number set forth on the signature pages hereto.
2.4 Repayment Terms. The Borrower will repay in full all principal and
---------------
any unpaid interest or other charges outstanding under this line of credit no
later than the Expiration Date.
2.5 Letters of Credit. This line of credit may be used for financing
-----------------
standby letters of credit with a maximum maturity not to extend beyond the
Expiration Date. The amount of the letters of credit outstanding at any one
time (including amounts drawn on letters of credit and not yet reimbursed) may
not exceed Seven Hundred Fifty Thousand Dollars ($750,000.00). The Borrower
agrees:
(1) any sum drawn under a letter of credit may, at the option of the
Bank, be added to the principal amount outstanding under the line of credit
pursuant to this Agreement. Such amount will bear interest and be due as
described elsewhere in this Agreement;
(2) if there is a default under this Agreement, to immediately prepay
and make the Bank whole for any outstanding letters of credit;
(3) the issuance of any letter of credit and any amendment to a letter
of credit is subject to the Bank's written approval and must be in form and
content satisfactory to the Bank and in favor of a beneficiary.
(4) to sign the Bank's form Application and Agreement for Standby
Letter of Credit in connection with and as a condition to the issuance of
each letter of credit;
(5) to pay any issuance and/or other fees that the Bank notifies the
Borrower will be charged for issuing and processing letters of credit for
the Borrower;
(6) to allow the Bank to automatically charge its checking account for
applicable fees, discounts, and other charges arising or accrued in respect
of the Letters of Credit; and
(7) to pay the Bank a non-refundable fee equal to 1% per annum of the
outstanding undrawn amount of each standby letter of credit, payable
quarterly in advance, calculated on the basis of the face amount
outstanding on the day the fee is calculated.
2.6 Term Loan. The Bank agrees to provide a term loan to the Borrower in
---------
the amount of Ten Million Dollars ($10,000,000.00) (the "Term Commitment").
---------------
Page 5
<PAGE>
2.7 Availability Period. The Term Commitment is available in one
-------------------
disbursement from the Bank between the date of this Agreement and June 30, 1996.
2.8 Purpose. The term loan shall be used to refinance existing
-------
indebtedness, to finance capital expenditures previously made and for working
capital.
2.9 Term Loan Repayment Terms; Prepayment.
-------------------------------------
(1) The Borrower will repay the principal amount of the term loan in
seventy-one (71) successive monthly installments of One Hundred Thirty-
Eight Thousand Eight Hundred Eighty-Nine Dollars ($138,889.00) starting
August 1, 1996. On July 1, 2002, the Borrower will repay the remaining
principal balance of the term loan.
(2) The Borrower may prepay the term loan in full or in part at any
time in an amount not less than One Hundred Thousand Dollars ($100,000.00)
or an integral multiple thereof. The prepayment will be applied to the
most remote installment of principal due under this Agreement.
2.10 Interest Rate. Unless the Borrower elects an optional interest rate
-------------
as described below, the interest rate for the loans made hereunder is the lesser
of (a) the maximum lawful rate of interest permitted under applicable usury
laws, now or hereafter enacted (the "Maximum Rate") or (b) the rate that is
------------
equal to the Bank's Reference Rate. Notwithstanding the foregoing, if at any
time the Reference Rate shall exceed the Maximum Rate and thereafter the
Reference Rate shall become less than the Maximum Rate, the rate of interest
payable shall be the Maximum Rate until the Bank shall have received the amount
of interest it otherwise would have received if the interest payable had not
been limited by the Maximum Rate during the period of time the Reference Rate
exceeded the Maximum Rate. The "Reference Rate" is the rate of interest
--------------
publicly announced from time to time by the Bank in Irving, Texas, as its
Reference Rate. The Reference Rate is set by the Bank based on various factors,
including the Bank's costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing some loans. The
Bank may price loans to its customers at, above, or below the Reference Rate.
Any change in the Reference Rate shall take effect at the opening of business on
the day specified in the public announcement of a change in the Bank's Reference
Rate. Borrower and Bank agree that Tex. Rev. Civ. Stat. Ann. art. 5069 Ch. 15
(which regulates certain revolving loan accounts and revolving tri-party
accounts) shall not apply to the line of credit under this Agreement. To the
extent that the line of credit under this Agreement is deemed an open end
account as such term is defined in Article 5069-1.01(f) of the Texas Revised
Civil Statutes, as amended, the Bank retains the right to modify the interest
rate in accordance with applicable law. Borrower represents and warrants to
Bank and to all other owners and holders of any indebtedness evidenced hereby
that all
Page 6
<PAGE>
loans evidenced by this Agreement are for business, commercial or other similar
purpose and not primarily for personal, family, household or agricultural use,
as such terms are used or defined in Texas Revised Civil Statutes, Article 5069-
1.04, Texas Credit Code and Regulation Z promulgated by the Board of Governors
of the Federal Reserve System and under Titles I and V of the Consumer Credit
Protection Act. In no event shall the provisions of Tex. Rev. Civ. Stat. Ann.
arts. 5069-2.01 through 5069-8.06, or 5069-15.01 through 5069-15.11, be
applicable to the loans evidenced hereby. To the extent that Texas law
determines the maximum lawful rate of interest, such rate shall be determined by
utilizing the indicated rate (weekly) ceiling from time to time in effect
pursuant to Tex. Rev. Civ. Stat. Ann. art. 5069-1.04, as amended.
2.11 Optional Interest Rates; Payment of Interest. Instead of the
--------------------------------------------
Reference Rate, the Borrower may elect to have all or portions of each loan bear
interest at the rate(s) described below during an interest period agreed to by
the Bank and the Borrower; provided, however, that the Borrower shall not have
-------- -------
the option or right to elect to have all or any portion of a loan bear interest
at the rate described below when such rate exceeds the Maximum Rate. Each
interest rate is a rate per year. Interest (calculated based on the Reference
Rate or at the optional rates described below) will be paid on the first day of
each month commencing August 1, 1996 and on the last day of each interest
period. At the end of any interest period, the interest rate will revert to the
Reference Rate, unless the Borrower has designated another optional interest
rate for the portion.
2.12 Additional Costs; Acknowledgment of Prepayment Fees. The Borrower
---------------------------------------------------
acknowledges that prepayment of all or any portion of the advances bearing
interest at an optional interest rate may result in the Bank incurring
additional costs, expenses and/or liabilities. The Borrower therefore agrees to
pay the prepayment fees described herein if all or any portion of the optional
interest rate advances are prepaid. The Borrower further acknowledges that the
Bank's willingness to offer an optional interest rate to the Borrower is
sufficient and independent consideration for this agreement to pay the fee.
2.13 Long Term Rate. The Borrower may elect to have all or portions of the
--------------
principal balance of the term loan bear interest at a rate equal to the lesser
of (a) the Maximum Rate or (b) the Long Term Rate, subject to the following
requirements:
(1) The interest period during which the Long Term Rate will be in
effect will be for the remaining term of the term loan.
(2) The "Long Term Rate" means a fixed interest rate equal to the
--------------
Bank's Cost of Funds Rate in existence at the time the Long Term Rate is
selected plus one and one-quarter percent (1.25%). "Cost of Funds Rate"
------------------
means the rate then quoted by the Bank at
Page 7
<PAGE>
which the Bank can acquire United States dollars in any domestic market for
a period equal to the applicable interest period and in an amount of the
term loan subject thereto, adjusted for such reserves as the Bank may deem
appropriate.
(3) Each Long Term Rate portion will be for an amount not less than
Two Hundred Fifty Thousand Dollars ($250,000.00).
(4) Any portion of the term loan bearing interest at the Long Term
Rate will not be converted to a different rate during the applicable
interest period.
(5) The Borrower may prepay the Long Term Rate portion in whole or in
part in the minimum amount of One Hundred Thousand Dollars ($100,000.00).
The Borrower will give the Bank irrevocable written notice of the
Borrower's intention to make the prepayment, specifying the date and amount
of the prepayment. The notice must be received by the Bank at least 5
banking days in advance of the prepayment. All prepayments of principal on
the Long Term Rate portion will be applied on the most remote principal
installment or installments of the term loan then unpaid.
(6) Each prepayment of a Long Term Rate portion will be accompanied by
payment of all accrued interest on the amount of the prepayment and a
prepayment fee (as calculated by the Bank in its discretion) to be equal
to the present value of the amount (if any) by which:
(1) the additional interest which would have been payable on the
amount prepaid had it not been prepaid exceeds
(2) the amount of interest which would accrue on the amount paid
if it were reinvested from the date of prepayment through its original
maturity at a then prevailing rate equal to the interest rate yield
on like term U.S. Government Treasury securities determined by the
Bank based on information from either the Telerate or Reuters
information services, The Wall Street Journal, or other information
-----------------------
sources the Bank deems appropriate.
The Bank is under no obligation to actually reinvest any prepayment.
(7) If at any time during any applicable interest period the Long Term
Rate shall exceed the Maximum Rate and thereafter the Long Term Rate shall
become less than the Maximum Rate, the rate of interest payable shall be
the Maximum Rate until the Bank shall have received the amount of interest
it otherwise would have received if the interest
Page 8
<PAGE>
payable had not been limited by the Maximum Rate during the period of time
the Long Term Rate exceeded the Maximum Rate.
2.14 Libor Rate. The Borrower may elect to have all or portions of the
----------
principal balance of either loan bear interest at the rate equal to the lesser
of (i) the Maximum Rate or (ii) the Libor Rate plus (i) one percent (1%) with
respect to the line of credit or (ii) one and one-quarter percent (1.25%) with
respect to the term loan (the "Eurodollar Rate"), subject to the following
---------------
requirements:
(1) The interest period during which the Eurodollar Rate will be in
effect will be (i) 1, 2, 3 or 6 months with respect to the line of credit
or (ii) 1, 2, 3, 6 or 12 months with respect to the term loan. The last
day of the interest period will be determined by the Bank using the
practices of the London interbank market.
(2) Each Eurodollar Rate portion under a loan will be for an amount
not less than Five Hundred Thousand Dollars ($500,000.00) or an integral
multiple thereof.
(3) The Borrower shall irrevocably request a Eurodollar Rate portion
no later than 9:00 a.m. San Francisco time two (2) banking days before the
commencement of the interest period.
(4) The "LIBOR Rate" means the interest rate determined by the
----------
following formula, rounded upward to the nearest 1/100 of one percent.
(All amounts in the calculation will be determined by the Bank as of the
first day of the interest period.)
LIBOR Rate = London Rate
---------------------------
(1.00 - Reserve Percentage)
Where,
(1) "London Rate" means the interest rate (rounded upward to the
-----------
nearest 1/16th of one percent) at which the Bank's London Branch,
London, Great Britain, would offer U.S. dollar deposits for the
applicable interest period to other major banks in the London
interbank market at approximately 11:00 a.m. London time two (2)
banking days prior to the commencement of the interest period.
(2) "Reserve Percentage" means the total of the maximum reserve
------------------
percentages for determining the reserves to be maintained by member
banks of the Federal Reserve System for Eurocurrency Liabilities, as
defined in Federal Reserve Board Regulation D, rounded upward to the
nearest 1/100 of one percent. The percentage will be expressed as a
decimal, and will include, but not be
Page 9
<PAGE>
limited to, marginal, emergency, supplemental, special, and other
reserve percentages.
(5) The Borrower may not elect an Eurodollar Rate with respect to any
portion of the principal balance of either loan which is scheduled to be
repaid before the last day of the applicable interest period.
(6) Any portion of the principal balance of a loan already bearing
interest at the Eurodollar Rate will not be converted to a different rate
during its interest period.
(7) Each prepayment of an Eurodollar Rate portion will be accompanied
by the amount of accrued interest on the amount prepaid, and a prepayment
fee equal to the amount (if any) by which
(1) the additional interest which would have been payable on the
amount prepaid had it not been paid until the last day of the interest
period, exceeds
(2) the interest which would have been recoverable by the Bank by
placing the amount prepaid on deposit in the London interbank market
for a period starting on the date on which it was prepaid and ending
on the last day of the interest period for such portion.
(8) The Bank will have no obligation to accept an election for an
Eurodollar Rate portion if any of the following described events has
occurred and is continuing:
(1) Dollar deposits in the principal amount, and for periods
equal to the interest period, of an Eurodollar Rate portion are not
available in the London interbank market; or
(2) The Eurodollar Rate does not accurately reflect the cost of
an Eurodollar Rate portion.
(9) If at any time during any applicable interest period the
Eurodollar Rate shall exceed the Maximum Rate and thereafter the Eurodollar
Rate shall become less than the Maximum Rate, the rate of interest payable
shall be the Maximum Rate until the Bank shall have received the amount of
interest it otherwise would have received if the interest payable had not
been limited by the Maximum Rate during the period of time the Eurodollar
Rate exceeded the Maximum Rate.
3. FEES, EXPENSES AND DEPOSITS
3.1 Unused commitment fee. Subject to the provisions of Section 11.12
---------------------
hereof, the Borrower agrees to pay a fee on any difference between Ten Million
Dollars ($10,000,000) and the amount
Page 10
<PAGE>
of the line of credit it actually uses, determined by the average loan balance
maintained during the specified period. The fee will be calculated at one-
quarter of one percent (0.25%) per year. This fee is due on October 1, 1996 and
on the first day of each following January, April, July and October until the
Expiration Date.
3.2 Expenses.
--------
(1) The Borrower agrees to repay the Bank within ten (10) days of the
receipt of the Bank's written notice for expenses that include, but are not
limited to, filing, recording and search fees, appraisal fees, title report
fees, documentation fees, and any other similar fees. The Bank's written
notice shall be accompanied by documentation evidencing the amount and
nature of such expenses.
(2) The Borrower agrees to reimburse the Bank for any expenses it
incurs in the preparation of this Agreement and any agreement or instrument
required by this Agreement. Expenses include, but are not limited to,
reasonable attorneys' fees (not to exceed $35,000.00 for the initial
closing of the transaction contemplated hereby and the initial preparation
of this Agreement) plus out-of-pocket costs and expenses incurred by the
Bank's attorneys.
(3) The Borrower agrees to reimburse the Bank for the cost of periodic
audits of the collateral securing this Agreement; provided that, prior to
the occurrence of a default, such audits are not conducted more than once a
year and the costs of such audits do not exceed $2,500 plus all out-of-
pocket expenses of the Bank. The audits may be performed by employees of
the Bank or by independent auditors.
3.3 Deposits Accounts. The Borrower acknowledges that the interest rates
-----------------
and other fees provided by the Bank to the Borrower hereunder have been provided
to the Borrower based on the Bank's understanding that by December 1, 1996, the
Borrower and each Guarantor (as hereafter defined in Section 4.2) have agreed to
move all of their deposit accounts to the Bank. Borrower and Guarantor
acknowledge that but for such agreement, the rates and fees changed hereunder
would be higher. If by December 1, 1996 the deposit accounts of Borrower and
the Guarantors are not held with the Bank, the Borrower acknowledges that the
Bank may automatically and with 5 days written notice to Borrower, increase the
interest rates and fees hereunder to an amount that will compensate the Bank for
the fact that such deposit accounts are not held at the Bank.
3.4 No Excess Fees. Notwithstanding anything to the contrary in this
--------------
Section 3, in no event shall any sums payable under this Section 3 (to the
extent, if any, constituting interest under any applicable laws), together with
all amounts constituting interest
Page 11
<PAGE>
under applicable laws and payable in connection with the credit evidenced
hereby, exceed the Maximum Rate or the maximum amount of interest permitted to
be charged, taken, reserved, received or contracted for under applicable usury
laws.
4. COLLATERAL
4.1 Personal Property. The Borrower's obligations to the Bank under this
-----------------
Agreement will be secured by all equipment, fixtures, inventory, accounts,
receivables and related assets the Borrower now owns or will own in the future,
as further defined in a security agreement executed by the Borrower. In
addition, all collateral securing this Agreement shall also secure all other
present and future obligations of the Borrower to the Bank. All collateral
securing any other present or future obligations of the Borrower to the Bank
shall also secure this Agreement.
4.2 Personal Property Supporting Guaranty. The obligations of Aztec
-------------------------------------
Industries, Inc., Aztec Industries, Inc. - Moss Point, Automatic Processing,
Incorporated, The Calvert Company, Inc., Gulf Coast Galvanizing, Inc., Arkgalv,
Inc., Arbor-Crowley, Inc., Aztec Group Company, Aztec Holdings, Inc., Aztec
Manufacturing Partnership, Ltd., Aztec Manufacturing-Waskom Partnership, Ltd.,
Rig-A-Lite Partnership, Ltd., Atkinson Industries, Inc., and Arizona
Galvanizing, Inc. (the "Guarantors") to the Bank will be secured by all
----------
equipment, fixtures, inventory, accounts, receivables and related assets the
Guarantors now own or will own in the future, as further defined in the security
agreement executed by the Guarantors.
4.3 Additional Property Upon Default. If a default (as described in
--------------------------------
Section 10) or any event that with the giving of notice or lapse of time or both
would be such a default occurs, within twenty (20) days of the request of the
Bank, Borrower shall grant liens and security interest (and cause each Guarantor
to grant liens and security interest) to Bank to secure all present and future
obligations of the Borrower and Guarantors, respectively, in all real and
personal property of Borrower and each Guarantor in which the Bank does not
already have a lien pursuant to such documentation as the Bank may request
(including, without limitation, deeds of trust, security agreements, pledge
agreements, and financing statements) and, in connection with the foregoing,
Borrower shall, and shall cause each Guarantor to, provide such other
documentation as the Bank may reasonably require including surveys,
environmental audits, title insurance policies, exception documents, lien
waivers or subordinations and appraisals.
5. DISBURSEMENTS, PAYMENTS AND COSTS
5.1 Requests for Credit. Each request for an extension of credit will be
-------------------
made in writing by means of a Borrowing Certificate in the form of Exhibit A
hereto.
Page 12
<PAGE>
5.2 Disbursements and Payments. Each disbursement by the Bank and each
--------------------------
payment by the Borrower will be:
(1) made at the Bank's branch (or other location) selected by the Bank
from time to time;
(2) made for the account of the Bank's branch selected by the Bank
from time to time;
(3) made in immediately available funds, or such other type of funds
selected by the Bank; and
(4) evidenced by records kept by the Bank. In addition, the Bank may,
at its discretion, require the Borrower to sign one or more promissory
notes.
5.3 Direct Debit (Pre-Billing).
--------------------------
(a) The Borrower agrees that the Bank will debit the Borrower's
deposit account number 2605100154 (the "Designated Account") on the date
------------------
each payment of principal, interest or any fees from the Borrower become
due (the "Due Date"). If the Due Date is not a banking day, the Designated
--------
account will be debited on the next banking day.
(b) Approximately 15 days prior to each Due Date, the Bank will mail
to the Borrower a statement of the amounts that will be due on that Due
Date (the "Billed Amount"). The calculation will be made on the assumption
-------------
that no new extensions of credit or payments will be made between the date
of the billing statement and the Due Date, and that there will be no
changes in the application interest rate.
(c) The Bank will debit the Designated Account for the Billed Amount,
regardless of the actual amount due on that date (the "Accrued Amount").
--------------
If the Billed Amount debited to the Designated Account differs from the
Accrued Amount, the discrepancy will be treated as follows:
(i) If the Billed Amount is less than the Accrued Amount, the
Billed Amount for the following Due Date will be increased by the
amount of the discrepancy. The Borrower will not be in default by
reason of any such discrepancy.
(ii) If the Billed Amount is more than the Accrued Amount, the
Billed Amount for the following Due Date will be decreased by the
amount of the discrepancy.
Regardless of any such discrepancy, interest will continue to accrue
based on the actual amount of principal
Page 13
<PAGE>
outstanding without compounding. The Bank will not pay the Borrower
interest on any overpayment.
(d) The Borrower will maintain sufficient funds in the Designated
Account to cover each debit. If there are insufficient funds in the
Designated Account on the date the Bank enters any debit authorized by this
Agreement, the debit will be reversed.
5.4 Banking Days. Unless otherwise provided in this Agreement, a banking
------------
day is a day other than a Saturday or a Sunday on which the Bank is open for
business in Texas. For amounts bearing interest at a Eurodollar Rate (if any),
a banking day is a day other than a Saturday or a Sunday on which the Bank is
open for business in Texas and Bank of America, National Trust and Savings
Association is open for business in California and dealing in the London
interbank market for dollar deposits. All payments and disbursements which
would be due on a day which is not a banking day will be due on the next banking
day. All payments received on a day which is not a banking day will be applied
to the credit on the next banking day.
5.5 Taxes. The Borrower will not deduct any taxes from any payments it
-----
makes to the Bank. If any government authority imposes any taxes on any
payments made by the Borrower, the Borrower will pay the taxes and will also pay
to the Bank, at the time interest is paid, any additional amount which the Bank
specifies as necessary to preserve the after-tax yield the Bank would have
received if such taxes had not been imposed. Upon request by the Bank, the
Borrower will confirm that it has paid the taxes by giving the Bank official tax
receipts (or notarized copies) within 30 days after the due date. However, the
Borrower will not pay the Bank's net income taxes.
5.6 Additional Costs. Subject to the provisions of Section 11.12 hereof,
----------------
the Borrower will pay the Bank, on demand, for the Bank's costs or losses
arising from any statute or regulation, or any request or requirement of a
regulatory agency which is applicable to all national banks or a class of all
national banks. The costs and losses will be allocated to the loan in a manner
determined by the Bank, using any reasonable method. The costs include the
following:
(1) any reserve or deposit requirements; and
(2) any capital requirements relating to the Bank's assets and
commitments for credit.
Notwithstanding the foregoing, (A) the Bank shall notify the Borrower after
(i) an event has occurred which resulted in it incurring any such costs or
losses and (ii) the Bank has determined to charge Borrower for such costs or
losses, (B) Borrower will have no obligation to pay the Bank any such costs or
losses which arose
Page 14
<PAGE>
for periods prior to the date which is thirty (30) days prior to the date on
which the Borrower received the notice from the Bank, and (C) in no event shall
any sum payable under this Section 5.7 (to the extent, if any, constituting
interest under applicable laws), together with all amounts constituting interest
under applicable laws and payable in connection with the credit evidenced
hereby, exceed the Maximum Rate or the maximum amount permitted to be charged,
taken, reserved, received or contracted for by any applicable usury laws.
5.7 Interest Calculation. Except as otherwise stated in this Agreement,
--------------------
all interest and fees, if any, will be computed on the basis of a 360-day year
and the actual number of days elapsed. This results in more interest or a
higher fee than if a 365-day year is used.
5.8 Default Rate. Upon the occurrence and during the continuation of any
------------
default under this Agreement, advances under this Agreement will, at the option
of the Bank, bear interest at the lesser of (a) the Maximum Rate or (b) a rate
per annum which is two (2) percentage points higher than the Reference Rate (the
"Default Rate").
------------
5.9 Overdrafts. At the Bank's sole option in each instance, the Bank may
----------
make advances under this Agreement to prevent or cover an overdraft on any
account of the Borrower with the Bank. Each such advance will accrue interest
from the date of the advance or the date on which the account is overdrawn,
whichever occurs first, at the Reference Rate.
6. CONDITIONS
The Bank must receive the following items, in form and content acceptable
to the Bank, before it is required to extend any credit to the Borrower under
this Agreement:
6.1 Authorizations. Evidence that the execution, delivery and performance
--------------
by the Borrower and each Guarantor of this Agreement and any instrument or
agreement required under this Agreement have been duly authorized.
6.2 Security Agreements. Signed original security agreements,
-------------------
assignments, financing statements and fixture filings (together with collateral
in which the Bank requires a possessory security interest), which the Bank
requires.
6.3 Evidence of Priority. Evidence that security interests and liens in
--------------------
favor of the Bank are valid, enforceable, and prior to all others' rights and
interests, except those the Bank consents to in writing; provided that, except
as provided in the security agreements executed by the Borrower and Guarantors,
no title documents for motor vehicles need to show the Bank's interests.
Page 15
<PAGE>
6.4 Consent to Removal. For any personal property collateral located on
------------------
real property which is subject to a mortgage or deed of trust or which is not
owned by the Borrower, a Consent to Removal from the owner of the real property
and the holder of any mortgage or deed of trust must be received in a form
acceptable to the Bank.
6.5 Insurance. Evidence of insurance coverage, as required in the
---------
"Covenants" section of this Agreement.
6.6 Environmental Questionnaire. A completed Bank form Environmental
---------------------------
Questionnaire and Disclosure Statement.
6.7 Guaranty. A Guaranty signed by each of the Guarantors, in a form
--------
acceptable to the Bank.
6.8 Legal Opinion. A written opinion from the Borrower's legal counsel,
-------------
covering such matters as the Bank's legal counsel, Jenkens & Gilchrist, a
Professional Corporation, may require. The legal counsel and the terms of the
opinion must be acceptable to the Bank.
6.9 Existence, Good Standing, and Foreign Qualification. Certificates of
---------------------------------------------------
existence, good standing, and foreign qualification for the Borrower and each
Guarantor from its state of incorporation or organization and from any other
state in which the Borrower or such Guarantor is required to qualify to conduct
its business.
6.10 Other Items. Any other items that the Bank, or its legal counsel may
-----------
reasonably request.
7. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is repaid in
full, the Borrower makes the following representations and warranties and the
representations and warranties contained in Section 9 hereof. Each request for
an extension of credit constitutes a renewed representation:
7.1 Organization of Borrower. The Borrower is a corporation duly
------------------------
incorporated and validly existing under the laws of the state of its
incorporation.
7.2 Authorization. This Agreement, and any instrument or agreement
-------------
required hereunder, are within the Borrower's powers, have been duly authorized,
and do not conflict with any of its organizational papers.
7.3 Enforceable Agreement. This Agreement is a legal, valid and binding
---------------------
agreement of the Borrower, enforceable against the Borrower in accordance with
its terms, and any instrument or agreement required hereunder, when executed and
delivered, will be similarly legal, valid, binding and enforceable.
Page 16
<PAGE>
7.4 Good Standing. In each state in which the Borrower does business, it
-------------
is properly licensed, in good standing, and, where required, in compliance with
fictitious name statutes.
7.5 No Conflicts. This Agreement does not conflict with any law,
------------
agreement, or obligation by which the Borrower is bound.
7.6 Financial Information. All financial and other information that has
---------------------
been or will be supplied to the Bank, including the Borrower's financial
statement dated as of February 29, 1996, is:
(1) sufficiently complete to give the Bank accurate knowledge of the
Borrower's (and each Guarantor's) financial condition.
(2) in form and content required by the Bank.
(3) in compliance with all government regulations that apply.
Since the date of the financial statement specified above, there has been no
material adverse change in the assets or the financial condition of the Borrower
or any Guarantor.
7.7 Lawsuits. There is no lawsuit, tax claim or other dispute pending or
--------
threatened against the Borrower which, if lost, would impair the Borrower's
financial condition or ability to repay the loan.
7.8 Collateral. All collateral required in this Agreement is owned by the
----------
grantor of the security interest free of any title defects or any liens or
interests of others, except those which are listed on Schedule 7.8 hereto.
7.9 Permits, Franchises. The Borrower possesses all permits, memberships,
-------------------
franchises, contracts and licenses required and all trademark rights, trade name
rights, patent rights and fictitious name rights necessary to enable it to
conduct the business in which it is now engaged.
7.10 Other Obligations. The Borrower is not in default on any obligation
-----------------
for borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.
7.11 Income Tax Returns. The Borrower has no knowledge of any pending
------------------
assessments or adjustments of its income tax for any year.
7.12 No Event of Default. There is no set of circumstances and no event
-------------------
has occurred which is, or with notice or lapse of time or both would be, a
default under this Agreement and each
Page 17
<PAGE>
representation or warranty given by Borrower and each Guarantor in connection
with this Agreement is true and correct.
7.13 Merchantable Inventory. All inventory which is included in the
----------------------
Borrowing Base is of good and merchantable quality and free from material
defects.
7.14 ERISA Plans.
-----------
(1) The Borrower has fulfilled its obligations, if any, under the
minimum funding standards of ERISA and the Code with respect to each Plan
and is in compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and has not incurred any liability with
respect to any Plan under Title IV of ERISA.
(2) No reportable event has occurred under Section 4043(b) of ERISA
for which the PBGC requires 30 day notice.
(3) No action by the Borrower to terminate or withdraw from any Plan
has been taken and no notice of intent to terminate a Plan has been filed
under Section 4041 of ERISA.
(4) No proceeding has been commenced with respect to a Plan under
Section 4042 of ERISA, and no event has occurred or condition exists which
might constitute grounds for the commencement of such a proceeding.
(5) The following terms have the meanings indicated for purposes of
this Agreement:
(1) "Code" means the Internal Revenue Code of 1986, as amended
----
from time to time.
(2) "ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended from time to time.
(3) "PBGC" means the Pension Benefit Guaranty Corporation
----
established pursuant to Subtitle A of Title IV of ERISA.
(4) "Plan" means any employee pension benefit plan maintained or
----
contributed to by the Borrower and insured by the Pension Benefit
Guaranty Corporation under Title IV of ERISA.
7.15 Solvency. Borrower and each Guarantor, both individually and on a
--------
consolidated basis: (a) owns and will own assets the fair saleable value of
which are (i) greater than the total amount of its liabilities (including
contingent liabilities) and (ii) greater than the amount that will be required
to pay probable liabilities of then existing debts as they become absolute and
matured considering all financing alternatives and potential asset sales
Page 18
<PAGE>
reasonably available to it; (b) has capital that is not unreasonably small in
relation to its business as presently conducted; and (c) does not intend to
incur and does not believe that it will incur debts beyond its ability to pay
such debts as they become due.
7.16 Benefit Received. Borrower and each Guarantor will receive reasonably
----------------
equivalent value in exchange for the obligations incurred under the documents to
which each is a party. Borrower and each Guarantor will derive substantial
benefit from the consummation of the transaction contemplated hereby in an
amount at least equal to its obligations under such documents to which it is a
party.
8. COVENANTS
The Borrower agrees, so long as credit is available under this Agreement
and until the Bank is repaid in full:
8.1 Use of Proceeds. To use the proceeds of the line of credit only for
---------------
the general working capital needs of the Borrower and its subsidiaries and to
finance acquisitions permitted hereby.
8.2 Financial Information. To provide the following financial information
---------------------
and statements and such additional information as requested by the Bank from
time to time:
(1) Within ninety (90) days of the Borrower's fiscal year end, the
Borrower's and its subsidiaries' annual financial statements. These
financial statements must be audited (with an unqualified opinion) by a
Certified Public Accounting firm acceptable to the Bank. The audited
statements shall be prepared on a consolidated basis. Within ninety (90)
days of the Borrower's fiscal year end, the Borrower's internally prepared
annual financial statement on a consolidated and consolidating basis.
(2) Within forty-five days of the period's end, the Borrower's and its
subsidiaries' quarterly financial statements. These financial statements
may be prepared by the Borrower. The statements shall be prepared on a
consolidated basis.
(3) Copies of the Borrower's Form 10-K Annual Report, Form 10-Q
Quarterly Report and Form 8-K current Report within 10 days after the date
of filing with the Securities and Exchange Commission.
(4) A borrowing base certificate in substantially the form of Exhibit
B hereto setting forth the respective amounts of Acceptable Receivables and
Acceptable Inventory as of the last day of each month within thirty (30)
days after each month end and statements showing an aging and
reconciliation
Page 19
<PAGE>
of the Borrower's receivables within thirty (30) days after the end of each
month.
(5) Annual operating forecasts of the Borrower and its subsidiaries
prepared on a consolidated and consolidating basis and delivered to the
Bank by May 31 of each year.
(6) Promptly upon the Bank's request, such other statements, lists of
property and accounts, budgets, forecasts or reports as to the Borrower and
as to each Guarantor as the Bank may request.
8.3 Quick Ratio. To maintain on a consolidated basis a ratio of Quick
-----------
Assets to Current Liabilities of at least 0.5:1.0. As used herein, the term
"Quick assets" means cash, short-term cash investments, net trade receivables,
- -------------
and marketable securities not classified as long-term investments. As used
herein, the term "Current Liabilities" means current liabilities plus any amount
-------------------
of the line of credit which would otherwise not be included in current
liabilities.
8.4 Tangible Net Worth. To maintain on a consolidated basis Tangible Net
------------------
Worth equal to at least Sixteen Million Dollars ($16,000,000.00). As used
herein, the term "Tangible Net Worth" means the gross book value of the
------------------
Borrower's assets (excluding goodwill, patents, trademarks, trade names,
organization expense, treasury stock, unamortized debt discount and expense,
deferred research and development costs, deferred marketing expenses, and other
like intangibles, and monies due from affiliates, officers, directors or
shareholders of the Borrower) less total liabilities, including but not limited
to accrued and deferred income taxes, and any reserves against assets.
8.5 Debt to Tangible Net Worth. To maintain on a consolidated basis a
--------------------------
ratio of Total Liabilities to Tangible Net Worth not exceeding 1.75:1.0. As
used herein, the term "Total Liabilities" means the sum of current liabilities
-----------------
plus long term liabilities.
8.6 Cash Flow Ratio. To maintain on a consolidated basis a Cash Flow
---------------
Ratio of at least 1.6:1.0. As used herein, the term "Cash Flow Ratio" means the
---------------
ratio of Cash Flow to the current portion of long term debt plus interest
expense. "Cash Flow" is defined as net income from operations (before
---------
extraordinary or nonrecurring gains or losses), after taxes, plus depreciation,
amortization and other non-cash charges, plus interest expense, minus dividends.
This ratio will be calculated at the end of each fiscal quarter, using the
results of that quarter and each of the 3 immediately preceding quarters. The
current portion of long term debt will be measured as of the last day of the
fiscal quarter preceding the date of calculation.
8.7 Other Debts. Not, and not permit any Guarantor, to have outstanding
-----------
or incur any direct or contingent debts or lease
Page 20
<PAGE>
obligations (other than those to the Bank), or become liable for the debts of
others without the Bank's written consent. This does not prohibit:
(1) Acquiring goods, supplies, or merchandise on normal trade credit.
(2) Endorsing negotiable instruments received in the usual course of
business.
(3) Obtaining surety bonds in the usual course of business.
(4) Existing debt and lease obligations disclosed on Schedule 8.7.
(5) Additional debts and lease obligations for the acquisition of
fixed or capital assets, not to exceed One Million Dollars ($1,000,000.00)
in the aggregate outstanding at any time.
(6) Debt arising from lawsuits and judgments that do not otherwise
constitute a default hereunder.
8.8 Other Liens. Not, and not permit any Guarantor, to create, assume, or
-----------
allow any security interest or lien (including judicial liens) on property the
Borrower or any Guarantor now or later owns, except:
(1) Security interests and liens in favor of the Bank.
(2) Liens for taxes not yet due.
(3) Liens outstanding on the date of this Agreement disclosed on
Schedule 8.8 hereto.
(4) Liens granted as purchase money security interests in equipment
acquired after the date of this Agreement, provided that the obligations
incurred otherwise meet the requirements of Section 8.7(e) and such liens
only encumber the equipment acquired.
8.9 Capital Expenditures. Not, and not permit any Guarantor, without the
--------------------
Bank's prior written consent, to spend or incur obligations (including the total
amount of any capital leases) for more than Four Million Dollars ($4,000,000.00)
in the aggregate for Borrower and all Guarantors in any single fiscal year to
acquire fixed or capital assets, excluding from such aggregate amount any such
expenditures financed pursuant to Section 8.7(d).
8.10 Dividends. Not to declare or pay any dividends on any of its shares,
---------
except (a) annual dividends not in excess of fifty percent (50%) of net income
for any year as long as no default
Page 21
<PAGE>
exists or would result therefrom, or (b) payable in capital stock of the
Borrower.
8.11 Treasury Stock. Not to purchase, redeem, or otherwise acquire for
--------------
value any of its shares, or create any sinking fund in relation thereto;
provided that, Borrower may purchase or otherwise acquire for value its shares
for an aggregate purchase price not to exceed in any fiscal year the sum of (a)
Two Hundred Fifty Thousand Dollars ($250,000.00) plus (b) the proceeds of any
key man life insurance policy provided for the purpose of funding the repurchase
of its shares.
8.12 Loans to Officers. Not, and not permit any Guarantor, to make any
-----------------
loans, advances or other extensions of credit to any of its executives,
officers, directors, shareholders or affiliates (or any relatives of any of the
foregoing) in an aggregate amount exceeding Two Hundred Fifty Thousand Dollars
($250,000) for Borrower and the Guarantors in the aggregate for the entire term
of this Agreement; provided that, in addition to the foregoing, Borrower may
make advances to the Guarantors from proceeds of the line of credit hereunder in
an amount for each Guarantor not to exceed at anytime outstanding the value of
such Guarantor's assets included in the Borrowing Base.
8.13 Notices to Bank. To promptly notify the Bank in writing of:
---------------
(1) any lawsuit containing a claim or seeking damages over One Hundred
Thousand Dollars ($100,000) against the Borrower or any Guarantor;
(2) any substantial dispute between the Borrower or any Guarantor and
any government authority;
(3) any failure to comply with or default under this Agreement; and
(4) any material adverse change in the Borrower's or any Guarantor's
financial condition or operations.
8.14 Books and Records. To maintain adequate books and records.
-----------------
8.15 Audits. To allow the Bank and its agents to inspect the Borrower's
------
and the Guarantors' properties and examine, audit and make copies of books and
records at any reasonable time. If any of the Borrower's or any Guarantor's
properties, books or records are in the possession of a third party, the
Borrower authorizes the third party to permit the Bank or its agents to have
access to perform inspections or audits and to respond to the Bank's requests
for information concerning such properties, books and records.
Page 22
<PAGE>
8.16 Compliance with Laws. To comply with the laws (including any
--------------------
fictitious name statute), regulations, and orders of any government body with
authority over the Borrower's or any Guarantor's business.
8.17 Maintenance of Properties. To make any repairs, renewals, or
-------------------------
replacements to keep the Borrower's or any Guarantor's properties in good
working condition.
8.18 Preservation of Rights. To maintain and preserve all rights,
----------------------
privileges, and franchises the Borrower or any Guarantor now has.
8.19 Perfection of Liens. To help the Bank perfect and protect its
-------------------
security interests and liens, and reimburse it for related costs it incurs to
protect its security interests and liens.
8.20 Cooperation. To take any action reasonably requested by the Bank to
-----------
carry out the intent of this Agreement.
8.21 Insurance.
---------
(1) Insurance Covering Collateral. To maintain, and cause the
-----------------------------
Guarantor's to maintain, all risk property damage insurance policies
covering the tangible property comprising the collateral. Each insurance
policy must be for the full replacement cost of the collateral and include
a replacement cost endorsement. The insurance must be issued by an
insurance company acceptable to the Bank and must include a lender's loss
payable endorsement in favor of the Bank in a form acceptable to the Bank.
(2) General Business Insurance. To maintain, and to cause each
--------------------------
Guarantor to maintain, insurance as is usual and customary for similarly
situated businesses in the Borrower's industry.
(3) Evidence of Insurance. Upon the request of the Bank, to deliver
---------------------
to the Bank a copy of each insurance policy, or, if permitted by the Bank,
a certificate of insurance listing all insurance in force.
8.22 Additional Negative Covenants. Not to, and not to permit any
-----------------------------
Guarantor to, without the Bank's written consent (which consent will not be
unreasonably withheld, with such reasonableness to be determined based on the
Bank's business perspective):
(1) engage in any business activities substantially different from the
Borrower's or any Guarantor's present business.
(2) liquidate or dissolve the Borrower's or any Guarantor's business.
Page 23
<PAGE>
(3) enter into any consolidation, merger, pool, joint venture,
syndicate, or other combination or purchase or acquire all or substantially
all the assets of another business, except for such transaction if (i) the
Borrower or applicable Guarantor is the surviving entity; (ii) no default
exists hereunder or would result therefrom and before, and after giving
effect to, the proposed acquisition, the representations and warranties set
forth herein shall be true and correct; (iii) Borrower delivers to the Bank
an Environmental Questionnaire and Disclosure Statement in form and
disclosing such information as is acceptable to the Bank relating to the
assets or entity to be acquired prior to the acquisition; and (iv) the
aggregate cash consideration paid in connection with all such transactions
does not exceed Five Million Dollars ($5,000,000) for Borrower and the
Guarantors in the aggregate during the entire term of this Agreement.
(4) sell, lease, or otherwise dispose of all or a substantial part of
the Borrower's or any Guarantor's business or the Borrower's or any
Guarantor's assets except assets with a fair market value that does not
exceed in the aggregate for Borrower and all Guarantors an amount equal to
Five Hundred Thousand Dollars ($500,000.00) in any calendar year; provided,
however, the Borrower's sale of its Houston real property and related
assets will not be included for purposes of the Five Hundred Thousand
Dollars ($500,000.00) limitation and such property may be sold or otherwise
disposed of free of the restrictions set forth in this paragraph.
(5) sell or otherwise dispose of any assets for less than fair market
value or enter into any sale and leaseback agreement covering any of its
fixed or capital assets.
(6) voluntarily suspend its business for more than three (3) days in
any thirty (30) day period.
(7) make any capital contribution to or investment in, or purchase or
own any stock, bonds, notes, debentures, or other securities of any entity,
except:
(1) readily marketable direct obligations of the United States of
America;
(2) fully insured certificates of deposit with maturities of one
year or less from the date of acquisition of any commercial bank
operating in the United States having capital and surplus in excess of
$50,000,000.00;
(3) other debt securities if at the time of purchase such debt
securities are rated in one of the two highest rating categories of
Standard and Poor's Corporation or Moody's Investors Service; and
Page 24
<PAGE>
(4) the Borrower may repurchase its own shares in accordance with
the permissions set out in Section 8.11.
8.23 ERISA Plans. As relates to the Borrower or any Guarantor, to give
-----------
prompt written notice to the Bank of:
(1) The occurrence of any reportable event under Section 4043(b) of
ERISA for which the PBGC requires 30 day notice.
(2) Any action by the Borrower to terminate or withdraw from a Plan or
the filing of any notice of intent to terminate under Section 4041 of
ERISA.
(3) Any notice of noncompliance made with respect to a Plan under
Section 4041(b) of ERISA.
(4) The commencement of any proceeding with respect to a Plan under
Section 4042 of ERISA.
9. HAZARDOUS WASTE INDEMNIFICATION.
9.1 INDEMNIFICATION. THE BORROWER WILL INDEMNIFY AND HOLD HARMLESS THE
---------------
BANK FROM ANY LOSS OR LIABILITY DIRECTLY OR INDIRECTLY ARISING OUT OF THE USE,
GENERATION, MANUFACTURE, PRODUCTION, STORAGE, RELEASE, THREATENED RELEASE,
DISCHARGE, DISPOSAL OR PRESENCE OF A HAZARDOUS SUBSTANCE. THIS INDEMNITY WILL
APPLY WHETHER THE HAZARDOUS SUBSTANCE IS ON, UNDER OR ABOUT THE BORROWER'S OR
ANY GUARANTOR'S PROPERTY OR OPERATIONS OR PROPERTY LEASED TO THE BORROWER OR ANY
GUARANTOR. THE INDEMNITY INCLUDES BUT IS NOT LIMITED TO ATTORNEYS' FEES
(INCLUDING THE REASONABLE ESTIMATE OF THE ALLOCATED COST OF IN-HOUSE COUNSEL AND
STAFF). THE INDEMNITY EXTENDS TO THE BANK, ITS PARENT, SUBSIDIARIES AND ALL OF
THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, SUCCESSORS, ATTORNEYS AND ASSIGNS.
FOR PURPOSES OF THIS AGREEMENT, THE TERM "HAZARDOUS SUBSTANCES" MEANS ANY
SUBSTANCE WHICH IS OR BECOMES DESIGNATED AS "HAZARDOUS" OR "TOXIC" UNDER ANY
FEDERAL, STATE OR LOCAL LAW. THIS INDEMNITY WILL SURVIVE REPAYMENT OF THE
BORROWER'S OBLIGATIONS TO THE BANK.
9.2 Representation and Warranty Regarding Hazardous Substances. Prior to
----------------------------------------------------------
entering into this Agreement, the Borrower has researched and inquired into the
previous uses and ownership of all property constituting its or its
subsidiaries' real property. Based on that due diligence, the Borrower
represents and warrants that to the best of its knowledge, no hazardous
substance has been disposed of or released or otherwise exists in, on, under or
onto the Borrower's or any of its subsidiaries' real property, except as the
Borrower has disclosed to the Bank in writing pursuant to the Environmental
Questionnaire and Disclosure Statement prepared by the Borrower.
9.3 Compliance Regarding Hazardous Substances. The Borrower and each of
-----------------------------------------
its subsidiaries has complied, and will comply with all
Page 25
<PAGE>
laws, regulations and ordinances governing or applicable to hazardous substances
as well as the recommendations of any qualified environmental engineer or other
expert which apply or pertain to such real property or the operations of the
Borrower and its subsidiaries.
9.4 Notices Regarding Hazardous Substances. Until full repayment of the
--------------------------------------
loan, the Borrower will promptly notify the Bank if it knows, suspects or
believes there may be any hazardous substance in or around its or any of its
subsidiaries' real property, or in the soil, groundwater or soil vapor on or
under such real property, or that the Borrower, any subsidiary or any of their
real property may be subject to any threatened or pending investigation by any
governmental agency under any law, regulation or ordinance pertaining to any
hazardous substance.
9.5 Site Visits, Observations and Testing. The Bank and its agents and
-------------------------------------
representatives will have the right at any reasonable time to enter and visit
the Borrower's or any of its subsidiaries' real property and any other place
where any property is located for the purposes of observing such real property,
taking and removing soil or groundwater samples, and conducting tests on any
part of the real property. The Bank is under no duty, however, to visit or
observe such real property or to conduct tests, and any such acts by the Bank
will be solely for the purposes of protecting the Bank's security and preserving
the Bank's rights under this Agreement. No site visit, observation or testing
by the Bank will result in a waiver of any default of the Borrower or impose any
liability on the Bank. In no event will any site visit, observation or testing
by the Bank be a representation that hazardous substances are or are not present
in, on or under any real property, or that there has been or will be compliance
with any law, regulation or ordinance pertaining to hazardous substances or any
other applicable governmental law. Neither the Borrower, its subsidiaries, nor
any other party is entitled to rely on any site visit, observation or testing by
the Bank. The Bank owes no duty of care to protect the Borrower, its
subsidiaries, or any other party against, or to inform the Borrower, its
subsidiaries, or any other party of, any hazardous substances or any other
adverse condition affecting the real property. The Bank will disclose to the
Borrower upon its request, any report or findings made as a result of, or in
connection with, any site visit, observation or testing by any third party
engaged by the Bank unless such reports or findings are protected by attorney
client privilege. As provided above, the Borrower shall have no right to rely
on any such report or finding and the Bank will not incur any liability to
Borrower or any other party for an matter disclosed in such report or finding.
In each instance, the Bank will give the Borrower or such subsidiary reasonable
notice before entering its real property or any other place the Bank is
permitted to enter under this Paragraph. The Bank will make reasonable efforts
to avoid interfering with the Borrower's and its subsidiaries' use of their
respective real property or any other property in exercising any rights provided
in this paragraph.
Page 26
<PAGE>
9.6 Continuation of Indemnity. The Borrower's indemnity obligations to
-------------------------
the Bank under Section 9.1, shall survive termination of this Agreement and
repayment of the Borrower's obligations to the Bank under this Agreement, and
shall also survive as unsecured obligations after any acquisition by the Bank of
the collateral securing this Agreement, including any real property or any part
of it, by foreclosure or any other means.
10. DEFAULT
If any of the following events occur, the Bank may do one or more of the
following: (i) declare the Borrower in default, (ii) stop making any additional
credit available to the Borrower, (iii) exercise any and all rights and remedies
as may be available to the Bank under the terms of any collateral documents,
security instruments, debt instruments or any other document or instrument
executed in connection herewith or in any way related hereto, (iv) exercise any
and all rights and remedies as may be available to the Bank at law or in equity,
and (v) declare the entire debt created and evidenced hereby to be immediately
due and payable in full, whereupon the entire unpaid principal indebtedness
evidenced hereby, and all accrued unpaid interest thereon, shall at once mature
and become due and payable without presentment, demand, protest, grace or notice
of any kind (including, without limitation, notice of intent to accelerate,
notice of acceleration or notice of protest), all of which are hereby severally
waived by the Borrower. If a bankruptcy petition is filed with respect to the
Borrower, the entire debt outstanding under this Agreement will automatically be
immediately due.
10.1 Failure to Pay. The Borrower fails to make a principal or interest
--------------
payment under this Agreement when due or shall fail to make any other payment
under this Agreement within ten (10) days of the date due.
10.2 Lien Priority. The Bank fails to have an enforceable first lien
-------------
(except for any prior liens set forth on Schedule 7.8) on or security interest
in any property given as security for the loans to be advanced to the Borrower
pursuant to this Agreement.
10.3 False Information. The Borrower or any Guarantor has given the Bank
-----------------
materially false or materially misleading information or representations.
10.4 Bankruptcy. The Borrower or any Guarantor files a bankruptcy
----------
petition, a bankruptcy petition is filed against the Borrower or any Guarantor,
or the Borrower or any Guarantor makes a general assignment for the benefit of
creditors. The default will be deemed cured if any bankruptcy petition filed
against the Borrower or any Guarantor is dismissed within a period of sixty (60)
days after the filing; provided, however, that the Bank will not be obligated to
extend any additional credit to the Borrower during that period.
Page 27
<PAGE>
10.5 Receivers. A receiver or similar official is appointed for the
---------
Borrower's or any Guarantor's business, or the business is terminated.
10.6 Lawsuits. Any lawsuit or lawsuits are filed on behalf of one or more
--------
trade creditors against the Borrower or any Guarantor in an aggregate amount of
Five Hundred Thousand Dollars ($500,000) or more in excess of any insurance
coverage.
10.7 Judgments. Any judgments or arbitration awards are entered against
---------
the Borrower or any Guarantor, or the Borrower or any Guarantor enters into any
settlement agreements with respect to any litigation or arbitration, in an
aggregate amount of Five Hundred Thousand Dollars ($500,000) or more in excess
of any insurance coverage.
10.8 Government Action. Any government authority takes any action that
-----------------
the Bank reasonably believes materially adversely affects the Borrower's or any
Guarantor's financial condition or ability to perform or repay its obligations
hereunder.
10.9 Material Adverse Change. A material adverse change occurs in the
-----------------------
Borrower's or any Guarantor's financial condition, properties or prospects, or
ability to repay the loan or perform its obligations under this Agreement or any
other loan document.
10.10 Cross-default. Any default occurs under any agreement in
-------------
connection with any credit the Borrower or any Guarantor has obtained from
anyone else or which the Borrower or any Guarantor has guaranteed which in
either case exceeds an aggregate principal amount (either individually or in the
aggregate) equal to Two Hundred Fifty Thousand Dollars ($250,000.00).
10.11 Default under Guaranty or Subordination Agreement. Any guaranty,
-------------------------------------------------
subordination agreement, security agreement, deed of trust, or other document
required by this Agreement is violated or no longer in effect.
10.12 Other Bank Agreements. The Borrower or any Guarantor fails to
---------------------
meet the conditions of, or fails to perform any obligation under any other
agreement the Borrower or any Guarantor has with the Bank or any affiliate of
the Bank.
10.13 ERISA Plans. The occurrence of any one or more of the following
-----------
events with respect to the Borrower or any of its subsidiaries, provided such
event or events could reasonably be expected, in the judgment of the Bank, to
subject the Borrower or such subsidiary to any tax, penalty or liability (or any
combination of the foregoing) which, in the aggregate, could have a material
adverse effect on the financial condition of the Borrower or any subsidiary with
respect to a Plan:
Page 28
<PAGE>
(1) A reportable event shall occur with respect to a Plan which is,
in the reasonable judgment of the Bank likely to result in the termination
of such Plan for purposes of Title IV of ERISA; or
(2) Any Plan termination (or commencement of proceedings to
terminate a Plan) or the Borrower's full or partial withdrawal from a Plan.
10.14 Other Breach Under Agreement. The Borrower fails to meet the
----------------------------
conditions of this Agreement or fails to perform any obligation under Sections
4.3 or 8.2 through 8.13 of this Agreement to the extent not otherwise
specifically referred to in this Article. The Borrower fails to perform any
obligations under this Agreement, other than those described in the preceding
sentence and those specifically referred to in this Article, and such failure
shall continue for a period of twenty (20) days.
10.15 Change of Control. If any persons or entities acquires after the
-----------------
date hereof more than fifty-one percent (51%) of the outstanding capital stock
of Borrower entitled (without regard to any contingency) to vote in the election
of the directors of Borrower.
10.16 Change in Management. The Borrower's or any Guarantor's executive
--------------------
management. shall change.
11. ENFORCING THIS AGREEMENT; MISCELLANEOUS
11.1 GAAP. Except as otherwise stated in this Agreement, all financial
----
information provided to the Bank and all financial covenants will be made
according to generally accepted accounting principles applied on a consistent
basis.
11.2 Governing Law. This Agreement is governed by Texas law.
-------------
11.3 Successors and Assigns. This Agreement is binding on the Borrower's
----------------------
and the Bank's successors and assignees. The Borrower agrees that it may not
assign this Agreement without the Bank's prior consent. The Bank may sell
participations in or assign this loan, and may exchange financial information
about the Borrower with actual or potential participants or assignees. If a
participation is sold or the loan is assigned, the purchaser will have the right
of set-off against the Borrower.
11.4 ARBITRATION.
-----------
(1) This paragraph concerns the resolution of any controversies or
claims between the Borrower and the Bank, including but not limited to
those that arise from:
(1) This Agreement (including any renewals, extensions or
modifications of this Agreement);
Page 29
<PAGE>
(2) Any document, agreement or procedure related to or delivered
in connection with this Agreement;
(3) Any violation of this Agreement; or
(4) Any claims for damages resulting from any business conducted
between the Borrower and the Bank, including claims for injury to
persons, property or business interests (torts).
(2) AT THE REQUEST OF THE BORROWER OR THE BANK, ANY SUCH CONTROVERSIES
OR CLAIMS WILL BE SETTLED BY ARBITRATION IN ACCORDANCE WITH THE UNITED
STATES ARBITRATION ACT. THE UNITED STATES ARBITRATION ACT WILL APPLY EVEN
THOUGH THIS AGREEMENT PROVIDES THAT IT IS GOVERNED BY TEXAS LAW.
(3) Arbitration proceedings will be administered by the American
Arbitration Association and will be subject to its commercial rules of
arbitration. The arbitration will be conducted within Dallas County,
Texas.
(4) For purposes of the application of the statute of limitations, the
filing of an arbitration pursuant to this paragraph is the equivalent of
the filing of a lawsuit, and any claim or controversy which may be
arbitrated under this paragraph is subject to any applicable statute of
limitations. The arbitrators will have the authority to decide whether any
such claim or controversy is barred by the statute of limitations and, if
so, to dismiss the arbitration on that basis.
(5) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(6) The decision that results from an arbitration proceeding may be
submitted to any authorized court of law to be confirmed and enforced.
(7) This provision does not limit the right of the Borrower or the
Bank to:
(1) exercise self-help remedies such as setoff;
(2) foreclose against or sell any real or personal property
collateral; or
(3) act in a court of law, before, during or after the
arbitration proceeding to obtain:
(1) an interim remedy; and/or
(2) additional or supplementary remedies.
Page 30
<PAGE>
(8) The pursuit of, or a successful action for, interim, additional
or supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of the Borrower or the Bank, including the
suing party, to submit the controversy or claim to arbitration if the other
party contests the lawsuit.
11.5 Severability; Waivers. If any part of this Agreement is not
---------------------
enforceable, the rest of the Agreement may be enforced. The Bank retains all
rights, even if it makes a loan after default. If the Bank waives a default, it
may enforce a later default. Any consent or waiver under this Agreement must be
in writing.
11.6 Costs. If the Bank incurs any expenses in connection with
-----
administering or enforcing this Agreement, or if the Bank takes collection
action under this Agreement, it is entitled to costs and reasonable attorneys'
fees, including any allocated costs of in-house counsel.
11.7 Attorneys' Fees. In the event of a lawsuit or arbitration
---------------
proceeding, the prevailing party is entitled to recover costs and reasonable
attorneys' fees (including any allocated costs of in-house counsel) incurred in
connection with the lawsuit or arbitration proceeding, as determined by the
court or arbitrator.
11.8 Indemnification. THE BORROWER AGREES TO INDEMNIFY THE BANK AGAINST,
---------------
AND HOLD THE BANK HARMLESS FROM, ALL CLAIMS, ACTIONS, LOSSES, COSTS AND EXPENSES
(INCLUDING ATTORNEYS' FEES AND ALLOCATED COSTS FOR IN-HOUSE LEGAL SERVICES)
INCURRED BY THE BANK AND ARISING FROM ANY CONTENTION, WHETHER WELL-FOUNDED OR
OTHERWISE, THAT THERE HAS BEEN A FAILURE TO COMPLY WITH ANY LAW REGULATING THE
BORROWER'S OR ANY SUBSIDIARIES' SALES OR LEASES TO OR PERFORMANCE OF SERVICES
FOR DEBTORS OBLIGATED UPON THE BORROWER'S OR ANY SUBSIDIARIES' ACCOUNTS
RECEIVABLE AND DISCLOSURES IN CONNECTION THEREWITH. THIS INDEMNITY WILL SURVIVE
REPAYMENT OF THE BORROWER'S OBLIGATIONS TO THE BANK AND TERMINATION OF THIS
AGREEMENT.
11.9 Notices. All notices required under this Agreement shall be
-------
personally delivered or sent by first class mail, postage prepaid, to the
addresses on the signature pages hereto, or to such other addresses as the Bank
and the Borrower may specify from time to time in writing.
11.10 Headings. Article and paragraph headings are for reference only
--------
and shall not affect the interpretation or meaning of any provisions of this
Agreement.
11.11 Counterparts. This Agreement may be executed in as many
------------
counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.
Page 31
<PAGE>
11.12 Usury Laws. It is the intention of the parties hereto to comply
----------
with applicable usury laws; accordingly, it is agreed that notwithstanding any
provisions to the contrary in this Agreement or in any of the documents
evidencing or securing payment hereof or otherwise relating hereto, in no event
shall this Agreement or such instruments or documents require or permit the
payment, charging, taking, reserving or receiving of any sums constituting
interest, as defined under applicable usury laws, in excess of the maximum
amount permitted by such laws. If any such excess of interest is contracted
for, paid, charged, taken, reserved or received under this Agreement or under
the terms of any of the documents evidencing or securing payment hereof or
otherwise relating hereto, or in any communication by Bank or any other person
to Borrower or any other party liable for the payment of the indebtedness
evidenced hereby, or if the maturity of the indebtedness is accelerated in whole
or in part, or in the event that all or part of the principal or interest shall
be prepaid, so that under any of such circumstances or under any other
circumstances whatsoever, the amount of interest contracted for, paid, charged,
taken, reserved or received under this Agreement or under any of the documents
securing payment hereof or otherwise relating hereto, on the amount of principal
actually outstanding from time to time shall exceed the maximum amount of
interest permitted by applicable usury laws, then in any such event (i) the
provisions of this Section shall govern and control, (ii) any such excess shall
be canceled automatically to the extent of such excess, and shall not be
collected or collectible, (iii) any such excess which is or has been received
shall be credited against the then unpaid principal balance hereof or refunded
to Borrower, at the Bank's option, and (iv) the effective rate of interest shall
be automatically reduced to the maximum lawful rate allowed under applicable
laws as construed by courts having jurisdiction hereof or thereof. It is
further agreed that, without limitation of the foregoing, all calculations of
the rate of interest contracted for, paid charged, taken, reserved or received
under this Agreement or under such other documents or instruments that are made
for the purpose of determining whether such rate exceeds the maximum lawful rate
of interest, shall be made, to the extent permitted by applicable usury laws, by
amortizing, prorating, allocating and spreading in equal parts during the period
of the full stated term of the indebtedness, all interest at any time contracted
for, paid, charged, taken, reserved or received from the Borrower or otherwise
by the holder or holders thereof. The terms of this Section shall be deemed to
be incorporated in every loan document, security instrument, debt instrument and
communication relating to this Agreement and the loan evidenced hereby. The
term "applicable usury laws" shall mean such laws of the State of Texas or the
laws of the United States, whichever laws allow the higher rate of interest, as
such laws now exist; provided, however, that if such laws shall hereafter allow
-------- -------
higher rates of interest, then the applicable usury laws shall be the laws
allowing the higher rates, to be effective as of the effective date of such
laws.
Page 32
<PAGE>
11.13 NO ORAL AGREEMENTS. This Agreement and any related security or
------------------
other agreements required by this Agreement, collectively:
(1) represent the sum of the understandings and agreements between
the Bank and the Borrower concerning the subject matter hereof;
(2) replace any prior oral or written agreements between the Bank
and the Borrower concerning the agreement between the Bank and the Borrower
as evidenced hereby; and
(3) are intended by the Bank and the Borrower as the final, complete
and exclusive statement of the terms agreed to by the Bank and the
Borrower.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
THIS WRITTEN AGREEMENT AND THE INSTRUMENTS AND DOCUMENTS EXECUTED IN
CONNECTION HEREWITH, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
This Agreement is executed as of the date stated at the top of the first page.
BANK OF AMERICA, TEXAS, N.A. AZTEC MANUFACTURING CO.
By: /s/ Donald P. Hellman By: /s/ L. C. Martin
---------------------------- ----------------------------
Donald P. Hellman L. C. Martin
Vice President President
Address where notices to Address where notices to
the Bank are to be sent: the Borrower are to be sent:
P.O. Box 619005 P.O. Box 668
Dallas, Texas 75261-9005 Crowley, Texas 76036
Telecopy No.: 214-444-7167
Page 33
<PAGE>
Exhibit 10(14)
First Amendment to Business Loan Agreement between Registrant
and Bank of America, Texas, N.A., dated February 12, 1997
<PAGE>
EXHIBIT 10.14
[LOGO OF BANK OF AMERICA]
Mr. L.C. Martin
Aztec Manufacturing Co.
P.O. Box 668
Crowley, Texas
As of February 12, 1997
Re: Business Loan Agreement (Receivables and Inventory) between Bank of
America, Texas, N.A. and Aztec Manufacturing Co. dated as of June 28,
1996 (as the same has been or may be amended, the "Agreement"). All
---------
capitalized terms used herein, unless otherwise defined herein, shall
have the same meaning as in the Agreement.
Dear Mr. Martin:
This letter (the "Amendment Letter") is written to request that the
----------------
Borrower agree to amend the Agreement as follows (the "Amendment"):
---------
1. Section 8.2 of the Agreement will be amended by adding thereto a new
subsection 8.2(g) to read in its entirety as follows:
(g) With each of the financial statements required to be delivered to
the Bank by the Borrower pursuant to this Section, a compliance certificate
in substantially the form of Exhibit C hereto.
2. The Agreement will be amended by adding an Exhibit C thereto as set
forth in Attachment 1 to this Amendment Letter.
If the Borrower agrees with the foregoing, please execute this Amendment
Letter in the space indicated below, have each of the Guarantors indicate their
consent to this Amendment Letter by providing their signature where indicated
and return a duplicate copy to the undersigned.
Each of the Borrower and the Guarantors agrees that:
a. Except as expressly set forth herein, this Amendment Letter shall not
be deemed to be an amendment or waiver of the terms and provisions of
the Agreement or any
<PAGE>
collateral document, security instrument, debt instrument or any other
document or instrument executed in connection with the Agreement or in
any way related thereto (all of such agreements, documents and
instruments are referred to collectively herein as the "Loan
----
Documents") nor a waiver of any default or event of default;
---------
b. Except as expressly modified by this Amendment Letter, the terms and
provisions of the Loan Documents are ratified and confirmed and shall
continue in full force and effect;
c. The Loan Documents continue to be legal, valid, binding and enforceable
in accordance with their respective terms; and
d. Each reference in any Loan Document to the Agreement is hereby amended
to mean the Agreement as amended by this Amendment Letter.
THIS AMENDMENT LETTER EMBODIES THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES HERETO AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS
AMENDMENT LETTER, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES
HERETO. This Amendment Letter shall be governed by and construed in accordance
with the laws of the State of Texas and the applicable laws of the United States
of America. This Amendment Letter may be executed in one or more counterparts
and on telecopy counterparts each of which shall be deemed an original but all
of which together shall constitute one and the same agreement.
Very truly yours.
THE BANK:
--------
BANK OF AMERICA, TEXAS, N.A.
By: /s/ Donald P. Hellman
---------------------------
Name: Donald P. Hellman
-----------------
Title: Vice President
--------------
Amendment Letter, Page 2
<PAGE>
Exhibit 10(15)
Second Amendment to Business Loan Agreement between Registrant
and Bank of America, Texas, N.A., dated October 16, 1997
<PAGE>
Exhibit 10.15
[LOGO BANK OF AMERICA]
Amendment to Documents
================================================================================
SECOND AMENDMENT TO BUSINESS LOAN AGREEMENT (RECEIVABLES AND INVENTORY)
This Second Amendment to Business Loan Agreement (Receivables and Inventory) is
entered into as of September 22, 1997, between Bank of America Texas, N.A.
("Bank") and Aztec Manufacturing Co. ("Borrower").
RECITALS
--------
A. WHEREAS, Bank and Borrower have entered into that certain Business Loan
Agreement (Receivables and Inventory) dated June 28, 1996, and amended on
February 12, 1997 (collectively the "Agreement"); and
B WHEREAS, Borrower and Bank desire to amend certain terms and provisions of
said Agreement as more specifically hereinafter set forth.
AGREED
------
NOW, THEREFORE, in consideration of the foregoing recitals and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Bank and Borrower mutually agree to amend said Agreement as follows:
1. Paragraph 2.5 (Letters of Credit) of the Agreement is amended and restated
in its entirety to read as follows:
2.5 Letters of Credit. This line of credit may be used for financing
standby and/or commercial letters of credit with a maximum maturity not
to exceed one year beyond the Expiration Date. The aggregate face
amount of all letters of credit outstanding at any one time (including
amounts drawn on letters of credit and not yet reimbursed) may not exceed
Two Million and no/100 Dollars ($ 2,000,000,00).
(a) any sum drawn under a letter of credit may, at the option of the
Bank, be added to the principal amount outstanding under the line of credit
pursuant to this Agreement. Such amount will bear interest and be due as
described elsewhere in this Agreement;
(b) if there is a default under this Agreement, to immediately
prepay and make the Bank whole for any outstanding letters of credit:
(c) the issuance of any letter of credit and any amendment to a letter
of credit is subject to the Banks written approval and must be in form and
content satisfactory to the Bank and in favor of a beneficiary.
(d) to sign the Bank's form application and Agreement for Standby
Letter of Credit in connection with and as a condition to the issuance of
each letter of credit;
(e) to pay any issuance and/or other fees that the Bank notifies the
Borrower will be charged for issuing and processing letters of credit
for the Borrower;
(f) to allow the Bank to automatically charge its checking account for
applicable fees, discounts, and other charges arising or accrued in
respect of the Letters of Credit; and
(g) to pay the Bank a non-refundable fee equal to 1% per annum of the
outstanding undrawn amount of each standby letter of credit, payable
quarterly in advance, calculated on the basis of the face amount
outstanding on the day the fee is calculated.
1
<PAGE>
2. Paragraph 8.22 (c), (iv) (Additional Negative Covenants) of the Agreement
is amended and restated to read as follows:
(iv) the aggregate cash consideration paid in connection with all such
transactions does not exceed Five Million Dollars
($5,000,000.00), from September 18, 1997 forward, for Borrower
and the Guarantors in the aggregate during the entire term of
this Agreement.
This Amendment will become effective as of the date first written above,
provided that each of the following conditions precedent have been satisfied in
a manner satisfactory to Bank:
The Bank has received from the Borrower a duly executed original of this
Amendment, together with a duly executed Guarantor Acknowledgment and
Consent in the form attached hereto (the "Consent").
Except as provided in this Amendment, all of the terms and provisions of the
Agreement and the documents executed in connection therewith shall remain in
full force and effect. All references in such other documents to the Agreement
shall hereafter be deemed to be references to the Agreement as amended hereby.
THIS WRITTEN AMENDMENT AND THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
I WITNESS WHEREOF, this Amendment has been executed by the parties hereto as of
the date first written above.
BANK OF AMERICA TEXAS, N.A.
Aztec Manufacturing Co.
By: /s/ Donald Hellman
---------------------------
Donald Hellman, Vice President
By: /s/ Dana Perry
------------------------------
Dana Perry, Vice President/Finance
2
<PAGE>
Exhibit 10(16)
Third Amendment to Business Loan Agreement between Registrant
and Bank of America, Texas, N.A., dated December 26, 1997
<PAGE>
EXHIBIT 10.16
[LOGO OF BANK OF AMERICA]
Amendment to Documents
================================================================================
THIRD AMENDMENT TO BUSINESS LOAN AGREEMENT
(RECEIVABLES AND INVENTORY)
This Third Amendment to Business Loan Agreement (Receivables and Inventory) is
entered into as of December 26, 1997, between Bank of America Texas, N.A.
("Bank") and Aztec Manufacturing Co. ("Borrower").
RECITALS
--------
A. WHEREAS, Bank and Borrower have entered into that certain Business Loan
Agreement (Receivables and Inventory) dated June 28, 1996, and amended on
February 12, 1997 and September 22, 1997 (collectively the "Agreement"); and
B. WHEREAS, Borrower and Bank desire to amend certain terms and provisions of
said Agreement as more specifically hereinafter set forth.
AGREED
------
NOW, THEREFORE, in consideration of the foregoing recitals and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Bank and Borrower mutually agree to amend said Agreement as follows:
1. Paragraph 8.11 (Treasury Stock) of the Agreement is amended in its entirety
to read as follows:
8.11 Treasury Stock. Not to purchase, redeem, or otherwise acquire for
--------------
value any of its shares, or create any sinking fund in relation thereto;
provided that, Borrower may purchase or otherwise acquire value its shares
for an aggregate purchase price not to exceed, during the period from the
date of this Amendment until July 1, 1999, the sum of (a) Two Million Two
Hundred Fifty Thousand Dollars ($2,250,000.00), plus (b) the proceeds of
any key man life insurance policy provided for the purpose of funding the
repurchase of its shares".
This Amendment will become effective as of the date first written above,
provided that each of the following conditions precedent have been satisfied in
a manner satisfactory to Bank:
The Bank has received from the Borrower a duly executed original of this
Amendment, together with a duly executed Guarantor Acknowledgment and
Consent in the form attached hereto (the "Consent").
Except as provided in this Amendment, all of the terms and provisions of the
Agreement and the documents executed in connection therewith shall remain in
full force and effect. All references in such other documents to the Agreement
shall hereafter be deemed to be references to the Agreement as amended hereby.
THIS WRITTEN AMENDMENT AND THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
1
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto as of
the date first written above.
BANK OF AMERICA TEXAS, N.A. Aztec Manufacturing Co.
By: /s/ Don Hellman By: /s/ Dana Perry
--------------------------- ------------------------
Don Hellman, Vice President Dana Perry, Vice President
2
<PAGE>
Exhibit 10(17)
Fourth Amendment to Business Loan Agreement between Registrant
and Bank of America, Texas, N.A., dated August 21, 1998
<PAGE>
Exhibit 10.17
[LOGO] Bank of America
Amendment to Documents
================================================================================
FOURTH AMENDMENT TO BUSINESS LOAN AGREEMENT (RECEIVABLES AND INVENTORY)
This Fourth Amendment to Business Loan Agreement is entered into as of August
20, 1998, between Bank of America Texas, N.A. ("Bank") and Aztec Manufacturing
Co. ("Borrower").
RECITALS
--------
A. WHEREAS, Bank and Borrower have entered into that certain Business Loan
Agreement (Receivables and Inventory) dated June 28, 1996, and amended on
February 12, 1997, September 22, 1997 and December 26, 1997 (collectively the
"Agreement"); and
B. WHEREAS, Borrower and Bank desire to amend certain terms and provisions of
said Agreement as more specifically hereinafter set forth.
AGREED
------
NOW, THEREFORE, in consideration of the foregoing recitals and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Bank and Borrower mutually agree to amend said Agreement as follows:
1. In Paragraph 2.2 (Availability Period) of the Agreement, the date "July
-------------------
1, 2001" is substituted for the date "July 1, 1999".
2. A new Paragraph 7.17 (Representations Concerning the Year 2000) is added to
----------------------------------------
the Agreement in its entirety to read as follows:
7.17 Representations Concerning the Year 2000. On the basis of a
----------------------------------------------
comprehensive review and assessment of Borrower's systems and
equipment, Borrower reasonably believes that the "Year 2000 problem"
(that is, the inability of computers, as well as embedded microchips
in non-computing devices, to perform properly date-sensitive functions
with respect to certain dates prior to and after December 31, 1999),
including costs of remediation, will not result in a material adverse
change in the operations, business properties, condition (financial or
otherwise) of Borrower. Borrower has developed feasible contingency
plans to adequately ensure uninterrupted and unimpaired business
operation in the event of failure of its own equipment due to the Year
2000 problem, as well as a general failure of or interruption in its
communications and delivery infrastructure. The Company is also
communicating with vendors and others with which it does business to
coordinate year 2000 compliance. There can be no assurance that the
systems of other companies and agencies on which the Company relies
will be timely converted or that such failure by other entities would
not have an adverse impact on the Company's operations.
3. The first sentence of Paragraph 8.3 (Quick Ratio) is amended and restated
-----------
in its entirety to read as follows:
8.3 Quick Ratio. To maintain on a consolidated basis a ratio of Quick
-----------
Assets to Current Liabilities of at least 0.6:1.0.
4. The first sentence in Paragraph 8.4 (Tangible Net Worth) of the Agreement
------------------
is amended and restated in its entirety to read as follows:
8.4 Tangible Net Worth. To maintain on a consolidated basis Tangible Net
------------------
Worth equal to at least the sum of the following to be measured
annually:
<PAGE>
(a) Twenty Million and No/100 Dollars ($20,000,000.00); plus
(b) the sum of 50% of net income
5. In the first sentence of Paragraph 8.6 (Cash Flow Ratio) of the Agreement,
---------------
the ratio of "2.00:1.00" is substituted for the ratio "1.6:1.0".
6. Paragraph 8.9 (Capital Expenditures) of the Agreement is amended and
--------------------
restated in its entirety to read as follows:
8.9 Capital Expenditures. Not, and not permit any Guarantor, without the
--------------------
Bank's prior written consent, to spend or incur obligations (including
the total amount of any capital leases) for more than Six Million Five
Hundred Thousand Dollars ($6,500,000.00) for the fiscal year of 1999
and Four Million Dollars ($4,000,000.00) thereafter in the aggregate
for Borrower and all Guarantors in any single fiscal year to acquire
fixed or capital assets, excluding from such aggregate amount any such
expenditures financed pursuant to Section 8.7(d).
7. Paragraph 8.11 (Treasury Stock) of the Agreement is amended in its entirety
to read as follows:
8.11 Treasury Stock. Not to purchase, redeem, or otherwise acquire for
--------------
value of any of its shares, or create any sinking fund in relation
thereto; provided that, Borrower may purchase or otherwise acquire
value its shares for an aggregate purchase price not to exceed,
during the period from the date of this Amendment until July 1, 2001,
the sum of (a) One Million Eight Hundred Thousand Dollars
($1,800,000.00), plus (b) the proceeds of any key man life insurance
policy for the purpose of funding the repurchase of its shares.
8. A new Paragraph 8.24 (Investments) is added to the Agreement in its
-----------
entirety to read as follows:
8.24 Investments. Borrower's investments are limited to U.S. Government
-----------
obligations or other "investment grade" instruments.
This Amendment will become effective as of the date first written above,
provided that each of the following conditions precedent have been satisfied in
a manner satisfactory to Bank:
The Bank has received from the Borrower a duly executed original of this
Amendment, together with a duly executed Guarantor Acknowledgment and
Consent in the form attached hereto (the "Consent").
Except as provided in this Amendment, all of the terms and provisions of the
Agreement and the documents executed in connection therewith shall remain in
full force and effect. All references in such other documents to the Agreement
shall hereafter be deemed to be references to the Agreement as amended hereby.
THIS WRITTEN AMENDMENT AND THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto as of
the date first written above.
BANK OF AMERICA TEXAS, N.A. AZTEC MANUFACTURING CO.
By: /s/ Donald P. Hellman By: /s/ Dana Perry
--------------------------------- ---------------------
Donald P. Hellman, Vice President V.P. FINANCE
<PAGE>
EXHIBIT 10(18)
Fifth Amendment to Business Loan Agreement
between Registrant and Bank of America, Texas, N.A., dated January 14, 1999
<PAGE>
EXHIBIT 10.18
FIFTH AMENDMENT TO BUSINESS LOAN AGREEMENT
(RECEIVABLES AND INVENTORY)
This FIFTH AMENDMENT TO BUSINESS LOAN AGREEMENT (RECEIVABLES AND INVENTORY)
("Amendment") is executed and entered into on January 14, 1999, by and between
---------
Bank of America, Texas, N.A. (the "Bank") and Aztec Manufacturing Co. (the
----
"Borrower").
- ---------
RECITALS:
A. The Borrower and the Lender are parties to that certain Business Loan
Agreement (Receivables and Inventory) dated as of June 28, 1996 (as amended and
as the same may be further amended, renewed, extended, restated, or otherwise
modified from time to time, the "Loan Agreement") pursuant to which the Lender
--------------
agreed to provide to the Borrower a secured revolving credit facility in the
maximum aggregate principal amount of $10,000,000 and a secured term loan
facility in the amount of $10,000,000.
B. The indebtedness of the Borrower to the Lender pursuant to the Loan
Agreement is secured by liens on the Borrower's property as described in that
certain Security Agreement: Receivables, Inventory and Equipment (Borrower);
C. Each subsidiary of the Borrower is a Pledging Party and a Guarantor
under the terms of the Loan Agreement.
D. The Borrower has requested that the Lender provide additional loans to
the Borrower as set forth herein and amend certain provisions of the Loan
Agreement, and, subject to satisfaction of the conditions set forth herein, the
Lender is willing to make such additional loans available to the Borrower and
amend the Loan Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I.
Definitions
-----------
Section A. Definitions. Unless otherwise defined in this Amendment, each
-----------
capitalized term used in this Amendment has the meaning given to such term in
the Loan Agreement (as amended by this Amendment).
<PAGE>
ARTICLE II.
Amendments
----------
Section A. Amendment to subsection 1.1(a) of the Loan Agreement.
----------------------------------------------------
Effective as of the date hereof, subsection 1.1(a) of the Loan Agreement is
-----------------
hereby amended and restated to read in its entirety as follows:
(a) Fifteen Million Dollars ($15,000,000.00), or
Section B. Amendment to Section 1.4 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 1.4 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
1.4 "Pledging Party" means the Borrower and each subsidiary of the
--------------
Borrower who is party to a security agreement in favor of the Bank pledging
to the Bank such subsidiary's accounts, inventory, equipment, and other
related assets.
Section C. Amendment to Section 2 of the Loan Agreement. Effective as of
--------------------------------------------
the date hereof, each of the following sections in Section 2 ("LOAN AMOUNTS AND
---------
TERMS") of the Loan Agreement is hereby amended and restated to read in its
entirety as follows:
2. LOAN AMOUNTS AND TERMS
2.1 Line of Credit Amount.
---------------------
(a) During the availability period described below, the Bank
will provide a line of credit (the "Line of Credit") to the Borrower.
--------------
The amount of the Line of Credit is equal to the amount of the
Borrowing Base.
(b) The Line of Credit is a revolving line of credit for
advances with a within line facility for letters of credit. During the
availability period, the Borrower may repay principal amounts and
reborrow them.
(c) Each advance must be for at least One Hundred Thousand
Dollars ($100,000.00) or an integral multiple thereof, or for the
amount of the remaining available Line of Credit, if less.
(d) The Borrower agrees not to permit the outstanding principal
balance of the Line of Credit, plus the outstanding amounts of any
----
letters of credit, including, without limitation, amounts drawn on
letters of credit and not yet reimbursed, to exceed the Borrowing
Base. If on any day such outstandings exceed the Borrowing Base, then
within five (5) days of such day the Borrower will pay the excess to
the Bank. The Bank may apply payments received from the Borrower under
this Paragraph to the obligations of the Borrower to the Bank in the
order and the manner as the Bank, in its discretion, may determine.
***
2
<PAGE>
2.3 Conditions to Each Extension of Credit. Before each extension of
--------------------------------------
credit under the Line of Credit, the Borrower will deliver a Borrowing
Certificate in the form of Exhibit A hereto completed in a manner satisfactory
---------
to the Bank by telecopy at the telecopy number set forth on the signature pages
hereto.
2.4 Repayment Terms. The Borrower will repay in full all principal and
---------------
any unpaid interest or other charges outstanding under the Line of Credit no
later than the Expiration Date.
2.5 Letters of Credit. The Line of Credit may be used for financing
-----------------
standby and/or commercial letters of credit with a maximum maturity not to
exceed one year beyond the Expiration Date. The aggregate face amount of all
letters of credit outstanding at any one time (including, without limitation,
amounts drawn on letters of credit and not yet reimbursed) may not exceed Two
Million Dollars ($2,000,000.00). The Borrower agrees:
(a) any sum drawn under a letter of credit may, at the option of the
Bank, be added to the principal amount outstanding under the Line of Credit
pursuant to this Agreement. Such amount will bear interest and be due as
described elsewhere in this Agreement;
(b) if there is a default under this Agreement, to immediately prepay
and make the Bank whole for any outstanding letters of credit;
(c) the issuance of any letter of credit and any amendment to a letter
of credit is subject to the Bank's written approval and must be in form and
content satisfactory to the Bank and in favor of a beneficiary;
(d) to sign the Bank's form Application and Agreement for Standby
Letter of Credit (or any similar form as requested by the Bank) in
connection with and as a condition to the issuance of each letter of
credit;
(e) to pay any issuance and/or other fees that the Bank notifies the
Borrower will be charged for issuing and processing letters of credit for
the Borrower;
(f) to allow the Bank to automatically charge its checking account for
applicable fees, discounts, and other charges arising or accrued in respect
of letters of credit; and
(g) to pay the Bank a non-refundable fee equal to one percent (1.0%)
per annum of the outstanding undrawn amount of each standby letter of
credit and one-quarter of one percent (0.25%) per annum of the outstanding
undrawn amount of each commercial letter of credit, each such fee payable
quarterly in advance, calculated on the basis of the face amount
outstanding on the day the fee is calculated.
2.6 Term Loans. The Bank agrees to provide term loans to the Borrower
----------
(the "Term Commitment") in the amounts of (a) Ten Million Dollars
---------------
($10,000,000.00) (the
3
<PAGE>
"Term Loan A") and (b) Ten Million Dollars ($10,000,000.00) (the "Term Loan B";
----------- -----------
the Term Loan A and the Term Loan B are referred to collectively herein as the
"Term Loans").
----------
2.7 Availability Period. The Term Commitment is available in two
-------------------
disbursements as follows:
(a) the Term Loan A shall be made in one disbursement from the Bank
between the date of this Agreement and June 30, 1996, and
(b) the Term Loan B shall be made in one disbursement from the Bank
between January 14, 1999 and _________________, 1999.
2.8 Purpose. The Term Loan A shall be used to refinance existing
-------
indebtedness, to finance capital expenditures previously made, and for working
capital purposes. The Term Loan B shall be used to repay indebtedness
outstanding under the Line of Credit on the date of disbursement.
2.9 Term Loan Repayment Terms; Prepayment.
-------------------------------------
(a) (i) The Borrower will repay the principal amount of the Term
Loan A in seventy-one (71) successive monthly installments of One
Hundred Thirty-Eight Thousand Eight Hundred Eighty-Nine Dollars
($138,889.00) starting August 1, 1996. On July 1, 2002, the Borrower
will repay the remaining principal balance of the Term Loan A.
(ii) The Borrower will repay the principal amount of the Term
Loan B in eighty-four (84) successive monthly installments starting on
the first day of the month following the disbursement of the Term Loan
B and continuing on the first day of each month thereafter as follows:
(A) the first eighty-three (83) installments shall be in the amount
of One Hundred Nineteen Thousand Forty-Seven and 62/100 Dollars
($119,047.62); and the final installment shall be for the remaining
principal balance of the Term Loan B.
(b) The Borrower may prepay the either of Term Loans in full or in
part at any time in an amount not less than One Hundred Thousand Dollars
($100,000.00) or an integral multiple thereof. Any such prepayment will be
applied to the Term Loan A or the Term Loan B, as designated by the
Borrower, to the most remote installment of principal due under this
Agreement.
***
2.13 Long Term Rate. The Borrower may elect to have all or portions of the
--------------
principal balance of the Term Loan A bear interest at a rate equal to the lesser
of (a) the Maximum Rate or (b) the Long Term Rate, subject to the following
requirements:
(a) The interest period during which the Long Term Rate will be in
effect will be for the remaining term of the Term Loan A.
(b) The "Long Term Rate" means a fixed interest rate equal to the
--------------
Bank's Cost of Funds Rate in existence at the time the Long Term Rate is
selected
4
<PAGE>
plus one and one-quarter percent (1.25%). "Cost of Funds Rate" means the
------------------
rate then quoted by the Bank at which the Bank can acquire United States
dollars in any domestic market for a period equal to the applicable
interest period and in an amount of the portion of the Term Loan A subject
thereto, adjusted for such reserves as the Bank may deem appropriate.
(c) Each Long Term Rate portion will be for an amount not less than
Two Hundred Fifty Thousand Dollars ($250,000.00).
(d) Any portion of the Term Loan A bearing interest at the Long Term
Rate will not be converted to a different rate during the applicable
interest period.
(e) The Borrower may prepay any Long Term Rate portion in whole or in
part in the minimum amount of One Hundred Thousand Dollars ($100,000.00).
The Borrower will give the Bank irrevocable written notice of the
Borrower's intention to make any such prepayment, specifying the date and
amount of such prepayment. The notice must be received by the Bank at
least five (5) banking days in advance of the prepayment. All prepayments
of principal on the Long Term Rate portion will be applied on the most
remote principal installment or installments of the Term Loan A then
unpaid.
(f) Each prepayment of a Long Term Rate portion will be accompanied
by payment of all accrued interest on the amount of the prepayment and a
prepayment fee (as calculated by the Bank in its discretion) to be equal to
the present value of the amount (if any) by which:
(i) the additional interest which would have been payable on the
amount prepaid had it not been prepaid exceeds
(ii) the amount of interest which would accrue on the amount paid
if it were reinvested from the date of prepayment through its original
maturity at a then prevailing rate equal to the interest rate yield on
like term U.S. Government Treasury securities determined by the Bank
based on information from either the Telerate or Reuters information
services, The Wall Street Journal, or other information sources the
-----------------------
Bank deems appropriate.
The Bank is under no obligation to actually reinvest any prepayment.
(g) If at any time during any applicable interest period the Long
Term Rate shall exceed the Maximum Rate and thereafter the Long Term Rate
shall become less than the Maximum Rate, the rate of interest payable shall
be the Maximum Rate until the Bank shall have received the amount of
interest it otherwise would have received if the interest payable had not
been limited by the Maximum Rate during the period of time the Long Term
Rate exceeded the Maximum Rate.
2.14 Libor Rate. The Borrower may elect to have all or portions of the
----------
principal balance of the loans bear interest at a rate equal to the lesser of
(i) the Maximum Rate or (ii) the Libor Rate plus (i) seven-eighths of one
----
percent (0.875%) with respect to the Line of
5
<PAGE>
Credit or (ii) one and one-quarter percent (1.25%) with respect to the Term
Loans (the "Eurodollar Rate"), subject to the following requirements:
---------------
(a) The interest period during which the Eurodollar Rate will be in
effect will be (i) 1, 2, 3, or 6 months with respect to the Line of Credit
or (ii) 1, 2, 3, 6, or 12 months with respect to the Term Loans. The last
day of the interest period will be determined by the Bank using the
practices of the London interbank market.
(b) Each Eurodollar Rate portion under a loan will be for an amount
not less than Five Hundred Thousand Dollars ($500,000.00) or an integral
multiple thereof.
(c) The Borrower shall irrevocably request a Eurodollar Rate portion
no later than 11:00 a.m. Dallas, Texas time two (2) banking days before the
commencement of the interest period.
(d) The "LIBOR Rate" means the interest rate determined by the
----------
following formula, rounded upward to the nearest 1/100 of one percent.
(All amounts in the calculation will be determined by the Bank as of the
first day of the interest period.)
LIBOR Rate = London Rate
---------------------------
(1.00 - Reserve Percentage)
Where,
(i) "London Rate" means the interest rate (rounded upward to the
-----------
nearest 1/16th of one percent) at which the Bank's London Branch,
London, Great Britain, would offer U.S. dollar deposits for the
applicable interest period to other major banks in the London
interbank market at approximately 11:00 a.m. London time two (2)
banking days prior to the commencement of the interest period.
(ii) "Reserve Percentage" means the total of the maximum reserve
------------------
percentages for determining the reserves to be maintained by member
banks of the Federal Reserve System for Eurocurrency Liabilities, as
defined in Federal Reserve Board Regulation D, rounded upward to the
nearest 1/100 of one percent. The percentage will be expressed as a
decimal, and will include, but not be limited to, marginal, emergency,
supplemental, special, and other reserve percentages.
(e) The Borrower may not elect an Eurodollar Rate with respect to any
portion of the principal balance of any loan which is scheduled to be
repaid before the last day of the applicable interest period.
(f) Any portion of the principal balance of a loan already bearing
interest at the Eurodollar Rate will not be converted to a different rate
during its interest period.
6
<PAGE>
(g) Each prepayment of an Eurodollar Rate portion will be
accompanied by the amount of accrued interest on the amount prepaid,
and a prepayment fee equal to the amount (if any) by which
(i) the additional interest which would have been payable
on the amount prepaid had it not been paid until the last day of
the interest period, exceeds
(ii) the interest which would have been recoverable by the
Bank by placing the amount prepaid on deposit in the London
interbank market for a period starting on the date on which it
was prepaid and ending on the last day of the interest period for
such portion.
(h) The Bank will have no obligation to accept an election for
an Eurodollar Rate portion if any of the following described events
has occurred and is continuing:
(i) Dollar deposits in the principal amount, and for
periods equal to the interest period, of an Eurodollar Rate
portion are not available in the London interbank market; or
(ii) The Eurodollar Rate does not accurately reflect the
cost of an Eurodollar Rate portion.
(i) If at any time during any applicable interest period the
Eurodollar Rate shall exceed the Maximum Rate and thereafter the
Eurodollar Rate shall become less than the Maximum Rate, the rate of
interest payable shall be the Maximum Rate until the Bank shall have
received the amount of interest it otherwise would have received if
the interest payable had not been limited by the Maximum Rate during
the period of time the Eurodollar Rate exceeded the Maximum Rate.
Section D. Amendment to Section 3.1 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 3.1 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
3.1 Unused commitment fee. Subject to the provisions of Section 11.12
---------------------
hereof, the Borrower agrees to pay a fee on any difference between Fifteen
Million Dollars ($15,000,000) and the amount of the Line of Credit it
actually uses, determined by the average loan balance maintained during the
specified period. The fee will be calculated at one-quarter of one percent
(0.25%) per year. This fee is due on October 1, 1996 and on the first day
of each following January, April, July and October until the Expiration
Date.
Section E. Amendment to Section 4.2 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 4.2 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
4.2 Personal Property Supporting Guaranty. The obligations of Aztec
-------------------------------------
Industries, Inc., Aztec Industries, Inc. - Moss Point, Automatic
Processing, Incorporated,
7
<PAGE>
The Calvert Company, Inc., Gulf Coast Galvanizing, Inc., Arkgalv, Inc.,
Arbor-Crowley, Inc., Aztec Group Company, Aztec Holdings, Inc., Aztec
Manufacturing Partnership, Ltd., Aztec Manufacturing-Waskom Partnership,
Ltd., Rig-A-Lite Partnership, Ltd., Atkinson Industries, Inc., Arizona
Galvanizing, Inc., Hobson Galvanizing, Inc., International Galvanizers
Partnership, Ltd., and Drilling Rig Electrical Systems Partnership, Ltd.
(collectively, the "Guarantors") to the Bank will be secured by all
----------
equipment, fixtures, inventory, accounts, receivables and related assets
the Guarantors now own or will own in the future, as further defined in the
security agreement executed by the Guarantors.
Section F. Amendment to subsection 5.3(b) of the Loan Agreement.
----------------------------------------------------
Effective as of the date hereof, subsection 5.3(b) of the Loan Agreement is
-----------------
hereby amended and restated to read in its entirety as follows:
(b) Approximately 15 days prior to each Due Date, the Bank will
mail to the Borrower a statement of the amounts that will be due on that
Due Date (the "Billed Amount"). The calculation will be made on the
-------------
assumption that no new extensions of credit or payments will be made
between the date of the billing statement and the Due Date, and that there
will be no changes in the applicable interest rate.
Section G. Amendment to Section 8.1 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 8.1 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
8.1 Use of Proceeds. To use the proceeds of the Line of Credit only
---------------
for the general working capital needs of the Borrower and its subsidiaries
and to finance acquisitions permitted hereby.
Section H. Amendment to Section 8.6 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, the first sentence of Section 8.6 of the Loan Agreement is
-----------
hereby amended and restated to read in its entirety as follows:
To maintain on a consolidated basis a Cash Flow Ratio of at least 1.75:1.0.
Section I. Amendment to Section 8.11 of the Loan Agreement. Effective as
-----------------------------------------------
of the date hereof, Section 8.11 of the Loan Agreement is hereby amended and
------------
restated to read in its entirety as follows:
8.11 Treasury Stock. Not to purchase, redeem, or otherwise acquire
--------------
for value any of its shares, or create any sinking fund in relation
thereto; provided that the Borrower may otherwise acquire for value its
shares for an aggregate purchase price not to exceed,, during the period
from August 4, 1998 through and including July 1, 2001, the sum of (a)
Seven Million Dollars ($7,000,000), plus (b) the proceeds of any key man
life insurance policy for the purpose of funding the repurchase of its
shares.
Section J. Amendment to Exhibit C of the Loan Agreement. Effective as of
--------------------------------------------
the date hereof, Exhibit C of the Loan Agreement is hereby amended and restated
---------
in its entirety to read as set forth in Exhibit 1 attached hereto.
---------
8
<PAGE>
ARTICLE III.
Conditions Precedent
--------------------
Section A. Items to be Delivered By Borrower. Prior to or simultaneously
---------------------------------
with execution and delivery of this Amendment, the Borrower shall deliver, or
cause to be delivered, to the Lender the following:
1. Officer's Certificates. Due certification by the corporate
----------------------
secretary (or other duly authorized officer acceptable to the Lender) of
the Borrower and each other Pledging Party (or the general partner of any
Pledging Party) (a) attaching a copy of resolutions duly adopted by its
board of directors approving the terms and conditions contained in this
Amendment, (b) certifying that the certificate of incorporation, bylaws,
certificate of limited partnership, and other constituent documents of the
Borrower, such other Pledging Party, or its general partner (as applicable)
as previously certified to the Lender remain in full force and effect
without amendment, and (c) including a certification of incumbency of all
officers who are authorized to act in respect of the corporate resolutions
referenced above, including the name, office, and signature of each such
officer.
2. Amendment Documents. Each agreement, certificate, document, or
-------------------
instrument required by the Lender to be executed or delivered by the
Borrower or any other Pledging Party in connection with this Amendment (the
"Amendment Documents"), duly executed or delivered by the parties thereto.
-------------------
Section B. Other Conditions. The effectiveness of this Amendment is
----------------
subject to the satisfaction of each of the additional following conditions
precedent:
1. Continued Effect of Representations and Warranties. All
--------------------------------------------------
representations and warranties contained in any loan document (including,
without limitation, the Loan Agreement, as amended hereby; all of such loan
documents are referred to collectively herein as the "Loan Documents")
--------------
shall be true, correct, and complete in all material respects (as
determined by the Lender in its sole discretion) except as disclosed
otherwise to the Lender in writing and as acceptable to the Lender or
representations specifically relating to a prior date or no longer relevant
due to the occurrence of an event or circumstances specifically permitted
hereunder or by any other Loan Document;
2. Absence of Default. No default or event of default shall have
------------------
occurred and be continuing (after giving effect to this Amendment);
3. Corporate Proceedings. All corporate proceedings taken in
---------------------
connection with the transactions contemplated by this Amendment and all
other agreements, documents, and instruments executed and/or delivered
pursuant hereto, and all legal matters incident thereto, shall be
satisfactory to the Lender and its legal counsel; and
4. Additional Information. The Lender shall have received such
----------------------
additional agreements, certificates, documents, instruments, and
information as the Lender or its legal
9
<PAGE>
counsel, Jenkens & Gilchrist, a Professional Corporation, may reasonably
request to effect the transactions contemplated hereby.
ARTICLE IV.
Representations and Warranties
------------------------------
Section A. Representations and Warranties. The Borrower hereby represents
------------------------------
and warrants to the Lender that, as of the date of and after giving effect to
this Amendment: (a) the execution, delivery, and performance of this Amendment
and any and all other Amendment Documents executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of the Borrower and will not violate the Borrower's certificate of
incorporation or bylaws; (b) all representations and warranties set forth in the
Loan Agreement and in the Loan Documents are true and correct in all material
respects as if made again on and as of such date (except as disclosed otherwise
to the Lender in writing and as acceptable to the Lender or representations
specifically relating to a prior date or no longer relevant due to the
occurrence of an event or circumstances specifically permitted hereunder or by
any other Loan Document); (c) no default or event of default has occurred and is
continuing; and (d) the Loan Agreement and the other Loan Documents (as amended
by this Amendment) are and remain legal, valid, binding, and enforceable
obligations of the Borrower.
ARTICLE V.
Miscellaneous
-------------
Section A. Governing Law. THIS AMENDMENT, AND ALL DOCUMENTS AND
-------------
INSTRUMENTS EXECUTED IN CONNECTION HEREWITH, SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAWS OF THE STATE OF TEXAS, PROVIDED THAT TO THE EXTENT FEDERAL
--------
LAW WOULD ALLOW A HIGHER RATE OF INTEREST THAN WOULD BE ALLOWED BY THE LAWS OF
THE STATE OF TEXAS, THEN WITH RESPECT TO THE PROVISIONS OF ANY LAW WHICH
PURPORTS TO LIMIT THE AMOUNT OF INTEREST THAT MAY BE CONTRACTED FOR, CHARGED OR
RECEIVED IN CONNECTION WITH ANY OF THE OBLIGATIONS, SUCH FEDERAL LAW SHALL
APPLY.
Section B. Agreement Remains in Effect; No Waiver. Except as expressly
--------------------------------------
provided herein, all terms and provisions of the Loan Agreement and the other
Loan Documents shall remain unchanged and in full force and effect and are
hereby ratified and confirmed. No delay or omission by the Lender in exercising
any power, right, or remedy shall impair such power, right, or remedy or be
construed as a waiver thereof or an acquiescence therein, and no single or
partial exercise of any such power, right, or remedy shall preclude other or
further exercise thereof or the exercise of any other power, right, or remedy
under the Loan Agreement, the Loan Documents, or otherwise.
Section C. Survival of Representations and Warranties. All
------------------------------------------
representations and warranties made in this Amendment or any other Loan Document
shall survive the execution and delivery of this Amendment and the other Loan
Documents, and no investigation by the Lender or
10
<PAGE>
any closing shall affect the representations and warranties or the right of the
Lender to rely upon them.
Section D. Reference to Loan Agreement and Loan Documents. Each of the
----------------------------------------------
Loan Documents, including the Loan Agreement, the Amendment Documents, and any
and all other agreements, documents, or instruments now or hereafter executed
and/or delivered pursuant to the terms hereof or pursuant to the terms of the
Loan Agreement, as amended hereby, are hereby amended so that any reference in
the Loan Documents to the Loan Agreement shall mean a reference to the Loan
Agreement as amended hereby, and the term "loan documents" as used in the Loan
Agreement and as used in any of the other Loan Documents includes, without
limitation, the Amendment Documents.
Section E. Severability. Any provision of this Amendment held by a court
------------
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section F. Successors and Assigns. This Amendment is binding upon and
----------------------
shall inure to the benefit of the Borrower, the Lender, and their respective
successors in interest and assigns. The Borrower may not assign any right,
power, duty, or obligation hereunder without the prior written consent of the
Lender.
Section G. Headings. The headings, captions, and arrangements used in
--------
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section H. Expenses of the Lender. As provided in the Loan Agreement, the
----------------------
Borrower agrees to pay on demand all reasonable, third party out-of-pocket costs
and expenses incurred by the Lender in connection with the preparation,
negotiation, and execution of this Amendment, the Amendment Documents, or the
other Loan Documents executed pursuant hereto and any and all amendments,
modifications, and supplements thereto, including, without limitation, the
reasonable fees of the Lender's legal counsel, and all reasonable costs and
expenses incurred by the Lender in connection with the enforcement or
preservation of any rights under the Loan Agreement, as amended hereby, or any
other Loan Document, including, without limitation, the reasonable costs and
fees of the Lender's legal counsel.
Section I. Counterparts. This Amendment may be executed simultaneously in
------------
one or more multiple originals, each of which shall be deemed an original, but
all of which together shall constitute one and the same agreement.
THIS AMENDMENT, TOGETHER WITH THE LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS AS WRITTEN, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
11
<PAGE>
IN WITNESS WHEREOF, the Borrower and the Lender have caused this Amendment
to be executed and delivered by their duly authorized officers effective as of
the date first written above.
BORROWER:
--------
AZTEC MANUFACTURING CO.
By: /s/ DANA PERRY
----------------------------------------------
Name: DANA PERRY
--------------------------------------------
Title: V.P. FINANCE
-------------------------------------------
LENDER:
------
BANK OF AMERICA, TEXAS, N.A.
By: /s/ RANDY WOODS
----------------------------------------------
Name: RANDY WOODS
--------------------------------------------
Title: BANK OFFICER
-------------------------------------------
12
<PAGE>
EXHIBIT 10(19)
Sixth Amendment to Business Loan Agreement
between Registrant and Bank of America, Texas, N.A., dated February 3, 1999
<PAGE>
SIXTH AMENDMENT TO BUSINESS LOAN AGREEMENT
(RECEIVABLES AND INVENTORY)
This SIXTH AMENDMENT TO BUSINESS LOAN AGREEMENT (RECEIVABLES AND INVENTORY)
(this "Amendment") is executed and entered into on August __, 1999, by and
---------
between Bank of America, N.A. (successor by merger to Bank of America, Texas,
N.A., the "Bank") and Aztec Manufacturing Co. (the "Borrower").
---- --------
RECITALS:
A. The Borrower and the Bank are parties to that certain Business Loan
Agreement (Receivables and Inventory) dated as of June 28, 1996 (as amended and
as the same may be further amended, renewed, extended, restated, or otherwise
modified from time to time, the "Loan Agreement") pursuant to which the Bank
--------------
agreed to provide to the Borrower a secured revolving credit facility and a
secured term loan facility.
B. The indebtedness of the Borrower to the Bank pursuant to the Loan
Agreement is secured by liens on the Borrower's property as described in that
certain Security Agreement: Receivables, Inventory and Equipment (Borrower);
C. Each subsidiary of the Borrower is a Pledging Party and a Guarantor
under the terms of the Loan Agreement.
D. The Borrower has requested that the Bank provide additional loans to
the Borrower as set forth herein and amend certain provisions of the Loan
Agreement, and, subject to satisfaction of the conditions set forth herein, the
Bank is willing to make such additional loans available to the Borrower and
amend the Loan Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1
Definitions
-----------
Section 1.1 Definitions. Unless otherwise defined in this Amendment, each
-----------
capitalized term used in this Amendment has the meaning given to such term in
the Loan Agreement (as amended by this Amendment).
<PAGE>
ARTICLE 2
Amendments
----------
Section 2.1 Amendment to subsection 1.1(a) of the Loan Agreement.
----------------------------------------------------
Effective as of the date hereof, subsection 1.1(a) of the Loan Agreement is
-----------------
hereby amended and restated to read in its entirety as follows:
(a) Twenty-Two Million Dollars ($22,000,000.00), or
Section 2.2 Amendment to Section 1.4 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 1.4 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
1.4 "Pledging Party" means the Borrower and each subsidiary of the
--------------
Borrower who is party to a security agreement in favor of the Bank pledging
to the Bank such subsidiary's accounts, inventory, equipment, and other
related assets; provided, however, that Pledging Party shall also mean and
-------- -------
include CGIT Westboro, Inc. ("CGIT") from and after the date of the
acquisition of CGIT by the Borrower, CGIT to execute and deliver to the
Bank a guaranty, security agreement, financing statements and such other
documents (including, without limitation, an officer's certificate as to
CGIT's charter documents, resolutions and authorized signatures) required
by the Bank to create and perfect a security interest in CGIT's accounts,
inventory, equipment, and other related assets within ninety (90) days of
the Borrower's acquisition of CGIT.
Section 2.3 Amendment to Section 2.14 of the Loan Agreement. Effective as
-----------------------------------------------
of the date hereof, Section 2.14 of the Loan Agreement is hereby amended and
------------
restated to read in its entirety as follows:
2.14 Libor Rate. The Borrower may elect to have all or portions of
----------
the principal balance of the loans bear interest at a rate equal to the
lesser of (i) the Maximum Rate or (ii) the Libor Rate plus (i) the
----
Applicable Libor Margin (as determined as provided in clause (j) below)
with respect to the Line of Credit or (ii) one and one-quarter percent
(1.25%) with respect to the Term Loans (the "Eurodollar Rate"), subject to
---------------
the following requirements:
(a) The interest period during which the Eurodollar Rate will
be in effect will be (i) 1, 2, 3, or 6 months with respect to the Line
of Credit or (ii) 1, 2, 3, 6, or 12 months with respect to the Term
Loans. The last day of the interest period will be determined by the
Bank using the practices of the London interbank market.
(b) Each Eurodollar Rate portion under a loan will be for an
amount not less than Five Hundred Thousand Dollars ($500,000.00) or an
integral multiple thereof.
(c) The Borrower shall irrevocably request a Eurodollar Rate
portion no later than 11:00 a.m. Dallas, Texas time two (2) banking
days before the commencement of the interest period.
2
<PAGE>
(d) The "LIBOR Rate" means the interest rate determined by the
----------
following formula, rounded upward to the nearest 1/100 of one percent.
(All amounts in the calculation will be determined by the Bank as of the
first day of the interest period.)
LIBOR Rate = London Rate
---------------------------------
(1.00 - Reserve Percentage)
Where,
(i) "London Rate" means the interest rate (rounded upward to the
-----------
nearest 1/16th of one percent) at which the Bank's London Branch,
London, Great Britain, would offer U.S. dollar deposits for the
applicable interest period to other major banks in the London
interbank market at approximately 11:00 a.m. London time two (2)
banking days prior to the commencement of the interest period.
(ii) "Reserve Percentage" means the total of the maximum reserve
------------------
percentages for determining the reserves to be maintained by member
banks of the Federal Reserve System for Eurocurrency Liabilities, as
defined in Federal Reserve Board Regulation D, rounded upward to the
nearest 1/100 of one percent. The percentage will be expressed as a
decimal, and will include, but not be limited to, marginal, emergency,
supplemental, special, and other reserve percentages.
(e) The Borrower may not elect an Eurodollar Rate with respect to any
portion of the principal balance of any loan which is scheduled to be
repaid before the last day of the applicable interest period.
(f) Any portion of the principal balance of a loan already bearing
interest at the Eurodollar Rate will not be converted to a different rate
during its interest period.
(g) Each prepayment of an Eurodollar Rate portion will be accompanied
by the amount of accrued interest on the amount prepaid, and a prepayment
fee equal to the amount (if any) by which
(i) the additional interest which would have been payable on the
amount prepaid had it not been paid until the last day of the interest
period, exceeds
(ii) the interest which would have been recoverable by the Bank
by placing the amount prepaid on deposit in the London interbank
market for a period starting on the date on which it was prepaid and
ending on the last day of the interest period for such portion.
(h) The Bank will have no obligation to accept an election for an
Eurodollar Rate portion if any of the following described events has
occurred and is continuing:
3
<PAGE>
(i) Dollar deposits in the principal amount, and for periods
equal to the interest period, of an Eurodollar Rate portion are not
available in the London interbank market; or
(ii) The Eurodollar Rate does not accurately reflect the cost of
an Eurodollar Rate portion.
(i) If at any time during any applicable interest period the
Eurodollar Rate shall exceed the Maximum Rate and thereafter the Eurodollar
Rate shall become less than the Maximum Rate, the rate of interest payable
shall be the Maximum Rate until the Bank shall have received the amount of
interest it otherwise would have received if the interest payable had not
been limited by the Maximum Rate during the period of time the Eurodollar
Rate exceeded the Maximum Rate.
(j) Prior to receipt of the Compliance Certificate to be delivered
with the Borrower's financial statements for the fiscal quarter ending
September 30, 1999, the margin over the Libor Rate for the Line of Credit
shall be _____ percent (____%); thereafter, the "Applicable Libor Margin"
shall be determined in accordance with the following table:
==========================================
RATIO OF TOTAL
LIABILITIES TO
TANGIBLE NET LIBOR RATE
WORTH MARGIN
Less than 1.25 to 1.00 0.875%
------------------------------------------
Greater than or equal to 1.00%
1.25 to 1.00 but less
than 2.01 to 1.00
------------------------------------------
Greater than or equal to 1.125%
2.01 to 1.00 but less
than 2.76 to 1.00
------------------------------------------
Greater than or equal to 1.25%
2.76 to 1.00
==========================================
Upon delivery of the Compliance Certificate pursuant to subsection
----------
8.2(g) after the end of each fiscal quarter commencing with such Compliance
------
Certificate delivered for the fiscal quarter ending December 31, 1999, the
Applicable Libor Margin shall automatically be adjusted to the rate
corresponding to the Ratio of Total Liabilities to Tangible Net Worth of
Borrower set forth in the table above, such automatic adjustment to take
effect prospectively the third Business Day after receipt by the Bank of
the Compliance Certificate (the "Adjustment Date"). If Borrower fails to
---------------
deliver such Compliance Certificate with respect to any fiscal quarter
which sets forth such ratio within the period of time required by
subsection 8.2(g), the
-----------------
4
<PAGE>
Applicable Libor Margin shall automatically be adjusted to one and one
quarter percent (1.25%) per annum. The automatic adjustments provided
for in the preceding sentence shall take effect on the last day that
the Compliance Certificate was required to be delivered and shall
remain in effect until subsequently adjusted in accordance herewith
upon the delivery of such Compliance Certificate.
Section 2.4 Amendment to Section 4.2 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 4.2 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
4.2 Personal Property Supporting Guaranty. The obligations of
-------------------------------------
Aztec Industries, Inc., Aztec Industries, Inc. - Moss Point, Automatic
Processing, Incorporated, The Calvert Company, Inc., Gulf Coast
Galvanizing, Inc., Arkgalv, Inc., Arbor-Crowley, Inc., Aztec Group Company,
Aztec Holdings, Inc., Aztec Manufacturing Partnership, Ltd., Aztec
Manufacturing-Waskom Partnership, Ltd., Rig-A-Lite Partnership, Ltd.,
Atkinson Industries, Inc., Arizona Galvanizing, Inc., Hobson Galvanizing,
Inc., International Galvanizers Partnership, Ltd., and Drilling Rig
Electrical Systems Partnership, Ltd. (collectively, the "Guarantors") to
----------
the Bank will be secured by all equipment, fixtures, inventory, accounts,
receivables and related assets the Guarantors now own or will own in the
future, as further defined in the security agreement executed by the
Guarantors; provided that the term "Guarantors" shall include CGIT upon its
--------
execution of a guaranty within ninety (90) days of the acquisition of CGIT
by the Borrower as provided by Section 1.4 of this Agreement.
-----------
Section 2.5 Amendment to Section 8.1 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 8.1 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
8.1 Use of Proceeds. To use the proceeds of the Line of Credit
---------------
only for the general working capital needs of the Borrower and its
subsidiaries and to finance acquisitions permitted hereby, including,
---------
without limitation, the acquisition of CGIT.
Section 2.6 Amendment to Section 8.4 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 8.4 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
8.4 Tangible Net Worth. To maintain on a consolidated basis
------------------
Tangible Net Worth equal to at least Eleven Million Dollars ($11,000,000,
plus fifty percent (50%) of the Borrower's positive net income for each
fiscal quarter of the Borrower ending after June 30, 1999 (no reductions to
be made for any losses). As used herein, the term "Tangible Net Worth"
------------------
means the gross book value of the Borrower's assets (excluding goodwill,
patents, trademarks, trade names, organization expense, treasury stock,
unamortized debt discount and expense, deferred research and development
costs, deferred marketing expenses, and other like intangibles, and monies
due from affiliates, officers, directors or shareholders of the Borrower)
less total liabilities, including but not limited to accrued and deferred
income taxes, and any reserves against assets.
5
<PAGE>
Section 2.7 Amendment to Section 8.5 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 8.5 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
8.5 Current and Long Term Liabilities to Tangible Net Worth. To
-------------------------------------------------------
maintain on a consolidated basis a ratio of long term debt and Current
Liabilities to Tangible Net Worth not exceeding 4.50 to 1.00 for the period
from the date of the Sixth Amendment to this Agreement through February 28,
2000, 3.00 to 1.00 thereafter through February 28, 2001, or 2.00 to 1.00
thereafter.
Section 2.8 Amendment to Section 8.6 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 8.6 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
8.6 Cash Flow Ratio. To maintain on a consolidated basis a Cash
---------------
Flow Ratio of at least 1.6:1.0. As used herein, the term "Cash Flow Ratio"
---------------
means the ratio of Cash Flow to the current portion of long term debt plus
interest expense. "Cash Flow" is defined as net income from operations
---------
(before extraordinary or nonrecurring gains or losses), after taxes, plus
depreciation, amortization and other non-cash charges, plus interest
expense, minus dividends. This ratio will be calculated at the end of each
fiscal quarter, using the results of that quarter and each of the 3
immediately preceding quarters. The current portion of long term debt will
be measured as of the last day of the fiscal quarter preceding the date of
calculation.
Section 2.9 Amendment to Section 8.11 of the Loan Agreement. Effective
-----------------------------------------------
as of the date hereof, Section 8.1l of the Loan Agreement is hereby amended and
------------
restated to read in its entirety as follows:
8.11 Treasury Stock. Not to purchase, redeem, or otherwise acquire
--------------
for value any of its shares, or create any sinking fund in relation
thereto.
Section 2.10 Amendment to Section 8.22 of the Loan Agreement. Effective
-----------------------------------------------
as of the date hereof, clause (c) of Section 8.22 of the Loan Agreement is
------------
hereby amended and restated to read in its entirety as follows:
(c) enter into any consolidation, merger, pool, joint
venture, syndicate, or other combination or purchase or
acquire all or substantially all the assets of another
business, except for such transaction if (i) the Borrower or
applicable Guarantor is the surviving entity; (ii) no
default exists hereunder or would result therefrom and
before, and after giving effect to, the proposed
acquisition, the representations and warranties set forth
herein shall be true and correct; and (iii) Borrower
delivers to the Bank an Environmental Questionnaire and
Disclosure Statement in form and disclosing such information
as is acceptable to the Bank relating to the assets or
entity to be acquired prior to the acquisition.
Section 2.11 Amendment to Article 8 of the Loan Agreement. Effective as
--------------------------------------------
of the date hereof, Article 8 of the Loan Agreement is hereby amended by adding
---------
thereto new Sections 8.24 to read in its entirety as follows:
-------------
6
<PAGE>
8.24 Funded Debt to EBITDA. To maintain on a consolidated basis
---------------------
at the end of each of the Borrower's fiscal quarters ending after the date
of the Sixth Amendment to this Agreement a ratio of Funded Debt to EBITDA
for the four consecutive fiscal quarters then ended not exceeding 3.00 to
1.00. As used herein, the term "Funded Debt" means all debt of the Borrower
-----------
and its Subsidiaries for borrowed money (including capital lease
obligations) and the term "EBITDA" means: (i) net income from operations
------
(before extraordinary or non-recurring gains or losses); plus (ii) any
----
provision for income or franchise taxes deducted in determining net income;
plus (iii) interest expense deducted in determining net income; plus (iv)
---- ----
depreciation and amortization expense deducted in determining net income;
plus (v) other non cash charges deducted in determining net income.
----
ARTICLE 3
Conditions Precedent
--------------------
Section 3.1 Items to be Delivered By Borrower. Prior to or
---------------------------------
simultaneously with execution and delivery of this Amendment, the Borrower shall
deliver, or cause to be delivered, to the Bank the following:
1 Officer's Certificates. Due certification by the corporate
----------------------
secretary (or other duly authorized officer acceptable to the Bank) of the
Borrower and each other Pledging Party (or the general partner of any
Pledging Party) (a) attaching a copy of resolutions duly adopted by its
board of directors approving the terms and conditions contained in this
Amendment, (b) certifying that the certificate of incorporation, bylaws,
certificate of limited partnership, and other constituent documents of the
Borrower, such other Pledging Party, or its general partner (as applicable)
as previously certified to the Bank remain in full force and effect without
amendment, and (c) including a certification of incumbency of all officers
who are authorized to act in respect of the corporate resolutions
referenced above, including the name, office, and signature of each such
officer.
2 Amendment Documents. Each agreement, certificate, document,
-------------------
or instrument required by the Bank to be executed or delivered by the
Borrower or any other Pledging Party in connection with this Amendment (the
"Amendment Documents"), duly executed or delivered by the parties thereto.
-------------------
Section 3.2 Other Conditions. The effectiveness of this Amendment is
----------------
subject to the satisfaction of each of the additional following conditions
precedent:
1 Continued Effect of Representations and Warranties. All
--------------------------------------------------
representations and warranties contained in any loan document (including,
without limitation, the Loan Agreement, as amended hereby; all of such loan
documents are referred to collectively herein as the "Loan Documents") shall be
--------------
true, correct, and complete in all material respects (as determined by the Bank
in its sole discretion) except as disclosed otherwise to the Bank in writing and
as acceptable to the Bank or representations specifically relating to a prior
date
7
<PAGE>
or no longer relevant due to the occurrence of an event or circumstances
specifically permitted hereunder or by any other Loan Document;
2 Absence of Default. No default or event of default shall have
------------------
occurred and be continuing (after giving effect to this Amendment);
3 Corporate Proceedings. All corporate proceedings taken in
---------------------
connection with the transactions contemplated by this Amendment and all
other agreements, documents, and instruments executed and/or delivered
pursuant hereto, and all legal matters incident thereto, shall be
satisfactory to the Bank and its legal counsel; and
4 Additional Information. The Bank shall have received such
----------------------
additional agreements, certificates, documents, instruments, and
information as the Bank or its legal counsel, Jenkens & Gilchrist, a
Professional Corporation, may reasonably request to effect the transactions
contemplated hereby.
ARTICLE 4
Representations and Warranties
------------------------------
Section 4.1 Representations and Warranties. The Borrower hereby
------------------------------
represents and warrants to the Bank that, as of the date of and after giving
effect to this Amendment: (a) the execution, delivery, and performance of this
Amendment and any and all other Amendment Documents executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of the Borrower and will not violate the Borrower's certificate of
incorporation or bylaws; (b) all representations and warranties set forth in the
Loan Agreement and in the Loan Documents are true and correct in all material
respects as if made again on and as of such date (except as disclosed otherwise
to the Bank in writing and as acceptable to the Bank or representations
specifically relating to a prior date or no longer relevant due to the
occurrence of an event or circumstances specifically permitted hereunder or by
any other Loan Document); (c) no default or event of default has occurred and is
continuing; and (d) the Loan Agreement and the other Loan Documents (as amended
by this Amendment) are and remain legal, valid, binding, and enforceable
obligations of the Borrower.
ARTICLE 5
Miscellaneous
-------------
Section 5.1 Governing Law. THIS AMENDMENT, AND ALL DOCUMENTS AND
-------------
INSTRUMENTS EXECUTED IN CONNECTION HEREWITH, SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAWS OF THE STATE OF TEXAS, PROVIDED THAT TO THE EXTENT FEDERAL
--------
LAW WOULD ALLOW A HIGHER RATE OF INTEREST THAN WOULD BE ALLOWED BY THE LAWS OF
THE STATE OF TEXAS, THEN WITH RESPECT TO THE PROVISIONS OF ANY LAW WHICH
PURPORTS TO LIMIT THE AMOUNT OF INTEREST THAT MAY BE CONTRACTED FOR, CHARGED OR
RECEIVED IN CONNECTION WITH ANY OF THE OBLIGATIONS, SUCH FEDERAL LAW SHALL
APPLY.
8
<PAGE>
Section 5.2 Agreement Remains in Effect; No Waiver. Except as expressly
--------------------------------------
provided herein, all terms and provisions of the Loan Agreement and the other
Loan Documents shall remain unchanged and in full force and effect and are
hereby ratified and confirmed. No delay or omission by the Bank in exercising
any power, right, or remedy shall impair such power, right, or remedy or be
construed as a waiver thereof or an acquiescence therein, and no single or
partial exercise of any such power, right, or remedy shall preclude other or
further exercise thereof or the exercise of any other power, right, or remedy
under the Loan Agreement, the Loan Documents, or otherwise.
Section 5.3 Survival of Representations and Warranties. All
------------------------------------------
representations and warranties made in this Amendment or any other Loan Document
shall survive the execution and delivery of this Amendment and the other Loan
Documents, and no investigation by the Bank or any closing shall affect the
representations and warranties or the right of the Bank to rely upon them.
Section 5.4 Reference to Loan Agreement and Loan Documents. Each of the
----------------------------------------------
Loan Documents, including the Loan Agreement, the Amendment Documents, and any
and all other agreements, documents, or instruments now or hereafter executed
and/or delivered pursuant to the terms hereof or pursuant to the terms of the
Loan Agreement, as amended hereby, are hereby amended so that any reference in
the Loan Documents to the Loan Agreement shall mean a reference to the Loan
Agreement as amended hereby, and the term "loan documents" as used in the Loan
Agreement and as used in any of the other Loan Documents includes, without
limitation, the Amendment Documents.
Section 5.5 Severability. Any provision of this Amendment held by a
------------
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 5.6 Successors and Assigns. This Amendment is binding upon and
----------------------
shall inure to the benefit of the Borrower, the Bank, and their respective
successors in interest and assigns. The Borrower may not assign any right,
power, duty, or obligation hereunder without the prior written consent of the
Bank.
Section 5.7 Headings. The headings, captions, and arrangements used in
--------
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 5.8 Expenses of the Bank. As provided in the Loan Agreement, the
--------------------
Borrower agrees to pay on demand all reasonable, third party out-of-pocket costs
and expenses incurred by the Bank in connection with the preparation,
negotiation, and execution of this Amendment, the Amendment Documents, or the
other Loan Documents executed pursuant hereto and any and all amendments,
modifications, and supplements thereto, including, without limitation, the
reasonable fees of the Bank's legal counsel, and all reasonable costs and
expenses incurred by the Bank in connection with the enforcement or preservation
of any rights under the Loan Agreement, as amended hereby, or any other Loan
Document, including, without limitation, the reasonable costs and fees of the
Bank's legal counsel.
9
<PAGE>
Section 5.9 Counterparts. This Amendment may be executed simultaneously
------------
in one or more multiple originals, each of which shall be deemed an original,
but all of which together shall constitute one and the same agreement.
THIS AMENDMENT, TOGETHER WITH THE LOAN AGREEMENT AND THE OTHER
LOAN DOCUMENTS AS WRITTEN, REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this Amendment to
be executed and delivered by their duly authorized officers effective as of the
date first written above.
BORROWER:
--------
AZTEC MANUFACTURING CO.
By: /s/ DANA PERRY
----------------------------------------
Name: DANA PERRY
--------------------------------------
Title: V.P. FINANCE
-------------------------------------
BANK:
----
BANK OF AMERICA, N.A. (successor by
merger to Bank of America, Texas, N.A.)
By: /s/ VINCE LIBERIO
----------------------------------------
Name: VINCE LIBERIO
--------------------------------------
Title: SENIOR V.P.
-------------------------------------
10
<PAGE>
EXHIBIT 10(20)
Seventh Amendment to Business Loan Agreement
between Registrant and Bank of America, Texas, N.A., dated August 26, 1999
<PAGE>
SEVENTH AMENDMENT TO BUSINESS LOAN AGREEMENT
(RECEIVABLES AND INVENTORY)
This SEVENTH AMENDMENT TO BUSINESS LOAN AGREEMENT (RECEIVABLES AND
INVENTORY) (this "Amendment") is executed and entered into on August 26, 1999,
---------
by and between Bank of America, N.A. (successor by merger to Bank of America,
Texas, N.A., the "Bank") and Aztec Manufacturing Co. (the "Borrower").
---- --------
RECITALS:
A. The Borrower and the Bank are parties to that certain Business Loan
Agreement (Receivables and Inventory) dated as of June 28, 1996 (as amended and
as the same may be further amended, renewed, extended, restated, or otherwise
modified from time to time, the "Loan Agreement") pursuant to which the Bank
--------------
agreed to provide to the Borrower a secured revolving credit facility and a
secured term loan facility.
B. The indebtedness of the Borrower to the Bank pursuant to the Loan
Agreement is secured by liens on the Borrower's property as described in that
certain Security Agreement: Receivables, Inventory and Equipment (Borrower);
C. Each subsidiary of the Borrower is a Pledging Party and a Guarantor
under the terms of the Loan Agreement.
D. The Borrower has requested that the Bank provide additional loans to
the Borrower as set forth herein and amend certain provisions of the Loan
Agreement, and, subject to satisfaction of the conditions set forth herein, the
Bank is willing to make such additional loans available to the Borrower and
amend the Loan Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1
Definitions
-----------
Section 1.1 Definitions. Unless otherwise defined in this Amendment, each
-----------
capitalized term used in this Amendment has the meaning given to such term in
the Loan Agreement (as amended by this Amendment).
<PAGE>
ARTICLE 2
Amendments
----------
Section 2.1 Amendment to subsection 1.1(a) of the Loan Agreement.
----------------------------------------------------
Effective as of the date hereof, subsection 1.1(a) of the Loan Agreement is
-----------------
hereby amended and restated to read in its entirety as follows:
(a) Twenty-Two Million Dollars ($22,000,000.00), or
Section 2.2 Amendment to Section 1.4 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 1.4 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
1.4 "Pledging Party" means the Borrower and each subsidiary of the
--------------
Borrower who is party to a security agreement in favor of the Bank pledging
to the Bank such subsidiary's accounts, inventory, equipment, and other
related assets; provided, however, that Pledging Party shall also mean and
-------- -------
include CGIT Westboro, Inc. ("CGIT") from and after the date of the
acquisition of CGIT by the Borrower, CGIT to execute and deliver to the
Bank a guaranty, security agreement, financing statements and such other
documents (including, without limitation, an officer's certificate as to
CGIT's charter documents, resolutions and authorized signatures) required
by the Bank to create and perfect a security interest in CGIT's accounts,
inventory, equipment, and other related assets within ninety (90) days of
the Borrower's acquisition of CGIT.
Section 2.3 Amendment to Section 2.14 of the Loan Agreement. Effective as
-----------------------------------------------
of the date hereof, Section 2.14 of the Loan Agreement is hereby amended and
------------
restated to read in its entirety as follows:
2.14 Libor Rate. The Borrower may elect to have all or portions of
----------
the principal balance of the loans bear interest at a rate equal to the
lesser of (i) the Maximum Rate or (ii) the Libor Rate plus (i) the
----
Applicable Libor Margin (as determined as provided in clause (j) below)
with respect to the Line of Credit or (ii) one and one-quarter percent
(1.25%) with respect to the Term Loans (the "Eurodollar Rate"), subject to
---------------
the following requirements:
(a) The interest period during which the Eurodollar Rate will be
in effect will be (i) 1, 2, 3, or 6 months with respect to the Line of
Credit or (ii) 1, 2, 3, 6, or 12 months with respect to the Term
Loans. The last day of the interest period will be determined by the
Bank using the practices of the London interbank market.
(b) Each Eurodollar Rate portion under a loan will be for an
amount not less than Five Hundred Thousand Dollars ($500,000.00) or an
integral multiple thereof.
(c) The Borrower shall irrevocably request a Eurodollar Rate
portion no later than 11:00 a.m. Dallas, Texas time two (2) banking
days before the commencement of the interest period.
2
<PAGE>
(d) The "LIBOR Rate" means the interest rate determined by the
----------
following formula, rounded upward to the nearest 1/100 of one percent.
(All amounts in the calculation will be determined by the Bank as of
the first day of the interest period.)
LIBOR Rate = London Rate
---------------------------
(1.00 - Reserve Percentage)
Where,
(i) "London Rate" means the interest rate (rounded upward
-----------
to the nearest 1/16th of one percent) at which the Bank's London
Branch, London, Great Britain, would offer U.S. dollar deposits
for the applicable interest period to other major banks in the
London interbank market at approximately 11:00 a.m. London time
two (2) banking days prior to the commencement of the interest
period.
(ii) "Reserve Percentage" means the total of the maximum
------------------
reserve percentages for determining the reserves to be maintained
by member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in Federal Reserve Board Regulation D,
rounded upward to the nearest 1/100 of one percent. The
percentage will be expressed as a decimal, and will include, but
not be limited to, marginal, emergency, supplemental, special,
and other reserve percentages.
(e) The Borrower may not elect an Eurodollar Rate with respect to
any portion of the principal balance of any loan which is scheduled to
be repaid before the last day of the applicable interest period.
(f) Any portion of the principal balance of a loan already
bearing interest at the Eurodollar Rate will not be converted to a
different rate during its interest period.
(g) Each prepayment of an Eurodollar Rate portion will be
accompanied by the amount of accrued interest on the amount prepaid,
and a prepayment fee equal to the amount (if any) by which
(i) the additional interest which would have been payable on
the amount prepaid had it not been paid until the last day of the
interest period, exceeds
(ii) the interest which would have been recoverable by the
Bank by placing the amount prepaid on deposit in the London
interbank market for a period starting on the date on which it
was prepaid and ending on the last day of the interest period for
such portion.
(h) The Bank will have no obligation to accept an election for an
Eurodollar Rate portion if any of the following described events has
occurred and is continuing:
3
<PAGE>
(i) Dollar deposits in the principal amount, and for
periods equal to the interest period, of an Eurodollar Rate
portion are not available in the London interbank market; or
(ii) The Eurodollar Rate does not accurately reflect the
cost of an Eurodollar Rate portion.
(i) If at any time during any applicable interest period the
Eurodollar Rate shall exceed the Maximum Rate and thereafter the
Eurodollar Rate shall become less than the Maximum Rate, the rate of
interest payable shall be the Maximum Rate until the Bank shall have
received the amount of interest it otherwise would have received if
the interest payable had not been limited by the Maximum Rate during
the period of time the Eurodollar Rate exceeded the Maximum Rate.
(j) Prior to receipt of the Compliance Certificate to be
delivered with the Borrower's financial statements for the fiscal
quarter ending September 30, 1999, the margin over the Libor Rate for
the Line of Credit shall be One and a quarter percent (1.25%);
thereafter, the "Applicable Libor Margin" shall be determined in
accordance with the following table:
===========================================================
RATIO OF TOTAL LIABILITIES
TO TANGIBLE NET WORTH LIBOR RATE MARGIN
Less than 1.25 to 1.00 0.875%
-----------------------------------------------------------
Greater than or equal to 1.00%
1.25 to 1.00 but less
than 2.01 to 1.00
-----------------------------------------------------------
Greater than or equal to 1.125%
2.01 to 1.00 but less
than 2.76 to 1.00
-----------------------------------------------------------
Greater than or equal to 1.25%
2.76 to 1.00
===========================================================
Upon delivery of the Compliance Certificate pursuant to
subsection 8.2(g) after the end of each fiscal quarter commencing with
-----------------
such Compliance Certificate delivered for the fiscal quarter ending
November 30, 1999, the Applicable Libor Margin shall automatically be
adjusted to the rate corresponding to the Ratio of Total Liabilities
to Tangible Net Worth of Borrower set forth in the table above, such
automatic adjustment to take effect prospectively the third Business
Day after receipt by the Bank of the Compliance Certificate (the
"Adjustment Date"). If Borrower fails to deliver such Compliance
----------------
Certificate with respect to any fiscal quarter which
4
<PAGE>
sets forth such ratio within the period of time required by subsection
----------
8.2(g), the Applicable Libor Margin shall automatically be adjusted to
------
one and one quarter percent (1.25%) per annum. The automatic
adjustments provided for in the preceding sentence shall take effect
on the last day that the Compliance Certificate was required to be
delivered and shall remain in effect until subsequently adjusted in
accordance herewith upon the delivery of such Compliance Certificate.
Section 2.4 Amendment to Section 4.2 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 4.2 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
4.2 Personal Property Supporting Guaranty. The obligations of Aztec
-------------------------------------
Industries, Inc., Aztec Industries, Inc. - Moss Point, Automatic
Processing, Incorporated, The Calvert Company, Inc., Gulf Coast
Galvanizing, Inc., Arkgalv, Inc., Arbor-Crowley, Inc., Aztec Group Company,
Aztec Holdings, Inc., Aztec Manufacturing Partnership, Ltd., Aztec
Manufacturing-Waskom Partnership, Ltd., Rig-A-Lite Partnership, Ltd.,
Atkinson Industries, Inc., Arizona Galvanizing, Inc., Hobson Galvanizing,
Inc., International Galvanizers Partnership, Ltd., and Drilling Rig
Electrical Systems Partnership, Ltd. (collectively, the "Guarantors") to
----------
the Bank will be secured by all equipment, fixtures, inventory, accounts,
receivables and related assets the Guarantors now own or will own in the
future, as further defined in the security agreement executed by the
Guarantors; provided that the tem "Guarantors" shall include CGIT upon its
--------
execution of a guaranty within ninety (90) days of the acquisition of CGIT
by the Borrower as provided by Section 1.4 of this Agreement.
-----------
Section 2.5 Amendment to Section 8.1 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 8.1 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
8.1 Use of Proceeds. To use the proceeds of the Line of Credit only
---------------
for the general working capital needs of the Borrower and its subsidiaries
and to finance acquisitions permitted hereby, including,without limitation,
---------
the acquisition of CGIT.
Section 2.6 Amendment to Section 8.4 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 8.4 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
8.4 Tangible Net Worth. To maintain on a consolidated basis Tangible
------------------
Net Worth equal to at least Eleven Million Dollars ($11,000,000, plus fifty
percent (50%) of the Borrower's positive net income for each fiscal quarter
of the Borrower ending after June 30, 1999 (no reductions to be made for
any losses). As used herein, the term "Tangible Net Worth" means the gross
------------------
book value of the Borrower's assets (excluding goodwill, patents,
trademarks, trade names, organization expense, treasury stock, unamortized
debt discount and expense, deferred research and development costs,
deferred marketing expenses, and other like intangibles, and monies due
from affiliates, officers, directors or shareholders of the Borrower) less
total liabilities, including but not limited to accrued and deferred income
taxes, and any reserves against assets.
5
<PAGE>
Section 2.7 Amendment to Section 8.5 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 8.5 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
8.5 Current and Long Term Liabilities to Tangible Net Worth. To
-------------------------------------------------------
maintain on a consolidated basis a ratio of long term debt and Current
Liabilities to Tangible Net Worth not exceeding 4.50 to 1.00 for the period
from the date of the Sixth Amendment to this Agreement through February 28,
2000, 3.00 to 1.00 thereafter through February 28, 2001, or 2.00 to 1.00
thereafter.
Section 2.8 Amendment to Section 8.6 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 8.6 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
8.6 Cash Flow Ratio. To maintain on a consolidated basis a Cash Flow
---------------
Ratio of at least 1.6:1.0. As used herein, the term "Cash Flow Ratio"
---------------
means the ratio of Cash Flow to the current portion of long term debt plus
interest expense. "Cash Flow" is defined as net income from operations
---------
(before extraordinary or nonrecurring gains or losses), minus taxes, plus
depreciation, amortization and other non-cash charges, plus interest
expense, minus dividends. This ratio will be calculated at the end of each
fiscal quarter, using the results of that quarter and each of the 3
immediately preceding quarters. The current portion of long term debt will
be measured as of the last day of the fiscal quarter preceding the date of
calculation.
Section 2.9 Amendment to Section 8.11 of the Loan Agreement. Effective as
-----------------------------------------------
of the date hereof, Section 8.1l of the Loan Agreement is hereby amended and
------------
restated to read in its entirety as follows:
8.11 Treasury Stock. Not to purchase, redeem, or otherwise acquire
--------------
for value any of its shares, or create any sinking fund in relation
thereto.
Section 2.10 Amendment to Section 8.22 of the Loan Agreement. Effective
-----------------------------------------------
as of the date hereof, clause (c) of Section 8.22 of the Loan Agreement is
------------
hereby amended and restated to read in its entirety as follows:
(c) enter into any consolidation, merger, pool, joint
venture, syndicate, or other combination or purchase or
acquire all or substantially all the assets of another
business, except for such transaction if (i) the Borrower or
applicable Guarantor is the surviving entity; (ii) no default
exists hereunder or would result therefrom and before, and
after giving effect to, the proposed acquisition, the
representations and warranties set forth herein shall be true
and correct; and (iii) Borrower delivers to the Bank an
Environmental Questionnaire and Disclosure Statement in form
and disclosing such information as is acceptable to the Bank
relating to the assets or entity to be acquired prior to the
acquisition.
6
<PAGE>
Section 2.11 Amendment to Article 8 of the Loan Agreement. Effective as
--------------------------------------------
of the date hereof, Article 8 of the Loan Agreement is hereby amended by adding
---------
thereto new Sections 8.24 to read in its entirety as follows:
-------------
8.25 Funded Debt to EBITDA. To maintain on a consolidated basis at
---------------------
the end of each of the Borrower's fiscal quarters ending after the date of
the Sixth Amendment to this Agreement a ratio of Funded Debt to EBITDA for
the four consecutive fiscal quarters then ended not exceeding 3.00 to 1.00.
As used herein, the term "Funded Debt" means all debt of the Borrower and
-----------
its Subsidiaries for borrowed money (including capital lease obligations)
and the term "EBITDA" means: (i) net income from operations (before
------
extraordinary or non-recurring gains or losses); plus (ii) any provision
----
for income or franchise taxes deducted in determining net income; plus
----
(iii) interest expense deducted in determining net income; plus (iv)
----
depreciation and amortization expense deducted in determining net income;
plus (v) other non cash charges deducted in determining net income.
----
ARTICLE 3
Conditions Precedent
--------------------
Section 3.1 Items to be Delivered By Borrower. Prior to or simultaneously
---------------------------------
with execution and delivery of this Amendment, the Borrower shall deliver, or
cause to be delivered, to the Bank the following:
1 Officer's Certificates. Due certification by the corporate
----------------------
secretary (or other duly authorized officer acceptable to the Bank) of the
Borrower and each other Pledging Party (or the general partner of any
Pledging Party) (a) attaching a copy of resolutions duly adopted by its
board of directors approving the terms and conditions contained in this
Amendment, (b) certifying that the certificate of incorporation, bylaws,
certificate of limited partnership, and other constituent documents of the
Borrower, such other Pledging Party, or its general partner (as applicable)
as previously certified to the Bank remain in full force and effect without
amendment, and (c) including a certification of incumbency of all officers
who are authorized to act in respect of the corporate resolutions
referenced above, including the name, office, and signature of each such
officer.
2 Amendment Documents. Each agreement, certificate, document, or
-------------------
instrument required by the Bank to be executed or delivered by the Borrower
or any other Pledging Party in connection with this Amendment (the
"Amendment Documents"), duly executed or delivered by the parties thereto.
-------------------
Section 3.2 Other Conditions. The effectiveness of this Amendment is
----------------
subject to the satisfaction of each of the additional following conditions
precedent:
1 Continued Effect of Representations and Warranties. All
--------------------------------------------------
representations and warranties contained in any loan document (including,
without limitation, the Loan Agreement, as amended hereby; all of such loan
documents are referred to collectively herein as the "Loan Documents")
--------------
shall be true, correct, and complete in all material respects (as
7
<PAGE>
determined by the Bank in its sole discretion) except as disclosed
otherwise to the Bank in writing and as acceptable to the Bank or
representations specifically relating to a prior date or no longer relevant
due to the occurrence of an event or circumstances specifically permitted
hereunder or by any other Loan Document;
2 Absence of Default. No default or event of default shall have
------------------
occurred and be continuing (after giving effect to this Amendment);
3 Corporate Proceedings. All corporate proceedings taken in
---------------------
connection with the transactions contemplated by this Amendment and all
other agreements, documents, and instruments executed and/or delivered
pursuant hereto, and all legal matters incident thereto, shall be
satisfactory to the Bank and its legal counsel; and
4 Additional Information. The Bank shall have received such
----------------------
additional agreements, certificates, documents, instruments, and
information as the Bank or its legal counsel, Jenkens & Gilchrist, a
Professional Corporation, may reasonably request to effect the transactions
contemplated hereby.
ARTICLE 4
Representations and Warranties
------------------------------
Section 4.1 Representations and Warranties. The Borrower hereby
------------------------------
represents and warrants to the Bank that, as of the date of and after giving
effect to this Amendment: (a) the execution, delivery, and performance of this
Amendment and any and all other Amendment Documents executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of the Borrower and will not violate the Borrower's certificate of
incorporation or bylaws; (b) all representations and warranties set forth in the
Loan Agreement and in the Loan Documents are true and correct in all material
respects as if made again on and as of such date (except as disclosed otherwise
to the Bank in writing and as acceptable to the Bank or representations
specifically relating to a prior date or no longer relevant due to the
occurrence of an event or circumstances specifically permitted hereunder or by
any other Loan Document); (c) no default or event of default has occurred and is
continuing; and (d) the Loan Agreement and the other Loan Documents (as amended
by this Amendment) are and remain legal, valid, binding, and enforceable
obligations of the Borrower.
ARTICLE 5
Miscellaneous
-------------
8
<PAGE>
Section 5.1 Governing Law. THIS AMENDMENT, AND ALL DOCUMENTS AND
-------------
INSTRUMENTS EXECUTED IN CONNECTION HEREWITH, SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAWS OF THE STATE OF TEXAS, PROVIDED THAT TO THE EXTENT FEDERAL
--------
LAW WOULD ALLOW A HIGHER RATE OF INTEREST THAN WOULD BE ALLOWED BY THE LAWS OF
THE STATE OF TEXAS, THEN WITH RESPECT TO THE PROVISIONS OF ANY LAW WHICH
PURPORTS TO LIMIT THE AMOUNT OF INTEREST THAT MAY BE CONTRACTED FOR, CHARGED OR
RECEIVED IN CONNECTION WITH ANY OF THE OBLIGATIONS, SUCH FEDERAL LAW SHALL
APPLY.
Section 5.2 Agreement Remains in Effect; No Waiver. Except as expressly
--------------------------------------
provided herein, all terms and provisions of the Loan Agreement and the other
Loan Documents shall remain unchanged and in full force and effect and are
hereby ratified and confirmed. No delay or omission by the Bank in exercising
any power, right, or remedy shall impair such power, right, or remedy or be
construed as a waiver thereof or an acquiescence therein, and no single or
partial exercise of any such power, right, or remedy shall preclude other or
further exercise thereof or the exercise of any other power, right, or remedy
under the Loan Agreement, the Loan Documents, or otherwise.
Section 5.3 Survival of Representations and Warranties. All
------------------------------------------
representations and warranties made in this Amendment or any other Loan Document
shall survive the execution and delivery of this Amendment and the other Loan
Documents, and no investigation by the Bank or any closing shall affect the
representations and warranties or the right of the Bank to rely upon them.
Section 5.4 Reference to Loan Agreement and Loan Documents. Each of the
----------------------------------------------
Loan Documents, including the Loan Agreement, the Amendment Documents, and any
and all other agreements, documents, or instruments now or hereafter executed
and/or delivered pursuant to the terms hereof or pursuant to the terms of the
Loan Agreement, as amended hereby, are hereby amended so that any reference in
the Loan Documents to the Loan Agreement shall mean a reference to the Loan
Agreement as amended hereby, and the term "loan documents" as used in the Loan
Agreement and as used in any of the other Loan Documents includes, without
limitation, the Amendment Documents.
Section 5.5 Severability. Any provision of this Amendment held by a court
------------
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 5.6 Successors and Assigns. This Amendment is binding upon and
----------------------
shall inure to the benefit of the Borrower, the Bank, and their respective
successors in interest and assigns. The Borrower may not assign any right,
power, duty, or obligation hereunder without the prior written consent of the
Bank.
Section 5.7 Headings. The headings, captions, and arrangements used in
--------
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
9
<PAGE>
Section 5.8 Expenses of the Bank. As provided in the Loan Agreement, the
--------------------
Borrower agrees to pay on demand all reasonable, third party out-of-pocket costs
and expenses incurred by the Bank in connection with the preparation,
negotiation, and execution of this Amendment, the Amendment Documents, or the
other Loan Documents executed pursuant hereto and any and all amendments,
modifications, and supplements thereto, including, without limitation, the
reasonable fees of the Bank's legal counsel, and all reasonable costs and
expenses incurred by the Bank in connection with the enforcement or preservation
of any rights under the Loan Agreement, as amended hereby, or any other Loan
Document, including, without limitation, the reasonable costs and fees of the
Bank's legal counsel.
Section 5.9 Counterparts. This Amendment may be executed simultaneously
------------
in one or more multiple originals, each of which shall be deemed an original,
but all of which together shall constitute one and the same agreement.
THIS AMENDMENT, TOGETHER WITH THE LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS AS WRITTEN, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this Amendment to
be executed and delivered by their duly authorized officers effective as of the
date first written above.
BORROWER:
--------
AZTEC MANUFACTURING CO.
By: /s/ DANA PERRY
---------------------------------------
Name: DANA PERRY
-------------------------------------
Title: V.P. FINANCE
------------------------------------
BANK:
----
BANK OF AMERICA, N.A. (successor by
merger to Bank of America, Texas, N.A.)
By: /s/ VINCE LIBERIO
---------------------------------------
Name: VINCE LIBERIO
-------------------------------------
Title: SENIOR V.P.
------------------------------------
10
<PAGE>
EXHIBIT 10(21)
Eight Amendment to Business Loan Agreement
between Registrant and Bank of America, Texas, N.A., dated January 31, 2000
<PAGE>
EIGHTH AMENDMENT TO BUSINESS LOAN AGREEMENT
(RECEIVABLES AND INVENTORY)
This EIGHTH AMENDMENT TO BUSINESS LOAN AGREEMENT (RECEIVABLES AND
INVENTORY) (this "Amendment") is executed and entered into on January 31, 2000,
---------
and between Bank of America, N.A. (successor by merger to Bank of America,
Texas, N.A., the "Bank") and Aztec Manufacturing Co. (the "Borrower").
---- --------
RECITALS:
A. The Borrower and the Bank are parties to that certain Business Loan
Agreement (Receivables and Inventory) dated as of June 28, 1996 (as amended and
as the same may be further amended, renewed, extended, restated, or otherwise
modified from time to time, the "Loan Agreement") pursuant to which the Bank
--------------
agreed to provide to the Borrower a secured revolving credit facility and a
secured term loan facility.
B. The indebtedness of the Borrower to the Bank pursuant to the Loan
Agreement is secured by liens on the Borrower's property as described in that
certain Security Agreement: Receivables, Inventory and Equipment (Borrower);
C. Each subsidiary of the Borrower is a Pledging Party and a Guarantor
under the terms of the Loan Agreement.
D. The Borrower has requested that the Bank provide additional loans to
the Borrower as set forth herein and amend certain provisions of the Loan
Agreement, and, subject to satisfaction of the conditions set forth herein, the
Bank is willing to make such additional loans available to the Borrower and
amend the Loan Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1
Definitions
-----------
Section 1.1 Definitions. Unless otherwise defined in this Amendment, each
-----------
capitalized term used in this Amendment has the meaning given to such term in
the Loan Agreement (as amended by this Amendment).
<PAGE>
ARTICLE 2
Amendments
----------
Section 2.1 Amendment to subsection 1.1(a) of the Loan Agreement.
----------------------------------------------------
Effective as of the date hereof, subsection 1.1(a) of the Loan Agreement is
-----------------
hereby amended and restated to read in its entirety as follows:
(a) Twenty Million Dollars ($20,000,000.00), or
Section 2.2 Amendment to subsection 1.1(b) of the Loan Agreement.
----------------------------------------------------
Effective as of the date hereof, clause (iii) of subsection 1.1(b) of the Loan
-----------------
Agreement is hereby amended and restated to read in its entirety as follows:
(iii) Sixty percent (60%) of the value of Acceptable Inventory
consisting of raw zinc provided that the amount of the Borrowing Base available
under clause (ii) above and this clause (iii) shall never exceed the amount
available under clause (i) above.
Section 2.3 Amendment to Definition of Acceptable Receivable. Effective
------------------------------------------------
as of the date hereof, clause (g)(iv) of the definition of "Acceptable
Receivable" in Section 1.2 of the Loan Agreement is hereby amended and restated
-----------
to read in its entirety as follows:
(iv) any person or entity located in a foreign country unless the
account is supported by a letter of credit issued by a bank
acceptable to the Bank or an insurance policy issued by an
insurance company acceptable to the Bank provided that the
amount of accounts receivable supported by insurance policies
may not exceed One Million Dollars ($1,000,000) in the
aggregate at any one time.
Section 2.4 Further Amendment to Definition of Acceptable Receivable.
--------------------------------------------------------
Effective as of the date hereof, the definition of "Acceptable Receivable" in
Section 1.2 of the Loan Agreement is hereby amended by adding thereto a new
- -----------
clause (n) to read in its entirety as follows:
(n) The account is otherwise acceptable to the Bank.
Section 2.5 Amendment to Section 1.4 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 1.4 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
1.4 "Pledging Party" means the Borrower and each subsidiary of the
--------------
Borrower organized in the United States of America or any State or other
subdivision thereof that is party to a security agreement in favor of the
Bank pledging to the Bank such subsidiary's accounts receivable, inventory,
equipment, and other related assets.
2
<PAGE>
Section 2.6 Amendments to Section 2 of the Loan Agreement. Effective as of
---------------------------------------------
the date hereof, each of the following sections in Section 2 ("LOAN AMOUNTS
---------
AND TERMS") of the Loan Agreement is hereby amended and restated to read in its
entirety as follows:
2.2 Availability Period. The line of credit is available between the
-------------------
date of this Agreement and July 1, 2002 (the "Expiration Date") unless the
---------------
Borrower is in default.
***
2.6 Term Loans. The Bank agrees to provide term loans to the Borrower
(the "Term Commitment") in the amounts of (a) Seventeen Million Five
---------------
Hundred Thousand Dollars ($17,500,000.00) (the "Term Loan A") and (b) Eight
-----------
Million Six Hundred Ninety Thousand Four Hundred Seventy-Six Dollars and
Eighteen Cents ($8,690,476.18) (the "Term Loan B"; the Term Loan A and the
Term Loan B are referred to collectively herein as the "Term Loans").
----------- ----------
2.7 Availability Period. The Term Commitment is available in two
-------------------
disbursements as follows:
(a) the Term Loan A shall be made in one disbursement from the
Bank on the date of the Eighth Amendment to this Agreement,
and
(b) the Term Loan B shall be made in one disbursement from the
Bank on the date of the Eighth Amendment to this Agreement.
2.8 Purpose. The line of credit provided pursuant to Section 2.1
-------
shall be used for working capital purposes. The Term Loan A shall be used to
refinance the Term Loan A existing under this Agreement prior to the execution
of the Eighth Amendment to this Agreement and outstanding on the effective date
of such Eighth Amendment, and to fund the acquisition of Westside Coating
Services, Inc. The Term Loan B shall be used to refinance the Term Loan B
existing under this Agreement prior to the execution of the Eighth Amendment to
this Agreement and outstanding on the effective date of such Eighth Amendment.
2.9 Term Loan Repayment Terms; Prepayment.
-------------------------------------
(a) (i) The Borrower will repay the principal amount of the Term
Loan A in seventy-three (73) successive monthly installments of
Two Hundred Thirty-Nine Thousand, Seven Hundred Twenty-Six
Dollars and Three Cents ($239,726.03) each, on the first business
day of each calendar month, starting February 1, 2000. On March
1, 2006, the Borrower will repay the remaining principal balance
of the Term Loan A.
(ii) The Borrower will repay the principal amount of the Term
Loan B in seventy-three (73) successive monthly installments of
One Hundred Nineteen Thousand Forty-Seven Dollars and Sixty-Two
Cents ($119,047.62) each, on the first business day of each
calendar month, starting February 1, 2000. On March 1, 2006, the
Borrower will repay the remaining principal balance of the Term
Loan B.
3
<PAGE>
(b) The Borrower may prepay either of the Term Loans in full or in
part at any time in an amount not less than One Hundred Thousand
Dollars ($100,000.00) or an integral multiple thereof. Any such
prepayment will be applied to the Term Loan A or the Term Loan B, as
designated by the Borrower, to the most remote installment of
principal due under this Agreement.
***
2.13 [Reserved]
2.14 Libor Rate. The Borrower may elect to have all or portions of the
----------
principal balance of the loans bear interest at a rate equal to the lesser of
(i) the Maximum Rate or (ii) the Libor Rate plus (i) the Applicable Libor Margin
----
(as determined as provided in clause (j) below) with respect to the Line of
Credit and Term Loan A or (ii) one and one-quarter percent (1.25%) with respect
to the Term Loan B (the "Eurodollar Rate"), subject to the following
---------------
requirements:
(a) The interest period during which the Eurodollar Rate will be in
effect will be (i) 1, 2, 3, or 6 months with respect to the Line of Credit
or (ii) 1, 2, 3, 6, or 12 months with respect to the Term Loans. The last
day of the interest period will be determined by the Bank using the
practices of the London interbank market.
(b) Each Eurodollar Rate portion under a loan will be for an amount
not less than Five Hundred Thousand Dollars ($500,000.00) or an integral
multiple thereof.
(c) The Borrower shall irrevocably request a Eurodollar Rate portion
no later than 11:00 a.m. Dallas, Texas time two (2) banking days before the
commencement of the interest period.
(d) The "LIBOR Rate" means the interest rate determined by the
----------
following formula, rounded upward to the nearest 1/100 of one percent.
(All amounts in the calculation will be determined by the Bank as of the
first day of the interest period.)
LIBOR Rate = London Rate
-----------------------------
(1.00 - Reserve Percentage)
Where,
(i) "London Rate" means the interest rate (rounded upward
-----------
to the nearest 1/16th of one percent) at which the Bank's London
Branch, London, Great Britain, would offer U.S. dollar deposits for
the applicable interest period to other major banks in the London
interbank market at approximately 11:00 a.m. London time two (2)
banking days prior to the commencement of the interest period.
(ii) "Reserve Percentage" means the total of the maximum
------------------
reserve percentages for determining the reserves to be maintained by
4
<PAGE>
member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in Federal Reserve Board Regulation D, rounded
upward to the nearest 1/100 of one percent. The percentage will be
expressed as a decimal, and will include, but not be limited to,
marginal, emergency, supplemental, special, and other reserve
percentages.
(e) The Borrower may not elect an Eurodollar Rate with respect to any
portion of the principal balance of any loan which is scheduled to be
repaid before the last day of the applicable interest period.
(f) Any portion of the principal balance of a loan already bearing
interest at the Eurodollar Rate will not be converted to a different rate
during its interest period.
(g) Each prepayment of an Eurodollar Rate portion will be accompanied
by the amount of accrued interest on the amount prepaid, and a prepayment
fee equal to the amount (if any) by which
(i) the additional interest which would have been payable on the
amount prepaid had it not been paid until the last day of the interest
period, exceeds
(ii) the interest which would have been recoverable by the Bank
by placing the amount prepaid on deposit in the London interbank
market for a period starting on the date on which it was prepaid and
ending on the last day of the interest period for such portion.
(h) The Bank will have no obligation to accept an election for an
Eurodollar Rate portion if any of the following described events has
occurred and is continuing:
(i) Dollar deposits in the principal amount, and for periods
equal to the interest period, of an Eurodollar Rate portion are not
available in the London interbank market; or
(ii) The Eurodollar Rate does not accurately reflect the cost of
an Eurodollar Rate portion.
(i) If at any time during any applicable interest period the
Eurodollar Rate shall exceed the Maximum Rate and thereafter the Eurodollar
Rate shall become less than the Maximum Rate, the rate of interest payable
shall be the Maximum Rate until the Bank shall have received the amount of
interest it otherwise would have received if the interest payable had not
been limited by the Maximum Rate during the period of time the Eurodollar
Rate exceeded the Maximum Rate.
(j) Prior to receipt of the Compliance Certificate to be delivered
with the Borrower's financial statements for the fiscal quarter ending
February 28, 2000, the margin over the Libor Rate for the Line of Credit
and Term Loan A shall be one and one-quarter
5
<PAGE>
percent (1.25%); thereafter, the "Applicable Libor Margin" shall be
determined quarterly in accordance with the following table:
================================================
RATIO OF FUNDED DEBT TO
EBITDA LIBOR RATE
MARGIN
------------------------------------------------
Less than or equal to 1.25 1.00%
to 1.00
------------------------------------------------
Greater than 1.25 to 1.00 1.125%
but less than or equal to
2.00 to 1.00
------------------------------------------------
Greater than 2.00 to 1.00 1.250%
but less than or equal to
2.75 to 1.00
------------------------------------------------
Greater than 2.75 to 1.00 1.500%
================================================
Upon delivery of the Compliance Certificate pursuant to
subsection 8.2(g) after the end of each fiscal quarter commencing with
-----------------
such Compliance Certificate delivered for the fiscal quarter ending
February 28, 2000, the Applicable Libor Margin shall automatically be
adjusted to the rate corresponding to the Ratio of Funded Debt to EBITDA
of Borrower set forth in the table above, such automatic adjustment to
take effect prospectively the third Business Day after receipt by the
Bank of the Compliance Certificate (the "Adjustment Date"). If Borrower
---------------
fails to deliver such Compliance Certificate with respect to any fiscal
quarter which sets forth such ratio within the period of time required
by subsection 8.2(g), the Applicable Libor Margin shall automatically be
-----------------
adjusted to one and one half percent (1.50%) per annum. The automatic
adjustments provided for in the preceding sentence shall take effect on
the last day that the Compliance Certificate was required to be
delivered and shall remain in effect until subsequently adjusted in
accordance herewith upon the delivery of such Compliance Certificate.
Section 2.7 Amendment to Section 3.1 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 3.1 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
3.1 Unused commitment fee. Subject to the provisions of Section
---------------------
11.12 hereof, the Borrower agrees to pay a fee on any difference between
Twenty Million Dollars ($20,000,000) and the amount of the Line of Credit
it actually uses, determined by the average loan balance maintained during
the specified period. The fee will be calculated at one-quarter of one
percent (0.25%) per year so long as the ratio of the Borrower's Funded Debt
to EBITDA (determined as provided in Section 8.24) is less than or equal to
2.75 to 1.00 and three-eighths of one percent (0.375%) per year for any
period that such ratio exceeds 2.75 to 1.00. This fee is due on April 1,
2000 and on the first day of each following January, April, July and
October until the Expiration Date.
6
<PAGE>
Section 2.8 Amendment to Section 3.2 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, clause (c) of Section 3.2 of the Loan Agreement is hereby
-----------
amended to read in its entirety as follows:
(c) The Borrower agrees to reimburse the Bank for the cost of
periodic audits of the collateral securing this Agreement; provided that, prior
to the occurrence of a default, such audits are not conducted at the expense of
the Borrower more than twice a year and the costs of each such audits do not
exceed $2,500 plus all out-of-pocket expenses of the Bank. The audits may be
performed by employees of the Bank or by independent auditors and may be made
more often than twice a year at the discretion of the Bank as provided in
Section 8.15 of this Agreement.
Section 2.9 Amendment to Borrowing Base Certificate. Effective as of the
---------------------------------------
date hereof, all references in the Borrowing Base Certificate (Exhibit B to the
---------
Loan Agreement) to the maximum amount of the Line of Credit shall be changed to
Twenty Million Dollars ($20,000,000.00) and the amount of the Borrowing Base
attributable to Acceptable Inventory shall never exceed the amount thereof
attributable to Acceptable Receivables.
Section 2.10 Amendment to Section 8.2 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, clause (b) of Section 8.2 of the Loan Agreement is hereby
amended to read in its entirety as follows:
(b) Within thirty days of the period's end, the Borrower's and
its subsidiaries' monthly financial statements. These financial statements may
be prepared by the Borrower. The statements shall be prepared on a consolidated
basis.
Section 2.11 Amendment to Section 8.3 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 8.3 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
8.3 Hedging Term Loan A. The Borrower will, not later than July
-------------------
31, 2000, enter into a swap contract with (a) the Bank or an
affiliate thereof or (b) one or more other counterparties
rated in one of the two highest rating categories of Standard
& Poors Corporation or Moody's Investors Service, Inc., in
each case on market terms, to fix the interest rates with
respect to one hundred percent (100%) of the Term Loan A
outstanding under this Agreement as of such date. Such swap
contract shall be on terms acceptable to the Bank.
Section 2.12 Amendment to Section 8.4 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 8.4 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
8.4 Tangible Net Worth. To maintain on a consolidated basis
------------------
Tangible Net Worth equal to at least Ten Million Dollars ($10,000,000.00),
plus fifty percent (50%) of the Borrower's positive net income for each
fiscal quarter of the Borrower ending after January 31, 2000 (no reductions
to be made for any losses). As used herein, the term "Tangible Net Worth"
------------------
means the gross book value of the Borrower's assets (excluding
7
<PAGE>
goodwill, patents, trademarks, trade names, organization expense, treasury
stock, unamortized debt discount and expense, deferred research and
development costs, deferred marketing expenses, and other like intangibles,
and monies due from affiliates, officers, directors or shareholders of the
Borrower) less total liabilities, including but not limited to accrued and
deferred income taxes, and any reserves against assets.
Section 2.13 Amendment to Section 8.5 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 8.5 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
8.5 Payment of Taxes and Claims. The Borrower will, and will cause
---------------------------
each of its subsidiaries to, pay or discharge when due
(a) all taxes, assessments, and governmental charges or
levies imposed upon it or upon its income or profits or
upon any properties belonging to it, except that real
property ad valorem taxes shall be deemed to have been
so paid or discharged if the same are paid before they
become delinquent, and
(b) all lawful claims of materialmen, mechanics, carriers,
warehousemen, and landlords for labor, materials,
supplies, and rentals which, if unpaid, might become a
lien on any properties of the Borrower or any of its
subsidiaries;
except that this Section 8.5 shall not require the payment or
------
discharge of any such tax, assessment, charge, levy, or claim
which is being contested in good faith by appropriate
proceedings and for which reserves in respect of the
reasonably anticipated liability therefor have been
appropriately established.
Section 2.14 Amendment to Section 8.6 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, the first sentence of Section 8.6 of the Loan Agreement is
-----------
hereby amended and restated to read in its entirety as follows:
To maintain on a consolidated basis a Cash Flow Ratio of at least 1.30
to 1.0 through the period ending February 28, 2000, or 1.25 to 1.00
thereafter.
Section 2.15 Amendment to Section 8.9 of the Loan Agreement. Effective as
----------------------------------------------
of the date hereof, Section 8.9 of the Loan Agreement is hereby amended and
-----------
restated to read in its entirety as follows:
8.9 Capital Expenditures. Not, and not permit any Guarantor,
--------------------
without the Bank's prior written consent, to spend or incur obligations
(including the total amount of any capital leases) of more than Six Million
Five Hundred Thousand Dollars ($6,500,000.00) for the fiscal year ending
February 28, 2000, Ten Million Dollars ($10,000,000.00) for the fiscal year
ending February 28, 2001, and Four Million Five Hundred Thousand Dollars
($4,500,000.00) for each fiscal year ending February 28 thereafter in the
aggregate for Borrower and all Guarantors in any single fiscal year to
8
<PAGE>
acquire fixed or capital assets, excluding from such aggregate amount any
such expenditures financed pursuant to Section 8.7(d).
Section 2.16 Amendment to Sections 8.24 and 8.25 of the Loan Agreement.
---------------------------------------------------------
Effective as of the date hereof, Section 8.24 of the Loan Agreement is hereby
------------
deleted and Section 8.25 is redesignated as new Section 8.24 and is hereby
------------ ------------
amended and restated to read in its entirety as follows:
8.24 Funded Debt to EBITDA. To maintain on a consolidated basis at
---------------------
the end of each of the Borrower's fiscal quarters ending after the date of
the Eighth Amendment to this Agreement a ratio of Funded Debt to EBITDA for
the four consecutive fiscal quarters then ended not exceeding 3.00 to 1.00
through the period ending November 30, 2000 or 2.75 to 1.00 thereafter. As
used herein, the term "Funded Debt" means all debt of the Borrower and its
-----------
Subsidiaries for borrowed money (including capital lease obligations) and
the term "EBITDA" means: (i) net income from operations (before
------
extraordinary or non-recurring gains or losses); plus (ii) any provision
----
for income or franchise taxes deducted in determining net income; plus
----
(iii) interest expense deducted in determining net income; plus (iv)
----
depreciation and amortization expense deducted in determining net income;
plus (v) other non cash charges deducted in determining net income.
----
Section 2.17 Amendment to Exhibit C to the Loan Agreement. Effective as of
--------------------------------------------
the date hereof, Exhibit C to the Loan Agreement is hereby amended and restated
---------
to read in its entirety as set forth in Exhibit 1 to this Amendment.
ARTICLE 3
Conditions Precedent
--------------------
Section 3.1 Items to be Delivered By Borrower. Prior to or simultaneously
---------------------------------
with execution and delivery of this Amendment, the Borrower shall deliver, or
cause to be delivered, to the Bank the following:
1. Officer's Certificates. Due certification by the corporate
----------------------
secretary (or other duly authorized officer acceptable to the Bank) of the
Borrower and each other Pledging Party (or the general partner of any
Pledging Party) (a) attaching a copy of resolutions duly adopted by its
board of directors approving the terms and conditions contained in this
Amendment, (b) certifying that the certificate of incorporation, bylaws,
certificate of limited partnership, and other constituent documents of the
Borrower, such other Pledging Party, or its general partner (as applicable)
as previously certified to the Bank remain in full force and effect without
amendment, and (c) including a certification of incumbency of all officers
who are authorized to act in respect of the corporate resolutions
referenced above, including the name, office, and signature of each such
officer.
2. Amendment Documents. Each agreement, certificate, document, or
-------------------
instrument required by the Bank to be executed or delivered by the Borrower
or any other Pledging Party in connection with this Amendment (the
"Amendment Documents"), duly executed or delivered by the parties thereto.
-------------------
9
<PAGE>
3. Reaffirmation. A Reaffirmation of Agreements executed by the
-------------
Guarantors in the form attached hereto.
4. Payment of Fees and Expenses. Payment of all fees and expenses
----------------------------
of or incurred by the Bank and its counsel to the extent billed on or
before the date hereof and payable pursuant to this Amendment including,
without limitation, an amendment fee payable to the Bank in the amount of
Twenty-Five Thousand Dollars ($25,000.00)
Section 3.2 Other Conditions. The effectiveness of this Amendment is
----------------
subject to the satisfaction of each of the additional following conditions
precedent:
1. Continued Effect of Representations and Warranties. All
--------------------------------------------------
representations and warranties contained in any loan document (including,
without limitation, the Loan Agreement, as amended hereby; all of such loan
documents are referred to collectively herein as the "Loan Documents")
--------------
shall be true, correct, and complete in all material respects (as
determined by the Bank in its sole discretion) except as disclosed
otherwise to the Bank in writing and as acceptable to the Bank or
representations specifically relating to a prior date or no longer relevant
due to the occurrence of an event or circumstances specifically permitted
hereunder or by any other Loan Document;
2. Absence of Default. No default or event of default shall have
------------------
occurred and be continuing (after giving effect to this Amendment);
3. Year 2000 Compliance. The Bank shall be satisfied that (a) the
--------------------
Borrower and its subsidiaries have taken all necessary and appropriate
steps to ascertain the extent of, and to quantify and successfully address,
business and financial risks facing the Borrower and its subsidiaries as a
result of failure to become Year 2000 compliant (that is, that computer
applications, imbedded microchips and other systems will be able to perform
date-sensitive functions prior to and after December 31, 1999) including
risks resulting from the failure of key vendors and suppliers of the
Borrower and its subsidiaries to become Year 2000 compliant, and (b) the
Borrower's and its subsidiaries' material computer applications and those
of its key vendors and suppliers have, on a timely basis, adequately
addressed the Year 2000 problem in all material respects.
4. Corporate Proceedings. All corporate proceedings taken in
---------------------
connection with the transactions contemplated by this Amendment and all
other agreements, documents, and instruments executed and/or delivered
pursuant hereto, and all legal matters incident thereto, shall be
satisfactory to the Bank and its legal counsel; and
5. Additional Information. The Bank shall have received such
----------------------
additional agreements, certificates, documents, instruments, and
information as the Bank or its legal counsel, may reasonably request to
effect the transactions contemplated hereby.
10
<PAGE>
ARTICLE 4
Representations and Warranties
------------------------------
Section 4.1 Representations and Warranties. The Borrower hereby represents
------------------------------
and warrants to the Bank that, as of the date of and after giving effect to this
Amendment: (a) the execution, delivery, and performance of this Amendment and
any and all other Amendment Documents executed and/or delivered in connection
herewith have been authorized by all requisite corporate action on the part of
the Borrower and will not violate the Borrower's certificate of incorporation or
bylaws; (b) all representations and warranties set forth in the Loan Agreement
and in the Loan Documents are true and correct in all material respects as if
made again on and as of such date (except as disclosed otherwise to the Bank in
writing and as acceptable to the Bank or representations specifically relating
to a prior date or no longer relevant due to the occurrence of an event or
circumstances specifically permitted hereunder or by any other Loan Document);
(c) no default or event of default has occurred and is continuing; and (d) the
Loan Agreement and the other Loan Documents (as amended by this Amendment) are
and remain legal, valid, binding, and enforceable obligations of the Borrower.
ARTICLE 5
Miscellaneous
-------------
Section 5.1 Governing Law. THIS AMENDMENT, AND ALL DOCUMENTS AND
-------------
INSTRUMENTS EXECUTED IN CONNECTION HEREWITH, SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAWS OF THE STATE OF TEXAS, PROVIDED THAT TO THE EXTENT FEDERAL
--------
LAW WOULD ALLOW A HIGHER RATE OF INTEREST THAN WOULD BE ALLOWED BY THE LAWS OF
THE STATE OF TEXAS, THEN WITH RESPECT TO THE PROVISIONS OF ANY LAW WHICH
PURPORTS TO LIMIT THE AMOUNT OF INTEREST THAT MAY BE CONTRACTED FOR, CHARGED OR
RECEIVED IN CONNECTION WITH ANY OF THE OBLIGATIONS, SUCH FEDERAL LAW SHALL
APPLY.
Section 5.2 Agreement Remains in Effect; No Waiver. Except as expressly
--------------------------------------
provided herein, all terms and provisions of the Loan Agreement and the other
Loan Documents shall remain unchanged and in full force and effect and are
hereby ratified and confirmed. No delay or omission by the Bank in exercising
any power, right, or remedy shall impair such power, right, or remedy or be
construed as a waiver thereof or an acquiescence therein, and no single or
partial exercise of any such power, right, or remedy shall preclude other or
further exercise thereof or the exercise of any other power, right, or remedy
under the Loan Agreement, the Loan Documents, or otherwise.
Section 5.3 Survival of Representations and Warranties. All
------------------------------------------
representations and warranties made in this Amendment or any other Loan Document
shall survive the execution and delivery of this Amendment and the other Loan
Documents, and no investigation by the Bank or any closing shall affect the
representations and warranties or the right of the Bank to rely upon them.
11
<PAGE>
Section 5.4 Reference to Loan Agreement and Loan Documents. Each of the
----------------------------------------------
Loan Documents, including the Loan Agreement, the Amendment Documents, and any
and all other agreements, documents, or instruments now or hereafter executed
and/or delivered pursuant to the terms hereof or pursuant to the terms of the
Loan Agreement, as amended hereby, are hereby amended so that any reference in
the Loan Documents to the Loan Agreement shall mean a reference to the Loan
Agreement as amended hereby, and the term "loan documents" as used in the Loan
Agreement and as used in any of the other Loan Documents includes, without
limitation, the Amendment Documents.
Section 5.5 Severability. Any provision of this Amendment held by a court
------------
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 5.6 Successors and Assigns. This Amendment is binding upon and
----------------------
shall inure to the benefit of the Borrower, the Bank, and their respective
successors in interest and assigns. The Borrower may not assign any right,
power, duty, or obligation hereunder without the prior written consent of the
Bank.
Section 5.7 Headings. The headings, captions, and arrangements used in
--------
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 5.8 Expenses of the Bank. As provided in the Loan Agreement, the
--------------------
Borrower agrees to pay on demand all reasonable, third party out-of-pocket costs
and expenses incurred by the Bank in connection with the preparation,
negotiation, and execution of this Amendment, the Amendment Documents, or the
other Loan Documents executed pursuant hereto and any and all amendments,
modifications, and supplements thereto, and all reasonable costs and expenses
incurred by the Bank in connection with the enforcement or preservation of any
rights under the Loan Agreement, as amended hereby, or any other Loan Document,
including, without limitation, the reasonable costs and fees of the Bank's legal
counsel (whether inside or outside counsel), the cost of any environmental
investigation and audit, appraisal, title insurance premiums and survey and
inspection fees.
Section 5.9 Arbitration. Any controversy or claim between or among the
-----------
parties hereto including but not limited to those arising out of or relating to
this Amendment, the Loan Agreement, any of the Loan Documents or any related
instruments, agreements or documents including any claim based on or arising
from an alleged tort, shall be determined by binding arbitration in accordance
with the Federal Arbitration Act (or if not applicable, the applicable state
law), and the rules of practice and procedure for the arbitration of commercial
disputes of JAMS/Endispute, or any successor thereto, as supplemented by any
special rules set forth in any of the Loan Documents. Judgment upon any
arbitration award may be entered in any court having jurisdiction. Any party to
the Loan Agreement may bring an action, including a summary or expedited
proceeding, to compel arbitration of any controversy or claim to which the Loan
Agreement applies in any court having jurisdiction over such action.
12
<PAGE>
Section 5.10 Counterparts. This Amendment may be executed simultaneously in
------------
one or more multiple originals, each of which shall be deemed an original, but
all of which together shall constitute one and the same agreement.
THIS AMENDMENT, TOGETHER WITH THE LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS AS WRITTEN, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this Amendment to
be executed and delivered by their duly authorized officers effective as of the
date first written above.
BORROWER:
--------
AZTEC MANUFACTURING CO.
By: /s/ DANA PERRY
--------------------------------------
Name: DANA PERRY
------------------------------------
Title: V.P. FINANCE
-----------------------------------
BANK:
----
BANK OF AMERICA, N.A. (successor by
merger to Bank of America, Texas, N.A.)
By: /s/ DANIEL BROWN
--------------------------------------
Name: DANIEL BROWN
------------------------------------
Title: VICE PRESIDENT
-----------------------------------
13
<PAGE>
EXHIBIT 21
Subsidiaries of Registrant
EXHIBIT 21
Page 1of 2
<PAGE>
----------------------------------------
AZTEC MANUFACTURING CO.
----------------------------------------
- ----------------------- -------------------- --------------------------
Aztec Industries, Inc. Arbor-Crowley, Inc. Atkinson Industries, Inc.
- ----------------------- -------------------- --------------------------
- -----------------------
Aztec Industries
Moss Point, Inc. ---------------------
- ----------------------- Arizona
Galvanizing, Inc.
---------------------
- ----------------------- -------------- ----------------
Automatic Aztec Group Aztec Holdings,
Processing, Inc. Company Inc.
- ----------------------- -------------- ----------------
--------------------------
- ----------------------- Hobson Galvanizing, Inc.
--------------------------
The Calvert Co., Inc. 1% 99%
- ----------------------- --------------------------
CGIT Westboro, Inc.
--------------------------
---------------------------
- ----------------------- Aztec Manufacturing --------------------------
Gulf Coast Partnership, Ltd. Westside Galvanizing, Inc.
Galvanizing, Inc. ---------------------------
- ----------------------- --------------------------
---------------------------
- ----------------------- Aztec Manufacturing
Arkansas Waskom Partnership, Ltd.
Galvanizing, Inc. ---------------------------
- -----------------------
---------------------------
Rig-A-Lite Partnership,
Ltd.
---------------------------
---------------------------
International Galvanizers
Partnership, Ltd.
---------------------------
---------------------------
Drilling Rig Electrical
Systems Partnership, Ltd.
---------------------------
EXHIBIT 21
Page 2 of 2
<PAGE>
EXHIBIT 23
Consent of Ernst & Young
EXHIBIT 23
Page 1of 2
<PAGE>
EXHIBIT 23
----------
CONSENT OF ERNST & YOUNG LLP
We consent to the incorporation by reference in the Registration Statements on
(Form S-8 No. 33-15481) pertaining to the 1986 Incentive Stock Plan of Aztec
Manufacturing Co., (Form S-8 No. 33-30993) pertaining to the 1998 Nonstatutory
Stock Option Plan of Aztec Manufacturing Co., (Form S-8 No. 33-49164) pertaining
to the 1991 Nonstatutory Stock Option Plan of Aztec Manufacturing Co., (Form S-8
No. 33-49158) pertaining to the 1991 Incentive Stock Option Plan of Aztec
Manufacturing Co., (Form S-8 No. 333-92377) pertaining to the Employee Benefit
Plan and Trust of Aztec Manufacturing Co., and (Form S-8 No. 333-31716)
pertaining to the Independent Director Share Ownership Plan of Aztec
Manufacturing Co. of our report dated March 31, 2000, with respect to the
consolidated financial statements and schedule of Aztec Manufacturing Co.,
included in the Annual Report (Form 10-K) for the year ended February 29, 2000.
Fort Worth, Texas
May 24, 2000
EXHIBIT 23
Page 2 of 2
<PAGE>
EXHIBIT 24
Special Power of Attorney
EXHIBIT 24
Page 1 of 2
<PAGE>
SPECIAL POWER OF ATTORNEY
THE STATE OF TEXAS (S)
(S) KNOW ALL MEN BY THESE PRESENTS
COUNTY OF TARRANT (S)
THAT WE, the undersigned, of Tarrant County, Texas, have made, constituted,
and appointed, and by these presents do make, constitute, and appoint L. C.
MARTIN, DANA L. PERRY and SAM ROSEN, and each of them severally, our true and
lawful attorneys and agents to execute in our name, place and stead (in such
capacity) the Annual Report on Form 10-K of AZTEC MANUFACTURING CO. ("Form 10-
K") for the fiscal year ended February 29, 2000, each of said attorneys and
agents to have power to act with or without the other and to have full power and
authority to do and perform in the name of and on behalf of each of the
undersigned, as the case may be, every act whatsoever necessary or advisable to
be done in the premises as fully and to all intents and purposes as any of the
undersigned might or could do in person, such power to extend to the execution
of any amendment to the Form 10-K.
WITNESS OUR HANDS this 18th day of April, 2000.
----
/s/ L.C. Martin
----------------------------
L. C. MARTIN
/s/ David H. Dingus
----------------------------
DAVID H. DINGUS
/s/ Robert H. Johnson
----------------------------
ROBERT H. JOHNSON
/s/ Martin C. Bowen
----------------------------
MARTIN C. BOWEN
/s/ Dr. H. Kirk Downey
----------------------------
DR. H. KIRK DOWNEY
/s/ Sam Rosen
----------------------------
SAM ROSEN
/s/ Kevern R. Joyce
----------------------------
KEVERN R. JOYCE
/s/ Dana L. Perry
----------------------------
DANA L. PERRY
/s/ R.J. Schumacher
----------------------------
R. J. SCHUMACHER
/s/ W.C. Walker
----------------------------
W. C. WALKER
EXHIBIT 24
Page 2 of 2
<TABLE> <S> <C>
<PAGE>
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> FEB-29-2000
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<SECURITIES> 0
<RECEIVABLES> 20,158,011
<ALLOWANCES> 586,900
<INVENTORY> 12,553,318
<CURRENT-ASSETS> 34,957,523
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0
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<COMMON> 6,304,580
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<TOTAL-LIABILITY-AND-EQUITY> 84,803,741
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