SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended
September 30, 1998
Commission file number 0-22924
HILITE INDUSTRIES, INC.
(Exact name of registrant specified in its charter)
Delaware 75-2147742
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
1671 S. Broadway
Carrollton, Texas 75006
(Address of principal (Zip code)
executive offices)
(972) 466-0475
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
As of November 11, 1998, the Company had 4,900,000 shares of Common
Stock outstanding.
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HILITE INDUSTRIES, INC.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1998
INDEX
Page
Part I FINANCIAL STATEMENTS
Item 1. Consolidated Financial
Statements
Consolidated Balance Sheets as
of September 30, 1998 and
June 30, 1997 3
Consolidated Statements of
Operations for the Three
Months Ended September 30, 1998
and 1997 4
Consolidated Statements of Cash
Flows for the Three Months Ended
September 30, 1998 and 1997 5
Notes to Interim Consolidated
Financial Statements 6
Item 2. Management's Discussion and
Analysis of Financial
Condition and Results of
Operations 9
Part II.
OTHER INFORMATION 14
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HILITE INDUSTRIES, INC.
Consolidated Balance Sheets
September June 30,
30,
1998 1998
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............. $ - -
Accounts receivable, less allowance for
doubtful accounts of $190,000 and
$193,015 at Sept. 30 and June 30,
respectively........................... 14,371,601 11,289,779
Tooling receivables.................... 171,596 716,700
Inventories............................ 11,031,883 9,927,849
Income tax receivable.................. - 542,188
Deferred income taxes.................. 1,817,012 1,817,012
Assets held for resale................. 148,251 532,533
Prepaid expenses and other............. 962,542 1,015,764
Total current assets................... 28,502,885 25,841,825
Property, plant and equipment, at cost. 44,726,950 43,538,367
Less: accumulated depreciation and
amortization........................... (17,015,786)(15,921,909)
Property, plant and equipment, net..... 27,711,164 27,616,458
Goodwill, net of amortization.......... 3,841,162 3,898,209
TOTAL ASSETS........................... $ 60,055,211 57,356,492
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.. $ 10,010,626 12,849,981
Long-term debt - current portion....... 2,422,945 2,422,945
Income taxes payable................... 5,994 -
Total current liabilities.............. 12,439,565 15,272,926
Long-term debt......................... 17,416,245 12,956,896
Deferred income taxes.................. 2,978,761 2,978,761
Total non-current liabilities.......... 20,395,006 15,935,657
Shareholders' equity:
Preferred Stock, $.01 par value;
5,000,000 shares authorized, none
issued and outstanding............... - -
Common stock, $.01 par value; 15,000,000
shares authorized,4,900,000 issued
and outstanding...................... 49,000 49,000
Additional paid-in capital............. 9,105,674 9,105,674
Retained earnings...................... 18,065,966 16,993,235
Total shareholders' equity............. 27,220,640 26,147,909
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 60,055,211 57,356,492
The accompanying notes are an integral part of these interim
consolidated financial statements.
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HILITE INDUSTRIES, INC.
Consolidated Statements of Income
Three Months Ended
September 30,
1998 1997
(Unaudited)
<S> <C> <C>
Net sales....................... $21,315,997 $ 21,030,298
Cost of sales................... 16,771,418 16,965,895
Gross profit.................... 4,544,579 4,064,403
Selling, general and administrative
expenses........................ 2,296,621 2,403,496
Operating income................ 2,247,958 1,660,907
Interest expense, net........... 347,995 390,476
Income before income taxes...... 1,899,963 1,270,431
Income tax provision............ 704,732 478,305
Net income...................... $ 1,195,231 $ 792,126
Per share data:
Basic and diluted earnings per
share........................... $ .24 $ .16
Shares used in computing earnings
per share:
Basic........................... 4,900,000 4,900,000
Diluted......................... 4,919,361 4,900,000
The accompanying notes are an integral part of these interim
consolidated financial statements.
</TABLE>
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<TABLE>
HILITE INDUSTRIES, INC.
Consolidated Statements of Cash Flows
Three Months Ended
September 30
1998 1997
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operations:
Net income............................ $ 1,195,231 $ 792,126
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation.......................... 798,035 853,538
Amortization.......................... 57,047 81,403
Cash provided from operations before
changes in operating assets and
liabilities......................... 2,050,313 1,727,067
Changes in operating assets and
liabilities:
Increase in accounts receivable....... (3,081,822) (912,585)
(Increase) decrease in tooling
receivable ......................... 545,104 (341,191)
Increase in inventories............... (1,104,034) (450,031)
(Increase) decrease in prepaid
expenses and other current assets... 53,222 (70,849)
Increase (decrease) in accounts
payable and accrued expenses........ (2,839,355) 1,123,401
Increase in income taxes payable ..... 548,182 60,409
Total changes in operating assets
and liabilities .................... (5,878,703) (590,846)
Net cash provided by (used in)
operations ......................... (3,828,390) 1,136,221
Cash flows used in investing
activities:
Additions to property, plant and
equipment .......................... (833,459) (1,281,096)
Proceeds from sale of assets.......... 325,000 -
Net cash used in investing activities. (508,459) (1,281,096)
Cash flows from financing activities:
Payment of cash dividend.............. (122,500) -
Repayment of long-term debt........... (605,737) (605,737)
Net increase in note payable.......... 5,065,086 750,612
Net cash from financing activities.... 4,336,849 144,875
Net decrease in cash and cash
equivalents ........................ - -
Cash and cash equivalents at beginning
of period .......................... - -
Cash and cash equivalents at end of
period ............................. $ - $ -
The accompanying notes are an integral part of these
interim consolidated financial statements.
</TABLE>
<PAGE>
HILITE INDUSTRIES, INC.
Notes to Interim Financial Statements (Unaudited)
1. BUSINESS AND BASIS OF PRESENTATION
The interim financial statements of Hilite Industries, Inc.
("Hilite") at September 30, 1998 and for the three month period
ended September 30, 1998, are unaudited, but include all
adjustments (consisting of normal recurring adjustments) which the
Company considers necessary for a fair presentation. The June 30,
1998 balance sheet was derived from the balance sheet included in
the Company's audited Financial Statements as included in the
Company's Annual Report on Form 10-K. As used herein, unless the
context otherwise requires, the term the "Company" refers
collectively to Hilite and Hilite's directly and indirectly
wholly-owned subsidiaries Hilite Industries - Texas, Inc., North
American Spring and Stamping Corp. ("NASS"), Hilite Industries -
Delaware, Inc. and Hilite Industries Automotive, LP, the Company's
principal operating entity in Texas.
The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes, and should be read
in conjunction with the Company's audited Financial Statements.
Operating results for the three month period ended September 30,
1998 are not necessarily indicative of the results that may be
expected for the fiscal year ending June 30, 1999.
2.INVENTORIES
Inventories at September 30, 1998 and June 30, 1998 consisted of
the following:
Sept. 30 June 30
Raw materials..... $ 4,295,993 $ 4,401,069
Work in process... 2,625,592 2,244,363
Finished goods.... 4,110,298 3,282,417
$11,031,883 $ 9,927,849
<PAGE>
3. RESTRUCTURING CHARGE
As a result of operating problems and inefficiencies at the NASS
division, the Company's Board of Directors approved a plan, in
June 1997, to substantially restructure the NASS operations. In
connection with this plan, the Company recorded a charge to pre-
tax earnings in fiscal 1997 totaling approximately $2,700,000.
The charge is comprised of a reduction (approximately $900,000) in
the net book value of certain assets primarily machinery,
equipment and tooling, to their estimated fair value, net of
estimated selling costs, accrual of certain costs which the
Company expects to incur in terminating contractual obligations,
but for which no future economic benefit will be received
(approximately $1,600,000) and other costs (approximately
$200,000). For the three months ending September 30, 1998
approximately $138,000 had been charged against the accrual for
terminating contractual obligations and approximately $12,000 had
been charged against the accrual for other costs. As of
September 30, 1998, approximately $680,000 of the restructuring
accrual remained and is expected to be paid during the remainder
of fiscal 1999.
4. DEBT
Effective October 1, 1998, the Company executed an amendment to
its existing loan agreement ("the Agreement") with a bank to
extend the expiration date to July 21, 2000 on the Company's
credit facilities. Under the new terms, the credit facilities
consist of the following:
1) A revolving line of credit of up to $12,000,000 subject to
availability requirements. As of September 30, 1998,
$10,459,000 had been used on the line of credit and $1,541,000
is available. The interest rate on the line of credit is
either LIBOR plus 1 1/2% or prime rate less 1/2% which resulted
in a blended rate ranging from 7.00% to 7.75% at September 30,
1998. The revolving line of credit expires on July 21, 2000.
An annual commitment fee of 1/4% is payable quarterly on the
average unused portion of the revolving line of credit,
2) Term loans with an original principal balance of $13,700,000
and a balance at September 30, 1998 of $7,560,000. Principal
payments on the term loan of approximately $163,000 together
with interest are payable monthly. The maturity date of the
term loans is August 1, 2002. The interest rate on the term
loans, LIBOR plus 1 1/2% was 7.31% at September 30, 1998,
3) An equipment acquisition facility of $3,000,000 for the
financing of equipment purchases. Any term loans issued under
this facility will bear interest, at the Company's option, at
either prime rate or LIBOR plus 1 1/2%. As of
September 30, 1998, no amounts were outstanding under this
facility;
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In addition to the above credit facility, the Company also has a
fifteen year real estate note and two five year equipment term
notes with the same bank. The real estate note, which has an
original principal amount of $960,000 and a $587,000 outstanding
balance at September 30, 1998, is payable in monthly installments
of $5,333 plus interest at the prime rate (8.25% at September 30,
1998) and expires on November 1, 2007. The equipment term notes
which have original principal amounts of $1,497,000 and $645,000,
respectively, and outstanding balances of $749,000 and 484,000,
respectively, at September 30, 1998, are payable in monthly
installments of $24,961 and $10,757, respectively at LIBOR plus 1
1/2% (7.25% and 7.72%, respectively, at September 30, 1998) and
expire on May 31, 2001 and 2002, respectively. Both the real
estate and equipment notes' due date can be accelerated, at the
bank's option, to July 21, 2000.
All of the notes and line of credit are collateralized by accounts
receivable, inventory, equipment and real estate of the Company.
5. CONTINGENCIES
On January 28, 1998, the Company announced that it had been
notified by a division of Ford Motor Company that a part
manufactured by the Company's specialty components and assemblies
division may be involved in a recall regarding a fuel gauge
accuracy problem with certain 1997 model year vehicles. Based
upon information currently available to the Company, management
believes that this matter will be resolved in a manner not
materially adverse to the Company.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Quarter Ended September 30, 1998 Compared to Quarter Ended September
30, 1997
<PAGE>
Net sales for the quarter ended September 30, 1998 were $21,316,000
compared to $21,030,000 for the quarter ended September 30, 1997,
representing a increase of $286,000 (1.4%). Brake valve sales
increased 27.0% to $7,588,000 in the first fiscal quarter of 1999
from $5,974,000 in the prior year. The increase resulted primarily
from valves for GM which are now used for more mid-sized models this
year and actuator assemblies and GM W-Car valves which were new
programs started late in the first quarter of the last fiscal year.
Power transmission component sales increased 27.2% to $7,329,000 for
the quarter ended September 30, 1998 from $5,760,000 in the same
period for fiscal 1998. The increase is almost entirely due to sales
of transfer case components which was a new program started in the
third quarter of fiscal 1998. First quarter 1999 sales were
$6,399,000 for the specialty components and assemblies division, a
decrease of 31.2% over last year's first quarter sales of $9,296,000.
The decrease in sales is primarily due to a one-time sales
opportunity of certain assemblies to Motorola, Inc. which occurred in
the prior year and due to the elimination of numerous unprofitable
parts in conjunction with the restructuring of the division. Also,
the specialty components and assemblies division benefited from
approximately $700,000 of price increases in the prior year on the
products eliminated as part of the restructuring. The impact of
price changes in the current quarter was not significant.
The Company's gross profit was $4,544,000 (21.3% of net sales) for
the first quarter of the 1999 fiscal year compared to gross profit of
$4,064,000 (19.3% of net sales) for the first quarter of the 1998
fiscal year. Increased sales volume in the brake valve and power
transmission components division were the primary contributors to the
increased gross profit as the gross profit in these divisions is
higher, on average, than the gross profit in the specialty components
and assemblies division. In addition, the margin increase is due to
fixed costs, such as building expenses, equipment depreciation and
supervisory salaries, not increasing at the same rate as sales.
Selling, general and administrative expenses were $2,297,000 (10.8%
of net sales) in the first quarter of the 1999 fiscal year compared
to $2,404,000 (11.4% of net sales) in the first quarter of the 1998
fiscal year. The decrease of $107,000 in selling, general and
administrative expenses is primarily due to a decrease in legal
costs. Also contributing to the decrease was lower commission
expense related to the decrease in sales at the specialty components
and assemblies division and that no commissions are paid on power
transmission component sales. This decrease was offset in part by
higher research and development costs.
Interest expense was $348,000 for the three months ended September
30, 1998 compared to $390,000 for the three months ended September
30, 1997. The settlement of the lawsuit against the former owners of
NASS which relieved the Company of its obligation to pay subordinated
debt is the primary contributor to the decreased interest expense as
approximately $40,000 of interest on subordinated debt was recorded
in the first quarter of fiscal 1998. The remaining decrease is due
to lower average debt balances over the prior year. The impact of
changes in interest rates was not significant.
<PAGE>
Net income was $1,195,000 (5.6% of net sales) for the first quarter
of the 1999 fiscal year compared to net income of $792,000 (3.8% of
net sales) for the same period of the prior fiscal year, representing
an increase of $401,000.
Liquidity and Capital Resources
During the three month period ended September 30, 1998, the Company's
net cash provided from operations before changes in operating assets
and liabilities was $2,050,000 compared to $1,727,000 in the same
period of the prior year, primarily due to the increase in net income
over the prior year. At September 30, 1998 the Company's working
capital was $16,063,000 compared to working capital of $10,569,000 at
June 30, 1998. The current ratio was 2.3 to 1 at September 30, 1998
and 1.7 to 1.0 at June 30, 1998. The book value per share increased
to $5.56 at September 30, 1998 from $5.34 per share at June 30, 1998.
Cash from operations was used for changes in operating assets and
liabilities of $5,579,000 through the first three months of the
current year compared to $591,000 during the same period of the prior
year. The increase is primarily due to a $3,082,000 increase in
accounts receivables due to an increase in the average number of days
sales outstanding for receivables to 58 days at September 30, 1998
from 44 days at June 30, 1997. The increase in the average number of
days sales outstanding is primarily due to the expiration on June 30,
1998 of a one year temporary acceleration in payment by a significant
customer. The 58 days outstanding at September 30, 1998 is slightly
longer than periods prior to the special terms period due to the
increased sales in the brake valve division which has slightly higher
collection periods. As of September 30, 1998, no significant amounts
were considered uncollectible.
Also, contributing to the increase in operating assets and
liabilities was a $1,104,000 increase in inventories primarily due to
the start-up of a new product in the specialty components and
assemblies division and a $2,839,000 decrease in accounts payable and
accrued expenses. The decrease is primarily due to timing on payment
of accounts payable balances as well as payments of for year end
accrued bonuses and employer 401(k) contributions and for payments to
satisfy the asset distribution of a terminated defined benefit plan
at NASS and terminated contractual obligations associated with the
NASS restructuring reserve.
The Company's capital expenditures were $833,000 for the three months
ended September 30, 1998. The Company presently estimates capital
expenditures for the year ending June 30, 1999 will approximate
$3,500,000, unless new business opportunities require additional
capital commitments. As of September 30, 1998, commitments, net of
progress payments, were $250,000 for capital expenditures and
$500,000 for tooling which is expected to be reimbursed by customers.
<PAGE>
The Company has a general credit facility of up to $12,000,000 and an
equipment acquisition facility of $3,000,000 (collectively the
"Credit Facilities") for working capital and capital equipment needs.
The Credit Facilities mature on July 21, 2000. As of September 30,
1998, $10,549,000 was outstanding and $1,541,000 was available under
the general credit facility and $3,000,000 was available under the
equipment acquisition facility. An annual fee of one quarter of one
percent is payable monthly on the unused portion of the Credit
Facilities. The bank has the right to accelerate each of the
maturity dates of the consolidated term note and real estate note to
coincide with the maturity date of the Credit Facilities.
The Company distributed a cash dividend during the first quarter of
$122,500 as part of a previously announced quarterly cash dividend
program. On October 27, 1998, the Company announced a first quarter,
2 1/2 cent dividend to be distributed in November 1998. With
4,900,000 shares currently outstanding, $122,500 will be paid to
shareholders in the second quarter. Subsequent dividends will depend
on future operating results.
On January 28, 1998, the Company announced that it had been notified
by a division of Ford Motor Company that a part manufactured by the
Company's specialty components and assemblies division may be
involved in an Owner Notification Program regarding a fuel gauge
accuracy problem with certain 1997 model year vehicles. Based upon
information currently available to the Company, management believes
that this matter will be resolved in a manner not materially adverse
to the Company.
Due to the timing of accounts payable payments and the increase in
accounts receivable balances, the amount borrowed under the general
credit facility was unusually high on September 30, 1998. The
Company anticipates that the cash flow from operations and reduction
of working capital will be sufficient to reduce borrowings during the
second quarter. In addition, the Company anticipates that the cash
flow from operations and bank credit availability will be adequate to
fund the existing acquisition debt, anticipated capital and tooling
requirements and working capital needs for the next two years.
Forward-looking Statements
As the second quarter begins, automotive build rates continue to be
strong. At these levels, Company projections of sales growth of 12%
to 15% in the brake valve and power transmission divisions appear
likely to be toward the upper end of the projections. Sales for the
specialty components and assemblies division for fiscal 1999 are
expected to approximate the Company's earlier projection of $26
million. Given that the sales growth is expected to be in more
profitable product lines, improvement in earnings should be achieved
in fiscal 1999. Looking farther ahead, the opportunities for all
three divisions are encouraging and an 8% to 12% annual internal
sales growth goal for the year 2000 and beyond is reasonable. Of
course, this assumes a healthy economy and automotive industry.
<PAGE>
Seasonality
Net sales and operating results do not follow a predictable seasonal
pattern from quarter to quarter because the development, initial
production and sales of new products may occur at different times of
the year. Generally, in these periods certain inefficiencies are
experienced which result in higher costs to the Company. In addition,
the Company usually experiences somewhat lower sales in the quarters
ended December 31 and September 30 as automobile manufacturers
traditionally close their plants for vacations or model changeovers
during these periods resulting in lower demand for the Company's
products.
Inflation
The Company believes that the relatively moderate rate of inflation
has not had a significant impact on the Company's revenues or
profitability.
Safe Harbor for Forward-looking Statements
Except for historical information contained herein, certain
statements in this Management's Discussion and Analysis of results of
operation and financial condition and other sections of this document
contain forward-looking statements that are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of
1995. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates," or variations of such words and
similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future
performance and involve unknown risks and uncertainties which may
cause the Company's actual results in future periods to differ
materially from forecasted results. Those risks include, among
others, risks associated with automotive and non-automotive build
rates, customer sourcing decisions, manufacturing process
efficiencies, cost and timing of start-up of new products and risks
related to technological changes in components which affect the life
of the product. Further, there can be no assurance that the
contingency related to a possible involvement of the Company in a
Ford Owner Notification Program will be resolved in a manner
consistent with the Company's expectations or without affecting the
Company's attempt to regain its Q1 status at the Ford Visteon
division. These and other risks are described in the Company's Form
10-K for the year ended June 30, 1998 filed with the Securities and
Exchange Commission ("SEC") and Forms 10-Q filed quarterly with the
SEC, copies of which are available from the SEC or may be obtained
upon request from the Company.
<PAGE>
Year 2000
Until recently, computer programs were written to store only two
digits of date-related information in order to more efficiently
handle and store data. As a result, these programs were unable to
properly distinguish between the year 1900 and the year 2000. This
is frequently referred to as the "Year 2000 Problem." The Company
recognizes the need to ensure its operations will not be adversely
impacted by Year 2000 software failures. The Company began
addressing Year 2000 compliance during fiscal 1998 and has determined
that all significant software and machinery are expected to be Year
2000 ready. However, certain personal computers will need to be
replaced and ancillary software will be upgraded for an estimated
cost of $100,000. The majority of this will be expended during
fiscal 1999.
During fiscal 1998 the Company began the process of surveying all
suppliers of raw materials and supplies to determine their readiness
for the Year 2000 problem and attempt to measure what impact, if any,
it will have on the Company. The survey will be completed during
fiscal 1999 so it is uncertain at this time as to what impact
supplier problems will have on the Company's operations. The Company
expects to use manual processing in the event of any system failure.
It is not expected that manual processing will cause significant
disruption to the Company's operations.
The Company does not expect the Year 2000 compliance to have a
significant effect on operations, nor does it expect the cost to be
material to the Company's consolidated results of operations or
financial position. The costs of Year 2000 modifications and the
date of completion will be closely monitored and are based on
management's best estimates. Actual results, however, could differ
from those anticipated.
<PAGE>
PART II - OTHER INFORMATION
Item 5. Other Information
Cash Dividend
On October 28, 1998, the Company announced a 2 1/2 cent cash dividend
to be distributed in November 1998. Through the first three months
of fiscal 1999, $122,500 has been distributed. Subsequent dividends
will depend upon future operating results.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Third Amended and Restated Secured Loan Agreement dated
October 1, 1998 among Hilite Industries, Inc., Hilite Industries
Automotive, LP and Comerica Bank-Texas.
(b) There were no reports on Form 8-K filed during the quarter for
which this report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
HILITE INDUSTRIES, INC.
Date: November 11, 1998 /s/ Daniel W. Brady
Daniel W. Brady
Chief Executive Officer
Date: November 11, 1998 /s/ Roy Wiegmann
Roy Wiegmann
Chief Financial Officer
FIRST AMENDMENT TO SECOND AMENDED AND RESTATED
SECURED LOAN AGREEMENT
THIS FIRST AMENDMENT TO SECOND AMENDED AND RESTATED SECURED LOAN
AGREEMENT (the "Amendment"), dated and effective as of October 1,
1998 (the "Effective Date") is among HILITE INDUSTRIES, INC., a
Delaware corporation ("Hilite"), HILITE INDUSTRIES AUTOMOTIVE, LP, a
Texas limited partnership ("Hilite LP"; Hilite and Hilite LP are
collectively referred to as the "Borrower"), NORTH AMERICAN SPRING &
STAMPING CORP. (DELAWARE), a Delaware corporation ("NASS"), HILITE
INDUSTRIES-TEXAS, a Delaware corporation ("Hilite-Texas"), and HILITE
INDUSTRIES-DELAWARE, INC., a Delaware corporation ("Hilite-Delaware";
NASS, Hilite-Texas and Hilite-Delaware are referred to herein as
"Guarantors", and individually, as a "Guarantor") and COMERICA BANK-
TEXAS, a Texas banking association ("Lender").
RECITALS:
Borrower and Lender have entered into that certain Second
Amended and Restated Secured Loan Agreement dated as of January 30,
1998 (such Loan Agreement, as amended or otherwise modified from time
to time, the "Agreement").
Borrower and Lender desire to amend the Agreement.
NOW, THEREFORE, in consideration of the premises herein
contained and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I
Definitions
Section 1.1. Definitions. Capitalized terms used in this
Amendment, to the extent not otherwise defined herein, shall have the
same meanings as in the Agreement, as amended hereby.
ARTICLE II
Amendment
Section 2.1. Amendment to Section 1.1. Effective as of
the Effective Date, the following respective definitions in Section
1.1 of the Agreement are hereby amended and restated in their
entirety as follows:
"Termination Date" shall mean July 21, 2000.
<PAGE>
ARTICLE III
Conditions Precedent
The effectiveness of this Amendment is subject to the conditions
that Lender shall have received this Amendment duly executed by
Borrower and the Guarantors, and such other documents as may be
reasonably required by Lender:
ARTICLE IV
Ratifications and Other Agreements
Section 4.1. Ratifications. The terms and provisions set
forth in this Amendment shall modify and supersede all inconsistent
terms and provisions set forth in the Agreement and except as
expressly modified and superseded by this Amendment, the terms and
provisions of all other documents executed in connection with the
Agreement are hereby ratified and confirmed and shall continue in
full force and effect. Borrower and Lender agree that the Agreement
as amended hereby and all other documents executed in connection with
the Agreement or this Amendment to which Borrower is a party shall
continue to be legal, valid, binding and enforceable in accordance
with their respective terms.
Section 4.2. Representations and Warranties. Borrower and each
of the Guarantors hereby represent and warrant to Lender that (a) the
execution, delivery and performance of this Amendment and any and all
other documents executed and/or delivered in connection herewith have
been authorized by all requisite corporate and partnership action on
the part of Borrower and each Guarantor and will not violate the
respective articles of incorporation, bylaws or partnership agreement
(as the case may be) of Borrower or any Guarantor, or any agreement
to which Borrower or any Guarantor or any of their properties are
bound, (b) the articles of incorporation, partnership agreement and
the bylaws of Borrower and each Guarantor, as the case may be, have
not been amended or revoked since the date of the Agreement and are
in full force and effect, (c) the representations and warranties
contained in the Agreement, as amended hereby, and any other
documents executed in connection therewith or herewith are true and
correct on and as of the date hereof as though made on and as of the
date hereof, (d) no Event of Default has occurred and is continuing
and no event or condition has occurred that with the giving of notice
or lapse of time or both would be an Event of Default, and (e) after
giving effect to this Amendment, Borrower is in full compliance with
all covenants and agreements contained in the Agreement as amended
hereby.
<PAGE>
ARTICLE V
Miscellaneous
Section 5.1. Survival of Representations and Warranties. All
representations and warranties made in this Amendment or any other
document executed in connection herewith shall survive the execution
and delivery of this Amendment, and no investigation by Lender or any
closing shall affect the representations and warranties or the right
of Lender to rely upon them.
Section 5.2. Reference to Agreement. Each of the Agreement and
any and all other agreements, documents, or instruments now or
hereafter executed and delivered pursuant to the terms hereof or
pursuant to the terms of the Agreement as amended hereby, are hereby
amended so that any reference in such documents to the Agreement
shall mean a reference to the Agreement as amended hereby.
Section 5.3. Expenses of Lender. As provided in the Agreement,
Borrower agrees to pay on demand all reasonable costs and expenses
incurred by Lender in connection with the preparation, negotiation,
and execution of this Amendment and any other documents executed
pursuant hereto and any and all amendments, modifications, and
supplements thereto, including without limitation the costs and
reasonable fees of Lender's legal counsel, and all costs and expenses
incurred by Lender in connection with the enforcement or preservation
of any rights under the Agreement, as amended hereby, or any other
document executed in connection therewith, including without
limitation the costs and reasonable fees of Lender's legal counsel.
Section 5.4. 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 5.5. Applicable Law. This Amendment and all other
documents executed pursuant hereto shall be deemed to have been made
and to be performable in Dallas, Dallas County, Texas and shall be
governed by and construed in accordance with the laws of the State of
Texas.
Section 5.6. Successors and Assigns. This Amendment is binding
upon and shall inure to the benefit of Lender, Borrower, Pledgor and
their respective successors and assigns, except Borrower may not
assign or transfer any of its rights or obligations hereunder without
the prior written consent of Lender.
Section 5.7. Counterparts. This Amendment may be executed in
one or more counterparts, each of which when so executed shall be
deemed to be an original, but all of which when taken together shall
constitute one and the same instrument.
<PAGE>
Section 5.8. Effect of Waiver. No consent or waiver, express
or implied, by Lender to or for any breach of or deviation from any
covenant, condition or duty by Borrower or any obligated party shall
be deemed a consent or waiver to or of any other breach of the same
or any other covenant, condition or duty.
Section 5.9. Headings. The headings, captions, and
arrangements used in this Amendment are for convenience only and
shall not affect the interpretation of this Amendment.
Section 5.10. ENTIRE AGREEMENT. THE AGREEMENT, THIS AMENDMENT
AND ALL OTHER INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND
DELIVERED IN CONNECTION WITH THE AGREEMENT OR THIS AMENDMENT
REPRESENT THE FINAL AGREEMENTS AMONG THE PARTIES HERETO AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES HERETO.
Executed as of the date first written above, but effective as of
October 1, 1998.
BORROWER:
HILITE INDUSTRIES, INC.
By: /s/ Daniel W. Brady
Name: Daniel W. Brady
Title: Chief Executive Officer
HILITE INDUSTRIES AUTOMOTIVE, LP
By: Hilite Industries, Inc., general
partner
By: /s/ Daniel W. Brady
Name: Daniel W. Brady
Title: Chief Executive Officer
LENDER:
COMERICA BANK-TEXAS
By: /s/ Michael Park
Vice President
<PAGE>
The foregoing First Amendment to Second Amended and Restated
Secured Loan Agreement is agreed and consented to in all respects as
of the date therein written, and the liability of each of the
undersigned Guarantors under each respective Guaranty of each
respective Guarantor remains in full force and effect and each
Guarantor hereby ratifies and affirms in all respects its respective
Guaranty.
GUARANTOR:
NORTH AMERICAN SPRING & STAMPING CORP.
(DELAWARE)
By: /s/ Daniel W. Brady
Name: Daniel W. Brady
Title: Chief Executive Officer
HILITE INDUSTRIES-TEXAS, INC.
By: /s/ Daniel W. Brady
Name: Daniel W. Brady
Title: Chief Executive Officer
HILITE INDUSTRIES-DELAWARE, INC.
By: /s/ James E. Lineberger, Jr.
Name: James E. Lineberger, Jr.
Title: President
