10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003
OR
[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FROM THE TRANSITION PERIOD FROM                                                TO

COMMISSION FILE NUMBER 1-7521

FRIEDMAN INDUSTRIES, INCORPORATED

(Exact name of registrant as specified in its charter)

TEXAS
(State or other jurisdiction of
incorporation or organization) 74-1504405
(I.R.S. Employer Identification
Number)

4001 HOMESTEAD ROAD, HOUSTON, TEXAS 77028-5585
(Address of principal executive office zip code)
Registrant’s telephone number, including area code (713) 672-9433

Former name, former address and former fiscal year, if changed since last report

     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, and (2) has been subject to such filing requirements for the past 90 days.

Yes     X No          

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes           No     X

     At June 30, 2003, the number of shares outstanding of the issuer’s only class of stock was 7,573,239 shares of Common Stock.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
	Item 1. Financial Statements
		CONSOLIDATED BALANCE SHEETS — UNAUDITED
		CONSOLIDATED STATEMENTS OF EARNINGS — UNAUDITED
		CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED
		NOTES TO QUARTERLY REPORT — UNAUDITED
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
Part II — OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 2. Changes in securities and use of proceeds
	Item 3. Defaults upon senior securities
	Item 4. Submission of matters to a vote of security holders
	Item 5. Other Information
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
Fifth Amend.to Amended Letter Agreement
Revolving Promissory Note
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

FRIEDMAN INDUSTRIES, INCORPORATED
CONSOLIDATED BALANCE SHEETS — UNAUDITED

ASSETS

				JUNE 30, 2003			MARCH 31, 2003
CURRENT ASSETS:
	Cash and cash equivalents			$	458,518		$	673,127
	Accounts receivable, net of allowance of $7,276 in both periods				9,792,478			9,966,061
	Inventories				22,410,128			24,032,268
	Other				106,023			98,044
			TOTAL CURRENT ASSETS		32,767,147			34,769,500
PROPERTY, PLANT AND EQUIPMENT:
	Land				437,793			437,793
	Buildings and improvements				4,063,579			4,063,579
	Machinery and equipment				17,289,065			17,216,823
	Less accumulated depreciation				(15,162,527	)		(14,930,027	)
					6,627,910			6,788,168
OTHER ASSETS:
	Cash value of officers’ life insurance				1,228,177			1,221,258
			TOTAL ASSETS	$	40,623,234		$	42,778,926
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
	Accounts payable and accrued expenses			$	5,605,730		$	9,870,888
	Current portion of long-term debt				68,496			68,496
	Dividends payable				227,189			151,460
	Income taxes payable				391,333			406,620
	Contribution to profit sharing plan				66,000			260,000
	Employee compensation and related expenses				307,281			277,924
			TOTAL CURRENT LIABILITIES		6,666,029			11,035,388
LONG-TERM DEBT, less current portion					2,039,920			57,329
DEFERRED INCOME TAXES					274,458			283,458
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS					156,000			156,000
STOCKHOLDERS’ EQUITY:
	Common stock, par value $1:
		Authorized shares — 10,000,000
		Issued and outstanding shares — 7,573,239 at June 30, 2003 and March 31, 2003			7,573,239			7,573,239
	Additional paid-in capital				27,710,369			27,710,369
	Retained deficit				(3,796,781	)		(4,036,857	)
			TOTAL STOCKHOLDERS’ EQUITY		31,486,827			31,246,751
			TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	40,623,234		$	42,778,926

2

FRIEDMAN INDUSTRIES, INCORPORATED

CONSOLIDATED STATEMENTS OF EARNINGS — UNAUDITED

		THREE MONTHS ENDED JUNE 30,
		2003			2002
Net sales		$	25,204,170		$	25,561,298
Costs and expenses
	Costs of goods sold		23,255,513			24,092,780
	General, selling and administrative costs		1,234,095			1,043,996
	Interest		8,732			30,114
			24,498,340			25,166,890
Interest and other income			(2,148	)		(25,524	)
Earnings before federal income taxes			707,978			419,932
Provision (benefit) for federal income taxes:
	Current		249,713			134,777
	Deferred		(9,000	)		8,000
			240,713			142,777
Net earnings		$	467,265		$	277,155
Average number of common shares outstanding:
	Basic		7,573,239			7,571,239
	Diluted		7,589,900			7,571,239
Net earnings per share:
	Basic	$	0.06		$	0.04
	Diluted	$	0.06		$	0.04
Cash dividends declared per common share		$	0.03		$	0.02

3

FRIEDMAN INDUSTRIES, INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED

				THREE MONTHS ENDED JUNE 30,
				2003			2002
OPERATING ACTIVITIES
	Net earnings			$	467,265		$	277,155
	Adjustments to reconcile net income to cash provided by operating activities:
		Depreciation			232,500			241,766
		Provision for deferred taxes			(9,000	)		8,000
	Decrease (increase) in operating assets:
		Accounts receivable			173,583			(271,431	)
		Inventories			1,622,140			1,408,408
		Other current assets			(7,979	)		(53,600	)
	Increase (decrease) in operating liabilities:
		Accounts payable and accrued expenses			(4,265,158	)		(1,801,026	)
		Contribution to profit-sharing plan payable			(194,000	)		(194,000	)
		Employee compensation and related expenses			29,357			9,109
		Federal income taxes payable			(15,287	)		134,777
			NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES		(1,966,579	)		(240,842	)
INVESTING ACTIVITIES
	Purchase of property, plant and equipment				(72,242	)		(140,764	)
	Increase in cash surrender value of officers’ life insurance				(6,919	)		(21,184	)
			NET CASH USED IN INVESTING ACTIVITIES		(79,161	)		(161,948	)
FINANCING ACTIVITIES
	Cash dividends paid				(151,460	)		(75,710	)
	Principal payments on notes payable				(17,409	)		(2,179,483	)
	Proceeds of long-term notes				2,000,000			69,493
			NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES		1,831,131			(2,185,700	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS					(214,609	)		(2,588,490	)
	Cash and cash equivalents at beginning of period				673,127			4,683,894
CASH AND CASH EQUIVALENTS AT END OF PERIOD				$	458,518		$	2,095,404

4

FRIEDMAN INDUSTRIES, INCORPORATED

NOTES TO QUARTERLY REPORT — UNAUDITED
THREE MONTHS ENDED JUNE 30, 2003

NOTE A — BASIS OF PRESENTATION

     The accompanying unaudited condensed, consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the financial statements and footnotes included in the Company’s annual report on Form 10-K for the year ended March 31, 2003.

NOTE B — INVENTORIES

     Inventories consist of prime coil, nonstandard coil and tubular materials. Prime coil inventory (“prime inventory”) consists primarily of raw materials, non-standard coil inventory consists primarily of finished goods and tubular inventory consists of both raw materials and finished goods. Inventories are valued at the lower of cost or replacement market. Cost for prime inventory is determined under the last-in, first-out (“LIFO”) method. Cost for tubular inventory is determined using the weighted average method. Cost for non-standard inventory is determined using the specific identification method.

NOTE C — NEW ACCOUNTING PRONOUNCEMENT

     In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46”). FIN 46 requires that unconsolidated variable interest entities must be consolidated by their primary beneficiaries. A primary beneficiary is the party that absorbs a majority of the entity’s expected losses or residual benefits. FIN 46 applies immediately to variable interest entities created after January 31, 2003 and to existing variable interest entities in the periods beginning after June 15, 2003. No variable interest entities have been created after January 31, 2003. Management is currently evaluating the effect of variable interest entities, if any, created prior to January 31, 2003.

NOTE D — STOCK BASED COMPENSATION

     The Company follows Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), for its employee stock options. Under APB 25, because the exercise price of the Company’s employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. The fair value of options was estimated using a Black-Scholes option pricing model with the following weighted average assumptions: risk-free interest rates of 3.0%, a dividend yield of 3.4%, volatility factor of the expected market price of the Company’s common stock of 0.42, and a weighted average expected life of the option of four years.

     The following schedule reflects the impact on net income and earnings per common share if the Company had applied the fair value recognition provisions of Statements of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, to stock based employee compensation for the three months ended June 30:

	2003		2002
Reported net income	$	467,265	$	277,155
Less: compensation expenses per SFAS No. 123, net of tax		31,582		.00
Pro forma net income	$	435,683	$	277,155
BASIC EARNINGS PER COMMON SHARE:
Reported net income		.06		.04
Less: compensation expense per SFAS No. 123, net of tax		.00		.00
Pro forma net income		.06		.04
DILUTED EARNINGS PER COMMON SHARE:
Reported net income		.06		.04
Less: compensation expense per SFAS No. 123, net of tax		.00		.00
Pro forma net income		.06		.04

NOTE E — RENEWAL OF CREDIT FACILITY

     During the quarter ended June 30, 2003, the Company extended its revolving line of credit facility through April 1, 2006.

5

NOTE F — SEGMENT INFORMATION

			THREE MONTHS ENDED
			JUNE 30,
			2003			2002
			IN THOUSANDS
Net sales
	Coil		$	13,395		$	14,044
	Tubular			11,809			11,517
		Total net sales	$	25,204		$	25,561
Operating profit
	Coil		$	710		$	367
	Tubular			769			586
		Total operating profit		1,479			953
	Corporate expenses			764			529
	Interest expense			9			30
	Interest & other income			(2	)		(26	)
		Total earnings before taxes	$	708		$	420

		June 30, 2003		March 31, 2003
Segment assets
	Coil	$	17,260	$	18,967
	Tubular		21,607		21,849
			38,867		40,816
	Corporate assets		1,756		1,963
			40,623		42,779

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

    Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002

     During the quarter ended June 30, 2003, sales and costs of goods sold declined $357,128 and $837,267, respectively, from the comparable amounts recorded during the quarter ended June 30, 2002, which had the effect of increasing gross profit by $480,139. Both coil and tubular operations experienced an increase in gross profit as the result of average selling prices accelerating at a greater rate than related costs of material. The Company experienced somewhat stronger market conditions for its products and services in the 2003 quarter as compared to market conditions in the 2002 quarter, and accordingly, overall operations reflected some improvement.

     General, selling and administrative costs increased $190,099 from the amount recorded in the 2002 quarter. This increase was related primarily to the write-off of a bad debt incurred during the 2003 quarter and to variable expenses associated with the increase in earnings.

     Interest expense decreased $21,382 from the comparable amount recorded during the 2002 quarter. This decrease was related primarily to a reduction in interest rates paid on borrowings and reductions in short and long term debt.

     Interest and other income decreased $23,376 primarily as the result of a decrease in average invested cash positions during the 2003 quarter.

     Federal income taxes during the 2003 quarter increased $97,936 from the comparable amount recorded during the 2002 quarter. This increase was related to the increase in earnings before taxes in the 2003 quarter since the effective tax rates were the same for both quarters.

Financial Position, Liquidity and Capital Resources

     The Company remained in a strong, liquid position at June 30, 2003. Current ratios were 4.9 and 3.2 at June 30, 2003 and March 31, 2003, respectively. Working capital was $26,101,118 at June 30, 2003 and $23,734,112 at March 31, 2003. During the quarter ended June 30, 2003, the Company maintained assets and liabilities at levels it believed were commensurate with operations. During the quarter ended June 30, 2003, the Company paid down accounts payable by using the cash flow generated from reducing inventories and borrowing funds pursuant to the revolving facility described below. The Company expects to continue to monitor and evaluate balance sheet components depending on changes in market conditions and the Company’s operations.

     The Company has extended its credit arrangement with a bank which provides for a revolving line of credit facility (the “revolving facility”). Pursuant to the revolving facility which expires April 1, 2006, the Company may borrow up to $6 million at an interest rate no greater than the bank’s prime rate. At June 30, 2003, the Company had borrowings of $2,000,000 outstanding under the revolving facility.

7

     Notwithstanding the current market conditions, the Company believes its cash flows from operations and borrowing capability under its revolving facility are adequate to fund its expected cash requirements for the next twenty-four months.

Critical Accounting Policies

     The preparation of consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. One such accounting policy which requires significant estimates and judgments is the valuation of LIFO inventories in the Company’s quarterly reporting. The Company’s quarterly valuation of inventory requires estimates of the year-end quantities which is inherently difficult. Historically, these estimates have been materially correct. In addition, the Company maintains an allowance for doubtful accounts receivable by providing for specifically identified accounts where collectibility is doubtful and a general allowance based on the aging of the receivables compared to past experience and current trends. On an on-going basis, the Company evaluates estimates and judgements. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances.

Forward-Looking Statements

     From time to time, the Company may make certain statements that contain “forward-looking” information (as defined in the Private Securities Litigation Reform Act of 1996) and that involve risk and uncertainty. These forward-looking statements may include, but are not limited to, future results of operations, future production capacity and product quality. Forward-looking statements may be made by management orally or in writing including, but not limited to, this Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of the Company’s filings with the Securities and Exchange Commission under the Securities Act of 1933 and the Securities Exchange Act of 1934. Actual results and trends in the future may differ materially depending on a variety of factors including but not limited to changes in the demand and prices of the Company products, changes in the demand for steel and steel products in general, and the Company’s success in executing its internal operating plans.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Not material

8

Item 4. Controls and Procedures

      The Company's management, with the participation of the Company's principal executive officer (CEO) and principal financial officer (CFO), evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the fiscal quarter ended June 30, 2003. Based on this evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures were effective as of the end of the fiscal quarter ended June 30, 2003 to ensure that information that is required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.

      There were no changes in the Company's internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2003 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

9

FRIEDMAN INDUSTRIES, INCORPORATED

Three Months Ended June 30, 2003

Part II — OTHER INFORMATION

Item 1. Legal Proceedings

      Not applicable

Item 2. Changes in securities and use of proceeds

a). Not applicable

b). Not applicable

c). Not applicable

d). Not applicable

Item 3. Defaults upon senior securities

a). Not applicable

b). Not applicable

Item 4. Submission of matters to a vote of security holders

      None

Item 5. Other Information

      Not applicable

Item 6. Exhibits and Reports on Form 8-K

a). Exhibits

10.1 —	Fifth Amendment to Amended and Restated Letter Agreement
10.2 —	Revolving Promissory Note Between the Company and JP Morgan Chase Bank
31.1 —	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Jack Friedman
31.2 —	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Ben Harper
32.1 —	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Jack Friedman
32.2 —	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Ben Harper

b). Reports on Form 8-K

      None

10

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.

	FRIEDMAN INDUSTRIES, INCORPORATED
Date August 14, 2003
	By	/s/  BEN HARPER
	Ben Harper, Senior Vice President-Finance
	(Principal Financial and Accounting Officer)

11

EXHIBIT INDEX

Exhibit No.	Description
Exhibit 10.1	— Fifth Amendment to Amended and Restated Letter Agreement
Exhibit 10.2	— Revolving Promissory Note Between the Company and JP Morgan Chase Bank
Exhibit 31.1	— Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Jack Friedman
Exhibit 31.2	— Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Ben Harper
Exhibit 32.1	— Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, signed by Jack Friedman
Exhibit 32.2	— Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, signed by Ben Harper

EX-10.1

EXHIBIT 10.1

FIFTH AMENDMENT TO AMENDED AND RESTATED LETTER AGREEMENT
(with Borrowing Base)

THIS FIFTH AMENDMENT TO AMENDED AND RESTATED LETTER AGREEMENT (this “Amendment”) dated effective as of April 1, 2003 (the “Effective Date”), is by and between FRIEDMAN INDUSTRIES, INCORPORATED (“Borrower”) and JPMORGAN CHASE BANK, formerly known as THE CHASE MANHATTAN BANK (“Bank”).

PRELIMINARY STATEMENT. Bank and Borrower have entered into an Amended And Restated Letter Agreement dated as of April 1, 1995, as amended by a First Amendment dated as of April 1, 1997, a Second Amendment dated as of July 21, 1997, a Third Amendment dated as of April 1, 1999, and a Fourth Amendment dated as of June 1, 2001 (collectively, “Credit Agreement”). All capitalized terms defined in the Credit Agreement and not otherwise defined herein shall have the same meanings herein as in the Credit Agreement. Bank and Borrower have agreed to amend the Credit Agreement to the extent set forth herein, and in order to, among other things, renew, modify and decrease the Revolving Credit Note and to reflect that the Advance/Term Note referenced in Section 1.2 of the Credit Agreement has now been paid off.

NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, Bank and Borrower hereby agree as follows:

1.     Section 1.1 of the Credit Agreement is amended to read as follows:

“Subject to the terms and conditions hereof, the Bank agrees to make loans (“Loan” or “Loans”) to Borrower from time to time before the Termination Date, not to exceed at any one time outstanding $6,000,000.00 (the “Commitment”). Borrower shall have the right to borrow, repay and reborrow. Bank and Borrower agree that Chapter 346 of the Texas Finance Code shall not apply to this Agreement, the Note or any Loan. The Loans shall be evidenced by, shall bear interest and shall be payable as provided in the promissory note of Borrower dated April 1, 2003 (together with any and all renewals, extensions, modifications, replacements, and rearrangements thereof and substitutions therefor, the “Note”), which is given in renewal, modification and decrease of that certain promissory note dated June 1, 2001, maturing April 1, 2004, in the original principal amount of $10,000,000.00. The purpose of the Loans made under the Commitment is to provide the Borrower with working capital support. “Termination Date” means the earlier of: (a) April 1, 2006; or (b) the date specified by Bank in accordance with Section 5 of the Credit Agreement.

2.     The Advance/Term Note referenced in Section 1.2 of the Credit Agreement has now been paid off and that Section is intentionally left blank.

3.     Section 2.1(c) of the Credit Agreement is amended to read “December 21, 2002” for the date of the last financial statement delivered to the Bank.

4.     Exhibit A of the Credit Agreement is amended by and replaced with the Exhibit A attached hereto for all purposes, which shall be a quarterly compliance certificate as further described therein.

5.     Borrower hereby represents and warrants to the Bank that after giving effect to the execution and delivery of this Amendment: (a) the representations and warranties set forth in the Credit Agreement are true and correct on the date hereof as though made on and as of such date; and (b) no Event of Default, or event which with passage of time, the giving of notice or both would become an Event of Default, has occurred and is continuing as of the date hereof.

6.     This Amendment shall become effective as of the Effective Date upon its execution and delivery by each of the parties named in the signature lines below, and the term “Agreement” as used in the Credit Agreement shall also refer to the Credit Agreement as amended by this Amendment.

7.     Borrower further acknowledges that each of the other Loan Documents is in all other respects ratified and confirmed, and all of the rights, powers and privileges created thereby or thereunder are ratified, extended, carried forward and remain in full force and effect except as the Credit Agreement is amended by this Agreement.

8.     This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed an original and all of which taken together shall constitute but one and the same agreement.

9.     This Amendment shall be included within the definition of “Loan Documents” as used in the Agreement.

10.     THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND AS APPLICABLE, THE LAWS OF THE UNITED STATES OF AMERICA.

THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE A “LOAN AGREEMENT” AS DEFINED IN SECTION 26.02(a) OF THE TEXAS BUSINESS & COMMERCE CODE, AND REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

Page 1 of 2 Pages

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed effective as of the Effective Date.

BORROWER:	FRIEDMAN INDUSTRIES, INCORPORATED
	By:	/s/ BEN HARPER
	Name:	Ben Harper
	Title:	Senior Vice President — Finance
BANK:	THE CHASE MANHATTAN BANK
	By:	/s/ FAITH A. EDWARDS
	Name:	Faith A. Edwards
	Title:	Vice President

Page 2 of 2 Pages

EXHIBIT A to Agreement between
FRIEDMAN INDUSTRIES, INCORPORATED (“Borrower”) and JPMORGAN CHASE BANK (“Bank”)
dated as of April 1, 1995, as some may be amended, restated and supplemented in writing

REPORTING REQUIREMENTS, FINANCIAL COVENANTS
AND
COMPLIANCE CERTIFICATE FOR CURRENT REPORTING PERIOD ENDING                , 200   (“END DATE”)

A. REPORTING PERIOD. THIS EXHIBIT WILL BE IN PROPER FORM AND BE SUBMITTED QUARTERLY.

B.

Financial Reporting. Borrower will provide the following financial information within the times indicated:			Compliance
			Certificate
WHO	WHEN DUE	WHAT	Compliance
			(Circle)
			Yes    No
BORROWER	(i) Quarterly at such time as this statement is	Borrower’s 10-Q together with a	Yes    No
	submitted to the Securities and Exchange	certificate of compliance duly executed by
	Commission (“SEC”)	an officer of Borrower.
	(ii) On an annual basis at such time at this	Borrower’s 10-K together with a certificate	Yes    No
	statement is submitted to the Securities and	of compliance duly executed by an officer
	Exchange Commission (“SEC”)	of Borrower

C.

FINANCIAL COVENANTS. Borrower will comply with the following financial covenants, defined in accordance with GAAP incorporating the calculation adjustments indicated on the Compliance Certificate:	COMPLIANCE CERTIFICATE
REQUIRED	ACTUAL REPORTED	Compliance
Except as specified otherwise, each covenant will be maintained at all times and reported for each Reporting Period or as of each Reporting Period End Date, as appropriate:	For Current Reporting Period/as of the End Date	(Circle) Yes    No

1. Maintain a Working Capital of at least $10,000,000.00.	$		-	$		=	$		Yes    No
		Current Assets			Current Liabilities			Working Capital
2. Maintain a Tangible Net Worth as adjusted of at		Stockholders’ Equity					$		Yes    No
least $25,000,000.00.		Minus:			Goodwill		$
					Other Intangible Assets		$
		Plus:			Subordinated Debt		$
		Equals:			Tangible Net Worth		$
3. Maintain a Current Ratio of at least 2.00 to 1.00.	$		/	$		=	$		Yes    No
		Current Assets			Current Liabilities			Current Ratio
4. Maintain a ratio of Total Indebtedness to Tangible Net Worth plus Subordinated Debt of no more than 1.10 to 1.00.		Total Indebtedness (GAAP)					$		Yes    No
		Tangible Net Worth					$
	$		/	$		=	$
		Total Indebtedness			Tangible Net Worth			Ratio

THE ABOVE SUMMARY REPRESENTS SOME OF THE COVENANTS AND AGREEMENTS CONTAINED IN THE NOTE AND DOES NOT IN ANY WAY RESTRICT OR MODIFY THE TERMS AND CONDITIONS OF THE NOTE. IN CASE OF CONFLICT BETWEEN THIS EXHIBIT A AND THE NOTE, THE NOTE SHALL CONTROL.

The undersigned hereby certifies that the above information and computations are true and correct and not misleading as of the date hereof, and that since the date of the Borrower’s most recent Compliance Certificate (if any):

o No default or Event of Default has occurred under the Note during the current Reporting Period, or been discovered from a prior period, and not reported.

o A default or Event of Default (as described below) has occurred during the current Reporting Period or has been discovered from a prior period and is being reported for the first time and:

o was cured on             .

o was waived by Bank in writing on             .

o is continuing.

Description of Event of Default:

Executed this                           day of                         , 200  .

EXHIBIT A Page 1 of 2 Pages

BORROWER: FRIEDMAN INDUSTRIES, INCORPORATED

SIGNATURE:

NAME:

TITLE:

ADDRESS:

EXHIBIT A Page 2 of 2 Pages

EX-10.2 4 h07958exv10w2.htm REVOLVING PROMISSORY NOTE

EXHIBIT 10.2

REVOLVING PROMISSORY NOTE
(this “Note”)

U.S. $6,000,000.00 April 1, 2003 (“Date”)

FOR VALUE RECEIVED, FRIEDMAN INDUSTRIES, INC. (“Borrower”), a Texas corporation, promises to pay to the order of JPMORGAN CHASE BANK, formerly known as THE CHASE MANHATTAN BANK (“Bank”) on or before April 1, 2006 (the “Termination Date”), at its banking house at 712 Main Street, P.O. Box 2558, Houston, Texas, or at such other location as Bank may designate, in lawful money of the United States of America, the lesser of: (i) the principal sum of SIX MILLION AND NO/100THS UNITED STATES DOLLARS (U.S. $6,000,000.00 or (ii) the aggregate unpaid principal amount of all loans made by Bank (each such loan being a “Loan”), which may be outstanding on the Termination Date. Each Loan shall be due and payable on the maturity date agreed to by Bank and Borrower with respect to such Loan (the “Maturity Date”). In no event shall any Maturity Date fall on a date after the Termination Date. This Note is the Revolving Note referenced in Section 1.1 of the Letter Agreement (as defined below). Capitalized terms used but not otherwise defined in this Note shall have the same meanings here as assigned to them in the Letter Agreement. Subject to the terms and conditions of this Note and the Letter Agreement, Borrower may borrow, repay and reborrow all or any part of the credit provided for herein at any time before the Termination Date, there being no limitation on the number of Loans made so long as the total unpaid principal amount at any time outstanding does not exceed the Commitment.

“Adjusted LIBOR Rate” means a per annum interest rate determined by Bank by dividing: (i) the LIBOR Rate by (ii) Statutory Reserves provided that Statutory Reserves is greater than zero, otherwise Adjusted LIBOR Rate means a per annum interest rate equal to the Libor Rate. “LIBOR Rate” means with respect to any LIBOR Loan for any Interest Period the interest rate determined by Bank by reference to Page 3756 of the Dow Jones Market Service (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by Bank from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) to be the rate at approximately 11:30 a.m. London time, two Business Days prior to the commencement of such Interest Period for the offering by Bank’s London office, of dollar deposits in an amount comparable to such LIBOR Loan with a maturity comparable to such Interest Period.

“Board” means the Board of Governors of the Federal Reserve System of the United States.

“Borrowing Date” means any Business Day on which Bank shall make or continue a Loan hereunder.

“Business Day” means a day: (i) on which Bank and commercial banks in New York City are generally open for business; and (ii) with respect to LIBOR Loans, on which dealings in United States Dollar deposits are carried out in the London interbank market.

“Highest Lawful Rate” means the maximum nonusurious rate of interest from time to time permitted by applicable law. To the extent that Texas law determines the Highest Lawful Rate, the Highest Lawful Rate is the weekly rate ceiling as defined in the Texas Finance Code Chapter 303. Bank may from time to time, as to current and future balances, elect and implement any other ceiling under such statutes and/or revise the index, formula or provisions of law used to compute the rate on this open-end account by notice to Borrower, if and to the extent permitted by, and in the manner provided in applicable law.

“Interest Period” means the period commencing on the Borrowing Date and ending on the Maturity Date, consistent with the following provisions. The duration of each Interest Period shall be: (a) in the case of a Prime Rate Loan, a period of up to the Termination Date unless any portion thereof is converted to a LIBOR Loan hereunder,; and (b) in the case of a LIBOR Loan, a period of up to one, two or three months; in each case as selected by Borrower and agreed to by Bank. Borrower’s choice of Interest Period is subject to the following limitations: (i) No Interest Period shall end on a date after the Termination Date; and (ii) If the last day of an Interest Period would be a day other than a Business Day, the Interest Period shall end on the next succeeding Business Day (unless the Interest Period relates to a LIBOR Loan and the next succeeding Business Day is in a different calendar month than the day on which the Interest Period would otherwise end, in which case the Interest Period shall end on the next preceding Business Day).

“Letter Agreement” means the Amended and Restated Letter Agreement dated as of April 1, 1995, by and between Borrower and Bank, as amended by a First Amendment dated as of April 1, 1997, a Second Amendment dated as of July 21, 1997, a Third Amendment dated as of April 1, 1999, a Fourth Amendment dated as of June 1, 2001, a Fifth Amendment dated as of April 1, 2003, and as it may be further amended from time to time.

“LIBOR Loan” means a Loan which bears interest at a rate determined by reference to the Adjusted LIBOR Rate.

“Loan Documents” means this Note, the Letter Agreement and any other document or instrument evidencing, securing, guaranteeing or given in connection with this Note.

“Obligations” means all principal, interest and other amounts which are or become owing under this Note or any other Loan Document.

“Obligor” means Borrower and any guarantor, surety, co-signer, general partner or other person who may now or hereafter be obligated to pay all or any part of the Obligations.

“Prime Rate” means the rate determined from time to time by Bank as its prime rate. The Prime Rate shall change automatically from time to time without notice to Borrower or any other person. THE PRIME RATE IS A REFERENCE RATE AND MAY NOT BE BANK’S LOWEST RATE.

“Prime Rate Loan” means a Loan which bears interest at a rate determined by reference to the Prime Rate.

“Statutory Reserves” means the difference (expressed as a decimal) of the number one minus the aggregate of the maximum reserve percentages (including, without limitation, any marginal, special, emergency, or supplemental reserves) expressed as a decimal established by the Board and any other banking authority to which Bank is subject to, with respect to the LIBOR Rate, for Eurocurrency Liabilities (as defined in Regulation D of the Board). Such reserve percentages shall include, without limitation, those imposed under such Regulation D. LIBOR Loans shall be deemed to constitute Eurocurrency Liabilities and as such shall be deemed to be subject to such reserve requirements without benefit of or credit for proration, exceptions or offsets which may be available from time to time to any bank under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

     Loans may be either Prime Rate Loans or LIBOR Loans. Borrower shall pay interest on the unpaid principal amount of each Prime Rate Loan at a rate per annum equal to the lesser of: (i) the Prime Rate in effect from time to time (the “Effective Prime Rate”); or (ii) the Highest Lawful Rate. Accrued interest on each Prime Rate Loan is due and payable monthly during the term of this Note, commencing May 1, 2003, on the same day of each month thereafter and on the Termination Date. Borrower shall pay interest on the unpaid principal amount of each LIBOR Loan for the Interest Period with respect thereto at a rate per annum equal to the lesser of: (i) the Adjusted LIBOR Rate plus one and one-half percent (1.50%) (the “Effective LIBOR Rate”); or (ii) the Highest Lawful Rate. Accrued interest on each LIBOR Loan is due on the last day of each Interest Period applicable thereto on any prepayment (on the amount prepaid), and on the Termination Date.

     If at any time the effective rate of interest which would otherwise be payable on any Loan evidenced by this Note exceeds the Highest Lawful Rate, the rate of interest to accrue on the unpaid principal balance of such Loan during all such times shall be limited to the Highest Rate, but any subsequent reductions in such interest rate shall not become effective to reduce such interest rate below the Highest Lawful Rate until the total amount of interest accrued on the unpaid principal balance of such Loan equals the total amount of interest which would have accrued if the Effective Prime Rate, or Effective LIBOR Rate, whichever is applicable, had at all times been in effect.

     Each LIBOR Loan shall be in an amount not less than $10,000.00 and an integral multiple of $10,000.00. Each Prime Rate Loan shall be in an amount not less than $10,000.00 and an integral multiple of $10,000.00. Interest on each Prime Rate Loan shall be computed on the basis of the actual number of days elapsed and a year comprised of 365 or 366 days, as the case may be. Interest on each LIBOR Loan shall be computed on the basis of the actual number of days elapsed and a year comprised of 360 days,

Page 1 of 3 Pages

unless such calculation would result in a usurious interest rate, in which case such interest shall be calculated on the basis of a 365 or 366 day year, as the case may be.

     The unpaid principal balance of this Note at any time will be the total amounts advanced by Bank, less the amount of all payments or prepayments of principal. Absent manifest error, the records of Bank will be conclusive as to amounts owed.

     Loans shall be made on Borrower’s irrevocable notice to Bank, given not later than 10:00 A.M. (Houston time) on, in the case of LIBOR Loans, the third Business Day prior to the proposed Borrowing Date or, in the case of Prime Rate Loans, the first Business Day prior to the proposed Borrowing Date. Each notice of a requested borrowing (a “Notice of Requested Borrowing”) under this paragraph may be oral or written, and shall specify: (i) the requested amount; (ii) proposed Borrowing Date; (iii) whether the requested Loan is to be a Prime Rate Loan or LIBOR Loan; and (iv) Interest Period for the LIBOR Loan. If any Notice of Requested Borrowing shall be oral, Borrower shall deliver to Bank prior to the Borrowing Date a confirmatory written Notice of Requested Borrowing.

     Borrower may on any Business Day prepay the outstanding principal amount of any Prime Rate Loan, in whole or in part. Partial prepayment shall be in an aggregate principal amount of $10,000.00 or a greater integral multiple of $10,000.00. Borrower shall have no right to prepay any LIBOR Loan.

     Provided than no Event of Default has occurred and is continuing, Borrower may elect to continue all or any part of any LIBOR Loan beyond the expiration of the then current Interest Period relating thereto by providing Bank at least three Business Days written or telecopy notice of such election, specifying the Loan or portion thereof to be continued and the Interest Period therefor and whether it is to be a Prime Rate Loan or LIBOR Loan provided that any continuation as a LIBOR Loan shall not be less than $10,000.00 and shall be in an integral multiple of $10,000.00. If an Event of Default shall have occurred and be continuing, the Borrower shall not have the option to elect to continue any such LIBOR Loan or to convert Prime Rate Loans into LIBOR Loans. Provided that no Event of Default has occurred and is continuing, Borrower may elect to convert any Prime Rate Loan at any time or from time to time to a LIBOR Loan by providing Bank at least three Business Days written or telecopy notice of such election, specifying each Interest Period therefor. Any conversion of Prime Rate Loans shall not result in a borrowing of LIBOR Loans in an amount less that $10,000.00 and in integral multiples of $10,000.00.

     If at any time Bank determines in good faith (which determination shall be conclusive) that any change in any applicable law, rule or regulation or in the interpretation, application or administration thereof makes it unlawful, or any central bank or other governmental authority asserts that is it unlawful, for Bank or its foregoing branch to maintain any LIBOR Loan by means of dollar deposits obtained in the London interbank market (any of the above being described as a “LIBOR Event”) then, at the option of Bank, the aggregate principal amount of all LIBOR Loans outstanding shall be prepaid; however the prepayment may be made at the sole option of the Bank with a Prime Rate Loan. Upon the occurrence of any LIBOR Event, and at any time thereafter so long as such LIBOR Event shall continue, the Bank may exercise its aforesaid option by giving written notice therefor to Borrower.

     If Bank determines after the date of this Note that any change in applicable laws, rules or regulations regarding capital adequacy, or any change in the interpretation or administration thereof by any appropriate governmental agency, or compliance with any request or directive to Bank regarding capital adequacy (whether or not having the force of law) of any such agency, increases the capital required to be maintained with respect to any Loan and therefore reduces the rate of return on Bank’s capital below the level Bank could have achieved but for such change or compliance (taking into consideration Bank’s policies with respect to capital adequacy), then Borrower will pay Bank from time to time, within 15 days of Bank’s request, any additional amount required to compensate Bank for such reduction. Bank will request any additional amount by delivering to Borrower a certificate of Bank setting forth the amount necessary to compensate Bank. The certificate will be conclusive and binding, absent manifest error. Bank may make any assumptions, and may use any allocations of costs and expenses and any averaging and attribution methods, which Bank in good faith finds reasonable.

     If any domestic or foreign law, treaty, rule or regulation (whether now in effect or hereinafter enacted or promulgated, including Regulation D of the Board) or any interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof (whether or not having the force of law): (a) changes, imposes, modifies, applies or deems applicable any reserve, special deposit or similar requirements in respect of any Loan or against assets of, deposits with or for the account of, or credit extended or committed by, Bank; or (b) imposes on Bank or the interbank eurocurrency deposit and transfer market or the market for domestic bank certificates or deposit any other condition affecting any such Loan; and the result of any of the foregoing is to impose a cost to Bank of agreeing to make, funding or maintaining any such Loan or to reduce the amount of any sum receivable by Bank in respect of any such Loan, then Bank may notify Borrower in writing of the happening of such event and Borrower shall upon demand pay to Bank such additional amounts as will compensate Bank for such costs as determined by Bank. Without prejudice to the survival of any other agreement of Borrower under this Note, the obligations of Borrower under this paragraph shall survive the termination of this Note.

     Borrower will indemnify Bank against, and reimburse Bank on demand for, any loss, cost or expense incurred or sustained by Bank (including without limitation any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by Bank to fund or maintain LIBOR Loans) as a result of: (a) any payment or prepayment (whether permitted by Bank or required hereunder or otherwise) of all or a portion of any LIBOR Loan on a day other than the Maturity Date of such Loan; (b) any payment or prepayment, whether required hereunder or otherwise, of any LIBOR Loan made after the delivery of a Notice of Requested Borrowing but before the applicable Borrowing Date if such payment or prepayment prevents the proposed Loan from becoming fully effective; or (c) the failure of any LIBOR Loan to be made by Bank due to any action or inaction of Borrower. Such funding losses and other costs and expenses shall be calculated and billed by Bank and such bill shall, as to the costs incurred, be conclusive absent manifest error.

     All past-due principal and interest on this Note, will, at Bank’s option, bear interest at the Highest Lawful Rate, or if applicable law does not provide for a maximum nonusurious rate of interest, at a rate per annum equal to the Prime Rate plus five percent (5%).

     In addition to all principal and accrued interest on this Note, Borrower agrees to pay: (a) all reasonable costs and expenses incurred by Bank and all owners and holders of this Note in collecting this Note through probate, reorganization, bankruptcy or any other proceeding; and (b) reasonable attorney’s fees if and when this Note is placed in the hands of an attorney for collection.

     Borrower and Bank intend to confirm strictly to applicable usury law. Therefore, the total amount of interest (as defined under applicable law) contracted for, changed or collected under this Note will never exceed the Highest Lawful Rate. If Bank contracts for, charges or receives any excess interest, it will be deemed a mistake. Bank will automatically reform the contract or charge to conform to applicable law, and if excess interest has been received, Bank will either refund the excess to Borrower or credit the excess on the unpaid principal amount of this Note. All amounts constituting interest will be spread throughout the full term of this Note in determining whether interest exceeds lawful amounts.

     If any Event Default occurs under the Letter Agreement, then Bank may do any or all of the following: (i) cease making Loans hereunder; (ii) declare the Obligations to be immediately due and payable, without notice of acceleration or of intention to accelerate, presentment and demand or protest or notice of any kind, all of which are hereby expressly waived; and (iv) exercise any and all other rights under the Loan Documents, at law, in equity or otherwise.

     No waiver of any default is a waiver of any other default. Bank’s delay in exercising any right or power under any Loan Document is not a waiver of such right or power.

     Each Obligor severally waives notice, demand, presentment for payment, notice of nonpayment, notice of intent to accelerate, notice of acceleration, protest, notice of protest, and the filing of suit and diligence in collecting this Note and all other demands and notices, and consents and agrees that its liabilities and obligations will not be released or discharged by any or all of the following, whether with or without notice to it or any other Obligor, and whether before or after the stated maturity hereof: (i) extensions of the time of payment; (ii) renewals; (iii) acceptances of partial payments; (iv) releases or substitutions of any collateral or any Obligor; and (v) failure, if any, perfect or maintain perfection of any security interest in any collateral. Each Obligor agrees

Page 2 of 3 Pages

that acceptance of any partial payment will not constitute a waiver and that waiver of any default will not constitute waiver of any prior or subsequent default. Nothing in this Agreement is intended to waive or vary the duties of Bank or the rights of any Obligor in violation of Section 9.602 of the Texas Business and Commerce Code.

     Where appropriate the neuter gender includes the feminine and the masculine and the singular number includes the plural number.

     Borrower represents and agrees that all Loans evidenced by this Note are and will be for business, commercial, investment, agricultural or other similar purpose and not primarily for personal, family, or household use. Borrower represents and agrees that the following statement is true unless the box preceding that statement is checked and initialed by Borrower and Bank: o

          No advances will be used for the purpose of purchasing or carrying any margin stock as that term is defined in Regulation U of the Board.

     Chapter 346 of the Finance Code (which regulates certain revolving loan accounts) shall not apply to this Note or to any Loan evidenced by this Note.

     This Note is governed by Texas law. If any provision of this Note is illegal or unenforceable, that illegality or unenforceability will not affect the remaining provisions of this Note. BORROWER AND BANK AGREE THAT THE COUNTY IN WHICH BANK’S PRINCIPAL OFFICE IN TEXAS IS LOCATED IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY BORROWER OR BANK, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR PROCEEDING AGAINST BORROWER MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN SUCH COUNTY TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW. TO THE EXTENT PERMITTED BY APPLICABLE LAW BORROWER HEREBY IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN INCONVENIENT FORUM. BORROWER AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED BELOW. BANK MAY SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW AND MAY BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER PROPER JURISDICTIONS OR VENUES.

     JURY TRIAL WAIVER. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW, BORROWER AND BANK HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY THAT BORROWER OR BANK MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN CONNECTION WITH THIS NOTE OR THE OBLIGATIONS. BORROWER REPRESENTS AND WARRANTS THAT NO REPRESENTATIVE OR AGENT OF BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT BANK WILL NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS RIGHT TO JURY TRIAL WAIVER. BORROWER ACKNOWLEDGES THAT BANK HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS WAIVER.

     For purposes of this Note, any assignee or subsequent holder of this Note will be considered the “Bank,” and each successor to Borrower will be considered the “Borrower.”

     Borrower represents that it is duly organized and validly existing and in good standing under the laws of the state of its incorporation or organization; has full power to own its properties and to carry on its business as now conducted; is duly qualified to do business and is on good standing in each jurisdiction in which the nature of the business conducted by it makes such qualification desirable; and has not commenced any dissolution proceedings. Each Borrower and cosigner that is subject to the Texas Revised Partnership Act (“TRPA”) agrees that Bank is not required to comply with Section 3.05(d) of the TRPA and agrees that Bank may proceed directly against one or more partners or their property without first seeking satisfaction from partnership property. Each of the persons signing below as Borrower represents that he/she has full requisite power and authority to execute and deliver this Note to Bank on behalf of the Borrower and to bind Borrower to the terms and conditions of this Note and that this Note is enforceable against Borrower.

     NO COURSE OF DEALING BETWEEN BORROWER AND BANK, NO COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EXTRINSIC EVIDENCE OF ANY NATURE MAY BE USED TO CONTRADICT OR MODIFY ANY TERM OF THIS NOTE OR ANY OTHER LOAN DOCUMENT.

     THIS NOTE AND THE OTHER WRITTEN LOAN DOCUMENTS 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, Borrower has executed this Note effective the day, month and year first aforesaid.

FRIEDMAN INDUSTRIES, INCORPORATED
By:	/s/ BEN HARPER
Name:	Ben Harper
Title:	Senior Vice President-Finance

(Bank’s signature is provided as its acknowledgment of the above as the final written agreement between the parties.)

JPMORGAN CHASE BANK
By:	/s/ FAITH A. EDWARDS
Name:	Faith A. Edwards
Title:	Vice President

Page 3 of 3 Pages

EX-31.1 5 h07958exv31w1.htm CERTIFICATION OF CEO PURSUANT TO SECTION 302

Exhibit 31.1

I, Jack Friedman, the Chairman of the Board and Chief Executive Officer of Friedman Industries, Incorporated, a Texas corporation, certify that:

I have reviewed this quarterly report on Form 10-Q of Friedman Industries, Incorporated;

      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, result of operations and cash flows of the registrant as of, and for, the periods presented in this report;

      The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) [intentionally omitted per SEC release 33-8238]

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

      The registrant's other certifying officers(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: August 14, 2003

/s/  JACK FRIEDMAN

Chairman of the Board and

Chief Executive Officer

EX-31.2 6 h07958exv31w2.htm CERTIFICATION OF CFO PURSUANT TO SECTION 302

Exhibit 31.2

I, Ben Harper, Senior Vice President-Finance and Secretary/Treasurer of Friedman Industries, Incorporated, a Texas corporation, certify that:

I have reviewed this quarterly report on Form 10-Q of Friedman Industries, Incorporated;

      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, result of operations and cash flows of the registrant as of, and for, the periods presented in this report;

      The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) [intentionally omitted per SEC release 33-8238]

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

      The registrant's other certifying officers(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: August 14, 2003

/s/  BEN HARPER

Senior Vice President-Finance and

Secretary/Treasurer

EX-32.1 7 h07958exv32w1.htm CERTIFICATION OF CEO PURSUANT TO SECTION 906

EXHIBIT 32.1

Certification Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906

of The Sarbanes-Oxley Act of 2002

Not Filed Pursuant to the Securities Exchange Act of 1934

      In connection with the Quarterly Report of Friedman Industries, Incorporated (the “Company”) on Form 10-Q for the period ending June 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jack Friedman, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

      (1) The Report fully complies with the requirement of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

      (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 14, 2003

By /s/ JACK FRIEDMAN

    Name: Jack Friedman

    Title: Chairman of the Board and Chief Executive Officer

EX-32.2 8 h07958exv32w2.htm CERTIFICATION OF CFO PURSUANT TO SECTION 906

EXHIBIT 32.2

Certification Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906

of The Sarbanes-Oxley Act of 2002

Not Filed Pursuant to the Securities Exchange Act of 1934

      In connection with the Quarterly Report of Friedman Industries, Incorporated (the “Company”) on Form 10-Q for the period ending June 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ben Harper, Senior Vice President-Finance and Secretary/Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

      (1) The Report fully complies with the requirement of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

      (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 14, 2003

By /s/ BEN HARPER

    Name: Ben Harper

    Title: Senior Vice President-Finance and Secretary/Treasurer

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