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<SEC-DOCUMENT>0000930661-02-001852.txt : 20020524
<SEC-HEADER>0000930661-02-001852.hdr.sgml : 20020524
<ACCEPTANCE-DATETIME>20020524160502
ACCESSION NUMBER: 0000930661-02-001852
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 19
CONFORMED PERIOD OF REPORT: 20020228
FILED AS OF DATE: 20020524
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: AZZ INC
CENTRAL INDEX KEY: 0000008947
STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640]
IRS NUMBER: 750948250
STATE OF INCORPORATION: TX
FISCAL YEAR END: 0228
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-12777
FILM NUMBER: 02662354
BUSINESS ADDRESS:
STREET 1: 400 N TARRANT RD
CITY: CROWLEY
STATE: TX
ZIP: 76036
BUSINESS PHONE: 8172974361
MAIL ADDRESS:
STREET 1: P O BOX 668
STREET 2: P O BOX 668
CITY: CROWLEY
STATE: TX
ZIP: 76036
FORMER COMPANY:
FORMER CONFORMED NAME: AZTEC MANUFACTURING CO
DATE OF NAME CHANGE: 20000911
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>d10k.txt
<DESCRIPTION>FORM 10-K
<TEXT>
<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K*
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended: February 28, 2002
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 1-12777
AZZ incorporated
(Exact name of registrant as specified in its charter)
TEXAS 75-0948250
(State of incorporation) (I.R.S. Employer Identification Number)
University Centre I, Suite 200
1300 University Drive
Fort Worth, Texas 76107
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 810-0095
Securities registered pursuant to section 12(b) of the act:
Title of Each Class Name of Exchange on Which Registered
------------------- ------------------------------------
Common Stock, $1.00 par value New York Stock Exchange
Securities registered pursuant to section 12(g) of the act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of Common Stock held by non-affiliates on May 13,
2002, was approximately $98,054,000. As of May 13, 2002, there were 5,002,731
shares of AZZ incorporated Common Stock $1.00 par value outstanding.
Documents Incorporated By Reference
Part III incorporates information by reference from the Proxy Statement for the
2002 Annual Meeting of Shareholders of Registrant.
- --------------------------------------------------------------------------------
<PAGE>
PART I
Item 1. Business
AZZ incorporated ("AZZ" or the "Company") was established in 1956 and
incorporated under the laws of the State of Texas. The Company is an electrical
equipment and components manufacturer serving the global growth markets of power
generation, transmission and distribution, and industrial markets as well as a
leading provider of hot dip galvanizing services to the steel fabrication market
nationwide.
The Company offers products through two distinct business segments, Electrical
and Industrial Products and the Galvanizing Services Segment.
The Company changed its name from Aztec Manufacturing Co. to AZZ incorporated on
July 10, 2000. The Company believes the new name more effectively represents the
scope of its business beyond manufacturing, reflects the changes in the Company
over the past 10 years and better enables it to cross-leverage its marketing
opportunities through the use of a common name and new image.
On November 1, 2001, the Company acquired 100% of the outstanding stock of
Central Electric Company (CEC), headquartered in Fulton, Missouri. CEC is
comprised of three operations consisting of a metal clad switchgear facility in
Fulton, Missouri, a power center operation in Tulsa, Oklahoma and a relay panel
and non-segmented bus-duct operation in Nashville, Tennessee. The consolidated
annual revenues of CEC are expected to be approximately $50 million. The cost of
the acquisition was $28.5 million including transaction costs. The acquisition
was paid for with $26.7 million of cash; $1.8 million in AZZ incorporated stock
(97,297 shares of common stock), which was valued based upon the average value
of the stock at the time of the public announcement of the acquisition. The
operating assets acquired included $1.2 million in cash.
On November 1, 2001, the Company also acquired the operating assets of Carter &
Crawley, Inc., headquartered in Greenville, South Carolina for $15.4 million in
cash including transaction costs. The operating assets acquired included $2.2
million in cash. Carter & Crawley, Inc. designs, manufactures and installs relay
panels and custom control systems for utilities and industrial manufacturers.
The annual revenues of Carter & Crawley are expected to be approximately $20
million.
Electrical and Industrial Products Segment
The Electrical and Industrial Products Segment produces highly engineered
specialty electrical products as well as lighting and tubular products. The
Company markets and sells its products throughout the global market place. The
electrical portion of this segment designs, manufactures, and configures
products that distribute electrical power to a generator, transformer, switching
device or other electrical configurations. These electrical systems are supplied
to the power generation, transmission and distribution markets as well as the
industrial market. Also provided by this segment are industrial lighting and
tubular products used for petrochemical and industrial applications. Lighting
products are provided to the petroleum, food processing, and power generation
industries, to consumer retail outlets and to industries with unique lighting
challenges. The principal markets for tubular products is the petroleum
industry. The markets for the Company's Electrical and Industrial Products
Segment are highly competitive and consist of a few large national companies, as
well as numerous small independents. Competition is based primarily on product
quality, range of product line, price and service. While some of these companies
are much larger and better financed than the Company, the Company believes that
it can compete favorably with them. Copper, aluminum and steel are the primary
raw materials used in this segment and are readily available. This segment's
products are sold though manufacturers' representatives and its internal sales
force. This segment is not dependent on any single customer or limited number of
customers for as much as 10% of sales, and the loss of any single customer would
not have a material adverse effect on consolidated revenues or net income of the
Company. Backlog of orders was approximately $85.3 million at February 28, 2002,
$34.8 million at February 28, 2001 and $31.2 million at February 29, 2000. All
of the year-end backlog should be delivered during the next 18 months.
1
<PAGE>
Orders included in the backlog are represented by contracts and purchase orders
that the Company believes to be firm. Total employment in this segment is 839
persons.
Galvanizing Services Segment
The Galvanizing Services Segment provides hot dip galvanizing to the steel
fabrication industry through facilities located throughout the South and
Southwest United States. The eleven galvanizing plants of the Company are
located in Texas, Louisiana, Alabama, Mississippi, Arkansas, and Arizona. Hot
dip galvanizing is a metallurgical process by which molten zinc is applied to a
customer's material. The zinc bonding provides corrosion protection of
fabricated steel for extended periods of up to 50 years. Galvanizing is a highly
competitive business and the Company competes with other independent galvanizing
companies, captive galvanizing facilities operated by manufacturers, and
alternate forms of corrosion protection such as paint. The Company is limited,
to some extent, in its galvanizing market to areas within a close proximity of
its existing locations due to freight cost. Zinc, the principal raw material
used in the galvanizing process, is readily available, but has volatile pricing.
The Company manages its exposure to commodity pricing of zinc by utilizing
contracts with zinc suppliers that include protective caps to guard against
rising commodity prices. This segment typically serves fabricators and/or
manufacturers involved in the highway construction, electrical utility,
transportation, water treatment, agriculture, petrochemical and chemical, pulp
and paper industries, and numerous OEM's. The market in general is broken into
two major categories, being large structural steel projects and custom
fabrication. This segment is not dependent on any single customer or limited
number of customers for as much as 10% of sales, and the loss of any customer
would not have a material adverse effect on consolidated revenues or net income
of the Company. The backlog of galvanizing orders generally is nominal due to
the short time requirement involved in the process. Total employment in this
segment is 416 persons.
General
The Company does not have a material portion of business that may be subject to
renegotiations of profits or termination of contracts or subcontracts at the
election of the government. There were no material amounts spent on research and
development activities during the proceeding three fiscal years.
Environmental
The Company is subject to various environmental protection reviews by state and
federal government agencies. The ultimate liability, if any, which might result
from such reviews or additional clean-up and remediation expenses cannot
presently be determined; however, as a result of an internal analysis and prior
clean-up efforts, management believes the results will not have a material
impact on the Company and that the recorded reserves for estimated losses are
adequate. The Company has reserved $590,000 and $186,000 as of February 28, 2002
and 2001, respectively, for estimated losses related to environmental
liabilities.
In order to maintain permits to operate certain of the Company's facilities,
future capital expenditures for equipment may be required to meet new or
existing environmental regulations.
The Company is involved from time to time in various suits and claims arising in
the normal course of business. In management's opinion, the ultimate resolution
of these matters will not have a material effect on the Company's financial
position or results of operations.
2
<PAGE>
Executive Officers of the Registrant
<TABLE>
<CAPTION>
Business Experience for Past
Name Age Five Years; Position or Office with Registrant Held Since
- ------------------ --- ---------------------------------------------- ----------
<S> <C> <C> <C>
L. C. Martin 76 Chairman of the Board 1987
Chief Executive Officer 1968-2001
President 1965-1998
David H. Dingus 54 President and Chief Executive Officer 2001
President and Chief Operating Officer 1998-2000
President and Chief Executive Officer of Reedrill Corp 1989-1998
Dana L. Perry 53 Vice President of Finance, Chief Financial Officer, Asst. Sec. 1992
Fred L. Wright, Jr. 61 Senior Vice President/Galvanizing Services Segment 1992
Clement H. Watson 55 Vice President Sales, Electrical Products 2000
Vice President Marketing and Sales Pulsafeeder, Inc. 1995-2000
John V. Petro 56 Vice President, Electrical Products 2001
General Manager of CGIT, Inc. 1995-2001
</TABLE>
Each executive officer was elected by the Board of Directors to hold office
until the next Annual Meeting or until his successor is elected. There are no
family relationships between Executive Officers of the Registrant.
Item 2. Properties
The following table sets forth information about the Company's principal
facilities owned on February 28, 2002:
<TABLE>
<CAPTION>
Buildings/
Location Land/Acres Sq. Footage Segment/Occupant
- -------- ---------- ----------- ----------------
<S> <C> <C> <C>
Crowley, Texas 123.5 201,000 Electrical and Industrial Products
Houston, Texas 37.0 36,000 Electrical and Industrial Products
Jackson, Mississippi 6.7 58,700 Electrical and Industrial Products
Pittsburg, Kansas 15.3 86,000 Electrical and Industrial Products
Westborough, Massachusetts - (Leased) 36,400 Electrical and Industrial Products
Fulton, MO - (Leased) 85,000 Electrical and Industrial Products
Nashville, TN - (Leased) 60,000 Electrical and Industrial Products
Tulsa, OK - (Leased) 66,000 Electrical and Industrial Products
Greenville, SC - (Leased) 65,000 Electrical and Industrial Products
Crowley, Texas 28.5 79,200 Galvanizing Services
Houston, Texas 8.7 25,800 Galvanizing Services
Houston, Texas 5.4 67,400 Galvanizing Services
Waskom, Texas 10.6 30,400 Galvanizing Services
Beaumont, Texas 12.9 33,700 Galvanizing Services
Moss Point, Mississippi 13.5 16,000 Galvanizing Services
Jackson, Mississippi 5.6 22,800 Galvanizing Services
</TABLE>
3
<PAGE>
Item 2. Properties (continued)
Buildings/
Location Land/Acres Sq. Footage Segment/Occupant
- -------- ---------- ----------- ----------------
Citronelle, Alabama 10.8 34,000 Galvanizing Services
Goodyear, Arizona 11.75 36,800 Galvanizing Services
Prairie Grove, Arkansas 11.5 34,000 Galvanizing Services
Belle Chasse, Louisiana 9.5 34,000 Galvanizing Services
Port Allen, Louisiana 22.2 48,700 Galvanizing Services
Fort Worth, Texas - (Leased) 15,300 Corporate Office
Item 3. Legal Proceedings
Environmental Proceedings
The Company is subject to various environmental protection reviews by state and
federal government agencies. The ultimate liability, if any, which might result
from such reviews or additional clean-up and remediation expenses cannot
presently be determined; however, as a result of an internal analysis and prior
clean-up efforts, management believes the results will not have a material
impact on the Company and that the recorded reserves for estimated losses are
adequate. The Company has reserved $590,000 and $186,000 as of February 28, 2002
and 2001, respectively, for estimated cost related to environmental compliance.
In order to maintain permits to operate certain of the Company's facilities,
future capital expenditures for equipment may be required to meet new or
existing environmental regulations.
The Company is involved from time to time in various suits and claims arising in
the normal course of business. In management's opinion, the ultimate resolution
of these matters will not have a material effect on the Company's financial
position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fourth quarter of the fiscal year ended
February 28, 2002, to a vote of security holders through the solicitation of
proxies or otherwise.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The common stock, $1.00 par value, of Registrant ("Common Stock") is traded on
the New York Stock Exchange and its symbol is AZZ. The Company was listed on the
New York Stock Exchange and started trading on March 20, 1997. Prior to that
date, the Company's stock traded on the NASDAQ National Market.
The following table sets forth the high and low sales prices of the Company's
Common Stock on the New York Stock Exchange on a quarterly basis and dividends
declared during the period indicated. During fiscal 2002 the Company paid cash
dividends totaling approximately $796,000 or $.16 per share.
4
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Quarter Ended Quarter Ended Quarter Ended Quarter Ended
May 31, August 31, November 30, February 28,
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share 2001 2000 2001 2000 2001 2000 2002 2001
- ------------------------------------------------------------------------------------------------
High $22.50 $16.625 $25.75 $22.9375 $21.35 $19.375 $21.50 $18.6875
- ------------------------------------------------------------------------------------------------
Low $15.90 $ 10.25 $19.00 $ 14.625 $14.20 $15.000 $16.90 $ 16.625
- ------------------------------------------------------------------------------------------------
Dividends (a)
Declared $ 0.16 - - - - - -
- ------------------------------------------------------------------------------------------------
</TABLE>
Effective January 7, 1999, the Board of Directors approved a stock rights plan,
which authorized and declared a dividend distribution of one right for each
share of common stock outstanding at the close of business on February 4, 1999.
The rights are exercisable at an initial exercise price of $60, subject to
certain adjustments as defined in the agreement, if a person or group acquires
15% or more of the Company's common stock or announces a tender offer that would
result in ownership of 15% or more of the common stock. Alternatively, the
rights may be redeemed at one cent per right at any time before a 15% position
has been acquired. The rights expire on January 7, 2009.
The approximate number of holders of record of common stock of Registrant at May
13, 2002 was 764.
(a) A cash dividend of $.16 per share was declared on March 27, 2001, and was
paid on April 27, 2001.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Fiscal Year
------------------------------------------------------------------------
2002(g) 2001 2000(a) 1999 1998(d)
------------ ------------- ------------- ------------- -------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Summary of operations:
Net sales $152,917 $121,406 $92,544 $80,922 $75,479
Net income 7,804 8,172 6,593 (b) 4,874 (e) 7,220
Earnings per share:
Basic earnings per common share $ 1.53 $ 1.67 $ 1.39 (b)$ .87 (e)$ 1.21
Diluted earnings per common share 1.50 1.63 1.38 (b) .86 (e) 1.19
Total assets $147,044 $ 88,368 $84,804 $58,399 $57,902
Long-term debt 53,550 22,947 31,075 20,266 11,321
Total liabilities 92,293 44,988 51,783 31,514 23,582
Shareholders' equity 54,751 43,380 33,021 (c) 26,885 34,320
Working capital 26,761 18,732 15,128 15,033 16,731
Cash provided by operating activities $ 14,150 $ 12,372 $13,833 $8,774 $ 2,698
Capital expenditures 12,772 5,099 4,152 6,992 3,395
Depreciation & amortization 6,347 5,838 4,770 3,630 3,035
Cash dividend per common share (f) .16 (f) 0 $ .16 $ .12 $ .10
Weighted average shares outstanding 5,117 4,892 4,753 5,614 5,968
</TABLE>
(a) Includes the acquisition of CGIT and Westside in September 1999 and
February 2000, respectively.
(b) Includes a pretax charge of $914,000 (or 10 cents per share) for the
liquidation and write-down of tubular goods inventories.
(c) Includes the repurchase of approximately 1.2 million shares of the
Company's common stock at a cost of $11.9 million.
(d) Includes the acquisition of three subsidiaries in March 1997, December
1997, and February 1998.
(e) Includes a one-time tax benefit of approximately $1,076,000 (or 18 cents
per share).
(f) A cash dividend of $.16 per share was declared on March 27, 2001, and was
paid on April 27, 2001.
(g) Includes the acquisitions of Central Electric Company and Carter & Crawley,
Inc. on November 1, 2001.
5
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
And Results of Operations
AZZ incorporated (the "Company") operates two distinct segments, Electrical and
Industrial Products Segment and Galvanizing Services Segment. The Electrical and
Industrial Products Segment serves the power generation, transmission and
distribution market as well as the industrial market. The Galvanizing Services
Segment consists of eleven hot dip galvanizing facilities located throughout the
South and Southwest United States that provides a value added galvanizing
service to the steel fabrication industry.
Management believes that the following commentary appropriately discusses and
analyzes the comparative results of operations and the financial conditions of
the Company for the periods covered.
General
For the fiscal year-ended February 28, 2002, the Company recorded record
revenues of $152.9 million compared to the prior year's revenues of $121.4
million. Approximately 68% of the Company's revenues were generated from the
Electrical and Industrial Products Segment and approximately 32% were generated
from the Galvanizing Services Segment. Net income for fiscal 2002 was $7.8
million compared to $8.2 million in the prior fiscal year. Net income as a
percent of sales was 5.1% for fiscal 2002 as compared to 6.7% for fiscal 2001.
The reduction in net income as a percentage of sales was primarily due to lower
operating margins in the Company's Galvanizing Services Segment and the
industrial products within the Electrical and Industrial Products Segment. These
lower margins were a result of the overall downturn of the general economy.
Earnings per share decreased by 8% to $1.50 per share for fiscal 2002 compared
to $1.63 per share in the prior fiscal year, on a diluted basis.
Results of Operations
Year ended February 28, 2002 (2002) compared with year ended February 28, 2001
(2001)
Revenues
The Company's consolidated net revenues for fiscal 2002 increased by $31.5
million or 26%, as compared to fiscal 2001.
The Electrical and Industrial Products Segment produces highly engineered
specialty products supplied to the power generation, transmission and
distribution market as well as lighting and tubular products to the industrial
market. The segment recorded record revenues for fiscal 2002 of $103.3 million,
an increase of 50% over the prior year results of $68.9 million. These results
were aided by the acquisitions of Central Electric Company and Carter & Crawley
Inc. on November 1, 2001. These acquisitions reinforce the Company's strategy of
broadening our range of products that we are able to offer to our existing
customer base. Excluding the acquisitions, revenues for the Electrical and
Industrial Products Segment increased 17% to $80.8 million for fiscal 2002. The
Electrical and Industrial Products Segment ended fiscal 2002 with a backlog of
$85.3 million, an increase of 145% from the prior year's backlog of $34.8
million. The backlog excluding acquisitions increased 34% to $46.5 million for
fiscal 2002. The electrical products backlog increased $51.5 million to $81.5
million. Approximately 75% of the $51.5 million increase is associated with the
acquired companies, which ended fiscal 2002 with a backlog of $38.8 million. The
remaining 25% increase is due to the dynamic market in which the existing
electrical products served during fiscal 2002. The industrial products backlog
decreased 21% to $3.8 million due the slow down in the petroleum and industrial
markets as well as the economic downturn in the general economy.
Revenues for this segment's electrical products increased 72% to $80.1 million
for fiscal 2002 as compared to $46.5 million in fiscal 2001. Revenues from the
acquisitions of Central Electric Company and Carter & Crawley, Inc. for four
months of the Company's ownership was $22.4 million. Revenues for the electrical
products excluding the acquisitions was $57.7 million for fiscal 2002, as
compared to $46.5 million in fiscal 2001, an increase of 24%. Increased demand
6
<PAGE>
for these products continued in fiscal 2002 as a result of the need for new
power plants and the upgrading of existing power plants in order to supply
economical and reliable electricity. The Company's prior year's expansions and
acquisitions have enabled it to capitalize on the growth in the power industry
market. Recent developments, which have impacted the capital markets funding for
new projects, have caused delays and cancellations of domestic power plant
construction planned for 2003 and beyond. Even though the current problems in
the power generation industry tempers our short term optimism, the Company
believes the long term need to expand power generation capacity is a basic one
that should resume once the capital markets are sorted out.
Revenues for industrial products of the Electrical and Industrial Products
Segment increased 4% to $23.2 million for fiscal 2002 as compared to $22.4
million for fiscal 2001. The growth was due to increased demand for petroleum
products during the first half of fiscal 2002. The Company was notified in the
fourth quarter of fiscal 2002 that it was being replaced as a supplier of a
product being offered to the automotive industry. This product generated
revenues of $950,000 for fiscal 2002 and $890,000 for fiscal 2001.
The Company's Galvanizing Services Segment, which is made up of eleven hot dip
galvanizing facilities, generated revenues of $49.6 million, a 6% decrease from
the prior year's revenues of $52.5 million. The downturn in the general economy
and the severe downturn of the telecommunication industry contributed to lower
revenues for this segment. This segment historically has closely followed the
direction of the overall industrial segment of the domestic economy.
Operating Income
The Company's consolidated operating income (see note 11 to Note to Consolidated
Financial Statements) increased 4% to $21.8 million in fiscal 2002 as compared
to $20.9 million in fiscal 2001. Increased revenues for the Electrical and
Industrial Segment produced the improvement in operating income for fiscal 2002.
Consolidated operating margins as a percent of sales declined in fiscal 2002 to
14.2% from the previous years operating margins of 17.2% as a result of
declining margins in the Galvanizing Services Segment.
In the Electrical and Industrial Products Segment, operating income for fiscal
2002 increased to $14.6 million, an increase of 29% as compared to $11.3 million
in fiscal 2001. These results were aided by acquisitions of Central Electric
Company and Carter & Crawley on November 1, 2001. Excluding the acquisitions,
operating income increased to $13.1 million for fiscal 2002, an increase of 16%,
as compared to $11.3 million in fiscal 2001. Operating margins for this segment
were 14.1% for fiscal 2002 as compared to 16.4% for fiscal 2002.
Operating income for this segment's electrical products increased 45% to $11.2
million for fiscal 2002 as compared to $7.7 million in fiscal 2001. The
acquisitions made on November 1, 2001 contributed operating income of $1.5
million for fiscal 2002. The additional $2 million of increased operating
income, excluding acquisitions, is a result of increased demand for the
segment's electrical systems. Margins for electrical products were 14% for
fiscal 2002 compared to 16.6% for fiscal 2001. The decline in operating margins
is a result of the lower margin products offered by the recent acquisitions as
compared with the Company's existing electrical products.
Operating income for this segment's industrial products decreased 5% to $3.4
million in fiscal 2002 as compared to $3.6 million in fiscal 2001. Operating
margins for industrial products were 14.4% for fiscal 2002 compared to 15.8% in
fiscal 2001. Pricing pressures on these products in order to maintain market
share contributed to lower margins. During the fourth quarter of fiscal 2002 the
Company was notified it was being replaced with an alternative vendor for it's
product offered to the automotive industry. Due to the effects of the loss of
this product and current economic conditions in the industrial market,
management has instituted cost reducing measures.
In the Galvanizing Services Segment, operating income decreased 26% to $7.2
million for fiscal 2002 as compared $9.7 million in fiscal 2001. Operating
margins were 15% for fiscal 2002 as compared to 18% in fiscal 2001. Operating
income and margins were impacted by higher natural gas and zinc costs for the
first half of fiscal 2002. In addition this segment experienced significant
reductions in sales volumes due to the downturn in the general economy. During
the fourth quarter of fiscal 2002, management instituted cost reductions to
offset a portion of the effect of lower sales volumes. As of the end of fiscal
2002 it appears the prices for zinc and natural gas have stabilized.
7
<PAGE>
General Corporate Expense
General corporate expenses for fiscal 2002 were $6.4 million, an increase of 23%
from fiscal 2001. As a percent of sales, general corporate expenses were 4.2%
for fiscal 2002 as compared to 4.3% in fiscal 2001.
Interest expense for fiscal 2002 was $2.4 million, an increase of 3% as compared
to fiscal 2001. The additional debt required to purchase the acquisitions of
Central Electric Company and Carter & Crawley Inc. created the additional
interest expense. A portion of the increased interest costs associated with the
acquisitions was offset by lower variable interest rates.
Provision For Income Taxes
The provision for income taxes reflects an effective tax rate of 38% for fiscal
2002 and 37.7% for fiscal 2001. The increase in the effective tax rate is a
result of higher state taxes and increased non-deductible expenses.
Year ended February 28, 2001 (2001) compared with year ended February 29, 2000
(2000)
Revenues
The Company's consolidated net revenues for fiscal 2001 grew by $28.9 million or
31% over the prior year.
The Electrical and Industrial Products Segment recorded revenues for fiscal 2001
of $68.9 million, an increase of 34% over the prior year results of $51.5
million. These results were aided by the inclusion of a full year of results of
operations associated with the acquisition made on September 1, 1999, which
added to the segment's capacity to manufacture electrical products. The
Electrical and Industrial Products Segment ended fiscal 2001 with a backlog of
$34.8 million, up 12% from the prior year's backlog of $31.2 million. The
backlog increased for both electrical and industrial products. The electrical
products backlog increased $2.4 million to $30 million primarily from inclusion
of backlog in the amount of $4.5 million associated with the acquisition made in
fiscal 2000. The industrial products backlog increased by $1.2 million to $4.8
million due to increased demand from the petroleum industry for the segment's
industrial products.
Revenues for this segment's electrical products increased 40% to $46.5 million
for fiscal 2001 as compared to $33.2 million in fiscal 2000. Approximately 27%
or $3.6 million of the increase is due to inclusion of a full year's operations
of the segment's acquisition made in fiscal 2000. The remainder of the $9.7
million increase, or 73%, was due to increased demand for the segment's
electrical systems that are provided to the power generation industry. These
products continue to benefit from the deregulation of the power industry and
growing need for reliable supplies of electricity throughout the United States.
The Company's recent plant expansions over the past two years have enabled it to
capture more market share through increased capacity. Excluding the fiscal 2000
acquisition, revenues from the sales of electrical products improved by 34% over
the prior year.
Revenues for this segment's industrial products increased 22% to $22.4 million
for fiscal 2001 as compared to $18.3 million in fiscal 2000. The growth is due
to increased demand for the industrial products in the petroleum markets served.
Revenues for the segment's industrial products were also aided by a full year of
business for its two new products for the automotive industry and the retail
lighting markets. Revenues for these two products increased to $1.9 million for
the current year versus $545,000 in the prior year, a 244% increase.
The Company's Galvanizing Services Segment, which is made up of eleven hot dip
galvanizing facilities, generated record revenues of $52.5 million for fiscal
2001, a 28% increase over the prior year's revenues of $41.1 million. The
acquisition of the Company's eleventh galvanizing facility on January 31, 2000
added an additional $8.1 million in revenue for fiscal 2002. Revenues for the
Galvanizing Services Segment excluding the prior year acquisition were $44.4
million in the current fiscal year as compared to $40.4 million in the prior
fiscal year, a 10% increase. This improvement was associated with higher volumes
due to increased demand for galvanized products from pole and tower
manufacturers as well as other areas of the telecommunications industry.
8
<PAGE>
Operating Income
The Company's consolidated operating income (see note 11 to Notes to
Consolidated Financial Statements) increased 27% to $20.9 million in fiscal 2001
as compared to $16.5 million in fiscal 2000. The Company's increased operating
income for fiscal 2001 is the result of increased revenues in both segments of
the Company's business. Consolidated operating margins were 17.2% for fiscal
2001 compared to 17.9% in fiscal 2000 as a result of declining operating margins
in the Galvanizing Services Segment.
In the Electrical and Industrial Products Segment, operating income for fiscal
2001 increased to $11.3 million, up 61% from $7 million in fiscal 2000.
Operating margin in this segment improved for fiscal 2002 to 16.3%, a 20%
increase from the prior year's operating margin of 13.6%.
Operating income for this segment's electrical products increased 45% to $7.7
million for fiscal 2001 as compared to $5.3 million in fiscal 2000. The
acquisition made on September 1, 1999 contributed operating income of $1 million
for fiscal 2001 as compared to $227,000 for fiscal 2000. Approximately $1.6
million of the increased operating income is due to the increased demand for the
segments electrical systems. Margins for electrical products were 16.6% for the
current fiscal year compared to 16% in the prior fiscal year. Improved margins
were a result of increased operating efficiencies associated with higher
volumes.
Operating income for this segment's industrial product sales increased 108% to
$3.6 million for fiscal 2001 as compared to $1.7 million for fiscal 2000. The
increase in operating income for these products is due to higher revenues and
improved margins. This group's operating income also benefited from the
increased demand for the two new products first offered in fiscal 2000. The new
products serve the retail lighting market and automotive industry, contributing
$28,000 and $290,000, respectively, to operating income. Operating margins
improved to 15.8% for fiscal 2001 as compared to 9.3% for fiscal 2000 a 70%
increase. The improved margins were a result of increased volumes allowing for
improved efficiencies due to an upturn in the petroleum market, one of the
markets served by these products.
In the Galvanizing Services Segment, operating income increased 2% to $9.7
million for fiscal 2001 from $9.5 million for the prior year. The acquisition of
the Company's eleventh galvanizing facility made on January 31, 2000 had a
positive impact on operating income for fiscal 2001 in the amount of $496,000 as
compared to a loss of $53,000 for the one month of operation in fiscal 2000. The
increase in operating income from the acquisition was offset by increased
operating costs in the other ten facilities. Operating margins for the existing
ten facilities prior to the acquisition decreased to 20.6% in the current fiscal
year as compared to 23.7% the prior fiscal year. The reduced margins were caused
by higher zinc and utility cost. Zinc costs for this segment increased 10% for
the fiscal 2001 year as compared to fiscal 2000. Net utility costs were up
approximately 42% for fiscal 2001 as compared with the prior year. The increase
in utility cost is a result of increased production as well as increased prices
for natural gas.
General Corporate Expenses
General corporate expenses for fiscal 2001 were $5.2 million, up 21% from fiscal
2000. As a percent of sales, general corporate expenses were 4.3% for fiscal
2001 compared to 4.6% in the prior year.
Interest expense for fiscal 2001 was $2.3 million, up 39% or $658,000 from
fiscal 2000. This increase was due to larger average outstanding loan balances
during fiscal 2001 associated with the acquisitions made during the second half
of fiscal 2000.
9
<PAGE>
Provision for Income Taxes
The provision for income taxes reflects an effective tax rate of 37.7% for
fiscal 2001 and 37.5% for fiscal 2000. The increase in the effective tax rate is
from an increase in non-deductible goodwill associated with the acquisition of
the Company's eleventh galvanizing facility in fiscal 2000.
Liquidity and Capital Resources
The Company has historically met its liquidity and capital resource needs
through a combination of cash flows from operating activities and bank
borrowings. The Company's cash requirements are generally for operating
activities, acquisitions, capital improvements, and debt repayment. The Company
believes that working capital, borrowing capabilities, and funds generated from
operations should be sufficient to finance anticipated operational activities,
capital improvements, debt repayment and possible future acquisitions.
The Company's operating activities generated cash flows of approximately $14.2
million, $12.4 million, and $13.8 million during fiscal 2002, 2001,and 2000,
respectively. Cash flow from operations in fiscal 2002 included net income in
the amount of $7.8 million, depreciation and amortization in the amount of $6.3
million, and net changes in operating assets and liabilities and other increases
in cash flows from operations of $100,000.
Through the use of cash flows and bank debt, the Company made $12.8 million in
capital improvements, which included the construction of a new galvanizing
facility located in Crowley, Texas to replace an outdated facility at the same
location. The Company also purchased 100% of the outstanding stock of Central
Electric Company and the operating assets of Carter & Crawley Inc., net of cash
for a total purchase price of $38.8 million. The breakdown of capital spending
by segment can be found in Note 11 of Notes to Consolidated Financial
Statements. Cash dividends were paid early in fiscal 2002 in the amount of
$796,000, but no dividend was declared or paid early in fiscal 2003 and no
resumption of a cash dividend is currently anticipated.
On November 1, 2001, the Company entered into a new syndicated credit facility,
which replaced the previous term notes and revolving line of credit. This
agreement includes a $40 million term facility and a $45 million revolving
credit facility. The revolving credit is contingent on asset-based collateral of
inventories and accounts receivables. The $40 million term note is payable in
$10 million installments over the next four years. At the end of fiscal 2002,
the Company had $40 million outstanding under the term note and $23.5
outstanding on the revolving credit facility. At February 28, 2002, the Company
had approximately $7.9 million available under the revolving credit facility.
The Company utilizes interest rate swap agreements to protect against volatile
interest rates and manage interest rate expense. At February 28, 2002, the
Company has a $5.7 million interest rate swap agreement entered into in February
1999 at a fixed rate of 6.8%. The Company has an additional $7.4 million
interest rate swap agreement entered into in April 2000 for a fixed rate of
8.51%. On November 1, 2001, the Company entered into an interest rate swap
agreement covering an additional $40 million of debt at a fixed rate of 5.89%.
In conjunction with the Company's new financing agreement the Company
discontinued hedge accounting for the February 1999 and April 2000 interest rate
swaps effective November 1, 2001. At February 28, 2002 the fair value of these
two swaps was a liability of $291,000. The November 2001 interest rate swap,
which was designated as a hedge of the Company's variable rate interest, has an
unrealized loss of $60,000 as of February 28, 2002. The accumulated balance in
other comprehensive income is $241,000, net of tax of $145,000, as of February
28, 2002. This amount will be charged to interest expense over the respective
terms of the three swaps.
The Company's current ratio was 1.70 to 1 at the end of fiscal 2002, as compared
to 1.88 to 1 in fiscal 2001. Shareholder equity grew 26% during fiscal 2002 to
$54.8 million ($10.70 per share). Long-term debt as a percent of shareholders
equity was 98% for fiscal 2002 as compared to 53% in fiscal 2001. The increase
in long-term debt as a percent of shareholder's equity for fiscal 2002 is the
result of additional long-term debt to complete the purchase of the Company's
two acquisitions on November 1, 2001.
10
<PAGE>
Inflation has not had a significant impact on the Company's operations in recent
years; however, the Company attempts to recover any cost increases through
improvements to its manufacturing process and through increases in price where
competitively feasible.
Critical Accounting Policies and Estimates
The preparation of the consolidated financial statements requires the Company to
make estimates that affect the reported value of assets, liabilities, revenues
and expenses. The Company's estimates are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, and form the basis for the Company's conclusions. The Company
continually evaluates the information used to make these estimates as the
business and the economic conditions change. The use of estimates is pervasive
throughout the Company's financial statements, but accounting policies and
estimates considered most critical are allowances for doubtful accounts,
accruals for contingent liabilities and revenue recognition. More information
regarding significant accounting policies can be found in Note 1 of Notes to
Consolidated Financial Statements
Allowance for Doubtful Accounts- The carrying value of the accounts receivables
is continually evaluated based on the likelihood of collection. An allowance is
maintained for estimated losses resulting from our customer's inability to make
required payments. The allowance is determined by historical experience of
uncollected accounts, the level of past due accounts, overall level of
outstanding accounts receivables, information about specific customers with
respect of their inability to make payments and future expectations of
conditions that might impact the collectibility of accounts receivables. If the
financial condition of the Company's customers were to deteriorate, resulting in
an impairment of their ability to make payments, additional allowances may be
required.
Accruals for Contingent Liabilities- The amounts the Company records for claims
such as insurance recoverables, warranty and other contingent liabilities
requires the Company to make judgments regarding the amount of expenses that
will ultimately be incurred. The Company uses past history and experience, as
well as other specific circumstances surrounding these claims in evaluating the
amount of liability that should be recorded. Actual results may be different
than the Company's estimates.
Revenue Recognition - Revenue is recognized for the Galvanizing Services segment
upon completion of the galvanizing services or shipment of product. Revenue is
recognized for the Electrical and Industrial Products segment upon shipment of
product or customer receipt of product, or based upon percentage of completion
method as contract services are performed. The extent of progress for revenue
recognized using the percentage of completion method is measured by the ratio of
contract costs incurred to date to estimated total contract costs at completion.
Contract costs include direct labor and material, and certain indirect costs.
Selling, general and administrative costs are charged to expense as incurred.
Provisions for estimated losses, if any, on uncompleted contracts are made in
the period in which such losses are estimable. The assumptions made in
determining the estimated cost could differ from actual performance resulting in
a different outcome for profits or losses than anticipated.
Impact of Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board issued SFAS No. 141
"Business Combinations", and SFAS No. 142 "Goodwill and Other Intangible
Assets", (Statement 142) effective for fiscal years beginning after December 15,
2001. Under the new rules, goodwill and certain intangible assets deemed to have
indefinite lives will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives.
The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of fiscal 2003, except, as
provided for under Statement 142, goodwill and indefinite-lived intangible
assets resulting from acquisitions completed after June 30, 2001 have not been
amortized. In 2002, the Company recognized $537,000 of tax-deductible goodwill
amortization expense and $702,000 of non-tax deductible goodwill amortization
expense. Application of the non-amortization provisions of Statement 142 is
expected to result in an increase in income before income taxes of approximately
$1,239,000 in 2003 based on goodwill amortization
11
<PAGE>
occurring in 2002 that will not occur in 2003. As of March 1, 2002, the Company
performed the first of the required impairment tests of goodwill and indefinite
lived intangible assets and has determined that these tests will not have an
effect on the earnings and financial position of the Company.
In July 2001, the Financial Accounting Standards Board issued SFAS No. 143,
"Accounting for Asset Retirement Obligations," effective for fiscal years
beginning after June 15, 2002. This Statement addresses financial accounting and
reporting for legal obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. The Company is
currently evaluating the effect, if any, this Statement will have on its
financial statements and related disclosures.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," effective for fiscal years beginning after
December 15, 2001. The new Statement supercedes current accounting guidance
relating to impairment of long-lived assets and provides a single accounting
methodology for long-lived assets to be disposed of, and also supercedes
existing guidance with respect to reporting the effects of the disposal of a
business. The Company is currently evaluating the effect, if any, this Statement
will have on its financial statements and related disclosures.
Forward Looking Statements
This Report contains, and from time to time the Company or certain of its
representatives may make, "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements are generally
identified by the use of words such as "anticipate," "expect," "estimate,"
"intend," "should," "may," "believe," and terms with similar meanings. Although
the Company believes that the current views and expectations reflected in these
forward-looking statements are reasonable, those views and expectations, and the
related statements, are inherently subject to risks, uncertainties, and other
factors, many of which are not under the Company's control. Those risks,
uncertainties, and other factors could cause the actual results to differ
materially from these in the forward-looking statements. Those risks,
uncertainties, and factors include, but are not limited to, many of the matters
described in this Report: change in demand, prices and raw material cost,
including zinc and natural gas which is used in the hot dip galvanizing process;
changes in the economic conditions of the various markets the Company serves,
foreign and domestic, including the market price for oil and natural gas;
customer requested delay of shipments, acquisition opportunities, adequacy of
financing, and availability of experienced management employees to implement the
Company's growth strategy; and customer demand and response to products and
services offered by the Company. The Company expressly disclaims any obligations
to release publicly any updates or revisions to these forward-looking statements
to reflect any change in its views or expectations. The Company can give no
assurances that such forward-looking statements will prove to be correct.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk relating to the Company's operations results primarily from changes
in interest rates and commodity prices. The Company has only limited involvement
with derivative financial instruments and is not a party to any leveraged
derivatives.
The Company manages its exposures to changes in interest rates by optimizing the
use of variable and fixed rate debt. The Company had approximately $23.6 million
of variable rate borrowings at February 28, 2002 after its hedges. In November
2001, the Company entered into a interest rate protection agreement with its
lender to modify the interest characteristics of $40 million of debt from
variable rate to a fixed rate. In conjunction with the Company's new financing
agreement the Company discontinued hedge accounting for the February 1999 and
April 2000 interest rate swaps effective November 1, 2001. At February 28, 2002
the fair value of these two swaps was a liability of $291,000. The November 2001
interest rate swap, which was designated as a hedge of the Company's variable
rate interest, has an unrealized loss of $60,000 as of February 28, 2002. The
accumulated balance in other comprehensive income is $241,000, net of tax of
$145,000, as of February 28, 2002. This amount will be charged
12
<PAGE>
to interest expense over the respective terms of the three swaps. The Company
believes it has adequately protected itself from increased interest cost under
these financial arrangements.
The Company manages its exposures to commodity prices, primarily zinc used in
its Galvanizing Services Segment, by utilizing contracts with its zinc suppliers
that include protective caps to guard against rising commodity prices.
Management believes these contractual agreements ensure adequate supplies and
partial offset against exposure to commodity price swings.
The Company does not believe that a hypothetical change of 10% of the interest
rate currently in effect or a change of 10% of commodity prices would have a
significantly adverse effect on the Company's results of operations, financial
position, or cash flows.
Item 8. Financial Statements and Supplementary Data
The Report of Independent Public Accountants, Financial Statements and Notes to
Financial Statements follow.
Report of Ernst & Young LLP, Independent Auditors
Board of Directors and Shareholders
AZZ incorporated
We have audited the accompanying consolidated balance sheets of AZZ incorporated
as of February 28, 2002 and 2001, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the three years in the
period ended February 28, 2002. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of AZZ incorporated
at February 28, 2002 and 2001, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended February 28,
2002, in conformity with accounting principles generally accepted in the United
States.
/s/ Ernst & Young LLP
Fort Worth, Texas
March 29, 2002
13
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
Years ended February 28, 2002 and 2001, and February 29, 2000
<TABLE>
<CAPTION>
2002 2001 2000
-------------- -------------- -------------
<S> <C> <C> <C>
Net sales $ 152,917,307 $ 121,405,601 $ 92,544,434
Costs and expenses:
Cost of sales 119,001,867 90,674,069 68,030,479
Selling, general, and administrative 18,700,183 15,187,907 12,307,958
Net (gain) loss on sale of property, plant
and equipment (37,631) 11,015 (44,851)
Interest expense 2,409,871 2,331,515 1,674,434
Other expense, net 245,850 73,865 27,229
-------------- -------------- -------------
140,320,140 108,278,371 81,995,249
-------------- -------------- -------------
Income before income taxes 12,597,167 13,127,230 10,549,185
Income tax expense 4,793,053 4,955,161 3,955,945
-------------- -------------- -------------
Net income $ 7,804,114 $ 8,172,069 $ 6,593,240
============== ============== =============
Earnings per common share:
Basic $ 1.53 $ 1.67 $ 1.39
Diluted $ 1.50 $ 1.63 $ 1.38
</TABLE>
See accompanying notes.
14
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
February 28, 2002 and 2001
<TABLE>
<CAPTION>
Assets 2002 2001
- ------ --------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,737,876 $ 1,446,502
Accounts receivable, net of allowance for doubtful accounts of
$758,000 in 2002 and $649,000 in 2001 32,927,725 21,576,988
Inventories 23,336,228 13,379,371
Costs and estimated earnings in excess of billings on
uncompleted contracts 4,130,982 2,432,765
Deferred income taxes 1,706,294 789,247
Prepaid expenses and other 990,438 416,710
--------------- -------------
Total current assets 64,829,543 40,041,583
Property, plant, and equipment, at cost:
Land 2,078,693 2,027,431
Buildings and structures 23,085,750 21,495,459
Machinery and equipment 29,372,556 24,294,097
Furniture and fixtures 3,367,780 2,446,544
Automotive equipment 1,894,252 1,556,787
Construction in progress 6,792,077 819,950
--------------- -------------
66,591,108 52,640,268
Less accumulated depreciation (27,781,500) (23,889,839)
--------------- -------------
Net property, plant, and equipment 38,809,608 28,750,429
Goodwill, less accumulated amortization of $5,378,000 in 2002 and
$4,139,000 in 2001 41,262,104 19,120,158
Other assets 2,142,615 455,475
--------------- -------------
$ 147,043,870 $ 88,367,645
=============== =============
</TABLE>
15
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated CONSOLIDATED BALANCE SHEETS (Continued)
- --------------------------------------------------------------------------------
February 28, 2002 and 2001
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity 2002 2001
- ------------------------------------ -------------- -------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 17,150,563 $ 9,221,135
Income tax payable 96,943 213,507
Accrued salaries and wages 2,744,684 2,515,380
Other accrued liabilities 8,013,630 4,954,209
Billings in excess of costs and estimated earnings on
uncompleted contracts 18,132 60,093
Long-term debt due within one year 10,045,000 4,345,284
-------------- -------------
Total current liabilities 38,068,952 21,309,608
Long-term debt due after one year 53,550,000 22,947,087
Deferred income taxes 673,663 730,941
Shareholders' equity:
Common stock, $1 par value; 25,000,000 shares authorized;
6,304,580 shares issued at February 28, 2002 and 2001 6,304,580 6,304,580
Capital in excess of par value 13,689,392 11,777,305
Retained earnings 44,740,066 37,731,715
Cumulative other comprehensive income (241,123) -
Less common stock held in treasury, at cost (1,047,199 shares
in 2002 and 1,336,343 shares in 2001) (9,741,660) (12,433,591)
-------------- -------------
Total shareholders' equity 54,751,255 43,380,009
-------------- -------------
$ 147,043,870 $ 88,367,645
============== =============
</TABLE>
See accompanying notes.
16
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Years ended February 28, 2002 and 2001, and February 29, 2000
<TABLE>
<CAPTION>
2002 2001 2000
-----------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 7,804,114 $ 8,172,069 $ 6,593,240
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 5,012,977 4,520,179 3,711,319
Amortization 1,333,810 1,317,675 1,059,046
Non-cash compensation expense 226,947 300,110 -
Provision for doubtful accounts 253,971 280,721 1,059,046
Deferred income tax benefit (265,807) (301,133) (380,599)
Net (gain) loss on sale of property, plant and equipment (37,631) 11,015 (44,851)
Effects of changes in operating assets and
liabilities, net of acquisition of subsidiaries:
Accounts receivable 1,774,030 (1,914,984) (4,171,042)
Inventories (477,986) (826,053) 285,279
Prepaid expenses and other (492,263) (34,663) 15,520
Other assets (339,238) 111,337 (121,852)
Net change in billings related to costs and
estimated earnings on uncompleted contracts (1,276,369) (2,290,872) 1,811,061
Accounts payable 2,478,535 1,918,436 2,565,852
Accrued salaries and wages (498,392) 635,619 689,537
Other accrued liabilities and income taxes (1,346,682) 472,824 1,522,436
-----------------------------------------------
Net cash provided by operating activities 14,150,016 12,372,280 13,833,433
Cash flows from investing activities:
Proceeds from the sale of property, plant and equipment 72,995 86,870 252,429
Purchases of property, plant and equipment (12,772,087) (5,098,534) (4,152,446)
Acquisition of subsidiaries, net of cash acquired (38,765,992) - (21,133,219)
Proceeds from the sale of long-term investments - 200,000 -
-----------------------------------------------
Net cash used in investing activities (51,465,084) (4,811,664) (25,033,236)
</TABLE>
17
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
- --------------------------------------------------------------------------------
Years ended February 28, 2002 and 2001, and February 29, 2000
<TABLE>
<CAPTION>
2002 2001 2000
----------------------------------------------------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from revolving loan $ 28,000,000 $ 6,750,000 12,147,000
Proceeds from long-term debt 40,000,000 - 17,500,000
Payments on revolving loan (10,250,000) (10,500,000) (10,397,000
Payments on long-term debt (21,447,371) (4,400,632) (7,267,969)
Cash dividends paid (795,763) (770,568) (566,872)
Proceeds from exercise of stock options 2,099,576 1,534,055 312,600
Purchase of treasury stock - (55,108) -
--------------------------------------------------
Net cash provided by (used in) financing activities 37,606,442 (7,442,253) 11,727,759
--------------------------------------------------
Net increase in cash and cash equivalents 291,374 118,363 527,956
Cash and cash equivalents at beginning of year 1,446,502 1,328,139 800,183
--------------------------------------------------
Cash and cash equivalents at end of year $ 1,737,876 $ 1,446,502 $ 1,328,139
==================================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 1,998,462 $ 2,528,254 $ 1,567,453
Income taxes $ 4,697,928 $ 4,797,461 $ 4,041,852
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Years ended February 28, 2002 and 2001, and February 29, 2000
<TABLE>
<CAPTION>
Capital in Cumulative Other
Common Stock excess of Retained Comprehensive Treasury
------------------------
Shares Amount par value earnings Income Stock Total
------------------------ ------------- ------------ -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at February 28, 1999 6,304,580 $ 6,304,580 $ 11,422,536 $ 23,736,974 - $(14,578,640) $ 26,885,450
Exercise of stock options - - (308,971) - - 621,571 312,600
Cash dividends declared - - - (770,568) - - (770,568)
Net income - - - 6,593,240 - - 6,593,240
--------- ----------- ------------ ------------ ---------- ------------ ------------
Balance at February 29, 2000 6,304,580 6,304,580 11,113,565 29,559,646 - (13,957,069) 33,020,722
Exercise of stock options - - 48,409 - - 1,485,646 1,534,055
Purchase of treasury stock
(3,166 shares) - - - - - (55,108) (55,108)
Stock compensation - - 207,170 - - 92,940 300,110
Federal income tax deducted
on stock options - - 408,161 - - - 408,161
Net income - - - 8,172,069 - - 8,172,069
--------- ----------- ------------ ------------ ---------- ------------ ------------
Balance at February 28, 2001 6,304,580 6,304,580 11,777,305 37,731,715 - (12,433,591) 43,380,009
Exercise of stock options - - 364,685 - - 1,734,891 2,099,576
Stock issued for acquisition - - 894,165 - - 905,835 1,800,000
Cash dividend declared - - - (795,763) - - (795,763)
Stock compensation - - 175,742 - - 51,205 226,947
Federal income tax deducted
on stock options - - 477,495 - - - 477,495
Comprehensive income:
Net income - - - 7,804,114 - - 7,804,114
Other comprehensive income,
net of tax:
Cumulative effect of
SFAS No. 133 - - - - (185,000) - (185,000)
Unrealized loss on market
value of interest rate
swaps - - - - (56,123) - (56,123)
------------
Comprehensive income 7,562,991
--------- ----------- ------------ ------------ ---------- ------------ ------------
Balance at February 28, 2002 6,304,580 $ 6,304,580 $ 13,689,392 $ 44,740,066 $ (241,123) $ (9,741,660) $ 54,751,255
========= =========== ============ ============ ========== ============ ============
</TABLE>
See accompanying notes.
19
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Summary of significant accounting policies
Organization--AZZ incorporated (the Company) operates primarily in the
------------
United States. Information about the Company's operations by segment is
included in Note 11 to the consolidated financial statements.
Basis of consolidation--The consolidated financial statements include the
----------------------
accounts of AZZ incorporated and its wholly owned subsidiaries. All
significant inter-company accounts and transactions have been eliminated
in consolidation.
Use of estimates--The preparation of the financial statements in
----------------
conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect
the amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Concentrations of credit risk--Financial instruments that potentially
-----------------------------
subject the Company to significant concentrations of credit risk consist
principally of cash and cash equivalents, trade accounts receivable and
interest rate swaps. See further discussion on the credit risk associated
with the interest rate swaps under "Derivative Financial Instruments."
The Company maintains cash and cash equivalents with various financial
institutions. These financial institutions are located throughout the
United States and Company policy is designed to limit exposure to any one
institution. The Company performs periodic evaluations of the relative
credit standing of those financial institutions that are considered in
the Company's banking relationships. The Company has not experienced any
losses in such accounts and believes it is not exposed to any significant
credit risk related to cash and cash equivalents.
Concentrations of credit risk with respect to trade accounts receivable
are limited due to the Company's diversity by virtue of two operating
segments, the number of customers, and the absence of a concentration of
trade accounts receivable in a small number of customers. The Company's
net credit losses in 2002, 2001 and 2000 were approximately $204,000,
$219,000 and $168,000, respectively. Collateral is usually not required
from customers as a condition of sale.
Revenue recognition--The Company recognizes revenue for the Galvanizing
-------------------
Services segment upon completion of galvanizing services or shipment of
product. Revenue for the Electrical and Industrial Products segment is
recognized upon shipment of product or customer receipt of product, or
based upon the percentage-of-completion method of accounting as contract
services are performed. The extent of progress for revenue recognized
using the percentage-of-completion method is measured by the ratio of
contract costs incurred to date to estimated total contract costs at
completion. Costs and estimated earnings in excess of related billings on
uncompleted contracts are recorded as current assets and billings in
excess of costs and estimated earnings on uncompleted contracts are
recorded as current liabilities. Contract costs include all direct
material and labor, and certain indirect costs. Selling, general and
administrative costs are charged to expense as incurred. Provisions for
estimated losses, if any, on uncompleted contracts are made in the period
in which such losses are estimable.
Cash and cash equivalents--For purposes of reporting cash flows, cash and
-------------------------
cash equivalents include cash on hand, deposits with banks and all highly
liquid investments with an original maturity of three months or less.
Inventories--Inventories are stated at the lower of cost or market. Cost
-----------
is determined principally using a weighted-average method for the
Electrical and Industrial Products segment and the first-in-first-out
(FIFO) method for the Galvanizing Services segment.
20
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
1. Summary of significant accounting policies (continued)
Property, plant and equipment -- For financial reporting purposes,
-----------------------------
depreciation is computed by the straight-line method over the estimated
useful lives of the related assets as follows:
Buildings and structures 10-25 years
Machinery and equipment 3-15 years
Furniture and fixtures 3-15 years
Automotive equipment 3 years
Maintenance and repairs are charged to expense as incurred; renewals and
betterments are capitalized.
Intangible assets and goodwill -- Intangible assets include purchased
------------------------------
intangibles primarily comprised of customer lists, backlogs and
non-compete agreements. Such intangible assets and goodwill, which
resulted from acquisitions completed on or before June 30, 2001, are
being amortized using the straight-line method over the estimated useful
lives of the assets ranging from two to forty years. Goodwill and
intangible assets with indefinite lives related to acquisitions
subsequent to June 30, 2001 will no longer be amortized in accordance
with SFAS No. 142 "Goodwill and Other Intangible Assets" (see New
Accounting Pronouncements below).
Impairment of long-lived assets -- The Company reviews long-lived assets
-------------------------------
and certain identifiable intangibles for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset is
impaired. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to its estimated fair
value, based on future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment
recognized is measured by the amount by which the carrying amount of the
assets exceeds the fair value of the assets. Management assesses whether
there has been an impairment of goodwill by considering factors such as
expected future operating income, current operating results and other
economic factors (see New Accounting Pronouncements below).
Debt Origination Costs - Debt origination costs are amortized using the
----------------------
effective interest rate method. Debt origination costs, net of
accumulated amortization, were $886,000 and $0 at February 28, 2002 and
2001, respectively.
Income taxes -- Income tax expense is based on the liability method.
------------
Under this method of accounting, deferred tax assets and liabilities are
recognized based on differences between financial accounting and income
tax bases of assets and liabilities using presently enacted tax rates and
laws.
Stock-based compensation -- The Company grants stock options for a fixed
------------------------
number of shares to employees and directors with an exercise price equal
to the fair value of the shares at the date of grant. The Company follows
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
to Employees (APB 25), and related interpretations in accounting for
employee stock options. Under APB 25, because the exercise price of the
Company's employee and director stock options equal the market price of
the underlying stock on the date of grant, no compensation expense is
recognized.
Financial instruments -- The Company's financial instruments consist of
---------------------
cash and cash equivalents, accounts receivables, long-term debt and
interest rate swaps. The fair value of financial instruments is
determined by reference to various market data and other valuation
techniques as appropriate. Unless otherwise disclosed, the fair value of
financial instruments approximates their recorded values.
21
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
1. Summary of significant accounting policies (continued)
The Company utilizes interest rate swaps to manage variable interest rate
risk associated with portions of its long-term debt. The fair value of
interest rate swap agreements is based on quotes obtained from financial
institutions. Information about the Company's swap agreements is included
in Note 9 to the consolidated financial statements.
Derivative financial instruments--From time to time, the Company uses
--------------------------------
derivatives to manage interest rate risk. The Company's policy is to use
derivatives for risk management purposes only, which includes maintaining
the ratio between the Company's fixed and floating rate debt obligations
that management deems appropriate, and prohibits entering into such
contracts for trading purposes. The Company enters into derivatives only
with counterparties (primarily financial institutions) which have
substantial financial wherewithal to minimize credit risk. The amount of
gains or losses from the use of derivative financial instruments has not
been and is not expected to be material to the Company's consolidated
financial statements.
Change in Accounting Principle
------------------------------
As of March 1, 2001, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which was amended by SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities," (collectively Statement 133). As amended, Statement 133
establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. The Statement requires that an
entity recognize all derivatives as either assets or liabilities on the
balance sheet and measure those instruments at fair value. Changes in the
fair value of derivative financial instruments are either recognized
periodically in income or in stockholders' equity as a component of
comprehensive income depending on whether the derivative financial
instrument qualifies for hedge accounting, and if so, whether it
qualifies as a fair value hedge or a cash flow hedge. The ineffective
portion of a derivative's change in fair value will be immediately
recognized in earnings. At March 1, 2001, the Company's derivatives
consisted of two interests rate swap agreements, which qualified for
hedge accounting.
The Company accounted for the adoption of Statement 133 as a cumulative
effect of a change in accounting principle. The adoption of Statement 133
resulted in a cumulative effect adjustment net of tax of $185,000, which
was recognized as a charge to cumulative other comprehensive income
(equity). The offsetting fair value of the interest rate swaps was
recognized in accrued liabilities. Through October 31, 2001, an
additional $164,000 was accrued in association with these swaps. In
conjunction with the Company's new financing (see Note 9), the Company
discontinued hedge accounting for these two swaps effective November 1,
2001. At February 28, 2002 the fair market value of these two swaps was a
liability of $291,000. The Company entered into a new interest rate swap
in November 2001, which was designated as a hedge of the Company's
variable rate interest exposure and has an unrealized fair value loss of
$60,000 as of February 28, 2002. The accumulated balance in other
comprehensive income is $241,000, net of tax of $145,000, as of February
28, 2002. This amount will be charged to interest expense over the
respective terms of the three swaps.
New accounting pronouncements
-----------------------------
In June 2001, the Financial Accounting Standards Board issued SFAS No.
141 "Business Combinations", and SFAS No. 142 "Goodwill and Other
Intangible Assets", (Statement 142) effective for fiscal years beginning
after December 15, 2001. Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but
will be subject to annual impairment tests in accordance with the
Statements. Other intangible assets will continue to be amortized over
their useful lives.
22
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
1. Summary of significant accounting policies (continued)
The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of fiscal 2003, except,
as provided for under Statement 142, goodwill and indefinite-lived
intangible assets resulting from acquisitions completed after June 30,
2001 will not be amortized (See Note 13). In fiscal 2002, the Company
recognized $537,000 of tax-deductible goodwill amortization expense and
$702,000 of non-tax deductible goodwill amortization expense. Application
of the non-amortization provisions of Statement 142 is expected to result
in an increase in income before income taxes of approximately $1,239,000
in 2003 based on goodwill amortization occurring in 2002 that will not
occur in 2003. As of March 1, 2002, the Company performed the first of
the required impairment tests of goodwill and indefinite lived intangible
assets and has determined that these tests will not have an effect on the
earnings and financial position of the Company.
In July 2001, the Financial Accounting Standards Board issued SFAS No.
143, "Accounting for Asset Retirement Obligations," effective for fiscal
years beginning after June 15, 2002. This Statement addresses financial
accounting and reporting for legal obligations associated with the
retirement of tangible long-lived assets and the associated asset
retirement costs. The Company is currently evaluating the effect, if any,
this Statement will have on its financial statements and related
disclosures.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," effective for fiscal years
beginning after December 15, 2001. The new Statement supercedes current
accounting guidance relating to impairment of long-lived assets and
provides a single accounting methodology for long-lived assets to be
disposed of, and also supercedes existing guidance with respect to
reporting the effects of the disposal of a business. The Company is
currently evaluating the effect, if any, this Statement will have on its
financial statements and related disclosures.
2. Inventories
Inventories consist of the following:
2002 2001
-------------- ------------
(In thousands)
Raw materials $ 11,640 $ 9,307
Work-in-process 9,783 2,562
Finished goods 1,913 1,510
------------ ------------
$ 23,336 $13,379
============ ============
3. Costs and Estimated Earnings on Uncompleted Contracts
Costs and estimated earnings on uncompleted contracts at February 28,
2002 and February 28, 2001 consist of the following:
<TABLE>
<CAPTION>
2002 2001
--------------------------
(In thousands)
<S> <C> <C>
Costs incurred on uncompleted contracts $ 19,408 $ 13,568
Estimated earnings 7,052 7,214
--------------------------
26,460 20,782
Less billings to date 22,347 18,409
--------------------------
$ 4,113 $ 2,373
==========================
</TABLE>
23
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
3. Costs and Estimated Earnings on Uncompleted Contracts (continued)
The amounts noted above are included in the accompanying balance sheet
under the following captions:
<TABLE>
<CAPTION>
2002 2001
--------------------------
(In thousands)
<S> <C> <C>
Cost and estimated earnings in excess of billings
on uncompleted contracts $ 4,131 $ 2,433
Billings in excess of costs and estimated earnings
on uncompleted contracts (18) (60)
--------------------------
$ 4,113 $ 2,373
==========================
</TABLE>
4. Other accrued liabilities
Other accrued liabilities consist of the following:
<TABLE>
<CAPTION>
2002 2001
---------- ----------
(In thousands)
<S> <C> <C>
Accrued warranty $ 1,453 $ 1,253
Accrued profit sharing 825 953
Other 5,736 2,748
---------- -----------
$ 8,014 $ 4,954
========== ===========
</TABLE>
5. Employee benefit plans
The Company has a trusteed profit sharing plan covering substantially all
of its employees. Under the provisions of the plan, the Company
contributes amounts as authorized by the Board of Directors.
Contributions to the profit sharing plan were $1,263,000 for 2002,
$1,328,000 for 2001 and $1,050,000 for 2000. During the fiscal year ended
2001, a 401(k) provision was added to the profit sharing plan with a
company-matching feature. Amounts related to the Company's matching
feature were $438,000 in 2002 and $375,000 in 2001.
6. Income taxes
Deferred federal and state income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial accounting purposes and the amounts used for
income tax purposes. Significant components of the Company's net deferred
income tax asset are as follows:
<TABLE>
<CAPTION>
2002 2001
---------- ----------
(In thousands)
<S> <C> <C>
Deferred income tax liabilities:
Depreciation methods and property basis differences $ (739) $ (903)
Other assets (312) (98)
---------- ----------
Total deferred income tax liabilities (1,051) (1,001)
Deferred income tax assets:
Employee related items 473 280
Inventories 324 211
Accrued warranty 246 152
Accounts Receivable 380 216
Interest rate swaps 145 -
Other 516 200
---------- ---------
Total deferred income tax assets 2,084 1,059
---------- ---------
Net deferred income tax asset $ 1,033 $ 58
========== =========
</TABLE>
24
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENT (Continued)
- --------------------------------------------------------------------------------
6. Income taxes (continued)
The provision for income taxes consists of:
<TABLE>
<CAPTION>
2002 2001 2000
--------- ----------- ----------
(In thousands)
<S> <C> <C> <C>
Federal:
Current $4,497 $4,634 $3,835
Deferred (237) (271) (345)
State:
Current 562 622 502
Deferred (29) (30) (36)
---------- ---------- ----------
$4,793 $4,955 $3,956
========== ========== ==========
</TABLE>
A reconciliation from the federal statutory income tax rate to the
effective income tax rate is as follows:
<TABLE>
<CAPTION>
2002 2001 2000
--------- --------- ---------
<S> <C> <C> <C>
Statutory federal income tax rate 34.0% 34.0% 34.0 %
Expenses not deductible for tax purposes 1.8 1.6 0.7
State income taxes, net of federal income tax benefit 2.9 2.7 3.1
Other (0.7) (0.6) (0.3)
-------- ------- --------
Effective income tax rate 38.0% 37.7% 37.5%
======== ======= ========
</TABLE>
7. Earnings per share
Basic earnings per share is based on the weighted average number of
shares outstanding during each year. Diluted earnings per share were
similarly computed but have been adjusted for the dilutive effect of the
weighted average number of stock options outstanding.
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
2002 2001 2000
----------- ---------- ---------
(In thousands, except share and per share amounts)
<S> <C> <C> <C>
Numerator:
Net income for basic and diluted
earnings per common share $ 7,804 $ 8,172 $ 6,593
=============== ================ ===============
Denominator:
Denominator for basic earnings per
common share - weighted-average shares 5,116,586 4,753,243
4,891,993
Effect of dilutive securities:
Stock options 70,114 118,187 21,711
--------------- ---------------- ---------------
Denominator for diluted earnings per
common share - adjusted weighted-
average shares 5,186,700 5,010,180 4,774,954
=============== ================ ===============
Basic earnings per common share $ 1.53 $ 1.67 $ 1.39
Diluted earnings per common share $ 1.50 $ 1.63 $ 1.38
</TABLE>
25
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
7. Earnings per share (continued)
Stock options for which the exercise price was greater than the average
market price of common shares were not included in the computation of
diluted earnings per share as the effect would be anti-dilutive. At the
end of fiscal years 2002, 2001 and 2000, there were 129,514, none and
229,487 stock options, respectively, outstanding with exercise prices
greater than the average market price of common shares.
Cash dividends paid per share were $0.16, $0.16 and $0.12 in 2002, 2001
and 2000, respectively.
8. Stock options and other shareholder matters
During fiscal 2002, the Company adopted the AZZ incorporated 2001
Long-Term Incentive Plan ("2001 plan"). The purpose of the plan is to
promote the growth and prosperity of the Company by permitting the
Company to grant to its employees, directors and advisors restricted
stock and options to purchase common stock of the Company. The maximum
number of shares that may be issued under this plan is 750,000 shares. In
conjunction with the adoption of the 2001 plan, all options still
available for issuance under pre-existing option plans were terminated.
At February 28, 2002, options outstanding under this plan amounted to
103,264 of which 17,753 are vested and exercisable at prices ranging from
$19.80 to $24.25 per share. Options under this plan vest from immediately
upon issuance to ratably over a period of three to five years and expire
at various dates through November 2011.
In addition to the 2001 Plan, the Company has options that were issued
but not exercised under the 1998 Incentive Stock Option Plan, (the "1998
Plan"). The maximum number of shares that may be issued under the plan
was 750,000 shares, prior to the adoption of the 2001 Plan. The 1998 Plan
was amended to withdraw 508,100 options and the common stock underlying
those options on February 28, 2002. At February 28, 2002, options
outstanding under this plan amounted to 128,436 of which 124,436 options
are vested and exercisable at prices ranging from $8.88 to $17.84 per
share. Options under this plan vest from immediately upon issuance to
ratably over a period of five years and expire at various dates through
March 2006.
In addition to the 2001 Plan, the Company has options that were issued
but not exercised under the 1991 Non-Statutory Stock Option Plan, (the
"1991 Plan") and the 1997 Non-Statutory Stock Option Grants, (the"1997
Grants"). The maximum number of shares that may be issued under these
plans were 157,500 shares for the 1991 Plan and 70,000 shares for the
1997 Grants, prior to the adoption of the 2001 Plan. The 1991 Plan
expired prior to the adoption of the 2001 Plan. At February 28, 2002,
options granted and outstanding under these plans amounted to 53,500 of
which 51,400 options are vested and exercisable at prices ranging from
$11.125 to $16.88 per share. Options under these plans vest ratably over
a five-year period and expire at various dates through July 2008.
In February 2000, the Company entered into an agreement with a company to
issue 70,000 stock options in exchange for services received and to be
received. These options vested over a period of eighteen months
contingent upon the achievement of certain performance measures. As of
February 28, 2001, 38,500 options had vested under this plan and the
remaining 31,500 unvested options were to vest in three separate groups
over six months following February 28, 2001 contingent upon the Company
meeting certain performance goals. During fiscal 2002 an additional
19,250 shares vested under this plan with 7,000 of the vested shares
being exercised in fiscal 2002. In August 2001, the Company amended the
February 2000 plan to allow for the remaining 12,250 unvested options to
vest over an additional eighteen-month period contingent upon the
achievement of certain performance measures. As of February 28, 2002,
none of the 12,250 unvested options have vested. During fiscal 2002 and
2001, the Company recorded expense of $94,000 and $159,000, respectively,
related to these options. These options expire in February 2005.
26
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
8. Stock options and other shareholder matters (continued)
During fiscal 2001 and 2002, the Company granted its directors and
advisory directors an aggregate of 10,000 shares of the Company's common
stock for each of the years. Stock compensation expense was recognized in
the amount of $133,000 for fiscal 2002 and $141,000 for fiscal 2001.
A summary of the Company's stock option activity and related information
is as follows:
<TABLE>
<CAPTION>
2002 2001 2000
------------------------- ------------------------ -----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
-------- ----------- -------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 324,161 $ 10.49 491,985 $ 10.14 369,453 $ 9.18
Granted 212,558 20.65 2,194 17.14 207,561 10.12
Exercised (186,347) 11.27 (159,847) 9.60 (66,798) 4.68
Forfeited (2,172) 10.65 (10,171) 10.59 (18,231) 10.51
-------- ----------- --------- ------------ ---------- ----------
Outstanding at end
of year 348,200 $ 17.67 324,161 $ 10.49 491,985 $10.14
======== =========== ========= ============ ========== ==========
Exercisable at end
of year 244,339 $ 15.77 268,461 $ 10.44 370,720 $10.01
======== =========== ========== ============ ========== ==========
Weighted average
fair value during
the years indicated
of options granted
during such year
indicated $ 7.19 $ 5.81 $ 3.35
=========== ========== =========
</TABLE>
The following table summarizes additional information about stock options
outstanding at February 28, 2002.
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Average Average Shares Average
Range of Total Remaining Exercise Currently Exercise
Exercise Prices Shares Life Price Exercisable Price
------------------ ---------- ------------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
$8.88-$11.13 90,121 4.3 $10.69 86,121 $10.77
$16.88-$19.80 169,315 4.2 $17.93 140,465 $17.77
$24.25 88,764 9.3 $24.25 17,753 $24.25
</TABLE>
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting
for Stock Based Compensation, requires the disclosure of pro forma net
income and income per share of common stock computed as if the Company
had accounted for its stock options under the fair value method set forth
in SFAS 123. The fair value of stock options granted was estimated at the
date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions: a risk-free interest rate ranging
from 5% to 6.5%, a dividend yield ranging from 1% to 1.25% and a
volatility factor ranging from 0.367 to 0.498. In addition, the fair
value of these options was estimated based on an expected life ranging
from 1 1/2 years to 6 years.
27
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
8. Stock options and other shareholder matters (continued)
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions, including the
expected stock price volatility. Because the Company's stock options have
characteristics significantly different from those described above, and
because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion the existing models do
not necessarily provide a reliable single measure of fair value for the
Company's stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense on a straight-line basis over the
option's vesting period as adjusted for estimated forfeitures. The
Company's pro forma information for fiscal 2002, 2001, and 2000 using the
fair value method is as follows:
<TABLE>
<CAPTION>
2002 2001 2000
------ ------ ------
In thousands except per share amounts)
<S> <C> <C> <C>
Pro forma net income $7,054 $7,999 $6,146
Pro forma earnings per common share:
Basic $ 1.38 $ 1.64 $ 1.30
Diluted $ 1.36 $ 1.60 $ 1.29
</TABLE>
As of February 28, 2001, the Company has approximately 1,001,936 and
17,693,484 shares, respectively reserved for future issuance under the
stock option plans and shareholder rights plan.
Effective January 7, 1999, the Board of Directors approved a stock rights
plan, which authorized and declared a dividend distribution of one right
for each share of common stock outstanding at the close of business on
February 4, 1999. The rights are exercisable at an initial exercise price
of $60, subject to certain adjustments as defined in the agreement, if a
person or group acquires 15% or more of the Company's common stock or
announces a tender offer that would result in ownership of 15% or more of
the common stock. Alternatively, the rights may be redeemed at one cent
per right at any time until ten business days following the first public
announcement of the acquisition of beneficial ownership of 15% of the
Company's common stock. The rights expire on January 7, 2009.
9. Long-term debt
<TABLE>
<CAPTION>
Long-term debt consists of the following at February 28, 2002 and 2001: 2002 2001
-------- ---------
(In thousands)
<S> <C> <C>
Term Note A payable to bank, due February 2006 $ - $ 14,384
Term Note B payable to bank, due February 2006 - 7,023
Revolving line of credit with bank, due July 2002 - 5,750
Term Note payable to bank, due in quarterly installments ranging from
$1,000,000 to $3,000,000 through November 2005 40,000 -
Revolving line of credit with bank, due November 2004 23,500 -
Industrial Revenue Bonds, due in December 2003, payable in monthly
installments (interest at 6.45% at February 28, 2002) 95 135
-------- ----------
63,595 27,292
Less amount due within one year 10,045 4,345
-------- ----------
$ 53,550 $ 22,947
======== ==========
</TABLE>
28
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
9. Long-term debt (continued)
On November 1, 2001, the Company entered into a new syndicated credit
facility, which replaced the previous term notes and revolving line of
credit. This agreement includes a $40 million term facility and a $45
million revolving credit facility.
Interest on borrowings under the term note and revolving line of credit
bear interest at a rate per annum equal to the lesser of the base rate
plus applicable margin for the base rate borrowings for the applicable
facility, or the adjusted eurodollar rate plus the applicable margin for
eurodollar rate borrowings for the applicable facility. The applicable
margin range is based on the leverage ratio, which was 2.25% at February
28, 2002 and correlated to an interest rate of 5.89% on the term note
and 4.44% on the revolving line of credit at February 28, 2002.
Additionally, the Company is obligated to pay a commitment fee based on
the leverage ratio at a rate ranging from .25% to .5% on the unused
revolving credit facility,
The Company's credit facility and industrial revenue bonds are subject
to loan agreements, which require the Company to comply with various
financial covenants including minimum requirements with regard to
consolidated net worth, leverage ratio, fixed charge coverage ratio and
capital expenditures. The Company's long-term debt is secured by
substantially all of the assets of the Company. Under the terms of the
credit facility, borrowing's on the revolving line of credit are subject
to a borrowing base calculation which is limited to 85% of certain trade
accounts receivable and a range of 50% to 60% of certain raw materials
and finished good inventories and is reduced by the balance of
outstanding letters of credit which may not exceed $5 million at any one
time. At February 28, 2002, the Company has approximately $7,858,000
available under the revolving credit facility after deducting $851,000
of outstanding letters of credit.
In order to manage interest rate expense, the Company has entered into
interest rate protection agreements (the Swap Agreements) to modify its
interest characteristics from a variable rate to a fixed rate. The
February 1999 swap agreement involves the exchange of interest
obligations from February 1999 through February 2006 whereby the Company
pays a fixed rate of 6.8% in exchange for a variable 30-day LIBOR plus
1.25% (3.08% at February 28, 2002). At the end of February 2002 the
notional amount of this swap was $5.7 million. The April 2000 swap
agreement involves the exchange of interest obligations from April 2000
through April 2002 whereby the Company pays a fixed rate of 8.51% in
exchange for a variable 30-day LIBOR plus 1.25% (3.08% at February 28,
2002). At the end of February 2002 the notional amount of this swap was
$7.4 million. In conjunction with the Company's new financing, the
Company discontinued hedge accounting for these two swaps effective
November 1, 2001. The November 2001 swap agreement involves the exchange
of interest rate obligations from November 2001 through November 2005
whereby the Company pays a fixed rate of 5.89% in exchange for a
variable 30-day LIBOR rate plus 2.25% (4.08% at February 28, 2002). At
the end of February 2002 there was $40 million of debt covered by this
swap agreement. The amount of debt covered by the November 2001 swap
agreement reduces on the same amortization schedule as the $40 million
term facility as defined by the loan agreement. Management intends to
hold the swaps until their maturities in April 2002, February 2006, and
November 2005, respectively. The fair value of the February 1999, April
2000 and November 2001 swap agreements is approximately $(225,000),
$(65,000), and $(60,000), respectively, at February 28, 2002.
Maturities of long-term debt are as follows (in thousands):
2003 $10,045
2004 10,050
2005 33,500
2006 10,000
-------------
$63,595
=============
29
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
10. Quarterly financial information, unaudited (in thousands, except per
share amounts)
<TABLE>
<CAPTION>
Quarters Ended
May 31, August 31, November 30, February 28,
2001 2001 2001 2002
------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
2002
----
Net sales $34,306 $32,874 $35,257 $50,480
Gross profit 8,060 7,393 8,108 10,354
Net income 2,176 1,836 2,035 1,757
Basic earnings per common share 0.44 0.36 0.39 0.34
Diluted earnings per common share 0.43 0.36 0.39 0.33
<CAPTION>
Quarters Ended
May 31, August 31, November 30, February 28,
2000 2000 2000 2001
-------------- ------------- --------------- ----------------
<S> <C> <C> <C> <C>
2001
----
Net sales $27,944 $30,474 $32,086 $30,902
Gross profit 7,200 7,746 7,780 8,006
Net income 1,871 2,052 2,099 2,150
Basic earnings per common share 0.39 0.42 0.43 0.43
Diluted earnings per common share 0.38 0.41 0.42 0.42
</TABLE>
11. Operating segments
The Company has two reportable segments as defined by the Financial
Accounting Standards Board No. 131, Disclosures about Segments of an
Enterprise and Related Information: (1) Electrical and Industrial
Products and (2) Galvanizing Services. The Electrical and Industrial
Products segment provides highly engineered specialty components
supplied to the power generation transmission and distribution market,
as well as products to the industrial market. The Galvanizing Services
segment provides hot dip galvanizing services to the steel fabrication
industry through facilities located throughout the south and southwest.
Hot dip galvanizing is a metallurgical process by which molten zinc is
applied to a customer's material. The zinc bonding renders a corrosive
resistant coating enhancing the life of the material for up to fifty
years.
30
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
11. Operating segments (continued)
Information regarding operations and assets by segment is as follows:
<TABLE>
<CAPTION>
2002 2001 2000
------------- ------------- ------------
(In thousands)
<S> <C> <C> <C>
Net sales:
Electrical and Industrial Products $ 103,301 $ 68,859 $ 51,459
Galvanizing Services 49,616 52,547 41,085
------------- -------------- --------------
$ 152,917 $121,406 $ 92,544
============= ============== ==============
Operating income (a):
Electrical and Industrial Products $ 14,562 $ 11,252 $ 7,004
Galvanizing Services 7,189 9,660 9,519
------------- -------------- --------------
21,751 20,912 16,523
General corporate expenses 6,360 5,178 4,292
Interest expense 2,410 2,332 1,674
Other (income) expense, net (b) 384 275 8
------------- -------------- --------------
9,154 7,785 5,974
------------- -------------- --------------
Income before income taxes $ 12,597 $ 13,127 $ 10,549
============= ============== ==============
Depreciation and amortization:
Electrical and Industrial Products $ 2,292 $ 2,137 $ 1,910
Galvanizing Services 3,847 3,580 2,745
Corporate 208 121 115
------------- -------------- --------------
$ 6,347 $ 5,838 $ 4,770
============= ============== ==============
Expenditures for acquisitions, net of cash, and
property, plant and equipment:
Electrical and Industrial Products $ 41,193 $ 1,612 $ 9,508
Galvanizing Services 9,712 3,443 15,580
Corporate 633 44 198
------------- -------------- --------------
$ 51,538 $ 5,099 $ 25,286
============= ============== ==============
Total assets:
Electrical and Industrial Products $ 101,870 $ 46,568 $ 43,184
Galvanizing Services 44,115 39,343 39,152
Corporate 1,059 2,457 2,468
------------- -------------- --------------
$ 147,044 $ 88,368 $ 84,804
============= ============== ==============
</TABLE>
(a) Operating income consists of net sales less cost of sales,
specifically identifiable general and administrative expenses and selling
expenses.
(b) Other (income) expense, net includes gains and losses on sale of
property, plant and equipment and other (income) expense not specifically
identifiable to a segment.
31
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
12. Commitments and contingencies
Leases
The Company leases various facilities under non-cancelable operating
leases with an initial term in excess of one year. As of February 28,
2002, the future minimum payments required under these operating leases
are summarized as follows:
Operating
Leases
------------------
(In thousands)
2003 $ 1,367
2004 1,230
2005 1,184
2006 961
2007 845
Thereafter 1,340
------------------
Total $ 6,927
==================
Rental expense for real estate and personal property was approximately
$1,421,000, $1,003,000, and $800,000 for the years ended February 28,
2002, February 28, 2001 and February 29, 2000, respectively, and includes
all short-term as well as long-term rental agreements.
Litigation and Environmental Contingencies
The Company is subject to various environmental protection reviews by
state and federal government agencies. The ultimate liability, if any,
which might result from such reviews or additional clean-up and
remediation expenses cannot presently be determined; however, as a result
of an internal analysis and prior clean-up efforts, management believes
the results will not have a material impact on the Company and that the
recorded reserves for estimated losses are adequate. The Company has
reserved $590,000 and $186,000 as of February 28, 2002 and 2001,
respectively, for estimated losses related to environmental liabilities.
In order to maintain permits to operate certain of the Company's
facilities, future capital expenditures for equipment may be required to
meet new or existing environmental regulations.
The Company is involved from time to time in various suits and claims
arising in the normal course of business. In management's opinion, the
ultimate resolution of these matters will not have a material effect on
the Company's financial position or results of operations.
13. Acquisitions
On November 1, 2001, the Company acquired 100% of the outstanding stock
of Central Electric Company (CEC), headquartered in Fulton, Missouri. CEC
is comprised of three operations consisting of a metal clad switchgear
facility in Fulton, Missouri, a power center operation in Tulsa, Oklahoma
and a relay panel and non-segmented bus-duct operation in Nashville,
Tennessee. The consolidated annual revenues of CEC are expect to be
approximately $50 million. The cost of the acquisition was $28.5 million
including transaction costs. The acquisition was paid for with $26.7
million of cash; $1.8 million in AZZ incorporated stock (97,297 shares of
common stock), which was valued based upon the average value of the stock
at the time of the public announcement of the acquisition. The operating
assets acquired included $1.2 million in cash. The acquisition resulted
in non-tax deductible goodwill of $15.4 million. The goodwill is reported
with the Industrial and Electrical Products Segment. Acquired intangible
assets of $885,000, consisted of a $583,000
32
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
13. Acquisitions (continued)
non-compete with a previous owner and $302,000 for the acquired backlog.
The weighted-average period for amortization of these intangible assets
is approximately three years. The previous owner guaranteed all
outstanding accounts receivable as of the closing date of November 1,
2001 and $500,000 was set-up in escrow to cover any potential bad debt
for the acquired accounts receivable.
On November 1, 2001, the Company also acquired the operating assets of
Carter & Crawley, Inc., headquartered in Greenville, South Carolina for
$15.4 million in cash including transaction costs. The operating assets
acquired included $2.2 million in cash. Carter & Crawley, Inc. designs,
manufactures and installs relay panels and custom control systems for
utilities and industrial manufactures. The annual revenues of Carter &
Crawley are expected to be approximately $20 million. The acquisition
resulted in tax-deductible goodwill of approximately $8 million. The
goodwill is reported with the Electrical and Industrial Products Segment.
The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of the acquisition November
1, 2001:
<TABLE>
<CAPTION>
Carter & Central
Crawley, Inc. Electric Company
-------------------- ---------------------
(In thousands)
<S> <C> <C>
Current Assets $ 8,210 $19,403
Property, plant & equipment 855 1,480
Intangible assets subject to amortization - 855
Goodwill 7,955 15,427
------------------ -------------------
Total assets acquired 17,020 37,165
Total liabilities acquired (1,619) (8,644)
-------------------- -------------------
Net asset acquired $ 15,401 $ 28,521
==================== ===================
</TABLE>
Listed below is the unaudited pro forma results of summary financial
information which includes the Company's historical results of operation
for the twelve-month periods ending February 28, 2002 and 2001 and that
of the acquired entities for the same periods adjusted for purchase
accounting and other proforma adjustments. The pro forma for the
twelve-month periods includes an expense for a non-recurring incentive
plan. The plan was terminated prior to the acquisition on November 1,
2001 and these expenses will not be incurred going forward. For the
twelve-month periods ended February 28, 2002 and 2001, the incentive plan
expense net of tax was $520,000 and $1 million, respectively. This
summary may not be indicative of what would have occurred had the
acquisitions been made at the beginning of these periods or of results
which may occur in the future.
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
2002 2001
------------------- --------------------
(In thousands except per share amounts)
<S> <C> <C>
Net sales $201,331 $190,196
Net income $ 9,513 $ 9,775
Earnings per common share:
Basic $ 1.84 $ 1.96
=================== =====================
Diluted $ 1.81 $ 1.91
=================== =====================
</TABLE>
33
<PAGE>
- --------------------------------------------------------------------------------
AZZ incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
13. Acquisitions (continued)
In September 1999 and February 2000, the Company purchased CGIT and
Westside Galvanizing, respectively. The total purchase price, net of cash
acquired, for these two businesses was approximately $13 million and
$10.6 million, respectively, and comprised of cash paid of $10.9 million
and $9.9 million and liabilities assumed of $2.1 million and $752,000,
respectively. The assets purchased were recorded at estimated fair value
and the costs in excess of fair value for these acquisitions of
approximately $7.3 million and $5.7 million were recorded as goodwill.
Pursuant to the provisions of the purchase agreement for CGIT, the
Company received from the seller purchase price refunds approximating
$371,000 during fiscal 2002.
These acquisitions were accounted for under the purchase method of
accounting. Operations applicable to acquired businesses are included in
the accompanying Consolidated Statements of Income from their respective
dates of acquisitions. The pro forma consolidated results of operations
for the year ended February 29, 2000, assuming the acquisitions had been
consummated as of March 1, 1999 are as follows:
(Unaudited)
2000
----------------------
(In thousands except per share amounts)
Net sales $104,787
Net income $ 6,048
Earnings per common share:
Basic $ 1.27
======================
Diluted $ 1.27
======================
34
<PAGE>
Item 9. Disagreements on Accounting and Financial Disclosure
No changes in accountants or disagreements with accountants on accounting and/or
financial disclosure have arisen.
PART III
Item 10. Directors and Executive Officers
The information required by this item with regard to executive officers is
included in Part I, Item 1 of this report under the heading "Executive Officers
of the Registrant."
The other information required by this item is incorporated herein by reference
to the Registrant's Proxy Statement for the 2002 Annual Meeting of Shareholders.
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference to the
Registrant's Proxy Statement for the 2002 Annual Meeting of Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein by reference to the
Registrant's Proxy Statement for the 2002 Annual Meeting of Shareholders.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated herein by reference to the
Registrant's Proxy Statement for the 2002 Annual Meeting of Shareholders.
35
<PAGE>
Schedule II
AZZ incorporated
Valuation and Qualifying Accounts and Reserves
(in thousands)
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------------
February 29, February 28, February 28,
2000 2001 2002
--------------- ---------------- ---------------
<S> <C> <C> <C>
Allowance for Doubtful Accounts
Balance at Beginning of year $ 428 $ 587 $ 649
Additions charged to income 298 281 254
Additions from acquisitions 28 0 59
Balances written off, net of recoveries (167) (219) (204)
--------------- ---------------- ---------------
Balance at end of year $ 587 $ 649 $ 758
=============== ================ ===============
</TABLE>
36
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
A. The following documents are filed as a part of this report.
1. Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors 13
Consolidated Statements of Income for the years ended 14
February 28, 2002, February 28, 2001, and February 29, 2000
Consolidated Balance Sheets as of February 28, 2002 and February 28, 2001 15-16
Consolidated Statements of Cash Flows for the years ended 17-18
February 28, 2002, February 28, 2001, and February 29, 2000
Consolidated Statements of Shareholders' Equity for the years ended 19
February 28, 2002, February 28, 2001, and February 29, 2000
Notes to Consolidated Financial Statements 20-34
</TABLE>
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts and Reserves 36
Schedules and compliance information other than those referred to above
have been omitted since the required information is not present or is not
present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated
financial statements and the notes thereto.
B. Reports on Form 8-K
The Registrant filed reports on Form 8-K on November 15, 2001 and Form 8-K/A
dated January 11, 2002, relating to the acquisitions of Central Electric Company
and Carter & Crawley, Inc.
C. Exhibits
The following exhibits are filed as a part of this report:
3(1) - Articles of Incorporation, and all amendments thereto (incorporated by
reference to the Annual Report on Form 10-K filed by Registrant for the fiscal
year ended February 28, 1981).
3(2) - Articles of Amendment to the Article of Incorporation of the Registrant
dated June 30, 1988 (incorporated by reference to the Annual Report on Form 10-K
filed by Registrant for the fiscal year ended February 29, 2000).
3(3) - Articles of Amendment to the Articles of Incorporation of the Registrant
dated October 25, 1999 (incorporated by reference to the Annual Report on Form
10-K filed by Registrant for the fiscal year ended February 29, 2000).
3(4) - Articles of Amendment to the Articles of Incorporation dated July 17,
2000 (incorporated by reference to the Quarterly Report Form 10-Q filed by
Registrant for the quarter ended August 31, 2000).
3(5) - Bylaws of AZZ incorporated as restated through March 27, 2001
(incorporated by reference to the Annual Report on Form 10-K filed by Registrant
for the fiscal year ended February 28, 2001).
37
<PAGE>
4 - Form of Stock Certificate for the Company's $1.00 par value Common Stock
(incorporated by reference to the Quarterly Report Form 10-Q filed by Registrant
for the quarter ended August 31, 2000).
10(1) - 1991 Incentive Stock Option Plan of Aztec Manufacturing Co.
(incorporated by reference to Exhibit 10h of the Annual Report on Form 10-K
filed by Registrant for the fiscal year ended February 28, 1991).
10(2) - 1991 Nonstatutory Stock Option Plan of Aztec Manufacturing Co.
(incorporated by reference to Exhibit 10i of the Annual Report on Form 10-K
filed by Registrant for the fiscal year ended February 28, 1991).
10(3) - 1998 Incentive Stock Option plan of Aztec Manufacturing Co.
(incorporated by reference to Exhibit 10k of the Annual Report on Form 10-K
filed by Registrant for the fiscal year ended February 28, 1998).
10(4) - 1998 Nonstatutory Stock Option plan of Aztec Manufacturing Co.
(incorporated by reference to Exhibit 10l of the Annual Report on Form 10-K
filed by Registrant for the fiscal year ended February 28, 1998).
10(5) - 1997 Nonstatutory Stock Option Grants of Aztec Manufacturing Co.
(incorporated by reference to Exhibit 10m of the Annual Report on Form 10-K
filed by Registrant for the fiscal year ended February 28, 1998).
10(6) - Aztec Manufacturing Co. Employee Plan and Trust as amended and restated
as of December 1, 1999 (incorporated by reference to Exhibit 4 of the Form S-8
Registration Statement Number 333-92377 filed on December 8, 1999).
10(7) - 1999 Independent Director Share Ownership Plan as Approved on January
19, 1999 and As Amended on September 22, 1999 (incorporated by reference to
Exhibit 10(22) of the Annual Report on Form 10-K filed by Registrant for the
fiscal year ended February 28, 2001).
10(8) - 2000 Advisory Director Share Ownership Plan as Approved on March 28,
2000 (incorporated by reference to Exhibit 10(23) of the Annual Report on Form
10-K filed by Registrant for the fiscal year ended February 28, 2001).
10(9) - AZZ incorporated 2001 Long-Term Incentive Plan (incorporated by
reference to Exhibit A of the Proxy Statement for the 2001 Annual Shareholders
Meeting).
10(10) - Amended and Restated Revolving and Term Loan Agreement with Bank of
America, N.A., dated November 1, 2001 (incorporated by reference to Exhibit (4)
of the Form 8-K filed by the Registrant on November 15, 2001).
10(11) - First amendment to Amended and Restated Revolving and Term Loan
Agreement with Bank of America, N.A., dated November 1, 2001*.
10(12) - Amendment adopted on February 29, 2000 to the 1999 Independent Director
Share Ownership Plan*.
10(13) - Employment Agreement between Registrant and David H. Dingus effective
March 1, 2001*.
10(14) - First amendment to Employment Agreement between Registrant and David H.
Dingus effective March 1, 2001*.
10(15) - Employment Agreement between Registrant and Dana L. Perry effective
March 1, 2001*.
10(16) - First amendment to Employment Agreement between Registrant and Dana L.
Perry effective March 1, 2001*.
10(17) - Change in Control Agreement between Registrant and all Class A
Employees effective March 1, 2001*.
10(18) - Change in Control Agreement between Registrant and all Class B
Employees effective March 1, 2001*.
10(19) - Change in Control Agreement between Registrant and all Class C
Employees effective March 1, 2001*.
10(20) - AZZ incorporated 2003 Management Incentive Bonus Plan*.
38
<PAGE>
10(21) - Termination of Change in Control Agreement between Registrant and L. C.
Martin*.
10(22) - Engagement Agreement between the Registrant and RCG Capital Markets
Group, Inc. dated February 7, 2000*.
10(23) - Amendment No. 1 dated July 12, 2000, to the Engagement Agreement
between the Registrant and RCG Capital Markets Group, Inc. dated February 7,
2000*.
10(24) - Amendment No. 2 dated October 6, 2000, to the Engagement Agreement
between the Registrant and RCG Capital Markets Group, Inc. dated February 7,
2000*.
10(25) - Amendment No. 3 dated August 31, 2001, to the Engagement Agreement
between the Registrant and RCG Capital Markets Group, Inc. dated February 7,
2000*.
11 - Computation of Per Share Earnings (see Note 7 to the Consolidated Condensed
Financial Statements)* .
21 - Subsidiaries of Registrant*.
23 - Consent of Ernst & Young LLP*.
24 - Power of Attorney*.
*Filed herewith.
39
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
AZZ incorporated
(Registrant)
<TABLE>
<S> <C>
Date: 5/24/2002 By: /s/ David H. Dingus
------------------------------------------- ---------------------------------------------
David H. Dingus, Principal Executive Officer
and Director
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant and in
the capacities and on the dates indicated.
<TABLE>
<S> <C>
L.C. Martin* /s/ Dana L. Perry
- ------------------------------------------------- -------------------------------------------------
L. C. Martin, Chairman of the Board Dana L. Perry, Principal Accounting Officer,
Principal Financial Officer, and Director
/s/ David H. Dingus /s/ Sam Rosen
- ------------------------------------------------- -------------------------------------------------
David H. Dingus, Principal Executive Sam Rosen, Director
Officer and Director
Daniel R. Feehan* R. J. Schumacher*
- ------------------------------------------------- -------------------------------------------------
Daniel R. Feehan, Director R. J. Schumacher, Director
Martin C. Bowen* Dr. H. Kirk Downey*
- ------------------------------------------------- -------------------------------------------------
Martin C. Bowen, Director Dr. H. Kirk Downey, Director
Daniel Berce* Kevern R. Joyce*
- ------------------------------------------------- -------------------------------------------------
Daniel Berce, Director Kevern R. Joyce, Director
/s/ Dana L. Perry
- -------------------------------------------------
*Dana L. Perry, Attorney-in-Fact
</TABLE>
40
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Description Numbered Page
------- ----------- -------------
3(1) Articles of Incorporation, and all
amendments thereto (incorporated by
reference to the Annual Report on Form
10-K filed by Registrant for the fiscal
year February 28, 1981).
3(2) Articles of Amendment to the Article of
Incorporation of the Registrant dated
June 30, 1988 (incorporated by reference
to the Annual Report on Form 10-K filed
by Registrant for the fiscal year ended
February 29, 2000).
3(3) Articles of Amendment to the Articles of
Incorporation of the Registrant dated
October 25, 1999 (incorporated by
reference to the Annual Report on Form
10-K filed by Registrant for the fiscal
year ended February 29, 2000).
3(4) Articles of Amendment to the Articles of
Incorporation dated July 17, 2000
(incorporated by reference to the
Quarterly Report Form 10-Q filed by
Registrant for the quarter ended August
31, 2000).
3(5) Bylaws of AZZ incorporated as restated
through March 27, 2001 (incorporated by
reference to the Annual Report on Form
10-K filed by Registrant for the fiscal
year ended February 28, 2001).
4 Form of Stock Certificate for the
Company's $1.00 par value Common Stock
(incorporated by reference to the
Quarterly Report Form 10-Q filed by
Registrant for the quarter ended August
31, 2000).
10(1) 1991 Incentive Stock Option Plan of
Aztec Manufacturing Co. (incorporated by
reference to Exhibit 10h of the Annual
Report on Form 10-K filed by Registrant
for the fiscal year ended February 28,
1991).
10(2) 1991 Nonstatutory Stock Option Plan of
Aztec Manufacturing Co.(incorporated by
reference to Exhibit 10i of the Annual
Report on Form 10-K filed by Registrant
for the fiscal year ended February 28,
1991).
10(3) 1998 Incentive Stock Option Plan of
Aztec Manufacturing Co. (incorporated by
reference to Exhibit 10k of the Annual
Report on Form 10-K filed by Registrant
for the fiscal year ended February 28,
1998).
10(4) 1998 Nonstatutory Stock Option Plan of
Aztec Manufacturing Co. (incorporated by
reference to Exhibit 10l of the Annual
Report on Form 10-K filed by Registrant
for the fiscal year ended February 28,
1998).
10(5) 1997 Nonstatutory Stock Option Grants of
Aztec Manufacturing Co. (incorporated by
reference to Exhibit 10m of the Annual
Report on Form 10-K filed by Registrant
for the fiscal year ended February 28,
1998).
10(6) Aztec Manufacturing Co. Employee Plan
and Trust as amended and restated as of
December 1, 1999 (incorporated by
reference to Exhibit 4 of the Form S-8
Registration Statement Number 333-92377
filed on December 8, 1999).
10(7) 1999 Independent Director Share
Ownership Plan as Approved on January
19, 1999 and As Amended on September 22,
1999 (incorporated by reference to
Exhibit 10(22) of the Annual Report on
Form 10-K filed by Registrant for the
fiscal year ended February 28, 2001).
41
<PAGE>
Sequentially
Exhibit Description Numbered Page
------- ----------- -------------
10(8) 2000 Advisory Director Share Ownership
Plan as Approved on March 28, 2000
(incorporated by reference to Exhibit
10(23) of the Annual Report on Form 10-K
filed by Registrant for the fiscal year
ended February 28, 2001).
10(9) AZZ incorporated 2001 Long-Term
Incentive Plan (incorporated by
reference to Exhibit A of the Proxy
Statement for the 2001 Annual
Shareholders Meeting).
10(10) Amended and Restated Revolving and Term
Loan Agreement with Bank of America,
N.A., dated November 1, 2001
(incorporated by reference to Exhibit
(4) of the Form 8-K filed by the
Registrant on November 15, 2001).
10(11) First amendment to Amended and Restated
Revolving and Term Loan Agreement with
Bank of America, N.A., dated November 1,
2001*.
10(12) Amendment adopted on February 29, 2000
to the 1999 Independent Director Share
Ownership Plan*.
10(13) Employment Agreement between Registrant
and David H. Dingus effective March 1,
2001*.
10(14) First amendment to Employment Agreement
between Registrant and David H. Dingus
effective March 1, 2001*.
10(15) Employment Agreement between Registrant
and Dana L. Perry effective March 1,
2001*.
10(16) First amendment to Employment Agreement
between Registrant and Dana L. Perry
effective March 1, 2001*.
10(17) Change in Control Agreement between
Registrant and all Class A Employees
effective March 1, 2001*.
10(18) Change in Control Agreement between
Registrant and all Class B Employees
effective March 1, 2001*.
10(19) Change in Control Agreement between
Registrant and all Class C Employees
effective March 1, 2001*.
10(20) AZZ incorporated 2003 Management
Incentive Bonus Plan*.
10(21) Termination of Change in Control
Agreement between Registrant and L.C.
Martin*.
10(22) Engagement Agreement between the
Registrant and RCG Capital Markets
Group, Inc. dated February 7, 2000*.
10(23) Amendment No. 1 dated July 12, 2000, to
the Engagement Agreement between the
Registrant and RCG Capital Markets
Group, Inc. dated February 7, 2000*.
10(24) Amendment No. 2 dated October 6, 2000,
to the Engagement Agreement between the
Registrant and RCG Capital Markets
Group, Inc. dated February 7, 2000*.
10(25) Amendment No. 3 dated August 31, 2001,
to the Engagement Agreement between the
Registrant and RCG Capital Markets
Group, Inc. dated February 7, 2000*.
42
<PAGE>
Sequentially
Exhibit Description Numbered Page
------- ----------- -------------
11 Computation of Per Share Earnings (see
Note 7 to the Consolidated Condensed
Financial Statements)*.
21 Subsidiaries of Registrant*.
23 Consent of Ernst & Young LLP*.
24 Power of Attorney*.
__________________
*Filed herewith
43
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.11
<SEQUENCE>3
<FILENAME>dex1011.txt
<DESCRIPTION>AMENDED RESTATED REVOLVING TERM LOAN CREDIT AGR
<TEXT>
<PAGE>
EXHIBIT 10(11)
First Amendment
to
Amended and Restated Revolving and Term Loan Credit Agreement
This First Amendment To Amended And Restated Revolving and Term Loan Credit
Agreement (this "Amendment") is executed as of April 5, 2002, effective as of
February 28, 2002 (the "Effective Date"), by and among AZZ incorporated, a Texas
corporation ("Borrower"), Bank of America, N.A., as Administrative Agent and
Collateral Agent for Lenders (in such capacity, Administrative Agent"), and
other Agents and Lenders party thereto.
A. Borrower, Administrative Agent, and Lenders entered into that certain
Amended and Restated Revolving and Term Loan Credit Agreement dated as of
November 1, 2001 (as the same may be further amended, modified, supplemented,
restated or amended and restated from time to time, the "Credit Agreement").
B. Borrower has requested that Lender amend certain terms and provisions of
the Credit Agreement.
C. Borrower, Administrative Agent, and Lenders have agreed, upon the following
terms and conditions, to amend the Credit Agreement subject to and upon the
terms and conditions provided herein.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
and for other valuable consideration, the parties hereto agree as follows:
Section 1. Defined Terms; References. Unless otherwise specifically defined
--------- -------------------------
herein, each term used herein that is defined in the Credit Agreement shall have
the meaning assigned to such term in the Credit Agreement.
Section 2. Amendments to Credit Agreement. Effective as of the Effective
--------- ------------------------------
Date, but subject to satisfaction of the conditions precedent set forth in
Section 4 hereof, the Credit Agreement is hereby amended as set forth below.
(a) The definition of "Applicable Margin" in Section 1.1 of the Credit
Agreement is amended in full to read as follows:
" `Applicable Margin' means, from February 28, 2002 until and
including November 1, 2002, the Applicable Margin set forth in Level 5, and
thereafter, on any date of determination, the percentage per annum set
forth in the table below for the Type of Borrowing or Commitment Fees (as
the case may be) that corresponds to the Leverage Ratio at such date of
determination, as calculated based on the quarterly Compliance Certificate
of Borrower most recently delivered pursuant to Section 9.3 hereof):
Bank Loan Final-Amendment AZZ First Amendment
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Applicable Margin (per annum)
-------------------------------------------------------------
Eurodollar Rate Base Rate Commitment
Level Leverage Ratio Borrowing and Borrowing Fees
Commission Fee
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Less than or equal to 1.500% 0.00% 0.250%
1.0:1.0
--------------------------------------------------------------------------------------------------
2 Greater than 1.0:1.0, 1.750% 0.00% 0.300%
but less than or equal
to 1.5:1.0
--------------------------------------------------------------------------------------------------
3 Greater than 1.5:1.0, 2.000% 0.250% 0.375%
but less than or equal
to 2.0:1.0
--------------------------------------------------------------------------------------------------
4 Greater than 2.0:1.0, 2.250% 0.500% 0.500%
but less than or equal
to 2.5:1.0
--------------------------------------------------------------------------------------------------
5 Greater than 2.50:1.0 2.500% 0.750% 0.500%
--------------------------------------------------------------------------------------------------
</TABLE>
Upon delivery of the Compliance Certificate pursuant to Section 9.3 or
the Permitted Acquisition Compliance Certificate in connection with a
Permitted Acquisition, on and after November 2, 2002 after the end of
each fiscal quarter commencing with the Compliance Certificate
delivered for the fiscal quarter ending August 31, 2002, the
Applicable Margin shall automatically be adjusted to the rate
corresponding to the Leverage Ratio set forth in the table above, such
automatic adjustment to take effect prospectively the third Business
Day after receipt by Administrative Agent of the Compliance
Certificate or the Permitted Acquisition Compliance Certificate, as
the case may be; provided that, if the Fixed Charge Coverage Ratio of
Borrower is greater than 1.25:1 for any two consecutive quarters
following the quarter ending February 28, 2002 (such two quarters
being a "Fixed Charge Coverage Ratio Compliance Period"), the
Applicable Margin for Eurodollar Rate Borrowings and Commission Fees
shall be the corresponding Applicable Margin set forth in the table
above less 0.250%; provided further that, if the Fixed Charge Coverage
Ratio of Borrower is less than 1.25:1 at any time of determination
following any Fixed Charge Coverage Ratio Compliance Period, the
Applicable Margin for Eurodollar Rate Borrowings and Commission Fees
shall be the corresponding Applicable Margin set forth in the table
above. If Borrower fails to deliver such Compliance Certificate or the
Permitted Acquisition Compliance Certificate, as the case may be, with
respect to any fiscal quarter or the Permitted Acquisition, as the
case may be, which sets forth such ratio within the period of time
required by Section 9.3 or by the definition of Permitted Acquisition,
as the case may be, the Applicable Margin shall automatically be
adjusted to that set forth in Level 5. The automatic adjustments
provided for in the preceding sentence shall take effect on the last
day that the Compliance Certificate was required to be delivered and
shall remain in effect until subsequently adjusted in accordance
herewith upon the delivery of such Compliance Certificate or the
Permitted Acquisition Compliance Certificate, as the case may be."
(b) The definition of "Permitted Acquisition" in Section 1.1
of the Credit Agreement is amended in full to read as follows:
" `Permitted Acquisition' means any Acquisition for which the
prior written consent of Required Lenders has been obtained and with
respect to which each of the following requirements shall have been
satisfied:
Bank Loan Final-Amendment AZZ First Amendment
2
<PAGE>
(a) as of the closing of any Acquisition, the Acquisition
has been approved and recommended by the board of directors of
the Person to be acquired or from which such business is to be
acquired;
(b) not less than 14 days prior to the closing of any
Acquisition, Borrower shall have delivered to Administrative
Agent a Permitted Acquisition Compliance Certificate
substantially in the form of Exhibit E-2 hereto, demonstrating
pro forma compliance with the terms and conditions of the Loan
Documents, after giving effect to the Acquisition, including (i)
pro forma income statement and balance sheet for the Companies
(after giving effect to the Acquisition), and (ii) cash flow
projections for the Acquisition for the period from the date of
any such Acquisition through the Revolver Termination Date,
demonstrating compliance with the Companies' applicable financial
covenants and debt amortization schedules;
(c) not less than 30 days prior to the closing of any
Acquisition, Borrower shall have delivered to Administrative
Agent a copy of the purchase agreement (including all schedules
and exhibits thereto) relating to such Acquisition (or if no
purchase agreement is available on such date, as soon thereafter
as possible, including all subsequent drafts thereof); and prior
to consummation of any Acquisition, Borrower shall have satisfied
the conditions precedent set forth in Section 7.2;
(d) any authorization required to be issued by any
Governmental Authority in connection with such Acquisition shall
be issued and shall be valid, binding, enforceable and subsisting
without any defaults thereunder or enforceable adverse
limitations thereon and shall not be subject to any proceedings
or claims opposing the issuance, development, or use thereof or
contesting the validity thereof unless the Company proposing to
enter into such Acquisition shall have entered into an agreement
with the seller protecting such Company from such adverse
limitations, proceedings, or claims, which agreement shall be on
terms and conditions satisfactory to Administrative Agent;
(e) as of the closing of any Acquisition, after giving
effect to such Acquisition, the acquiring party must be Solvent
and the Companies, on a consolidated basis, must be Solvent;
(f) as of the closing of any Acquisition, no Default or
Potential Default shall exist or occur as a result of, and after
giving effect to, such Acquisition; and
(g) as of the closing of any Acquisition, (i) if such
Acquisition is structured as a merger, Borrower (or if such
merger is with any Subsidiary of Borrower, then a domestic
company that is or becomes a Subsidiary) must be the surviving
entity after giving effect to such merger; and (ii) if such
Acquisition is structured as a stock/equity acquisition, the
acquiring Company shall own not less than a 75% interest in the
entity being acquired and such acquired entity will be a domestic
company that is or becomes a Domestic Subsidiary."
(c) The definition of "Total Commitment" in Section 1.1 of the
Credit Agreement is amended in full to read as follows:
"Total Commitment" means, on any date of determination, the
sum of (a) the aggregate principal amount outstanding under the Term
Facility plus, as applicable, (b)(i) prior to the
Bank Loan Final-Amendment AZZ First Amendment
3
<PAGE>
termination of all commitments to lend under the Revolver Facility,
the aggregate Revolver Commitments or (ii) after the termination of
all commitments to lend under the Revolver Facility, the aggregate
principal amount outstanding under the Revolver Facility.
(d) The last sentence of Section 9.20 of the Credit
Agreement is amended in full to read as follows:
"Notwithstanding the foregoing, (x) Distributions in the form
of cash or Cash Equivalents are permitted only with the prior written
consent of Required Lenders, unless the required minimum Fixed Charge
Coverage Ratio is at least 1.25:1 at the time of any such Distribution
and (y) subject to the preceding clause (x), Restricted Payments and
Distributions are permitted hereunder only to the extent that any such
Restricted Payment or Distribution is made in accordance with
applicable Law and constitutes a valid, non-voidable transaction."
(e) Section 9.29(b) of the Credit Agreement is amended in
full to read as follows:
"(b) Maximum Leverage Ratio. On and after February 28, 2002,
----------------------
through and including December 30, 2002, the Leverage Ratio to be
greater than 2.75:1; on and after December 31, 2002 through and
including February 27, 2004, the Leverage Ratio to be greater than
2.50:1; and thereafter, to be greater than 2.25:1.0, each to be
determined with respect to the immediately preceding Rolling Period."
(f) Section 9.29(c) of the Credit Agreement is amended in
full to read as follows:
"(c) Minimum Fixed Charge Coverage Ratio. The Fixed Charge
-----------------------------------
Coverage Ratio to be not less than: (i) from February 28, 2002 through
and including May 31, 2003, 1.05:1; (ii) from June 1, 2003 through and
including February 28, 2004, 1.10:1; (iii) from February 29, 2004
through and including February 27, 2005, 1.15:1; and (iv) from February
28, 2005 and thereafter, 1.25:1, in each case determined with respect
to the immediately preceding Rolling Period; provided that, the Fixed
Charge Coverage Ratio shall be at least 1.25:1 following the first
Rolling Period in which the aggregate EBITDA of Borrower for four
consecutive Rolling Periods is greater than $30,000,000."
(g) Section 9.29 of the Credit Agreement is amended by
adding thereto a new subsection (d) as follows:
"(d) Minimum EBITDA. At all times when the Fixed Charge
--------------
Coverage Ratio calculated pursuant to Section 9.29(c) is less than
1.25:1, beginning with the Rolling Period ended March 31, 2002, EBITDA
calculated on the last day of each month for the three month period
then ended, to be less than $5,200,000."
(h) Section 9.30 of the Credit Agreement is amended in
full to read as follows:
"9.30 Capital Expenditures. Neither the Borrower nor any of
--------------------
its Subsidiaries shall make or incur any Capital Expenditure if, after
giving effect thereto, the aggregate amount of all Capital Expenditures
by the Borrower and its Subsidiaries on a consolidated basis would
exceed (a) for the fiscal year ending February 28, 2002, $13,000,000,
(b) for the fiscal year ending February 28, 2003, $6,000,000, and (c)
for each fiscal year thereafter, $7,000,000; provided that, the amount
set forth in the foregoing clause (c) shall be increased to $9,000,000
if the required minimum Fixed Charge Coverage Ratio of Borrower is at
least 1.25:1."
Bank Loan Final-Amendment AZZ First Amendment
4
<PAGE>
(i) Schedule 2.1 to the Credit Agreement is deleted and replaced by
Schedule 2.1 attached hereto.
(j) Exhibit E-1 to the Credit Agreement is amended by amending Annex
B thereto as follows:
(i) Section 5(c)(xiii) thereof is amended in full to read as follows:
"(xiii) Fixed Charge Coverage Ratio [5(c)(vi) divided by 5(c)(xii)]:
______ to 1.0."
(ii) Section 5(c)(xiv) thereof is amended in full to read as follows:
"(xiv) Required Minimum Fixed Charge Coverage Ratio: ______ to 1.0."
(iii) A new Section 5(d) is added thereto as follows:
"d. Section 9.29(d) - Minimum EBITDA:
(i) Fixed Charge Coverage Ratio [5(c)(xiii)]: ________ to 1.0
(ii) EBITDA on the last day of the month for three month period
most recently ended: $___________
(iii) Minimum EBITDA Applicable: __________ Yes _________ No
(vii) Compliance: _________ Yes __________ No
Section 3. Conditions to Effectiveness. This Amendment shall become
--------- -----------------------------
effective as of the date first set forth above when and if Administrative Agent
has received the following:
(a) (i) for the respective accounts of the Lenders, an amendment fee
in an amount equal to 12.5 basis points of such Lenders' respective aggregate
Committed Sums, and (ii) the fees set forth in the fee letter dated as of April
___, 2002 between Borrower and Administrative Agent;
(b) this Amendment, duly executed by Borrower, each Guarantor, each
Lender and Administrative Agent;
(c) copies of the resolutions of Borrower's Board of Directors
approving and authorizing the execution, delivery and performance by Borrower of
this Amendment, certified as of the Effective Date by a Responsible Officer;
(d) a certificate of a Responsible Officer, certifying the names and
true signatures of the officers of Borrower authorized to execute and deliver
this Amendment; and
(e) such other assurances, certificates, documents, consents and
opinions as the Administrative Agent may reasonably require.
Section 4. Representations and Warranties of Borrower. Borrower
--------- ------------------------------------------
represents and warrants to the Lenders and Administrative Agent as set forth
below.
Bank Loan Final-Amendment AZZ First Amendment
5
<PAGE>
(a) The execution, delivery and performance by Borrower of
this Amendment and the Credit Agreement, as amended hereby, have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval not heretofore obtained of any director, stockholder,
security holder or creditor of Borrower, (ii) violate or conflict with any
provision of Borrower's Articles of Incorporation, (iii) result in or require
the creation or imposition of any Lien upon or with respect to any property now
owned or leased or hereafter acquired by Borrower, (iv) violate any Laws
applicable to Borrower or (v) result in a breach of or constitute a default
under, or cause or permit the acceleration of any obligation owed under, any
indenture or loan or credit agreement or any other material agreement to which
Borrower is a party or by which Borrower or any of its Property is bound or
affected.
(b) No authorization, consent, approval, order license or
permit from, or filing, registration or qualification with, any Governmental
Authority is or will be required to authorize or permit under applicable Law the
execution, delivery and performance by Borrower of this Amendment and the Credit
Agreement, as amended hereby.
(c) Each of this Amendment and the Credit Agreement, as
amended hereby, has been duly executed and delivered by Borrower and constitutes
the legal, valid and binding obligation of Borrower, enforceable against
Borrower in accordance with its terms, except as enforcement may be limited by
Debtor Relief Laws or equitable principles relating to the granting of specific
performance and other equitable remedies as a matter of judicial discretion.
(d) The representations and warranties of Borrower contained
in Section 8 of the Credit Agreement are true and correct in all material
respects as though made on and as of the Effective Date (except to the extent
such representations and warranties expressly refer to an earlier date, in which
case they are true and correct as of such earlier date).
(e) No Default or Event of Default exists or would result from
the effectiveness of this Amendment.
(f) Borrower agrees to perform such acts and duly authorize,
execute, acknowledge, deliver, file, and record such additional documents and
certificates as Administrative Agent may reasonably request in order to create,
perfect, preserve, and protect those guaranties, assurances, and Liens.
Section 5. Reference to and Effect on Loan Documents.
--------- -----------------------------------------
(a) On and after the Effective Date, each reference in the
Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or any
other expression of like import referring to the Credit Agreement, and each
reference in the other Loan Documents to "the Credit Agreement," "thereunder,"
"thereof," "therein" or any other expression of like import referring to the
Credit Agreement, shall mean and be a reference to the Credit Agreement as
amended by this Agreement.
(b) Except as specifically amended hereby, all provisions of
the Credit Agreement and all Collateral Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(c) Except as otherwise expressly provided herein, the
execution, delivery and effectiveness of this Amendment shall not operate as a
waiver of any right, power or remedy of any Bank or the Administrative Agent
under any of the Loan Documents or constitute a waiver of any provision of any
of the Loan Documents.
Bank Loan Final-Amendment AZZ First Amendment
6
<PAGE>
(d) Borrower (A) ratifies and confirms all provisions of the
Loan Documents applicable to Borrower, and (B) ratifies and confirms that all
guaranties, assurances, and Liens granted, conveyed, or assigned to
Administrative Agent under the Loan Documents by Borrower are not released,
reduced, or otherwise adversely affected by this Amendment and continue to
guarantee, assure, and secure full payment and performance of the present and
future Obligation.
Section 6. Costs and Expenses. Borrower agrees to pay on demand all
--------- ------------------
reasonable costs and expenses of the Administrative Agent in connection with the
preparation, execution and delivery of this Amendment and the other instruments
and documents to be delivered hereunder, including the reasonable fees and
out-of-pocket expenses of counsel for the Administrative Agent with respect
thereto and with respect to advising the Administrative Agent as to its rights
and responsibilities hereunder and thereunder.
Section 7. Execution in Counterparts. This Amendment may be executed in
--------- -------------------------
any number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute one and the same instrument.
This agreement, when countersigned by the parties hereto, shall be a "Loan
Document" as defined and referred to in the Credit Agreement and the other Loan
Documents.
Section 8. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
--------- -------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
Bank Loan Final-Amendment AZZ First Amendment
7
<PAGE>
Section 9. ENTIRETY. THIS AMENDMENT, THE CREDIT AGREEMENT, THE NOTES
------- --------
AND THE OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
AZZ INCORPORATED
By: /s/ DANA PERRY
---------------------------------
Name: Dana Perry
---------------------------
Title: Vice President
---------------------------
Signature Page to
AZZ First Amendment
<PAGE>
ADMINISTRATIVE AGENT:
--------------------
BANK OF AMERICA, N.A., as Administrative Agent
By: /s/ MICHAEL BRASHLER
-------------------------------------------
Name: Michael Brashler
------------------------------------
Title: Agency Officer
------------------------------------
Signature Page to
AZZ First Amendment
<PAGE>
LENDERS:
-------
BANK OF AMERICA, N.A.
By: /s/ STEVEN A. MACKENZIE
------------------------------------
Name: Steven A. Mackenzie
Title: Vice President
Signature Page to
AZZ First Amendment
<PAGE>
COMERICA BANK - TEXAS
By: /s/ COREY R. BAILEY
------------------------------------
Name: Corey R. Bailey
Title: Assistant Vice President
Signature Page to
AZZ First Amendment
<PAGE>
GUARANTY BANK
By: /s/ ROBERT S. HAYS
--------------------------------------
Name: Robert S. Hays
Title: Senior Vice President
Signature Page to
AZZ First Amendment
<PAGE>
WELLS FARGO BANK TEXAS, NATIONAL
ASSOCIATION
By: /s/ RUSTY ANDERSON
----------------------------------
Name: Rusty Anderson
Title: Vice President
Signature Page to
AZZ First Amendment
<PAGE>
To induce Administrative Agent and Lenders to enter into this Amendment, the
undersigned consent and agree (a) to its execution and delivery and terms and
conditions thereof, (b) that this document in no way releases, diminishes,
impairs, reduces, or otherwise adversely affects any Liens, charges, guaranties,
assurances, or other obligations or undertakings of any of the undersigned under
any Loan Documents, and (c) waive notice of acceptance of this Amendment, which
Amendment binds each of the undersigned and their respective successors and
permitted assigns and inures to Administrative Agent, Lenders, and their
respective successors and permitted assigns.
GUARANTORS:
AZTEC INDUSTRIES, INC.
THE CALVERT COMPANY, INC.
GULF COAST GALVANIZING, INC.
ARKGALV, INC.
ARBOR-CROWLEY, INC.
ATKINSON INDUSTRIES, INC.
AZTEC INDUSTRIES, INC. - MOSS POINT
AUTOMATIC PROCESSING INCORPORATED
ARIZONA GALVANIZING, INC.
HOBSON GALVANIZING, INC.
CGIT WESTBORO, INC.
WESTSIDE GALVANIZING SERVICES, INC.
CARTER AND CRAWLEY, INC.
CENTRAL ELECTRIC COMPANY
CENTRAL ELECTRIC MANUFACTURING
COMPANY
ELECTRICAL POWER SYSTEMS, INC.
CLARK CONTROL SYSTEMS, INC.
AZTEC MANUFACTURING PARTNERSHIP,
LTD.
By: AZZ GROUP, LP, its General Partner
By: AZZ GP, LLC, its General Partner
AZTEC MANUFACTURING - WASKOM
Partnership, LTD.
By: AZZ GROUP, LP, its General Partner
By: AZZ GP, LLC, its General Partner
RIG-A-LITE PARTNERSHIP, LTD.
By: AZZ GROUP, LP, its General Partner
By: AZZ GP, LLC, its General Partner
Signature Page to
AZZ First Amendment
<PAGE>
INTERNATIONAL GALVANIZERS
PARTNERSHIP, LTD.
By: AZZ GROUP, LP, its General Partner
By: AZZ GP, LLC, its General Partner
DRILLING RIG ELECTRICAL SYSTEMS CO.
PARTNERSHIP, LTD.
By: AZZ GROUP, LP, its General Partner
By: AZZ GP, LLC, its General Partner
AZZ GROUP, LP
By: AZZ GP, LLC, its General Partner
AZZ GP, LLC
AZZ LP, LLC
By /s/ DANA L. PERRY
-----------------------------------
Dana L. Perry
Secretary
AZZ HOLDINGS, INC.
By /s/ MIKE McLAIN
-----------------------------------
Mike McLain
President
Signature Page to
AZZ First Amendment
<PAGE>
SCHEDULE 2.1
------------
LENDERS AND COMMITMENTS
-----------------------
<TABLE>
<CAPTION>
=====================================================================================================================
NAME AND ADDRESS COMMITTED COMMITMENT COMMITTED COMMITMENT
OF LENDERS SUMS- PERCENTAGES - SUMS - TERM PERCENTAGES -
REVOLVER REVOLVER FACILITY TERM FACILITY
FACILITY FACILITY
=====================================================================================================================
<S> <C> <C> <C> <C>
Bank of America, N.A. $15,882,354.00 35.294120000 $14,117,646.00 35.294115000
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Steven A. MacKenzie
(214) 209-3680; (214)
209-3140 (fax)
- ---------------------------------------------------------------------------------------------------------------------
Comerica Bank - Texas $10,588,235.00 23.529411111 $9,411,765.00 23.529412500
8828 Stemmons Freeway,
Suite 441
Dallas, Texas 75247
Attn: Donald P. Hellman,
Senior Vice President
(214) 589-4419; (972)
263-9837 (fax)
- ---------------------------------------------------------------------------------------------------------------------
Guaranty Bank $7,941,176.00 17.647057778 $7,058,824.00 17.647060000
8333 Douglas Avenue
Dallas, Texas 75225
Attn: Robert S. Hays
(214) 360-2821; (214)
360-8908 (fax)
- ---------------------------------------------------------------------------------------------------------------------
Wells Fargo Bank Texas, $10,588,235.00 23.529411111 $9,411,765.00 23.529412500
National Association
505 Main Street, Suite 300
Fort Worth, Texas 76102
Attn: Rusty Anderson
(817) 334-7089; (817)
334-7000 (fax)
- ---------------------------------------------------------------------------------------------------------------------
$45,000,000.00 100.000000000% $40,000,000.00 100.000000000%
=====================================================================================================================
</TABLE>
Bank Loan Final-Amendment
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.12
<SEQUENCE>4
<FILENAME>dex1012.txt
<DESCRIPTION>AMD. TO THE 1999 IND. DIRECTOR SHARE OWNERSHIP PL
<TEXT>
<PAGE>
EXHIBIT 10(12)
AMENDMENT TO THE 1999 INDEPENDENT DIRECTOR
SHARE OWNERSHIP PLAN
ADOPTED ON FEBRUARY 29, 2000
WHEREAS by resolutions adopted on January 19, 1999 and September 22,
1999 the Board of Directors established a plan for the grant of stock options to
independent members of the Board of Directors (the "Plan");
NOW, THEREFORE, BE IT RESOLVED, that such Plan shall be known as the
1999 Independent Director Share Ownership Plan; and
RESOLVED FURTHER that in order to provide flexibility in the number of
shares to be granted to a new director the Plan is hereby amended to permit the
issuance under the Plan of such number of shares to a new independent director
as the Board may deem appropriate (but not less than 1,000 shares, or if less,
shares having a market value of $15,000) provided such grant does not violate
the provisions of the Plan with regard to the maximum number of shares which may
be granted under the Plan or to a single director; and
RESOLVED FURTHER that 50,000 shares of the Company's $1.00 par value
Common Stock shall be reserved for issuance under the Plan, registered under the
Securities Act of 1933 on Form S-8 and listed on the New York Stock Exchange;
and
RESOLVED FURTHER that the officers of the Company are authorized and
directed to take all such action as may be necessary or appropriate in order to
carry out the intent of these resolutions.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.13
<SEQUENCE>5
<FILENAME>dex1013.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10(13)
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), executed this ________ day of
February, 2002, to be effective as of March 1, 2001, is between AZZ
incorporated, a Texas corporation ("Company"), and David H. Dingus ("Employee")
R E C I T A L S:
A. Company and Employee desire to enter into this written agreement to
specify the terms and conditions of Employee*s employment with Company.
B. Company considers the maintenance of a sound management team,
including Employee, essential to protecting and enhancing its best interests and
those of its shareholders.
C. Employee will be the President and Chief Executive Officer of the
Company and also shall serve in such other positions with the Company's
affiliates as he may be asked by Company to assume. Employee will be an integral
member of Company*s management team.
NOW, THEREFORE, in consideration of Employee*s future employment with
Company and other good and valuable consideration, the parties agree as follows:
SECTION 1. EMPLOYMENT. Company hereby employs Employee, and Employee
hereby accepts employment, upon the terms and subject to the conditions
hereinafter set forth.
SECTION 2. DUTIES. Employee shall be employed as the President and Chief
Executive Officer of the Company, and such other positions within the Company or
its affiliates to which he may be appointed by the Company's Board of Directors
(the "Board"). Employee agrees to devote his full time and best efforts to the
performance of the duties attendant to his executive position with Company or
its affiliates.
SECTION 3. TERM. The initial term of employment of Employee hereunder
shall continue for thirty-six months from March 1, 2001 ("Employment Date"),
unless earlier terminated pursuant to Section 6 herein. Additionally, the
initial term of employment shall be automatically extended for additional one
year periods on each anniversary of the Employment Date unless either party
delivers written notice to the other party at least thirty (30) days prior to
the applicable anniversary date or unless terminated pursuant to Section 6
herein.
SECTION 4. COMPENSATION AND BENEFITS. In consideration for the services of
Employee hereunder, Company shall compensate Employee as follows:
(a) BASE SALARY. Until the termination of Employee*s employment
hereunder, Company or its affiliate shall pay Employee a base salary at an
annual rate of
-1-
<PAGE>
$350,000.00 ("Base Salary"). The Base Salary may not be decreased at any time
during the term of Employee*employment hereunder and may be increased by Company
prior to the annual anniversary of the Employee*s Employment Date. Any increase
in Base Salary shall be in the sole discretion of the Board.
(b) EXECUTIVE INCENTIVE BONUS. Employee shall be eligible to receive
such annual incentive bonus as may be provided from time to time by Company. The
Board has the right to interpret and to construe the terms and provisions of any
such plan and its actions in this regard shall be final and conclusive.
Employee's annual bonus for the Company's 2002 fiscal year shall be determined
under the 2002 Management Incentive Bonus Plan-President and Chief Executive
Officer, a copy of which is attached as Exhibit A to this Agreement.
(c) STOCK OPTIONS. Company, shall grant to Employee pursuant to its
2001 Long-Term Incentive Plan immediately upon its approval by the Company's
shareholders, and if it is not approved by the shareholders at the 2001 annual
meeting of shareholders, then pursuant to other existing plans or by individual
grants, the date of such award and the date of each award subsequently made
under this Agreement being referred to as the Award Date, options to purchase
43,151 shares of the Company's $1.00 par value common stock (the "Common Stock")
and shall likewise grant to Employee as of the close of business on March 1 of
each year thereafter during the term of this Agreement (each such grant to have
its own Award Date), options to purchase shares of the Company's Common Stock
having an aggregate valuation (the product of the number of shares optioned and
the Price, as hereinafter defined) based upon the closing price of the Common
Stock on the New York Stock Exchange at the date of each such grant (the
"Price"), of $641,667, options under each such grant (the one to be made
immediately after the 2001 annual meeting of shareholders and the ones to be
granted on March 1 of each year thereafter during the term of this Agreement) to
vest twenty percent on the respective Award Dates and twenty percent on each of
the first four anniversaries of the Award Dates. The options shall each be
exercisable at the Price. The options shall each have a term of ten (10) years
from their respective Award Dates and shall be either nonqualified or, if
available under a plan which has been approved by the shareholders, incentive
stock options, at the election of Employee.
(d) VACATION. Employee shall be entitled to 20 days of paid vacation
per year at the reasonable and mutual convenience of Company and Employee.
Accrued vacation not taken in any calendar year may be carried forward or used
in the following calendar year, but not in any subsequent calendar year unless
otherwise approved by the Board.
(e) GROUP INSURANCE BENEFITS. Employee shall be entitled to
participate in the Company's Employee Benefit Plan and Trust, group life, health
and disability programs and such other benefit programs as are made available to
Company*s other executives and officers and the Employee*s participation in such
programs shall be at the same rates and
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<PAGE>
subject to the same conditions as are available and applicable to Company*s
other executives and officers.
(f) LIFE INSURANCE BENEFITS. Company shall pay the premiums allocable
to a term life insurance policy in the face amount of $500,000.00 covering
Employee as the named insured, subject to Employee*s passing a standard physical
examination in order to permit issuance of the policy at standard (non-rated)
premiums and satisfaction of any other standard underwriting requirements.
Employee shall be the owner of such policy and shall have the right to designate
the beneficiary of the policy proceeds. Employee shall be liable for income
taxes with respect to premium amounts includable in Employee*s taxable income.
(g) CAR ALLOWANCE. As a condition of Employee*s employment, Employee
shall from tine to time be required to travel by automobile on Company*s
business. Accordingly, Company shall pay Employee a monthly car allowance of
$1,000.00, payable in equal semi-monthly installments, to cover Employee*s costs
of obtaining, maintaining and insuring a suitable automobile.
(h) CLUB MEMBERSHIP. Company will pay initiation fees and monthly
dues for a membership in a club suitable for business entertainment. All monthly
charges incurred at such clubs, however, shall be the sole responsibility of
Employee except as provided in Section 5 herein.
(i) ANNUAL PHYSICAL. The Company shall cover the cost to Employee of
an annual physical which Employee agrees to take with no more than fifteen
months to intervene between such annual physicals.
SECTION 5. EXPENSES. The parties anticipate that in connection with the
services to be performed by Employee pursuant to the terms of this Agreement,
Employee will be required to make payments for travel, entertainment of business
associates and similar expenses. Company shall reimburse Employee for all
appropriate and reasonable expenses authorized by Company and incurred by
Employee in the performance of his duties hereunder. Employee shall comply with
such budget limitations and approval and reporting requirements with respect to
expenses as Company may establish from time to time.
SECTION 6. TERMINATION.
(a) GENERAL. Employee*s employment hereunder shall commence on the
Employment Date and continue until the end of the term specified in Section 3,
except that the employment of Employee hereunder shall terminate prior to such
time in accordance with the following:
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<PAGE>
(i) DEATH OR DISABILITY. Upon the death of Employee during the
term of his employment hereunder or, at the option of Company, in the event of
Employee*s Disability, upon 30 days* notice to Employee.
(ii) FOR CAUSE. For "Cause" immediately upon written notice by
Company to Employee. A termination shall be for "Cause" if:
(1) Employee is convicted of a crime involving moral
turpitude or a crime providing for a term of imprisonment in a federal or state
penitentiary; or
(2) Employee commits any willful malfeasance or gross
negligence in the discharge of duties to the Company or any of its subsidiaries,
having a material adverse effect on the Company or any of its subsidiaries,
their business or reputations; or
(3) Employee fails to correct within five days after
written notice, any specific failure in performance of the duties of the
Employee's position with the Company; or
(iii) WITHOUT CAUSE. Without cause immediately upon notice by
Company to Employee.
(b) SEVERANCE PAY.
(i) TERMINATION UPON DEATH OR DISABILITY OR FOR CAUSE. Employee
shall not be entitled to any severance pay or other compensation upon
termination of his employment pursuant to Section 6(a) (i) or (ii) except for
his Base Salary accrued but unpaid as of the date of termination, unpaid expense
reimbursements under Section 5 for expenses incurred in accordance with the
terms hereof prior to termination, and compensation for accrued, unused vacation
as of the date of termination ("Accrued Amounts").
(ii) TERMINATION WITHOUT CAUSE. In the event Employee*s
employment hereunder is terminated pursuant to Section 6(a) (iii) prior to the
expiration of the initial term of this Agreement (as such initial term may have
been extended), Company shall pay Employee, as consideration for the execution
of a separation and release agreement and in lieu of any further compensation
payable hereunder other than Accrued Amounts, a cash amount equal to Employee*s
Base Salary for the period from the date of termination to the end of the term
of this Agreement but in no event less than Employee's Base Salary for a 24
month period plus any amounts to which Employee is entitled under any
compensation plan of the Company. Such separation payments shall be Employee*s
sole remedy in connection with such termination.
-4-
<PAGE>
(c) CHANGE IN CONTROL. Company and Employee shall enter into a Change
in Control Agreement (the "Change in Control Agreement"). That agreement shall
provide for payment to Employee of 2.99 times his base salary in the event that,
after a change in control, as defined in that agreement, Employee remains in the
employment of the Company for as long as his services are requested, up to a
period of one year following the change in control. Employee's obligation to
remain in the employment of the Company after the change in control will
terminate in the event of a constructive termination of the Employee, as defined
in that agreement.
SECTION 7. INVENTIONS; ASSIGNMENT.
(a) INVENTIONS DEFINED. All rights to discoveries, inventions,
improvements, designs and innovations (including all data and records pertaining
thereto) that relate to the business of Company, whether or not able to be
patented, copyrighted or reduced to writing, that Employee may discover, invent
or originate during the term of his employment hereunder, and for a period of
six months thereafter, either alone or with others and whether or not during
working hours or by the use of the facilities of Company ("Inventions") , shall
be the exclusive property of Company. Employee shall promptly disclose all
Inventions to Company, shall execute at the request of Company any assignments
or other documents Company may deem necessary to protect or perfect its rights
therein, and shall assist Company, at Company*s expense, in obtaining, defending
and enforcing Company*s rights therein. Employee hereby appoints Company as his
attorney-in-fact to execute on his behalf any assignments or other documents
deemed necessary by Company to protect or perfect its rights to any Inventions.
(b) COVENANT TO ASSIGN AND COOPERATE. Without limiting the generality
of the foregoing, Employee shall assign and transfer to Company the world-wide
right, title and interest of Employee in the Inventions. Employee agrees that
Company may apply for and receive patent rights (including Letters Patent in the
United States) for the Inventions in Company*s name in such countries as may be
determined solely by Company. Employee shall communicate to Company all facts
known to Employee relating to the Inventions and shall cooperate with Company*s
reasonable requests in connection with vesting title to the Inventions and
related patents exclusively in Company and in connection with obtaining,
maintaining and protecting Company*s exclusive patent rights in the Inventions.
(c) SUCCESSORS AND ASSIGNS. Employee*s obligations under this Section
7 shall inure to the benefit of Company and its successors and assigns and shall
survive the expiration of the term of this Agreement for such time as may be
necessary to protect the proprietary rights of Company in the Inventions.
SECTION 8. CONFIDENTIAL INFORMATION.
-5-
<PAGE>
(a) ACKNOWLEDGMENT OF PROPRIETARY INTEREST. Employee acknowledges the
proprietary interest of Company in all Confidential Information (as defined
below). Employee agrees that all Confidential Information learned by Employee
during his employment with Company or otherwise, whether developed by Employee
alone or in conjunction with others or otherwise, is and shall remain the
exclusive property at of Company. Employee further acknowledges and agrees that
his disclosure of any Confidential Information will result in irreparable injury
and damage to Company.
(b) CONFIDENTIAL INFORMATION DEFINED. "Confidential Information"
means all confidential or proprietary information of Company or any of its
affiliates, including without limitation, (i) information derived from reports,
investigations, experiments, research and work in progress,(ii) methods of
operation, (iii) market data. (iv) proprietary computer programs and codes, (v)
drawings, designs, plans and proposals, (vi) marketing and sales programs, (vii)
client lists, (viii) historical financial information and financial projections.
(ix) pricing formulae and policies, (x) all other concepts, ideas, materials and
information prepared or performed for or by Company and (xi) all information
related to the business, products, purchases or sales of Company or any of its
affiliates or any of their suppliers and customers, other than information that
is publicly available.
(c) COVENANT NOT TO DIVULGE CONFIDENTIAL INFORMATION. Company is
entitled to prevent the disclosure of Confidential Information. As a portion of
the consideration for the employment of Employee and for the compensation being
paid to Employee by Company, Employee agrees at all times during the term of his
employment hereunder and thereafter to hold in strict confidence and not to
disclose or allow to be disclosed to any person, firm or corporation, other than
to persons engaged by Company to further the business of Company, and not to use
except in the pursuit of the business of Company, the Confidential Information,
without the prior written consent of Company.
(d) RETURN OF MATERIALS AT TERMINATION. In the event of any
termination or cessation of his employment with Company for any reason. Employee
shall promptly deliver to Company all documents, data and other information
derived from or otherwise pertaining to Confidential Information. Employee shall
not take or retain any documents or other information, or any reproduction or
excerpt thereof, containing or pertaining to any Confidential Information.
SECTION 9. NON-SOLICITATION.
(a) SOLICITATION OF EMPLOYEES. During Employee*s employment with
Company and for a period of twelve (12) months after termination of such
employment at any time and for any reason, and regardless of whether any
payments are made to Employee under this Agreement as a result of such
termination, Employee shall not, directly or indirectly, solicit, participate in
or promote the solicitation of any person who was employed by Company at the
time of Employee*s termination of employment with Company to leave the employ of
-6-
<PAGE>
Company, or, on behalf of himself or any other person or entity, hire, employ or
engage any such person. Employee further agrees that, during such time, if an
employee of Company contacts Employee about prospective employment, Employee
will inform such employee that Employee cannot discuss the matter further with
him or her without the consent of Company.
(b) SOLICITATION OF CLIENTS, CUSTOMERS, ETC. During Employee*s
employment with Company and for a period of twelve (12) months after termination
of Employee*s employment under circumstances which result in payment of any
amounts to Employee under this Agreement, Employee shall not, directly or
indirectly, solicit any person who, at the time of termination of Employee*s
employment with Company, was a client, customer, vendor, consultant or agent of
Company to discontinue business, in whole or in part, with Company. Employee
further agrees that, during such time, if such a client, customer, vendor, or
consultant or agent contacts Employee about discontinuing business with Company
or moving that business elsewhere, Employee will inform such client, customer,
vendor, consultant or agent that Employee cannot discuss the matter further with
him or her without the consent of Company.
SECTION 10. GENERAL.
(a) NOTICES. All notices and other communications hereunder shall be
in writing or by written telecommunication, and shall be deemed to have been
duly given if delivered personally or if mailed by certified mail, return
receipt requested or by written telecommunication, to the relevant address set
forth below, or to such other address as the recipient of such notice or
communication shall have specified to the other party in accordance with this
Section 10(a):
If to Company, to:
AZZ incorporated
1300 South University Drive, Suite 200
Fort Worth, Texas 76107
Attention: Board of Directors
If to Employee, to:
David H. Dingus
1113 Somerset Blvd.
Colleyville, Texas 76034
(b) WITHHOLDING. All payments required to be made to Employee by
Employer under this Agreement shall be subject to the withholdings of such
amounts, if any, relating to federal, state, and local taxes as may be required
by law.
-7-
<PAGE>
(c) EQUITABLE REMEDIES. Each of the parties hereto acknowledges and
agrees that upon any breach by Employee of his obligations under any of Sections
7, 8, and 9, Employer shall have no adequate remedy at law and accordingly shall
be entitled to specific performance and other appropriate injunctive and
equitable relief.
(d) SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable, such provision shall be fully severable, and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof, and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid, and enforceable.
(e) WAIVERS. No delay or omission by either party in exercising any
right, power or privilege hereunder shall impair such right, power or privilege,
nor shall any single or partial exercise of any such right, power or privilege
preclude any further exercise thereof or the exercise of any other right, power
or privilege.
(f) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
(g) CAPTIONS. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
(h) REFERENCE TO AGREEMENT. Use of the words "herein," "hereof,"
"hereto," "hereunder," "herefrom" and the like in this Agreement refer to this
Agreement only as a whole and not to any particular section or subsection of
this Agreement, unless otherwise noted.
(i) BINDING AGREEMENT. This Agreement shall be binding upon and inure
to the benefit of the parties and shall be enforceable by the personal
representatives and heirs of the Employee and the successors and assigns of
Employer. This Agreement may be assigned by Company to any of its subsidiaries;
provided that in the event of any such assignment, Company shall remain liable
for all of its obligations hereunder and shall be liable for all obligations of
all such assignee hereunder. If Employee dies while any amounts would still be
payable to him hereunder, such amounts shall be paid to Employee*s estate. This
Agreement is not otherwise assignable by Employee.
(j) ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and understandings
relating to the
-8-
<PAGE>
subject matter hereof and may not be amended except by a written instrument
hereafter signed by each of the parties hereto.
(k) GOVERNING LAW. This Agreement and the performance hereof shall be
construed and governed in accordance with the laws of the State of Texas,
without regard to choice of law principles.
(l) GENDER AND NUMBER. The masculine gender shall be deemed to denote
the feminine or neuter genders, the singular to denote the plural, and the
plural to denote the singular, where the context so permits.
(m) APPLICABILITY. Any obligation, undertaking or duty of Employee to
the Company under this Agreement shall extend to any affiliate of the Company to
which Employee is assigned pursuant to Section 4(i) above.
SECTION 11. DEFINITIONS. As used in this Agreement, the following terms
will have the following meanings:
(a) "Agreement" has the meaning ascribed to it in the first paragraph
of this document.
(b) "Accrued Amounts" has the meaning ascribed to it in Section
6(b)(i)
(c) "Base Salary" has the meaning ascribed to it in Section 4(a)
(d) "Cause" has the meaning ascribed to it in Section 6(a)(ii).
(e) "Change in Control Agreement" has the meaning ascribed to it in
Section 6(c).
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Company" means AZZ incorporated, a Texas corporation.
(h) "Confidential Information" has the meaning ascribed to it in
Section 8(b).
(i) "Disability" with respect to an Employee shall, to the extent
permitted by law and subject to the Americans with Disability Act
or any state or local counterpart, be deemed to exist in
accordance with Section 6(a)(i) if the Employee meets the
definition of either "disabled" or "disability" under the terms
of
-9-
<PAGE>
Company*s long-term disability benefit program. Any refusal by
Employee to submit to a reasonable medical examination that is
job-related and consistent with business necessity and intended
to inquire into Employee's ability to perform job-related
functions shall be deemed to constitute conclusive evidence of
Company's right to terminate Employee in accordance with Section
6(a)(i) regardless of whether Employee actually has a disability.
(j) "Employee" has the meaning ascribed to it in the first paragraph
of this document.
(k) "Company" refers to Company and its successors and assigns.
(l) "Employment Date" has the meaning ascribed to it in Section 3.
(m) "Price" has the meaning ascribed to it in Section 4(c).
(n) "Inventions" has the meaning ascribed to it in Section 7(a).
EXECUTED as of the date and year first above written.
AZZ incorporated
By: /s/ L.C. MARTIN
________________________________
L.C. MARTIN
Chairman of Board of Directors
EMPLOYEE
By: /s/ DAVID H. DINGUS
________________________________
David H. Dingus
-10-
<PAGE>
AZZ incorporated 2002
Management Incentive Bonus Plan
ARTICLE I
THE PLAN
1.1 Name. This Plan shall be known as the "AZZ incorporated 2002
----
Management Incentive Bonus Plan."
1.2 Purpose. The Purpose of the Plan is to provide an incentive to key
-------
managers to meet the short-term objectives of the Company's current business
plan.
1.3 Eligibility to Participate. Any full time employee of the Company who
--------------------------
is found by the Plan administrator to have management level responsibilities,
the performance of which are critical to the success of the Company, may be
designated by the administrator as a Plan participant.
1.4 Term. The Plan shall continue in effect from year to year until
----
terminated by action of the Board.
ARTICLE II
ADMINISTRATION
2.1 Plan Administrator. The Plan shall be administered by the Compensation
------------------
Committee (the "Committee") of the Company's Board of Directors (the "Board").
By approval of this Plan the Board delegates to the Committee full authority to
administer this Plan including, without limitation, authority to (i) designate
Plan participants, (ii) establish performance criteria for participants on an
individual basis, (iii) establish schedules, formulas or other methods for
determining the bonuses which Plan participants are eligible to earn, (iv) make
adjustments, or determine not to make adjustments, for extraordinary events
which effect bonuses earned under the Plan and (v) interpret the Plan (which
interpretations shall be final and binding on the Company and on Plan
participants) and make all determinations necessary or advisable for the
administration of the Plan.
2.2 Company Assistance. The Company shall provide all information
------------------
reasonably requested by the Committee in connection with its duties as Plan
administrator.
2.3 Responsibilities of the CEO. The Committee shall be responsible for
---------------------------
determining the criteria and scale for calculation of the cash incentive bonus
which the Company's CEO shall be eligible to earn under the Plan. The CEO shall
be responsible for
Exhibit A to Employment Agreement
<PAGE>
recommending annually to the Committee the criteria and the scale for
calculation of the cash incentive bonus which other Plan participants shall be
eligible to earn under the Plan.
ARTICLE III
INCENTIVE AWARDS, EFFECT OF TERMINATION
OF EMPLOYMENT AND TIME OF PAYMENT
3.1 Incentive Awards. the Committee shall annually or more often if it
----------------
determines additional awards to be necessary or appropriate in order to
accomplish the purposes of the Plan, grant incentive awards to eligible
employees by use of the Incentive Bonus Participation form attached to this Plan
as Exhibit A or such other award form as it may develop in connection with its
administration of the Plan.
3.2 Termination of Employment. A Plan participant must continue to be a
-------------------------
full-time employee of the Company at the time of payment of incentive bonuses
under the Plan to be eligible to receive such a payment unless termination from
employment resulted from retirement, death, disability or termination (other
than a termination for cause), in which case the terminated employee shall
receive a portion of the incentive bonus prorated for the portion of the
Company's fiscal year prior to such termination. In such a case payment shall be
made to the terminated participant or the participant's estate at the same time
that payments are made to active employee participants. As used above, a
termination shall be for cause if: (i) Employee is convicted of a crime
involving moral turpitude or a crime providing for a term of imprisonment in a
federal or state penitentiary; (ii) Employee commits any willful malfeasance or
gross negligence in the discharge of duties to the Company or any of its
subsidiaries, having a material adverse effect on the Company or any of its
subsidiaries, their business or reputations; or (iii) Employee fails to correct
within five days after written notice, any specific failure in performance of
the duties of the Employee's position with the Company.
3.3 Payment of Awards. Awards earned shall be paid, after adjustment for
-----------------
payroll taxes and any other appropriate withholding, no later than twenty-one
(21) days after receipt by the Company of audited financial statements for the
applicable period.
(End of Plan)
<PAGE>
AZZ incorporated
Management Incentive Bonus Plan Participation
President and Chief Executive Officer
-------------------------------------
(Management Position Held)
You are being offered participation in the Company's 2002 Management
Incentive Bonus Plan. The terms of this offer are set forth below. A copy of the
2002 Management Incentive Bonus Plan is attached as Exhibit A to this
participation form. Your participation in the Plan will be controlled and
governed by the terms of the Plan, so please read it carefully and if you wish
to accept participation in the Plan, sign and return the enclosed copy of this
participation form to the Company's CFO and Treasurer, Dana L. Perry.
1. Plan participant: DAVID H. DINGUS
---------------------------------------------------------
2. Fiscal Year: 2002
--------------------------------------------------------------
3. Criteria for bonus: Earnings Per Share (diluted)
-------------------------------------------------------
4. Schedule or formula by which the amount of the incentive bonus will be
calculated:
Your incentive bonus for 2002 fiscal year will be based on the Company's
targeted diluted earnings per share of $1.87 per share. Your bonus will be
calculated based on the following schedule:
30% of base salary at target EPS
35% of base salary at 110% of target EPS
40% of base salary at 120% of target EPS or more
20% of base salary at 90% of target EPS
10% of base salary at 80% of target EPS
1% of base salary at 71% of target EPS
0% of base salary at 70% of target EPS
The percent of target diluted EPS earned will be rounded to the nearest
whole percent. The percent of base salary earned will be prorated to reflect the
same relative position to the benchmarks above and below it as shown in the
table that the percent of target diluted EPS achieved bears to the benchmark
percentages just above and below it as shown in the table. The percentage of
base salary so determined shall be rounded to the nearest one-tenth of one
percent. Solely by way of example, if the targeted diluted earnings per share
were $1.00 and the actual diluted earnings per share were $1.17 and your base
salary were $350,000.00, the incentive bonus would be calculated as follows:
EXHIBIT A
<PAGE>
Step One: Percent of target accomplished: $1.17 = 117% of target (use
nearest whole percent)
Step Two: 117% is related 110%-120% as 38.5% (use nearest one-tenth of
one percent) is related to 35%-40%
Step Three: 38.50% of $350,000 = $134,750.00
Step Four: Incentive bonus is $134,750.00
/s/ L. C. MARTIN
__________________________________
Authorized Officer
Accepted: I accept participation in the AZZ incorporated 2002 Management
Incentive Bonus Plan, acknowledge receipt of a copy of the Plan and agree that
my participation will be governed by the terms of the Plan.
/s/ DAVID H. DINGUS
__________________________________
Plan Participant
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.14
<SEQUENCE>6
<FILENAME>dex1014.txt
<DESCRIPTION>AMENDMENT #1 TO EMPLOYMENT AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10(14)
AMENDMENT NO. ONE TO EMPLOYMENT AGREEMENT
-----------------------------------------
This Amendment No. One to Employment Agreement ("Amendment No. One") is
entered into as of the 27th day of March, 2002, between AZZ incorporated, a
Texas corporation, (the "Company") and David H. Dingus, President and Chief
Executive Officer of the Company ("Employee").
WHEREAS, the Company and Employee entered into an Employment Agreement (the
"Employment Agreement") effective March 1, 2001; and
WHEREAS, the Company and the Employee entered into a Change in Control
Agreement (the "Change in Control Agreement) effective on or about December 18,
2001; and
WHEREAS, the Company and the Employee desire to amend the Employment
Agreement in order to eliminate payments to the Employee under both the
Employment Agreement and the Change in Control Agreement in the event of a
change in control of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
between the Company and the Employee regarding his future employment with the
Company, it is agreed as follows:
1. The following sentence shall be added to Section 6(c) of the Employment
Agreement. "This Employment Agreement shall terminate upon the occurrence of a
change in control as defined in the Change in Control Agreement, and Employee
shall not be entitled to the severance pay provided by Section 6(b)(i) or
Section 6(b)(ii) of this Employment Agreement."
2. Except as amended by this Amendment No. One, all of the terms and
provisions of the Employment Agreement are ratified, confirmed and approved.
EXECUTED this the 13 day of May, 2002.
AZZ incorporated
By /s/ DANA L. PERRY
_______________________________________
Dana L. Perry, Its Vice President and
Chief Financial Officer
/s/ DAVID H. DINGUS
_________________________________________
David H. Dingus
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.15
<SEQUENCE>7
<FILENAME>dex1015.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10(15)
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), executed this ________ day of
February, 2002, to be effective as of March 1, 2001, is between AZZ
incorporated, a Texas corporation ("Company"), and Dana L. Perry ("Employee")
R E C I T A L S:
A. Company and Employee desire to enter into this written agreement to
specify the terms and conditions of Employee*s employment with Company.
B. Company considers the maintenance of a sound management team, including
Employee, essential to protecting and enhancing its best interests and those of
its shareholders.
C. Employee will be Vice President and Chief Financial Officer of the
Company and shall serve in such other positions with the Company's affiliates as
he may be asked by Company to assume. Employee will be an integral member of
Company*s management team.
NOW, THEREFORE, in consideration of Employee*s future employment with
Company and other good and valuable consideration, the parties agree as follows:
SECTION 1. EMPLOYMENT. Company hereby employs Employee, and Employee hereby
accepts employment, upon the terms and subject to the conditions hereinafter set
forth.
SECTION 2. DUTIES. Employee shall be employed as Vice President and Chief
Financial Officer of the Company, and such other positions within the Company or
its affiliates to which he may be appointed by the Company's Board of Directors
(the "Board"). Employee agrees to devote his full time and best efforts to the
performance of the duties attendant to his executive position with Company or
its affiliates.
SECTION 3. TERM. The initial term of employment of Employee hereunder shall
continue for thirty-six months from March 1, 2001 ("Employment Date"), unless
earlier terminated pursuant to Section 6 herein. Additionally, the initial term
of employment shall be automatically extended for additional one year periods on
each anniversary of the Employment Date unless either party delivers written
notice to the other party at least thirty (30) days prior to the applicable
anniversary date or unless terminated pursuant to Section 6 herein.
SECTION 4. COMPENSATION AND BENEFITS. In consideration for the services of
Employee hereunder, Company shall compensate Employee as follows:
(a) BASE SALARY. Until the termination of Employee*s employment
hereunder, Company or its affiliate shall pay Employee a base salary at an
annual rate of
-1-
<PAGE>
$196,000.00 ("Base Salary"). The Base Salary may not be decreased at any time
during the term of Employee*employment hereunder and may be increased by Company
prior to the annual anniversary of the Employee*s Employment Date. Any increase
in Base Salary shall be in the sole discretion of the Board.
(b) EXECUTIVE INCENTIVE BONUS. Employee shall be eligible to receive
such annual incentive bonus as may be provided from time to time by Company. The
Board has the right to interpret and to construe the terms and provisions of any
such plan and its actions in this regard shall be final and conclusive.
Employee's annual bonus for the Company's 2002 fiscal year shall be determined
under the 2002 Management Incentive Bonus Plan-Vice President and Chief
Financial Officer, a copy of which is attached as Exhibit A to this Agreement.
(c) STOCK OPTIONS. Company, shall grant to Employee pursuant to its
2001 Long-Term Incentive Plan immediately upon its approval by the Company's
shareholders, and if it is not approved by the shareholders at the 2001 annual
meeting of shareholders, then pursuant to other existing plans or by individual
grants, the date of such award and the date of each award subsequently made
under this Agreement being referred to as the Award Date, options to purchase
9,975 shares of the Company's $1.00 par value common stock (the "Common Stock")
and shall likewise grant to Employee as of the close of business on March 1 of
each year thereafter during the term of this Agreement (each such grant to have
its own Award Date), options to purchase shares of the Company's Common Stock
having an aggregate valuation (the product of the number of shares optioned and
the Price, as hereinafter defined) based upon the closing price of the Common
Stock on the New York Stock Exchange at the date of each such grant (the
"Price"), of $148,333, options under each such grant (the one to be made
immediately after the 2001 annual meeting of shareholders and the ones to be
granted on March 1 of each year thereafter during the term of this Agreement) to
vest twenty percent on the respective Award Dates and twenty percent on each of
the first four anniversaries of the Award Dates. The options shall each be
exercisable at the Price. The options shall each have a term of ten (10) years
from their respective Award Dates and shall be either nonqualified or, if
available under a plan which has been approved by the shareholders, incentive
stock options, at the election of Employee.
(d) VACATION. Employee shall be entitled to 20 days of paid vacation
per year at the reasonable and mutual convenience of Company and Employee.
Accrued vacation not taken in any calendar year may be carried forward or used
in the following calendar year, but not in any subsequent calendar year unless
otherwise approved by the Board.
(e) GROUP INSURANCE BENEFITS. Employee shall be entitled to
participate in the Company's Employee Benefit Plan and Trust, group life, health
and disability programs and such other benefit programs as are made available to
Company*s other executives and officers and the Employee*s participation in such
programs shall be at the same rates and
-2-
<PAGE>
subject to the same conditions as are available and applicable to Company*s
other executives and officers.
(f) LIFE INSURANCE BENEFITS. Company shall pay the premiums allocable
to a term life insurance policy in the face amount of $300,000.00 covering
Employee as the named insured, subject to Employee*s passing a standard physical
examination in order to permit issuance of the policy at standard (non-rated)
premiums and satisfaction of any other standard underwriting requirements.
Employee shall be the owner of such policy and shall have the right to designate
the beneficiary of the policy proceeds. Employee shall be liable for income
taxes with respect to premium amounts includable in Employee*s taxable income.
(g) CAR ALLOWANCE. As a condition of Employee*s employment, Employee
shall from time to time be required to travel by automobile on Company business.
Accordingly, Company shall furnish an automobile to Employee and pay Employee*s
costs of maintaining, operating and insuring it.
(h) ANNUAL PHYSICAL. The Company shall cover the cost to Employee of
an annual physical which Employee agrees to take with no more than fifteen
months to intervene between such annual physicals.
SECTION 5. EXPENSES. The parties anticipate that in connection with the
services to be performed by Employee pursuant to the terms of this Agreement,
Employee will be required to make payments for travel, entertainment of business
associates and similar expenses. Company shall reimburse Employee for all
appropriate and reasonable expenses authorized by Company and incurred by
Employee in the performance of his duties hereunder. Employee shall comply with
such budget limitations and approval and reporting requirements with respect to
expenses as Company may establish from time to time.
SECTION 6. TERMINATION.
(a) GENERAL. Employee*s employment hereunder shall commence on the
Employment Date and continue until the end of the term specified in Section 3,
except that the employment of Employee hereunder shall terminate prior to such
time in accordance with the following:
(i) DEATH OR DISABILITY. Upon the death of Employee during the
term of his employment hereunder or, at the option of Company, in the event of
Employee*s Disability, upon 30 days* notice to Employee.
(ii) FOR CAUSE. For "Cause" immediately upon written notice by
Company to Employee. A termination shall be for "Cause" if:
-3-
<PAGE>
(1) Employee is convicted of a crime involving moral
turpitude or a crime providing for a term of imprisonment in a federal or state
penitentiary; or
(2) Employee commits any willful malfeasance or gross
negligence in the discharge of duties to the Company or any of its subsidiaries,
having a material adverse effect on the Company or any of its subsidiaries,
their business or reputations; or
(3) Employee fails to correct within five days after
written notice, any specific failure in performance of the duties of the
Employee's position with the Company; or
(iii) WITHOUT CAUSE. Without cause immediately upon notice by
Company to Employee.
(b) SEVERANCE PAY.
(i) TERMINATION UPON DEATH OR DISABILITY OR FOR CAUSE. Employee
shall not be entitled to any severance pay or other compensation upon
termination of his employment pursuant to Section 6(a) (i) or (ii) except for
his Base Salary accrued but unpaid as of the date of termination, unpaid expense
reimbursements under Section 5 for expenses incurred in accordance with the
terms hereof prior to termination, and compensation for accrued, unused vacation
as of the date of termination ("Accrued Amounts").
(ii) TERMINATION WITHOUT CAUSE. In the event Employee*s
employment hereunder is terminated pursuant to Section 6(a) (iii) prior to the
expiration of the initial term of this Agreement (as such initial term may have
been extended) , Company shall pay Employee, as consideration for the execution
of a separation and release agreement and in lieu of any further compensation
payable hereunder other than Accrued Amounts, a cash amount equal to Employee*s
Base Salary for the period from the date of termination to the end of the term
of this Agreement but in no event less than Employee's Base Salary for a 24
month period plus any amounts to which Employee is entitled under any
compensation plan of the Company. Such separation payments shall be Employee*s
sole remedy in connection with such termination.
(c) CHANGE IN CONTROL. Company and Employee shall enter into a Change
in Control Agreement (the "Change in Control Agreement"). That agreement shall
provide for payment to Employee of 2.99 times his base salary in the event that,
after a change in control, as defined in that agreement, Employee remains in the
employment of the Company for as long as his services are requested, up to a
period of one year following the change in control. Employee's obligation to
remain in the employment of the Company after the change in control will
terminate in the event of a constructive termination of the Employee, as defined
in that agreement.
-4-
<PAGE>
SECTION 7. INVENTIONS; ASSIGNMENT.
(a) INVENTIONS DEFINED. All rights to discoveries, inventions,
improvements, designs and innovations (including all data and records pertaining
thereto) that relate to the business of Company, whether or not able to be
patented, copyrighted or reduced to writing, that Employee may discover, invent
or originate during the term of his employment hereunder, and for a period of
six months thereafter, either alone or with others and whether or not during
working hours or by the use of the facilities of Company ("Inventions") , shall
be the exclusive property of Company. Employee shall promptly disclose all
Inventions to Company, shall execute at the request of Company any assignments
or other documents Company may deem necessary to protect or perfect its rights
therein, and shall assist Company, at Company*s expense, in obtaining, defending
and enforcing Company*s rights therein. Employee hereby appoints Company as his
attorney-in-fact to execute on his behalf any assignments or other documents
deemed necessary by Company to protect or perfect its rights to any Inventions.
(b) COVENANT TO ASSIGN AND COOPERATE. Without limiting the generality
of the foregoing, Employee shall assign and transfer to Company the world-wide
right, title and interest of Employee in the Inventions. Employee agrees that
Company may apply for and receive patent rights (including Letters Patent in the
United States) for the Inventions in Company*s name in such countries as may be
determined solely by Company. Employee shall communicate to Company all facts
known to Employee relating to the Inventions and shall cooperate with Company*s
reasonable requests in connection with vesting title to the Inventions and
related patents exclusively in Company and in connection with obtaining,
maintaining and protecting Company*s exclusive patent rights in the Inventions.
(c) SUCCESSORS AND ASSIGNS. Employee*s obligations under this Section
7 shall inure to the benefit of Company and its successors and assigns and shall
survive the expiration of the term of this Agreement for such time as may be
necessary to protect the proprietary rights of Company in the Inventions.
SECTION 8. CONFIDENTIAL INFORMATION.
(a) ACKNOWLEDGMENT OF PROPRIETARY INTEREST. Employee acknowledges the
proprietary interest of Company in all Confidential Information (as defined
below). Employee agrees that all Confidential Information learned by Employee
during his employment with Company or otherwise, whether developed by Employee
alone or in conjunction with others or otherwise, is and shall remain the
exclusive property at of Company. Employee further acknowledges and agrees that
his disclosure of any Confidential Information will result in irreparable injury
and damage to Company.
(b) CONFIDENTIAL INFORMATION DEFINED. "Confidential Information" means
all confidential or proprietary information of Company or any of its affiliates,
including
-5-
<PAGE>
without limitation, (i) information derived from reports, investigations,
experiments, research and work in progress,(ii) methods of operation, (iii)
market data. (iv) proprietary computer programs and codes, (v) drawings,
designs, plans and proposals, (vi) marketing and sales programs, (vii) client
lists, (viii) historical financial information and financial projections. (ix)
pricing formulae and policies, (x) all other concepts, ideas, materials and
information prepared or performed for or by Company and (xi) all information
related to the business, products, purchases or sales of Company or any of its
affiliates or any of their suppliers and customers, other than information that
is publicly available.
(c) COVENANT NOT TO DIVULGE CONFIDENTIAL INFORMATION. Company is
entitled to prevent the disclosure of Confidential Information. As a portion of
the consideration for the employment of Employee and for the compensation being
paid to Employee by Company, Employee agrees at all times during the term of his
employment hereunder and thereafter to hold in strict confidence and not to
disclose or allow to be disclosed to any person, firm or corporation, other than
to persons engaged by Company to further the business of Company, and not to use
except in the pursuit of the business of Company, the Confidential Information,
without the prior written consent of Company.
(d) RETURN OF MATERIALS AT TERMINATION. In the event of any
termination or cessation of his employment with Company for any reason. Employee
shall promptly deliver to Company all documents, data and other information
derived from or otherwise pertaining to Confidential Information. Employee shall
not take or retain any documents or other information, or any reproduction or
excerpt thereof, containing or pertaining to any Confidential Information.
SECTION 9. NON-SOLICITATION.
(a) SOLICITATION OF EMPLOYEES. During Employee*s employment with
Company and for a period of twelve (12) months after termination of such
employment at any time and for any reason, and regardless of whether any
payments are made to Employee under this Agreement as a result of such
termination, Employee shall not, directly or indirectly, solicit, participate in
or promote the solicitation of any person who was employed by Company at the
time of Employee*s termination of employment with Company to leave the employ of
Company, or, on behalf of himself or any other person or entity, hire, employ or
engage any such person. Employee further agrees that, during such time, if an
employee of Company contacts Employee about prospective employment, Employee
will inform such employee that Employee cannot discuss the matter further with
him or her without the consent of Company.
(b) SOLICITATION OF CLIENTS, CUSTOMERS, ETC. During Employee*s
employment with Company and for a period of twelve (12) months after termination
of Employee*s employment under circumstances which result in payment of any
amounts to Employee under this Agreement, Employee shall not, directly or
indirectly, solicit any person who, at the time of termination of Employee*s
employment with Company, was a client,
-6-
<PAGE>
customer, vendor, consultant or agent of Company to discontinue business, in
whole or in part, with Company. Employee further agrees that, during such time,
if such a client, customer, vendor, or consultant or agent contacts Employee
about discontinuing business with Company or moving that business elsewhere,
Employee will inform such client, customer, vendor, consultant or agent that
Employee cannot discuss the matter further with him or her without the consent
of Company.
SECTION 10. GENERAL.
(a) NOTICES. All notices and other communications hereunder shall be
in writing or by written telecommunication, and shall be deemed to have been
duly given if delivered personally or if mailed by certified mail, return
receipt requested or by written telecommunication, to the relevant address set
forth below, or to such other address as the recipient of such notice or
communication shall have specified to the other party in accordance with this
Section 10(a):
-7-
<PAGE>
If to Company, to:
AZZ incorporated
1300 South University Drive, Suite 200
Fort Worth, Texas 76107
Attention: Board of Directors
If to Employee, to:
Dana L. Perry
3919 Buena Vista Circle
Granbury, Texas 76049
(b) WITHHOLDING. All payments required to be made to Employee by
Employer under this Agreement shall be subject to the withholdings of such
amounts, if any, relating to federal, state, and local taxes as may be required
by law.
(c) EQUITABLE REMEDIES. Each of the parties hereto acknowledges and
agrees that upon any breach by Employee of his obligations under any of Sections
7, 8, and 9, Employer shall have no adequate remedy at law and accordingly shall
be entitled to specific performance and other appropriate injunctive and
equitable relief.
(d) SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable, such provision shall be fully severable, and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof, and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid, and enforceable.
(e) WAIVERS. No delay or omission by either party in exercising any
right, power or privilege hereunder shall impair such right, power or privilege,
nor shall any single or partial exercise of any such right, power or privilege
preclude any further exercise thereof or the exercise of any other right, power
or privilege.
(f) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
(g) CAPTIONS. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
-8-
<PAGE>
(h) REFERENCE TO AGREEMENT. Use of the words "herein," "hereof,"
"hereto," "hereunder," "herefrom" and the like in this Agreement refer to this
Agreement only as a whole and not to any particular section or subsection of
this Agreement, unless otherwise noted.
(i) BINDING AGREEMENT. This Agreement shall be binding upon and inure
to the benefit of the parties and shall be enforceable by the personal
representatives and heirs of the Employee and the successors and assigns of
Employer. This Agreement may be assigned by Company to any of its subsidiaries;
provided that in the event of any such assignment, Company shall remain liable
for all of its obligations hereunder and shall be liable for all obligations of
all such assignee hereunder. If Employee dies while any amounts would still be
payable to him hereunder, such amounts shall be paid to Employee*s estate. This
Agreement is not otherwise assignable by Employee.
(j) ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and understandings
relating to the subject matter hereof and may not be amended except by a written
instrument hereafter signed by each of the parties hereto.
(k) GOVERNING LAW. This Agreement and the performance hereof shall be
construed and governed in accordance with the laws of the State of Texas,
without regard to choice of law principles.
(l) GENDER AND NUMBER. The masculine gender shall be deemed to denote
the feminine or neuter genders, the singular to denote the plural, and the
plural to denote the singular, where the context so permits.
(m) APPLICABILITY. Any obligation, undertaking or duty of Employee to
the Company under this Agreement shall extend to any affiliate of the Company to
which Employee is assigned pursuant to Section 4(i) above.
SECTION 11. DEFINITIONS. As used in this Agreement, the following terms
will have the following meanings:
(a) "Agreement" has the meaning ascribed to it in the first paragraph
of this document.
(b) "Accrued Amounts" has the meaning ascribed to it in Section
6(b)(i)
(c) "Base Salary" has the meaning ascribed to it in Section 4(a)
(d) "Cause" has the meaning ascribed to it in Section 6(a)(ii).
-9-
<PAGE>
(e) "Change in Control Agreement" has the meaning ascribed to it in
Section 6(c).
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Company" means AZZ incorporated, a Texas corporation.
(h) "Confidential Information" has the meaning ascribed to it in
Section 8(b).
(i) "Disability" with respect to an Employee shall, to the extent
permitted by law and subject to the Americans with Disability Act
or any state or local counterpart, be deemed to exist in
accordance with Section 6(a)(i) if the Employee meets the
definition of either "disabled" or "disability" under the terms
of Company*s long-term disability benefit program. Any refusal by
Employee to submit to a reasonable medical examination that is
job-related and consistent with business necessity and intended
to inquire into Employee's ability to perform job-related
functions shall be deemed to constitute conclusive evidence of
Company's right to terminate Employee in accordance with Section
6(a)(i) regardless of whether Employee actually has a disability.
(j) "Employee" has the meaning ascribed to it in the first paragraph
of this document.
(k) "Company" refers to Company and its successors and assigns.
(l) "Employment Date" has the meaning ascribed to it in Section 3.
(m) "Price" has the meaning ascribed to it in Section 4(c).
(n) "Inventions" has the meaning ascribed to it in Section 7(a).
-10-
<PAGE>
EXECUTED as of the date and year first above written.
AZZ incorporated
By: /s/ DAVID H. DINGUS
____________________________________________
David H. Dingus
President and CEO
EMPLOYEE
By: /s/ DANA L. PERRY
____________________________________________
Dana L. Perry
-11-
<PAGE>
AZZ Incorporated 2002
Management Incentive Bonus Plan
ARTICLE I
THE PLAN
1.1 Name. This Plan shall be known as the "AZZ incorporated 2002
----
Management Incentive Bonus Plan."
1.2 Purpose. The Purpose of the Plan is to provide an incentive to key
-------
managers to meet the short-term objectives of the Company's current business
plan.
1.3 Eligibility to Participate. Any full time employee of the Company who
--------------------------
is found by the Plan administrator to have management level responsibilities,
the performance of which are critical to the success of the Company, may be
designated by the administrator as a Plan participant.
1.4 Term. The Plan shall continue in effect from year to year until
----
terminated by action of the Board.
ARTICLE II
ADMINISTRATION
2.1 Plan Administrator. The Plan shall be administered by the Compensation
------------------
Committee (the "Committee") of the Company's Board of Directors (the "Board").
By approval of this Plan the Board delegates to the Committee full authority to
administer this Plan including, without limitation, authority to (i) designate
Plan participants, (ii) establish performance criteria for participants on an
individual basis, (iii) establish schedules, formulas or other methods for
determining the bonuses which Plan participants are eligible to earn, (iv) make
adjustments, or determine not to make adjustments, for extraordinary events
which effect bonuses earned under the Plan and (v) interpret the Plan (which
interpretations shall be final and binding on the Company and on Plan
participants) and make all determinations necessary or advisable for the
administration of the Plan.
2.2 Company Assistance. The Company shall provide all information
------------------
reasonably requested by the Committee in connection with its duties as Plan
administrator.
2.3 Responsibilities of the CEO. The Committee shall be responsible for
---------------------------
determining the criteria and scale for calculation of the cash incentive bonus
which the Company's CEO shall be eligible to earn under the Plan. The CEO shall
be responsible for
Exhibit A to Employment Agreement
<PAGE>
recommending annually to the Committee the criteria and the scale for
calculation of the cash incentive bonus which other Plan participants shall be
eligible to earn under the Plan.
ARTICLE III
INCENTIVE AWARDS, EFFECT OF TERMINATION
OF EMPLOYMENT AND TIME OF PAYMENT
3.1 Incentive Awards. the Committee shall annually or more often if it
----------------
determines additional awards to be necessary or appropriate in order to
accomplish the purposes of the Plan, grant incentive awards to eligible
employees by use of the Incentive Bonus Participation form attached to this Plan
as Exhibit A or such other award form as it may develop in connection with its
administration of the Plan.
3.2 Termination of Employment. A Plan participant must continue to be a
-------------------------
full-time employee of the Company at the time of payment of incentive bonuses
under the Plan to be eligible to receive such a payment unless termination from
employment resulted from retirement, death, disability or termination (other
than a termination for cause), in which case the terminated employee shall
receive a portion of the incentive bonus prorated for the portion of the
Company's fiscal year prior to such termination. In such a case payment shall be
made to the terminated participant or the participant's estate at the same time
that payments are made to active employee participants. As used above, a
termination shall be for cause if: (i) Employee is convicted of a crime
involving moral turpitude or a crime providing for a term of imprisonment in a
federal or state penitentiary; (ii) Employee commits any willful malfeasance or
gross negligence in the discharge of duties to the Company or any of its
subsidiaries, having a material adverse effect on the Company or any of its
subsidiaries, their business or reputations; or (iii) Employee fails to correct
within five days after written notice, any specific failure in performance of
the duties of the Employee's position with the Company.
3.3 Payment of Awards. Awards earned shall be paid, after adjustment for
-----------------
payroll taxes and any other appropriate withholding, no later than twenty-one
(21) days after receipt by the Company of audited financial statements for the
applicable period.
(End of Plan)
<PAGE>
AZZ incorporated
Management Incentive Bonus Plan Participation
Vice President and Chief Financial Officer
-----------------------------------------
(Management Position Held)
You are being offered participation in the Company's 2002 Management
Incentive Bonus Plan. The terms of this offer are set forth below. A copy of the
2002 Management Incentive Bonus Plan is attached as Exhibit A to this
participation form. Your participation in the Plan will be controlled and
governed by the terms of the Plan, so please read it carefully and if you wish
to accept participation in the Plan, sign and return the enclosed copy of this
participation form to the Company's President and Chief Executive Officer, David
H. Dingus.
1. Plan participant: DANA L. PERRY
---------------------------------------------------------
2. Fiscal Year: 2002
--------------------------------------------------------------
3. Criteria for bonus: Earnings Per Share (diluted)
-------------------------------------------------------
4. Schedule or formula by which the amount of the incentive bonus will be
calculated:
Your incentive bonus for 2002 fiscal year will be based on the Company's
targeted diluted earnings per share of $1.87 per share. Your bonus will be
calculated based on the following schedule:
30% of base salary at target EPS
35% of base salary at 110% of target EPS
40% of base salary at 120% of target EPS or more
20% of base salary at 90% of target EPS
10% of base salary at 80% of target EPS
1% of base salary at 71% of target EPS
0% of base salary at 70% of target EPS
The percent of target diluted EPS earned will be rounded to the nearest
whole percent. The percent of base salary earned will be prorated to reflect the
same relative position to the benchmarks above and below it as shown in the
table that the percent of target diluted EPS achieved bears to the benchmark
percentages just above and below it as shown in the table. The percentage of
base salary so determined shall be rounded to the nearest one-tenth of one
percent. Solely by way of example, if the targeted diluted earnings per share
were $1.00 and the actual diluted earnings per share were $1.17 and your base
salary were $196,000.00, the incentive bonus would be calculated as follows:
EXHIBIT A
<PAGE>
Step One: Percent of target accomplished: $1.17 = 117% of target (use
nearest whole percent)
Step Two: 117% is related 110%-120% as 38.5% (use nearest one-tenth of
one percent) is related to 35%-40%
Step Three: 38.50% of $196,000 = $75,460.00
Step Four: Incentive bonus is $75,460.00
/s/ DAVID H. DINGUS
----------------------------------------
Authorized Officer
Accepted: I accept participation in the AZZ incorporated 2002 Management
Incentive Bonus Plan, acknowledge receipt of a copy of the Plan and agree that
my participation will be governed by the terms of the Plan.
/s/ DANA L. PERRY
----------------------------------------
Plan Participant
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.16
<SEQUENCE>8
<FILENAME>dex1016.txt
<DESCRIPTION>AMENDMENT # 1 TO EMPLOYMENT AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10(16)
AMENDMENT NO. ONE TO EMPLOYMENT AGREEMENT
-----------------------------------------
This Amendment No. One to Employment Agreement ("Amendment No. One") is
entered into as of the 27th day of March, 2002, between AZZ incorporated, a
Texas corporation, (the "Company") and Dana L. Perry, Vice President and Chief
Financial Officer of the Company ("Employee").
WHEREAS, the Company and Employee entered into an Employment Agreement (the
"Employment Agreement") effective March 1, 2001; and
WHEREAS, the Company and the Employee entered into a Change in Control
Agreement (the "Change in Control Agreement) effective on or about December 18,
2001; and
WHEREAS, the Company and the Employee desire to amend the Employment
Agreement in order to eliminate payments to the Employee under both the
Employment Agreement and the Change in Control Agreement in the event of a
change in control of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
between the Company and the Employee regarding his future employment with the
Company, it is agreed as follows:
1. The following sentence shall be added to Section 6(c) of the Employment
Agreement. "This Employment Agreement shall terminate upon the occurrence of a
change in control as defined in the Change in Control Agreement, and Employee
shall not be entitled to the severance pay provided by Section 6(b)(i) or
Section 6(b)(ii) of this Employment Agreement."
2. Except as amended by this Amendment No. One, all of the terms and
provisions of the Employment Agreement are ratified, confirmed and approved.
EXECUTED this the 13 day of May, 2002.
AZZ incorporated
By /s/ DAVID H. DINGUS
----------------------------------------
David H. Dingus, Its President and
Chief Executive Officer
/s/ DANA L. PERRY
----------------------------------------
Dana L. Perry
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.17
<SEQUENCE>9
<FILENAME>dex1017.txt
<DESCRIPTION>CHANGE IN CONTROL AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10(17)
AZZ incorporated
1300 South University Drive, Suite 200
Fort Worth, Texas 76107
[CLASS A]
December 18, 2001
___________________________
___________________________
___________, ________ _____
Dear _______________:
AZZ incorporated (the "Company") considers it essential to the best
interest of its shareholders to foster the continued employment of key personnel
such as yourself (sometimes referred to below as the "Executive") in the event
of a change in control of the Company, whether it be on a friendly or an
unfriendly basis. The Company's Board of Directors (the "Board") recognizes that
the uncertainty which would result from a change in control could cause key
management personnel to terminate their employment at a time that their
continued employment is especially critical to the Company and its shareholders.
In order to encourage its key management personnel to remain with the
Company through a change in control and its aftermath, and in order to encourage
their continued attention and dedication and to avoid the distraction that would
exist in the absence of financial security, the Company is proposing that it
enter into this letter agreement (the "Agreement") with you under which you will
receive certain benefits in the event your employment by the Company is
terminated within a specified period subsequent to a change in control of the
Company (as defined in Section 4(a) below).
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through March 1, 2002, provided, however,
that commencing on March 1, 2002 and each March 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless, not
later than by November 30 of the preceding year, the Company shall have given
notice that it does not wish to extend this Agreement and provided, further,
that notwithstanding any such notice (the "Notice") by the Company not to
extend, if a Change in Control of the Company (each as hereinafter defined)
shall have occurred during the original or extended term of this Agreement, this
Agreement shall continue in effect until the latter of (i) the end of the
original or extended term; (ii) one year beyond the date on which the Change in
Control occurred; or (iii) until all payments, if any, required to be made by
the Company or otherwise to you under this Agreement shall have been paid in
full.
<PAGE>
December 18, 2001
Page 2
2. Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) Cause. A termination shall be for "Cause" if: (i) Executive is
-----
convicted of a crime involving moral turpitude or a crime providing
for a term of imprisonment in a federal or state penitentiary; or (ii)
Executive commits any willful malfeasance or gross negligence in the
discharge of duties to the Company or any of its subsidiaries, having
a material adverse effect on the Company or any of its subsidiaries,
their business or reputation; or (iii) Executive fails to correct
within five days after written notice from the Board, any specific
failure in performance of the duties of the Executive's position with
the Company.
(b) Disability. "Disability" shall mean, to the extent permitted by law
----------
and subject to the Americans with Disabilities Act or any applicable
state or local counterpart, those conditions described in the
definition of "disabled" or "disability" under the Company's long-term
disability benefit program.
(c) Employee Plan. "Employee Plan" shall mean an employee benefit plan of
-------------
the Company or a trustee or other fiduciary holding securities for
such a plan.
(d) Good Reason. "Good Reason" shall mean, without your express written
-----------
consent, the occurrence after a Change in Control of the Company of
any of the following circumstances unless, in the case of paragraphs
A, B, E, F, G, or H, such circumstances are fully corrected within 15
days of notice, which shall be given by the Executive to the Company,
of the existence of such a circumstance:
(A) The assignment of duties to you inconsistent with your present
status as ____________________ of the Company (or such other
title or titles as you may be holding immediately prior to the
Change in Control of the Company) or a substantial adverse
alteration in the nature or status of your responsibilities from
those in effect immediately prior to the Change in Control of the
Company;
(B) A reduction by the Company in your annual base salary in effect
on the date of the Change in Control of the Company;
(C) The relocation of the Company*s principal executive offices to a
location outside of Tarrant County, Texas (or, if different, the
metropolitan area in which such offices are located immediately
prior to the change in control of the Company) or the Company*s
requiring
<PAGE>
December 18, 2001
Page 3
you to be based anywhere other than a site less than thirty (30)
miles from the site where you are now principally based except
for (i) required travel on Company business to an extent
substantially consistent with your present business travel
obligations and (ii) proposed relocations of which you have
already been informed in writing on or prior to the date of this
Agreement or to which you may hereafter consent;
(D) The failure by the Company, without your consent, to pay to you
any portion of your current compensation, after the same shall
have become due and payable and within seven (7) days after
receipt by the Company of written notice from you specifying that
such compensation is due and has not been paid;
(E) The failure by the Company to continue in effect any compensation
plan in which you participate immediately prior to the Change in
Control of the Company which is material to your total
compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue
your participation therein on a basis not materially less
favorable, both in terms of the amount of benefits provided and
the level of your participation relative to other participants,
as existed at the time of the Change in Control of the Company;
(F) The failure of the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under the
AZZ incorporated Employee Benefit Plan & Trust or under any of
the Company*s other deferred compensation plans, life insurance,
medical, health and accident, or disability plans in which you
were participating at the time of the Change in Control of the
Company, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive you of any material fringe benefit enjoyed by you at the
time of the Change in Control of the Company, or the failure by
the Company to provide you with the number of paid vacation days
to which you are entitled on the basis of any employment contract
with you or years of service with the Company in accordance with
the Company*s normal vacation policy for officers in effect at
the time of the Change in Control of the Company;
<PAGE>
December 18, 2001
Page 4
(G) The failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement,
as contemplated in Section 4 hereof; or
(H) Any purported termination of your employment by the Company
except because of total disability, death or for Cause.
3. Potential Change in Control. For purposes of this Agreement, a
"Potential Change in Control of the Company" shall be deemed to have occurred if
(a) the Company enters into an agreement, consummation of which would result in
the occurrence of a Change in Control of the Company; (b) any person (including
the Company) publicly announces an intention to take or to consider taking
actions which if consummated would constitute a Change in Control of the
Company; (c) any person, other than an Employee Plan, who is or becomes the
beneficial owner, directly or indirectly, of 10% or more of the Common Stock
then outstanding, increases his beneficial ownership of such securities by 5% or
more of the Common Stock then outstanding; or (d) the Board adopts a resolution
to the effect that, for purposes of this Agreement, a Potential Change in
Control of the Company has occurred. You agree that, subject to the terms and
conditions of this Agreement, in the event of a Potential Change in Control of
the Company, you will remain in the employment of the Company until the earliest
of (i) a date which is nine (9) months after the occurrence of such Potential
Change in Control of the Company, (ii) the termination by you of your employment
with the Company by reason of death or Disability as defined in Subsection 2(b)
or (iii) the occurrence of a Change in Control of the Company.
4. Change in Control. No benefit shall be payable hereunder unless
there shall have been a change in control of the Company. For the purpose of
this Agreement, the term "Change in Control" of the Company shall mean a change
in control of a nature that would be required to be reported in response to Item
5(f) of Schedule 14A of Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Exchange Act") provided, however, a change in control
shall be deemed to have occurred if: (A) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or fiduciary
holding securities under an employee benefit plan of the Company, is or becomes
the "beneficial owner" (as defined in Rule 13(d)-3 under the Exchange Act),
directly or indirectly of securities of the Company representing 35% or more of
the combined voting power of the Company's then outstanding voting securities;
(B) there is a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 75% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;
<PAGE>
December 18, 2001
Page 5
or (C) the shareholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
5. Compensation Upon Termination. Following a Change in Control of
the Company, as defined by Subsection 4(a), upon termination of your employment
you shall be entitled to the following benefits:
(a) If your employment shall be terminated within one year by the Company
for Cause or by you other than for Good Reason, the Company shall pay
you your full base salary through the date of termination, plus all
other amounts to which you are entitled under any compensation or
benefit plan of the Company at the time such payments are due, and the
Company shall have no further obligations to you under this Agreement.
(b) If your employment by the Company shall be terminated before one year
following a Change in Control (i) by the Company other than for Cause
or Disability or (ii) by you for Good Reason, then you shall be
entitled to the benefits provided below:
(A) the Company shall pay you within 15 days after the date of
termination your full base salary through the date of termination
at the rate in effect at the time of your termination of
employment, plus any other amounts to which you are entitled
under any compensation plan of the Company, at the time such
payments are due;
(B) in lieu of any further salary payments to you for periods
subsequent to the date of termination, the Company shall pay as
severance pay to you within 15 days after the date of termination
(i) a lump sum cash severance payment (the "Severance Payment")
in an amount equal to one times your "base amount" (within the
meaning of section 280G(b)(3) of the Internal Revenue Code of
1986, as amended (the "Code")) and (ii) all options held by you
for the purchase of Company shares shall fully vest and become
immediately exercisable;
(C) The Company shall also reimburse to you all legal fees and
expenses incurred by you in seeking to obtain or enforce any
right or benefit provided by Section 5(b);
<PAGE>
December 18, 2001
Page 6
(D) You shall not be required to mitigate the amount of any payment
provided for in Section 5(b) by seeking other employment or
otherwise, nor shall the amount of any payment or benefit
provided for in this Section 3 be reduced by any compensation
earned by you as a result of employment after the Service Term by
another employer or otherwise or by retirement benefits earned or
paid.
6. Successors. The Company will require any successor (either direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and perform this Agreement. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled
hereunder following a Change in Control of the Company (except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed to be the date on which you become entitled to such
compensation from the Company). As used in this Agreement, Company shall mean
the Company as hereinbefore defined and any successor to its business or assets.
7. Binding Agreement. This Agreement shall inure to the benefit of
and be enforceable by your heirs, personal representatives and assigns. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, unless otherwise provided herein, such amount shall be paid
in accordance with the terms of this Agreement to your heirs, personal
representatives or assigns.
8. Notice. Notices and other communications pursuant to this
Agreement shall be deemed to have been given if in writing (i) delivered
personally or by documented courier or delivery service; or (ii) mailed by
registered or certified mail (return receipt requested and postage prepaid) to
the following listed persons at the addresses specified below, or to such other
persons or addresses as the party entitled to notice shall give, in the manner
hereinabove described, to the others entitled to notice:
If to the Executive:
__________________________
__________________________
__________________________
If to AZZ incorporated:
<PAGE>
December 18, 2001
Page 7
AZZ incorporated
1300 South University Drive, Suite 200
Fort Worth, Texas 76107
Attn: President and CEO
With a copy to:
Shannon, Gracey, Ratliff & Miller, L.L.P.
3800 Carter Burgess Tower
777 Main Street
Fort Worth, Texas 76102
Attn: Sam Rosen
9. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be authorized to act on the
Company's behalf. No waiver by either party hereto at any time of any breach by
the other party hereto of, or non-compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or other, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Texas. All references to sections of the Exchange
Act or to the Internal Revenue Code of 1986, as amended, shall be deemed also to
refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law.
10. Validity. The validity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
12. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled, at the Company's expense,
exclusively by arbitration in Tarrant County, Texas in accordance with the rules
of the American Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction; provided, however,
that the Executive shall be entitled to seek specific performance of his right
to be paid compensation, other than the Severance Payment, for
<PAGE>
December 18, 2001
Page 8
service performed to the end of his employment by the Company during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
AZZ incorporated
By:_____________________________________
David H. Dingus, President and CEO
Agreed to this _____ day of __________, 2002:
EXECUTIVE:
______________________________
Name:_________________________
Position:_____________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>10
<FILENAME>dex1018.txt
<DESCRIPTION>CHANGE IN CONTROL AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10(18)
AZZ incorporated
1300 South University Drive, Suite 200
Fort Worth, Texas 76107
[CLASS B]
December 18, 2001
___________________________
___________________________
___________, ________ _____
Dear _______________:
AZZ incorporated (the "Company") considers it essential to the best
interest of its shareholders to foster the continued employment of key personnel
such as yourself (sometimes referred to below as the "Executive") in the event
of a change in control of the Company, whether it be on a friendly or an
unfriendly basis. The Company's Board of Directors (the "Board") recognizes that
the uncertainty which would result from a change in control could cause key
management personnel to terminate their employment at a time that their
continued employment is especially critical to the Company and its shareholders.
In order to encourage its key management personnel to remain with the
Company through a change in control and its aftermath, and in order to encourage
their continued attention and dedication and to avoid the distraction that would
exist in the absence of financial security, the Company is proposing that it
enter into this letter agreement (the "Agreement") with you under which you will
receive certain benefits in the event your employment by the Company is
terminated within a specified period subsequent to a change in control of the
Company (as defined in Section 4(a) below).
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through March 1, 2002, provided, however,
that commencing on March 1, 2002 and each March 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless, not
later than by November 30 of the preceding year, the Company shall have given
notice that it does not wish to extend this Agreement and provided, further,
that notwithstanding any such notice (the "Notice") by the Company not to
extend, if a Change in Control of the Company (each as hereinafter defined)
shall have occurred during the original or extended term of this Agreement, this
Agreement shall continue in effect until the latter of (i) the end of the
original or extended term; (ii) two years beyond the date on which the Change in
Control occurred; or (iii) until all payments, if any, required to be made by
the Company or otherwise to you under this Agreement shall have been paid in
full.
<PAGE>
December 18, 2001
Page 2
2. Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) Cause. A termination shall be for "Cause" if: (i) Executive is
-----
convicted of a crime involving moral turpitude or a crime providing
for a term of imprisonment in a federal or state penitentiary; or (ii)
Executive commits any willful malfeasance or gross negligence in the
discharge of duties to the Company or any of its subsidiaries, having
a material adverse effect on the Company or any of its subsidiaries,
their business or reputation; or (iii) Executive fails to correct
within five days after written notice from the Board, any specific
failure in performance of the duties of the Executive's position with
the Company.
(b) Disability. "Disability" shall mean, to the extent permitted by law
----------
and subject to the Americans with Disabilities Act or any applicable
state or local counterpart, those conditions described in the
definition of "disabled" or "disability" under the Company's long-term
disability benefit program.
(c) Employee Plan. "Employee Plan" shall mean an employee benefit plan of
-------------
the Company or a trustee or other fiduciary holding securities for
such a plan.
(d) Good Reason. "Good Reason" shall mean, without your express written
-----------
consent, the occurrence after a Change in Control of the Company of
any of the following circumstances unless, in the case of paragraphs
A, B, E, F, G, or H, such circumstances are fully corrected within 15
days of notice, which shall be given by the Executive to the Company,
of the existence of such a circumstance:
(A) The assignment of duties to you inconsistent with your present
status as ____________________ of the Company (or such other
title or titles as you may be holding immediately prior to the
Change in Control of the Company) or a substantial adverse
alteration in the nature or status of your responsibilities from
those in effect immediately prior to the Change in Control of the
Company;
(B) A reduction by the Company in your annual base salary in effect
on the date of the Change in Control of the Company;
(C) The relocation of the Company's principal executive offices to a
location outside of Tarrant County, Texas (or, if different, the
metropolitan area in which such offices are located immediately
prior to the change in control of the Company) or the Company's
requiring
<PAGE>
December 18, 2001
Page 3
you to be based anywhere other than a site less than thirty (30)
miles from the site where you are now principally based except
for (i) required travel on Company business to an extent
substantially consistent with your present business travel
obligations and (ii) proposed relocations of which you have
already been informed in writing on or prior to the date of this
Agreement or to which you may hereafter consent;
(D) The failure by the Company, without your consent, to pay to you
any portion of your current compensation, after the same shall
have become due and payable and within seven (7) days after
receipt by the Company of written notice from you specifying that
such compensation is due and has not been paid;
(E) The failure by the Company to continue in effect any compensation
plan in which you participate immediately prior to the Change in
Control of the Company which is material to your total
compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue
your participation therein on a basis not materially less
favorable, both in terms of the amount of benefits provided and
the level of your participation relative to other participants,
as existed at the time of the Change in Control of the Company;
(F) The failure of the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under the
AZZ incorporated Employee Benefit Plan & Trust or under any of
the Company's other deferred compensation plans, life insurance,
medical, health and accident, or disability plans in which you
were participating at the time of the Change in Control of the
Company, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive you of any material fringe benefit enjoyed by you at the
time of the Change in Control of the Company, or the failure by
the Company to provide you with the number of paid vacation days
to which you are entitled on the basis of any employment contract
with you or years of service with the Company in accordance with
the Company's normal vacation policy for officers in effect at
the time of the Change in Control of the Company;
<PAGE>
December 18, 2001
Page 4
(G) The failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement,
as contemplated in Section 4 hereof; or
(H) Any purported termination of your employment by the Company
except because of total disability, death or for Cause.
3. Potential Change in Control. For purposes of this Agreement, a
"Potential Change in Control of the Company" shall be deemed to have occurred if
(a) the Company enters into an agreement, consummation of which would result in
the occurrence of a Change in Control of the Company; (b) any person (including
the Company) publicly announces an intention to take or to consider taking
actions which if consummated would constitute a Change in Control of the
Company; (c) any person, other than an Employee Plan, who is or becomes the
beneficial owner, directly or indirectly, of 10% or more of the Common Stock
then outstanding, increases his beneficial ownership of such securities by 5% or
more of the Common Stock then outstanding; or (d) the Board adopts a resolution
to the effect that, for purposes of this Agreement, a Potential Change in
Control of the Company has occurred. You agree that, subject to the terms and
conditions of this Agreement, in the event of a Potential Change in Control of
the Company, you will remain in the employment of the Company until the earliest
of (i) a date which is nine (9) months after the occurrence of such Potential
Change in Control of the Company, (ii) the termination by you of your employment
with the Company by reason of death or Disability as defined in Subsection 2(b)
or (iii) the occurrence of a Change in Control of the Company.
4. Change in Control. No benefit shall be payable hereunder unless
there shall have been a change in control of the Company. For the purpose of
this Agreement, the term "Change in Control" of the Company shall mean a change
in control of a nature that would be required to be reported in response to Item
5(f) of Schedule 14A of Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Exchange Act") provided, however, a change in control
shall be deemed to have occurred if: (A) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or fiduciary
holding securities under an employee benefit plan of the Company, is or becomes
the "beneficial owner" (as defined in Rule 13(d)-3 under the Exchange Act),
directly or indirectly of securities of the Company representing 35% or more of
the combined voting power of the Company's then outstanding voting securities;
(B) there is a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 75% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;
<PAGE>
December 18, 2001
Page 5
or (C) the shareholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
5. Compensation Upon Termination. Following a Change in Control of
the Company, as defined by Subsection 4(a), upon termination of your employment
you shall be entitled to the following benefits:
(a) If your employment shall be terminated within two years by the Company
for Cause or by you other than for Good Reason, the Company shall pay
you your full base salary through the date of termination, plus all
other amounts to which you are entitled under any compensation or
benefit plan of the Company at the time such payments are due, and the
Company shall have no further obligations to you under this Agreement.
(b) If your employment by the Company shall be terminated before two years
following a Change in Control (i) by the Company other than for Cause
or Disability or (ii) by you for Good Reason, then you shall be
entitled to the benefits provided below:
(A) the Company shall pay you within 15 days after the date of
termination your full base salary through the date of termination
at the rate in effect at the time of your termination of
employment, plus any other amounts to which you are entitled
under any compensation plan of the Company, at the time such
payments are due;
(B) in lieu of any further salary payments to you for periods
subsequent to the date of termination, the Company shall pay as
severance pay to you within 15 days after the date of termination
(i) a lump sum cash severance payment (the "Severance Payment")
in an amount equal to two times your "base amount" (within the
meaning of section 280G(b)(3) of the Internal Revenue Code of
1986, as amended (the "Code")) and (ii) all options held by you
for the purchase of Company shares shall fully vest and become
immediately exercisable;
(C) The Company shall also reimburse to you all legal fees and
expenses incurred by you in seeking to obtain or enforce any
right or benefit provided by Section 5(b);
<PAGE>
December 18, 2001
Page 6
(D) You shall not be required to mitigate the amount of any payment
provided for in Section 5(b) by seeking other employment or
otherwise, nor shall the amount of any payment or benefit
provided for in this Section 3 be reduced by any compensation
earned by you as a result of employment after the Service Term by
another employer or otherwise or by retirement benefits earned or
paid.
6. Successors. The Company will require any successor (either direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and perform this Agreement. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled
hereunder following a Change in Control of the Company (except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed to be the date on which you become entitled to such
compensation from the Company). As used in this Agreement, Company shall mean
the Company as hereinbefore defined and any successor to its business or assets.
7. Binding Agreement. This Agreement shall inure to the benefit of
and be enforceable by your heirs, personal representatives and assigns. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, unless otherwise provided herein, such amount shall be paid
in accordance with the terms of this Agreement to your heirs, personal
representatives or assigns.
8. Notice. Notices and other communications pursuant to this
Agreement shall be deemed to have been given if in writing (i) delivered
personally or by documented courier or delivery service; or (ii) mailed by
registered or certified mail (return receipt requested and postage prepaid) to
the following listed persons at the addresses specified below, or to such other
persons or addresses as the party entitled to notice shall give, in the manner
hereinabove described, to the others entitled to notice:
If to the Executive:
__________________________
__________________________
__________________________
If to AZZ incorporated:
<PAGE>
December 18, 2001
Page 7
AZZ incorporated
1300 South University Drive, Suite 200
Fort Worth, Texads 76107
Attn: President and CEO
With a copy to:
Shannon, Gracey, Ratliff & Miller, L.L.P.
3800 Carter Burgess Tower
777 Main Street
Fort Worth, Texas 76102
Attn: Sam Rosen
9. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be authorized to act on the
Company's behalf. No waiver by either party hereto at any time of any breach by
the other party hereto of, or non-compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or other, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Texas. All references to sections of the Exchange
Act or to the Internal Revenue Code of 1986, as amended, shall be deemed also to
refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law.
10. Validity. The validity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
12. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled, at the Company's expense,
exclusively by arbitration in Tarrant County, Texas in accordance with the rules
of the American Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction; provided, however,
that the Executive shall be entitled to seek specific performance of his right
to be paid compensation, other than the Severance Payment, for
<PAGE>
December 18, 2001
Page 8
service performed to the end of his employment by the Company during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
AZZ incorporated
By: ______________________________________
David H. Dingus, President and CEO
Agreed to this _____ day of _____________, 2002:
EXECUTIVE:
_________________________________________
Name: ___________________________________
Position: _______________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.19
<SEQUENCE>11
<FILENAME>dex1019.txt
<DESCRIPTION>CHANGE IN CONTROL AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10(19)
AZZ incorporated
1300 South University Drive, Suite 200
Fort Worth, Texas 76107
December 18, 2001
[CLASS C]
Mr. David H. Dingus
1113 Somerset Blvd.
Colleyville, Texas 76034
Dear Mr. Dingus:
AZZ incorporated (the "Company") considers it essential to the best
interest of its shareholders to foster the continued employment of key personnel
such as yourself (sometimes referred to below as the "Executive") in the event
of a change in control of the Company, whether it be on a friendly or an
unfriendly basis. The Company's Board of Directors (the "Board") recognizes that
the uncertainty which would result from a change in control could cause key
management personnel to terminate their employment at a time that their
continued employment is especially critical to the Company and its shareholders.
In order to encourage its key management personnel to remain with the
Company through a change in control and its aftermath, and in order to encourage
their continued attention and dedication and to avoid the distraction that would
exist in the absence of financial security, the Company is proposing that it
enter into this letter agreement (the "Agreement") with you under which you
will receive certain benefits in the event of a change in control, provided you
continue in the employment of the Company for the period set forth below
1. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect through March 1, 2002, provided, however,
that commencing on March 1, 2002 and each March 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless, not
later than by November 30 of the preceding year, the Company shall have given
notice that it does not wish to extend this Agreement and provided, further,
that notwithstanding any such notice (the "Notice") by the Company not to
extend, if a Potential Change in Control or a Change in Control of the Company
(each as hereinafter defined) shall have occurred during the original or
extended term of this Agreement, this Agreement shall continue in effect until
the latter of (i) the end of the original or extended term; (ii) nine months
beyond the date on which the Potential Change in Control occurred; (iii) twelve
months beyond the date on which the Change in Control occurred; (iv) if a Change
in Control occurs during the term as extended by (ii) above, twelve months
beyond the date on which that Change in Control occurs; or (v) until all
payments, if any, required to be made by the Company or otherwise to you under
this Agreement shall have been paid in full.
<PAGE>
Mr. David H. Dingus
December 18, 2001
Page 2
2. Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) Cause. A termination shall be for "Cause" if: (i) Executive is
-----
convicted of a crime involving moral turpitude or a crime providing
for a term of imprisonment in a federal or state penitentiary; or (ii)
Executive commits any willful malfeasance or gross negligence in the
discharge of duties to the Company or any of its subsidiaries, having
a material adverse effect on the Company or any of its subsidiaries,
their business or reputation; or (iii) Executive fails to correct
within five days after written notice from the Board, any specific
failure in performance of the duties of the Executive's position with
the Company.
(b) Disability. "Disability" shall mean, to the extent permitted by law
----------
and subject to the Americans with Disabilities Act or any applicable
state or local counterpart, those conditions described in the
definition of "disabled" or "disability" under the Company's long-term
disability benefit program.
(c) Employee Plan. "Employee Plan" shall mean an employee benefit plan of
-------------
the Company or a trustee or other fiduciary holding securities for
such a plan.
(d) Good Reason. "Good Reason" shall mean, without your express written
-----------
consent, the occurrence after a Change in Control of the Company of
any of the following circumstances unless, in the case of paragraphs
A, B, E, F, G, or H, such circumstances are fully corrected within 15
days of notice, which shall be given by the Executive to the Company,
of the existence of such a circumstance:
(A) The assignment of duties to you inconsistent with your present
status as President and Chief Executive Officer of the Company
(or such other title or titles as you may be holding immediately
prior to the Change in Control of the Company) or a substantial
adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to the
Change in Control of the Company;
(B) A reduction by the Company in your annual base salary in effect
on the date of the Change in Control of the Company;
(C) The relocation of the Company's principal executive offices to a
location outside of Tarrant County, Texas (or, if different, the
metropolitan area in which such offices are located immediately
prior to the change in control of the Company) or the Company's
requiring you to be based anywhere other than a site less than
thirty (30) miles
<PAGE>
Mr. David H. Dingus
December 18, 2001
Page 3
from the site where you are now principally based except for (i)
required travel on Company business to an extent substantially
consistent with your present business travel obligations and (ii)
proposed relocations of which you have already been informed in
writing on or prior to the date of this Agreement or to which you
may hereafter consent;
(D) The failure by the Company, without your consent, to pay to you
any portion of your current compensation, after the same shall
have become due and payable and within seven (7) days after
receipt by the Company of written notice from you specifying that
such compensation is due and has not been paid;
(E) The failure by the Company to continue in effect any compensation
plan in which you participate immediately prior to the Change in
Control of the Company which is material to your total
compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue
your participation therein on a basis not materially less
favorable, both in terms of the amount of benefits provided and
the level of your participation relative to other participants,
as existed at the time of the Change in Control of the Company;
(F) The failure of the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under the
AZZ incorporated Employee Benefit Plan & Trust or under any of
the Company's other deferred compensation plans, life insurance,
medical, health and accident, or disability plans in which you
were participating at the time of the Change in Control of the
Company, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive you of any material fringe benefit enjoyed by you at the
time of the Change in Control of the Company, or the failure by
the Company to provide you with the number of paid vacation days
to which you are entitled on the basis of any employment contract
with you or years of service with the Company in accordance with
the Company's normal vacation policy for officers in effect at
the time of the Change in Control of the Company;
(G) The failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement,
as contemplated in Section 4 hereof; or
<PAGE>
Mr. David H. Dingus
December 18, 2001
Page 4
(H) Any purported termination of your employment by the Company
except because of total disability, death or for Cause.
3. Potential Change in Control and Employment Continuation
Agreement. For purposes of this Agreement, a "Potential Change in Control of the
Company" shall be deemed to be in effect during the period during which (a) the
Company has in effect an agreement, consummation of which would result in the
occurrence of a Change in Control of the Company; (b) any person (including the
Company) publicly announces and is pursuing an intention to take or to consider
taking actions which if consummated would constitute a Change in Control of the
Company (but only for a period of nine months following such an announcement);
(c) any person, other than an Employee Plan, who is or becomes the beneficial
owner, directly or indirectly, of 10% or more of the Common Stock then
outstanding, increases his beneficial ownership of such securities by 5% or more
of the Common Stock then outstanding (but only for a period of nine months
following such increase); or (d) the Board has in effect a resolution to the
effect that, for purposes of this Agreement, a Potential Change in Control of
the Company has occurred. You agree that, subject to the terms and conditions of
this Agreement, in the event of a Potential Change in Control of the Company,
you will remain in the employment of the Company until the earliest of (i) a
date which is nine (9) months after the occurrence of such Potential Change in
Control of the Company, (ii) the termination by you of your employment with the
Company by reason of death or Disability as defined in Subsection 2(b) or (iii)
the occurrence of a Change in Control of the Company in which case your
obligation to the Company shall be as set forth in paragraph 4 below.
4. Change in Control and Employment Continuation Agreement.
(a) No benefit shall be payable hereunder unless there shall have been a
change in control of the Company. For the purpose of this Agreement,
the term "Change in Control" of the Company shall mean a change in
control of a nature that would be required to be reported in response
to Item 5(f) of Schedule 14A of Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") provided,
however, a change in control shall be deemed to have occurred if: (A)
any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than a trustee or fiduciary holding securities
under an employee benefit plan of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13(d)-3 under the Exchange
Act), directly or indirectly of securities of the Company representing
35% or more of the combined voting power of the Company's then
outstanding voting securities; (B) there is a merger or consolidation
of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the
<PAGE>
Mr. David H. Dingus
December 18, 2001
Page 5
surviving entity) at least 75% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or (C) the
shareholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company
of all or substantially all of the Company's assets.
(b) You agree, subject to the terms and conditions contained in this
agreement, that in the event of a Change in Control of the Company,
you will remain in the employ of the Company for a period of one year
from the occurrence of such Change in Control of the Company or, if
shorter, until the termination of your employment by reason of (i)
your total disability, (ii) death, (iii) termination by the Company
for any reason other than for Cause, or (iv) voluntary termination by
you for Good Reason. The period from a Change in Control to the
earlier of one of the events described in the immediately preceding
sentence is hereafter referred to as the "Service Term."
5. Compensation Following Change in Control. Subject to the terms
and conditions of this Agreement, during the period a Potential Change in
Control is in effect and following a Change in Control of the Company you shall
be entitled to the following benefits:
(a) If you continue your service as an employee of the Company through the
Service Term (i) the Company shall pay you, within 15 days after the
expiration of the Service Term, a lump sum cash payment (the
"Retention Bonus") in an amount equal to 2.99 times your "base amount"
as that term is used in Section 280G(b)(3) of the Internal Revenue
Code of 1986, as amended, and (ii) all options held by you for the
purchase of Company shares shall fully vest and become immediately
exercisable whether or not you continue in the employ of the Company
after the expiration of the Service Term.
(b) If your employment shall be terminated during a period in which a
Potential Change in Control is in effect or before one year following
a Change in Control as a result of (i) your death, (ii) total
disability, (iii) termination by the Company for any reason, other
than for Cause, or (iv) voluntarily by you for Good Reason, the
Company shall, in addition to the payment provided for in Section 5(a)
pay you your full base salary through the date of termination of your
employment at the rate in effect at the time of your termination of
employment, plus any other amounts to which you are entitled under any
compensation agreement which you might have with the Company, at the
time such payments are due and all options held by you for the
purchase of Company shares shall fully vest and
<PAGE>
Mr. David H. Dingus
December 18, 2001
Page 6
become immediately exercisable. The payment provided for in Section
5(a) shall be due within 15 days after the date of your termination.
(c) If your employment shall be terminated before one year following a
Change in Control (i) by you for any reason whatsoever other than as a
result of your death, total disability or for Good Reason or (ii) by
the Company for Cause, the Company shall pay you your full base salary
through the date of termination of your employment at the rate in
effect at the time of your termination of employment, plus any amounts
to which you are entitled under any compensation plan of the Company,
at the time such payments are due, but you shall not be entitled to
the payment provided for in Section 5(a).
(d) The Company shall also reimburse to you all legal fees and expenses
incurred by you in seeking to obtain or enforce any right or benefit
provided by this Agreement.
(e) You shall not be required to mitigate the amount of any payment
provided for in this Section 3 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for
in this Section 3 be reduced by any compensation earned by you as a
result of employment after the Service Term by another employer or
otherwise or by retirement benefits earned or paid.
6. Successors. The Company will require any successor (either
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and perform this Agreement. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled
hereunder following a Change in Control of the Company (except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed to be the date on which you become entitled to such
compensation from the Company). As used in this Agreement, Company shall mean
the Company as hereinbefore defined and any successor to its business or assets.
7. Binding Agreement. This Agreement shall inure to the benefit of
and be enforceable by your heirs, personal representatives and assigns. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, unless otherwise provided herein, such amount shall be paid
in accordance with the terms of this Agreement to your heirs, personal
representatives or assigns.
8. Notice. Notices and other communications pursuant to this
Agreement shall be deemed to have been given if in writing (i) delivered
personally or by documented
<PAGE>
Mr. David H. Dingus
December 18, 2001
Page 7
courier or delivery service; or (ii) mailed by registered or certified mail
(return receipt requested and postage prepaid) to the following listed persons
at the addresses specified below, or to such other persons or addresses as the
party entitled to notice shall give, in the manner hereinabove described, to the
others entitled to notice:
If to the Executive:
David H. Dingus
1113 Somerset Blvd.
Colleyville, Texas 76034
If to AZZ incorporated:
AZZ incorporated
1300 South University Drive, Suite 200
Fort Worth, Texas 76107
Attn: Chairman of the Board
With a copy to:
Shannon, Gracey, Ratliff & Miller, L.L.P.
3800 Carter Burgess Tower
777 Main Street
Fort Worth, Texas 76102
Attn: Sam Rosen
9. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be authorized to act on the
Company's behalf. No waiver by either party hereto at any time of any breach by
the other party hereto of, or non-compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or other, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Texas. All references to sections of the Exchange
Act or to the Internal Revenue Code of 1986, as amended, shall be deemed also to
refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law.
<PAGE>
Mr. David H. Dingus
December 18, 2001
Page 8
10. Validity. The validity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
12. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled, at the Company's expense,
exclusively by arbitration in Tarrant County, Texas in accordance with the rules
of the American Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction; provided, however,
that the Executive shall be entitled to seek specific performance of his right
to be paid up to the end of the Service Term during the pendency of any dispute
or controversy arising under or in connection with this Agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
AZZ incorporated
By:_____________________________________
L.C. Martin, Chairman of the Board
Agreed to this ____ day of _______________, 2002:
EXECUTIVE:
_____________________________________
David H. Dingus,
President and Chief Executive Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.20
<SEQUENCE>12
<FILENAME>dex1020.txt
<DESCRIPTION>2003 MANAGEMENT INCENTIVE BONUS PLAN
<TEXT>
<PAGE>
EXHIBIT 10(20)
AZZ INCORPORATED 2003 MANAGEMENT INCENTIVE BONUS PLAN
-----------------------------------------------------
The Company has adopted its 2003 Management Incentive Compensation
Plan (the "Plan") to encourage its key managers to contribute their best efforts
and management skills in an effort to help the Company achieve its budgeted
financial goals for the current fiscal year. Each participant in the Plan is
assigned one or more objective goals taken from the Company's budget for the
current year. The Company's success in reaching these goals determines the size
of the cash incentive bonus received by each participant. Approximately 17 key
managers are participating in the Plan.
Each participant in the Plan has a target cash bonus of 15% to 30% of
his best base pay for the fiscal year (the "Target Bonus"). That Target Bonus is
earned if the participant's weighted average performance is approximately 90.9%,
meaning that on the average the participant met 90.9% of the targets in his
performance areas. Some portion of the Target Bonus is earned by a participant
when his weighted average performance is at least 50%. If a participant's
average performance score is between 50% and 84%, his bonus is equal to that
percent of his Target Bonus. From 85% to 125% weighted average performance, the
participant receives a percent of his Target Bonus which exceeds his weighted
average performance since a "kicker" is applied, the magnitude of which kicker
increases with improvement in weighted average performance. The maximum bonus
attainable is 225% of the Target Bonus which results in a bonus equal to 33.75%
to 67.5% of base pay (i.e. 225% of 15% to 30% of base pay).
The "kicker" which is applied when weighted average of performance is
50% to 125% is as follows:
Weighted Percent of
Performance Kicker Target Bonus Earned
----------- ------ -------------------
50% - 69% n/k* 50% - 69%
70% - 84% n/k* 70% - 84%
85% - 89% 5% 89.25% - 93.45%
90% - 94% 10% 99% - 103.4%
95% - 99% 20% 114% - 118.8%
100% - 104% 30% 130% - 135.2%
105% - 109% 40% 147% - 152.6%
110% - 114% 50% 165% - 171%
115% - 119% 60% 184% - 190.4%
120% - 125% 80% 216% - 225%
*No kicker
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.21
<SEQUENCE>13
<FILENAME>dex1021.txt
<DESCRIPTION>TERMINATION OF CHANGE IN CONTROL
<TEXT>
<PAGE>
EXHIBIT 10(21)
TERMINATION OF CHANGE IN CONTROL AGREEMENT
------------------------------------------
This Agreement is entered into as of March 27, 2002, between AZZ
incorporated (the "Company") and L. C. Martin ("Employee").
WHEREAS, the parties to this Agreement entered into a Change in Control
Agreement (the "Change in Control Agreement") on April 25, 1986, and entered
into an amendment to that agreement on May 15, 1992 ("Amendment No. 1 to Change
in Control Agreement"); and
WHEREAS, the parties desire to terminate the Change in Control Agreement,
as amended;
NOW, THEREFORE, in consideration of the premises and agreements made by the
Company with regard to the continued employment of Employee, it is agreed that
the Change in Control Agreement, as amended, between the Company and Employee is
terminated and shall no longer be of any force or effect as of March 27, 2002,
the effective date of this Agreement.
EXECUTED this the 13 day of May, 2002.
AZZ incorporated
/s/ DAVID H. DINGUS
By_______________________________________
David H. Dingus, Its President and
Chief Executive Officer
/s/ L. C. MARTIN
_________________________________________
L. C. Martin
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.22
<SEQUENCE>14
<FILENAME>dex1022.txt
<DESCRIPTION>ENGAGEMENT AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10(22)
ENGAGEMENT AGREEMENT
February 7, 2000
Mr. David H. Dingus
President & COO
Aztec Manufacturing Co.
P.O. Box 688
400 North Tarrant
Crowley, TX 76036
1. This letter agreement will confirm the understanding between Aztec
Manufacturing Co. and/or its affiliates and successors (the "Company" or
"AZZ") and RCG Capital Markets Group, Inc. and/or its affiliates and
successors ("RCG") with respect to the matters set forth herein. RCG will
provide consulting and other services, as more particularly described herein
and in the attachment hereto entitled Financial Relations Services
Attachment (the "Financial Relations Services"), to the Company and will
represent the Company during the engagement as exclusive Financial Relations
Consultants with respect to the Financial Relations Services, on the terms
and conditions set forth herein and in the attachments hereto, all of which
are incorporated herein by reference and form a part hereof. The period
during which RCG will perform the Financial Relations Services for the
Company will commence on February 7, 2000 (the "Commencement Date") and,
unless otherwise terminated as provided in this paragraph or in paragraph
nine of this letter agreement, will terminate on the date which is Eighteen
(18) months following the commencement date (the "Termination Date"). The
period beginning on the Commencement Date and ending on the Termination Date
is hereafter referred to as the "Engagement Term". As more particularly
described in paragraph 9 below, either party may terminate this agreement at
any time after the initial Six (6) month anniversary of the Commencement
Date upon thirty (30) days prior written notice to the other party. (the
"Early Termination Date")
2. During the Engagement Term, the Company agrees to furnish or cause to be
furnished to RCG all information concerning the Company as RCG reasonably
requests and deems appropriate for purposes of providing the Financial
Relations Services. The Company represents that all information, with
respect to the Company, provided to RCG will be complete and correct in all
material respects and will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein not misleading in light of the circumstances under which
such statements are made. Aztec understands that in rendering the Financial
Relations Services required hereunder, RCG will be using and relying on
publicly available information and the information furnished to RCG by Aztec
without independent verification thereof. RCG will treat as confidential any
non-public information provided to it hereunder and will not disclose the
same to third parties at any time unless required by applicable law. In the
event disclosure has been or will be made by RCG, RCG will use its
reasonable best efforts to cooperate as requested by the Company in
minimizing any potential loss or injury to the Company as a consequence of
any such necessary disclosure. In addition, RCG will use its reasonable best
efforts to comply with all applicable state and Federal securities laws in
the performance of this agreement.
3. During the Engagement Term, RCG and its employees, consultants and
contractors will be generally available to Aztec Manufacturing Co., in
connection with its rendering of the Financial Relations Services.
Specifically, RCG (a) will outline, develop and implement a financial
relations program to assist the Company in creating and/or enhancing a
positive and more visible public image, (b) may contact existing and future
shareholders, broker/dealers, potential investors, registered
representatives, institutions, mutual fund managers, investment banking
sources, securities analysts, independent portfolio managers, and other
professional investment community
<PAGE>
February 7, 2000
Page 2
contacts including certain financial media sources for the purpose of
enhancing the Company's public image and perceived value, (c) will assist
the Company in the creation, production and distribution of certain
financial markets and investor/shareholder corporate image materials,
including corporate profiles, due diligence materials and investor packages,
as well as all financial press releases; (d) assist the Company in its
endeavor to secure research analyst coverage through a targeted securities
professionals campaign and (e) otherwise perform the services described in
the Financial Relations Services Attachment.
4. During the Engagement Term, the Company will afford RCG the opportunity and
reasonable time period to review and/or comment on any disclosure, prior to
its release, which the Company plans to make to any of the sources described
in paragraph (3) and which relates to the Financial Relations Services to be
provided hereunder. In addition, RCG will be responsible for assisting the
Company in writing and/or editing, producing, coordinating and disseminating
all financial industry press releases. RCG agrees that it will not release
or distribute any press release without the Company's prior consent.
5. In consideration of RCG's services hereunder, the Company agrees to pay RCG,
promptly when due, the Compensation as described by and in strict accordance
with the attachment hereto entitled Financial Relations Compensation
Attachment. Should RCG and the Company determine to extend the Engagement
Term or change the scope of the engagement, then a mutually acceptable
amendment or supplement to that attachment shall be promptly executed by RCG
and Company. Absent any such amendment, all terms and conditions of this
letter agreement shall be binding to the parties.
6. RCG shall be entitled to such additional fees as may be mutually agreed upon
by separate agreement between the parties hereto, for additional consulting
services not anticipated in this agreement rendered during the engagement
term.
7. As more particularly set forth in the Financial Relations Compensation
Attachment, the Company agrees to pay all of RCG's direct and certain
indirect out-of-pocket expenses reasonably incurred, in connection with this
engagement. As set forth in the Financial Relations Compensation Attachment,
an expense retainer shall be utilized for this purpose.
8. The Company and RCG agree to indemnify each other (the indemnifying party
hereafter being referred to as the "Indemnitor", and the party entitled to
indemnification hereafter being referred to as the "Indemnitee") as follows:
Indemnitor agrees to defend, indemnify and hold harmless Indemnitee, and its
officers, directors, and employees against any and all losses, claims,
demands, suits, actions, judgments, awards, damages, liabilities, costs,
reasonable attorneys' fees, and expenses incurred in investigating,
preparing or defending any such action or claim, directly or indirectly
caused by, related to, or asserted by a third party, based upon or arising
out of (a) the Indemnitor's breach of or the incorrectness of any of its
representations, warranties, or covenants contained in this agreement;
and/or (b) any Services rendered by RCG as defined in or contemplated by
this agreement, as it may be amended from time to time (the "Agreement").
Notwithstanding the foregoing, the Indemnitor shall have no obligation to
indemnify or hold the Indemnitee harmless with regard to Indemnitee's gross
negligence, willful misconduct, or the material breach of or the
incorrectness of any representation, warranty or covenant of Indemnitee
contained in this Agreement.
9. Either party hereto may terminate this engagement as follows:
(a)Either party hereto may terminate this agreement at the conclusion of
Initial Six (6) months from the execution date of the agreement by
providing the other party a 30-day advance written notification of
"Intent to Terminate Agreement". Not withstanding the above, the
<PAGE>
Febrary 7, 2000
Page 3
Company may also terminate this Agreement after the Initial Six (6)
months at any time "without cause", upon providing RCG Thirty (30)
days advance written notice. In the event of a termination by the
Company, "without cause" after the initial Six (6) months, RCG shall
be entitled to receive Fifty (50%) percent of the remaining engagement
term period cash compensation to the extent it is unpaid, pro-rated
from the notice date of termination, along with reimbursement of any
non paid, out-of-pocket expenses up to the effective date of
termination. Additionally, RCG will be entitled to receive all
unexercised vested, and 1/12 of the remaining non-vested warrants or
stock options granted hereunder for each month past the initial Six
(6) month period, up to and including the date of termination. Such
payment is due and payable on the effective date of termination.
(b) WITH CAUSE: In addition, the Company may terminate this Agreement at
any time upon written notice to RCG:
(i) If RCG fails to cure any material breach of any provision of this
Agreement within Sixty (60) days from written notice from the Company
(unless such breach cannot be reasonably cured within the Sixty (60)
days and RCG is actively pursuing to cure said breach).
(ii) For RCG's substantial negligence, willful misconduct, fraud,
misappropriation, embezzlement, or other dishonesty;
(iii) Upon a final and conclusive judicial ruling of RCG's failure to
have materially complied with applicable law or regulation relating
to the Services it will perform;
(iv) Upon the filing by or against RCG of a petition to have RCG
adjudged as bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy, and where any
such involuntary petition is not dismissed within 90 days.
Upon termination under subparagraph (b) of this paragraph 9, the Company
shall have no liability to RCG for Compensation accruing after such
termination, and RCG shall have no further entitlement thereto. Upon
such termination, RCG shall be entitled to receive and retain only
accrued Compensation and vested Options to the date of such termination,
to the extent it is unpaid, together with expenses not yet reimbursed.
(c) RCG may terminate this agreement at any time upon written notice to
the Company.
(i) If the Company fails to cure any material breach of any provision of
this Agreement with Sixty (60) days from written notice from the
Company (unless such breach cannot be reasonably cured within the
Sixty (60) days and the Company is actively pursuing to cure said
breach);
(ii)For the Company's substantial negligence, willful misconduct, fraud
or misrepresentation;
Such termination under 9(c)(i or ii) shall be deemed to be a termination
by the Company "without cause" as provided in paragraph 9 (a) above.
(iii) Upon a final and conclusive judicial ruling of Company's failure
to have materially complied with any applicable law or regulation
relating to the Services being provided;
(iv) Upon the filing by or against the Company of a petition to have the
Company adjudged as bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy, and where any
such involuntary petition is not dismissed within 90 days.
<PAGE>
February 7, 2000
Page 4
(d) RENEWAL. The Company agrees to notify RCG in writing Thirty (30) days
prior to the end of the Eighteen (18) month period of its intent to not
renew. Should the Company fail to notify RCG, the contract will revert
to a month-to-month agreement until specifically renewed in writing or
terminated with the advance Thirty (30) day notice. Such renewal or
month-to-month engagement shall be on the same terms and conditions
contained herein, unless modified and agreed in writing by both parties.
10. RCG hereby fully discloses that certain associates, affiliates, officers and
employees of RCG are:
(a) Licensed as Registered Securities Principals issued by the National
Association of Securities Dealers ("NASD"); and/or
(b) Licensed as Registered Representatives issued by the NASD.
All NASD registrations are carried by SWS Financial Services, Inc., which is
a non-RCG affiliated NASD-registered broker/dealer.
RCG further discloses and the Company specifically acknowledges that RCG is
NOT a broker/dealer registered with the NASD or any other regulatory agency.
Furthermore, in the performance of Services under the terms and conditions
of this agreement, such services shall not be considered to be acting in any
broker/dealer or underwriting capacity and therefore RCG is not receiving
any compensation from the Company as such.
11. The Company understands and acknowledges that RCG provides other and similar
consulting services to companies, which may or may not conduct business and
activities similar to those of the Company. RCG is not required to devote
its full time and attention to the performance of its duties detailed in
this agreement, and may devote only so much of its time and attention as it
deems reasonable or necessary.
12. As the services are being provided by an Arizona domiciled corporation, the
validity and interpretation of this letter agreement shall be governed by
the laws of the State of Arizona applicable to agreements made and to be
fully performed therein.
13. In the event of any controversy or dispute arising out of, or relating to
this Agreement or breach thereof, RCG and AZZ agree to settle such
controversy by arbitration pursuant to Arizona Revised Statutes, 12-1501 et
--
seq. and in accordance with the rules, of the American Arbitration
---
Association governing commercial transactions then existing, to the extent
that such Rules are not inconsistent with said Statutes and this Agreement.
Judgment upon the award rendered under arbitration may be entered in any
court having jurisdiction. The cost of the arbitration procedure shall be
borne by the losing party, or, if the decision is not clearly in favor of
one party or the other, the costs shall be borne as determined by the
arbitrator. The parties agree that the arbitration procedure provided herein
shall be the sole and exclusive remedy to resolve any controversy or dispute
arising hereunder, and that the proper venue for such arbitration proceeding
shall be Maricopa County, Arizona.
14. For the convenience of the parties, any number of counterparts of this
letter agreement may be executed by the parties hereto. Each such
counterpart shall be deemed to be an original instrument, but all such
counterparts taken together shall constitute one and the same letter
agreement.
15. Miscellaneous:
<PAGE>
February 7, 2000
Page 5
(a) Modification: This Agreement sets forth the entire understanding of the
------------
parties with respect to the subject matter hereof. This Agreement may
be amended only in writing signed by both parties.
(b) Notices: Any notices hereunder shall be sent to the Company and RCG at
-------
their respective addresses set forth. Any notice shall be given by
registered or certified mail, postage prepaid, and shall be deemed to
have been given when received by the non-sending party. Either party
may designate any other address to which notice shall be given, by
giving written notice to the other of such change in address in the
manner herein provided.
(c) Waiver: Any waiver by either party of a breach of any provision of this
------
Agreement shall not operate as or be construed to be a waiver of any
other breach of that provision or of any breach of any other provision
of this Agreement. The failure of a party to insist upon strict
adherence to any term of this Agreement on one or more occasions will
not be considered a waiver or deprive that party of the right
thereafter to insist upon adherence to that term of any other term of
this Agreement.
(d) Relationship of the Parties: Nothing in this Agreement shall create any
---------------------------
partnership or joint venture between the parties hereto, it being
understood and agreed that the parties are independent contractors and
neither has the authority to bind the other in any way.
(e) Entire agreement: This Agreement contains the entire agreement between
----------------
the parties and may not be altered or modified, except in writing and
signed by the party to be charged thereby, and supersedes any and all
previous agreements between the parties.
If the foregoing correctly sets forth our agreement, please sign the enclosed
copy of the letter in the space provided and return it to us, whereupon all
parties will be bound to the terms of this engagement.
Confirmed and agreed to February 7, 2000
RCG Capital Markets Group, Inc. Aztec Manufacturing Co.
/s/ A. MAX RAMRAS /s/ DAVID H. DINGUS
By: _________________________________ By: _________________________________
President President
Title: ______________________________ Title: ______________________________
<PAGE>
February 7, 2000
Page 6
FINANCIAL RELATIONS
SERVICES ATTACHMENT
As of February 7, 2000 and by the of execution of this agreement, RCG
Capital Markets Group, Inc. and/or affiliates, (collectively "RCG") will serve
as the exclusive Financial Relations Counsel for Aztec Manufacturing Co. ("AZZ"
or "Company"). RCG anticipates the following services will be attempted and/or
implemented within the scope of this engagement:
. Outline, define, establish and implement a well-coordinated "Financial
Relations" campaign.
. Create, produce, enhance existing and distribute high-quality, due
diligence and marketing materials, which specifically include, but are
not limited to a "Corporate Profile" document and the Company's
"Investor Package".
. Specifically develop, proactively execute and maintain a targeted
securities professionals telecommunications and information campaign
specifically directed toward retail brokers, institutional investors,
third-party portfolio managers and small/mid-cap mutual funds, buy and
sell side analysts and the financial media as circumstances dictate,
including, but not limited to, preparation, clearing with the Company
and dissemination of quarterly press releases and other news releases
deemed appropriate by the Company. RCG will allocate and utilize its
proprietary securities industry, small/mid cap company oriented,
databases and fax-line communications programs. (This will include
responding to all incoming investment community inquiries and
fulfillment of information and data requests.)
. RCG will attempt to secure investment recommendations and on-going
corporate research coverage from national or regional investment
banking or research firms and/or an endorsement by an investment
newsletter publication.
. When appropriate, plan, arrange and coordinate specific follow-on
road-show presentations to strategically targeted primary metropolitan
financial markets.
. RCG will be responsible for the origination and release of financial
industry data and financial media information on behalf of Aztec
Manufacturing Co. RCG will also be responsible for editing (or
writing) all press releases and coordinating information disseminated
to all media sources relating to the securities industry and capital
markets.
. RCG will organize, monitor and follow-up all conference calls between
the Company and RCG's targeted segment of the investment community, in
conjunction with material press releases, through a teleconferencing
service. (RCG will be responsible for faxing and/or emailing the
invitations and will follow up with calls to the recipients in an
effort to expand the conference call participation.)
. Plan, arrange and coordinate periodic registered representative,
institutional and/or other securities professionals meetings,
luncheons, dinners or special gatherings.
. Implement periodic direct mailings which may include the most recent
statistical information reports, and any appropriate articles or press
releases that have been released during the last reported quarter.
<PAGE>
February 7, 2000
Page 7
. Update all due diligence and marketing materials. RCG anticipates
updating Company information on a regular basis as required when there
are material changes or events that should be disseminated to the
investment community.
. Implement an AZZ Internet Site on RCG's Internet Home Page, RCG
Online. RCG Online will also create an Internet link to the Company's
home page. The purpose of these inclusions will be to provide the
investment community 24-hour access site to obtain up-to-date
information about the Company. There will be an additional cost of
$350 per month for this service
RCG intends to perform the services and accomplish the specified goals within
the scope of this engagement. However, due to the nature and type of services
being performed, RCG cannot guarantee, nor can it be assumed that certain
specific results will be realized with reference to increased market valuation
of AZZ securities.
<PAGE>
FINANCIAL RELATIONS
COMPENSATION ATTACHMENT
In consideration of the Financial Relations Services to be rendered pursuant
hereto Aztec Manufacturing Co. agrees to promptly pay RCG the following
compensation (the "Compensation"):
(a) Cash Compensation. During the term of this Agreement, the Company shall pay
-----------------
RCG a monthly fee of $6,500 payable monthly in advance of services rendered
and beginning upon the commencement date of this Agreement (the "Retainer
Fees").
(b) Expense reimbursement. In addition, RCG shall be reimbursed for all direct
---------------------
and certain indirect prorated out-of-pocket incurred in connection with the
performance of the Financial Relations Services pursuant hereto. Aztec
Manufacturing Co., will remit $5,000 to RCG, which RCG will utilize as an
escrow deposit for the express purpose of indemnifying RCG in the event of
late payment of monthly expenses by the Company. RCG will provide the
Company with a detailed breakdown of all reimbursable expenses incurred in
the previous month by approximately the Twentieth (20/th/) day of the
following month of service. Aztec Manufacturing Co. agrees to reimburse RCG
within 15 days of receipt of detailed invoice each month. If Aztec is
delinquent in timely reimbursement of expenses as defined above, RCG will
have the right to withdraw from the escrow account the applicable dollar
amount to fully reimburse RCG. If reimbursement is not received by RCG by
the 25/th/ day after the date of the invoice, Aztec will then be
immediately required to remit to RCG an amount equal to the expenses in
question. RCG will then replenish the escrow account for the amount
withdrawn to cover the delinquency. RCG can at its discretion discontinue
all representation activities on behalf Aztec Manufacturing Co. if RCG
deems Aztec to be routinely delinquent in the timely payment of expenses
and/or the monthly fees as stated above. Such discontinuance does not
extinguish the Company's obligation for reimbursement and payment of
retainer fees.
RCG will obtain prior approval from the Company for all specific expense
items and any single miscellaneous expense item in excess of $750. RCG
acknowledges and understands that the Company will have specific amounts
budgeted for these expenditures and will use it's best efforts to ensure
those budget amounts are not exceeded.
(c) Stock Warrants/Options. Upon execution of this and subject to Board of
----------------------
Directors approval, the Company will grant RCG a non-forfeitable,
non-cancelable warrant/option (the "Warrants/Options") to acquire 70,000
shares of Aztec common stock of which 30% shall vest immediately and the
balance will be subject to the performance based vesting provisions
outlined below. The Options issued will possess a Five year expiration term
and will provide RCG the right, until February 7, 2005, to purchase common
shares of the Company at a price equal to the $10.13 per share of AZZ
common stock. The Company agrees to issue an options/warrants document
which conforms to and delineates the terms and conditions contained herein,
within sixty (60) days of this Agreement's execution date. The
Warrants/options will have the following vesting provisions:
25% - Upon confirmation of a 30% increase (10,400 shares) in the
average daily trading volume of the Company's stock over any 10
consecutive trading day period. (Baseline will be 8,000
shares.)
15% - Upon confirmation of corporate research coverage from Two (2)
buy- or sell-side analysts or an endorsement by an appropriate
investment newsletter publication with a subscriber base in
excess of 3,000. Such coverage shall be of the type and kind
which is considered and anticipated to be on-going and
continual by the
<PAGE>
February 7, 2000
Page 9
analyst initiating the recommendation. (Vesting to be prorated
at 7.5% for each research or recommendation event).
20% - Upon confirmation of securing at least a 12.5 P/E ratio for a
period of at least 45 consecutive calendar days.
10% - Upon confirmation of two (2) positive financial (non-trade
oriented) media events, such as articles in newspapers or
financial magazines of recognized standing such as the Barrons,
Wall Street Journal, Fortune, Forbes, Business Week Magazine,
Individual Investor magazine, Investors Business Daily or such
as source as may be mutually agreed upon in the financial and
investment community or television or radio media coverage on
well recognized financial, investment or business programs.
Such events shall be of the type and kind whereby the Company
is the predominant focus of the media coverage. (Vesting to be
prorated at 5% for each media event).
The shares underlying the non-forfeitable, non-cancelable warrant/option issued
will be eligible for registration by demand registration rights via a form S-3
registration statement or by non-proratable piggy-back registration rights
should the Company file an applicable registration. RCG agrees to pay 50% up to
$5,000 in costs associated with such registration. Such payment by RCG is due
upon the effective date of the registration statement. In the event that RCG
provides a written request to exercise any portion or all of its option position
the Company hereby agrees to immediately effectuate such exercise and to file
such registration statement within 15 days of the request.
Furthermore, RCG agrees that during the initial Eighteen month contract period,
it will not sell more than 33.33% of it's vested stock position during each six
month period cumulative over the initial eighteen month engagement term. In the
event the Company exercises it right to early termination as provided for in
this agreement, this provision shall no longer be applicable. Additionally, RCG
shall only be required one time, to pay 50% up to $5,000 in costs associated
with demand registration rights described above, in order to comply with this
provision. Any future costs associated with additional demand registration
rights as provided for above, shall be borne by the Company.
In the event that AZZ is merged into or a controlling interest is acquired by
any entity, which results in a material change in AZZ management, RCG will be
immediately vested in all remaining options, including those, which to that
point have not yet been vested.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.23
<SEQUENCE>15
<FILENAME>dex1023.txt
<DESCRIPTION>AMENDMENT #1 TO THE ENGAGEMENT AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10(23)
[LETTERHEAD OF RCG CAPITAL MARKETS GROUP, INC.]
July 12, 2000
Mr. David H. Dingus
President & COO
AZZ incorporated.
P.O. Box 668
400 North Tarrant
Crowley, TX 76036
In line with our recent discussion and verbal agreement, the original engagement
agreement between Aztec Manufacturing Co. ("AZZ") and RCG Capital Markets Group,
Inc., ("RCG") dated February 7, 2000 shall be amended to reflect the following
changes:
Referencing paragraph (c) of the Financial Relations Compensation Attachment,
the option exercise price shall be adjusted from $10.13 to $16.25 for those
particular vesting elements and related percentages which occur by securing
research and the second media events as described in that attachment.
Notwithstanding the above, it is agreed that the option exercise price shall
remain at the $10.13 upon securing the first media vesting event. Furthermore,
the option exercise price for the vesting event which occurs upon obtaining a
12.5 P/E ratio, shall be adjusted to become the closing stock price of AZZ
common stock on the 45/th/ consecutive calendar day when achievement has been
obtained for that vesting element. All other option elements vested to date
shall remain as per the terms and conditions of the original attachment.
In addition, by execution of this amendment, both parties acknowledge and agree
that the July 7, 2000 termination letter tendered by AZZ is hereby withdrawn by
the Company.
All other terms, provisions and conditions of the original engagement agreement
shall remain in effect and shall continue to govern the on-going consulting
relationship between RCG and AZZ.
Sincerely,
/s/ A. Max Ramras
A. Max Ramras
President and CEO
Accepted:
/s/ DANA PERRY
AZZ incorporated
Dated: 8-1-00
Financial Relations / Capital Markets Consultants
<PAGE>
------------------
Exhibit 10(23)
------------------
AZZ incorporated
STOCK OPTION AGREEMENT
WITH
RCG CAPITAL MARKETS GROUP, INC.
This Stock Option Agreement (the "Agreement") is entered into between AZZ
incorporated, a Texas corporation (the "Company") and RCG Capital Markets Group,
Inc. (the "Optionee") as of February 22, 2000, pursuant to part (c) of the
Financial Relations Compensation Attachment to the Engagement Agreement between
the Company and Optionee dated February 7, 2000 and the amendments of July 12,
2000 and October 6, 2000 to the Engagement Agreement. In consideration of the
mutual promises and covenants made herein the parties hereby agree as follows:
1. GRANT OF OPTION. The Company grants to the Optionee an option (the
---------------
"Option") to purchase from the Company all or any part of a total of 70,000
shares of the Company's $1.00 par value common stock (the "Shares").
2. CHARACTER OF OPTION. The Option is not an "incentive stock option"
-------------------
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
3. TERM. The unexercised part of the Option will expire at 11:59 P.M.
----
(CST) on February 21, 2005.
4. VESTING AND EXERCISE PRICE. The Option shall vest, thereby giving
--------------------------
Optionee the right to purchase shares at the following prices, in the following
numbers, upon the occurrence of the following events:
<TABLE>
<CAPTION>
Event No. of Shares Exercise Price
----- ------------- --------------
<S> <C> <C>
(a) Execution of this Agreement. 21,000 $10.13
(b) Upon confirmation of a 30% increase, to 17,500 $10.13
10,400 shares in average daily trading
volume, of the Company's stock over any 10
consecutive trading day period, over a
stipulated baseline of 8,000 shares.
(c) Confirmation of corporate research 10,500 $16.25
coverage from two(2) buy or sell side
analysts or an endorsement by an
appropriate investment newsletter
publication with a subscriber base in
excess of 3,000, vesting of one-half of
this portion of the Option (the right to
purchase 5,250 Shares) to occur upon the
first research or recommendation event,
and vesting of the other one-half of
</TABLE>
-1-
<PAGE>
<TABLE>
<S> <C> <C>
this portion of the Option (the right to
purchase 5,250 additional Shares) to
occur upon the second research or
recommendation event.
(d) Confirmation of maintenance of at least 14,000 [closing price on
a 12.5 P/E ratio for a period of at the NYSE on the last
least 45 consecutive calendar days. trading day within
the 45 consecutive
calendar days]
(e) Confirmation of two (2) positive 3,500 $10.13
financial (non-trade oriented) media (1/st/ media event)
events, such as articles in newspapers
or financial magazines of recognized
standings such as Barron's, Wall Street
Journal, Fortune, Forbes, Business Week
Magazine, Individual Investor Magazine,
Investor's Business Daily or such other
source as may be mutually agreed upon,
in the financial and investment
community or television or radio media 3,500 $16.25
coverage on well recognized financial, (2/nd/ media event)
investment or business programs, vesting
of the first one-half of this portion of
the Option (the right to purchase 3,500
Shares) to occur upon the first media
event and vesting of the second one-half
of this portion of the Option (the right
to purchase 3,500 additional Shares) to
occur upon the second media event.
</TABLE>
5. PROCEDURE FOR EXERCISE. Exercise of the Option or a portion thereof
----------------------
shall be effected by the Optionee's giving written notice of exercise to the
Company at its principal place of business and the Optionee's payment of the
purchase price prescribed in Section 4 above for the Shares to be acquired
pursuant to the exercise.
6. PAYMENT OF PURCHASE PRICE. Payment of the purchase price for any
--------------------------
Shares purchased pursuant to the Option shall be made in cash.
7. TRANSFER OF OPTION. Neither the Option nor any interest therein may
------------------
be assigned, pledged, hypothecated or otherwise transferred and may be exercised
only by the Optionee.
-2-
<PAGE>
8. TERMINATION. The Option shall terminate on the expiration date set
-----------
forth in Section 3 above.
9. RESERVATION OF SHARES. The Company shall at all times during the term
----------------------
of the Option reserve and keep available a sufficient number of shares of its
Common Stock to satisfy the Company's obligation to transfer to shares to the
Optionee upon exercise of the Option.
10. COMPLIANCE WITH SECURITIES LAWS. The Shares shall be issued pursuant
-------------------------------
to the exercise of the Option only after registration of the securities on Form
S-8 under the Securities Act of 1933. Optionee consents to the imposition of a
legend upon the certificate representing such shares restricting their transfer
until the filing of a Form S-8 Registration Statement by the Company. The
Company agrees to file a Form S-8 Registration covering the Option and the
Shares underlying the Option upon receipt from Optionee of a request that such a
filing be made.
11. ANTI-DILUTION. If the outstanding common stock of the Company is
-------------
increased, decreased, changed into, or exchanged for a different number or kind
of shares or securities through merger, consolidation, combination, exchange of
shares, other reorganization or recapitalization, reclassification, stock
dividend, stock split or reverse stock split, an appropriate and proportionate
adjustment shall be made to the number and type of shares subject to the Option.
Any adjustment in the Option shall be made without changing the aggregate
purchase price applicable to the unexercised portion of the Option, but with a
corresponding adjustment in the price of each share covered by the Option.
12. AMENDMENT. This Agreement may be amended only by an instrument
---------
in writing, signed by both the Company and the Optionee.
13. MISCELLANEOUS. This Agreement will be construed and enforced in
-------------
accordance with the laws of the State of Texas and will be binding upon and
inure to the benefit of any successor or assign of the Company and to any
successor of the Optionee.
EXECUTED as of the day first above shown.
AZZ incorporated
By: /s/ Dana L. Perry
----------------------------------------
Dana L. Perry, Vice President and CFO
RCG CAPITAL MARKETS GROUP, INC.
By: /s/ A. Max Ramras
----------------------------------------
A. Max Ramras, President and CEO
-3-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.24
<SEQUENCE>16
<FILENAME>dex1024.txt
<DESCRIPTION>AMENDMENT #2 TO THE ENGAGEMENT AGREEMENT
<TEXT>
<PAGE>
Exhibit 10(24)
October 6, 2000
Mr. A. Max Ramras
President and CEO
RCG Capital Markets Group, Inc.
5635 E. Thomas Road
Phoenix, Arizona 85018
Re: Engagement Agreement between RCG Capital Markets
Group, Inc. ("Optionee") and AZZ incorporated
("Company"), formerly Aztec Manufacturing Co., dated
February 7, 2000 (the "Engagement Agreement") and
Amendment No. 1 to the Engagement Agreement dated July
12, 2000
Dear Mr. Ramras:
This letter will serve as the second amendment to the captioned Engagement
Agreement.
As previously agreed, the exercise price of $10.13, which is applicable to
a portion of the Shares covered by the Option, was derived from the market price
on February 22, 2000, the date of approval of the Engagement Agreement by the
Board of Directors of AZZ incorporated. The Company and Optionee agreed to
pricing on that date since the Option was not effective until that date and it
was necessary to price the Option on the date it became effective.
This letter will confirm that options to purchase 17,500 Shares, which were
contingent upon an increase in the average trading volume of AZZ stock, have
vested with an exercise price of $10.13 per Share.
This will also confirm the agreement of Company and Optionee that the
registration of the Shares underlying the Option may be on form S-8 and that RCG
has requested that such a filing be made.
All terms in this letter which are capitalized shall have the definition
for such terms contained in the Stock Option Agreement dated as of February 22,
2000 between the Company and Optionee.
<PAGE>
Mr. A. Max Ramras
October 6, 2000
Page 2
- -----------------------------
Please confirm the agreement of Optionee to the matters set forth in this
letter.
Yours very truly,
/s/ Dana L. Perry
Dana L. Perry, Vice President and CFO
Accepted:
RCG CAPITAL MARKETS GROUP, INC.
By: /s/ A. Max Ramras
---------------------------------------------
A. Max Ramras, President and CEO
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.25
<SEQUENCE>17
<FILENAME>dex1025.txt
<DESCRIPTION>AMENDMENT #3 TO THE ENGAGEMENT AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10(25)
[LETTERHEAD OF RCG CAPITAL MARKETS GROUP, INC.]
August 31, 2001
Mr. David H. Dingus
President & CEO
AZZ incorporated.
P.O. Box 668
400 North Tarrant
Crowley, TX 76036
Dear David,
In line with our discussion during your visit on August 9th, the original
engagement agreement between AZZ incorporated ("AZZ") and RCG Capital Markets
Group, Inc., ("RCG") dated February 7, 2000 and the amendment letter dated July
12, 2000 shall be amended to reflect the following changes:
Referencing paragraph (c) of the Financial Relations Compensation Attachment,
the option exercise price shall be adjusted from $10.13 and $16.25 to $30 for
all remaining 12,250 shares not vested to date. The prior vesting elements
relative to the remaining non-vested shares shall no longer be applicable and
such shares shall vest upon confirmation of AZZ common stock trading at a price
of $30 per share for 45 consecutive calendar days. The prior option elements
vested to date and as reference below shall remain as per the terms and
conditions of the original attachment.
21,000 shares exercisable at $10.13 per share
17,500 shares exercisable at $10.13 per share
5,250 shares exercisable at $16.25 per share
14,000 shares exercisable at $25.00 per share
In addition, by execution of this amendment, both parties acknowledge and agree
to renew the original agreement as amended under the same terms and conditions
for an engagement term of eighteen months commencing on August 7, 2001.
All other terms, provisions and conditions of the original engagement agreement
shall remain in effect and shall continue to govern the on-going consulting
relationship between RCG and AZZ.
Sincerely,
/s/ A. Max Ramras
A. Max Ramras
President and CEO
Accepted:
/s/ DANA PERRY
AZZ incorporated
Dated: _____________
Financial Relations / Capital Markets Consultants
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>18
<FILENAME>dex21.txt
<DESCRIPTION>SUBSIDIARIES OF THE REGISTRANT
<TEXT>
<PAGE>
Exhibit 21 - Subsidiaries of Registrant
[LOGO]
<TABLE>
<S> <C> <C> <C> <C>
-----------------------
AZZ incorporated
75-0948250
3/26/56
TX TX
-----------------------
- ----------------------- ------------------------ ---------------------- ---------------------- -----------------------
Aztec Industries, The Calvert Company, Gulf Coast Arkgalv, Inc. Arbor-Crowley, Inc.
Inc. Inc. Galvanizing, Inc. (d/b/a Arkansas 51-0337454
75-1318815 64-0792921 75-2493283 Galvanizing, Inc. 12/3/91
8/21/69 9/28/90 1/28/94 75-2254883
MS MS MS MS AL AL AR AR TX DE
- ----------------------- ------------------------ ---------------------- ---------------------- -----------------------
- ----------------------- --------------- ----------------
Aztec Industries, Inc. AZZ GP, LLC AZZ GP, LLC
Moss Point No FEIN No FEIN
75-2107319 9/30/2000 9/30/2000
3/1/86
MS MS TX DE TX DE
- ----------------------- --------------- ----------------
1% General 99% Limited Partner
Partner
- ----------------------- ---------------- Aztec
Automatic AZZ Manufacturing
Processing Group, LP Partnership, Ltd.
Incorporated 75-2403898 1% General 75-2403896
64-0594499 9/30/00 Partner 12/4/91
1/6/77 TX TX
-----------------------
MS MS TX TX
- ----------------------- ----------------
Aztec
Manufacturing-
Waskom Partnership,
Ltd.
75-2403909
12/4/91
TX TX
-----------------------
Rig-A-Lite
Partnership,
Ltd.
75-0353821
12/4/91
TX TX
-----------------------
International
Galvanizers
Partnership, Ltd.
75-0553184
11/26/97
TX TX
-----------------------
Drilling Rig
Electrical Systems
Co.
Partnership
75-2733744
TX TX
-----------------------
</TABLE>
-----------------------
Atkinson Industries,
Inc.
48-0126010
1/23/36
KS KS
-----------------------
- --------------------- -------------------- --------------------
Aztec Holdings, Inc. Arizona Galvanizing Hobson alvanizing
51-0337457 Inc. Inc.
12/3/91 75-2508628 72-1350019
4/28/93 4/497
DE DE AZ AZ LA LA
- --------------------- -------------------- --------------------
99% Limited
Partner
-------------------- -------------------
CGIT Westboro, Inc. Westside Galvanizing
75-2832437 Services, Inc.
9/1/99 72-0866859
2/1/2000
MA DE LA DE
-------------------- -------------------
------------------- ----------------------------
Central Electric Carter and Company, Inc.
Company 75-2960819
43-0995652
MO 7/72 MO SC 11/01 DE
------------------- ----------------------------
----------------- ---------------- -----------------
Central Clark Control
Electric Electrical Systems, Inc.
Manufacturing Power Systems, 63-1148768
Company Inc.
43-0716500 43-1759385
MO 5/56 MO OK 10/96 MO TN 1/01 MO
---------------- ---------------- ----------------
Reporting Legend
Domestic
Corporation
Domestic
Limited
Partnership
Domestic
LLC
Domestic "Check
the-box" Limited
Partnership
State of Formation
Footnote Reference
----------------
AZZ
75-2222222
TX 3/29/59 DE
----------------
FEIN
Date of Formation
State of Commercial Domicile
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>19
<FILENAME>dex23.txt
<DESCRIPTION>CONSENT OF INDEPENDENT AUDITORS
<TEXT>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-49164) pertaining to the 1991 Nonstatutory Stock Option Plan of
AZZ incorporated, (Form S-8 No. 33-49158) pertaining to the 1991 Incentive Stock
Option Plan of AZZ incorporated, (Form S-8 No. 333-92377) pertaining to the
Employee Benefit Plan and Trust of AZZ incorporated, (Form S-8 No. 333-31716)
pertaining to the Independent Director Share Ownership Plan of AZZ incorporated,
(Form S-8 No. 333-38470) pertaining to the 1998 Incentive Stock Option Plan,
1998 Nonstatutory Stock Option Plan and 1997 Nonstatutory Stock Option Grants of
AZZ incorporated and (Form S-8 No. 333-48886) pertaining to the 2000 Advisory
Director Share Ownership Plan of AZZ incorporated of our report dated March 29,
2002, with respect to the consolidated financial statements and schedule of AZZ
incorporated, included in the Annual Report (Form 10-K) for the year ended
February 28, 2002.
/s/ Ernst & Young, LLP
- ----------------------
Fort Worth, Texas
May 23, 2002
1
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24
<SEQUENCE>20
<FILENAME>dex24.txt
<DESCRIPTION>SPECIAL POWER OF ATTORNEY
<TEXT>
<PAGE>
EXHIBIT 24
SPECIAL POWER OF ATTORNEY
THE STATE OF TEXAS (S)
(S) KNOW ALL MEN BY THESE PRESENTS
COUNTY OF TARRANT (S)
THAT WE, the undersigned, of Tarrant County, Texas, have made, constituted,
and appointed, and by these presents do make, constitute, and appoint DAVID H.
DINGUS, DANA L. PERRY and SAM ROSEN, and each of them severally, our true and
lawful attorneys and agents to execute in our name, place and stead (in such
capacity) the Annual Report on Form 10-K of AZZ incorporated ("Form 10-K") for
the fiscal year ended February 28, 2002, each of said attorneys and agents to
have power to act with or without the other and to have full power and authority
to do and perform in the name of and on behalf of each of the undersigned, as
the case may be, every act whatsoever necessary or advisable to be done in the
premises as fully and to all intents and purposes as any of the undersigned
might or could do in person, such power to extend to the execution of any
amendment to the Form 10-K.
WITNESS OUR HANDS this 27th day of March, 2002.
----
/s/ L.C. Martin
----------------------------------------------
L. C. MARTIN
/s/ David H. Dingus
----------------------------------------------
DAVID H. DINGUS
/s/ Daniel Berce
----------------------------------------------
DANIEL BERCE
/s/ Martin C. Bowen
----------------------------------------------
MARTIN C. BOWEN
/s/ Dr. H. Kirk Downey
----------------------------------------------
DR. H. KIRK DOWNEY
/s/ Sam Rosen
----------------------------------------------
SAM ROSEN
/s/ Kevern Joyce
----------------------------------------------
KEVERN R. JOYCE
/s/ Dana L. Perry
----------------------------------------------
DANA L. PERRY
/s/ R. J. Schumacher
----------------------------------------------
R. J. SCHUMACHER
/s/ Daniel R. Feehan
----------------------------------------------
DANIEL R. FEEHAN
l
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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