SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: December 31, 1995 Commission File No.: 0-12392
RAWSON-KOENIG, INC.
(Exact name of registrant as specified in its charter)
Texas 74-1957377
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2301 Central Parkway
Houston, Texas 77092
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 688-4414
Class Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of Each on which registered
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value Per Share
Preferred Stock, $10.00 Par Value Per Share
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 any definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
Amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
January 31, 1996 $1,457,545
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Common Stock outstanding as of: February 21, 1996 -- 3,901,190 shares
Documents Incorporated by Reference
List hereunder the following documents if incorporated by reference and the
part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes. None
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RAWSON-KOENIG, INC.
FORM 10-K
PART I
ITEM 1. BUSINESS
(a) The Registrant designs, manufactures and markets certain equipment for
light trucks, principally under the "Rawson-Koenig" name. As used in this
report, the term "the Registrant" refers to Rawson-Koenig, Inc. unless a
contrary or more limited meaning is indicated by the context. The
Registrant was incorporated in Texas on November 18, 1977.
The demand for the products manufactured by the Registrant is cyclical, and
tied to the general economic conditions of the geographic market for the
Registrant's products. In particular, demand for the Registrant's products
is related to certain service industries, including construction and public
utilities. The primary market for the Registrant's products is the United
States.
The ability of the Registrant to improve its results of operations and
recover the cost of its assets through operations is dependent on
improvements in manufacturing efficiency and increased sales volume through
the expansion of its distribution base and the introduction of new and
improved product lines. See paragraph (c)(xi) below for a discussion of
the Registrant's research and development activities.
(b) The Registrant operates in the truck equipment industry segment, which
accounted for approximately 100% of its business in 1995. See the
Financial Statements of Registrant included in this report for data
relating to the amounts of sales for the last three years.
(c) The following paragraphs provide information as to specific aspects of the
Registrant's business.
(i) Substantially all of the Registrant's products are truck equipment,
which includes truck service bodies, truck tool boxes, winches and
truck-mounted cranes. Service bodies are structures mounted on a
truck chassis in order to provide cover, storage space or working
space, while tool boxes are simpler and usually smaller structures
which are also truck-mounted but are designed solely for storage of
tools or other property.
The Registrant's service bodies offer a wide selection of standard
and optional features. Like the Registrant's tool boxes, they can
be installed on trucks of all major United States and foreign
producers and are used for general, industrial and recreational
purposes. In general, the Registrant believes that its service
bodies and tool boxes compete in the upper portions of their
respective markets in terms of quality and price. The Registrant
also believes that it offers the largest line of tool boxes
available from any single manufacturer.
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The Registrant's standard winches have pulling capacities of 2,000
to 30,000 pounds, are designed to be truck-mounted and also are sold
for general and industrial purposes. All these winches are
available with or without automatic safety brakes and may be used
with mechanical, hydraulic or electrical power sources. In addition
to these standard products, the Registrant manufactures winches for
special applications such as mining, logging and well drilling.
The Registrant's crane models may be mounted on the Registrant's
service bodies specially designed to withstand additional stress
when the crane is in use. Lifting capacity of the cranes ranges up
to 6,000 pounds depending on the model.
The Registrant sells its products primarily through a nationwide
network of distributors, although certain sales are also made
directly to end user customers and to truck dealers. The Registrant
currently deals with approximately 350 active distributors of its
service bodies, tool boxes, winches and cranes.
The Registrant's only agreements with each distributor are contained
in an authorization letter and a credit application. The Registrant
believes that its relations with its distributors are good and that,
in any event, the loss of any single distributor would have no
material impact on its operations.
The Registrant believes that its most effective sales promotion and
advertising method is a combination of product demonstration and the
use of a strong diverse distributor network. The Registrant's
distributors are strategically located to provide coverage of key
marketing areas. The distributor network is also supported by the
Registrant through product line literature, trade shows, cooperative
advertising and seminars by the Registrant's sales personnel.
(ii) The Registrant continually monitors and updates its product lines.
In 1993, the Registrant introduced a new line of aluminum tool boxes
designed for sport and recreational use. In 1994 and 1995, the
Registrant concentrated on keeping up with increasing demand while
continuing to make product improvements on an ongoing basis.
(iii) The Registrant purchases steel, welding supplies, castings, paint
and other materials from independent suppliers. Virtually all
purchases are made on the basis of competitive bids. The Registrant
utilizes a combination of foreign, national and regional suppliers.
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All classes of supplies purchased by the Registrant are
presently available from a number of sources. The Registrant
deals with a large number of suppliers. Accordingly, the
Registrant believes that its business is not dependent upon any
single supplier or upon any group of suppliers. It is possible
that shortages of a particular type of supply could occur at
any time in the future. However, the Registrant has no reason
to anticipate any such shortage.
(iv) The Registrant owns no patents that are material to its business.
(v) Sales are seasonal in nature and in most years tend to be highest
around May and lowest around October. This seasonality is believed
to reflect, among other factors, model changes of truck
manufacturers in September and October and low levels of activity in
the construction industries in the fall and winter months. In 1994
and 1995, however, seasonality was less of a factor due to truck
manufacturers being overloaded with incoming orders throughout the
entire year.
(vi) Most of the Registrant's inventory is comprised of standard
products. Reference is made to Note 4 to the Financial Statements
for information as to a line of credit which is available to finance
inventory as required.
(vii) Since a significant portion of sales are made through distributors,
the Registrant does not necessarily know the identity of any
particular purchaser of its products. All statements made in the
following paragraph are subject to this qualification.
The Registrant sells to a large number of customers, and to the best
of its knowledge, no customer accounted for as much as 10% of sales
during the years ended December 31, 1993, 1994 and 1995. The
Registrant also believes that foreign or export sales, sales to
governmental agencies and sales to the military are insignificant.
The Registrant's products are marketed on a nationwide basis. The
Registrant's products are used in a variety of industries, and the
relative importance of these industries may vary from year to year.
The service and public utility industries were the most significant
industries during the years ended December 31, 1993, 1994 and 1995.
(viii) The Registrant's backlogs at the respective dates indicated were
approximately as follows: $692,000 at December 31, 1993, $1,399,000
at December 31, 1994 and $1,004,000 at December 31, 1995. All
backlog at December 31, 1995 is believed to be firm and is expected
to be shipped during the fiscal year ending December 31, 1996.
(ix) The Registrant does not do a material amount of business with the
federal government.
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(x) The market for all the Registrant's products is very competitive.
Although the Registrant's products are marketed on a nationwide
basis, each manufacturer of otherwise competitive service bodies may
have certain advantages in its own region because of transportation
costs. In addition to this factor, competition in selling service
bodies is believed to involve such factors as product quality,
delivery capability, product price and quality of distributors. In
selling tool boxes, the more important competitive factors are
believed to be product quality, delivery capability, product prices,
range of product line and number of distributors or other outlets.
The Registrant competes in selling service bodies with a number of
manufacturers, some of which are larger in terms of assets and
sales. However, the Registrant believes that no single manufacturer
dominates the market for these products and that it can continue to
compete successfully for its market share, particularly in its
primary sales region.
Because of lower transportation costs, competition for sales of tool
boxes, winches and cranes is generally on a national rather than a
regional basis. Competition is based primarily on quality and
price. As stated elsewhere, the Registrant offers a standard product
line but stresses its ability to construct specialized products.
While several competitive manufacturers of tool boxes, winches and
cranes are larger in terms of sales and assets, and some offer
related equipment not produced by the Registrant, the Registrant
believes that no single manufacturer dominates the market and that
it can continue to compete successfully for its market share.
(xi) The Registrant does not carry on research and development activities
except in connection with product testing, development and design.
Six employees were involved on a part-time basis in product testing,
development and design during the years ended December 31, 1993,
1994 and 1995. The amount spent on such activities was less than
$100,000 in each of these years.
(xii) The Registrant does not believe that compliance with federal, state
and local environmental laws will adversely affect its business,
earnings or competitive position in the long run when regulations
are enforced uniformly across the nation.
(xiii) At December 31, 1995, the Registrant employed 283 persons. No
employee is represented by any union, and the Registrant believes
that its employee relations are good.
(d) The Registrant's products are marketed primarily in the United States.
Direct export sales are immaterial to the Registrant's operations.
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ITEM 2. PROPERTIES
The Registrant owns its manufacturing and office facilities in Houston,
Texas and Fort Worth, Texas. The Registrant's Houston service body and tool box
manufacturing facility occupies approximately 163,000 square feet of space in a
metal and brick building located in an office and industrial park, while its
executive and administrative offices occupy approximately 12,000 square feet in
the same building. The Registrant's winch and crane manufacturing facility
occupies approximately 24,000 square feet of space in an adjacent metal and
concrete building constructed on the same tract of approximately 13 acres. The
Fort Worth facility is on approximately 3.7 acres of land with metal and block
buildings totaling approximately 73,000 square feet. The Houston facilities are
subject to mortgage liens of approximately $1,446,000. The Registrant owns
almost all of the machinery and equipment used in its operations.
ITEM 3. LEGAL PROCEEDINGS
The Registrant is not a party to and its property is not subject to any
material pending legal proceedings other than ordinary routine litigation
incidental to its business.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
(a) The Registrant's common stock, no par value per share (Common Stock), is
traded on the National Association of Securities Dealers Automated
Quotation System (NASDAQ) Small Cap Market under the symbol "RAKO". The
following table shows the high and low bid and ask prices of the Common
Stock during the periods indicated:
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<TABLE>
<CAPTION>
Bid Ask
High Low High Low
<S> <C> <C> <C> <C>
Year Ended December 31, 1994:
First Quarter 1-3/4 1-3/16 2 1-7/16
Second Quarter 3-1/4 1 3-1/2 1-1/4
Third Quarter 3 2-1/8 3-1/4 2-3/16
Fourth Quarter 2-5/16 2 2-5/8 2-1/8
Year Ended December 31, 1995:
First Quarter 2-1/16 1-5/8 2-5/16 1-3/4
Second Quarter 1-13/16 1-13/16 2 1-15/16
Third Quarter 1-7/8 1-1/2 2 1-5/8
Fourth Quarter 1-3/4 1-1/8 2 1-3/8
Year Ending December 31, 1996:
January 1996 1-17/32 1-5/16 1-5/8 1-5/8
</TABLE>
The foregoing figures, which were obtained from NASDAQ monthly statistical
reports, do not reflect retail markups or markdowns and may not represent actual
trades.
(b) As of February 21, 1996, the Common Stock was held by approximately 1,440
stockholders of record.
(c) The Registrant has not paid any dividends since it became a publicly held
company.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial information for the Registrant for the
periods indicated must be read in conjunction with the Financial Statements in
this report and the notes thereto, which are an integral part of the Financial
Statements.
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<PAGE>
<TABLE>
<CAPTION>
(In Thousands Except Per Share Data)
Calendar Years Ended
December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Sales $18,682 $17,185 $14,450 $12,678 $12,695
Total assets 9,824 9,089 8,377 7,932 7,803
Long-term debt (less
current portion) 2,095 1,856 1,964 2,249 2,479
Net income 825 1,142 480 209 392
Income per share .21 .29 .12 .05 .10
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Summary. The following table sets forth for the years indicated (1)
percentages which certain items reflected in the accompanying statements of
income and in the accompanying selected financial data bear to total sales of
the Registrant and (2) the percentage increase (decrease) of such items as
compared to the indicated prior year.
<TABLE>
<CAPTION>
Percentage
Increase
(Decrease)
Percentage of Sales from Prior
Calendar Years Ended: Year:
1995 1994 1993 1995 1994
<S> <C> <C> <C> <C> <C>
Sales 100.0 100.0 100.0 8.7 18.9
Cost of sales 79.8 77.4 81.5 12.1 12.9
Selling, general, and
admin. expenses 13.8 13.3 12.9 13.3 22.8
Interest expense 1.0 1.2 1.8 (7.8) (17.5)
Other (income) expense, net (1.0) (0.5) (0.6) 111.0 7.7
Income before income taxes 6.4 8.6 4.4 (19.6) 130.1
Income taxes 2.0 2.0 1.1 7.3 107.9
Net income 4.4 6.6 3.3 (27.7) 137.7
</TABLE>
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Results of Operations.
Calendar Year Ended December 31, 1993. Sales for the year ended December
31, 1993 increased 14% from the year ending December 31, 1992 due primarily to
the Registrant's intensified marketing efforts and improvement in the national
economy. Cost of sales as a percentage of sales decreased from 83.2% to 81.5%
due to the Registrant's improvements in manufacturing efficiency. Selling,
general and administrative expenses as a percentage of sales decreased from
13.3% in 1992 to 12.9% in 1993 due to the combined effect of increased sales
volume and management's cost control efforts.
Calendar Year Ended December 31, 1994. Sales for the year ended December
31, 1994 increased 18.9% from the year ending December 31, 1993 due primarily to
the Registrant's intensified marketing efforts and continued improvement in the
national economy, particularly improvement in light truck sales. Cost of sales
as a percentage of sales decreased from 81.5% to 77.4% due to volume
efficiencies and the Registrant's continued program of upgrading manufacturing
equipment and refining production methods. Selling, general and administrative
expenses as a percentage of sales increased from 12.9% in 1993 to 13.3% in 1994
primarily due to increases in insurance costs and payroll-related expenses.
Calendar Year Ended December 31, 1995. Sales for the year ended December
31, 1995 increased 8.7% from the year ending December 31, 1994 due primarily to
the Registrant's continued marketing efforts and strong national light truck
sales. Cost of sales increased from 77.4% to 79.8% due to sharp increases in
material costs during the third and fourth quarters of 1995. In late 1995 and
in January 1996, material costs began to decline and have since returned to
previous levels. Selling, general and administrative expenses as a percentage
of sales increased from 13.3% in 1994 to 13.8% in 1995 primarily due to
increases in insurance costs and payroll-related expenses. Additionally, during
1995, approximately $240,000 of office improvements and repairs were incurred of
which $105,000 was expensed. Income tax expense for the year ended December 31,
1995 increased 7.3% from the year ending December 31, 1994 due to alternative
minimum tax credits which were fully utilized during 1994.
Liquidity and Capital Resources. The Registrant generated approximately
$665,000 in cash from operations during the year ended December 31, 1995. The
Registrant plans to fund future operations from cash on hand, cash from
operations and by use of its credit facility which currently has an available
line of credit of approximately $1,568,000 based upon the applicable borrowing
base calculation. The Registrant's line of credit expires in April 1997. The
Registrant also has an unused agreement with a bank to borrow up to $1,500,000
to finance equipment purchases.
The Registrant has entered into an agreement with an equipment manufacturer
to purchase metal processing equipment at an approximate cost of $1,125,000.
The equipment is scheduled to be delivered and installed in June 1996. The
purchase agreement requires the Registrant to make periodic installment into an
escrow account. As of December 31, 1995, the Registrant has made a 10% down
payment of approximately $112,000 that is being held in the escrow account. The
Registrant intends to use its available credit facilities to fund the remaining
90% of the purchase price as the installments become due in 1996.
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The Registrant presently has no other material commitments for capital
expenditures and foresees no present need to raise external funds for these or
other purposes in view of its current cash position.
Inflation. The Registrant's business is relatively labor intensive, and
the Registrant purchases supplies and components from third parties.
Nevertheless, the Registrant has generally been able to raise its prices
sufficiently to offset any adverse effects of inflation. During the year ended
December 31, 1993, the Registrant increased its prices for certain tool boxes.
During the year ended December 31, 1994, the Registrant increased prices on its
cranes. During the year ended December 31, 1995, the Registrant increased
prices on its service bodies, tool boxes and winches. During January 1996, the
Registrant increased prices on all of its products. The Registrant cannot
predict any possible future effects of inflation on its operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted in a separate section of this
report. Reference is made to the index on page 16 preceding the Financial
Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the directors
and executive officers of the Registrant.
Name Age Position Served As A
Director Since
Thomas C. Rawson 43 Chairman of the Board, September 18, 1987
Director and Chief
Executive Officer
Catherine A. Rawson 71 Director, President and September 18, 1987
Principal Financial
Officer
Pamela Y. Rawson 39 Director September 18, 1987 (1)
Farrell G. Huber, Jr. 63 Director July, 1983 (2)
George W. Fazakerly 54 Director September 21, 1987
Allen F. Rhodes 71 Director September 21, 1987
Joseph M. Scheer 69 Director April 10, 1991
Fredrick C. Wamhoff 38 Vice President-
Manufacturing
Operations and
Secretary
Richard F. Koenig 52 Vice President-
Information Systems
(1) Except for the period September 21, 1987 to October 17, 1989.
(2) Except for the period September 18, 1987 to September 21, 1987.
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Thomas C. Rawson co-founded Rawson Industries, Inc. ("Rawson") in 1978 with
his father, the late Clare J. Rawson, his mother, Catherine A. Rawson, and his
wife, Pamela Y. Rawson. He holds a law degree from Thomas M. Cooley School of
Law in Michigan and a Bachelor of Science Degree from Michigan State University.
Mr. Rawson was admitted to the State Bar of Texas in 1979. Mr. Rawson served as
a Director and President of the Registrant from September 18, 1987 to October
17, 1989, when he was elected Chairman of the Board and Chief Executive Officer.
Catherine A. Rawson co-founded Rawson in 1978. Prior to joining Rawson, she
was employed as a Test Administrator for the Michigan Civil Service Commission
and prepared and administered bookkeeping records for various family-owned
businesses. Mrs. Rawson received an Associate Arts Degree from Pierce College in
1965. Mrs. Rawson served as Treasurer and a Director of Rawson from 1978 to
1987 and Treasurer and Vice President of Administration of the Registrant from
September 18, 1987 to October 17, 1989. She is currently President, Principal
Financial Officer and a Director of the Registrant.
Pamela Y. Rawson co-founded Rawson in 1978 after earning a Bachelor of
Science degree in Social Studies from Michigan State University. She served as
Secretary and a Director of Rawson and a Director of the Registrant from
September 18, 1987 to September 21, 1987. She was re-elected to the Board of
Directors of the Registrant on October 17, 1989.
Farrell G. Huber, Jr. is Chairman of the Board of Directors of Houston-
Huber, Inc., an investment company. He also served as Chairman of the Board and
Chief Executive Officer of Huber Construction Co. and Able Supply Company,
companies engaged in furnace and refractory materials manufacturing and
installation, before their sale in 1986. Mr. Huber is also a Director of
Keystone International, Inc.
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George W. Fazakerly is a partner in the Dallas law firm of Vial, Hamilton,
Koch & Knox. He specializes in corporate and securities matters and received
his Juris Doctor Degree from Southern Methodist University in 1969. He has been
a partner with Vial, Hamilton, Koch & Knox since 1974.
Allen F. Rhodes is currently Chairman of the Silver Fox Advisors, a
business consulting firm. He was President of Arnco Technology, a metallurgical
research company, from 1991 to 1993, and President and Chief Executive Officer
of Anglo Energy, Ltd. from 1983 to 1986. Mr. Rhodes is also a Director of
Keystone International, Inc.
Joseph M. Scheer is currently a management consultant and personal
investor. He is also a Director of Microsemi Corporation, a semiconductor
manufacturer headquartered in Santa Ana, California. He was a Director of
Laserform Inc., a prototype parts manufacturer in Auburn Hills, Michigan from
1989 to 1994.
Fredrick C. Wamhoff joined Rawson in 1984. Prior thereto, Mr. Wamhoff was
in the private practice of law in Lansing, Michigan. He attended Michigan State
University and was graduated in 1979 with a Bachelor of Arts Degree. He
received his Juris Doctor Degree from Marquette University in 1982. Mr. Wamhoff
has been a member of the Michigan and Wisconsin Bars since 1982 and the Texas
Bar since 1986.
Richard F. Koenig began his career with the Registrant in 1967 and has
served the Registrant in many and various functions including Manager of
Engineering and Data Processing, and General Manager of the Registrant's winch
and crane manufacturing facilities. Mr. Koenig has been a key member of the
Registrant's upper management team since September 17, 1987 and was elected Vice
President-Information Systems on January 18, 1994.
Each Director holds office until the next annual meeting of Shareholders of
the Registrant and until his successor is duly elected and qualified. Officers
of the Registrant are elected by, and serve at, the discretion of the Board of
Directors.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth, in summary fashion, the compensation paid
or accrued for the last three (3) fiscal years to each of the most highly
compensated executive officers of the Registrant whose annual rate of
remuneration exceeded $100,000.
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<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Name Annual Restricted All Other
and Compen- Stock Options/ LTIP Compen-
Principal Salary Bonus sation Award(s) SARs Payouts sation
Position<F1> Year ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas C. 1995 151,200 2,000 0 0 0 0 0
Rawson, 1994 148,533 2,000 0 0 0 0 0
C.E.O. 1993 135,258 1,050 0 0 0 0 0
Catherine 1995 151,500 2,000 0 0 0 0 0
A. 1994 142,913 2,000 0 0 0 0 0
Rawson, 1993 135,258 1,050 0 0 0 0 0
President
<FN>
<F1>
No other officers received compensation in excess of $100,000 during the last
three (3) fiscal years.
</FN>
</TABLE>
The Registrant currently has no stock option plans. During the last three
(3) fiscal years the Registrant granted no stock options or stock appreciation
rights ("SAR") to any of its employees or directors; further, during the last
three (3) fiscal years no SAR or stock options were exercised by any of the
Registrant's employees or directors. The Registrant made no awards of long term
incentive plans to any employee or director of the Registrant in the last three
(3) fiscal years. The Registrant has no written employment contracts with any
executive officer of the Registrant and has no compensatory plan or arrangement
with any executive officer which provides for compensation as a result of the
resignation, retirement or termination of employment of an executive officer, or
as a result of change in control of the Registrant.
Compensation of Directors
Of the seven directors of the Registrant, four are "outside" directors or
non-employees of the Registrant. Each outside director receives a fee of $500
for attendance at meetings of the Board of Directors. The three "inside"
directors receive no fee for attendance at meetings of the Board of Directors.
In addition, of the four outside directors, two live outside of the Houston area
and receive reimbursement for travel expenses incurred in connection with
attendance of meetings of the Board of Directors. The Board of Directors of the
Registrant has not formed any committees. The following table sets forth the
amounts received by each of the four outside directors during the last fiscal
year, including travel expense reimbursement.
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Name Directors' Fees Travel Reimbursement
Farrell G. Huber, Jr. $2,000 Not Applicable
George W. Fazakerly, $2,000 $898
Allen F. Rhodes $2,000 Not Applicable
Joseph M. Scheer $2,000 $1,749
During 1995, the Registrant paid Joseph M. Scheer $6,400 for management,
marketing and financial services rendered by him for the Registrant. Under the
terms of such arrangement Mr. Scheer bills the Registrant $100 per hour for his
services and is reimbursed for out-of-pocket expenses incurred by him in
connection with the services provided under the arrangement. During 1995, the
out-of-pocket reimbursement paid to Mr. Scheer was $321.
During 1995, the Registrant paid Allen F. Rhodes $1,070 for management
consulting services rendered by him for the Registrant. Under the terms of such
arrangement Mr. Rhodes bills the Registrant $100 per hour for his services.
Prior to 1994, Pamela Y. Rawson was a non-employee director of the
Registrant. During 1994, Ms. Rawson became a part-time employee of the
Registrant and serves as a payroll administrator. During 1995, the Registrant's
compensation paid to Ms. Rawson consisted of hourly wages totaling $11,857.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE
REGISTRANT
The following table shows the number and percentage of shares of Common
Stock of the Registrant that may be deemed to be beneficially owned as of
February 21, 1996, by (i) each person known by the Registrant to be the
beneficial owner of more than five percent of the outstanding shares of Common
Stock of the Registrant, (ii) each director and nominee for director of the
Registrant who owns shares of Common Stock of the Registrant and (iii) all
directors, nominees, and officers as a group. The persons listed below have the
sole power to vote and to dispose of the shares beneficially owned by them
except as otherwise indicated below.
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<PAGE>
<TABLE>
<CAPTION>
Shares of Common
Stock Beneficially
Owned As Of Percentage of
Name February 21, 1996 Class Owned
<S> <C> <C>
Floyd A. Cailloux
P.O. Box 1952
Kerrville, TX 78028 282,214 <F1> 7.2
Kennedy Capital Management, Inc.
425 N. New Ballas Road
Suite 181
St. Louis, MO 63141 251,500 6.5
Farrell G. Huber, Jr.
2301 Central Parkway
Houston, TX 77092 1,562 0 <F2>
Catherine A. Rawson
2301 Central Parkway
Houston, TX 77092 1,161,261 60.0 <F3>
Thomas C. Rawson
2301 Central Parkway
Houston, TX 77092 1,180,800 60.0 <F3>
Pamela Y. Rawson
2301 Central Parkway
Houston, TX 77092 1,180,800 60.0 <F3>
Allen F. Rhodes
2301 Central Parkway
Houston, TX 77092 12,197 0 <F2>
Joseph M. Scheer
2301 Central Parkway
Houston, TX 77092 85,000 2.2
All directors and officers
as a group 2,443,883 62.6
<FN>
<F1>
Includes 273,415 shares held by entities controlled by Mr. Cailloux and
includes 8,799 shares held by a charitable remainder trust of which Mr.
Cailloux is a lifetime beneficiary.
<F2>
Represents less than 1% of the issued and outstanding shares.
<F3>
Catherine A. Rawson, Thomas C. Rawson and Pamela Y. Rawson constitute a "group"
as such term is defined under applicable regulations of the Security and
Exchange Commission. Therefore, the share ownership percentage of the entire
group is listed by each individual's name. In the case of Thomas C. Rawson and
Pamela Y. Rawson ownership of shares held or to be held by either such person
are assumed to be beneficially owned by such other person due to their marital
relationship.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
-15-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Index to Financial Statements:
Page
Reference
Report of Independent Accountants F-1
Balance Sheets as of December 31, 1995 and 1994 F-2
For the years ended December 31, 1995, 1994 and 1993, the
Statements of Income F-3
Statements of Shareholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6
2. All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission, which are not
presented, are not required under the related instructions or are
inapplicable, and therefore have been omitted.
3. The following exhibits are filed with this report:
Page Number
In This Filing
or Incorporation
Exhibit Number and Description By Reference to
(2) Plan of Acquisition, Reorganization,
Arrangement, Liquidation or Succession*
(3) Articles of Incorporation and Bylaws
3.1 Restated Articles of Incorporation Exhibit 3.1***
3.2 Amended and Restated Bylaws Exhibit 3.2***
(4) Instruments defining the rights of Exhibit 4 to Koenig's
security holders, including indentures Registration on Form
10, as amended, under
the Securities
Exchange
Act of 1934.
(9) Voting trust agreement*
-16-
<PAGE>
(10) Material Contracts
10.1 Koenig, Inc. Profit-Sharing
Plan and Trust Exhibit 10.1**
10.2 Koenig, Inc. 1983 Stock
Option Plan Exhibit 10.2**
10.3 Koenig, Inc. Restricted Stock Plan Exhibit 10.3**
10.4 Loan Agreement dated
September 22, 1987 Exhibit 10.4***
10.5 Agreement of Sale and Purchase
of Houston Plant Facility with
conformed exhibits Exhibit 10.5****
10.6 Loan Agreement dated
January 29, 1990 Exhibit 10.6*****
10.7 First Amendment to Letter Loan
Agreement dated March 31, 1991 Exhibit 10.7******
10.8 Second Amendment to Letter Loan
Agreement dated May 21, 1991 Exhibit 10.8******
10.9 Third Amendment to Letter Loan
Agreement dated March 24, 1992 Exhibit 10.9*******
10.10 Fourth Amendment to Letter Loan
Agreement dated April 30, 1993 Exhibit 10.10********
10.11 Fifth Amendment to Letter Loan
Agreement dated May 21, 1993 Exhibit 10.11********
10.12 Sixth Amendment to Letter Loan
Agreement dated April 30, 1994 Exhibit 10.12*********
10.13 Amended and Restated Letter Loan
Agreement dated April 21, 1995 Exhibit 10.13
10.14 First Amendment to Amended and
Restated Letter Loan Agreement,
Promissory Note (Advancing Term) and
Amended and Restated Security
Agreement dated September 21, 1995 Exhibit 10.14
(11) Statement re: computation of
per share earnings*
(12) Statement re: computation of ratios*
(13) Annual report to security holders*
(18) Letter re: change in accounting principles*
(21) Subsidiaries of the registrant*
(22) Published report regarding
matters submitted to vote
of security holders*
(23) Consents of experts and counsel*
(24) Power of attorney*
(27) Financial Data Schedule Exhibit 27
(28) Information from reports furnished
to state insurance regulatory
authorities*
(99) Additional Exhibits*
-17-
<PAGE>
* Inapplicable.
** Included in the Registrant's Form 10-K for the year ended September
30, 1983.
*** Included in the Registrant's Form 10-K for the year ended September
30, 1987.
**** Included in the Registrant's Form 10-K for the year ended September
30, 1988.
***** Included in the Registrant's Form 10-K for the year ended December
31, 1990.
****** Included in the Registrant's Form 10-K for the year ended December
31, 1991.
******* Included in the Registrant's Form 10-K for the year ended December
31, 1992.
******** Included in the Registrant's Form 10-K for the year ended December
31, 1993.
********* Included in the Registrant's Form 10-K for the year ended December
31, 1994.
(b) Reports on Form 8-K.
No reports were filed on Form 8-K during the last quarter of the period
covered by this report.
-18-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in
Houston, Texas, on the 19th day of March 1996.
Rawson-Koenig, Inc.
By:/s/ Thomas C. Rawson
--------------------
Thomas C. Rawson
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
Registrant and in the capacities indicated and on the date indicated:
Signature Title Date
/s/ Thomas C. Rawson Chairman of the March 19, 1996
- ------------------------- Board, Director and
Thomas C. Rawson Chief Executive Officer
/s/ Catherine A. Rawson Director, President March 21, 1996
- ------------------------- and Principal Financial
Catherine A. Rawson Officer
/s/ Leslie T. Horvath Controller March 19, 1996
- -------------------------
Leslie T. Horvath
/s/ George W. Fazakerly Director March 25, 1996
- -------------------------
George W. Fazakerly
/s/ Farrell G. Huber, Jr. Director March 20, 1996
- -------------------------
Farrell G. Huber, Jr.
/s/ Pamela Y. Rawson Director March 21, 1996
- -------------------------
Pamela Y. Rawson
/s/ Allen F. Rhodes Director March 21, 1996
- -------------------------
Allen F. Rhodes
/s/ Joseph M. Scheer Director March 19, 1996
- -------------------------
Joseph M. Scheer
-19-
<PAGE>
FINANCIAL STATEMENTS
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Rawson-Koenig, Inc.
We have audited the accompanying balance sheets of Rawson-Koenig, Inc. as of
December 31, 1995 and 1994, and the related statements of income, shareholders'
equity, and cash flows for the years ended December 31, 1995, 1994 and 1993.
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 generally accepted auditing
standards. Those standards require that we plan and perform our audits 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 financial position of Rawson-Koenig, Inc. as of
December 31, 1995 and 1994, and the results of its operations and its cash
flows for the years ended December 31, 1995, 1994 and 1993, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Houston, Texas
February 2, 1996
F-1
<PAGE>
RAWSON-KOENIG, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 315,412 $ 193,026
Accounts receivable, trade (net of allowance for
doubtful accounts of $40,000 in 1995 and 1994)........ 1,713,511 1,608,555
Inventories............................................ 3,615,265 3,565,329
Prepayments and other.................................. 173,960 164,232
---------- ----------
Total current assets................................. 5,818,148 5,531,142
Property, plant and equipment, net....................... 3,893,266 3,557,452
Other assets............................................. 112,412
---------- ----------
Total assets....................................... $9,823,826 $9,088,594
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt...................... $ 215,253 $ 203,626
Current portion of capital lease obligation............ 27,025 29,672
Accounts payable....................................... 437,681 650,878
Accrued expenses....................................... 884,326 837,151
Income taxes payable................................... 61,000 233,459
---------- ----------
Total current liabilities............................ 1,625,285 1,954,786
Long-term debt, less current portion..................... 2,095,124 1,828,859
Capital lease obligation, less current portion........... 27,025
---------- ----------
Total liabilities.................................... 3,720,409 3,810,670
---------- ----------
Commitments and contingencies (Note 7)
Shareholders' equity:
Preferred stock, $10 par value, 1,000,000 shares
authorized, none issued
Common stock, no par, $1,000 stated value, 5,000,000
shares authorized, 3,901,190 shares issued and
outstanding at December 31, 1995 and 1994............. 1,000 1,000
Additional paid-in capital............................. 4,529,120 4,529,120
Retained earnings...................................... 1,573,297 747,804
---------- ----------
Total shareholders' equity........................... 6,103,417 5,277,924
---------- ----------
Total liabilities and shareholders' equity......... $9,823,826 $9,088,594
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
RAWSON-KOENIG, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Sales................................... $18,682,075 $17,184,557 $14,449,688
Cost of sales........................... 14,903,247 13,300,320 11,777,024
----------- ----------- -----------
Gross profit........................ 3,778,828 3,884,237 2,672,664
Selling, general and administrative
expenses................................ 2,585,773 2,281,899 1,857,857
----------- ----------- -----------
Income from operations.............. 1,193,055 1,602,338 814,807
Other income (expense):
Interest expense...................... (194,436) (210,891) (255,649)
Other, net............................ 193,874 92,330 85,760
----------- ----------- -----------
Income before provision for income
taxes.............................. 1,192,493 1,483,777 644,918
----------- ----------- -----------
Provision for income taxes:
Federal............................... 306,000 267,000 118,500
State................................. 61,000 75,000 46,000
----------- ----------- -----------
367,000 342,000 164,500
----------- ----------- -----------
Net income.......................... $ 825,493 $ 1,141,777 $ 480,418
=========== =========== ===========
Net income per share................ $ .21 $ .29 $ .12
=========== =========== ===========
Average shares outstanding.............. 3,901,190 3,901,190 3,901,190
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
RAWSON-KOENIG, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK ADDITIONAL EARNINGS TOTAL
---------------- PAID-IN (ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT) EQUITY
--------- ------ ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1992................... 3,901,190 $1,000 $4,529,120 $ (874,391) $3,655,729
Net income.............. 480,418 480,418
--------- ------ ---------- ---------- ----------
Balance, December 31,
1993................... 3,901,190 1,000 4,529,120 (393,973) 4,136,147
Net income.............. 1,141,777 1,141,777
--------- ------ ---------- ---------- ----------
Balance, December 31,
1994................... 3,901,190 1,000 4,529,120 747,804 5,277,924
Net income.............. 825,493 825,493
--------- ------ ---------- ---------- ----------
Balance, December 31,
1995................... 3,901,190 $1,000 $4,529,120 $1,573,297 $6,103,417
========= ====== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
RAWSON-KOENIG, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................ $ 825,493 $1,141,777 $ 480,418
----------- ---------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............ 470,156 454,292 448,032
Loss (gain) on sale of property, plant
and equipment........................... (15,500) 10,480 (2,033)
Change in assets and liabilities:
Increase in accounts receivable......... (104,956) (363,771) (209,384)
Increase in inventories................. (49,936) (498,925) (263,166)
Increase in prepayments and other....... (9,728) (53,083) (4,927)
Increase in other assets................ (112,412)
Increase (decrease) in accounts payable. (213,197) 116,901 62,240
Increase in accrued expenses............ 47,175 132,528 207,127
Increase (decrease) in income taxes
payable................................ (172,459) 159,774 50,633
----------- ---------- ---------
Total adjustments...................... (160,857) (41,804) 288,522
----------- ---------- ---------
Net cash provided by operating
activities............................ 664,636 1,099,973 768,940
----------- ---------- ---------
Cash flows from investing activities:
Purchase of property, plant, and
equipment............................... (805,970) (236,915) (370,767)
Proceeds from sale of property, plant,
and equipment........................... 15,500 1,955 3,297
----------- ---------- ---------
Net cash used by investing activities.. (790,470) (234,960) (367,470)
----------- ---------- ---------
Cash flows from financing activities:
Proceeds from note payable............... 1,544,605 250,000 300,000
Payments on note payable................. (1,063,000) (800,000) (400,000)
Payments on long-term debt............... (203,713) (262,007) (231,626)
Payments on capital lease obligation..... (29,672) (26,926) (24,434)
----------- ---------- ---------
Net cash provided (used) by financing
activities............................ 248,220 (838,933) (356,060)
----------- ---------- ---------
Net increase in cash and cash equivalents.. 122,386 26,080 45,410
Cash and cash equivalents at beginning of
year...................................... 193,026 166,946 121,536
----------- ---------- ---------
Cash and cash equivalents at end of year... $ 315,412 $ 193,026 $ 166,946
=========== ========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
RAWSON-KOENIG, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF ORGANIZATION:
Rawson-Koenig, Inc. (the "Company"), a Texas corporation, designs,
manufactures, and markets certain equipment for light trucks. Its chief
products are truck tool boxes, truck service bodies, winches and truck-mounted
cranes.
The Company sells its products to customers in the truck equipment industry
located throughout the United States. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral. The
Company maintains reserves for potential credit losses and such losses have
been within management's expectations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Net Income Per Share
Net income per share is computed on the basis of the weighted average number
of shares of common stock outstanding during the year.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers any highly
liquid debt instruments purchased with an original maturity date of three
months or less to be cash equivalents.
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts.
Inventories
Inventories are valued at the lower of cost or market. Cost, which includes
material, labor and manufacturing overhead, is determined by the first-in,
first-out (FIFO) method and, at December 31, 1995 and 1994, consisted of the
following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Raw materials....................................... $1,262,869 $1,525,930
Work in process..................................... 1,609,002 1,264,910
Finished goods...................................... 743,394 774,489
---------- ----------
$3,615,265 $3,565,329
========== ==========
</TABLE>
Tooling Costs
The costs of constructing tools and dies for use in manufacturing are
capitalized and depreciated over four years using the straight-line method.
These costs are included in machinery and equipment.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost and include improvements
that significantly add to productive capacity or extend useful lives. Costs of
maintenance and repairs are charged to expense. Upon retirement or disposal of
assets, the cost and related accumulated depreciation are removed from the
accounts and the gain or loss, if any, is reflected in operations.
F-6
<PAGE>
RAWSON-KOENIG, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Depreciation expense for the years ended December
31, 1995, 1994 and 1993, amounted to $470,156, $454,292 and $444,493,
respectively.
Property, plant and equipment at December 31, 1995 and 1994, consisted of the
following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Land............................................ $ 680,000 $ 575,000
Buildings....................................... 3,014,778 2,730,149
Machinery and equipment......................... 4,792,240 4,429,980
Furniture and fixtures.......................... 385,703 334,480
Vehicles........................................ 110,974 173,531
Machinery and equipment under capital lease..... 130,230 130,230
----------- -----------
9,113,925 8,373,370
Accumulated depreciation and amortization....... (5,220,659) (4,815,918)
----------- -----------
$ 3,893,266 $ 3,557,452
=========== ===========
</TABLE>
Included in accumulated depreciation and amortization at December 31, 1995
and 1994, is $72,102 and $54,799, respectively, of accumulated amortization on
machinery and equipment acquired under a capital lease agreement.
Income Taxes
Income taxes are computed under the provisions of the Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes" ("SFAS 109").
Under SFAS 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to the differences between the financial
statement carrying value of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured by using
enacted tax rates that are applicable to the future years in which deferred tax
assets or liabilities are expected to be realized or settled. Under SFAS 109,
the effect of a change in tax rates on deferred tax assets and liabilities is
recognized in net earnings in the period in which the tax rate change was
enacted. The Company establishes a valuation allowance when it is more likely
than not that a deferred tax asset will not be recovered.
Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reported period. Actual results could differ from those estimates.
Reclassifications
Certain 1993 amounts have been reclassified to conform with the December 31,
1995 and 1994 presentations. These reclassifications had no effect on total
assets, total liabilities, total shareholders' equity, sales or net income.
3. ACCRUED EXPENSES:
Accrued expenses at December 31, 1995 and 1994, include $400,000 for
potential claims against the Company by its employees arising from injuries
incurred in the normal course of business. During 1993, the Company accrued
$100,000 for potential claims which were charged to cost of sales. Actual
claims for medical expenses and lost time paid during the years ended December
31, 1995, 1994 and 1993 were $1,085, $7,570 and $44,302, respectively. In
addition, during 1994 and 1993 the Company had stop-loss insurance for any
individual claim in excess of $250,000. Effective May 1, 1994, the Company was
fully insured under standard workers' compensation insurance for claims
incurred after that date.
F-7
<PAGE>
RAWSON-KOENIG, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. LONG-TERM DEBT:
Long-term debt at December 31, 1995 and 1994, consisted of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Revolving line of credit in the amount of
$2,200,000 with a bank, which matures April 30,
1997. Interest is payable monthly at the bank's
prime rate (8.5% at December 31, 1995).
Borrowings under the agreement are restricted
to certain percentages of accounts receivable
and inventories................................ $ 631,605 $ 150,000
Real estate loan payable to a bank, due in
monthly payments of $22,047, including interest
at 8.5% per year, with the unpaid balance due
May 2000....................................... 1,445,618 1,579,370
Installment loan payable to a bank, due in
monthly payments of $5,830, plus interest at
the bank's prime rate (8.5% at December 31,
1995), with the unpaid balance due April 1999.. 233,154 303,115
---------- ----------
2,310,377 2,032,485
Current portion of long-term debt............... (215,253) (203,626)
---------- ----------
Long-term portion............................... $2,095,124 $1,828,859
========== ==========
</TABLE>
During the period January 1, 1994 through April 30, 1994, the Company's
short-term borrowings under the line of credit averaged $704,167, with a
weighted average interest rate of 6.63%. Effective April 30, 1994, the line of
credit was reclassified to long-term as the maturity date was extended to April
1996.
Effective April 21, 1995, the Company amended and restated its loan agreement
with its primary lender. The restated agreement extended the maturity date of
the line of credit to April 30, 1997, and reduced the interest rate on amounts
outstanding under the line of credit to the bank's prime rate of interest. The
restated agreement also lowered the rate of interest on the Company's
installment loan to the bank's prime rate.
During 1994, the Company entered into an advancing term equipment loan
agreement with a bank which provided for loan advances for equipment purchases
of up to $500,000 through April 30, 1995. Effective September 21, 1995, the
agreement was amended to allow the Company to borrow up to $1,500,000 to
finance equipment purchases through August 31, 1996. Any borrowings outstanding
under the agreement as of August 31, 1996, will be converted to a five year
term loan that will be due in sixty equal monthly principal payments beginning
September 30, 1996 plus interest at the bank's prime rate. As of December 31,
1995, there were no amounts outstanding under this facility.
The line of credit agreement and other bank debt contain various restrictive
covenants which include, among other things, maintenance of a minimum tangible
net worth and minimum working capital, restrictions on property, plant and
equipment additions and additional indebtedness, and requirements to maintain
certain financial ratios. All loans from the bank are collateralized by
accounts receivable, inventories, equipment and Houston real estate.
F-8
<PAGE>
RAWSON-KOENIG, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Future maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1996......................................................... $ 215,253
1997......................................................... 860,244
1998......................................................... 242,867
1999......................................................... 211,686
2000......................................................... 780,327
----------
$2,310,377
==========
</TABLE>
Cash paid for interest was $194,578, $211,372 and $253,879 for the years
ended December 31, 1995, 1994 and 1993, respectively.
5. INCOME TAXES:
The composition of deferred tax assets and liabilities and the related tax
effects at December 31, 1995 and 1994, was as follows:
<TABLE>
<CAPTION>
1995 1994
--------------------- ---------------------
CURRENT NONCURRENT CURRENT NONCURRENT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Deferred tax assets:
Tax assets which have been
expensed for book purposes...... $ 29,703 $ 28,043
Accrued expenses deductible when
paid for tax.................... 148,000 144,500
Net operating loss carryforwards. 62,335 $176,954 62,335 $ 239,289
Investment tax credit
carryforwards................... 15,000 15,000
--------- -------- --------- ---------
Total deferred tax assets...... 240,038 191,954 249,878 239,289
Deferred tax liabilities:
Property, plant and equipment ba-
sis............................. 146,546 124,812
--------- -------- --------- ---------
Net deferred tax assets before
valuation allowance................ 240,038 45,408 249,878 114,477
Valuation allowance................ (240,038) (45,408) (249,878) (114,477)
--------- -------- --------- ---------
Net deferred tax assets........ $ - $ - $ - $ -
========= ======== ========= =========
</TABLE>
Changes during 1995, 1994 and 1993 in the valuation allowance account
applicable to net deferred tax assets were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Beginning balance............................. $364,355 $ 655,976 $ 586,286
Increase (decrease) due to change in assets
expensed for book purposes................... 1,660 (85,226)
Increase due to change in accrued expenses
deductible when paid for tax................. 3,500 7,408 34,430
Increase (decrease) due to change in property,
plant and equipment basis.................... (21,734) (1,247) 145,424
Increase (decrease) due to change in
alternative minimum tax credit carryforwards. (125,500) 118,500
Decrease due to use of net operating loss
carryforwards................................. (62,335) (87,056) (228,664)
--------- --------- ---------
$ 285,446 $ 364,355 $ 655,976
========= ========= =========
</TABLE>
F-9
<PAGE>
RAWSON-KOENIG, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The differences between the federal income tax provision and the amount that
would result if the federal statutory rate of 34% were applied to pretax
financial income for 1995, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Federal income tax
provision at the
statutory rate......... $405,448 34.0% $ 504,484 34.0% $ 219,272 34.0%
Utilization of net
operating loss
carryforwards.......... (62,335) (5.2) (87,056) (5.9) (228,664) (35.5)
Alternative minimum tax. 118,500 18.4
Utilization of
alternative minimum tax
credit carryforwards... (4,013) (0.4) (125,500) (8.4)
State income tax, net of
federal benefit........ 40,260 3.4 49,500 3.3 30,360 4.7
Change in valuation
allowance, net of
alternative minimum tax
and utilization of net
operating loss and
alternative minimum tax
credit carryforwards... (16,574) (1.4) 3,092 0.2 23,711 3.7
Other................... 4,214 0.4 (2,520) (0.2) 1,321 0.2
-------- ---- --------- ---- --------- -----
$367,000 30.8% $ 342,000 23.0% $ 164,500 25.5%
======== ==== ========= ==== ========= =====
</TABLE>
At December 31, 1995, the Company had approximate tax net operating loss and
tax credit carryforwards available to offset future taxable income as follows:
<TABLE>
<CAPTION>
NET OPERATING LOSS
CARRYFORWARDS
---------------------
ALTERNATIVE
TAX MINIMUM TAX INVESTMENT
REPORTING REPORTING TAX CREDIT
EXPIRATION YEAR ENDING DECEMBER 31, PURPOSES PURPOSES CARRYFORWARDS
----------------------------------- --------- ----------- -------------
<S> <C> <C> <C>
1998................................... $ 6,000
1999................................... 9,000
2001................................... $530,000 $530,000
2002................................... 58,000 58,000
2003................................... 58,000 58,000
2004................................... 58,000 58,000
-------- -------- -------
$704,000 $704,000 $15,000
======== ======== =======
</TABLE>
Utilization of net operating loss carryforwards is limited under the
alternative minimum tax rules. Additionally, special limitations exist under
the tax law which may restrict the utilization of the regular tax and
alternative minimum tax net operating loss carryforwards.
Pursuant to the Tax Reform Act of 1986, unexpired investment tax credit
carryforwards have been reduced by 35%.
Cash paid for income taxes was $575,773, $182,226 and $113,867 for the years
ended December 31, 1995, 1994 and 1993, respectively.
F-10
<PAGE>
RAWSON-KOENIG, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. RELATED PARTY TRANSACTIONS:
During 1995 and 1994, the Company paid $7,470 and $5,500, respectively, to
directors for consulting fees. In addition, the Company made payments for legal
services provided by the law firm of a director in the amount of $49,217,
$30,990 and $49,624 for the years ended December 31, 1995, 1994 and 1993,
respectively. Accrued amounts payable to this law firm at December 31, 1995 and
1994 were $29,079 and $25,000, respectively.
7. COMMITMENTS AND CONTINGENCIES:
The Company is engaged in various claims and litigation arising from its
operations. In the opinion of management, uninsured losses, if any, resulting
from these matters will not have a significant effect upon the financial
position or results of operations of the Company.
The Company has entered into an agreement with an equipment manufacturer to
purchase metal processing equipment at an approximate cost of $1,125,000. The
equipment is scheduled to be delivered and installed in June 1996. The purchase
agreement requires the Company to make installment payments into an escrow
account as the machine is being built. An escrow payment of $112,412 made in
October 1995 is included in the balance sheet as other assets at December 31,
1995. The Company made an escrow payment of $112,412 in January 1996 and
estimates that an escrow payment of $787,500 will be due in June 1996. The
escrowed amounts will transfer to the manufacturer after the machine is
installed. A final payment of approximately $112,500 is due to the manufacturer
after the machine is fully operational.
F-11
AMENDED AND RESTATED
LETTER LOAN AGREEMENT
April 21, 1995
Bank One, Texas, NA
910 Travis
Houston, Texas 77002
Attn: Barry A. Kelly
Gentlemen:
The undersigned, Rawson-Koenig, Inc., a Texas corporation ("Borrower"),
duly organized and existing under the laws of the State of Texas, has requested
that Bank One, Texas, NA ("Lender") lend to Borrower the aggregate sum of
$5,567,818.20. Lender has advised Borrower that Lender is willing to lend such
funds to Borrower upon the terms and subject to the conditions set forth in this
letter loan agreement (the "Agreement"). In consideration for the above
premises and the mutual promises and covenants herein contained, Borrower and
Lender do hereby agree as follows:
1. Loans. On the terms and subject to the conditions hereinafter set
forth, Lender agrees to lend to Borrower, the aggregate sum of $5,567,818.20
(the "Loans"). The Loans shall be evidenced by (i) a Master Revolving Credit
Note (the "Revolving Note") in a form satisfactory to Lender, duly executed by
Borrower in the principal amount of $2,200,000.00 and made payable to the order
of Lender, (ii) a Term Promissory Note (the "Real Estate Note") in a form
satisfactory to Lender, duly executed by Borrower in the principal amount of
$488,604.20 as of January 29, 1990 as evidenced by an assignment to Lender from
Texas Commerce Bank-Fort Worth ("TCB"), of an existing promissory note from
Borrower, payable to the order of TCB in the original face amount of
$575,000.00, (iii) a Term Promissory Note (the "Central Parkway Note") in a form
satisfactory to Lender, duly executed by Borrower in the principal amount of
$1,879,214.00 as of May 20, 1991 as evidenced by an assignment to Lender from
Keystone International, Inc. ("Keystone"), of an existing promissory note from
Borrower, payable to the order of Keystone in the original face amount of
$2,000,000.00, and (iv) an Advancing Term Promissory Note (the "Equipment Note")
in a form satisfactory to Lender, duly executed by Borrower in the principal
amount of $1,000,000.00 and payable to the order of Lender. The Real Estate
Note, the Revolving Note, the Central Parkway Note and the Equipment Note, and
any renewals and extensions thereof, are collectively referred to as the
"Notes". Principal and interest on each of the Notes shall be due and payable
in the manner and at the times set forth in such Notes.
2. Advances.
(a) Subject to the terms hereof, Borrower may borrow, pay, reborrow
and repay under the Revolving Note, provided, however, the maximum principal
outstanding under the Revolving Note shall not exceed the lesser of (i)
$2,200,000 or (ii) the Borrower's Loan Limit, as such term is defined in
-1-
Schedule "A" attached hereto and made a part hereof. Borrower's requests for
advances, whether for cash or Letter of Credit (hereinafter defined), under the
Revolving Note shall specify the aggregate amount of the advance and the date of
such advance. Borrower shall furnish to Lender a request for borrowing in a
form satisfactory to Lender at least two (2) business days prior to the
requested borrowing date. Lender shall make the requested funds or Letter of
Credit available to Borrower at Lender's principal banking office in Houston,
Texas. If at any time prior to the maturity date of the Revolving Note, the
outstanding advances under the Revolving Note exceed Borrower's Loan Limit as
shown on any reports delivered to Lender under Paragraph 5(c) or as indicated by
Lender's own records, Borrower shall, on the date of the delivery of such report
to Lender or on the date of notice from Lender as to Lender's records, prepay on
the Revolving Note such amount as may be necessary to eliminate such excess.
(b) On the terms and subject to the conditions hereinafter set forth,
Lender agrees to make advances on the Revolving Note to Borrower for the
issuance of one or more letters of credit the total outstanding amount of which
shall not exceed $500,000.00 at any one time. Each of the letters of credit
shall be evidenced by an Application and Agreement for Standby and/or Commercial
Letter of Credit (the "Application") in a form satisfactory to Lender, and shall
mature no later than ninety (90) days after the maturity date of the Revolving
Note. Each of these letters of credit and any renewals, extensions and
modifications thereof are collectively referred to herein as the "Letter of
Credit". Repayment of drafts against the Letter of Credit shall be governed by
this Agreement and the Application, and shall be and is secured by the
collateral and guaranties provided in Paragraph 9 hereof.
(c) Subject to the terms hereof, Lender will lend to Borrower an
aggregate amount not to exceed $1,000,000.00 to be used for Borrower's equipment
purchases. From time to time, Borrower may submit to Lender requests for
advances under the Equipment Note, which requests shall specify the aggregate
amount of the advance and the date of such advance. Borrower shall be entitled
only to an advance under the Equipment Note in an amount approved by Lender, and
in no event shall any such advance exceed Borrower's actual cost of any such
purchased equipment. Borrower shall furnish to Lender a request for borrowing
in a form satisfactory to Lender and a copy of the invoice for the assets to be
purchased, at least two (2) business days prior to the requested borrowing date.
Lender shall make the requested funds available to Borrower at Lender's
principal banking office in Houston, Texas. In connection with advances, Lender
shall not be obligated to make any advances under the Equipment Note after April
30, 1996. Borrower shall not be entitled to reborrow any sums already repaid
under the Equipment Note.
3. Conditions Precedent.
(a) The obligation of Lender to make the initial advances under each
Loan to Borrower is subject to the conditions precedent that, as of the date of
such advance, Lender shall have received duly executed copies of each document
listed on the last page hereof relating to such Loan, in form and substance
acceptable to Lender and its legal counsel (all such documents, together with
-2-
this Agreement and any other security documents relating to the Loans, and any
modifications thereof, to be hereinafter collectively referred to as the "Loan
Documents").
(b) Lender's obligation to make any advances under the Loans shall be
subject to the additional conditions precedent that, as of the date of such
advance and after giving effect thereto: (i) all representations and warranties
made by Borrower to Lender are true and correct, as if made on such date, (ii)
all documents and proceedings shall be reasonably satisfactory to legal counsel
for Lender, (iii) no condition or event exists which constitutes an Event of
Default (as hereinafter defined) or which, with the lapse of time and/or giving
of notice, would constitute an Event of Default, and (iv) all conditions
precedent set forth in subparagraph (a) above shall have been satisfied.
4. Representations and Warranties. In order to induce Lender to make the
Loans, Borrower represents and warrants to Lender that:
(a) The Loan Documents are the legal and binding obligations of
Borrower, enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency or other laws of general application relating
to the enforcement of creditors' rights;
(b) All financial statements delivered by Borrower to Lender prior to
the date hereof are true and correct, fairly present the financial condition of
Borrower and have been prepared in accordance with generally accepted accounting
principles, consistently applied; as of the date hereof, there are no
obligations, liabilities or indebtedness (including contingent and indirect
liabilities) which are material to Borrower and not reflected in such financial
statements; and no material adverse changes have occurred in the financial
condition or business of Borrower since the date of the most recent financial
statements which Borrower has delivered to Lender;
(c) Neither the execution and delivery of this Agreement and the
other Loan Documents, nor consummation of any of the transactions herein or
therein contemplated, nor compliance with the terms and provisions hereof or
thereof, will contravene or conflict with any provision of law, statute or
regulation to which Borrower is subject or any judgment, license, order or
permit applicable to Borrower or any indenture, mortgage, deed of trust or other
instrument to which Borrower may be subject; no consent, approval, authorization
or order of any court, governmental authority or third party is required in
connection with the execution and delivery by Borrower of this Agreement or
transactions contemplated herein or therein;
(d) No litigation, investigation, or governmental proceeding is
pending, or, to the knowledge of any of Borrower's officers, threatened against
or affecting Borrower, which may result in any material adverse change in
Borrower's business, properties or operations;
-3-
(e) There is no specific fact known to Borrower that Borrower has not
disclosed to Lender in writing which is likely to result in any material adverse
change in Borrower's business, properties or operations;
(f) Borrower owns all of the assets reflected on its most recent
balance sheet free and clear of all liens, security interests or other
encumbrances, except as previously disclosed in writing to Lender;
(g) The principal office, chief executive office and principal place
of business of Borrower is in Houston, Texas;
(h) All taxes required to be paid by Borrower have in fact been paid,
except for taxes being contested in good faith by appropriate proceedings for
which adequate reserves have been established;
(i) Borrower is not in violation of any law, ordinance, governmental
rule or regulation to which it is subject, and is not in default under any
material agreement, contract or understanding to which it is a party;
(j) No written certificate or written statement herewith or
heretofore delivered by Borrower to Lender in connection herewith, or in
connection with any transaction contemplated hereby, contains any untrue
statement of a material fact or fails to state any material fact necessary to
keep the statements contained therein from being misleading; and
(k) Borrower has taken all steps necessary to determine and has
determined that no hazardous substances, or other substances known or suspected
to pose a threat to health or the environment which are in violation of
Applicable Environmental Laws ("Hazard[s]") exist with respect to the Collateral
(hereinafter defined). No prior use, either by Borrower or, to Borrower's
knowledge, the prior owners of the Collateral, has occurred, which violates any
laws pertaining to health or the environment ("Applicable Environmental Laws"),
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA"), the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), the Texas Water Code
and the Texas Solid Waste Disposal Act. The Borrower's handling and maintenance
of the Collateral does not and will not result in the disposal or release of any
hazardous substance or Hazard on, in or to the Collateral. The terms "hazardous
substance" and "release" shall each have the meanings specified in CERCLA, and
the terms "solid waste" and "disposal" (or "disposed") shall each have the
meanings specified in RCRA; provided, however, that in the event either CERCLA
or RCRA is amended so as to broaden the meaning of any term defined thereby,
such broader meaning shall apply subsequent to the effective date of such
amendment; and provided further that, to the extent that the laws of the State
of Texas establish a meaning for "hazardous substance", "release", "solid
waste", or "disposal" which is broader than that specified in either CERCLA or
RCRA, such broader definition shall apply.
-4-
5. Affirmative Covenants. Until payment in full of the Notes and all
other obligations and liabilities of Borrower hereunder, Borrower agrees and
covenants that (unless Lender shall otherwise consent in writing):
(a) As soon as available, and in any event within thirty (30) days
after the close of each calendar quarter of each fiscal year of Borrower,
Borrower shall deliver to Lender an unaudited financial statement showing the
consolidated and consolidating financial condition of Borrower and any
subsidiary at the close of each such quarter and the results of operations
during such quarter, which financial statements shall include, but shall not be
limited to, a profit and loss statement, balance sheet and such other matters as
Lender may reasonably request; all such quarterly financial statements shall be
forwarded to Lender with a letter of transmittal from him in which he shall
certify that Borrower is in compliance with all of the affirmative covenants
contained in this Paragraph 5 and further stating that no Event of Default
exists in the performance by Borrower of any of the other terms, conditions and
covenants required under this Agreement to be performed by Borrower;
(b) Within ninety (90) days after the end of each fiscal year of
Borrower, Borrower shall deliver to Lender a copy of the annual audited
financial statement of Borrower prepared in conformity with generally accepted
accounting principles, certified (with no material qualifications or exceptions)
by independent public accountants selected by Borrower and satisfactory to
Lender, which show the consolidated and consolidating financial condition of
Borrower and any subsidiary at the close of such fiscal year and the results of
operations during such fiscal year, and shall include, but not be limited to, a
profit and loss statement, balance sheet and such other matters as Lender may
reasonably request;
(c) As soon as available, and in any event within thirty (30) days
after the end of each month, and upon each request for an advance Borrower shall
deliver to Lender a Borrowing Base Report and Compliance Certificate in the form
of Schedule "B" attached hereto together with such other information as may be
deemed necessary or appropriate by Lender, and as soon as available, and in any
event within thirty (30) days after the end of each month, Borrower shall
deliver to Lender an aging and listing of all accounts of Borrower in a form
acceptable to Lender;
(d) Borrower shall conduct its business in an orderly and efficient
manner consistent with good business practices and in accordance with all valid
regulations, laws and orders of any governmental authority and will act in
accordance with customary industry standards in maintaining and operating its
assets, properties and investments;
(e) Borrower shall maintain complete and accurate books and records
of its transactions in accordance with generally accepted accounting principles,
and will give Lender access during business hours to all books, records and
documents of Borrower and permit Lender to make and take away copies thereof;
(f) Borrower shall furnish to Lender, immediately upon becoming aware
of the existence of any condition or event constituting an Event of Default or
event which, with the lapse of time and/or giving of notice, would constitute an
-5-
Event of Default, written notice specifying the nature and period of existence
thereof and any action which Borrower is taking or proposes to take with respect
thereto;
(g) Borrower shall promptly notify Lender of (i) any material adverse
change in its financial condition or business; (ii) any default under any
material agreement, contract or other instrument to which Borrower is a party or
by which any of its properties are bound, or any acceleration of any maturity of
any indebtedness owing by Borrower, (iii) any material adverse claim against or
affecting Borrower or any of its properties; and (iv) any litigation, or any
claim or controversy which might become the subject of litigation, against
Borrower or affecting any of Borrower's property, if such litigation or
potential litigation might, in the event of an unfavorable outcome, have a
material adverse effect on Borrower's financial condition or business or might
cause an Event of Default;
(h) Borrower shall promptly pay all lawful claims, whether for labor,
materials or otherwise, which might or could, if unpaid, become a lien or charge
on any property or assets of Borrower, unless and to the extent only that the
same are being contested in good faith by appropriate proceedings and reserves
deemed adequate by Lender have been established therefor;
(i) Borrower shall maintain or cause to be maintained insurance from
responsible and reputable companies in such amounts and covering such risks as
is acceptable to Lender, is prudent and is usually carried by companies engaged
in businesses similar to that of Borrower; Borrower shall furnish Lender, on
request, with certified copies of insurance policies or other appropriate
evidence of compliance with the foregoing covenant;
(j) Borrower shall preserve and maintain all licenses, privileges,
franchises, certificates and the like necessary for the operation of its
business; and
(k) Borrower shall promptly furnish to Lender, at Lender's request,
such additional financial or other information concerning assets, liabilities,
operations and transactions of Borrower as Lender may from time to time
reasonably request;
(l) Borrower shall give notice to Lender immediately upon acquiring
knowledge of the presence of any Hazards relating to the Collateral, which is in
a condition that is resulting or could reasonably be expected to result in any
adverse environmental impact, with a full description thereof; promptly comply
with all Applicable Environmental Laws requiring the notice, removal, treatment,
or disposal of such hazardous substances; and provide Lender, within thirty (30)
days after demand by Lender, with financial assurance evidencing to Lender's
satisfaction that sufficient funds are available to pay the cost of removing,
treating and disposing of any such known Hazards and discharging any liens or
assessments that may be established relating to the Collateral; and
(m) Borrower shall pay a letter of credit commission to Lender in
respect of each Letter of Credit issued by Lender equal to the greater of $150
or an amount determined by multiplying (i) one percent (1%) of the face amount
-6-
of such Letter of Credit by (ii) a fraction, the numerator of which shall be the
number of days between the date of such Letter of Credit and the stated
expiration date thereof and the denominator of which shall be 365; such
commission shall be payable at the time a Letter of Credit is issued and upon
any renewal or extension thereof; additionally, Borrower agrees to reimburse
Lender for all actual out-of-pocket expenses incurred by Lender, such as
advising or confirming bank fees, telex charges and the like and to pay those
fees customarily charged by Lender for any amendments to a Letter of Credit.
6. Negative Covenants. Until payment in full of the Notes and all other
obligations and liabilities of Borrower hereunder, Borrower covenants that it
shall not (unless Lender shall otherwise consent in writing):
(a) Permit, at any time, its ratio of Current Assets to Current
Liabilities to be less than 1.20 to 1.00; as used herein, the term "Current
Asset" shall mean all assets of Borrower that, in accordance with generally
accepted accounting principles, would be included as current assets on a balance
sheet as of such date, and the term "Current Liabilities" shall mean all
liabilities of Borrower that, in accordance with generally accepted accounting
principles, would be included as current liabilities on a balance sheet as of
such date;
(b) Permit, at any time, its Fixed Charge Coverage Ratio to be less
than 1.20 to 1.00; as used herein, the term "Fixed Charge Coverage Ratio" shall
mean the ratio of (i) Borrower's after-tax net income, less dividends, plus
depreciation and amortization, plus interest expense, plus lease expense, to
(ii) Borrower's interest expense, plus current maturities of long term debt and
capital leases (not including debt under the Revolving Note), plus lease
expense, all of which (except current maturities of long term debt and capital
leases) are based on the immediately preceding four fiscal quarters of Borrower;
(c) Permit, at any time, its Tangible Net Worth to be less than
$4,900,000; as used herein, the term "Tangible Net Worth" shall mean Borrower's
shareholders' equity minus all intangibles;
(d) Permit, at any time, its ratio of total liabilities to Tangible
Net Worth to be more than 2.00 to 1.00;
(e) Incur or assume any indebtedness or borrow money, except for (i)
the Loans; (ii) debt incurred in the ordinary course of business (which may
include up to $200,000 of purchase money indebtedness incurred for the
acquisition of assets); and (iii) debt reflected on Borrower's most recent
balance sheet; or sell any of its accounts receivable with or without recourse;
(f) Endorse, guarantee, or otherwise become liable for the
obligations of any person, firm or corporation except for endorsements of
negotiable instruments by Borrower in the ordinary course of business;
-7-
(g) Mortgage, assign, encumber, incur, assume or grant a security
interest in or lien upon any of Borrower's assets, except to Lender (provided,
however, that the foregoing shall not apply to an inchoate lien for taxes which
are not delinquent or which are being contested in good faith and liens
resulting from deposits to secure the payments of worker's compensation or
social security or to secure the performance of bids or contracts in the
ordinary course of business) and except for purchase money security interests
required to secure the debt permitted pursuant to Subparagraph 6(e) hereinabove;
(h) Liquidate, dissolve or reorganize; or merge or consolidate with,
or acquire all or substantially all of the assets of, any other company, firm or
association; or make any other substantial change in its capitalization or its
business;
(i) Sell any of its assets used or useful in its business, except in
the ordinary course of business; or sell any of its assets to any other person,
firm or corporation with the agreement that such assets shall be leased back to
Borrower;
(j) Own, purchase or acquire, directly or indirectly, any promissory
notes, stock or securities of any other person, firm or corporation, other than
securities guaranteed as to the principal and interest by the United States
government; or make any loans or advances to any other person; or
(k) Expend or enter into any commitment to expend any amount for the
acquisition or lease of tangible, fixed or capital assets, including repairs,
replacements and improvements, which are capitalized under proper accounting
practice, which exceeds $2,000,000.00 in the aggregate during any fiscal year
during the term hereof.
7. Default. An "Event of Default" shall exist if any one or more of the
following events (herein collectively called "Events of Default") shall occur:
(a) Borrower shall fail to pay when due any principal of, or interest
on, the Notes or any other fee or payment due hereunder or under any of the Loan
Documents within ten (10) days of Lender's sending written demand therefor;
provided, Lender shall not be obligated to send such demand more than twice per
calendar year, and thereafter Borrower shall be in default upon its failure to
pay such sums when due;
(b) Any representation or warranty made in any of the Loan Documents
shall prove to be untrue or inaccurate in any material respect as of the date on
which such representation or warranty is made;
(c) Default shall occur in the performance of any of the covenants or
agreements of Borrower contained herein or in any of the other Loan Documents;
provided, however, with respect to the Affirmative Covenants set forth in
Paragraph 5 of this Agreement [specifically excluding Subparagraphs 5(f) and
5(g)] Borrower shall be entitled to a ten (10) day opportunity to cure such
default after Lender has sent written notice of such occurrence; provided,
-8-
Lender shall not be obligated to send such notice more than twice per calendar
year, and thereafter Borrower shall be in default upon such occurrence;
(d) Borrower shall (i) apply for or consent to the appointment of a
receiver, custodian, trustee, intervenor or liquidator of it or of all or a
substantial part of its assets, (ii) voluntarily become the subject of a
bankruptcy, reorganization or insolvency proceeding or be insolvent or admit in
writing that it is unable to pay debts as they become due, (iii) make a general
assignment for the benefit of creditors, (iv) file a petition or answer seeking
reorganization or an arrangement with creditors or to take advantage of any
bankruptcy or insolvency laws, (v) file an answer admitting the material
allegations of, or consent to, or default in answering, a petition filed against
it in any bankruptcy, reorganization or insolvency proceeding, (vi) become the
subject of an order for relief under any bankruptcy, reorganization or
insolvency proceeding, or (vii) fail to pay any money judgment against it before
the expiration of thirty (30) days after such judgment becomes final and no
longer subject to appeal;
(e) An order, judgment or decree shall be entered by any court of
competent jurisdiction or other competent authority approving a petition
appointing a receiver, custodian, trustee, intervenor or liquidator of Borrower
or of all or substantially all of its assets, and such order, judgment or decree
shall continue unstayed and in effect for a period of thirty (30) days; or a
complaint or petition shall be filed against Borrower seeking or instituting a
bankruptcy, insolvency, reorganization, rehabilitation or receivership
proceeding of Borrower, and such petition or complaint shall not have been
dismissed within thirty (30) days;
(f) Borrower shall default in the payment of any indebtedness of
Borrower or in the performance of any of Borrower's material obligations and
such default shall continue for more than any applicable period of grace; or
(g) Any change in either (i) the management of Borrower at the chief
executive officer level and President level, or (ii) the ownership of
controlling interest of the stock of Borrower during the term of the Loans; as
used herein, the term "controlling interest" shall mean 51% of the stock of
Borrower; and if a shareholder is an individual, the death of such shareholder
shall not be deemed to be a change in the ownership of such stock of Borrower.
8. Remedies Upon Event of Default. If an Event of Default shall have
occurred and be continuing, then Lender, at its option, may (i) declare the
principal of, and all interest then accrued on, the Notes and any other
liabilities of Borrower to Lender to be forthwith due and payable, whereupon the
same shall forthwith become due and payable without notice, presentment, demand,
protest, notice of intention to accelerate, or other notice of any kind, all of
which Borrower hereby expressly waives, anything contained herein or in the
Notes to the contrary notwithstanding, (ii) reduce any claim to judgment, and/or
(iii) without notice of default or demand, pursue and enforce any of Lender's
rights and remedies under the Loan Documents or otherwise provided under or
pursuant to any applicable law or agreement.
-9-
9. Collateral. Payment of the Notes and performance of the obligations
described herein shall be secured, or guaranteed, directly or indirectly, by a
first priority (except as otherwise specified below) perfected security interest
or mortgage, as the case may be, in and upon the following property and assets
(the "Collateral"):
(i) All of Borrower's general intangibles, equipment, accounts,
inventory, instruments, chattel paper and documents; and
(ii) Certain real estate located in Houston, Harris County, Texas,
together with all improvements located or to be located thereon, which
property and assets are more particularly described in a Deed of Trust
filed of record in the Official Public Records of Real Property of Harris
County, Texas under Clerk's File No. L524904, and under Film Code No.
###-##-####, which Deed of Trust has been assigned to Lender by the terms
of a Transfer of Note and Liens from Keystone to Lender.
10. Miscellaneous.
(a) Waiver. No failure to exercise, and no delay in exercising, on
the part of Lender, any right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right. The rights of Lender
hereunder and under the other Loan Documents shall be in addition to all other
rights provided by law. No notice or demand given in any case shall constitute
a waiver of the right to take other action in the same, similar or other
instances without such notice or demand.
(b) Notices. Any notices or other communications required or
permitted to be given by any of the Loan Documents must be given in writing and
must be personally delivered or mailed by prepaid certified or registered mail
to the party to whom such notice or communication is directed at the address of
such party as follows:
(i) Borrower: Rawson-Koenig, Inc.
2301 Central Parkway
Houston, Texas 77092
(ii) Lender: Bank One, Texas, NA
910 Travis Street
Houston, Texas 77002
Attn: Barry A. Kelly
Any such notice or other communication shall be deemed to have been given
(whether actually received or not) on the day it is personally delivered as
aforesaid, or, if mailed, on the third day after it is mailed as aforesaid. Any
party may change its address for purposes of this Agreement by giving notice of
such change to all other parties pursuant to this Paragraph 10(b).
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(c) Governing Law. This Agreement and the other Loan Documents are
being executed and delivered, and are intended to be performed, in the State of
Texas, and the substantive laws of Texas shall govern the validity,
construction, enforcement and interpretation of this Agreement and all other
Loan Documents, except to the extent: (i) otherwise specified therein; (ii) the
federal or state laws governing national banking associations expressly
supersede and have contrary application; or (iii) federal laws governing maximum
interest rates shall provide for rates of interest higher than those permitted
under the laws of the State of Texas.
(d) Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under present or future laws effective
during the term of this Agreement, such provision shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement, and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement.
(e) Maximum Interest Rate. It is the intention of the parties hereto
to comply with the usury laws of the State of Texas and the United States;
accordingly, it is agreed that notwithstanding any provision to the contrary in
the Notes, or in any of the documents securing payment hereof or otherwise
relating hereto, no such provision shall require the payment or permit the
collection of interest in excess of the maximum permitted by applicable state or
Federal law. If any excess of interest in such respect is provided for, or
shall be adjudicated to be so provided for, in the Notes or in any of the
documents securing payment hereof or otherwise relating hereto, or in the event
the maturity of the indebtedness evidenced by the Notes is accelerated in whole
or in part, or in the event that all or part of the principal or interest of the
Notes shall be prepaid, so that under any of such circumstances the amount of
interest contracted for, charged or received under the Notes or under any of the
instruments securing payment hereof or otherwise relating hereto, on the amount
of principal actually outstanding from time to time under the Notes shall exceed
the maximum amount of interest permitted by the usury laws of the State of Texas
and the United States, then, in any such event, (i) the provisions of this
paragraph shall govern and control, (ii) neither Borrower nor its heirs, legal
representatives or assigns or any other party liable for the payment hereof
shall be obligated to pay the amount of such interest to the extent that it is
in excess of the maximum amount permitted by applicable state or Federal law,
(iii) any such excess which may have been collected shall be, at the holder's
option (at maturity or in the Event of Default hereunder), either applied as a
credit against the then unpaid principal amount hereof or refunded to Borrower,
and (iv) the effective rate of interest shall be automatically subject to
reduction to the maximum lawful contract rate allowed under the usury laws of
the State of Texas or the United States as now or hereafter construed by the
courts having jurisdiction. It is further agreed that without limitation of the
foregoing, all calculations of the rate of interest contracted for, charged or
received under the Notes or under such other documents which are made for the
purpose of determining whether such rate exceeds the maximum lawful rate of
interest, shall be made, to the extent permitted by the laws of the State of
Texas and the United States, by amortizing, prorating, allocating and spreading
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in equal parts during the period of the full stated term of the Loans, all
interest at any time contracted for, charged or received from Borrower or
otherwise by the holder of the Notes in connection with such Loans.
(f) Entirety and Amendments. The Loan Documents embody the entire
agreement between the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof and thereof, and
this Agreement and the other Loan Documents may be amended only by an instrument
in writing executed by the party, or an authorized officer of the party, against
whom such amendment is sought to be enforced.
(g) Parties Bound. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns; provided, however, that Borrower may
not, without the prior written consent of Lender, assign any rights, powers,
duties or obligations hereunder.
(h) Headings. Paragraph and section headings are for convenience of
reference only and shall in no way affect the interpretation of this Agreement.
(i) Financial Terms. As used in this Agreement, all financial and
accounting terms not otherwise defined herein shall be defined and calculated in
accordance with generally accepted accounting principles consistently applied.
(j) Hazardous Substances; Indemnification. Borrower shall protect,
indemnify and hold Lender, its directors, officers, employees and agents, and
any immediate successors to Lender's interest in the Collateral and any other
person who acquires any portion of the Collateral at a foreclosure sale or
otherwise through the exercise of Lender's rights and remedies under the Loan
Documents, and all directors, officers, employees and agents of all of the
aforementioned indemnified parties, harmless from and against any and all actual
or potential claims, proceedings, lawsuits, liabilities, damages, losses, fines,
penalties, judgments, awards, costs and expenses (including, without limitation,
attorneys' fees and costs and expenses of investigation) which arise out of or
relate in any way to any use, handling, production, transportation, disposal or
storage of any hazardous substance or solid waste whether by Borrower or any
tenant or any other person during the ownership of the Collateral by Borrower,
including, without limitation, (i) all foreseeable and all unforeseeable
consequential damages directly or indirectly arising out of (A) the use,
generation, storage, discharge or disposal of the Collateral by Borrower or (B)
any residual contamination affecting any natural resource or the environment,
and (ii) the cost of any required or necessary repair, cleanup, or
detoxification of the Collateral and the preparation of any closure or other
required remedial plans. In addition, Borrower agrees that in the event the
Collateral is assigned an identification number by the Environmental Protection
Agency, the Collateral shall be solely in the name of Borrower or other
responsible person and, as between Borrower and Lender, Borrower shall assume
any and all liability for such removed Collateral. All such costs, damages, and
expenses referred to herein shall hereinafter be referred to as "Expenses".
Borrower understands and agrees that its liability to the aforementioned
indemnified parties shall arise upon the earlier to occur of (a) discovery of
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any violation of the Applicable Environmental Laws or (b) the institution of any
Hazardous Materials Claim, and not upon the realization of loss or damage, and
Borrower agrees to pay to Lender from time to time, immediately upon Lender's
request, an amount equal to such Expenses, as reasonably determined by Lender.
In addition, Borrower agrees that any Expenses incurred by Lender and not paid
by Borrower shall be additional indebtedness of Borrower and shall be secured by
the Loan Documents and shall accrue interest at the Maximum Rate. The
agreements contained herein shall survive the repayment of the Note and the
termination of the Loan Documents. As used herein, "Hazardous Materials Claims"
shall mean any and all enforcement, clean-up, removal or other governmental or
regulatory actions or orders threatened, instituted or completed pursuant to any
Applicable Environmental Laws, together with all claims made or threatened by
any third party against Borrower or the Collateral relating to damage,
contribution, cost recovery compensation, loss or injury resulting from any
hazardous substance or solid waste. Notwithstanding anything to the contrary
contained in this subparagraph or in the Loan Documents, it is hereby expressly
agreed and understood that Borrower's obligation to protect, indemnify and hold
Lender and the other aforementioned indemnified parties harmless from and
against any and all Hazardous Materials Claims and Expenses pursuant to this
subparagraph shall not apply to Hazardous Materials Claims or Expenses arising
out of or relating in any way to any use, handling, production, transportation,
disposal or storage of the Collateral directly caused by Lender or any such
other indemnified party during the management, operation, possession or
ownership of the Collateral by Lender or any such other indemnified party, and
not resulting from a condition existing prior to the commencement of such
management, operation, possession or ownership of the Collateral by Lender or
any such other indemnified party.
11. Construction and Conflicts. The provisions of this Agreement shall be
in addition to those of the Notes, the Loan Documents and any guaranty, pledge
or security agreement, note or other evidence of liability held by Lender, all
of which shall be construed as complementary to each other. Nothing herein
contained shall prevent Lender from enforcing the Notes, the Loan Documents and
any and all other notes, guaranty, pledge or security agreements in accordance
with their respective terms. To the extent of any irreconcilable conflict
between the terms hereof and the terms of the Notes, the Loan Documents or any
other document executed in connection herewith, the terms of this Agreement
shall control.
12. NO ORAL AGREEMENTS. THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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If Lender agrees to the foregoing, Lender should execute this Agreement in
the space indicated below.
"Borrower"
RAWSON-KOENIG, INC.
By /S/ Thomas C. Rawson
---------------------
Thomas C. Rawson,
Chairman of the Board
ACCEPTED:
"Lender"
BANK ONE, TEXAS, NA
By /S/ Barry A. Kelly
------------------------------
Barry A. Kelly, Vice President
List of Loan Documents
1. Amended and Restated Letter Loan Agreement
2. Master Revolving Credit Note
3. Equipment Note
4. Corporate Resolutions
5. Modification of Note and Liens (Real Estate Note)
6. Supplemental Deed of Trust
7. Amended and Restated Security Agreement
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SCHEDULE "A"
"Borrower's Loan Limit", as used herein, shall be based upon, and shall not
exceed, the sum of: (a) eighty percent (80%) of Borrower's Eligible Accounts (as
defined below) outstanding on the date of a request for a Loan advance; plus (b)
the lesser of (i) $1,250,000 or (ii) fifty percent (50%) of the Net Security
Value of Inventory (as defined below) of Borrower.
An "Eligible Account" shall mean an account which continuously meets each
of the following requirements is an Eligible Account: (i) it is lawfully owned
by Borrower, and Borrower has the right to transfer any interest therein; (ii)
if it arises from the sale or lease of goods, the goods have been shipped or
delivered to the person who is obligated on the account (the "account debtor");
(iii) if it arises from the performance of services, such services have been
fully rendered, to the extent of the billing; (iv) it is a valid obligation of
the account debtor, enforceable in accordance with its terms and free and clear
of all liens, security interests, restrictions, setoffs, adverse claims,
assessments, defaults, prepayments, defenses and conditions precedent other than
the security interest created by this Letter Agreement; (v) rendered to the
account debtor and is not evidenced by any instrument or chattel paper; (vi) it
is not aged more than ninety (90) days from the date of invoice; (vii) it is not
owed by any account debtor closely affiliated with, related to or employed by
Borrower or domiciled outside of the United States (unless, in the case of an
account debtor domiciled outside of the United States, such account is deemed by
Lender to be properly secured); and (viii) it is not owed by an account debtor
that has fifteen percent (15%) or more of its accounts with Lender aged more
than ninety (90) days from the date of invoice.
"Net Security Value of Inventory" shall mean the net value of all
inventory, with the exception of work in process, and after taking into account
charges, liens and security interests (other than the interest of Lender) of all
kinds against inventory, changes in the market value thereof, all
transportation, processing and other handling charges affecting the value
thereof, inventory surplus and estimated earnings on uncompleted contracts, all
as determined by Lender in its reasonable discretion.
SCHEDULE "B"
BORROWING BASE REPORT AND COMPLIANCE CERTIFICATE
I. Total Accounts Receivable: $____________
Less: Ineligible Accounts - ____________
Eligible Accounts Receivable = $____________
II. Eligible Inventory: $____________
III. 80% x Eligible Accounts Receivable: $____________
The lesser of (i) 50% x Inventory
or (ii) $1,250,000: + $____________
Borrower's Loan Limit: = $____________
(maximum $2,200,000)
IV. Current Principal Balance: $____________
V. Advance Request: $____________
VI. Total Outstanding After Draw: $____________
VII. Available Funds/(Repayment Amount): $____________
The undersigned officer of Borrower, hereby certifies to Lender that to
the best of his/her knowledge (i) the computations set forth above are true,
correct and complete as of the date set forth above or as of the date of
execution hereof, as the case may be, (ii) such computations have been made in
full compliance with and conformity to the Letter Loan Agreement (the "Loan
Agreement") between Borrower and Lender, and (iii) the matters set forth in
Paragraph 3(b) of the Loan Agreement are true and correct.
All capitalized terms used herein which have been defined in the Loan
Agreement have been used in accordance with the definitions ascribed to them in
the Loan Agreement
EXECUTED this ____ day of _____________, 19__.
---------------------------------
(Signature of Certifying Officer)
MASTER REVOLVING CREDIT NOTE
$2,200,000.00 Houston, Texas April 21, 1995
FOR VALUE RECEIVED, the undersigned, RAWSON-KOENIG, INC., a Texas
(hereinafter called the "Maker"), promises to pay to the order of BANK ONE,
TEXAS, NA, a national banking association (hereinafter called the "Payee"), at
its office located at 910 Travis Street, Houston, Texas 77002, or at such other
place as the Payee may designate in writing to the Maker, in lawful money of the
United States of America, the principal sum of TWO MILLION TWO HUNDRED THOUSAND
AND NO/100 DOLLARS ($2,200,000.00), or so much thereof that may be advanced and
outstanding pursuant to the hereinafter defined Loan Agreement, together with
interest thereon from the date hereof until maturity (determined on a daily
basis and for the actual number of days elapsed based on either a 365 or 366 day
year, as the case may be) at a fluctuating rate per annum equal to the lesser of
(i) the Base Rate in effect from day-to-day and (ii) the Maximum Rate. If at
any time and from time to time the rate of interest calculated pursuant to item
(i) above would exceed the Maximum Rate, thereby causing the interest payable
hereon to be limited to the Maximum Rate, then any subsequent reduction in the
rate specified in item (i) above shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon from
and after the date of the first advance hereunder equals the amount of interest
which would have accrued hereon if the rate specified in item (i) above had at
all times been in effect.
As used herein, the term "Base Rate" means, at any time, the rate of
interest per annum established from time to time by Payee. Without notice to
the Maker or any other person, the Base Rate shall change automatically from
time to time as and in the amount by which such Base Rate shall fluctuate, with
each such change to be effective as of the date of each change in such Base
Rate. The Base Rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer. The Payee may make
commercial loans or other loans at rates of interest at, above or below the Base
Rate.
As used herein, the term "Maximum Rate" shall mean, with respect to the
holder hereof, the maximum nonusurious interest rate, if any, that at any time,
may be under applicable law contracted for, taken, reserved, charged or received
on the indebtedness evidenced by this Note. If applicable law ceases to provide
for such a maximum rate of interest, the Maximum Rate shall be equal to eighteen
percent (18%) per annum.
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Accrued interest hereon on the outstanding principal balance of this Note
shall be due and payable in monthly installments as it accrues, the first
installment becoming due and payable on or before May 30, 1995, with a like
installment becoming due and payable on or before the same day of each
succeeding calendar month thereafter until April 30, 1997 (the "Maturity Date"),
when the outstanding principal balance of this Note, and all accrued and unpaid
interest hereon, shall be finally due and payable. Until the earlier of an
Event of Default or the Maturity Date, the Maker may borrow, pay, prepay in
whole or in part and reborrow hereunder, subject to the terms and provisions
relating to this Note as set forth in the Amended and Restated Letter Loan
Agreement (said Agreement, as it may hereafter be amended or otherwise modified
from time to time, being the "Loan Agreement", the terms defined therein and not
otherwise defined herein being used herein as therein defined) of even date
herewith, so long as not more than $2,200,000 is outstanding at any one time, it
being understood that this Note is a master revolving credit note and it being
expressly contemplated that by reason of prepayments hereon there may be times
when no indebtedness is owing hereunder; but, notwithstanding such occurrences,
this Note shall remain valid and shall be in full force and effect as to loans
or advances made subsequent to such occurrences.
The Maker reserves the right to prepay this Note, in whole or in part, at
any time, without penalty or notice. All payments hereunder, whether designated
as payments of principal or interest, shall be applied: first to unpaid and
accrued interest; then to the discharge of any expenses or damages for which the
Payee may be entitled to receive reimbursement under the terms of this Note or
under the terms of any document executed in connection herewith; and, lastly, to
unpaid principal in the inverse order of maturity. Unless changed in accordance
with law, the applicable method of calculating the usury ceiling rate under
Texas law shall be the indicated (weekly) ceiling rate in effect and applicable
to the loan evidenced by this Note, as provided in Tex. Rev. Civ. Stat. Ann.
art. 5069-1.04, as amended; provided, that the Payee may also rely on alternate
maximum rates of interest under other applicable laws if they are higher. All
past due principal and interest on this Note, whether due as the result of
acceleration of maturity or otherwise, shall bear interest from the date the
payment thereof shall have become due until the same have been fully discharged
by payment at a per annum rate equal to the lesser of (i) the Base Rate plus
five percent (5%) or (ii) the Maximum Rate.
This Note has been executed and delivered pursuant to, and is subject to
certain terms and conditions in, the Loan Agreement and is the "Revolving Note"
referred to therein. The Payee shall be entitled to the benefits provided for
in the Loan Agreement. Reference is made to the Loan Agreement for the
statement of any obligation of the Payee to advance funds hereunder and the
Events of Default (as defined therein) upon which the maturity of this Note may
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be accelerated. The time of payment of this Note is also subject to
acceleration in the event the Maker defaults or otherwise fails to discharge its
obligations under any of the instruments securing payment hereof.
All co-signers and endorsers of this Note are to be regarded as principals
as to their respective joint and several liability to any legal holder hereof
and the Maker, and each of the guarantors, sureties and endorsers, hereby
expressly and severally waive grace, and all notices, demands, presentments for
payment, notice of nonpayment, protest and notice of protest, notice of intent
to accelerate, notice of acceleration of the indebtedness due hereunder, and
diligence in collecting this Note or enforcing any security rights of the Payee
under any document securing this Note, and agree (i) that the Payee or other
legal holder of this Note may, at any time, and from time to time, on request of
or by agreement with the Maker, extend the date of maturity of all or any part
hereof, without notifying or consulting with any Maker or principal hereof, who
shall remain fully obligated for the payment hereof; (ii) that it will not be
necessary for the Payee or any holder hereof, in order to enforce payment of
this Note, to first institute or exhaust its remedies against the Maker or other
party liable therefor or to enforce its rights against any security for this
Note; and (iii) to any substitution, exchange or release of any security now or
hereafter given for this Note or the release of any party primarily or
secondarily liable hereon.
In the event of default hereunder or under any of the instruments securing
payment hereof and the placing of this Note in the hands of an attorney for
collection (whether or not suit is filed), or if this Note is collected by suit
or legal proceedings or through the probate court or bankruptcy proceedings, the
Maker agrees to pay the holder hereof the costs and reasonable attorney's fees
incurred in the collection hereof.
As recited in Paragraph 10(e) of the Loan Agreement, which Paragraph is
incorporated by reference herein, notwithstanding any provision herein to the
contrary, the Payee shall never be entitled to receive or collect interest
hereunder, nor shall or may amounts received hereunder be credited to interest
hereunder, so that the Payee shall receive or be paid interest exceeding the
maximum amount permitted by applicable law.
Any check, draft, money order or other instrument given in payment of all
or any portion hereof may be accepted by the holder hereof and handled in
collection in the customary manner, but the same shall not constitute payment
hereunder or diminish any rights of the holder hereof except to the extent that
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actual cash proceeds of such instrument are unconditionally received by the
holder and applied to this indebtedness in the manner elsewhere herein provided.
It is further agreed that the Payee shall have a first lien on all deposits
and other sums at any time credited by or due from the Payee to any maker,
endorser, surety or guarantor hereof as collateral security for the payment of
this Note, and the Payee, at its option, may at any time, without notice and
without any liability, hold all or any part of any such deposits or other sums
until all sums owing on this Note have been paid in full and/or apply or set off
all or any part of any such deposits or other sums credited by or due from the
Payee to or against any sums due on this Note in any manner and in any order of
preference which the Payee, in its sole discretion, chooses.
The loan evidenced by this Note was negotiated and consummated in the State
of Texas and it is agreed and understood that the legality, enforceability and
construction hereof shall be governed by Texas law and, to the extent
applicable, by the laws of the United States of America. The Maker and the
Payee expressly agree, pursuant to Article 15.10(b) of Chapter 15 ("Chapter 15")
of the Texas Credit Code, that Chapter 15 shall not apply to this Note or to any
advance evidenced by this Note and that this Note and all such advances shall
not be governed by or subject to the provisions of Chapter 15 in any manner
whatsoever.
This Note is given in renewal, extension, modification and restatement (but
not in extinguishment) of that certain master revolving credit note dated
January 29, 1990, as amended. Payment of this Note is secured as described in
one or more Loan Documents referred to in the Loan Agreement.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
RAWSON-KOENIG, INC.
By /S/ Thomas C. Rawson
--------------------------
Thomas C. Rawson, Chairman
of the Board of Directors
Page 4 of a 4 Page $2,200,000.00 Promissory Note
PROMISSORY NOTE
(Advancing Term)
$1,000,000.00 Houston, Texas April 21, 1995
FOR VALUE RECEIVED, the undersigned, RAWSON-KOENIG, INC., a Texas
corporation (hereinafter called the "Maker"), promises to pay to the order of
BANK ONE, TEXAS, NA, a national banking association (hereinafter called the
"Payee"), at its office located at 910 Travis Street, Houston, Texas 77002, or
at such other place as the Payee may designate in writing to the Maker, in
lawful money of the United States of America, the principal sum of ONE MILLION
AND NO/100 DOLLARS ($1,000,000.00), or so much thereof that may be advanced and
outstanding pursuant to the hereinafter defined Loan Agreement, together with
interest thereon from the date hereof until maturity (determined on a daily
basis and for the actual number of days elapsed based on either a 365 or 366 day
year, as the case may be) at a fluctuating rate per annum equal to the lesser of
(i) the Base Rate in effect from day-to-day and (ii) the Maximum Rate. If at
any time and from time to time the rate of interest calculated pursuant to item
(i) above would exceed the Maximum Rate, thereby causing the interest payable
hereon to be limited to the Maximum Rate, then any subsequent reduction in the
rate specified in item (i) above shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon from
and after the date of the first advance hereunder equals the amount of interest
which would have accrued hereon if the rate specified in item (i) above had at
all times been in effect.
As used herein, the term "Base Rate" means, at any time, the rate of
interest per annum established from time to time by Payee. Without notice to
the Maker or any other person, the Base Rate shall change automatically from
time to time as and in the amount by which such Base Rate shall fluctuate, with
each such change to be effective as of the date of each change in such Base
Rate. The Base Rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer. The Payee may make
commercial loans or other loans at rates of interest at, above or below the Base
Rate.
As used herein, the term "Maximum Rate" shall mean, with respect to the
holder hereof, the maximum nonusurious interest rate, if any, that at any time,
may be under applicable law contracted for, taken, reserved, charged or received
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on the indebtedness evidenced by this Note. If applicable law ceases to provide
for such a maximum rate of interest, the Maximum Rate shall be equal to eighteen
percent (18%) per annum.
The principal of and all accrued but unpaid interest on this Note shall be
due and payable as follows:
Accrued interest hereon shall be due and payable in monthly
installments as it accrues, the first such installment becoming due
and payable on or before May 31, 1995, with a like installment being
due and payable on or before the last day of each succeeding calendar
month thereafter until and including April 30, 1996 (the "Advancing
Termination Date"). Thereafter, this Note shall be due and payable
in monthly installments of (i) all accrued and unpaid interest hereon,
plus (ii) a principal installment in an amount based on a sixty (60)
month equal amortization of the outstanding principal amount of this
Note as of the Advancing Termination Date; the first such installment
becoming due and payable on or before one month after the Advancing
Termination Date, with a like installment becoming due and payable on
or before the same day of each of the succeeding calendar months
thereafter until April 30, 2001, when this Note, including all
outstanding principal and accrued, unpaid interest hereon shall be
fully and finally paid.
The Maker reserves the right to prepay this Note, in whole or in part, at
any time, without penalty or notice. All payments hereunder, whether designated
as payments of principal or interest, shall be applied: first to unpaid and
accrued interest; then to the discharge of any expenses or damages for which the
Payee may be entitled to receive reimbursement under the terms of this Note or
under the terms of any document executed in connection herewith; and, lastly, to
unpaid principal in the inverse order of maturity. Unless changed in accordance
with law, the applicable method of calculating the usury ceiling rate under
Texas law shall be the indicated (weekly) ceiling rate in effect and applicable
to the loan evidenced by this Note, as provided in Tex. Rev. Civ. Stat. Ann.
art. 5069-1.04, as amended; provided, that the Payee may also rely on alternate
maximum rates of interest under other applicable laws if they are higher. All
past due principal and interest on this Note, whether due as the result of
acceleration of maturity or otherwise, shall bear interest from the date the
payment thereof shall have become due until the same have been fully discharged
by payment at the Maximum Rate.
Initialed for
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This Note has been executed and delivered pursuant to, and is subject to
certain terms and conditions in, that certain Amended and Restated Letter Loan
Agreement of even date herewith (said Agreement as it may hereafter be amended
or modified from time to time being the "Loan Agreement", the terms defined
therein and not otherwise defined herein being used herein as therein defined),
and is the "Equipment Note" referred to therein. The Payee shall be entitled to
the benefits provided for in the Loan Agreement. Reference is made to the Loan
Agreement for the statement of any obligation of the Payee to advance funds
hereunder and the Events of Default (as defined therein) upon which the maturity
of this Note may be accelerated. The time of payment of this Note is also
subject to acceleration in the event the Maker defaults or otherwise fails to
discharge its obligations under any of the instruments securing payment hereof.
In the Event of Default hereunder or under any of the instruments securing
payment hereof and the placing of this Note in the hands of an attorney for
collection (whether or not suit is filed), or if this Note is collected by suit
or legal proceedings or through the probate court or bankruptcy proceedings, the
Maker agrees to pay the holder hereof the costs and reasonable attorney's fees
incurred in the collection hereof.
As recited in Paragraph 10(e) of the Loan Agreement, which paragraph is
incorporated by reference herein, notwithstanding any provision herein to the
contrary, the Payee shall never be entitled to receive or collect interest
hereunder, nor shall or may amounts received hereunder be credited to interest
hereunder, so that the Payee shall receive or be paid interest exceeding the
maximum amount permitted by applicable law.
Any check, draft, money order or other instrument given in payment of all
or any portion hereof may be accepted by the holder hereof and handled in
collection in the customary manner, but the same shall not constitute payment
hereunder or diminish any rights of the holder hereof except to the extent that
actual cash proceeds of such instrument are unconditionally received by the
holder and applied to this indebtedness in the manner elsewhere herein provided.
It is further agreed that the Payee shall have a first lien on all deposits
and other sums at any time credited by or due from the Payee to any maker,
endorser, surety or guarantor hereof as collateral security for the payment of
this Note, and the Payee, at its option, may at any time, without notice and
without any liability, hold all or any part of any such deposits or other sums
Initialed for
Page 3 of a 4 Page $1,000,000.00 Promissory Note Identification:
/S/ TR
-------
until all sums owing on this Note have been paid in full and/or apply or set off
all or any part of any such deposits or other sums credited by or due from the
Payee to or against any sums due on this Note in any manner and in any order of
preference which the Payee, in its sole discretion, chooses.
The loan evidenced by this Note was negotiated and consummated in the State
of Texas and it is agreed and understood that the legality, enforceability and
construction hereof shall be governed by Texas law and, to the extent
applicable, by the laws of the United States of America. The Maker and the
Payee expressly agree, pursuant to Article 15.10(b) of Chapter 15 ("Chapter 15")
of the Texas Credit Code, that Chapter 15 shall not apply to this Note or to any
advance evidenced by this Note and that this Note and all such advances shall
not be governed by or subject to the provisions of Chapter 15 in any manner
whatsoever.
This Note is secured by (i) a Supplemental Deed of Trust of even date
herewith executed by the Maker for the benefit of the Payee covering the
property described therein, given to supplement that certain Deed of Trust dated
January 29, 1988 executed by the Maker for the benefit of Keystone
International, Inc. ("Keystone") and filed for record in the Official Public
Records of Real Property of Harris County, Texas under Clerk's File No. L524904,
and subsequently transferred and assigned by Keystone to the Payee by Transfer
of Note and Liens dated May 20, 1991, filed for record in the Official Public
Records of Real Property of Harris County, Texas, under Clerk's File No.
N191393, and (ii) an Amended and Restated Security Agreement of even date
herewith executed by the Maker to the Payee.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
RAWSON-KOENIG, INC.
By /S/ Thomas C. Rawson
--------------------------
Thomas C. Rawson, Chairman
of the Board of Directors
Page 4 of a 4 Page $1,000,000.00 Promissory Note
RAWSON-KOENIG, INC.
Certificate
The undersigned hereby certifies that he is the duly elected and acting
Secretary of RAWSON-KOENIG, INC., a Texas corporation (the "Company"), and as
such has custody of the corporate records of the Company and is authorized to
execute and deliver this Certificate on behalf of the Company; and with
reference to loans being extended, renewed and modified by BANK ONE, TEXAS, NA
(the "Lender"), the undersigned hereby further certifies as follows:
1. Attached hereto as Exhibit "A" is a full, true and correct copy of the
Resolutions duly adopted by the Board of Directors of the Company by a unanimous
written consent effective April 21, 1995, in accordance with the Texas Business
Corporation Act, and the Articles of Incorporation and Bylaws of the Company.
2. The Resolutions attached as Exhibit "A" hereto have not been amended,
modified or rescinded and are in full force and effect on the date hereof.
3. The undersigned officers have been duly elected to the positions set
forth next to their respective names below, and are qualified to act in such
capacities and execute documents on behalf of the Company, and the signature
appearing opposite each name is the authentic signature of each such officer.
Name Office Signature
Catherine Rawson President /s/ Catherine Rawson
------------------------
Chairman of the Board
Thomas C. Rawson and /s/ Thomas C. Rawson
Chief Executive Officer ------------------------
Fred Wamhoff Secretary /s/ Fred Wamhoff
------------------------
4. The Company is duly organized and existing under the laws of the State
of Texas.
5. All franchise and other taxes required to maintain the Company's
existence have been paid and no such taxes are delinquent.
6. No proceedings are pending for the forfeiture of the Company's
authority to do business or to force its dissolution, voluntarily or
involuntarily.
-1-
7. There is no provision in the Articles of Incorporation or Bylaws of
the Company limiting the above-described resolutions, and said resolutions are
in conformity with the provisions of the Company's Articles of Incorporation and
Bylaws, and with the proceedings of the Board of Directors.
8. The Articles of Incorporation of the Company previously delivered to
the Lender are in full force and effect and have not been amended or modified,
except as may have been disclosed in writing to the Lender.
9. The Bylaws of the Company previously delivered to the Lender are in
full force and effect and have not been amended or modified except as may have
been disclosed in writing to the Lender.
EXECUTED the 21st day of April, 1995.
By /S/ Fred Wamhoff
-----------------------
Fred Wamhoff, Secretary
The undersigned, the Chairman of the Board of the Company, hereby certifies
that Fred Wamhoff is the Secretary of the Company and is authorized to execute
and deliver this Certificate for and on behalf of the Company.
By /S/ Thomas C. Rawson
----------------------
Thomas C. Rawson,
Chairman of the Board
-2-
EXHIBIT "A"
WHEREAS, RAWSON-KOENIG, INC. (the "Company") has obtained loans (the
"Existing Loans") from BANK ONE, TEXAS, NA, successor in interest to Team Bank
(the "Lender") pursuant to the terms of that certain Amended and Restated Letter
Loan Agreement (the "Loan Agreement") of even date herewith; and
WHEREAS, Lender has agreed (i) to modify, renew and extend the Existing
Loans and (ii) to loan additional funds in the amount of $1,000,000 (together
with the Existing Loans is hereinafter collectively called the "Loan") to the
Company, pursuant to the terms of the Loan Agreement;
RESOLVED, further, in regard to the Loan that any one of the President, the
Chairman of the Board of Directors, the Secretary, or the Chief Executive
Officer of the Company is hereby authorized and directed to execute and deliver,
for and on behalf of the Company, documents as may be deemed necessary or
desirable by such officers or required by the Lender in regard to the Loan; and
further
RESOLVED, that the drafts of such documents presented to the Board of
Directors of the Company are hereby approved; and further
RESOLVED, that the officers executing and delivering any of the above-
described documents are hereby authorized and empowered to execute and deliver
the same in the name and on behalf of the Company, and in such manner of
counterparts as the officer or officers executing the same shall deem necessary
or desirable, and with such terms, conditions and provisions, including
modifications from the drafts presented to the Board of Directors, as the
officer or officers executing the same may approve, the execution of such
documents to evidence with approval conclusively; and further
RESOLVED, that any and all instruments executed and delivered on behalf of
the Company in connection with the foregoing resolutions by any person
purporting to be an officer of the Company shall be deemed to be the act of the
Company and shall be in all respects binding against the Company; and further
RESOLVED, that the officers of the Company be, and they hereby are,
authorized and empowered on behalf of and in the name of the Company to take or
cause to be taken in the name of the Company all such other and further action,
to make all payments and to execute, acknowledge and deliver any and all
certificates, opinions, documents and other instruments in such form and under
the corporate seal as required, as in the judgment of such officers may be
necessary, proper or convenient in order to carry out the foregoing resolutions,
to consummate the Loan described herein, and to comply with the terms and
provisions of all the documents described above; and further
-1-
RESOLVED, that all actions by any and all officers of the Company taken or
performed up to the date hereof and in respect to the preparation, execution and
delivering of the documents, certificates or other instruments required pursuant
to the provisions of the above-described documents, and the taking prior to the
date hereof of any and all actions otherwise required by the terms and
provisions of said documents or any other documents executed in connection
therewith be, and they are hereby, in all respects approved, ratified and
confirmed; and further
RESOLVED, that any one of the President, the Chairman of the Board of
Directors, Secretary or the Chief Executive Officer of the Company is hereby
authorized to make applications for and effect other loans from time to time on
behalf of the Company from the Lender and for such loans, to make, execute and
deliver promissory notes, drafts, bonds or other written obligations of the
Company in such form, date and maturity and at such rate of interest as such
officer or officers of the Company may determine and in the event the company
adopts a corporate seal, to cause the same to be affixed to any such instruments
whenever necessary or required. It is further resolved that said officers are
hereby authorized in the name of the Company to renew or extend any loan or
loans from time to time and execute and deliver promissory notes, drafts, bonds
or other obligations or extensions to any notes theretofore given; and further
RESOLVED, that the authority hereinabove given to said officers to
negotiate loans in excess of the Loan specifically referenced herein shall
remain irrevocable insofar as the Lender is concerned until the Lender be
notified of the revocation of such authority and shall in writing acknowledge
receipt of such notification.
-2-
FIFTH MODIFICATION OF NOTE AND LIENS
(Real Estate Note)
THE STATE OF TEXAS )
) KNOW ALL PERSONS BY THESE PRESENTS:
COUNTY OF HARRIS )
THIS FIFTH MODIFICATION OF NOTE AND LIENS (herein called "Agreement") is
entered into effective as of April 21st, 1995, by and between BANK ONE, TEXAS,
NA, successor in interest by merger with TEAM BANK (herein called "Lender"), and
RAWSON-KOENIG, INC., a Texas corporation, (herein called "Borrower").
W I T N E S S E T H:
WHEREAS, Borrower made, executed and delivered that certain Promissory Note
(herein called the "Note") dated September 22, 1987, in the original principal
sum of FIVE HUNDRED SEVENTY-FIVE THOUSAND AND NO/100 DOLLARS ($575,000.00)
payable to the order of TEXAS COMMERCE BANK OF FORT WORTH, TEXAS, which is now
known as Texas Commerce Bank National Association ("TCB"), as therein provided,
said Note being secured by a Deed of Trust, Security Agreement and Financing
Statement (the "Tarrant County Deed of Trust") of even date therewith, executed
by Borrower to Gregory D. Stuteville, Trustee for the benefit of TCB, and filed
for record in the Official Public Records of Real Property of Tarrant County,
Texas, under Clerk's File No. 594747 and corrected and re-recorded under Clerk's
File No. 602929, covering the property (the "Tarrant County Property") more
fully described therein; and
WHEREAS, the Note and liens were transferred and assigned from TCB to
Lender by that certain Transfer of Note and Liens dated to be effective January
29, 1990 and filed for record in the Official Public Records of Real Property of
Tarrant County, Texas under Vol. 09943, Page 0973; and
WHEREAS, Borrower made, executed and delivered that certain Modification,
Renewal and Extension of Note and Liens (the "Harris County Modification") dated
May 21, 1991, and filed for record in the Official Public Records of Real
Property of Harris County, Texas, under Clerk's File No. N191391, wherein
Borrower and Lender agreed that the liens encumbering the property (the "Harris
County Property") securing the indebtedness described therein, shall also secure
the Note; and
WHEREAS, the Note and Security Documents (hereinafter defined) were
modified, renewed and extended pursuant to the terms and conditions of a Second
Modification, Renewal and Extension of Note and Liens ("Second Modification")
dated March 24, 1992, and filed for record in the Official Public Records of
Real Property of Tarrant County, Texas under Vol. 10637, Page 1665 and in the
Official Public Records of Real Property of Harris County, Texas, under Clerk's
File No. P001208; and
-1-
WHEREAS, the Note and Security Documents were modified, renewed and
extended pursuant to the terms and conditions of a Third Modification of Note
and Liens ("Third Modification") dated April 30, 1993, and filed for record in
the Official Public Records of Real Property of Tarrant County, Texas; and
WHEREAS, the Note and Security Documents were modified, renewed and
extended pursuant to the terms and conditions of a Fourth Modification of Note
and Liens ("Fourth Modification") dated April 30, 1994, and filed for record in
the Official Public Records of Real Property of Harris County, Texas under
Clerk's File No. P924820, wherein Borrower requested, and Lender agreed, among
other things, to release the Tarrant County Property from the liens securing the
Tarrant County Deed of Trust; and
WHEREAS, Borrower has requested, and Lender has agreed, on the terms and
conditions set forth herein, to modify the terms of the Note.
NOW, THEREFORE, in consideration of the mutual covenants, rights and
obligations contained herein, the benefits to be derived therefrom and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree and contract as follows:
1. Lender and Borrower hereby acknowledge that the outstanding principal
balance of the Note on the effective date hereof is TWO HUNDRED SEVENTY-
NINE THOUSAND SEVEN HUNDRED NINETY FOUR AND 20/100 DOLLARS ($279,794.20).
2. The Borrower hereby promises to pay to the order of the Lender the sum of
TWO HUNDRED SEVENTY-NINE THOUSAND SEVEN HUNDRED NINETY FOUR AND 20/100
DOLLARS ($279,794.20) (representing the balance due under the Note) at the
offices of the Lender in Houston, Harris County, Texas, together with
interest thereon from and after the date hereof until maturity on the
unpaid principal balance outstanding from time to time thereon at a per
annum rate (determined on a daily basis and for the actual number of days
elapsed based on either a 365 or 366 day year, as the case may be) equal
to the lesser of (i) the Base Rate in effect from day-to-day or (ii) the
Maximum Rate. If at any time and from time to time the rate of interest
calculated pursuant to item (i) above would exceed the Maximum Rate,
thereby causing the interest payable hereon to be limited to the Maximum
Rate, then any subsequent reduction in the rate specified in item (i)
above shall not reduce the rate of interest hereon below the Maximum Rate
until the total amount of interest accrued hereon from and after the date
of the first advance hereunder equals the amount of interest which would
have accrued hereon if the rate specified in item (i)above and had at all
times been in effect.
The term "Base Rate" shall mean, at any time, the rate of interest per
annum established from time to time by Lender. Without notice to the
Borrower or any other person, the Base Rate shall change automatically
from time to time as and in the amount by which such Base Rate shall
-2-
fluctuate, with each such change to be effective as of the date of each
change in such Base Rate. The Base Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any
customer. The Lender may make commercial loans or other loans at rates of
interest at, above or below the Base Rate.
3. This Agreement is entered into in modification (and not in extinguishment,
substitution, novation or discharge) of the unpaid principal balance of
the Note. All liens, security interests and obligations securing and
guaranteeing payment of the Note, including without limitation the Harris
County Modification, the Second Modification, the Third Modification and
the Fourth Modification (collectively the "Security Documents") are hereby
ratified, confirmed, renewed, extended and brought forward as security for
the payment hereunder.
4. The Security Documents are hereby amended to provide that the Notes
described therein shall mean (i) the Note, as modified hereby, and (ii)
the Revolving Note (with an extended maturity of April 30, 1997), as
modified, renewed and extended by the terms of a master revolving credit
note of even date herewith and the Loan Agreement.
5. All other terms, conditions and provisions contained in the Note, except
as otherwise specifically set forth herein, shall continue and remain in
full force and effect.
6. All terms, conditions and provisions contained in the Security Documents,
except as modified, restated (where applicable), renewed and extended by
the documents referred to herein, shall continue and remain in full force
and effect.
7. This Agreement has been executed and delivered pursuant to, and is subject
to certain terms and conditions set forth in, that certain Amended and
Restated Letter Loan Agreement of even date herewith (the "Loan
Agreement"), and is the "Real Estate Note" referred to therein. The
Lender shall be entitled to the benefits provided in the Loan Agreement.
Reference is made to the Loan Agreement for the statement of any
obligation of the Lender to advance funds hereunder and the Events of
Default upon which the maturity of the Note may be accelerated.
8. As additional consideration for the execution, delivery and performance of
this Agreement by the parties hereto and to induce Lender to enter into
this Agreement, Borrower warrants and represents to Lender that to its
best knowledge and belief no facts, events, statuses or conditions exist
or have existed which, either now or with the passage of time or giving of
notice, or both, constitute or will constitute a basis for any claim or
cause of action against Lender or any defense to (a) the payment of any
obligations and indebtedness under the Note and/or the Security Documents
or (b) the performance of any of its obligations in respect to the Note
and/or Security Documents, and in the event any such facts, events,
statuses or conditions exist or have existed, Borrower unconditionally and
irrevocably waives any and all claims and causes of action against Lender
and any defenses to its payment and performance obligations in respect to
the Note and the Security Documents.
-3-
9. Borrower shall have taken reasonable steps necessary to determine and have
determined that no hazardous substances, solid wastes, or other substances
known or suspected to pose a threat to health or the environment
("Hazard(s)") have been disposed of or otherwise released on or to the
Property or exist on or within any portion of the Property. Borrower is
not aware of any prior uses of the Property which violate any laws
pertaining to health or the environment ("Applicable Environmental Laws"),
including, without limitation, the Comprehensive Environment Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA"), the
Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), the
Texas Water Code and the Texas Solid Waste Disposal Act. The use which
Borrower makes and intends to make of the Property will not result in the
disposal or release of any hazardous substance, solid waste or Hazard on,
in or to the Property. The terms "hazardous substance" and "release"
shall each have the meanings specified in CERCLA, and the terms "solid
waste" and "disposal" (or "disposed") shall each have the meanings
specified in RCRA; provided, however, that in the event either that
CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the effective date
of such amendment; and provided further that, to the extent that the laws
of the State of Texas establish a meaning for "hazardous substance",
"release", "solid waste", or "disposal" which is broader than that
specified in either CERCLA or RCRA, such broader definition shall apply.
10. Borrower shall give notice to Lender immediately upon (i) Borrower's
receipt of any notice from any governmental authority of a violation of
any Applicable Environmental Laws and (ii) acquiring knowledge of the
presence of any hazardous substances, solid wastes or Hazards on the
Property in a condition that is resulting or could reasonably be expected
to result in any adverse environmental impact and impending remediation
cost of $50,000 or more, with a full description thereof; promptly comply
with all Applicable Environmental Laws requiring the notice, removal,
treatment, or disposal of such hazardous substances; and provide Lender,
within thirty (30) days after demand by Lender, with financial assurance
evidencing to Lender's satisfaction that sufficient funds are available to
pay the cost of removing, treating and disposing of such hazardous
substances, solid wastes or Hazards and discharging any liens or
assessments that may be established on the Property or the improvements
thereon as a result thereof.
11. This Agreement shall be governed by and construed in accordance with the
laws of the State of Texas. If any provision of this Agreement or the
application thereof to any person or circumstances shall, for any reason
and to any extent, be invalid or unenforceable, neither the remainder of
this Agreement, nor the application of such provision to any other persons
or circumstances shall be affected thereby, but rather same shall be
enforced to the greatest extent permitted by law.
-4-
12. This Agreement, and all the terms, provisions and conditions hereof, shall
be binding upon each party hereto and such party's heirs, legal
representatives, successors and assigns.
13. This Agreement may be executed in multiple originals. This Agreement may
also be executed in multiple counterparts, and all so executed shall
constitute one agreement, binding on the parties hereto, notwithstanding
that all parties are not signatories to the original or the same
counterpart.
14. This Agreement represents the entire understanding and agreement between
the parties hereto with respect to the subject matter hereof, supersedes
all prior negotiations, oral representations and writings between the
parties, and cannot be amended or supplemented orally, but only by an
agreement in writing signed by Lender. The Borrower certifies that it is
relying on no representation, warranty, covenant or agreement except for
those set forth herein.
15. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
EXECUTED by each party on the date of its respective acknowledgment, but to
be effective for all purposes as of the date first above written.
"BORROWER"
RAWSON-KOENIG, INC.
By /S/ Thomas C. Rawson
------------------------------
Thomas C. Rawson,
Chairman of the Board
"LENDER"
BANK ONE, TEXAS, NA
By /S/ Barry A. Kelly
------------------------------
Barry A. Kelly, Vice-President
-5-
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me this 21st day of April, 1995, by
Thomas C. Rawson, Chairman of the Board of Rawson-Koenig, Inc., a Texas
corporation, on behalf of said corporation.
/S/ Leslie T. Horvath
------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me this 21st day of April, 1995, by
Barry A. Kelly, Vice-President of Bank One, Texas, NA, a national banking
association, on behalf of said association.
/S/ Leslie T. Horvath
------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
-6-
SUPPLEMENTAL DEED OF TRUST
THE STATE OF TEXAS )
) KNOW ALL PERSONS BY THESE PRESENTS:
COUNTY OF HARRIS )
THIS SUPPLEMENTAL DEED OF TRUST is entered into effective as of April 21,
1995, by and between BANK ONE TEXAS, NA, a national banking association (herein
called "Lender"), and RAWSON-KOENIG, INC., a Texas corporation (herein called
"Borrower").
RECITALS:
1. Borrower made, executed and delivered that certain Promissory Note
(herein called the "Original Note") dated January 29, 1988, in the original
principal sum of Two Million and No/100 Dollars ($2,000,000.00), payable to the
order of Keystone International, Inc., a Texas corporation ("Keystone"), as
therein provided, said Original Note being secured in part by a Deed of Trust
(the "Deed of Trust") of even date therewith, executed by Borrower to W. Wayne
Patterson, as Trustee ("Trustee") for the benefit of Keystone and filed for
record in the Official Public Records of Real Property of Harris County, Texas
under Clerk's File No. L524904, covering the property (the "Property"), more
fully described on Exhibit "A" annexed hereto. The Deed of Trust, and any other
instruments securing or guaranteeing the Original Note are herein called the
"Security Documents".
2. The Original Note and liens securing same were transferred and
assigned from Keystone to Lender by that certain Transfer of Note and Liens
dated May 20, 1991, which was filed for record in the Official Public Records of
Real Property of Harris County, Texas, under Clerk's File No. N191393 and,
thereafter, modified by the terms of a Modification, Renewal and Extension of
Note and Liens dated May 21, 1991, which was filed for record in the Official
Public Records of Real Property of Harris County, Texas, under Clerk's File No.
N191391, pursuant to the terms of a Second Amendment to Letter Loan Agreement
dated May 21, 1991, which has been amended by a Third Amendment to Letter Loan
Agreement dated May 24, 1992, Fourth Amendment to Letter Loan Agreement dated
April 30, 1993, Fifth Amendment to Letter Loan Agreement dated May 21, 1993 and
Sixth Amendment to Letter Loan Agreement dated April 30, 1994.
3. Borrower has this date entered into an Amended and Restated Letter
Loan Agreement with Lender, whereby Lender has agreed, subject to the terms and
conditions thereof, to provide the Borrower with an additional loan facility in
the amount of One Million and No/100 Dollars ($1,000,000.00) (the "Equipment
Loan"), to be evidenced by an Advancing Term Promissory Note of even date
herewith, provided, among other things, Borrower supplements the Deed of Trust
to include the Equipment Loan as being secured by the liens granted in the Deed
of Trust.
-1-
4. Borrower has agreed to supplement the Deed of Trust as provided
hereinbelow.
A G R E E M E N T:
1. NOW, THEREFORE, Borrower, in consideration of Ten And No/100 Dollars
($10.00) and other good and valuable consideration in hand paid, the receipt and
sufficiency of which are hereby acknowledged, has GRANTED, BARGAINED, SOLD and
CONVEYED and by these presents does GRANT, BARGAIN, SELL and CONVEY unto
Trustee, the Property. TO HAVE AND TO HOLD THE PROPERTY, together with all and
singular the rights, privileges, hereditaments and appurtenances thereto and in
anywise incident, appertaining or belonging unto Trustee, and his successors or
substitutes forever; and Borrower hereby binds itself, its successors and
assigns, to warrant and forever defend title to the Property unto Trustee, his
successors, substitutes and assigns, against every person whomsoever lawfully
claiming or to claim the same or any part thereof.
2. This conveyance is made in trust to secure and enforce the payment of
the Equipment Loan, and the Security Documents shall be from and after this date
deemed modified as necessary to secure the Equipment Loan. Henceforth, the term
"said indebtedness" as defined in the Deed of Trust shall include the Equipment
Loan, as well as all renewals, extensions, modifications and rearrangements
thereof.
3. As supplemented hereby, the Borrower hereby reaffirms all covenants,
representations and warranties made in the Deed of Trust and Borrower hereby
agrees that all of the terms and conditions thereof are incorporated herein by
this reference.
4. All terms, conditions and provisions contained in the Security
Documents, except as modified, restated (where applicable), or amended hereby,
shall continue and remain in full force and effect.
5. The Property shall be and remain in all respects subject to the lien,
charge or encumbrance of the Security Documents, as modified, and nothing herein
contained and nothing done pursuant hereto shall affect or be construed to
affect the lien, charge or encumbrance of the Security Documents, as modified,
or the priority thereof over any other liens, charges or encumbrances or to
release or affect the liability of any party or parties whomsoever who may now
or hereafter be liable under or on account of the Security Documents, as
amended, nor shall anything herein contained or done in pursuance hereof affect
or be construed to affect any other security for the said indebtedness, if any,
held by the Lender.
6. No renewal or extension of the time of payment of any part or all of
the Equipment Loan, no releases or surrender of any security for the Equipment
Loan, no release of any person primarily or secondarily liable on the Equipment
Loan (including any maker, endorser or guarantor), no delay in enforcement of
payment of the Equipment Loan, and no delay or omission in exercising any right
or power with respect to the Equipment Loan, shall in any way or manner impair
or affect the rights of the Lender hereunder.
-2-
7. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBJECT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
EXECUTED by each part on the date of its respective acknowledgment, but to
be effective for all purposes as of the date first above written.
"BORROWER"
RAWSON-KOENIG, INC.
By:/S/ Thomas C. Rawson
------------------------------
Thomas C. Rawson, Chairman
of the Board of Directors
"LENDER"
BANK ONE, TEXAS, NA
By:/S/ Barry A. Kelly
------------------------------
Barry A. Kelly, Vice President
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on this April 21, 1995, by
Thomas C. Rawson, Chairman of the Board of Directors of Rawson-Koenig, Inc., a
Texas corporation, on behalf of said corporation.
/S/ Leslie T. Horvath
---------------------------------
Notary Public, State of Texas
-3-
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on this April 21, 1995, by Barry
A. Kelly, Vice President of Bank One, Texas, NA, a national banking association,
on behalf of said association.
/S/ Leslie T. Horvath
----------------------------------
Notary Public, State of Texas
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AMENDED AND RESTATED
SECURITY AGREEMENT
(Accounts, Inventory, Equipment, Fixtures,
General Intangibles, Other)
April 21, 1995
RAWSON-KOENIG, INC., a Texas corporation with its office and its address
for notice being 2301 Central Parkway, Houston, Harris County, Texas 77092
(hereinafter called "Debtor"), for value received, the receipt and sufficiency
of which are hereby acknowledged, hereby grants to BANK ONE, TEXAS, NA, a
national banking association (hereinafter called "Secured Party"), the security
interest hereinafter set forth and agrees with Secured Party as follows:
SECTION 1. SECURITY INTEREST.
1.1 Collateral. Debtor hereby grants to Secured Party a security interest
in and agrees that Secured Party has and shall continue to have a security
interest in the following property, including without limitation the items
described on Exhibits, if any, attached hereto and made a part hereof, to-wit:
ACCOUNTS:
All accounts now owned or existing as well as any and all that may
hereafter arise or be acquired by Debtor, and all the proceeds and
products thereof, including without limitation, all notes, drafts,
acceptances, instruments and chattel paper arising therefrom, and all
returned or repossessed goods arising from or relating to any such
accounts, or other proceeds of any sale or other disposition of
inventory;
INVENTORY:
All of Debtor's inventory, including all goods, merchandise, raw
materials, goods in process, finished goods and other tangible
personal property now owned or hereafter acquired and held for sale or
lease or furnished or to be furnished under contracts for service or
used or consumed in Debtor's business and all additions and accessions
thereto and contracts with respect thereto and all documents of title
evidencing or representing any part thereof, and all products and
proceeds thereof;
FIXTURES:
All of Debtor's fixtures and appurtenances thereto, and such other
goods, chattels, fixtures, equipment and personal property affixed or
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in any manner attached to the real estate and or building(s)
or structure(s) described in Exhibit "A" attached hereto, including
all additions and accessions thereto and replacements thereof and
articles in substitution therefor, howsoever attached or affixed;
EQUIPMENT:
All equipment of every nature and description whatsoever now owned or
hereafter acquired by Debtor including all accessions, appurtenances
and additions thereto and substitutions therefor, wheresoever located,
including all tools, parts and accessories used in connection
therewith;
GENERAL INTANGIBLES:
All personal property (including things in action) other than goods,
accounts, chattel paper, documents, instruments and money;
CHATTEL PAPER:
All of Debtor's interest under lease agreements and other instruments
or documents, whether now existing or owned by Debtor or hereafter
arising or acquired by Debtor, evidencing both a debt and security
interest in or lease of specific goods;
INSTRUMENTS AND DOCUMENTS:
All of Debtor's now owned or existing as well as hereafter acquired or
arising instruments, documents and money;
and accessions, additions and attachments thereto and the proceeds and products
thereof, including without limitation, all cash, general intangibles, accounts,
inventory, equipment, fixtures, farm products, notes, drafts, acceptances,
instruments and chattel paper or other property, benefits or rights arising
therefrom, and in and to all returned or repossessed goods arising from or
relating to any of the collateral described herein or other proceeds of any sale
or other disposition of such collateral (all of the foregoing hereinafter
sometimes called the "Collateral").
1.2 Obligations. The security interest granted hereby is to secure the
payment of (i) a Master Revolving Credit Note executed by Debtor in the
principal amount of $2,200,000.00 and made payable to the order of Secured
Party, and any and all extensions, renewals and rearrangements thereof, (ii) a
Term Promissory Note executed by Debtor in the principal amount of $488,604.20
as of January 29, 1990 and made payable to the order of Texas Commerce Bank-Fort
Worth, and subsequently assigned to Secured Party, and any and all extensions,
renewals and rearrangements thereof, (iii) a Term Promissory Note executed by
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Debtor in the principal amount of $1,879,214.00 and made payable to the order of
Keystone International, Inc., and subsequently assigned to Secured Party, and
any and all extensions, renewals and rearrangements thereof, and (iv) an
Advancing Term Promissory Note duly executed by Debtor in the principal amount
of $1,000,000.00 and made payable to the order of Secured Party, and any and all
extensions, renewals and rearrangements thereof, and (vi) any and all other
indebtedness and liabilities whatsoever of Debtor to Secured Party whether
direct or indirect, absolute or contingent, due or to become due and whether now
existing or hereafter arising and howsoever evidenced or acquired, whether joint
or several (all of which are hereinafter sometimes called the "Obligations").
Debtor acknowledges that the security interest hereby granted shall secure all
future advances as well as any other obligations and liabilities of Debtor to
Secured Party whether now in existence or hereafter arising.
SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR.
2.1 Ownership. Except for the security interest granted hereby and any
security interests approved by Secured Party, the Debtor is, and as to the
Collateral acquired after the date hereof which is included within the security
interest specified in Section 1 hereof, Debtor will be, the owner of all such
Collateral free from all adverse claims, security interests and encumbrances.
2.2 Liens. There is no financing statement now on file in any public
office covering any part of the Collateral, and so long as any amount remains
unpaid on any Obligations of the Debtor to Secured Party, Debtor will not
execute and there will not be on file in any public office any such enforceable
financing statement or statements except the financing statement filed or to be
filed in respect to the security interest hereby granted.
2.3 Financial Information. Subject to any limitation stated therein or in
connection therewith, all information furnished to Secured Party concerning the
Collateral and proceeds thereof, or otherwise for the purpose of obtaining
credit or an extension of credit, is or will be at the time the same is
furnished, accurate and correct in all material respects.
2.4 Business Use. The Collateral will be used by the Debtor primarily for
business use.
2.5 Removal. Except as herein provided, Debtor will not remove the
Collateral from the county or counties designated at the beginning of this
Agreement without the written consent of Secured Party. The address of Debtor
designated at the beginning of this Agreement is Debtor's place of business if
Debtor has no place of business. Debtor agrees to notify Secured Party promptly
of any change in such address.
SECTION 3. PROVISIONS REGARDING ACCOUNTS.
The following provisions shall apply to all accounts included within the
Collateral:
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3.1 Eligible Accounts. The term "account", as used in this Agreement
shall have the same meaning as set forth in the Uniform Commercial Code of Texas
(the "UCC") in effect as of the date of execution hereof, and as set forth in
any amendment to the UCC to become effective after the date of execution hereof,
and also shall include all present and future notes, instruments, documents,
general intangibles, drafts, acceptances and chattel paper of Debtor, and the
proceeds thereof. As of the time any account becomes subject to such security
interest, Debtor shall be deemed to have warranted as to each and all of such
accounts (i) that each account and all papers and documents relating thereto are
genuine and in all respects what they purport to be, (ii) that each account is
valid and subsisting and arises out of a bona fide sale of goods sold and
delivered to, or out of and for services therefore actually rendered by Debtor
to, the account debtor named in the account, (iii) that the amount of the
account represented as owing is the correct account actually and unconditionally
owing except for normal cash discounts and is not subject to any set-offs,
credits, deductions or countercharges, (iv) that Debtor is the owner thereof
free and clear of all liens, encumbrances and security interest of any and every
nature whatsoever.
3.2 Collection. Secured Party shall have the right in its own name or in
the name of Debtor, after an Event of Default by Debtor and upon five (5) days'
advance notice to Debtor, to demand, collect, receive, receipt for, sue for,
compound and give acquittal for, any and all amounts due or to become due on the
accounts and to endorse the name of Debtor on all commercial paper given in
payment or part payment thereof, and in its discretion to file any claim or take
any other action or proceeding which Secured Party may deem necessary or
appropriate to protect and preserve and realize upon the security interest of
Secured Party in the Collateral. In order to assure collection of accounts in
which Secured Party has a security interest hereunder, Secured Party may notify
the post office authorities to change the address for delivery of mail addressed
to Debtor to such address as Secured Party may designate, and to open and
dispose of such mail and receive the collections of accounts included herewith.
3.3 Further Action. Debtor will from time to time execute such further
instruments and do such further acts and things as Secured Party may reasonably
require, by way of further assurance to Secured Party, including without
limitation, an assignment or other form of identification in the form required
by Secured Party of all accounts and/or chattel paper, together with such other
evidence of the existence and identity of such accounts or chattel paper as
Secured Party may reasonably require.
SECTION 4. PROVISIONS REGARDING INVENTORY.
The following provisions shall apply to all inventory included within the
Collateral:
4.1 Location. Debtor will promptly notify Secured Party in writing of any
addition to, change in or discontinuance of its places of business, the places
at which inventory that is included in the Borrower's Loan Limit (as defined in
the Loan Agreement described in Section 7.5 hereof) is located as shown herein,
the location of its chief executive office and the location of the office where
it keeps its records as set forth herein. All Collateral included in said
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Borrower's Loan Limit will be located at Debtor's places of business existing
on the date hereof as modified by any notice(s) given pursuant hereto.
4.2 Use of Inventory. Until an Event of Default, Debtor may use the
inventory in any lawful manner not inconsistent with this Agreement or with the
terms or conditions of any policy of insurance thereon and may also sell that
part of the Collateral consisting of inventory provided that all of such sales
are in the ordinary course of business. A sale in the ordinary course of
business does not include a transfer in partial or total satisfaction of a debt.
Until an Event of Default, Debtor may also use and consume any raw materials or
supplies, the use and consumption of which are necessary in order to carry on
Debtor's business.
4.3 Proceeds. All accounts which are proceeds of the inventory collateral
covered hereby shall be subject to all of the terms and provisions hereof
pertaining to accounts.
SECTION 5. GENERAL COVENANTS.
5.1 Financing Statements. Debtor agrees to execute and deliver such
financing statement or statements, or amendments thereof or supplements thereto,
or other instruments as Secured Party may from time to time require in order to
comply with the UCC (or other applicable State law of the jurisdiction where any
of the Collateral is located) and to preserve and protect the security interest
hereby granted.
5.2 Performance by Secured Party. Secured Party may, at its option, after
an Event of Default, but without obligation to Debtor, discharge taxes, liens or
security interests or other encumbrances at any time levied or placed upon the
Collateral, and may place and pay for insurance thereon, or pay for the repair,
improvement, maintenance and preservation of the Collateral and pay any filing
or recording fees necessary to preserve and protect the security interest hereby
granted. Debtor agrees to reimburse Secured Party on demand for any payment
made or any expense incurred by Secured Party pursuant to the foregoing
authorization, and such amount shall constitute additional obligations of Debtor
which shall be secured by and entitled to the benefits of this Agreement.
Debtor agrees to pay interest on such amounts at a rate per annum at all times
equal to the highest lawful contract rate permitted by applicable usury laws
from the date such are incurred by Secured Party until paid by Debtor.
5.3 Collection of Accounts and Chattel Paper. Secured Party shall have
the right at any time, in its own name or in the name of Debtor, after an Event
of Default by Debtor and upon five (5) days' notice to Debtor, to notify any and
all account debtors or lessees under chattel paper to make payment thereof
directly to Secured Party and to demand, collect, receive, receipt for, sue for,
compound for and give acquittal for, any and all amounts due or to become due on
the accounts and chattel paper, and to endorse the name of Debtor on all
commercial paper or chattel paper, as the case may be, given in payment or part
payment thereof, and in its discretion to file any claim or take any other
action or proceeding which Secured Party may deem necessary or appropriate to
protect and preserve and realize upon the security interest of Secured Party in
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the Collateral; but to the extent Secured Party does not so elect, Debtor shall
continue to collect the accounts and rents under chattel paper. Except as
otherwise permitted by the provision to this sentence, all proceeds of
collection of accounts and chattel paper received by Debtor shall forthwith be
accounted for and transmitted to Secured Party in the form as received by Debtor
and shall not be commingled with any funds of Debtor; provided, however, that
prior to an Event of Default by Debtor in the payment of any Obligations to
Secured Party or until the privilege given to Debtor by this provision shall be
revoked by Secured Party in writing, Debtor need transmit to Secured Party only
the proceeds of accounts included in the identification or assignment made
pursuant to Section 3.3.
5.4 Inspection of Collateral. Debtor shall at all reasonable times allow
Secured Party by or through any of its officers, agents, attorneys or
accountants, to examine or inspect the Collateral wherever located and to
examine, inspect and make extracts from Debtor's books and records. Debtor
shall do, make execute and deliver all such additional and further acts, things,
deeds, insurances, instruments as Secured Party may require, to more completely
vest in and assure to Secured Party its rights hereunder and in or to the
Collateral.
5.5 Insurance. Debtor shall have and maintain insurance at all times with
respect to all tangible Collateral covered hereby insuring against risks of fire
(including so-called extended coverage), theft and other risks as Secured Party
may reasonably require, containing such terms, in such form and amounts and
written by such companies as may be reasonably satisfactory to Secured Party,
all of such insurance to contain loss payable clauses in favor of Secured Party
as its interest may appear. All policies of insurance shall provide for ten
(10) days' written minimum cancellation notice to Secured Party and at request
of Secured Party shall be delivered to and held by it. Secured Party is hereby
authorized to act as attorney for Debtor in obtaining, adjusting, settling and
cancelling such insurance and endorsing any drafts or instruments. Secured
Party shall be authorized to apply the proceeds from any insurance to the
Obligations secured hereby whether or not such Obligations are then due and
payable.
5.6 Additional Collateral. As additional security for payment of the
Obligations, Debtor hereby grants to Secured Party a security interest, and a
contractual pledge and assignment of, in and to any and all money, property,
accounts, securities, documents, chattel paper, claims, demands, instruments,
items or deposits of Debtor, or to which Debtor is a party, now held or
hereafter coming within Secured Party's custody or control, including without
limitation, all certificates of deposit and other depository accounts, whether
such have matured or the exercise of Secured Party's rights results in loss of
interest or other penalty on such deposits. Without prior notice to or demand
upon Debtor, Secured Party may exercise its rights granted above, as well as
other rights and remedies at law and equity (all of which are cumulative), at
any time when an Event of Default has occurred.
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SECTION 6. DEFAULT.
6.1 Event of Default. The occurrence of any one or more of the following
events or conditions shall constitute an event of default (herein called an
"Event of Default"): (a) an Event of Default under the terms of the Loan
Agreement; (b) the title of Debtor to a substantial part of the Collateral shall
become the subject of litigation which would or might, in Secured Party's
opinion, upon final determination result in substantial impairment or loss of
the security provided by this Agreement and upon notice by Secured Party to
Debtor such litigation is not dismissed within sixty (60) days of such notice;
(c) any sale, lease, encumbrance, transfer or other disposition of the
Collateral without Secured Party's consent; or (d) the Collateral becomes, in
the reasonable judgment of Secured Party, unsatisfactory or insufficient in
character or value.
6.2 Maturity of Obligation. Upon the occurrence of an Event of Default,
and at any time thereafter, Secured Party, may, at its option, without demand,
notice of intention to accelerate, notice of acceleration, notice of nonpayment,
presentment, protest, notice of dishonor, or any other notice whatsoever, to the
Debtor, declare all Obligations secured hereby immediately due and payable and
Secured Party shall thereupon have the rights and remedies of a secured party
under the UCC and as otherwise granted herein or under any applicable law or in
any other agreement executed by Debtor (all of which rights and remedies shall
be cumulative), including, without limitation, the right to sell, lease or
otherwise dispose of any or all of the Collateral and to apply the proceeds
thereof toward payment of any costs and expenses and attorney's fees and legal
expenses thereby incurred by the Secured Party and toward payment of the
Obligations in such order or manner as the Secured Party may elect. Secured
Party shall have the right to take immediate possession of the Collateral, with
or without process of law, and for that purpose Secured Party may enter upon any
premises on which the Collateral or any part thereof may be situated and remove
the same therefrom. Secured Party may require Debtor to assemble the Collateral
and make it available to Secured Party at a place to be designated by the
Secured Party which is reasonably convenient to both parties. Unless the
Collateral is perishable or threatens to decline speedily in value or is of a
type customarily sold on a recognized market, Secured Party will send Debtor
reasonable notice of the time and place of any public sale thereof or of the
time after which any private sale or other disposition thereof is to be made.
The requirement of sending a reasonable notice shall be met if such notice is
mailed, postage prepaid, to Debtor at the address designated at the beginning of
this Agreement at least ten (10) days before the time of the sale or
disposition. Expenses of sale, legal expenses, plus interest thereon at a rate
per annum at all times equal to the highest lawful contract rate permitted by
applicable usury laws, shall constitute additional Obligations of Debtor which
shall be due on demand and which shall be secured by and entitled to the
benefits of this Agreement. If the proceeds of any sale or other lawful
disposition by Secured Party of the Collateral following its retaking are
insufficient to pay the expenses of retaking, repairing, holding, preparing the
Collateral for sale, selling it and the like, to satisfy the Obligations of
Debtor to Secured Party, then Debtor agrees to pay any deficiency, but Debtor
shall be entitled to any surplus if one results after lawful application of all
such proceeds.
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6.3 Remedy. Secured Party may remedy any Event of Default and may waive
any default without waiving the Event of Default remedied or without waiving any
other prior or subsequent Event of Default.
6.4 Limitation of Charges. It is the intention of the parties hereto to
comply with applicable laws; accordingly, it is agreed that notwithstanding any
provision to the contrary in this Agreement, or in any of the documents
evidencing the Obligations or otherwise relating thereto, no such provision
shall require the payment or permit the collection of interest in excess of the
maximum permitted by such laws. If any excess of interest in such respect is
provided for, or shall be adjudicated to be so provided for, in this Security
Agreement, or in any of the documents evidencing the Obligations or otherwise
relating thereto, then in such event (a) the provisions of this Section shall
govern and control, (b) neither Debtor hereof nor its successors or assigns or
any other party liable for the payment thereof, shall be obligated to pay the
amount of such interest to the extent that it is in excess of the maximum amount
permitted by such laws, (c) any such excess which may have been collected shall
be, at the option of the holder of the instrument evidencing the Obligations,
either applied as a credit against the then unpaid principal amount thereof or
refunded to the maker thereof and (d) the effective rate of interest shall be
automatically subject to reduction to the maximum lawful rate allowed to be
lawfully contracted for by Debtor under applicable usury laws as now or
hereafter construed by the courts having jurisdiction. It is further agreed
that without limitation of the foregoing, all calculations of the rate of
interest contracted for, charged or received under the Note or under such other
documents which are made for the purpose of determining whether such rate
exceeds the maximum lawful rate of interest, shall be made, to the extent
permitted by applicable laws, by amortizing, prorating, allocating and spreading
in equal parts during the period of full stated term of the Obligations, all
interest at any time contracted for, charged or received from Debtor or
otherwise by the holder of the Obligations in connection with such Obligations.
6.5 Cumulative Remedies. The remedies of Secured Party hereunder are
cumulative, and the exercise of any one or more of the remedies provided herein
shall not be construed as a waiver of any of the other remedies of Secured
Party.
SECTION 7. GENERAL.
7.1 Partial Invalidity and Construction. Any provision hereon found to be
invalid under the law of the State of Texas, or any other State having
jurisdiction or other applicable law, shall be invalid only with respect to the
offending provision. All words used herein shall be construed to be of such
gender or number as the circumstances require. If this Agreement is executed by
more than one Debtor, the obligations of all such Debtors shall be joint and
several. This Agreement shall be binding upon the heirs, personal
representatives, successors or assigns of the parties hereto, but shall inure to
the benefit of successor or assigns of Secured Party only. The law of the State
of Texas shall apply to this Agreement and its construction and interpretation.
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7.2 Reproduction as Financing Statement. Any carbon, photographic or
other reproduction of any financing statement signed by Debtor is sufficient as
a financing statement for all purposes, including without limitation, filing in
any state as may be permitted by the provisions of the Uniform Commercial Code
of such state.
7.3 Prior Agreements. This Agreement and the security interest herein
granted are in addition to, and not in substitution, novation or discharge of,
any and all prior or contemporaneous security agreements and security interests
in favor of Secured Party or assigned to Secured Party by others. All rights,
powers and remedies of Secured Party in all such security agreements are
cumulative, but in the event of actual conflict in terms and conditions, the
terms and conditions of the latest security agreement shall govern and control.
7.4 Continuing Effect. The security interest hereby granted and all the
terms and provisions hereof shall be deemed a continuing security agreement and
shall continue in full force and effect, and all the terms and provisions hereof
shall remain effective as between the parties, until first to occur of the
following: (i) the expiration of four (4) years from the date of payment of
Debtor's last Obligations to Secured Party; or (ii) repayment by Debtor of all
Obligations secured hereby and the giving by Debtor of ten (10) days' written
notice of revocation of the terms and provisions hereof.
7.5 Loan Agreement. This Agreement is being executed in connection with
that certain Amended and Restated Letter Loan Agreement (the "Loan Agreement")
by and between Debtor and Secured Party of even date herewith, reference to
which is here made for all purposes.
7.6 Amendment and Restatement. This Agreement is given in amendment and
restatement of that certain Amended and Restated Security Agreement dated April
30, 1994, executed by and between Debtor and Secured Party. All security
interests securing the Obligations are hereby ratified, confirmed, renewed,
extended and brought forward and said security interests shall not in any manner
be waived, the purpose of this amendment and restatement being simply to carry
forward all security interests securing the Obligations, which security
interests are acknowledged by Debtor to be valid and subsisting.
7.7 No Oral Agreements. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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SIGNED in multiple counterparts and delivered on the day and year first
above written.
Debtor:
RAWSON-KOENIG, INC.
By /S/ Thomas C. Rawson
--------------------
Thomas C. Rawson,
Chairman of the Board
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FIRST AMENDMENT TO AMENDED AND
RESTATED LETTER LOAN AGREEMENT,
PROMISSORY NOTE (ADVANCING TERM) AND
AMENDED AND RESTATED SECURITY AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED LETTER LOAN AGREEMENT,
PROMISSORY NOTE (ADVANCING TERM) AND AMENDED AND RESTATED SECURITY AGREEMENT
("Amendment") is made and entered into effective the 21st day of September,
1995, by and between RAWSON-KOENIG, INC., a Texas corporation (herein called
"Borrower"), and BANK ONE, TEXAS, NA, with offices in Houston, Texas (herein
called "Lender").
R E C I T A L S:
WHEREAS, Borrower and Lender entered into, among other agreements, (i) an
Amended and Restated Letter Loan Agreement dated April 21, 1995 (the "Loan
Agreement"; the terms defined therein being used herein as therein defined
unless otherwise defined herein), (ii) a Promissory Note (Advancing Term) of
even date with the Loan Agreement in the principal sum of $1,000,000.00
("Equipment Note"), and (iii) an Amended and Restated Security Agreement of even
date with the Loan Agreement (the "Security Agreement"); and
WHEREAS, Borrower and Lender desire to (i) increase the principal sum of
the Equipment Note from $1,000,000.00 to $1,500,000.00, (ii) extend the period
under which Lender is obligated to make advances under the Equipment Note from
April 30, 1996 to August 31, 1996, (iii) extend the maturity date of the
Equipment Note from April 30, 2001 to August 31, 2001, and (iv) amend certain
terms and provisions of the Loan Agreement.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the mutual promises herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, Borrower and Lender hereby agree to amend the Loan Agreement,
the Equipment Note and the Security Agreement as hereinafter set forth.
1. Amendments to Loan Agreement. The Loan Agreement is, effective the
date hereof, and subject to the satisfaction of the conditions precedent set
forth in Section 4 hereof, hereby amended as follows:
(a) The introductory paragraph of the Loan Agreement is hereby
amended by deleting the reference to "$5,567,818.20" and substituting
therefor "$6,067,818.20".
(b) Paragraph 1 of the Loan Agreement is hereby amended by deleting
the reference to "$5,567,818.20" and substituting therefor "$6,067,818.20",
and by deleting the reference to "$1,000,000.00", as set forth in item (iv)
therein, and substituting therefor "$1,500,000.00".
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(c) Subparagraph 2(c) of the Loan Agreement is hereby amended by
deleting the reference to "$1,000,000.00" and substituting therefor
"$1,500,000.00", and by deleting the reference to "April 30, 1996" and
substituting therefor "August 31, 1996".
2. Amendments to Equipment Note. The Equipment Note is, effective the
date hereof, and subject to the satisfaction of the conditions precedent set
forth in Section 4 hereof, hereby amended as follows:
(a) The first grammatical paragraph on page two of the Equipment Note
dated April 21, 1995 is, effective the date hereof, amended by deleting the
reference to "April 30, 1996" and substituting "August 31, 1996" therefor,
and by deleting the reference to "April 30, 2001" and substituting
"August 31, 2001" therefor.
(b) Upon the effective date hereof, Lender shall be authorized to
endorse on the Equipment Note the following legend or a legend of similar
effect:
"The Advancing Termination Date set forth in this Note has been
extended until August 31, 1996, and the final maturity set forth
in this Note has been extended until August 31, 2001, pursuant
to a First Amendment to Amended and Restated Letter Loan Agreement,
Promissory Note (Advancing Term) and Amended and Restated Security
Agreement, dated as of September 21st, 1995 amending, among other
things, the Loan Agreement referred to in this Note."
3. Amendment to Security Agreement. The Security Agreement is, effective
the date hereof, and subject to the satisfaction of the conditions precedent set
forth in Section 4 hereof, hereby amended as follows:
(a) Section 1.2 of the Security Agreement is hereby amended by
deleting the reference to "$1,000,000.00", as set forth in item (iv)
therein, and substituting therefor "$1,500,000.00".
4. Conditions of Effectiveness. This Amendment shall become effective
when, and only when, Lender shall have received counterparts of this Amendment
executed by Borrower and Sections 1, 2 and 3 hereof shall become effective when,
and only when, Lender shall have additionally received all of the following
documents:
(a) Modification of Note and Liens executed by Borrower;
(b) Certificates of the Boards of Directors of Borrower authorizing
the execution, delivery and performance of this Amendment, and the matters
contemplated hereby; and
(c) Any other instruments or documents as may be required by Lender.
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5. Representations and Warranties of Borrower. Borrower represents and
warrants as follows:
(a) Borrower is duly authorized and empowered to execute, deliver and
perform this Amendment and all other instruments referred to or mentioned
herein to which it is a party, and all action on its part requisite for the
due execution, delivery and the performance of this Amendment has been duly
and effectively taken. This Amendment, when executed and delivered, will
constitute valid and binding obligations of Borrower enforceable in
accordance with its terms. This Amendment does not violate any provisions
of Borrower's Articles of Incorporation, By-Laws, or any contract,
agreement, law or regulation to which Borrower is subject, and does not
require the consent or approval of any regulatory authority or governmental
body of the United States or any state.
(b) The representations and warranties made by Borrower in the Loan
Agreement are true and correct as of the date of this Amendment.
(c) No event has occurred and is continuing which constitutes an
Event of Default or would constitute an Event of Default but for the
requirement that notice be given or time elapse or both.
6. Reference to and Effect on the Security Instruments.
(a) Upon the effectiveness of Sections 1, 2 and 3 hereof, on and
after the date hereof each reference in the Loan Agreement to "this
Agreement", "hereunder", "hereof", "herein" or words of like import, and
each reference in the other Security Instruments (hereinafter defined) to
the Loan Agreement, shall mean and be a reference to the Loan Agreement as
amended hereby.
(b) Except as specifically amended above, the Loan Agreement, the
Equipment Note, the Security Agreement, and all other instruments securing
or guaranteeing Borrower's obligations to Lender (the "Security
Instruments") shall remain in full force and effect and are hereby ratified
and confirmed. Without limiting the generality of the foregoing, the
Security Instruments and all collateral described therein do and shall
continue to secure the payment of all obligations of Borrower under the
Loan Agreement and the Equipment Note, as amended hereby, and under the
other Security Instruments.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of Lender under any of the Security Instruments, nor
constitute a waiver of any provision of any of the Security Instruments.
7. Waiver. As additional consideration for the execution, delivery and
performance of this Amendment by the parties hereto and to induce Lender to
enter into this Amendment, Borrower warrants and represents to Lender that no
facts, events, statuses or conditions exist or have existed which, either now or
with the passage of time or giving of notice, or both, constitute or will
-3-
constitute a basis for any claim or cause of action against Lender or any
defense to (a) the payment of any obligations and indebtedness under the
Equipment Note and/or the Security Instruments or (b) the performance of any of
their obligations with respect to the Equipment Note and/or the Security
Instruments, and in the event any such facts, events, statuses or conditions
exist or have existed, Borrower unconditionally and irrevocably waives any and
all claims and causes of action against Lender and any defenses to their payment
and performance obligations in respect to the Equipment Note and the Security
Instruments.
8. Costs and Expenses. Borrower agrees to pay on demand all costs and
expenses of Lender in connection with the preparation, reproduction, 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 Lender. In addition, Borrower shall pay any and all fees payable or
determined to be payable in connection with the execution and delivery, filing
or recording of this Amendment and the other instruments and documents to be
delivered hereunder, and agrees to save Lender harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such fees.
9. Execution in Counterparts. This Amendment may be executed in any
number of counterparts and by different 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 but one and the same
instrument.
10. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Texas.
11. Final Agreement. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed in multiple counterparts, each of which is an original instrument
for all purposes, all as of the day and year first above written.
LENDER: BORROWER:
BANK ONE, TEXAS, NA RAWSON-KOENIG, INC.
By: /s/ Barry A. Kelly By: /s/ Thomas C. Rawson
------------------------------ --------------------------
Barry A. Kelly, Vice President Thomas C. Rawson, Chairman
of the Board of Directors
-4-
MODIFICATION OF NOTE AND LIENS
THE STATE OF TEXAS )
) KNOW ALL PERSONS BY THESE PRESENTS:
COUNTY OF HARRIS )
THIS MODIFICATION OF NOTE AND LIENS (herin called "Agreement") is entered
into effective as of the 21st day of September, 1995, by and between BANK ONE,
TEXAS, NA, a national banking association (herein called "Lender"), and RAWSON-
KOENIG, INC., a Texas corporation (herein called "Borrower").
W I T N E S S E T H:
WHEREAS, Borrower made, executed and delivered that certain Promissory Note
(herein called the "Note") dated April 21, 1995, in the original principal sum
of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00), payable to the order of
Lender, as therein provided, said Note being (a) issued pursuant to the Amended
and Restated Letter Loan Agreement of even date with the Note (which, as it may
have been amended, supplemented or restated, is called the "Loan Agreement")
between Borrower and Lender, and (b) secured by a Supplemental Deed of Trust
(the "Deed of Trust") of even date therewith, executed by Borrower for the
benefit of Lender, and filed for record in the Official Public Records of Real
Property of Harris County, Texas under Clerk's File No. R424607, covering the
property (the "Property") more fully described therein; and
WHEREAS, the indebtedness evidenced by the Note matures on April 30, 2001;
and
WHEREAS, Borrower has requested, and Lender has agreed, on the terms and
conditions set forth herein, to an enlargement of the principal sum of the
Note.
NOW, THEREFORE, in consideration of the mutual covenants, rights and
obligations contained herein, the benefits to be derived therefrom and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto do hereby agree and contract as
follows:
1. Lender and Borrower hereby acknowledge that the outstanding principal
balance of the Note on the effective date hereof is ZERO AND NO/100
DOLLARS ($0.00).
2. Borrower hereby promises to pay to the order of Lender the sum of ONE
MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($1,500,000.00), or so
much thereof as may be advanced and outstanding pursuant to the Loan
Agreement, at the offices of Lender in Houston, Harris County, Texas,
together with interest thereon from and after the date hereof until
maturity on the unpaid principal balance outstanding from time to time
thereon at the per annum rate of interest set forth in the Note.
-1-
3. Accrued interest on the Note shall be due and payable in monthly
installments as it accrues, the first such installment becoming due and
payable on or before September 30, 1995, with a like installment being
due and payable on or before the last day of each succeeding calendar
month thereafter until and including August 31, 1996 (the "Advancing
Termination Date"). Thereafter, the Note shall be due and payable in
monthly installments of (i) all accrued and unpaid interest thereon, plus
(ii) a principal installment in an amount based on a sixty (60) month
equal amortization of the outstanding principal amount of this Note as of
the Advancing Termination Date; the first such installment becoming due and
payable on or before one month after the Advancing Termination Date, with a
like installment becoming due and payable on or before the same day of each
of the succeeding calendar months thereafter until August 31, 2001, when
the Note, including all outstanding principal and accrued, unpaid interest
hereon shall be fully and finally paid.
4. This Agreement is entered into in modification and enlargement (and not in
extinguishment, substitution, novation or discharge) of the unpaid
principal balance of the Note. All liens, security interest and
obligations securing and guaranteeing payment of the Note, including
without limitation the Loan Agreement and the Deed of Trust (collectively
the "Security Documents") are hereby ratified, confirmed, renewed,
extended and brought forward as security for the payment hereunder.
5. All terms, conditions and provisions contained in the Note, except as
specifically set forth herein, shall continue and remain in full force and
effect.
6. The Security Documents are hereby amended to provide that the Note
described therein shall mean the Note, as modified hereby. All terms,
conditions and provisions contained in the Security Documents, except as
modified and restated (where applicable) by the documents referred to
herein, shall continue and remain in full force and effect.
7. The Property shall be and remain in all respects subject to the lien,
charge or encumbrance of the Security Documents, as modified, and nothing
herein contained and nothing done pursuant hereto shall affect or be
construed to affect the lien, charge or encumbrance of the Security
Documents, as modified, or the priority thereof over any other liens,
charges or encumbrances or to release or affect the liability of any party
or parties whomsoever who may now or hereafter be liable under or on
account of the Security Documents, as modified and restated (where
applicable), nor shall anything herein contained or done in pursuance
hereof affect or be construed to affect any other security for the
indebtedness evidenced by the Note, if any, held by Lender.
8. This Agreement shall be governed by and construed in accordance with the
laws of the State of Texas. If any provision of this Agreement or the
application thereof to any person or circumstances shall, for any reason
and to any extent, be invalid or unenforceable, neither the remainder of
this Agreement, nor the application of such provision to any other persons
or circumstances shall be affected thereby, but rather same shall be
enforced to the greatest extent permitted by law.
-2-
9. This Agreement, and all the terms, provisions and conditions hereof, shall
be binding upon each party hereto and such party's legal representatives,
successors and assigns.
10. This Agreement may be executed in multiple originals. This Agreement may
also be executed in multiple counterparts, and all so executed shall
constitute one agreement, binding on the parties hereto, notwithstanding
that all parties are not signatories to the original or the same
counterpart.
11. THIS WRITTEN AGREEMENT, TOGETHER WITH THE SECURITY DOCUMENTS, REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED by each party on the date of its respective acknowledgment, but to
be effective for all purposes as of the date first above written.
RAWSON-KOENIG, INC.
"BORROWER"
RAWSON-KOENIG, INC.
By /S/ Thomas C. Rawson
------------------------------
Thomas C. Rawson, Chairman
of the Board of Directors
"LENDER"
BANK ONE, TEXAS, NA
By /S/ Barry A. Kelly
------------------------------
Barry A. Kelly, Vice President
-3-
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me this 21st day of September,
1995, by Thomas C. Rawson, Chairman of the Board of Directors of Rawson-Koenig,
Inc., a Texas corporation, on behalf of said corporation.
/S/ Leslie T. Horvath
-----------------------------
Notory Public, State of Texas
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me this 25th day of September,
1995, by Barry A. Kelly, Vice President of Bank One, Texas, NA, a national
banking association, on behalf of said association.
/S/ Cheryl L. Thrash
-----------------------------
Notary Public, State of Texas
-4-
RAWSON-KOENIG, INC.
Certificate
The undersigned hereby certifies that he is the duly elected and acting
Secretary of RAWSON-KOENIG, INC., a Texas corporation (the "Company"), and as
such has custody of the corporate records of the Company and is authorized to
execute and deliver this Certificate on behalf of the Company; and with
reference to a loan being modified by BANK ONE, TEXAS, NA (the "Lender"), the
undersigned hereby further certifies as follows:
1. Attached hereto as Exhibit "A" is a full, true and correct copy of the
Resolutions duly adopted by the Board of Directors of the Company by a unanimous
written consent effective September 21st, 1995, in accordance with the Texas
Business Corporation Act, and the Articles of Incorporation and Bylaws of the
Company.
2. The Resolutions attached as Exhibit "A" hereto have not been amended,
modified or rescinded and are in full force and effect on the date hereof.
3. The undersigned officers have been duly elected to the positions set
forth next to their respective names below, and are qualified to act in such
capacities and execute documents on behalf of the Company, and the signature
appearing opposite each name is the authentic signature of each such officer.
Name Office Signature
Catherine Rawson President /s/ Catherine Rawson
------------------------
Chairman of the Board
Thomas C. Rawson and /s/ Thomas C. Rawson
Chief Executive Officer ------------------------
Fred Wamhoff Secretary /s/ Fred Wamhoff
------------------------
4. The Company is duly organized and existing under the laws of the State
of Texas.
5. All franchise and other taxes required to maintain the Company's
existence have been paid and no such taxes are delinquent.
6. No proceedings are pending for the forfeiture of the Company's
authority to do business or to force its dissolution, voluntarily or
involuntarily.
7. There is no provision in the Articles of Incorporation or Bylaws of
the Company limiting the above-described resolutions, and said resolutions are
in conformity with the provisions of the Company's Articles of Incorporation and
Bylaws, and with the proceedings of the Board of Directors.
-1-
8. The Articles of Incorporation of the Company previously delivered to
the Lender are in full force and effect and have not been amended or modified,
except as may have been disclosed in writing to the Lender.
9. The Bylaws of the Company previously delivered to the Lender are in
full force and effect and have not been amended or modified except as may have
been disclosed in writing to the Lender.
EXECUTED the 21st day of September, 1995.
/S/ Fred Wamhoff
---------------------------------------
Fred Wamhoff, Secretary
The undersigned, the Chairman of the Board of the Company, hereby certifies
that Fred Wamhoff is the Secretary of the Company and is authorized to execute
and deliver this Certificate for and on behalf of the Company.
/S/ Thomas C. Rawson
---------------------------------------
Thomas C. Rawson, Chairman of the Board
-2-
EXHIBIT "A"
WHEREAS, RAWSON-KOENIG, INC. (the "Company") shall modify and enlarge a
loan (the "Loan") from BANK ONE, TEXAS, NA (the "Lender"), in the amount of
$1,500,000, pursuant to the terms of the Loan Agreement, as amended;
RESOLVED, further, in regard to the Loan that any one of the President, the
Chairman of the Board of Directors, the Secretary, or the Chief Executive
Officer of the Company is hereby authorized and directed to execute and deliver,
for and on behalf of the Company, documents as may be deemed necessary or
desirable by such officers or required by the Lender in regard to the Loan; and
further
RESOLVED, that the drafts of such documents presented to the Board of
Directors of the Company are hereby approved; and further
RESOLVED, that the officers executing and delivering any of the above-
described documents are hereby authorized and empowered to execute and deliver
the same in the name and on behalf of the Company, and in such manner of
counterparts as the officer or officers executing the same shall deem necessary
or desirable, and with such terms, conditions and provisions, including
modifications from the drafts presented to the Board of Directors, as the
officer or officers executing the same may approve, the execution of such
documents to evidence with approval conclusively; and further
RESOLVED, that any and all instruments executed and delivered on behalf of
the Company in connection with the foregoing resolutions by any person
purporting to be an officer of the Company shall be deemed to be the act of the
Company and shall be in all respects binding against the Company; and further
RESOLVED, that the officers of the Company be, and they hereby are,
authorized and empowered on behalf of and in the name of the Company to take or
cause to be taken in the name of the Company all such other and further action,
to make all payments and to execute, acknowledge and deliver any and all
certificates, opinions, documents and other instruments in such form and under
the corporate seal as required, as in the judgment of such officers may be
necessary, proper or convenient in order to carry out the foregoing resolutions,
to consummate the Loan described herein, and to comply with the terms and
provisions of all the documents described above; and further
RESOLVED, that all actions by any and all officers of the Company taken or
performed up to the date hereof and in respect to the preparation, execution and
delivering of the documents, certificates or other instruments required pursuant
to the provisions of the above-described documents, and the taking prior to the
date hereof of any and all actions otherwise required by the terms and
provisions of said documents or any other documents executed in connection
therewith be, and they are hereby, in all respects approved, ratified and
confirmed; and further
-1-
RESOLVED, that any one of the President, the Chairman of the Board of
Directors, Secretary or the Chief Executive Officer of the Company is hereby
authorized to make applications for and effect other loans from time to time on
behalf of the Company from the Lender and for such loans, to make, execute and
deliver promissory notes, drafts, bonds or other written obligations of the
Company in such form, date and maturity and at such rate of interest as such
officer or officers of the Company may determine and in the event the Company
adopts a corporate seal, to cause the same to be affixed to any such instruments
whenever necessary or required. It is further resolved that said officers are
hereby authorized in the name of the Company to renew or extend any loan or
loans from time to time and execute and deliver promissory notes, drafts, bonds
or other obligations or extensions to any notes theretofore given; and further
RESOLVED, that the authority hereinabove given to said officers to
negotiate loans in excess of the Loan specifically referenced herein shall
remain irrevocable insofar as the Lender is concerned until the Lender be
notified of the revocation of such authority and shall in writing acknowledge
receipt of such notification.
-2-
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 315,412
<SECURITIES> 0
<RECEIVABLES> 1,753,511
<ALLOWANCES> 40,000
<INVENTORY> 3,615,265
<CURRENT-ASSETS> 5,818,148
<PP&E> 9,113,925
<DEPRECIATION> 5,220,659
<TOTAL-ASSETS> 9,823,826
<CURRENT-LIABILITIES> 1,625,285
<BONDS> 2,095,124
0
0
<COMMON> 1,000
<OTHER-SE> 6,102,417
<TOTAL-LIABILITY-AND-EQUITY> 9,823,826
<SALES> 18,682,075
<TOTAL-REVENUES> 18,682,075
<CGS> 14,903,247
<TOTAL-COSTS> 14,903,247
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 466
<INTEREST-EXPENSE> 194,436
<INCOME-PRETAX> 1,192,493
<INCOME-TAX> 367,000
<INCOME-CONTINUING> 825,493
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 825,493
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
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