<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________
SCHEDULE 13E-4
ISSUER TENDER OFFER TRANSACTION STATEMENT
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
RAWSON-KOENIG, INC.
(Name of the Issuer)
RAWSON-KOENIG, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, NO PAR VALUE PER SHARE
(Title of Class of Securities)
754498
(CUSIP Number of Class of Securities)
THOMAS C. RAWSON, CHIEF EXECUTIVE OFFICER
RAWSON-KOENIG, INC.
2301 CENTRAL PARKWAY
HOUSTON, TEXAS 77092
(713) 688-4414
(Name, Address and Telephone Number of Persons Authorized to Receive Notices
and Communications Behalf of Person(s) Filing Statement)
WITH COPIES TO:
GEORGE W. FAZAKERLY, ESQ.
GARY L. WOOLFOLK, ESQ.
VIAL, HAMILTON, KOCH & KNOX, L.L.P.
1717 MAIN STREET, SUITE 4400
DALLAS, TEXAS 75201
(214) 712-4400
June 4, 1997
(Date tender offer first published, sent or given to security holders)
CALCULATION OF FILING FEE
--------------------------------------------------------------
Transaction Valuation Amount of Filing Fee
--------------------------------------------------------------
$3,352,039.20* $670.41**
--------------------------------------------------------------
* The total transaction value is based on 3,901,190 shares outstanding as of
June 3, 1997, less 2,342,102 shares held by the Rawson Family, multiplied
by the offer price of $2.15 per share.
** Calculated as 1/50 of one percent of the transaction value.
[ ] Check box if any part of the fee is offset by Rule
O-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing and registration statement
number, or the Form or Schedule and the date of filing.
Amount Previously Paid: .........................
Form or Registration No.: .......................
Filing Party: ...................................
Date Filed: .....................................
Exhibit Index is located on Page 5.
<PAGE>
INTRODUCTION
This Rule 13e-4 Issuer Tender Offer Statement on Schedule 13E-4 (the
"Schedule 13E-4") is being filed by Rawson-Koenig, Inc., a Texas corporation
(the "Company"), pursuant to Section 13(e) of the Securities Exchange Act of
1934, as amended and Rule 13e-4 thereunder in connection with the tender offer
by the Company for all the issued and outstanding shares of its common stock, no
par value (the "Common Stock") held by persons or entities that own Common Stock
(the Public Shareholders") other than Thomas C. Rawson, Pamela Y. Rawson and The
Rawson Family Limited Partnership, which is controlled by Catherine A. Rawson
(collectively the "Rawson Family"), upon the terms and subject to the conditions
set forth in the Offer to Purchase dated June , 1997 (the "Offer to
Purchase") and the related Letter of Transmittal (which together with the Offer
to Purchase constitute the "Offer"), copies of which are filed as Exhibits (a)
(1) and (a) (2) hereto respectively.
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer of the securities that are the subject of the
tender offer is Rawson-Koenig, Inc., a Texas corporation with its
principal place executive offices at 2301 Central Parkway
Houston, Texas 77092.
(b) The class of equity securities being sought is all of the issued and
outstanding shares of Common Stock, no par value per share of the
Company held by the Public Shareholders. The information set forth
under "INTRODUCTION", SPECIAL FACTORS -- INTERESTS OF CERTAIN PERSONS
IN THE OFFER AND THE MERGER" and " THE TENDER OFFER -- SECTION 1.
TERMS OF THE OFFER; EXPIRATION DATE" of the Offer to Purchase is
incorporated herein by reference.
(c) The information concerning the principal market in which the Common
Stock is traded and certain high and low sales prices for the Common
Stock in such principal market is set forth in "THE TENDER OFFER --
SECTION 6. PRICE RANGE OF SHARES; DIVIDENDS" of the Offer to Purchase
is incorporated herein by reference.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth under "THE TENDER OFFER -- SECTION
8. FINANCING OF THE OFFER AND THE MERGER of the Offer to Purchase is
incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
(a)-(d) and (f)-(g) The information set forth under "INTRODUCTION",
"SPECIAL FACTORS -- PURPOSE AND BACKGROUND OF THE OFFER; CERTAIN EFFECTS OF
THE OFFER; PLANS OF THE COMPANY AFTER THE OFFER" and "SPECIAL FACTORS --
RIGHTS OF SHAREHOLDERS IN THE EVENT OF MERGER" of the Offer to Purchase is
incorporated herein by reference.
(e) The information set forth under "THE TENDER OFFER -- SECTION 6. PRICE
RANGE OF SHARES; DIVIDENDS" and "THE TENDER OFFER -- SECTION 8.
FINANCING OF THE OFFER AND THE MERGER" of the Offer to Purchase is
incorporated herein by reference.
(h)-(j) The information set forth under "THE TENDER OFFER -- SECTION 10.
EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; Nasdaq QUOTATION AND
EXCHANGE ACT REGISTRATION" of the Offer to Purchase is incorporated herein
by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
No transactions in Common Stock have been effected during the last 40
business days by the Issuer or by the persons referred to in General
Instruction C to this Schedule 13E-4.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
The information set forth under "SPECIAL FACTORS -- PURPOSE AND BACKGROUND
OF THE OFFER; CERTAIN EFFECTS OF THE OFFER; PLANS OF THE COMPANY AFTER THE
OFFER" of the Offer to Purchase describes the contractual arrangement between
the Rawson Family and the Company for the payment by the Rawson Family to the
Public Shareholders of their proportionate share in any premium received by the
Rawson Family in the event of certain extraordinary corporate transactions and
is incorporated herein by reference. In addition,
Page 2 of 5 Pages
<PAGE>
"SPECIAL CONSIDERATIONS --BENEFICIAL OWNERSHIP OF COMMON STOCK" and "SPECIAL
CONSIDERATIONS -- INTEREST OF CERTAIN PERSONS IN THE OFFER AND MERGER" is
incorporated by reference herein.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth under "INTRODUCTION", "SPECIAL FACTORS --
OPINION OF RAUSCHER PIERCE REFSNES", "SPECIAL FACTORS -- FEES AND EXPENSES" and
"THE TENDER OFFER -- SECTION 13. FEES AND EXPENSES" of the Offer to Purchase is
incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a) The information set forth under "THE TENDER OFFER -- SECTION 7.
CERTAIN INFORMATION CONCERNING THE COMPANY" of the Offer to Purchase is
incorporated herein by reference. In addition, the Company's audited financial
statements for the years ended December 31, 1996 and December 31, 1995 and the
Company's unaudited financial statements for the periods ended March 31, 1997
and March 31, 1996 are attached to the Offer to Purchase as Schedules III and IV
thereto, respectively are incorporated herein by reference.
(b) The information set forth under "THE TENDER OFFER -- SECTION 7.
CERTAIN INFORMATION CONCERNING THE COMPANY" is incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) Not applicable.
(b) The information set forth under "THE TENDER OFFER -- SECTION 12.
CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS" of the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth under "THE TENDER OFFER -- SECTION 10.
EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; Nasdaq QUOTATION AND EXCHANGE
ACT REGISTRATION" of the Offer to Purchase is incorporated herein by reference.
(d) Not applicable.
(e) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, is incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Form of Offer to Purchase dated June , 1997.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter from Wheat, First Securities, Inc. to Brokers, Dealers,
Commercial Banks, Trust Companies and Nominees.
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies
and Nominees to Clients.
(a)(6) Form of Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Press Release issued by the Company on June 4, 1997.
(b) Amended and Restated Letter Loan Agreement between the Company and Bank
One, Texas, N.A. dated June 18, 1997.
(c) Agreement between the Rawson Family and the Company dated as of June 2,
1997.
(d) None.
(e) Not applicable.
(f) None.
Page 3 of 5 Pages
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
June 25, 1997
Rawson-Koenig, Inc.
By: /s/ Thomas C. Rawson
--------------------
Name: Thomas C. Rawson
Title: Chief Executive Officer
Page 4 of 5 Pages
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE IN
SEQUENTIAL
NUMBERING
SYSTEM
_____________________________________________________________________________________________________________________________
<S> <C>
(a)(1) Form of Offer to Purchase dated June , 1997.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter from Wheat, First Securities, Inc. to Brokers, Dealers,
Commercial Banks, Trust Companies and Nominees.
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees to Clients.
(a)(6) Form of Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Press Release issued by the Company on June 4, 1997.
(b) Amended and Restated Letter Loan Agreement between the Company and Bank
One, Texas, N.A. dated June 18, 1997.
(c) Agreement between the Rawson Family and the Company dated as of June 2,
1997.
</TABLE>
Page 5 of 5
<PAGE>
Exhibit (a)(1): FORM OF OFFER TO PURCHASE
OFFER TO PURCHASE FOR CASH
BY
RAWSON-KOENIG, INC.
OF
ITS ISSUED AND OUTSTANDING SHARES
OF COMMON STOCK, NO PAR VALUE,
AT
$2.15 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN DAYLIGHT
TIME, ON , 1997, UNLESS THE OFFER IS EXTENDED.
RAWSON-KOENIG, INC., a Texas corporation (the "Company"), is offering to
purchase the issued and outstanding shares of its common stock, no par value
(the "Common Stock"), held by persons or entities that own Common Stock (the
"Public Shareholders") other than Thomas C. Rawson, Pamela Y. Rawson and The
Rawson Family Limited Partnership, which is controlled by Catherine A. Rawson
(collectively, the "Rawson Family"), at $2.15 per share of Common Stock, net to
the seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in this Offer to Purchase (the "Offer to Purchase") and in
the related Letter of Transmittal, which together with this Offer to Purchase
constitutes the "Offer".
The Offer is not conditioned upon any minimum number of shares of the
Common Stock owned by the Public Shareholders (the "Shares") being tendered.
The Offer is , however, subject to certain other conditions. See TENDER OFFER -
SECTION 11. CERTAIN CONDITIONS OF THE OFFER.
THE BOARD OF DIRECTORS OF THE COMPANY, BY UNANIMOUS VOTE OF ALL DIRECTORS
PRESENT AND VOTING, BASED UPON, AMONG OTHER THINGS, THE UNANIMOUS RECOMMENDATION
AND APPROVAL OF THE DIRECTORS OF THE COMPANY WHO ARE NOT OFFICERS OF THE COMPANY
OR COUNSEL TO THE COMPANY (THE "INDEPENDENT DIRECTORS"), HAS DETERMINED THAT THE
OFFER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE PUBLIC SHAREHOLDERS, AND
RECOMMENDS THAT THE PUBLIC SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
The Common Stock is listed and traded on the National Association of
Securities Dealers Automated Quotation System ("Nasdaq") SmallCap Market, Inc.
under the ticker symbol "RAKO". On June 3, 1997, the last trading day before
the Company announced the Offer, the last sale price was $1.875 per Share.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION
FOR THE COMMON STOCK.
__________________________________
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
_________________________________
THE DEALER MANAGER FOR THE OFFER IS
WHEAT, FIRST SECURITIES, INC.
JUNE , 1997
<PAGE>
IMPORTANT
ANY SHAREHOLDER DESIRING TO TENDER ALL OR ANY PORTION OF SUCH SHAREHOLDER'S
SHARES OF COMMON STOCK SHOULD EITHER (1) COMPLETE AND SIGN THE LETTER OF
TRANSMITTAL (OR A FACSIMILE THEREOF) IN ACCORDANCE WITH THE INSTRUCTIONS IN THE
LETTER OF TRANSMITTAL AND MAIL OR DELIVER IT TOGETHER WITH THE CERTIFICATE(S)
EVIDENCING TENDERED SHARES, AND ANY OTHER REQUIRED DOCUMENTS, TO THE DEPOSITARY
OR TENDER SUCH SHARES PURSUANT TO THE PROCEDURE FOR BOOK-ENTRY TRANSFER SET
FORTH IN "THE TENDER OFFER -- SECTION 3. PROCEDURES FOR ACCEPTING THE OFFER AND
TENDERING SHARES" OR (2) REQUEST SUCH SHAREHOLDER'S BROKER, DEALER, COMMERCIAL
BANK, TRUST COMPANY OR OTHER NOMINEE TO EFFECT THE TRANSACTION FOR SUCH
SHAREHOLDER. ANY SHAREHOLDER WHOSE SHARES ARE REGISTERED IN THE NAME OF A
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE MUST CONTACT
SUCH BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE IF SUCH
SHAREHOLDER DESIRES TO TENDER SUCH SHARES.
ANY SHAREHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATES
EVIDENCING SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE, OR WHO CANNOT COMPLY WITH
THE PROCEDURE FOR BOOK-ENTRY TRANSFER ON A TIMELY BASIS, MAY TENDER SUCH SHARES
BY FOLLOWING THE PROCEDURE FOR GUARANTEED DELIVERY SET FORTH IN "THE TENDER
OFFER -- SECTION 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES".
QUESTIONS OR REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE INFORMATION
AGENT OR THE DEALER MANAGER AT THEIR RESPECTIVE ADDRESSES AND TELEPHONE NUMBERS
SET FORTH ON THE BACK COVER OF THIS OFFER TO PURCHASE. ADDITIONAL COPIES OF
THIS OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL AND THE NOTICE OF GUARANTEED
DELIVERY MAY ALSO BE OBTAINED FROM THE INFORMATION AGENT OR FROM BROKERS,
DEALERS, COMMERCIAL BANKS OR TRUST COMPANIES.
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<PAGE>
TABLE OF CONTENTS
INTRODUCTION......................................................... 4
SPECIAL FACTORS...................................................... 5
Purpose and Background of the Offer; Certain Effects of the Offer;
Plans of Company After the Offer................................ 5
Rights of Shareholders in the Event of Merger..................... 8
Recommendation of the Company's Board; Fairness of the Offer...... 9
Opinion of Rauscher Pierce Refsnes................................ 10
Interests of Certain Persons in the Offer and the Merger.......... 12
Beneficial Ownership of Common Stock.............................. 14
Fees and Expenses................................................. 15
THE TENDER OFFER..................................................... 15
1. Terms of the Offer; Expiration Date............................ 15
2. Acceptance for Payment and Payment for Shares.................. 16
3. Procedures for Accepting the Offer and Tendering Shares........ 17
4. Withdrawal Rights.............................................. 20
5. Certain Federal Income Tax Consequences........................ 20
6. Price Range of Shares; Dividends............................... 21
7. Certain Information Concerning the Company..................... 22
8. Financing of the Offer and the Merger.......................... 29
9. Dividends and Distributions.................................... 29
10. Effect of the Offer on the Market for the Shares; Nasdaq
Quotation And Exchange Act Registration...................... 30
11. Certain Conditions of the Offer................................ 30
12. Certain Legal Matters and Regulatory Approvals................. 31
13. Fees and Expenses.............................................. 32
14. Miscellaneous.................................................. 32
SCHEDULE I - Directors and Executive Officers of the Company...... I-1
SCHEDULE II - Opinion of Rauscher Pierce Refsnes, Inc.............. II-1
SCHEDULE III - Summary of Shareholder Appraisal Rights and Text
of Articles 5.11, 5.12, 5.13, and 5.16 of the
Texas Business Corporation Act..................... III-1
SCHEDULE IV - Audited Financial Statements (and Related Notes)
for the Company for the Years for the Years Ended
December 31, 1996 and December 31, 1995............ IV-1
SCHEDULE V - Unaudited Financial Statements (and Related Notes)
for the Company for Three-Month Periods Ended
March 31, 1997 and March 31, 1996.................. V-1
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<PAGE>
To the Public Shareholders of Rawson-Koenig, Inc.:
INTRODUCTION
RAWSON-KOENIG, INC., a Texas corporation (the "Company"), is offering to
purchase the issued and outstanding shares of its Common Stock, no par value
(the "Common Stock"), held by persons or entities that own Common Stock (the
"Public Shareholders") other than Thomas C. Rawson, Pamela Y. Rawson, and The
Rawson Family Limited Partnership, which is controlled by Catherine A. Rawson
(collectively, the "Rawson Family"), at $2.15 per share of Common Stock, net to
the seller in cash (the "Offer Price"), upon the terms and subject to the
conditions set forth in this Offer to Purchase (the "Offer to Purchase") and in
the related Letter of Transmittal, which together with this Offer to Purchase
constitutes the "Offer".
Tendering Shareholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of the shares of
Common Stock of the Company held by the Public Shareholders (the "Shares") by
the Company pursuant to this Offer. The Company will pay all charges and
expenses of Wheat, First Securities, Inc. (the "Dealer Manager"), Harris Trust
Company of New York (the "Depositary") and D.F. King & Co., Inc. (the
"Information Agent") incurred in connection with the Offer. See "SPECIAL FACTORS
- - FEES AND EXPENSES" and "THE TENDER OFFER -- SECTION 13. FEES AND EXPENSES".
The Offer is not conditioned upon any minimum number of Shares being
tendered. The Offer is, however, subject to certain other conditions. See "THE
TENDER OFFER -- SECTION 11. CERTAIN CONDITIONS OF THE OFFER", which sets forth
in full the conditions of the Offer. After expiration of the Offer, the Board
of Directors of the Company intends to authorize a reverse stock split of the
Common Stock of 1 share for 100 shares, which will eliminate any remaining odd-
lot Public Shareholders (Public Shareholders owning less than 100 Shares) by
making their Shares fractional shares that will be purchased by the Company at
the appropriate multiple of the Offer Price prior to the reverse split. In
addition, if necessary to cause the Common Stock not to be listed for quotation
by Nasdaq, to terminate the registration of the Common Stock under the
Securities and Exchange Act of 1934 (the "Exchange Act"), and to cash-out any
remaining Public Shareholders after the Offer and the reverse split, the Company
will enter into a merger agreement with RKI Acquisition, Inc., a Texas
corporation to be formed, which will be wholly owned by the Rawson Family, and
seek shareholder approval of such merger in accordance with applicable laws (the
"Merger"). It is contemplated that the Merger consideration will be at the
Offer Price (as adjusted by the reverse stock split) and that after the Merger
there will be no Public Shareholders of the Company. See "THE TENDER OFFER --
SECTION 10. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, Nasdaq QUOTATION
AND EXCHANGE ACT REGISTRATION."
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD"), BY UNANIMOUS VOTE OF ALL
DIRECTORS PRESENT AND VOTING, BASED UPON, AMONG OTHER THINGS, THE UNANIMOUS
RECOMMENDATION AND APPROVAL OF THE DIRECTORS OF THE COMPANY WHO ARE NOT OFFICERS
OF THE COMPANY OR COUNSEL TO THE COMPANY (THE "INDEPENDENT DIRECTORS"), HAS
DETERMINED THAT THE OFFER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE PUBLIC
SHAREHOLDERS, AND RECOMMENDS THAT THE PUBLIC SHAREHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER.
The Board has received the written opinion of Rauscher Pierce Refsnes, Inc.
("Rauscher Pierce Refsnes") that the $2.15 net per Share cash consideration to
be offered to the Public Shareholders in the Offer is fair to such shareholders
from a financial point of view. See "SPECIAL FACTORS --
-4-
<PAGE>
OPINION OF RAUSCHER PIERCE REFSNES" for further information concerning the
opinion of Rauscher Pierce Refsnes.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), which is being mailed to Shareholders herewith.
The Common Stock is listed and traded on the National Association of
Securities Dealers Automated Quotation System ("Nasdaq") SmallCap Market, Inc.
under the ticker symbol "RAKO". On June 3, 1997, the last trading day before
the Company announced the Offer, the last sales price was $1.875 per share.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION
FOR THE COMMON STOCK.
Rawson-Koenig, Inc. as a public corporation originates from the Koenig family
blacksmith shop started in 1911. In 1977, Koenig Iron Works, Inc. was bought
by Keystone International, Inc. It was then spun-off as a separate public
company to the Keystone International, Inc. shareholders in 1983 and its name
was changed to Koenig, Inc. In 1987, Rawson Industries, Inc., a Texas
corporation, was merged into Koenig, Inc. with the Rawson Family acquiring 2.3
million shares of the Common Stock in exchange for their shares of Rawson
Industries, Inc.
The Rawson Family owns 2,342,102 shares of Common Stock (approximately 60% of
the issued and outstanding Shares of the Common Stock), and have informed the
Company that they do not intend to tender any Common Stock owned by them
pursuant to the Offer. The Company expects that Floyd A. Cailloux, holder of
282,214 Shares (approximately 7.2% of the issued and outstanding shares of
Common Stock of the Company), and that Joseph M. Scheer, Allen F. Rhodes and
Farrell G. Huber, Jr., being all of the Independent Directors, who hold in the
aggregate 99,097 Shares (approximately 2.5% of the issued and outstanding shares
of Common Stock of the Company), will each tender pursuant to the Offer. See
"SPECIAL FACTORS -- BENEFICIAL OWNERSHIP OF COMMON STOCK". The Company also
expects that Richard F. Koenig, an officer of the Company, will tender his
shares pursuant to the Offer. In the event these shareholders tender all of
their Shares, and if these are the only Shares tendered, the Rawson Family will
then own approximately 66.60% of the then issued and outstanding shares of
Common Stock.
At June 3, 1997, (a) 3,901,190 shares of Common Stock were issued and
outstanding, (b) no shares of Common Stock were held in the treasury of the
Company and (c) no Shares were reserved for future issuance to employees
pursuant to any outstanding employee stock options. Prior to the announcement
of the Offer, there were approximately 1,400 holders of record of the issued and
outstanding shares of Common Stock.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
SPECIAL FACTORS
PURPOSE AND BACKGROUND OF THE OFFER; CERTAIN EFFECTS OF THE OFFER; PLANS OF
COMPANY AFTER THE OFFER
The purpose of the Offer is to enable the Company to acquire as many Shares
as possible pursuant to the terms and conditions of the Offer, as a first step
in acquiring the entire equity interest
-5-
<PAGE>
in the Company held by the Public Shareholders. Following the completion of the
Offer, the Board intends to authorize a reverse stock split of the Common Stock
of 1 share for 100 shares, which will eliminate any remaining odd-lot Public
Shareholders (Public Shareholders owning less than 100 Shares) by making their
Shares fractional shares that will be purchased by the Company at the
appropriate multiple of the Offer Price prior to the reverse split. In
addition, if necessary to cause the Shares not to be listed for quotation by
Nasdaq, to terminate the registration of the Shares under the Exchange Act, and
to cash out any remaining Public Shareholders after the Offer and the reverse
split, the Company will enter into a merger agreement with RKI Acquisition,
Inc., a Texas corporation to be formed which will be wholly owned by the Rawson
Family, and seek shareholder approval of the Merger in accordance with
applicable laws. It is contemplated that the per share consideration in the
Merger will be at the Offer Price as adjusted by the reverse stock split and
that after the Merger there will be no Public Shareholders of the Company. See
"THE TENDER OFFER -- SECTION 10. EFFECT OF THE OFFER ON THE MARKET FOR THE
SHARES; Nasdaq QUOTATION AND EXCHANGE ACT REGISTRATION." The net result of the
tender offer, the reverse split, and the Merger will be that the Company will
become a private company, the shares of which will be owned 100% by the Rawson
Family.
Under Texas Law, the approval of the Board and the affirmative vote of the
holders of 66 and 2/3rds% of the outstanding shares of Common Stock are required
to approve the Merger. The Board has not approved or adopted the Merger, and,
unless the Merger is consummated pursuant to the short-form merger provisions of
Texas Law as described below, the only other required corporate action by the
Company is the approval and adoption of the Merger by the affirmative vote of
the holders of at least 66 and 2/3rds% of the Common Stock. The Rawson Family
will not have sufficient voting power to cause the approval and adoption of the
Merger immediately after the Offer if no Shares other than the Shares of the
Independent Directors, Floyd A. Cailloux and the officers of the Company are
tendered, without the affirmative vote of other shareholders of the Company.
However, after the reverse stock split, the Rawson Family will have sufficient
voting power to cause the approval and adoption of the Merger without the
affirmative vote of any of the remaining shareholders of the Company.
Under Texas Law, if the Rawson Family's total percentage of stock ownership,
pursuant to the Offer and the reverse stock split (which will reduce the total
number of shares of Common Stock outstanding and thereby proportionately
increase the percentage ownership of the Rawson Family), is sufficient to equal
at least 90% of the Common Stock then outstanding, the Rawson Family will be
able to approve the Merger without a vote of the Company's other shareholders.
If, however, the percentage of ownership of the Rawson Family of the Common
Stock does not equal at least 90%, then in such case, a vote of the Company's
shareholders will be required under Texas Law, and a significantly longer period
of time may be required to effect the Merger. See "SPECIAL FACTORS -- RIGHTS OF
SHAREHOLDERS IN THE EVENT OF MERGER".
Following the consummation of the Offer, the reverse stock split and the
Merger, the Shares will no longer be quoted on Nasdaq and the registration of
the Shares under the Exchange Act will be terminated. Accordingly, following
the Merger there will be no publicly traded equity securities of the Company
outstanding and the Company will no longer be required to file periodic reports
with the Commission. See "THE TENDER OFFER -- SECTION 11. EFFECT OF THE OFFER
ON THE MARKET FOR SHARES; Nasdaq QUOTATION AND EXCHANGE ACT REGISTRATION".
All shares purchased in the Offer will be held in the treasury of the Company
until the completion of the reverse stock split and, if necessary, the Merger,
at which time the Shares will be retired by the taking of all required corporate
action and filings with the office of the Texas Secretary of State.
-6-
<PAGE>
Since the Rawson Family acquired the majority ownership of the Company in
1987, the market price for the Company's stock has been essentially flat. The
public market has not responded to sustained profitability of the Company, and
the stock has remained very thinly traded.
In September 1995, an unaffiliated third party with substantial experience in
buying and selling companies approached Mr. Thomas Rawson, on an informal basis,
to discuss the potential of purchasing the Rawson Family's Common Stock in the
Company. The proposed price for the Rawson Family's Common Stock was the
current market price as reported on Nasdaq (at that time, $1.5625 per share).
Mr. Rawson indicated to said party that he had no interest in selling his shares
at that price.
Thereafter, in April 1996, Mr. Rawson was approached, again on an informal
basis, by another unaffiliated third party with substantial experience in buying
and selling companies, who indicated that he would be interested in exploring
the purchase of the Rawson Family's Common Stock for a price equal to the market
price of the Common Stock as reported on Nasdaq (at that time, $1.4375 per
share). Mr. Rawson's response was that he had no interest in selling the shares
at that price.
Following the initial contacts, Mr. Rawson has been further contacted at
different times by each of said third parties (or their respective
representatives) to determine if Mr. Rawson had reconsidered his prior response
to their proposed offers. Mr. Rawson's response has uniformly been that he has
no interest in selling the shares at the proposed price, which has consistently
been the current market price as reported on Nasdaq.
Reversion of the Company to private ownership will eliminate the substantial
general and administrative costs attendant to the Company's status as a
reporting company under the Exchange Act. In addition to the non-income
producing time expended by Company management, the legal, accounting and other
expenses involved in the preparation of annual and other periodic reports, as
well as similar expenses and costs of printing and mailing proxy solicitation
materials and Annual Reports are considerable. Additionally, the Company's
management believes that required public disclosures under the Exchange Act have
given its competitors, who are not similarly burdened, certain information and
insights about the Company's operations which have helped them in competing with
the Company.
The Company has been unable to utilize the Common Stock effectively for
acquisitions, financing, or employee incentives because of its low market price
and low trading volume, and so has been unable to realize some of the principle
benefits of public ownership.
For these reasons, the Rawson Family informed the Board of Directors of the
Company (the "Board") on March 7, 1997 that they desired to convene a meeting of
the Board on March 20, 1997 for the purpose of further exploring the feasibility
of a "going private" transaction. In prior conversations with investment
bankers, the Rawson Family had discussed generally the possibility of such a
transaction, and had discussed with the Company's principal lender the
possibility of providing financing to the Company for such a transaction.
At the March 20, 1997 Board meeting, a general discussion was held concerning
the proposed transaction, and the Board determined that the proposed transaction
should be explored and formed a committee of independent directors consisting of
Allen F. Rhodes, Farrell G. Huber, Jr. and Joseph M. Scheer (the "Independent
Directors"). The committee of Independent Directors was given the authority to
accept bids and recommend to the Board a reputable and experienced brokerage
firm to render a fairness opinion to the Board relating to the proposed
transaction. The Independent Directors did not retain an unaffiliated
representative to act solely on behalf of the Public Shareholders for the
purposes of negotiating the terms of the Offer or the preparation of a report
concerning the fairness of the Offer.
-7-
<PAGE>
Thereafter, at a subsequent Board meeting held on May 6, 1997, following a
report to the Board by the committee of Independent Directors, the firm of
Rauscher Pierce Refsnes was retained for this purpose.
A further meeting of the Board was held on May 27, 1997, at which
representatives of Rauscher Pierce Refsnes presented their preliminary report to
the Board concerning their opinion as to the fairness, from a financial point of
view, of the Offer Price to the Public Shareholders, and were questioned by the
Board concerning the methods used and factors considered by Rauscher Pierce
Refsnes in rendering the preliminary report.
The Rawson Family has informed the Board that, assuming the completion of the
Offer and the Merger, they have no present intention that the Company will
change its fundamental business, sell or otherwise dispose of any material part
of its business, merge, liquidate or otherwise wind-up its business. The Rawson
Family has further agreed with the Company that in the event that there is
relating to the Company (or any successor to the Company): (i) a change in
control (other than by death of a member of the Rawson Family or by inter-vivos
for estate planning purposes by any member of the Rawson Family), (ii) a
disposition of substantially all of the assets, or (iii) a liquidation
(collectively, a "Transaction") at any time within three years following the
later of the date of consummation of the Offer or the date of consummation of
the Merger, which Transaction results in the receipt by the Rawson Family of a
sum in excess of $8,387,558.50 (i.e., the Offer Price multiplied by the
3,901,190 Shares currently issued and outstanding), 40% (i.e., the Public
Shareholders' ownership percentage of the Company) of such excess will be paid
over proportionately to each of the Public Shareholders of record on the date
immediately proceeding the commencement of the Offer.
The Company anticipates that each of its current directors will remain as
directors of the Company following the consummation of the Offer, the reverse
split, and, if necessary, the Merger.
RIGHTS OF SHAREHOLDERS IN THE EVENT OF MERGER
No appraisal rights are available in connection with the Offer. However, if
the Merger is consummated, shareholders who have not tendered their Shares will
have certain rights under Texas Law to dissent and demand appraisal of, and to
receive payment in cash of the fair value of their Shares, unless the Offer and
the reverse split result in the Rawson Family owning at least 90% of the then-
issued and outstanding Common Stock. Such rights to dissent, if the statutory
procedures are complied with, could lead to a judicial determination of the fair
value of the Shares, as of the day prior to the date on which the shareholders'
vote was taken approving the Merger (excluding any element of value arising from
the accomplishment or expectation of the Merger), required to be paid in cash to
such dissenting shareholders for their Shares. In addition, such dissenting
shareholders would be entitled to receive payment of a fair rate of interest
beginning 91 days after the date of the Merger to the date of such judgment on
the amount determined to be the fair value of their Shares. In determining the
fair value of the Shares, the court is required to take into account all
relevant factors. Accordingly, such determination could be based upon
considerations other than, or in addition to, the market value of the Shares,
including, among other things, asset values and earning capacity. In Parkview
v. Waco Construction, Inc., the Texas Court of Appeals stated, among other
things, that "a qualified appraiser appointed by the Court shall have the power
to examine any of the books and records of the corporation the shares of which
he is charged with valuing and he shall make a determination of the fair value
of the shares upon such investigation as to him may seem proper. The appraiser
shall also afford a reasonable opportunity to the parties interested to submit
to him pertinent evidence as to the value of the shares." Therefore, the value
so determined in any appraisal proceeding could be the same as or more or less
than the price received in the Merger.
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<PAGE>
In addition, Texas courts have held that, in certain circumstances, a
controlling shareholder of a company involved in a merger has a fiduciary duty
to other shareholders that requires that the merger be fair to such other
shareholders. In determining whether a merger is fair to minority shareholders,
Texas courts have considered, among other things, the type and amount of
consideration to be received by the shareholders and whether there was fair
dealing among the parties. The Texas Court of Appeals stated in Gannon v. Baker
that the remedy ordinarily available to minority stockholders in a cash-out
merger is the right to appraisal described above. However, a damages remedy may
be available if a merger is found to be the product of fraud or irregularity.
See Schedule III attached hereto for a description of appraisal rights under
Texas Law, as well as a reproduction of the text of Articles 5.11, 5.12, 5.13,
and 5.16 of the Texas Business Corporation Act.
RECOMMENDATION OF THE COMPANY'S BOARD; FAIRNESS OF THE OFFER
RECOMMENDATION OF THE COMPANY'S BOARD. On May 27, 1997, the Board, by
unanimous vote of all directors present and voting, based in part on the
unanimous recommendation and approval of the Independent Directors, determined
that the Offer is fair to and in the best interests of the Public Shareholders
of the Company, subject only to receipt of a final report and opinion of
Rauscher Pierce Refsnes, and a firm commitment from the Company's principal
lender to provide financing. The Board, by a unanimous vote of all directors
present and voting, has recommended that all Public Shareholders accept the
Offer and tender their Shares pursuant to the Offer.
FAIRNESS OF THE OFFER. In reaching its determinations referred to
immediately above, the Board considered the following factors, each of which, in
the view of the Independent Directors as well as the other members of the Board,
supported such determinations:
(a) the historical market prices and recent trading activity of the
Shares, including the fact that the $2.15 net per Share cash consideration to
be paid to the Public Shareholders in the Offer represents a premium of
$0.275 per share over the last reported sales price on the last full trading
day preceding the public announcement of the Offer and a $ 0.40 per share
premium over the average closing price for the thirty days prior to May 30,
1997;
(b) the large number of odd-lot shareholders (approximately 75% of
shareholders of record as of June 13, 1997), largely attributable to the
"spin-off" of the Company by Keystone International, Inc. to its
shareholders, who by virtue of the low trading volume in the Shares, the
brokerage fees associated with sales, and the low market price of the shares,
are unable to realize any appreciable benefit on the sale of their Shares;
(c) the fact that two previous informal cash offers by independent,
experienced outside third parties for a controlling interest in the Company
were proposed at a price equal to the market price of the Common Stock as
reported on Nasdaq at the time of the offers;
(d) the opinion of Rauscher Pierce Refsnes that the consideration to be
offered to the Public Shareholders is fair to such shareholders from a
financial point of view and the Report and analysis presented by Rauscher
Pierce Refsnes, which included discussion and analysis of other offers to
purchase, historical trading volume and market prices, multiples of net
income, cash flow from operations, book value, orderly liquidation value and
various other factors;
(e) the market price for the Shares as compared to the performance of
the Company;
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<PAGE>
(f) the structure of the transaction, which is designed, among other
things, to result in the receipt by the Public Shareholders of cash
consideration at the earliest practicable time without any brokerage fees;
(g) the fact that the Company has never in its history paid a cash
dividend to the holders of Common Stock, and the expectation that no such
cash dividends are expected to be paid in the foreseeable future;
(h) the stated unwillingness of the Rawson Family to consider a sale of
their majority interest in the Company, which made pursuit of other potential
alternatives (such as sale of the Company as a going concern or a business
combination with another company) impracticable;
(i) the intention of the Rawson Family to continue the business as a
going concern, which makes any consideration of liquidation of the Company or
values that ultimately might be obtained from such a liquidation highly
speculative;
(j) the voluntary nature of the Offer; and
(k) the availability of dissenters' rights under Texas Law in the event
of the Merger.
The members of the Board, including the Independent Directors, evaluated the
various factors listed above in light of their knowledge of the business,
financial condition and prospects of the Company, and based on the advice of
financial and legal advisors. In light of the number and variety of factors
that the Board and the Independent Directors considered in connection with their
evaluation of the Offer, neither the Board nor the Independent Directors found
it practicable to assign relative weights to the foregoing factors, and ,
accordingly, neither the Board nor the Independent Directors did so. In
addition to the factors listed above, the Board and the Independent Directors
had each considered the fact that consummation of the Offer would eliminate the
opportunity of the Public Shareholders to participate in any potential future
growth in the value of the Company, but determined that this loss of opportunity
was ameliorated in part by the price of $2.15 net per Share to be paid in the
Offer, as well as the agreement of the Rawson Family to share any excess
proceeds from a private sale of the Company within three (3) years after the
consummation of the Offer. See "SPECIAL FACTORS -- PURPOSE AND BACKGROUND OF
THE OFFER; CERTAIN EFFECTS OF THE OFFER; PLANS OF COMPANY AFTER THE OFFER.
OPINION OF RAUSCHER PIERCE REFSNES
Rauscher Pierce Refsnes has acted as financial advisor to the Independent
Directors in connection with the Offer. As part of its role as financial
advisor, Rauscher Pierce Refsnes was engaged to render to the Board an opinion
as to the fairness, from a financial point of view, of the Offer Price to the
Company's Public Shareholders. See "SPECIAL FACTORS -- PURPOSE AND BACKGROUND
OF THE OFFER; CERTAIN EFFECTS OF THE OFFER; PLANS OF COMPANY AFTER THE OFFER".
On May 27, 1997, in connection with the Boards' and the Independent
Directors' evaluation of the Offer, Rauscher Pierce Refsnes made a preliminary
presentation to the Board and the Independent Directors with respect thereto
(the "Report"). As part of the presentation, Rauscher Pierce Refsnes reviewed
with the Board and the Independent Directors certain of the information and
financial data described below.
Final copies of the Report dated May 27, 1997 were delivered to the
Independent Directors and the Board, in connection with the Boards' and the
Independent Directors' evaluation of the Offer. A
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<PAGE>
copy of the Report is available for inspection and copying at the offices of the
Company during regular business hours by any interested Public Shareholder or
his representative who has been so designated in writing.
Rauscher Pierce Refsnes delivered its written opinion to the Board dated May
27, 1997 (the "Rauscher Pierce Refsnes Opinion"). A copy of the Rauscher Pierce
Refsnes Opinion, which sets forth the assumptions made, matters considered and
limitations of review undertaken by Rauscher Pierce Refsnes, is attached as
Schedule II hereto.
No limitations were imposed by the Company, the Board or the Independent
Directors on the scope of Rauscher Pierce Refsnes's investigation or the
procedures to be followed by Rauscher Pierce Refsnes in rendering the Rauscher
Pierce Refsnes Opinion, except that Rauscher Pierce Refsnes was not authorized
to solicit, and did not solicit, any indications of interest from any third
party with respect to a purchase of all or a part of the Company's business.
Rauscher Pierce Refsnes was not requested to and did not make any recommendation
to the Independent Directors or the Board as to the form or amount of
consideration to be offered to the Public Shareholders in the Offer, which was
determined through discussions among the Board and the Independent Directors and
their financial and legal advisors (including Rauscher Pierce Refsnes). In
arriving at the Rauscher Pierce Refsnes Opinion, Rauscher Pierce Refsnes did not
ascribe a specific range of value to the Company, but rather made its
determination as to the fairness, from a financial point of view, of the
consideration to be offered to the Public Shareholders in the Offer on the basis
of the financial and comparative analyses described below. The Rauscher Pierce
Refsnes Opinion is for the use and benefit of the Independent Directors and the
Board and was rendered to them in connection with their consideration of the
Offer and is not intended to be and does not constitute a recommendation to any
Public Shareholder as to whether to accept the consideration to be offered to
such Public Shareholder in the Offer.
The Company's Independent Directors recommended Rauscher Pierce Refsnes to
render the opinion referred to above, and the Board decided to engage Rauscher
Pierce Refsnes for this purpose because Rauscher Pierce Refsnes is a well-known
and reputable regional investment banking firm and regularly engages in the
valuation of businesses and their securities. The Independent Directors
requested bids from two other investment banking firms and decided to recommend
Rauscher Pierce Refsnes to the Board based on their evaluation of all the bids.
The following paragraphs summarize the financial and comparative analyses
performed by Rauscher Pierce Refsnes in connection with their opinion. The
summary does not represent a complete description of the analyses performed by
Rauscher Pierce Refsnes.
In arriving at the Rauscher Pierce Refsnes Opinion, Rauscher Pierce Refsnes
reviewed and analyzed: (a) the specific terms of the Offer; (b) publicly
available information concerning the Company which Rauscher Pierce Refsnes
believed to be relevant to its analysis, including the Company's Forms 10-K for
the years ended December 31, 1996, 1995, 1994 and 1993; (c) other financial and
operating information with respect to the business, operations and prospects of
the Company prepared by the Company in 1997 and furnished to Rauscher Pierce
Refsnes by the Company (including the Company's internal financial projections
for the fiscal years 1997-2001, prepared in April 1997); (d) a trading history
of the Shares from January 3, 1995 through May 27, 1997; (e) a comparison of the
financial terms of the Offer with the financial terms of certain other
transactions that Rauscher Pierce Refsnes deemed relevant; (f) an analysis of
what an outside party might pay for the Company on a going concern basis; (g) an
analysis of the Offer Price compared to (i) net income for the year ended
December 31, 1996; (ii) estimated net income for the year ending December 31,
1997; (iii) estimated net income for the year ending December 31, 1998; (iv)
cash flow from operations for the year ended December 31, 1996; (v) estimated
cash flow from operations for the years ending December 31, 1997 and December
31, 1998; (vi) the book value of the Company on March 31, 1997;
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<PAGE>
(h) an analysis of the Offer Price compared to the orderly liquidation value of
the Company; and (i) a comparison of the trading prices of the Shares with the
trading prices of other publicly held companies in businesses similar to the
business of the Company. In addition, Rauscher Pierce Refsnes had discussions
with the management of the Company concerning its business, operations, assets,
financial condition and prospects, and undertook such other studies, analyses
and investigations as Rauscher Pierce Refsnes deemed appropriate.
In arriving at the Rauscher Pierce Refsnes Opinion, Rauscher Pierce Refsnes
assumed and relied upon the accuracy and completeness of the financial
information provided by the Company and other information used by Rauscher
Pierce Refsnes without assuming any responsibility for independent verification
of such information and further relied upon the assurances of management of the
Company that they were not aware of any facts that would make the information
provided by the Company inaccurate or misleading. With respect to the financial
projections of the Company, upon advice of the Company, Rauscher Pierce Refsnes
assumed that such projections were reasonably prepared on a basis reflecting the
best available estimates and judgments of the management of the Company as to
the future financial performance of the Company. In arriving at the Rauscher
Pierce Refsnes Opinion, Rauscher Pierce Refsnes conducted a limited physical
inspection of the properties and facilities of the Company and did not make any
evaluations or appraisals of the assets or liabilities of the Company, but did
consider the appraised value of the assets of the Company, which appraisals were
commissioned by Bank One, Texas, N.A. in connection with the financing of the
Offer. See, "THE TENDER OFFER -- SECTION 8 -- FINANCING OF THE OFFER AND THE
MERGER." The Rauscher Pierce Refsnes Opinion was necessarily based upon market,
economic and other conditions as they existed on, and could be evaluated as of,
the date of the Rauscher Pierce Refsnes Opinion.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant methods of financial and comparative analysis
and the application of those methods to the particular circumstances and,
therefore, such an opinion is not readily susceptible to summary description.
Furthermore, in arriving at the Rauscher Pierce Refsnes Opinion, Rauscher Pierce
Refsnes did not attribute any particular weight to any analysis or factor
considered by it, but rather made qualitative judgments as to the significance
and relevancy of each analysis and factor. Accordingly, Rauscher Pierce Refsnes
believes that its analyses must be considered as a whole and that considering
any portions of its analyses and of the factors considered by it, without
considering all analyses and factors, could create a misleading or incomplete
view of the process underlying the Rauscher Pierce Refsnes Opinion. In its
analyses, Rauscher Pierce Refsnes made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the Company's control. Any estimates
contained in these analyses are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than as set forth therein. Additionally, analyses relating to the
value of businesses do not purport to be appraisals or to reflect the prices at
which businesses actually may be sold.
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER
In considering the recommendation of the Board and the Independent Directors
with respect to the Offer and the fairness of the consideration to be received
in the Offer and the Merger (if necessary), shareholders should be aware that
certain officers and directors of the Company have interests in the Offer that
are described below and which may present them with certain potential conflicts
of interest. As a result of the Rawson Family's current ownership of
approximately 60% of the outstanding shares of Common Stock, Thomas C. Rawson
(Chairman of the Board, Director and Chief Executive Officer of the Company),
Catherine A. Rawson (Director, President and Principal Financial Officer of the
Company), and Pamela Y. Rawson (a Director of the Company) may be deemed to
control the Company. The Board was aware of these actual and potential
conflicts of interest and
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<PAGE>
considered them along with the other matters described under "SPECIAL FACTORS --
RECOMMENDATION OF THE COMPANY'S BOARD; FAIRNESS OF THE OFFER".
The Rawson Family has informed the Company that they do not intend to tender
any Common Stock owned by them pursuant to the Offer. The Company expects that
Floyd A. Cailloux, holder of 282,214 Shares (approximately 7.2% of the issued
and outstanding shares of Common Stock of the Company), and that Joseph M.
Scheer, Allen F. Rhodes and Farrell G. Huber, Jr., being all of the Independent
Directors, who hold in the aggregate, 99,097 Shares (approximately 2.5% of the
issued and outstanding shares of Common Stock of the Company), will each tender
their Shares pursuant to the Offer. See "SPECIAL FACTORS -- BENEFICIAL
OWNERSHIP OF COMMON STOCK". The Company also expects that Richard F. Koenig, an
officer of the Company and certain other employees of the Company who are not
members of the Rawson Family will tender their Shares pursuant to the Offer.
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<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information, as of June 3, 1997,
regarding the ownership of Common Stock by each person known by the Company to
be the beneficial owner of more than 5% of the outstanding Common Stock, each
director of the Company, the Chief Executive Officer of the Company, the other
officers of the Company, and all executive officers and directors of the Company
as a group:
Shares of Common
Stock Beneficially
Owned As Of Percentage of
Name June 3, 1997 Class Owned
Floyd A. Cailloux
P.O. Box 1952
Kerrville, TX 78028 282,214 7.2
Farrell G. Huber, Jr.
7701 Texas Avenue
Houston, TX 77056 1,900 *1
Richard F. Koenig
2301 Central Parkway
Houston, TX 77092 3,063 *1
Catherine A. Rawson
2301 Central Parkway
Houston, TX 77092 1,161,261/1/ 60.0/1/
Thomas C. Rawson
2301 Central Parkway
Houston, TX 77092 1,180,841 60.0/3/
Pamela Y. Rawson
2301 Central Parkway
Houston, TX 77092 1,180,841 60.0/2/
Allen F. Rhodes
5643 Ella Lee Lane
Houston, TX 77056 12,197 *1
Joseph M. Scheer
16262 Dorilee Lane
Encino, CA 91436 85,000 2.2
All directors and officers as a group 2,444,262 62.7
/1/ Represents less than 1% of the issued and outstanding shares.
/2/ Shares are held by the Rawson Family Limited Partnership that is controlled
by Catherine A. Rawson.
/3/ Catherine A. Rawson, Thomas C. Rawson and Pamela Y. Rawson constitute a
"group" as such term is defined under applicable regulations of the Securities
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.
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FEES AND EXPENSES
The following is an estimate of expenses incurred or to be incurred in
connection with the Offer. Also see "THE TENDER OFFER -- SECTION 13. FEES AND
EXPENSES".
<TABLE>
<CAPTION>
<S> <C>
Legal Fees................ $125,000
Printing and Mailing...... 30,000
Filing Fees............... 1,000
Depositary Fees........... 10,000
Information Agent Fees.... 12,000
Dealer Manager Fees....... 78,000
Investment Bankers' Fees.. 50,000
Accountants' Fees......... 25,000
Miscellaneous............. 19,000
--------
Total $350,000
========
</TABLE>
THE TENDER OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), the Company will accept
for payment, and will pay for, all Shares validly tendered prior to the
Expiration Date (as hereinafter defined) and not withdrawn as permitted by "THE
TENDER OFFER -- SECTION 4. WITHDRAWAL RIGHTS". The term "Expiration Date"
means 12:00 midnight, New York City time, on Friday, , 1997, unless
and until the Company, in its sole discretion, shall have extended the period
during which the Offer is open, in which event the term "Expiration Date" shall
mean the latest time and date at which the Offer, as so extended by the Company,
shall expire.
The Company expressly reserves the right, in its sole discretion, at any time
and from time to time, to extend for any reason the period of time during which
the Offer is open, including the occurrence of any of the conditions specified
in "THE TENDER OFFER -- SECTION 11. CERTAIN CONDITIONS OF THE OFFER", by giving
oral or written notice of such extension to the Depositary. During any such
extension, all Shares previously tendered and not withdrawn will remain subject
to the Offer, subject to the rights of a tendering shareholder to withdraw such
shareholder's Shares. See "THE TENDER OFFER -- SECTION 4. WITHDRAWAL RIGHTS".
Subject to the applicable regulations of the Commission, the Company also
expressly reserves the right, in its sole discretion, at any time and from time
to time, (i) to delay acceptance for payment of, or, regardless of whether such
Shares were theretofore accepted for payment, payment for, any Shares, pending
receipt of any regulatory approval specified in "THE TENDER OFFER -- SECTION 12.
CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS", (ii) to terminate the Offer
and not accept for payment any Shares upon the occurrence of any of the
conditions specified in "THE TENDER OFFER -- SECTION 11. CERTAIN CONDITIONS OF
THE OFFER" and (iii) to waive any condition or otherwise amend the Offer in any
respect, by giving oral or written notice of such delay, termination, waiver or
amendment to the Depositary and by making a public announcement thereof. The
Company acknowledges that (i) Rule 13e-4(f) under the Exchange Act requires the
Company to pay the consideration offered or return the Shares tendered promptly
after the termination or withdrawal of the Offer and (ii) the Company may not
delay acceptance for payment of, or payment for (except as provided in clause
(i) of the first sentence of this paragraph), any Shares upon the
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<PAGE>
occurrence of any of the conditions specified in "THE TENDER OFFER -- SECTION
11. CERTAIN CONDITIONS OF THE OFFER" without extending the period of time
during which the Offer is open.
Any such extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof, such announcement in
the case of an extension to be made no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date.
Subject to applicable law (including Rules 13e-3(e)(2), 13e-4(e)(2) and 13e-4(f)
under the Exchange Act, which require that material changes be promptly
disseminated to Shareholders in a manner reasonably designed to inform them of
such changes) and without limiting the manner in which Purchaser may choose to
make any public announcement, Purchaser shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a press release to the Dow Jones News Service.
If the Company makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Company will extend the Offer to the extent required by Rules 13e-
3(e)(2), 13e-4(e)(2) and 13e-4(f) under the Exchange Act.
If, prior to the Expiration Date, the Company should decide to decrease the
number of Shares being sought or to increase or decrease the consideration being
offered in the Offer, such decrease in the number of Shares being sought or such
increase or decrease in the consideration being offered will be applicable to
all shareholders whose Shares are accepted for payment pursuant to the Offer
and, if at the time notice of any such decrease in the number of Shares being
sought or such increase or decrease in the consideration being offered is first
published, sent or given to holders of such Shares, the Offer is scheduled to
expire at any time earlier than the period ending on the tenth business day from
and including the date that such notice is first so published, sent or given,
the Offer will be extended at least until the expiration of such ten business
day period. For purposes of the Offer, a "business day" means any day other
than a Saturday, Sunday or federal holiday and consists of the time period from
12:01 a.m. through 12:00 midnight, New York City time.
This Offer to Purchase and the related Letter of Transmittal will be mailed
to record holders of Shares whose names appear on the Company's shareholder list
and will be furnished, for subsequent transmittal to beneficial owners of
Shares, to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the shareholder
list or, if applicable, who are listed as participants in a clearing agency's
security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), the
Company will accept for payment, and will pay for, all Shares validly tendered
prior to the Expiration Date and not properly withdrawn, promptly after the
latest to occur of (i) the Expiration Date and (ii) the satisfaction or waiver
of the conditions to the Offer set forth in "THE TENDER OFFER -- SECTION 11.
CERTAIN CONDITIONS OF THE OFFER". Subject to applicable rules of the
Commission, the Company expressly reserves the right to delay acceptance for
payment of, or payment for, Shares pending receipt of any regulatory approvals
specified in "THE TENDER OFFER -- SECTION 12. CERTAIN LEGAL MATTERS AND
REGULATORY APPROVALS" or in order to comply in whole or in part with any other
applicable law.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
the certificates evidencing such Shares (the "Share Certificates") or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility"
and, collectively, the "Book-Entry Transfer Facilities") pursuant to the
procedures set forth in "THE TENDER OFFER -- SECTION 3.
-16-
<PAGE>
PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES", (ii) the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees or, in the case of a book-entry transfer, an
Agent's Message (as defined below) in lieu of the Letter of Transmittal and
(iii) any other documents required under the Letter of Transmittal.
For purposes of the Offer, the Company will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when the Company gives oral or written notice to the
Depositary of the Company's acceptance for payment of such Shares pursuant to
the Offer. Upon the terms and subject to the conditions of the Offer, payment
for Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payments from the Company
and transmitting such payments to tendering shareholders whose Shares have been
accepted for payment. Under no circumstances will interest on the purchase
price for Shares be paid, regardless of any delay in making such payment.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
Shareholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure
set forth in "THE TENDER OFFER -- SECTION 3. PROCEDURES FOR ACCEPTING THE OFFER
AND TENDERING SHARES", such Shares will be credited to an account maintained at
such Book-Entry Transfer Facility), as promptly as practicable following the
expiration or termination of the Offer.
If, prior to the Expiration Date, the Company shall increase the
consideration offered to any holders of Shares pursuant to the Offer, such
increased consideration will be paid to all holders of Shares that are purchased
pursuant to the Offer, whether or not such Shares were tendered prior to such
increase in consideration.
The Company reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of its affiliates, the right to purchase all or
any portion of the Shares tendered pursuant to the Offer, but any such transfer
or assignment will not relieve the Company of its obligations under the Offer
and will in no way prejudice the rights of tendering shareholders to receive
payment for Shares validly tendered and accepted for payment pursuant to the
Offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. In order for a
holder of Shares validly to tender Shares pursuant to the Offer, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees (or, in the case of a book-entry
transfer, an Agent's Message (as defined below) in lieu of the Letter of
Transmittal) and any other documents required by the Letter of Transmittal, must
be received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase and either (i) the Share Certificates evidencing
tendered Shares must be received by the Depositary at such address or such
Shares must be tendered pursuant to the procedure for book-entry transfer
described below and a Book-Entry Confirmation must be received by the Depositary
(including an Agent's Message if the tendering shareholder has not delivered a
Letter of Transmittal), in each case prior to the Expiration Date, or (ii) the
tendering shareholder must comply with the guaranteed delivery procedures
described below. The term "Agent's Message" means a message, transmitted by a
Book-Entry Transfer Facility to, and received by, the Depositary and forming a
part of a Book-Entry Confirmation, which states that such Book-Entry Transfer
Facility has received an express acknowledgement from the participant in such
Book-Entry Transfer Facility tendering the Shares that are the subject of such
book-entry confirmation, that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal and that the Company may enforce
such agreement against such participant.
-17-
<PAGE>
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will establish accounts with respect to
the Shares at the Book-Entry Transfer Facilities for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the system of any Book-Entry
Transfer Facility may make a book-entry delivery of Shares by causing such Book-
Entry Transfer Facility to transfer such Shares into the Depositary's account at
such Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer at a Book-Entry Transfer Facility,
either the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, together with any required signature guarantees, or an
Agent's Message in lieu of the Letter of Transmittal, and any other required
documents, must, in any case, be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the tendering shareholder must comply with the guaranteed
delivery procedure described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be
guaranteed by a firm that is a member of the Medallion Signature Guarantee
Program, or by any other "eligible guarantor institution", as such term is
defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing referred
to as an "Eligible Institution"), except in cases where Shares are tendered (i)
by a registered holder of Shares who has not completed either the box entitled
"Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Instruction. If a Share Certificate is registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is to
be made, or a Share Certificate not accepted for payment or not tendered is to
be returned, to a person other than the registered holder(s), then the Share
Certificate must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name(s) of the registered holder(s) appear on
the Share Certificate, with the signature(s) on such Share Certificate or stock
powers guaranteed by an Eligible Institution. See Instructions 1 and 5 of the
Letter of Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and the Share Certificates evidencing such shareholder's Shares are
not immediately available or such shareholder cannot deliver the Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date, or such shareholder cannot complete the procedure for delivery
by book-entry transfer on a timely basis, such Shares may nevertheless be
tendered, provided that all the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Company, is
received prior to the Expiration Date by the Depositary as provided below;
and
(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing
all tendered Shares, in proper form for transfer, in each case together with
the Letter of Transmittal (or a facsimile thereof), properly completed and
duly executed, with any required signature guarantees, and any
-18-
<PAGE>
other documents required by the Letter of Transmittal are received by the
Depositary within three Nasdaq trading days after the date of execution of
such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram or facsimile transmission to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the form
of Notice of Guaranteed Delivery made available by the Company.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of the
Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, and the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
and any other documents required by the Letter of Transmittal.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by the Company in its sole discretion, which
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may, in the opinion of its
counsel, be unlawful. The Company also reserves the absolute right to waive any
condition of the Offer or any defect or irregularity in the tender of any Shares
of any particular shareholder, whether or not similar defects or irregularities
are waived in the case of other shareholders. No tender of Shares will be
deemed to have been validly made until all defects and irregularities have been
cured or waived. None of the Company, the Dealer Manager, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification. The Company's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
OTHER REQUIREMENTS. By executing the Letter of Transmittal as set forth
above, a tendering shareholder irrevocably appoints designees of the Company as
such shareholder's proxies, each with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such shareholder's
rights with respect to the Shares tendered by such shareholder and accepted for
payment by the Company (and with respect to any and all other Shares or other
securities issued or issuable in respect of such Shares on or after May 31,
1997). All such proxies shall be considered coupled with an interest in the
tendered Shares. Such appointment will be effective when, and only to the
extent that, the Company accepts such Shares for payment. Upon such acceptance
for payment, all prior proxies given by such shareholder with respect to such
Shares (and such other Shares and securities) will be revoked without further
action, and no subsequent proxies may be given nor any subsequent written
consent executed by such shareholder (and, if given or executed, will not be
deemed to be effective) with respect thereto. The designees of the Company
will, with respect to the Shares for which the appointment is effective, be
empowered to exercise all voting and other rights of such shareholder as they in
their sole discretion may deem proper at any annual or special meeting of the
Company's shareholders or any adjournment or postponement thereof, by written
consent in lieu of any such meeting or otherwise.
The acceptance for payment by the Company of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering shareholder and the Company upon the terms and subject to the
conditions of the Offer.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO
CERTAIN SHAREHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE
OFFER, EACH SUCH SHAREHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH SHAREHOLDER'S
CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH
-19-
<PAGE>
SHAREHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY
COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. IF BACKUP
WITHHOLDING APPLIES WITH RESPECT TO A SHAREHOLDER, THE DEPOSITARY IS REQUIRED TO
WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH SHAREHOLDER. SEE INSTRUCTION 9 OF THE
LETTER OF TRANSMITTAL.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable except that such Shares may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by the Company
pursuant to the Offer, may also be withdrawn at any time after , 1997.
If the Company extends the Offer, is delayed in its acceptance for payment of
Shares or is unable to accept Shares for payment pursuant to the Offer for any
reason, then, without prejudice to the Company's rights under the Offer, the
Depositary may, nevertheless, on behalf of the Company, retain tendered Shares,
and such Shares may not be withdrawn except to the extent that tendering
shareholders are entitled to withdrawal rights as described in this Section 4.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover page of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder of such Shares, if different from that of the person who
tendered such Shares. If Share Certificates evidencing Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such Share Certificates, the serial numbers shown on
such Share Certificates must be submitted to the Depositary and the signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution,
unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for book-
entry transfer as set forth in the "THE TENDER OFFER -- SECTION 3. PROCEDURES
FOR ACCEPTING THE OFFER AND TENDERING SHARES", any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Shares.
All questions as to the form and validity (including time of receipt) or any
notice of withdrawal will be determined by the Company, in its sole discretion,
whose determination will be final and binding. None of the Company, the Dealer
Manager, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or incur any liability for failure to give any such notification.
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in "THE TENDER OFFER -- SECTION 3. PROCEDURES FOR
ACCEPTING THE OFFER AND TENDERING SHARES".
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer will be a taxable transaction for federal income tax
purposes and may also be a taxable transaction under applicable state, local or
foreign tax laws. In general, a shareholder will recognize gain or loss for
federal income tax purposes equal to the difference between the amount of cash
received in exchange for the Shares sold and such shareholder's adjusted tax
basis in such Shares. Assuming the Shares constitute capital assets in the
hands of the shareholder, such gain or loss will be capital gain or loss and
will be long-term capital gain or loss if the holder will have held the Shares
for more than one year at the time of the sale. Gain or loss will be calculated
separately for each block of Shares tendered pursuant to the Offer.
-20-
<PAGE>
In general, in order to prevent backup federal income tax withholding at a
rate of 31% on the cash consideration to be received in the Offer, each
shareholder who is not otherwise exempt from such requirements must provide such
holder's correct taxpayer identification number (and certain other information)
by completing the Substitute Form W-9 in the Letter of Transmittal.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF
SHAREHOLDERS, INCLUDING BROKER-DEALERS, SHAREHOLDERS WHO ACQUIRED
SHARES PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION, INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES
AND FOREIGN CORPORATIONS.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. SHAREHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
OFFER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM
TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally
traded on Nasdaq SmallCap Market, Inc. under the ticker symbol "RAKO". The
following table sets forth the high and low bid and ask prices per Share during
the quarters indicated:
<TABLE>
<CAPTION>
Bid Ask
High Low High Low
Year Ended December 31, 1995:
- -----------------------------
<S> <C> <C> <C> <C>
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 Ended December 31, 1996:
- ---------------------
First Quarter 1-17/32 1-1/4 1-5/8 1-1/2
Second Quarter 1-15/16 1-1/8 2-1/8 1-3/8
Third Quarter 1-21/32 1-5/16 2 1-9/16
Fourth Quarter 1-7/8 1-1/4 2 1-13/32
Year Ending December 31, 1997:
- ---------------------
First Quarter 1-13/16 1-9/16 2-1/16 1-3/4
</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. As of June 13, 1997, the Common Stock was held by approximately 1,400
stockholders of record. The Registrant has not paid any dividends since it
became a publicly held company.
-21-
<PAGE>
There is no legal restriction on the payment of dividends by the Company.
The Company has never declared or paid dividends and has no future plans to do
so. The Company currently intends to retain any future earnings for the
development of its business.
On June 3, 1997, the last full trading day prior to the announcement of the
Offer, the closing price per Share as reported on Nasdaq was $1.875. On
, 1997, the last full trading day prior to the commencement of the Offer, the
closing price per Share as reported on Nasdaq was $ .
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set
forth herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been furnished by the Company.
GENERAL. The Company is a Texas corporation with its principal executive
offices located at 2301 Central Parkway, Houston, Texas 77092. The Company
designs, manufacturers and markets certain equipment for light trucks
principally under the name "Rawson-Koenig". Its chief products are truck tool
boxes, truck service bodies, winches and truck-mounted cranes.
In 1983, the Company's stock was registered and spun-off by Keystone
International, Inc. to the shareholders of Keystone International, Inc. In
1987, Rawson Industries, Inc. was merged into Koenig, Inc. and the Rawson
Industries, Inc. shareholders received 2,300,000 registered shares of Common
Stock. Since that time, the Company has made no additional public offerings of
Common Stock.
FINANCIAL INFORMATION. Set forth below is certain selected financial
information relating to the Company which has been excerpted or derived from the
audited financial statements contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1996 (the "Form 10-K") and the Form 10-Q
for the three months ended March 31, 1997 (the "Form 10-Q") and the Form 10-Q
for the three months ended March 31, 1996. More comprehensive financial
information is included in the Form 10-K and Form 10-Q and other documents filed
by the Company with the Commission. The financial information that follows is
qualified in its entirety by reference to such reports and other documents,
including the financial statements and related notes contained therein. Such
reports and other documents may be examined and copies may be obtained from the
offices of the Commission in the manner set forth below. In addition, Schedules
IV and V hereto set forth the Company's audited financial statements for the
year ended December 31, 1996 and the Company's unaudited financial statements
for the three months ended March 31, 1997, respectively.
-22-
<PAGE>
Summary Financial and Operating Data
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS
----------------------- ENDED MARCH 31,
----------------
1996 1995 1997/2/ 1996
----------- ---------- -------- ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT:
Sales $19,522 $18,682 $ 5,411 $5,036
Net income 1,100 825 490 261
BALANCE SHEET (at end of period):
Working Capital 3,800 4,193 4,156 3,637
Total assets 10,489 9,824 10,509 9,453
Shareholders' equity 7,203 6,103 7,693 6,365
PER SHARE:/1/
Net income per common share .28 .21 .13 .07
</TABLE>
__________________________________
/1/Average number of shares of Common Stock outstanding during each period was
3,901,190.
/2/The three months ended March 31, 1997, includes a $280,000 non-recurring
reduction to cost of sales as a result of a decrease in the accrued liability
for potential claims arising from employee injuries incurred in the normal
course of business prior to May 1, 1994.
-23-
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES; BOOK VALUE PER SHARE. The ratio of
earnings to fixed charges for the years ended December 31, 1996 and December 31,
1995, was 12.1 to 1 and 7.1 to 1, respectively. The ratio of earnings to fixed
charges for the three months ended March 31, 1997 and March 31, 1996, was 18.3
to 1 and 9.9 to 1, respectively. The book value per share was $1.85 at December
31, 1996 and $1.97 at March 31, 1997.
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS. The following
unaudited pro forma condensed financial information and explanatory notes give
effect to the Offer and are based on the estimates and assumptions set forth in
the notes to such statements. This pro forma information has been prepared
using the historical financial statements of the Company and should be read in
conjunction with the historical financial statements and notes thereto included
elsewhere in this Offer to Purchase.
The pro forma condensed balance sheet information as of December 31, 1996
and as of March 31, 1997, gives effect to the Offer as if it had occurred on
such dates, respectively. The pro forma condensed income statements from the
year ended December 31, 1996 and the three month period ended March 31, 1997
gives effect to the Offer as if it had occurred on January 1, 1996 and January
1, 1997, respectively. The pro forma condensed financial data may not be
indicative of actual results that would have been achieved if the Offer had
occurred on the date indicated or the results that may be realized in the
future.
-24-
<PAGE>
Rawson-Koenig, Inc.
Pro Forma Balance Sheet
December 31, 1996
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
----------- ------------ ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 334(a) $ (10)(c) $ 324
Accounts receivable, trade, net 1,269 1,269
Inventories 3,941 3,941
Prepayments and other 107 107
------- ------ -------
Total current assets 5,651 (10) 5,641
Property, plant and equipment, net 4,838 4,838
Other assets 10 (c) 10
------- ------ -------
Total assets $10,489 $ -- $10,489
======= ====== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 229 $ 308 (b) $ 537
Accounts payable 685 685
Accrued expenses 858 858
Income taxes payable 79 79
------- ------ -------
Total current liabilities 1,851 308 2,159
Long-term debt, less current portion 1,435 350 (a) 4,829
3,044 (b)
------ -------
Total liabilities 3,286 3,702 6,988
------- ------ -------
Shareholders' equity:
Common stock 1 (350)(a) 1
Additional paid-in-capital 4,529 (3,352) 827
Retained earnings 2,673 2,673
------- ------ -------
Total shareholders' equity 7,203 (3,702) 3,501
------- ------ -------
Total liabilities and shareholders' equity $10,489 $ -- $10,489
======= ====== =======
</TABLE>
-25-
<PAGE>
Rawson-Koenig, Inc.
Pro Forma Balance Sheet
March 31, 1997
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ------------- ---------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 497 $ (10)(c) $ 487
Accounts receivable, trade, net 1,629 1,629
Inventories 3,493 3,493
Prepayments and other 124 124
------- ------- -------
Total current assets 5,743 (10) 5,733
Property, plant and equipment, net 4,766 4,766
Other assets 10 (c) 10
------- ------- -------
Total assets $10,509 $ -- $10,509
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 232 $ 308 (b) $ 540
Accounts payable 787 787
Accrued expenses 417 417
Income taxes payable 151 151
------- ------- -------
Total current liabilities 1,587 308 1,895
Long-term debt, less current portion 1,175 350 (a) 4,569
3,044 (b)
Deferred income tax 54 54
------- ------- -------
Total liabilities 2,816 3,702 6,518
------- ------- -------
Shareholders' equity:
Common stock
Additional paid-in-capital 1 (350)(a) 1
4,529 (3,352)(b) 827
Retained earnings
3,163 3,163
------- ------- -------
Total shareholders' equity 7,693 (3,702) 3,991
------- ------- -------
Total liabilities and shareholders' equity $10,509 $ -- $10,509
======= ======= =======
</TABLE>
-26-
<PAGE>
Rawson-Koenig, Inc.
Pro Forma Income Statement
For the year ended December 31, 1996
(Unaudited)
(In Thousands, Except per Share Data)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
----------- ------------ ----------
<S> <C> <C> <C>
Sales $19,522 $ $19,522
Cost of sales 15,002 15,002
------- --------- -------
Gross profit 4,520 4,520
Selling, general and administrative expenses 2,749 2 (e) 2,751
------- --------- -------
Income from operations 1,771 (2) 1,769
Other income (expense):
Interest expense (147) (303) (d) (450)
Other, net 9 9
------- --------- -------
Income before provision for income 1,633 (305) 1,328
taxes ------- --------- -------
Provision for income taxes:
Federal 454 (104) (f) 350
State 79 (14) (f) 65
--------- -------
533 (118) 415
------- --------- -------
Net income $ 1,100 $ (187) $ 913
======= ========= =======
Net income per share $ 0.28 $ (0.05) $ 0.23
======= ========= =======
</TABLE>
-27-
<PAGE>
Rawson-Koenig, Inc.
Pro Forma Income Statement
For the three months ended March 31, 1997
(Unaudited)
(In Thousands, Except per Share Data)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
----------- ------------ ----------
<S> <C> <C> <C>
Sales $5,411 $ $5,411
Cost of sales 3,990 3,990
------ --------- ------
Gross profit 1,421 1,421
Selling, general and administrative expenses 806 (1)(e) 807
------ --------- ------
Income from operations 615 (1) 614
Other income (expense):
Interest expense (34) (78)(d) (112)
Other, net 6 6
------ --------- ------
Income before provision for income taxes 587 (79) 508
------ --------- ------
Provision for income taxes:
Federal 82 (11)(f) 71
State 15 (2)(f) 13
------ --------- ------
97 (13) 84
------ --------- ------
Net income $ 490 $ (66) $ 424
====== ========= ======
Net income per share $ 0.13 $ (0.02) $ 0.11
====== ========= ======
</TABLE>
Notes to Pro Forma Condensed Financial Statements.
(a) Estimated expense of the Offer of $350 to be financed from bank loan
proceeds.
(b) Purchase of Public Shareholders' shares to be financed from bank loan
proceeds:
<TABLE>
<S> <C>
Shares held by Public Shareholders 1,559
Times $2.15 per share Offer Price x $ 2.15
------
Total price $3,352
======
Summary of bank loan proceeds:
Total price $3,352
Estimated expenses 350
------
Total loan proceeds 3,702
Less current portion (308)
------
Long-term debt $3,394
======
</TABLE>
(c) Bank loan fees based on 0.25 percent of bank loan proceeds.
(d) Interest expense at 8.5% per year for the respective periods.
(e) Bank loan fees amortized on the straight-line method over five years.
(f) Income tax effect on items (d) and (e) for the respective periods.
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The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Information as of particular
dates concerning the Company's directors and officers, their remuneration, stock
options granted to them, the principal holders of the Company's securities and
any material interest of such persons in transactions with the Company is
required to be disclosed in proxy statements distributed to the Company's
stockholders and filed with the Commission. Such reports, proxy statements and
other information should be available for inspection at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and also should be available for inspection at the
Commission's regional offices located at Seven World Trade Center, 13th Floor
New York, New York 10048 and the Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such materials may also be obtained
by mail, upon payment of the Commission's customary fees, by writing to its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The
information should also be available for inspection at the National Association
of Securities Dealers, Inc., 1735 K Street N.W., Washington, D.C. 20006.
8. FINANCING OF THE OFFER AND THE MERGER. The total amount of funds
required by the Company to consummate the Offer, the reverse stock split, and
the Merger (if necessary), and to pay related fees and expenses is estimated to
be approximately $3.7 million. The Company will ensure that it has sufficient
cash to acquire all the Shares from the Public Shareholders by a real estate
term loan facility in the principal amount of approximately $4.2 million
maturing June 18, 2002, and an equipment term loan in the principal amount of up
to approximately $1.4 million maturing. These loans will bear interest at the
lender's prime rate of interest and are between the Company, as borrower and
Bank One, Texas, N.A., as lender. Each of these loans are governed by an
Amended and Restated Letter Loan Agreement, which also includes a revolving
promissory note in the principal amount of $2.2 million for working capital
purposes, and an advancing term promissory note in the principal amount of $1.0
million for capital expenditures. All of these loans are secured by the real
estate, equipment, accounts receivable and inventory of the Company.
Approximately $1.3 million of pre-existing debt borrowed by the Company under
its previous loan agreements with Bank One, Texas, N.A. has been transferred to
these loan facilities.
Additional material terms of the Amended and Restated Letter Loan Agreement
are (i) clearance to proceed with the Offer from the Securities and Exchange
Commission by affirmation of no further comments, and (ii) the usual and
customary affirmative and negative covenants related to the Company's financial
condition.
In connection with the financing of the Offer, Bank One, Texas N.A.
commissioned and received appraisals from three appraisal firms, with each
appraisal firm appraising different assets (collectively, the "Appraisers").
The Company did not give any instructions to, or place any limitations on, any
of the Appraisers in connection with the appraisals.
The Company plans to repay such borrowings from funds generated by
operations and does not anticipate any refinancing of the debt incurred in
connection with the Offer or the Merger, if necessary. However, it is
anticipated that the revolving loan for working capital purposes and the advance
term promissory note may be extended, refinanced, renewed, increased or amended
in the future, but the Company currently has no plans to do so.
9. DIVIDENDS AND DISTRIBUTIONS. If, on or after May 31, 1997, the
Company should declare or pay any dividend on the Shares or make any other
distribution (including the issuance of additional shares of capital stock
pursuant to a stock dividend or stock split, the issuance of other securities or
the issuance of rights for the purchase of any securities) with respect to the
Shares that is payable or distributable to shareholders of record on a date
prior to the transfer to the name of the Company on the Company's stock transfer
records of the Shares purchased pursuant to the Offer, then, without prejudice
to the Company's rights under "THE TENDER OFFER -- SECTION 11. CERTAIN
CONDITIONS OF THE OFFER", (i) the purchase price per Share payable by the
Company pursuant to the Offer will be reduced to the extent any such dividend or
distribution is payable in cash and (ii) any non-cash dividend, distribution or
right shall be received and held by the tendering
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shareholder for the account of the Company and will be required to be promptly
remitted and transferred by each tendering shareholder to the Depositary for the
account of the Company, accompanied by appropriate documentation of transfer.
10. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; Nasdaq QUOTATION AND
EXCHANGE ACT REGISTRATION. The purchase of Shares by the Company pursuant to
the Offer will reduce the number of Shares that might otherwise trade publicly
and will reduce the number of holders of Shares, which could adversely affect
the liquidity and market value of the remaining Shares held by the public.
The Company intends to cause the Shares not to be listed for quotation by
Nasdaq following consummation of the Offer, and if necessary, the Merger.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the standards for continued inclusion in Nasdaq.
According to Nasdaq's published guidelines, the Shares would not be eligible to
be included for listing on the Nasdaq SmallCap Market, Inc. if, among other
things, the number of holders of the Shares falls below 300, or if the number of
publicly held Shares falls below 100,000, or if the aggregate market value of
such publicly held Shares does not exceed $200,000 or there are not at least two
registered and active market makers, one of which may be a market maker entering
a stabilizing bid, Nasdaq rules provide that the securities would no longer
qualify for inclusion in Nasdaq and Nasdaq would cease to provide any
quotations. Shares held directly or indirectly by an officer or director of the
Company or by a beneficial owner of more than 10% of the Common Stock will
ordinarily not be considered as being publicly held for this purpose. In the
event the Shares were no longer eligible for Nasdaq quotation, quotations might
still be available from other sources. The extent of the public market for the
Shares and the availability of such quotations would, however, depend upon the
number of holders of such Shares remaining at such time, the interest in
maintaining a market in such Shares on the part of securities firms, the
possible termination of registration of such Shares under the Exchange Act as
described below and other factors.
The Shares are not currently "margin securities", as such term is defined
under the rules of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of not
allowing brokers to extend credit on the collateral of such securities.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if the Shares are not listed on a national securities exchange and there are
fewer than 300 record holders. The termination of the registration of the
Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to holders of Shares and to the
Commission and would make certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b), the requirement of
furnishing a proxy statement in connection with shareholders' meetings and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable to the Shares. In addition,
"affiliates" of the Company and persons holding "restricted securities" of the
Company may be deprived of the ability to dispose of such securities pursuant to
Rule 144 promulgated under the Securities Act of 1933, as amended. The Company
currently intends to terminate the registration of the Shares under the Exchange
Act as soon after consummation of the Offer as the requirements for termination
of registration are met; if such requirements are not met after the consummation
of the Offer, the Company intends to declare a reverse stock split of 1 share
for 100 shares of Common Stock as an additional step to ensure that the
requirements for termination of registration are met, and, if necessary, to
consummate the Merger.
11. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision
of the Offer, the Company shall not be required to accept for payment or pay for
any Shares tendered pursuant to the Offer, and may terminate or amend the Offer
and may postpone the acceptance for payment of, and payment for, Shares
tendered, if prior to the acceptance for payment of Shares, any of the following
conditions exist:
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<PAGE>
(a) an order shall have been entered in any action or proceeding
before any federal or state court or governmental agency or other
regulatory body or a permanent injunction by any federal or state court of
competent jurisdiction in the United States shall have been issued and
remain in effect making illegal the purchase of, or payment for, any Shares
by the Company;
(b) there shall have been any federal or state statute, rule or
regulation enacted or promulgated on or after the date of the Offer that
could reasonably be expected to result, directly or indirectly, in any of
the consequences referred to in paragraph (a) above;
(c) there shall have occurred and be remaining in effect (i) any
general suspension of, or limitation on prices for, trading in securities
of the Company on Nasdaq, (ii) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States, (iii)
a commencement of a war or armed hostilities or other national or
international calamity, directly or indirectly, involving the United States
or (iv) in the case of any of the foregoing existing on the date hereof, a
material acceleration or worsening thereof;
(d) the Company (with the approval of a majority of the Independent
Directors) shall have agreed that the Company shall terminate the Offer or
postpone the acceptance for payment of or payment for Shares thereunder;
which, in the reasonable judgment of the Company in any such case, and
regardless of the circumstances giving rise to any such condition, makes it
inadvisable to proceed with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right; the waiver of any such right with respect to particular facts and
other circumstances shall not be deemed a waiver with respect to any other facts
and circumstances; and each such right shall be deemed an ongoing right that may
be asserted at any time and from time to time.
12. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
GENERAL. The Company is not aware of any license or other regulatory
permit that appears to be material to the business of the Company that might be
adversely affected by the acquisition of Shares by the Company pursuant to the
Offer or, except as set forth below, of any approval or other action by any
domestic (federal or state) or foreign governmental, administrative or
regulatory authority or agency which would be required prior to the acquisition
of Shares by the Company pursuant to the Offer. Should any such approval or
other action be required, it is the Company's present intention to seek such
approval or action. The Company does not currently intend, however, to delay
the purchase of Shares tendered pursuant to the Offer pending the outcome of any
such action or the receipt of any such approval (subject to the Company's right
to decline to purchase Shares if any of the conditions in THE TENDER OFFER --
SECTION 11. CERTAIN CONDITIONS OF THE OFFER shall have occurred). There can be
no assurance that any such approval or other action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to the business of the Company, or that certain parts of the businesses
of the Company, might not have to be disposed of or held separate or other
substantial conditions complied with in order to obtain such approval or other
action or in the event that such approval was not obtained or such other action
was not taken. The Company's obligation under the Offer to accept for payment
and pay for Shares is subject to certain conditions, including conditions
relating to the legal matters discussed in this Section 12. See "THE TENDER
OFFER -- SECTION 11. CERTAIN CONDITIONS OF THE OFFER".
STATE TAKEOVER LAWS. The Company conducts business in a number of states
throughout the United States, some of which have enacted takeover laws. Texas
has not enacted any such laws. The Company does not know whether any of these
laws will, by their terms, apply to the Offer and has not complied with any such
laws. Should any person seek to apply any state takeover law, the
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<PAGE>
Company will take such action as then appears desirable, which may include
challenging the validity or applicability of any such statute in appropriate
court proceedings. In the event it is asserted that one or more state takeover
laws are applicable to the Offer, and an appropriate court does not determine
that it is inapplicable or invalid as applied to the Offer, the Company might be
required to file certain information with, or receive approvals from, the
relevant state authorities. In addition, if enjoined, the Company might be
unable to accept for payment any Shares tendered pursuant to the Offer, or be
delayed in continuing or consummating the Offer. In such case, the Company may
not be obligated to accept for payment any Shares tendered. See "THE TENDER
OFFER -- SECTION 11. CERTAIN CONDITIONS OF THE OFFER".
ANTITRUST. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
and the rules that have been promulgated thereunder by the Federal Trade
Commission (the "FTC"), certain transactions may not be consummated unless
certain information has been furnished to the Antitrust Division of the
Department of Justice and the FTC and certain waiting period requirements have
been satisfied. The acquisition of Shares by the Company pursuant to the Offer,
however, is not subject to such requirements. See "THE TENDER OFFER -- SECTION
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES".
LITIGATION. To the best knowledge of the Company, no lawsuits have been
filed relating to the Offer, the Merger or the proposed reverse stock split
since June 4, 1997, the date of the announcement by the Company that it proposed
to acquire the Shares from the Public Shareholders.
13. FEES AND EXPENSES. Except as set forth below, the Company will not
pay any fees or commissions to any broker, dealer or other person for soliciting
tenders of Shares pursuant to the Offer.
Wheat, First Securities, Inc. is acting as Dealer Manager in connection
with the Offer. The Dealer Manager will be paid a fee of the greater of (i)
$0.05 per Share for each Share tendered pursuant to the Offer and (ii) $60,000.
This fee will be a minimum of $60,000 and approximately $78,000 if all of the
Shares are tendered pursuant to the Offer. The Company has agreed to reimburse
the Dealer Manager for all reasonable out-of-pocket expenses incurred by the
Dealer Manager up to $3,000, including the reasonable fees and expenses of legal
counsel, and to indemnify the Dealer Manager against certain liabilities and
expenses in connection with its engagement, including certain liabilities under
the federal securities laws.
The Company has retained D.F. King & Co., Inc., as the Information Agent,
and Harris Trust Company of New York, as the Depositary, in connection with the
Offer. The Information Agent may contact holders of Shares by mail, telephone,
telecopy, telegraph and personal interview and may request banks, brokers,
dealers and other nominee stockholders to forward materials relating to the
Offer to beneficial owners.
As compensation for acting as Information Agent in connection with the
Offer, D.F. King & Co., Inc. will be paid an estimated fee of $12,000 and will
also be reimbursed for certain out-of-pocket expenses and may be indemnified
against certain liabilities and expenses in connection with the Offer, including
certain liabilities under the federal securities laws. The Company will pay the
Depositary a fee of $10,000 for its services in connection with the Offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Depositary
against certain liabilities and expenses in connection therewith, including
certain liabilities under federal securities laws. Brokers, dealers, commercial
banks and trust companies will be reimbursed by the Company for customary
handling and mailing expenses incurred by them in forwarding material to their
customers.
14. MISCELLANEOUS. The Company is not aware of any jurisdiction in which
the making of the Offer is prohibited by any administrative or judicial action
pursuant to any valid state statute. If the Company becomes aware of any valid
state statute prohibiting the making of the Offer or the acceptance of Shares
pursuant thereto, the Company will make a good faith effort to comply with any
such state statute. If, after such good faith effort, the Company cannot comply
with any such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders
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of Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of the Company by the Dealer Manager
or by one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY NOT CONTAINED IN THIS OFFER TO PURCHASE
OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Pursuant to Rule 13e-3 and Rule 13e-4 of the General Rules and Regulations
under the Exchange Act, the Company has filed with the Commission the Schedule
13E-3 and the Schedule 13E-4 together with exhibits, furnishing additional
information with respect to the Offer and may file amendments thereto. Such
statements, including exhibits and any amendments thereto, which furnish certain
additional information with respect to the Offer, may be inspected at, and
copies may be obtained from, the same places and in the same manner as set forth
in "THE TENDER OFFER -- SECTION 7. CERTAIN INFORMATION CONCERNING THE COMPANY"
(except that they will not be available at the regional offices of the
Commission).
RAWSON-KOENIG, INC.
June , 1997
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the name, current business address,
citizenship and present principal occupation or employment, and material
occupations, positions, offices or employments and business addresses thereof
for the past five years of each directors and executive officer of the Company.
Unless otherwise indicated, each such person is a citizen of the United States
of America.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME, CITIZENSHIP MATERIAL POSITIONS HELD DURING THE PAST FIVE
AND CURRENT BUSINESS ADDRESS YEARS AND BUSINESS ADDRESSES THEREOF
- ------------------------------------- ---------------------------------------------
<S> <C>
Thomas C. Rawson Mr. Rawson has been Chairman of the Board and the
2301 Central Parkway Chief Executive Officer of the Company since October
Houston, TX 77092 1989. From September 1987 to October 1989, Mr.
Rawson was a Director and President of the Company.
Catherine A. Rawson Mrs. Catherine Rawson has been President, Principal
2301 Central Parkway Financial Officer and a Director of the Company since
Houston, TX 77092 October 1989. From September 1987 to October
1989, Mrs. Rawson was Treasurer, Vice President of
Administration and a Director of the Company.
Pamela Y. Rawson Mrs. Pamela Rawson has been a Director of the
2301 Central Parkway Company since October 1989. Mrs. Rawson has been a
Houston, TX 77092 part-time payroll administrator for the Company since
1994.
Farrell G. Huber, Jr. Farrell G. Huber, Jr. is currently retired and was a
5220 Texas Avenue Director of Keystone International, Inc., 9600 W. Gulf
Houston, TX 77011 Bank Road, Houston, TX 77040, from 1980 to May 5,
1997. Mr. Huber has been a director of the Company
since July 1983, except for the period from September
18, 1987 through September 21, 1987.
George W. Fazakerly Mr. Fazakerly has been a Director of the Company since
Vial, Hamilton, Koch & Knox, L.L.P. October 1989. Since January 1974 Mr. Fazakerly has
1717 Main Street, Suite 4400 been a partner in the Dallas, Texas law firm of Vial,
Dallas, TX 75201 Hamilton, Koch & Knox, L.L.P.
Allen F. Rhodes Allen F. Rhodes is currently Chairman of the Silver Fox
5634 Ella Lee Lane Advisors, P.O. Box 572465, Houston, TX 77257. He
Houston, TX 77056 has been a member of the Silver Fox Advisors since
1993. He was President of Arnco Technology, P.O. Box
40472, Houston, TX 77240, from 1991 to 1993. Mr.
Rhodes has been a Director of Keystone International,
Inc., 9600 W. Gulf Bank Road, Houston, TX 77040,
since 1980.
Joseph M. Scheer Mr. Scheer has been a Director of the Company since
16262 Dorilee Lane 1991. Since 1994, Mr. Scheer has been a director of
Encino, CA 91436 Microsemi Corp., 2830 S. Fairview St., Santa Ana, CA
92704. Mr. Scheer has been a member of the Advisory
Board of Soligen Technologies, Inc., 19408 Londelius
Street, Northridge, CA 91324 since 1996 and was a
Director of Laserform, Inc., 1124 Centre Road, Auburn
Hills, MI 48326, from 1989 to 1994.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Fredrick C. Wamhoff Fredrick C. Wamhoff has been Vice President - General
2301 Central Parkway Counsel and Secretary of the Company since July 1996.
Houston, TX 77092 Mr. Wamhoff has been a Vice President of the Company
since 1988. From 1990 to July 1996, Mr. Wamhoff
was Vice President - Operations and Secretary of the
Company.
Richard F. Koenig Richard F. Koenig has been Vice President - Information
2301 Central Parkway Systems of the Company since January 1994. Mr.
Houston, TX 77092 Koenig joined the Company in 1967 and has served in
various functions over the years including as manager of
cost estimating from 1989 through July 1996.
</TABLE>
I-2
<PAGE>
SCHEDULE II
OPINION OF RAUSCHER PIERCE REFSNES, INC.
May 27 1997
Board of Directors
Rawson-Koenig, Inc.
2301 Central Parkway
Houston, Texas 77092
Attention: Mr. Thomas C. Rawson
Chairman of the Board and
Chief Executive Officer
Ladies and Gentlemen:
You have advised Rauscher Pierce Refsnes, Inc. ("RPR") that Rawson-Koenig,
Inc. ("Rawson") has proposed to purchase all outstanding publicly held common
shares of Rawson at a price of $2.15 per share in cash in a "going private"
transaction. You have requested that RPR issue an opinion ("Opinion") as to the
fairness to the public common stockholders of Rawson of the financial terms of
the proposed transaction, as set forth in a preliminary Tender Offer Information
Circular (the "Tender Offer") dated May 20, 1997.
RPR, as part of its investment banking business, is continually engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes.
In arriving at our opinion, we have, among other things:
1. Reviewed a preliminary Tender Offer document dated May 20, 1997;
2. Reviewed Rawson's Form 10-K for the years ended December 31, 1996,
1995, 1994 and 1993;
3. Reviewed Rawson's internal projections for 1997 through 2001 prepared
in April, 1997;
4. Reviewed Rawson's corporate profile and product literature;
5. Considered such other information, financial studies, analyses and
investigations as we deemed relevant under the circumstances; and
6. Discussed with management of Rawson the outlook for future operating
results, the assets and liabilities of the Company, material in the
foregoing documents, and other matters we considered relevant to our
inquiry.
In our review and in arriving at our opinion, we have, with your
permission, (i) not independently verified any of the foregoing information and
have relied upon its being complete and accurate in all material respects, and
(ii) not made an independent evaluation or appraisal of specific assets of
Rawson. Our opinion is provided solely for your benefit in connection with the
proposed transaction, according to the terms of our engagement letter dated May
5, 1997.
II-1
<PAGE>
Rawson-Koenig, Inc.
May 27, 1997
Page 2
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration to be received pursuant to the proposed
transaction is fair to the public common stockholders of Rawson from a financial
point of view.
RAUSCHER PIERCE REFSNES, INC.
By: /s/ Clyde Buck
--------------------------
G. Clyde Buck
Managing Director
II-2
<PAGE>
SCHEDULE III
SUMMARY OF SHAREHOLDER APPRAISAL RIGHTS AND
TEXT OF ARTICLES 5.11, 5.12, 5.13 AND 5.16 OF THE
TEXAS BUSINESS CORPORATION ACT
SUMMARY OF SHAREHOLDER APPRAISAL RIGHTS. No appraisal rights are available
in connection with the Offer. However, if the Merger is consummated,
shareholders will have certain rights under Texas Law to dissent and demand
appraisal of, and to receive payment in cash of the fair value of, their Shares.
Such rights to dissent, if the statutory procedures are complied with, could
lead to a judicial determination of the fair value of the Shares, as of the day
prior to the date on which the shareholders' vote was taken approving the Merger
(excluding any element of value arising from the accomplishment or expectation
of the Merger), required to be paid in cash to such dissenting shareholders for
their Shares. In addition, such dissenting shareholders would be entitled to
receive payment of a fair rate of interest beginning 91 days after the date of
the Merger to the date of such judgment on the amount determined to be the fair
value of their Shares. In determining the fair value of the Shares, the court
is required to take into account all relevant factors. Accordingly, such
determination could be based upon considerations other than, or in addition to,
the market value of the Shares, including, among other things, asset values and
earning capacity. In Parkview v. Waco Construction Inc., the Texas Court of
Appeals stated, among other things, that a qualified appraiser appointed by the
court shall have the power to examine any of the books and records of the
corporation the shares of which he is charged with valuing and he shall make a
determination of the fair value of the shares upon such investigation as to him
may seem proper. The appraiser shall also afford a reasonable opportunity to
the parties interested to submit to him pertinent evidence as to the value of
the shares. Therefore, the value so determined in any appraisal proceeding
could be the same, more or less than the purchase price per Share received in
the Merger.
In addition, Texas courts have held that, in certain circumstances, a
controlling shareholder of a company involved in a merger has a fiduciary duty
to other shareholders that requires that the merger be fair to such other
shareholders. In determining whether a merger is fair to minority shareholders,
Texas courts have considered, among other things, the type and amount of
consideration to be received by the shareholders and whether there was fair
dealing among the parties. The Texas Court of Appeals stated in Gannon v.
Parker, that the remedy ordinarily available to minority stockholders in a cash-
out merger is the right to appraisal described above. However, a damages remedy
may be available if a merger is found to be the product of fraud or
irregularity.
TEXAS BUSINESS CORPORATION ACT
Article 5.11. Rights of Dissenting Shareholders in the Event of Certain
Corporate Actions
A. Any shareholder of a domestic corporation shall have the right to
dissent from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party if shareholder
approval is required by Article 5.03 or 5.16 of this Act and the shareholder
holds shares of a class or series that was entitled to vote thereon as a class
or otherwise;
(2) Any sale, lease, exchange or other disposition (not including any
pledge, mortgage, deed of trust or trust indenture unless otherwise provided in
the articles of incorporation) of all, or substantially all, the property and
assets, with or without good will, of a corporation requiring the special
authorization of the shareholders as provided by this Act;
(3) Any plan of exchange pursuant to Article 5.02 of this Act in which the
shares of the corporation of the class or series held by the shareholder are to
be acquired.
B. Notwithstanding the provisions of Section A of this Article, a
shareholder shall not have the right to dissent from any plan of merger in which
there is a single surviving or new domestic or
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<PAGE>
foreign corporation, or from any plan of exchange, if (1) the shares held by the
shareholder are part of a class of shares which are listed on a national
securities exchange, or are held of record by not less than 2,000 holders, on
the record date fixed to determine the shareholders entitled to vote on the plan
of merger or the plan of exchange, and (2) the shareholder is not required by
the terms of the plan of merger or the plan of exchange to accept for his shares
any consideration other than (a) shares of a corporation that, immediately after
the effective time of the merger or exchange, will be part of a class or series
of shares of which are (i) listed, or authorized for listing upon official
notice of issuance, on a national securities exchange, or (ii) held of record by
not less than 2,000 holders, and (b) cash in lieu of fractional shares otherwise
entitled to be received.
Article 5.12 Procedure for Dissent by Shareholders as to Said Corporate Actions
A. Any shareholder of any domestic corporation who has the right to
dissent from any of the corporate actions referred to in Article 5.11 of this
Act may exercise that right to dissent only by complying with the following
procedures:
(1)(a) With respect to proposed corporate action that is submitted to
a vote of shareholders at a meeting, the shareholder shall file with the
corporation, prior to the meeting, a written objection to the action, setting
out that the shareholder's right to dissent will be exercised if the action is
effective and giving the shareholder's address, to which notice thereof shall be
delivered or mailed in that event. If the action is effected and the
shareholder shall not have voted in favor of the action, the corporation, in the
case of action other than a merger, or the surviving or new corporation (foreign
or domestic) or other entity that is liable to discharge the shareholder's right
of dissent, in the case of a merger, shall, within ten (10) days after the
action is effected, deliver or mail to the shareholder written notice that the
action has been effected, and the shareholder may, within ten (10) days from the
delivery or mailing of the notice, make written demand on the existing,
surviving, or new corporation (foreign or domestic) or other entity, as the case
may be, for payment of the fair value of the shareholder's shares. The fair
value of the shares shall be the value thereof as of the day immediately
preceding the meeting, excluding any appreciation or depreciation in
anticipation of the proposed action. The demand shall state the number and class
of the shares owned by the shareholder and the fair value of the shares as
estimated by the shareholder. Any shareholder failing to make demand within the
ten (10) day period shall be bound by the action.
(b) With respect to proposed corporate action that is approved
pursuant to Section A of Article 9.10 of this Act, the corporation, in the case
of action other than a merger, and the surviving or new corporation (foreign or
domestic) or other entity that is liable to discharge the shareholder's right of
dissent, in the case of a merger, shall, within ten (10) days after the date the
action is effected, mail to each shareholder of record as of the effective date
of the action notice of the fact and date of the action and that the shareholder
may exercise the shareholder's right to dissent from the action. The notice
shall be accompanied by a copy of this Article and any articles or documents
filed by the corporation with the Secretary of State to effect the action. If
the shareholder shall not have consented to the taking of the action, the
shareholder may, within twenty (20) days after the mailing of the notice, make
written demand on the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, for payment of the fair value of
the shareholder's shares. The fair value of the shares shall be the value
thereof as of the date the written consent authorizing the action was delivered
to the corporation pursuant to Section A of Article 9.10 of this Act, excluding
any appreciation or depreciation in anticipation of the action. The demand
shall state the number and class of shares owned by the dissenting shareholder
and the fair value of the shares as estimated by the shareholder. Any
shareholder failing to make demand within the twenty (20) day period shall be
bound by the action.
(2) Within twenty (20) days after receipt by the existing, surviving,
or new corporation (foreign or domestic) or other entity, as the case may be, of
a demand for payment made by a dissenting shareholder in accordance with
Subsection (1) of this Section, the corporation (foreign or domestic) or other
entity shall deliver or mail to the shareholder a written notice that shall
either set out that the corporation (foreign or domestic) or other entity
accepts the amount claimed in the demand and agrees to pay that amount within
ninety (90) days after the date on which the action was
III-2
<PAGE>
effected, and, in the case of shares represented by certificates, upon the
surrender of the certificates duly endorsed, or shall contain an estimate by the
corporation (foreign or domestic) or other entity of the fair value of the
shares, together with an offer to pay the amount of that estimate within ninety
(90) days after the date on which the action was effected, upon receipt of
notice within sixty (60) days after that date from the shareholder that the
shareholder agrees to accept that amount and, in the case of shares represented
by certificates, upon the surrender of the certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate
action was effected, the value of the shares is agreed upon between the
shareholder and the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, payment for the shares shall be
made within ninety (90) days after the date on which the action was effected
and, in the case of shares represented by certificates, upon surrender of the
certificates duly endorsed. Upon payment of the agreed value, the shareholder
shall cease to have any interest in the shares or in the corporation.
B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking for
a finding and determination of the fair value of the shareholder's shares. Upon
the filing of any such petition by the shareholder, service of a copy thereof
shall be made upon the corporation (foreign or domestic) or other entity, which
shall, within ten (10) days after service, file in the office of the clerk of
the court in which the petition was filed a list containing the names and
addresses of all shareholders of the domestic corporation who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the corporation (foreign or domestic) or other
entity. If the petition shall be filed by the corporation (foreign or domestic)
or other entity, the petition shall be accompanied by such a list. The clerk of
the court shall give notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or domestic) or other
entity and to the shareholders named on the list at the addresses therein
stated. The forms of the notices by mail shall be approved by the court. All
shareholders thus notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. The
appraisers shall have power to examine any of the books and records of the
corporation the shares of which they are charged with the duty of valuing, and
they shall make a determination of the fair value of the shares upon such
investigation as to them may seem proper. The appraisers shall also afford a
reasonable opportunity to the parties interested to submit to them pertinent
evidence as to the value of the shares. The appraisers shall have such power
and authority as may be conferred on Masters in Chancery by the Rules of Civil
Procedures or by the order of their appointment.
D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the clerk of the
court. Notice of the filing of the report shall be given by the clerk to the
parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled to
payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning 91 days after the date on which the
applicable corporate action from which the shareholder elected to dissent was
effected to the date of such judgment, to the shareholders entitled to payment.
The judgment shall be payable to the holders of uncertificated shares
immediately but to the holders of shares represented by certificates only upon,
and simultaneously with, the surrender to the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may be, of duly
endorsed certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those shares or in
the corporation. The court shall
III-3
<PAGE>
allow the appraisers a reasonable fee as court costs, and all court costs shall
be allotted between the parties in the manner that the court determines to be
fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation
(foreign or domestic) or other entity, as the case may be, pursuant to the
payment of the agreed value of the shares or pursuant to payment of the judgment
entered for the value of the shares, as in this Article provided, shall, in the
case of a merger, be treated as provided in the plan of merger and, in all other
cases, may be held and disposed of by the corporation as in the case of other
treasury shares.
F. The provisions of this Article shall not apply to a merger if, on the
date of the filing of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other corporation, domestic or
foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided by
this Article to a shareholder objecting to any corporation action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his shares or money damages to the shareholder with respect to the action.
If the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, complies with the requirements of this Article, any
shareholder who fails to comply with the requirements of this Article shall not
be entitled to bring suit for the recovery of the value of his shares or money
damages to the shareholder with respect to the action.
Article 5.13 Provisions Affecting Remedies of Dissenting Shareholders
A. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act shall not thereafter be entitled to
vote or exercise any other rights of a shareholder except the right to receive
payment for his shares pursuant to the provisions of those articles and the
right to maintain an appropriate action to obtain relief on the ground that the
corporate action would be or was fraudulent, and the respective shares for which
payment has been demanded shall not thereafter be considered outstanding for the
purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder,
the corporation shall make an appropriate notation thereof in its shareholder
records. Within twenty (20) days after demanding payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act, each holder of
certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the corporation, terminate such shareholder's rights under Article
5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated shares for
which payment has been demanded or shares represented by a certificate on which
notation has been so made shall be transferred, any new certificate issued
therefore shall bear similar notation together with the name of the original
dissenting holder of such shares and a transferee of such shares shall acquire
by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of the fair
value thereof.
C. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act may withdraw such demand at any
time before payment for his shares or before any petition has been filed
pursuant to Article 5.12 or 5.16 of this Act asking for a finding and
determination of the fair value of such shares, but no such demand may be
withdrawn after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B
of this Article the corporation shall terminate the shareholder's rights under
Article 5.12 or 5.16 of this Act, as the case may be, or if after the hearing of
a petition filed pursuant to Article 5.12 or 5.16, the court shall determine
that such shareholder and all persons claiming under him shall be conclusively
presumed to have approved and ratified the corporate action from which he
dissented and shall be bound thereby, the right of such shareholder to be paid
the fair value of his shares shall cease, and his status as a shareholder shall
be restored without prejudice to any corporate proceedings which
III-4
<PAGE>
may have been taken during the interim, and such shareholder shall be entitled
to receive any dividends or other distributions made to shareholders in the
interim.
Article 5.16 Merger into Subsidiary or Subsidiaries into Parent Corporation
Qualifications
A. In any case in which at least ninety (90%) percent of the outstanding
shares of each class and series of a domestic or foreign corporation or
corporations is owned by another domestic or foreign corporation, and at least
one of such corporations is a domestic corporation and the other or others are
domestic corporations or foreign corporations organized under the laws of a
jurisdiction that permit such a merger, the corporation having such share
ownership may (1) merge such other domestic or foreign corporation or
corporations into itself, (2) merge itself into such other corporation, or (3)
merge itself and one or more of such corporations into another of such domestic
or foreign corporations:
(a) in the event that the corporation having such share ownership will be a
surviving corporation in the merger, by executing and filing articles of merger
in accordance with Section B of this Article; or
(b) in the event that the corporation having such share ownership will not
be a surviving corporation in the merger, by the corporation having such share
ownership adopting a plan of merger in the manner required by Article 5.03 of
this Act, except that no action under Section 5.03 shall be required to be taken
by the corporation or corporations whose shares are so owned, and executing and
filing articles of merger in accordance with Section B of this Article.
Signature of articles; contents
B. The articles of merger shall be signed on behalf of the parent
corporation by an officer and shall set forth:
(1) The name of the parent corporation, and the name or names of the
subsidiary corporations and the respective jurisdiction under which each such
corporation is organized.
(2) The number of outstanding shares of each class of each subsidiary
corporation and the number of such shares of each class owned by the parent
corporation.
(3) A copy of the resolution adopted by the board of directors of the
parent corporation to so merge and the date of the adoption thereof. If the
parent corporation does not own all the outstanding shares of each class of each
subsidiary corporation that is a party to the merger, the resolution shall state
the terms and conditions of the merger, including the cash or other property,
including shares, obligations, evidences of ownership, rights to purchase
securities, or other securities of any person or entity or any combination of
the shares, obligations, evidences of ownership, rights, or other securities, to
be used, paid or delivered by the surviving corporation upon surrender of each
share of the subsidiary corporation or corporations not owned by the parent
corporation.
(4) If the surviving corporation is a foreign corporation, the address,
including street number if any, of its registered or principle office in the
jurisdiction under whose laws it is governed. If the surviving corporation is a
foreign corporation, on the merger taking effect the surviving foreign
corporation is deemed to (a) appoint the Secretary of State of this state as
its agent for service of process to enforce an obligation or the rights of
dissenting shareholders of each domestic corporation that is a party to the
merger, and (b) agree that it will promptly pay to the dissenting shareholders
of each domestic corporation that is a party to the merger the amount, if any,
to which they are entitled under this Article.
(5) If a plan of merger is required by Section A of this Article to be
adopted in the manner required by Article 5.03 of this Act, the information
required by Section A of Article 5.04 of this Act.
III-5
<PAGE>
C. Delivery to Secretary of State; Duties. The original and a copy of the
articles of merger shall be delivered to the Secretary of State. If the
Secretary of State finds that such articles conform to law, he shall, when all
fees and franchise taxes have been paid as required by law:
(1) Endorse on the original and the copy of the word "Filed," and the
month, day and year of the filing thereof.
(2) File the original in his office.
(3) Issue a certificate of merger to which he shall affix the copy and
deliver them to the surviving corporation or its representative.
D. Effective Date and Effect. The effective date and the effect of such
merger shall be the same as provided in Articles 5.05 and 5.06 of this Act if
the surviving corporation is a domestic corporation. If the surviving
corporation is a foreign corporation, the effective date and the effect of such
merger shall be the same as in the case of the merger of domestic corporations
except in so far as the laws of such other jurisdiction provide otherwise.
Remedy of minority shareholders
E. In the event all of the shares of a subsidiary domestic corporation
that is a party to a merger effected under this Article are not owned by the
parent corporation immediately prior to the merger, the surviving corporation
(foreign or domestic) shall, within ten (10) days after the effective date of
the merger, mail to each shareholder of record of each subsidiary domestic
corporation a copy of the articles of merger and notify the shareholder that the
merger has become effective. Any such shareholder who holds shares of a class
or series that would have been entitled to vote on the merger if it had been
effected pursuant to Article 5.03 of this Act shall have the right to dissent
from the merger and demand payment of the fair value for his shares in lieu of
the cash or other property to be used, paid or delivered to such shareholder
upon the surrender of such shareholder's shares pursuant to the terms and
conditions of the merger, with the following procedure:
(1) Such shareholder shall within twenty (20) days after the mailing of the
notice and copy of the articles of merger make written demand on the surviving
corporation, domestic or foreign, for payment of the fair value of his shares.
The fair value of the shares shall be the value thereof as of the day before the
effective date of the merger, excluding any appreciation or depreciation in
anticipation of such act. The demand shall state the number and class of the
shares owned by the dissenting shareholder and the fair value of such shares as
estimated by him. Any shareholder failing to make demand within the twenty (20)
day period shall be bound by the corporate action.
(2) Within ten (10) days after receipt by the surviving corporation of a
demand for payment by the dissenting shareholder of the fair value of his shares
in accordance with Subsection (1) of this section, the corporation (foreign or
domestic) shall deliver or mail to the dissenting shareholder a written notice
which shall either set out that the corporation (foreign or domestic) accepts
the amount claimed in the demand and agrees to pay such amount within ninety
(90) days after the date on which the corporate action was effected and, in the
case of shares represented by certificates, upon the surrender of the shares
certificates duly endorsed, or shall contain an estimate by the corporation of
the fair value of such shares, together with an offer to pay the amount of that
estimate within ninety (90) days after the date on which such corporate action
was effected, upon receipt of notice within sixty (60) days after that date from
the shareholder that the shareholder agrees to accept that amount and, in the
case of shares represented by certificates, upon the surrender of the share
certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate action
was effected, the value of the shares is agreed upon between the dissenting
shareholder and the surviving corporation (foreign or domestic), payment for the
shares shall be made within ninety (90) days after the date on which the
corporate action was effected and, in the case of shares represented by
certificates, upon surrender of his certificate or certificates representing
such shares. Upon payment
III-6
<PAGE>
of the agreed value, the dissenting shareholder shall cease to have any interest
in such shares or in the corporation.
(4) If, within sixty (60) days after the date on which such corporate
action was effected, the shareholder and the surviving corporation (foreign or
domestic) do not so agree, then the dissenting shareholder or the corporation
(foreign or domestic) may, within sixty (60) days after the expiration of the
sixty (60) day period, file a petition in any court of competent jurisdiction in
the county in which the principle office of the corporation is located, asking
for a finding and determination of the fair value of the shareholder's shares as
provided in Section B of Article 5.12 of this Act and thereupon the parties
shall have the rights and duties and follow the procedure set forth in Sections
B to D inclusive of Article 5.12.
(5) In the absence of fraud in the transaction, the remedy provided by this
Article to a shareholder objecting to the corporate action is the exclusive
remedy for the recovery of the value of his shares or money damages to the
shareholder with respect to the corporate action. If the surviving corporation
(foreign or domestic) complies with the requirements of this Article, any such
shareholder who fails to comply with the requirements of this Article shall not
be entitled to bring suit for the recovery of the value of his shares or money
damages to such shareholder with respect to such corporate action.
III-7
<PAGE>
Dissenting shareholders
F. If a plan of merger is required by Section A of this Article to be
adopted in the manner required by Article 5.03 of this Act, the provisions of
Articles 5.11 and 5.12 of this Act shall apply to the rights of the shareholders
of the parent corporation to dissent from such merger. Except as otherwise
provided in this Article, the provisions of Articles 5.11 and 5.12 of this Act
shall not be applicable to a merger effected under the provisions of this
Article. The provisions of Article 5.13 of this Act shall be applicable to any
merger effected under the provisions of this Article to the extent provided in
Article 5.13 of this Act.
III-8
<PAGE>
SCHEDULE IV
FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Rawson-Koenig, Inc.:
We have audited the financial statements and the financial statement
schedule of Rawson-Koenig, Inc. (the "Company") listed in Item 14(a) of this
Form 10-K. 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, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents
fairly, in all material respects, the information required to be included
therein.
COOPERS & LYBRAND L.L.P.
Houston, Texas
February 12, 1997
IV-1
<PAGE>
RAWSON-KOENIG, INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
1996 1995
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents......................... $ 334,199 $ 315,412
Accounts receivable, trade (net of allowance for
doubtful accounts of $40,000 in 1996 and 1995)... 1,269,006 1,713,511
Inventories....................................... 3,941,189 3,615,265
Prepayments and other............................. 106,548 173,960
----------- -----------
Total current assets.......................... 5,650,942 5,818,148
Property, plant and equipment, net.................. 4,838,109 3,893,266
Other assets........................................ 112,412
----------- -----------
Total assets.................................. $10,489,051 $ 9,823,826
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................. $ 228,639 $ 215,253
Current portion of capital lease obligation....... 27,025
Accounts payable.................................. 685,360 437,681
Accrued expenses.................................. 857,960 884,326
State income taxes payable........................ 79,000 61,000
----------- -----------
Total current liabilities....................... 1,850,959 1,625,285
Long-term debt, less current portion................ 1,434,813 2,095,124
----------- -----------
Total liabilities............................... 3,285,772 3,720,409
----------- -----------
Commitments and contingencies
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, 1996 and 1995......... 1,000 1,000
Additional paid-in capital........................ 4,529,120 4,529,120
Retained earnings................................. 2,673,159 1,573,297
----------- -----------
Total shareholders' equity...................... 7,203,279 6,103,417
----------- -----------
Total liabilities and shareholders' equity.... $10,489,051 $ 9,823,826
=========== ===========
The accompanying notes are an integral part of the financial statements.
IV-2
<PAGE>
RAWSON-KOENIG, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
----------- ----------- -----------
Sales................................... $19,521,871 $18,682,075 $17,184,557
Cost of sales........................... 15,002,105 14,903,247 13,300,320
----------- ----------- -----------
Gross profit........................ 4,519,766 3,778,828 3,884,237
Selling, general and administrative
expenses............................... 2,748,844 2,585,773 2,281,899
----------- ----------- -----------
Income from operations.............. 1,770,922 1,193,055 1,602,338
Other income (expense):
Interest expense...................... (147,211) (194,436) (210,891)
Other, net............................ 9,151 193,874 92,330
----------- ----------- -----------
Income before provision for income
taxes.............................. 1,632,862 1,192,493 1,483,777
----------- ----------- -----------
Provision for income taxes:
Federal............................... 454,000 306,000 267,000
State................................. 79,000 61,000 75,000
----------- ----------- -----------
533,000 367,000 342,000
----------- ----------- -----------
Net income.......................... $ 1,099,862 $ 825,493 $ 1,141,777
=========== =========== ===========
Net income per share................ $ .28 $ .21 $ .29
=========== =========== ===========
Average shares outstanding.............. 3,901,190 3,901,190 3,901,190
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
IV-3
<PAGE>
RAWSON-KOENIG, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<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,
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
Net income...................... 1,099,862 1,099,862
---------- -------- ----------- ------------ ------------
Balance, December 31, 1996...... 3,901,190 $ 1,000 $ 4,529,120 $ 2,673,159 $ 7,203,279
========== ======== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
IV-4
<PAGE>
RAWSON-KOENIG, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 1,099,862 $ 825,493 $ 1,141,777
----------- ----------- -----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................. 502,706 470,156 454,292
Loss (gain) on disposal of property,
plant and equipment.......................... 7,323 (15,500) 10,480
Change in assets and liabilities:
Decrease (increase) in accounts
receivable, trade........................... 444,505 (104,956) (363,771)
Increase in inventories...................... (325,924) (49,936) (498,925)
Decrease (increase) in prepayments and
other....................................... 67,412 (9,728) (53,083)
Decrease (increase) in other assets.......... 112,412 (112,412)
Increase (decrease) in accounts payable...... 135,267 (213,197) 116,901
Increase (decrease) in accrued expenses...... (26,366) 47,175 132,528
Increase (decrease) in state income
taxes payable............................... 18,000 (172,459) 159,774
----------- ----------- -----------
Total adjustments........................... 935,335 (160,857) (41,804)
----------- ----------- -----------
Net cash provided by operating
activities................................. 2,035,197 664,636 1,099,973
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property, plant, and
equipment.................................... (1,342,460) (805,970) (236,915)
Proceeds from disposal of property,
plant, and equipment......................... 15,500 1,955
----------- ----------- -----------
Net cash used by investing activities....... (1,342,460) (790,470) (234,960)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from revolving line of credit........ 1,030,000 1,544,605 250,000
Payments on revolving line of credit.......... (1,461,605) (1,063,000) (800,000)
Payments on long-term debt.................... (215,320) (203,713) (262,007)
Payments on capital lease obligation.......... (27,025) (29,672) (26,926)
----------- ----------- -----------
Net cash provided (used) by financing
activities................................. (673,950) 248,220 (838,933)
----------- ----------- -----------
Net increase in cash and cash equivalents....... 18,787 122,386 26,080
Cash and cash equivalents at beginning
of year........................................ 315,412 193,026 166,946
----------- ----------- -----------
Cash and cash equivalents at end of year........ $ 334,199 $ 315,412 $ 193,026
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
IV-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, 1996 and 1995, consisted of the
following:
1996 1995
----------- -----------
Raw materials................................. $ 1,391,135 $ 1,262,869
Work in process............................... 1,554,390 1,609,002
Finished goods................................ 995,664 743,394
----------- -----------
$ 3,941,189 $ 3,615,265
=========== ===========
Tooling Costs
The costs of self-constructing tools and dies for use in manufacturing are
capitalized and depreciated over four years using the straight-line method.
Capitalized costs consist of labor, material and construction overhead.
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.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Estimated useful lives range from three to thirty
one years. Depreciation expense for the years ended December 31, 1996, 1995
and 1994, amounted to $502,706, $470,156 and $454,292, respectively.
IV-6
<PAGE>
RAWSON-KOENIG, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Property, plant and equipment at December 31, 1996 and 1995, consisted of
the following:
1996 1995
----------- -----------
Land.......................................... $ 680,000 $ 680,000
Buildings..................................... 3,134,856 3,014,778
Machinery and equipment....................... 5,313,870 4,023,323
Self-constructed tools and dies............... 865,320 768,917
Furniture and fixtures........................ 394,737 385,703
Vehicles...................................... 151,554 110,974
Machinery and equipment under capital lease... 130,230
----------- -----------
10,540,337 9,113,925
Accumulated depreciation and amortization..... (5,702,228) (5,220,659)
----------- -----------
$ 4,838,109 $ 3,893,266
=========== ===========
Included in accumulated depreciation and amortization at December 31, 1995,
is $72,102 of accumulated amortization on machinery and equipment acquired
under a capital lease agreement. The lease expired during 1996 and the Company
purchased the equipment for $1 under the terms of the lease.
Included in accumulated depreciation and amortization at December 31, 1996
and 1995, is $660,514 and $546,081, respectively, of accumulated depreciation
on self-constructed tools and dies.
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.
3. ACCRUED EXPENSES:
Accrued expenses at December 31, 1996 and 1995, include $400,000 for
potential claims against the Company by its employees arising from injuries
incurred in the normal course of business prior to May 1, 1994. Actual claims
for medical expenses and lost time paid during the years ended December 31,
1996, 1995 and 1994, for injuries incurred prior to May 1, 1994, were $12,000,
$1,085 and $7,570, respectively. In addition, prior to May 1, 1994, 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.
IV-7
<PAGE>
RAWSON-KOENIG, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Accrued expenses at December 31, 1996 and 1995, include $123,097 and
$124,110, respectively, for accrued payroll.
4. LONG-TERM DEBT:
Long-term debt at December 31, 1996 and 1995, consisted of the following:
1996 1995
----------- -----------
Revolving line of credit in the amount of
$2,200,000 with a bank, which matures
April 30, 1998. Interest is payable monthly
at the bank's prime rate (8.25% at
December 31, 1996). Borrowings under the
agreement are restricted to certain
percentages of accounts receivable and
inventories.................................. $ 200,000 $ 631,605
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......................... 1,300,258 1,445,618
Installment loan payable to a bank, due in
monthly payments of $5,830 plus interest
at the bank's prime rate with the unpaid
balance due April 1999....................... 163,194 233,154
----------- -----------
1,663,452 2,310,377
Current portion of long-term debt............. (228,639) (215,253)
----------- -----------
Long-term portion............................. $ 1,434,813 $ 2,095,124
=========== ===========
Effective May 28, 1996, the Company amended its loan agreement with its
primary lender. The amended agreement extended the maturity date of the line
of credit to April 30, 1998 and provided the Company with an advancing term
equipment loan under which the Company may borrow up to $1,000,000 to finance
equipment purchases through April 30, 1997. Any borrowings outstanding under
this advancing term equipment loan as of April 30, 1997, will be converted to
a five year term loan that will be due in sixty equal monthly principal
payments beginning May 30, 1997, plus interest at the bank's prime rate. As of
December 31, 1996, there were no amounts outstanding under this advancing term
equipment loan.
The Company's other advancing term equipment loan agreement, that allowed
for borrowings up to $1,500,000, expired unused on August 31, 1996.
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.
Future maturities of long-term debt are as follows:
YEAR ENDING DECEMBER 31,
------------------------
1997...................................................... $ 228,639
1998...................................................... 442,867
1999...................................................... 211,686
2000...................................................... 780,260
-----------
$ 1,663,452
===========
IV-8
<PAGE>
RAWSON-KOENIG, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Cash paid for interest was $147,572, $194,578 and $211,372 for the years
ended December 31, 1996, 1995 and 1994, respectively.
5. INCOME TAXES:
The composition of deferred tax assets and liabilities and the related tax
effects at December 31, 1996 and 1995 was as follows:
1996 1995
----------- -----------
Deferred tax assets:
Tax assets which have been
expensed for book purposes............. $ 24,570 $ 29,703
Accrued expenses deductible when
paid for tax........................... 148,000 148,000
Net operating loss carryforwards........ 176,955 239,289
Investment tax credit carryforwards..... 15,000 15,000
----------- -----------
Total deferred tax assets............. 364,525 431,992
Deferred tax liabilities:
Property, plant and equipment basis..... 156,302 146,546
----------- -----------
Net deferred tax assets before
valuation allowance...................... 208,223 285,446
Valuation allowance....................... (208,223) (285,446)
----------- -----------
Net deferred tax assets............... $ - $ -
=========== ===========
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 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------ ----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Federal income tax
provision at the statutory rate................ $ 555,173 34.0% $ 405,448 34.0% $ 504,484 34.0%
Utilization of net operating loss carryforwards. (62,334) (3.8) (62,335) (5.2) (87,056) (5.9)
Utilization of alternative minimum tax
credit carryforwards........................... (4,013) (0.4) (125,500) (8.4)
State income tax, net of federal benefit........ 52,140 3.2 40,260 3.4 49,500 3.3
Change in valuation allowance, net of
alternative minimum tax and utilization
of net operating loss and alternative
minimum tax credit carryforwards............... (14,889) (.9) (16,574) (1.4) 3,092 0.2
Other........................................... 2,910 .1 4,214 0.4 (2,520) (0.2)
---------- ----- --------- ----- --------- -----
$ 533,000 32.6% $ 367,000 30.8% $ 342,000 23.0%
========== ===== ========= ===== ========= =====
</TABLE>
IV-9
<PAGE>
RAWSON-KOENIG, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1996, the Company had approximate tax net operating loss
and tax credit carryforwards available to offset future taxable income as
follows:
NET OPERATING LOSS
CARRYFORWARDS
------------------
ALTERNATIVE
REGULAR MINIMUM
TAX TAX INVESTMENT
REPORTING REPORTING TAX CREDIT
EXPIRATION YEAR ENDING DECEMBER 31, PURPOSES PURPOSES CARRYFORWARDS
----------------------------------- --------- ----------- -------------
1998.................................. $ 6,000
1999.................................. 9,000
2001................................... $ 346,000 $ 346,000
2002.................................. 58,000 58,000
2003.................................. 58,000 58,000
2004.................................. 58,000 58,000
--------- ---------- ----------
$ 520,000 $ 520,000 $ 15,000
========= ========== ==========
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.
Cash paid for income taxes was $503,530, $575,773 and $182,226 for the
years ended December 31, 1996, 1995 and 1994, respectively.
6. RELATED PARTY TRANSACTIONS:
During 1996 and 1995, the Company paid $8,127 and $7,470, 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
$90,346, $49,217 and $30,990 for the years ended December 31, 1996, 1995 and
1994, respectively. Accrued amounts payable to this law firm at December 31,
1996 and 1995 were $36,067 and $29,079, 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 material adverse effect upon the financial
position or results of operations of the Company.
8. SUPPLEMENTAL CASH FLOW INFORMATION:
During 1996, the Company purchased certain equipment with a cost of
$1,124,120 of which $112,412 was included in accounts payable at December 31,
1996.
IV-10
<PAGE>
RAWSON-KOENIG, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN C
ADDITIONS
COLUMN B --------------------- COLUMN E
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
COLUMN A BEGINNING COSTS AND OTHER COLUMN D END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Valuation and qualifying accounts
deducted in the balance sheet
from the related assets to
which they apply:
(a) Allowance for doubtful accounts
receivable:
Year ended December 31, 1994............ $ 40,000 $ (9,746) $ 10,124 $ 378 $ 40,000
Year ended December 31, 1995............ 40,000 466 63 529 40,000
Year ended December 31, 1996............ 40,000 6,217 - 6,217 40,000
(b) Deferred tax asset valuation
allowance:
Year ended December 31, 1994............ 655,976 - - 291,621 364,355
Year ended December 31, 1995............ 364,355 - - 78,909 285,446
Year ended December 31, 1996............ 285,446 - - 77,223 208,223
</TABLE>
IV-11
<PAGE>
SCHEDULE V
Rawson-Koenig, Inc.
Condensed Balance Sheets
(Unaudited)
(in thousands)
March 31, March 31,
1997 1996
--------- ---------
Assets
- ------
Current assets:
Cash and cash equivalents $ 497 $ 136
Accounts receivable, net 1,629 1,655
Inventories 3,493 3,460
Prepayments and other 124 67
--------- ---------
Total current assets 5,743 5,318
Property, plant and equipment, net 4,766 3,910
Other assets 225
--------- ---------
Total assets $ 10,509 $ 9,453
========= =========
V-1
<PAGE>
Rawson-Koenig, Inc.
Condensed Balance Sheets, continued
(Unaudited)
(in thousands, except share amounts)
March 31, March 31,
1997 1996
--------- ---------
Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities:
Current portion of long-term debt $ 232 $ 219
Current portion of capital lease obligation 19
Accounts payable 787 500
Accrued expenses 417 787
Income taxes payable 151 156
--------- ---------
Total current liabilities 1,587 1,681
Long-term debt, less current portion 1,175 1,407
Deferred income taxes 54
--------- ---------
Total liabilities 2,816 3,088
--------- ---------
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 1 1
Additional paid-in capital 4,529 4,529
Retained earnings 3,163 1,835
--------- ---------
Total shareholders' equity 7,693 6,365
--------- ---------
Total liabilities and shareholders' equity $ 10,509 $ 9,453
========= =========
V-2
<PAGE>
Rawson-Koenig, Inc.
Condensed Statements of Operations
(Unaudited)
(in thousands, except per share data and average shares outstanding)
Three Months Ended
March 31,
1997 1996
----------- -----------
Sales $ 5,411 $ 5,036
Cost of sales 3,990 3,868
----------- -----------
Gross profit 1,421 1,168
Selling, general and administrative expenses 806 736
----------- -----------
Income from operations 615 432
Other income (expense):
Interest expense (34) (44)
Other, net 6 4
----------- -----------
Income before income taxes 587 392
Income taxes:
Federal 82 112
State 15 19
----------- -----------
Net income $ 490 $ 261
=========== ===========
Net income per share $ .13 $ .07
=========== ===========
Average shares outstanding 3,901,190 3,901,190
=========== ===========
V-3
<PAGE>
Rawson-Koenig, Inc.
Condensed Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1997 1996
-------- --------
Cash flow from operating activities:
Net income $ 490 $ 261
-------- --------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 146 121
Change in assets and liabilities, net (142) 269
-------- --------
Total adjustments 4 390
-------- --------
Net cash provided by operating activities 494 651
Cash flows from investing activities:
Purchase of property and equipment, net (74) (138)
Cash flows from financing activities:
Decrease in borrowings, net (257) (692)
-------- --------
Net increase (decrease) in cash and cash
equivalents 163 (179)
Cash and cash equivalents at beginning
of period 334 315
-------- --------
Cash and cash equivalents at end
of period $ 497 $ 136
======== ========
Supplemental cash flow disclosure:
Income taxes paid $ - $ -
======== ========
Interest paid $ 36 $ 45
======== ========
V-4
<PAGE>
EXHIBIT (a)(2): FORM OF LETTER OF TRANSMITTAL
LETTER OF TRANSMITTAL
TO TENDER SHARES
OF
COMMON STOCK
OF
RAWSON-KOENIG, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED , 1997
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON , 1997, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
By Overnight Courier:
77 Water Street, 4th Floor
New York, NY 10005
By Mail: By Facsimile Transmission: By Hand:
(For Eligible Institutions Only)
Wall Street Station Fax: (212) 701-7636 Receive Window
P.O. Box 1010 (212) 701-7637 77 Water Street, 5th Floor
New York, NY 10268-1010 Confirm by Telephone: New York, NY
(212) 701-7624
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OR TELEX
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by shareholders either if
certificates evidencing Shares (as defined below) are to be forwarded herewith
or if delivery of Shares is to be made by book-entry transfer to the
Depositary's account at The Depository Trust Company ("DTC") or the Philadelphia
Depository Trust Company ("PDTC") (each a "Book-Entry Transfer Facility" and
collectively, the "Book-Entry Transfer Facilities") pursuant to the book-entry
transfer procedure described under "THE TENDER OFFER -- SECTION 3. PROCEDURES
FOR ACCEPTING THE OFFER AND TENDERING SHARES" in the Offer to Purchase (as
defined below). DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Shareholders whose certificates evidencing Shares ("Share Certificates")
are not immediately available or who cannot deliver their Share Certificates and
all other documents required hereby to the Depositary prior to the Expiration
Date (as defined under "THE TENDER OFFER -- SECTION 1. TERMS OF THE OFFER;
EXPIRATION DATE" in the Offer to Purchase) or who cannot complete the procedure
for delivery by book-entry transfer on a timely basis and who wish to tender
their Shares must do so pursuant to the
<PAGE>
guaranteed delivery procedure described under "THE TENDER OFFER -- SECTION 3.
PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES" in the Offer to
Purchase. See Instruction 2.
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES)
of Registered Holder(s)
(Please fill in, if blank,
exactly as name(s) appear(s)
on Share Certificate(s)
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
(Attach additional list if necessary)
- --------------------------------------------------------------------------------
SHARE CLASS AND SERIES TOTAL NUMBER NUMBER OF
CERTIFICATE OF SERIES OF SHARES SHARES
NUMBER(S)* REPRESENTED BY REPRESENTED BY TENDERED**
SHARE CERTIFICATE(S) SHARE CERTIFICATE(S)*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Shares.......................................................
- --------------------------------------------------------------------------------
* Need not be completed by shareholders tendering by book=entry transfer.
** Unless otherwise indicated, it will be assumed that all shares represented
by any certificates delivered to the depositary are being tendered.
See Instruction 4.
- -------------------------------------------------------------------------------
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution...........................................
Check Box of Applicable Book-Entry Transfer Facility:
(CHECK ONE) [ ] DTC [ ] PDTC
Account Number..........................................................
Transaction Code Number.................................................
[ ] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)..........................................
Window Ticket No. (if any)...............................................
Date of Execution of Notice of Guaranteed Delivery.......................
Name of Institution which Guaranteed Delivery............................
_______________________
Ladies and Gentlemen:
The undersigned hereby tenders to Rawson-Koenig, Inc., a Texas corporation
(the "Company") the above-described shares of Common Stock, no par value per
share, of the Company (all shares of such Common Stock from time to time
outstanding being, collectively, the "Shares") pursuant to the Company's offer
to purchase all Shares, at $2.15 per Share, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
May 31, 1997 (the "Offer to Purchase"), receipt of which is hereby acknowledged,
and in this Letter of Transmittal (which, together with the Offer to Purchase,
constitute the "Offer"). The undersigned understands that the Company reserves
the right to transfer or assign, in whole or from time to time in part, to one
or more of its affiliates, the right to purchase all or any portion of the
Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to all the Shares that are being tendered
hereby and all dividends, distributions (including, without limitation,
distributions of additional Shares) and rights declared, paid or distributed in
respect of such Shares on or after May 31, 1997 (collectively, "Distributions")
and irrevocably appoints the Depositary the true and lawful agent and attorney-
in-fact of the undersigned with respect to such Shares and all Distributions,
with full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (i) deliver Share Certificates
evidencing such Shares and all Distributions, or transfer ownership of such
Shares and all Distributions on the account books maintained by a Book-Entry
Transfer Facility, together, in either case, with all accompanying evidences of
transfer and authenticity, to or upon the order of the Company, (ii) present
such Shares and all Distributions for transfer on the books of the Company and
(iii) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares and all Distributions, all in accordance with the terms
of the Offer.
<PAGE>
The undersigned hereby irrevocably appoints Thomas C. Rawson and
Catherine A. Rawson and each of them, as the attorneys and proxies of the
undersigned, each with full power of substitution, to vote in such manner as
each such attorney and proxy or his substitute shall, in his sole discretion,
deem proper and otherwise act (by written consent or otherwise) with respect to
all the Shares tendered hereby that have been accepted for payment by the
Company prior to the time of such vote or other action and all Shares and other
securities issued in Distributions in respect of such Shares, which the
undersigned is entitled to vote at any meeting of shareholders of the Company
(whether annual or special and whether or not an adjourned or postponed meeting)
or consent in lieu of any such meeting or otherwise. This proxy and power of
attorney is coupled with an interest in the Shares tendered hereby, is
irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares by the Company in accordance with the
terms of the Offer. Such acceptance for payment shall revoke all other proxies
and powers of attorney granted by the undersigned at any time with respect to
such Shares (and all Shares and other securities issued in Distributions in
respect of such Shares), and no subsequent proxy or power of attorney shall be
given or written consent executed (and if given or executed, shall not be
effective) by the undersigned with respect thereto. The undersigned understands
that, in order for Shares to be deemed validly tendered, immediately upon the
Company's acceptance of such Shares for payment, the Company must be able to
exercise full voting and other rights with respect to such Shares, including,
without limitation, voting at any meeting of the Company's shareholders then
scheduled.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, that when such Shares are accepted for
payment by the Company, the Company will acquire good, marketable and
unencumbered title thereto and to all Distributions, free and clear of all
liens, restrictions, charges and encumbrances, and that none of such Shares and
Distributions will be subject to any adverse claim. The undersigned, upon
request, shall execute and deliver all additional documents deemed by the
Depositary or the Company to be necessary or desirable to complete the sale,
assignment and transfer of the Shares tendered hereby and all Distributions. In
addition, the undersigned shall remit and transfer promptly to the Depositary
for the account of the Company all Distributions in respect of the Shares
tendered hereby, accompanied by appropriate documentation of transfer, and
pending such remittance and transfer or appropriate assurance thereof, the
Company shall be entitled to all rights and privileges as owner of each such
Distribution and may withhold the entire purchase price of the Shares tendered
hereby, or deduct from such purchase price the amount or value of such
Distribution as determined by the Company in its sole discretion.
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in the Offer to Purchase under "THE TENDER OFFER --
SECTION 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES" and in the
instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer. The Company's acceptance of such Shares for
payment will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions", please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased or
not tendered in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered". Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions", please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered". In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares purchased
and return all Share Certificates evidencing Shares not purchased or not
<PAGE>
tendered in the name(s) of, and mail such check and Share Certificates to, the
person(s) so indicated. Unless otherwise indicated herein in the box entitled
"Special Payment Instructions". The undersigned recognizes that the Company has
no obligation, pursuant to the Special Payment Instructions, to transfer any
Shares from the name of the registered holder(s) thereof if the Company does not
purchase any of the Shares tendered hereby.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
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<S> <C>
To be completed ONLY if the check for the purchase To be completed ONLY if the check for the purchase
price of Shares or Share Certificates evidencing price of Shares purchased or Share Certificates
Shares not tendered or not purchased are to be evidencing Shares not tendered or not purchased
issued in the name of someone other than the are to be mailed to someone other than the under-
undersigned. signed, or the undersigned at an address other than
Issue [ ] check [ ] Share Certificate(s) to: that shown under "Description of Shares Tendered".
Name ............................................... Mail [ ] check [ ] Share Certificates(s) to:
(Please Print)
Address ............................................ Name .............................................
.................................................... (Please Print)
(Zip Code) Address ..........................................
..................................................
.................................................... (Zip Code)
(Taxpayer Identification No. or Social Security No.)
(See Substitute Form W-9 below)
</TABLE>
<PAGE>
SIGN HERE
(Please complete Substitute Form W-9 below)
................................................................................
Signature(s) of Shareholder(s)
................................................................................
Dated................................................................... , 1997
Name(s).........................................................................
(Please Print)
................................................................................
Capacity (full title)...........................................................
Address.........................................................................
................................................................................
................................................................................
(Include Zip Code)
Area Code and Telephone No......................................................
Tax Identification or Social Security No........................................
(See Substitute Form W-9 on Reverse Side)
(Must be signed by registered holder(s) exactly as name(s) appear(s) on stock
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by a trustee, executor, administrator, guardian, attorney-in-
fact, officer of a corporation or other person acting in a fiduciary or
representative capacity, please set forth full title and see Instruction 5.)
Guarantee of Signature(s)
(If required - See Instructions 1 and 5)
For use by Financial Institutions Only
Financial Institutions: Place Medallion
Guarantee in space below.
Name of Firm....................................................................
Authorized Signature............................................................
Name............................................................................
Address.........................................................................
Area Code and Telephone Number..................................................
Dated................................................................... , 1997
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of
Transmittal must be guaranteed by a firm that is a member of the Medallion
Signature Guarantee Program, or by any other "eligible guarantor institution,"
as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended (each of the foregoing being referred to as an "Eligible
Institution"), unless (i) this Letter of Transmittal is signed by the registered
holder(s) of the Shares (which term, for purposes of this document, shall
include any participant in a Book-Entry Transfer Facility whose name appears on
a security position listing as the owner of Shares) tendered hereby and such
holder(s) has (have) completed neither the box entitled "Special Payment
Instructions" nor the box entitled "Special Delivery Instructions" on the
reverse hereof or (ii) such Shares are tendered for the account of an Eligible
Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This
Letter of Transmittal is to be used either if Share Certificates are to be
forwarded herewith or if Shares are to be delivered by book-entry transfer
pursuant to the procedure set forth under "THE TENDER OFFER -- SECTION 3.
PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES" in the Offer to
Purchase. Share Certificates evidencing all physically tendered Shares, or a
confirmation of a book-entry transfer into the Depositary's account at a Book-
Entry Transfer Facility of all Shares delivered by book-entry transfer as well
as a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by this Letter of Transmittal, must be
received by the Depositary at one of its addresses set forth on the reverse
hereof prior to the Expiration Date (as defined under "THE TENDER OFFER --
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE" in the Offer to Purchase). If
Share Certificates are forwarded to the Depositary in multiple deliveries, a
properly completed and duly executed Letter of Transmittal must accompany each
such delivery.
Shareholders whose Share Certificates are not immediately available, who
cannot deliver their Share Certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot complete the procedure for
delivery by book-entry transfer on a timely basis may tender their Shares
pursuant to the guaranteed delivery procedure described under "THE TENDER OFFER
- -- SECTION 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES" in the
Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by
or through an Eligible Institution; (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form made available by the
Company, must be received by the Depositary prior to the Expiration Date; and
(iii) the Share Certificates evidencing all physically delivered Shares in
proper form for transfer by delivery, or a confirmation of a book-entry transfer
into the Depositary's account at a Book-Entry Transfer Facility of all Shares
delivered by book-entry transfer, in each case together with a Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message (as defined under "THE TENDER OFFER -- SECTION 3. PROCEDURES FOR
ACCEPTING THE OFFER AND TENDERING SHARES" in the Offer to Purchase)), and any
other documents required by this Letter of Transmittal, must be received by the
Depositary within three Nasdaq trading days after the date of execution of such
Notice of Guaranteed Delivery, all as described under "THE TENDER OFFER --
SECTION 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES" in the Offer
to Purchase.
The method of delivery of this Letter of Transmittal, Share Certificates
and all other required documents, including delivery through any Book-Entry
Transfer Facility, is at the option and risk of the tendering shareholder, and
the delivery will be deemed made only when actually received by the Depositary.
If delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. In all cases, sufficient time should be allowed to
ensure timely delivery.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a facsimile hereof), all tendering shareholders waive any right to receive
any notice of the acceptance of their Shares for payment.
<PAGE>
3. INADEQUATE SPACE. If the space provided herein under "Description
of Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY BOOK-
ENTRY TRANSFER). If fewer than all the Shares evidenced by any Share
Certificate delivered to the Depositary herewith are to be tendered hereby, fill
in the number of Shares which are to be tendered in the box entitled "Number of
Shares Tendered". In such cases, new Share Certificate(s) evidencing the
remainder of the Shares that were evidenced by the Share Certificates delivered
to the Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on the reverse hereof, as soon as practicable after the expiration
or termination of the Offer. All Shares evidenced by Share Certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, the signature(s) must correspond with the name(s) as
written on the face of the Share Certificates evidencing such Shares without
alteration, enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Company of such person's authority so to act must be
submitted.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this
Instruction 6, the Company will pay all stock transfer taxes with respect to the
sale and transfer of any Shares to it or its order pursuant to the Offer. If,
however, payment of the purchase price of any Shares purchased is to be made to,
or Share Certificate(s) evidencing Shares not tendered or not purchased are to
be issued in the name of, a person other than the registered holder(s), the
amount of any stock transfer taxes (whether imposed on the registered holder(s),
such other person or otherwise) payable on account of the transfer to such other
person will be deducted from the purchase price of such Shares purchased, unless
evidence satisfactory to the Company of the payment of such taxes, or exemption
therefrom, is submitted. Except as provided in this Instruction 6, it will not
be necessary for transfer tax stamps to be affixed to the Share Certificates
evidencing the Shares tendered hereby.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the
purchase price of any Shares tendered hereby is to be issued, or Share
Certificate(s) evidencing Shares not tendered
<PAGE>
or not purchased are to be issued, in the name of a person other than the
person(s) signing this Letter of Transmittal or if such check or any such Share
Certificate is to be sent to someone other than the person(s) signing this
Letter of Transmittal or to the person(s) signing this Letter of Transmittal but
at an address other than that shown in the box entitled "Description of Shares
Tendered" on the reverse hereof, the appropriate boxes on the reverse of this
Letter of Transmittal must be completed.
8. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions and requests for assistance may be directed to the Information Agent
or the Dealer Manager at their respective addresses or telephone numbers set
forth below. Additional copies of the Offer to Purchase, this Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent or from brokers, dealers, commercial banks or trust companies.
9. SUBSTITUTE FORM W-9. Each tendering shareholder is required to
provide the Depositary with a correct Taxpayer Identification Number ("TIN") on
the Substitute Form W-9, which is provided under "Important Tax Information"
below, and to certify, under penalties of perjury, that such number is correct
and that such shareholder is not subject to backup withholding of federal income
tax. If a tendering shareholder has been notified by the Internal Revenue
Service that such shareholder is subject to backup withholding, such shareholder
must cross out item (2) of the Certification box of the Substitute Form W-9,
unless such shareholder has since been notified by the Internal Revenue Service
that such shareholder is no longer subject to backup withholding. Failure to
provide the information on the Substitute Form W-9 may subject the tendering
shareholder to 31% federal income tax withholding on the payment of the purchase
price of all Shares purchased from such shareholder. If the tendering
shareholder has not been issued a TIN and has applied for one or intends to
apply for one in the near future, such shareholder should write "Applied For" in
the space provided for the TIN in Part I of the Substitute Form W-9, and sign
and date the Substitute Form W-9. If "Applied For" is written in Part I and the
Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31% on all payments of the purchase price to such shareholder until a
TIN is provided to the Depositary.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES AND
SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS
DEFINED IN THE OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under the federal income tax law, a shareholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such shareholder's correct TIN on Substitute Form W-9 below. If such
shareholder is an individual, the TIN is such shareholder's social security
number. If the Depositary is not provided with the correct TIN, the shareholder
may be subject to a $50 penalty imposed by the Internal Revenue Service and
payments that are made to such shareholder with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding of 31%. In addition,
if a shareholder makes a false statement that results in no imposition of backup
withholding, and there was no reasonable basis for such a statement, a $500
penalty may also be imposed by the Internal Revenue Service.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement, signed under penalties of
perjury, attesting to such individual's exempt status. Forms of such statements
can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions. A shareholder should consult his or her tax advisor as
to such shareholder's qualification for an exemption from backup withholding and
the procedure for obtaining such exemption.
<PAGE>
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the shareholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depositary of such shareholder's correct TIN by
completing the form below certifying that (a) the TIN provided on Substitute
Form W-9 is correct (or that such shareholder is awaiting a TIN) and (b) that
(i) such shareholder has not been notified by the Internal Revenue Service that
such shareholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) the Internal Revenue Service has
notified such shareholder that such shareholder is no longer subject to backup
withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering shareholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the shareholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% of all payments of the purchase price to such
shareholder until a TIN is provided to the Depositary.
<PAGE>
TO BE COMPLETED BY ALL TENDERING SHAREHOLDERS
(See Instruction 9)
PAYER'S NAME: HARRIS TRUST COMPANY OF NEW YORK
- --------------------------------------------------------------------------------
SUBSTITUTE PART I - PLEASE PROVIDE
FORM W-9 YOUR TIN IN THE BOX AT THE ________________________
RIGHT AND CERTIFY BY Social Security Number
Department of the SIGNING AND DATING BELOW.
Treasury Internal or
Revenue Service
________________________
Payer's Request for Employer Identification
Taxpayer Identification Number
Number (TIN)
- --------------------------------------------------------------------------------
PART II
- --------------------------------------------------------------------------------
CERTIFICATION - Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification
number (or I am waiting for a number to be issued to me);
(2) I am not subject to backup withholding because (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS - You must cross out item (2) above if you
have been notified by the IRS that you are currently subject to backup
withholding because of underreporting interest or dividends on your tax
return. However, if after being notified by the IRS that you were subject
to backup withholding you received another notification from the IRS that
you are no longer subject to backup withholding, do not cross out such
item (2).
- --------------------------------------------------------------------------------
SIGNATURE _______________________ DATE __, 1997 PART III
Awaiting TIN [ ]
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) I intend to mail
or deliver an application in the near future, I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
reportable payments made to me will be withheld, but that such amounts will be
refunded to me if I then provide a Taxpayer Identification Number within sixty
(60) days.
Signature ______________________________________ Date___________________
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<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal certificates evidencing
Shares and any other required documents should be sent or delivered by each
shareholder or such shareholder's broker, dealer, commercial bank, trust company
or other nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
By Overnight Courier:
77 Water Street, 4th Floor
New York, NY 10005
By Mail: By Facsimile Transmission: By Hand:
(For Eligible Institutions Only)
Wall Street Station Fax: (212) 701-7636 Receive Window
P.O. Box 1010 (212) 701-7637 77 Water Street, 5th Floor
New York, NY 10268-1010 Confirm by Telephone: New York, NY
(212) 701-7624
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent. A shareholder may also contact brokers, dealers, commercial
banks or trust companies for assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
Banks and Brokers Call Collect:
(212) -
All Others Call Toll Free:
(800) -
The Dealer Manager for the Offer is:
WHEAT, FIRST SECURITIES, INC.
Riverfront Plaza, West Tower
901 East Byrd Street
Richmond, Virginia 23219
____________________________________
June , 1997
<PAGE>
EXHIBIT (a)(3): FORM OF NOTICE OF GUARANTEED DELIVERY
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF RAWSON-KOENIG, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) (i) if certificates
("Share Certificates") evidencing shares of common stock, no par value per share
(the "Common Stock"), of Rawson-Koenig, Inc., a Texas corporation (the
"Shares"), are not immediately available, (ii) if Share Certificates and all
other required documents cannot be delivered to Harris Trust Company of New
York, as Depositary (the "Depositary"), prior to the Expiration Date (as defined
in Section 1 of the Offer to Purchase (as defined below)) or (iii) if the
procedure for delivery by book-entry transfer cannot be completed on a timely
basis. This Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram or facsimile transmission to the Depositary. See "THE
TENDER OFFER -- SECTION 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING
SHARES" in the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
By Overnight Courier:
77 Water Street, 4th Floor
New York, NY 10005
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND:
(For Eligible Institutions Only)
Wall Street Station Fax: (212) 701-7636 Receive Window
P.O. Box 1010 (212) 701-7637 77 Water Street, 5th Floor
New York, NY 10268-1010 Confirm by Telephone: New York, NY
(212) 701-7624
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Rawson-Koenig, Inc., a Texas corporation,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated , 1997 (the "Offer to Purchase"), and the related Letter
of Transmittal (which together constitute the "Offer"), receipt of each of which
is hereby acknowledged, the number of Shares specified below pursuant to the
guaranteed delivery procedure described under "THE TENDER OFFER -- SECTION 3.
PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES" in the Offer to
Purchase.
<TABLE>
<CAPTION>
Number of Shares: SIGNATURE(S) OF HOLDER(S)
Certificate Nos. (If Available):
<S> <C>
Check box if Shares will be delivered by book-entry transfer:
[ ] The Depository Trust Company Date: , 1997
[ ] Philadelphia Depository Trust Company Name(s) of Holders:
---------------------------------------
Please Type or Print Name
---------------------------------------
Address
---------------------------------------
(Zip Code)
---------------------------------------
Area Code and Telephone Number
</TABLE>
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of the Medallion Signature
Guarantee Program, guarantees to deliver to the Depositary, at one of its
addresses set forth above, Share Certificates evidencing the Shares tendered
hereby, in proper form for transfer, or confirmation of book-entry transfer of
such Shares into the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company, in each case with delivery of a Letter of
Transmittal (or facsimile thereof) properly completed and duly executed, and any
other required documents, all within three National Association of Securities
Dealers Automated Quotation -- SmallCap Market System trading days of the date
hereof.
NAME OF FIRM AUTHORIZED SIGNATURE
ADDRESS
ZIP CODE
AREA CODE AND TELEPHONE NO.
TITLE:
NAME:
(Please Type or Print)
DATED: , 1997
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD
BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT (a)(4): FORM OF LETTER FROM WHEAT, FIRST SECURITIES, INC. TO
BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES AND
NOMINEES.
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
RAWSON-KOENIG, INC.
AT
$2.15 NET PER SHARE
BY
RAWSON-KOENIG, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME,
ON , 1997, UNLESS THE OFFER IS EXTENDED.
, 1997
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
We have been appointed by Rawson-Koenig, Inc., a Texas corporation (the
"Company") to act as Dealer Manager in connection with the Company's offer to
purchase all outstanding shares of Common Stock, no par value per share held by
the Public Shareholders (the "Shares"), of the Company at a price of $2.15 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Company's Offer to Purchase, dated , 1997 (the
"Offer"), and the related Letter of Transmittal (which together constitute the
"Offer") enclosed herewith. Please furnish copies of the enclosed materials to
those of your clients for whose accounts you hold Shares registered in your name
or in the name of your nominee.
Enclosed for your information and use are copies of the following
documents:
1. Offer to Purchase, dated , 1997;
2. Letter of Transmittal to be used by holders of Shares in accepting the
Offer and tendering Shares;
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents are not immediately available or cannot
be delivered to Harris Trust Company of New York (the "Depositary") by the
Expiration Date (as defined in the Offer to Purchase) or if the procedure for
book-entry transfer cannot be completed by the Expiration Date;
4. A letter to shareholders of the Company from Thomas C. Rawson, Chief
Executive Officer of the Company, together with a Solicitation/Recommendation
Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by
the Company;
5. A letter which may be sent to your clients for whose accounts you hold
Shares registered in your name or in the name of your nominee, with space
provided for obtaining such clients' instructions with regard to the offer;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON , 1997, UNLESS THE OFFER IS EXTENDED.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of certificates
evidencing such Shares (or a confirmation of a book-entry transfer of such
Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities (as defined in the Offer to Purchase)), a Letter of Transmittal (or
facsimile thereof) properly completed and duly executed and any other required
documents.
<PAGE>
If holders of Shares wish to tender, but cannot deliver their certificates
or other required documents, or cannot comply with the procedure for book-entry
transfer, prior to the expiration of the Offer, a tender of Shares may be
effected by following the guaranteed delivery procedure described under "THE
TENDER OFFER -- SECTION 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING
SHARES" in the Offer to Purchase.
The Company will not pay any fees or commissions to any broker, dealer or
other person (other than the Dealer Manager, the Depositary and the Information
Agent as described in the Offer) in connection with the solicitation of tenders
of Shares pursuant to the Offer. However, the Company will reimburse you for
customary mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to your clients. The Company will pay or cause to be paid
any stock transfer taxes payable with respect to the transfer of Shares to it,
except as otherwise provided in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
D.F. King & Co., Inc. (the "Information Agent") at their respective addresses
and telephone numbers set forth on the back cover page of the Offer to Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent, at the address and telephone number set forth on the back
cover page of the Offer to Purchase.
VERY TRULY YOURS,
WHEAT, FIRST SECURITIES, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU,
OR ANY OTHER PERSON, THE AGENT OF PARENT, PURCHASER, THE COMPANY, THE DEALER
MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE>
EXHIBIT (a)(5): FORM OF LETTER FROM BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES AND NOMINEES TO CLIENTS.
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
RAWSON-KOENIG, INC.
AT
$2.15 NET PER SHARE
BY
RAWSON-KOENIG, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME,
ON , 1997, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration are an Offer to Purchase, dated, 1997 (the
"Offer to Purchase"), and a related Letter of Transmittal in connection with the
offer by Rawson-Koenig, Inc., a Texas corporation (the "Company") to purchase
all outstanding shares of Common Stock, no par value per share held by the
Public Shareholders (the "Shares"), of the Company at a price of $2.15 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase and in a related Letter of Transmittal (which
together constitute the "Offer").
We are (or our nominee is) the holder of record of Shares held by us for
your account. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US OR OUR NOMINEE AS
THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF
TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY
YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer.
Your attention is invited to the following:
1. The tender price is $2.15 per Share, net to the seller in cash.
2. The Offer is being made for all outstanding Shares of the Public
Shareholders.
3. The Board of Directors of the Company and the Independent Directors have
determined that the Offer is fair to, and in the best interests of, the
shareholders of the Company, and recommends that shareholders accept the Offer
and tender their Shares pursuant to the Offer.
4. The Offer and withdrawal rights will expire at 12:00 Midnight, New York
City time, on , 1997, unless the Offer is extended.
5. Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by the
Company pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS
SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR
BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
<PAGE>
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and is being made to all holders of Shares. The Company is not
aware of any state where the making of the Offer is prohibited by administrative
or judicial action pursuant to any valid state statute. If the Company becomes
aware of any valid state statute prohibiting the making of the Offer or the
acceptance of Shares pursuant thereto, the Company will make a good faith effort
to comply. If after such good faith effort, the Company cannot comply with such
state statute, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) the holders of Shares in such state. In any jurisdiction where
the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of the
Company by Wheat, First Securities, Inc. or one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR
CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF
RAWSON-KOENIG, INC. BY RAWSON-KOENIG, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated , 1997, and the related Letter of
Transmittal (which together constitute the "Offer") in connection with the offer
by Rawson-Koenig, Inc., a Texas corporation (the "Company") to purchase all
outstanding shares of Common Stock, no par value per share, held by the Public
Shareholders (the "Shares"), of the Company.
This will instruct you to tender the number of Shares indicated below (or
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
Dated: , 1997 SIGN HERE
Signature(s)
Number of Shares to be Tendered:
------------------------------------
Shares* Please Type or Print Name(s)
------------------------------------
Please Type or Print Address
------------------------------------
(Zip Code)
------------------------------------
Area Code and Telephone Number
------------------------------------
Taxpayer Identification Number or
Social Security Number
___________________________
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
<PAGE>
EXHIBIT (a)(6): FORM OF GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER (W-9)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
IRS INSTRUCTIONS
(SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE.)
PURPOSE OF FORM. -- A person who is required to file an information return
with the Internal Revenue Service (the IRS) must obtain your correct taxpayer
identification number (TIN) to report income paid to you, real estate
transactions, mortgage interest you paid, the acquisition or abandonment of
secured property, or contributions you made to an individual retirement account
(IRA). Use Form W-9 to furnish your correct TIN to the requester (the person
asking you to furnish your TIN), and, when applicable (1) to certify that the
TIN you are furnishing is correct (or that you are waiting for a number to be
issued), (2) to certify that you are not subject to backup withholding, and (3)
to claim exemption from backup withholding if you are an exempt payee.
Furnishing your correct TIN and making the appropriate certifications will
prevent certain payments from being subject to backup withholding.
NOTE: IF A REQUESTER GIVES YOU A FORM OTHER THAN A W-9 TO REQUEST YOUR TIN,
YOU MUST USE THE REQUESTER'S FORM.
HOW TO OBTAIN A TIN. -- If you do not have a TIN, apply for one
immediately. To apply, get FORM SS-5, Application for Social Security Card (SSN)
(for individuals), from your local office of the Social Security Administration,
or FORM SS-4, Application for Employer Identification Number (EIN) (for
businesses and all other entities), from your local IRS office.
To complete Form W-9, if you do not have a TIN and have applied for one or
intend to apply for one in the near future, write "Applied For" in the space for
the TIN in Part I of the substitute Form W-9, sign and date the form, and give
it to the requester. Generally, you will then have 60 days to obtain a TIN and
furnish it to the requester. If the requester does not receive your TIN within
60 days, backup withholding, if applicable, will begin and continue until you
furnish your TIN to the requester. For reportable interest or dividend
payments, the payer must exercise one of the following options concerning backup
withholding during this 60-day period. Under option (1), a payer must backup
withhold on any withdrawals you make from your account after 7 business days
after the requester receives this form back from you. Under option (2), the
payer must backup withhold on any reportable interest or dividend payments made
to your account, regardless of whether you make any withdrawals. The backup
withholding under option (2) must begin no later than 7 business days after the
requester receives this form back. Under option (2), the payer is required to
refund the amounts withheld if your certified TIN is received within the 60-day
period and you were not subject to backup withholding during the period.
NOTE: WRITING "APPLIED FOR" ON THE SUBSTITUTE FORM W-9 MEANS THAT YOU HAVE
ALREADY APPLIED FOR A TIN OR THAT YOU INTEND TO APPLY FOR ONE IN THE NEAR
FUTURE.
As soon as you receive your TIN, complete another Form W-9, include your
TIN, sign and date this form, and give it to the requester.
WHAT IS BACKUP WITHHOLDING? -- Persons making certain payment to you after
1992 are required to withhold and pay to the IRS 31% of such payments under
certain conditions. This is called "backup withholding." Payments that could
be subject to backup withholding include interest, dividends, broker and barter
exchange transactions, rents, royalties, nonemployee compensation, and certain
payments from fishing boat operators, but do not include real estate
transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
(1) You do not furnish your TIN to the requester, or
(2) The IRS notifies the requester that you furnished an incorrect TIN, or
(3) You are notified by the IRS that you are subject to backup withholding
because you failed to report all your interest and dividends on your tax return
(for reportable interest and dividends only), or
<PAGE>
(4) You fail to certify to the requester that you are not subject to backup
withholding under (3) above (for reportable interest and dividend accounts
opened after 1983 only), or
(5) You fail to certify your TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983, or
broker accounts considered inactive in 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies. Certain payees and payments
are exempt from backup withholding and information reporting. See PAYEES AND
PAYMENTS EXEMPT FROM BACKUP WITHHOLDING, below, and EXEMPT PAYEES AND PAYMENTS
under SPECIFIC INSTRUCTIONS, below, if you are an exempt payee.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING -- The following is a
list of payees exempt from backup withholding and for which no information
reporting is required. For interest and dividends, all listed payees are exempt
except item (9). For broker transactions, payees listed in (1) through (13) and
a person registered under the Investment Advisers Act of 1940 who regularly acts
as a broker are exempt. Payments subject to reporting under sections 6041 and
6041A are generally exempt from backup withholding only if made to payees
described in items (1) through (7), except that a corporation that provides
medical and health care services or bills and collects payments for such
services is not exempt from backup withholding or information reporting. Only
payees described in items (2) through (6) are exempt from backup withholding for
barter exchange transactions, patronage dividends, and payments by certain
fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under Section 501(a), or an IRA, or a
custodial account under section 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States,
or any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S.
or a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed
in the most recent publication of the American Society of Corporation
Secretaries, Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section
4947.
Payments of dividends and patronage dividends generally not subject to
backup withholding also include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in trade or business in the U.S.
and that have at least one nonresident partner.
<PAGE>
- - Payments of patronage dividends not paid in money.
- - Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include
the following:
- - Payments of interest on obligations issued by individuals.
NOTE: YOU MAY BE SUBJECT TO BACKUP WITHHOLDING IF THIS INTEREST IS $600 OR
MORE AND IS PAID IN THE COURSE OF THE PAYER'S TRADE OR BUSINESS AND YOU HAVE NOT
PROVIDED YOUR CORRECT TIN TO THE PAYER.
- - Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
- - Payments described in section 6049(b)(5) to nonresident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Mortgage interest paid by you.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044,
6045, 6049, 6050A and 6050N, and their regulations.
PENALTIES
FAILURE TO FURNISH TIN. -- If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
MISUSE OF TINS. -- If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
SPECIFIC INSTRUCTIONS
NAME. -- If you are an individual, you must generally provide the name
shown on your social security card. However, if you have changed your last
name, for instance, due to marriage, without informing the Social Security
Administration of the name change, please enter your first name, the last name
shown on your social security card and your new last name.
If you are a sole proprietor, you must furnish your individual name and
either your SSN or EIN. You may also enter your business name. Enter your
name(s) as shown on your social security card and/or as it was used to apply or
your EIN on Form SS-4.
SIGNING THE CERTIFICATION.
(1) INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984 AND
BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983. -- You are requested to furnish
your correct TIN, but you are not required to sign the certification.
<PAGE>
(2) INTEREST, DIVIDEND, BROKER AND BARTER EXCHANGE ACCOUNTS OPENED AFTER
1983 AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983. -- You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out item (2) in the certification before signing the form.
(3) REAL ESTATE TRANSACTIONS. -- You must sign the certification. You may
cross out item (2) of the certification.
(4) OTHER PAYMENTS. -- You are required to furnish your correct TIN, but
you are not required to sign the certification unless you have been notified of
an incorrect TIN. Other payments include payments made in the course of the
requester's trade or business for rents, royalties, goods (other than bills for
merchandise), medical and health care services, payments to a nonemployee for
services (including attorney and accounting fees), and payments to certain
fishing boat crew members.
(5) MORTGAGE INTEREST PAID BY YOU, ACQUISITION OR ABANDONMENT OF SECURED
PROPERTY, OR IRA CONTRIBUTIONS. -- You are requested to furnish your correct
TIN, but you are not required to sign the certification.
(6) EXEMPT PAYEES AND PAYMENTS. -- If you are exempt from backup
withholding, you should complete this form to avoid possible erroneous backup
withholding. Enter your correct TIN in Part I, write "EXEMPT" in the block in
Part II, and sign and date the form. If you are a nonresident alien or foreign
entity not subject to backup withholding, give the requester a completed Form W-
8. Certificate of Foreign Status.
(7) "AWAITING TIN". -- Following the instructions under HOW TO OBTAIN A
TIN, on page 1, write "Applied For" in the space for the TIN in Part I of the
Substitute Form W-9 and sign and date the form.
SIGNATURE. -- For a joint account, only the person whose TIN is shown in
Part I should sign the form.
PRIVACY ACT NOTICE. -- Section 6109 requires you to furnish your correct
TIN to persons who must file information returns with the IRS to report
interest, dividends, and certain other income paid to you, mortgage interest you
paid, the acquisition or abandonment of secured property, or contributions you
made to an IRA. The IRS uses the numbers for identification purposes and to
help verify the accuracy of your tax return. You must provide your TIN whether
or not you are required to file a tax return. Payers must generally withhold
31% of taxable interest, dividends, and certain other payments to a payee who
does not furnish a TIN to payer. Certain penalties may also apply.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
- --------------------------------------------------------------------------------
FOR THE TYPE OF ACCOUNT IN: GIVE THE NAME AND
SOCIAL SECURITY
NUMBER OF:
1., 2., 3., 4., or 5.
- --------------------------------------------------------------------------------
FOR THE TYPE OF ACCOUNT IN: GIVE THE NAME AND
EMPLOYER IDENTIFICATION
NUMBER OF:
6., 7., 8., 9., 10., or 11.
- --------------------------------------------------------------------------------
1. Individual The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if
combined funds, the
first individual on the
account(1)
<PAGE>
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. A. The usual revocable The grantor-trustee(1)
savings trust (grantor is
also trustee)
B. So-called trust account The actual owner(1)
that is not a legal or valid
trust under state law
5. Sole proprietorship The owner(3)
6. A valid trust, estate or Legal entity(4)
pension trust
7. Corporate The corporation
8. Association, club, The organization
religious, charitable,
educational, or other tax
exempt organization
9. Partnership The partnership
10. A broker or registered The broker or nominee
nominee
11. Account with the Department The public entity
of Agriculture in the name
of a public entity (such as
a state or local government,
school district, or prison)
that receives agricultural
program payments
________________________________
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the individual's name. You may also enter your business name. You may
use your SSN or EIN.
(4) List first and circle the name of the legal trust, estate or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless
the legal entity itself is not designated in the account title.)
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL
BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
<PAGE>
EXHIBIT (a)(7): PRESS RELEASE
FOR IMMEDIATE RELEASE
- ---------------------
FOR: RAWSON-KOENIG, INC. CONTACT: Les Horvath
2301 Central Parkway Controller
Houston, Texas 77092 (713) 688-4414
RAWSON-KOENIG, INC.
ANNOUNCES TENDER OFFER
----------------------
Houston, Texas, June 4, 1997 - Rawson-Koenig, Inc. (Nasdaq SmallCap Market
Symbol: RAKO) announced today that its Board of Directors had approved a tender
offer by the Company to acquire all of the issued and outstanding shares of
common stock of the Company not owned by the Rawson Family, which currently owns
approximately 60% of the issued and outstanding shares.
The offer price is $2.15 net per share to sellers in cash. On June 3,
1997, the last full trading day prior to the announcement of the tender offer,
the last sales price per share was $1.875. The Company will pay all fees and
expenses of the tender offer, and tendering sellers will not be required to pay
any brokerage fees or commissions.
The tender offer was approved by the Company's independent directors as
well as by its full board of directors. It is intended that the tender offer
will be commenced at the earliest practicable time following reviews of the
necessary documentation by the Securities and Exchange Commission.
The tender offer will be immediately followed by a 1 for 100 reverse stock
split, which will result in all remaining odd-lot shareholders (i.e.,
shareholders owning less than 100 shares) receiving $2.15 net per share in cash
for each share held prior to the reverse split.
All remaining shares, if any, not purchased in the tender offer or the
reverse stock split, will be converted into the right to receive $2.15 net per
share (as adjusted for the reverse stock split) in a merger to be consummated as
soon as practicable after the tender offer.
Thomas C. Rawson, Chief Executive Officer of the Company, commented: "This
transaction will give our shareholders, many of whom own very small amounts of
stock, the opportunity to sell their shares at a substantial premium over
historical market prices and at the same time avoid the fees and commissions of
brokers."
Headquartered in Houston, Texas, Rawson-Koenig, Inc. manufactures truck
service bodies, truck tool boxes, winches, and truck-mounted cranes.
<PAGE>
Exhibit (b):
AMENDED AND RESTATED
LETTER LOAN AGREEMENT
June 18, 1997
Bank One, Texas, N.A.
910 Travis
Houston, Texas 77002
Attn: John E. Elam, Jr.
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, N.A. ("Lender") make a loan to Borrower. Lender has
advised Borrower that Lender is willing to make such loan 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, a sum evidenced by the below described
promissory notes (the "Loans"). The Loans shall be evidenced by (i) a Term
Promissory Note (the "Real Estate Note") in a form satisfactory to Lender and
Borrower, in the principal amount of $4,200,000.00 (ii) a Term Promissory Note
(the "Equipment Note") in a form satisfactory to Lender and Borrower, in the
principal amount of $1,390,000.00, and (iii) a Revolving Promissory Note (the
"Revolving Note") in a form satisfactory to Lender and Borrower, in the
principal amount of $2,200,000.00, and (iv) an Advancing Term Promissory Note
(the "Advancing Note") in a form satisfactory to Lender and Borrower, in the
original principal amount of $1,000,000.00. The Real Estate Note, the Equipment
Note, the Revolving Note and the Advancing Note and any renewals and extensions
thereof, are collectively referred to as the "Notes". Each of the Notes shall
be duly executed Borrower, and principal and interest thereon 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
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 on the requested borrowing date 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
<PAGE>
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
Borrower, 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 Advancing Note, which requests shall specify the aggregate
amount of the advance and the date of such advance. Borrower shall only be
entitled to an advance under the Advancing 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 Advancing Note after June
18, 1998. Borrower shall not be entitled to reborrow any sums already repaid
under the Advancing Note.
3. Conditions Precedent.
(a) The obligation of Lender to make the initial advance under each
Loan is subject to the condition precedent that Lender shall have received:
(i) 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
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");
(ii) Written confirmation from Borrower that the Securities and
Exchange Commission has no further comments in regard to
Borrower's purchase of all of its issued and outstanding shares
of common stock held or controlled by shareholders other than
Catherine A. Rawson, Pamela Y. Rawson and Thomas C. Rawson (the
"Public Shares") pursuant to the tender offer by Borrower to
purchase the Public Shares;
-2-
<PAGE>
(iii) Confirmation that the price at which Borrower shall
purchase its issued and outstanding shares shall not exceed that
which is acceptable to Lender;
(iv) An origination fee of 1/4 percent (0.25%) of funds advanced
hereunder, as consideration for Lender's commitment to make such
advances;
(v) A Mortgagee Policy of Title Insurance in an amount and form
satisfactory to Lender and Borrower; and
(vi) An environmental assessment report for the real estate
portion of the Collateral (described in Paragraph 9 hereof),
which shall be in form and content satisfactory to Lender.
(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;
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(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;
(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.
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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
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;
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(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
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.
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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 Borrower's Tangible Net Worth to be less than $3,000,000 at
any time during calendar year 1997; and each calendar year thereafter a sum
equal to the previous calendar year's required minimum Tangible Net Worth, plus
fifty percent (50%) of Borrower's Net Income for the previous calendar year; as
used herein, the term "Tangible Net Worth" shall mean Borrower's shareholders'
equity, minus all intangibles; "Net Income" shall mean net earnings (after
income and state franchise taxes) determined in accordance with generally
accepted accounting principles;
(d) Permit, at any time, its ratio of total liabilities to Tangible
Net Worth to be more than 2.50 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; 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;
(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
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<PAGE>
substantial change in its capitalization or its business, except for Borrower's
purchase of the Public Shares and the possible merger pursuant to the tender
offer described in Paragraph 3(a)(ii) hereof;
(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, except those
trade accounts receivable arising in the normal course of business and the
purchase of the Public Shares pursuant to the tender offer described in
Paragraph 3(a) (ii) hereof; 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,
Lender shall not be obligated to send such notice more than twice per calendar
year, and thereafter Borrower shall be in default upon any 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
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<PAGE>
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 (after the purchase of the shares
pursuant to the tender offer described in paragraph 3(a)(ii) hereof) 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. 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, and Haltom
City, Tarrant County, Texas, together with all improvements located or to
be located thereon.
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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: Corporate Lending
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).
(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
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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 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
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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 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
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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.
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
/s/ JOHN E. ELAM
By _________________________________
John E. Elam, Jr., Vice President
List of Loan Documents
1. Amended and Restated Letter Loan Agreement
2. $4,200,000.00 Term Promissory Note (Real Estate Note)
3. $1,390,000.00 Term Promissory Note (Equipment Note)
4 $2,200,000.00 Revolving Credit Note
5. $1,000,000.00 Advancing Line of Credit
6. Deed of Trust, Security Agreement and Assignment of Rents
7. Amended and Restated Security Agreement
8. Corporate Resolutions
9. Notice of Invalidity of Oral Agreements
-13-
<PAGE>
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 Borrower 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.
<PAGE>
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 or Controller 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)
<PAGE>
RENEWAL AND MODIFICATION
PROMISSORY NOTE
(REAL ESTATE NOTE)
$4,200,000.00 HOUSTON, TEXAS JUNE 18, 1997
THIS RENEWAL AND MODIFICATION PROMISSORY NOTE (THE "NOTE") IS EXECUTED IN
RENEWAL, EXTENSION, MODIFICATION AND ENLARGEMENT, BUT NOT EXTINGUISHMENT,
SUBSTITUTION, NOVATION OR DISCHARGE, OF THE INDEBTEDNESS EVIDENCED BY THAT ONE
CERTAIN PROMISSORY NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $2,000,000.00 DATED
JANUARY 29, 1988, EXECUTED BY RAWSON-KOENIG, INC. IN FAVOR OF KEYSTONE
INTERNATIONAL, INC., AND SECURED BY A DEED OF TRUST OF EVEN DATE THEREWITH, DULY
RECORDED UNDER CLERK'S FILE NO. L524904 OF THE OFFICIAL PUBLIC RECORDS OF REAL
PROPERTY OF HARRIS COUNTY, TEXAS, WHICH NOTE AND LIENS WERE DULY TRANSFERRED AND
ASSIGNED TO BANK ONE, TEXAS, N.A. BY THAT ONE CERTAIN TRANSFER OF NOTE AND LIENS
DATED MAY 20, 1991 AS RECORDED IN THE OFFICIAL PUBLIC RECORDS OF REAL PROPERTY
OF HARRIS COUNTY, TEXAS, UNDER CLERK'S FILE NO. N191393, AND INCLUDING ANY AND
ALL AMENDMENTS, MODIFICATIONS AND/OR RENEWALS THEREOF.
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, N.A., 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 up to FOUR
MILLION TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($4,200,000.00), 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
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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.
The principal of and all accrued but unpaid interest on this Note shall be
due and payable as follows:
Monthly principal installments of TWENTY-THREE THOUSAND THREE HUNDRED
THIRTY-THREE AND 33/100 DOLLARS ($23,333.33) each, plus interest accrued on
the outstanding principal balance, the first installment becoming due and
payable on or before JULY 21, 1997, with a like installment of principal,
plus interest accrued on the outstanding principal balance becoming due and
payable on or before the 21st day of each calendar month thereafter until
JUNE 18, 2002, when this Note, including all principal and accrued and
unpaid interest hereon shall be finally due and payable.
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.
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 previously amended and as it
may hereafter be amended
Initialed for
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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 "Real Estate 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
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
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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 as described in one or more Loan Documents referred to
in the Loan Agreement, and secured as more particularly described in that
certain Deed of Trust, Security Agreement, and Assignment of Rents and Profits
of even date herewith.
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
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<PAGE>
RENEWAL AND MODIFICATION
PROMISSORY NOTE
(EQUIPMENT NOTE)
$1,390,000.00 HOUSTON, TEXAS JUNE 18, 1997
THIS RENEWAL AND MODIFICATION PROMISSORY NOTE (THE "NOTE") IS EXECUTED IN
RENEWAL, EXTENSION, MODIFICATION AND ENLARGEMENT, BUT NOT EXTINGUISHMENT,
SUBSTITUTION, NOVATION OR DISCHARGE, OF THE INDEBTEDNESS EVIDENCED BY THAT ONE
CERTAIN PROMISSORY NOTE IN THE ORIGINAL PRINCIPAL SUM OF $575,000.00, DATED
SEPTEMBER 22, 1987, EXECUTED BY RAWSON-KOENIG, INC. IN FAVOR OF TEXAS COMMERCE
BANK OF FORT WORTH, WHICH NOTE WAS DULY TRANSFERRED AND ASSIGNED TO BANK ONE,
TEXAS, N.A., INCLUDING ANY AND ALL AMENDMENTS, MODIFICATIONS AND/OR RENEWALS
THEREOF.
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, N.A., 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 up to ONE
MILLION THREE HUNDRED NINETY THOUSAND AND NO/100 DOLLARS ($1,390,000.00), 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.
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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.
The principal of and all accrued but unpaid interest on this Note shall be
due and payable as follows:
Monthly installments of (i) all accrued and unpaid interest hereon, plus
(ii) a principal installment in an amount based on an eighty-four (84)
month equal amortization of the original outstanding principal amount of
this Note; the first installment becoming due and payable on or before the
thirtieth day after the advance of principal hereunder, with a like
installment of principal, plus interest accrued on the outstanding
principal balance becoming due and payable on or before the same day of
each calendar month thereafter until JUNE 18, 2002, when this Note,
including all principal and accrued and unpaid interest hereon shall be
finally due and payable.
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.
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 previously amended and 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
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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
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 as described in one or more Loan Documents referred to
in the Loan Agreement.
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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
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Renewal and Modification Promissory Note
<PAGE>
RENEWAL MASTER REVOLVING CREDIT NOTE
$2,200,000.00 HOUSTON, TEXAS JUNE 18, 1997
THIS RENEWAL MASTER REVOLVING CREDIT NOTE (THE "NOTE") IS EXECUTED AND
DELIVERED IN REPLACEMENT, RENEWAL AND EXTENSION (NOT IN EXTINGUISHMENT) OF THE
INDEBTEDNESS, BOTH UNPAID PRINCIPAL AND ACCRUED UNPAID INTEREST, AS OF THE DATE
HEREOF, ON A CERTAIN REVOLVING PROMISSORY NOTE DATED APRIL 21, 1995, IN THE
ORIGINAL PRINCIPAL AMOUNT OF $2,200,000.00 (THE "ORIGINAL NOTE"), WHICH ORIGINAL
NOTE WAS EXECUTED BY RAWSON-KOENIG, INC. AND PAYABLE TO THE ORDER OF BANK ONE
TEXAS, N.A., INCLUDING ANY AND ALL AMENDMENTS, MODIFICATIONS AND/OR RENEWALS
THEREOF, AND ALL LIENS, SECURITY INTERESTS, PLEDGES, COLLATERAL ASSIGNMENTS AND
GUARANTIES SECURING AND/OR GUARANTEEING PAYMENT OF THE ORIGINAL NOTE ARE HEREBY
RATIFIED, CONFIRMED, RENEWED, EXTENDED AND BROUGHT FORWARD AS SECURITY AND/OR
GUARANTY FOR THE PAYMENT HEREOF.
FOR VALUE RECEIVED, the undersigned, RAWSON-KOENIG, INC., a Texas
(hereinafter called the "Maker"), promises to pay to the order of BANK ONE
TEXAS, N.A., 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
Initialed for
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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.
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 JUNE 30, 1997, with a like
installment becoming due and payable on or before the last day of each
succeeding calendar month thereafter until APRIL 30, 1999 (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 of even date herewith (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
Initialed for
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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
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.
Initialed for
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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
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.
Payment of this Note is secured as described in one or more Loan Documents
referred to in the Loan Agreement.
Initialed for
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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 5 of a 5 Page $2,200,000.00 Credit Note
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RENEWAL AND MODIFICATION ADVANCING PROMISSORY NOTE
("ADVANCING NOTE")
$1,000,000.00 HOUSTON, TEXAS JUNE 18, 1997
THIS RENEWAL AND MODIFICATION ADVANCING PROMISSORY NOTE (THE "NOTE") IS
EXECUTED AND DELIVERED IN REPLACEMENT, MODIFICATION, RENEWAL AND EXTENSION (NOT
IN EXTINGUISHMENT) OF THE INDEBTEDNESS, BOTH UNPAID PRINCIPAL AND ACCRUED UNPAID
INTEREST, AS OF THE DATE HEREOF, ON A CERTAIN PROMISSORY NOTE (ADVANCING TERM)
DATED MAY 28, 1996, IN THE ORIGINAL PRINCIPAL AMOUNT OF UP TO $1,000,000.00 (THE
"ORIGINAL NOTE"), WHICH ORIGINAL NOTE WAS EXECUTED BY RAWSON-KOENIG, INC. AND
PAYABLE TO THE ORDER OF BANK ONE TEXAS, N.A., INCLUDING ANY AND ALL AMENDMENTS,
MODIFICATIONS AND/OR RENEWALS THEREOF, AND ALL LIENS, SECURITY INTERESTS,
PLEDGES, COLLATERAL ASSIGNMENTS AND GUARANTIES SECURING AND/OR GUARANTEEING
PAYMENT OF THE ORIGINAL NOTE ARE HEREBY RATIFIED, CONFIRMED, RENEWED, EXTENDED
AND BROUGHT FORWARD AS SECURITY AND/OR GUARANTY FOR THE PAYMENT HEREOF.
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.
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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.
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 JULY 31, 1997, with a like installment being due and
payable on or before the last day of each succeeding calendar month
thereafter until and including JUNE 18, 1998 (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 JUNE 18, 2003, 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
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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.
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 "Advancing 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
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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 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 $1,000,000.00 Advancing Note
<PAGE>
DEED OF TRUST, SECURITY AGREEMENT
AND ASSIGNMENT OF RENTS
THE STATE OF TEXAS (S)
(S) KNOW ALL PERSONS BY THESE PRESENTS:
COUNTY OF TARRANT (S)
COUNTY OF HARRIS (S)
THAT THE UNDERSIGNED, RAWSON-KOENIG, INC., a Texas corporation (hereinafter
called "Grantor"), whose address is 2301 Central Parkway, Houston, Texas 77092,
for and in consideration of the indebtedness hereinafter described, have
granted, bargained, sold and conveyed, and by these presents do grant, bargain,
sell and convey, in trust, unto Mike Ballases, 910 Travis, Houston, Texas 77002,
as Trustee and all substitute trustees hereunder (all of whom are hereinafter
called "Trustee"), and unto his or their successors and assigns, forever, all
and singular the property hereinafter described, situated in the Counties of
Harris and Tarrant, and State of Texas, to wit:
Those certain tracts or parcels of land being more particularly described
by metes and bounds on Exhibit "A" attached hereto and made a part hereof
for all purposes
together with (a) all rights, titles, interests, estates, reversions and
remainders owned and to be owned by Grantors in and to the above described
premises and in and to the properties covered hereby and all lands owned or to
be owned by Grantors next or adjacent to any land herein described or herein
mentioned; (b) all buildings and improvements now or hereafter located on the
lands described or mentioned; (c) all rights, titles and interests now owned or
hereafter acquired by Grantors in and to all easements, streets and rights-of-
way of every kind and nature adjoining the said lands, and all public or private
utility connections thereto, and all appurtenances, servitudes, rights, ways,
privileges and prescriptions thereunto; (d) the escrowed sums described in
paragraph (5) hereof, all goods, equipment, fixtures, inventory, machinery,
furniture, furnishings and other personal property that is now owned or
hereafter acquired by Grantors and now or hereafter affixed to, or located on,
the above described real estate and used or usable for any present or future
operation of any building or buildings now or hereafter located on said lands,
including without limitation, all rights, titles and interests of Grantors in
and to any such personal property that may be subject to any title retention or
security agreement superior in lien or security interest to the lien or security
interest of this Deed of Trust; (e) all permits, licenses, franchises,
certificates, utility commitments and/or reservations, wastewater capacity
reservations and other rights and privileges obtained in connection with the
property described herein; (f) all rights, titles and interests of Grantors in
and to all timber to be cut, or crops to be harvested, from the real estate
covered hereby and all minerals in, under, and upon, produced and to be produced
from said real estate; and without limitation of the foregoing, any and all
rights, rents, revenues, benefits, leases, contracts, accounts, general
intangibles, money, instruments, documents, tenements, hereditaments and
appurtenances now or hereafter owned by Grantors and appertaining to, generated
from, arising out of or belonging to the above-described properties or any part
thereof (all of the aforesaid being hereinafter sometimes called the "Mortgaged
Property").
<PAGE>
TO HAVE AND TO HOLD the Mortgaged Property unto Trustee and his assigns,
forever, and Grantors do hereby bind Grantors, their respective heirs, legal
representatives, successors and assigns, to warrant and forever defend the
Mortgaged Property unto Trustee, his successors and assigns, forever, against
the claim or claims of all persons whomsoever claiming or to claim the same, or
any part thereof.
This conveyance is made in trust, however, to secure and enforce the
payment of those certain promissory notes (hereinafter sometimes called "Note",
whether one or more) of even date herewith as follows: (i) a Term Promissory
Note in the original principal amount of $4,200,000.00 (the "Real Estate Note")
with a final maturity date of June 18, 2002; (ii) a Term Promissory Note in the
original principal amount of $1,390,000.00 (the "Equipment Note") with a final
maturity date of June 18, 2002; (iii) a Revolving Promissory Note (the
"Revolving Note") in the original principal amount of $2,200,000.00 with a final
maturity date of April 30, 1999; and (iv) an Advancing Term Promissory Note (the
"Advancing Note") in the original principal amount of $1,000,000.00 with a final
maturity date of June 18, 2003, executed by Grantors, payable to the order of
BANK ONE, TEXAS, N.A. (hereinafter called "Beneficiary"), whose address is 910
Travis, Houston, Texas 77002, which Note bears interest at the rate therein
stated, such Note providing in part, that if certain defaults occur, the unpaid
principal thereof and all accrued unpaid interest may be declared due and
payable, at the holder's option, prior to the stated maturity thereof, and
providing further for the payment of attorney's fees and other expenses of
collection under certain circumstances, and (b) the performance of all covenants
and agreements of Grantors herein.
This Deed of Trust, Security Agreement and Assignment of Rents (herein
called "Deed of Trust") shall secure, in addition to the Note, all funds
hereafter advanced by Beneficiary to or for the benefit of Grantors, as
contemplated by any covenant or provision herein contained or for any other
purpose related thereto, (all of the aforesaid, including all amounts payable
under the Note, being hereinafter sometimes called the "Indebtedness"). Said
indebtedness shall be payable at the above stated address of Beneficiary or at
such other place as Beneficiary may hereafter direct in writing; and, unless
otherwise provided herein or in the instrument evidencing the Indebtedness,
shall bear interest at the same rate per annum as the Note bears, from date of
accrual of the Indebtedness until paid. In addition, any and all attorney's
fees and expenses of collection payable under the terms of the Note shall be and
constitute a part of the Indebtedness secured hereby. This Deed of Trust shall
also secure all renewals, rearrangements, extensions and enlargements of any of
the Indebtedness.
For $10.00 and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantors have GRANTED, BARGAINED,
SOLD, ASSIGNED and CONVEYED, and by these presents do GRANT, BARGAIN, SELL,
ASSIGN and CONVEY absolutely unto Beneficiary, any and all rents, revenues,
income, proceeds, profits, security and other benefits paid or payable by
parties for the use, lease, license, operation or other enjoyment of the
Mortgaged Property (herein collectively called "Rents"), subject only to the
hereinafter described license, TO HAVE AND TO HOLD unto Beneficiary forever, and
Grantors do hereby bind Grantors, their respective heirs, legal representatives,
successors and assigns to warrant and forever defend the title to the Rents unto
Beneficiary against every person whomsoever lawfully claiming or to claim the
same, or any part thereof. Grantors represent and warrant that Grantors have
not previously assigned or pledged, and will not hereafter assign or pledge, all
or any portion of the Rents. Beneficiary hereby grants Grantors a limited
license to exercise and enjoy
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<PAGE>
all incidences of ownership of the Rents, including without limitation the right
to collect, demand, sue for, attach, levy, recover and receive the Rents.
Grantors hereby agree to receive all Rents and hold the same as a trust fund to
be applied first to the payment of the Note, second to the payment of all taxes,
insurance premiums, utility charges, maintenance and repair costs, replacement
reserves and other operating, management and maintenance expenses of the
Mortgaged Property, as same become due, and finally, Grantors may use the
balance of the Rents collected in any manner not inconsistent with this Deed of
Trust. So long as the license is in effect, Grantors (a) shall comply with
their obligations under all leases of all or portions of the Mortgaged Property,
(b) shall maintain each of such leases in full force and effect during the term
thereof, (c) shall, upon Beneficiary's request, deliver to each tenant under
such leases a notice of this assignment of Rents in a form acceptable to
Beneficiary, (d) upon request by Beneficiary, shall deliver Beneficiary true and
correct copies of such leases, and (e) shall not anticipate or collect any Rents
more than thirty (30) days in advance of the time when the same become due under
the terms of the leases.
Upon the occurrence of a default under this Deed of Trust, which continues
after the expiration of the applicable curative or grace period (if any), the
hereinabove described license shall immediately terminate without any action
being required of Beneficiary, and any and all tenants are hereby authorized by
Grantors, upon written notice to such tenants by Beneficiary, to make future
payments of Rents to Beneficiary without further consent of Grantors.
Thereafter, Beneficiary shall have the exclusive right, power and authority to
collect the Rents, regardless of whether a foreclosure sale of the remainder of
the Mortgaged Property has occurred under this Deed of Trust, or whether
Beneficiary has taken possession of the remainder of the Mortgaged Property or
attempted to do any of the same.
Neither the acceptance by Beneficiary of this assignment of Rents, nor the
granting of any other right, power, privilege or authority herein concerning the
Rents, nor the exercise of any of the aforesaid, shall (a) prior to the actual
taking of physical possession and operational control of the Mortgaged Property
by Beneficiary, be deemed to constitute Beneficiary as a "mortgagee in
possession", or (b) at any time thereafter, obligate Beneficiary (i) to appear
in or defend any action or proceeding relating to the Rents or the remainder of
the Mortgaged Property, (ii) to take any action hereunder, (iii) to expend any
money or incur any expenses or perform or discharge any obligation, duty or
liability with respect to any lease, (iv) to assume any obligation or
responsibility for any deposits which are not physically delivered to
Beneficiary, or (v) for any injury or damage to person or property sustained in
or about the Mortgaged Property.
Upon the payment in full of the Indebtedness secured by this Deed of Trust,
Beneficiary agrees to re-assign the Rents to Grantors.
In order to better secure payment of the Indebtedness, and to secure
performance of Grantors' covenants and agreements set forth herein, Grantors do
hereby jointly and severally covenant and agree with Beneficiary and with
Trustee and represent and warrant to Beneficiary and Trustee as follows:
1. Payment of Indebtedness. Grantors shall pay all of the Indebtedness,
together with the interest and other appurtenant charges thereon, when the same
shall become due, in accordance with the terms of the Note and all other
instruments evidencing the Indebtedness or
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<PAGE>
evidencing any renewals, rearrangements, extensions or enlargements of the same,
or any part thereof.
2. Title of Grantors; Legal Existence; Compliance with Laws. Grantors
represent and warrant that they have good and indefeasible title in fee simple
to the above described land and the improvements thereon, that the Mortgaged
Property is free from encumbrance superior to the liens and security interests
hereby created, unless otherwise herein provided, and that Grantors have full
right and authority to make this conveyance. Grantors agree to maintain and
preserve their legal existence (as permitted in Letter Loan Agreement of even
date herewith) and all related rights, franchises and privileges. Grantors shall
at all times comply with and perform all obligations under any applicable laws,
statutes, regulations or ordinances relating to the Mortgaged Property and
Grantors' use and operation thereof. Except as otherwise reflected in any
written environmental report furnished by Grantors to Beneficiary (the
"Environmental Report"), the Mortgaged Property has never been used as a toxic
or hazardous waste or substance disposal site, nor are any toxic or hazardous
wastes or substances disposed of, stored on, or contained in the Mortgaged
Property in any way which could subject Grantors, Beneficiary, or any subsequent
lienholder of the Mortgaged Property to liability or damages under any
applicable laws pertaining to health or the environment. Grantors will defend,
at their own cost and expense, indemnify and hold Beneficiary harmless from and
against, any action, proceeding, claim, liability or damages arising from, in
connection with, or in any way affecting or related to, the Mortgaged Property
or any breach, default or noncompliance with any legal requirement (including,
without limitation, any applicable laws pertaining to health or the
environment), and all costs and expenses incurred by Beneficiary in protecting
its interests hereunder or defending itself in such an event (including all
court costs and attorneys' fees) shall be borne by Grantors.
3. Insurance. Grantors shall keep all buildings and other property
covered by this Deed of Trust insured against fire and lightning with extended
coverage and against such other risks as Beneficiary may require, in an amount
not less than 100% of the full insurable value, with loss made payable to
Beneficiary pursuant to the Texas standard mortgagee clause, without
contribution, and shall deliver certificates of the policies of insurance to
Beneficiary promptly as issued. Such policies shall provide, by way of riders,
endorsements or otherwise (so long as readily available), that the insurance
provided thereby shall not be terminated, reduced or otherwise limited
regardless of any breach of the representations and agreements set forth
therein, and that no such policy shall be cancelled, endorsed or amended to any
extent unless the issuer thereof shall have first given Beneficiary at least
fifteen (15) days' prior written notice. If Grantors fail to furnish such
certificates, Beneficiary, at its option, may procure such insurance at
Grantors' expense. All certificates (or binders) for the renewal and substitute
policies of insurance shall be delivered to Beneficiary at least ten (10) days
before termination of the insurance protection replaced by such renewal or
substituted policies. In case of loss, Beneficiary, at its option, shall be
entitled to receive and retain the proceeds of the insurance policies, applying
the same toward payment of the Indebtedness as Beneficiary shall see fit, or at
Beneficiary's option, Beneficiary may pay the same over wholly or in part to
Grantors for the repair of said building or buildings or for the erection of a
new building or buildings in their place, or for any other purpose satisfactory
to Beneficiary, but Beneficiary shall not be obligated to see to the proper
application of any amount paid over to Grantors; provided, however, Beneficiary
shall fund the insurance proceeds to Grantors, at Grantor's request, for the
repairs or replacement of the building or buildings if, as determined in the
sole discretion of Beneficiary: (A) the insurance proceeds plus the amount of
cash deposited by Grantors with Beneficiary are
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adequate to complete such restoration work; and (B) the construction of all
improvements (including the restoration work) will be completed no later than
eighteen months from the date of this Deed of Trust. If Beneficiary allows
payment of all or part of such proceeds to Grantors, such payments shall be
disbursed on such terms and subject to such conditions as Beneficiary may
specify. Grantors agree that regardless of whether any insurance proceeds
payable to them are sufficient to pay the costs of repair and restoration of the
Mortgaged Property, they shall promptly commence and carry out the repair,
replacement, restoration and rebuilding of any and all of the Mortgaged Property
damaged or destroyed by fire or other casualty so as to return same, to the
extent practicable, to its condition immediately prior to such damage to or
destruction thereof. Grantors shall not permit or carry on any activities
within or relating to the Mortgaged Property that are prohibited by the terms of
any insurance policy covering any part of the Mortgaged Property. In the event
of a foreclosure of this Deed of Trust, the purchaser of the Mortgaged Property
shall succeed to all of the rights of Grantors, including any right to unearned
premiums, in and to all policies of insurance assigned and delivered to
Beneficiary pursuant to the provisions of this Deed of Trust. Regardless of the
types or amounts of insurance required and approved by Beneficiary, Grantors
shall assign and deliver to, and do hereby assign to, Beneficiary all policies
of insurance that insure against any loss or damage to the Mortgaged Property,
as collateral and further security for the payment of the Indebtedness.
Grantors shall also obtain and maintain in force and effect such liability and
other insurance policies and protection as Beneficiary may from time to time
specify.
4. Taxes and Assessments. Grantors shall pay all taxes and assessments
against the Mortgaged Property, including, without limitation, all taxes in lieu
of ad valorem taxes, as the same become due and payable. Upon request of
Beneficiary, Grantors shall provide Beneficiary with copies of paid tax receipts
or other satisfactory evidence showing that all taxes and assessments against
the Mortgaged Property have been paid in full at least fifteen (15) days prior
to the date such taxes or other assessments are delinquent. At any time any law
shall be enacted imposing or authorizing the imposition of any tax upon this
Deed of Trust, or upon any rights, titles, liens, or security interests created
hereby, or upon the Note, or any part thereof, Grantors shall immediately pay
all such taxes; provided, that, if it is unlawful for Grantors to pay such
taxes, Grantors shall prepay the Note in full without penalty within thirty (30)
days after demand therefor by Beneficiary.
5. Intentionally Deleted.
6. Assignment of Condemnation Proceeds. Immediately upon their obtaining
knowledge of the institution or threatened institution of any proceeding for the
condemnation of the Mortgaged Property or any portion thereof, Grantors shall
notify Beneficiary of such fact. All judgments, decrees and awards or payment
for injury or damage to the Mortgaged Property, and all awards pursuant to
proceedings for condemnation thereof, including interest thereon, are hereby
assigned in their entirety to Beneficiary, who shall apply the same first to
reimbursement of all costs and expenses incurred by Beneficiary in connection
with such condemnation proceeding and the balance shall be applied to the
Indebtedness in such manner as it may elect; and Beneficiary is hereby
authorized, in the name of Grantors, to execute and deliver valid acquittances
for, and to appeal from, any such award, judgment or decree. Notwithstanding
the foregoing, if (A) the total proceeds of such condemnation equal less than
$250,000.00 and (B) the portion of the Mortgaged Property so taken has
improvements thereon, Beneficiary agrees to pay all or a portion of such
proceeds over to Grantors for the actual costs of repair of said
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improvements or the erection of new improvements in their place, which repair
and restoration work Grantors shall promptly commence and complete to the
satisfaction of Beneficiary. Any proceeds in excess of such actual costs of
restoration and repair shall be retained by Beneficiary and credited against the
Indebtedness. If Beneficiary allows a portion of the proceeds of any
condemnation proceeding to be paid to Grantors for use in rebuilding, restoring
or repairing the Mortgaged Property, then the disbursement of such proceeds
shall be on such terms and subject to such conditions as Beneficiary may
specify. Beneficiary shall have the right to participate in any such
condemnation proceeding.
7. Defense of Title. If, while this trust is in force, the title of
Trustee to the Mortgaged Property, or any part thereof, shall be endangered or
shall be attacked directly or indirectly, Grantors hereby authorize Beneficiary,
at Grantors' expense, to take all necessary and proper steps for the defense of
said title, including the employment of counsel, the prosecution or defense of
litigation, and the compromise or discharge of claims made against said title.
8. Costs and Expenses. All costs and expenses incurred in performing and
complying with Grantors' covenants set forth herein shall be borne solely by
Grantors. If Grantors shall fail, refuse or neglect to make any payment or
perform any act required herein, then at any time thereafter, and without notice
to or demand upon Grantors and without waiving or releasing any other right,
remedy or recourse Beneficiary may have because of same, Beneficiary may (but
shall not be obligated to) make such payment or perform such act for the account
of and at the expense of Grantors, and shall have the right to rent the
Mortgaged Property for such purpose and to take all such actions and expend such
sums thereon and with respect to the Mortgaged Property as it may deem necessary
or appropriate. Grantors shall pay or reimburse Beneficiary against any and all
such expenses and costs. To the extent not prohibited by applicable law,
Grantors will pay all costs and expenses and reimburse Beneficiary for any and
all expenditures of every character incurred or expended from time to time,
regardless of whether or not a default shall have occurred hereunder, in
connection with Beneficiary's evaluating, monitoring, administering and
protecting the Mortgaged Property, and creating, perfecting and realizing upon
Beneficiary's security interests in and liens on the Mortgaged Property,
including, without limitation, all appraisal fees, consulting fees, filing fees,
taxes, brokerage fees and commissions, fees incident to security interest, lien
and other title searches and reports, escrow fees, attorneys' fees, legal
expenses, court costs, auctioneer fees and expenses, other fees and expenses
incurred in connection with the liquidation or sale of the Mortgaged Property
and all other professional fees. Any amount to be paid hereunder by Grantors to
Beneficiary, to the extent not prohibited by applicable law, shall be payable
upon demand and shall bear interest from the date of expenditure until paid at
the lesser of (i) the rate of interest provided in the Note for past due
installments of principal and/or interest, or (ii) the maximum nonusurious rate
of interest from time to time permitted by applicable law ("Highest Lawful
Rate"). At all such times, if any, that Chapter One ("Chapter One") of Title
79, Texas Revised Civil Statutes, 1925, as amended (the "Texas Credit Code")
establishes the Highest Lawful Rate, the Highest Lawful Rate shall be the
"indicated rate ceiling" (as defined in Chapter One) from time to time in effect
unless the Note specifically provides otherwise. Grantors shall indemnify
Beneficiary for any expenses incurred by Beneficiary pursuant to this paragraph,
and shall indemnify Beneficiary against all losses, expenses, damage, claims and
causes of action, incurred or accruing by reason of any acts performed by
Beneficiary pursuant to the provisions of this paragraph. To the extent not
prohibited by applicable law, the sum of all such costs and expenses incurred by
Beneficiary pursuant to this paragraph and not reimbursed by Grantors shall be
added to the Indebtedness and
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thereafter shall form a part of the same; and it shall be secured by this Deed
of Trust and by subrogation to all of the rights of the person, corporation or
body politic receiving such payment.
9. Maintenance of Property; No Other Liens or Security Interests.
Grantors shall keep every part of the Mortgaged Property in good condition, make
promptly all repairs, renewals and replacements necessary to such end, prevent
waste to any part of the Mortgaged Property, and do promptly all else necessary
to such end; and Grantors shall discharge all claims for labor performed and
material furnished therefor, and shall not suffer any lien of mechanics or
materialmen therefor to attach to any part of the Mortgaged Property. Grantors
shall guard every part of the Mortgaged Property from removal, destruction and
damage, and shall not do or suffer to be done any act whereby the value of any
part of the Mortgaged Property may be lessened. Except as Grantors have
described in writing to Beneficiary, no building or other property now or
hereafter covered by the lien of this Deed of Trust shall be removed, demolished
or materially altered or enlarged. Grantors shall not initiate, join in, or
consent to any change in any private restrictive covenants, zoning ordinances or
other public or private restrictions limiting or defining the uses that may be
made of the Mortgaged Property or any part thereof without the prior written
consent of Beneficiary. Beneficiary and its agents or representatives shall
have access to the Mortgaged Property at all reasonable times in order to
inspect same and verify Grantors' compliance with their duties and obligations
under this Deed of Trust. Grantors shall not, without the prior written consent
of Beneficiary, grant, convey or otherwise create or permit to be created, any
type of mortgage, lien, security interest or other encumbrance on any of the
Mortgaged Property, regardless of whether the same shall be inferior and
subordinate to the liens and security interests of Beneficiary in and to the
Mortgaged Property.
10. Restrictions on Transfer. Upon a sale or transfer (including a lease
for a term of longer than five years), without Beneficiary's prior written
consent, of (i) all or any part of the Mortgaged Property, or any interest
(beneficial or otherwise) therein, or (ii) actual or beneficial interests in
Grantors (if Grantors are not natural persons but are corporations,
partnerships, trusts or other legal entities), Beneficiary (pursuant to
Paragraph 12 hereof), at Beneficiary's option, and without demand, presentment
for payment, notice of nonpayment, grace, protest, notice of protest, notice of
intent to accelerate the indebtedness, notice of acceleration of the
indebtedness, or any other notice, all of which are expressly waived by
Grantors, may declare the entire unpaid principal balance and accrued interest
on the Note and any other unpaid indebtedness secured hereby immediately due and
payable, and Beneficiary may invoke any of its remedies hereunder. Grantors
agree that Beneficiary may condition its consent to any such sale or transfer on
(a) execution by the transferee of a written assumption agreement containing
such terms as Beneficiary may require, (b) an increase in the rate of interest
payable under the Note, and/or (c) the payment to Beneficiary of a reasonable
transfer fee.
11. Grantors' Successors in Interest. In the event the ownership of the
Mortgaged Property or any part thereof becomes vested in a person other than
Grantors, Beneficiary may, without notice to Grantors, deal with such successor
or successors in interest with reference to this Deed of Trust and to the
Indebtedness in the same manner as with Grantors, without in any way vitiating
or discharging Grantors' liability hereunder or upon the Indebtedness or waiving
the provisions of paragraph 10 hereof. No sale of the Mortgaged Property and no
forbearance on the part of Beneficiary, and no extension of the time for the
payment of the Indebtedness given by Beneficiary, shall operate to release,
discharge, modify, change or affect, either in whole or in
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part, any original liability of Grantors, or the liability of the guarantors or
sureties of Grantors, or of any other party liable for the payment of the
Indebtedness or any part thereof.
12. Default and Acceleration. In the event Grantors shall default in the
prompt payment, when due, of the Indebtedness, or any part thereof, or fail to
keep and perform any of the covenants or agreements contained herein or in any
other document securing the payment of the Indebtedness, or, in the event
Grantors or any person liable for the Indebtedness, or any part thereof, files a
voluntary petition in bankruptcy or for corporate reorganization, makes an
assignment for the benefit of any creditor, or if the Mortgaged Property or any
property owned by a person liable for the Indebtedness is placed under control
or in the custody of any court or receiver, or if Grantors abandon any of the
Mortgaged Property, then, in any such event, Beneficiary, at Beneficiary's
option, and without demand, presentment for payment, notice of nonpayment,
grace, protest, notice of protest, notice of intent to accelerate the
Indebtedness, notice of acceleration of the Indebtedness, or any other notice
(EXCEPT AS MAY BE PROVIDED TO THE CONTRARY in the Letter Loan Agreement of even
date herewith between Grantors and Beneficiary), all of which are hereby
expressly waived by Grantors, may declare the entire unpaid balance and accrued
interest on the Note and any other unpaid Indebtedness immediately due and
payable, whereupon it shall be so due and payable.
13. Prepayment. If, following the occurrence of an event of default
hereunder and an acceleration of the Indebtedness or any portion thereof, but
prior to a foreclosure sale of the Mortgaged Property, Grantors shall tender to
Beneficiary payment of an amount sufficient to satisfy the entire amount of the
Note, such tender shall be deemed to be a voluntary prepayment under the Note
and accordingly, Grantors shall also pay to Beneficiary the premium (if any)
then required under the Note in order to exercise the prepayment privilege
contained therein.
14. Survival of Covenants and Liens. All of the covenants and agreements
of Grantors set forth herein shall survive the execution and delivery of this
Deed of Trust and shall continue in force until the Indebtedness is paid in
full. Accordingly, if Grantors shall perform faithfully each and all of the
covenants and agreements herein contained, then, and then only, this conveyance
shall become null and void and shall be released in due form, upon Grantors'
written request and at Grantors' expense; otherwise, it shall remain in full
force and effect. No release of this conveyance or the lien thereof shall be
valid unless executed by Beneficiary.
15. Foreclosure and Sale. If an event of default hereunder shall occur,
Beneficiary may, at Beneficiary's election and by or through Trustee or
otherwise, sell or offer for sale, in one or more sales, all or any part of the
Mortgaged Property, in such portions, order and parcels as Beneficiary may
determine, with or without having first taken possession of same, to the highest
bidder for cash (or credit on the indebtedness if Beneficiary is the highest
bidder) at public auction. Such sale shall be made at the courthouse door of
the County wherein the Mortgaged Property (or any of that portion thereof to be
sold) is located, on the first Tuesday of any month between the hours of 10:00
A.M. and 4:00 P.M. after giving legally adequate written notice of sale of that
portion of the Mortgaged Property to be sold, at least twenty-one (21)
consecutive days prior to the date of said sale:
(a) by posting at the courthouse door of each county in which the Mortgaged
Property (or the portion thereof to be sold) is located, a written notice
designating the county in which the Mortgaged Property will be sold;
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(b) by filing in the office of the county clerk of each county in which the
Mortgaged Property (or the portion thereof to be sold) is located, a copy of the
notice posted under subparagraph (a); and
(c) by serving written notice of the sale by certified mail on each debtor
who, according to the records of Beneficiary, is obligated to pay the Note (and,
in the event the proceeds of the foreclosure sale are to be applied to a portion
of the indebtedness other than or in addition to the Note, then to each debtor
who, according to the records of Beneficiary, is obligated to pay such portion
of the indebtedness), such service to be complete and effective when the notice
is deposited in the United States mail, postage prepaid and addressed to the
debtor at the debtor's last known address as shown by the records of
Beneficiary.
In the alternative, such notice and sale may be accomplished in such manner as
permitted or required by Title 5, Section 51.002 of the Texas Property Code
relating to the sale of real property under contract lien and/or by Chapter 9 of
the Texas Business and Commerce Code relating to the sale of collateral after
default by a debtor (as said title and chapter now exist or may be hereafter
amended or succeeded), or by any other present or subsequent articles or
enactments relating to same. In instances where the Mortgaged Property is
located in states other than Texas, such sales shall be made in accordance with
the legal requirements therefor for such state, including, to the extent there
relevant, the Uniform Commercial Code there in effect. Nothing contained in this
Paragraph 15 shall be construed to limit in any way Trustee's rights to sell the
Mortgaged Property by private sale if, and to the extent that, such private sale
is permitted under the laws of the state where the Mortgaged Property (or that
portion thereof to be sold) is located, or by public or private sale after entry
of a judgment by any court of competent jurisdiction ordering same. At any such
sale (i) whether made under the power herein contained, the aforesaid Title 5,
Section 51.002 of the Texas Property Code, the Texas Business and Commerce Code,
any other legal requirement or by virtue of any judicial proceedings or any
other legal right, remedy or recourse, it shall not be necessary for Trustee to
have physically present, or to have constructive possession of, the Mortgaged
Property (Grantors hereby covenanting and agreeing to deliver to Trustee any
portion of the Mortgaged Property not actually or constructively possessed by
Trustee immediately upon demand by Trustee), and the title to and right of
possession of any such property shall pass to the purchaser thereof as
completely as if the same had been actually present and delivered to purchaser
at such sale, (ii) each instrument of conveyance executed by Trustee shall
contain a general warranty of title, binding upon Grantors, (iii) each and every
recital contained in any instrument of conveyance made by Trustee shall
conclusively establish the truth and accuracy of the matters recited therein,
including, without limitation, nonpayment of the Note (and/or other portion of
the Indebtedness with respect to which the sale has been conducted),
advertisement and conduct of such sale in the manner provided herein and
otherwise by law, and appointment of any successor Trustee hereunder, (iv) any
and all prerequisites to the validity thereof shall be conclusively presumed to
have been performed, (v) the receipt of Trustee or of such other party or
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers for his or their purchase money and no such purchaser or purchasers,
or his or their assigns or personal representatives, shall thereafter be
obligated to see to the application of such purchase money or be in any way
answerable for any loss, misapplication or nonapplication thereof, (vi) to the
fullest extent permitted by law, Grantors shall be completely and irrevocably
divested of all of their right, title, interest, claim and demand whatsoever,
either at law or in equity, in and to the property sold, and such sale shall be
a perpetual bar both at law and in equity against Grantors, and against any and
all other persons
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claiming or to claim the property sold or any part thereof, by, through or under
Grantors and (vii) to the extent and under such circumstances as are permitted
by law, Beneficiary may be a purchaser at any such sale. The Mortgaged Property
may be sold in one or more parcels and in such manner and order as Trustee, in
his sole discretion, may elect, it being expressly understood and agreed that
the right of sale arising out of any event of default shall not be exhausted by
any one or more sales. The Trustee making such sale shall receive the proceeds
thereof and shall apply the same as follows: (i) he shall pay the reasonable
expense of executing this trust, including a commission to himself of five per
cent (5%) of the gross proceeds of the sale; (ii) after paying such expenses, he
shall pay, so far as may be possible, the Indebtedness (including the Note),
discharging first the portion of the Indebtedness arising under the covenants or
agreements herein contained and not evidenced by the Note; (iii) he shall pay
the residue, if any, to Grantors, their respective heirs, legal representatives,
successors or assigns.
16. Fair Market Value Calculation. The following shall be the basis for
the finder of fact's determination of the fair market value of the Mortgaged
Property as of the date of the foreclosure sale in proceedings governed by
Sections 51.003, 51.004 and 51.005 of the Texas Property Code (as amended from
time to time):
(a) The Mortgaged Property shall be valued in an "as is" condition as of
the date of the foreclosure sale, without any assumption or expectation that the
Mortgaged Property will be repaired or improved in any manner before a resale of
the Mortgaged Property after foreclosure;
(b) The valuation shall be based upon an assumption that the foreclosure
purchaser desires a prompt resale of the Mortgaged Property for cash promptly
(but no later than twelve months) following the foreclosure sale;
(c) All reasonable closing costs customarily borne by the seller in a
commercial real estate transaction should be deducted from the gross fair market
value of the Mortgaged Property, including, without limitation, brokerage
commissions, title insurance, a survey of the Mortgaged Property, tax
prorations, attorney's fees, and marketing costs;
(d) The gross fair market value of the Mortgaged Property shall be further
discounted to account for any estimated holding costs associated with
maintaining the Mortgaged Property pending sale, including, without limitation
utilities expenses, property management fees, taxes and assessments (to the
extent not accounted for in subparagraph (c) above), and other maintenance
expenses; and
(e) Any expert opinion testimony given or considered in connection with a
determination of the fair market value of the Mortgaged Property must be given
by persons having at least five (5) years experience in appraising property
similar to the Mortgaged Property and who have conducted and prepared a complete
written appraisal of the Mortgaged Property taking into consideration the
factors set forth above.
17. Substitute Trustee. If the herein named Trustee shall die or become
disqualified from acting in the execution of this trust, or shall fail or refuse
to execute the same when requested by Beneficiary so to do, or if, for any
reason, Beneficiary shall prefer to appoint a substitute trustee to act instead
of the herein named Trustee, Beneficiary shall have full power to appoint, at
any time by written instrument, a substitute trustee, and, if necessary, several
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substitute trustees in succession, who shall succeed to all the estate, rights,
powers and duties of Trustee named herein, and no notice of such appointment
need to be given to Grantors or to any other person or filed for record in any
public office. Such appointment may be executed by any authorized agent of
Beneficiary; and if Beneficiary be a corporation and such appointment be
executed in its behalf by any officer of such corporation, such appointment
shall be conclusively presumed to be executed with authority and shall be valid
and sufficient without proof of any action by the board of directors or any
superior officer of the corporation. Grantors, severally, hereby ratify and
confirm any and all acts that the Trustee, or his successor or successors in
this trust, shall lawfully do by virtue hereof.
18. Purchaser's Right to Disaffirm. The purchaser at any trustee's or
foreclosure sale hereunder may disaffirm any easement granted, or rental or
lease contract made, in violation of any provision of this Deed of Trust, and
may take immediate possession of the Mortgaged Property free from, and despite
the terms of, such grant of easement and rental or lease contract.
19. Beneficiary as Purchaser. Beneficiary may bid and being the highest
bidder therefor, become the purchaser of any and all Mortgaged Property offered
for sale at any trustee's or foreclosure sale hereunder and shall have the right
to credit the amount of the bid upon the amount of the Indebtedness owing to
Beneficiary, in lieu of cash payment.
20. Recovery of Unmatured Indebtedness. It is agreed that if default be
made in the payment of any installment of the Note or other Indebtedness secured
by this Deed of Trust, or in the observance or performance of any covenant or
agreement of Grantors contained or referred to herein, the holder of the
Indebtedness or any part thereof under which such default occurs shall have the
option to proceed with foreclosure in satisfaction of such default either
through the courts or by directing Trustee or his successors in trust to proceed
as if under a full foreclosure, conducting the sale as herein provided, and
without declaring the whole Indebtedness due, and provided that if a sale is
made because of default of an installment, or a part of an installment, such
sale may be made subject to the unmatured part of the Note or other Indebtedness
secured by this Deed of Trust; and it is agreed that such sale, if so made,
shall not in any manner affect the unmatured portion of the Indebtedness, but as
to such unmatured portion of the Indebtedness, this Deed of Trust shall remain
in full force and effect just as though no sale had been made under the
provisions of this paragraph. It is further agreed that several sales may be
made hereunder without exhausting the right of sale for any unmatured portion of
the Indebtedness, it being the intention of the parties hereto to provide for a
foreclosure and sale of the security for any matured portion of the Indebtedness
without exhausting the power to foreclose and to sell the security for any other
portion of the Indebtedness whether matured at the time or subsequently
maturing. It is agreed that an assignee holding any installment or part of any
installment of the Note or other indebtedness secured hereby shall have the same
powers as are hereby conferred on the holder of the Indebtedness to proceed with
foreclosure on a matured installment or installments, and also to request
Trustee or his successors in trust to sell the Mortgaged Property or any part
thereof; but if an assignee forecloses or causes a sale to be made to satisfy
any installment, part of an installment, or installments, then the purchaser at
such foreclosure or sale shall be made subject to all of the terms and
provisions hereof with respect to the unmatured part of the Note and other
indebtedness secured hereby owned by the then holder of such indebtedness.
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21. Rights of Beneficiary Upon Default. In the event of default by
Grantors in the performance of one or more of their covenants and agreements as
set forth herein, then Beneficiary may, at its option, enter upon and take
exclusive possession of the Mortgaged Property and thereafter manage, use, lease
and otherwise operate same in such manner and by and through such persons,
objects or employees as it may deem proper and necessary. Beneficiary shall be
likewise entitled to possession of all books and records of Grantors that relate
to the Mortgaged Property. The rights of Beneficiary under this paragraph may
be enforced through an action for forcible entry and detainer or any other means
authorized by law. Any and all rents or other issues or profits received by
Beneficiary shall be accounted for in the manner provided for in the opening
provisions of this Deed of Trust. Grantors hereby indemnify and hold
Beneficiary harmless from and against any and all liability, loss, cost, damage
or expense which Beneficiary may incur under or by reason of this paragraph or
for any action taken by Beneficiary hereunder.
22. Election to Discontinue Remedy. In the event Beneficiary shall elect
to invoke any of the rights or remedies provided for herein, but shall
thereafter determine to withdraw or discontinue same for any reason, it shall
have the unqualified right to do so, whereupon all parties shall be
automatically restored and returned to their respective positions regarding the
Indebtedness and this Deed of Trust as shall have existed prior to the
invocation of Beneficiary's rights hereunder, and the rights, powers and
remedies of Beneficiary hereunder shall be and remain in full force and effect.
23. Release or Renewal of Liens. Any part of the Mortgaged Property may
be released by Beneficiary without affecting the lien, security interest and
rights hereof against the remainder. The lien, security interest and rights
hereby granted shall not affect or be affected by any other security taken for
the Indebtedness or any part thereof. The taking of additional security, or the
extension or renewal of the Indebtedness or any part thereof, shall at no time
release or impair the lien, security interest and rights granted hereby, or
affect the liability of any endorser, guarantor or surety, or improve the right
of any junior lienholder; and this Deed of Trust, as well as any instrument
given to secure any renewal or extension of the Indebtedness, or any part
thereof, shall be and remain a first and prior lien and security interest on all
of the Mortgaged Property not expressly released, until the Indebtedness is
completely paid.
24. Maximum Interest. The invalidity, or unenforceability in particular
circumstances, of any provisions of this Deed of Trust shall not extend beyond
such provision in such circumstances and no other provision of this Deed of
Trust shall be affected thereby. It is the intention of the parties hereto to
comply with the applicable usury laws; accordingly, it is agreed that,
notwithstanding any provisions to the contrary in the Note or any instrument
evidencing the Indebtedness, or in this Deed of Trust or any of the documents or
instruments securing payment of the Indebtedness or otherwise relating thereto,
in no event shall the Note or such documents require the payment or permit the
collection of interest in excess of the maximum amount permitted by such laws.
If any such excess interest is contracted for, charged or received, under the
Note or any instrument evidencing the Indebtedness, or under this Deed of Trust
or under the terms of any of the other documents securing payment of the
Indebtedness or otherwise relating thereto, or in the event the maturity of any
of the Indebtedness is accelerated in whole or in part, or in the event that all
or part of the principal or interest of the Indebtedness shall be prepaid, so
that under any of such circumstances, the amount of interest contracted for,
charged or received under the Note or any instruments evidencing the
Indebtedness, or under this Deed of
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Trust or under any of the instruments securing payment of the Indebtedness or
otherwise relating thereto, shall exceed the maximum amount of interest
permitted by the applicable usury laws, then in any such event (a) the
provisions of this paragraph shall govern and control, (b) neither Grantors nor
any other person or entity now or hereafter liable for the payment of the Note
or any instrument evidencing the Indebtedness shall be obligated to pay the
amount of such interest to the extent that it is in excess of the maximum amount
of interest permitted by the applicable usury laws, (c) any such excess that may
have been collected shall be either applied as a credit against the then unpaid
principal amount of the Indebtedness or refunded to Grantors, at the holder's
option, and (d) the effective rate of interest shall be automatically reduced to
the maximum lawful contract rate allowed under the applicable usury laws as now
or hereafter construed by the courts having jurisdiction thereof. 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 any instrument
evidencing the Indebtedness, or under this Deed of Trust or under such other
documents that are made for the purpose of determining whether such rate exceeds
the maximum lawful contract rate, shall be made, to the extent permitted by the
applicable usury laws, by amortizing, prorating, allocating and spreading in
equal parts during the period of the full stated term of the loans evidenced by
the Note or the instruments evidencing the Indebtedness, all interest at any
time contracted for, charged or received from Grantors or otherwise by the
holder or holders hereof in connection with such loans.
25. Waiver of Marshalling and Certain Rights. To the extent that Grantors
may lawfully do so, Grantors hereby expressly waive any right pertaining to the
marshalling of assets, the administration of estates of decedents, or other
matters to defeat, reduce or affect (a) the right of Beneficiary to sell all or
any part of the Mortgaged Property for the collection of the Indebtedness
(without any prior or different resort for collection), or (b) the right of
Beneficiary to the payment of the Indebtedness out of the proceeds of the sale
of all or any part of the Mortgaged Property in preference to every other person
and claimant.
26. Waivers. It is expressly agreed that (i) no waiver of any default on
the part of Grantors or breach of any of the provisions of this Deed of Trust
shall be considered a waiver of any other or subsequent default or breach, and
no delay or omission in exercising or enforcing the rights and powers herein
granted shall be construed as a waiver of such rights and powers, and likewise
no exercise or enforcement of any rights or powers hereunder shall be held to
exhaust such rights and powers, and every such right and power may be exercised
from time to time; (ii) any failure by Beneficiary to insist upon the strict
performance by Grantors of any of the terms and provisions herein shall not be
deemed to be a waiver of any of the terms and provisions herein, and
Beneficiary, notwithstanding any such failure, shall have the right thereafter
to insist upon the strict performance by Grantors of any and all of the terms
and provisions of this Deed of Trust; (iii) neither Grantors nor any other
person now or hereafter obligated for the payment of the whole or any part of
the Indebtedness shall be relieved of such obligations by reason of the failure
of Beneficiary or Trustee to comply with any request of Grantors, or of any
other person so obligated, to take action to foreclose this Deed of Trust or
otherwise enforce any of the provisions of this Deed of Trust or of any
obligations secured by this Deed of Trust, or by reason of the release,
regardless of consideration, of the whole or any part of the security held for
the Indebtedness, or by reason of the subordination in whole or in part by
Beneficiary of the lien, security interest or rights evidenced hereby, or by
reason of any agreement or stipulation with any subsequent owner or owners of
the Mortgaged Property extending the time of payment or modifying the terms of
the Indebtedness or this Deed of Trust
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<PAGE>
without first having obtained the consent of Grantors or such other person, and,
in the latter event, Grantors and all such other persons shall continue to be
liable to make such payments according to the terms of any such agreement of
extension or modification unless expressly released and discharged in writing by
Beneficiary; (iv) regardless of consideration, and without the necessity for any
notice to or consent by the holder of any subordinate lien or security interest
on the Mortgaged Property, Beneficiary may release the obligation of anyone at
any time liable for any of the Indebtedness or any part of the security held for
the Indebtedness and may extend the time of payment or otherwise modify the
terms of the Indebtedness and/or this Deed of Trust without, as to the security
or the remainder thereof, in anywise impairing or affecting the lien or security
interest of this Deed of Trust or the priority of such lien or security
interest, as security for the payment of the Indebtedness as it may be so
extended or modified over any subordinate lien or security interest; (v) the
holder of any subordinate lien or security interest shall have no right, and
shall not be granted the right, to terminate any lease affecting the Mortgaged
Property whether or not such lease be subordinate to this Deed of Trust; and
(vi) Beneficiary may resort for the payment of the Indebtedness to any security
therefor held by Beneficiary in such order and manner as Beneficiary may elect.
27. Terminable Tenancy Upon Foreclosure. In the event of a Trustee's sale
hereunder, and, if at the time of such sale, Grantors, or any other party
occupies the Mortgaged Property so sold, each and all shall immediately become
the tenant of the purchaser at such sale, which tenancy shall be terminable at
the will of landlord. An action of forcible detainer and/or any other legal
proceedings shall lie if the tenant holds over after a demand in writing for
possession of said property.
28. Application of Payments on Indebtedness. In the event any portion of
the Indebtedness is not, for any reason whatsoever, secured by this Deed of
Trust on the Mortgaged Property, the full amount of all payments made on the
Indebtedness shall first be applied to such unsecured portion of the
Indebtedness until the same has been fully paid.
29. Appointment of Receiver. It is agreed that Beneficiary, in any action
to foreclose, shall be entitled to the appointment of a receiver of the rents
and profits of the Mortgaged Property as a matter of right and without notice,
with power to collect the rents, issues and profits of the Mortgaged Property
due and coming due during the pendency of such foreclosure suit, without regard
to the value of the Mortgaged Property or the solvency of any person or persons
liable for the payment of the Indebtedness involved in said suit. Grantors, for
themselves and any subsequent owner or owners, hereby waive any and all defenses
to the application for a receiver as above provided, and hereby specifically
consent to such appointment without notice; but nothing herein contained is to
be construed to deprive Beneficiary of any other right, remedy or privilege it
may now have under the law to have a receiver appointed. The provision for the
appointment of a receiver of the rents and profits is made an express condition
upon which the loan evidenced by the Note is made.
30. Subrogation. To the extent that proceeds of the Note are used to pay
any prior indebtedness secured by an outstanding lien, security interest, charge
or prior encumbrance against the Mortgaged Property, such proceeds have been
advanced by Beneficiary at Grantors' request; and Beneficiary shall be
subrogated to any and all rights, powers, equities, liens and security interests
owned or granted by any owner or holder of such prior indebtedness,
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irrespective of whether said security interests, liens, charges or encumbrances
are released of record.
31. Security Agreement.
(a) Security Interest. This Deed of Trust shall be a security
agreement between Grantors, as the debtor, and Beneficiary, as the secured
party, covering the Mortgaged Property constituting personal property or
fixtures governed by the Texas Uniform Commercial Code (the "Code"), and
Grantors grant to Beneficiary a security interest in such portion of the
Mortgaged Property. In addition to Beneficiary's other rights hereunder,
Beneficiary shall have all rights of a secured party under the Code. Grantors
shall execute and deliver to Beneficiary all financing statements that may be
required by Beneficiary to establish and maintain the validity and priority of
Beneficiary's security interest, and Grantors shall bear all costs thereof,
including all state and county UCC record searches reasonably required by
Beneficiary. If Beneficiary should dispose of any of the Mortgaged Property
pursuant to the Code, ten (10) days' written notice by Beneficiary to Grantors
shall be deemed to be reasonable notice; provided, however, Beneficiary may
dispose of such property in accordance with the foreclosure procedures of this
Deed of Trust in lieu of proceeding under the Code. Beneficiary and Grantors
agree that a carbon, photographic or other reproduction of this Deed of Trust is
sufficient as a financing statement.
(b) Notice of Changes. Grantors shall give advance notice in writing
to Beneficiary of any proposed change in Grantors' name, identity, or structure,
and shall execute and deliver to Beneficiary, prior to or concurrently with the
occurrence of any such change, all additional financing statements that
Beneficiary may require to establish and maintain the validity and priority of
Beneficiary's security interest with respect to any of the Mortgaged Property
described or referred to herein.
(c) Fixtures. Some of the items of the Mortgaged Property described
herein are goods that are or are to become fixtures related to the land
described herein, and it is intended that, as to those goods, this Deed of Trust
shall be effective as a financing statement filed as a fixture filing from the
date of its filing for record in the real estate records of the county in which
the Mortgaged Property is situated. Information concerning the security
interest created by this Deed of Trust may be obtained from Beneficiary, as
secured party, at the address of Beneficiary stated above. The mailing address
of the Grantors, as debtor, is as stated above.
32. Income and Expense Statements. Grantors shall, upon reasonable
request of Beneficiary, deliver to Beneficiary, (i) then current annual
statements, in form and content satisfactory to Beneficiary, itemizing the
income and expenses of the Mortgaged Property, and (ii) then current financial
statements of Grantors and all guarantors of the Indebtedness.
33. Beneficiary's Consent. In any instance hereunder where Beneficiary's
prior approval or consent is required to be obtained by Grantors, or
Beneficiary's judgment is required to be exercised as to any matter, the
granting or denial of such approval or consent and the exercise of such judgment
shall be within the sole discretion of Beneficiary, and Beneficiary shall not,
for any reason and to any extent, be required to grant such approval or consent
or exercise such judgment in any particular manner regardless of the
reasonableness of either the request or Beneficiary's judgment.
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<PAGE>
34. Notices. All notices or other communications required or permitted to
be given pursuant to this Deed of Trust shall be in writing and shall be
considered as properly given if (i) mailed by first class United States mail,
postage prepaid, registered or certified with return receipt requested, or (ii)
delivered in person to the address of the intended addressee, or (iii) by
prepaid telegram. Notice by mail shall be effective upon the expiration of
three (3) business days after its deposit in the United States mail, except as
otherwise set forth in Paragraph 15 above when notice is effective upon deposit
in the United States mail. Notice given in any other manner shall be effective
only if and when received at the address of the addressee. For purposes of
notice, the addresses of the parties shall be as set forth in the opening
recitals hereinabove; provided, however, that either party shall have the right
to change its address for notice hereunder to any other location within the
United States by the giving of fifteen (15) days' notice to the other party in
the manner set forth hereinabove.
35. Environmental Matters. Grantors have taken the 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 Mortgaged Property or exist on or within any portion of the Mortgaged
Property except as disclosed in the Environmental Report. Grantors are not
aware of any prior uses of the Mortgaged 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, except as described in the Environmental
Report. The use which Grantors make and intend to make of the Mortgaged
Property will not result in the disposal or release of any hazardous substance,
solid waste or Hazard on, in or to the Mortgaged Property in violation of
Applicable Environmental Laws. 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. Grantors shall give notice to Beneficiary immediately upon (i)
Grantors' 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 Mortgaged
Property 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
Beneficiary, within thirty (30) days after demand by Beneficiary, with financial
assurance evidencing to Beneficiary'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 Mortgaged Property or the improvements thereon as
a result thereof. Grantors hereby defend, indemnify and hold harmless
Beneficiary, its employees, agents, shareholders, officers and directors
(collectively, the "Indemnified Parties"), from and against any claims, demands,
obligations, penalties, fines, suits, liabilities, settlements, damages, losses,
costs or expenses (including, without limitation, attorney and consultant fees
and expenses,
-16-
<PAGE>
investigation and laboratory fees and expenses, cleanup costs, and court costs
and other litigation expenses) of whatever kind or nature, known or unknown,
contingent or otherwise, arising out of or in any way related to (i) the
presence, disposal, release, threatened release, removal or production of any
hazardous substances, solid wastes or Hazards which are on, in, from or
affecting any portion of the Mortgaged Property; (ii) any personal injury
(including wrongful death) or property damage (real or personal) arising out of
or related to such hazardous substances, solid wastes or Hazards; (iii) any
lawsuit brought or threatened, settlement reached, or order by a governmental
authority relating to such hazardous substances, solid wastes or Hazards, and/or
(iv) any violation of any applicable laws, or demands of governmental
authorities, or violation of any policies or requirements of Beneficiary, which
are based upon or in any way related to such hazardous substances, solid wastes
or Hazards, regardless of whether or not any of the conditions described under
any of the foregoing subsections (i) through (iv), inclusive, was or is caused
by or within the control of Grantors, AND REGARDLESS OF WHETHER SUCH IS CAUSED
BY THE NEGLIGENCE OF AN INDEMNIFIED PARTY. Grantors agree, upon notice and
request by an Indemnified Party, to contest and defend any demand, claim, suit,
proceeding or action with respect to which Grantors have hereinabove indemnified
and held the Indemnified Parties harmless and to bear all costs and expenses of
such contest and defense. Grantors further agree to reimburse any Indemnified
Party upon demand for any costs or expenses incurred by any Indemnified Party in
connection with any matters with respect to which Grantors have hereinabove
indemnified and held the Indemnified Parties harmless. The provisions of this
paragraph shall be in addition to any other obligations and liabilities Grantors
may have to Beneficiary at common law, in equity or under documentation executed
in connection with the Note, and shall survive the closing, funding and payment
in full of the Note.
36. Professional Services. Promptly upon Beneficiary's request (but no
more often than once per calendar year, unless required by banking regulations
or regulators) , Grantors, at Grantors' sole cost and expense, shall: (a) cause
an inspection and written appraisal of the Mortgaged Property (or such parts of
it as are designated in Beneficiary's request), to be made by an appraiser
approved by Beneficiary in its sole discretion; and (b) cause to be conducted or
prepared any other written report, summary, opinion, inspection, review, survey,
audit or other professional service relating to the Mortgaged Property or any
operations in connection with it (all as designated in Beneficiary's request),
including without limitation any accounting, auctioneering, architectural,
consulting, engineering, design, legal, management, pest control, surveying,
title abstracting or other technical, managerial or professional service
relating to the Mortgaged Property or its operations. Beneficiary may elect to
deliver any such request orally, by telegram, by mail or by hand delivery
addressed to Grantors as provided in this Deed of Trust or by any other legally
effective method, and it may be given at anytime and from time to time before
the complete and final release and discharge of the security for the Note.
37. Further Documentation. Grantors agree that Grantors shall execute and
deliver such other and further documents and do and perform such other acts as
may be reasonably necessary and proper to carry out the intention of the parties
as herein expressed and to effect the purposes of this Deed of Trust and the
loan transaction referred to herein. Without limitation of the foregoing,
Grantors agree to execute and deliver such documents as may be necessary to
cause the liens and security interests granted hereby to cover and apply to any
property placed in, on or about the Mortgaged Property in addition to, or as
replacement or substitute for any of the Mortgaged Property.
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<PAGE>
38. Binding on Successors. The covenants herein contained shall inure to
the benefit of Beneficiary and Trustee, their heirs, legal representatives,
successors and assigns, and shall be binding upon the respective heirs, legal
representatives, successors and assigns of Grantors, but nothing in this
paragraph shall constitute an authorization for Grantors to sell or in any way
dispose of the Mortgaged Property or any part thereof if otherwise prohibited by
any of the terms hereof.
39. Definitions. Wherever used in this Deed of Trust, unless the context
clearly indicates a contrary intent or unless otherwise specifically provided
herein, the words "Deed of Trust" shall mean "this Deed of Trust, Security
Agreement and Assignment of Rents and any supplement or supplements hereto"; the
word "Grantors" shall mean "Grantors, their respective heirs, legal
representatives, successors and assigns, and/or any subsequent owner or owners
of the Mortgaged Property"; the word "Beneficiary" shall mean "Beneficiary or
any subsequent lawful holder or holders of the Note or other indebtedness
secured hereby"; the word "Note" shall mean the "Note secured by this Deed of
Trust and any renewals, extensions, rearrangements and enlargements thereof";
the word "person" shall mean "an individual, corporation, trust, partnership or
unincorporated association"; and the pronouns of any gender shall include the
other genders, and either the singular or plural shall include the other.
40. Renewal of Deeds of Trust. The Notes hereinbefore described and
secured hereby have, in part, been given to renew and extend the unpaid balance
owing on those certain promissory notes referenced in and secured by:
(1) a Deed of Trust, Security Agreement and Financing Statement
("Tarrant County Deed of Trust") 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
more fully described therein (the "Tarrant County Property"); which liens were
transferred and assigned 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; further secured by 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; as same were modified, renewed and
extended pursuant to the terms and conditions of (a) a Second Modification,
Renewal and Extension of Note and Liens 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; (b) a Third
Modification of Note and Liens dated April 30, 1993, and filed for record in the
Official Public Records of Real Property of Tarrant County, Texas; (c) a Fourth
Modification of Note and Liens 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; (d) a Fifth Modification of Note and Liens dated
effective April 21, 1995, and filed for record in the Official Public Records of
Real Property of Harris County, Texas; and, most recently, by (e) a Sixth
Modification Agreement dated May 28, 1996, filed for record in the Official
Public Records of Real Property of Harris County, Texas on March 31, 1997 under
County Clerk's File No. S379149; and
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(2) a Deed of Trust filed for record in the Official Public Records of
Real Property of Harris County, Texas, under Clerk's File No. L524904 covering
the property more fully described therein; which liens were transferred and
assigned to Lender by that certain Transfer of Note and Liens dated May 20,
1991, and filed for record in the Official Public Records of Real Property of
Harris County, Texas under Clerk's File No. N191393; which liens were modified,
renewed and extended pursuant to the terms and conditions of (a) the Harris
County Modification; and (b) that certain Supplemental Deed of Trust dated May
21, 1991, and filed for record in the Official Public Records of Real Property
of Tarrant County, Texas, under Volume 10321, Page 2277.
It is expressly agreed that the holder of the Note secured hereby is subrogated
to all the rights, liens and equities securing the original indebtedness above
described.
41. 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.
EXECUTED to be effective as of the 18th day of June, 1997.
"BORROWER"
RAWSON-KOENIG, INC.,
a Texas corporation
By: /s/ THOMAS C. RAWSON
-------------------------
Thomas C. Rawson
Chairman of the Board of Directors
THE STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
This instrument was acknowledged before me on June 18, 1997, 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
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<PAGE>
EXHIBIT "A"
HARRIS COUNTY PROPERTY
Tract I:
Being 13.400 acres out of the John Flowers 1/3 League, Abstract No. 269,
Houston, Harris County, Texas; said 13.400 acre tract being part of and out of
that certain tract described by instrument filed under County Clerk's File No.
F921426, and recorded under Film Code No. 117-82-1030, of the Official Public
Records of Real Property of Harris County, Texas, and being a portion of that
certain tract described by instrument filed under Harris County Clerk's File No.
F921425, and recorded under Film Code No. 117-82-1027, of said property records;
said 13.400 acre tract of land being more fully described as follows:
COMMENCING at a found 1-1/4 inch iron pipe marking the southeasterly corner of
Central Park Northwest, Section Two, as recorded in Volume 286, Page 62 of the
Harris County Map Records of Harris County, Texas; said 1-1/4 inch iron pipe
also marking the northerly right-of-way line of Dacoma Street (width varies);
THENCE S 89 degrees 04' 00" W, a distance of 278.80 feet along said northerly
right of way line for Dacoma Street to a found 1-3/8 inch iron rod marking the
beginning of a curve to the right;
THENCE along said curve to the right having a central angle of 13 degrees 34'
20" and a radius of 1357.50 feet, an arc distance of 321.57 feet, subtended by a
chord bearing S 89 degrees 08' 50" E, 320.82 feet in length, to a found 5/8 inch
iron rod in the northerly right-of-way line of Dacoma Street (width varies),
said point also marking the southeast corner of the remainder of Lot 4 out of
the ZONANA Subdivision as recorded in Volume 25, page 1 of the Harris County Map
Records;
THENCE N 15 degrees 54' 06" E, along the easterly line of said ZONANA
Subdivision, for total length of 574.57 feet to a found 1/2 inch iron rod; said
point being the Point of Beginning;
THENCE S 49 degrees 45' 31" E, a distance of 143.98 feet to a found 5/8 inch
iron rod found in the westerly line of a 21.9867 acre tract as described by
instrument filed under County Clerk's File No. F808743, and recorded under Film
Code No. ###-##-####, of the Official Public Records of Real Property of Harris
County, Texas;
THENCE N 17 degrees 35' 00" E, along westerly line of said 21.9867 acre tract a
distance of 91.10 feet to a set 5/8 inch iron rod marking the beginning of a
curve to the left;
THENCE along said curve to the left having a central angle of 16 degrees 18'
00", a radius of 270.00 feet, subtending by a chord bearing N 09 degrees 26' 00"
E, 76.55 feet in length, and a total distance of 76.81 feet to a found 5/8 inch
iron rod, said rod being in the westerly line of said 21.9867 acre tract;
Page 1 of 3 Pages
<PAGE>
THENCE N 01 degrees 17' 00" E, along the westerly line of said 21.9867 acre
tract a distance of 574.58 feet to a set 5/8 inch iron rod;
THENCE N 66 degrees 23' 00" W, a distance of 570.83 feet to a set 5/8 inch iron
rod marking an interior corner of said 21.9867 acre tract;
THENCE S 23 degrees 37' 00" W, with the easterly line for the Fairway Park
Subdivision as recorded in Volume 184, Page 135, of the Harris County Map
Records, a distance of 931.73 feet to a set 5/8 inch iron rod;
THENCE S 66 degrees 24' 48" E, a distance of 479.00 feet to a set 5/8 inch iron
rod;
THENCE N 16 degrees 06' 00" E, a distance of 314.37 feet to a found cyclone
fence corner;
THENCE S 74 degrees 14' 34" E, a distance of 85.04 feet to a found 1/2 inch iron
rod;
THENCE S 49 degrees 46' 17" E, a distance of 164.47 feet to the PLACE OF
BEGINNING and containing 13.400 acres (583,704 square feet) of land more or
less.
Tract II:
Easement rights appurtenant to 13.400 acres, more or less, described as Tract I
hereinabove, out of the John Flowers 1/3 League, Abstract No. 269, Houston,
Harris County, Texas, as such rights were created by and between Albert S.
Weycer, Trustee, et. al., and Keystone International, Inc., as set forth under
instrument filed under Clerk's File No. J851285 of the Official Public Records
of Real Property of Harris County, Texas.
Page 2 of 3 Pages
<PAGE>
EXHIBIT "A"
TARRANT COUNTY PROPERTY
Lots 3, 4, 5, 6, 7, 8, 9 and 10, Block 1, RANDOL ADDITION to the City of Haltom
City, Tarrant County, Texas, according to plat recorded in Volume 388-18, Page
73, Deed Records of Tarrant County, Texas.
Page 3 of 3 Pages
<PAGE>
AMENDED AND RESTATED
SECURITY AGREEMENT
(ACCOUNTS, INVENTORY, EQUIPMENT, FIXTURES,
GENERAL INTANGIBLES, OTHER)
June 18, 1997
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, N.A., 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, 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
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
<PAGE>
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 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, of even date
herewith, 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 Renewal and Modification Promissory Note of even date herewith,
executed by Debtor in the principal amount of $4,200,000.00 and made payable to
the order of Secured Party, which Note represents a consolidation, renewal and
enlargement of certain promissory notes more fully described therein, (iii) a
Renewal and Modification Advancing Promissory Note of even date herewith, 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,
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<PAGE>
(iv) a Promissory Note executed by Debtor in the original principal amount of
$1,390,000.00 of even date herewith, and made payable to the order of Secured
Party, and any and all extensions, renewals, and rearrangements thereof, and (v)
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:
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
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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
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
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<PAGE>
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
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
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<PAGE>
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.
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;
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<PAGE>
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.
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
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<PAGE>
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.
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.
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<PAGE>
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
21, 1995, 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.
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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<PAGE>
EXHIBIT "A"
HARRIS COUNTY PROPERTY
Tract I:
Being 13.400 acres out of the John Flowers 1/3 League, Abstract No. 269,
Houston, Harris County, Texas; said 13.400 acre tract being part of and out of
that certain tract described by instrument filed under County Clerk's File No.
F921426, and recorded under Film Code No. 117-82-1030, of the Official Public
Records of Real Property of Harris County, Texas, and being a portion of that
certain tract described by instrument filed under Harris County Clerk's File No.
F921425, and recorded under Film Code No. 117-82-1027, of said property records;
said 13.400 acre tract of land being more fully described as follows:
COMMENCING at a found 1-1/4 inch iron pipe marking the southeasterly corner of
Central Park Northwest, Section Two, as recorded in Volume 286, Page 62 of the
Harris County Map Records of Harris County, Texas; said 1-1/4 inch iron pipe
also marking the northerly right-of-way line of Dacoma Street (width varies);
THENCE S 89 degrees 04' 00" W, a distance of 278.80 feet along said northerly
right of way line for Dacoma Street to a found 1-3/8 inch iron rod marking the
beginning of a curve to the right;
THENCE along said curve to the right having a central angle of 13 degrees 34'
20" and a radius of 1357.50 feet, an arc distance of 321.57 feet, subtended by a
chord bearing S 89 degrees 08' 50" E, 320.82 feet in length, to a found 5/8 inch
iron rod in the northerly right-of-way line of Dacoma Street (width varies),
said point also marking the southeast corner of the remainder of Lot 4 out of
the ZONANA Subdivision as recorded in Volume 25, page 1 of the Harris County Map
Records;
THENCE N 15 degrees 54' 06" E, along the easterly line of said ZONANA
Subdivision, for total length of 574.57 feet to a found 1/2 inch iron rod; said
point being the Point of Beginning;
THENCE S 49 degrees 45' 31" E, a distance of 143.98 feet to a found 5/8 inch
iron rod found in the westerly line of a 21.9867 acre tract as described by
instrument filed under County Clerk's File No. F808743, and recorded under Film
Code No. ###-##-####, of the Official Public Records of Real Property of Harris
County, Texas;
THENCE N 17 degrees 35' 00" E, along westerly line of said 21.9867 acre tract a
distance of 91.10 feet to a set 5/8 inch iron rod marking the beginning of a
curve to the left;
THENCE along said curve to the left having a central angle of 16 degrees 18'
00", a radius of 270.00 feet, subtending by a chord bearing N 09 degrees 26' 00"
E, 76.55 feet in length, and a total
Page 1 of 3 Pages
<PAGE>
distance of 76.81 feet to a found 5/8 inch iron rod, said rod being in the
westerly line of said 21.9867 acre tract;
THENCE N 01 degrees 17' 00" E, along the westerly line of said 21.9867 acre
tract a distance of 574.58 feet to a set 5/8 inch iron rod;
THENCE N 66 degrees 23' 00" W, a distance of 570.83 feet to a set 5/8 inch iron
rod marking an interior corner of said 21.9867 acre tract;
THENCE S 23 degrees 37' 00" W, with the easterly line for the Fairway Park
Subdivision as recorded in Volume 184, Page 135, of the Harris County Map
Records, a distance of 931.73 feet to a set 5/8 inch iron rod;
THENCE S 66 degrees 24' 48" E, a distance of 479.00 feet to a set 5/8 inch iron
rod;
THENCE N 16 degrees 06' 00" E, a distance of 314.37 feet to a found cyclone
fence corner;
THENCE S 74 degrees 14' 34" E, a distance of 85.04 feet to a found 1/2 inch iron
rod;
THENCE S 49 degrees 46' 17" E, a distance of 164.47 feet to the PLACE OF
BEGINNING and containing 13.400 acres (583,704 square feet) of land more or
less.
Tract II:
Easement rights appurtenant to 13.400 acres, more or less, described as Tract I
hereinabove, out of the John Flowers 1/3 League, Abstract No. 269, Houston,
Harris County, Texas, as such rights were created by and between Albert S.
Weycer, Trustee, et. al., and Keystone International, Inc., as set forth under
instrument filed under Clerk's File No. J851285 of the Official Public Records
of Real Property of Harris County, Texas.
Page 2 of 3 Pages
<PAGE>
EXHIBIT "A"
TARRANT COUNTY PROPERTY
Lots 3, 4, 5, 6, 7, 8, 9 and 10, Block 1, RANDOL ADDITION to the City of Haltom
City, Tarrant County, Texas, according to plat recorded in Volume 388-18, Page
73, Deed Records of Tarrant County, Texas.
<PAGE>
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 by BANK ONE TEXAS, N.A. (the "Lender") to the
Company, 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 June 18, 1997, 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
---- ------ ---------
/s/ CATHERINE A. RAWSON
Catherine A. Rawson President ________________________
Chairman of the Board /s/ THOMAS C. RAWSON
Thomas C. Rawson and ________________________
Chief Executive Officer
/s/ FREDRICK C. WAMHOFF
Fredrick C. Wamhoff Secretary ________________________
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.
<PAGE>
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 18th day of June, 1997.
/s/ FREDRICK C. WAMHOFF
____________________________________
Fredrick C. Wamhoff, Secretary
The undersigned, the Chairman of the Board of the Company, hereby certifies
that Fredrick C. 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
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<PAGE>
EXHIBIT "A"
WHEREAS, RAWSON-KOENIG, INC. (the "Company") shall secure loans (the
"Loans") from BANK ONE TEXAS, N.A. (the "Lender"), in the total amount of
$8,790,000.00, pursuant to the terms of the Amended and Restated Letter Loan
Agreement.
RESOLVED, further, in regard to the Loan that any one of the President, the
Chairman of the Board of Directors, the Chief Executive Officer, or the
Secretary 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
RESOLVED, that any one of the President, the Chairman of the Board of
Directors, the Chief Executive Officer or the Secretary 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
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<PAGE>
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.
A-2
<PAGE>
NOTICE OF INVALIDITY OF ORAL AGREEMENTS
TO: BORROWER AND ALL OTHER DEBTORS AND OBLIGORS WITH RESPECT TO THE LOAN WHICH
IS IDENTIFIED BELOW.
1. 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.
2. As used in this Notice:
"Borrower" means the borrower identified below.
"Debtor" and "Obligor" mean any entity who (i) is obligated or becomes
obligated to pay the Loan (for example, as maker, cosigner or guarantor) or (ii)
has pledged any property as security for the Loan.
"Lender" means the lender identified below.
"Loan" means the loans by Lender which are evidenced by the promissory
notes and note modification agreements of even date herewith executed by
Borrower, payable to the order of Lender, as more fully described in the Amended
and Restated Letter Loan Agreement of even date herewith.
"Loan Agreement" means one or more promises, promissory notes, agreements,
undertakings, security agreements, deeds of trust or other documents, or
commitments, or any combination of those actions or documents, relating to the
Loan.
3. Each Borrower, Debtor, and Obligor who signs below acknowledges,
represents, and warrants to Lender that Lender has given and such party has
received a copy of this Notice on the date stated above, prior to the execution
of any Loan Agreement.
LENDER: BORROWER:
BANK ONE TEXAS, N.A. RAWSON-KOENIG, INC.
By /s/ JOHN E. ELAM, JR. By /s/ THOMAS C. RAWSON
--------------------------------- ------------------------------
John E. Elam, Jr., Vice-President Thomas C. Rawson, Chairman
of the Board of Directors
Date: June 18, 1997 Date: June 18, 1997
--------------------------------- ----------------------------
<PAGE>
EXHIBIT (c): AGREEMENT BETWEEN THE RAWSON FAMILY AND THE COMPANY
RAWSON FAMILY AGREEMENT
This Rawson Family Agreement (this "Agreement") is made effective as of
June 2, 1997 by and among Rawson-Koenig, Inc. (the "Company"), and Thomas C.
Rawson, Pamela Y. Rawson and The Rawson Family Limited Partnership, which is
controlled by Catherine A. Rawson (collectively, the "Rawson Family").
WHEREAS, the Rawson Family owns 60% of the Common Stock, no par value, of
the Company;
WHEREAS, the Company is making a tender offer to purchase the issued and
outstanding shares of its Common Stock, no par value (the "Offer"), held by
persons or entities other than the Rawson Family (the "Public Shareholders") at
the price set forth in the Offer to Purchase, including any amendments thereto
(the "Offer Price"); and
WHEREAS, pursuant to the Offer, the Rawson Family has agreed to share with
the Public Shareholders any Excess Proceeds (as defined herein), if any,
received in the future as a result of certain change in control transactions as
set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Rawson Family
hereby agree as follows:
1. DEFINITIONS.
a. "Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company or any successor to the Company
to any "person" (as such term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended); (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company or any successor to the Company; or
(iii) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as defined
above), other than the Rawson Family or their heirs (including assignees by
inter vivos transfers for estate planning purposes), acquires a direct or
indirect interest in more than 50% of the voting power of the Common Stock of
the Company or any successor to the Company.
b. Unless otherwise defined herein, all initially capitalized terms
herein shall have the same definitions set forth in the Offer to Purchase,
including any amendments thereto, filed by the Company with the Securities and
Exchange Commission.
2. AGREEMENT REGARDING PROCEEDS UPON A CHANGE OF CONTROL. In the event a
Change of Control occurs at any time within the three years following the later
of the date of consummation of the Offer or the date of consummation of the
Merger, the parties agree that if the aggregate amount of proceeds received by
the Rawson
<PAGE>
Family as a result of such Change of Control (the "Proceeds") exceeds the
product of the Offer Price multiplied by the 3,901,190 shares currently issued
and outstanding (the "Total Purchase Price"), then any positive difference
between the Proceeds and the Total Purchase Price (the "Excess Proceeds") shall
be distributed by the Company as follows: the Rawson Family shall receive their
proportionate share of the Excess Proceeds (i.e. 60%, collectively) and the
Public Shareholders of record on the date immediately prior to the commencement
of the Offer shall receive the remaining amount of the Excess Proceeds (i.e.
40%, collectively) in proportion to their ownership interests.
3. TRANSFER OF RIGHTS. This Agreement shall be binding on any heirs,
successors or permitted assigns of the parties.
4. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties and there are no other promises or conditions in any other agreement
whether oral or written. This Agreement supersedes any prior written or oral
agreements between the parties.
5. SEVERABILITY. If any provision of this Agreement shall be held to be
invalid or unenforceable for any reason, the remaining provisions shall continue
to be valid and enforceable. If a court finds that any provision of this
Agreement is invalid or unenforceable, but that by limiting such provision it
would become valid or enforceable, then such provision shall be deemed to be
written, construed, and enforced as so limited.
6. TERM. This Agreement shall terminate three years following the later
of the date of consummation of the Offer or the date of consummation of the
Merger.
7. APPLICABLE LAW. This Agreement shall be governed by and construed
according to the laws of the State of Texas.
RAWSON-KOENIG, INC.
/s/ THOMAS C. RAWSON
By: ____________________________________________
Thomas C. Rawson
Name: ___________________________________________
Chairman of the Board
Its: ____________________________________________
/s/ THOMAS C. RAWSON
- --------------------------------------------------
Thomas C. Rawson
/s/ PAMELA Y. RAWSON
- --------------------------------------------------
Pamela Y. Rawson
The Rawson Family Limited Partnership
/s/ CATHERINE A. RAWSON
By: ----------------------------------------------
Name: Catherine A. Rawson
Its: Managing General Partner
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