SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: December 31, 1996 Commission File No.: 0-12392
RAWSON-KOENIG, INC.
(Exact name of registrant as specified in its charter)
Texas 74-1957377
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2301 Central Parkway
Houston, Texas 77092
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 688-4414
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of Each Class on which registered
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value Per Share
Preferred Stock, $10.00 Par Value Per Share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in any definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
Amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference
to the price at which the stock was sold, or the average bid and asked prices of
of such stock, as of a specified date within 60 days prior to the date of filing
January 31, 1997 $2,093,355
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Common Stock outstanding as of: February 21, 1997 -- 3,901,190 shares
Documents Incorporated by Reference
List hereunder the following documents if incorporated by reference and the
part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes. None
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RAWSON-KOENIG, INC.
FORM 10-K
PART I
ITEM 1. BUSINESS
(a) The Registrant designs, manufactures and markets certain equipment for
light trucks, principally under the "Rawson-Koenig" name. As used in this
report, the term "the Registrant" refers to Rawson-Koenig, Inc. unless a
contrary or more limited meaning is indicated by the context. The
Registrant was incorporated in Texas on November 18, 1977.
The demand for the products manufactured by the Registrant is cyclical, and
tied to the general economic conditions of the geographic market for the
Registrant's products. In particular, demand for the Registrant's products
is related to certain service industries, including construction and public
utilities. The primary market for the Registrant's products is the United
States.
The ability of the Registrant to improve its results of operations and
recover the cost of its assets through operations is dependent on
improvements in manufacturing efficiency and increased sales volume through
the expansion of its distribution base and the introduction of new and
improved product lines. See paragraph (c)(xi) below for a discussion of
the Registrant's research and development activities.
(b) The Registrant operates in the truck equipment industry segment, which
accounted for approximately 100% of its business in 1996. See the
Financial Statements of Registrant included in this report for data
relating to the amounts of sales for the last three years.
(c) The following paragraphs provide information as to specific aspects of the
Registrant's business.
(i) Substantially all of the Registrant's products are truck equipment,
which includes truck service bodies, truck tool boxes, winches and
truck-mounted cranes. Service bodies are structures mounted on a
truck chassis in order to provide cover, storage space or working
space, while tool boxes are simpler and usually smaller structures,
which are also truck-mounted, but are designed solely for storage of
tools or other property.
The Registrant's service bodies offer a wide selection of standard
and optional features. Like the Registrant's tool boxes, they can
be installed on trucks of all major United States and foreign
producers and are used for general, industrial and recreational
purposes. In general, the Registrant believes that its service
bodies and tool boxes compete in the upper portions of their
respective markets in terms of quality and price. The Registrant
also believes that it offers the largest line of tool boxes
available from any single manufacturer.
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The Registrant's standard winches have pulling capacities of 2,000
to 30,000 pounds, are designed to be truck-mounted and also are sold
for general and industrial purposes. All these winches are
available with or without automatic safety brakes and may be used
with mechanical, hydraulic or electrical power sources. In addition
to these standard products, the Registrant manufactures winches for
special applications such as mining, logging and well drilling.
The Registrant's crane models may be mounted on the Registrant's
service bodies specially designed to withstand additional stress
when the crane is in use. Lifting capacity of the cranes ranges up
to 6,000 pounds depending on the model.
The Registrant sells its products primarily through a nationwide
network of distributors, although certain sales are also made
directly to end-user customers and to truck dealers. The Registrant
currently deals with approximately 350 active distributors of its
service bodies, tool boxes, winches and cranes.
The Registrant's only agreements with each distributor are contained
in an authorization letter and a credit application. The Registrant
believes that its relations with its distributors are good and that,
in any event, the loss of any single distributor would have no
material impact on its operations.
The Registrant believes that its most effective sales promotion and
advertising method is a combination of product demonstration and the
use of a strong diverse distributor network. The Registrant's
distributors are strategically located to provide coverage of key
marketing areas. The distributor network is also supported by the
Registrant through product line literature, trade shows, cooperative
advertising and seminars by the Registrant's sales personnel.
(ii) The Registrant continually monitors and updates its product lines.
In 1994, 1995 and 1996, the Registrant concentrated on keeping up
with increasing demand while continuing to make product improvements
on an ongoing basis.
(iii) The Registrant purchases steel, welding supplies, castings, paint
and other materials from independent suppliers. Virtually all
purchases are made on the basis of competitive bids. The Registrant
utilizes a combination of foreign, national and regional suppliers.
All purchases are made in U.S. dollars.
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All classes of supplies purchased by the Registrant are presently
available from a number of sources. The Registrant deals with a
large number of suppliers. Accordingly, the Registrant believes
that its business is not dependent upon any single supplier or upon
any group of suppliers. It is possible that shortages of a
particular type of supply could occur at any time in the future.
However, the Registrant has no reason to anticipate any such
shortage.
(iv) The Registrant owns no patents that are material to its business.
(v) Sales are seasonal in nature and in most years tend to be highest
around May and lowest around October. This seasonality is believed
to reflect, among other factors, model changes of truck
manufacturers in September and October and low levels of activity in
the construction industries in the fall and winter months. In 1994
and 1995, seasonality was less of a factor due to truck
manufacturers being overloaded with incoming orders throughout the
entire year. In 1996, sales declined in December.
(vi) Most of the Registrant's inventory is comprised of standard
products. Reference is made to Note 4 to the Financial Statements
for information as to a line of credit which is available to finance
inventory as required.
(vii) Since a significant portion of sales are made through distributors,
the Registrant does not necessarily know the identity of any
particular purchaser of its products. All statements made in the
following paragraph are subject to this qualification.
The Registrant sells to a large number of customers, and to the best
of its knowledge, no customer accounted for as much as 10% of sales
during the years ended December 31, 1994, 1995 and 1996. The
Registrant also believes that foreign or export sales, sales to
governmental agencies and sales to the military are insignificant.
The Registrant's products are marketed on a nationwide basis. The
Registrant's products are used in a variety of industries, and the
relative importance of these industries may vary from year to year.
The service and public utility industries were the most significant
industries during the years ended December 31, 1994, 1995 and 1996.
(viii) The Registrant's backlogs at the respective dates indicated were
approximately as follows: $1,399,000 at December 31, 1994,
$1,004,000 at December 31, 1995 and $835,000 at December 31, 1996.
All backlog at December 31, 1996 is believed to be firm and is
expected to be shipped during the fiscal year ending December 31,
1997.
(ix) The Registrant does not do a material amount of business with the
federal government.
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(x) The market for all the Registrant's products is very competitive.
Although the Registrant's products are marketed on a nationwide
basis, each manufacturer of otherwise competitive service bodies may
have certain advantages in its own region because of transportation
costs. In addition to this factor, competition in selling service
bodies is believed to involve such factors as product quality,
delivery capability, product price and quality of distributors. In
selling tool boxes, the more important competitive factors are
believed to be product quality, delivery capability, product prices,
range of product line and number of distributors or other outlets.
The Registrant competes in selling service bodies with a number of
manufacturers, some of which are larger in terms of assets and
sales. However, the Registrant believes that no single manufacturer
dominates the market for these products and that it can continue to
compete successfully for its market share, particularly in its
primary sales region.
Because of lower transportation costs, competition for sales of tool
boxes, winches and cranes is generally on a national rather than a
regional basis. Competition is based primarily on quality and
price. As stated elsewhere, the Registrant offers a standard
product line but stresses its ability to construct specialized
products. While several competitive manufacturers of tool boxes,
winches and cranes are larger in terms of sales and assets, and some
offer related equipment not produced by the Registrant, the
Registrant believes that no single manufacturer dominates the market
and that it can continue to compete successfully for its market
share.
(xi) The Registrant does not carry on research and development activities
except in connection with product testing, development and design.
Six employees were involved on a part-time basis in product testing,
development and design during the years ended December 31, 1994 and
1995. Eight employees were involved on a part-time basis in product
testing, development and design during the year ended December 31,
1996. The amount spent on such activities was less than $100,000 in
each of these years.
(xii) The Registrant does not believe that compliance with federal, state
and local environmental laws will adversely affect its business,
earnings or competitive position in the long run when regulations
are enforced uniformly across the nation. In 1994, 1995 and 1996,
compliance with federal, state and local environmental laws did not
have a material effect on the Registrant's earnings and competitive
position in the market. In 1994, 1995 and 1996, no material capital
expenditures for environmental control facilities were incurred and
none are anticipated for 1997.
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(xiii) At December 31, 1996, the Registrant employed 301 persons. No
employee is represented by any union, and the Registrant believes
that its employee relations are good.
(d) The Registrant's products are marketed primarily in the United States.
Direct export sales are immaterial to the Registrant's operations.
ITEM 2. PROPERTIES
The Registrant owns its manufacturing and office facilities in Houston,
Texas and Fort Worth, Texas. The Registrant's Houston service body and
tool box manufacturing facility occupies approximately 163,000 square feet
of space in a metal and brick building located in an office and industrial
park, while its executive and administrative offices occupy approximately
12,000 square feet in the same building. The Registrant's winch and crane
manufacturing facility occupies approximately 24,000 square feet of space
in an adjacent metal and concrete building constructed on the same tract of
approximately 13 acres. The Fort Worth facility is on approximately 3.7
acres of land with metal and block buildings totaling approximately 73,000
square feet. The Houston facilities are subject to mortgage liens of
approximately $1,300,000. The Registrant owns almost all of the machinery
and equipment used in its operations.
ITEM 3. LEGAL PROCEEDINGS
The Registrant is not a party to and its property is not subject to any
material pending legal proceedings other than ordinary routine litigation
incidental to its business.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
(a) The Registrant's common stock, no par value per share (Common Stock), is
traded on the National Association of Securities Dealers Automated
Quotation System (NASDAQ) Small Cap Market under the symbol "RAKO". The
following table shows the high and low bid and ask prices of the Common
Stock during the periods indicated:
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<PAGE>
<TABLE>
<CAPTION>
Bid Ask
High Low High Low
<S> <C> <C> <C> <C>
Year Ended December 31, 1995:
First Quarter 2-1/16 1-5/8 2-5/16 1-3/4
Second Quarter 1-13/16 1-13/16 2 1-15/16
Third Quarter 1-7/8 1-1/2 2 1-5/8
Fourth Quarter 1-3/4 1-1/8 2 1-3/8
Year 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:
January 1997 1-11/16 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.
(b) As of February 21, 1997, the Common Stock was held by approximately 1,400
stockholders of record.
(c) The Registrant has not paid any dividends since it became a publicly held
company.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial information for the Registrant for the
periods indicated must be read in conjunction with the Financial Statements in
this report and the notes thereto, which are an integral part of the Financial
Statements.
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<PAGE>
<TABLE>
<CAPTION>
(In Thousands Except Per Share Data)
Years Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Sales $19,522 $18,682 $17,185 $14,450 $12,678
Total assets 10,489 9,824 9,089 8,377 7,932
Long-term debt (less
current portion) 1,435 2,095 1,856 1,964 2,249
Net income 1,100 825 1,142 480 209
Net income per share .28 .21 .29 .12 .05
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Summary.
The following table sets forth for the years indicated (1) percentages
which certain items reflected in the accompanying statements of income and in
the accompanying selected financial data bear to total sales of the Registrant
and (2) the percentage increase (decrease) of such items as compared to the
indicated prior year.
<TABLE>
<CAPTION>
Percentage
Increase
<Decrease>
Percentage of Sales from Prior
Years Ended December 31: Year:
1996 1995 1994 1996 1995
<S> <C> <C> <C> <C> <C>
Sales 100.0 100.0 100.0 4.5 8.7
Cost of sales 76.8 79.8 77.4 .7 12.1
Selling, general, and
admin. expenses 14.1 13.8 13.3 6.3 13.3
Interest expense .8 1.0 1.2 (24.3) (7.8)
Other (income) expense, net - (1.0) (0.5) (95.3) 111.0
Income before income taxes 8.3 6.4 8.6 36.9 (19.6)
Income taxes 2.7 2.0 2.0 45.2 7.3
Net income 5.6 4.4 6.6 33.2 (27.7)
</TABLE>
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<PAGE>
Results of Operations.
Year Ended December 31, 1994. Sales for the year ended December 31, 1994
increased 18.9% from the year ending December 31, 1993 due primarily to the
Registrant's intensified marketing efforts and continued improvement in the
national economy, particularly improvement in light truck sales. Cost of sales
as a percentage of sales decreased from 81.5% in 1993 to 77.4% in 1994 due
to volume efficiencies and the Registrant's continued program of upgrading
manufacturing equipment and refining production methods. Selling, general and
administrative expenses as a percentage of sales increased from 12.9% in 1993 to
13.3% in 1994 primarily due to increases in insurance costs and payroll-related
expenses.
Year Ended December 31, 1995. Sales for the year ended December 31, 1995
increased 8.7% from the year ending December 31, 1994 due primarily to the
Registrant's continued marketing efforts and strong national light truck sales.
Cost of sales increased from 77.4% in 1994 to 79.8% in 1995 due to sharp
increases in material costs during the third and fourth quarters of 1995.
Selling, general and administrative expenses as a percentage of sales increased
from 13.3% in 1994 to 13.8% in 1995 primarily due to increases in insurance
costs and payroll-related expenses. Additionally, during 1995, approximately
$240,000 of office improvements and repairs were incurred of which $105,000 was
expensed. Income tax expense increased 7.3% from 1994 to 1995 due to
alternative minimum tax credits which were fully utilized during 1994.
Year Ended December 31, 1996. Sales for the year ended December 31, 1996
increased 4.5% from the year ending December 31, 1995 due primarily to the
Registrant's increased marketing efforts and, to a lessor degree, due to an
increase in nationwide sales of light trucks. Over the last three years the
Registrant has concentrated on improving its marketing efforts by increasing the
number and quality of its sales staff and by increasing advertising, trade show
attendance, and personal demonstrations of its products. Cost of sales as a
percentage of sales decreased from 79.8% in 1995 to 76.8% in 1996 primarily due
to lower material costs during the third and fourth quarters of 1996 compared to
the same period of 1995. During the third and fourth quarters of 1995 the
Registrant experienced sharp increases in material costs. In 1996 material
costs declined to previous levels. Selling, general and administrative expenses
as a percentage of sales increased from 13.8% in 1995 to 14.1% in 1996 primarily
due to increases in insurance costs and payroll-related expenses. Interest
expense decreased 24.3% from 1995 to 1996 primarily due to lower average
borrowings during 1996. Income tax expense increased 45.2% from 1995 to 1996
primarily due to the increase in income before income taxes and due to the
decreased effect of net operating loss carryforwards.
Liquidity and Capital Resources.
The Registrant plans to fund future operations from cash on hand, cash from
operations and by use of its credit facility, which currently has an available
line of credit of approximately $2,000,000 based upon the applicable borrowing
base calculation. The Registrant's line of credit expires in April 1998. The
Registrant also has an agreement with a bank to borrow up to $1,000,000 to
finance equipment purchases under which no borrowings have occurred.
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Net cash provided from operating activities was $1,099,973, $664,636 and
$2,035,197 for 1994, 1995 and 1996, respectively. Accounts receivable are
usually collected within 30 days. Accounts payable are paid within 30 days.
During 1994, 1995 and 1996, the Registrant increased inventory levels to be more
responsive to customer needs. In 1996 inventory increased $325,924.
In 1994, 1995 and 1996, the Registrant used $234,960, $790,470 and
$1,342,460, respectively, for investing activities. The purchase of property,
plant and equipment accounted for the majority of investing activities in these
three years.
In 1996 the Registrant used $673,950 for financing activities. In 1994,
1995 and 1996 financing activities consisted of scheduled payments of long-term
debt and borrowings and payments under the Registrant's line of credit
agreement. In 1996, the Registrant reduced the outstanding balance on the line
of credit by $431,605. The outstanding balance on the line of credit was
$200,000 at December 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 the Houston
facility.
The Registrant intends to renew and extend the line of credit prior to the
April 1998 expiration date. Although management believes that the combination
of cash from operations and the bank credit facilities will be sufficient to
meet the Registrant's long-term liquidity and capital resource needs, there can
be no assurance that such bank financing will be available on terms acceptable
to the Registrant.
Inflation.
The Registrant's business is relatively labor intensive, and the Registrant
purchases supplies and components from third parties. Nevertheless, the
Registrant has generally been able to raise its prices sufficiently to offset
any adverse effects of inflation. During the year ended December 31, 1994, the
Registrant increased prices on its cranes. During the year ended December 31,
1995, the Registrant increased prices on its service bodies, tool boxes and
winches. During January 1996 and January 1997, the Registrant increased prices
on the majority of its products. In January 1997, the Registrant also decreased
prices on a few of its products. The Registrant cannot predict any possible
future effects of inflation on its operations.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted in a separate section of this
report. Reference is made to the index on page 16 preceding the Financial
Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the directors
and executive officers of the Registrant.
Served As A
Name Age Position Director Since
Thomas C. Rawson 44 Chairman of the Board, September 18, 1987
Director and Chief
Executive Officer
Catherine A. Rawson 72 Director, President September 18, 1987
and Principal
Financial Officer
Pamela Y. Rawson 40 Director September 18, 1987 (1)
Farrell G. Huber, Jr. 64 Director July, 1983 (2)
George W. Fazakerly 55 Director September 21, 1987
Allen F. Rhodes 72 Director September 21, 1987
Joseph M. Scheer 70 Director April 10, 1991
Fredrick C. Wamhoff 39 Vice President-General
Counsel and Secretary
Richard F. Koenig 53 Vice President-
Information Systems
(1) Except for the period from September 21, 1987 to October 17, 1989.
(2) Except for the period from September 18, 1987 to September 21, 1987.
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Thomas C. Rawson co-founded Rawson Industries, Inc. ("Rawson") in 1978
with his father, the late Clare J. Rawson, his mother, Catherine A. Rawson, and
his wife, Pamela Y. Rawson. He holds a law degree from Thomas M. Cooley School
of Law in Michigan and a Bachelor of Science Degree from Michigan State
University. Mr. Rawson was admitted to the State Bar of Texas in 1979. Mr.
Rawson served as a Director and President of the Registrant from September 18,
1987 to October 17, 1989, when he was elected Chairman of the Board and Chief
Executive Officer.
Catherine A. Rawson co-founded Rawson in 1978. Prior to joining Rawson, she
was employed as a Test Administrator for the Michigan Civil Service Commission
and prepared and administered bookkeeping records for various family-owned
businesses. Mrs. Rawson received an Associate Arts Degree from Pierce College
in 1965. Mrs. Rawson served as Treasurer and a Director of Rawson from 1978 to
1987 and Treasurer and Vice President of Administration of the Registrant from
September 18, 1987 to October 17, 1989. She is currently President, Principal
Financial Officer and a Director of the Registrant.
Pamela Y. Rawson co-founded Rawson in 1978 after earning a Bachelor of
Science degree in Social Studies from Michigan State University. She served as
Secretary and a Director of Rawson and a Director of the Registrant from
September 18, 1987 to September 21, 1987. She was re-elected to the Board of
Directors of the Registrant on October 17, 1989.
Farrell G. Huber, Jr. is a personal investor. Mr. Huber has been a
Director of Keystone International, Inc., an industrial valve and operator
manufacturer, since 1980 and plans on retiring from the Keystone International,
Inc. Board on May 5, 1997.
George W. Fazakerly is a partner in the Dallas law firm of Vial, Hamilton,
Koch & Knox. He specializes in corporate and securities matters and received
his Juris Doctor Degree from Southern Methodist University in 1969. He has been
a partner with Vial, Hamilton, Koch & Knox since 1974.
Allen F. Rhodes is currently Chairman of the Silver Fox Advisors, a
business consulting firm. He has been a member of the Silver Fox Advisors since
1993. He was President of Arnco Technology, a metallurgical research company,
from 1991 to 1993, and President and Chief Executive Officer of Gripper, Inc.,
an undersea pipeline fittings manufacturer, from 1986 to 1991. Mr. Rhodes has
been a Director of Keystone International, Inc., an industrial valve and
operator manufacturer, since 1980.
Joseph M. Scheer is currently a management consultant and personal
investor. He has been a Director of Microsemi Corporation, an electronics
component manufacturer, since 1994 and a member of the Advisory Board of Soligen
Corporation, an innovative manufacturer of cast parts and tools, since 1996. He
was a Director of Laserform Inc., a prototype parts manufacturer in Auburn
Hills, Michigan from 1989 to 1994.
Fredrick C. Wamhoff joined Rawson in 1984 and has served the Registrant in
various functions including Vice President - Manufacturing Operations. He
currently serves as Vice President - General Counsel and Secretary of the
Registrant. Prior to joining Rawson, Mr. Wamhoff was in the private practice of
law in Lansing, Michigan. He attended Michigan State University and was
graduated in 1979 with a Bachelor of Arts Degree. He received his Juris Doctor
Degree from Marquette University in 1982. Mr. Wamhoff has been a member of the
Michigan and Wisconsin Bars since 1982 and the Texas Bar since 1986.
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Richard F. Koenig began his career with the Registrant in 1967 and has
served the Registrant in many and various functions including Manager of
Engineering and Data Processing, and General Manager of the Registrant's winch
and crane manufacturing facilities. Mr. Koenig has been a key member of the
Registrant's upper management team since September 17, 1987 and was elected Vice
President - Information Systems on January 18, 1994.
Each Director holds office until the next annual meeting of Shareholders of
the Registrant and until his successor is duly elected and qualified. Officers
of the Registrant are elected by, and serve at, the discretion of the Board of
Directors.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth, in summary fashion, the compensation paid
or accrued for the last three fiscal years to each of the most highly
compensated executive officers of the Registrant whose annual rate of
remuneration exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name Other
and Annual Restricted All Other
Principal Compen- Stock Options/ LTIP Compen-
Position Salary Bonus sation Awards SARs Payouts sation
<F1> Year ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas C. 1996 163,703 2,000 0 0 0 0 0
Rawson, 1995 151,200 2,000 0 0 0 0 0
C.E.O. 1994 148,533 2,000 0 0 0 0 0
Catherine 1996 157,691 2,000 0 0 0 0 0
A. 1995 151,500 2,000 0 0 0 0 0
Rawson, 1994 142,913 2,000 0 0 0 0 0
President
<FN>
<F1>
No other officers received compensation in excess of $100,000 during the last
three fiscal years.
</FN>
</TABLE>
The Registrant currently has no stock option plans. During the last three
fiscal years the Registrant granted no stock options or stock appreciation
rights ("SAR") to any of its employees or directors; further, during the last
three fiscal years no SAR or stock options were exercised by any of the
Registrant's employees or directors. The Registrant made no awards of long term
incentive plans to any employee or director of the Registrant in the last three
fiscal years. The Registrant has no written employment contracts with any
executive officer of the Registrant and has no compensatory plan or arrangement
with any executive officer which provides for compensation as a result of the
resignation, retirement or termination of employment of an executive officer, or
as a result of change in control of the Registrant.
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Compensation of Directors
Of the seven directors of the Registrant, four are "outside" directors or
non-employees of the Registrant. Each outside director receives a fee of $1,000
for attendance at meetings of the Board of Directors. Prior to October 1996,
each of the four outside directors received a fee of $500 for each meeting
attended. The three "inside" directors receive no fee for attendance at
meetings of the Board of Directors. In addition, of the four outside directors,
two live outside of the Houston area and receive reimbursement for travel
expenses incurred in connection with attendance of meetings of the Board of
Directors. The Board of Directors of the Registrant has not formed any
committees. The following table sets forth the amounts received by each of the
four outside directors during the last fiscal year, including travel expense
reimbursement.
Name Directors' Fees Travel Reimbursement
Farrell G. Huber, Jr. $2,500 Not Applicable
George W. Fazakerly $2,500 $840
Allen F. Rhodes $2,500 Not Applicable
Joseph M. Scheer $2,500 $1,399
During 1996, the Registrant paid Joseph M. Scheer $6,400 for management,
marketing and financial services rendered by him for the Registrant. Under the
terms of such arrangement Mr. Scheer bills the Registrant $100 per hour for his
services and is reimbursed for out-of-pocket expenses incurred by him in
connection with the services provided under the arrangement. During 1996, the
out-of-pocket reimbursement paid to Mr. Scheer was $328.
Prior to 1994, Pamela Y. Rawson was a non-employee director of the
Registrant. During 1994, Ms. Rawson became a part-time employee of the
Registrant and serves as a payroll administrator. During 1996, the Registrant's
compensation paid to Ms. Rawson consisted of hourly wages totaling $23,405.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE
REGISTRANT
The following table shows the number and percentage of shares of Common
Stock of the Registrant that may be deemed to be beneficially owned as of
February 21, 1997, by (i) each person known by the Registrant to be the
beneficial owner of more than five percent of the outstanding shares of Common
Stock of the Registrant, (ii) each director and nominee for director of the
Registrant who owns shares of Common Stock of the Registrant and (iii) all
directors, nominees, and officers as a group. The persons listed below have the
sole power to vote and to dispose of the shares beneficially owned by them
except as otherwise indicated below.
-14-
<PAGE>
<TABLE>
<CAPTION>
Shares of Common
Stock Beneficially
Owned As Of Percentage of
Name February 21, 1997 Class Owned
<S> <C> <C>
Floyd A. Cailloux
P.O. Box 1952
Kerrville, TX 78028 282,214 <F1> 7.2
Farrell G. Huber, Jr.
2301 Central Parkway
Houston, TX 77092 1,562 0 <F2>
Catherine A. Rawson
2301 Central Parkway
Houston, TX 77092 1,161,261 <F3> 60.0 <F4>
Thomas C. Rawson
2301 Central Parkway
Houston, TX 77092 1,180,841 60.0 <F4>
Pamela Y. Rawson
2301 Central Parkway
Houston, TX 77092 1,180,841 60.0 <F4>
Allen F. Rhodes
2301 Central Parkway
Houston, TX 77092 12,197 0 <F2>
Joseph M. Scheer
2301 Central Parkway
Houston, TX 77092 85,000 2.2
All directors and officers
as a group 2,443,924 62.6
<FN>
<F1>
Includes 273,415 shares held by entities controlled by Mr. Cailloux and includes
8,799 shares held by a charitable reminder trust of which Mr. Cailloux is a
lifetime beneficiary.
<F2>
Represents less than 1% of the issued and outstanding shares.
<F3>
Shares are held by the Rawson Family Limited Partnership that is controlled
by Catherine A. Rawson.
<F4>
Catherine A. Rawson, Thomas C. Rawson and Pamela Y. Rawson constitute a "group"
as such term is defined under regulations of the Security and Exchange
Commission. Therefore, the share ownership percentage of the entire group is
listed by each individual's name. In the case of Thomas C. Rawson and Pamela Y.
Rawson ownership of shares held or to be held by either such person are assumed
to be beneficially owned by such other person due to their marital relationship.
</FN>
</TABLE>
-15-
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Index to Financial Statements:
Page
Reference
Report of Independent Accountants F-1
Balance Sheets as of December 31, 1996 and 1995 F-2
For the years ended December 31, 1996, 1995 and 1994, the
Statements of Income F-3
Statements of Shareholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6
Schedule II - Valuation and Qualifying Accounts F-11
2. All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission, which are not
presented, are not required under the related instructions or are
inapplicable, and therefore have been omitted.
3. The following exhibits are filed with this report:
Page Number
In This Filing
or Incorporation
Exhibit Number and Description By Reference to
(2) Plan of Acquisition, Reorganization,
Arrangement, Liquidation or Succession*
(3) Articles of Incorporation and Bylaws
3.1 Restated Articles of Incorporation Exhibit 3.1***
3.2 Amended and Restated Bylaws Exhibit 3.2***
(4) Instruments defining the rights of Exhibit 4 to Koenig's
security holders, including indentures Registration on Form
10, as amended, under
the Securities Exchange
Act of 1934.
(9) Voting trust agreement*
-16-
<PAGE>
(10) Material Contracts
10.1 Koenig, Inc. Profit-Sharing
Plan and Trust Exhibit 10.1**
10.2 Koenig, Inc. 1983 Stock
Option Plan Exhibit 10.2**
10.3 Koenig, Inc. Restricted Stock Plan Exhibit 10.3**
10.4 Loan Agreement dated
September 22, 1987 Exhibit 10.4***
10.5 Agreement of Sale and Purchase
of Houston Plant Facility with
conformed exhibits Exhibit 10.5****
10.6 Loan Agreement dated
January 29, 1990 Exhibit 10.6*****
10.7 First Amendment to Letter Loan
Agreement dated March 31, 1991 Exhibit 10.7******
10.8 Second Amendment to Letter Loan
Agreement dated May 21, 1991 Exhibit 10.8******
10.9 Third Amendment to Letter Loan
Agreement dated March 24, 1992 Exhibit 10.9*******
10.10 Fourth Amendment to Letter Loan
Agreement dated April 30, 1993 Exhibit 10.10********
10.11 Fifth Amendment to Letter Loan
Agreement dated May 21, 1993 Exhibit 10.11********
10.12 Sixth Amendment to Letter Loan
Agreement dated April 30, 1994 Exhibit 10.12*********
10.13 Amended and Restated Letter Loan
Agreement dated April 21, 1995 Exhibit 10.13**********
10.14 First Amendment to Amended and
Restated Letter Loan Agreement,
Promissory Note (Advancing Term)
and Amended and Restated Security
Agreement dated September 21, 1995 Exhibit 10.14**********
10.15 Second Amendment to Amended and
Restated Letter Loan Agreement
and Amended and Restated Security
Agreement, and First Amendment to
Revolving Note dated May 28, 1996 Exhibit 10.15
(11) Statement re: computation of
per share earnings*
(12) Statement re: computation of ratios*
(13) Annual report to security holders*
(16) Letter re: change in certifying accountant*
(18) Letter re: change in accounting principles*
(21) Subsidiaries of the registrant*
(22) Published report regarding
matters submitted to vote
of security holders*
-17-
<PAGE>
(23) Consents of experts and counsel*
(24) Power of attorney*
(27) Financial Data Schedule Exhibit 27
(99) Additional Exhibits*
* Inapplicable.
** Included in the Registrant's Form 10-K for the year ended September
30, 1983.
*** Included in the Registrant's Form 10-K for the year ended September
30, 1987.
**** Included in the Registrant's Form 10-K for the year ended September
30, 1988.
***** Included in the Registrant's Form 10-K for the year ended December
31, 1990.
****** Included in the Registrant's Form 10-K for the year ended December
31, 1991.
******* Included in the Registrant's Form 10-K for the year ended December
31, 1992.
******** Included in the Registrant's Form 10-K for the year ended December
31, 1993.
********* Included in the Registrant's Form 10-K for the year ended December
31, 1994.
********** Included in the Registrant's Form 10-K for the year ended December
31, 1995.
(b) Reports on Form 8-K.
No reports were filed on Form 8-K during the last quarter of the period
covered by this report.
-18-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in
Houston, Texas, on the 19th day of March 1997.
Rawson-Koenig, Inc.
By:/s/ Thomas C. Rawson
---------------------
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
Registrant and in the capacities indicated and on the date indicated:
Signature Title Date
/s/ Thomas C. Rawson Chairman of the March 19, 1997
- ------------------------- Board, Director and
Thomas C. Rawson Chief Executive Officer
/s/ Catherine A. Rawson Director, President March 19, 1997
- ------------------------- and Principal Financial
Catherine A. Rawson Officer
/s/ Leslie T. Horvath Controller March 19, 1997
- -------------------------
Leslie T. Horvath
/s/ George W. Fazakerly Director March 19, 1997
- -------------------------
George W. Fazakerly
/s/ Farrell G. Huber, Jr. Director March 19, 1997
- -------------------------
Farrell G. Huber, Jr.
/s/ Pamela Y. Rawson Director March 19, 1997
- -------------------------
Pamela Y. Rawson
/s/ Allen F. Rhodes Director March 19, 1997
- -------------------------
Allen F. Rhodes
/s/ Joseph M. Scheer Director March 19, 1997
- -------------------------
Joseph M. Scheer
-19-
<PAGE>
FINANCIAL STATEMENTS
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Rawson-Koenig, Inc.:
We have audited the 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
F-1
<PAGE>
RAWSON-KOENIG, INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
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
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
RAWSON-KOENIG, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
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
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
RAWSON-KOENIG, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 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.
F-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.
F-5
<PAGE>
RAWSON-KOENIG, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF ORGANIZATION:
Rawson-Koenig, Inc. (the "Company"), a Texas corporation, designs,
manufactures, and markets certain equipment for light trucks. Its chief
products are truck tool boxes, truck service bodies, winches and truck-mounted
cranes.
The Company sells its products to customers in the truck equipment industry
located throughout the United States. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral. The
Company maintains reserves for potential credit losses and such losses have
been within management's expectations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Net Income Per Share
Net income per share is computed on the basis of the weighted average number
of shares of common stock outstanding during the year.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers any
highly liquid debt instruments purchased with an original maturity date of
three months or less to be cash equivalents.
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts.
Inventories
Inventories are valued at the lower of cost or market. Cost, which includes
material, labor and manufacturing overhead, is determined by the first-in,
first-out (FIFO) method and, at December 31, 1996 and 1995, consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
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
=========== ==========
</TABLE>
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.
F-6
<PAGE>
RAWSON-KOENIG, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Property, plant and equipment at December 31, 1996 and 1995, consisted of
the following:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
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
=========== ==========
</TABLE>
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.
F-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:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
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
========== ==========
</TABLE>
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:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1997...................................................... $ 228,639
1998...................................................... 442,867
1999...................................................... 211,686
2000...................................................... 780,260
----------
$1,663,452
==========
</TABLE>
F-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:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
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....................... $ - $ -
========= =========
</TABLE>
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>
F-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:
<TABLE>
<CAPTION>
NET OPERATING LOSS
CARRYFORWARDS
---------------------
ALTERNATIVE
REGULAR MINIMUM
TAX TAX INVESTMENT
REPORTING REPORTING TAX CREDIT
EXPIRATION YEAR ENDING DECEMBER 31, PURPOSES PURPOSES CARRYFORWARDS
----------------------------------- --------- ----------- -------------
<S> <C> <C> <C>
1998................................... $ 6,000
1999................................... 9,000
2001................................... $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
======== ======== =======
</TABLE>
Utilization of net operating loss carryforwards is limited under the
alternative minimum tax rules. Additionally, special limitations exist under
the tax law which may restrict the utilization of the regular tax and
alternative minimum tax net operating loss carryforwards.
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.
F-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>
F-11
SECOND AMENDMENT TO AMENDED AND
RESTATED LETTER LOAN AGREEMENT AND
AMENDED AND RESTATED SECURITY AGREEMENT, AND
FIRST AMENDMENT TO REVOLVING NOTE
THIS SECOND AMENDMENT TO AMENDED AND RESTATED LETTER LOAN AGREEMENT AND AMENDED
AND RESTATED SECURITY AGREEMENT, AND FIRST AMENDMENT TO REVOLVING NOTE
("Amendment") is made and entered into effective the 28th day of May, 1996, by
and between RAWSON-KOENIG, INC., a Texas corporation (herein called "Borrower"),
and BANK ONE, TEXAS, NA, with offices in Houston, Texas (herein called
"Lender").
R E C I T A L S:
WHEREAS, Borrower and Lender entered into, among other agreements, (i) an
Amended and Restated Letter Loan Agreement dated April 21, 1995 (as amended, the
"Loan Agreement"; the terms defined therein being used herein as therein defined
unless otherwise defined herein), (ii) a Master Revolving Credit Note of even
date with the Loan Agreement in the principal sum of $2,200,000.00 ("Revolving
Note"), and (iii) an Amended and Restated Security Agreement of even date with
the Loan Agreement (the "Security Agreement"); and
WHEREAS, Borrower and Lender entered into that certain First Amendment to
Amended and Restated Letter Loan Agreement, Promissory Note (Advancing Term) and
Amended and Restated Security Agreement dated effective September 21, 1995; and
WHEREAS, Borrower and Lender desire to (i) provide for a new $1,000,000.00
advancing term facility, (ii) extend the maturity date of the Revolving Note
from April 30, 1997 to April 30, 1998, and (iii) amend certain terms and
provisions of the Loan Agreement.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the mutual promises herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, Borrower and Lender hereby agree to amend the Loan Agreement, the
Revolving Note and the Security Agreement as hereinafter set forth.
1. Amendments to Loan Agreement. The Loan Agreement is, effective the
date hereof, and subject to the satisfaction of the conditions precedent set
forth in Section 4 hereof, hereby amended as follows:
(a) The introductory paragraph of the Loan Agreement is hereby deleted
and replaced with the following:
"The undersigned, Rawson-Koenig, Inc., a Texas corporation ("Borrower"), duly
organized and existing under the laws of the State of Texas, has requested that
Bank One, Texas, NA ("Lender") 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:"
(b) Paragraph 1 of the Loan Agreement is hereby deleted and replaced with
the following:
"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 Master
Revolving Credit Note (the "Revolving Note") in a form satisfactory to Lender,
duly executed by Borrower in the principal amount of $2,200,000.00 and made
payable to the order of Lender, (ii) a Term Promissory Note (the "Real Estate
Note") in a form satisfactory to Lender, duly executed by Borrower in the
principal amount of $488,604.20 as of January 29, 1990 as evidenced by an
assignment to Lender from Texas Commerce Bank-Fort Worth ("TCB"), of an existing
promissory note from Borrower, payable to the order of TCB in the original face
amount of $575,000.00, (iii) a Term Promissory Note (the "Central Parkway Note")
in a form satisfactory to Lender, duly executed by Borrower in the principal
amount of $1,879,214.00 as of May 20, 1991 as evidenced by an assignment to
Lender from Keystone International, Inc. ("Keystone"), of an existing promissory
note from Borrower, payable to the order of Keystone in the original face amount
of $2,000,000.00, (iv) an Advancing Term Promissory Note (the "Equipment Note")
in a form satisfactory to Lender, duly executed by Borrower in the original
principal amount of $1,000,000.00 and payable to the order of Lender, which
Equipment Note has been subsequently increased to a principal amount of
$1,500,000, and (v) an Advancing Term Promissory Note (the "Second Equipment
Note") in a form satisfactory to Lender, duly executed by Borrower in the
principal amount of $1,000,000.00 and payable to the order of Lender. The Real
Estate Note, the Revolving Note, the Central Parkway Note, the Equipment Note,
and the Second Equipment Note, and any renewals and extensions thereof, are
collectively referred to as the "Notes". Principal and interest on each of the
Notes shall be due and payable in the manner and at the times set forth in such
Notes."
(c) Subparagraph 2(d) is hereby added to the Loan Agreement as follows:
"(d) 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 Second Equipment Note, which requests shall specify the
aggregate amount of the advance and the date of such advance. Borrower shall be
entitled only to an advance under the Second Equipment Note in an amount
approved by Lender, and in no event shall any such advance exceed Borrower's
actual cost of any such purchased equipment. Borrower shall furnish to Lender a
request for borrowing in a form satisfactory to Lender and a copy of the invoice
for the assets to be purchased, at least two (2) business days prior to the
requested borrowing date. Lender shall make the requested funds available to
Borrower at Lender's principal banking office in Houston, Texas. In connection
with advances, Lender shall not be obligated to make any advances under the
Second Equipment Note after April 30, 1997. Borrower shall not be entitled to
reborrow any sums already repaid under the Second Equipment Note."
(d) The reference to "$4,900,000" as Borrower's minimum Tangible Net Worth
in paragraph 6(c) of the Loan Agreement is hereby deleted and replaced with
"$5,000,000".
2. Amendments to Revolving Note. The Revolving Note is, effective the
date hereof, and subject to the satisfaction of the conditions precedent set
forth in Section 4 hereof, hereby amended as follows:
(a) The first grammatical paragraph on page two of the Revolving Note
dated April 21, 1995 is, effective the date hereof, amended by deleting the
reference to "April 30, 1997" and substituting "April 30, 1998" therefor.
(b) Upon the effective date hereof, Lender shall be authorized to endorse
on the Revolving Note the following legend or a legend of similar effect:
"The final maturity set forth in this Note has been extended until April 30,
1998, pursuant to a Second Amendment to Amended and Restated Letter Loan
Agreement and Amended and Restated Security Agreement and First Amendment to
Revolving Note, dated as of May 28, 1996 amending, among other things, the Loan
Agreement referred to in this Note."
3. Amendment to Security Agreement. The Security Agreement is, effective
the date hereof, and subject to the satisfaction of the conditions precedent set
forth in Section 4 hereof, hereby amended as follows:
(a) Section 1.2 of the Security Agreement is hereby deleted and replaced
with the following:
"1.2 Obligations. The security interest granted hereby is to secure the
payment of (i) a Master Revolving Credit Note executed by Debtor in the
principal amount of $2,200,000.00 and made payable to the order of Secured
Party, and any and all extensions, renewals and rearrangements thereof, (ii) a
Term Promissory Note executed by Debtor in the principal amount of $488,604.20
as of January 29, 1990 and made payable to the order of Texas Commerce Bank-Fort
Worth, and subsequently assigned to Secured Party, and any and all extensions,
renewals and rearrangements thereof, (iii) a Term Promissory Note executed by
Debtor in the principal amount of $1,879,214.00 and made payable to the order of
Keystone International, Inc., and subsequently assigned to Secured Party, and
any and all extensions, renewals and rearrangements thereof, (iv) an Advancing
Term Promissory Note duly executed by Debtor in the original principal amount of
$1,000,000.00 and made payable to the order of Secured Party, the principal
amount of which has subsequently been increased to $1,500,000, and any and all
extensions, renewals and rearrangements thereof, (v) an Advancing Term
Promissory Note duly executed by Debtor in the principal amount of $1,000,000.00
and made payable to the order of Secured Party, and any and all extensions,
renewals and rearrangements thereof, and (vi) any and all other indebtedness and
liabilities whatsoever of Debtor to Secured Party whether direct or indirect,
absolute or contingent, due or to become due and whether now existing or
hereafter arising and howsoever evidenced or acquired, whether joint or several
(all of which are hereinafter sometimes called the "Obligations"). Debtor
acknowledges that the security interest hereby granted shall secure all future
advances as well as any other obligations and liabilities of Debtor to Secured
Party whether now in existence or hereafter arising."
4. Conditions of Effectiveness. This Amendment shall become effective
when, and only when, Lender shall have received counterparts of this Amendment
executed by Borrower and Sections 1, 2 and 3 hereof shall become effective when,
and only when, Lender shall have additionally received all of the following
documents:
(a) Sixth Modification of Note and Liens executed by Borrower;
(b) Second Supplemental Deed of Trust executed by Borrower;
(c) Certificates of the Boards of Directors of Borrower authorizing the
execution, delivery and performance of this Amendment, and the matters
contemplated hereby; and
(d) Any other instruments or documents as may be required by Lender.
5. Representations and Warranties of Borrower. Borrower represents and
warrants as follows:
(a) Borrower is duly authorized and empowered to execute, deliver and
perform this Amendment and all other instruments referred to or mentioned herein
to which it is a party, and all action on its part requisite for the due
execution, delivery and the performance of this Amendment has been duly and
effectively taken. This Amendment, when executed and delivered, will constitute
valid and binding obligations of Borrower enforceable in accordance with its
terms. This Amendment does not violate any provisions of Borrower's Articles of
Incorporation, By-Laws, or any contract, agreement, law or regulation to which
Borrower is subject, and does not require the consent or approval of any
regulatory authority or governmental body of the United States or any state.
(b) The representations and warranties made by Borrower in the Loan
Agreement are true and correct as of the date of this Amendment.
(c) No event has occurred and is continuing which constitutes an Event of
Default or would constitute an Event of Default but for the requirement that
notice be given or time elapse or both.
6. Reference to and Effect on the Security Instruments.
(a) Upon the effectiveness of Sections 1, 2 and 3 hereof, on and after the
date hereof each reference in the Loan Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import, and each reference in
the other Security Instruments (hereinafter defined) to the Loan Agreement,
shall mean and be a reference to the Loan Agreement as amended hereby.
(b) Except as specifically amended above, the Loan Agreement, the
Revolving Note, the Security Agreement, and all other instruments securing or
guaranteeing Borrower's obligations to Lender (the "Security Instruments") shall
remain in full force and effect and are hereby ratified and confirmed. Without
limiting the generality of the foregoing, the Security Instruments and all
collateral described therein do and shall continue to secure the payment of all
obligations of Borrower under the Loan Agreement and the Revolving Note, as
amended hereby, and under the other Security Instruments.
(c) The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of Lender under any of the Security Instruments, nor constitute a waiver
of any provision of any of the Security Instruments.
7. Waiver. As additional consideration for the execution, delivery and
performance of this Amendment by the parties hereto and to induce Lender to
enter into this Amendment, Borrower warrants and represents to Lender that no
facts, events, statuses or conditions exist or have existed which, either now or
with the passage of time or giving of notice, or both, constitute or will
constitute a basis for any claim or cause of action against Lender or any
defense to (a) the payment of any obligations and indebtedness under the Notes
and/or the Security Instruments or (b) the performance of any of their
obligations with respect to the Notes and/or the Security Instruments, and in
the event any such facts, events, statuses or conditions exist or have existed,
Borrower unconditionally and irrevocably waives any and all claims and causes of
action against Lender and any defenses to their payment and performance
obligations in respect to the Notes and the Security Instruments.
8. Costs and Expenses. Borrower agrees to pay on demand all costs and
expenses of Lender in connection with the preparation, reproduction, execution
and delivery of this Amendment and the other instruments and documents to be
delivered hereunder, including the reasonable fees and out-of-pocket expenses of
counsel for Lender. In addition, Borrower shall pay any and all fees payable or
determined to be payable in connection with the execution and delivery, filing
or recording of this Amendment and the other instruments and documents to be
delivered hereunder, and agrees to save Lender harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such fees.
9. Execution in Counterparts. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
instrument.
10. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Texas.
11. Final Agreement. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed in multiple counterparts, each of which is an original instrument
for all purposes, all as of the day and year first above written.
LENDER: BORROWER:
BANK ONE, TEXAS, NA RAWSON-KOENIG, INC.
By:/s/ Barry A. Kelly By:/s/ Thomas C. Rawson
------------------ --------------------
Barry A. Kelly, Thomas C. Rawson,
Vice President Chairman of the Board of
Directors
<PAGE>
PROMISSORY NOTE
(Advancing Term)
$1,000,000.00 Houston, Texas May 28, 1996
FOR VALUE RECEIVED, the undersigned, RAWSON-KOENIG, INC., a Texas
corporation (hereinafter called the "Maker"), promises to pay to the order of
BANK ONE, TEXAS, NA, a national banking association (hereinafter called the
"Payee"), at its office located at 910 Travis Street, Houston, Texas 77002, or
at such other place as the Payee may designate in writing to the Maker, in
lawful money of the United States of America, the principal sum of ONE MILLION
AND NO/100 DOLLARS ($1,000,000.00), or so much thereof that may be advanced and
outstanding pursuant to the hereinafter defined Loan Agreement, together with
interest thereon from the date hereof until maturity (determined on a daily
basis and for the actual number of days elapsed based on either a 365 or 366 day
year, as the case may be) at a fluctuating rate per annum equal to the lesser of
(i) the Base Rate in effect from day-to-day and (ii) the Maximum Rate. If at
any time and from time to time the rate of interest calculated pursuant to item
(i) above would exceed the Maximum Rate, thereby causing the interest payable
hereon to be limited to the Maximum Rate, then any subsequent reduction in the
rate specified in item (i) above shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon from
and after the date of the first advance hereunder equals the amount of interest
which would have accrued hereon if the rate specified in item (i) above had at
all times been in effect.
As used herein, the term "Base Rate" means, at any time, the rate of
interest per annum established from time to time by Payee. Without notice to
the Maker or any other person, the Base Rate shall change automatically from
time to time as and in the amount by which such Base Rate shall fluctuate, with
each such change to be effective as of the date of each change in such Base
Rate. The Base Rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer. The Payee may make
commercial loans or other loans at rates of interest at, above or below the Base
Rate.
As used herein, the term "Maximum Rate" shall mean, with respect to the
holder hereof, the maximum nonusurious interest rate, if any, that at any time,
may be under applicable law contracted for, taken, reserved, charged or received
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
June 31, 1996, with a like installment being due and payable on or before the
last day of each succeeding calendar month thereafter until and including April
30, 1997 (the "Advancing Termination Date"). Thereafter, this Note shall be
due and payable in monthly installments of (i) all accrued and unpaid interest
hereon, plus (ii) a principal installment in an amount based on a sixty (60)
month equal amortization of the outstanding principal amount of this Note as of
the Advancing Termination Date; the first such installment becoming due and
payable on or before one month after the Advancing Termination Date, with a like
installment becoming due and payable on or before the same day of each of the
succeeding calendar months thereafter until April 30, 2002, when this Note,
including all outstanding principal and accrued, unpaid interest hereon shall be
fully and finally paid.
The Maker reserves the right to prepay this Note, in whole or in part, at
any time, without penalty or notice. All payments hereunder, whether designated
as payments of principal or interest, shall be applied: first to unpaid and
accrued interest; then to the discharge of any expenses or damages for which the
Payee may be entitled to receive reimbursement under the terms of this Note or
under the terms of any document executed in connection herewith; and, lastly, to
unpaid principal in the inverse order of maturity. Unless changed in accordance
with law, the applicable method of calculating the usury ceiling rate under
Texas law shall be the indicated (weekly) ceiling rate in effect and applicable
to the loan evidenced by this Note, as provided in Tex. Rev. Civ. Stat. Ann.
art. 5069-1.04, as amended; provided, that the Payee may also rely on alternate
maximum rates of interest under other applicable laws if they are higher. All
past due principal and interest on this Note, whether due as the result of
acceleration of maturity or otherwise, shall bear interest from the date the
payment thereof shall have become due until the same have been fully discharged
by payment at the Maximum Rate.
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 dated April 21, 1995, as previously amended and as amended by that
certain Second Amendment to Amended and Restated Letter Loan Agreement and
Amended and Restated Security Agreement and First Amendment to Revolving Note 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 "Second Equipment Note" referred to therein. The Payee
shall be entitled to the benefits provided for in the Loan Agreement. Reference
is made to the Loan Agreement for the statement of any obligation of the Payee
to advance funds hereunder and the Events of Default (as defined therein) upon
which the maturity of this Note may be accelerated. The time of payment of this
Note is also subject to acceleration in the event the Maker defaults or
otherwise fails to discharge its obligations under any of the instruments
securing payment hereof.
In the Event of Default hereunder or under any of the instruments securing
payment hereof and the placing of this Note in the hands of an attorney for
collection (whether or not suit is filed), or if this Note is collected by suit
or legal proceedings or through the probate court or bankruptcy proceedings, the
Maker agrees to pay the holder hereof the costs and reasonable attorney's fees
incurred in the collection hereof.
As recited in Paragraph 10(e) of the Loan Agreement, which paragraph is
incorporated by reference herein, notwithstanding any provision herein to the
contrary, the Payee shall never be entitled to receive or collect interest
hereunder, nor shall or may amounts received hereunder be credited to interest
hereunder, so that the Payee shall receive or be paid interest exceeding the
maximum amount permitted by applicable law.
Any check, draft, money order or other instrument given in payment of all
or any portion hereof may be accepted by the holder hereof and handled in
collection in the customary manner, but the same shall not constitute payment
hereunder or diminish any rights of the holder hereof except to the extent that
actual cash proceeds of such instrument are unconditionally received by the
holder and applied to this indebtedness in the manner elsewhere herein provided.
It is further agreed that the Payee shall have a first lien on all deposits
and other sums at any time credited by or due from the Payee to any maker,
endorser, surety or guarantor hereof as collateral security for the payment of
this Note, and the Payee, at its option, may at any time, without notice and
without any liability, hold all or any part of any such deposits or other sums
until all sums owing on this Note have been paid in full and/or apply or set off
all or any part of any such deposits or other sums credited by or due from the
Payee to or against any sums due on this Note in any manner and in any order of
preference which the Payee, in its sole discretion, chooses.
The loan evidenced by this Note was negotiated and consummated in the State
of Texas and it is agreed and understood that the legality, enforceability and
construction hereof shall be governed by Texas law and, to the extent
applicable, by the laws of the United States of America. The Maker and the
Payee expressly agree, pursuant to Article 15.10(b) of Chapter 15 ("Chapter 15")
of the Texas Credit Code, that Chapter 15 shall not apply to this Note or to any
advance evidenced by this Note and that this Note and all such advances shall
not be governed by or subject to the provisions of Chapter 15 in any manner
whatsoever.
This Note is secured by (i) a Supplemental Deed of Trust of even date
herewith executed by the Maker for the benefit of the Payee covering the
property described therein, given to supplement that certain Deed of Trust dated
January 29, 1988 executed by the Maker for the benefit of Keystone
International, Inc. ("Keystone") and filed for record in the Official Public
Records of Real Property of Harris County, Texas under Clerk's File No. L524904,
and subsequently transferred and assigned by Keystone to the Payee by Transfer
of Note and Liens dated May 20, 1991, filed for record in the Official Public
Records of Real Property of Harris County, Texas, under Clerk's File No.
N191393, and (ii) an Amended and Restated Security Agreement dated April 21,
1995 executed by the Maker to the Payee.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
RAWSON-KOENIG, INC.
By:/s/ Thomas C. Rawson
--------------------
Thomas C. Rawson, Chairman
of the Board of Directors
<PAGE>
SECOND SUPPLEMENTAL DEED OF TRUST
THE STATE OF TEXAS )
) KNOW ALL PERSONS BY THESE PRESENTS:
COUNTY OF HARRIS )
THIS SECOND SUPPLEMENTAL DEED OF TRUST is entered into effective as of May
28, 1996, by and between BANK ONE TEXAS, NA, a national banking association
(herein called "Lender"), and RAWSON-KOENIG, INC., a Texas corporation (herein
called "Borrower").
RECITALS:
1. Borrower made, executed and delivered that certain Promissory Note
(herein called the "Original Note") dated January 29, 1988, in the original
principal sum of Two Million and No/100 Dollars ($2,000,000.00), payable to the
order of Keystone International, Inc., a Texas corporation ("Keystone"), as
therein provided, said Original Note being secured in part by a Deed of Trust
(the "Deed of Trust") of even date therewith, executed by Borrower to W. Wayne
Patterson, as Trustee ("Trustee") for the benefit of Keystone and filed for
record in the Official Public Records of Real Property of Harris County, Texas
under Clerk's File No. L524904, covering the property (the "Property"), more
fully described on Exhibit "A" annexed hereto. The Deed of Trust, and any other
instruments securing or guaranteeing the Original Note are herein called the
"Security Documents".
2. The Original Note and liens securing same were transferred and assigned
from Keystone to Lender by that certain Transfer of Note and Liens dated May 20,
1991, which was filed for record in the Official Public Records of Real Property
of Harris County, Texas, under Clerk's File No. N191393 and, thereafter,
modified by the terms of a Modification, Renewal and Extension of Note and Liens
dated May 21, 1991, which was filed for record in the Official Public Records of
Real Property of Harris County, Texas, under Clerk's File No. N191391, pursuant
to the terms of a Second Amendment to Letter Loan Agreement dated May 21, 1991,
which has been amended by a Third Amendment to Letter Loan Agreement dated May
24, 1992, Fourth Amendment to Letter Loan Agreement dated April 30, 1993, Fifth
Amendment to Letter Loan Agreement dated May 21, 1993 and Sixth Amendment to
Letter Loan Agreement dated April 30, 1994.
3. Borrower and Lender executed that certain Amended and Restated Letter
Loan Agreement dated April 21, 1995, pursuant to which Lender provided Borrower
with an additional loan facility in the original principal amount of One Million
and No/100 Dollars ($1,000,000.00) (the "Equipment Loan") evidenced by an
Advancing Term Promissory Note of even date therewith, and secured by, among
other things, a Supplemental Deed of Trust executed by Borrower in favor of
Lender, filed for record under Clerk's File No. R424607 in the Official Public
Records of Real Property of Harris County, Texas, said Amended and Restated
Letter Loan Agreement having been amended by that certain First Amendment to
Amended and Restated Letter Loan Agreement, Promissory Note (Advancing Term) and
Amended and Restated Security Agreement dated September 21, 1995, and the
principal amount of the Equipment Loan was increased to $1,500,000 by the terms
of a Modification of Note and Liens dated September 21, 1995.
4. Borrower has of this date entered into a Second Amendment to Amended
and Restated Letter Loan Agreement and Amended and Restated Security Agreement
and First Amendment to Revolving Note with Lender, whereby Lender has agreed,
subject to the terms and conditions thereof, to provide Borrower with an
additional loan facility in the amount of One Million and No/100 Dollars
($1,000,000.00) (the "Second Equipment Loan"), to be evidenced by an Advancing
Term Promissory Note of even date herewith, provided, among other things,
Borrower supplements the Deed of Trust to include the Second Equipment Loan as
being secured by the liens granted in the Deed of Trust.
5. Borrower has agreed to supplement the Deed of Trust as provided
hereinbelow.
A G R E E M E N T:
1. NOW, THEREFORE, Borrower, in consideration of Ten And No/100 Dollars
($10.00) and other good and valuable consideration in hand paid, the receipt and
sufficiency of which are hereby acknowledged, has GRANTED, BARGAINED, SOLD and
CONVEYED and by these presents does GRANT, BARGAIN, SELL and CONVEY unto
Trustee, the Property. TO HAVE AND TO HOLD THE PROPERTY, together with all and
singular the rights, privileges, hereditaments and appurtenances thereto and in
anywise incident, appertaining or belonging unto Trustee, and his successors or
substitutes forever; and Borrower hereby binds itself, its successors and
assigns, to warrant and forever defend title to the Property unto Trustee, his
successors, substitutes and assigns, against every person whomsoever lawfully
claiming or to claim the same or any part thereof.
2. This conveyance is made in trust to secure and enforce the payment of
the Second Equipment Loan, and the Security Documents shall be from and after
this date deemed modified as necessary to secure the Second Equipment Loan.
Henceforth, the term "said indebtedness" as defined in the Deed of Trust shall
include the Second Equipment Loan, as well as all renewals, extensions,
modifications and rearrangements thereof.
3. As supplemented hereby, the Borrower hereby reaffirms all covenants,
representations and warranties made in the Deed of Trust and Borrower hereby
agrees that all of the terms and conditions thereof are incorporated herein by
this reference.
4. All terms, conditions and provisions contained in the Security
Documents, except as modified, restated (where applicable), or amended hereby,
shall continue and remain in full force and effect.
5. The Property shall be and remain in all respects subject to the lien,
charge or encumbrance of the Security Documents, as modified, and nothing herein
contained and nothing done pursuant hereto shall affect or be construed to
affect the lien, charge or encumbrance of the Security Documents, as modified,
or the priority thereof over any other liens, charges or encumbrances or to
release or affect the liability of any party or parties whomsoever who may now
or hereafter be liable under or on account of the Security Documents, as
amended, nor shall anything herein contained or done in pursuance hereof affect
or be construed to affect any other security for the said indebtedness, if any,
held by the Lender.
6. No renewal or extension of the time of payment of any part or all of
the Second Equipment Loan, no releases or surrender of any security for the
Second Equipment Loan, no release of any person primarily or secondarily liable
on the Second Equipment Loan (including any maker, endorser or guarantor), no
delay in enforcement of payment of the Second Equipment Loan, and no delay or
omission in exercising any right or power with respect to the Second Equipment
Loan, shall in any way or manner impair or affect the rights of the Lender
hereunder.
7. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBJECT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
EXECUTED by each part on the date of its respective acknowledgment, but to
be effective for all purposes as of the date first above written.
"BORROWER"
RAWSON-KOENIG, INC.
By:/s/ Thomas C. Rawson
--------------------
Thomas C. Rawson,
Chairman of the Board of
Directors
"LENDER"
BANK ONE, TEXAS, NA
By:/s/ Barry A. Kelly
------------------
Barry A. Kelly,
Vice President
<PAGE>
SIXTH MODIFICATION OF NOTE AND LIENS
(Real Estate Note)
THE STATE OF TEXAS )
) KNOW ALL PERSONS BY THESE PRESENTS:
COUNTY OF HARRIS )
THIS SIXTH MODIFICATION OF NOTE AND LIENS (herein called "Agreement") is
entered into effective as of May 28, 1996, by and between BANK ONE, TEXAS, NA,
successor in interest by merger with TEAM BANK (herein called "Lender"), and
RAWSON-KOENIG, INC., a Texas corporation, (herein called "Borrower").
W I T N E S S E T H:
WHEREAS, Borrower made, executed and delivered that certain Promissory Note
(herein called the "Note") dated September 22, 1987, in the original principal
sum of FIVE HUNDRED SEVENTY-FIVE THOUSAND AND NO/100 DOLLARS ($575,000.00)
payable to the order of TEXAS COMMERCE BANK OF FORT WORTH, TEXAS, which is now
known as Texas Commerce Bank National Association ("TCB"), as therein provided,
said Note being secured by a Deed of Trust, Security Agreement and Financing
Statement (the "Tarrant County Deed of Trust") of even date therewith, executed
by Borrower to Gregory D. Stuteville, Trustee for the benefit of TCB, and filed
for record in the Official Public Records of Real Property of Tarrant County,
Texas, under Clerk's File No. 594747 and corrected and re-recorded under Clerk's
File No. 602929, covering the property (the "Tarrant County Property") more
fully described therein; and
WHEREAS, the Note and liens were transferred and assigned from TCB to
Lender by that certain Transfer of Note and Liens dated to be effective January
29, 1990 and filed for record in the Official Public Records of Real Property of
Tarrant County, Texas under Vol. 09943, Page 0973; and
WHEREAS, Borrower made, executed and delivered that certain Modification,
Renewal and Extension of Note and Liens (the "Harris County Modification") dated
May 21, 1991, and filed for record in the Official Public Records of Real
Property of Harris County, Texas, under Clerk's File No. N191391, wherein
Borrower and Lender agreed that the liens encumbering the property (the "Harris
County Property") securing the indebtedness described therein, shall also secure
the Note; and
WHEREAS, the Note and Security Documents (hereinafter defined) were
modified, renewed and extended pursuant to the terms and conditions of a Second
Modification, Renewal and Extension of Note and Liens ("Second Modification")
dated March 24, 1992, and filed for record in the Official Public Records of
Real Property of Tarrant County, Texas under Vol. 10637, Page 1665 and in the
Official Public Records of Real Property of Harris County, Texas, under Clerk's
File No. P001208; and
WHEREAS, the Note and Security Documents were modified, renewed and
extended pursuant to the terms and conditions of a Third Modification of Note
and Liens ("Third Modification") dated April 30, 1993, and filed for record in
the Official Public Records of Real Property of Tarrant County, Texas; and
WHEREAS, the Note and Security Documents were modified, renewed and
extended pursuant to the terms and conditions of a Fourth Modification of Note
and Liens ("Fourth Modification") dated April 30, 1994, and filed for record in
the Official Public Records of Real Property of Harris County, Texas under
Clerk's File No. P924820, wherein Borrower requested, and Lender agreed, among
other things, to release the Tarrant County Property from the liens securing the
Tarrant County Deed of Trust; and
WHEREAS, the Note and Security Documents were most recently renewed and
extended pursuant to the terms and conditions of a Fifth Modification of Note
and Liens ("Fifth Modification") dated effective April 21, 1995, and filed for
record in the Official Public Records of Real Property of Harris County, Texas
under Clerk's File No. L524904, wherein, among other things, the Security
Documents were amended to extend the Revolving Note; and
WHEREAS, Borrower has requested, and Lender has agreed, on the terms and
conditions set forth herein, to extend the term of the Revolving Note.
NOW, THEREFORE, in consideration of the mutual covenants, rights and
obligations contained herein, the benefits to be derived therefrom and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree and contract as follows:
1. Lender and Borrower hereby agree that the final maturity date of the
Revolving Note is extended from April 30, 1997 to April 30, 1998.
2. This Agreement is entered into in extension (and not in extinguishment,
substitution, novation or discharge) of the unpaid principal balance of the
Revolving Note. All liens, security interests and obligations securing and
guaranteeing payment of the Revolving Note, including without limitation the
Harris County Modification, the Second Modification, the Third Modification, the
Fourth Modification and the Fifth Modification (collectively the "Security
Documents") are hereby ratified, confirmed, renewed, extended and brought
forward as security for the payment hereunder.
3. The Security Documents are hereby amended to provide that the Notes
described therein shall mean (i) the Note, as previously modified, and (ii) the
Revolving Note as modified (with an extended maturity of April 30, 1998).
4. All other terms, conditions and provisions contained in the Revolving Note,
except as otherwise specifically set forth herein, shall continue and remain in
full force and effect.
5. All terms, conditions and provisions contained in the Security Documents,
except as modified, restated (where applicable), renewed and extended by the
documents referred to herein, shall continue and remain in full force and
effect.
6. This Agreement has been executed and delivered pursuant to, and is subject
to certain terms and conditions set forth in, that certain Second Amendment to
Amended and Restated Letter Loan Agreement and Amended and Restated Security
Agreement and First Amendment to Revolving Note of even date herewith (the "Loan
Agreement"), and the Revolving Note is the "Revolving Note" referred to therein.
The Lender shall be entitled to the benefits provided in the Loan Agreement.
Reference is made to the Loan Agreement for the Events of Default upon which the
maturity of the Revolving Note may be accelerated.
7. This Agreement shall be governed by and construed in accordance with the
laws of the State of Texas. If any provision of this Agreement or the
application thereof to any person or circumstances shall, for any reason and to
any extent, be invalid or unenforceable, neither the remainder of this
Agreement, nor the application of such provision to any other persons or
circumstances shall be affected thereby, but rather same shall be enforced to
the greatest extent permitted by law.
8. This Agreement, and all the terms, provisions and conditions hereof, shall
be binding upon each party hereto and such party's heirs, legal representatives,
successors and assigns.
9. This Agreement may be executed in multiple originals. This Agreement may
also be executed in multiple counterparts, and all so executed shall constitute
one agreement, binding on the parties hereto, notwithstanding that all parties
are not signatories to the original or the same counterpart.
10. This Agreement represents the entire understanding and agreement between
the parties hereto with respect to the subject matter hereof, supersedes all
prior negotiations, oral representations and writings between the parties, and
cannot be amended or supplemented orally, but only by an agreement in writing
signed by Lender. The Borrower certifies that it is relying on no
representation, warranty, covenant or agreement except for those set forth
herein.
11. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
EXECUTED by each party on the date of its respective acknowledgment, but to
be effective for all purposes as of the date first above written.
"BORROWER"
RAWSON-KOENIG, INC.
By:/s/ Thomas C. Rawson
--------------------
Thomas C. Rawson,
Chairman of the Board
"LENDER"
BANK ONE, TEXAS, NA
By:/s/ Barry A. Kelly
------------------
Barry A. Kelly,
Vice-President
<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 a loan being modified by BANK ONE, TEXAS, NA (the "Lender"), the
undersigned hereby further certifies as follows:
1. Attached hereto as Exhibit "A" is a full, true and correct copy of the
Resolutions duly adopted by the Board of Directors of the Company by a unanimous
written consent effective May 28, 1996, in accordance with the Texas Business
Corporation Act, and the Articles of Incorporation and Bylaws of the Company.
2. The Resolutions attached as Exhibit "A" hereto have not been amended,
modified or rescinded and are in full force and effect on the date hereof.
3. The undersigned officers have been duly elected to the positions set
forth next to their respective names below, and are qualified to act in such
capacities and execute documents on behalf of the Company, and the signature
appearing opposite each name is the authentic signature of each such officer.
Name Office Signature
Catherine Rawson President /s/ Catherine Rawson
Thomas C. Rawson Chairman of the Board
and Chief Executive
Officer /s/ Thomas C. Rawson
Fred Wamhoff Secretary /s/ Fred Wamhoff
4. The Company is duly organized and existing under the laws of the State
of Texas.
5. All franchise and other taxes required to maintain the Company's
existence have been paid and no such taxes are delinquent.
6. No proceedings are pending for the forfeiture of the Company's
authority to do business or to force its dissolution, voluntarily or
involuntarily.
7. There is no provision in the Articles of Incorporation or Bylaws of the
Company limiting the above-described resolutions, and said resolutions are in
conformity with the provisions of the Company's Articles of Incorporation and
Bylaws, and with the proceedings of the Board of Directors.
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 28th day of May, 1996.
/s/ Fred Wamhoff
----------------
Fred Wamhoff, Secretary
The undersigned, the Chairman of the Board of the Company, hereby certifies
that Fred Wamhoff is the Secretary of the Company and is authorized to execute
and deliver this Certificate for and on behalf of the Company.
/s/ Thomas C. Rawson
--------------------
Thomas C. Rawson,
Chairman of the Board
EXHIBIT "A"
WHEREAS, RAWSON-KOENIG, INC. (the "Company") shall (i) renew and extend a
loan in the original principal amount of $2,200,000.00 and (ii) obtain a loan of
additional funds in the amount of $1,000,000.00 to be evidenced by a Promissory
Note (Advancing Term) of even date herewith (collectively, the "Loan") from BANK
ONE, TEXAS, NA (the "Lender"), pursuant to the terms of the Loan Agreement, as
amended;
RESOLVED, further, in regard to the Loan that any one of the President, the
Chairman of the Board of Directors, the Secretary, or the Chief Executive
Officer of the Company is hereby authorized and directed to execute and deliver,
for and on behalf of the Company, documents as may be deemed necessary or
desirable by such officers or required by the Lender in regard to the Loan; and
further
RESOLVED, that the drafts of such documents presented to the Board of
Directors of the Company are hereby approved; and further
RESOLVED, that the officers executing and delivering any of the above-
described documents are hereby authorized and empowered to execute and deliver
the same in the name and on behalf of the Company, and in such manner of
counterparts as the officer or officers executing the same shall deem necessary
or desirable, and with such terms, conditions and provisions, including
modifications from the drafts presented to the Board of Directors, as the
officer or officers executing the same may approve, the execution of such
documents to evidence with approval conclusively; and further
RESOLVED, that any and all instruments executed and delivered on behalf of
the Company in connection with the foregoing resolutions by any person
purporting to be an officer of the Company shall be deemed to be the act of the
Company and shall be in all respects binding against the Company; and further
RESOLVED, that the officers of the Company be, and they hereby are,
authorized and empowered on behalf of and in the name of the Company to take or
cause to be taken in the name of the Company all such other and further action,
to make all payments and to execute, acknowledge and deliver any and all
certificates, opinions, documents and other instruments in such form and under
the corporate seal as required, as in the judgment of such officers may be
necessary, proper or convenient in order to carry out the foregoing resolutions,
to consummate the Loan described herein, and to comply with the terms and
provisions of all the documents described above; and further
RESOLVED, that all actions by any and all officers of the Company taken or
performed up to the date hereof and in respect to the preparation, execution and
delivering of the documents, certificates or other instruments required pursuant
to the provisions of the above-described documents, and the taking prior to the
date hereof of any and all actions otherwise required by the terms and
provisions of said documents or any other documents executed in connection
therewith be, and they are hereby, in all respects approved, ratified and
confirmed; and further
RESOLVED, that any one of the President, the Chairman of the Board of
Directors, Secretary or the Chief Executive Officer of the Company is hereby
authorized to make applications for and effect other loans from time to time on
behalf of the Company from the Lender and for such loans, to make, execute and
deliver promissory notes, drafts, bonds or other written obligations of the
Company in such form, date and maturity and at such rate of interest as such
officer or officers of the Company may determine and in the event the Company
adopts a corporate seal, to cause the same to be affixed to any such instruments
whenever necessary or required. It is further resolved that said officers are
hereby authorized in the name of the Company to renew or extend any loan or
loans from time to time and execute and deliver promissory notes, drafts, bonds
or other obligations or extensions to any notes theretofore given; and further
RESOLVED, that the authority hereinabove given to said officers to
negotiate loans in excess of the Loan specifically referenced herein shall
remain irrevocable insofar as the Lender is concerned until the Lender be
notified of the revocation of such authority and shall in writing acknowledge
receipt of such notification.
<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 executed by Borrower,
payable to the order of Lender, as described in the Second Amendment to Amended
and Restated Letter Loan Agreement and Amended and Restated Security Agreement
and First Amendment to Revolving Note 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, NA RAWSON-KOENIG, INC.
By:/s/ Barry A. Kelly By:/s/ Thomas C. Rawson
------------------ --------------------
Barry A. Kelly, Vice-President Thomas C. Rawson,
Chairman of the Board of
Directors
Date: May 28, 1996 Date: May 28, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 334,199
<SECURITIES> 0
<RECEIVABLES> 1,309,006
<ALLOWANCES> 40,000
<INVENTORY> 3,941,189
<CURRENT-ASSETS> 5,650,942
<PP&E> 10,540,337
<DEPRECIATION> 5,702,228
<TOTAL-ASSETS> 10,489,051
<CURRENT-LIABILITIES> 1,850,959
<BONDS> 1,434,813
0
0
<COMMON> 1,000
<OTHER-SE> 7,202,279
<TOTAL-LIABILITY-AND-EQUITY> 10,489,051
<SALES> 19,521,871
<TOTAL-REVENUES> 19,521,871
<CGS> 15,002,105
<TOTAL-COSTS> 15,002,105
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,217
<INTEREST-EXPENSE> 147,211
<INCOME-PRETAX> 1,632,862
<INCOME-TAX> 533,000
<INCOME-CONTINUING> 1,099,862
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,099,862
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
