U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT
OF 1934 for the fiscal year ended September 27, 1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES
EXCHANGE ACT OF 1934 [ NO FEE REQUIRED ] for the transition
period from
_____________ to _____________.
Commission file number 0-18353
THE COEUR D'ALENES Company
Idaho 82-0109390
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
PO Box 2610
Spokane, Washington 99220-2610
(Address of principal executive offices)(Zip Code)
(509) 924-6363
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
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Name of each exchange
Title of each class on which registered
- - - -----------------------------------------------------------
Common stock, no par value
Check whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and
has been subject to such filing requirements for at least
the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-B is not contained
herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [__ ]
Issuer's revenues for its most recent fiscal year:
$12,858,765
The aggregate market value of the voting stock of the
registrant held by non affiliates cannot be readily
determined because there is no established public trading
market for such stock.
Shares outstanding as of November 29, 1997: 5,353,450
No documents incorporated by reference herein.
ITEM 1. DESCRIPTION OF BUSINESS.
(a) GENERAL DEVELOPMENT OF BUSINESS.
The Coeur d'Alenes Company was first established as J.
R. Marks & Co., in Murray, Idaho during the gold rush of
1884 as a supply house for miners. By 1886, there were
five stores in North Idaho. In 1889, they became part of
Holley, Mason, Marks & Company of Spokane, Washington. In
1892, the five North Idaho stores were spun off by a group
(including an original owner) and incorporated under the
name of The Coeur d'Alene Hardware Co. In 1913, the major
shareholders of Coeur d'Alene Ironworks put the assets of
both companies together, and the resulting Company was
incorporated under the name of Coeur d'Alene Hardware and
Foundry Company. In 1959, Coeur d'Alene Hardware and
Foundry Company changed its name to The Coeur d'Alenes
Company.
In February 1993, The Coeur d'Alenes Company merged
with and into an inactive mining company, Conjecture, Inc.
("Conjecture"), with Conjecture being the surviving
corporation but changing its name to The Coeur d'Alenes
Company ("Cd'A" or the "Company") immediately following the
merger. Conjecture was incorporated in 1954 under the
original name Conjecture Mines, Inc., but changed its name
to Conjecture, Inc. in 1989.
Cd'A, together with its wholly-owned subsidiary Union
Iron Works, Inc. of Spokane (dba Cd'A Stock Steel), is
engaged in the business of the distribution, processing and
fabrication of steel, other metals and related products. In
early 1993 Conjecture's unpatented mining claims lapsed
and, since the merger, Cd'A has sold Conjecture's remaining
patented mining claims. As a result, Cd'A is no longer
involved in the mining business on even an inactive basis.
As part of its strategic plan, Cd'A has implemented
various changes over the years in order to shift its
business emphasis and focus away from higher volume, lower
margin business (involving a lesser value added component
in the form of fabrication, processing or other services)
and more towards a lower volume, higher margin business
(involving a greater value added component in the form of
fabrication, processing, delivery or other services). As a
result of these changes, a significant amount of Cd'A's
revenue is currently generated by the value added and
service aspects of this business.
In October 1993, Cd'A made a significant acquisition of
assets when it purchased property for distribution options
for approximately $1,150,000, with the seller providing
most of the financing. During September, 1995,
construction began on a new facility at the same location
to house the fabrication and processing business. A
construction loan from the Seafirst bank in the amount of
$1,678,728 was used to pay off the seller provided
financing and provide 75 percent of the cost of
construction. In September, 1996, the facility was
complete and the business relocated. During August, 1996,
construction began to remodel and enlarge the office space
located on the same property. The total cost was
approximately $262,000. The project was completed December
1996. See Items 2 and 6.
(b) NARRATIVE DESCRIPTION OF BUSINESS.
Cd'A is based in Spokane, Washington and conducts its
operations in two separate facilities located at 3900 E
Broadway in Spokane, Washington. The fabrication and
processing operations generally consist of the custom
production of finished metal structures or products (or
components thereof) in accordance with a customer's
specifications. The fabrication and processing operations
include activities such as cutting, bending, drilling,
riveting, welding, assembling. The items produced by the
fabrication and processing operations vary depending upon
the nature of a customer's order, but in the past have
included such items as baghouses (which trap emissions from
factories or other manufacturing facilities), crucibles,
potshells and liners for aluminum, magnesium or other metal
producers, slurry impellers for industry and structural
metal supports for highway signs. The distribution
operations generally consist of the resale of stock metal
materials purchased from mills with further processing or
other services, such as cutting, bending, burning, or
sawing stock metal materials to a customer's specifications
(component parts) or delivery to a customer's location.
Metal materials in various types, grades, shapes and sizes
are sold by the distribution operations, including such
items as beams, bars, plates, sheets, angles, tubes, pipes,
gratings and decorative iron. The distribution operations
are referred to in the industry and sometimes referred to
herein as a steel service center.
Cd'A is not dependent on a single supplier or a small
number of suppliers. Over time, it has purchased from
domestic mills, foreign mills or a combination thereof,
depending upon mill prices, transportation costs and
foreign currency exchange rates.
Cd'A's customers are primarily industrial in nature.
Although the mix of Cd'A's customers varies over time, a
substantial portion of Cd'A's sales in the recent past has
been to customers engaged in the agriculture, lumber,
construction, mining, metal producing, or other
manufacturing industries.
Since there is turnover among Cd'A's customers (especially
in the fabrication and processing business which is on a
job to job basis and often involves relatively large jobs),
over any given period, the business of a few customers may
represent a significant portion of Cd'A's business. In
fiscal 1997 and 1996 one customer amounted to 12% and 16%
respectively of total sales. The loss of this large
customer could have a significant adverse effect on the
immediate business of Cd'A especially in those situations
where it resulted in the loss of large fabrication and
processing jobs which had already been awarded to Cd'A. The
turnover among customers, however, means that any such
adverse effect on the business of Cd'A over the longer term
will be more attenuated. Nonetheless, it is still
important for Cd'A to retain any such large customers. The
primary market area served by Cd'A is the Pacific
Northwest. Although the market area also fluctuates
somewhat over time, currently the biggest market area in
terms of sales is the Inland Northwest (Eastern Washington,
Northern Idaho, Northeastern Oregon and Western Montana).
The geographical market area of Cd'A is somewhat
constrained by high relative transportation costs
associated with delivery to customers of products it sells.
The transportation cost component, however, is a more
significant factor for the steel service center operations
than for the fabrication and processing operations because
of the higher value added component and potential for
higher margins in the fabrication and processing business.
Cd'A markets its products throughout the Inland Northwest
through sales representatives who cover this territory.
Cd'A's steel service center business faces stiff
competition, both from other steel service centers (mainly
those located in or near Cd'A's market area due to
transportation costs) and, for larger orders not requiring
additional processing or other services, from the mills
themselves (not necessarily limited to those located in or
near Cd'A's market area since transportation costs from the
mill to Cd'A and from Cd'A to the customer may be
approximately the same as transportation costs from the
mill directly to the customer). Cd'A's fabrication and
processing business also faces stiff competition from other
fabrication and processing businesses, primarily those
located in the West and Midwest but also to a lesser but
recently increased extent, those located in other areas of
the United States. Again, transportation costs somewhat
constrain the size of the geographical market area for
competing fabrication and processing operations, although
as mentioned above this is a less significant factor than
for steel service center operations. Relatively high
transportation costs have not had and are not anticipated
to have, a significant impact on Cd'A's operations because,
as mentioned above, the competition in the area generally
is faced with the same costs. In addition, to the extent
that the fabrication and processing business market has
been in Western Washington where much of the competition is
located, the cost of living and therefore labor rate
differentials generally were enough to offset the higher
transportation cost of Cd'A.
Cd'A's steel service center business has larger
working capital requirements than the fabrication and
processing business. Cd'A is required to carry significant
amounts of inventory (generally three to four months worth)
in the steel service center business in order to provide
just-in-time delivery for its customers. Although Cd'A
provides rights to return materials, materials returned to
Cd'A after sale for reasons other than quality of product
or service are subject to a restocking charge. Cd'A
experiences a very limited amount of returned goods.
Customer payment terms are primarily net 30 days. Ten day
payment discounts are offered to some customers. The
fabrication and processing business requires much smaller
working capital for work in process inventory.
Both the steel service center business and the
fabrication and processing business are dependent on local,
regional and, to a lesser extent, national economic
conditions. The cyclical nature of these businesses makes
it necessary for Cd'A to constantly watch the economic
indicators in order to adjust capacity and inventory
appropriately. Failure to anticipate a downturn or upturn
can have a negative effect on earnings and cash flows
because capacity and inventory may be too high in a
downturn resulting in a higher cost structure and increased
cash flow pressures and too low in an upturn resulting in
lost sales.
Cd'A has generally not experienced a material
seasonal effect on its business. The company's two major
areas of business, steel distribution and steel fabrication
and processing are somewhat counter cyclical.
Cd'A has no material patents, trademarks, licenses,
franchises, concessions or royalty agreements. Cd'A
fabrication and processing business had a labor contract
with Ironworkers Local #506 which expired August 1995. The
Company continued to apply the terms and conditions of the
expired contract while attempting to negotiate a new,
mutually agreeable contract. In December 1996 the
employees who were members of the Ironworkers union elected
to decertify and are no longer covered by a labor contract.
Cd'A also had a labor contract with Teamsters Local #582
which expired in April 1995. Following the Ironworkers
decertification, in June 1997, the Teamsters Local #582
disclaimed recognition of a bargaining unit at Cd'A. There
are currently no employees covered by a labor contract.
Various environmental laws and regulations apply to Cd'A's
operations. Cd'A is not aware of any environmental law or
regulation claim by any governmental authority or
regulatory body with which it has not complied. At this
time, it is not expected that federal, state or local
environmental laws or regulations will have a material
adverse effect on the capital expenditures, earnings or
competitive position of Cd'A. Cd'A has not made any
material capital expenditures for environmental control
facilities during the current or prior two fiscal years,
nor is it currently anticipated that Cd'A will make any
material capital expenditures for environmental control
facilities during the next fiscal year.
Cd'A is not aware of any existing or probable
governmental regulations which would have a material
adverse effect on Cd'A's business.
Cd'A currently has 69 total employees (46 in the steel
service center business and 23 in the fabrication and
processing business).
ITEM 2. DESCRIPTION OF PROPERTY.
Cd'A conducts its operations out of two facilities located
at 3900 E Broadway in Spokane WA. Each of the two
facilities is approximately 42,150 square feet for a total
of approximately 84,300 sq ft. The fabrication and
processing business occupies approximately 30,000 square
feet in the most recently constructed building, with the
steel service center business occupying the remaining
54,300 square feet. The property was purchased by Cd'A in
October 1993 with approximately 45,000 square feet of
building including approximately 3,000 square feet of
office space. An additional 42,150 square foot facility
was added during the fiscal year ended September 1996.
During the first quarter of the fiscal year ended September
1997, an additional 3,050 sq. ft. of office space was added
to the existing office space.
The facilities have a first lien in favor of a bank
securing a promissory note in the amount of approximately
$1,924,000 September 27, 1997 and a second lien in favor of
the holders of convertible debentures in the amount of
$128,000. See item 5 and 6.
ITEM 3. LEGAL PROCEEDINGS.
Cd'A is not a party to any material pending legal
proceedings, nor is any of its property subject to any
material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
No matters were submitted to a vote of security holders
during the fourth quarter of the last fiscal year through
solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
(a) MARKET FOR COMMON STOCK. Although the common
stock of Cd'A, having no par value, is traded on the over-
the-counter market based in Spokane, Washington, there is
currently no established public trading market for Cd'A
Common Stock. Since July 1, 1993, Cd'A Common Stock has
been traded on this over-the-counter market, with the
primary basis consisting of limited quotations by Sandberg
Securities and Empire Securities, two securities broker-
dealers based in Spokane, Washington. The range of high
bid and low bid quotations for Cd'A Common Stock, by
quarters, for the period beginning October 1, 1995 through
September 30, 1997 are set forth in dollars per share
below:
1997 1996
High - Low High - Low
July 1 - September 30 $.20 - $.20 $.15 - $.16
April 1 - June 30 $.20 - $.20 $.15 - $.15
January 1 - March 31 $.20 - $.17 $.15 - $.15
October 1 - December 31 $.17 - $.15 $.15 - $.15
The source of the above quotations is the Spokane over-the-
counter listing, and the above quotations reflect inter-
dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual
transactions. In addition, the lack of an established
public trading market for Cd'A Common Stock should be kept
in mind in reviewing the above quotations. The prices
shown are reflective of limited transactions.
(b) HOLDERS. As of December 1, 1997, there were
approximately 1,220 holders of record of Cd'A Common Stock.
(c) DIVIDENDS. In the last two fiscal years, Cd'A has not
declared or paid any dividend on Cd'A Common Stock. Cd'A
is restricted under the terms of its bank loan agreement
from paying dividends in an amount greater than 10% of net
income without the prior approval of the bank lender.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION OR PLAN OF OPERATIONS.
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS OF THE COMPANY SHOULD BE READ IN
CONJUNCTION WITH THE COMPANY'S FINANCIAL STATEMENTS AND
NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT.
This report contains forward-looking statements
regarding, among other items, anticipated trends in the
Company's business. These forward-looking statements are
based largely on the Company's expectations and are subject
to a number of risks and uncertainties, certain of which
are beyond the Company's control. Actual results could
differ materially from these forward-looking statements as
a result of the factors described elsewhere herein,
including, among others, regulatory or economic influences.
In light of these risks and uncertainties, there can be no
assurance that the forward-looking information contained in
this Report will in fact transpire or prove to be accurate.
LIQUIDITY AND CAPITAL RESOURCES
The Company anticipates that it will continue operating the
steel distribution business much as it has for the past two
years during the twelve month period beginning September
29, 1997 and ending September 26, 1998. Gross margins as a
percent of sales will be comparable to the year just ended.
The economic climate in the Company's market area is
similar to last year, allowing Cd'A to anticipate fairly
strong demand for its distribution products and a
relatively weak demand for fabrication projects.
During October 1993, the Company purchased the real
estate occupied by the Steel Service Center business and
sold convertible debentures in a private placement in order
to raise the down payment. The purchase price of the
property was $1,150,000 with the seller initially carrying
a note for $950,000. The convertible debenture offering
was for $250,000 with $200,000 used for the down payment
and $50,000 used to purchase computer hardware. Interest
accrues on the outstanding balance of the debentures at the
rate of 9-1/4%. The debentures are due on October 31, 1998
and are secured by a second lien on the real estate. The
debentures allow the holder to convert in whole or in part
to Cd'A Common stock after October 31, 1994. The initial
conversion price was $.125 per share of Cd'A common stock.
On November 1 in each of 1995, 1996 and 1997, the
conversion price is increased by an amount equal to 20% of
the initial conversion price. On October 30, 1995,
$122,000 of the debentures were converted at the initial
conversion price of $.125 per share resulting in 976,000
additional shares of common stock issued and outstanding.
The Company may, at its option, call any or all of the
outstanding debentures for redemption after January 2,
1994.
During September 1995, the Company began construction
on an additional facility located on the property next to
the steel service center. The Company obtained a
construction loan from a bank which was used to finance the
construction and repay the remaining balance of the note
payable to the seller. The construction loan was converted
to a permanent loan with a twenty year amortization period
and a ten year balloon payment. The agreement allows the
Company to choose a fixed or variable rate of interest.
The rate at September 27, 1997 (8.75%) is variable at 2.75%
calculated at 2.75% over the LIBOR index rate. The loan is
secured with a first lien on the property.
In September, 1997 the Company borrowed additional
funds to purchase a new 1/2"X12' Cincinnati shear. A bank
has provided an equipment loan in the amount of $250,000 to
purchase the shear and some crane improvements. The loan
requires interest only payments until April 1998 and the
interest rate is 1/2% over the bank's prime rate. The loan
is collateralized by equipment. The amount advanced on the
note as of September 27, 1997 was $195,000. It is
convertible to a long-term note with a 7 year amortization
in April 1998. It is the Company's intention to convert
the note to a long-term note.
Cd'A plans to continue to expend very limited research
and development funds to market a tarping system primarily
for use on railroad cars. The design is intended to
withstand all kinds of weather and travel conditions.
After several revisions from the initial concept, two tarps
are currently in their third year of use on Union Pacific
railroad cars. Interest in the tarps continues to
increase, but the ownership of the railroad cars by an
entity other than the party interested in the tarps
continues to impede the Company's marketing effort.
Management estimates that an additional $5,000 will be
spent to adapt the concept to the trucking industry where
the customer will be obvious. The financing for the
project will come from internally generated funds. This
project was scheduled for the last fiscal year, but was put
off until the current year.
In fiscal 1997, the Company financed its operations
primarily with cash flows from operating activities and
borrowings under the operating line of credit. During the
year ended September 27, 1997, cash decreased by
approximately $21,000.
The Company's cash flows provided by operating
activities were $45,000 in fiscal 1997 and $198,000 in
fiscal 1996. Cash flows provided by operating activities
in fiscal 1997 were primarily impacted by net income of
$125,000, adjusted by depreciation of $200,000 as well as a
decrease in inventories of $446,000 which resulted in
reductions in trade payables of $433,000. Cash flows
provided by operating activities in fiscal 1996 were
primarily the result of $290,000 net income, adjusted by
depreciation of $148,000, $189,000 increase in accounts
receivable, $413,000 increase in inventories along with
$313,000 increase in accounts payable.
Cash flows used by investing activities during fiscal
1997 consisted of $525,000 in additions to property and
equipment partially offset by proceeds from equipment sales
of $140,000. During fiscal 1996 additions to property and
equipment were $1,376,000. Long term bank borrowings of
$466,000 in fiscal 1997 and $1,051,000 in fiscal 1996 were
the primary source of funding for the capital acquisitions
for both years.
Working capital at September 27, 1997, of
approximately $1,885,000 increased by approximately
$248,000 over $1,637,000 for the prior year. The increase
is primarily the result of decreased inventories requiring
lower trade payables and prior year borrowings on the
operating line to finance the office construction converted
to long term debt.
Cd'A is very dependent on external sources of funding
in the forms of operating lines of credit and long term
property and equipment loans. As of the end of the fiscal
year ended in September 1997, Cd'A has an operating line of
credit in the amount of $1,850,000 at the Seafirst Bank.
The operating line expires April 1, 1998. In the event
that it is not possible to renew the operating line, it
would be necessary for Cd'A to raise capital through stock
issuances, bond sales or other available means.
Management, however, does not anticipate a significant
problem in renewing the operating line next April on
substantially the same terms and conditions as the current
line.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share," which
establishes standards for computing and presenting earnings
per share and applies to entities with publicly held common
stock. SFAS No. 128 is effective for financial statements
for periods ending after December 15, 1997, and requires
restatement of all prior-period earnings per share data
presented.
In February 1997, the FASB issued SFAS No. 129
"Disclosure of Information about Capital Structure" which
clarifies disclosure rules about such items as right and
privileges of debt and equity securities, dividend and
liquidation preferences, participation rights and call
prices. It also requires that liquidation preferences be
shown on the face of the balance sheet. SFAS No. 129 is
effective for financial statements for period ending after
December 31, 1997.
In June 1997, the FASB issued SFAS No. 130,
"Reporting Comprehensive Income," which requires the
disclosure of comprehensive income and requires the
presentation of a reconciliation for net income to the
change in equity of the business during the year arising
due to transactions from nonowner sources. SFAS No. 130 is
effective for financial statements for periods beginning
after December 15, 1997.
In June 1997, the FASB issued SFAS No. 131
"Disclosures about Segments of an Enterprise and Related
Information" which supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise" and
establishes standards for the way that public companies
report information about operating segments in annual
financial statements and requires reporting of selected
information about operating segments in interim financial
statements issued to the public. It also establishes
standards for disclosures regarding products and services,
geographic areas and major customers. SFAS No. 131 defines
operating segments as components of a company about which
separate financial information is available that is
evaluated regularly by the chief operating decision maker
in deciding how to allocate the resources and in assessing
performance. SFAS No. 131 is effective for financial
statements for periods beginning after December 15, 1997
and requires comparative information for earlier years to
be restated.
None of the foregoing pronouncements is expected to
have a material effect on the Company's financial statement
presentation.
RESULTS OF OPERATIONS
The following table sets forth for the periods
indicated the percentage of revenues represented by certain
items reflected in the Company's statements of income:
Year Ended
September
27,1997 28,1996
Net Sales 100.00% 100.00%
Cost of Sales 73.86% 71.86%
Gross Profit 26.14% 28.14%
Selling, General &
Administrative Expense 23.43% 24.43%
Operating Income 2.71% 3.71%
Interest Income .21% .18%
Interest Expense (2.35)% (1.67)%
Other Income .83% 1.16%
Income Before Income
Taxes 1.40% 3.38%
Income Tax Expense .43% 1.06%
Net Income .97% 2.32%
Fiscal 1997 Compared To Fiscal 1996
Net sales increased 3% to $12,859,000 in fiscal 1997 from
$12,499,000 in fiscal 1996. A 22% decrease in the
fabrication and processing sales almost offset a 11%
increase in the sales of the distribution business. During
fiscal 1997, the fabrication and processing sales of
$2,339,000 represented 18% of the total Company's sales and
the distribution sales of $10,520,000 represented 82% of
the total sales. The comparable figures for fiscal 1996
are fabrication and processing sales of $2,995,000 at 24%
of total sales and distribution sales of $9,504,000
representing 76% of total sales. The decrease in
processing and fabrication sales was the result of large
capital expenditure curtailments on the part of a few
significant customers. The restricted spending is likely
to continue during at least the first quarter of the
current fiscal year. The increase in the steel
distribution business revenues was primarily the result of
increased service in an expanded delivery area. Total tons
sold by the distribution business increased by 12% during
fiscal 1997 over fiscal 1996.
Cost of sales as a percentage of net sales at 74% for
fiscal 1997 was a full two percentage points higher than
72% for fiscal 1996. The increase in cost of sales as a
percentage of revenues is due to a combination of two
factors. First, the fabrication and processing sales had
special non-recurring higher margin projects for a customer
in fiscal 1996 which was completed early in the 1997 fiscal
year. Cost of sales for the fabrication and processing
business were 67% for the 1997 fiscal year and 62% for the
1996 fiscal year. Second, the mix of sales was more
heavily weighted by the steel distribution business in
fiscal 1997. Historically the fabrication business
commands a higher gross margin than the distribution sales
because of the increased "value added" component. Cost of
sales for the distribution business were 75% in fiscal 1997
and 76% for fiscal 1996.
Selling, general and administrative expenses decreased
by approximately $40,000 during fiscal 1997 compared to
fiscal 1996. The decrease of 1% reflects the fact that
fiscal 1997 operations were slightly less disrupted by the
inefficiencies of working around the construction project
than the fiscal 1996 operations.
Interest expense increased $92,000 to $301,000 during
the 1997 fiscal year from $209,000 for the 1996 fiscal
year. The increase reflects additional debt incurred
during late fiscal 1996 and early fiscal 1997 to finance
the construction of new and expanded facilities.
Other income decreased from a level of $145,000 in
fiscal 1996 to $106,000 in fiscal 1997. The decrease is
the result of a business interruption claim settlement in
fiscal 1996 which was not repeated in fiscal 1997.
Income tax expense of $55,000 for fiscal 1997 compares
to $133,000 for fiscal 1996. The effective tax rate of
30.46% was only slightly lower for fiscal 1997 than the
31.37% rate for fiscal 1996.
At September 27, 1997, the company has a deferred long
term tax liability of $65,000 resulting primarily from the
use of accelerated methods of depreciation of fixed assets
offset slightly by a long term tax asset due to a net
operating loss carryover. A valuation allowance has been
established to the extent the Company believes it is more
likely than not that the net operating loss tax advantage
will not be realized. The Company also has a short term
deferred tax asset of $46,000 resulting from vacation
accrual and allowance for bad debts.
Various factors discussed above resulted in a net
income for the fiscal year ended in September 1997 of
$125,000 compared to $290,000 for the year ended in
September 1996.
During the past several years, Cd'A has made
significant changes in the structure of its operations in
response to changing market conditions: the shift in
business emphasis to lower volume, higher margin business,
the physical reorganization of its operations along
business line (fabrication and processing versus
distribution), the addition of more efficient equipment and
the utilization of property owned by the Company to replace
leased premises. During the 1996 fiscal year the Company
moved the fabrication and processing business to the same
location as the distribution business which is a major
supply source. The move will make the operations more
efficient and eliminate the need for duplicate equipment.
Management believes that this step in the reorganization
process now allows the Company to take advantage of the
counter cyclical nature of the two business lines without
requiring duplicate handling and overhead necessitated by
the distance which separated the two businesses.
Management believes that the distribution business will
continue to experience moderate to strong demand throughout
the 1998 fiscal year.
The fabrication and processing business will continue
to develop its market niche and expand its customer base.
However, the near term outlook for the current customer
base indicates continuing lower demand. In order to
diversify a little further, the fabrication business has
become a dealer for Demag cranes and R and S slat (roll up)
doors. Neither of these business lines require a
significant inventory of products. The customers tend to
be the same as those which use fabricated products and
offers the advantage of introduction to a different set of
buyers within these companies.
ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS.
See the Consolidated Financial Statements beginning on
page 22.
INDEX TO FINANCIAL STATEMENTS
Audited Consolidated Financial Statements
Report of Independent Certified Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Income Consolidated
Statements of Stockholders'
Equity Consolidated Statements of Cash Flows
Summary of Significant Accounting Policies Notes to
Consolidated Financial
Statements
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT.
(a) DIRECTORS AND EXECUTIVE OFFICERS. THE FOLLOWING TABLE
SETS FORTH THE DIRECTORS AND EXECUTIVE OFFICERS OF CD'A.
Name Age Position Period
Service
Commenced
Jimmie T.G. Coulson 64 Director, Jan. 1976
6203 S. Corkery Ext. President, Jan. 1982
Spokane, WA 99223 Chief Exec Off Jan. 1982
Marilyn A. Schroeder 46 Director, Dec. 1991
N. 15406 Lloyd Lane Treasurer, Jan. 1982
Mead, WA 99021 Chief Fin Off. Jan. 1982
Secretary May 1994
Wendell J. Satre 79 Director Mar. 1989
39 W. 33rd
Spokane, WA 99203
Robert Shanewise, M.D. 75 Director Mar. 1989
921 W. Comstock Ct.
Spokane, WA 99203
Lawrence A. Stanley 69 Director Feb. 1997
311 W. 32nd Ave.
Spokane WA 99203
Lawrence A. Coulson 39 Vice-President Jan. 1990
5611 S. Corkery Road
Spokane WA 99223
Joel E. Simpson 40 Vice-President Aug. 1995
1306 E. Sara Lane
Spokane WA 99223
Mr. Coulson has been a director of Cd'A since January
1976 and president and chief executive officer of Cd'A
since January 1982. He is also a director and president of
Union Iron Works, Inc., of Spokane (dba Cd'A Stock Steel),
which is a wholly-owned subsidiary of Cd'A. Mr. Coulson
also is a director of Inland Northwest Bank, a publicly-
held bank based in Spokane, Washington. He serves as the
Steel Service Center Institute governmental affairs
immediate past chairman.
Ms. Schroeder has been treasurer and chief financial
officer of Cd'A since January 1982, a director of Cd'A
since December 1991 and secretary since May 1994. She also
serves as chairman of the board of directors of Associated
Industries of the Inland Northwest.
Mr. Satre has been a director of Cd'A since March
1989. He is a retired chairman and CEO of Washington Water
Power. He also is a director and chairman of Output
Technology Corporation, president and chairman of the Board
of Directors of Consolidated Electronics, Inc. and a
director of Key Tronic Corporation where he served as
acting president from August 1991 to March 1992.
Dr. Shanewise has been a director of Cd'A since March
1989. Dr. Shanewise has been an orthopedic surgeon for
Orthopedic Associates, Inc., from 1955 to present. He also
was a director of Conjecture from 1979 to February 1993 and
president of Conjecture from 1987 to the merger date of
February 2, 1993 with The Coeur d'Alenes Company. Dr.
Shanewise is owner of Moran Vista Assisted Living Facility.
Lawrence A. Stanley is currently CEO of Empire Bolt
and Screw, Inc.; a Director of Washington Water Power
Company; Output Technology Corporation, a manufacturer of
high speed printers for industry; and CXT, Inc. a
prestressed concrete manufacturer. He is past Chairman of
the Association of Washington Businesses and the Spokane
Area Chamber of Commerce.
Lawrence Coulson has been the General Manager at Stock
Steel since September 1986 and a Vice-President since
January 1990. Lawrence is a certified credit executive
(C.C.E.) and Director of the National Association of Credit
Management Inland Northwest. Lawrence is also the
immediate past President of the Spokane Chapter of the
Steel Service Center Institute. Lawrence has a Masters
Degree in Business Administration from Gonzaga University.
Joel E. Simpson has been employed at The Coeur
d'Alenes Company since 1979. Joel became Merchandise
Manager in 1985, Steel Service Center Manager in 1988,
General Manager of the Industrial Fabrication Division in
1993 and Vice-President of Cd'A in 1995. He served as
President of the Steel Service Center Institute, Spokane
chapter from 1989 to 1992 and is currently on the Spokane
Economic Development Council's Workforce Development
Committee. Joel has an MBA degree from City University.
Each of the directors of Cd'A serve until his or her
successor is duly elected at the next annual shareholder
meeting of Cd'A or until his or her earlier resignation,
removal or death.
(b) COMPLIANCE WITH SECTION 16(A) OF EXCHANGE ACT.
Based solely upon a review of Forms 3, 4 and 5 and
amendments thereto furnished to the Company with respect to
the last fiscal year, Cd'A is not aware of any failure to
file any of such Forms during the last fiscal year or prior
years by any person who, at any time during the last fiscal
year, was a director, officer, or a beneficial owner of
more than 10 shares of Cd'A Common Stock. Two Forms 4 for
Jimmie Coulson and Marilyn Schroeder were filed three weeks
late.
ITEM 10. EXECUTIVE COMPENSATION.
<TABLE>
<S> <C> <C> <C> <C> <C>
Name & Principal Other Annual
Position Yr Salary<F1> Compensation Bonus Total
Jimmie Coulson 97 $102,577<F2> $0 0 $102,577
President, CEO 96 $102,088<F2> $52,716 0 $154,804
95 $105,953<F2> $37,572 0 $143,525
</TABLE>
<F1> Based upon salaries paid or accrued during fiscal
years ended September 27, 1997,
September 28, 1996 and September 30, 1995. There are no
employees other than the CEO who receive compensation in
excess of $100,000 annually.
<F2> Includes contribution to employee profit-sharing and
401(k) plan ("the plan") of $2,054 in 1997, $2,016 in 1996
and $1,835 in 1995. The plan is qualified under Section
401 and 501 of the Internal Revenue Code of 1986. All
employees are eligible to participate after one year of
service if they are 21 years of age or older and meet the
minimum hours worked requirement. The plan is funded by
discretionary contributions determined by the Cd'A Board of
Directors and as of July 1, 1993, by a 25% match to
employee contributed funds to a maximum of 6% of salary.
The profit-sharing contributions are allocated to
participants based on the participants salary as a
percentage of total salaries of all participants. Vesting
occurs on an incremental basis between the third and
seventh year of service. No distributions were made to any
executive officer during the last three fiscal years except
as required to refund any excess deferrals.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
The following table sets forth the beneficial
ownership of Cd'A Common Stock as of December 1, 1997 by
each person known by Cd'A to be a beneficial owner of 5% or
more of Cd'A Common Stock. As of such date, a total of
5,353,450 shares of Cd'A Common Stock were outstanding.
This disclosure is made pursuant to certain rules and
regulations promulgated by the Securities and Exchange
Commission and in certain instances the number of shares
shown as being beneficially owned may not be deemed to be
beneficially owned for other purposes.
<TABLE>
<S> <C> <C> <C>
Title of Name and Address Amount and
Class Of Beneficial Owner Nature of
Beneficial Percent
Ownership of Class
Common Stock Jimmie T.G. Coulson<F1>
6302 S. Corkery Road
Spokane WA 99223 2,060,747 38.49
Common Stock Arlene C. Coulson
4010 East 80th
Spokane WA 99223 646,098 12.07
Common Stock Lawrence A. Coulson<F2>
South 5711 Corkery Road
Spokane WA 99223 310,177 5.79
Common Stock Ingersoll Rand Company
91 New England Avenue
Piscataway NJ 08854 272,795 5.10
</TABLE>
<F1> The amount and percentage shown in this table as
beneficially owned by Mr. Coulson includes 403,421 of the
646,098 shares which are also shown in this table as
beneficially owned by Arlene C. Coulson. Arlene Coulson is
the record owner of these 403,421 shares, but pursuant to a
property settlement agreement (i) Mr. Coulson has the right
to vote these shares (or Arlene Coulson's right to vote
these shares is limited) in certain circumstances and, (ii)
Mr. Coulson has a first right of refusal to acquire these
shares in the event of a third party's offer to purchase
them on certain terms. This table should be read taking
into account that these 403,421 shares are shown as
beneficially owned by both Arlene Coulson and Mr. Coulson.
Mr. Coulson disclaims beneficial ownership of these 403,421
shares.
<F2> Lawrence Coulson is the son of Jimmie Coulson
(b) SECURITY OWNERSHIP OF MANAGEMENT.
The following table sets forth the beneficial
ownership of Cd'A Common Stock as of December 1, 1997 by
each director and executive officer of Cd'A, named
individually, and all directors and executive officers of
Cd'A as a group, without naming them. This disclosure is
made pursuant to certain rules and regulations promulgated
by the Securities and Exchange Commission and in certain
instances the number of shares shown as being beneficially
owned may not be deemed to be beneficially owned for other
purposes.
<TABLE>
<S> <C> <C> <C>
Title of Name and Address of Amount and Nature of Percent of
Class Beneficial Owner Beneficial Ownership Class
Common Stock Jimmie T.G. Coulson
6302 S. Corkery Road
Spokane WA 99223 2,060,747 38.49*
Common Stock Lawrence A. Coulson
5711 S. Corkery Road
Spokane WA 99223 310,177 5.79
Common Stock Marilyn A. Schroeder
N. 15406 Lloyd Lane
Mead WA 99021 103,525 1.93
Common Stock Wendell J. Satre
39 West 33rd Ave
Spokane WA 99203 389 0<F2>
Common Stock Joel E. Simpson
E. 1306 Sara Lane
Spokane WA 99223 1,105 0<F2>
Common Stock Robert Shanewise, M.D.
921 W. Comstock Court
Spokane WA 99203 96,809 1.81
Common Stock Lawrence A. Stanley
311 West 32nd
Spokane WA 99203 389 0<F2>
Common Stock All directors & executive
officers as a group
(7 persons) <F1> 2,573,141 48.07
</TABLE>
<F1> The amount and percentage shown in this table as
beneficially owned by Mr. Coulson and by all directors and
executive officers as a group includes the 403,421 shares
beneficially owned by Arlene Coulson which are referred to
in footnote 1 to the preceding table.
<F2> Indicates less than 1% of outstanding shares of class.
(c) CHANGES IN CONTROL. Cd'A is not aware of any
arrangements which may result in a change of control of
Cd'A. See also item 6 relating to convertible debentures
issued in October 1993.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The purchasers of the $250,000 aggregate principal amount
of the Convertible Debentures sold and issued by Cd'A on
October 29, 1993 and December 31, 1993, included the
following persons and entities. Jimmie T.G. Coulson
(President, Chief Executive Officer and director) purchased
$87,000 original aggregate principal amount of the
Convertible Debentures. A retirement account for the
benefit of Robert P. Shanewise, M.D. (director of Cd'A)
purchased $50,000 original aggregate principal amount of
Convertible Debentures. Lawrence A. Coulson (son of Jimmie
T.G. Coulson) purchased $35,000. CINV (a partnership whose
partners are Jimmie T.G. Coulson, Lawrence A. Coulson and
David A. Coulson, sons of Jimmie T.G. Coulson, each of whom
has a one-third partnership interest) purchased $15,000.
Ben Harney and Dorothy Harney (parents of Marilyn A.
Schroeder, Treasurer and a director of Cd'A) purchased
$13,000, Harry Yost and Ruth Yost (parents of Arlene
Coulson) purchased $50,000. On October 31, 1995, the
$87,000 purchased by Jimmie T. G. Coulson and the $35,000
purchased by Lawrence Coulson were converted to common
stock at a conversion price of $0.125 per share.
Cd'A has no parent Company.
PART IV
ITEM 13. EXHIBITS, SCHEDULES, AND REPORTS ON FORM 8-K.
(a) EXHIBITS
Exhibit Index
Page No. Exhibit No. Description of Exhibit
43 3.1<F2> Articles of Incorporation of Cd'A
77 3.2<F2> Bylaws of Cd'A - Amendments to By-
Laws dated 05/02/94
97 10.1<F2> Seafirst Bank - Commercial
Security Agreements(Cd'A & Union
Iron Works) dated 03/27/95
Seafirst Bank - Business Loan
Agreement dated 03/24/97 (Cd'A)
<F2> Seafirst Bank - Promissory Notes
dated 03/27/95 (Cd'A and Union
Iron Works)
Seafirst Bank - Loan Modification
Agreement dated 09/18/95 (Cd'A and
Union Iron Works)
<F2> Seafirst Bank - Promissory Notes
Dated 12/20/95, 9/17/96 Union Iron
Works)
<F2> Seafirst Bank - Deed of Trust,
Security Agreement and Fixture
Filing With Assignment of Leases
and Rents dated 12/20/95 (Cd'A)
<F2> Seafirst Bank - Construction Loan
Agreement dated 12/20/9(Cd'A)
<F2> Seafirst Bank - Certificate and
Indemnity Agreement Regarding
Building Laws and Hazardous
Substances dated 12/20/95 (Cd'A)
<F2> Seafirst Bank - Agreement of
Subordination dated 12/20/95 (Cd'A
and Union Iron Works)
<F2> Seafirst Bank - Loan Modification
and Additional Advance Agreement
dated 11/21/96 (Cd'A)
<F2> Seafirst Bank - First Amended and
Restated Promissory Note dated
11/12/96 (Cd'A)
<F2> Seafirst Bank - Subordination
Agreement dated 2/5/96 (Cd'A)
120 10.2<F2> Convertible Debentures due 1998 of
Cd'A and related Deed of Trust
dated October 29,1993 executed by
Cd'A in favor of Stewart Title
Company of Spokane as Trustee for
the benefit of the holder
Convertible Debentures. see 4.1
235 10.6<F2> Adoption Agreement #003 401K
Employee Profit Sharing Plan dated
04/30/93
13.1<F2> Annual report to security holders
18.1<F1> Description of change in
accounting principles
267 21 <F2> List of Subsidiaries
<F1> See Note 4 to Consolidated Financial Statements
<F2> Previously filed with the Securities and Exchange
Commission on Form 10- KSB for year ending September
1994
(b) REPORTS ON FORM 8-K.
None.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
THE COEUR D'ALENES Company
Date: December 19, 1997 By /S/ Jimmie Coulson
President,
Chief Executive Officer
Director, (Principal
Executive Officer)
Date: December 19, 1997 By /S/Marilyn A. Schroeder
Treasurer and Director
(Principal Financial
Officer and Principal
Accounting Officer)
Date: December 19, 1997 By /S/Wendell J. Satre
Director
Date: December 19, 1997 By /S/Robert P. Shanewise,
M.D.
Director
Date: December 19, 1997 By /S/Lawrence A. Stanley
Director
<PAGE>
Report of Independent Certified Public Accountants
Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Stockholders'
Equity
Consolidated Statements of Cash Flows
Summary of Accounting Policies
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
The Coeur d'Alenes Company and Subsidiary
Spokane, Washington
We have audited the accompanying consolidated balance
sheets of The Coeur d'Alenes Company and Subsidiary as of
September 27, 1997 and September 28, 1996, and the related
consolidated statements of income, changes in stockholders'
equity and cash flows for the years then ended. 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 the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the consolidated financial position of The Coeur d'Alenes
Company and Subsidiary at September 27, 1997 and September
28, 1996, and the results of their operations and their
cash flows for the years then ended in conformity with
generally accepted accounting principles.
November 13, 1997
<TABLE>
<S> <C> <C>
September 27, September
28, 1997 1996
Assets
Current assets:
Cash and cash equivalents $ 89,495 $
68,645
Accounts and notes receivable, less allowance of
$53,306 and $77,050 for doubtful accounts
(Notes 2 and 3)
1,240,996
1,181,599
Inventories (Notes 1 and 2) 2,342,671
2,788,654
Income taxes receivable (Note 6) 24,004 -
Deferred tax asset (Note 6) 46,000
70,450
Total current assets 3,743,166
4,109,348
Property and equipment (Notes 3 and 4):
Land 306,320
304,547
Building and leasehold
improvements 1,890,690
2,175,598
Machinery and equipment 2,146,358
2,375,308
Vehicles 149,669
166,423
Office equipment 242,678
310,746
4,735,715
5,332,622
Less accumulated depreciation 1,400,291
2,235,079
Net property and equipment 3,335,424
3,097,543
Other assets 73,365
50,732
$ 7,151,955 $
7,257,623
September 27, September
28,
1997 1996
Liabilities and Stockholders' Equity
Current liabilities:
Short-term bank borrowings
(Note 2) $ 833,656 $
863,477
Accounts payable 613,608
1,046,662
Accrued expenses 307,520
486,478
Current maturities of
long-term debt (Note 3) 103,663
75,821
Total current liabilities 1,858,447
2,472,438
Deferred tax liability (Note 6) 65,000
44,403
Long-term debt, less current
maturities (Note 3) 2,393,822
2,031,406
Long-term debt to related parties
(Notes 4 and 9) 128,000
128,000
Total liabilities 4,445,269
4,676,247
Commitments and Contingencies
(Notes 5, 7 and 8)
Stockholders' equity (Note 4)
Common stock, no par, shares authorized 10,000,000;
issued 5,357,373, and outstanding 5,353,561
1,186,192
1,186,192
Retained earnings 1,524,294
1,398,984
2,710,486
2,585,176
Less treasury stock,
at cost; 3,812 shares 3,800
3,800
Total stockholders' equity 2,706,686
2,581,376
$ 7,151,955
$7,257,623
September 27, September
28,
Years ended 1997 1996
Net sales $ 12,858,765 $
12,498,993
Cost of sales 9,498,045
8,982,259
Gross profit 3,360,720
3,516,734
Selling, general and
administrative expenses 3,012,712
3,052,693
Operating income 348,008
464,041
Other income (expense):
Interest income 27,012
22,594
Interest expense (301,306 )
(209,124 )
Other income 106,485
145,391
Net other expense (167,809 )
(41,139 )
Income before income tax expense 180,199
422,902
Income tax expense (Note 6) 54,889
132,673
Net income $125,310 $
290,229
</TABLE>
Earnings per common and common
equivalent share (Note 9):
Primary $ 0.02 $ 0.06
Fully diluted $ 0.02 $ 0.05
Common Stock Retained Treasury Stock
Shares Amount Earnings Shares
Amount
Balance, September 30, 1995 4,377,577 $ 1,064,192 $
1,108,755 3,796 $ 3,796
Net income - - 290,229 - -
Conversion of debentures into common stock
976,000
122,000
- - - -
- - - -
- - - -
Treasury stock purchase (16 ) - - 16
4
Balance, September 28, 1996 5,353,561 1,186,192
1,398,984 3,812 3,800
Net income - - 125,310 - -
Balance, September 27, 1997 5,353,561 $ 1,186,192 $
1,524,294 3,812 $ 3,800
Increase (Decrease) in Cash and Cash Equivalents
September 27, September 28,
Years ended 1997 1996
Operating activities:
Net income $ 125,310 $ 290,229
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 199,739 147,663
Gain on disposal of
property and equipment (52,666) (2,888)
Provision for doubtful
Accounts 3,000 -
Deferred tax provision
(benefit) 45,047 (8,604)
Changes in assets and liabilities:
Receivables (86,401) (189,236)
Inventories 445,983 (412,549)
Other assets (22,633) 4,853
Accounts payable (433,054) 312,895
Accrued expenses (178,958) 55,679
Net cash provided by operating
Activities 45,367 198,042
Investing activities:
Additions to property and
equipment (525) (1,376,381)
Proceeds from sale of fixed
assets 140,324 8,740
Net cash used in investing
activities (384,954) (1,367,641)
Increase (Decrease) in Cash and Cash Equivalents
September 27, Sept 28,
Years ended 1997 1996
Financing activities:
Borrowings under line of
credit agreements 13,121,040
12,311,000
Repayments under line of
credit agreements (13,150,861)
(12,219,587)
Principal repayments of
long-term debt (76,014)
(31,800)
Borrowings of long-term debt 466,272 1,050,550
Purchase of treasury stock - (4 )
Net cash provided by financing
Activities 360,437 1,110,159
Net increase (decrease) in cash
and cash equivalents 20,850
(59,440)
Cash and cash equivalents,
beginning of year 68,645 128,085
Cash and cash equivalents,
end of year $ 89,495 $ 68,645
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest $ 294,844 $220,163
Income taxes $ 23,700 $124,119
Noncash financing activities:
Conversion of
debentures into
common stock $ - $122,000
Repayment of debt with proceeds from issuance of
new debt
$- $878,178
Principles of Consolidation The accompanying
consolidated financial statements include the accounts of
The Coeur d'Alenes Company and its wholly-owned
subsidiary, Union Iron Works, Inc. (collectively referred
to as "the Company"). Union Iron Works, Inc. ("the
Subsidiary") is doing business as Stock Steel. All
significant intercompany balances and transactions have
been eliminated in consolidation.
Nature of Business The Company is engaged in the
distribution, processing and fabrication of steel and
related products to customer specifications. Most of the
Company's business activity is with customers located
within the Pacific Northwest.
During the years ended September 27, 1997 and September 28,
1996, the Company had sales to a major customer of
$1,569,679 and $1,949,000, respectively, which represent
12% and 16% of net sales for those years.
Fiscal Year The Company's fiscal year is a 52 or 53
week period ending on the last Saturday in September.
Fiscal 1997 and 1996 were 52 week years.
Cash and Cash Equivalents For purposes of balance
sheet classification and the statements of cash flows, the
Company considers all highly liquid short-term investments
having an original maturity of three months or less to be
cash equivalents.
Inventories Inventories are valued at the lower of
cost or market. Cost is determined by using the last-in,
first-out (LIFO) method for processing and fabrication
steel inventories. The first-in, first-out (FIFO) method
of pricing is used for all distribution and other
inventories, which are composed primarily of steel service
center stock.
Property, Equipment and Depreciation Property and
equipment are stated at cost. Depreciation is computed
using straight-line and accelerated methods over estimated
useful lives of the assets which range from 3 to 39 years.
Revenue and Cost Recognition Sales are recorded and
customers are billed when products are shipped or projects
are completed. Costs of orders and projects are recorded
in the same accounting period as related sales.
Income Taxes The Company accounts for income taxes
in accordance with the provisions of Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes". SFAS No. 109 requires a company to recognize
deferred tax assets and liabilities for the expected future
income tax consequences of events that have been recognized
in a company's financial statements. Under this method,
deferred tax liabilities and assets are determined based on
the temporary differences between the financial statement
carrying amounts and tax bases of assets and liabilities
using enacted tax rates in effect in the years in which the
temporary differences are expected to reverse.
Earnings Per Common Share The primary earnings per
common share is computed by dividing the Company's net
income by the weighted average number of shares of common
stock outstanding during the year.
Earnings per share - assuming full dilution was determined
on the assumptions that the convertible debentures were
converted as of the first day the year and net earnings
were adjusted for the interest expense on the debentures,
net of its tax effect.
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 amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Fair Value of Financial Instruments The carrying
amounts reported in the balance sheet as of September 27,
1997 and September 28, 1996 for cash, accounts and notes
receivables, short-term bank borrowings, accounts payable
and accrued expenses approximate fair value because of the
immediate or short-term maturity of these financial
instruments. The fair value of debt payable to related
parties at September 27, 1997 and September 28, 1996 is
approximately $146,000 and $145,000 based on the estimated
fair value of the common stock into which the debt is
convertible. The carrying amount of long-term debt
approximates its fair value as substantially all of the
debt have interest rates which change with market interest
rates.
New Accounting Pronouncements In February 1997, the
Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings per Share," which establishes standards for
computing and presenting earnings per share and applies to
entities with publicly held common stock or potential
common stock. SFAS No. 128 is effective for financial
statements for periods ending after December 15, 1997, and
requires restatement of all prior-period earnings per share
data presented.
In February 1997, the FASB issued SFAS No. 129, "Disclosure
of Information about Capital Structure" which clarifies
disclosure rules about such items as right and privileges
of debt and equity securities, dividend and liquidation
preferences, participation rights and call prices. It also
requires that liquidation preferences be shown on the face
of the balance sheet. SFAS No. 129 is effective for
financial statements for periods ending after December 31,
1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income," which requires the disclosure of
comprehensive income and requires the presentation of a
reconciliation for net income to the change in equity of
the business during the year arising due to transactions
from nonowner sources. SFAS No. 130 is effective for
financial statements for periods beginning after December
15, 1997.
In June 1997, the FASB issued SFAS No. 131 "Disclosures
about Segments of an Enterprise and Related Information"
which supersedes SFAS No. 14, "Financial Reporting for
Segments of a Business Enterprise" and establishes
standards for the way that public companies report
information about operating segments in annual financial
statements and requires reporting of selected information
about operating segments in interim financial statements
issued to the public. It also establishes standards for
disclosures regarding products and services, geographic
areas and major customers. SFAS No. 131 defines operating
segments as components of a company about which separate
financial information is available that is evaluated
regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance.
SFAS No. 131 is effective for financial statements for
periods beginning after December 15, 1997 and requires
comparative information for earlier years to be restated.
None of the foregoing pronouncements is expected to have a
material effect on the Company's financial statement
presentation.
1. Inventories Inventories are summarized as follows:
September 27, September 28,
1997 1996
Fabrication inventories:
Raw materials $ 74,501 $ 147,528
Work-in-progress 293,181 550,462
Inventories, at
FIFO cost 367,682 697,990
LIFO reserve (50,538) ( 56,711)
Inventories, at LIFO cost 317,144 641,279
Distribution inventories,
at FIFO 2,025,527 2,147,375
Total inventories $2,342,671 $2,788,654
During the year ended September 27, 1997, the
liquidation of LIFO inventories decreased cost of sales
and, therefore, increased income before income tax expense
by approximately $6,500.
2. Short-Term Bank Borrowings The Company has a $1.85
million bank credit line available for revolving credit
requirements which is subject to renewal on April 1, 1998.
Interest is charged at the lender's prime rate plus 0.325%
(8.82% at September 27, 1997). Outstanding borrowings are
collateralized by accounts receivable and inventories.
Short-term borrowing activity was as follows:
September 27, September 28,
1997 1996
Balance outstanding at
year-end $ 833,656 $ 863,477
Weighted average interest
rate at year-end 8.82% 8.57%
Maximum amount outstanding at
any month end $ 1,328,508 $ 1,225,341
Average amount outstanding $ 1,068,809 $ 894,237
Weighted average interest rate
during the year 8.69% 8.80%
The weighted average interest rate and monthly
balances are computed using the end of month borrowings
outstanding and the related end of month interest rate.
The month end balances and interest rates are averaged to
determine the yearly weighted average balance of borrowings
and the weighted average interest rate for the year.
The credit line agreement contains covenants under which
the Company may not declare or pay any dividends in excess
of 10% of annual net (after tax) profit or enter into
mergers, acquisitions or any major sales of assets or
corporate reorganizations without prior consent by the
bank. The Company is also required to maintain certain
financial ratios concerning working capital, debt to
equity, and a minimum tangible net worth of $2,000,000. At
September 27, 1997 the Company was in compliance with all
of its bank covenants.
3. Long-Term Debt Long-term debt consists of the
following:
September 27, September 28,
1997 1996
Note payable to a bank, monthly payments of $17,225
including interest at 2.75% over the LIBOR index rate
(8.75% at September 27, 1997);
due January 2007, collateralized by property
$1,924,395 $1,678,728
Note payable to a bank, monthly payments of $4,018
including interest at 0.5% over the bank's prime rate
(9% at September 27, 1997); due September 2003
collateralized
by equipment
223,134 250,000
Note payable to a bank, monthly interest only payments at
0.5% over the bank's prime rate (9% at September 27,
1997); due April 1998, collateralized by equipment
195,000 -
Note payable to a bank, monthly payments of $3,203
including interest at 8.75%; due September 2002,
collateralized
by equipment
154,956 178,499
2,497,485 2,107,227
Less current maturities 103,663 75,821
Long-term debt $2,393,822 $2,031,406
The $195,000 note payable to a bank contains a
provision which allows the Company to convert the balance
outstanding at maturity to a note having a seven year
repayment term. Total available borrowings under this
agreement are $250,000. As the Company intends to exercise
this conversion feature, the amount outstanding at
September 27, 1997 has been classified as long-term debt.
Scheduled long-term debt maturities as of September 27,
1997 are as follows:
Year ending Amount
September 26, 1998 $ 103,663
September 25, 1999 125,655
September 24, 2000 137,248
September 30, 2001 149,909
September 28, 2002 163,350
Thereafter 1,817,660
Total $ 2,497,485
4. Long-Term Debt to Related Parties At September 27,
1997 and September 28, 1996, the Company owed $128,000 to
related parties pursuant to the terms of a convertible
debenture agreement. The debentures require semi-annual
interest payments at 9.25%, are secured by land and
building and are due on October 31, 1998. The debentures
are convertible into shares of the Company's common stock
at a per share rate of $.175 through October 31, 1997 and
$.20 from November 1, 1997 through maturity. The Company,
at its option, may call any or all outstanding debentures
for redemption.
5. Lease Commitments The Company leases office
furniture and equipment and vehicles under operating leases
that expire at various dates through 2002. As of September
27, 1997, future minimum rental payments required under
operating leases that have remaining noncancellable terms
in excess of one year are as follows:
Year ending Amount
September 26, 1998 $ 139,778
September 25, 1999 119,206
September 24, 2000 104,479
September 30, 2001 102,407
September 28, 2002 85,423
Thereafter 65,339
Total $ 616,632
Rental expense for all operating leases was
$194,764 and $247,159 for the years ended September 27,
1997 and September 28, 1996.
6. Income Taxes Income tax expense (benefit) consists
of the following:
September 27, September 28,
Years ended 1997 1996
Federal:
Current $ 9,142 $ 136,777
Deferred 45,047 (8,604)
State - current 700 4,500
Income tax expense $ 54,889 $ 132,673
Major items causing the Company's effective tax
rate to differ from the statutory rates are as follows:
September 27, 1997 September 28, 1996
Amount Percent Amount Percent
Income tax expense at statutory rate
$ 61,268 34.0% $143,787 34.0%
Tax rate differences
(12,965 ) (7.1 ) 3,383 0.8%
Other 6,586 3.6 (14,497) (3.4)%
Income tax expense
$ 54,889 30.5% $132,673 31.4%
Significant components of the Company's deferred
tax assets and liabilities consist of the following:
September 27, Sept 28,
1997 1996
Current deferred tax assets:
Allowance for doubtful
accounts $ 13,327 $ 26,813
Vacation accrual 29,809 39,398
Other 2,864 4,239
Current deferred tax asset $ 46,000 $ 70,450
September 27, September 28,
1997 1996
Non-current deferred tax
Assets (liabilities):
Net operating loss
carryforwards $ 123,000 $ 126,600
Depreciation (96,900) (61,413)
Other (4,400) (5,833)
Gross non-current deferred tax asset(liability)
21,700 59,354
Valuation allowance (86,700) ( 103,757)
Non-current deferred tax
liability $ (65,000) $ (44,403)
A valuation allowance on the Company's deferred
tax assets has been established to the extent the Company
believes it is more likely than not that the deferred tax
assets will not be realized.
At September 27, 1997, the Company has available net
operating loss carryforwards of approximately $422,000
which expire through 2007. Utilization of the operating
loss carryforwards is limited to $12,180 per year.
7. Commitments The Company routinely makes commitments
to purchase and sell steel products up to nine months in
advance of anticipated deliveries. Outstanding firm
purchase commitments at September 27, 1997 aggregated
$1,226,000. Negotiated firm sales contracts aggregated
$356,000 at September 27, 1997.
8. Retirement Plan The Company sponsors a qualified
401(k) and profit-sharing plan ("the Plan"). The Plan
allows individual participants to make contributions to the
Plan with matching contributions by the Company to the
extent of 25% of the employees' contributions up to a
maximum of 6% of annual salary per participant. Additional
discretionary contributions may be made by the Company
based on net income. Substantially all full-time employees
are eligible to participate. Total Company contributions
to the Plan were $20,717 and $31,923 for fiscal 1997 and
1996.
9. Earnings Per Common Share The weighted average
number of common shares outstanding for the years ended
September 27, 1997 and September 28, 1996, was 5,353,561
and 5,273,127 shares, for calculation of primary earnings
per common share.
Earnings per common share assuming full dilution is
computed as follows:
September 27, September 28,
Fiscal year ended 1997 1996
Income before effects of
dilution $ 125,310 $ 290,229
Interest expense avoided if
debentures are converted
(net of tax)a 7,720 7,699
Net income $ 133,030 $ 297,928
Average shares of common stock outstanding for
fiscal 1997:
Outstanding Days Average
Date Shares Outstanding Outstanding
Beginning of year
09/29/96 5,353,561 - -
Convertible debentures outstanding
09/29/96 6,206,894 364 6,206,894
End of year
09/27/97 6,206,894 - -
6,206,894
Average shares of common stock outstanding for
fiscal 1996:
Outstanding Days Average
Date Shares Outstanding Outstanding
Beginning of year
10/01/95 4,377,577 - -
Convertible debentures Outstanding
10/01/95 6,377,577 129 2,260,185
Treasury shares purchased
02/07/96 6,377,561 235 4,117,382
End of year
09/28/96 6,377,561 - -
6,377,567
a For purposes of earnings on common shares
assuming full dilution, convertible debentures for 1997 and
1996 are assumed to be converted as of the first day of the
year. Such conversion negates the need to pay interest on
the debentures. The debentures were assumed to be
converted at their stated per share conversion rate at the
beginning of each fiscal year of $0.15 and $0.125 for 1997
and 1996. See also Note 4 concerning the convertible
debentures.
10. Segment Information Selected financial information of
the Company's operating results on a segment basis for the
years ended September 27, 1997 and September 28, 1996 is
presented as follows:
Fabrication Distribution Eliminations Total
1997:
Net sales
$2,535,986 $10,905,626 $(582,847 ) $12,858,765
Operating income (loss)
$(136,189 ) $ 484,197 $ - $ 348,008
Identifiable assets
$ 1,978,697 $ 5,173,258 $ - $ 7,151,955
Depreciation expense
$ 110,243 $ 89,496 $ - $ 199,739
Capital expenditures
$ 154,158 $ 371,120 $ - $ 525,278
1996:
Net sales
$ 3,067,058 $ 9,927,005 $ (495,070) $12,498,993
Operating income
$ 103,449 $ 360,592 $ - $ 464,041
Identifiable assets
$ 2,411,185 $ 4,846,438 $ - $ 7,257,623
Depreciation expense
$ 74,130 $ 73,533 $ - $ 147,663
Capital expenditures
$ 500,107 $ 876,274 $ - $ 1,376,381
Operating income is total revenue less operating
expense. In computing operating income, none of the
following items have been added or deducted: interest
expense, interest income and other income. Identifiable
assets by segment are those assets that are used in the
segmental operation.
11. Valuation and Qualifying Accounts Allowance for
doubtful accounts activity was as follows:
Years ended September 27, September 28,
1997 1996
Balance, beginning of year $ 77,050 $ 84,214
Charged to expense 3,000 -
Write-offs, net of recoveries (26,744) (7,164)
Balance, end of year $ 53,306 $ 77,050
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS
<FISCAL-YEAR-END> SEP-27-1997 SEP-28-1996
<PERIOD-END> SEP-27-1997 SEP-28-1996
<CASH> 89,495 68,645
<SECURITIES> 0 0
<RECEIVABLES> 1,294,302 1,258,649
<ALLOWANCES> 53,306 77,050
<INVENTORY> 2,342,671 2,788,654
<CURRENT-ASSETS> 3,743,166 4,109,348
<PP&E> 4,735,715 5,332,622
<DEPRECIATION> 1,400,291 2,235,079
<TOTAL-ASSETS> 7,151,955 7,257,623
<CURRENT-LIABILITIES> 1,858,447 2,472,438
<BONDS> 1,924,395 1,678,728
0 0
0 0
<COMMON> 1,186,192 1,186,192
<OTHER-SE> 1,524,294 1,398,984
<TOTAL-LIABILITY-AND-EQUITY> 7,151,955 7,257,623
<SALES> 12,858,765 12,498,993
<TOTAL-REVENUES> 12,992,262 12,666,978
<CGS> 9,498,045 8,982,259
<TOTAL-COSTS> 12,565,646 11,902,279
<OTHER-EXPENSES> 356,195 341,797
<LOSS-PROVISION> 3,000 0
<INTEREST-EXPENSE> 301,306 209,124
<INCOME-PRETAX> 180,199 422,902
<INCOME-TAX> 54,889 132,673
<INCOME-CONTINUING> 180,199 422,902
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 125,310 290,229
<EPS-PRIMARY> .02 .06
<EPS-DILUTED> .02 .05
</TABLE>
SEAFIRST BANK
BUSINESS LOAN AGREEMENT
This Seafirst Business Loan Agreement ("Agreement") is made
between Bank of America NT&SA doing business as Seafirst
Bank ("Bank") and The Coeur d'Alenes Co. Inc. and Union
Iron Works, Inc. of Spokane ("Borrower") with respect to
the following:
PART A
I. NON REVOLVING LINE / TERM LOAN #TBA. Subject to the
terms of this Agreement, Bank agrees to lend to Borrower as
follows:
(a) Amount: $250,000.00 under a Non-Revolving Line,
available through expiration of April 1, 1998, at which
time the outstanding principal balance will be converted to
a Term Loan, fully amortized over 84 months. Maturity date
April 1, 2005.
(b) Interest Rate:
[X] Bank's publicly announced Reference Rate plus
0.50 percent of the principal per annum. "Reference Rate"
means the rate of interest publicly announced from time to
time by Bank in San Francisco, California as its "Reference
Rate". The Reference Rate is set based on various factors,
including Bank's costs and desired return, general economic
conditions, and other factors, and is used as a reference
point for pricing some loans. Bank may price loans to its
customers at, above, or below the Reference Rate. Any
change in the Reference Rate shall take effect at the
opening of business on the day specified in the public
announcement of a change in the Reference Rate.
[X] Borrower has the option, at expiration, of converting
this to a fixed rate loan at 2.50% per annum over the
reserve-adjusted fixed rate index quoted by Bank on the
expiration date, rounded upward to the next highest one-
eighth of one percent (0.125%), so long as Borrower is not
in default under the Loan Documents.
(c) Interest Rate Basis: All interest will be calculated
at the per annum interest rate based on a 360-day year and
applied to the actual number of days elapsed.
(d) Repayment: At the times and in amounts as set forth
in note(s) required under Part B Article 1 of this
Agreement.
(e) Loan Fee: $ 500.00 payable on _March 24, 1997.
Loan fee is fully earned and non-refundable upon execution
of this Agreement.
(f) Other Fee(s) (identify): _____________________
(g) Collateral. This term loan shall be secured by
a security interest, which is hereby granted, in
favor of Bank on the following collateral:
_____Borrower's Equipment_________
Also, collateral securing other loans with
Bank may secure this loan.
II. LINE OF CREDIT # 18. Subject to the terms of this
Agreement, Bank will make loans to Borrower under a
[X] revolving [ ] non-revolving line of credit
as follows:
(a) Total Amount Available: $1,850,000.00__
[X] Subject to the provisions of any accounts
receivable and/or inventory borrowing plan required herein;
it is expressly understood that collateral ineligible for
borrowing purposes is determined solely by Bank.
[ ] Subject to (describe):________________________
(b) Availability period: March 24, 1997
through April 1, 1998. However, if loans are made
and/or new promissory notes executed after the last
date, such advances will be subject to the terms of
this Agreement until repaid in full unless a written
statement signed by the Bank and Borrower provides
otherwise, or a replacement loan agreement is executed.
The making of such additional advances alone, however,
does not constitute a commitment by the bank to make any
further advances or extend the availability period.
(c) Interest Rate:
[X] Bank's publicly announced Reference Rate plus
0.325 percent of the principal per annum. "Reference
Rate" means the rate of interest publicly announced from
time to time by Bank in San Francisco, California as its
"Reference Rate". The Reference Rate is set based on
various factors, including Bank's costs and desired return,
general economic conditions, and other factors, and is used
as a reference point for pricing some loans. Bank may
price loans to its customers at, above, or below the
Reference Rate. Any change in the Reference Rate shall
take effect at the opening of business on the day specified
in the public announcement of a change in the Reference
Rate.
[ ] _____________________________________________
(d) Interest Rate Basis. All interest will be calculated
at the per annum interest rate based on 360-day year and
applied to the actual number of days elapsed.
(e) Repayment: At the times and in amounts as set forth
in note(s) required under Part B Article 1 of this
Agreement.
(f) Loan Fee: $ 1,000.00 payable on March
24, 1997 .
(g) Fee on Unutilized Portion of Line: On
, and every ___________ thereafter, Borrower shall pay a
fee based upon the average daily unused portion of the line
of credit. This fee will be calculated as follows:
___________________________________________________________
(h) Other Fee(s) (identify): ____________________________
(i) Collateral. This revolving line of credit shall be
secured by a security interest, which is hereby granted, in
favor of Bank on the following collateral:
______Borrower's Accounts Receivable and inventory_________
Also, collateral securing other loans with Bank may
secure this loan.
SEAFIRST
BANK OF AMERICA NT & SA DBA SEAFIRST BANK
BUSINESS LOAN AGREEMENT
1. Promissory Note(s). All loans shall be evidenced by promissory notes in a
form and substance satisfactory to Bank.
2. Conditions to Availability of Loan/Line of Credit. Before Bank is
obligated to disburse/make any advance, or at any time thereafter which Bank
deems necessary and appropriate, Bank must receive all of the following, each
of which must be in form and substance satisfactory to Bank ("loan documents"):
2.1 Original, executed promissory note(s);
2.2 Original executed security agreement(s) and/or deed(s) of trust covering
the collateral described in Part A;
2.3 All collateral described in Part A in which Bank wishes to have a
possessory security interest;
2.4 Financing statement(s) executed by Borrower;
2.5 Such evidence that Bank may deem appropriate that the security interests
and liens in favor of Bank are valid, enforceable, and prior to the rights
and interests of others except those consented to in writing by Bank;
2.6 The following guaranty(ies) in favor of the Bank:
2.7 Subordination agreement(s) in favor of Bank executed by:
2.8 Evidence that the execution, delivery, and performance by Borrower of
this Agreement and the execution, delivery, and performance by Borrower
and any corporate guarantor or corporate subordinating creditor of any
instrument or agreement required under this Agreement, as appropriate,
have been duly authorized;
2.9 Any other document which is deemed by the Bank to be required from time
to time to evidence loans or to effect the provisions of this Agreement;
2.10 If requested by Bank, a written legal opinion expressed to Bank, of
counsel for Borrower as to the matters set forth in sections 3.1 and 3.2,
and to the best of such counsel's knowledge after reasonable
investigation, the matters set forth in sections 3.3, 3.5, 3.6, 3.7,
3.8 and such other matters as the Bank may reasonably request;
2.11 Pay or reimburse Bank for any out-of-pocket expenses expended in making
or administering the loans made hereunder including without limitation
attorney's fees (including allocated costs of in-house counsel);
2.12 Other (describe):
3. Representations and Warranties. Borrower represents and warrants to Bank,
except as Borrower has disclosed to Bank in writing, as of the date
of this Agreement and hereafter so long as credit granted under this
Agreement is available and until full and final payment of all sums
outstanding under this Agreement and promissory notes that:
3.1 Borrower is duly organized and existing under the laws of the state of
its organization as a:
General Limited
__X_ Corporation ___ Partnership ____ Partnership
____ Sole Proprietorship dba LLC with duration of
Borrower is properly licensed and in good standing in each state in which
Borrower is doing business and Borrower has qualified under, and complied
with, where required, the fictitious or trade name statutes of each state in
which Borrower is doing business, and Borrower has obtained all necessary
government approvals for its business activities; the execution, delivery,
and performance of this Agreement and such notes and other instruments
required herein are within Borrower's powers, have been duly authorized
wer and any guarantor, are not in conflict with the terms of any charter,
bylaw, or other organization papers of Borrower, and this Agreement, such
notes and the loan documents are valid and enforceable according to their
terms;
3.2 The execution, delivery, and performance of this Agreement, the loan
documents and any other instruments are not in conflict with any law or any
indenture, agreement or undertaking to which Borrower is a party or by which
Borrower is bound or affected;
3.3 Borrower has title to each of the properties and assets as reflected in
its financial statements (except such assets which have been sold or
otherwise disposed of in the ordinary course of business), and no assets or
revenues of the Borrower are subject to any lien except as required or
permitted by this Agreement, disclosed in its financial statements or
otherwise previously disclosed to Bank in writing;
3.4 All financial information, statements as to ownership of Borrower and
all other statements submitted by Borrower to Bank, whether previously or in
the future, are and will be true and correct in all material respects upon
submission and Environmental Response, Compensation, and Liability Act of 1
ecovery Act, as amended, 49 U.S.C. Section 6901, et seq., or other applicable
state or federal laws, rules or regulations adopted pursuant to any of the
foregoing.
3.9 Each chief place of business of Borrower, and the office or offices
where Borrower keeps its records concerning any of the collateral, is located
at:
4. Affirmative Covenants. So long as credit granted under this Agreement is
available and until full and final payment of all sums outstanding under this
Agreement and promissory note(s) Borrower will:
4.1 Use the proceeds of the loans covered by this Agreement only in
connection with Borrower's business activities and e 3.7 There is no event
which is, or with notice or lapse of time, or both,
would be, an Event of Default (as defined in Section 7) under this Agreement;
3.8 Borrower has exercised due diligence in inspecting Borrower's properties
for hazardous wastes and hazardous substances. Except as otherwise previously
disclosed and acknowledged to Bank in writing:
(a) during the period of Borrower's ownership of Borrower's properties,
there has been no use, generation, manufacture, storage, treatment, disposal,
release or threatened release of any hazardous waste or hazardous substance
by any person in, on, under or about any of Borrower's properties; (b)
Borrower has no actual or constructive knowledge that there has been any use,
generation, manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste or hazardous substance by a or about any of
Borrower's properties by any prior owner or occupant of any of Borrower's
properties; and (c) Borrower has no actual or constructive notice of any
actual or threatened litigation or claims of any kind by any person relating
to such matters. The terms "hazardous waste(s)," hazardous substance(s),"
"disposal," "release," and "threatened release" as used in this Agreement
shall have the same meanings as set forth in the Comprehensive Env
ucted by the relevant corporation, and (e) any revaluation or other write-up
in book value of assets subsequent to the fiscal year of such corporation
last ended at the date of this Agreement;
4.4 Upon request Borrower agrees to insure and to furnish Bank with evidence
of insurance covering the life of Borrower (if an individual) or the lives of
designated partners or officers of Borrower (if a partnership or corporation)
in the amounts stated below. Borrower shall take such actions as are
reasonably requested by Bank, such as assigning the insurance policies to
Bank or naming Bank as beneficiary and obtaining the insurer's acknowledgment
thereof, to provide that in the event of the death of an
Name: ________N/A________Amount: $ ____________
Name: ________N/A________Amount: $ ____________
4.5 Promptly give written notice to Bank of: (a) all litigation and claims
made or threatened affecting Borrower where the amount is $__50,000___ or
more; (b) any substantial dispute which may exist between Borrower and any
governmental regulatory body or law enforcement authority; (c) any Event of
Default under this Agreement or any other agreement with Bank or any other
creditor or any event which become an Event of Default; and (d) any other
matter which has resulted or might result in a material adverse financial
condition or operations;
4.6 Borrower shall as soon as available, but in any event within __120__
days following the end of each year and within __45__ days following the end
of each _quarter__ provide to Bank, in a form satisfactory to Bank (including
audited statements if required at any time by Bank), such financial statements
and other information respecting the financial condition and operations of
Borrower as Bank may reasonably request;
4.7 Borrower will maintain in effect insurance with responsible insurance
companies in such amounts and against such risks as is customarily maintained
by persons engaged in businesses similar to that of Borrower and all policies
covering property given as security for the loans shall have loss payable
clauses in favor of Bank. Borrower agrees to deliver to Bank such evidence of
insurance as Bank may reasonably require and, within thirty (30) days after
notice from Bank, to obtain such additional insurance;
4.8 Borrower will pay all indebtedness taxes and other obligations for which
the Borrower is liable or to which its income or property is subject before they
shall become delinquent, except any which is being contested by the Borrower in
good faith;
4.9 Borrower will continue to conduct its business as presently constituted,
and will maintain and preserve all rights, privileges and franchises now
enjoyed, conduct Borrower's business in an orderly, efficient and customary
manner, keep all Borrowers properties in good working order and condition,
and from time to time make all needed repairs, renewals or replacements so
that the efficiency of Borrower's properties shall be fully maintained and
preserved;
4.10 Borrower will maintain adequate books, accounts and records and prepare
all financial statements required hereunder in accordance with generally
accepted accounting principles and practices consistently applied, and in
compliance with the regulations of any governmental regulatory body having
jurisdiction over Borrower or Borrower's business;
4.11 Borrower will permit representatives of Bank to examine and make copies
of the books and records of Borrower and to examine the collateral of the
Borrower at reasonable times;
4.12 Borrower will perform, on request of Bank, such acts as may be
necessary or advisable to perfect any lien or security interest provided for
herein or otherwise carry out the intent of this Agreement;
4.13 Borrower will comply with all applicable federal, state and municipal
laws, ordinances, rules and regulations relating to its properties, charters,
businesses and operations, including compliance with all minimum funding and
other requirements related to any of Borrower's employee benefit plans;
4.14 Borrower will permit representatives of Bank to enter onto Borrower's
properties to inspect and test Borrower's properties as Bank, in its sole
discretion, may deem appropriate to determine Borrower's compliance with
section 5.8 of this Agreement; provided however, that any such inspections
and tests shall be for Bank's sole benefit and shall not be construed to
create any responsibility or liability on the part of Bank to Borrower or to
any third party.
5. Negative Covenants. So long as credit granted under this Agreement is
available and until full and final payment of all sums outstanding under this
Agreement and promissory note(s):
5.1 Borrower will not, during any fiscal year, expend or incur in the
aggregate more than $___N/A___ for fixed assets for FYE 12/97, nor more than
$____N/A___for any single fixed asset whether or not payable that fiscal year
or later under any purchase agreement or lease;
5.2 Borrower will not, without the prior written consent of Bank, purchase
or lease under an agreement for acquisition, incur any other indebtedness for
borrowed money, mortgage, assign, or otherwise encumber any of Borrower's
assets, nor sell, transfer or otherwise hypothecate any such assets except in
the ordinary course of business. Borrower shall not guaranty, endorse,
co-sign, or otherwise become liable upon the obligations of others, except by
the endorsement of negotiable instruments for deposit or
5.3 The total of salaries, withdrawals, or other forms of compensation,
whether paid in cash or otherwise, by Borrower shall not exceed the following
amounts for the persons indicated, nor will amounts in excess of such limits
be paid to any other person:
Name: _____________N/A________________________
Monthly/Yearly Amount: $ _________________________
Name: _____________N/A________________________
Monthly/Yearly Amount: $ _______________________
5.4 Borrower will not, without Bank's prior written consent, declare any
dividends on shares of its capital stock, or apply any of its assets to the
purchase, redemption or other retirement of such shares, or otherwise amend
its capital structure;
5.5 Borrower will not make any loan or advance to any person(s) or purchase
or otherwise acquire the capital stock, assets or obligations of, or any
interest in, any person, except:
(a) commercial bank time deposits maturing within one year,
(b) marketable general obligations of the United States or a State, or
marketable obligations fully guarantied by the United States,
(c) short-term commercial paper with the highest rating of a generally
recognized rating service,
(d) other investments related to the Borrower's
business which, together with such other
investments now outstanding, do not in the
aggregate exceed the sum of $50,000at any time;
5.6 Borrower will not liquidate or dissolve or enter into any consolidation,
merger, pool, joint venture, syndicate or other combination, or sell, lease,
or dispose of Borrower's business assets as a whole or such as in the opinion
of Bank constitute a substantial portion of Borrower's business or assets;
5.7 Borrower will not engage in any business activities or operations
substantially different from or unrelated to present business activities or
operations; and
5.8 Borrower, and Borrower's tenants, contractors, agents or other parties
authorized to use any of Borrower's properties, will not use, generate,
manufacture, store, treat, dispose of, or release any hazardous substance or
hazardous waste in, on, under or about any of Borrower's properties, except
as previously disclosed to Bank in writing as provided in section 3.8; and
any such activity shall be conducted in compliance with all applicable federal,
state and local laws, regulations and ordinances, including
6. Waiver, Release and Indemnification. Borrower hereby:
(a) releases and waives any claims against Bank for indemnity or
contribution in the event Borrower becomes liable for cleanup or other costs
under any of the applicable federal, state or local laws, regulations or
ordinances, including without limitation those described in section 3.8, and
(b) agrees to indemnify and hold Bank harmless from and against any and all
claims, losses, liabilities, damages, penalties and expenses which Bank may
directly or indirectly sustain or suffer resulting from a breach of
representations and warranties with respect to hazardous wastes and hazardous
substances contained in section 3.8, or (ii) section 5.8. The provisions of
this section 6 shall survive the full and final payment of all sums
outstanding under this Agreement and promissory notes and shall not be
affected by Bank's acquisition of any interest in any of the Borrower's
properties, whether by foreclosure or otherwise.
7. Events of Default. The occurrence of any of the following events ("Events
of Default") shall terminate any and all obligations on the part of Bank to
make or continue the loan and/or line of credit and, at the option of Bank,
shall make all sums of interest and principal outstanding under the loan
and/or line of credit immediately due and payable, without notice of default,
presentment or demand for payment, protest or notice of non payment or
dishonor, or other notices or demands of any kind or character
which are waived by Borrower, and Bank may proceed with collection of such
obligations and enforcement and realization upon all security which it may
hold and to the enforcement of all rights hereunder or at law:
7.1 The Borrower shall fail to pay when due any amount payable by it
hereunder on any loans or notes executed in connection herewith;
7.2 Borrower shall fail to comply with the provisions of any other covenant,
obligation or term of this Agreement for a period of fifteen (15) days after
the earlier of written notice thereof shall have been given to the Borrower
by Bank or Borrower or any Guarantor has knowledge of an Event of Default or
an event that can become an Event of Default;
7.3 Borrower shall fail to pay when due any other obligation for borrowed
money, or to perform any term or covenant on its part to be performed under
any agreement relating to such obligation or any such other debt shall be
declared to be due and payable and such failure shall continue after the
applicable grace period;
7.4 Any representation or warranty made by Borrower in this Agreement or in
any other statement to Bank shall prove to have been false or misleading in
any material respect when made;
7.5 Borrower makes an assignment for the benefit of creditors, files a
petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions to
any court for a receiver or trustee for Borrower or any substantial part of
its property, commences any proceeding relating to the arrangement,
readjustment, reorganization or liquidation under any bankruptcy or similar
laws, or if there is commenced against Borrower any such proceedings which
remain undismissed for a period of thirty (30) days or, if Borrower by
7.6 Any judgment attaches against Borrower or any of its properties for an
amount in excess of $__50,000___which remains unpaid, unstayed on appeal,
unbonded, or undismissed for a period of thirty (30) days;
7.7 Loss of any required government approvals, and/or any governmental
regulatory authority takes or institutes action which, in the opinion of
Bank, will adversely affect Borrower's condition, operations or ability to
repay the loan and/or line of credit;
7.8 Failure of Bank to have a legal, valid and binding first lien on, or a
valid and enforceable prior perfected security interest in, any property
covered by any deed of trust or security agreement required under this
Agreement;
7.9 Borrower dies, becomes incompetent, or ceases to exist as a going concern;
7.10 Occurrence of an extraordinary situation which gives Bank reasonable
grounds to believe that Borrower may not, or will be unable to, perform its
obligations under this or any other agreement between Bank and Borrower; or
7.11 Any of the preceding events occur with respect to any guarantor of
credit under this Agreement, or such guarantor dies or becomes incompetent,
unless the obligations arising under the guaranty and related agreements have
been unconditionally assumed by the guarantor's estate in a manner satisfactory
to Bank.
8. Successors; Waivers. Notwithstanding the Events of Default above, this
Agreement shall be binding upon and inure to the benefit of Borrower and
Bank, their respective successors and assigns, except that Borrower may not
assign its rights hereunder. No consent or waiver under this Agreement shall
be effective unless in writing and signed by the Bank and shall not waive or
affect any other default, whether prior or subsequent thereto, and whether of
the same or different type. No delay or omission on the
9. Arbitration.
9.1 At the request of either Bank or Borrower any controversy or claim
between the Bank and Borrower, arising from or relating to this Agreement or
any Loan Document executed in connection with this Agreement or arising from
any alleged tort shall be settled by arbitration in King County Washington.
The United States Arbitration Act will apply to the arbitration proceedings
which will be administered by the American Arbitration Association under its
commercial rules of arbitration except that unless the arbitrated exceeds
$5,000,000 there shall be only one arbitrator. Any controversy over whether
an issue is arbitrable shall be determined by the arbitrator(s). Judgment
upon the arbitration award may be entered in any court having jurisdiction.
The institution and maintenance of any action for judicial relief or pursuit
of a provisional or ancillary remedy shall not constitute a waiver of the
right of either party, including plaintiff, to submit to it the controversy
or claim to arbitration if such action
For purposes of the application of the statute of limitations the filing of
an arbitration as provided herein is the equivalent of filing a lawsuit and
the arbitrator(s) will have the authority to decide whether any claim or
controversy is barred by the statute of limitations, and if so, to dismiss
the arbitration on that basis. The parties consent to the joinder in the
arbitration proceedings of any guarantor, hypothecator or other party having
it the controversy or claim to arbitration if such action
For purposes of the application of the statute of limitations the filing of
an arbitration as provided herein is the equivalent of filing a lawsuit and
the arbitrator(s) will have the authority to decide whether any claim or
controversy is barred by the statute of limitations, and if so, to dismiss
the arbitration on that basis. The parties consent to the joinder in the
arbitration proceedings of any guarantor, hypothecator or other party having
an interest related to the claim or controversy being arbited
9.2 Notwithstanding the provisions of Section 9.1, no controversy or claim
shall be submitted to arbitration without the consent of all parties if at
the time of the proposed submission, such controversy or claim arises from or
relates to an obligation secured by real property;
9.3 No provision of this Section 9 shall limit the right of the Borrower or
the Bank to exercise self-help remedies such as setoff, foreclosure or sale
of any collateral, or obtaining any ancillary provisional or interim remedies
from a court of competent jurisdiction before, after or during the pendency of
any arbitration proceeding. The exercise of any such remedy does not waive the
right of either party to request arbitration. At Bank's option foreclosure
under any deed of trust may be accomplished by
10. Collection Activities, Lawsuits and Governing Law. Borrower agrees to
pay Bank all costs and expenses (including reasonable attorney's fees and the
allocated cost for in-house legal services incurred by Bank), to enforce this
Agreement, any notes or any Loan Documents pursuant to this Agreement, whether
or not suit is instituted. If suit is instituted by Bank to enforce this
Agreement or any of these documents, Borrower consents to the personal
jurisdiction of the Courts of the State of Washington and
11. Additional Provisions. Borrower agrees to the additional provisions set
forth immediately following this Section 11 or on any "Exhibit_______"
attached to and hereby incorporated into Agreement. This Agreement
supersedes all oral negotiations or agreements between Bank and Borrower with
respect to the subject matter hereof and constitutes the entire understanding
and Agreement of the matters set forth in this Agreement.
11.1 If any provision of this Agreement is held to be invalid or
unenforceable, then (a) such provision shall be deemed modified if possible,
or if not possible, such provision shall be deemed stricken, and (b) all
other provisions shall remain in full force and effect.
11.2 If the imposition of or any change in any law, rule, or regulation
guideline or the interpretation or application of any thereof by any court of
administrative or governmental authority (including any request or policy
whether or not having the force of law) shall impose or modify any taxes
(except U.S. federal, state or local income or franchise taxes imposed on
Bank), reserve requirements, capital adequacy requirements or other
obligations which would: (a) increase the cost to Bank for extending or
(c) reduce the rate of return on Bank's capital as a consequence of Bank's
obligations with respect to any loan and/or line of credit to which this
Agreement relates, then Borrower agrees to pay Bank such additional amounts
as will compensate Bank therefor, within five (5) days after Bank's written
demand for such payment, which demand shall be accompanied by an explanation
of such imposition or charge and a calculation in reasonable detail of the
additional amounts payable by Borrower, which explanation
11.3 Bank may sell participations in or assign this loan in whole or in part
without notice to Borrower and Bank may provide information regarding the
Borrower and this Agreement to any prospective participant or assignee. If a
participation is sold or the loan is assigned the purchaser will have the
right of set off against the Borrower and may enforce its interest in the
Loan irrespective of any claims or defenses the Borrower may have against the
Bank.
12. Notices. Any notices shall be given in writing to the opposite party's
signature below or as that party may otherwise specify in writing.
13. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.
This Business Loan Agreement (Parts A and B) executed by the parties on March
24, 1997. Borrower acknowledges having read all of the provisions of this
Agreement and Borrower agrees to its terms.
Eastern Wholesale Team #1
SEAFIRST BANK
(Branch/Office)
By: James R. Dean
Title: Vice President
Address: P.O. Box 1446
City, State, Zip: Spokane, WA 99210
Phone: (509) 353-1480
Fax: (509) 353-1492
The Coeur d'Alenes Company, Inc.
(Borrower Name)
By:
Title:
Address: P.O. Box 2610
City, State, Zip: Spokane, WA 99220
Phone: (509) 924-6363
Fax: (509) 924-6924
Union Iron Works, Inc. of Spokane
(Borrower Name)
By: _______
Title:
Address: P.O. Box 2610
City, State, Zip: Spokane, WA 99220
Phone: (509) 924-6363
Fax: (509) 924-6924
SEAFIRST BANK
PROMISSORY NOTE
PRINCIPAL: $1,850,000.00
MATURITY: 04-01-1998
LOAN NO: 18/59
CALL: AFS
ACCOUNT: 1701484046
OFFICER: 85607
BORROWER: THE COEUR D'ALENES COMPANY AND UNION IRON WORKS,
INC OF SPOKANE, WASHINGTON
PO BOX 2610, SPOKANE, WA 99220-2610
LENDER: BANK OF AMERICA NT&SA D/B/A/SEAFIRST BANK EASTERN
DIVISION TEAM 1
C/0 CLSC-E(DOC'S)
PO BOX 1446 (SFC-5) SPOKANE, WASHINGTON 99210-
1630
Principal Amount: $250,000.00 0.500% Over the Index Date
of Note: March 24, 1997
PROMISE TO PAY. THE COEUR D'ALENES COMPANY AND UNION IRON
WORKS, INC OF SPOKANE, WASHINGTON ("Borrower") promises to
pay to BANK OF AMERICA NT&SA D/B/A SEAFIRST BANK
("Lender"), or order, in lawful money of the United States
of America, the principal amount of Two Hundred Fifty
Thousand & 00/100 Dollars ($250,000.00) or so much as may
be outstanding, together with interest on the unpaid
outstanding principal balance until paid in full.
PAYMENT. Borrower will pay this loan in one payment of all
outstanding principal plus all accrued unpaid interest on
April 1, 1998. In addition, Borrower will pay regular
monthly payments of accrued unpaid interest beginning May
1, 1997, and all subsequent interest payments are due on
the same day of each month after that. Interest on this
Note is computed on a 365/360 simple interest basis; that
is, by applying the ratio of the annual interest rate over
a year of 360 days, multiplied by the outstanding principal
balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender
at Lender's address shown above or at such other place as
Lender may designate in writing. Unless otherwise agreed
or required by applicable law, payments will be applied
first to accrued unpaid interest, then to principal, and
any remaining amount to any unpaid collection costs and
late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is
subject to change from time to time based on changes in an
index which is the Lender's publicly announced Reference
Rate (the "Index"). The interest rate change will not
occur more often than each day the Reference Rate changes.
Lender will tell Borrower the current Index rate upon
Borrower's request. Borrower understands that Lender may
make loans based on other rates as well. The interest rate
change will not occur more often than each day. The
interest rate to be applied to the unpaid principal balance
of this Note will be at a rate of 0.500 percentage points
over the Index. NOTICE: Under no circumstances will the
interest rate on this Note be more than the maximum rate
allowed by applicable law.
PREPAYMENT FEE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the
date of the loan and will not be subject to refund upon
early payment (whether voluntary or as a result of
default), except as otherwise required by law. Early
payments will not, unless agreed to by Lender in writing,
relieve Borrower of Borrower's obligation to continue to
make payments under the payment schedule. Rather, they
will reduce the principal balance due and may result in
Borrower's making fewer payments.
LATE CHARGE. If a payment is 10 days or more late,
Borrower will be charged 5.000% of the regularly scheduled
payment or $20.00, whichever is greater.
DEFAULT. Borrower will be in default if any of the
following happens: (a) Borrower fails to make any payment
when due. (b) Borrower breaks any promise Borrower has made
to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition
contained in this Note or any agreement related to this
Note, or in any other agreement or loan Borrower has with
Lender. (c) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is
false or misleading in any material respect either now or
at the time made or furnished. (d) Borrower becomes
insolvent, a receiver is appointed for any part of
Borrower's property, Borrower makes an assignment for the
benefit of creditors, or any proceeding is commenced either
by Borrower or against Borrower under any bankruptcy or
insolvency laws. (e) Any creditor tries to take any of
Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of
Borrower's accounts with Lender. (f) Any guarantor dies or
any of the other events described in this default section
occurs with respect to any guarantor of this Note. (g) A
material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired. (h) Lender in
good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the
entire unpaid principal balance on this Note and all
accrued unpaid interest immediately due, without notice,
and then Borrower will pay that amount. Upon default,
including failure to pay upon final maturity, Lender, at
its option, may also, if permitted under applicable law, do
one or both of the following: (a) increase the variable
interest rate on this Note to 2.500 percentage points over
the Index, and (b) add any unpaid accrued interest to
principal and such sum will bear interest therefrom until
paid at the rate provided in this Note (including any
increased rate). The interest rate will not exceed the
maximum rate permitted by applicable law. Lender may hire
or pay someone else to help collect this Note if Borrower
does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses
whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment
collection services. If not prohibited by applicable law,
Borrower also will pay any court costs, in addition to all
other sums provided by law. This Note has been delivered
to Lender and accepted by Lender in the State of
Washington. If there is a lawsuit, Borrower agrees upon
Lender's request to submit to the jurisdiction of the
courts situated in King County, the State of Washington.
This Note shall be governed by and construed in accordance
with the laws of the State of Washington.
LINE OF CREDIT. This Note evidences a straight line of
credit. Once the total amount of principal has been
advanced, Borrower is not entitled to further loan
advances. Advances under this Note, as well as directions
for payment from Borrower's accounts, may be requested
orally or in writing by Borrower or by an authorized
person. Lender may, but need not, require that all oral
requests be confirmed in writing. The following party or
parties are authorized to request advances under the line
of credit until Lender receives from Borrower at Lender's
address shown above written notice of revocation of their
authority: JIMMIE T G COULSON and MARILYN SCHROEDER.
Borrower agrees to be liable for all sums either: (a)
advanced in accordance with the instructions of an
authorized person or (b) credited to any of Borrower's
accounts with Lender. The unpaid principal balance owing
on this Note at any time may be evidenced by endorsements
on this Note or by Lender's internal records, including
daily computer print-outs. Lender will have no obligation
to advance funds under this Note it: (a) Borrower or any
guarantor is in default under the terms of this Note or any
agreement that Borrower or any guarantor has with Lender,
including any agreement made in connection with the signing
of this Note; (b) Borrower or any guarantor ceases doing
business or is insolvent; (c) any guarantor seeks, claims
or otherwise attempts to limit, modify or revoke such
guarantor's guarantee of this Note or any other loan with
Lender; (d) Borrower has applied funds provided pursuant to
this Note for purposes other than those authorized by
Lender; or (e) Lender in good faith deems itself insecure
under this Note or any other agreement between Lender and
Borrower.
STATUTE OF FRAUDS PROVISION. ORAL AGREEMENTS OR ORAL
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.
GENERAL PROVISIONS. Lender may delay or forgo enforcing
any of its rights or remedies under this Note without
losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by
law, waive presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this
Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew,
extend (repeatedly and for any length of time) or modify
this loan, with the consent of Borrower, or release any
party or guarantor; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and
take any other action deemed necessary by Lender without
the consent of or notice to anyone.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD
ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE
INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF
THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF
THE NOTE.
BORROWER:
THE COEUR D'ALENES COMPANY AND UNION IRON WORKS, INC OF
SPOKANE, WASHINGTON
By: /S/ Jimmie T G Coulson, President, CEO
THE COEUR D'ALENES COMPANY BY JIMMIE T G COULSON,
PRESIDENT/CEO
By: /S/ Jimmie T G Coulson, President, CEO
UNION IRON WORKS, INC OF SPOKANE, WASHINGTON BY JIMMIE T G
COULSON, PRESIDENT/CEO
SEAFIRST BANK
PROMISSORY NOTE
PRINCIPAL: $250,000.00
MATURITY: 04-01-1998
LOAN NO: 18/59
CALL: AFS
ACCOUNT: 1701484046
OFFICER: 85607
BORROWER: THE COEUR D'ALENES COMPANY AND UNION IRON WORKS,
INC OF SPOKANE, WASHINGTON
PO BOX 2610, SPOKANE, WA 99220-2610
LENDER: BANK OF AMERICA NT&SA D/B/A/SEAFIRST BANK EASTERN
DIVISION TEAM 1
C/0 CLSC-E(DOC'S)
PO BOX 1446 (SFC-5) SPOKANE, WASHINGTON
99210-1630
Principal Amount: $250,000.00 0.500% Over the Index
Date of Note: March 24, 1997
PROMISE TO PAY. THE COEUR D'ALENES COMPANY AND UNION IRON
WORKS, INC OF SPOKANE, WASHINGTON ("Borrower") promises to
pay to BANK OF AMERICA NT&SA D/B/A SEAFIRST BANK
("Lender"), or order, in lawful money of the United States
of America, the principal amount of One Million Eight
Hundred Fifty Thousand & 00/100 Dollars ($1,850,000.00) or
so much as may be outstanding, together with interest on
the unpaid outstanding principal balance until paid in
full.
PAYMENT. Borrower will pay this loan in one payment of all
outstanding principal plus all accrued unpaid interest on
April 1, 1998. In addition, Borrower will pay regular
monthly payments of accrued unpaid interest beginning April
1, 1997, and all subsequent Interest payments are due on
the same day of each month after that. Interest on this
Note is computed on a 365/360 simple interest basis; that
is, by applying the ratio of the annual interest rate over
a year of 360 days, multiplied by the outstanding principal
balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender
at Lender's address shown above or at such other place as
Lender may designate in writing. Unless otherwise agreed
or required by applicable law, payments will be applied
first to accrued unpaid interest, then to principal, and
any remaining amount to any unpaid collection costs and
late charges.
AUTOMATIC PAYMENTS. Borrower hereby authorizes Lender to
automatically deduct from Borrower's checking/savings
account number 68351402, or such other Seafirst account as
may be authorized in the future, the loan payment according
to the amount and terms of this Note. If the funds in the
account are insufficient to cover any payment, Lender shall
not be obligated to advance funds to cover the payment. At
any time and for any reasons, Borrower or Lender may
voluntarily terminate Automatic Payments. Our business
days are Monday through Friday. Payments that come due on
a Saturday, Sunday or legal bank holiday, will be deducted
on the following business day.
VARIABLE INTEREST RATE. The Interest rate on this Note is
subject to change from time to time based on changes in an
index which is the Lender's publicly announced Reference
Rate (the "Index"). The interest rate change will not
occur more often than each day the Reference Rate changes.
Lender will tell Borrower the current Index rate upon
Borrower's request. Borrower understands that Lender may
make loans based on other rates as well. The interest rate
change will not occur more often than each day. The
interest rate to be applied to the unpaid principal balance
of this Note will be at a rate of 0.325 percentage points
over the Index. NOTICE: Under no circumstances will the
interest rate on this Note be more than the maximum rate
allowed by applicable law.
PREPAYMENT FEE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the
date of the loan and will not be subject to refund upon
early payment (whether voluntary or as a result of
default), except as otherwise required by law. Early
payments will not, unless agreed to by Lender in writing,
relieve Borrower of Borrower's obligation to continue to
make payments under the payment schedule. Rather, they
will reduce the principal balance due and may result in
Borrower's making fewer payments.
LATE CHARGE. If a payment is 10 days or more late,
Borrower will be charged 5.000% of the regularly scheduled
payment or $20.00, whichever is greater.
DEFAULT. Borrower will be in default if any of the
following happens: (a) Borrower fails to make any payment
when due. (b) Borrower breaks any promise Borrower has made
to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition
contained in this Note or any agreement related to this
Note, or in any other agreement or loan Borrower has with
Lender. (c) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is
false or misleading in any material respect either now or
at the time made or furnished. (d) Borrower becomes
insolvent, a receiver is appointed for any part of
Borrower's property, Borrower makes an assignment for the
benefit of creditors, or any proceeding is commenced either
by Borrower or against Borrower under any bankruptcy or
insolvency laws. (e) Any creditor tries to take any of
Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of
Borrower's accounts with Lender. (f) Any guarantor dies or
any of the other events described in this default section
occurs with respect to any guarantor of this Note. (g) A
material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired. (h) Lender in
good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the
entire unpaid principal balance on this Note and all
accrued unpaid interest immediately due, without notice,
and then Borrower will pay that amount. Upon default,
including failure to pay upon final maturity, Lender, at
its option, may also, if permitted under applicable law, do
one or both of the following: (a) increase the variable
interest rate on this Note to 2.325 percentage points over
the Index, and (b) add any unpaid accrued interest to
principal and such sum will bear interest therefrom until
paid at the rate provided in this Note (including any
increased rate). The interest rate will not exceed the
maximum rate permitted by applicable law. Lender may hire
or pay someone else to help collect this Note if Borrower
does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses
whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment
collection services. If not prohibited by applicable law,
Borrower also will pay any court costs, in addition to all
other sums provided by law. This Note has been delivered
to Lender and accepted by Lender in the State of
Washington. If there is a lawsuit, Borrower agrees upon
Lender's request to submit to the jurisdiction of the
courts situated in King County, the State of Washington.
This Note shall be governed by and construed in accordance
with the laws of the State of Washington.
LINE OF CREDIT. This Note evidences a revolving line of
credit. Advances under this Note, as well as directions
for payment from Borrower's accounts, may be requested
orally or in writing by Borrower or by an authorized
person. Lender may, but need not, require that all oral
requests be confirmed in writing. The following party or
parties are authorized to request advances under the line
of credit until Lender receives from Borrower at Lender's
address shown above written notice of revocation of their
authority: JIMMIE T G COULSON and MARILYN SCHROEDER.
Borrower agrees to be liable for all sums either: (a)
advanced in accordance with the instructions of an
authorized person or (b) credited to any of Borrower's
accounts with Lender. The unpaid principal balance owing
on this Note at any time may be evidenced by endorsements
on this Note or by Lender's internal records, including
daily computer print-outs. Lender will have no obligation
to advance funds under this Note if: (a) Borrower or any
guarantor is in default under the terms of this Note or any
agreement that Borrower or any guarantor has with Lender,
including any agreement made in connection with the signing
of this Note; (b) Borrower or any guarantor ceases doing
business or is insolvent; (c) any guarantor seeks, claims
or otherwise attempts to limit, modify or revoke such
guarantor's guarantee of this Note or any other loan with
Lender; (d) Borrower has applied funds provided pursuant to
this Note for purposes other than those authorized by
Lender; or (e) Lender in good faith deems itself insecure
under this Note or any other agreement between Lender and
Borrower.
STATUTE OF FRAUDS PROVISION. ORAL AGREEMENTS OR ORAL
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.
GENERAL PROVISIONS. Lender may delay or forgo enforcing
any of its rights or remedies under this Note without
losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by
law, waive presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this
Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew,
extend (repeatedly and for any length of time) or modify
this loan, with the consent of Borrower, or release any
party or guarantor; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and
take any other action deemed necessary by Lender without
the consent of or notice to anyone.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD
ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE
INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF
THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF
THE NOTE.
BORROWER: THE COEUR D'ALENES COMPANY AND UNION IRON WORKS,
INC OF SPOKANE, WASHINGTON
By: /S/ Jimmie T G Coulson, President, CEO
THE COEUR D'ALENES COMPANY BY JIMMIE T G COULSON,
PRESIDENT/CEO
By: /S/ Jimmie T G Coulson, President, CEO
UNION IRON WORKS, INC OF SPOKANE, WASHINGTON BY JIMMIE T G
COULSON, PRESIDENT/CEO
1 SEAFIRST BANK
MEMBER FDIC
Loan No. 604938 and 453817-9
FIRST AMENDED AND RESTATED
PROMISSORY NOTE
$1,950,000.00
November 12, 1996
Seattle, Washington
This First Amended and Restated Promissory Note
("Note") is tile 'Restated Note' referred to in (he Loan
Modification and Additional Advance Agreement of even date
herewith between Maker and Lender. This Note supersedes and
replaces in its entirety but does not constitute a novation
of that certain Note dated December 20, 1995, by Maker and
payable to Lender in the face amount of $1,688,000.00. This
Note contains modifications and changes in the terms of the
loan by Lender to Maker.
FOR VALUE RECEIVED, the undersigned ("Maker")
promise(s) to pay to the order of BANK OF AMERICA NW, N.A.,
doing business as SEAFIRST BANK ("Lender"), at its
principal office in Seattle, Washington, or at such other
place or places or to such other party as the "Holder"
(defined below) may from time to time designate in writing,
the principal sum of ONE MILLION NINE HUNDRED FIFTY
THOUSAND AND NO/100 DOLLARS ($1,950,000.00), or so much
thereof as may be advanced, in ]awful money of the United
States of America, together with interest thereon, on the
following agreements, terms and conditions The term
"Holder" as used in this Note means Lender or any future
holder of this Note, and their successors and Assigns
I TERM This Note shall have an initial term (the
"Construction Term") expiring on January 1, 1997 The last
day of the Construction Term is referred to in this Note
as the "Maturity Date" If Maker is not then in default
under this Note or any other documents or instruments
executed by Maker in connection with the loan (the "Loan")
evidenced by this Note (collectively with this Note, the
"Loan Documents"), on or before the last day of the
Construction Term, the Loan shall convert to a permanent
loan (the "Permanent Loan") if Maker has complied with the
following conditions, and with all other conditions as may
be specified in any other Loan Document:
(a) Maker shall have provided the Holder with current
financial statements of Maker, any general partner in Maker
and any guarantor of the Loan, each certified as correct by
the appropriate party, showing no material adverse change
in any such person's or entity's financial condition from
the date of this Note, and otherwise acceptable to the
Holder in its sole discretion;
(b) Maker is not then in default under this Note or
any other Loan Document;
(c) The improvements to be constructed with the
proceeds of the Loan shall have been completed in
accordance with the plans and specifications for the
improvements approved by Lender and a certificate of
occupancy shall have been issued by the applicable
governmental authority allowing the use and occupancy of
the improvements for their intended purposes; and
(d) Maker shall have complied with such other
conditions to the conversion as the Holder may reasonably
require and specify in writing prior to the date of the
conversion
If the Loan is converted to the Permanent Loan as provided
above, the Maturity Date shall be extended to that date
which is one hundred twenty (120) months from the first day
of the first calendar month following the date of the
conversion unless otherwise agreed in writing by the Holder
First Amended and Restated Promissory Note
2 INTEREST Interest shall commence to run on each advance
under this Note from the date of the advance and will be
computed on the outstanding balance of this Note as it
exists from time to time at the interest rates provided for
in subparagraphs 2(a) and 2(b) below, as applicable
After maturity, or after default, interest shall accrue on
the outstanding principal balance of this Note at an
interest rate equal to four percentage points (4%) per
annum above the interest rate otherwise applicable to this
Note.
(a) Construction Term Interest. During the
Construction Term, the principal balance of this Note shall
bear interest at a per annum interest rate equal to the sum
of the publicly announced prime rate (the "Prime Rate") of
Lender, as the same may change from time to time, plus
three hundred twenty-five onethousandths of one percentage
point (0325%) per annum interest rate adjustments caused by
changes to the Prime Rate shall be effective the same day
as the adjustments to the Prime Rate are effective Interest
on this Note during the Construction Term shall be computed
on the basis of a 360-day year and the actual number of
days elapsed in the period for which interest is payable
(b) Permanent Loan Interest If the Loan converts to
the Permanent Loan, interest shall accrue on the principal
balance of this Note either at a variable interest rate
as provided in subparagraph 2(b)(i) below (the "Variable
Rate"), or at a fixed interest rate as provided in
subparagraph 2(b)(ii) below (the "Fixed Rate") After
conversion to the Permanent Loan, interest on this Note
shall be calculated using a 30-day month and a 360-day year
(I) Variable Rate Unless Maker elects to have
interest calculated at the Fixed Rate pursuant to
subparagraph 2(b)(ii) below, interest shall accrue on the
principal balance of this Note at the Variable Rate The
initial Variable Rate shall be equal to the "LIBOR index"
(defined below) as of the date the Loan converts to the
Permanent Loan, plus two and three-fourths percentage
points (2750%) per annum, rounded to the next highest one-
eighth of one percent (0.125%) The Variable Rate, if
applicable, will change five (5) months after the first
payment date stated in subparagraph 3(b) below, and every
sixth (6th) month thereafter (each such date being referred
to in this Note as an "Interest Change Date")
(1) LIBOR Index Current Index - Changes in the
Variable Rate will be based on changes in the 180-day LIBOR
as defined below (the "LIBOR index") If the LIBOR Index is
no longer available, the Holder will choose a new index
based upon comparable information and give Maker notice of
the choice The most recently available LIBOR Index fifteen
(15)Business Days before each interest Change Date is the
"Current Index"
(2) Calculation of Variable Rate - Before each
interest Change Date, if applicable, the Holder will
calculate the new Variable Rate which shall be equal to
the Current Index, plus two and three-fourths percentage
points (2 750%) per annum, rounded to the next highest one-
eighth of one percent (0 125%) This new interest rate will
be the Variable Rate until the next interest Change Date
(3) LIBOR means the London Interbank Offer Rate,
adjusted at the Holder's option for statutory reserves,
deposit insurance, regulatory capital, taxes and
assessments, in any, and is the average of the rates of
interest, on a per annum basis, at which deposits in United
States dollars having a term of 180 days are offered by
major banks in immediately available funds to prime banks
in the London Interbank market at 11:00 A M (London time)
on the date the Loan converts to a Permanent Loan, or the
day which is fifteen (15) Business Days prior to the
applicable interest Change Date, as applicable This rate is
reported on Telerate, a national and international medium
which provides interest rate quotations daily, as quoted by
the British Bankers Association as interest Settlement
Rates on page 3750 (or such other page as may replace it)
Such interest rate quotation, as provided by Telerate,
shall be deemed conclusive and final with respect to LIBOR
determinations for so long as Telerate continues to make
such interest rate reports if Telerate or the British
Bankers Association report is no longer available For 180-
day maturities, a comparable publication or report
containing such information selected by the Holder will be
used. If there is no such publication or comparable
publication containing such information, the 180-day LIBOR
shall be the average rate (rounded if necessary to the
nearest one thousandth of a percent) at which dollar
deposits having a maturity of 180 days are offered by at
least two major banks in an interbank market where
Eurodollars are being traded to prime banks in immediately
available Funds on the LIBOR determination date described
above or as soon thereafter as such offer quotes can be
obtained.
(4) Business Day means a day on which commercial banks
are generally open for business in Seattle, Washington and
London, England
(5) The amount of adjustment for reserves, deposit
insurance, regulatory capital, taxes and assessments may
change an any Interest Change Date depending on such
charges then being assessed against the Holder Such charges
may change due to various factors. including but not
limited to, changes in the requirements for reserves and
capital adequacy promulgated by the Federal Reserve System
of the United States and/or other state and federal
regulatory agencies, statutory changes affecting the
Holder, and/or imposition of taxes, FDIC fees and/or
assessments Each determination of an adjustment amount
shall be made by the Holder in its sole and absolute
discretion and shall be conclusive and binding upon Maker
and shall be determined without benefit of or credit for
prorations, exceptions or offsets that may be available to
the Holder from time to time.
(ii) Fixed Rate Prior to the date the Loan converts to
the Permanent Loan, Maker may elect by written notice to
the Holder to have interest on the entire principal amount
of this Note calculated for the entire term of the
permanent Loan at a Fixed Rate, as provided below Further,
so long as Maker is not in default under the terms of this
Note or any Loan Document, at any time after the Loan
converts to the Permanent Loan, Maker at its option, and
upon the payment of a fee to the Holder equal to 0250% of
the then outstanding principal balance of this Note (or
$500 00, whichever is greater), may elect by written notice
to the Holder to have interest calculated on the entire
principal balance of this Note at a Fixed Rate calculated
as provided below for the remainder of the term of the
Permanent Loan Maker's ability to fix the interest rate
on this Note pursuant to this subparagraph 2@)(ii) is
subject to the availability to the Holder of match funding
opportunities for a time period equivalent to the term of
this Note following the date of Maker's election to fix the
interest rate.
(1) Calculation of Fixed Rate If Maker elects to have
a Fixed Rate apply to this Note, interest shall accrue on
the principal balance of this Note at a per annum rate
equal to Lender's reserve adjusted "Fixed Rate Index" as
quoted by Lender on the date the interest rate is converted
to the Fixed Rate, for a period equivalent to the term of
the Permanent Loan or remainder thereof, as applicable),
plus two and thirty-three one-hundredths percentage points
(2330%) per annum, rounded upward to the next highest one-
eighth of one percent (0125%) The Fixed Rate Index may be
adjusted at the Holder's option to reflect statutory
reserves, deposit insurance, regulatory capital, taxes and
assessments, if any, as set forth in subparagraph
2(b)(i)(5) above.
(2) Date of Conversion - The interest rate will be
converted to the Fixed Rate on the date the Holder receives
Maker's written notice electing the Fixed Rate option,
provided such notice is received before noon, Seattle time,
on a Business Day, and the fee payable in connection with
the election has been received by Holder If notice is
received by Holder after noon, Seattle time, on a Business
Day, the interest rate applicable to this Note will convert
to a Fixed Rate on the next Business Day, For purposes of
this subparagraph 2(b)(ii)(Z) only, the term "Business Day"
means a day on which commercial banks are generally open
for business in Seattle, Washington
3 PAYMENTS
(a) Construction Term Payments During the Construction
Term, Maker shall make monthly payments of interest on this
Note as it accrues Payments shall be due on the first day
of each calendar month during the Construction Term,
commencing on the first day of the first calendar month
following the initial advance by the Holder under this
Note.
(b) Permanent Loan Payments if the Loan converts to
the Permanent Loan Maker shall make monthly payments of
principal and interest to the Holder, in amounts sufficient
to fully amortize the principal balance of this Note over a
twenty (20) year amortization period in substantially equal
payments, based on the interest rate applicable to this
Note, calculated as provided below Such monthly payments of
principal and interest shall be due on the first day of
each calendar month during the term of the Permanent Loan,
commencing on the first day of the second calendar month
following the month in which the Loan converts to the
Permanent Loan The monthly payments required on this Note
following conversion to the Permanent Loan shall be
calculated as follows:
(i) Variable Rate Payments If interest is accruing on
this Note at a Variable Rate, the amount of the initial
monthly payments shall be in an amount sufficient to fully
amortize the principal balance of this Note at the initial
Variable Rate, in substantially equal monthly payments over
the amortization period specified above Promptly after the
Loan converts to the Permanent Loan, the Holder will
provide Maker with a dosing statement (or other written
notice) which will confirm the initial Variable Rate and
the amount of the initial principal and interest payments
due under this Note. The monthly payment will change after
each Interest Change Date to an amount sufficient to repay
the then unpaid principal balance of this Note in full at
the then current interest rate, in substantially equal
monthly payments over the balance of the amortization
period specified above Until the payment is again changed,
Maker shall pay the new monthly payment each month
beginning on the first day of the first calendar month
alter the applicable Interest Change Date The Holder will
mail or deliver to Maker a notice of any changes in the
interest rate applicable to this Note, and any resulting
changes in the monthly payments required under this Note,
prior to the date the first payment is due after the
applicable interest Change Date.
(ii) Fixed Rate Payments If interest is accruing on
this Note at a Fixed Rate, the amount of the monthly
payments shall be in an amount sufficient to fully amortize
the principal balance of this Note at the applicable Fixed
Rate, in substantially equal monthly payments over the
amortization period specified above, or the remainder
thereof, as applicable The applicable Fixed Rate and the
amount of the monthly principal and interest payments due
under this Note shall be confirmed in writing by the Holder
(either pursuant to a closing statement or other written
notice) after the interest rate is fixed and prior to the
date the first payment is due at the Fixed Rate.
(c) General At the option of the Holder, all payments
under this Note, including payment at maturity, shall be
made in same day funds On the Maturity Date (as the same
may be extended as provided in this Note), the unpaid
principal balance of this Note, all unpaid accrued interest
and all other sums then due and owing pursuant to this Note
or any other Loan Document shall be due and payable in
full.
Each payment shall be applied first, at Holder's option, to
any unpaid late charges or other sums payable by Maker
under this Note or any other Loan Document, then to
interest to the due date of the payment, and then to the
principal balance of this Note.
4 AUTOMATIC WITHDRAWAL The payments on this Note and any
other sums secured by the Deed of Trust will be deducted on
the first (Sit) day of each month from Seafirst Deposit
Account No. 6831402, or such other Seafirst Deposit Account
as may be authorized in the future.
5 LATE CHARGES; RETURNED ITEM FEE In any payment due
hereunder is not received by the Holder within fifteen (1
5) days of the due date, at the option of the Holder
without waiving such default or any of its remedies, a late
charge shall be added to the delinquent payment in the
amount of four percent (4%) of the full payment not
timely paid Any such late charge shall be due and payable
on demand, and the Holder, at its option, may (a) refuse
any late payment or any subsequent payment unless
accompanied by the applicable late charge, (b) add the late
charge to the principal balance of this Note, (c) pay any
late charge with advances of the undisbursed proceeds of
the Loan, if any, or (d) treat the failure to pay the late
charge as demanded as a default under this Note If a late
charge is added to the principal balance of this Note, it
shall bear interest at the same rate as the principal
balance of this Note Any payment to Holder by check, draft
or other item shall be received by Holder subject to
collection and will constitute payment when collected not
when received For each "nsf' or returned check, draft or
other item, in addition to any applicable late charge,
Maker shall pay to the Holder on demand a returned item fee
in accordance with the Holder's schedule of such fees then
in effect.
6 PREPAYMENT During the Construction Term, and thereafter,
so long as interest is calculated on this Note at a
Variable Rate, this Note may be prepaid in whole or in
part, at any time, without payment of a prepayment fee
During any period when a Fixed Rate is applicable to this
Note, this Note may be prepaid only as set forth in Exhibit
A attached partial prepayments, if permitted, shall not
postpone nor reduce the amount of the monthly payments
required under this Note.
7 DEFAULT After a default under any of the Loan Documents,
or if Maker fails to make any payment under this Note when
due, the Holder, at its option, without notice to
Maker(except as provided below), may declare the entire
principal balance of this Note and all unpaid accrued
interest thereon and other charges payable by Maker
pursuant to this Note or any other Loan Document
immediately due and payable in full, and the Holder may
exercise any and all other rights or remedies available to
it under any Loan Document, at law or in equity Any
additional interest due because of a default shall accrue
from the date of default and shall be paid as a condition
to the curing of the default Notwithstanding the foregoing,
the Holder will not accelerate the Maturity Date (a)
because of a monetary default by Maker under this Note or
any other Loan Document unless the default is not cured
within ten (10) days of the date on which the Holder mails
or delivers written notice of the default to Maker, or (b)
because of a nonmonetary default by Maker under this Note
or any other Loan Document unless the default is not cured
within thirty (30) days of the date on which the Holder
mails or delivers written notice of the default to Maker
For purposes of this Note, the term "monetary default"
means a failure by Maker to make any payment required
pursuant to this Note or any other Loan Document, and the
term "nonmonetary default " shall mean a failure by Maker
to perform any obligation contained in this Note or any
other Loan Document. other than the obligation to make the
payments provided for in this Note or any other Loan
Document if the nonmonetary default is capable of being
cured and cannot reasonably be made within the thirty (30)
day cure period, the cure period shall be extended up to
ninety (90) days so long as Maker has commenced action to
cure within the thirty (10) day cure period, and in the
Holder's opinion, Maker is proceeding to cure the default
with due diligence None of the foregoing shall be construed
to obligate the Holder to forbear in any other manner
From exercising its remedies and the holder may pursue any
other rights or remedies which the Holder may have because
of the default.
8 CUMULATIVE REMEDIES The rights and remedies of any Holder
under this Note or any other Loan Document, or at law or in
equity, shall be cumulative and concurrent, may be pursued
singly, successively or together against Maker, any
guarantor of this Note, or any security for this Note A
failure by any Holder to exercise its option to accelerate
this Note upon the occurrence of a default or to exercise
any other rights to which it may be entitled shall not
constitute a waiver of the right to exercise such option or
any such rights in the event of any any subsequent default
whether of the same or a different nature.
9 WAIVERS Maker and all endorsers, guarantors and all other
persons or entities who may become liable for all or any
pan of the obligations evidenced by this Note, jointly and
severally waive diligence, presentment, protest and demand,
and also notice of protest, demand, non-payment, dishonor
or maturity and also recourse to suretyship defenses
generally; and consent to any and all renewals, extensions
and modifications of the terms of this Note or any other
Loan Document, including the time for payment, and agree
any such renewal, extension or modification or the release
or substitution of any security for the indebtedness
evidenced by this Note or any other indulgences, shall not
affect the liability of said parties for the indebtedness
evidenced by this Note. Any such renewals, extensions,
modifications, releases or indulgences may be made without
notice to such parties.
10 COSTS AND EXPENSES Whether or not suit is brought Maker
shall pay on demand all costs and expenses, including
attorneys' fees and costs and allocated costs of in-
house legal counsel, incurred by or on behalf of the Holder
in connection with this Note, including without limitation
costs incurred in the collection of this Note, in
protecting the security for this Note or in foreclosing or
enforcing this Note or any other Loan Document, or
resulting from the Holder being made a party to any
litigation because of the existence of this Note or any
other Loan Document. Without limiting the generality of the
foregoing, if Maker becomes the subject of any bankruptcy
or insolvency proceeding, Maker shall pay all fees and
expenses incurred by the Holder in connection with such
bankruptcy or insolvency proceeding
II MAXIMUM INTEREST Maker represents and warrants the
proceeds of this Note shall be used solely for commercial,
investment and business purposes, and not for personal,
family or household purposes Notwithstanding any other
provision of this Note or any other Loan Document,
interest, loan fees and charges payable by reason of the
indebtedness evidenced by this Note shall not exceed the
maximum, if any, permitted by applicable law If by virtue
of applicable law, sums in excess of such maximum would
otherwise be payable, then such excess sums shall be
construed as having been immediately applied by the Holder
to the principal balance of this Note when received If at
the time any such sum is received by the Holder, the
principal balance of this Note has been paid in full, such
sums shall be promptly refunded by the Holder to Maker,
less any sums due to the Holder.
12 SECURITY, This Note is secured by a deed of trust
dated December 10. 1995 (the "Deed of Trust") encumbering
certain real property located in Spokane County, Washington
(the "Property") Unless otherwise specified in this Note,
all notices given pursuant to this Note must be in writing
and will be effectively given if given in accordance with
the terms of the Deed of Trust.
13 GENERAL This Note shall be binding upon Maker and
Maker's beneficiaries, heirs devisees, personal
representatives, successors and assigns if Maker consists
of more than one person or entity, all of such persons and
entities shall be jointly and severally liable for Maker's
obligations under this Note This Note is governed by and
shall be construed in accordance with the laws of the State
of Washington Each person or entity executing this Note
consents to the non-exclusive personal jurisdiction and
venue of the courts of the State of Washington and the
United States federal courts located therein, in any action
relating to or arising out of the enforcement or
interpretation of this Note or any other Loan Document Each
such person or entity further agrees not to assert in any
such action that the proceeding has been brought in an
inconvenient forum.
14 ARBITRATION. Any dispute relating to this Note or
the Loan (whether in contract or tort) shall be settled by
arbitration if requested by Maker, the Holder or any other
party to the dispute (such as a guarantor); provided, both
Maker and the Holder must consent to a request for
arbitration relating to an obligation secured by real
property The arbitration proceedings shall be held in
Seattle, Washington in accordance with the commercial
arbitration rules of the American Arbitration Association,
and the United States Arbitration Act(i.e., Title 9, USC)
There shall be one arbitrator who shall decide whether an
issue is arbitrable or whether any claim is barred by a
statute of limitations judgment on the arbitration award
may be entered in any court having jurisdiction.
Commencement of a lawsuit shall not constitute a waiver
of the right of any party to request arbitration if the
lawsuit is contested Each party shall have the right
before, during and after the commencement of any
arbitration proceeding to exercise any of the following
remedies in any order or concurrently: (i) self-help
remedies such as setoff or repossession; (ii) judicial or
nonjudicial foreclosure against real or personal property
collateral; and (iii) provisional remedies including
injunction, appointment of receiver, attachment, claim
and delivery and replevin. The exercise of any such remedy
shall not waive a party's right to request arbitration
Nothing in this paragraph shall limit in any way any
right tile Holder may have to foreclose the Deed of Trust
judicially as a mortgage, or nonjudicially pursuant to the
power of sale.
15. DISPUTED OBLIGATIONS. All communications
concerning disputed debts and obligations of Maker under
this Note or any other Loan Document, including without
limitation disputes as to the amount of any payment, fee or
charge, and including as instrument tendered as full
satisfaction of a disputed debt, must be in writing and
must be sent to the following address, or to such other
address as the Holder may hereafter specify:
Seafirst Bank
Attention: Loan Servicing Manager
Real Estate Group (CSC-14)
701 Fifth Avenue, Floor 14
Seattle, Washington 98104
Any such communication should include the name of Maker,
the applicable loan number, a description of the dispute
and the relief or remedy requested, and an address and
telephone number where the person sending the notice fan be
contacted.
NOTICE: ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT OR FORBEAR FROM ENFORCING REPAYMENT OF A DEBT
ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
MAKER:
THE COEUR D'ALENES COMPANY,
an Idaho corporation
By: Marilyn Schroeder
Its: Treasurer
BYLAWS OF THE COEUR D'ALENES COMPANY
ARTICLE I
SHAREHOLDERS' MEETINGS
Section 1. Annual Meeting. The annual meeting of the
shareholders shall be held during the month of February each
year or on such date and at such time as the directors may
determine, for the election of directors and the transaction
of such other business as may come before the meeting.
Section 2. Special Meetings. Special meetings of the
shareholders may be called at any time by the President or
by the Board of Directors. At any time, upon receipt of
written request of shareholders holding in the aggregate
one-tenth (1/10) of the voting power of all shareholders, it
shall be the duty of the Secretary or other person duly
authorized, to call a special meeting of shareholders to be
held at the registered office at such time as the Secretary
or other duly authorized person may fix. The notice of such
meeting shall comply with the requirements set forth in
Section 4 of this Article and shall further state the
purpose or purposes for which the meeting is called. If the
Secretary or other duly authorized person shall neglect or
refuse to issue such call, the shareholders making the
request may do so.
Section 3. Place of Meeting. The annual meeting of
shareholders or any special meeting of shareholders shall be
held at the principal office of the corporation or at such
other place either within or without the State of Idaho as
determined by the Board of Directors.
Section 4. Notice of Meetings. Except as otherwise
required by statute, notice of the time and place of each
meeting of shareholders, whether annual or special, shall be
given to each shareholder of record entitled to vote at such
meeting not less than ten (10) nor more than fifty (50) days
before the date of such meeting, by delivering a written or
printed notice thereof to him or her personally, or by
mailing such notice, in a postage-prepaid envelope addressed
to the shareholder at the address as it appears on the stock
transfer books of the corporation.
Section 5. Waivers. Notice of any meeting of shareholders
shall not be required as to any shareholder who shall attend
such meeting in person or by proxy; and if any shareholder
shall, in person or by attorney duly authorized, waive
notice of any meeting, whether before or after such meeting,
notice thereof shall not be required as to the shareholder.
Section 6. Quorum. Unless otherwise provided in the
Articles of Incorporation, the presence in person or by
proxy duly authorized, of the holders of the majority of the
shares entitled to vote shall constitute a quorum for the
transaction of business. If a quorum be present, the
affirmative vote of the majority of the shares represented
at such meeting and entitled to vote on the subject matter
shall be the act of the shareholders, unless the vote of a
greater number is required by law or by the Articles of
Incorporation, or other sections of these Bylaws.
Section 7. Voting. Unless otherwise provided in the
Articles of Incorporation, every shareholder of record shall
be entitled to one vote per share on each matter submitted
to a vote at any meeting of shareholders. No proxy shall be
valid after eleven (11) months from the date of its
execution, unless such proxy provides for a longer period.
The Board of Directors may fix in advance a record date for
the determination of shareholders entitled to vote at such
meeting, or for any other purpose, as set forth in Article
IV, Section 4 of these Bylaws. No share of stock shall be
voted at any meeting which shall have been transferred on
the books of the corporation subsequent to the record date
fixed herein and prior to the date of the meeting. When a
determination of the shareholders entitled to vote at any
meeting of shareholders has been made, such determination
shall apply to any adjournment thereof.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Number and Term of Office. The number of
directors who shall manage the affairs of this corporation
shall be not less than the minimum number required by law
nor more than nine (9). The directors shall be elected
annually, and each director shall continue in office until a
successor shall have been elected and qualified, or until
the director's death, or until he or she shall resign or
shall have been removed.
Section 2. Place of Meeting. Meetings of the Board of
Directors may be held either within or without the State of
Idaho.
Section 3. Annual Meeting. The Board of Directors shall
meet immediately following the annual meeting of the
shareholders and election of directors, for the purpose of
election of officers of the corporation and the transaction
of their business. The annual meeting shall be held at the
registered office of the corporation, or at such other place
within or without the State of Idaho, which may be consented
to by all directors.
Section 4. Regular Meetings. The Board of Directors may,
by resolution adopted by the affirmative vote of a majority
of the whole Board, from time to time, appoint the time and
place for holding regular meetings of the Board if it be
deemed advisable. Such regular meetings shall thereupon be
held at the time and place so appointed. Notice of any such
meeting or any adjournment thereof shall be mailed to each
director, addressed to the director at his or her residence
or usual place of business, not later than five (5) days
before the day on which the meeting is to be held, or shall
be sent to the director at such place by telegraph, or be
delivered personally or by telephone, not later than five
(5) days before such day of meeting. In case the day
appointed for a regular meeting shall fall upon a legal
holiday, such meeting shall be held on the next following
day not a legal holiday, at the regularly appointed hour.
Except as otherwise provided in the Bylaws, any type of
business may be transacted at any regular meeting.
Section 5. Special Meetings. Special meetings of the Board
of Directors shall be held whenever called by the President,
or by a majority of the directors. Notice of any such
meeting or any adjournment thereof shall be mailed to each
director, addressed to the director at his or her residence
or usual place of business, not later than five (5) days
before the day on which the meeting is to be held, or shall
be sent to the director at such place by telegraph, or be
delivered personally or by telephone, not later than five
(5) days before such day of meeting. Notice of any meeting
of the Board need not, however, be given to any director if
waived by the director in writing or if the director shall
be present at the meeting; and any meeting of the Board of
Directors shall be a legal meeting without any notice
thereof having been given if all the members shall be
present thereat except as otherwise provided in the Bylaws
or as may be indicated in the notice thereof, and any and
all business may be transacted at any special meeting.
Section 6. Quorum and Manner of Acting. A majority of the
number of directors fixed by resolution of the directors
shall constitute a quorum for the transaction of business.
The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the
Board of Directors. In the absence of a quorum, a majority
of the directors present may adjourn any meeting, from time
to time, until a quorum is present.
Section 7. Resignations. Any director of the corporation
may resign at any time either by oral tender of resignation
at any meeting of the Board or by giving written notice
thereof to the Secretary. Such resignation shall take
effect at the time specified therefor; and, unless otherwise
specified with respect thereto, the acceptance of such
resignation shall not be necessary to make it effective.
Section 8. Filling of Vacancies. In the case of any
vacancy or vacancies in the Board of Directors, such vacancy
or vacancies shall be filled by the remaining directors.
Section 9. Salaries and Bonuses. The Board of Directors
shall have power to fix salaries of officers, and the Board
shall further have power to determine and authorize payment
of bonuses from time to time as may be best determined by
the financial condition of the corporation.
Section 10. Conference Telephone. Meetings of the Board of
directors or any committee designated by the Board of
Directors may be effectuated by means of conference
telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each
other at the same time, and participation by such means
shall constitute presence in person at such meeting.
Section 11. Action Without a Meeting. Any action required
or permitted to be taken by the Board of Directors at a
meeting may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed
by all of the Directors.
ARTICLE III
COMMITTEES
The Board of Directors may, by resolution adopted by a
majority of the full Board of Directors, designate from
among its members an Executive Committee and one or more
other committees, each of which, to the extent provided in
such resolution, shall have and may exercise all the
authority of the Board of Directors, except no such
committee shall have the authority to (1) authorize
distributions or dividends or the issuance of shares, unless
a resolution of the Board of Directors, or these Bylaws, or
Articles of Incorporation expressly so provide; (2) approve
or recommend to shareholders actions or proposals required
by the statute to be approved by shareholders; (3) fill
vacancies on the Board of Directors or any committee
thereof; (4) amend the Bylaws; (5) fix compensation of any
committee; (6) approve a plan of merger, consolidation, or
exchange of shares not requiring shareholder approval; or
(7) appoint other committees of the Board of Directors or
the members thereof; or (8) amend the Articles of
Incorporation.
ARTICLE IV
OFFICERS, EMPLOYEES, AND AGENTS
POWERS AND DUTIES
Section 1. Officers. The elected officers of the
corporation shall be a President, who shall be a Director,
one or more Vice Presidents, Secretary, and Treasurer. The
office of President and Secretary may not be held by the
same person but any other offices may be combined in one
person. The Board of Directors may appoint such other
officers and agents as from time to time may appear to be
necessary or advisable in the conduct of the affairs of the
corporation.
Section 2. Term of Office. All officers shall hold office
at the pleasure of the Board.
Section 3. Removal of Elected Officers. Any elected
officer may be removed at any time, either for or without
cause, by affirmative vote of a majority of the whole Board
of Directors, at any meeting called for the purpose.
Section 4. Vacancies. If any vacancy occurs in any office,
the Board of Directors may elect or appoint a successor to
fill such a vacancy.
Section 5. The President. The President shall be the chief
executive officer of the corporation and shall have general
and active control of its business and affairs. The
President shall preside, when present, at all meetings of
the shareholders (except as otherwise provided by statute),
and at all meetings of the Board of Directors. The
President shall have all powers usually appertaining to the
office of President of a corporation.
Section 6. Vice President. The Vice President shall
perform all such duties and services as shall be assigned to
or by required of him or her, from time to time, by the
Board of Directors, and unless the authority be expressly
limited, shall act in the place of the President, exercising
all the President's powers and performing the President's
duties during his or her absence or disability. There may
be one or more Vice Presidents.
Section 7. Secretary. The Secretary shall attend to the
giving of notice of all meetings of shareholders and of the
Board of Directors and shall keep and attest true records of
all proceedings thereat. He or she shall have charge of the
corporate seal and have authority to attest any and all
instruments or writings to which the same may be affixed.
The Secretary shall keep and account for all books,
documents, papers and records of the corporation, except
those which are hereinafter directed to be in charge of the
Treasurer. The Secretary shall have authority to sign stock
certificates with the President or Vice President and shall
generally perform all the duties usually appertaining to the
office of Secretary of a corporation.
Section 8. Treasurer. The Treasurer shall have the care
and custody of all monies, funds and securities of the
corporation and shall deposit or cause to be deposited all
funds of the corporation in and with such depositories as
the Board of Directors shall from time to time direct. The
Treasurer shall have the power to sign stock certificates,
with the president or Vice President, to endorse for deposit
or collection all checks, drafts, notes, bills of exchange
or other commercial paper payable to the corporation and to
give proper receipts of discharges therefor. The Treasurer
shall keep all books of account relating to the business of
the corporation and shall render a statement of the
corporation's financial condition at each annual meeting of
the shareholders and whenever required so to do by the Board
of Directors.
Section 9. Agents. The agents appointed by the Board of
Directors shall have such powers as given them by the said
Board of Directors.
ARTICLE V
STOCK AND TRANSFER OF STOCK
Section 1. Stock Certificates. Every shareholder shall be
entitled to a certificate signed by the President or Vice
President and the Secretary or Assistance Secretary of the
corporation, certifying the number of shares owned by the
shareholder in the corporation. The seal of the corporation
shall be affixed to the certificate
Section 2. Transfers of Stock. Shares of stock may be
transferred by delivery of the certificates therefor,
accompanied either by an assignment in writing on the back
of the certificates or by written power of attorney to sell
assign, and transfer the same, signed by the record holder
thereof; but no transfer shall affect the right of the
corporation to pay any dividend upon the stock to the holder
of record thereof or to treat the holder of record as the
holder in fact thereof for all purposes, and no transfer
shall be valid, except between the parties thereto, until
such transfer shall have been made upon the books of the
corporation.
Section 3. Lost Certificates. In case any certificates of
stock shall be lost, stolen, or destroyed, the Board of
Directors, in its discretion, may authorize the issuance of
a substitute certificate in place of the certificate so
lost, stolen or destroyed; provided, that in each such case,
the applicant for a substitute certificate shall furnish to
the corporation evidence satisfactory to the corporation, in
its discretion, of the loss, theft, or destruction of such
certificate and of the ownership thereof, and also such
security, or indemnity, as may be by it required.
Section 4. Record Date. The Board of Directors is
authorized, from time to time, to fix in advance a date, not
more than fifty (50) nor less than ten (10) days preceding
the date of any meeting of shareholders or the date for the
payment of any dividend or the date of the allotment of
rights or the date when any change or conversion or exchange
of stock shall go into effect, as a record date for the
determination of the shareholders entitled to receive
payment of any such dividend, or to any such allotment of
right or to exercise the rights with respect to any such
change, conversion or exchange of stock, as the case may be.
In such case, such shareholders, and only such shareholders
as shall be entitled to notice of and to vote at such
meeting, or to receive payment of such and to vote at such
meeting, or to receive such allotment of rights or to
exercise such rights, as the case may be, notwithstanding
any transfer of any stock on the books of the corporation
after any such record date fixed as aforesaid.
The Board of Directors is also authorized, from time to
time, when it is deemed necessary or advisable for the
purpose, to prescribe a period of not more than fifty (50)
nor less than ten (10) days at any one time during which no
transfer of stock on the books of the corporation may be
made.
ARTICLE VI
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Any person, his or her heirs, executors or administrators,
shall be indemnified or reimbursed by the corporation for
all reasonable expenses, including attorneys' fees actually
incurred in connection with any action, suit or proceeding,
civil or criminal, to which he or she or they shall be made
a party by reason of being or having been a director,
officer or employee of the corporation, or of any firm,
corporation or organization, which he or she shall serve in
any capacity at the request of the corporation to the
fullest extent permitted by 30-1-5 of the Idaho Code or any
amendment or amendments thereto. Where such indemnification
may be permitted by the laws of the State of Idaho, the
corporation shall assist in every manner reasonable under
the circumstances to provide for such indemnification.
ARTICLE VII
AMENDMENTS
These Bylaws may be repealed or amended and new Bylaws
adopted at any annual meeting or special meeting of the
Board of Directors. The Board of Directors may adopt,
alter, amend or repeal such Bylaws as shall be necessary for
the regulation and management of the affairs of the
corporation and which shall be consistent with the laws of
the State of Idaho and the Articles of Incorporation.
