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 26, 1998
[ ] 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. [X]
Issuer's revenues for its most recent fiscal year: $14,368,061
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 December 2, 1998: 5,349,478
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 operations 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 1998, no single customer contributed business in excess of 10% of
total net sales. In fiscal 1997 one customer amounted to 12% 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 72 total employees (55 in the steel service center
business and 17 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. The building is approximately 42,150 square feet for a total
of approximately 84,300 sq ft. The fabrication and processing business
occupies approximately 20,000 square feet in the most recently constructed
building, with the steel service center business occupying the remaining
64,300 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 Company believes
its facilities are suitable and adequate to meet its current needs.
The facilities have a first lien in favor of a bank securing a promissory
note in the amount of approximately $1,890,000 as of September 26, 1998 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, 1996 through September 30, 1998 are set forth in
dollars per share below:
1998 1997
High - Low High - Low
July 1 - September 30 $.28 - $.28 $.20 - $.20
April 1 - June 30 $.28 - $.20 $.20 - $.20
January 1 - March 31 $.20 - $.20 $.20 - $.17
October 1 - December 31 $.20 - $.20 $.17 - $.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 2, 1998, there were approximately 996 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 27, 1998 and ending September 25,
1999. Gross margins as a percent of sales are likely to be somewhat lower
than for the year just ended. Rapidly declining inventory replacement costs
along with weakening demand will create a downward pressure on revenues. The
economic climate will likely prevent sales growth in the distribution
business during the current year. The demand for fabricated product appears
strong at the present time, however the market is difficult to gage further
than six months into the future. 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. The convertible
debenture offering was for $250,000 with $200,000 used for the down payment
and $50,000 used to purchase computer hardware. The debentures were due
October 31, 1998, but the initial term has been extended for one year
through October 31, 1999. The interest rate during the initial term was
9-1/4% but has been reduced to 8-3/4% for the period of the extension. The
debentures allowed 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 was 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
conversion price for the period of the extension is $.28 per share. The
Company may, at its option, call any or all of the outstanding debentures
for redemption. The debentures are secured by a second lien on the real
estate. 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 on the
loan existing at that time. The construction loan was converted to a
permanent loan with a twenty year amortization period and a ten year balloon
payment. The agreement allowed the Company to fix the rate at any time
during the life of the loan. In February, 1998 the Company chose to fix
the rate at 8-1/2%. The loan is secured with a first lien on the property.
In September, 1997 the Company borrowed funds to purchase a new 1/2"x12'
Cincinnati shear. A bank has provided the financing with a $250,000
equipment loan. The interest rate is 8.625%. During the current year the
Company plans to replace some additional worn out equipment. The bank has
provided an additional loan in the amount of $150,000 to cover 80% of the
acquisition price. The interest rate is also 1/2% over the bank's prime
rate. The amount advanced on the note as of September 26, 1998 was $12,000.
The loan requires interest only payments until April 1999, at which time it
can be converted to a long-term note with a 5-year amortization. It is the
Company's intention to convert the note to a long-term note. Cd'A plans to
continue to expend research and development funds to market a tarping
system used on flat bed trailers. After several revisions to the initial
concept, the Company is ready to market and manufacture these custom tarps.
The financing for the project will come from internally generated funds.
In fiscal 1998, the Company financed its operations primarily with cash
flows from operating activities. During the year ended September 26, 1998,
cash decreased by approximately $50,000. The Company's cash flows provided
by operating activities were approximately $220,000 in fiscal 1998 and
approximately $45,000 in fiscal 1997. Cash flows provided by operating
activities in fiscal 1998 were primarily impacted by net income of $251,000,
adjusted by depreciation of $219,000, an increase in accounts payable and
accrued expenses of $65,000 and reduced by increases in accounts receivable
and inventories in the amounts of $165,000 and $211,000 respectively. Cash
flows provided by operating activities in fiscal 1997 primarily consisted of
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 accounts
payables of $433,000.
Cash flows used by investing activities of $242,000 during fiscal 1998
consisted of $245,000 in additions to property and equipment. Cash flows
used in investing activities of $385,000 during fiscal 1997 consisted of
$525,000 in additions to property and equipment, partially offset by
proceeds from equipment sales of $140,000.
Working capital at September 26, 1998 of approximately $2,102,000
increased by
approximately $217,000 over $1,885,000 for the prior year. The increase is
primarily the result of net income for the year invested in accounts
receivable and increased levels of inventory. 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 26, 1998, Cd'A has an operating line of credit in the
amount of $1,850,000 with a bank. The interest rate is the bank's prime
rate plus 1/4%. The operating line expires May 1, 1999. 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 June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (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 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.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure
About Pensions and Other Postretirement Benefits," which standardizes the
disclosure requirements for pension and other postretirement benefits. SFAS
No. 132 is effective for financial statement periods beginning after December
15, 1997.
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities," which requires companies to recognize
all derivative contracts as either assets or liabilities in the balance
sheet and to measure them at fair value. If certain conditions are met, a
derivative may be specifically designated as a hedge, the objective of which
is to match the timing of gain or loss recognition on the hedging derivative
with the recognition (i) the change in fair value of the hedged asset or
liability that is attributable to the hedged risk or (ii) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the period
of change. SFAS No. 133 is effective for financial statement periods
beginning after June 15, 1999.
In October 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage-
Backed Securities Retained After the Securitization of Mortgage Loans Held for
Sale by a Mortgage Banking Enterprise," which effectively changes the way
mortgage banking firms account for certain securities and other interests they
retain after securitizing mortgage loans that were held for sale. SFAS No. 134
is effective for financial statement periods beginning after December 15, 1998.
None of the foregoing pronouncements is expected to have a material effect
on the Company's reported operating results or on its financial statement
presentation.
YEAR 2000 COMPLIANCE
The Company has reviewed its business and processing systems and
determined that the majority of the systems are already year 2000 compliant.
The Company is making inquiries of customers and suppliers on which the
operations of the business are critically dependent to determine their year
2000 readiness. An analysis of the responses received so far indicates
substantial compliance with year 2000 issues, so that any effect based on a
third party's noncompliance is not expected to be material.
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
26, 1998 27, 1997
Net Sales 100.00% 100.00%
Cost of Sales 74.62% 73.86%
Gross Profit 25.38% 26.14%
Selling, General &
Administrative Expense 21.20% 23.43%
Operating Income 4.18% 2.71%
Interest Income .26% .21%
Interest Expense (2.10)% (2.35)%
Other Income .18% .83%
Income Before
Income Taxes 2.52% 1.40%
Income Tax Expense 77% .43%
Net Income 1.75% .97%
Fiscal 1998 Compared To Fiscal 1997
Net sales increased 12% to $14,368,000 in fiscal 1998 from $12,859,000 in
fiscal 1997. The sales increase was contributed equally by the fabrication
business and the distribution business with each experiencing approximately
a 12% sales growth. At the beginning of fiscal 1997, the press brake
operation was transferred from the fabrication business to the distribution
business where the service could be provided by the same business that holds
the inventory. The sales growth indicated by business has factored out the
affect of the realignment. The fabrication business sales of $2,331,000
represented 16% of the total Company's sales and the distribution sales of
$12,037,000 represented the remaining 84%. Comparable figures for fiscal
1997 are fabrication sales of $2,102,000 at 16% of total sales and
distribution sales of $10,757,000 representing 84% of total sales. In order
to facilitate this comparison, $237,000 in sales have been reclassified as
distribution sales that were formerly included with the fabrication business.
This is the only comparison that can benefit from this kind of a
reclassification as the costs associated with the press brake work in fiscal
1997 cannot be separately identified. Cost of sales as a percentage of
net sales for fiscal 1998 at 75% of sales is comparable to 74% for fiscal
1997. The result is actually a combination of a 1 percentage point decline
in the cost of sales percent of the distribution business along with a 3
percentage point increase for the fabrication business. Cost of sales for
the distribution business was 74% for fiscal 1998 and 75% for fiscal 1997.
Cost of sales for the fabrication business was 70% for fiscal 1998 and 67%
for fiscal 1997. Historically the fabrication business is able to achieve
higher gross margins than the distribution business because the value added
component is larger.
Selling, general and administrative expenses increased by approximately
$33,000 during fiscal 1998 compared to fiscal 1997. The increase of 1%
reflects the result of a reorganization in the shop to accommodate the shift
of the press brake work to the distribution business. As a percentage of
sales, the total selling general and administrative expenses declined to 21%
of sales in fiscal 1998 from 23% of sales in fiscal 1997.
Interest expense at $302,000 during fiscal 1998 was only slightly higher
than $301,000 for fiscal 1997. Principal payments on long-term debt were
$102,000 and new long-term borrowings were $67,000. The operating line of
credit had a slightly higher average interest rate than the prior year but
the average balance outstanding was lower. The net result was approximately
the same interest expense for fiscal 1998 as fiscal 1997.
Other income decreased from a level of $106,000 in fiscal 1997 to $26,000
in fiscal 1998. The decrease is primarily the result of two factors. An
auction of surplus equipment in fiscal 1997 generated a $50,000 gain. In
addition, the Company participates in a retrospective rating plan for
Industrial Insurance coverage and the return for fiscal 1997 was
approximately $10,000 higher than in fiscal 1998.
Income tax expense of $110,000 for fiscal 1998 compares to $55,000 for
fiscal 1997. The effective tax rate for both years was 30%.
At September 26, 1998, the Company had a deferred long term tax liability
of $120,000 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 $56,000 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 1998 of $251,000 compared to $125,000 for the year
ended in September 1997.
ISSUES, OUTLOOKS AND UNCERTAINTIES
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 include more value added processes, physical
reorganization along business lines - most recently to move the press brake
business to the distribution line of business, continuous upgrade of
equipment and replacement of leased premises with owned premises. The
recent move of the fabrication business has allowed 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. It also allows each of the businesses to a
limited extent, to expand and contract of the amount of space required
according to market conditions. Management believes that the market for
the distribution business in fiscal 1999 will be significantly weaker than
for the year just ended. The fabrication business should be stronger.
Continuously declining replacement costs for inventories will have a
negative affect on gross margins and profitability due to decreases in
selling prices. The fabrication business in continuing to develop its
market niche and working to expand its customer base. The near term outlook
is good for the fabrication business. In order to diversify a little
further, the fabrication business is now a dealer for Demag cranes. The
income generated to date on this venture is small but the potential for the
future is good.
ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS.
See the Consolidated Financial Statements beginning on page 19.
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.
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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
Commenced
Period of
Service
Jimmie T.G. Coulson 65 Director, Jan. 1976
6203 S. Corkery Ext. Rd. President, Jan. 1982
Spokane, WA 99223 Chief Exec Off. Jan. 1982
Marilyn A. Schroeder 47 Director, Dec. 1991
N. 15406 Lloyd Lane Treasurer, Jan. 1982
Mead, WA 99021 Chief Fin Off. Jan. 1982
Secretary May 1994
Wendell J. Satre 80 Director Mar. 1989
39 W. 33rd
Spokane, WA 99203
Robert Shanewise, M.D. 76 Director Mar. 1989
921 W. Comstock Ct.
Spokane, WA 99203
Lawrence A. Stanley 70 Director Feb. 1997
311 W. 32nd Ave.
Spokane WA 99203
Lawrence A. Coulson 40 Vice-President Jan. 1990
5611 S. Corkery Road
Spokane WA 99223
Joel E. Simpson 41 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 served the Steel Service Center Institute governmental affairs committee
as a 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 from May
1994 through February 1998 and Vice-President since February 1998. She also
serves as a member 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 a 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% of the shares
of Cd'A Common Stock.
ITEM 10. EXECUTIVE COMPENSATION.
Name & Principal Other Annual
Position Yr Salary* Compensation Bonus
Total
Jimmie Coulson 98 $109,197** 0 $ 7,200 $116,397
President, CEO 97 $102,577** 0 0 $102,577
96 $102,088** 0 $52,716 $154,804
* Based upon salaries paid or accrued during fiscal years ended September
26, 1998, September 27,1997 and September 28, 1996. There are no employees
other than the CEO who receive compensation in excess of $100,000 annually.
** Includes contribution to employee profit-sharing and 401(k) plan ("the
plan") of $1,785 in 1998 and $2,054 in 1997 and $2,016 in 1996. 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, 1998, by a 50% 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 2, 1998 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
5,349,473 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.
Title of Name and Address Amount and Percent
of Beneficial Owner Nature of Class of
Beneficial
Ownership
Common Stock Jimmie T.G. Coulson*
6302 S. Corkery Road
Spokane WA 99223 2,363,060 44.17
Common Stock Arlene C. Coulson
4010 East 80th
Spokane WA 99223 611,098 11.42
Common Stock Lawrence A. Coulson**
S 5711 Corkery Road
Spokane WA 99223 361,507 6.76
* The amount and percentage shown in this table as beneficially owned by Mr.
Coulson includes 368,421 of the 611,098 shares which are also shown in this
table as beneficially owned by Arlene C. Coulson. Arlene Coulson is the
record owner of these 368,421 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 368,421 shares are
shown as beneficially owned by both Arlene Coulson and Mr. Coulson. Mr.
Coulson disclaims beneficial ownership of these 368,421 shares.
** 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 2, 1998 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.
Title Name and Address of Amount and Nature Percent
of Beneficial Owner of Beneficial of Class
Ownership
Common Jimmie T.G. Coulson
Stock 6302 S. Corkery Road
Spokane WA 99223 2,363,060 44.17*
Common Lawrence A. Coulson
Stock 5711 S. Corkery Road
Spokane WA 99223 361,507 6.76
Common Marilyn A. Schroeder
Stock N. 15406 Lloyd Lane
Mead WA 99021 170,159 3.18
Common Wendell J. Satre
Stock 39 West 33rd Ave
Spokane WA 99203 389 0**
Common
Stock Joel E. Simpson
E. 1306 Sara Lane
Spokane WA 99223 26,003 0**
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**
Common
Stock All directors & executive
officers as a group --------- -----
(7 persons) * 3,018,316 56.42
* 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 368,421 shares beneficially owned by Arlene Coulson which are referred
to in footnote 1 to the preceding table.
** 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.
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PART IV
ITEM 13. EXHIBITS, SCHEDULES, AND REPORTS ON FORM 8-K.
(a) EXHIBITS
Exhibit Index
Page Exhibit Description of Exhibit
No. No.
43 3.1** Articles of Incorporation of Cd'A
77 3.2 Bylaws of Cd'A - Amendments to By-Laws
dated 05/02/94
97 10.1** Seafirst Bank - Commercial Security Agreements
(Cd'A & Union Iron Works) dated 03/27/95
** Seafirst Bank - Business Loan
Agreement dated 04/13/98
(Cd'A)
** Seafirst Bank - Promissory Note 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)
Seafirst Bank - Promissory Notes dated 5/1/98
(Cd'A Union Iron Works)
** Seafirst Bank - Deed of Trust, Security Agreement
and
Fixture Filing With Assignment of Leases
and Rents dated 12/20/95 (Cd'A)
** Seafirst Bank - Certificate and
Indemnity Agreement
Regarding Building Laws and Hazardous
Substances dated 12/20/95
(Cd'A)
** Seafirst Bank - Agreement of Subordination
dated
12/20/95 (Cd'A and Union Iron Works)
** Seafirst Bank - Loan Modification and
Additional Advance Agreement dated 11/21/96
(Cd'A)
** Seafirst Bank - First Amended and Restated
Promissory Note dated 11/12/96 (Cd'A)
** Seafirst Bank - Subordination Agreement dated
2/5/96
(Cd'A)
120 10.2 Convertible Debentures due 1999 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 holders
of such Convertible Debenture see 4.1
10.3*
235 10.6** Adoption Agreement #003 401K
Employee Profit Sharing Plan
dated 04/30/93
13.1** Annual report to security holders
18.1* Description of change in
accounting principles
267 21 ** List of Subsidiaries
* See Note 4 to Consolidated Financial Statements
** Previously filed with the Securities and Exchange Commission on Form
10-KSB for year ending September 1994
(b) REPORTS ON FORM 8-K.
None.
The Coeur d'Alenes Company
and Subsidiary
Consolidated Financial Statements
Years Ended September 26, 1998 and September 27, 1997
Report of Independent Certified Public Accountants 3
Financial Statements:
Consolidated Balance Sheets 4
Consolidated Statements of Income 5
Consolidated Statements of Changes in Stockholders' Equity 6
Consolidated Statements of Cash Flows 7-8
Summary of Accounting Policies 9-12
Notes to Consolidated Financial Statements 13-22
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 26, 1998 and September 27,
1997, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of 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 26, 1998 and September 27,
1997, and the results of their operations and their cash flows for each of the
years then ended in conformity with generally accepted accounting principles.
November 12, 1998
September 26, September 27,
1998 1997
Assets
Current assets:
Cash and cash equivalents $ 39,486 $ 89,495
Accounts and notes receivable,
less allowance of
$56,848 and $53,306 for
doubtful accounts
(Notes 2 and 11) 1,417,269 1,240,996
Inventories (Notes 1 and 2) 2,553,384 2,342,671
Deferred tax asset (Note 6) 56,000 46,000
Income taxes receivable (Note 6) - 24,004
Total current assets 4,066,139 3,743,166
Property and equipment (Notes 3 and 4):
Land 306,320 306,320
Building and leasehold improvements 1,959,076 1,890,690
Machinery and equipment 2,233,818 2,146,358
Vehicles 150,772 149,669
Office equipment 246,101 242,678
4,896,087 4,735,715
Less accumulated depreciation 1,539,044 1,400,291
Net property and equipment 3,357,043 3,335,424
Other assets 72,010 73,365
$7,495,192 $7,151,955
September 26, September 27,
1998 1997
Liabilities and Stockholders' Equity
Current liabilities:
Short-term bank borrowings (Note 2) $842,826 $833,656
Accounts payable 585,811 613,608
Accrued expenses 400,509 307,520
Current maturities of long-term debt
(Note 3) 134,714 103,663
Total current liabilities 1,963,860 1,858,447
Deferred tax liability (Note 6) 120,000 65,000
Long-term debt, less current maturities
(Note 3) 2,328,170 2,393,822
Long-term debt to related parties
(Notes 4 and 9) 128,000 128,000
Total liabilities 4,540,030 4,445,269
Commitments and Contingencies
(Notes 5, 7 and 8)
Stockholders' equity
(Notes 4 and 9):
Common stock, no par,
shares authorized
10,000,000; issued
5,357,373, and outstanding
5,350,338 and 5,353,561 1,186,192 1,186,192
Retained earnings 1,775,320 1,524,294
2,961,512 2,710,486
Less treasury stock, at cost;
7,035 and 3,812 shares 6,350 3,800
Total stockholders' equity 2,955,162 2,706,686
$ 7,495,192 $ 7,151,955
September 26, September 27,
Years ended 1998 1997
Net sales $ 14,368,061 $ 12,858,765
Cost of sales 10,721,254 9,498,045
Gross profit 3,646,807 3,360,720
Selling, general and
administrative expenses 3,045,846 3,012,712
Operating income 600,961 348,008
Other income (expense):
Interest income 36,835 27,012
Interest expense (301,817 ) (301,306 )
Other income 25,532 106,485
Net other expense (239,450 ) (167,809 )
Income before income
tax expense 361,511 180,199
Income tax expense
(Note 6) 110,485 54,889
Net income $ 251,026 $ 125,310
Earnings per common and common
equivalent share (Note 9):
Basic $ 0.05 $ 0.02
Diluted $ 0.04 $ 0.02
Common Stock
Shares Retained Treasury Stock
Outstanding Amount Earnings Shares Amount
Balance,
Sept 28, 1996 5,353,561 $1,186,192 $1,398,984 3,812 $3,800
Net income - - 125,310 - -
Balance,
Sept 27, 1997 5,353,561 1,186,192 1,524,294 3,812 3,800
Net income - - 251,026 - -
Treasury stock purchase
(3,223) - - 3,223 2,550
Balance,
Sept 26, 1998 5,350,338 $1,186,192 $1,775,320 7,035 $6,350
Increase (Decrease) in Cash and Cash Equivalents
September 26, September 27,
Years ended 1998 1997
Operating activities:
Net income $ 251,026 $ 125,310
Adjustments to reconcile net
income to net cash
provided by operating activities:
Depreciation 219,040 199,739
Loss (gain) on disposal of property
and equipment 1,606 (52,666)
Provision for doubtful accounts 12,400 3,000
Deferred income taxes 45,000 45,047
Changes in assets and liabilities:
Receivables (164,669) (86,401)
Inventories (210,713) 445,983
Other assets 1,355 (22,633)
Accounts payable (27,797) (433,054)
Accrued expenses 92,989 (178,958)
Net cash provided by operating
activities 220,237 45,367
Investing activities:
Additions to property and equipment (245,165) (525,278)
Proceeds from sale of fixed assets 2,900 140,324
Net cash used in investing activities (242,265) (384,954)
Increase (Decrease) in Cash and Cash Equivalents
September 26, September 27,
Years ended 1998 1997
Financing activities:
Borrowings under line
of credit agreements 14,080,000 13,121,040
Repayments under line of
credit agreements (14,070,830 ) (13,150,861 )
Principal repayments of
long-term debt (101,601 ) (76,014 )
Borrowings of long-term debt 67,000 466,272
Purchase of treasury stock (2,550 ) -
Net cash (used in) provided by
financing activities (27,981 ) 360,437
Net (decrease) increase in cash
and cash equivalents (50,009 ) 20,850
Cash and cash equivalents,
beginning of year 89,495 68,645
Cash and cash equivalents,
end of year $ 39,486 $ 89,495
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest $ 301,171 $ 294,844
Income taxes $ 40,793 $ 23,700
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 year ended September 27, 1997, the Company had sales to a major
customer of $1,569,679 which represent 12% of net sales for that year. No
single customer accounted for more than 10% of the Company's revenues during
the year ended September 26, 1998.
Fiscal Year The Company's fiscal year is a 52 or 53 week period ending on
the last Saturday in September. Fiscal 1998 and 1997 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 Effective September 28, 1997, the Company
adopted SFAS No. 128, "Earning per Share". SFAS No. 128 establishes standards
for computing and presenting earnings per share ("EPS"). SFAS No. 128 replaces
the presentation of primary EPS with earnings per common share ("basic EPS").
Basic EPS is computed by dividing net income by the weighted average number of
common shares outstanding for the period. SFAS No. 128 also requires
presentation of EPS assuming dilution ("diluted EPS"). Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock. Diluted
earnings per share was determined on the assumptions that the convertible
debentures were converted as of the first day of the year and net earnings
were adjusted for the interest expense on the debentures, net of its tax
effect. The adoption of SFAS No. 128 had no effect on the Company's
financial statements.
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
consolidated balance sheets as of September 26, 1998 and September 27, 1997 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 26, 1998 and September 27, 1997 is
approximately $179,000 and $146,000 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.
Research and Development Costs Expenditures associated with research
and development are expensed as incurred. These costs amounted to $20,377 and
$6,699 during the years ended September 26, 1998 and September 27, 1997,
respectively.
New Accounting Pronouncements In June 1997, the Financial Accounting
Standards Board (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 and requires the reporting of comparative totals for
comprehensive income in interim reports.
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". SFAS No. 131 establishes
standards for the way 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.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure about
Pensions and Other Postretirement Benefits," which standardizes the disclosure
requirements for pension and other postretirement benefits. SFAS No. 132 is
effective for financial statement periods beginning after December 15, 1997.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which requires companies to recognize all
derivative contracts as either assets or liabilities in the balance sheet and
to measure them at fair value. If certain conditions are met, a derivative
may be specifically designated as a hedge, the objective of which is to
match the timing of gain or loss recognition on the hedging derivative with the
recognition of (i) the change in the fair value of the hedged asset or
liability that is attributable to the hedged risk or (ii) the earnings
effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in income
in the period of change. SFAS No. 133 is effective for financial statement
periods beginning after June 15, 1999.
In October 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage-Backed
Securities Retained After the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise", which effectively changes the way mortgage
banking firms account for certain securities and other interests they retain
after securitizing mortgage loans that were held for sale. SFAS No. 134 is
effective for financial statement periods beginning after December 15, 1998.
None of the foregoing pronouncements is expected to have a material effect on
the Company's reported operating results or on its financial statement
presentation.
1. Inventories Inventories are summarized as follows:
September 26, September 27,
1998 1997
Fabrication inventories:
Raw materials $ 31,826 $ 74,501
Work-in-progress 67,293 293,181
Inventories, at FIFO cost 99,119 367,682
LIFO reserve (19,861 ) (50,538 )
Inventories, at LIFO cost 79,258 317,144
Distribution inventories, at
FIFO 2,474,126 2,025,527
Total inventories $ 2,553,384 $ 2,342,671
During the years ended September 26, 1998 and September 27, 1997,
the liquidation of LIFO inventories decreased cost of sales and, therefore,
increased income before income tax expense by approximately $61,500 and $6,500,
respectively.
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
May 1, 1999. Interest is charged at the lender's prime rate plus 0.25% (8.75%
at September 26, 1998). Outstanding borrowings are collateralized by accounts
receivable and inventories.
Short-term borrowing activity was as follows:
September 26, September 27,
1998 1997
Balance outstanding at year-end $ 842,826 $ 833,656
Weighted average interest rate at
year-end 8.75% 8.82%
Maximum amount outstanding
at any month end $1,340,566 $1,328,508
Average amount outstanding $ 848,317 $1,068,809
Weighted average interest rate
during the year 8.78% 8.69%
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 during 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 $2,200,000. At September 26,
1998 the Company was in compliance with all of its bank covenants.
3. Long-Term Debt
Long-term debt consists of the following:
September 26, September 27,
1998 1997
Note payable to a bank, monthly
payments of $16,925
including interest at 8.5%;
due January 2007,
collateralized by property $1,884,068 $1,924,395
Note payable to a bank, monthly
payments of $3,990 including
interest at 8.625%;
due June 2005,
collateralized by
equipment 243,495 195,000
Note payable to a bank, monthly
payments of $4,018 including
interest at 0.5% over the
bank's prime rate (9% at
September 26, 1998); due
September 2003,
collateralized by equipment 194,085 223,134
Note payable to a bank, monthly
payments of $3,203 including
interest at 8.75%; due
September 2002,
collateralized by equipment 129,236 154,956
Note payable to a bank,
monthly interest only
payments at 0.5% over the
bank's prime rate (9% at
September 26, 1998); due
May 1999, collateralized by
equipment 12,000 -
September 26, September 27,
1998 1997
2,462,884 2,497,485
Less current maturities 134,714 103,663
Long-term debt, less
current maturities $2,328,170 $2,393,822
The $12,000 note payable to a bank contains a provision which allows
the Company to convert the balance outstanding at maturity to a note having a
five year repayment term. Total available borrowings under this agreement are
$150,000. As the Company intends to exercise this conversion feature, the
amount outstanding at September 26, 1998 has been classified as long-term debt.
Scheduled long-term debt maturities as of September 26, 1998 are as follows:
Year ending Amount
September 25, 1999 $134,714
September 23, 2000 148,259
September 29, 2001 161,692
September 28, 2002 176,203
September 27, 2003 152,283
Thereafter 1,689,733
Total $ 2,462,884
4. Long-Term Debt to Related Parties At September 26, 1998 and September
27, 1997, the Company owed $128,000 to related parties pursuant to the terms of
a convertible debenture agreement. The debentures require semi-annual interest
payments and are secured by the Company's land and building. In October 1998,
the agreement was amended from an interest rate of 9.25% to 8.75% and from a
due date of October 31, 1998 to October 31, 1999. Accordingly, the related
party debt has been classified as a noncurrent liability at September 26, 1998.
The debentures are convertible into shares of the Company's common stock at a
per share rate of $.28 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 2003. As
of September 26, 1998, 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 25, 1999 $ 135,481
September 23, 2000 125,523
September 29, 2001 120,341
September 28, 2002 101,135
September 27, 2003 69,267
Total $ 551,747
Rental expense for all operating leases was $298,268 and $194,764
for the years ended September 26, 1998 and September 27, 1997.
6. Income Taxes Income tax expense consists of the following:
September 26, September 27,
Years ended 1998 1997
Federal:
Current $ 64,454 $ 9,142
Deferred 45,000 45,047
State - current 1,031 700
Income tax expense $ 110,485 $ 54,889
Major items causing the Company's effective tax rate to differ from
the statutory rates are as follows:
September 26, 1998 September 27, 1997
Amount Amount
Percent Percent
Income tax expense
at statutory rate $ 122,914 34.0% $61,268 34.0%
Graduated tax rate
Differences (8,785) (2.4) (12,965) (7.1)
Other (3,644) (1.0 ) 6,586 3.6
Income tax expense $110,485 30.6 % $54,889 30.5 %
Significant components of the Company's deferred tax assets and
liabilities consist of the following:
September 26, September 27,
1998 1997
Current deferred tax assets:
Allowance for doubtful accounts $ 17,100 $ 13,327
Vacation accrual 36,100 29,809
Other 2,800 2,864
Current deferred tax asset $ 56,000 $ 46,000
Non-current deferred tax assets
(liabilities):
Net operating loss carryforwards $ 131,000 $ 123,000
Depreciation (151,900) (96,900)
Other (900) (4,400)
Gross non-current deferred tax asset
(liability) (21,800) 21,700
Valuation allowance (98,200) (86,700)
Non-current deferred tax liability $(120,000) $ (65,000)
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 26, 1998, the Company has available net operating loss
carryforwards of approximately $398,000 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 26, 1998 aggregated
$1,140,581. Negotiated firm sales contracts aggregated $244,700 at September
26, 1998.
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 50% 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 $21,236
and $20,717 for fiscal 1998 and 1997.
9. Earnings Per Common Share Earnings per common share for the year ended
September 26, 1998 is computed as follows:
Income Shares Per-Share Amount
Basic EPS
Income available to
common stockholders $251,026 5,352,815 $0.05
Effect of Dilutive Securities
Convertible debentures 7,720 731,429
Diluted EPS
Income available to
common stockholders plus
assumed conversions $258,746 6,084,244 $0.04
Earnings per common share for the year ended September 27, 1997 is
computed as follows:
Income Shares Per-Share Amount
Basic EPS
Income available to
common stockholders $125,310 5,353,561 $0.02
Effect of Dilutive Securities
Convertible debentures 7,720 853,333
Diluted EPS
Income available to
common stockholders plus
assumed conversions $133,030 6,206,894 $0.02
For purposes of diluted earnings per common share, convertible
debentures for 1998 and 1997 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 $0.175 and $0.15 for
1998 and 1997.
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 26, 1998 and
September 27, 1997 is presented as follows:
Fabrication Distribution Eliminations Total
1998:
Net sales $2,361,604 $12,281,614 $(275,157 ) $14,368,061
Operating income (loss) $ 182,000 $ 418,961 $ - $ 600,961
Identifiable assets $1,521,206 $ 5,973,986 $ - $7,495,192
Depreciation expense $ 53,685 $ 165,355 $ - $ 219,040
Capital expenditures $ 54,890 $ 190,275 $ - $ 245,165
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
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 26, 1998 September 27, 1997
Balance, beginning of year $ 53,306 $ 77,050
Charged to expense 12,400 3,000
Write-offs, net of recoveries (8,858) (26,744)
Balance, end of year $ 56,848 $ 53,306
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 22, 1997 By /S/ Jimmie Coulson
President,
Chief Executive Officer
Director,
(Principal Executive Officer)
Date: December 22, 1997 By /S/ Marilyn A. Schroeder
Treasurer and Director
(Principal Financial Officer and Principal
Accounting Officer)
Date: December 22, 1997 By /S/ Wendell J. Satre
Director
Date: December 22, 1997 By/S/ Robert P. Shanewise, M.D.
Director
Date: December 22, 1997 By /S/ Lawrence A. Stanley
Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> SEP-26-1998 SEP-27-1998
<PERIOD-END> SEP-26-1998 SEP-27-1998
<CASH> 39,486 89,495
<SECURITIES> 0 0
<RECEIVABLES> 1,474,117 1,294,302
<ALLOWANCES> 56,848 53,306
<INVENTORY> 2,553,384 2,342,671
<CURRENT-ASSETS> 4,066,139 3,743,166
<PP&E> 4,896,087 4,735,715
<DEPRECIATION> 1,539,044 1,400,291
<TOTAL-ASSETS> 7,495,192 7,151,955
<CURRENT-LIABILITIES> 1,963,860 1,858,447
<BONDS> 1,884,068 1,924,395
0 0
0 0
<COMMON> 1,186,192 1,186,192
<OTHER-SE> 1,768,970 1,524,294
<TOTAL-LIABILITY-AND-EQUITY> 7,495,192 7,151,955
<SALES> 14,368,061 12,858,765
<TOTAL-REVENUES> 14,430,428 12,992,262
<CGS> 10,721,254 9,498,045
<TOTAL-COSTS> 13,877,585 12,565,646
<OTHER-EXPENSES> 412,302 356,195
<LOSS-PROVISION> 12,400 3,000
<INTEREST-EXPENSE> 301,817 301,306
<INCOME-PRETAX> 361,511 180,199
<INCOME-TAX> 110,485 54,889
<INCOME-CONTINUING> 361,511 180,199
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 251,026 125,310
<EPS-PRIMARY> $.05 $.02
<EPS-DILUTED> $.04 $.02
</TABLE>
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: $150,000.00 under a Non-Revolving Line,
available through expiration of May 1, 1999, at which time
the outstanding principal balance will be converted to a
Term Loan, fully amortized over 60 months. Maturity date
May 1, 2004.
(b) This loan must be closed by (date)
______________________
This loan matures on (date)______________________________
(c) 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.
(d) 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.
(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: $ 375.00 payable on _April 13, 1998.
Loan fee is fully earned and non-refundable upon execution
of this Agreement.
(g) Other Fee(s) (identify):
(h) 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: April 13, 1998 through
May 1, 1999
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 0.250
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 April 13,
1998.
(g) Fee on Unutilized Portion of Line: On N/A, and every
N/A 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 inhouse 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, and, as to Borrower 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 are and will be complete upon submission insofar as
may be necessary to give Bank a true and accurate knowledge of the subject
matter thereof;
3.5 Borrower has filed all tax returns and reports as required by law to
be filed and has paid all taxes and assessments applicable to Borrower
or to its properties which are presently due and payable, except those being
contested in good faith;
3.6 There are no proceedings, litigation or claims (including unpaid
taxes) against Borrower pending or, to the knowledge of the Borrower,
threatened, before any court or government agency, and no other event
has occurred which may have a material adverse effect on Borrower's
financial condition;
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 any
person in, on, under 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 Environmental Response, Compensation, and Liability
Act of 1980, as amended, 42 U.S.C. Section 9601, et seq., the Superfund
Amendments and Reauthorization Act of 1986, as amended, Pub. L. No.
99-499, the Hazardous Materials Transportation Act, as amended, 49 U.S. C.
Section 1801, et seq., the Resource Conservation and Recovery 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 exclusively for the following
purposes:
4.2 Maintain current assets in an amount at least equal to __1.30_
times current liabilities, and not less than $__1,200,000___ in excess
thereof. Current assets and current liabilities shall be determined in
accordance with generally accepted accounting principles and practices,
consistently applied;
4.3 Maintain a tangible net worth of at least $__2,200,000___and not
permit Borrower's total indebtedness which is not subordinated in a manner
satisfactory to Bank to exceed ___2.30__times Borrower's tangible net
worth. "Tangible net worth" means the excess of total assets over
total liabilities, excluding, however, from the determination of total assets
(a) all assets which should be classified as intangible assets such as
goodwill, patents, trademarks, copyrights, franchises, and deferred charges
(including unamortized debt discount and research and development costs),
(b) treasury stock, (c) cash held in a sinking or other similar fund
established for the purpose of redemption or other retirement of capital
stock, (d) to the extent not already deducted from total assets, reserves
for depreciation, depletion, obsolescence or amortization of properties
and other reserves or appropriations of retained earnings which have been
or should be established in connection with the business conducted 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 any of
the named insureds the policy proceeds will be applied to payment of
Borrower's obligations owing to Bank;
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
$_100,000___ 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 change
in Borrower's 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 including
"Quarterly Compliance Certificates", as per the attached, and the U.S.
Securities Commission Report 10-K.
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 with an
insurer satisfactory to the Bank;
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 collection in the ordinary course of business.
For purposes of this paragraph, the sale or assignment of accounts
receivable, or the granting of a security interest therein, shall be
deemed the incurring of indebtedness for borrowed money;
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; except as shown in Exhibit "A";
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
$100,000__ at 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 without limitation those
described in section 3.8.
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 (i) any
of Borrower's 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, all of 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 or Borrower's representations regarding the
"year 2000 problem" shall cease to be true, whether or not true when made,
and as a result Bank reasonably believes that Borrower's financial condition
or its ability to pay its debts as they come due will thereby be materially
impaired;
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 any act indicates its consent or acquiescence in any such
proceeding or the appointment of any such trustee or receiver;
7.6 Any judgment attaches against Borrower or any of its properties for an
amount in excess of $_100,000___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 part of the Bank
in exercising any right shall operate as a waiver of such right or any other
right.
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 Spokane 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 amount of the claim(s) being 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 the controversy or claim to
arbitration if such action for judicial relief is contested. 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 arbitrated
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 exercise of the power of sale under the deed of trust or judicial
foreclosure as a mortgage.
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 Federal Courts
located in the State of Washington. Borrower further consents to the venue of
this suit, being laid in King County, Washington. This Agreement and any notes
and security agreements entered into pursuant to this Agreement shall be
construed in accordance with the laws of the State of Washington.
11. Additional Provisions. Borrower agrees to the additional provisions set
forth immediately following this Section 11 or on any "Exhibit_A______"
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
maintaining any loans and/or line of credit to which this Agreement relates,
(b) reduce the amounts payable to Bank under this Agreement, such notes and
other instruments, 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 and calculations shall be conclusive, absent
manifest error.
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 April
13, 1998. 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: /S/ 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: /S/ Marilyn A. Schroeder
Title: Treasurer/CFO
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: /S/ Marilyn A. Schroeder
Title: Treasurer/CFO
Address: P.O. Box 2610
City, State, Zip: Spokane, WA 99220
Phone: (509) 924-6363
Fax: (509) 924-6924
Form 3082, Rev. 11/93, Word 5.01
Exhibit A
The following modifications are hereby made and incorporated into this
agreement:
Part B, Section 5.4, is hereby modified to read:
"Borrower will not, without Bank's prior written consent, declare any dividends
in excess of 10% of its annual net (after tax) profit on shares of the capital
stock ..."
Part B, Section 9.1 and Section 10:
The venue in both questions is hereby modified to read "Spokane County,
Washington".
Initials
Principal $150,000.00 Maturity: 5/1/1999 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
Lender: BANK OF AMERICA NT&SA D/B/A SEAFIRST BANK
EASTERN DIVISION TEAM #1
C/O CLSC-E (DOC'S)
P.O. BOX 1446 (SFC-5)
SPOKANE, WA 99210-1630
Principal Amount: $150,000.00 0.500% Over the Index
Date of Note: April 14, 1998
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 Hundred Fifty Thousand & 00/100
Dollars ($150,000.00) 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
May 1,, 1999. In addition, Borrower will pay regular
monthly payments of accrued unpaid interest beginning June
1, 1998, 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 Spokane
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. The obligations under this
Note or any other agreement between Lender and
Borrower are joint and several.
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
B
y
:
/S/ Marilyn
Schroeder,Treasurer, CFO
THE COEUR D'ALENES COMPANY BY MARILYN A.
SCHROEDER, TREASURER/CFO
BY: /S/ Marilyn Schroeder Treasurer, CFO
UNION IRON WORKS, INC OF SPOKANE, WASHINGTON BY
MARILYN A. SCHROEDER, TREASURER/CFO
Variable Rate. Line of Credit. LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver.
3.23 (c) 1997 CFI ProServices, Inc. All rights reserved. [WA-D20 GLO321 CO.LN
G2.OVL]
Principal: $250,000.00 Loan Date: Maturity 5-1-2005
Loan No.: 18/59 Call: AFS Account: 17001484046
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/O CLSC-E (DOC'S)
P.O. BOX 1446 (SFC-5)
SPOKANE, WA 99210-1630
Principal Amount: $250000.00 Interest Rate: 8.625%
Date of Note: June 2, 1998
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 at the rate of
8.625% per annum on the unpaid outstanding
principal balance until paid in full.
PAYMENT. Borrower will pay this loan in in 84
payments of $3,990.10 each payment. Borrowers
first payment is due July 1, 1998 and all
subsequent payments are dueon the same day of each
month after that. Borrower's final payment will
be due on June 1, 2005, and will be for all
principal and all accrued interest not yet paid.
Payments include principal and interest. 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 68351519, 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.
PREPAYMENT FEE. Upon prepayment of this Note,
Lender is entitled to the following prepayment
fee: See Attached Exhibit "A". 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 Spokane
County, the State of Washington. This Note shall
be governed by and construed in accordance with
the laws of the State of Washington.
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. The obligations under this
Note are joint and several.
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/ Marilyn Schroeder,Treasurer, CFO
THE COEUR D'ALENES COMPANY
BY MARILYN A. SCHROEDER, TREASURER/CFO
BY:/S/ Marilyn Schroeder Treasurer, CFO
UNION IRON WORKS, INC OF SPOKANE, WASHINGTON BY
MARILYN A. SCHROEDER, TREASURER/CFO
EXHIBIT A
PREPAYMENT FEES
If the principal balance of this note is prepaid
in whole or in part, whether by voluntary
prepayment, operation of law, acceleration or
otherwise, a prepayment fee, in addition to any
interest earned, will be immediately payable to
the holder of this note.
The amount of the prepayment fee depends of the
following:
1. The amount by which interest reference rates
as defined below have changed between the
time the loan is prepaid and either a) the
time the loan was made for fixed rate loans
or b) the time the interest rate last changed
(repriced) for variable rate loans.
2. A prepayment fee factor (see "Prepayment Fee
Factor Schedule" on reverse).
3. The amount of principal prepaid.
If the proceeds from a CD or time deposit pledged
to secure the loan are used to prepay the loan
resulting in payment of an early withdrawal
penalty for the CD, a prepayment fee will not also
be charged under the loan.
DEFINITION OF REFERENCE RATE FOR VARIABLE RATE
LOANS
The Reference Rate used to represent interest rate
levels for variable rate loans shall be the index
rate used to determine the rate of this loan
having maturities equivalent to the remaining
period to interest rate change date (repricing) of
this loan rounded upward to nearest month. The
"Initial Reference Rate" shall be the Reference
Rate at time of last repricing and a new Initial
Reference Rate shall be assigned at each
subsequent repricing. The "Final Reference Rate"
shall be the Reference Rate at time of prepayment.
DEFINITION OF REFERENCE RATE FOR FIXED RATE LOANS
The "Reference Rate" used to represent interest
rate levels on fixed rate loans shall be the bond
equivalent yield of the average U.S. Treasury rate
having maturities equivalent to the remaining
period to maturity of this loan rounded upward to
the nearest month. The "Initial Reference Rate"
shall be the Reference Rate at the time the loan
was made. The "Final Reference Rate" shall be the
Reference Rate at time of prepayment.
The Reference Rate shall be interpolated from the
Federal Reserve Statistical Release (Publication
H.15) as displayed on Page 119 of the Dow Jones
Telerate Service (or such other page or service as
may replace that page or service for the purpose
of displaying rates comparable to said U.S.
Treasury rates) on the day the loan was made
(Initial Reference Rate) or the day of prepayment
(Final Reference Rate).
An initial reference rate of 5.72% has been
assigned to this loan to represent interest rate
levels at origination.
CALCULATION OF PREPAYMENT FEE
If the Initial Reference Rate is less than or
equal to the Final Reference Rate, there is no
prepayment fee.
If the Initial Reference Rate is greater than the
Final Reference Rate, the prepayment fee shall be
equal to the difference between the Initial and
Final Reference Rates (expressed as a decimal),
multiplied by the appropriate factor from the
Prepayment Fee Factor Schedule, multiplied by the
principal amount of the loan being prepaid.
The Coeur d'Alenes Company and Union Iron Works,
Inc of Spokane Washington
By: Marilyn Schroeder, Treasurer
The Coeur d'Alenes Company
By: Marilyn Schroeder, Treasurer
PROMISSORY NOTE Page 2
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 meeting will be held as soon as
practical after the shareholders' meeting 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.
