-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GYFh8TADcD7L+ihch1CYdZMHnt1f+8+JGDNFw7qqQ/zNGx3Bb3gZKyr9971CD6/b amDZBeh2sAlu+9LwY3F9IA== 0000725014-97-000001.txt : 19970321 0000725014-97-000001.hdr.sgml : 19970321 ACCESSION NUMBER: 0000725014-97-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970320 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RAWSON KOENIG INC CENTRAL INDEX KEY: 0000725014 STANDARD INDUSTRIAL CLASSIFICATION: TRUCK & BUS BODIES [3713] IRS NUMBER: 741957377 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12392 FILM NUMBER: 97559745 BUSINESS ADDRESS: STREET 1: 2301 CENTRAL PKWY CITY: HOUSTON STATE: TX ZIP: 77092 BUSINESS PHONE: 7136884414 MAIL ADDRESS: STREET 1: 2301 CENTRAL PKWY CITY: HOUSTON STATE: TX ZIP: 77092 FORMER COMPANY: FORMER CONFORMED NAME: KOENIG INC DATE OF NAME CHANGE: 19870927 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended: December 31, 1996 Commission File No.: 0-12392 RAWSON-KOENIG, INC. (Exact name of registrant as specified in its charter) Texas 74-1957377 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2301 Central Parkway Houston, Texas 77092 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (713) 688-4414 Securities registered pursuant to Section 12(b) of the Act: Name of each Exchange Title of Each Class on which registered None Not Applicable Securities registered pursuant to Section 12(g) of the Act: Common Stock, No Par Value Per Share Preferred Stock, $10.00 Par Value Per Share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in any definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any Amendment to this Form 10-K. [X] State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of of such stock, as of a specified date within 60 days prior to the date of filing January 31, 1997 $2,093,355 Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Common Stock outstanding as of: February 21, 1997 -- 3,901,190 shares Documents Incorporated by Reference List hereunder the following documents if incorporated by reference and the part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes. None -1- RAWSON-KOENIG, INC. FORM 10-K PART I ITEM 1. BUSINESS (a) The Registrant designs, manufactures and markets certain equipment for light trucks, principally under the "Rawson-Koenig" name. As used in this report, the term "the Registrant" refers to Rawson-Koenig, Inc. unless a contrary or more limited meaning is indicated by the context. The Registrant was incorporated in Texas on November 18, 1977. The demand for the products manufactured by the Registrant is cyclical, and tied to the general economic conditions of the geographic market for the Registrant's products. In particular, demand for the Registrant's products is related to certain service industries, including construction and public utilities. The primary market for the Registrant's products is the United States. The ability of the Registrant to improve its results of operations and recover the cost of its assets through operations is dependent on improvements in manufacturing efficiency and increased sales volume through the expansion of its distribution base and the introduction of new and improved product lines. See paragraph (c)(xi) below for a discussion of the Registrant's research and development activities. (b) The Registrant operates in the truck equipment industry segment, which accounted for approximately 100% of its business in 1996. See the Financial Statements of Registrant included in this report for data relating to the amounts of sales for the last three years. (c) The following paragraphs provide information as to specific aspects of the Registrant's business. (i) Substantially all of the Registrant's products are truck equipment, which includes truck service bodies, truck tool boxes, winches and truck-mounted cranes. Service bodies are structures mounted on a truck chassis in order to provide cover, storage space or working space, while tool boxes are simpler and usually smaller structures, which are also truck-mounted, but are designed solely for storage of tools or other property. The Registrant's service bodies offer a wide selection of standard and optional features. Like the Registrant's tool boxes, they can be installed on trucks of all major United States and foreign producers and are used for general, industrial and recreational purposes. In general, the Registrant believes that its service bodies and tool boxes compete in the upper portions of their respective markets in terms of quality and price. The Registrant also believes that it offers the largest line of tool boxes available from any single manufacturer. -2- The Registrant's standard winches have pulling capacities of 2,000 to 30,000 pounds, are designed to be truck-mounted and also are sold for general and industrial purposes. All these winches are available with or without automatic safety brakes and may be used with mechanical, hydraulic or electrical power sources. In addition to these standard products, the Registrant manufactures winches for special applications such as mining, logging and well drilling. The Registrant's crane models may be mounted on the Registrant's service bodies specially designed to withstand additional stress when the crane is in use. Lifting capacity of the cranes ranges up to 6,000 pounds depending on the model. The Registrant sells its products primarily through a nationwide network of distributors, although certain sales are also made directly to end-user customers and to truck dealers. The Registrant currently deals with approximately 350 active distributors of its service bodies, tool boxes, winches and cranes. The Registrant's only agreements with each distributor are contained in an authorization letter and a credit application. The Registrant believes that its relations with its distributors are good and that, in any event, the loss of any single distributor would have no material impact on its operations. The Registrant believes that its most effective sales promotion and advertising method is a combination of product demonstration and the use of a strong diverse distributor network. The Registrant's distributors are strategically located to provide coverage of key marketing areas. The distributor network is also supported by the Registrant through product line literature, trade shows, cooperative advertising and seminars by the Registrant's sales personnel. (ii) The Registrant continually monitors and updates its product lines. In 1994, 1995 and 1996, the Registrant concentrated on keeping up with increasing demand while continuing to make product improvements on an ongoing basis. (iii) The Registrant purchases steel, welding supplies, castings, paint and other materials from independent suppliers. Virtually all purchases are made on the basis of competitive bids. The Registrant utilizes a combination of foreign, national and regional suppliers. All purchases are made in U.S. dollars. -3- All classes of supplies purchased by the Registrant are presently available from a number of sources. The Registrant deals with a large number of suppliers. Accordingly, the Registrant believes that its business is not dependent upon any single supplier or upon any group of suppliers. It is possible that shortages of a particular type of supply could occur at any time in the future. However, the Registrant has no reason to anticipate any such shortage. (iv) The Registrant owns no patents that are material to its business. (v) Sales are seasonal in nature and in most years tend to be highest around May and lowest around October. This seasonality is believed to reflect, among other factors, model changes of truck manufacturers in September and October and low levels of activity in the construction industries in the fall and winter months. In 1994 and 1995, seasonality was less of a factor due to truck manufacturers being overloaded with incoming orders throughout the entire year. In 1996, sales declined in December. (vi) Most of the Registrant's inventory is comprised of standard products. Reference is made to Note 4 to the Financial Statements for information as to a line of credit which is available to finance inventory as required. (vii) Since a significant portion of sales are made through distributors, the Registrant does not necessarily know the identity of any particular purchaser of its products. All statements made in the following paragraph are subject to this qualification. The Registrant sells to a large number of customers, and to the best of its knowledge, no customer accounted for as much as 10% of sales during the years ended December 31, 1994, 1995 and 1996. The Registrant also believes that foreign or export sales, sales to governmental agencies and sales to the military are insignificant. The Registrant's products are marketed on a nationwide basis. The Registrant's products are used in a variety of industries, and the relative importance of these industries may vary from year to year. The service and public utility industries were the most significant industries during the years ended December 31, 1994, 1995 and 1996. (viii) The Registrant's backlogs at the respective dates indicated were approximately as follows: $1,399,000 at December 31, 1994, $1,004,000 at December 31, 1995 and $835,000 at December 31, 1996. All backlog at December 31, 1996 is believed to be firm and is expected to be shipped during the fiscal year ending December 31, 1997. (ix) The Registrant does not do a material amount of business with the federal government. -4- (x) The market for all the Registrant's products is very competitive. Although the Registrant's products are marketed on a nationwide basis, each manufacturer of otherwise competitive service bodies may have certain advantages in its own region because of transportation costs. In addition to this factor, competition in selling service bodies is believed to involve such factors as product quality, delivery capability, product price and quality of distributors. In selling tool boxes, the more important competitive factors are believed to be product quality, delivery capability, product prices, range of product line and number of distributors or other outlets. The Registrant competes in selling service bodies with a number of manufacturers, some of which are larger in terms of assets and sales. However, the Registrant believes that no single manufacturer dominates the market for these products and that it can continue to compete successfully for its market share, particularly in its primary sales region. Because of lower transportation costs, competition for sales of tool boxes, winches and cranes is generally on a national rather than a regional basis. Competition is based primarily on quality and price. As stated elsewhere, the Registrant offers a standard product line but stresses its ability to construct specialized products. While several competitive manufacturers of tool boxes, winches and cranes are larger in terms of sales and assets, and some offer related equipment not produced by the Registrant, the Registrant believes that no single manufacturer dominates the market and that it can continue to compete successfully for its market share. (xi) The Registrant does not carry on research and development activities except in connection with product testing, development and design. Six employees were involved on a part-time basis in product testing, development and design during the years ended December 31, 1994 and 1995. Eight employees were involved on a part-time basis in product testing, development and design during the year ended December 31, 1996. The amount spent on such activities was less than $100,000 in each of these years. (xii) The Registrant does not believe that compliance with federal, state and local environmental laws will adversely affect its business, earnings or competitive position in the long run when regulations are enforced uniformly across the nation. In 1994, 1995 and 1996, compliance with federal, state and local environmental laws did not have a material effect on the Registrant's earnings and competitive position in the market. In 1994, 1995 and 1996, no material capital expenditures for environmental control facilities were incurred and none are anticipated for 1997. -5- (xiii) At December 31, 1996, the Registrant employed 301 persons. No employee is represented by any union, and the Registrant believes that its employee relations are good. (d) The Registrant's products are marketed primarily in the United States. Direct export sales are immaterial to the Registrant's operations. ITEM 2. PROPERTIES The Registrant owns its manufacturing and office facilities in Houston, Texas and Fort Worth, Texas. The Registrant's Houston service body and tool box manufacturing facility occupies approximately 163,000 square feet of space in a metal and brick building located in an office and industrial park, while its executive and administrative offices occupy approximately 12,000 square feet in the same building. The Registrant's winch and crane manufacturing facility occupies approximately 24,000 square feet of space in an adjacent metal and concrete building constructed on the same tract of approximately 13 acres. The Fort Worth facility is on approximately 3.7 acres of land with metal and block buildings totaling approximately 73,000 square feet. The Houston facilities are subject to mortgage liens of approximately $1,300,000. The Registrant owns almost all of the machinery and equipment used in its operations. ITEM 3. LEGAL PROCEEDINGS The Registrant is not a party to and its property is not subject to any material pending legal proceedings other than ordinary routine litigation incidental to its business. ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS (a) The Registrant's common stock, no par value per share (Common Stock), is traded on the National Association of Securities Dealers Automated Quotation System (NASDAQ) Small Cap Market under the symbol "RAKO". The following table shows the high and low bid and ask prices of the Common Stock during the periods indicated: -6-
Bid Ask High Low High Low Year Ended December 31, 1995: First Quarter 2-1/16 1-5/8 2-5/16 1-3/4 Second Quarter 1-13/16 1-13/16 2 1-15/16 Third Quarter 1-7/8 1-1/2 2 1-5/8 Fourth Quarter 1-3/4 1-1/8 2 1-3/8 Year Ended December 31, 1996: First Quarter 1-17/32 1-1/4 1-5/8 1-1/2 Second Quarter 1-15/16 1-1/8 2-1/8 1-3/8 Third Quarter 1-21/32 1-5/16 2 1-9/16 Fourth Quarter 1-7/8 1-1/4 2 1-13/32 Year Ending December 31, 1997: January 1997 1-11/16 1-9/16 2-1/16 1-3/4
The foregoing figures, which were obtained from NASDAQ monthly statistical reports, do not reflect retail markups or markdowns and may not represent actual trades. (b) As of February 21, 1997, the Common Stock was held by approximately 1,400 stockholders of record. (c) The Registrant has not paid any dividends since it became a publicly held company. ITEM 6. SELECTED FINANCIAL DATA The following selected financial information for the Registrant for the periods indicated must be read in conjunction with the Financial Statements in this report and the notes thereto, which are an integral part of the Financial Statements. -7-
(In Thousands Except Per Share Data) Years Ended December 31, 1996 1995 1994 1993 1992 Sales $19,522 $18,682 $17,185 $14,450 $12,678 Total assets 10,489 9,824 9,089 8,377 7,932 Long-term debt (less current portion) 1,435 2,095 1,856 1,964 2,249 Net income 1,100 825 1,142 480 209 Net income per share .28 .21 .29 .12 .05
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Summary. The following table sets forth for the years indicated (1) percentages which certain items reflected in the accompanying statements of income and in the accompanying selected financial data bear to total sales of the Registrant and (2) the percentage increase (decrease) of such items as compared to the indicated prior year.
Percentage Increase Percentage of Sales from Prior Years Ended December 31: Year: 1996 1995 1994 1996 1995 Sales 100.0 100.0 100.0 4.5 8.7 Cost of sales 76.8 79.8 77.4 .7 12.1 Selling, general, and admin. expenses 14.1 13.8 13.3 6.3 13.3 Interest expense .8 1.0 1.2 (24.3) (7.8) Other (income) expense, net - (1.0) (0.5) (95.3) 111.0 Income before income taxes 8.3 6.4 8.6 36.9 (19.6) Income taxes 2.7 2.0 2.0 45.2 7.3 Net income 5.6 4.4 6.6 33.2 (27.7)
-8- Results of Operations. Year Ended December 31, 1994. Sales for the year ended December 31, 1994 increased 18.9% from the year ending December 31, 1993 due primarily to the Registrant's intensified marketing efforts and continued improvement in the national economy, particularly improvement in light truck sales. Cost of sales as a percentage of sales decreased from 81.5% in 1993 to 77.4% in 1994 due to volume efficiencies and the Registrant's continued program of upgrading manufacturing equipment and refining production methods. Selling, general and administrative expenses as a percentage of sales increased from 12.9% in 1993 to 13.3% in 1994 primarily due to increases in insurance costs and payroll-related expenses. Year Ended December 31, 1995. Sales for the year ended December 31, 1995 increased 8.7% from the year ending December 31, 1994 due primarily to the Registrant's continued marketing efforts and strong national light truck sales. Cost of sales increased from 77.4% in 1994 to 79.8% in 1995 due to sharp increases in material costs during the third and fourth quarters of 1995. Selling, general and administrative expenses as a percentage of sales increased from 13.3% in 1994 to 13.8% in 1995 primarily due to increases in insurance costs and payroll-related expenses. Additionally, during 1995, approximately $240,000 of office improvements and repairs were incurred of which $105,000 was expensed. Income tax expense increased 7.3% from 1994 to 1995 due to alternative minimum tax credits which were fully utilized during 1994. Year Ended December 31, 1996. Sales for the year ended December 31, 1996 increased 4.5% from the year ending December 31, 1995 due primarily to the Registrant's increased marketing efforts and, to a lessor degree, due to an increase in nationwide sales of light trucks. Over the last three years the Registrant has concentrated on improving its marketing efforts by increasing the number and quality of its sales staff and by increasing advertising, trade show attendance, and personal demonstrations of its products. Cost of sales as a percentage of sales decreased from 79.8% in 1995 to 76.8% in 1996 primarily due to lower material costs during the third and fourth quarters of 1996 compared to the same period of 1995. During the third and fourth quarters of 1995 the Registrant experienced sharp increases in material costs. In 1996 material costs declined to previous levels. Selling, general and administrative expenses as a percentage of sales increased from 13.8% in 1995 to 14.1% in 1996 primarily due to increases in insurance costs and payroll-related expenses. Interest expense decreased 24.3% from 1995 to 1996 primarily due to lower average borrowings during 1996. Income tax expense increased 45.2% from 1995 to 1996 primarily due to the increase in income before income taxes and due to the decreased effect of net operating loss carryforwards. Liquidity and Capital Resources. The Registrant plans to fund future operations from cash on hand, cash from operations and by use of its credit facility, which currently has an available line of credit of approximately $2,000,000 based upon the applicable borrowing base calculation. The Registrant's line of credit expires in April 1998. The Registrant also has an agreement with a bank to borrow up to $1,000,000 to finance equipment purchases under which no borrowings have occurred. -9- Net cash provided from operating activities was $1,099,973, $664,636 and $2,035,197 for 1994, 1995 and 1996, respectively. Accounts receivable are usually collected within 30 days. Accounts payable are paid within 30 days. During 1994, 1995 and 1996, the Registrant increased inventory levels to be more responsive to customer needs. In 1996 inventory increased $325,924. In 1994, 1995 and 1996, the Registrant used $234,960, $790,470 and $1,342,460, respectively, for investing activities. The purchase of property, plant and equipment accounted for the majority of investing activities in these three years. In 1996 the Registrant used $673,950 for financing activities. In 1994, 1995 and 1996 financing activities consisted of scheduled payments of long-term debt and borrowings and payments under the Registrant's line of credit agreement. In 1996, the Registrant reduced the outstanding balance on the line of credit by $431,605. The outstanding balance on the line of credit was $200,000 at December 31, 1996. The line of credit agreement and other bank debt contain various restrictive covenants which include, among other things, maintenance of a minimum tangible net worth and minimum working capital, restrictions on property, plant and equipment additions and additional indebtedness, and requirements to maintain certain financial ratios. All loans from the bank are collateralized by accounts receivable, inventories, equipment and the Houston facility. The Registrant intends to renew and extend the line of credit prior to the April 1998 expiration date. Although management believes that the combination of cash from operations and the bank credit facilities will be sufficient to meet the Registrant's long-term liquidity and capital resource needs, there can be no assurance that such bank financing will be available on terms acceptable to the Registrant. Inflation. The Registrant's business is relatively labor intensive, and the Registrant purchases supplies and components from third parties. Nevertheless, the Registrant has generally been able to raise its prices sufficiently to offset any adverse effects of inflation. During the year ended December 31, 1994, the Registrant increased prices on its cranes. During the year ended December 31, 1995, the Registrant increased prices on its service bodies, tool boxes and winches. During January 1996 and January 1997, the Registrant increased prices on the majority of its products. In January 1997, the Registrant also decreased prices on a few of its products. The Registrant cannot predict any possible future effects of inflation on its operations. -10- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this item is submitted in a separate section of this report. Reference is made to the index on page 16 preceding the Financial Statements. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information concerning the directors and executive officers of the Registrant. Served As A Name Age Position Director Since Thomas C. Rawson 44 Chairman of the Board, September 18, 1987 Director and Chief Executive Officer Catherine A. Rawson 72 Director, President September 18, 1987 and Principal Financial Officer Pamela Y. Rawson 40 Director September 18, 1987 (1) Farrell G. Huber, Jr. 64 Director July, 1983 (2) George W. Fazakerly 55 Director September 21, 1987 Allen F. Rhodes 72 Director September 21, 1987 Joseph M. Scheer 70 Director April 10, 1991 Fredrick C. Wamhoff 39 Vice President-General Counsel and Secretary Richard F. Koenig 53 Vice President- Information Systems (1) Except for the period from September 21, 1987 to October 17, 1989. (2) Except for the period from September 18, 1987 to September 21, 1987. -11- Thomas C. Rawson co-founded Rawson Industries, Inc. ("Rawson") in 1978 with his father, the late Clare J. Rawson, his mother, Catherine A. Rawson, and his wife, Pamela Y. Rawson. He holds a law degree from Thomas M. Cooley School of Law in Michigan and a Bachelor of Science Degree from Michigan State University. Mr. Rawson was admitted to the State Bar of Texas in 1979. Mr. Rawson served as a Director and President of the Registrant from September 18, 1987 to October 17, 1989, when he was elected Chairman of the Board and Chief Executive Officer. Catherine A. Rawson co-founded Rawson in 1978. Prior to joining Rawson, she was employed as a Test Administrator for the Michigan Civil Service Commission and prepared and administered bookkeeping records for various family-owned businesses. Mrs. Rawson received an Associate Arts Degree from Pierce College in 1965. Mrs. Rawson served as Treasurer and a Director of Rawson from 1978 to 1987 and Treasurer and Vice President of Administration of the Registrant from September 18, 1987 to October 17, 1989. She is currently President, Principal Financial Officer and a Director of the Registrant. Pamela Y. Rawson co-founded Rawson in 1978 after earning a Bachelor of Science degree in Social Studies from Michigan State University. She served as Secretary and a Director of Rawson and a Director of the Registrant from September 18, 1987 to September 21, 1987. She was re-elected to the Board of Directors of the Registrant on October 17, 1989. Farrell G. Huber, Jr. is a personal investor. Mr. Huber has been a Director of Keystone International, Inc., an industrial valve and operator manufacturer, since 1980 and plans on retiring from the Keystone International, Inc. Board on May 5, 1997. George W. Fazakerly is a partner in the Dallas law firm of Vial, Hamilton, Koch & Knox. He specializes in corporate and securities matters and received his Juris Doctor Degree from Southern Methodist University in 1969. He has been a partner with Vial, Hamilton, Koch & Knox since 1974. Allen F. Rhodes is currently Chairman of the Silver Fox Advisors, a business consulting firm. He has been a member of the Silver Fox Advisors since 1993. He was President of Arnco Technology, a metallurgical research company, from 1991 to 1993, and President and Chief Executive Officer of Gripper, Inc., an undersea pipeline fittings manufacturer, from 1986 to 1991. Mr. Rhodes has been a Director of Keystone International, Inc., an industrial valve and operator manufacturer, since 1980. Joseph M. Scheer is currently a management consultant and personal investor. He has been a Director of Microsemi Corporation, an electronics component manufacturer, since 1994 and a member of the Advisory Board of Soligen Corporation, an innovative manufacturer of cast parts and tools, since 1996. He was a Director of Laserform Inc., a prototype parts manufacturer in Auburn Hills, Michigan from 1989 to 1994. Fredrick C. Wamhoff joined Rawson in 1984 and has served the Registrant in various functions including Vice President - Manufacturing Operations. He currently serves as Vice President - General Counsel and Secretary of the Registrant. Prior to joining Rawson, Mr. Wamhoff was in the private practice of law in Lansing, Michigan. He attended Michigan State University and was graduated in 1979 with a Bachelor of Arts Degree. He received his Juris Doctor Degree from Marquette University in 1982. Mr. Wamhoff has been a member of the Michigan and Wisconsin Bars since 1982 and the Texas Bar since 1986. -12- Richard F. Koenig began his career with the Registrant in 1967 and has served the Registrant in many and various functions including Manager of Engineering and Data Processing, and General Manager of the Registrant's winch and crane manufacturing facilities. Mr. Koenig has been a key member of the Registrant's upper management team since September 17, 1987 and was elected Vice President - Information Systems on January 18, 1994. Each Director holds office until the next annual meeting of Shareholders of the Registrant and until his successor is duly elected and qualified. Officers of the Registrant are elected by, and serve at, the discretion of the Board of Directors. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth, in summary fashion, the compensation paid or accrued for the last three fiscal years to each of the most highly compensated executive officers of the Registrant whose annual rate of remuneration exceeded $100,000.
SUMMARY COMPENSATION TABLE Long Term Compensation Annual Compensation Awards Payouts (a) (b) (c) (d) (e) (f) (g) (h) (i) Name Other and Annual Restricted All Other Principal Compen- Stock Options/ LTIP Compen- Position Salary Bonus sation Awards SARs Payouts sation Year ($) ($) ($) ($) (#) ($) ($) Thomas C. 1996 163,703 2,000 0 0 0 0 0 Rawson, 1995 151,200 2,000 0 0 0 0 0 C.E.O. 1994 148,533 2,000 0 0 0 0 0 Catherine 1996 157,691 2,000 0 0 0 0 0 A. 1995 151,500 2,000 0 0 0 0 0 Rawson, 1994 142,913 2,000 0 0 0 0 0 President No other officers received compensation in excess of $100,000 during the last three fiscal years.
The Registrant currently has no stock option plans. During the last three fiscal years the Registrant granted no stock options or stock appreciation rights ("SAR") to any of its employees or directors; further, during the last three fiscal years no SAR or stock options were exercised by any of the Registrant's employees or directors. The Registrant made no awards of long term incentive plans to any employee or director of the Registrant in the last three fiscal years. The Registrant has no written employment contracts with any executive officer of the Registrant and has no compensatory plan or arrangement with any executive officer which provides for compensation as a result of the resignation, retirement or termination of employment of an executive officer, or as a result of change in control of the Registrant. -13- Compensation of Directors Of the seven directors of the Registrant, four are "outside" directors or non-employees of the Registrant. Each outside director receives a fee of $1,000 for attendance at meetings of the Board of Directors. Prior to October 1996, each of the four outside directors received a fee of $500 for each meeting attended. The three "inside" directors receive no fee for attendance at meetings of the Board of Directors. In addition, of the four outside directors, two live outside of the Houston area and receive reimbursement for travel expenses incurred in connection with attendance of meetings of the Board of Directors. The Board of Directors of the Registrant has not formed any committees. The following table sets forth the amounts received by each of the four outside directors during the last fiscal year, including travel expense reimbursement. Name Directors' Fees Travel Reimbursement Farrell G. Huber, Jr. $2,500 Not Applicable George W. Fazakerly $2,500 $840 Allen F. Rhodes $2,500 Not Applicable Joseph M. Scheer $2,500 $1,399 During 1996, the Registrant paid Joseph M. Scheer $6,400 for management, marketing and financial services rendered by him for the Registrant. Under the terms of such arrangement Mr. Scheer bills the Registrant $100 per hour for his services and is reimbursed for out-of-pocket expenses incurred by him in connection with the services provided under the arrangement. During 1996, the out-of-pocket reimbursement paid to Mr. Scheer was $328. Prior to 1994, Pamela Y. Rawson was a non-employee director of the Registrant. During 1994, Ms. Rawson became a part-time employee of the Registrant and serves as a payroll administrator. During 1996, the Registrant's compensation paid to Ms. Rawson consisted of hourly wages totaling $23,405. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE REGISTRANT The following table shows the number and percentage of shares of Common Stock of the Registrant that may be deemed to be beneficially owned as of February 21, 1997, by (i) each person known by the Registrant to be the beneficial owner of more than five percent of the outstanding shares of Common Stock of the Registrant, (ii) each director and nominee for director of the Registrant who owns shares of Common Stock of the Registrant and (iii) all directors, nominees, and officers as a group. The persons listed below have the sole power to vote and to dispose of the shares beneficially owned by them except as otherwise indicated below. -14-
Shares of Common Stock Beneficially Owned As Of Percentage of Name February 21, 1997 Class Owned Floyd A. Cailloux P.O. Box 1952 Kerrville, TX 78028 282,214 7.2 Farrell G. Huber, Jr. 2301 Central Parkway Houston, TX 77092 1,562 0 Catherine A. Rawson 2301 Central Parkway Houston, TX 77092 1,161,261 60.0 Thomas C. Rawson 2301 Central Parkway Houston, TX 77092 1,180,841 60.0 Pamela Y. Rawson 2301 Central Parkway Houston, TX 77092 1,180,841 60.0 Allen F. Rhodes 2301 Central Parkway Houston, TX 77092 12,197 0 Joseph M. Scheer 2301 Central Parkway Houston, TX 77092 85,000 2.2 All directors and officers as a group 2,443,924 62.6 Includes 273,415 shares held by entities controlled by Mr. Cailloux and includes 8,799 shares held by a charitable reminder trust of which Mr. Cailloux is a lifetime beneficiary. Represents less than 1% of the issued and outstanding shares. Shares are held by the Rawson Family Limited Partnership that is controlled by Catherine A. Rawson. Catherine A. Rawson, Thomas C. Rawson and Pamela Y. Rawson constitute a "group" as such term is defined under regulations of the Security and Exchange Commission. Therefore, the share ownership percentage of the entire group is listed by each individual's name. In the case of Thomas C. Rawson and Pamela Y. Rawson ownership of shares held or to be held by either such person are assumed to be beneficially owned by such other person due to their marital relationship.
-15- ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. Index to Financial Statements: Page Reference Report of Independent Accountants F-1 Balance Sheets as of December 31, 1996 and 1995 F-2 For the years ended December 31, 1996, 1995 and 1994, the Statements of Income F-3 Statements of Shareholders' Equity F-4 Statements of Cash Flows F-5 Notes to Financial Statements F-6 Schedule II - Valuation and Qualifying Accounts F-11 2. All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission, which are not presented, are not required under the related instructions or are inapplicable, and therefore have been omitted. 3. The following exhibits are filed with this report: Page Number In This Filing or Incorporation Exhibit Number and Description By Reference to (2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession* (3) Articles of Incorporation and Bylaws 3.1 Restated Articles of Incorporation Exhibit 3.1*** 3.2 Amended and Restated Bylaws Exhibit 3.2*** (4) Instruments defining the rights of Exhibit 4 to Koenig's security holders, including indentures Registration on Form 10, as amended, under the Securities Exchange Act of 1934. (9) Voting trust agreement* -16- (10) Material Contracts 10.1 Koenig, Inc. Profit-Sharing Plan and Trust Exhibit 10.1** 10.2 Koenig, Inc. 1983 Stock Option Plan Exhibit 10.2** 10.3 Koenig, Inc. Restricted Stock Plan Exhibit 10.3** 10.4 Loan Agreement dated September 22, 1987 Exhibit 10.4*** 10.5 Agreement of Sale and Purchase of Houston Plant Facility with conformed exhibits Exhibit 10.5**** 10.6 Loan Agreement dated January 29, 1990 Exhibit 10.6***** 10.7 First Amendment to Letter Loan Agreement dated March 31, 1991 Exhibit 10.7****** 10.8 Second Amendment to Letter Loan Agreement dated May 21, 1991 Exhibit 10.8****** 10.9 Third Amendment to Letter Loan Agreement dated March 24, 1992 Exhibit 10.9******* 10.10 Fourth Amendment to Letter Loan Agreement dated April 30, 1993 Exhibit 10.10******** 10.11 Fifth Amendment to Letter Loan Agreement dated May 21, 1993 Exhibit 10.11******** 10.12 Sixth Amendment to Letter Loan Agreement dated April 30, 1994 Exhibit 10.12********* 10.13 Amended and Restated Letter Loan Agreement dated April 21, 1995 Exhibit 10.13********** 10.14 First Amendment to Amended and Restated Letter Loan Agreement, Promissory Note (Advancing Term) and Amended and Restated Security Agreement dated September 21, 1995 Exhibit 10.14********** 10.15 Second Amendment to Amended and Restated Letter Loan Agreement and Amended and Restated Security Agreement, and First Amendment to Revolving Note dated May 28, 1996 Exhibit 10.15 (11) Statement re: computation of per share earnings* (12) Statement re: computation of ratios* (13) Annual report to security holders* (16) Letter re: change in certifying accountant* (18) Letter re: change in accounting principles* (21) Subsidiaries of the registrant* (22) Published report regarding matters submitted to vote of security holders* -17- (23) Consents of experts and counsel* (24) Power of attorney* (27) Financial Data Schedule Exhibit 27 (99) Additional Exhibits* * Inapplicable. ** Included in the Registrant's Form 10-K for the year ended September 30, 1983. *** Included in the Registrant's Form 10-K for the year ended September 30, 1987. **** Included in the Registrant's Form 10-K for the year ended September 30, 1988. ***** Included in the Registrant's Form 10-K for the year ended December 31, 1990. ****** Included in the Registrant's Form 10-K for the year ended December 31, 1991. ******* Included in the Registrant's Form 10-K for the year ended December 31, 1992. ******** Included in the Registrant's Form 10-K for the year ended December 31, 1993. ********* Included in the Registrant's Form 10-K for the year ended December 31, 1994. ********** Included in the Registrant's Form 10-K for the year ended December 31, 1995. (b) Reports on Form 8-K. No reports were filed on Form 8-K during the last quarter of the period covered by this report. -18- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Houston, Texas, on the 19th day of March 1997. Rawson-Koenig, Inc. By:/s/ Thomas C. Rawson --------------------- Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the Registrant and in the capacities indicated and on the date indicated: Signature Title Date /s/ Thomas C. Rawson Chairman of the March 19, 1997 - ------------------------- Board, Director and Thomas C. Rawson Chief Executive Officer /s/ Catherine A. Rawson Director, President March 19, 1997 - ------------------------- and Principal Financial Catherine A. Rawson Officer /s/ Leslie T. Horvath Controller March 19, 1997 - ------------------------- Leslie T. Horvath /s/ George W. Fazakerly Director March 19, 1997 - ------------------------- George W. Fazakerly /s/ Farrell G. Huber, Jr. Director March 19, 1997 - ------------------------- Farrell G. Huber, Jr. /s/ Pamela Y. Rawson Director March 19, 1997 - ------------------------- Pamela Y. Rawson /s/ Allen F. Rhodes Director March 19, 1997 - ------------------------- Allen F. Rhodes /s/ Joseph M. Scheer Director March 19, 1997 - ------------------------- Joseph M. Scheer -19- FINANCIAL STATEMENTS REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders Rawson-Koenig, Inc.: We have audited the financial statements and the financial statement schedule of Rawson-Koenig, Inc. (the "Company") listed in Item 14(a) of this Form 10-K. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform our audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Rawson-Koenig, Inc. as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. Houston, Texas February 12, 1997 F-1 RAWSON-KOENIG, INC. BALANCE SHEETS DECEMBER 31, 1996 AND 1995
1996 1995 ----------- ---------- ASSETS Current assets: Cash and cash equivalents............................. $ 334,199 $ 315,412 Accounts receivable, trade (net of allowance for doubtful accounts of $40,000 in 1996 and 1995)....... 1,269,006 1,713,511 Inventories........................................... 3,941,189 3,615,265 Prepayments and other................................. 106,548 173,960 ----------- ---------- Total current assets.............................. 5,650,942 5,818,148 Property, plant and equipment, net...................... 4,838,109 3,893,266 Other assets............................................ 112,412 ----------- ---------- Total assets...................................... $10,489,051 $9,823,826 =========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt..................... $ 228,639 $ 215,253 Current portion of capital lease obligation........... 27,025 Accounts payable...................................... 685,360 437,681 Accrued expenses...................................... 857,960 884,326 State income taxes payable............................ 79,000 61,000 ----------- ---------- Total current liabilities........................... 1,850,959 1,625,285 Long-term debt, less current portion.................... 1,434,813 2,095,124 ----------- ---------- Total liabilities................................... 3,285,772 3,720,409 ----------- ---------- Commitments and contingencies Shareholders' equity: Preferred stock, $10 par value, 1,000,000 shares authorized, none issued Common stock, no par, $1,000 stated value, 5,000,000 shares authorized, 3,901,190 shares issued and outstanding at December 31, 1996 and 1995............................................. 1,000 1,000 Additional paid-in capital............................ 4,529,120 4,529,120 Retained earnings..................................... 2,673,159 1,573,297 ----------- ---------- Total shareholders' equity.......................... 7,203,279 6,103,417 ----------- ---------- Total liabilities and shareholders' equity........ $10,489,051 $9,823,826 =========== ==========
The accompanying notes are an integral part of the financial statements. F-2 RAWSON-KOENIG, INC. STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ----------- ----------- ----------- Sales................................... $19,521,871 $18,682,075 $17,184,557 Cost of sales........................... 15,002,105 14,903,247 13,300,320 ----------- ----------- ----------- Gross profit........................ 4,519,766 3,778,828 3,884,237 Selling, general and administrative expenses............................... 2,748,844 2,585,773 2,281,899 ----------- ----------- ----------- Income from operations.............. 1,770,922 1,193,055 1,602,338 Other income (expense): Interest expense...................... (147,211) (194,436) (210,891) Other, net............................ 9,151 193,874 92,330 ----------- ----------- ----------- Income before provision for income taxes.............................. 1,632,862 1,192,493 1,483,777 ----------- ----------- ----------- Provision for income taxes: Federal............................... 454,000 306,000 267,000 State................................. 79,000 61,000 75,000 ----------- ----------- ----------- 533,000 367,000 342,000 ----------- ----------- ----------- Net income.......................... $ 1,099,862 $ 825,493 $ 1,141,777 =========== =========== =========== Net income per share................ $ .28 $ .21 $ .29 =========== =========== =========== Average shares outstanding.............. 3,901,190 3,901,190 3,901,190 =========== =========== ===========
The accompanying notes are an integral part of the financial statements. F-3 RAWSON-KOENIG, INC. STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
RETAINED COMMON STOCK ADDITIONAL EARNINGS TOTAL ---------------- PAID-IN (ACCUMULATED SHAREHOLDERS' SHARES AMOUNT CAPITAL DEFICIT) EQUITY --------- ------ ---------- ------------ ------------- Balance, December 31, 1993................... 3,901,190 $1,000 $4,529,120 $ (393,973) $4,136,147 Net income.............. 1,141,777 1,141,777 --------- ------ ---------- ---------- ---------- Balance, December 31, 1994................... 3,901,190 1,000 4,529,120 747,804 5,277,924 Net income.............. 825,493 825,493 --------- ------ ---------- ---------- ---------- Balance, December 31, 1995................... 3,901,190 1,000 4,529,120 1,573,297 6,103,417 Net income.............. 1,099,862 1,099,862 --------- ------ ---------- ---------- ---------- Balance, December 31, 1996................... 3,901,190 $1,000 $4,529,120 $2,673,159 $7,203,279 ========= ====== ========== ========== ==========
The accompanying notes are an integral part of the financial statements. F-4 RAWSON-KOENIG, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ---------- ---------- ---------- Cash flows from operating activities: Net income................................ $1,099,862 $ 825,493 $1,141,777 ---------- ---------- ---------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............ 502,706 470,156 454,292 Loss (gain) on disposal of property, plant and equipment..................... 7,323 (15,500) 10,480 Change in assets and liabilities: Decrease (increase) in accounts receivable, trade...................... 444,505 (104,956) (363,771) Increase in inventories................. (325,924) (49,936) (498,925) Decrease (increase) in prepayments and other.................................. 67,412 (9,728) (53,083) Decrease (increase) in other assets..... 112,412 (112,412) Increase (decrease) in accounts payable. 135,267 (213,197) 116,901 Increase (decrease) in accrued expenses. (26,366) 47,175 132,528 Increase (decrease) in state income taxes payable.......................... 18,000 (172,459) 159,774 ---------- ---------- ---------- Total adjustments...................... 935,335 (160,857) (41,804) ---------- ---------- ---------- Net cash provided by operating activities............................ 2,035,197 664,636 1,099,973 ---------- ---------- ---------- Cash flows from investing activities: Purchase of property, plant, and equipment............................... (1,342,460) (805,970) (236,915) Proceeds from disposal of property, plant, and equipment.................... 15,500 1,955 ---------- ---------- ---------- Net cash used by investing activities.. (1,342,460) (790,470) (234,960) ---------- ---------- ---------- Cash flows from financing activities: Proceeds from revolving line of credit... 1,030,000 1,544,605 250,000 Payments on revolving line of credit..... (1,461,605) (1,063,000) (800,000) Payments on long-term debt............... (215,320) (203,713) (262,007) Payments on capital lease obligation..... (27,025) (29,672) (26,926) ---------- ---------- ---------- Net cash provided (used) by financing activities............................ (673,950) 248,220 (838,933) ---------- ---------- ---------- Net increase in cash and cash equivalents.. 18,787 122,386 26,080 Cash and cash equivalents at beginning of year...................................... 315,412 193,026 166,946 ---------- ---------- ---------- Cash and cash equivalents at end of year... $ 334,199 $ 315,412 $ 193,026 ========== ========== ==========
The accompanying notes are an integral part of the financial statements. F-5 RAWSON-KOENIG, INC. NOTES TO FINANCIAL STATEMENTS 1. NATURE OF ORGANIZATION: Rawson-Koenig, Inc. (the "Company"), a Texas corporation, designs, manufactures, and markets certain equipment for light trucks. Its chief products are truck tool boxes, truck service bodies, winches and truck-mounted cranes. The Company sells its products to customers in the truck equipment industry located throughout the United States. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains reserves for potential credit losses and such losses have been within management's expectations. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Net Income Per Share Net income per share is computed on the basis of the weighted average number of shares of common stock outstanding during the year. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers any highly liquid debt instruments purchased with an original maturity date of three months or less to be cash equivalents. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. Inventories Inventories are valued at the lower of cost or market. Cost, which includes material, labor and manufacturing overhead, is determined by the first-in, first-out (FIFO) method and, at December 31, 1996 and 1995, consisted of the following:
1996 1995 ----------- ---------- Raw materials...................................... $1,391,135 $1,262,869 Work in process.................................... 1,554,390 1,609,002 Finished goods..................................... 995,664 743,394 ----------- ---------- $ 3,941,189 $3,615,265 =========== ==========
Tooling Costs The costs of self-constructing tools and dies for use in manufacturing are capitalized and depreciated over four years using the straight-line method. Capitalized costs consist of labor, material and construction overhead. Property, Plant and Equipment Property, plant and equipment are recorded at cost and include improvements that significantly add to productive capacity or extend useful lives. Costs of maintenance and repairs are charged to expense. Upon retirement or disposal of assets, the cost and related accumulated depreciation are removed from the accounts and the gain or loss, if any, is reflected in operations. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives range from three to thirty one years. Depreciation expense for the years ended December 31, 1996, 1995 and 1994, amounted to $502,706, $470,156 and $454,292, respectively. F-6 RAWSON-KOENIG, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Property, plant and equipment at December 31, 1996 and 1995, consisted of the following:
1996 1995 ----------- ---------- Land............................................. $ 680,000 $ 680,000 Buildings........................................ 3,134,856 3,014,778 Machinery and equipment.......................... 5,313,870 4,023,323 Self-constructed tools and dies.................. 865,320 768,917 Furniture and fixtures........................... 394,737 385,703 Vehicles......................................... 151,554 110,974 Machinery and equipment under capital lease...... 130,230 ----------- ---------- 10,540,337 9,113,925 Accumulated depreciation and amortization........ (5,702,228) (5,220,659) ----------- ---------- $ 4,838,109 $3,893,266 =========== ==========
Included in accumulated depreciation and amortization at December 31, 1995, is $72,102 of accumulated amortization on machinery and equipment acquired under a capital lease agreement. The lease expired during 1996 and the Company purchased the equipment for $1 under the terms of the lease. Included in accumulated depreciation and amortization at December 31, 1996 and 1995, is $660,514 and $546,081, respectively, of accumulated depreciation on self-constructed tools and dies. Income Taxes Income taxes are computed under the provisions of the Financial Accounting Standards Board Statement No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying value of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured by using enacted tax rates that are applicable to the future years in which deferred tax assets or liabilities are expected to be realized or settled. Under SFAS 109, the effect of a change in tax rates on deferred tax assets and liabilities is recognized in net earnings in the period in which the tax rate change was enacted. The Company establishes a valuation allowance when it is more likely than not that a deferred tax asset will not be recovered. Management Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. 3. ACCRUED EXPENSES: Accrued expenses at December 31, 1996 and 1995, include $400,000 for potential claims against the Company by its employees arising from injuries incurred in the normal course of business prior to May 1, 1994. Actual claims for medical expenses and lost time paid during the years ended December 31, 1996, 1995 and 1994, for injuries incurred prior to May 1, 1994, were $12,000, $1,085 and $7,570, respectively. In addition, prior to May 1, 1994, the Company had stop-loss insurance for any individual claim in excess of $250,000. Effective May 1, 1994, the Company was fully insured under standard workers' compensation insurance for claims incurred after that date. F-7 RAWSON-KOENIG, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Accrued expenses at December 31, 1996 and 1995, include $123,097 and $124,110, respectively, for accrued payroll. 4. LONG-TERM DEBT: Long-term debt at December 31, 1996 and 1995, consisted of the following:
1996 1995 ---------- ---------- Revolving line of credit in the amount of $2,200,000 with a bank, which matures April 30, 1998. Interest is payable monthly at the bank's prime rate (8.25% at December 31, 1996). Borrowings under the agreement are restricted to certain percentages of accounts receivable and inventories................................ $ 200,000 $ 631,605 Real estate loan payable to a bank, due in monthly payments of $22,047, including interest at 8.5% per year, with the unpaid balance due May 2000....................................... 1,300,258 1,445,618 Installment loan payable to a bank, due in monthly payments of $5,830 plus interest at the bank's prime rate with the unpaid balance due April 1999..................................... 163,194 233,154 ---------- ---------- 1,663,452 2,310,377 Current portion of long-term debt............... (228,639) (215,253) ---------- ---------- Long-term portion............................... $1,434,813 $2,095,124 ========== ==========
Effective May 28, 1996, the Company amended its loan agreement with its primary lender. The amended agreement extended the maturity date of the line of credit to April 30, 1998 and provided the Company with an advancing term equipment loan under which the Company may borrow up to $1,000,000 to finance equipment purchases through April 30, 1997. Any borrowings outstanding under this advancing term equipment loan as of April 30, 1997, will be converted to a five year term loan that will be due in sixty equal monthly principal payments beginning May 30, 1997, plus interest at the bank's prime rate. As of December 31, 1996, there were no amounts outstanding under this advancing term equipment loan. The Company's other advancing term equipment loan agreement, that allowed for borrowings up to $1,500,000, expired unused on August 31, 1996. The line of credit agreement and other bank debt contain various restrictive covenants which include, among other things, maintenance of a minimum tangible net worth and minimum working capital, restrictions on property, plant and equipment additions and additional indebtedness, and requirements to maintain certain financial ratios. All loans from the bank are collateralized by accounts receivable, inventories, equipment and Houston real estate. Future maturities of long-term debt are as follows:
YEAR ENDING DECEMBER 31, ------------------------ 1997...................................................... $ 228,639 1998...................................................... 442,867 1999...................................................... 211,686 2000...................................................... 780,260 ---------- $1,663,452 ==========
F-8 RAWSON-KOENIG, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Cash paid for interest was $147,572, $194,578 and $211,372 for the years ended December 31, 1996, 1995 and 1994, respectively. 5. INCOME TAXES: The composition of deferred tax assets and liabilities and the related tax effects at December 31, 1996 and 1995 was as follows:
1996 1995 --------- --------- Deferred tax assets: Tax assets which have been expensed for book purposes.................................. $ 24,570 $ 29,703 Accrued expenses deductible when paid for tax... 148,000 148,000 Net operating loss carryforwards................ 176,955 239,289 Investment tax credit carryforwards............. 15,000 15,000 --------- --------- Total deferred tax assets..................... 364,525 431,992 Deferred tax liabilities: Property, plant and equipment basis............. 156,302 146,546 --------- --------- Net deferred tax assets before valuation allowance........................................ 208,223 285,446 Valuation allowance............................... (208,223) (285,446) --------- --------- Net deferred tax assets....................... $ - $ - ========= =========
The differences between the federal income tax provision and the amount that would result if the federal statutory rate of 34% were applied to pretax financial income for 1996, 1995 and 1994 were as follows:
1996 1995 1994 ----------------- ----------------- ----------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT -------- ------- -------- ------- -------- ------- Federal income tax provision at the statutory rate......... $555,173 34.0% $405,448 34.0% $504,484 34.0% Utilization of net operating loss carryforwards.......... (62,334) (3.8) (62,335) (5.2) (87,056) (5.9) Utilization of alternative minimum tax credit carryforwards... (4,013) (0.4) (125,500) (8.4) State income tax, net of federal benefit........ 52,140 3.2 40,260 3.4 49,500 3.3 Change in valuation allowance, net of alternative minimum tax and utilization of net operating loss and alternative minimum tax credit carryforwards... (14,889) (.9) (16,574) (1.4) 3,092 0.2 Other................... 2,910 .1 4,214 0.4 (2,520) (0.2) -------- ---- -------- ---- -------- ---- $533,000 32.6% $367,000 30.8% $342,000 23.0% ======== ==== ======== ==== ======== ====
F-9 RAWSON-KOENIG, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) At December 31, 1996, the Company had approximate tax net operating loss and tax credit carryforwards available to offset future taxable income as follows:
NET OPERATING LOSS CARRYFORWARDS --------------------- ALTERNATIVE REGULAR MINIMUM TAX TAX INVESTMENT REPORTING REPORTING TAX CREDIT EXPIRATION YEAR ENDING DECEMBER 31, PURPOSES PURPOSES CARRYFORWARDS ----------------------------------- --------- ----------- ------------- 1998................................... $ 6,000 1999................................... 9,000 2001................................... $346,000 $346,000 2002................................... 58,000 58,000 2003................................... 58,000 58,000 2004................................... 58,000 58,000 -------- -------- ------- $520,000 $520,000 $15,000 ======== ======== =======
Utilization of net operating loss carryforwards is limited under the alternative minimum tax rules. Additionally, special limitations exist under the tax law which may restrict the utilization of the regular tax and alternative minimum tax net operating loss carryforwards. Cash paid for income taxes was $503,530, $575,773 and $182,226 for the years ended December 31, 1996, 1995 and 1994, respectively. 6. RELATED PARTY TRANSACTIONS: During 1996 and 1995, the Company paid $8,127 and $7,470, respectively, to directors for consulting fees. In addition, the Company made payments for legal services provided by the law firm of a director in the amount of $90,346, $49,217 and $30,990 for the years ended December 31, 1996, 1995 and 1994, respectively. Accrued amounts payable to this law firm at December 31, 1996 and 1995 were $36,067 and $29,079, respectively. 7. COMMITMENTS AND CONTINGENCIES: The Company is engaged in various claims and litigation arising from its operations. In the opinion of management, uninsured losses, if any, resulting from these matters will not have a material adverse effect upon the financial position or results of operations of the Company. 8. SUPPLEMENTAL CASH FLOW INFORMATION: During 1996, the Company purchased certain equipment with a cost of $1,124,120 of which $112,412 was included in accounts payable at December 31, 1996. F-10 RAWSON-KOENIG, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
COLUMN C ADDITIONS COLUMN B --------------------- COLUMN E BALANCE AT CHARGED TO CHARGED TO BALANCE AT COLUMN A BEGINNING COSTS AND OTHER COLUMN D END DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD ----------- ---------- ---------- ---------- ---------- ---------- Valuation and qualifying accounts deducted in the balance sheet from the related assets to which they apply: (a) Allowance for doubtful accounts receivable: Year ended December 31, 1994............ $ 40,000 $(9,746) $10,124 $ 378 $ 40,000 Year ended December 31, 1995............ 40,000 466 63 529 40,000 Year ended December 31, 1996............ 40,000 6,217 - 6,217 40,000 (b) Deferred tax asset valuation allowance: Year ended December 31, 1994............ 655,976 - - 291,621 364,355 Year ended December 31, 1995............ 364,355 - - 78,909 285,446 Year ended December 31, 1996............ 285,446 - - 77,223 208,223
F-11 EX-10.15 2 LOAN AGREEMENTS DATED MAY 28, 1996 SECOND AMENDMENT TO AMENDED AND RESTATED LETTER LOAN AGREEMENT AND AMENDED AND RESTATED SECURITY AGREEMENT, AND FIRST AMENDMENT TO REVOLVING NOTE THIS SECOND AMENDMENT TO AMENDED AND RESTATED LETTER LOAN AGREEMENT AND AMENDED AND RESTATED SECURITY AGREEMENT, AND FIRST AMENDMENT TO REVOLVING NOTE ("Amendment") is made and entered into effective the 28th day of May, 1996, by and between RAWSON-KOENIG, INC., a Texas corporation (herein called "Borrower"), and BANK ONE, TEXAS, NA, with offices in Houston, Texas (herein called "Lender"). R E C I T A L S: WHEREAS, Borrower and Lender entered into, among other agreements, (i) an Amended and Restated Letter Loan Agreement dated April 21, 1995 (as amended, the "Loan Agreement"; the terms defined therein being used herein as therein defined unless otherwise defined herein), (ii) a Master Revolving Credit Note of even date with the Loan Agreement in the principal sum of $2,200,000.00 ("Revolving Note"), and (iii) an Amended and Restated Security Agreement of even date with the Loan Agreement (the "Security Agreement"); and WHEREAS, Borrower and Lender entered into that certain First Amendment to Amended and Restated Letter Loan Agreement, Promissory Note (Advancing Term) and Amended and Restated Security Agreement dated effective September 21, 1995; and WHEREAS, Borrower and Lender desire to (i) provide for a new $1,000,000.00 advancing term facility, (ii) extend the maturity date of the Revolving Note from April 30, 1997 to April 30, 1998, and (iii) amend certain terms and provisions of the Loan Agreement. A G R E E M E N T: NOW, THEREFORE, in consideration of the mutual promises herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, Borrower and Lender hereby agree to amend the Loan Agreement, the Revolving Note and the Security Agreement as hereinafter set forth. 1. Amendments to Loan Agreement. The Loan Agreement is, effective the date hereof, and subject to the satisfaction of the conditions precedent set forth in Section 4 hereof, hereby amended as follows: (a) The introductory paragraph of the Loan Agreement is hereby deleted and replaced with the following: "The undersigned, Rawson-Koenig, Inc., a Texas corporation ("Borrower"), duly organized and existing under the laws of the State of Texas, has requested that Bank One, Texas, NA ("Lender") make a loan to Borrower. Lender has advised Borrower that Lender is willing to make such loan to Borrower upon the terms and subject to the conditions set forth in this letter loan agreement (the "Agreement"). In consideration for the above premises and the mutual promises and covenants herein contained, Borrower and Lender do hereby agree as follows:" (b) Paragraph 1 of the Loan Agreement is hereby deleted and replaced with the following: "1. Loans. On the terms and subject to the conditions hereinafter set forth, Lender agrees to lend to Borrower, a sum evidenced by the below described promissory notes (the "Loans"). The Loans shall be evidenced by (i) a Master Revolving Credit Note (the "Revolving Note") in a form satisfactory to Lender, duly executed by Borrower in the principal amount of $2,200,000.00 and made payable to the order of Lender, (ii) a Term Promissory Note (the "Real Estate Note") in a form satisfactory to Lender, duly executed by Borrower in the principal amount of $488,604.20 as of January 29, 1990 as evidenced by an assignment to Lender from Texas Commerce Bank-Fort Worth ("TCB"), of an existing promissory note from Borrower, payable to the order of TCB in the original face amount of $575,000.00, (iii) a Term Promissory Note (the "Central Parkway Note") in a form satisfactory to Lender, duly executed by Borrower in the principal amount of $1,879,214.00 as of May 20, 1991 as evidenced by an assignment to Lender from Keystone International, Inc. ("Keystone"), of an existing promissory note from Borrower, payable to the order of Keystone in the original face amount of $2,000,000.00, (iv) an Advancing Term Promissory Note (the "Equipment Note") in a form satisfactory to Lender, duly executed by Borrower in the original principal amount of $1,000,000.00 and payable to the order of Lender, which Equipment Note has been subsequently increased to a principal amount of $1,500,000, and (v) an Advancing Term Promissory Note (the "Second Equipment Note") in a form satisfactory to Lender, duly executed by Borrower in the principal amount of $1,000,000.00 and payable to the order of Lender. The Real Estate Note, the Revolving Note, the Central Parkway Note, the Equipment Note, and the Second Equipment Note, and any renewals and extensions thereof, are collectively referred to as the "Notes". Principal and interest on each of the Notes shall be due and payable in the manner and at the times set forth in such Notes." (c) Subparagraph 2(d) is hereby added to the Loan Agreement as follows: "(d) Subject to the terms hereof, Lender will lend to Borrower an aggregate amount not to exceed $1,000,000.00 to be used for Borrower's equipment purchases. From time to time, Borrower may submit to Lender requests for advances under the Second Equipment Note, which requests shall specify the aggregate amount of the advance and the date of such advance. Borrower shall be entitled only to an advance under the Second Equipment Note in an amount approved by Lender, and in no event shall any such advance exceed Borrower's actual cost of any such purchased equipment. Borrower shall furnish to Lender a request for borrowing in a form satisfactory to Lender and a copy of the invoice for the assets to be purchased, at least two (2) business days prior to the requested borrowing date. Lender shall make the requested funds available to Borrower at Lender's principal banking office in Houston, Texas. In connection with advances, Lender shall not be obligated to make any advances under the Second Equipment Note after April 30, 1997. Borrower shall not be entitled to reborrow any sums already repaid under the Second Equipment Note." (d) The reference to "$4,900,000" as Borrower's minimum Tangible Net Worth in paragraph 6(c) of the Loan Agreement is hereby deleted and replaced with "$5,000,000". 2. Amendments to Revolving Note. The Revolving Note is, effective the date hereof, and subject to the satisfaction of the conditions precedent set forth in Section 4 hereof, hereby amended as follows: (a) The first grammatical paragraph on page two of the Revolving Note dated April 21, 1995 is, effective the date hereof, amended by deleting the reference to "April 30, 1997" and substituting "April 30, 1998" therefor. (b) Upon the effective date hereof, Lender shall be authorized to endorse on the Revolving Note the following legend or a legend of similar effect: "The final maturity set forth in this Note has been extended until April 30, 1998, pursuant to a Second Amendment to Amended and Restated Letter Loan Agreement and Amended and Restated Security Agreement and First Amendment to Revolving Note, dated as of May 28, 1996 amending, among other things, the Loan Agreement referred to in this Note." 3. Amendment to Security Agreement. The Security Agreement is, effective the date hereof, and subject to the satisfaction of the conditions precedent set forth in Section 4 hereof, hereby amended as follows: (a) Section 1.2 of the Security Agreement is hereby deleted and replaced with the following: "1.2 Obligations. The security interest granted hereby is to secure the payment of (i) a Master Revolving Credit Note executed by Debtor in the principal amount of $2,200,000.00 and made payable to the order of Secured Party, and any and all extensions, renewals and rearrangements thereof, (ii) a Term Promissory Note executed by Debtor in the principal amount of $488,604.20 as of January 29, 1990 and made payable to the order of Texas Commerce Bank-Fort Worth, and subsequently assigned to Secured Party, and any and all extensions, renewals and rearrangements thereof, (iii) a Term Promissory Note executed by Debtor in the principal amount of $1,879,214.00 and made payable to the order of Keystone International, Inc., and subsequently assigned to Secured Party, and any and all extensions, renewals and rearrangements thereof, (iv) an Advancing Term Promissory Note duly executed by Debtor in the original principal amount of $1,000,000.00 and made payable to the order of Secured Party, the principal amount of which has subsequently been increased to $1,500,000, and any and all extensions, renewals and rearrangements thereof, (v) an Advancing Term Promissory Note duly executed by Debtor in the principal amount of $1,000,000.00 and made payable to the order of Secured Party, and any and all extensions, renewals and rearrangements thereof, and (vi) any and all other indebtedness and liabilities whatsoever of Debtor to Secured Party whether direct or indirect, absolute or contingent, due or to become due and whether now existing or hereafter arising and howsoever evidenced or acquired, whether joint or several (all of which are hereinafter sometimes called the "Obligations"). Debtor acknowledges that the security interest hereby granted shall secure all future advances as well as any other obligations and liabilities of Debtor to Secured Party whether now in existence or hereafter arising." 4. Conditions of Effectiveness. This Amendment shall become effective when, and only when, Lender shall have received counterparts of this Amendment executed by Borrower and Sections 1, 2 and 3 hereof shall become effective when, and only when, Lender shall have additionally received all of the following documents: (a) Sixth Modification of Note and Liens executed by Borrower; (b) Second Supplemental Deed of Trust executed by Borrower; (c) Certificates of the Boards of Directors of Borrower authorizing the execution, delivery and performance of this Amendment, and the matters contemplated hereby; and (d) Any other instruments or documents as may be required by Lender. 5. Representations and Warranties of Borrower. Borrower represents and warrants as follows: (a) Borrower is duly authorized and empowered to execute, deliver and perform this Amendment and all other instruments referred to or mentioned herein to which it is a party, and all action on its part requisite for the due execution, delivery and the performance of this Amendment has been duly and effectively taken. This Amendment, when executed and delivered, will constitute valid and binding obligations of Borrower enforceable in accordance with its terms. This Amendment does not violate any provisions of Borrower's Articles of Incorporation, By-Laws, or any contract, agreement, law or regulation to which Borrower is subject, and does not require the consent or approval of any regulatory authority or governmental body of the United States or any state. (b) The representations and warranties made by Borrower in the Loan Agreement are true and correct as of the date of this Amendment. (c) No event has occurred and is continuing which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both. 6. Reference to and Effect on the Security Instruments. (a) Upon the effectiveness of Sections 1, 2 and 3 hereof, on and after the date hereof each reference in the Loan Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import, and each reference in the other Security Instruments (hereinafter defined) to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended hereby. (b) Except as specifically amended above, the Loan Agreement, the Revolving Note, the Security Agreement, and all other instruments securing or guaranteeing Borrower's obligations to Lender (the "Security Instruments") shall remain in full force and effect and are hereby ratified and confirmed. Without limiting the generality of the foregoing, the Security Instruments and all collateral described therein do and shall continue to secure the payment of all obligations of Borrower under the Loan Agreement and the Revolving Note, as amended hereby, and under the other Security Instruments. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Lender under any of the Security Instruments, nor constitute a waiver of any provision of any of the Security Instruments. 7. Waiver. As additional consideration for the execution, delivery and performance of this Amendment by the parties hereto and to induce Lender to enter into this Amendment, Borrower warrants and represents to Lender that no facts, events, statuses or conditions exist or have existed which, either now or with the passage of time or giving of notice, or both, constitute or will constitute a basis for any claim or cause of action against Lender or any defense to (a) the payment of any obligations and indebtedness under the Notes and/or the Security Instruments or (b) the performance of any of their obligations with respect to the Notes and/or the Security Instruments, and in the event any such facts, events, statuses or conditions exist or have existed, Borrower unconditionally and irrevocably waives any and all claims and causes of action against Lender and any defenses to their payment and performance obligations in respect to the Notes and the Security Instruments. 8. Costs and Expenses. Borrower agrees to pay on demand all costs and expenses of Lender in connection with the preparation, reproduction, execution and delivery of this Amendment and the other instruments and documents to be delivered hereunder, including the reasonable fees and out-of-pocket expenses of counsel for Lender. In addition, Borrower shall pay any and all fees payable or determined to be payable in connection with the execution and delivery, filing or recording of this Amendment and the other instruments and documents to be delivered hereunder, and agrees to save Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such fees. 9. Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. 10. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Texas. 11. Final Agreement. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed in multiple counterparts, each of which is an original instrument for all purposes, all as of the day and year first above written. LENDER: BORROWER: BANK ONE, TEXAS, NA RAWSON-KOENIG, INC. By:/s/ Barry A. Kelly By:/s/ Thomas C. Rawson ------------------ -------------------- Barry A. Kelly, Thomas C. Rawson, Vice President Chairman of the Board of Directors PROMISSORY NOTE (Advancing Term) $1,000,000.00 Houston, Texas May 28, 1996 FOR VALUE RECEIVED, the undersigned, RAWSON-KOENIG, INC., a Texas corporation (hereinafter called the "Maker"), promises to pay to the order of BANK ONE, TEXAS, NA, a national banking association (hereinafter called the "Payee"), at its office located at 910 Travis Street, Houston, Texas 77002, or at such other place as the Payee may designate in writing to the Maker, in lawful money of the United States of America, the principal sum of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00), or so much thereof that may be advanced and outstanding pursuant to the hereinafter defined Loan Agreement, together with interest thereon from the date hereof until maturity (determined on a daily basis and for the actual number of days elapsed based on either a 365 or 366 day year, as the case may be) at a fluctuating rate per annum equal to the lesser of (i) the Base Rate in effect from day-to-day and (ii) the Maximum Rate. If at any time and from time to time the rate of interest calculated pursuant to item (i) above would exceed the Maximum Rate, thereby causing the interest payable hereon to be limited to the Maximum Rate, then any subsequent reduction in the rate specified in item (i) above shall not reduce the rate of interest hereon below the Maximum Rate until the total amount of interest accrued hereon from and after the date of the first advance hereunder equals the amount of interest which would have accrued hereon if the rate specified in item (i) above had at all times been in effect. As used herein, the term "Base Rate" means, at any time, the rate of interest per annum established from time to time by Payee. Without notice to the Maker or any other person, the Base Rate shall change automatically from time to time as and in the amount by which such Base Rate shall fluctuate, with each such change to be effective as of the date of each change in such Base Rate. The Base Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. The Payee may make commercial loans or other loans at rates of interest at, above or below the Base Rate. As used herein, the term "Maximum Rate" shall mean, with respect to the holder hereof, the maximum nonusurious interest rate, if any, that at any time, may be under applicable law contracted for, taken, reserved, charged or received on the indebtedness evidenced by this Note. If applicable law ceases to provide for such a maximum rate of interest, the Maximum Rate shall be equal to eighteen percent (18%) per annum. The principal of and all accrued but unpaid interest on this Note shall be due and payable as follows: Accrued interest hereon shall be due and payable in monthly installments as it accrues, the first such installment becoming due and payable on or before June 31, 1996, with a like installment being due and payable on or before the last day of each succeeding calendar month thereafter until and including April 30, 1997 (the "Advancing Termination Date"). Thereafter, this Note shall be due and payable in monthly installments of (i) all accrued and unpaid interest hereon, plus (ii) a principal installment in an amount based on a sixty (60) month equal amortization of the outstanding principal amount of this Note as of the Advancing Termination Date; the first such installment becoming due and payable on or before one month after the Advancing Termination Date, with a like installment becoming due and payable on or before the same day of each of the succeeding calendar months thereafter until April 30, 2002, when this Note, including all outstanding principal and accrued, unpaid interest hereon shall be fully and finally paid. The Maker reserves the right to prepay this Note, in whole or in part, at any time, without penalty or notice. All payments hereunder, whether designated as payments of principal or interest, shall be applied: first to unpaid and accrued interest; then to the discharge of any expenses or damages for which the Payee may be entitled to receive reimbursement under the terms of this Note or under the terms of any document executed in connection herewith; and, lastly, to unpaid principal in the inverse order of maturity. Unless changed in accordance with law, the applicable method of calculating the usury ceiling rate under Texas law shall be the indicated (weekly) ceiling rate in effect and applicable to the loan evidenced by this Note, as provided in Tex. Rev. Civ. Stat. Ann. art. 5069-1.04, as amended; provided, that the Payee may also rely on alternate maximum rates of interest under other applicable laws if they are higher. All past due principal and interest on this Note, whether due as the result of acceleration of maturity or otherwise, shall bear interest from the date the payment thereof shall have become due until the same have been fully discharged by payment at the Maximum Rate. This Note has been executed and delivered pursuant to, and is subject to certain terms and conditions in, that certain Amended and Restated Letter Loan Agreement dated April 21, 1995, as previously amended and as amended by that certain Second Amendment to Amended and Restated Letter Loan Agreement and Amended and Restated Security Agreement and First Amendment to Revolving Note of even date herewith (said Agreement as previously amended and as it may hereafter be amended or modified from time to time being the "Loan Agreement", the terms defined therein and not otherwise defined herein being used herein as therein defined), and is the "Second Equipment Note" referred to therein. The Payee shall be entitled to the benefits provided for in the Loan Agreement. Reference is made to the Loan Agreement for the statement of any obligation of the Payee to advance funds hereunder and the Events of Default (as defined therein) upon which the maturity of this Note may be accelerated. The time of payment of this Note is also subject to acceleration in the event the Maker defaults or otherwise fails to discharge its obligations under any of the instruments securing payment hereof. In the Event of Default hereunder or under any of the instruments securing payment hereof and the placing of this Note in the hands of an attorney for collection (whether or not suit is filed), or if this Note is collected by suit or legal proceedings or through the probate court or bankruptcy proceedings, the Maker agrees to pay the holder hereof the costs and reasonable attorney's fees incurred in the collection hereof. As recited in Paragraph 10(e) of the Loan Agreement, which paragraph is incorporated by reference herein, notwithstanding any provision herein to the contrary, the Payee shall never be entitled to receive or collect interest hereunder, nor shall or may amounts received hereunder be credited to interest hereunder, so that the Payee shall receive or be paid interest exceeding the maximum amount permitted by applicable law. Any check, draft, money order or other instrument given in payment of all or any portion hereof may be accepted by the holder hereof and handled in collection in the customary manner, but the same shall not constitute payment hereunder or diminish any rights of the holder hereof except to the extent that actual cash proceeds of such instrument are unconditionally received by the holder and applied to this indebtedness in the manner elsewhere herein provided. It is further agreed that the Payee shall have a first lien on all deposits and other sums at any time credited by or due from the Payee to any maker, endorser, surety or guarantor hereof as collateral security for the payment of this Note, and the Payee, at its option, may at any time, without notice and without any liability, hold all or any part of any such deposits or other sums until all sums owing on this Note have been paid in full and/or apply or set off all or any part of any such deposits or other sums credited by or due from the Payee to or against any sums due on this Note in any manner and in any order of preference which the Payee, in its sole discretion, chooses. The loan evidenced by this Note was negotiated and consummated in the State of Texas and it is agreed and understood that the legality, enforceability and construction hereof shall be governed by Texas law and, to the extent applicable, by the laws of the United States of America. The Maker and the Payee expressly agree, pursuant to Article 15.10(b) of Chapter 15 ("Chapter 15") of the Texas Credit Code, that Chapter 15 shall not apply to this Note or to any advance evidenced by this Note and that this Note and all such advances shall not be governed by or subject to the provisions of Chapter 15 in any manner whatsoever. This Note is secured by (i) a Supplemental Deed of Trust of even date herewith executed by the Maker for the benefit of the Payee covering the property described therein, given to supplement that certain Deed of Trust dated January 29, 1988 executed by the Maker for the benefit of Keystone International, Inc. ("Keystone") and filed for record in the Official Public Records of Real Property of Harris County, Texas under Clerk's File No. L524904, and subsequently transferred and assigned by Keystone to the Payee by Transfer of Note and Liens dated May 20, 1991, filed for record in the Official Public Records of Real Property of Harris County, Texas, under Clerk's File No. N191393, and (ii) an Amended and Restated Security Agreement dated April 21, 1995 executed by the Maker to the Payee. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. RAWSON-KOENIG, INC. By:/s/ Thomas C. Rawson -------------------- Thomas C. Rawson, Chairman of the Board of Directors SECOND SUPPLEMENTAL DEED OF TRUST THE STATE OF TEXAS ) ) KNOW ALL PERSONS BY THESE PRESENTS: COUNTY OF HARRIS ) THIS SECOND SUPPLEMENTAL DEED OF TRUST is entered into effective as of May 28, 1996, by and between BANK ONE TEXAS, NA, a national banking association (herein called "Lender"), and RAWSON-KOENIG, INC., a Texas corporation (herein called "Borrower"). RECITALS: 1. Borrower made, executed and delivered that certain Promissory Note (herein called the "Original Note") dated January 29, 1988, in the original principal sum of Two Million and No/100 Dollars ($2,000,000.00), payable to the order of Keystone International, Inc., a Texas corporation ("Keystone"), as therein provided, said Original Note being secured in part by a Deed of Trust (the "Deed of Trust") of even date therewith, executed by Borrower to W. Wayne Patterson, as Trustee ("Trustee") for the benefit of Keystone and filed for record in the Official Public Records of Real Property of Harris County, Texas under Clerk's File No. L524904, covering the property (the "Property"), more fully described on Exhibit "A" annexed hereto. The Deed of Trust, and any other instruments securing or guaranteeing the Original Note are herein called the "Security Documents". 2. The Original Note and liens securing same were transferred and assigned from Keystone to Lender by that certain Transfer of Note and Liens dated May 20, 1991, which was filed for record in the Official Public Records of Real Property of Harris County, Texas, under Clerk's File No. N191393 and, thereafter, modified by the terms of a Modification, Renewal and Extension of Note and Liens dated May 21, 1991, which was filed for record in the Official Public Records of Real Property of Harris County, Texas, under Clerk's File No. N191391, pursuant to the terms of a Second Amendment to Letter Loan Agreement dated May 21, 1991, which has been amended by a Third Amendment to Letter Loan Agreement dated May 24, 1992, Fourth Amendment to Letter Loan Agreement dated April 30, 1993, Fifth Amendment to Letter Loan Agreement dated May 21, 1993 and Sixth Amendment to Letter Loan Agreement dated April 30, 1994. 3. Borrower and Lender executed that certain Amended and Restated Letter Loan Agreement dated April 21, 1995, pursuant to which Lender provided Borrower with an additional loan facility in the original principal amount of One Million and No/100 Dollars ($1,000,000.00) (the "Equipment Loan") evidenced by an Advancing Term Promissory Note of even date therewith, and secured by, among other things, a Supplemental Deed of Trust executed by Borrower in favor of Lender, filed for record under Clerk's File No. R424607 in the Official Public Records of Real Property of Harris County, Texas, said Amended and Restated Letter Loan Agreement having been amended by that certain First Amendment to Amended and Restated Letter Loan Agreement, Promissory Note (Advancing Term) and Amended and Restated Security Agreement dated September 21, 1995, and the principal amount of the Equipment Loan was increased to $1,500,000 by the terms of a Modification of Note and Liens dated September 21, 1995. 4. Borrower has of this date entered into a Second Amendment to Amended and Restated Letter Loan Agreement and Amended and Restated Security Agreement and First Amendment to Revolving Note with Lender, whereby Lender has agreed, subject to the terms and conditions thereof, to provide Borrower with an additional loan facility in the amount of One Million and No/100 Dollars ($1,000,000.00) (the "Second Equipment Loan"), to be evidenced by an Advancing Term Promissory Note of even date herewith, provided, among other things, Borrower supplements the Deed of Trust to include the Second Equipment Loan as being secured by the liens granted in the Deed of Trust. 5. Borrower has agreed to supplement the Deed of Trust as provided hereinbelow. A G R E E M E N T: 1. NOW, THEREFORE, Borrower, in consideration of Ten And No/100 Dollars ($10.00) and other good and valuable consideration in hand paid, the receipt and sufficiency of which are hereby acknowledged, has GRANTED, BARGAINED, SOLD and CONVEYED and by these presents does GRANT, BARGAIN, SELL and CONVEY unto Trustee, the Property. TO HAVE AND TO HOLD THE PROPERTY, together with all and singular the rights, privileges, hereditaments and appurtenances thereto and in anywise incident, appertaining or belonging unto Trustee, and his successors or substitutes forever; and Borrower hereby binds itself, its successors and assigns, to warrant and forever defend title to the Property unto Trustee, his successors, substitutes and assigns, against every person whomsoever lawfully claiming or to claim the same or any part thereof. 2. This conveyance is made in trust to secure and enforce the payment of the Second Equipment Loan, and the Security Documents shall be from and after this date deemed modified as necessary to secure the Second Equipment Loan. Henceforth, the term "said indebtedness" as defined in the Deed of Trust shall include the Second Equipment Loan, as well as all renewals, extensions, modifications and rearrangements thereof. 3. As supplemented hereby, the Borrower hereby reaffirms all covenants, representations and warranties made in the Deed of Trust and Borrower hereby agrees that all of the terms and conditions thereof are incorporated herein by this reference. 4. All terms, conditions and provisions contained in the Security Documents, except as modified, restated (where applicable), or amended hereby, shall continue and remain in full force and effect. 5. The Property shall be and remain in all respects subject to the lien, charge or encumbrance of the Security Documents, as modified, and nothing herein contained and nothing done pursuant hereto shall affect or be construed to affect the lien, charge or encumbrance of the Security Documents, as modified, or the priority thereof over any other liens, charges or encumbrances or to release or affect the liability of any party or parties whomsoever who may now or hereafter be liable under or on account of the Security Documents, as amended, nor shall anything herein contained or done in pursuance hereof affect or be construed to affect any other security for the said indebtedness, if any, held by the Lender. 6. No renewal or extension of the time of payment of any part or all of the Second Equipment Loan, no releases or surrender of any security for the Second Equipment Loan, no release of any person primarily or secondarily liable on the Second Equipment Loan (including any maker, endorser or guarantor), no delay in enforcement of payment of the Second Equipment Loan, and no delay or omission in exercising any right or power with respect to the Second Equipment Loan, shall in any way or manner impair or affect the rights of the Lender hereunder. 7. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBJECT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. EXECUTED by each part on the date of its respective acknowledgment, but to be effective for all purposes as of the date first above written. "BORROWER" RAWSON-KOENIG, INC. By:/s/ Thomas C. Rawson -------------------- Thomas C. Rawson, Chairman of the Board of Directors "LENDER" BANK ONE, TEXAS, NA By:/s/ Barry A. Kelly ------------------ Barry A. Kelly, Vice President SIXTH MODIFICATION OF NOTE AND LIENS (Real Estate Note) THE STATE OF TEXAS ) ) KNOW ALL PERSONS BY THESE PRESENTS: COUNTY OF HARRIS ) THIS SIXTH MODIFICATION OF NOTE AND LIENS (herein called "Agreement") is entered into effective as of May 28, 1996, by and between BANK ONE, TEXAS, NA, successor in interest by merger with TEAM BANK (herein called "Lender"), and RAWSON-KOENIG, INC., a Texas corporation, (herein called "Borrower"). W I T N E S S E T H: WHEREAS, Borrower made, executed and delivered that certain Promissory Note (herein called the "Note") dated September 22, 1987, in the original principal sum of FIVE HUNDRED SEVENTY-FIVE THOUSAND AND NO/100 DOLLARS ($575,000.00) payable to the order of TEXAS COMMERCE BANK OF FORT WORTH, TEXAS, which is now known as Texas Commerce Bank National Association ("TCB"), as therein provided, said Note being secured by a Deed of Trust, Security Agreement and Financing Statement (the "Tarrant County Deed of Trust") of even date therewith, executed by Borrower to Gregory D. Stuteville, Trustee for the benefit of TCB, and filed for record in the Official Public Records of Real Property of Tarrant County, Texas, under Clerk's File No. 594747 and corrected and re-recorded under Clerk's File No. 602929, covering the property (the "Tarrant County Property") more fully described therein; and WHEREAS, the Note and liens were transferred and assigned from TCB to Lender by that certain Transfer of Note and Liens dated to be effective January 29, 1990 and filed for record in the Official Public Records of Real Property of Tarrant County, Texas under Vol. 09943, Page 0973; and WHEREAS, Borrower made, executed and delivered that certain Modification, Renewal and Extension of Note and Liens (the "Harris County Modification") dated May 21, 1991, and filed for record in the Official Public Records of Real Property of Harris County, Texas, under Clerk's File No. N191391, wherein Borrower and Lender agreed that the liens encumbering the property (the "Harris County Property") securing the indebtedness described therein, shall also secure the Note; and WHEREAS, the Note and Security Documents (hereinafter defined) were modified, renewed and extended pursuant to the terms and conditions of a Second Modification, Renewal and Extension of Note and Liens ("Second Modification") dated March 24, 1992, and filed for record in the Official Public Records of Real Property of Tarrant County, Texas under Vol. 10637, Page 1665 and in the Official Public Records of Real Property of Harris County, Texas, under Clerk's File No. P001208; and WHEREAS, the Note and Security Documents were modified, renewed and extended pursuant to the terms and conditions of a Third Modification of Note and Liens ("Third Modification") dated April 30, 1993, and filed for record in the Official Public Records of Real Property of Tarrant County, Texas; and WHEREAS, the Note and Security Documents were modified, renewed and extended pursuant to the terms and conditions of a Fourth Modification of Note and Liens ("Fourth Modification") dated April 30, 1994, and filed for record in the Official Public Records of Real Property of Harris County, Texas under Clerk's File No. P924820, wherein Borrower requested, and Lender agreed, among other things, to release the Tarrant County Property from the liens securing the Tarrant County Deed of Trust; and WHEREAS, the Note and Security Documents were most recently renewed and extended pursuant to the terms and conditions of a Fifth Modification of Note and Liens ("Fifth Modification") dated effective April 21, 1995, and filed for record in the Official Public Records of Real Property of Harris County, Texas under Clerk's File No. L524904, wherein, among other things, the Security Documents were amended to extend the Revolving Note; and WHEREAS, Borrower has requested, and Lender has agreed, on the terms and conditions set forth herein, to extend the term of the Revolving Note. NOW, THEREFORE, in consideration of the mutual covenants, rights and obligations contained herein, the benefits to be derived therefrom and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree and contract as follows: 1. Lender and Borrower hereby agree that the final maturity date of the Revolving Note is extended from April 30, 1997 to April 30, 1998. 2. This Agreement is entered into in extension (and not in extinguishment, substitution, novation or discharge) of the unpaid principal balance of the Revolving Note. All liens, security interests and obligations securing and guaranteeing payment of the Revolving Note, including without limitation the Harris County Modification, the Second Modification, the Third Modification, the Fourth Modification and the Fifth Modification (collectively the "Security Documents") are hereby ratified, confirmed, renewed, extended and brought forward as security for the payment hereunder. 3. The Security Documents are hereby amended to provide that the Notes described therein shall mean (i) the Note, as previously modified, and (ii) the Revolving Note as modified (with an extended maturity of April 30, 1998). 4. All other terms, conditions and provisions contained in the Revolving Note, except as otherwise specifically set forth herein, shall continue and remain in full force and effect. 5. All terms, conditions and provisions contained in the Security Documents, except as modified, restated (where applicable), renewed and extended by the documents referred to herein, shall continue and remain in full force and effect. 6. This Agreement has been executed and delivered pursuant to, and is subject to certain terms and conditions set forth in, that certain Second Amendment to Amended and Restated Letter Loan Agreement and Amended and Restated Security Agreement and First Amendment to Revolving Note of even date herewith (the "Loan Agreement"), and the Revolving Note is the "Revolving Note" referred to therein. The Lender shall be entitled to the benefits provided in the Loan Agreement. Reference is made to the Loan Agreement for the Events of Default upon which the maturity of the Revolving Note may be accelerated. 7. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. If any provision of this Agreement or the application thereof to any person or circumstances shall, for any reason and to any extent, be invalid or unenforceable, neither the remainder of this Agreement, nor the application of such provision to any other persons or circumstances shall be affected thereby, but rather same shall be enforced to the greatest extent permitted by law. 8. This Agreement, and all the terms, provisions and conditions hereof, shall be binding upon each party hereto and such party's heirs, legal representatives, successors and assigns. 9. This Agreement may be executed in multiple originals. This Agreement may also be executed in multiple counterparts, and all so executed shall constitute one agreement, binding on the parties hereto, notwithstanding that all parties are not signatories to the original or the same counterpart. 10. This Agreement represents the entire understanding and agreement between the parties hereto with respect to the subject matter hereof, supersedes all prior negotiations, oral representations and writings between the parties, and cannot be amended or supplemented orally, but only by an agreement in writing signed by Lender. The Borrower certifies that it is relying on no representation, warranty, covenant or agreement except for those set forth herein. 11. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. EXECUTED by each party on the date of its respective acknowledgment, but to be effective for all purposes as of the date first above written. "BORROWER" RAWSON-KOENIG, INC. By:/s/ Thomas C. Rawson -------------------- Thomas C. Rawson, Chairman of the Board "LENDER" BANK ONE, TEXAS, NA By:/s/ Barry A. Kelly ------------------ Barry A. Kelly, Vice-President RAWSON-KOENIG, INC. Certificate The undersigned hereby certifies that he is the duly elected and acting Secretary of RAWSON-KOENIG, INC., a Texas corporation (the "Company"), and as such has custody of the corporate records of the Company and is authorized to execute and deliver this Certificate on behalf of the Company; and with reference to a loan being modified by BANK ONE, TEXAS, NA (the "Lender"), the undersigned hereby further certifies as follows: 1. Attached hereto as Exhibit "A" is a full, true and correct copy of the Resolutions duly adopted by the Board of Directors of the Company by a unanimous written consent effective May 28, 1996, in accordance with the Texas Business Corporation Act, and the Articles of Incorporation and Bylaws of the Company. 2. The Resolutions attached as Exhibit "A" hereto have not been amended, modified or rescinded and are in full force and effect on the date hereof. 3. The undersigned officers have been duly elected to the positions set forth next to their respective names below, and are qualified to act in such capacities and execute documents on behalf of the Company, and the signature appearing opposite each name is the authentic signature of each such officer. Name Office Signature Catherine Rawson President /s/ Catherine Rawson Thomas C. Rawson Chairman of the Board and Chief Executive Officer /s/ Thomas C. Rawson Fred Wamhoff Secretary /s/ Fred Wamhoff 4. The Company is duly organized and existing under the laws of the State of Texas. 5. All franchise and other taxes required to maintain the Company's existence have been paid and no such taxes are delinquent. 6. No proceedings are pending for the forfeiture of the Company's authority to do business or to force its dissolution, voluntarily or involuntarily. 7. There is no provision in the Articles of Incorporation or Bylaws of the Company limiting the above-described resolutions, and said resolutions are in conformity with the provisions of the Company's Articles of Incorporation and Bylaws, and with the proceedings of the Board of Directors. 8. The Articles of Incorporation of the Company previously delivered to the Lender are in full force and effect and have not been amended or modified, except as may have been disclosed in writing to the Lender. 9. The Bylaws of the Company previously delivered to the Lender are in full force and effect and have not been amended or modified except as may have been disclosed in writing to the Lender. EXECUTED the 28th day of May, 1996. /s/ Fred Wamhoff ---------------- Fred Wamhoff, Secretary The undersigned, the Chairman of the Board of the Company, hereby certifies that Fred Wamhoff is the Secretary of the Company and is authorized to execute and deliver this Certificate for and on behalf of the Company. /s/ Thomas C. Rawson -------------------- Thomas C. Rawson, Chairman of the Board EXHIBIT "A" WHEREAS, RAWSON-KOENIG, INC. (the "Company") shall (i) renew and extend a loan in the original principal amount of $2,200,000.00 and (ii) obtain a loan of additional funds in the amount of $1,000,000.00 to be evidenced by a Promissory Note (Advancing Term) of even date herewith (collectively, the "Loan") from BANK ONE, TEXAS, NA (the "Lender"), pursuant to the terms of the Loan Agreement, as amended; RESOLVED, further, in regard to the Loan that any one of the President, the Chairman of the Board of Directors, the Secretary, or the Chief Executive Officer of the Company is hereby authorized and directed to execute and deliver, for and on behalf of the Company, documents as may be deemed necessary or desirable by such officers or required by the Lender in regard to the Loan; and further RESOLVED, that the drafts of such documents presented to the Board of Directors of the Company are hereby approved; and further RESOLVED, that the officers executing and delivering any of the above- described documents are hereby authorized and empowered to execute and deliver the same in the name and on behalf of the Company, and in such manner of counterparts as the officer or officers executing the same shall deem necessary or desirable, and with such terms, conditions and provisions, including modifications from the drafts presented to the Board of Directors, as the officer or officers executing the same may approve, the execution of such documents to evidence with approval conclusively; and further RESOLVED, that any and all instruments executed and delivered on behalf of the Company in connection with the foregoing resolutions by any person purporting to be an officer of the Company shall be deemed to be the act of the Company and shall be in all respects binding against the Company; and further RESOLVED, that the officers of the Company be, and they hereby are, authorized and empowered on behalf of and in the name of the Company to take or cause to be taken in the name of the Company all such other and further action, to make all payments and to execute, acknowledge and deliver any and all certificates, opinions, documents and other instruments in such form and under the corporate seal as required, as in the judgment of such officers may be necessary, proper or convenient in order to carry out the foregoing resolutions, to consummate the Loan described herein, and to comply with the terms and provisions of all the documents described above; and further RESOLVED, that all actions by any and all officers of the Company taken or performed up to the date hereof and in respect to the preparation, execution and delivering of the documents, certificates or other instruments required pursuant to the provisions of the above-described documents, and the taking prior to the date hereof of any and all actions otherwise required by the terms and provisions of said documents or any other documents executed in connection therewith be, and they are hereby, in all respects approved, ratified and confirmed; and further RESOLVED, that any one of the President, the Chairman of the Board of Directors, Secretary or the Chief Executive Officer of the Company is hereby authorized to make applications for and effect other loans from time to time on behalf of the Company from the Lender and for such loans, to make, execute and deliver promissory notes, drafts, bonds or other written obligations of the Company in such form, date and maturity and at such rate of interest as such officer or officers of the Company may determine and in the event the Company adopts a corporate seal, to cause the same to be affixed to any such instruments whenever necessary or required. It is further resolved that said officers are hereby authorized in the name of the Company to renew or extend any loan or loans from time to time and execute and deliver promissory notes, drafts, bonds or other obligations or extensions to any notes theretofore given; and further RESOLVED, that the authority hereinabove given to said officers to negotiate loans in excess of the Loan specifically referenced herein shall remain irrevocable insofar as the Lender is concerned until the Lender be notified of the revocation of such authority and shall in writing acknowledge receipt of such notification. NOTICE OF INVALIDITY OF ORAL AGREEMENTS TO: BORROWER AND ALL OTHER DEBTORS AND OBLIGORS WITH RESPECT TO THE LOAN WHICH IS IDENTIFIED BELOW. 1. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 2. As used in this Notice: "Borrower" means the borrower identified below. "Debtor" and "Obligor" mean any entity who (i) is obligated or becomes obligated to pay the Loan (for example, as maker, cosigner or guarantor) or (ii) has pledged any property as security for the Loan. "Lender" means the lender identified below. "Loan" means the loans by Lender which are evidenced by the promissory notes and note modification agreements of even date executed by Borrower, payable to the order of Lender, as described in the Second Amendment to Amended and Restated Letter Loan Agreement and Amended and Restated Security Agreement and First Amendment to Revolving Note of even date herewith. "Loan Agreement" means one or more promises, promissory notes, agreements, undertakings, security agreements, deeds of trust or other documents, or commitments, or any combination of those actions or documents, relating to the Loan. 3. Each Borrower, Debtor, and Obligor who signs below acknowledges, represents, and warrants to Lender that Lender has given and such party has received a copy of this Notice on the date stated above, prior to the execution of any Loan Agreement. LENDER: BORROWER: BANK ONE, TEXAS, NA RAWSON-KOENIG, INC. By:/s/ Barry A. Kelly By:/s/ Thomas C. Rawson ------------------ -------------------- Barry A. Kelly, Vice-President Thomas C. Rawson, Chairman of the Board of Directors Date: May 28, 1996 Date: May 28, 1996 EX-27 3
5 YEAR DEC-31-1996 DEC-31-1996 334,199 0 1,309,006 40,000 3,941,189 5,650,942 10,540,337 5,702,228 10,489,051 1,850,959 1,434,813 0 0 1,000 7,202,279 10,489,051 19,521,871 19,521,871 15,002,105 15,002,105 0 6,217 147,211 1,632,862 533,000 1,099,862 0 0 0 1,099,862 .28 .28
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