- ------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
SPURLOCK INDUSTRIES, INC.
(Name of Issuer)
Common Stock, No Par Value
(Title of Class of Securities)
852190-10-7
(CUSIP Number)
Warren E. Beam, Jr., 5090 General Mahone Highway, P.O. Box 8
Waverly, Virginia 23890 (804) 834-3113
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
August 30, 1996
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
Check the following box if a fee is being paid with the statement [X]. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934, as amended (the "Act"), or otherwise subject to the liabilities of that
section of the Act but shall be subject to all other provisions of the Act
(however, see the Notes).
Page 1 of 8 Pages
- -------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------------- ---------------------------------
CUSIP No. 852190-10-7 Page 2 of 8 Pages
- ------------------------------- ---------------------------------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Harold N. Spurlock
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_]
Not Applicable (b) [_]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [_]
Not Applicable
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 306,000
SHARES ----------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
3,364,800
OWNED BY
----------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 306,000
PERSON ----------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
3,364,800
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,670,800
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [_]
Not Applicable
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
54.6%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
Item 1. Security and Issuer.
This Schedule 13D relates to the Common Stock, no par value
per share ("Common Stock"), of Spurlock Industries, Inc. (the "Issuer"). The
address of the principal executive offices of the Issuer is 5090 General Mahone
Highway, P.O. Box 8, Waverly, Virginia 23890.
Item 2. Identity and Background.
(a) Harold N. Spurlock.
(b) The business address of Mr. Spurlock is 5090 General
Mahone Highway, Waverly, Virginia 23890.
(c) Mr. Spurlock is Vice President for Product
Development of Spurlock Adhesives, Inc. ("Spurlock Adhesives"), a wholly owned
subsidiary of the Issuer and whose address is the same as the Issuer's as set
forth in Item 1.
(d) During the past five years, Mr. Spurlock has not been
convicted in a criminal proceeding, excluding traffic violations or similar
misdemeanors.
(e) During the past five years, Mr. Spurlock has not been
a party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and has not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
(f) Mr. Spurlock is a citizen of the United States of
America.
Item 3. Source and Amount of Funds or Other Consideration.
Spurlock Family Limited Partnership (the "Partnership") is a
limited partnership organized under the laws of the Commonwealth of Virginia.
The Agreement of Limited Partnership (the "Partnership Agreement") is attached
to this Schedule 13D as Exhibit A. The general partner of the Partnership is
Spurlock Family Corporation (the "Corporation"), a corporation organized under
the laws of the Commonwealth of Virginia. Control of the Corporation is shared
equally by Harold N. Spurlock, Irvine R. Spurlock, and H. Norman Spurlock, Jr.
(the "Shareholders").
Page 3 of 8 Pages
<PAGE>
Mr. Spurlock is President, a director, and a shareholder of
the Corporation, the sole general partner of the Partnership, and, as such,
shares the voting power and the investment power of both the Partnership and the
Corporation. Accordingly, Mr. Spurlock has beneficial ownership of 3,364,800
shares of Common Stock. Mr. Spurlock also has beneficial ownership of 306,000
shares of Common Stock, which he holds in his individual capacity.
Prior to the formations of the Partnership and the
Corporation, Mr. Spurlock had beneficial ownership of 2,406,000 shares of Common
Stock, all of which he held in his individual capacity. Mr. Spurlock
subsequently gave the right to acquire 33,648 shares to the Corporation and the
right to acquire 2,066,352 shares to the Partnership.
The source and amount of funds or other consideration used by
Mr. Spurlock in acquiring beneficial ownership of shares of Common Stock, prior
to the formations of the Partnership and the Corporation, were as follows:
On July 15, 1996, Air Resources Corporation ("Air Resources")
was converted from a Colorado chartered corporation to a Virginia corporation by
merging into the Issuer pursuant to an Agreement and Plan of Merger dated as of
February 15, 1996 (the "Plan"). Under the Plan, each outstanding share of common
stock of Air Resources was converted into one share of Common Stock. As a result
of his ownership of a similar number of shares of common stock of Air Resources,
Mr. Spurlock acquired beneficial ownership of 2,406,000 shares of Common Stock
on July 15, 1996.
The source and amount of funds or other consideration used by
Mr. Spurlock in acquiring beneficial ownership of shares of common stock of Air
Resources were as follows:
(i) 1,333,334 shares of common stock of Air Resources
were acquired through the conversion of 666,667 shares of preferred stock of Air
Resources on a two-for-one basis on December 21, 1995. Mr. Spurlock acquired
these shares of preferred stock in consideration for all of the capital stock of
Spurlock Adhesives, a subsidiary of the Issuer and formerly a subsidiary of Air
Resources, pursuant to an Agreement and Plan of Reorganization dated April 22,
1992, between Air Resources and Spurlock Adhesives.
(ii) 1,066,666 shares of common stock of Air Resources
were acquired through the conversion of 533,333 shares of preferred stock of Air
Resources on a two-for-one basis, on December 21, 1995. Mr. Spurlock purchased
these shares of preferred stock from BTL Specialty Resins Corp. for $250,000 in
September 1994 with personal funds.
(iii) 6,000 shares of common stock of Air Resources were
purchased for $7,980 in September 1993 with personal funds.
Page 4 of 8 Pages
<PAGE>
Item 4. Purpose of Transaction.
Mr. Spurlock's purpose in acquiring Common Stock of the Issuer
is personal investment. In addition, Mr. Spurlock may acquire additional shares
of Common Stock if the price is acceptable and personal funds are available for
such purchase.
There are no plans or proposals which Mr. Spurlock may have
which relate to or would result in:
(a) the disposition of securities of the Issuer;
(b) an extraordinary corporate transaction, such as a
merger, reorganization or liquidation, involving the Issuer or
any of its subsidiaries;
(c) a sale or transfer of a material amount of assets of
the Issuer or any of its subsidiaries;
(d) any change in the present board of directors or
management of the Issuer, including any plans or proposals
that change the number or term of directors or to fill
any existing vacancies on the board;
(e) any material change in the present capitalization or
dividend policy of the Issuer;
(f) any other material change in the Issuer's business or
corporate structure;
(g) changes in the Issuer's charter, bylaws or
instruments corresponding thereto or other actions which may
impede the acquisition of control of the Issuer by any person;
(h) causing a class of securities of the Issuer to be
delisted from a national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system of
a registered national securities association;
(i) a class of equity securities of the Issuer becoming
eligible for termination of registration pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934, as amended;
or
(j) any action similar to any of those enumerated above.
Page 5 of 8 Pages
<PAGE>
Item 5. Interest in Securities of the Issuer.
(a) The aggregate number of shares of Common Stock
beneficially owned by Mr. Spurlock is 3,670,800 or 54.6% of the issued and
outstanding shares of Common Stock on August 27, 1996.
(b) Mr. Spurlock possesses the sole power to vote and
dispose of 306,000 of the shares of Common Stock and the shared power to
vote and dispose of 3,364,800 of the shares of Common Stock.
(c) On July 15, 1996, Air Resources was converted
from a Colorado chartered corporation to a Virginia corporation pursuant to the
Plan. Under the Plan, each outstanding share of common stock of Air Resources
was converted into one share of Common Stock. As a result of his ownership of a
similar number of shares of common stock of Air Resources, Mr. Spurlock acquired
beneficial ownership of 2,406,000 shares of Common Stock on July 15, 1996.
On July 4, 1996, the Corporation obtained the right
to acquire 100,944 shares of Common Stock when the Shareholders agreed to make
capital contributions to the Corporation of certain of their shares of Common
Stock. On August 21, 1996, the Partnership obtained the right to acquire
3,364,800 shares of Common Stock in the form of capital contributions from the
Corporation, as general partner, and the Shareholders, as limited partners. As a
result of his control of the general partner of the Partnership and his direct
holdings of 306,000 shares of Common Stock, Mr. Spurlock had beneficial
ownership of 3,670,800 shares of Common Stock on August 21, 1996.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
(a) Partnership Relationships
Under the Partnership Agreement, the Corporation, Harold N.
Spurlock, Irvine R. Spurlock and H. Norman Spurlock, Jr. contributed the right
to acquire certain shares of Common Stock to the Partnership in exchange for
partnership interests therein. In addition, Harold N. Spurlock, Irvine R.
Spurlock and H. Norman Spurlock, Jr. contributed the right to acquire certain
shares of Common Stock to the Corporation in exchange for pro rata shareholder
interests therein. Pursuant to the Partnership Agreement, the Partnership
possesses sole voting and dispositive power with respect to all such shares
contributed to the Partnership, and the Corporation and the Shareholders possess
shared voting and dispositive power with respect to all such shares.
Page 6 of 8 Pages
<PAGE>
(b) Relationships with the Issuer
Harold N. Spurlock is a director of the Issuer and Vice
President for Product Development of Spurlock Adhesives.
Item 7. Material to be Filed as Exhibits.
See Exhibit Index attached hereto.
Page 7 of 8 Pages
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: August 27, 1996 /s/ Harold N. Spurlock
--------------------------
HAROLD N. SPURLOCK
Attention: Intentional misstatements or omissions of fact constitute
Federal criminal violations (see 18 U.S.C. 1001).
<PAGE>
Exhibit Index
Exhibit Description
A. Agreement of Limited Partnership dated August 21, 1996.
<PAGE>
Exhibit A
Partnership Agreement of
Spurlock Family Limited Partnership
<PAGE>
Table of Contents
Recitals:........................................................ 1
Section I. Name................................................. 1
Section II. Place of Business, Agent............................ 1
A. Place of Business..................... 1
B. Agent................................. 1
Section III. Business........................................... 2
Section IV. Term................................................ 2
A. Initial Term.......................... 2
B. Extension............................. 2
Section V. Capital and Partnership Interests.................... 2
A. Partnership Interests................. 2
B. Additions............................. 2
C. Adjustments........................... 2
D. Loans................................. 3
E. Amount of Contributions............... 3
F. No Interest Paid...................... 3
G. Withdrawals........................... 3
Section VI. Profits, Losses, and Cash Flow...................... 3
A. Profits and Losses.................... 3
B. Assignment or Death................... 4
C. Cash Flow............................. 4
Section VII. Management......................................... 4
A. General Partner....................... 4
B. Multiple General Partners............. 5
C. Compensation.......................... 5
D. Expenses.............................. 5
E. Limited Partner....................... 6
F. Tax Matters Partner................... 6
Section VIII. Financial Statements.............................. 6
Section IX. Banking............................................. 6
i
<PAGE>
Section X. Transfer of Partnership Interests.................... 6
A. General Prohibition................... 6
B. Permitted Transfers................... 6
C. Right of First Refusal................ 7
D. Purchase Price........................ 7
E. Purchase Terms........................ 8
F. Closing............................... 8
G. Admission of Substitute Partner....... 8
Section XI. Amendments.......................................... 8
Section XII. Expulsion, Death of Limited Partners............... 9
A. Expulsion............................. 9
B. Limited Partner's Death, Etc.......... 9
Section XIII. Dissolution....................................... 9
A. Causes................................ 9
B. Continuation.......................... 9
C. Liquidation........................... 9
D. Gain or Loss.......................... 10
E. Partnership Assets Sole Source........ 10
Section XIV. Power of Attorney.................................. 10
A. General............................... 10
B. Power With an Interest................ 10
Section XV. Miscellaneous....................................... 11
A. Notices............................... 11
B. Non-Waiver............................ 11
C. Severability.......................... 11
D. Good Faith............................ 11
E. Governing Law......................... 11
F. Cumulative Rights..................... 11
G. Other Activities...................... 12
H. Confidentiality....................... 12
I. Counterparts.......................... 12
J. Waiver of Partition................... 12
K. Binding Terms......................... 12
L. Personal Property..................... 12
M. Gender and Number..................... 12
ii
<PAGE>
Section XVI. Definitions........................................ 12
A. Agreement............................. 12
B. Capital Account....................... 12
C. Certificate........................... 12
D. Days.................................. 12
E. General Partner....................... 12
F. Income Offset......................... 13
G. Limited Partner....................... 13
H. Net Cash Flow......................... 13
I. Partners.............................. 13
J. Partnership........................... 13
K. Partnership Capital................... 13
L. Partnership Interests................. 13
M. Tax Sensitive Adjustments............. 13
N. Transfer.............................. 13
iii
<PAGE>
Partnership Agreement
This Partnership Agreement (the "Agreement") is entered into and shall
be effective as of August __, 1996, by and between the General Partner and the
Limited Partners.
Recitals:
A. The Partners desire to enter into the Agreement to establish a
Limited Partnership under the Virginia Revised Uniform Limited Partnership Act;
B. The Partners desire to permit the transfer of partnership
interests among the family members of the Partners in order to facilitate the
continued ownership, management and investment of such property by the family.
The Partners also desire to facilitate gifts among family members, avoid
transfers of partnership interests to non-family members, minimize the rights of
future creditors of the family members with respect to the partnership assets,
and to promote consolidated voting of Spurlock Industries, Inc. stock; and
C. The Partners desire to share in the risks, benefits, profits
and losses of the Partnership's activities.
D. All capitalized terms not otherwise defined herein, shall have
the meanings ascribed to them, respectively, in Article XVI.
Agreement:
The Partners agree as follows:
Section I. Name.
The Partnership's name is Spurlock Family Limited Partnership.
Section II. Place of Business, Agent.
A. Place of Business. The Partnership's principal place of
business is 5090 General Mahone Highway, Waverly, Virginia 23890, although the
General Partner may change the Partnership's principal place of business to
another location and add additional places of business.
B. Agent. The Partnership's agent for service of process shall
be Robert L. Musick, Jr., 1021 E. Cary Street, Two James Center, 16th Floor,
Richmond, Virginia 23219. All records that the Partnership is required to keep
at a specified office shall be kept at the Partnership's principal place of
business.
<PAGE>
Section III. Business.
The Partnership is formed to own, manage, vote and re-invest stock of
Spurlock Industries, Inc., a Virginia corporation, and such other real and
personal property as the General Partner may acquire for the Partnership, and to
conduct any other lawful business.
Section IV. Term.
A. Initial Term. The Partnership shall begin on the effective
date of the filing of a Certificate of Limited Partnership with the State
Corporation Commission of Virginia and end on December 31, 2050, unless
terminated earlier or later extended.
B. Extension. The Partnership may be continued beyond its
scheduled termination date by an affirmative vote of all the Partners.
Section V. Capital and Partnership Interests.
A. Partnership Interests. Each Partner's percentage of
Partnership Interest and each Partner's percentage of the total Partnership
Capital Accounts shall be the same and shall be indicated on Schedule A attached
to this Agreement.
B. Additions. Any General Partner who has a deficit balance in
his or her Capital Account when his or her Partnership Interest is liquidated
must contribute to the Partnership capital enough cash to restore that General
Partner's Capital Account balance to zero. This contribution shall be made by
the end of such taxable year or, if later, within ninety days following the date
of that liquidation. Otherwise, a Partner shall not be compelled to make any
additional capital contributions.
C. Adjustments. Each Partner's Capital Account shall be adjusted
as necessary to reflect the economic conditions of the Partners and their
Partnership Interests. These adjustments shall include, but are not limited to,
the following:
1. Adjustments to reflect each Partner's distributive
share of Partnership profits and losses, including capital gains and losses, and
tax-exempt income;
2. Adjustments to reflect each Partner's additional
contributions to the Partnership;
3. Adjustments to reflect distributions made by the
Partnership to each Partner; and
4. Tax-Sensitive Adjustments (as defined below).
2
<PAGE>
D. Loans. A Partner's loans to the Partnership shall not be
added to his or her Capital Account.
E. Amount of Contributions. The amount of a Partner's
contributions of property to the Partnership and of the Partnership's
distributions of property to a Partner shall be reflected in the Partner's
Capital Account at the fair market value of the property on the date of the
contribution or distribution, reduced by any liabilities secured by that
property, if those liabilities are treated under applicable federal income tax
laws as being assumed by or taken subject to by the transferee.
F. No Interest Paid. A Partner shall receive no interest on his
or her capital contributions or Partnership Interest.
G. Withdrawals. A Partner may withdraw his or her Capital
Account only as expressly authorized in this instrument. However, for sixty
calendar days immediately following any gratuitous contribution to the capital
of the Partnership, a Partner whose Capital Account is thereby gratuitously
increased (a "Donee Partner"), shall have the right to withdraw an amount equal
to his or her share of such gifts, subject to the following limitations:
1. This demand power can be exercised by a written
request delivered to the General Partner. The request may be made on behalf of a
Donee Partner who is unable to exercise this demand power because of a legal
disability (including minority), by a legally authorized guardian or other
personal representative. If there is no then serving personal representative,
the General Partner shall appoint an appropriate adult individual to act for the
disabled Donee Partner in this matter.
2. The General Partner must reasonably notify the person
who would exercise these demand powers of the existence of the powers, and the
existence and amount of the gratuitous contribution to the Partnership's
capital.
3. The maximum amount that a Donee Partner may withdraw
with respect to all gratuitous increases in his or her Capital Account made by
the same donor in the same calendar year shall be the lesser of the total amount
of the increase in his or her Capital Account and the amount of the federal gift
tax annual exclusion in effect on the date of the earliest of such
contributions. If requested by a married donor at the time of a contribution,
the limitation based on the gift tax annual exclusion shall be twice the amount
of the gift tax annual exclusion.
Section VI. Profits, Losses, and Cash Flow.
A. Profits and Losses.
1. The Partnership's net profits and losses (and each
item of income, deduction, gain, loss, and credit that makes up net profits and
losses) shall be computed in
3
<PAGE>
accordance with generally accepted accounting principles, consistently applied,
and shall be allocated among the Partners solely according to their respective
Capital Accounts.
2. Notwithstanding the general rule just stated, income, gain,
loss, and deductions with respect to property contributed to the Partnership by
a Partner shall be shared among the Partners so as to take account of any
variation between the basis and the fair market value of the contributed
property at the time of the contribution, in accordance with any applicable U.S.
Treasury regulations.
3. There shall be an "Income Offset," under which net losses
that would otherwise be allocated to a Limited Partner and that would cause the
Limited Partner's Capital Account to be in a deficit shall instead be allocated
to the General Partner. After such an allocation of net losses, net profits
shall be allocated to the General Partner, until the General Partner shall have
received an allocation of net profits equal to the aggregate allocation of net
losses allocated under this paragraph.
B. Assignment or Death. When a Partner dies, retires, is
expelled, or assigns his or her Partnership Interest, profits and losses shall
be allocated based on the number of days in that year during which each Partner
owned a Partnership Interest, or on any other reasonable basis selected by the
General Partner, as long as it is consistent with applicable United States tax
laws and regulations.
C. Cash Flow. The General Partner shall cause the Partnership to
distribute its Net Cash Flow annually, in proportion to Partnership Capital
Accounts.
Section VII. Management.
A. General Partner. The General Partner shall have the full and
exclusive power on the Partnership's behalf to manage its business and affairs
and to do or cause to be done anything deemed necessary or appropriate for the
Partnership's business. This authority includes, but is not limited to, the
following:
1. The General Partner may vote all shares of Spurlock
Industries, Inc. common stock and other securities owned by the Partnership;
2. The General Partner may sell real or personal
property to any person, giving any warranties or assurances deemed appropriate;
3. The General Partner may buy, lease, or otherwise
acquire real or personal property to carry on and conduct the Partnership's
business;
4. The General Partner may borrow money for the
Partnership's business;
4
<PAGE>
5. The General Partner may issue promissory notes and
other debt instruments (negotiable or nonnegotiable), in any amounts and secured
by any encumbrance on all or any part of the Partnership's assets;
6. The General Partner may assign any debts owing to the
Partnership;
7. The General Partner may engage in any other means of
financing;
8. The General Partner may enter into any agreement for
sharing of profits and any joint venture agreement with any person or entity
engaging in any business or venture in which this Partnership may engage;
9. The General Partner may manage, administer, conserve,
improve, develop, operate, lease, utilize, and defend the Partnership's assets,
directly or through third parties;
10. The General Partner may execute any type of agreement
or instrument in connection with any other Partnership power;
11. The General Partner may employ all types of agents
and employees (including lawyers and accountants), even if they are related by
blood, marriage, or business relationship with the General Partner, and to pay
them reasonable compensation;
12. The General Partner may buy or otherwise obtain the
use of any type of equipment or other property that may be convenient or
advisable in connection with any Partnership business;
13. The General Partner may incur any reasonable expense
for travel, telephone, insurance, taxes, and such other things, in carrying on
the Partnership's business;
14. The General Partner may sue and be sued, complain and
defend in the Partnership's name of and on its behalf; and
15. The General Partner may quitclaim, release or abandon
any Partnership assets with or without consideration.
B. Multiple General Partners. Multiple General Partners shall
act by an affirmative vote of the Partners holding a majority of the General
Partnership Interests.
C. Compensation. The General Partner shall receive reasonable
compensation for management of the Partnership.
D. Expenses. All reasonable expenses incurred by the General
Partner in conducting the Partnership's business, including (but not limited to)
overhead, administrative and travel expenses, and professional, technical, and
other services, shall be reimbursed by the Partnership.
5
<PAGE>
E. Limited Partner. A Limited Partner (other than one who is
also a General Partner) shall take no part in the management of the Partnership.
F. Tax Matters Partner. Spurlock Family Corporation shall be the
tax matters partner and, as such, shall be solely responsible for representing
the Partnership in all dealings with the U.S. Internal Revenue Service and any
state, local, and any foreign tax authorities. The Tax Matters partner shall
keep the other Partners reasonably informed of any Partnership dealings with any
tax agency.
Section VIII. Financial Statements.
Within a reasonable period after the close of each fiscal year, the
General Partner shall, at the Partnership's expense, give a written report to
each Partner who requests it, indicating that Partner's share of the Partnership
income or loss and any changes in that Partner's Capital Account. This may be
satisfied by giving each Partner a copy of any tax form which includes such
information.
Section IX. Banking.
All Partnership funds shall be deposited in its name in such accounts
as the General Partner may designate. The General Partner may authorize other
persons to draw checks on Partnership bank accounts, but such authority must be
in writing. Each bank in which a Partnership account is maintained is relieved
of any responsibility to inquire into a Partner's authority to deal with such
funds, and is absolved of all liability with respect to withdrawals from such
Partnership accounts by any person duly authorized by the General Partner.
Section X. Transfer of Partnership Interests.
A. General Prohibition. Except as otherwise permitted by the
Agreement, a Partner shall not Transfer any Partnership Interest. An attempted
Transfer of Partnership Interest not in accordance with the terms of the
Agreement shall not be valid and shall not be reflected on the Partnership's
books.
B. Permitted Transfers. A Partner may transfer any Partnership
Interest with the written consent of all the Partners. In addition, a Partner
may transfer during life or at death all or any portion of his Partnership
Interest to (a) another Partner, (b) a lineal descendant of a Partner or a
lineal descendant of the deceased Partner, or (c) a trust established solely for
the benefit of one or more of (i) a Partner, (ii) a lineal descendant of a
Partner, or (iii) a lineal descendant of the deceased Partner, except that any
spouse of a Partner or the spouse of the deceased Partner may hold an income
interest in such trust and/or a limited power to appoint the income and/or
principal of such trust to a Partner and/or a lineal descendant of a Partner
6
<PAGE>
and/or a lineal descendant of the deceased Partner. The requirements of
paragraphs C. through G. of this Section X shall not apply to permitted
transfers under this paragraph. A permitted transferee under this paragraph
shall be admitted as a substitute or additional Partner upon his or her
agreement in writing to assume all of the obligations and undertakings of the
transferor Partner under this Agreement.
C. Right of First Refusal.
1. Except to the extent of a permitted transfer as described
in paragraph B above, a Partner who wishes to Transfer any Partnership Interest,
or who has reason to believe that an involuntary Transfer or a Transfer by
operation of law is reasonably foreseeable (an "Offering Partner"), shall first
give each other Partner written notice of his intent to Transfer such
Partnership Interest (the "Offered Interest") or of his knowledge that an
Involuntary Transfer or Transfer by operation of law is reasonably foreseeable.
This notice must contain a description of the portion of the Partnership
Interest to be Transferred, the consideration (if any) to be paid, the terms of
Transfer and of the payment of consideration (including, but not limited to, the
relative percentages of cash and debt, and the terms of any debt instruments),
and the name, address (both home and office), and business or occupation of the
person to whom the Partnership Interest would be transferred, and any other
facts which are or would reasonably be deemed material to the proposed Transfer.
2. Upon the receipt of such notice, each other Partner shall
have a right to buy that share of the Offered Interest having the same
proportion to all of the Offering Partner's Partnership Interest as the buying
Partner's Partnership Interest bears to the Partnership Interests of all
Partners (except the Offering Partner). If a Partner does not exercise his right
to buy his proportional share of the Offered Interest, each other Partner shall
have a right to buy that share of the Offered Interest having the same
proportion to all of the Offering Partner's Partnership Interest as the buying
Partner's Partnership Interest bears to the Partnership Interests of all
Partners (except the Offering Partner and any Partner not wishing to purchase a
share of the Offered Interest).
3. Each Partner may exercise this purchase option by giving
the Offering Partner written notice within thirty calendar days after receipt of
the latter's notice.
4. If the Partners do not agree to buy all of the Offered
Interest, the Offering Partner may complete the intended Transfer. If this
Transfer is not completed within thirty calendar days after expiration of the
option period, any attempted Transfer shall be deemed pursuant to a new offer
and this section shall again apply.
D. Purchase Price. The purchase price that the Partners must pay
for the Offered Interest under this section shall be the lesser of (i) that
purchase price of the proposed Transfer, and (ii) the fair market value of the
Offered Interest as determined by an independent appraiser selected by the
General Partner, whose decision in this matter shall be conclusive.
7
<PAGE>
E. Purchase Terms. One-quarter of the purchase price shall be
paid in cash or by good personal check at the closing for the sale of such
Partnership Interest, and the balance shall be paid in twenty equal quarterly
principal payments beginning three months after the date of such closing. Simple
interest shall be added to each installment, computed against the outstanding
principal balance at the Applicable Federal Rate determined for federal income
tax purposes on the date of the closing. The buyer shall give the Offering
Partner a promissory note as evidence of this debt, and the buyer may prepay all
or any part of the principal balance of the note at any time without penalty or
premium.
F. Closing.
1. The purchase of a Partnership Interest under this section
shall take place at a closing to be held not later than the tenth day after the
earlier of the date on which the Partners' purchase options all have expired, or
the earliest date on which the Partners in the aggregate exercise their purchase
options, if any, to buy all of the offered Partnership Interest. The closing
shall be held during normal business hours at the Partnership's principal
business office, or at any other place to which the parties agree.
2. If the offering Partner is not present at the closing, then
the buyer shall deposit the purchase price by check, note, or both, as this
section requires, with any state or federally chartered bank with which the
Partnership has an account, as escrow agent, to be paid to the Offering Partner
as soon as is reasonably practicable, less an appropriate fee to the Partnership
(not to exceed one thousand dollars) to cover additional administrative costs,
and the Partnership shall adjust its books to reflect the transfer of these
Partnership Interests.
G. Admission of Substitute Partner. No person to whom a
Partnership Interest is properly transferred (other than a permitted transferee
under paragraph B. of this Section X) shall be substituted as a new Partner in
place of the Offering Partner until:
1. He or she agrees in writing to assume all of the
obligations and undertakings of the Offering Partner under this Agreement;
2. He or she pays the Partnership a reasonable fee to
cover costs of preparing, executing and recording all pertinent documents; and
3. He or she is elected a Partner by a unanimous vote of
the other Partners.
Section XI. Amendments.
This Agreement shall be amended automatically to reflect the admission
of a substitute Partner pursuant to any valid Transfers of Partnership
Interests. Otherwise, this Agreement shall be amended only with the unanimous
consent of the Partners.
8
<PAGE>
Section XII. Expulsion, Death of Limited Partners.
A. Expulsion. Any Limited Partner, other than Harold N.
Spurlock, Sr., Irvine R. Spurlock or H. Norman Spurlock, Jr., may be expelled
from the Partnership by the unanimous decision of the Partners other than the
Limited Partner expelled. However, the Partnership must pay an expelled Partner
an amount equal to the fair market value of the expelled Partner's Partnership
Interest. The fair market value of an expelled Partner's Partnership Interest
shall be determined by an independent appraisal performed by a professional
appraiser selected by the General Partner whose decision in this matter shall be
conclusive.
B. Limited Partner's Death, Etc. A Limited Partner's
death, adjudication of insanity or incompetence shall not dissolve the
Partnership. Instead, the personal representative of the deceased Limited
Partner's estate, or the legal representative of an incompetent or insane
Limited Partner, shall have the same rights and be subject to the same
limitations as the Limited Partner that they represent.
Section XIII. Dissolution.
A. Causes. The Partnership shall be dissolved upon the
expiration of its stated term, the written determination of all the Partners, or
the death or withdrawal of the last then-serving General Partner.
B. Continuation. If, within ninety days from the General
Partner's death or withdrawal, the other Partners elect to continue the
Partnership, then:
1. The Partnership shall not be dissolved and it shall
continue under this Agreement;
2. A General Partnership Interest of any deceased General
Partner shall retain its character as a General Partnership Interest if such
interest is transferred at death to a permitted transferee as defined in
paragraph B. of Section 10 of the Agreement (and the Agreement and certificate
shall be amended). In all other cases, such General Partnership Interest shall
be converted into a Limited Partnership Interest, and the former General
Partner's successors or assigns shall become Limited Partners; and
3. The Limited Partners shall elect a new General Partner or
General Partners if there are no General Partner (and the Agreement and
certificate shall be amended).
C. Liquidation. Upon its dissolution, the Partnership shall
commence to wind up its affairs. The Partners shall continue to share in profits
and losses during liquidation as they did before dissolution. The Partnership's
assets may be sold, if a price deemed reasonable by the General Partner can be
obtained. The proceeds from liquidation of Partnership assets shall be applied
as follows:
9
<PAGE>
1. First, all of the Partnership's debts and liabilities
to persons other than Partners shall be paid and discharged in the order of
priority as provided by law;
2. Second, all debts and liabilities to Partners shall
be paid and discharged in the order of priority as provided by law; and
3. Third, all remaining assets shall be distributed
proportionately among the Partners based on their respective positive Capital
Accounts.
D. Gain or Loss. Any gain or loss on the disposition of Partnership
properties in the process of liquidation shall be credited or charged to the
Partners in proportion to their Partnership Interests; except that gain or loss
with respect to property contributed to the Partnership by a Partner shall be
shared among the Partners so as to take account of any variation between the
basis of the property so contributed and its fair market value at the time of
contribution, in accordance with any applicable U.S. Treasury regulations. Any
property distributed in kind in the liquidation shall be valued and treated as
though it were sold and the cash proceeds distributed. The difference between
the value of property distributed in kind and its book value shall be treated as
a gain or loss on the sale of property, and shall be credited or charged to the
Partners accordingly.
E. Partnership Assets Sole Source. The Partners shall look solely to
the Partnership's assets for the payment of any debts or liabilities owed by the
Partnership to the Partners and for the return of their capital contributions
and liquidation amounts. If the Partnership property remaining after the payment
or discharge of all of its debts and liabilities to persons other than Partners
is insufficient to return the Partners' capital contributions, they shall have
no recourse therefor against the Partnership or any other Partners, except to
the extent that such other Partners may have outstanding debts or obligations
owing to the Partnership.
Section XIV. Power of Attorney.
A. General. Each Limited Partner names the General Partner as the
Limited Partner's attorney-in-fact, and gives the General Partner full power and
authority, in the place of the Limited Partner, to file and record any written
instruments that are necessary or appropriate to: (a) amend the certificate of
Partnership; (b) satisfy requirements of the laws of any state in which the
Partnership is doing business; (c) continue the Partnership, admit additional or
substituted Partners, dissolve or terminate the Partnership or any interest in
it; (d) obtain or settle any loan; and (e) transfer any Partnership assets.
B. Power With an Interest. The power of attorney granted under
this section is coupled with an interest, irrevocable, and survives the Limited
Partner's incompetency. This power of attorney may be exercised by the General
Partner by a facsimile signature or by listing all of the Limited Partners with
a signature of the General Partner as the attorney-in-fact for all
10
<PAGE>
of them. This power of attorney survives the assignment of a Limited Partner's
interest, and empowers the General Partner to act to the same extent for any
successor Limited Partner.
Section XV. Miscellaneous.
A. Notices.
1. Any notice under this Agreement shall be given and served
either by personal delivery to the party to whom it is directed, or by
registered or certified mail, postage and charges prepaid, and if it is sent to
a Partner, addressed with his or her address as it appears on the records of the
Partnership.
2. Any notice shall be deemed given when it is personally
delivered, or, if mailed, on the date it is postmarked by the United States
Postal Service, if it was addressed as required in this section.
3. Any Partner may change his or her address for purposes of
this Agreement by written notice to the General Partner, stating his or her new
address. A change of address shall be effective fifteen days after the notice is
received by the General Partner.
B. Non-Waiver. Any party's failure to seek redress for violation
of or to insist upon the strict performance of any provision of this Agreement
shall not prevent a subsequent act, which would have originally constituted a
violation, from having the effect of an original violation.
C. Severability. Every provision of this Agreement is intended
to be severable. If any term or provision hereof is invalid for any reason
whatsoever, its invalidity shall not affect the validity of the remainder of the
Agreement.
D. Good Faith. The doing of any act or the failure to do any act
by a Partner or the Partnership, the effect of which causes any loss or damage
to the Partnership, shall not subject such Partner or the Partnership to any
liability, if done pursuant to advice of the Partnership's legal counsel or in
good faith to promote the Partnership's best interests.
E. Governing Law. This Agreement is to be construed according to
the laws of the State of Virginia.
F. Cumulative Rights. The rights and remedies provided in this
Agreement are cumulative and the use of any right or remedy does not limit a
party's right to use any or all other remedies. All rights and remedies in this
Agreement are in addition to any other legal rights the parties may have.
11
<PAGE>
G. Other Activities. Every Partner may engage in whatever
H. Confidentiality. No Partner may, without the General
Partner's express written consent, divulge to others any information not already
known to the public pertinent to the services, clients, customers or operations
of the Partnership, whether before or after the Partnership's dissolution.
I. Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all parties hereto had all signed the
same document. All counterparts shall be construed together and shall constitute
one agreement.
J. Waiver of Partition. Each Partner waives any right to
maintain any action for partition with respect to the Partnership's property or
assets during the Partnership's term.
K. Binding Terms. The terms of this Agreement are binding upon
and inure to the benefit of the parties and, to the extent permitted by this
Agreement, their heirs, executors, administrators, legal representatives,
successors and assigns.
L. Personal Property. The interests of each Partner in the
Partnership are personal property.
M. Gender and Number. Unless the context requires otherwise, the
use of a masculine pronoun includes the feminine and the neuter, and vice versa,
and the use of the singular includes the plural, and vice versa.
Section XVI. Definitions.
A. Agreement. The "Agreement" is the Spurlock Family Limited
Partnership Agreement, as amended from time to time. The Agreement shall include
all schedules amended from time to time.
B. Capital Account. "Capital Account" has the meaning ascribed
to such term in U.S. Treasury regulation ss. 1.704-1(b), as amended.
C. Certificate. The "Certificate" is the certificate of limited
partnership filed on behalf of Spurlock Family Limited Partnership as amended
from time to time.
D. Days. "Day" or "days" refers to a calendar day, including any
days which fall on legal holidays or weekends.
E. General Partner. The "General Partner" shall refer to the
General Partner listed on Schedule A attached hereto, and any additional or
successor General Partners.
12
<PAGE>
F. Income Offset. The "Income Offset" shall be synonymous with
and interpreted consistently with the "qualified income offset" defined in U.S.
Treasury regulation ss. 1.704- l(b)(2)(ii)(d), as amended.
G. Limited Partners. The "Limited Partners" shall refer to the
Limited Partners listed on Schedule A attached hereto, and any persons who later
become Limited Partners.
H. Net Cash Flow. Net cash flow is the Partnership's total net
income, computed for federal income tax purposes, increased by any depreciation
or depletion deductions taken into account in computing taxable income and any
nontaxable income or receipts (other than capital contributions and the proceeds
of any Partnership borrowing); and reduced by any principal payments on any
Partnership debts, expenditures to acquire or improve Partnership assets, and
such reasonable reserves and additions thereto as the General Partner shall
determine to be advisable and in the best interests of the Partnership, having
due regard to the interests of the Limited Partner.
I. Partners. The "Partners" or a "Partner," when used without
the words "General" or "Limited," shall refer to both the General and Limited
Partners.
J. Partnership. The "Partnership" is the Spurlock Family Limited
Partnership.
K. Partnership Capital. The "Partnership Capital" is the total
of the Partners' capital contributions.
L. Partnership Interests. The "Partnership Interests" are the
M. Tax Sensitive Adjustments. The "Tax Sensitive Adjustments"
are all adjustments to a Partner's Capital Account that are not specifically
required under the terms of this Agreement, but that are required by U.S.
Treasury regulations ss. 1.704-1(b)(2)(iv) ("Maintenance of Capital Accounts"),
as amended. These adjustments shall be made annually, unless these regulations
require a more frequent adjustment.
N. Transfer. A "Transfer" of a partnership interest includes any sale,
pledging, encumbering, giving, bequeathing, or other transferring or disposing
of, or permitting to be sold, encumbered, attached, or otherwise disposed of or
have ownership changed in any manner, whether voluntarily, involuntarily, or by
operation of law. "Transfer" shall not include any assignment of any Partnership
Interest to another Partner or to any trust that is entirely revocable by the
assignor, but such trust shall be treated as the agent of the assignor, and any
subsequent disposition of such Partnership Interest by such trust shall be
deemed to have been made by the trust's settlor or grantor.
13
<PAGE>
Witness the following duly authorized signatures of the Partners:
Spurlock Family Corporation, General Partner
By: /s/ Harold N. Spurlock, Sr.
By: ---------------------------------------
Harold N. Spurlock, Sr., President
/s/ Harold N. Spurlock, Sr.
---------------------------------------------
Harold N. Spurlock, Sr., Limited Partner
/s/ Irvine R. Spurlock
---------------------------------------------
Irvine R. Spurlock, Limited Partner
/s/ H. Norman Spurlock, Jr.
---------------------------------------------
H. Norman Spurlock, Jr., Limited Partner
State of Virginia )
) ss.
County/City of Richmond )
-------------
The foregoing instrument was acknowledged before me, the undersigned
notary, by Harold N. Spurlock, Sr., President of Spurlock Family Corporation, a
Virginia corporation, as General Partner, on this 21st day of August, 1996.
----
/s/ Bonnie Cross
------------------------------------
Notary Public
My commission expires: February 28 , 19 98 .
------------ ----
State of Virginia )
) ss.
County/City of Richmond )
--------------
The foregoing instrument was acknowledged before me, the undersigned
notary, by Harold N. Spurlock, Sr. as Limited Partner, on this 21st day of
August, 1996. ----
14
<PAGE>
/s/ Bonnie Cross
------------------------------------
Notary Public
My commission expires: February 28 , 19 98 .
---------------- ----
State of Virginia )
) ss.
County/City of Richmond )
-----------------
The foregoing instrument was acknowledged before me, the undersigned
notary, by Irvine R. Spurlock as Limited Partner, on this 21st day of August,
1996. ----
/s/ Bonnie Cross
------------------------------------
Notary Public
My commission expires: February 28 , 19 98 .
---------------- ----
State of Virginia )
) ss.
County/City of Richmond )
------------------
The foregoing instrument was acknowledged before me, the undersigned
notary, by H. Norman Spurlock, Jr. as Limited Partner, on this 21st day of
August, 1996. ----
/s/ Bonnie Cross
------------------------------------
Notary Public
My commission expires: February 28 , 19 98 .
---------------- ----
15
<PAGE>
Schedule A
Partners and Partnership Interests
Partners Partnership Initial Capital
Interests Contributions
General Partner
Spurlock Corporation
EIN 3.000% 100,944 shares Spurlock
5090 General Mahone Hwy. Industries, Inc. common
Waverly, Virginia 23890 stock:
$
Limited Partners Cash: $300
Harold N. Spurlock, Sr.
SSN ###-##-####
1616 Blair Road 61.410% 2,066,352 shares
Petersburg, Virginia 23805 Spurlock Industries, Inc.
common stock:
$
Irvine R. Spurlock Cash: $6,140
SSN ###-##-####
17062 Cabin Point Rd. 17.795% 598,752 shares Spurlock
Carson, Virginia 23830 Industries, Inc. common
stock(1):
$
H. Norman Spurlock, Jr. Cash: $1,780
SSN ###-##-####
1706 Westover Ave. 17.795% 598,752 shares Spurlock
Petersburg, Virginia 23805 Industries, Inc. common
stock(1):
$
Total Cash: $1,780
100.000%
Initial Capital 3,364,800 shares
Contributions Spurlock Industries, Inc.
common stock:
$
Cash: $10,000
1. 507,400 of these shares are being transferred to the Partnership subject
to their pledge to Lloyd B. Putman as collateral for payment of a promissory
note jointly made by Irvine R. Spurlock and H. Norman Spurlock, Jr. in favor of
Mr. Putman. In the event that either or both Irvine R. Spurlock or H. Norman
Spurlock, Jr. is unable to deliver such shares, free and clear of liens and
encumbrances, his Partnership Interest percentage shall be adjusted on a pro
rata basis.
- --------------------------------------------------------------------------------
Initials:
Harold N. Spurlock, Sr. HNS
-----------------
Irvine R. Spurlock IRS
-----------------
H. Norman Spurlock, Jr. HNS
-----------------
