UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission file number 0-3041
JUSTIN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Texas 75-0102185
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2821 West 7th Street, Fort Worth, Texas 76107
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 336-5125
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $2.50 Par Value
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 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
such stock, as of a specified date within 60 days prior to the date of filing.
$206,383,651 as of February 17, 1995
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
27,212,991 Common Shares as of March 17, 1995
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II, and IV incorporate certain information by reference from the
Annual Report to Shareholders for the year ended December 31, 1994. Part III
incorporates information by reference from the Proxy Statement for the Annual
Meeting of Shareholders held on March 17, 1995.
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PART I
ITEM 1. BUSINESS
Justin Industries, Inc. ("Justin") and its subsidiaries are herein
collectively and/or singly referred to as the "company". The company where
specifically indicated has incorporated by reference certain information
contained in its 1994 Annual Report to Shareholders. Other references made to
that report are for information purposes only and the information in the Annual
Report to Shareholders is not deemed incorporated in this Form 10-K.
GENERAL DEVELOPMENT OF BUSINESS
Justin's business origins can be traced back to 1879, when H. J. Justin began
making boots at Spanish Fort, Texas on the Chisholm Trail. Justin was
incorporated under the laws of the State of Texas on April 26, 1916, as Acme
Brick Company, the successor to an Illinois company incorporated in 1891. In
August 1968, the company changed its name to First Worth Corporation and created
a division, later incorporated with the name "Acme Brick Company" ("Acme"), to
handle the company's business relating to brick, concrete block, concrete
panels, and prestressed concrete structural components. The company changed its
name in October 1972 to Justin Industries, Inc.
In 1968, Justin purchased for cash and promissory notes all the outstanding
Common Stock of Louisiana Concrete Products, Inc. ("Louisiana Concrete"). Also
during 1968, Justin acquired the net assets or the outstanding stock of six
additional small firms in the concrete products field for cash and shares of
Justin Common Stock. The operations of Louisiana Concrete and the six small
firms were combined with the concrete products operations of Featherlite
Building Products Corporation and Featherlite Precast Corporation (whose
acquisition is discussed below).
In December 1968, Justin acquired all of the outstanding common stock of
Justin Belt Company, Inc., H. J. Justin & Sons, Inc., and its subsidiary, Justin
Leathergoods Company, which companies were reorganized in 1984 to be known as
the "Justin Boot Company" ("Justin Boot"). Justin Boot's stock was acquired in
exchange for Justin Common Stock and Justin voting Preferred Stock (subsequently
converted into shares of Justin Common Stock). The acquisition of Justin Boot
was treated as a pooling of interests for accounting purposes.
In May 1973, Justin acquired all of the outstanding common stock of Northland
Publishing Company, Inc. ("Northland") in exchange for shares of Justin Common
Stock. The acquisition was accounted for as a purchase. In April 1974, Justin
acquired for cash all the outstanding capital stock of Sanford Brick Corporation
("Sanford"), Sanford, North Carolina. The acquisition was accounted for as a
purchase. On April 30, 1984, all of the common stock of Sanford was sold.
In August 1976, Justin acquired 62.6% of the outstanding common stock of
Kingstip, Inc. ("Kingstip") for cash and effective January 31, 1977, acquired
the remaining 37.4% of Kingstip's capital stock in exchange for shares of Justin
Common Stock. The acquisition was accounted for as a purchase. Through 1983,
all operations of Kingstip were conducted through its subsidiary, The
Featherlite Corporation. Effective December 31, 1983, these operations were
reorganized into two distinct operating entities, Featherlite Building Products
Corporation and Featherlite Precast Corporation.
Ceramic Cooling Tower Company ("CCT") was incorporated by Justin in 1968, as
an outgrowth of Acme's operations in the design and sale of water cooling
systems. Effective December 31, 1991, the net assets and business of CCT were
sold for $20 million cash.
In June 1981, Justin issued shares of Justin Common Stock for all the
outstanding common stock of Nocona Boot Company ("Nocona").
In September 1984, the company's Featherlite Building Products Corporation
subsidiary purchased all of the common stock of Gulde Block and Brick, Inc. for
cash.
In 1985, the company acquired the operations of four additional companies for
cash and the assumption of certain liabilities. These acquisitions were
Chippewa Shoe Company, Builders Block Company, Inc., RLI, Inc. (name changed to
Tradewinds Technologies, Inc. ("Tradewinds")), and MEGA Equipment Company.
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In 1986, the company acquired the operating assets of Parr Block Company for
cash and notes.
Pursuant to a tender offer and subsequent merger effective October 15, 1990,
the company acquired all of the outstanding shares of Tony Lama Company, Inc.
("Tony Lama") at a price of $9.00 per share in cash with the aggregate purchase
price for such shares and related costs totalling approximately $18,787,000.
Tony Lama is in the business of designing, manufacturing, and selling western
style boots. The acquisition was accounted for as a purchase.
On October 7, 1991, the company purchased the brick manufacturing assets of
Elgin-Butler Brick Company for cash and subordinated notes totalling
approximately $4,527,000.
Effective August 1, 1994, the Company purchased American Tile Supply Company
and its related companies ("American Tile") for cash and subordinated notes
totalling approximately $16 million. American Tile distributes floor and wall
tile primarily in Texas. The acquisition was accounted for as a purchase.
In December 1987, the company made the decision to discontinue operations of
two of its businesses, Featherlite Precast Corporation (manufacturers of
precast/prestressed concrete components) and MEGA Equipment Company (distributor
of John Deere construction and utility earthmoving equipment). Both of these
companies were more severely affected by the cyclical nature of the building
industry and it was felt that Justin and its shareholders would be better served
by concentrating the company's resources in its remaining core group of
businesses. In 1988, the operations of MEGA Equipment Company and two of the
three Featherlite Precast Corporation plants were sold to third parties.
Justin's continuing operations are in two principal business areas: (i)
manufacture and sale of building materials, which includes the operations of
Acme, American Tile, Featherlite Building Products Corporation, and Tradewinds,
and (ii) manufacture and sale of footwear products, which includes the
operations of Justin Boot, Nocona and Tony Lama.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS (LINES OF BUSINESS)
A five year analysis of sales and operating profit contribution by industry
segment is presented on page 17 of the company's 1994 Annual Report to
Shareholders and additional financial information, including identifiable
assets, by industry segment is included in Note 8 of Notes to Consolidated
Financial Statements on page 26 of the shareholders' report. Such information
is hereby incorporated by reference.
NARRATIVE DESCRIPTION OF BUSINESS
The following information is presented in addition to the information included
in the Report on Operations contained on pages 5 through 11 of the company's
1994 Annual Report to Shareholders, which is incorporated herein by reference.
Manufacture and Sale of Building Materials
The building materials segment includes clay brick manufactured and sold under
the name Acme Brick for use in residential and commercial construction. The
primary market for Acme Brick is the Central and Southwest United States where
distribution is mainly through company operated sales offices. Acme also
distributes through independent dealerships in other parts of the United States.
Acme is one of the largest manufacturers of face brick in the United States.
Other products in the company's building materials segment include concrete
block manufactured and sold under the trade name Featherlite Building Products
and cut limestone manufactured under the name Texas Quarries. The primary
markets for these products are in Texas and its neighboring states.
Acme and Featherlite also represent other manufacturers as distributors of
such items as clay brick, glass block, glazed and unglazed tile and masonry
units, fireplace equipment, masonry cleaners, masonry saws, wall reinforcements,
masonry tools, masonry cement, and purchased used brick for resale.
Since August, 1994, this segment also includes the sale of ceramic and marble
floor and wall tile through American Tile Supply distribution centers in Texas.
Tradewinds manufactures a unique line of premium quality evaporative coolers
used primarily for central residential cooling and light commercial and spot
cooling.
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In the states of Texas, Louisiana, Arkansas, Oklahoma, New Mexico, Kansas,
Tennessee, and Missouri, Acme, American Tile, and Featherlite market their
building materials through approximately 480 full-time company sales employees
serving architects, contractors, home builders, and others in the construction
market. These direct sales comprise the majority of the company's building
materials sales. In the other states, sales are made principally through
independent distributors and dealers. The majority of the building materials
manufactured by the company are utilized within a 250 mile radius of the plant
where they are produced. Tradewinds' coolers are sold by direct sales personnel
in selected major markets and by distribution elsewhere.
Manufacture and Sale of Footwear Products
Footwear operations include the design, manufacture and distribution of men's,
women's, and children's western style, safety, work and sports boots and shoes,
primarily for sale in the United States under the primary trade names of
"Justin(R)", "Nocona(R)", "Tony Lama(R)", "Chippewa(R)", "Sport Lace-R(R)", and
"Diamond J(R)".
Justin Boot Company, headquartered in Fort Worth, Texas, started business in
1879 as H. J. Justin & Sons, Inc. The company owns and operates footwear
manufacturing plants in Fort Worth, Texas, Cassville, Sarcoxie, and Carthage,
Missouri. Nocona Boot Company, headquartered in Nocona, Texas, started business
in 1925 and owns and operates its boot manufacturing plant in Nocona. Tony Lama
Company, Inc., headquartered in El Paso, Texas, was established in 1911. The
company owns and operates a western boot manufacturing plant in El Paso, Texas.
Certain administrative functions of the three companies are centralized in Fort
Worth, Texas.
The company's footwear products are marketed by company salesmen and
independent sales representatives who are compensated on a commission basis.
Sales are made throughout the United States to a network of approximately 7,000
authorized retail outlets and dealers such as western goods stores, department
stores, chain stores, and mail order houses. Footwear products are sold in the
general price range of other medium to high quality lines and are manufactured
using a wide range of leathers.
Other
Northland's primary activity is publishing books about the history and art of
the West. Many of these books have won awards for fine design, printing, and
binding in major book competitions including the Western Heritage Awards at the
National Cowboy Hall of Fame. Northland's books are marketed by company
personnel throughout the United States.
RAW MATERIALS
The principal raw materials for the company's brick are clay and shale mined
from company-owned or leased properties. The company has developed adequate
clay reserves located at or near plant sites to supply its needs for the
foreseeable future. Other raw materials used in the building materials
operations, such as cement, aggregate, and additives, are purchased by the
company in the open market and appear to be readily available for the
foreseeable future from numerous domestic suppliers. Materials for evaporative
coolers are purchased in the open market or manufactured to the company's
specifications and all appear to be readily available for the foreseeable future
from numerous suppliers.
The company consumes large quantities of natural gas and other combustible
fuels in the drying and firing of its clay products. In periods of severe cold
weather and occasionally at other times, the company's natural gas supplies have
been limited by its suppliers at certain locations. The company believes it
will be able to obtain an adequate supply of energy in the future to meet its
requirements.
The primary raw material used in the footwear product line is finished
leather. Finished leather, which is readily available, is purchased from
various tanneries in the United States and from tanneries in foreign countries
and their representatives in the United States. Inventories are maintained to
meet production requirements. Other raw materials incidental to the production
of these products such as thread, tacks, staples, buckles, and clasps appear to
be readily available for the foreseeable future from numerous domestic
suppliers.
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PATENTS AND TRADEMARKS
Many of the company's products and processes are patented. In addition, most
of the company's products are marketed under registered trademarks.
SEASONAL NATURE OF BUSINESS
Demand for building materials and evaporative coolers is seasonal, with sales
during periods of warm weather representing a higher than average proportion of
total yearly sales while sales of footwear products are generally highest in the
fourth quarter.
WORKING CAPITAL REQUIREMENTS
It is the company's policy to increase inventory levels during periods when
production capabilities exceed sales. The company may also from time to time
increase its inventory of raw materials in its footwear business segment to
assure itself of an adequate supply of such raw materials.
Historically, funds required for working capital have been generated from
operations and from borrowings from commercial banks.
SIGNIFICANT CUSTOMERS
No material part of the company's business is dependent upon a single customer
or upon a few customers, the loss of any one or more of whom would have a
material adverse effect on the company's business.
BACKLOG OF ORDERS AT END OF FISCAL YEAR
An analysis of backlog orders is presented on page 16 of the company's 1994
Annual Report to Shareholders, which is incorporated herein by reference. In
accordance with industry practice, unfilled orders for clay brick and footwear
products are generally cancelable by customers at any time and for this reason
may not be considered firm backlog in the traditional sense, despite the fact
that in the past orders have been canceled only infrequently. Substantially all
unfilled orders are expected to be filled within one year.
COMPETITION
The business environment in which the company operates is highly competitive
in the areas of price, service, and product quality. Unless otherwise indicated
below, the company's relative competitive position within its product lines and
market areas is not readily available due to constant changes in the number and
identity of competitors and types of competitive products.
In the building materials segment, competition includes other suppliers of
brick and concrete products, as well as suppliers of diverse alternative
building materials such as steel, aluminum, glass, plastic, and wood products.
There are numerous manufacturers of various types of brick and concrete products
in the United States, virtually all of which operate on a regional or local
basis. In every geographical area served by the company, there are numerous
competitors in all significant building product lines. The company is one of
the largest face brick manufacturers in the United States and the largest in the
Southwest. There are numerous plants manufacturing concrete products in the
area in which the company owns and operates plants. Tradewinds' evaporative
coolers compete with approximately ten other major manufacturers, two of which
currently have approximately 70 percent of the market. None of the competition,
however, manufactures coolers constructed of injection molded polypropylene
material.
The company's western style boots and other footwear products compete with
approximately 25 other major manufacturers of high quality merchandise, and many
more manufacturers of lesser quality footwear.
RESEARCH ACTIVITIES
In the normal course of business, the company conducts research and
development activities to improve existing products and to develop new products
within its current product lines. These activities include developing new
styles, effective use of new materials, and developing new manufacturing
techniques. The amount spent during each of the last three fiscal years on
these activities did not exceed one percent of the company's total operating
revenues.
ENVIRONMENT
There are numerous federal, state, and local statutes, regulations and
ordinances regulating discharge of materials into the environment or otherwise
relating to the protection of the environment, including those concerning clean
air, water, and waste disposal. In management's opinion, none of these will
materially affect the company's earnings or competitive position and should not
require any material increase in capital expenditures.
EMPLOYEES
The company had 5,007 employees in its operations as of December 31, 1994.
The number of employees by job position at December 31, 1994, was as follows:
Building Parent and
Materials Footwear Other Total
--------- -------- ---------- -----
Production 1,396 2,098 3 3,497
Sales 479 261 6 74
Administrative, Engineering,
Clerical, and Other 454 269 41 764
----- ----- ----- -----
2,329 2,628 50 5,007
===== ===== ===== =====
FOREIGN OPERATIONS
Footwear products are marketed in foreign countries, primarily Canada, Western
Europe, and Japan. Foreign operations are not material to consolidated
operations.
ITEM 2. PROPERTIES
Information concerning the company's principal production facilities is as
follows:
The company's current annual brick manufacturing capacity is approximately 775
million brick. The company's 16 operating brick plants are located on
approximately 6,000 acres of land, which includes associated clay mining
operations. The plants have individual production capacities ranging from 16.5
million to 128 million brick each year.
The company's tile distribution centers operate out of 11 leased facilities,
consisting of approximately 175,000 square feet of showroom, office and
warehouse space.
The company's concrete operations include 8 concrete block plants operated by
Featherlite and one plant operated by Acme on tracts of land ranging from 5
acres to 24 acres. In addition, Featherlite operates a limestone mill on a 36
acre tract of land and owns 62 acres of volcanic cinder mines and leases mining
rights on 2,100 acres of land for quarrying architectural limestone.
Tradewinds manufactures its evaporative coolers in Phoenix, Arizona, in a
leased facility containing approximately 90,000 square feet.
The footwear manufacturing facilities consist of 7 plants and related
warehouses containing approximately 784,000 square feet, located on land owned
by the company. These plants have a designed capacity to produce in excess of 3
million pair of footwear annually.
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The company's corporate administrative headquarters in Fort Worth, Texas, is
contained in 26,000 square feet of modern office facilities.
The company owns various interests in oil and gas mineral leases in Texas,
Oklahoma, Louisiana, and Arkansas. Revenues received to date from these
interests have not and are not anticipated to have a material effect on
consolidated revenues.
ITEM 3. LEGAL PROCEEDINGS
The company is involved in various claims and lawsuits incidental to its
business. In the opinion of management, these claims and lawsuits in the
aggregate will not have a material adverse effect on the company's consolidated
financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the company's security holders during
the last quarter of its fiscal year ended December 31, 1994.
EXECUTIVE OFFICERS
Certain information regarding the executive officers is as follows:
Employed Date First
by Appointed an
Name Age Company Officer Title
In
John Justin 78 1936 December 1969 Chairman of the
Board and
Chief Executive
Officer
J. T. Dickenson 65 1974 September 1983 President and
Chief Operating
Officer
Richard J. Savitz 48 1979 March 1982 Vice President-
Finance and
Treasurer
Jon M. Bennett 63 1969 December 1979 Vice President-
Administration
and Secretary
Edward L. Stout, Jr. 69 1949 March 1974 Vice President-
Brick Operations
Frank A. Scivetti 52 1982 March 1994 Vice President-
Footwear
Operations
Judy B. Hunter (1) 36 1990 October 1990 Controller,
Assistant
Treasurer
There are no family relationships among any of the above officers and there
are no known arrangements or understandings between any executive officer and
any other person pursuant to which any of the above named persons was selected
as an officer.
(1) Prior to her employment with the company, Ms. Hunter was employed by Ernst
& Young LLP, Fort Worth. She was a senior manager.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Incorporated by reference from the 1994 Annual Report to Shareholders, pages
28, 29, and 30.
As of February 17, 1995, there were 1,975 common shareholders of record. In
addition, approximately 2,887 shareholders are participants in the Justin
Industries, Inc. Employee Stock Ownership Plan.
Dividends declared for the most recent two fiscal years are as follows:
Quarter Ended Cash Dividend Declared
------------- ----------------------
3/31/93 $.04
6/30/93 $.04
9/30/93 $.04
12/31/93 $.04
3/31/94 $.04
6/30/94 $.04
9/30/94 $.04
12/31/94 $.04
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference from the 1994 Annual Report to Shareholders, pages
28 and 29.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Incorporated by reference from the 1994 Annual Report to Shareholders, pages
13 through 17.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets of the company at December 31, 1994 and 1993
and the consolidated statements of income, shareholders' equity, and cash flows
for the years 1994, 1993, and 1992 and the report of independent auditors
thereon, and the company's unaudited quarterly financial data for the two-year
period ended December 31, 1994 are incorporated by reference from the 1994
Annual Report to Shareholders, pages 18 through 27 and page 30.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Incorporated herein by reference from the company's definitive proxy statement
for the Annual Meeting of Shareholders held March 17, 1995 ("Proxy Statement"),
pages 3, 4 and 7.
Information regarding the executive officers is included in Part I.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference from the Proxy Statement, pages 7 through 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required as to security ownership is incorporated herein by
reference from the Proxy Statement, pages 5 and 6.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference from the Proxy Statement, page 14.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
Reference
------------------------------------
Annual Report
to Shareholders
Form 10-K (page)
Data incorporated by reference from
attached Annual Report to Shareholders
of Justin Industries, Inc.:
Report of independent auditors 27
Consolidated balance sheet at
December 31, 1994 and 1993 18
For the years ended December 31,
1994, 1993, and 1992:
Consolidated statement of income 19
Consolidated statement of
shareholders' equity 19
Consolidated statement of cash flows 20
Notes to consolidated financial statements 21-26
2. Financial Statement Schedules
Report of Independent Auditors and
Consent of Independent Auditors S-1
Schedules for years ended December 31,
1994, 1993, and 1992:
II - Valuation and qualifying accounts S-2
All other schedules and compliance information have been omitted since the
required information is not present or is not present in amounts sufficient to
require submission of the schedule, or because the information required is
included in the financial statements and the notes thereto.
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3. Exhibits
Exhibit
No. Description
------- -----------
3.1 Articles of Incorporation of Registrant, as amended (incorporated by
reference to the Registrant's Current Report on Form S-8 dated March 22,
1994)
3.2 By-Laws of Registrant, as amended (incorporated by reference to the
Registrant's Current Report on Form 8-K dated September 7, 1990)
4.1 Rights Agreement dated as of October 6, 1989 between Registrant and
Team Bank, as Rights Agent (incorporated by reference to Registrant's
Registration Statement on Form 8-A dated October 10, 1989)
4.2 First Amendment to Rights Agreement dated as of October 4, 1990
between Registrant and Ameritrust Texas, N.A., as successor Rights Agent
(incorporated by reference to Registrant's Amendment No. 1 on Form 8 to
Registration Statement on Form 8-A dated October 4, 1990)
10.1 Registrant's 1981 Stock Option Plan*
10.2 Registrant's 1984 Incentive Stock Option Plan*
10.3 Registrant's 1992 Stock Option Plan (incorporated by reference from
the company's definitive proxy statement for the Annual Meeting of
Shareholders held on April 3, 1992)
10.4 Registrant's Deferred Compensation Plan*
10.5 Form of Registrant's Special Executive Benefit Program*
10.6 Registrant's Supplemental Executive Retirement Plan of 1992
(incorporated by reference to Registrant's 1992 Annual Report on Form
10-K)
10.7 Registrant's Employee Stock Ownership Plan, as restated January 1,
1989
10.8 First Amendment to the Registrant's Restated Employee Stock Ownership
Plan, effective July 1, 1994
10.9 Second Amendment to the Registrant's Restated Employee Stock
Ownership Plan, effective August 1, 1994
10.10 Employment Agreement dated as of December 14, 1994 between
Registrant and John S. Justin, Jr.
10.11 Form of Severance Agreement dated March 23, 1990 between Registrant
and certain of its executive officers*
10.12 Form of Severance Agreement dated March 23, 1990 between Registrant
and certain of its officers and employees*
10.13 Revolving Loan Agreement between Registrant, NationsBank of Texas,
N.A. (formerly NCNB Texas National Bank) as Administrative Lender and
the several banks listed on the signature pages thereof, as amended in
the First and Second Amendments through June 9, 1990*
10.14 Third Amendment to the Revolving Loan Agreement dated as of December
3, 1990 among Registrant, NationsBank of Texas, N.A. (formerly NCNB
Texas National Bank), Bank One, Texas, N.A. (formerly Team Bank),
Citibank, N.A., The Bank of New York and Texas Commerce Bank--Fort
Worth, N.A. (incorporated by reference to Registrant's Current Report on
Form 8-K dated December 3, 1990)
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Exhibit
No. Description
------- -----------
10.15 Fourth Amendment to the Revolving Loan Agreement dated as of
December 31, 1991 among Registrant, certain subsidiaries of the
Registrant, NationsBank of Texas, N.A., as Administrative Lender,
NationsBank of Texas, N.A., Bank One, Texas, N.A. (formerly Team Bank),
Citibank, N.A., The Bank of New York and Texas Commerce Bank, National
Association (successor by merger to Texas Commerce Bank--Fort Worth,
N.A.) (incorporated by reference to Registrant's 1991 Annual Report on
Form 10-K)
10.16 Fifth Amendment to the Revolving Loan Agreement dated as of May 1,
1992 among Registrant, certain subsidiaries of the Registrant,
NationsBank of Texas, N.A., as Administrative Lender, NationsBank of
Texas, N.A., Bank One, Texas, N.A. (formerly Team Bank), Citibank, N.A.,
The Bank of New York and Texas Commerce Bank, National Association
(successor by merger to Texas Commerce Bank--Fort Worth, N.A.)
(incorporated by reference to Registrant's 1992 Annual Report on Form
10-K)
10.17 Sixth Amendment to the Revolving Loan Agreement dated as of December
31, 1993 among Registrant, certain subsidiaries of the Registrant,
NationsBank of Texas, N.A., as Administrative Lender, NationsBank of
Texas, N.A., Bank One, Texas, N.A., Citibank, N.A., The Bank of New York
and Texas Commerce Bank, National Association (incorporated by reference
to Registrant's 1993 Annual Report on Form 10-K)
10.18 Term Loan Agreement dated as of December 3, 1990 among the
Registrant, NationsBank of Texas, N.A. (formerly NCNB Texas National
Bank), Bank One, Texas, N.A. (formerly Team Bank), Citibank, N.A. and
Texas Commerce Bank--Fort Worth, N.A. (incorporated by reference to
Amendment No. 4 to Registrant's Schedule 14D-9 dated December 6, 1990)
10.19 First Amendment to the Term Loan Agreement dated as of December 31,
1991 among Registrant, certain subsidiaries of the Registrant,
NationsBank of Texas, N.A., as Administrative Lender, NationsBank of
Texas, N.A., Bank One, Texas, N.A. (formerly Team Bank), Citibank, N.A.
and Texas Commerce Bank, National Association (successor by merger to
Texas Commerce Bank--Fort Worth, N.A.) (incorporated by reference to
Registrant's 1991 Annual Report on Form 10-K)
10.20 Second Amendment to the Term Loan Agreement dated as of May 1, 1992
among Registrant, certain subsidiaries of the Registrant, NationsBank of
Texas, N.A., as Administrative Lender, NationsBank of Texas, N.A., Bank
One, Texas, N.A. (formerly Team Bank), Citibank, N.A. and Texas Commerce
Bank, National Association (successor by merger to Texas Commerce Bank--
Fort Worth, N.A.) (incorporated by reference to Registrant's 1992 Annual
Report on Form 10-K)
10.21 Third Amendment to the Term Loan Agreement dated as of December 31,
1993 among Registrant, certain subsidiaries of the Registrant,
NationsBank of Texas, N.A., as Administrative Lender, NationsBank of
Texas, N.A., Bank One, Texas, N.A., Citibank, N.A. and Texas Commerce
Bank, National Association (incorporated by reference to Registrant's
1993 Annual Report on Form 10-K)
10.22 Form of Subordinated Promissory Notes dated August 1, 1994 between
Registrant and the former shareholders of American Tile
13 Annual report to shareholders for the year ended December 31, 1994
21 Subsidiaries of the Registrant
23 Report of Independent Auditors and Consent of Independent Auditors
(included herein at page S-1)
27 Financial Data Schedule
*Incorporated by reference to Registrant's Amendment No. 1 on Form 8 to Annual
Report on Form 10-K dated August 23, 1990.
(b) Reports on Form 8-K
None.
Page 11
================================================================================
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
JUSTIN INDUSTRIES, INC.
(Registrant)
By: /S/ JOHN JUSTIN
John Justin
Chairman of the Board and Chief Executive Officer
March 17, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
/S/ JOHN JUSTIN /S/ BAYARD H. FRIEDMAN
John Justin Bayard H. Friedman
Chairman of the Board and Director, March 17, 1995
Chief Executive Officer
March 17, 1995
/S/ J. T. DICKENSON /S/ DEE J. KELLY
J. T. Dickenson Dee J. Kelly
Director, President and Chief Director, March 17, 1995
Operating Officer
March 17, 1995
/S/ RICHARD J. SAVITZ /S/ JOSEPH R. MUSOLINO
Richard J. Savitz Joseph R. Musolino
Vice President-Finance, Principal Director, March 17, 1995
Finance and Accounting Officer
March 17, 1995
/S/ MARVIN GEARHART /S/ JOHN V. ROACH
Marvin Gearhart John V. Roach
Director, March 17, 1995 Director, March 17, 1995
/S/ ROBERT E. GLAZE /S/ WILLIAM E. TUCKER
Robert E. Glaze William E. Tucker
Director, March 17, 1995 Director, March 17, 1995
Page 12
================================================================================
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of Justin Industries, Inc.
as of December 31, 1994 and 1993, and for each of the three years in the period
ended December 31, 1994, and have issued our report thereon dated January 26,
1995, incorporated by reference in this Annual Report (Form 10-K). Our audits
also included the financial statement schedule listed in Item 14(a) of the
Annual Report (Form 10-K). This schedule is the responsibility of the company's
management. Our responsibility is to express an opinion based on our audits.
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 set forth therein.
/S/ ERNST & YOUNG LLP
Fort Worth, Texas
January 26, 1995
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Justin Industries, Inc. of our report dated January 26, 1995, included in the
1994 Annual Report to Shareholders of Justin Industries, Inc.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-11915) pertaining to the Justin Industries, Inc. 1981 Stock
Option Plan and the Justin Industries, Inc. 1984 Incentive Stock Option Plan and
in the related Prospectus of our reports dated January 26, 1995, with respect to
the consolidated financial statements and schedule of Justin Industries, Inc.
included or incorporated by reference in this Annual Report (Form 10-K) for the
year ended December 31, 1994.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-52783) pertaining to the Justin Industries, Inc. Employee Stock
Ownership Plan and in the related Prospectus of our report dated January 26,
1995, with respect to the consolidated financial statements and schedule of
Justin Industries, Inc. included or incorporated by reference in this Annual
Report (Form 10-K) for the year ended December 31, 1994.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-61776) pertaining to the Justin Industries, Inc. 1992 Stock
Option Plan and in the related Prospectus of our reports dated January 26, 1995,
with respect to the consolidated financial statements and schedule of Justin
Industries, Inc. included or incorporated by reference in this Annual Report
(Form 10-K) for the year ended December 31, 1994.
/S/ ERNST & YOUNG LLP
Fort Worth, Texas
March 22, 1995
Page S-1
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JUSTIN INDUSTRIES, INC.
CONSOLIDATED
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31
(in thousands of dollars)
Balance at Additions Balance at
Beginning Charged to Deductions End of
of Year Income (1) Year (2)
---------- ---------- ---------- ----------
Reserve Deducted from
Related Assets:
1992:
Doubtful Accounts $2,652 $1,613 $1,211 $3,054
1993:
Doubtful Accounts $3,054 $1,004 $1,044 $3,014
1994
Doubtful Accounts $3,014 $866 $661 $3,219
(1) Accounts written off, less recoveries.
(2) The reserve for doubtful accounts is deducted from accounts receivable in
the financial statements.
Page S-2
JUSTIN INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(As Restated January 1, 1989)
Effective: January 1, 1989
Justin Industries, Inc.
Employee Stock Ownership Plan
(As Restated January 1, 1989)
TABLE OF CONTENTS
Page No.
PREAMBLE
ARTICLE I Purpose And Definitions I-1
1.1 - Purpose I-1
1.2 - Definitions I-1
1.3 - Construction I-5
ARTICLE II Service Credit II-1
2.1 - Hour Of Service II-1
2.2 - Participation Service II-2
2.3 - Break In Service II-3
2.4 - Loss Of Service II-3
ARTICLE III Participation Requirements III-1
3.1 - Participation Originating Under
The Previous Plan III-1
3.2 - Participation Originating Under This Plan III-1
3.3 - Cessation Of Participation And Reentry III-1
3.4 - Participation Of Employees Of New Employers III-2
ARTICLE IV Contributions and ESOP Loans IV-1
4.1 - ESOP Employer Contributions
and ESOP Loans IV-1
4.2 - Member (Pre-Tax) Salary Deferral
Contributions IV-4
4.3 - Discontinuance of Member
(After-Tax) Contributions IV-4
4.4 - Seven Thousand Dollar ($7,000) Test IV-5
4.5 - Deferral And Contribution Percentage Tests IV-5
ARTICLE V Maintenance Of Individual Accounts V-1
5.1 - Establishment Of Individual Accounts V-1
5.2 - Allocation Of Contributions V-1
5.3 - Allocation Of Gains and Losses V-2
5.4 - Notification To Members V-3
ARTICLE VI Retirement or Earlier Termination of Employment VI-1
6.1 - Benefit VI-1
ARTICLE VII Death VII-1
7.1 - Designation Of Beneficiary VII-1
7.2 - Benefit VII-1
7.3 - No Beneficiary VII-2
ARTICLE VIII Code Section 415 Limits VIII-1
8.1 - Limit On Annual Additions Under
Code Section 415 VIII-1
ARTICLE IX Voting Employer Stock and Dividends
on Employer Stock IX-1
9.1 - Voting Employer Stock IX-1
9.2 - Actions Relating to a Tender Offer IX-1
9.3 - No Pass-Through Of Cash Dividends
On Employer Stock IX-2
ARTICLE X In-Service Withdrawals X-1
10.1 - Withdrawals X-1
ARTICLE XI Time And Methods Of Payment XI-1
11.1 - Time of Payment XI-1
11.2 - Method Of Payment XI-1
11.3 - Balance of $3,500 or Less XI-2
11.4 - Minority Or Incompetency XI-2
11.5 - Put Options XI-3
11.6 - Continued Application XI-3
ARTICLE XII Top-Heavy Restrictions XII-1
12.1 - Top-Heavy Restrictions XII-1
ARTICLE XIII Administration XIII-1
13.1 - Appointment Of Committee XIII-1
13.2 - Committee Powers And Duties XIII-1
13.3 - Claims Procedure XIII-3
13.4 - Committee Procedures XIII-4
13.5 - Authorization Of Benefit Payments XIII-4
13.6 - Payment Of Expenses XIII-4
13.7 - Unclaimed Benefits XIII-5
13.8 - Indemnity XIII-5
ARTICLE XIV Trust Fund XIV-1
14.1 - Establishment Of Trust Fund XIV-1
14.2 - Payment Of Contributions To Trust Fund XIV-1
14.3 - Bonding Of Trustee XIV-1
ARTICLE XV Adoption And Withdrawal By Other Organizations XV-1
15.1 - Procedure For Adoption XV-1
15.2 - Withdrawal XV-2
ARTICLE XVI Amendments XVI-1
16.1 - Right To Amend XVI-1
16.2 - Amendment to Vesting Provision XVI-1
ARTICLE XVII Withdrawal And Termination XVII-1
17.1 - Employer Withdrawal XVII-1
17.2 - Transfers Of Plan Assets And Plan Mergers XVII-1
17.3 - Plan Termination XVII-2
17.4 - Distribution On Termination XVII-2
ARTICLE XVIII General Provisions XVIII-1
18.1 - Nonguarantee Of Employment XVIII-1
18.2 - Manner Of Payment XVIII-1
18.3 - Nonalienation Of Benefits XVIII-1
18.4 - Amounts Returnable To An Employer XVIII-2
18.5 - Governing Law XVIII-3
Justin Industries, Inc.
Employee Stock Ownership Plan
(As Restated January 1, 1989)
PREAMBLE
WHEREAS, effective January 1, 1978, Justin Industries, Inc. organized and
existing under the laws of State of Texas, established the Employee Stock
Ownership Plan for its eligible Employees (hereinafter referred to as the
"Previous Plan") which was restated January 1, 1985 and amended thereafter; and
WHEREAS, the Previous Plan was restated January 1, 1989, to comply with
the Internal Revenue Code of 1986 and related rulings and regulations; and
WHEREAS, in order to meet Internal Revenue Service requirements for
qualification under said Internal Revenue Code of 1986 and related rulings and
regulations, further changes are required in said Previous Plan;
NOW, THEREFORE, the Previous Plan is hereby again restated, and amended in
its entirety, superseded and replaced by this separate restated Plan, as of
January 1, 1989.
There will be no termination and no gap or lapse in time or effect between
such Plans, and the existence of a qualified Plan shall be continuous and
uninterrupted.
This restated Plan is conditioned upon its qualification under Sections
401(a), 401(k), 401(m) and 4975(e)(7) of the Internal Revenue Code of 1986, as
amended from time to time, with employer contributions being deductible under
Section 404 of said Code or any other applicable sections thereof, as amended
from time to time.
The terms and conditions of this restated Plan are as follows:
================================================================================
ARTICLE I
Purpose And Definitions
1.1 Purpose: The purpose of this Plan is to give Employees capital
ownership in the Corporation (in the form of Employer Stock) and to encourage
Employees to save and invest, systematically, a portion of their current
Compensation in order that they may have a source of additional income upon
their retirement, or for their family in the event of death. The benefits
provided by this Plan will be paid from the Trust Fund and will be in addition
to the benefits Employees are entitled to receive under any other programs of
the Employer.
This Plan and the separate related Trust forming a part hereof are
established and shall be maintained for the exclusive benefit of the eligible
Employees of the Employer and their Beneficiaries. No part of the Trust Fund
can ever revert to the Employer or be used for or diverted to any other purpose
other than for the exclusive benefit of the Employees of the Employer and their
Beneficiaries, except as provided in Section 18.4 hereof.
1.2 Definitions: Where the following words and phrases appear in this
Plan, they shall have the respective meanings set forth below, unless the
context clearly indicates otherwise:
(a) Affiliated Employer: Any business entity (including an
Employer hereunder) that, together with an Employer hereunder,
constitutes a controlled group of corporations, a group of trades or
businesses under common control, or an affiliated service group, all
as defined in Code Section 414 (subject, however, to the provisions of
Code Section 415(h) when applying the benefit limitations of Code
Section 415).
(b) Allocation Date: The date as of which contributions are
allocated hereunder, which shall be
(1) the last day of December as to ESOP
Employer Contributions, and
(2) as soon as practicable after the end of
each payroll period as to Salary Deferral
Contributions.
Page I-1
================================================================================
The Committee may use more frequent Allocation Dates if it so
desires.
(c) Beneficiary: A person designated by a Member to receive
benefits hereunder upon the death of such Member.
(d) Code: The Internal Revenue Code of 1986, as amended from
time to time.
(e) Committee: The persons appointed to administer the Plan in
accordance with Article XIII hereof.
(f) Compensation: Base Pay plus piece-rate earnings, overtime,
bonuses, and 75% of commissions paid to an Employee during a Plan Year
by the Employer (or predecessor company) for personal services. The
amount of Compensation which will be considered in determining
contributions on behalf of a Member will be limited to $200,000 (as
adjusted) in plan years beginning after December 31, 1988 and to
$150,000 (as adjusted) in plan years beginning on or after January 1,
1994, in accordance with the limit on annual compensation under Code
Section 401(a)(17).
If during a year any Employee ("family member") is the spouse or
lineal descendant, below age 19, of another Employee ("HCE") who
either is a five percent (5%) owner (as defined in Code Section 416(i)
or is a highly compensated employee (as defined in Code Section 414(q)
in the group consisting of the ten (10) such highly compensated
employees with the greatest compensation during such year, then, for
purposes of the above dollar limitation, such "family member's"
compensation for such year will be aggregated with such "HCE's"
compensation for such year. The dollar limit applicable to each such
Employee's compensation for such year will be the dollar limit
applicable for such year multiplied by a fraction, the numerator of
which is such Employee's unlimited compensation for such year and the
denominator of which is the sum of the unlimited compensation for such
year for all Employees with whom such Employee is a family member, as
defined above.
For purposes of determining an Employee's compensation, any
election by such Employee to reduce his regular cash remuneration
under Code Section 125 or 401(k) shall be treated as if the Employee
did not make such election.
(g) Contributions: Amounts contributed hereunder on and after
January 1, 1989 for allocation to Members as follows:
(1) ESOP Employer Contributions: The contributions
made by the Employer, under Section 4.1 hereof,
which are determined at the discretion of the
Employer.
Page I-2
================================================================================
(2) Salary Deferral Contributions: The pre-tax
contributions made under Section 4.2 hereof
through salary deferral pursuant to Code Section
401(k).
(3) Employee Contributions: The after-tax
contributions made by Members prior to
January 1, 1988, under the Previous Plan.
(h) Corporation: Justin Industries, Inc., a corporation
organized and existing under the laws of the State of Texas or its
successor or successors.
(i) Covered Employment: The employment category for which the
Plan is maintained, which includes any employment with the Employer,
excluding:
(1) Persons who are employed as sales
representatives of Justin Boot Company,
division of Footwear Management Company,
Inc. who are compensated solely
on the basis of sales commissions and
who were first employed on or after November 1,
1992.
(2) Prior to July 1, 1994, persons who are
employed by Tony Lama Company, a division of
Footwear Management Company, Inc.
(3) Employment as a "leased employee" (as
such term is defined within the definition of
Employee below).
(4) Employment covered by a collective
bargaining agreement unless such agreement
provides for participation in this Plan.
(j) Disability: A physical or mental condition which, in the
judgment of the Committee, totally and presumably permanently prevents
an Employee from engaging in any gainful employment, provided that a
finding of Disability shall not be made unless the Employee has been
determined eligible to receive a disability benefit under the Federal
Social Security Act as amended.
(k) Effective Date: January 1, 1989, except as otherwise
provided herein. Any provision hereunder effective prior to January
1, 1989 will be applicable under the Previous Plan.
(l) Employee: Any person who, on or after the Effective Date,
is receiving remuneration for personal services rendered as a common
law employee of the Employer or Affiliated Employer, or would be
receiving such remuneration except for an authorized absence. A
"leased employee" will also be deemed an Employee. A "leased
Page I-3
================================================================================
employee" is any leased employee within the meaning of Code Section
414(n)(2), except that if such leased employees constitute less than
twenty percent (20%) of the Employer's nonhighly compensated workforce
within the meaning of Code Section 414(n)(5)(C)(ii), then the term
"Employee" will not include those leased employees covered by a plan
described in Code Section 414(n)(5) unless otherwise provided by the
terms of such plan (or this Plan).
(m) Employer: The Corporation and any other organization which
adopts the Plan in accordance with Article XV hereof.
(n) Employer Stock: Common stock of the Corporation which is
readily tradable on an established securities market, with $2.50 par
value.
(o) ERISA: The Employee Retirement Income Security Act of 1974,
as amended from time to time.
(p) Individual Account: Each of the accounts maintained by the
Committee showing the individual interests in the Trust Fund of each
Member, former Member, and Beneficiary, as described in Section 5.1
hereof. If so provided for in a qualified domestic relations order
(as defined in Code Section 414(p)), an account will be maintained for
an alternate payee representing such alternate payee's interest
hereunder.
(q) Leave of Absence: Any absence from service authorized by an
Employer under such Employer's standard personnel practices for
reasons other than termination of employment, death, discharge or
Retirement, provided that all persons under similar circumstances must
be treated alike in the granting of such Leaves of Absence, and
provided further that the Employee returns, or is physically unable to
return as determined by the Employer, or retires within the period
specified in the authorized Leave of Absence.
(r) Limitation Year: The year used in applying Code Section
415, which year is the calendar year. Notwithstanding the Effective
Date hereof, such limitations, as set forth in Section 8.1 hereof,
apply beginning with the first Limitation Year beginning after 1986.
(s) Member: An Employee who has met the eligibility
requirements for participation set forth in Article III hereof.
(t) Plan: Justin Industries, Inc. Employee Stock Ownership Plan
(As Restated January 1, 1989), the Plan set forth herein as amended
from time to time.
(u) Plan Administrator: The Committee.
Page I-4
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(v) Plan Year: Each annual period beginning on January 1st and
ending on December 31st.
(w) Previous Plan: Justin Industries, Inc. Employee Stock
Ownership Plan (As Restated Effective January 1, 1985) and any
predecessor thereto, in force and effect for the period prior to the
Effective Date, the Plan hereby being amended and restated. Any
reference herein to the Previous Plan as of a certain date or for a
certain period shall be deemed a reference to the Previous Plan as
then in effect.
(x) Retirement (or Retired): Termination of employment with all
Affiliated Employers after a Member has reached his normal retirement
age or early retirement age under a qualified defined benefit pension
plan of the Employer. Such retirement shall be considered as
commencing on the day immediately following a Member's last day of
employment (or authorized Leave of Absence, if later).
(y) Service: A period or periods of employment of an Employee
as described in Article II hereof.
(z) Trust Agreement: Justin Industries, Inc. Employee Stock
Ownership Trust.
(aa) Trust Or Trust Fund: The fund maintained in accordance
with the terms of the Trust Agreement.
(bb) Trustee: The corporation or individuals appointed by the
Employer to administer the Trust in accordance with the Trust
Agreement.
(cc) Valuation Date: The date as of which the Trust Fund is
valued and gains or losses allocated, which shall be as of the last
day of each calendar quarter, or such other date as the Committee may
specify; however, such date shall be at least once each year.
1.3 Construction: The masculine gender, where appearing in the Plan,
shall be deemed to include the feminine gender, unless the context indicates to
the contrary.
Page I-5
================================================================================
ARTICLE II
Service Credit
2.1 Hour Of Service:
a. Hours Of Service Credit Used For All Purposes: An Hour of Service is
any hour for which an Employee is directly or indirectly paid or entitled to
payment for the performance of duties (irrespective of whether the employment
relationship has terminated) or for certain reasons other than the performance
of duties, including any hour for which back pay (irrespective of mitigation of
damages) is due, by the Employer or Affiliated Employer.
Such payment for reasons other than the performance of duties must be due
to vacation, holiday, illness, incapacity (including disability), lay off, jury
duty, military duty or Leave of Absence; provided, however, that no Hour of
Service need be credited for payments received solely for the purpose of
complying with applicable workers' compensation or unemployment or disability
insurance laws or for payments received solely for reimbursing the Employee for
medical or medically related expenses. It is further provided that no more than
five hundred one (501) Hours of Service credit need be given for each single
continuous period for which an Employee is paid for reasons other than the
performance of duties. The determination of such Hours of Service for the
nonperformance of duties shall be in accordance with Section 2530.200b-2(b) of
the Minimum Standards Regulations prescribed by the Secretary of Labor.
Hours of Service credit at the rate of forty (40) hours per week shall also
be granted for any nonpaid period of absence authorized by the Employer in
accordance with its uniform Leave of Absence policy for granting such credit or
for military duty to the extent required under federal law.
Page II-1
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Each Hour of Service earned by an Employee shall be credited to him as of
the time when he actually earned such Hour except as otherwise permissible or
required under Section 2530.200b-2(c) of the Minimum Standards Regulations
prescribed by the Secretary of Labor. In no event will an Employee receive
credit for the same Hours of Service more than once.
b. Hours Of Service Credit Used Only For Purposes Of Determining Breaks In
Service: Solely for purposes of determining whether an Employee has incurred a
one (1) year Break in Service, Hours of Service credit shall be given (if not
already given under a. above in this Section) for any absence, beginning after
December 31, 1984, by reason of pregnancy of the Employee, birth of the
Employee's child, placement of a child with the Employee in connection with the
adoption of such child by said Employee, and absence for purposes of caring for
such child for a period beginning immediately following such birth or placement.
No more than five hundred one (501) Hours of Service credit need be given
for such periods of absence, and the credit given shall be the Hours of Service
which otherwise would normally have been credited to such Employee but for such
absence. In any case in which hourly records are not maintained, Hours of
Service credit shall be given at the rate of eight (8) hours for each day of
such absence.
Said Hours of Service shall be credited in the Plan Year during which said
absence began only if the Employee would be prevented from incurring a Break in
Service in said year by treating said periods of absence as Hours of Service;
however, if said Employee would not incur a Break in Service during said year,
such Hours of Service shall be credited in the immediately following year.
2.2 Participation Service: Participation Service is the period of
employment used in determining eligibility for participation in this Plan.
Subject to the loss of service rules below in this Article, a year of
Page II-2
================================================================================
Participation Service is the completion of one thousand (1,000) Hours of Service
in the twelve (12) month period beginning with the date of the Employee's first
Hour of Service or in any Plan Year following such date.
2.3 Break In Service: For purposes of determining Participation Service,
an Employee shall have a year of Break in Service for the twelve (12) month
period beginning with the date of his first Hour of Service and for any Plan
Year following such date if during such twelve (12) month period or such Plan
Year he completes five hundred (500) or fewer Hours of Service. Authorized
Leaves of Absence, however, shall not constitute a Break in Service provided the
Employee returns within the authorized absence.
2.4 Loss Of Service: If an Employee who has not become a Member hereunder
has a termination of employment that results in at least five (5) consecutive
years of Breaks in Service that are equal to or greater than the total years of
Participation Service, then he shall lose all such prior Participation Service
previously accrued hereunder.
Page II-3
================================================================================
ARTICLE III
Participation Requirements
3.1 Participation Originating Under The Previous Plan: Employees in
Covered Employment who were participants in the Previous Plan immediately prior
to the Effective Date, or would have become participants on the Effective Date,
shall automatically become Members in this restated Plan as of the Effective
Date.
3.2 Participation Originating Under This Plan: Each Employee who does not
become a Member in this Plan in accordance with Section 3.1 hereof shall become
a Member in this Plan on the first January 1st or July 1st (i.e., "entry date")
on which he:
a. is in Covered Employment;
b. has attained his twenty-first (21st) birthday;
c. has completed a year of Participation Service; and
d. has agreed to participation hereunder in writing on a form
prescribed by the Committee.
3.3 Cessation Of Participation And Reentry: If an Employee has a year or
more of Breaks in Service, or if he leaves Covered Employment, before he has
become a Member hereunder, he will, following such Break in Service or
interruption of Covered Employment, become a Member on the first entry date
specified in Section 3.2 hereof after he meets the requirements for
participation specified in Section 3.2 hereof. For purposes of determining
whether an Employee's prior Participation Service is to be counted toward such
requirements, the provisions of Section 2.4 hereof shall be applicable.
If, however, an Employee leaves Covered Employment after having met the
participation requirements of Section 3.2 hereof but before his entry date, he
Page III-1
================================================================================
will, if he reenters Covered Employment after such entry date but before having
a one (1) year Break in Service, become a Member immediately upon such reentry
into Covered Employment.
If an Employee has a year or more of Breaks in Service, or if he leaves
Covered Employment, after he has a vested benefit hereunder, he will cease his
participation in this Plan, but will, immediately following such Break in
Service or interruption of Covered Employment, again become a Member hereunder,
provided he is in Covered Employment.
3.4 Participation Of Employees Of New Employers: If, after the Effective
Date hereof, any organization adopts the Plan and Trust as a new Employer as
herein provided, it shall specify in its adoption resolution or decision an
initial date for the application and enrollment of its eligible Employees under
the Plan and shall thereafter be governed by the provisions of this Article III.
Page III-2
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ARTICLE IV
Contributions and ESOP Loans
4.1 ESOP Employer Contributions and ESOP Loans: The Employer shall, for
any Plan Year, contribute an ESOP Employer Contribution, determined at the
discretion of the Employer's Board of Directors, which shall be at least
sufficient to discharge any obligations of the Trust as to a loan obtained by
the Trustee for purposes of acquiring Employer Stock.
An Employer's contribution shall be made in cash, shares of Employer Stock
or such other property as the Employer's Board of Directors may determine.
Shares of Employer Stock and any other property made as an ESOP Employer
Contribution shall be valued at fair market value as of the date of
contribution. Employer Contributions in cash shall be used to pay any
outstanding obligations of the Trust incurred for the purchase of Employer
Stock, or may be applied to purchase additional shares of Employer Stock.
The Committee may direct the Trustee to incur debt obligations from time
to time to finance the acquisition of Employer Stock for the Trust. The
Employer Stock so acquired shall be held in a loan suspense account. Any such
debt obligation shall bear a reasonable rate of interest and may be secured by a
collateral pledge of the Employer Stock so acquired. No other Trust assets may
be pledged as collateral by the Trustee, and no lender shall have recourse
against the Trust Fund other than any shares of Employer Stock remaining subject
to pledge. Any pledge of Employer Stock must provide for the release of shares
so pledged as the debt obligation is repaid by the Trustee and such shares are
released from the loan suspense account and allocated to Members' Individual
Accounts; provided that the number of shares pledged to be released from the
loan suspense account for allocation to the Members' Individual Accounts for
Page IV-1
================================================================================
each Plan Year shall be the number of shares pledged held in the loan suspense
account prior to the release, multiplied by a fraction the numerator of which is
the amount of principal and/or interest paid for such Plan Year on the loan
obtained to acquire the shares and the denominator of which is the sum of the
numerator plus the total payments of principal and interest to be paid on the
loan in all future years. Repayments of principal and interest on any debt
obligations shall be made by the Trustee (as directed by the Committee) only
from ESOP Employer Contributions in cash to the Trust. This Plan's ESOP
Accounts are intended to be invested primarily in Employer Stock and ESOP loans
must meet the following requirements:
a. The number of future years under the loan must be definitely
ascertainable and must be determined without taking into account any
possible extensions or renewal periods.
b. If the interest rate under the loan is variable, the
interest to be paid in future years must be computed using the
interest rate applicable as of the end of the plan year.
c. The loan must have a specific term and must not be payable
on demand.
d. The loan must be for the primary benefit of the Plan
participants and their beneficiaries.
e. ESOP loan proceeds must be used within a reasonable time
after their receipt to acquire Employer Stock, repay such loan, or
repay a prior exempt ESOP loan.
f. Except for the put option described in Section 11.5, no
security acquired with the proceeds of an exempt loan may be subject
Page IV-2
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to a put, call or other option, or buy-sell or other arrangement while
held by and when distributed from the Plan, whether or not the Plan
has continued to operate as an ESOP.
g. Collateral must be limited to Employer Stock purchased with
such exempt loan or a prior exempt loan.
h. No person entitled to payment under an exempt loan shall
have any right to assets of the Plan other than collateral given for
such loan, contributions (other than contributions of Employer Stock)
made to repay such exempt loan, and earnings attributable to
collateral and investment of contributions.
i. Payments made with respect to amount equal to the sum of
contributions and earnings received during or prior to such year less
such payments in prior years.
j. Such contributions and earnings must be accounted for
separately in the books of accounts of the ESOP until the exempt loan
is repaid.
k. Assets transferred in satisfaction of a loan must not exceed
the amount of default. For a disqualified person (as defined in Code
section 4975(e)), the assets transferred to satisfy default can not
exceed the payment schedule of the loan.
l. Employer Stock may be forfeited only after other assets.
m. If more than one class of Employer Stock subject to exempt
loan provisions have been allocated to a Member's account, the Plan
must forfeit the same proportion of each such class.
Page IV-3
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n. If securities acquired with the proceeds of an exempt loan
available for distribution consist of more than one class, a
distributee must receive substantially the same proportion of each
such class.
4.2 Member (Pre-Tax) Salary Deferral Contributions: When he becomes a
Member hereunder and prior to each January 1 or July 1 thereafter, a Member may
enter into a written salary deferral agreement with his Employer which shall
provide that the Member elects to defer (on a pre-tax basis) a portion of his
Compensation; provided, however:
(1) The Committee may require such contributions to be a whole
dollar or a whole percentage of his Compensation.
(2) Such deferral must meet the deferral percentage test in
Section 4.5 hereof, and the Committee may require modifications in
order to meet such test.
(3) Such deferral cannot exceed the dollar limit in Section 4.4
hereof.
(4) Such deferral cannot exceed fifteen percent (15%) of the
Member's Compensation for the Plan Year.
A salary deferral agreement shall be entered into on such forms as the
Committee may prescribe, provided that changes, suspensions or discontinuance of
salary deferrals may be made by the Member as of any January 1 or July 1 in
accordance with Committee guidelines, and may be made by the Committee if called
for under Section 4.4 or 4.5 hereof or if the Employer's deduction limits under
Code Section 404(a) would otherwise be exceeded, or if the annual addition
limitations under Code Section 415 would otherwise be exceeded as to any
Employee. If any Member fails to make a new election as to salary deferral for
any Plan Year, the Committee shall deem his election to be the same as for the
prior year.
4.3 Discontinuance of Member (After-Tax) Contributions: Member (after-
tax) Contributions were discontinued effective January 1, 1988.
Page IV-4
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4.4 Seven Thousand Dollar ($7,000) Test: If a Member's Salary Deferral
Contributions hereunder after 1986 should exceed Seven Thousand Dollars
($7,000), (subject to the cost-of-living adjustment set forth in Code Section
402(g)(5)), in any taxable year of the Member, the excess (adjusted for earnings
or losses thereon) shall be distributed to the Member. If the Member also
participates in another elective deferral program (within the meaning of Code
Section 402(g)(3)) and if, when aggregating his elective deferrals under all
such programs, an excess of deferral contributions arises under the dollar
limitation in Code Section 402(g) with respect to such Member, the Member shall,
no later than March 1st following the close of the Member's taxable year, notify
the Committee as to the portion of such excess deferrals to be allocated to this
Plan and such excess so allocated to this Plan (adjusted for earnings or losses
thereon) shall be distributed to the Member after reduction by any excess
contribution already distributed for such year under Section 4.5b hereof. Any
distribution under this Section shall be made to the Member no later than the
April 15th immediately following the close of the Member's taxable year for
which such contributions were made.
4.5 Deferral And Contribution Percentage Tests:
a. Highly Compensated Employee: For purposes of this Section, after 1986,
the term Highly Compensated Employee shall mean any Employee who, during the
Plan Year of determination or the immediately preceding Plan Year:
(i) was at any time during such year(s) a five
percent (5%) owner (as defined in Code Section
416(i)(1));
(ii) received compensation (as defined below) from
the Affiliated Employers in excess of Seventy-Five
Thousand Dollars ($75,000);
(iii) received compensation (as defined below) from
the Affiliated Employers in excess of Fifty Thousand
Dollars ($50,000) and was in the top twenty percent
(20%) of the Employees of all Affiliated Employers
Page IV-5
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(when ranked on the basis of compensation paid during
such year); excluding, however, for purposes of
determining the top twenty percent (20%):
(A) Employees who have not completed at
least six (6) months of service;
(B) Employees who normally work less
than seventeen and one-half (17 1/2) hours
per week;
(C) Employees who normally work during
not more than six (6) months during any Plan
Year;
(D) Employees who have not attained age
twenty-one (21);
(E) Employees covered under a
collective bargaining agreement
(to the extent permitted in
appropriate regulations); and
(F) Employees who are nonresident
aliens and who receive no earned
income (as defined in Code
Section 911(d)(2) which constitutes
income from sources within the
United States (within the
meaning of Code Section 861(a)(3)); or
(iv) was at any time an officer and received
compensation (as defined below) greater than fifty percent
(50%) of the dollar limitation in effect under Code Section
415(b)(1)(A) for such Plan Year; provided that, for purposes
of this subparagraph (iv):
(A) no more than fifty (50) Employees
(or if lesser, the greater of three (3)
Employees or ten percent (10%) of the
Employees) of the Affiliated
Employers shall be considered as
officers, and
(B) if in such Plan Year, no officer
satisfied the requirements set forth in this
subparagraph (iv) above, the highest paid
officer of the Affiliated Employers during
such Plan Year shall be considered
an officer.
(1) For purposes of this Section, the term compensation shall
have the same meaning as in Code Section 415(c)(3), without regard to
Page IV-6
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(A) Code Sections 125, 402(a)(8), and 402(h)(1)(B), and (B) Code
Section 403(b) in the case of contributions made by an Affiliated
Employer under a salary reduction agreement.
(2) For purposes of determining whether an Employee is highly
compensated in the Plan Year for which the determination is being
made, any Employee not described in subparagraphs (ii), (iii), or (iv)
above for the preceding year (disregarding this paragraph (2)), shall
not be treated as described in subparagraphs (ii), (iii), or (iv)
above unless such Employee is a member of the group consisting of the
one hundred (100) Employees of the Employer who were paid the highest
compensation during the Plan Year for which such determination is
being made. Notwithstanding the preceding sentence nor the first
sentence in paragraph (a) above in this Section, if the Employer so
elects, the determination described in said paragraph (a) above will
be made only for the Plan Year of determination if such Plan Year is a
calendar year and no such determination will be made for the
immediately preceding Plan Year, in which event the preceding sentence
in this such paragraph (2) will not apply; provided, however, the
Employer may only make such election if the same election is made as
to all plans, entities and arrangements of the Employer with respect
to which a determination of Highly Compensated Employees is necessary.
(3) For purposes of this Section, if any individual is a member
of the family (spouse, and lineal ascendants or descendants and the
spouses of such lineal ascendants or descendants) of a five-percent
(5%) owner or of a Highly Compensated Employee in the group consisting
of the ten (10) highly compensated Employees paid the greatest
compensation during such Plan Year, then the following provisions
shall be applicable:
(A) such family member shall not be
considered a separate Employee,
(B) any compensation paid to such
family member (as well as any
applicable contribution (or
benefit) paid to or on behalf of such
person) shall be treated as if it
were paid to (or on behalf of)
said five-percent (5%) owner or Highly
Compensated Employee, and
(C) any excess contribution and/or
aggregate excess contribution as to such
aggregated family members under the
following provisions of this Section
shall be allocated among such family
members on the basis of their respective
contributions combined for purposes of
determining such excess.
Page IV-7
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(4) For purposes of this Section, former Employees shall be
treated as Highly Compensated Employees, if:
(A) such an Employee was a highly compensated
Employee upon termination of employment with the
Affiliated Employers; or
(B) such an Employee was a highly compensated
Employee at any time after attaining age fifty-five
(55).
However, former Employees are disregarded when determining the
top twenty-percent (20%), the top one-hundred (100) or the includible
officers group above.
b. Deferral Percentage Test: Each Plan Year, after 1986, the Committee
shall determine:
(1) The "deferral percentage" for each Employee who is then
eligible for salary deferrals, which shall be the ratio of the amount
of such Employee's salary deferral for such Plan year to the
Employee's compensation (as defined in a manner meeting the
requirements of Code Section 414(s), subject to the dollar limitation
set forth in Section 1.2(f) hereof), while a Member, for such Plan
Year. An elective contribution will be taken into account under the
deferral percentage test of IRC section 401(k)(3)(A) for a Plan Year
only if it relates to compensation that either would have been
received by the Employee in the Plan Year (but for the deferral
election) or is attributable to services performed by the Employee in
the Plan Year and would have been received by the Employee within 2-
1/2 months after the close of the Plan Year (but for the deferral
election). An elective contribution will be taken into account under
the deferral percentage test for a Plan Year only if it is allocated
to the Employee as of a date within that Plan Year. For this purpose,
an elective contribution is considered allocated as of a date within a
Plan Year if the allocation is not contingent on participation or
performance of services after such date and the elective contribution
is actually paid to the trust no later than 12 months after the Plan
Year to which the contribution relates.
(2) The "highly compensated deferral percentage", which shall be
the average of the "deferral percentages" for all Highly Compensated
Employees then eligible for salary deferrals.
(3) The "nonhighly compensated deferral percentage", which shall
be the average of the "deferral percentages" for all Employees then
eligible for salary deferrals who were not included in the "highly
Page IV-8
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compensated deferral percentage" in (2) above.
In no event shall the "highly compensated deferral percentage" exceed the
greater of:
(A) a deferral percentage equal to one and
one-fourth (1 1/4) times the "nonhighly
compensated deferral percentage"; and
(B) a deferral percentage equal to two (2)
times the "nonhighly compensated deferral
percentage" but not more than two (2)
percentage points greater than the
"nonhighly compensated deferral percentage".
If the above deferral percentage test would otherwise be violated as of
the end of the Plan Year, then notwithstanding any other provision hereof, every
contribution included in the "highly compensated deferral percentage" for a
Member whose deferral percentage is greater than the permitted maximum shall
automatically be revoked to the extent necessary to comply with such deferral
percentage test and the amount of such contribution, to the extent revoked,
shall constitute an "excess contribution" to be distributed to such Member
(adjusted for earnings and losses thereon) within two and one-half (2 1/2)
months following the close of the Plan Year for which such contribution was
made. Such excess shall first be reduced by any excess deferral for such Plan
Year already distributed to the Member under Section 4.4 hereof. To determine
the amount of the excess contribution and the Members to whom the excess
contributions are to be distributed, the Salary Deferral Contributions of Highly
Compensated Employees shall be reduced in order of the deferral percentages
beginning with the Highly Compensated Employee with the highest of the deferral
percentages. The actual deferral percentage of the Highly Compensated Employee
with the highest actual deferral percentage is reduced by the amount required to
cause the Employee's actual deferral percentage to equal the percentage of the
Page IV-9
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Highly Compensated Employee with the next highest actual deferral percentage.
If a lesser reduction would satisfy the actual deferral percentage test, only
this lesser reduction shall be made. This process will be repeated until the
deferrals satisfy the actual deferral percentage test. The highest actual
deferral percentage remaining under the Plan after completion of the above
leveling procedure is the highest permitted actual deferral percentage. In no
case may the amount of excess contributions to be distributed for a Plan Year
with respect to any Highly Compensated Employee exceed the amount of Salary
Deferral Contributions made on behalf of the Highly Compensated Employee for the
Plan Year.
If a Highly Compensated Employee participates in two or more plans
maintained by the Employer or Affiliated Employer, that are subject to the
deferral percentage test, then such Employee's deferral percentage shall be
determined by aggregating his participation in all such plans.
c. Contribution Percentage Test: Each Plan Year, after 1986, the
Committee shall determine:
(1) The "contribution percentage" for each Employee who is then
eligible to receive matching Employer contributions, which shall be
the ratio of the amount of such Employee's matching Employer
contribution to the Employee's compensation (as defined in a manner
meeting the requirements of Code Section 414(s), subject to the dollar
limitation set forth in Section 1.2(f) hereof), while a Member, for
such Plan Year. Matching Employer contributions for a Plan Year must
be contributed to the Trust within twelve months after the close of
such year.
(2) The "highly compensated contribution percentage", which
shall be the average of the "contribution percentages" for all
eligible Highly Compensated Employees.
(3) The "nonhighly compensated contribution percentage", which
shall be the average of the "contribution percentages" for all
Employees then eligible who were not included in the "highly
compensated contributions percentage" in (2) above.
Page IV-10
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In no event shall the "highly compensated contribution percentage" exceed
the greater of:
(A) a contribution percentage equal to
one and one-fourth (1 1/4) times the
"nonhighly compensated contribution
percentage"; and
(B) a contribution percentage equal to
two (2) times the "nonhighly compensated
contribution percentage" but not more
than two (2) percentage points greater
than the "nonhighly compensated
contribution percentage".
If the above contribution percentage test would otherwise be violated as of
the end of the Plan Year, then notwithstanding any other provision hereof every
contribution included in the "highly compensated contribution percentage" for a
Member whose contribution percentage is greater than the permitted maximum shall
automatically be revoked to the extent necessary to comply with such
contribution percentages test and the amount of such contribution, to the extent
revoked, shall constitute an "aggregate excess contribution" to be distributed
to such Member (adjusted for earnings or losses thereon) or forfeited, if
applicable, within two and one-half (2 1/2) months following the close of the
Plan Year for which such contribution was made. To determine the amount of
aggregate excess contributions and the Members to whom the aggregate excess
contributions are to be distributed, the applicable contributions of Highly
Compensated Employees are reduced in the order of their contribution percentage
beginning with the Highly Compensated Employee with the highest contribution
percentage. The actual contribution percentage of the Highly Compensated
Employee with the highest actual contribution percentage is reduced by the
amount required to cause the Employee's actual contribution percentage to equal
the percentage of the Highly Compensated Employee with the next highest actual
contribution percentage. If a lesser reduction would satisfy the actual
Page IV-11
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contribution percentage test, only this lesser reduction shall be made. This
process will be repeated until the Plan satisfies the actual contribution
percentage test. The highest actual contribution percentage remaining under the
Plan after completion of the above leveling procedure is the highest permitted
actual contribution percentage. In no case may the amount of excess aggregate
contributions with respect to any Highly Compensated Employee exceed the amount
of Employee and matching Employer contributions made on behalf of the Highly
Compensated Employee for the Plan Year.
d. Collective Bargaining Employees: Any collective bargaining unit
Employees hereunder hereof shall be disregarded when the above deferral and
contribution percentage tests are applied to nonbargaining Employees. The
deferral percentage test shall be applied separately to the Employees in each
collective bargaining unit who are eligible to make salary deferral elections
hereunder, or, if there is more than one collective bargaining unit with
Employees eligible to make salary deferrals hereunder, applied in the aggregate
to all collective bargaining unit Employees who are eligible to make salary
deferral elections hereunder, as determined each year by the Committee. The
above contribution percentage test is deemed to be automatically met by any
collective bargaining unit Employees otherwise subject to such test.
Page IV-12
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ARTICLE V
Maintenance Of Individual Accounts
5.1 Establishment Of Individual Accounts: The Committee shall create and
maintain adequate records to reflect at all times the interest in the Trust Fund
of each Member. Such records shall be in the form of separate Individual
Accounts for each Member who has an interest in the Trust Fund, such accounts to
be referred to as follows:
a. ESOP Account: An individual ESOP Account to which shall be
credited a Member's applicable share of ESOP Employer Contributions
and gains or losses allocable thereto.
b. Salary Deferral Account: The account representing Salary
Deferral Contributions and gains or losses allocable thereto.
c. Employee Contribution Account: The account representing
Employee Contributions and gains or losses allocable thereto.
d. PAYSOP Account: An individual PAYSOP Account to which shall
be credited a Member's applicable share of Employer contributions,
made for the PAYSOP Accounts of the Previous Plan, and gains or losses
allocable thereto.
Credits and charges shall be made to such accounts in the manner herein
described. The Individual Accounts are primarily for accounting purposes, and a
segregation of the assets of the Trust Fund to each account by the Trustee shall
not be required. Distributions and withdrawals made from an account shall be
charged to the account as of the date when paid.
Account balances from the Previous Plan shall be carried forward into the
above-referenced accounts, as applicable.
5.2 Allocation Of Contributions: Each contribution for eligible Members
shall be allocated as follows:
a. ESOP Employer Contribution: As the Trustee makes each annual
payment on the balance due on any loan that has been obtained by the
Page V-1
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Trustee in accordance with the terms of this Plan for the purchase of
Employer Stock, each annual payment shall be considered a purchase of
Employer Stock, and shall be deemed to be an ESOP Employer
Contribution. On the Allocation Date, the ESOP Account of each Member
eligible to receive an allocation will be credited with the allocable
share of Employer Stock having been purchased and paid for by the
Trust, or contributed in kind by the Employer. The amount of the
annual allocation to the ESOP Account of each such Member shall be an
amount equal to fifty percent (50%), or such other lesser or greater
percentage as the Board may determine annually in its sole discretion,
of the Salary Deferral Contributions made by a Member during the Plan
Year but disregarding any such Salary Deferral Contributions in excess
of five percent (5%) of the Member's Compensation for the Plan Year.
Prior to allocation hereunder, any Employer Stock purchased with the
proceeds of a loan as permitted under Section 4.1 hereof shall be held in a
suspense account which shall be an asset of the Plan.
b. Salary Deferral Contributions: Any Salary Deferral
Contribution received hereunder on behalf of a Member shall be
allocated to this Salary Deferral Contribution Account as of the
Allocation Date applicable to such contribution.
5.3 Allocation Of Gains And Losses: The Trust Fund's gains or losses
shall be allocated as of each Valuation Date as follows:
a. The Committee shall, before taking into account the
contributions for the period since the last preceding Valuation Date,
determine the then market value of the Trust Fund and the net gain or
loss of the Trust Fund from the preceding valuation, taking into
account expenses of administration and charges against such Trust
Fund, including payment of outstanding obligations of the Trust
incurred in the purchase of Employer Stock.
b. The Committee shall determine the total aggregate value of
all Individual Accounts as shown in its records for the preceding
Valuation Date, reduced by any distributions therefrom. This balance
shall be the value used in c. below.
c. The Committee shall then adjust the value of each Individual
Account by crediting each such Individual Account with its proportion
of the net gain if there is a gain or charging it with its proportion
of the net loss if there is a loss; the proportion to be so credited
or charged to each Individual Account shall be calculated by
multiplying such gain or loss by a fraction, the numerator of which is
the then value of said Individual Account and the denominator of which
is the then aggregate value of all Individual Accounts.
Page V-2
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5.4 Notification To Members: At least once annually the Committee shall
advise each Member for whom an Individual Account is held hereunder the amount
held in such account.
Page V-3
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ARTICLE VI
Retirement or Earlier
Termination of Employment
6.1 Benefit: A Member shall at all times have a fully vested and
nonforfeitable interest in his Individual Accounts hereunder. Distribution will
be made upon his termination of employment, subject, however, to the post age
70 1/2 distribution provisions of Section 11.1 hereof. The amount of his
Individual Accounts shall be the balance as of the Valuation Date concurrent
with or next preceding the date of his Retirement, plus any contributions
allocated to, and minus any payments from, his Individual Accounts since such
Valuation Date, except that, if a Retired or Disabled Member who terminated
employment other than on a year-end Allocation Date so elects, in writing and in
advance, his balance shall be determined as of the year-end Allocation Date next
following the date of his Retirement or Disability, including allocation of any
contribution then being allocated hereunder, taking into account the Member's
Compensation and Salary Deferral Contributions made up to his Retirement or
Disability. Payment shall be made at the time and in the manner provided in
Article XI hereof.
Page VI-1
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ARTICLE VII
Death
7.1 Designation Of Beneficiary: Each Member and former Member may, from
time to time, designate one (1) or more primary Beneficiaries and contingent
Beneficiaries to receive benefits payable hereunder in the event of the death of
such Member or former Member. If a married Employee wishes to designate someone
other than his spouse to be a primary Beneficiary (or wishes to continue such a
designation made prior to January 1, 1985), such designation will not become (or
continue) effective unless his spouse (if his spouse can be located) consents in
writing to such designation, acknowledges the effect of such designation and has
such consent and acknowledgment witnessed by a Plan representative or a notary
public. Such designation shall be made in writing upon a form provided by the
Committee and shall be filed with the Committee. The last such designation
filed with the Committee shall control. If the spouse duly consents to the
designation of another beneficiary and to future changes in such designation,
then spousal consent is not needed for any such future changes.
7.2 Benefit: Upon the death of a Member or former Member, his designated
Beneficiary, or Beneficiaries, shall be fully vested with respect to the balance
of his Individual Accounts as of the Valuation Date concurrent with or next
preceding the date of his death, plus any contributions allocated to, and minus
any payments from, the Member's Individual Accounts since such Valuation Date,
except that, if the Beneficiary of an Employee who died other than on a year-end
Allocation Date so elects in writing and in advance, such balance shall be
determined as of the year-end Allocation Date next following the date of death,
including allocation of any contribution then being allocated hereunder, taking
Page VII-1
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into account the Member's Compensation and Salary Deferral Contributions made up
to the Member's death. Payment shall be made at the time and in the manner
provided in Article XI hereof.
7.3 No Beneficiary: If a Member or former Member dies without a
Beneficiary surviving him, or if all his Beneficiaries die before receiving the
payment to which they are entitled, then the amount, if any, remaining in such
Member's Individual Account shall be paid to the following, with priority as
follows:
a. the Member's surviving spouse;
b. the Member's children and children of
deceased children, per stirpes;
c. The Member's parents;
d. The Member's brothers and sisters, or if
deceased, the children of such brothers and
sisters, per stirpes;
e. The Member's estate.
A certified copy of a death certificate shall be sufficient evidence of
death and the Committee shall be fully protected in relying thereon. The
Committee may accept other evidence of death at its own discretion.
Page VII-2
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ARTICLE VIII
Code Section 415 Limits
8.1 Limit On Annual Additions Under Code Section 415: Contributions
hereunder shall be subject to the limitations of Code Section 415, as provided
in this Section.
a. Definitions: For purposes of this Section the following
definitions shall apply:
(1) "Annual Addition" shall mean the sum of the
following additions to a Member's Individual Account for the
Limitation Year:
(a) Employer contributions (including salary
reduction contributions);
(b) His own (after-tax) contributions, if
any;
(c) Forfeitures, if any.
Annual Additions to other Employer defined
contribution plans (also taken into account when applying
the limitations described below) shall include any voluntary
employee contributions to an account in a defined benefit
plan and any employer contributions to an individual
retirement account or annuity under Code Section 408 or to a
medical account for a key employee under Code Section 401(h)
or 419A(d), except that the 25%-of-pay limit below shall not
apply to employer contributions to a key employee's medical
account.
(2) "Earnings" for any Limitation Year shall be
the Employee's earned income, wages, salaries, and fees for
professional services, and other amounts received for
personal services actually rendered in the course of
employment with the Employer (including, but not limited to,
commissions paid salesmen, compensation for services on the
basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses), provided such amounts are
actually paid or includible in gross income during such
year. Earnings shall exclude the following:
(i) Employer contributions to a plan
of deferred compensation which are not
Page VIII-1
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included in the Employee's gross income
for the taxable year in which contributed
or Employer contributions under a
simplified employee pension plan or any
distributions from a funded plan of
deferred compensation;
(ii) Amounts realized from the exercise
of a nonqualified stock option, or when
restricted stock (or property) held by
the Employee either becomes freely
transferable or is no longer subject
to a substantial risk of forfeiture;
(iii) Amounts realized from the sale,
exchange or other disposition of stock
acquired under a qualified stock option;
and
(iv) Other amounts which received
special tax benefits, or contributions
made by the Employer (whether or not
under a salary reduction agreement)
towards the purchase of an annuity
described in Section 403(b) of the
Code (whether or not the amounts are
actually excludable from the gross
income of the Employee).
b. Defined Contribution Plan(s) Only: The Annual Addition to a
Member's Individual Account hereunder (together with the Annual
Additions to the Member's account(s) under any other qualified defined
contribution plan(s) maintained by an Affiliated Employer) for any
Limitation Year may not exceed the lesser of:
(1) Thirty Thousand Dollars ($30,000.00), and for
each year thereafter the dollar amount prescribed by the
Secretary of the Treasury, to take into account any cost-of-
living adjustment under Section 415(d) of the Code, or, if
greater, twenty-five percent (25%) of the dollar limitation
under Code Section 415(b)(1)(A); or
(2) Twenty-five percent (25%) of the Member's
Earnings for the Limitation Year.
c. Defined Contribution And Defined Benefit Plans: If, in any
Limitation Year, a Member also participates in one (1) or more
qualified defined benefit plans maintained by any Affiliated Employer
(whether or not terminated), then for such Limitation Year, the sum of
the Defined Benefit Plan Fraction (as defined below) for such
Limitation Year and Defined Contribution Plan Fraction (as defined
Page VIII-2
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below) for such Limitation Year shall not exceed one (1.0).
The Defined Benefit Fraction for any Limitation Year shall mean a
fraction (a) the numerator of which is the projected annual benefit
of the member under the qualified defined benefit plan(s) (determined
as of the close of the Limitation Year), and (b) the denominator of
which is the lesser of One Hundred Twenty-Five Percent (125%) of the
dollar limitation under Code Section 415(b)(1)(A) or One Hundred Forty
Percent (140%) of the percentage limitation under Code Section
415(b)(1)(B) for the year of determination (taking into account the
effect of Section 235(g)(4) of the Tax Equity and Fiscal
Responsibility Act of 1982).
The Defined Contribution Fraction for any Limitation Year shall
mean a fraction (a) the numerator of which is the sum of the Annual
Additions (as defined during each applicable Limitation Year) to the
Member's accounts under all qualified defined contribution plans
maintained by an Affiliated Employer as of the close of the Limitation
Year (subject to reduction to the extent permitted under the
transition rule in Section 235(g)(3) of the Tax Equity and Fiscal
Responsibility Act of 1982), and (b) the denominator of which is the
sum of the lesser of One Hundred Twenty-Five Percent (125%) of the
dollar limitation under Code Section 415(c)(1)(A) or One Hundred Forty
Percent (140%) of the percentage limitation under Code Section
415(c)(1)(B), for such Limitation Year and for all prior Limitation
Years during which the Employee was employed by an Affiliated Employer
(provided, however, at the election of the Committee, the denominator
shall be increased by using for Limitation Years ending prior to
January 1, 1983, an amount equal to the denominator in effect for the
Limitation Year ending in 1982, multiplied by the transition fraction
provided in Code Section 415(e)(6)(B)).
If, in any Limitation Year, the sum of the Defined Benefit Plan
Fraction and Defined Contribution Plan Fraction for a Member would
exceed one (1.0) without adjustment of the amount of Annual Additions
that can be allocated to such Member under paragraph b. of this
Section, then the amount of maximum annual benefit that can be paid to
such Member under any qualified defined benefit plan(s) maintained by
an Affiliated Employer, shall be reduced to the extent necessary to
reduce the sum of the Defined Benefit Plan Fraction and Defined
Contribution Plan Fraction for such Member to one (1.0).
d. Excess Allocation: If forfeitures available for allocation
or if a reasonable error in either estimating a Member's Earnings or
in determining the Member's elective deferrals (under Code Section
402(g)(3)) would cause the limitation on Annual Additions described
above to be exceeded, then the amount of such excess shall be
allocated among all other Members' ESOP Accounts to the extent
possible without exceeding such limitation. Such allocation will be
made in the same manner as ESOP Employer Contributions are allocated
Page VIII-3
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hereunder. Notwithstanding the above, any such excess amount of after-
tax contribution or elective pre-tax contribution (under Code Section
402(g)(3)) shall be refunded to the Member.
To the extent that the Committee determines that contributions
not yet made to the Plan on behalf of Members would cause an excess
hereunder if actually made to the Plan, the Committee may apply the
above limitations prospectively to limit the contribution amount
actually receivable by the Plan for such Member.
Page VIII-4
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ARTICLE IX
Voting Employer Stock and
Dividends on Employer Stock
9.1 Voting Employer Stock: Prior to the holding of each annual or special
meeting of holders of Employer Stock, the Trustee will send to all Members who
have any Employer Stock in their Individual Account, the proxy statement for
such meeting, together with a form to be returned to the Trustee. This form,
when completed by the Member, will set forth the Member's instructions as to the
manner of voting all Employer Stock allocated to the Member's Individual
Account. Upon receipt of the instructions from the Member, the Trustee will
vote (or exercise dissenter's rights when applicable) the Employer Stock in
accordance with the instructions of the Member. If, within five days prior to
such meeting, the Trustee does not receive instructions, the Trustee will vote
(or exercise dissenter's rights, where applicable) the Employer Stock for which
it has not received instructions, in the same proportion (based on the total
number of shares allocated to Members' Individual Accounts) that shares for
which directions were received are voted. The Trustee shall vote all other
securities that it holds in such manner as the Committee shall direct.
The Trustee shall vote (or exercise dissenter's rights, when applicable)
all Employer Stock held by it to the extent it is not allocated to any
Individual Accounts, as well as all other securities that it holds, in such
manner as the Committee shall direct.
9.2 Actions Relating to a Tender Offer: In the event of a tender offer
for Employer Stock, the Trustee will send to all Members the tender offer
documents and other materials relating to such tender offer that are sent to
holders of Employer Stock, together with a form to be returned to the Trustee.
This form, once completed by the Member, will set forth instructions to the
Page IX-1
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Trustee as to whether to tender into the tender offer the Employer Stock
allocated to the Member's Individual Account. Upon receipt of the instructions
from the Member, the Trustee will take such action as directed by the Member.
In the case in which valid instructions are not received from Members with
respect to any shares of Employer Stock allocated to Members' Individual
Accounts, the Trustee will tender into such tender offer only that number of
shares that bears the same ratio to the total of all such shares in each such
case as the number of shares for which the Trustee has received valid
instructions to tender into the tender offer bears to the total number of shares
allocated to Members' Individual Accounts.
9.3 No Pass-Through Of Cash Dividends On Employer Stock: Cash dividends
on shares of Employer Stock held in the Trust shall not be passed through to
Members, but shall be retained in the Trust until distribution under the normal
distribution provisions of this Plan.
Page IX-2
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ARTICLE X
In-Service Withdrawals
10.1 Withdrawals: Each Member, by filing a written request with the
Committee (on a form furnished by the Committee and in accordance with Committee
guidelines) may, once each year, withdraw amounts from any of his Individual
Accounts, while in the employment of the Employer, in accordance with the
following paragraphs.
a. Withdrawals From ESOP Account In Lieu of Diversification: Effective
with the 1987 Plan Year, in-service withdrawals from the ESOP Accounts in this
Plan in lieu of investment diversification, as provided for under Code Section
401(a)(28), will be in accordance with the following provisions:
(1) "Qualified Member" shall mean a Member who has attained age fifty-
five (55) and completed ten (10) years of participation in the Plan.
(2) "Qualified Election Period" shall mean the six (6) Plan Year
period beginning with the later of (i) the first Plan Year after
December 31, 1986; or (ii) the first Plan Year in which the Member
first becomes a Qualified Member.
(3) "Post 86 Stock" shall mean Employer Stock, allocated to a
Member's ESOP Account, that was acquired by the Plan after December
31, 1986.
(4) Each Qualified Member may elect certain withdrawals from that
portion of his ESOP Account that represents his Post 86 Stock. Such
withdrawals must be elected by filing with the Committee a written
application on a form furnished by the Committee. The Member may make
one such withdrawal during each of the ninety (90) day periods that
follow the close of each of the six Plan years in his Qualified
Election Period. If, however, the value of his Post 86 Stock is less
than Five Hundred Dollars ($500) as of the December 31st immediately
preceding the first such ninety day period, then no such withdrawal
will be allowed until such ninety day period as follows a December
31st as of which his Post 86 Stock had a value of at least Five
Hundred Dollars ($500). Thereafter, no such de minimis rule will
apply to such Member. The total withdrawals for all six such ninety
day periods may not exceed, in the aggregate, fifty percent (50%) of
his Post 86 Stock; provided, however, that the total of all such
withdrawals for the first five (5) of such ninety day periods may not
exceed, in the aggregate, twenty-five percent (25%) of his Post 86
Stock.
Page X-1
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(5) Each such elected withdrawal shall be made within one hundred
eighty (180) days after the close of the Plan Year to which it
relates.
b. Withdrawals From Employee Contribution Accounts: A Member may elect a
withdrawal from his Employee Contribution Account. Such withdrawal election
must be made by filing with the Committee a written application on a form
furnished by the Committee. Such withdrawal shall be paid as soon as
practicable after the Committee receives written application. After the total
of such Member's withdrawals from his Employee Contribution Account equals the
amount of his after-tax contributions credited thereto before 1987, then any
further withdrawal from such account will automatically consist partially of his
(after-tax) contributions and partially of (taxable) earnings and gains thereon.
The amount thereof consisting of the Member's contributions shall be the portion
of the further amount to be withdrawn from such account which bears the same
ratio to such further amount to be withdrawn as the balance of the Member's
after-tax contributions held therein bears to the balance of the Member's
Employee Contribution Account. The remaining amount of such further withdrawal
shall be earnings and gains.
c. Withdrawals From Salary Deferral Accounts: A Member may, if he has
first withdrawn the maximum amount available under b. above, request a
withdrawal from his Salary Deferral Account, but only of Salary Deferral
Contributions that have been in his account for at least one year. Such request
must be made by filing with the Committee a written application on a form
furnished by the Committee. Any such request for a withdrawal must show that
(i) the Member has an immediate and heavy financial need, and (ii) the
withdrawal is necessary to satisfy such need. The following rules apply:
(1) Immediate And Heavy Financial Need: An immediate heavy financial
need shall be deemed to exist with respect to a Member only if the
withdrawal request is on account of any of the following:
(A) Expenses for medical care described in Code
Section 213(d) incurred by the Member, the
Member's spouse, or any dependents of the
Member (as defined in Code Section
152), including expenses necessary for any
such person to obtain such medical care.
(B) Costs directly related to the purchase
(excluding mortgage payments) of a
principal residence for the Member.
(C) Payment of tuition and related educational
fees for not more than the next twelve
months of post-secondary education for the
Member, his spouse, children, or dependents.
Page X-2
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(D) The need to prevent the eviction of the
Member from his principal residence or
foreclosure on the mortgage on the
Member's principal residence.
(E) Such other events as may be acceptable to the
Internal Revenue Service.
(2) Necessity Of Withdrawal To Satisfy Immediate And Heavy Financial
Need: A hardship withdrawal request shall be deemed to be necessary
to satisfy an immediate and heavy financial need only if all of the
following conditions are satisfied:
(A) The amount of the withdrawal request is not
in excess of the immediate and heavy financial
need of the Member (including any reasonably
anticipated taxes on such withdrawal).
(B) The Member has obtained all distributions,
other than hardship distributions from his
Salary Deferral Account, and all nontaxable
loans currently available from all
plans maintained by the Employer or
Affiliated Employers.
(C) The Member's right to make elective
contributions to this Plan and all
other plans (including nonqualified
deferred compensation plans) maintained by
the Employer or Affiliated Employers is
(and shall be) suspended for twelve (12)
months after receipt of the hardship
distribution. In the event more than one (1)
distribution is made hereunder within a
twelve (12) month period, the suspension
period shall not be tacked to the
remaining portion of the prior suspension
period but rather shall start anew.
(D) The Member's right to make Salary Deferral
Contributions to this Plan and all other
plans maintained by the Employer or
Affiliated Employers in the taxable year
following the taxable year of the hardship
distribution is (and shall be) limited to
an amount equal to the applicable limit
under Code Section 402(g) reduced by
the Member's Salary Deferral Contributions in
the taxable year of the hardship distribution.
The term "taxable year" as used hereunder means
the Member's taxable year.
(3) Source Of Hardship Withdrawal: In the event of a hardship
withdrawal, such withdrawal may only be made from Salary Deferral
Contributions, and from earnings on such Salary Deferrals
Contributions as of December 31, 1988. Hardship withdrawals shall not
Page X-3
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be allowed hereunder with respect to any earnings credited after
December 31, 1988.
The Committee may establish procedures to be followed in making such
withdrawals, including minimum amounts of withdrawals. Upon Committee approval,
such withdrawal shall be paid as soon as practicable.
Page X-4
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ARTICLE XI
Time and Methods of Payment
11.1 Time of Payment: Payment of any Member's Individual Account shall be
as soon as practicable after such account becomes distributable hereunder,
subject to the following:
a. In no event (subject to b. below) shall payment be later than
sixty (60) days after the close of the Plan Year in which the Member's
employment with all Affiliated Employers terminates (for whatever
reason).
b. A former Employee who has not attained age 65 will (unless
cashed out under Section 11.3 below) not receive his distribution
until age 65, or if earlier, upon his election to receive such
distribution.
c. Notwithstanding the above, if, (i) at any time during the
Plan Year ending in the calendar year in which a Member attains age
seventy and one-half (70 1/2), such Member is a five percent (5%)
owner as described in Section 12.1a.(1)(iii) hereof, or (ii) any
other Member attains age seventy and one-half (70 1/2) after December
31, 1987, then in no event shall distribution of his Individual
Accounts be delayed beyond April 1st of the calendar year following
the calendar year in which such Member attains age seventy and one-
half (70 1/2), regardless of whether he has actually retired. Any
additional amounts subsequently credited to a Member's Individual
Account will be distributed in the calendar year following the
calendar year when credited.
11.2 Method of Payment: When benefits become payable, the distributee may
(subject to the following sections of this Article) elect that such benefits
shall be paid in one (1) of the following ways, or a combination thereof:
(i) Lump sum, payable in cash.
(ii) Lump sum, payable in shares of Employer Stock (except
fractional shares, which will be paid in cash).
(iii) A direct rollover, if the payment is an eligible rollover
distribution to an eligible retirement plan specified by the
distributee. An eligible rollover distribution is any distribution of
all or any portion of the balance to the credit of the distributee,
except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or
life expectancy) of the distributee or the joint lives (or joint life
Page XI-1
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expectancies) of the distributee and the distributee's designated
beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under Section
401(a)(9) of the Code; and the portion of any distribution that is not
includible in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer securities.)
An eligible retirement plan is an individual retirement account
described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan
described in Section 403(a) of the Code, or a qualified trust described
in Section 401(a) of the Code, that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan is
only an individual retirement account or individual retirement annuity.
A distributee includes an Employee or former Employee. In addition,
the Employee's or former Employee's surviving spouse and the Employee's
or former Employee's spouse or former spouse who is the alternate payee
under a qualified domestic relations order, as defined in Section 414(p)
of the Code, are distributees with regard to the interest of the spouse
or former spouse. A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the distributee.
In the event distribution is delayed, the allocation of gains or losses
described in Section 5.3 hereof shall continue to be applicable to the
Individual Accounts until distributed.
11.3 Balance of $3,500 or Less: If, when first distributable under this
Article, the total nonforfeitable balance in a Member's Individual Accounts is
equal to or less than Three Thousand Five Hundred Dollars ($3,500), such balance
will automatically be distributed to him (or his beneficiary in the case of the
Member's death) in a lump sum, subject to the direct rollover option in Section
11.2 hereof.
11.4 Minority or Incompetency: During the minority or incompetency of any
person entitled to receive benefits hereunder, the Committee may direct the
Trustee to make payments or distributions to the guardian of such person, or
other persons as may be directed by the Committee. Neither the Committee nor
the Trustee shall be required to see to the application of any payments so made,
and the receipt of the payee (including the endorsement of a check or checks)
shall be conclusive as to all interested parties.
Page XI-2
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11.5 Put Option: If at the time of distribution hereunder, or at any time
within the fifteen (15) month period following distribution, Employer Stock is
not publicly traded, or is subject to a trading limitation, the Employer shall
issue a put option to each Member or Beneficiary receiving a distribution of
Employer Stock from the Trust. The put option shall permit the Member to sell
such Employer Stock to the Employer, at any time during the fifteen (15) month
period following such distribution. The purchase price for such Employer Stock
shall be its fair market value as determined by a qualified independent
appraiser chosen by the Committee, as of the Valuation Date next preceding the
date of exercise of the option; provided that if the sale of the stock is
between the Plan and a disqualified person, the purchase price of the Employer
Stock shall be determined as of the date of the sale. Exercise of the put
option shall be made in writing to the Committee. The payment for Employer
Stock sold pursuant to a put option shall be made in a lump sum or in
substantially equal, annual installments over a period not exceeding five (5)
years, with interest payable at a reasonable rate on any unpaid installment
balance, as determined by the Committee. The Employer or the Committee (on
behalf of the Trust) may offer to purchase any shares of Employer Stock (which
are not sold pursuant to a put option) from any Former Member (or Beneficiary)
at any time in the future, at their then fair market value.
11.6 Continued Application: The provisions of Section 11.5 hereof shall
continue to be applicable to shares of Employer Stock even if the Plan ceases to
be an employee stock ownership plan under Section 4975(e)(7) of the Code.
Page XI-3
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ARTICLE XII
Top-Heavy Restrictions
12.1 Top-Heavy Restrictions:
a. Determination Of Top-Heaviness
Subject to b. of this Section, this Plan will be considered to be top-heavy
in any Plan Year if the aggregate value of the account balances of key
Employees hereunder is greater than sixty percent (60%) of the aggregate
value of all account balances hereunder. For purposes of determining
whether such top-heaviness exists in any such Plan Year the following
provisions shall be applicable:
(1) The term "Key Employee" shall have the same meaning as is
specified in section 416(i) of the Code, to wit:
(i) an officer of the Employers (including an employer required to be
aggregated under Code sections 414(b), (c), (m) and (o)) having
compensation for the Plan Year greater than fifty percent (50%)
of the amount in effect under Code section 415(b)(1)(A) for the
calendar year in which such Plan Year ends. Further, for these
purposes, after aggregating all employees required to be
aggregated under Code sections 414(b), (c), (m), (n) and (o),
no more than fifty (50) employees - or if lesser, the greater of
three (3) employees or ten percent (10%) of the employees - shall
be treated as officers. For purposes of determining the number
of officers taken into account, employees described in Code
section 414(q)(8) shall be excluded. Determination of who is an
officer shall be made by the Retirement Committee based on all
the facts and circumstances, including, but not limited to, the
source of authority, the term, the nature and extent or limits
of duty. Generally, the term means an administrative executive
in regular and continuous service. A partner of a partnership
will not be treated as an officer merely because he owns a
capital or profits interest in the partnership, exercises his
voting rights as a partner and may for limited purposes be
authorized to and does in fact act as an agent of the
partnership;
(ii) one (1) of the ten (10) employees having compensation from the
Employers for the Plan Year, in excess of the limitation in
effect under Code section 415(c)(1)(A) for the calendar year in
Page XII-1
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which the Plan Year ends, owning (or considered as owning
within the meaning of Code section 318, as modified by Code
section 416(i)(1)(B)(iii)(I)) both more than a one-half percent
(1/2%) ownership interest and the largest interests in the
Employers. If two (2) or more employees have the same percentage
interest during the testing period, the employee having greater
compensation from the Employers for the Plan Year during any part
of which that ownership interest existed, shall be treated as
having a larger interest (see Internal Revenue Service
Regulations 1.416-1, T-19);
(iii) A "five percent (5%) owner" of an Employer which means any person
who owns (or is considered as owning within the meaning of Code
section 318, as modified by Code section 416(i)(1)(B)(iii)(I))
more than five percent (5%) of the outstanding stock of an
Employer or stock possessing more than five percent (5%) of the
total combined voting power of all stock of an Employer (if an
Employer is not a corporation, any person who owns more than
five percent (5%) of the capital or profits interest in the
Employer). In determining percentage ownership hereunder,
employers that would otherwise be aggregated under Code sections
414(b), (c), (m) and (o) shall be treated as separate employers;
and
(iv) A "one percent (1%) owner" of an Employer having compensation
from an Employer of more than one hundred fifty thousand dollars
($150,000). "One percent (1%) owners" means any person who owns
(or is considered as owning within the meaning of Code section
318 as modified by Code section 416(i)(1)(B)(iii)(I)) more than
one percent (1%) of the outstanding stock of an Employer or stock
possessing more than one percent (1%) of the total combined
voting power of all stock of an Employer (if an Employer is not a
corporation, any person who owns more than one percent (1%) of
the capital or profits interest in the Employer). In determining
percentage ownership hereunder, employers that would otherwise be
aggregated under Code sections 414(b), (c), (m) and (o) shall be
treated as separate employers. However, in determining whether
an individual has compensation of more than one hundred fifty
thousand dollars ($150,000), compensation from the Employers
required to be aggregated under Code sections 414(b), (c), (m)
and (o) shall be taken into account.
The term Key Employee as of any Determination Date shall be
applied to any Participant, former Participant or retired
Participant (or his spouse or Beneficiary) who was a Key
Employee during the Plan Year (ending with such Determination
Date) or in any of the four (4) immediately preceding Plan Years
(the "testing period").
The term "compensation" as used above in this paragraph (1) shall have
the same meaning as in Code Section 414(q)(7).
Page XII-2
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Any Employee who is not a key Employee is a nonkey Employee.
(2) For purposes of this Section, if a former Employee has not
performed any services for the Employer at any time during
the five (5) Plan Years immediately preceding the current
Plan Year, any account balance remaining hereunder for such
former Employee shall not be taken into account. Also, any
account balance attributable to deductible employee
contributions (under Code Section 219) or attributable to a
rollover initiated by an Employee from the plan of an employer
that is not an Affiliated Employer shall not be taken into
account under this Section.
(3) The value of any account balance shall be determined as of the
most recent Valuation Date within the preceding Plan Year, except
that in the first Plan Year hereunder such account balance shall
be determined as of the most recent Valuation Date within such
first Plan Year. Such value shall include any contributions
allocable as of such date.
(4) The value of any account balance shall be increased to
include any payment thereof made hereunder prior to the
Valuation Date as of which such value is being determined,
provided any such payment was made within the five (5) Plan
Years immediately preceding the current Plan Year. If an
account balance has been fully paid out prior to such
Valuation Date, but within the five (5) Plan Years
immediately preceding the current Plan Year, the amount
thereof shall be taken into account, except that such amount
shall not be taken into account hereunder if the paid out
amount was either (i) rolled over or transferred to another
plan of the Employer or Affiliated Employer or (ii) rolled
over or transferred to any other plan but not at the direction
of the Employee who had accrued such account.
(5) If an Employee or former Employee for whom an account
balance was maintained hereunder died prior to such
Valuation Date, the value, if any, taken into account
hereunder with respect to such individual shall include
the sum of any payments made to him prior to such
Valuation Date and within the five (5) Plan Years
immediately preceding the current Plan Year, together with
the amount, as of such Valuation Date, of any remaining
account balance payable hereunder to the Beneficiary of such
individual plus the sum of any payments made to such
Beneficiary hereunder prior to such Valuation Date and
within the five (5) Plan Years immediately preceding the
current Plan Year.
(6) If an Employee or former Employee (whether or not deceased)
with respect to whom an account balance would be taken into
account, as described above, was previously a key Employee,
Page XII-3
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but as of the last day of the immediately preceding Plan Year
was no longer a key Employee, then no account balance or
payments thereof with respect to him or his Beneficiary shall
be taken into account in making the top-heavy determinations
described in this Section.
(7) The top-heavy status of this Plan, including the
identification of key Employees, will be determined as of each
Plan Year's determination date, which shall be (i) as to the
first Plan Year, the last day of such year and (ii) as to each
subsequent Plan Year, the last day of the immediately preceding
Plan Year.
b. Aggregation With Other Plans: The aggregation of this Plan with other
plans for purposes of determining top-heavy status shall be in accordance
with the following:
(1) Required Aggregation: If a key Employee under this Plan also
participates in another plan of the Employer or Affiliated
Employer which is qualified under Code Section 401(a) or
which is a simplified employee pension plan under Code
Section 408(k), or if this Plan and another plan must be
aggregated so that either this Plan or the other plan will
meet the antidiscrimination and coverage requirements of Code
Section 401(a)(4) or 410, then this Plan and any such other
plan will be aggregated for purposes of determining top
heaviness. This Plan will automatically be deemed
top-heavy if such required aggregation of plans is top-heavy
as a group and will automatically be deemed not top-heavy if
such required aggregate of plans is not top-heavy as a group.
(2) Permissive Aggregation: Any other plan of the Employer or
Affiliated Employer which is qualified under Code Section
401(a) or which is a simplified employee pension plan under
Code Section 408(k), and which is not in the required
aggregation referenced in (1) above, may be aggregated with
this Plan (and with any other plan(s) in the required
aggregation group in (1) above) for purposes of determining
top heaviness if such aggregation would continue to meet
the antidiscrimination and coverage requirements of Code
Sections 401(a)(4) and 410. This Plan will automatically
be deemed not top-heavy if such permissive aggregation of
plans is not top-heavy as a group.
(3) Determining Aggregate Top-Heavy Status: The top-heavy
status of the plans as a group is determined by aggregating
the plans' respective top-heavy determinations that are
made as of determination dates that fall within the same
calendar year.
c. Effects Of Top-Heaviness
Page XII-4
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If this Plan becomes top-heavy, the following special provisions shall
apply except (i) in the case of an Employee hereunder who is also covered
by another top-heavy qualified defined contribution plan of an Affiliated
Employer, the top-heavy minimum allocation in (1) below shall not apply if
the top-heavy minimum allocation under such other plan is applied to such
Employee thereunder, and (ii) in the case of an Employee hereunder who is
also covered by a top-heavy qualified defined benefit plan of an Affiliated
Employer, the top-heavy minimum allocation in (1) below shall not apply if
the top-heavy minimum benefit under such other plan is applied to such
Employee thereunder, but if such top-heavy minimum benefit is not applied
to such Employee, then the top-heavy minimum allocation in (2) below shall
be applied except that the percentage shall be five percent (5%).
(1) Minimum Allocation: If any Employee is covered under this Plan
during any Plan Year when the Plan is top-heavy, he shall, during
such Plan Year, receive an allocated Employer contribution (other
than an elective contribution under Code Section 401(k)) at least
equal to a percentage of his considered compensation (defined
below) for such Plan Year, which percentage shall be the lesser
of:
(i) three percent (3%), and
(ii) the actual percentage that the allocation of Employer
contributions and forfeitures, including elective
contributions under Code Section 401(k), received for
such Plan Year by the key Employee receiving the largest
such allocation, represented as a percentage of such
key Employee's considered compensation (defined below).
An Employee's considered compensation is the amount of
compensation he received from the Employer for such Plan Year
(not in excess of the dollar limitation in Section 1.2(f)
hereof) reportable on income tax Form W-2 or its equivalent.
Page XII-5
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(2) Adjustments To Code Section 415 Limits: If this Plan is top-
heavy during any Plan Year, the combined plan limitations of
Code Section 415, as described in Section 8.1 hereof, shall be
applied for such Plan Year by substituting "One Hundred Percent
(100%)" for "One Hundred Twenty-Five Percent (125%)" wherever the
latter term appears in said Section 8.1 hereof.
Page XII-6
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ARTICLE XIII
Administration
13.1 Appointment Of Committee: The Corporation shall appoint a Committee
consisting of at least three (3) persons who shall be responsible for the
administration of this Plan. All action taken by the Committee shall be deemed
actions taken by the Corporation and the Corporation shall, alone, have
fiduciary responsibility in connection with such actions, except with respect to
willful misconduct or gross negligence. All usual and reasonable expenses of
the Committee may be paid in whole or in part by the Corporation, and any
expenses not paid by the Corporation shall be paid by the Trustee out of the
principal or income of the Trust. The members of the Committee shall not
receive compensation with respect to their services for the Committee. The
members of the Committee shall serve without bond or security for the
performance of their duties hereunder unless the applicable law makes the
furnishing of such bond or security mandatory or unless required by the
Corporation. The Corporation may pay the premiums on any bond secured under
this Section including the purchase of fiduciary liability insurance for any
person who becomes a fiduciary under this Plan.
13.2 Committee Powers And Duties: The Committee shall have such powers as
may be necessary to discharge its duties hereunder, including, but not by way of
limitation, the following powers and duties:
a. to construe and interpret the Plan, decide all questions of
eligibility and determine the amount, manner and time of payment of
any benefits hereunder;
b. to prescribe rules for the operation of the Plan, including
procedures to be followed to obtain benefits and to appeal any
unfavorable Committee determinations, as described in Section 13.3
hereof;
Page XIII-1
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c. to receive from the Employer and from Employees such
information as shall be necessary for the proper administration of the
Plan;
d. to employ an independent qualified public accountant to
examine the books, records, and any financial statements and schedules
which are required to be included in the annual report;
e. to file with the appropriate government agency (or agencies)
the annual report, plan description, summary plan description, and
other pertinent documents which may be duly requested;
f. to file such terminal and supplementary reports as may be
necessary in the event of the termination of the Plan;
g. to furnish each Employee and each Beneficiary receiving
benefits hereunder a summary plan description explaining the Plan;
h. to furnish any Employee or Beneficiary, who requests in
writing, statements indicating such Employee's or Beneficiary's total
account balances and nonforfeitable benefits, if any;
i. to furnish to an Employee a statement containing information
contained in a registration statement required by Section 6057(a)(2)
of the Code prior to the time prescribed by law to file such
registration if such statement contains information regarding the
Employee;
j. to maintain all records necessary for verification of
information required to be filed with the appropriate government
agency (or agencies);
k. to report to the Trustee all available information regarding
the amount of benefits payable to each Employee, the computations with
respect to the allocation of assets, and any other information which
the Trustee may require in order to terminate the Plan;
l. to delegate to one or more of the members of the Committee
the right to act in its behalf in all matters connected with the
administration of the Plan and Trust;
m. to delegate to any individual(s) such of the above powers
and duties as the Committee deems appropriate; and
n. to appoint or employ for the Plan any agents it deems
advisable, including, but not limited to, legal counsel.
Page XIII-2
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The Committee shall have no power to add to, subtract from or modify any of
the terms of the Plan, nor to change or add to any benefits provided by the
Plan, nor to waive or fail to apply any requirements of eligibility for benefits
under the Plan. All rules and decisions of the Committee shall be uniformly and
consistently applied to all Employees in similar circumstances.
A majority of the members of the Committee shall constitute a quorum for
the transaction of business. No action shall be taken except upon a majority
vote of the Committee members. An individual shall not vote or decide upon any
matter relating solely to himself or vote in any case in which his individual
right or claim to any benefit under the Plan is particularly involved. If, in
any case in which a Committee member is so disqualified to act, and the
remaining members cannot agree, the Board of Directors of the Corporation will
appoint a temporary substitute member to exercise all the powers of the
disqualified member concerning the matter in which he is disqualified.
13.3 Claims Procedure: The Committee may prescribe procedures for
obtaining benefits and is required to provide a notice in writing to any person
whose claim for benefits under this Plan has been denied, setting forth (1) the
specific reasons for such denial, (2) the specific reference to pertinent Plan
provisions on which the denial is based, (3) a description of any additional
material or information necessary to the claimant to perfect the claim and an
explanation of why such material or information is necessary, and (4) an
explanation of the Plan's claim review procedure as described below, including
the name and address of the party to whom an appeal should be sent.
A claimant has the right to appeal a denial of claim by written application
to the Committee within sixty (60) days of notice of denial or, if no such
notice has been given, at the end of the expiration of a reasonable period of
time after the claim was filed. The claimant, or a duly authorized
Page XIII-3
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representative, may review pertinent documents and may submit issues and
comments in writing to the Committee.
After the Committee reviews the claims appeal, a final decision shall be
made and communicated to the claimant within sixty (60) days of receipt of the
appeal by the Committee, unless special circumstances require an extension.
Such extension cannot extend beyond one hundred twenty (120) days after receipt
of the appeal by the Committee. The communication shall be set forth in writing
in a manner calculated to be understood by the claimant and shall identify the
reasons for the denial and shall reference any pertinent Plan provisions upon
which the denial is based.
13.4 Committee Procedures: The Committee shall adopt such bylaws as it
deems desirable. The Committee shall elect one of its members as chairman and
shall elect a secretary who may, but need not, be a member of the Committee.
The Committee shall advise the Trustee of such elections in writing. The
Secretary of the Committee shall keep a record of all meetings and forward all
necessary communications to the Trustee.
13.5 Authorization Of Benefit Payments: The Committee shall issue
directions to the Trustee concerning all benefits which are to be paid from the
Trust Fund pursuant to the provisions of the Plan. The Committee shall keep on
file, in such manner, as it may deem convenient or proper, all reports from the
Trustee.
13.6 Payment Of Expenses: All expenses incident to the administration,
termination or protection of the Plan and Trust, including but not limited to,
actuarial, legal, accounting, and Trustee's fees, shall be paid by the Employer,
or if not paid by the Employer, shall be paid by the Trustee from the Trust Fund
and, until paid, shall constitute a first and prior claim and lien against the
Page XIII-4
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Trust Fund. Any expenses paid by the Corporation may be subject to
reimbursement by Employers for their proportionate shares.
13.7 Unclaimed Benefits: During the time when a benefit hereunder is
payable to any distributee, the Committee, upon request by the Trustee, or at
its own instance, shall mail by registered or certified mail to such
distributee, at his last known address, a written demand for his then address,
or for satisfactory evidence of his continued life, or both. If such
information is not furnished to the Committee within one year from the mailing
of such demand, then the Committee may, in its sole discretion, after the proper
statutory period, allow such unclaimed benefits to escheat to the proper
governmental unit under the applicable escheat law.
13.8 Indemnity: The Employer indemnifies and saves harmless any member of
the Board of Directors of the Employer and any Employee of the Employer from and
against any and all loss resulting from liability to which any such person may
be subjected by reason of any conduct (except willful or reckless misconduct) in
a fiduciary capacity under this Plan or Trust, or both, including all expenses
reasonably incurred in such person's defense, in case the Employer fails to
provide such defense. The indemnification provisions of this Section shall not
relieve any such person of any liability he may have under ERISA for breach of a
fiduciary duty.
Page XIII-5
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ARTICLE XIV
Trust Fund
14.1 Establishment Of Trust Fund: A Trust Fund shall be established for
the purpose of receiving contributions, and paying benefits, under this Plan. A
Trustee (or Trustees) shall be appointed under the terms of a trust agreement to
administer the Trust Fund in accordance with the terms of such trust agreement.
14.2 Payment Of Contributions To Trust Fund: All contributions under this
Plan shall be paid to the Trustee and shall be held, invested and reinvested by
the Trustee in accordance with the terms of the trust agreement. All property
and funds of the Trust Fund, including income from investments and from all
other sources, shall be retained for the exclusive benefit of Employees, as
provided in the Plan, and shall be used to pay benefits to Employees or their
beneficiaries, or to pay expenses of administration of the Plan and Trust Fund,
except as provided in Section 18.4 hereof.
14.3 Bonding Of Trustee: No Trustee shall be required to furnish any bond
or security for the performance of its powers and duties hereunder unless the
applicable law makes the furnishing of such bond or security mandatory, in which
event the Corporation shall pay the premium on any bond secured hereunder.
Page XIV-1
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ARTICLE XV
Adoption And Withdrawal
By Other Organizations
15.1 Procedure For Adoption: Any corporation or other organization with
employees, now in existence or hereafter formed or acquired, which is not
already an Employer under this Plan and which is otherwise legally eligible,
may, in the future, with the consent and approval of the Corporation, by formal
resolution of its own board or governing authority, adopt the Plan hereby
created and the related Trust, for all or any classification of persons in its
employment, and thereby, from and after the specified effective date become an
Employer under this Plan. Such adoption shall be effectuated by and evidenced
by a formal designation resolution of the Corporation, and by such formal
resolution of the adopting organization consented to by the Corporation. The
adoption resolution may contain such specific changes and variations in Plan or
Trust terms and provisions applicable to such adopting Employer and its
Employees, as may be acceptable to the Corporation and the Trustee. However,
the sole, exclusive right of any other amendment of whatever kind or extent, to
the Plan or Trust is reserved by the Corporation. The adoption resolution shall
become, as to such adopting organization and its employees, a part of this Plan,
as then amended or thereafter amended, and the related Trust. It shall not be
necessary for the adopting organization to sign or execute the original or the
amended Plan and Trust documents. The effective date of the Plan for any such
adopting organization shall be that stated in the resolution of adoption, and
from and after such effective date such adopting organization shall assume all
the rights, obligations and liabilities of an individual Employer entity
hereunder and under the Trust. The administrative powers and control of the
Corporation, as provided in the Plan and Trust, including the sole right to
Page XV-1
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amendment, and of appointment and removal of the Committee and the Trustee and
their successors, shall not be diminished by reason of the participation of any
such adopting organization in the Plan and Trust.
15.2 Withdrawal: Any participating Employer by action of its Board of
Directors or other governing authority and notice to the Corporation and
Trustee, may withdraw from the Plan and Trust at any time without affecting
other Employers not withdrawing, by complying with the provisions of the Plan
and Trust. A withdrawing Employer may arrange for the continuation by itself or
its successor, of this Plan and Trust in separate form for its own Employees,
with such amendments, if any, as it may deem proper, and may arrange for
continuation of the Plan and Trust by merger with an existing plan and trust,
and transfer of Trust assets. The Corporation may, in its absolute discretion,
terminate an adopting Employer's participation at any time when in its judgment
such adopting Employer fails or refuses to discharge its obligations under the
Plan.
Page XV-2
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ARTICLE XVI
Amendments
16.1 Right To Amend: The Board of Directors of the Corporation (or other
body duly authorized by such Board) reserves the right to make from time to time
any amendment or amendments to this Plan which do not permit reversion of any
part of the Trust Fund to the Employers except as provided in Section 18.4 and
which do not cause any part of the Trust Fund to be used for, or diverted to,
any purpose other than the exclusive benefit of Employees included in this Plan
and their Beneficiaries, other than with respect to allowances of expenses of
administration as provided herein, and which do not, directly or indirectly,
reduce any Member's account balance unless such amendment is required in order
to maintain the Plan's qualified status under Code Section 401(a).
The participation in the Plan by other Employers shall not limit the power
reserved to the Corporation to amend the Plan as set out in this Article XV.
Each such amendment shall be binding on all Employers to the extent accepted by
them. Acceptance of each such Employer shall be presumed, but each such
Employer may, as provided in Section 13.2 hereof, withdraw from participation.
16.2 Amendment to Vesting Provision: Although the Employer reserves the
right to amend the vesting provision in Section 16.1 hereof at any time, the
Employer shall not amend the vesting provision (and no amendment shall be
effective) if the amendment would reduce the nonforfeitable percentage of any
Member's Accounts (determined as of the later of the date the Employer adopts
the amendment, or the date the amendment becomes effective) to a percentage less
than the nonforfeitable percentage computed under the Plan without regard to the
amendment.
Page XVI-1
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In the event the vesting provision of the Plan is amended, any Member who
has completed three (3) Years of Service, will automatically have the vested
percentage of his Accounts determined under Section 6.1 hereof, computed under
the Plan without regard to such amendment.
Page XVI-2
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ARTICLE XVII
Withdrawal And Termination
17.1 Employer Withdrawal: An Employer may at any time, by adoption of a
resolution, withdraw from the Plan with respect to any or all of the Employees
employed by said Employer.
Upon an Employer's liquidation, bankruptcy, insolvency, sale,
consolidation, or merger to or with another organization which is not an
Employer hereunder, or upon an adjudication or other official determination of a
court of competent jurisdiction or other public authority pursuant to which a
conservator, receiver, or other legal custodian is appointed for the purpose of
operation or liquidation of an Employer, such Employer (or its successor) will
automatically be withdrawn from this Plan with respect to all of its Employees,
unless the Corporation and such Employer (or its successor) agree to its
continued participation hereunder.
Any such withdrawal of an Employer from this Plan will be carried out in a
manner intended to meet the requirements of Section 401(a) of the Internal
Revenue Code. The Corporation may require that an advance determination letter
be obtained from the Internal Revenue Service approving the terms of any such
withdrawal.
Upon the consolidation or merger of two (2) or more of the Employers under
this Plan with each other, no such withdrawal will occur, but the surviving
Employer or organization shall succeed to all the rights and duties under the
plan and trust of the Employers involved.
17.2 Transfers Of Plan Assets And Plan Mergers: The Plan and Trust shall
not be merged or consolidated with, nor shall any Plan assets or liabilities be
transferred to, any other plan, unless either (i) each Participant in the Plan
(if the Plan then terminated) receives a benefit immediately after such merger,
Page XVII-1
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consolidation, or transfer, which is equal to or greater than the benefit he
would have been entitled to receive immediately before such merger,
consolidation, or transfer (if the Plan had then terminated) or (ii) the
conditions in (i) are deemed to be met due to compliance with the procedures
set forth in Treasury Regulation 1.414(1)-1 regarding plan mergers and
transfers.
17.3 Plan Termination: The Corporation may at any time, by adoption of a
resolution, terminate this Plan with respect to itself and all other Employers
hereunder. This Plan shall automatically terminate if all Employers cease to
exist and no successor continues the Plan.
A partial termination of this Plan will occur if required under the
qualification requirements of Section 401(a) of the Code.
17.4 Distribution on Termination: Upon termination, or partial
termination, of the Plan, the proportionate interests of the affected Members
and their Beneficiaries shall be distributed after provision is made for the
expenses of administration, and termination, except that no PAYSOP Account
contribution may be distributed until such contribution has been held in the
Plan (including the Previous Plan) for at least 84 months. Notwithstanding the
above, no in-service withdrawal from the Salary Deferral Account shall be
allowed, except as provided for in Section 10.1(c) hereof, if the Employer
maintains or establishes another Defined Contribution plan.
Page XVII-2
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ARTICLE XVIII
General Provisions
18.1 Nonguarantee Of Employment: Nothing contained in this Plan shall be
construed as a contract of employment between an Employer and Employee, or as a
right of any Employee to be continued in the employment of an Employer, or as a
limitation of the right of an Employer to discharge any of its Employees, with
or without cause.
18.2 Manner Of Payment: Wherever and whenever it is herein provided for
payments or distributions to be made, whether in money or otherwise, said
payments or distributions shall be made directly into the hands of the Member,
his Beneficiary, his administrator, executor or guardian, as the case may be.
Deposit to the credit of a Member in any bank or trust company selected by a
Member or Beneficiary hereunder shall be deemed payment into his hands, and
provided further, that in the event any person otherwise entitled to receive any
payment or distribution shall be a minor or an incompetent, such payment or
distribution may be made to his guardian or other person as may be determined by
the Committee.
18.3 Nonalienation Of Benefits: Benefits payable under this Plan shall
not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any
kind, either voluntary or involuntary, prior to being received by the person
entitled to the benefit under the terms of the Plan. Any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose
of any right to benefits payable hereunder shall be void. The Trust Fund shall
not in any manner be liable for, or subject to, the debts, contracts,
liabilities, engagements, or torts of any person entitled to benefits hereunder.
Page XVIII-1
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None of the unpaid Plan benefits or Trust assets shall be considered an asset of
the Member in the event of his insolvency or bankruptcy.
Notwithstanding the foregoing, the Committee may approve payment to an
alternate payee based upon any "qualified domestic relations order" as defined
in Code Section 414(p), and such payment shall not be deemed a prohibited
alienation of benefits.
18.4 Amounts Returnable To An Employer: In no event shall an Employer
receive any amounts from the Trust, except such amounts, if any, as set forth
below:
a. In the event of a contribution made by an Employer by a
mistake of fact, such contribution may be returned to such Employer
within one year after payment thereof.
b. If an Employer's determination letter issued by the District
Director of Internal Revenue is an initial determination letter as to
such Employer and is to the effect that the Plan and Trust herein set
forth or as amended prior to the receipt of such letter do not meet
the applicable requirements of the Internal Revenue Code of 1986, such
Employer shall be entitled at its option to withdraw, within one year
of the receipt of such letter, all contributions made on and after its
effective date, in which event the Plan and Trust shall then terminate
as to such Employer and all rights of the Employees shall be those as
if the Plan had never been adopted.
c. Each contribution hereunder is conditioned upon the
deductibility of such contribution under Section 404 of the Code and
shall be returned to an Employer within one year if such deduction is
disallowed (to the extent of the disallowance).
d. The maximum amount that may be returned to the employer in
the case of mistake of fact or the disallowance of a deduction is the
excess of (1) the amount contributed, over, as relevant, (2) (A) the
amount that would have been contributed had no mistake of fact
occurred, or (B) the amount that would have been contributed had the
contribution been limited to the amount that is deductible after any
disallowance by the Internal Revenue Service. Earnings attributable
to the excess contribution may not be returned to the employer, but
losses attributable thereto must reduce the amount to be so returned.
Furthermore, if the withdrawal of the amount attributable to the
mistaken or nondeductible contribution would cause the balance of the
individual account of any participant to be reduced to less than the
balance which would have been in the account had the mistake or
Page XVIII-2
================================================================================
nondeductible amount not been contributed, then the amount to be
returned to the employer must be limited so as to avoid such
reduction.
18.5 Governing Law: This Plan and each of its provisions shall be
construed and their validity determined by the application of the laws of the
State of Texas, except to the extent such law is preempted by Federal statute.
Page XVIII-3
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IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing instrument comprising Justin Industries, Inc. Employee Stock Ownership
Plan (As Restated January 1, 1989), JUSTIN INDUSTRIES, INC., the Corporation,
has caused its corporate seal to be affixed hereto and these presents to be duly
executed in its name and behalf by its proper officers thereunto authorized this
14th day of December, 1994.
ATTEST: JUSTIN INDUSTRIES, INC.
/S/ Jon M. Bennett By: /S/ J. T. Dickenson
Secretary Name: J. T. Dickenson
Title: President
(CORPORATE SEAL)
FIRST AMENDMENT TO THE
JUSTIN INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(As Restated January 1, 1989)
WHEREAS, Justin Industries, Inc., a Texas corporation with its principal office
and place of business in Tarrant County, Texas (the "Company") adopted the
Justin Industries, Inc. Employee Stock Ownership Plan (the "Plan") effective as
of January 1, 1978; and
WHEREAS, the Plan was amended and restated effective January 1, 1985; was
further amended by the First Amendment thereto effective January 1, 1985; was
further amended by the Second Amendment thereto effective January 1, 1988; and
was further amended by the Third Amendment thereto effective October 6, 1989;
and was further amended by the Fourth Amendment thereto effective November 1,
1992; and
WHEREAS, the Plan was further amended and restated January 1, 1989; and
WHEREAS, the Board of Directors of the Company has authorized this First
Amendment to the Justin Industries, Inc. Employee Stock Ownership Plan (As
Restated January 1,1989);
NOW THEREFORE, pursuant to the powers reserved in Section 16.1 of the Plan (As
Restated January 1, 1989), the Company does hereby amend such Plan, effective
July 1, 1994, by restating page V-3, to include a new Section 5.5 (Investment
Fund Options), and by restating page (i) of the Table of Contents to reference
such new Section 5.5 such restated pages to be as attached hereto.
================================================================================
Justin Industries, Inc.
Employee Stock Ownership Plan
(As Restated January 1, 1989)
TABLE OF CONTENTS
Page No.
PREAMBLE
ARTICLE I Purpose And Definitions I-1
1.1 - Purpose I-1
1.2 - Definitions I-1
1.3 - Construction I-5
ARTICLE II Service Credit II-1
2.1 - Hour Of Service II-1
2.2 - Participation Service II-3
2.3 - Break In Service II-3
2.4 - Loss Of Service II-3
ARTICLE III Participation Requirements III-1
3.1 - Participation Originating Under
The Previous Plan III-1
3.2 - Participation Originating Under This Plan III-1
3.3 - Cessation Of Participation And Reentry III-1
3.4 - Participation Of Employees Of New Employers III-2
ARTICLE IV Contributions and ESOP Loans IV-1
4.1 - ESOP Employer Contributions -
and ESOP Loans IV-1
4.2 - Member (Pre-Tax) Salary Deferral
Contributions IV-2
4.3 - Discontinuance of Member
(After-Tax) Contributions IV-3
4.4 - Seven Thousand Dollar ($7,000) Test IV-3
4.5 - Deferral And Contribution Percentage Tests IV-3
ARTICLE V Maintenance Of Individual Accounts V-1
5.1 - Establishment Of Individual Accounts V-1
5.2 - Allocation Of Contributions V-1
5.3 - Allocation Of Gains and Losses V-2
5.4 - Notification To Members V-3
5.5 - Investment Fund Options V-3
ARTICLE VI Retirement or Earlier Termination of Employment VI-1
6.1 - Benefit VI-1
Page (i)
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5.4 Notification To Members: At least once annually the Committee shall
advise each Member for whom an Individual Account is held hereunder the amount
held in such account.
5.5 Investment Fund Options: Separate Investment Funds will be
established in the Trust (and may be changed from time to time) and any Salary
Deferral Contributions received hereunder on or after July 1, 1994 will be
eligible for deposit in, and thereafter maintained in, such Investment Funds in
accordance with the following:
a. Investment Direction As To Contributions: Any such contribution
allocated to a Member's Individual Account hereunder on or after July 1, 1994
will be invested in the Investment Fund (or Funds) designated by the Member on a
form furnished by the Committee and in accordance with Committee guidelines. All
such contributions for which no such designation is duly made shall be invested
in the Investment Fund designated by the Committee for this purpose.
b. Change Of Investment Directions: Any direction by a Member for
investment of such contributions made to his Individual Accounts under this Plan
shall be deemed to be a continuing direction until changed. A Member may change,
on a form furnished by the Committee, his investment direction for future
contributions, but such a change may be made only in accordance with Committee
guidelines, including any restrictions on the number of changes permitted each
year and the times for making such changes.
c. Shifts In Investments: A Member may direct, on a form furnished by the
Committee, that all or any part of his Individual Account in any such Investment
Fund or Funds be shifted into any other available Investment Fund or Funds, but
such a shift may be made only in accordance with Committee guidelines, including
any restrictions on the number of changes permitted each year and the times for
making such changes.
Page V-3
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d. Allocation of Gains and Losses: The determination and allocation of
gains and losses described in Section 5.3 shall be applied separately to each
Investment Fund and any such determination and allocation as to any Trust Fund
assets not part of an Investment Fund shall be performed disregarding all such
Investment Funds.
Notwithstanding the above, if the manager of any such Investment Fund
determines and allocates such Fund's gains and losses (which must be done at
least annually) in a manner different from that described in Section 5.3, then
Section 5.3 shall not apply to such Investment Fund.
Page V-4
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Except as amended by this instrument, the Plan (As Restated January 1, 1989)
shall remain in full force and effect. This instrument may be executed in a
number of counterparts, each of which shall be deemed to be an original even
though the others are not produced and all of which collectively shall be deemed
to be but one instrument.
IN WITNESS WHEREOF, this Amendment has been executed this 18th day of March,
1994, effective as of July 1, 1994.
JUSTIN INDUSTRIES, INC.
By: /S/ J. T. Dickenson
J.T. Dickenson, President
and Chief Operating Officer
ATTEST:
/S/ Jon M. Bennett
Jon M. Bennett, Secretary
060294
SECOND AMENDMENT TO THE
JUSTIN INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(As Restated January 1. 1989)
WHEREAS, Justin Industries, Inc., a Texas corporation with its principal office
and place of business in Tarrant County, Texas (the "Company") adopted the
Justin Industries, Inc. Employee Stock Ownership Plan (the "Plan") effective as
of January 1, 1978; and
WHEREAS, the Plan was amended and restated effective January 1, 1985; was
further amended by the First Amendment thereto effective January 1, 1985; was
further amended by the Second Amendment thereto effective January 1, 1988; and
was further amended by the Third Amendment thereto effective October 6, 1989;
and was further amended by the Fourth Amendment thereto effective November 1,
1992; and
WHEREAS, the Plan was further amended and restated January 1, 1989; was further
amended by the First Amendment thereto effective July 1, 1994; and
WHEREAS, the Board of Directors of the Company has authorized this Second
Amendment to the Justin Industries, Inc. Employee Stock Ownership Plan (As
Restated January 1, 1989);
NOW THEREFORE, pursuant to the powers reserved in Section 16.1 of the Plan (As
Restated January 1, 1989), the Company does hereby amend such Plan, effective
August 1, 1994, by:
(i) restating pages III-1 and III-2, to add a special one-time only
August 1, 1994 entry date in Section 3.2;
(ii) restating page IV-2, to revise Section 4.2 as to Members' changes in
salary deferrals;
(iii) restating page V-3, to revise Section 5.5 (Investment Fund Options)
to allow flexibility in manner of election;
(iv) restating page IX-2, to allow dividend pass-through under Section
9.3;
(v) restating pages XIII-4 and XIII-5, to allow assessment, under Section
13.6, of a withdrawal fee when Members take distributions; and
Such revised pages are as attached hereto.
================================================================================
ARTICLE III
Participation Requirements
3.1 Participation Originating Under The Previous Plan: Employees in
Covered Employment who were participants in the Previous Plan immediately prior
to the Effective Date, or would have become participants on the Effective Date,
shall automatically become Members in this restated Plan as of the Effective
Date.
3.2 Participation Originating Under This Plan: Each Employee who does not
become a Member in this Plan in accordance with Section 3.1 hereof shall become
a Member in this Plan on the first January 1st or July 1st (i.e., "entry date")
on which he:
a. is in Covered Employment;
b. has attained his twenty-first (21st)
birthday;
c. has completed a year of Participation
Service; and
d. has agreed to participation hereunder in
writing on a form prescribed by the
Committee.
Notwithstanding the above, all eligible Employees who are not Members
hereunder on July 1, 1994 may become Members hereunder on August 1, 1994,
provided they otherwise meet the requirements for participation hereunder.
3.3 Cessation Of Participation And Reentry: If an Employee has a year or
more of Breaks in Service, or if he leaves Covered Employment, before he has
become a Member hereunder, he will, following such Break in Service or
interruption of Covered Employment, become a Member on the first entry date
specified in Section 3.2 hereof after he meets the requirements for
participation specified in Section 3.2 hereof. For purposes of determining
whether an Employee's prior Participation Service is to be counted toward such
requirements, the provisions of Section 2.5 hereof shall be applicable.
If, however, an Employee leaves Covered Employment after having met the
participation requirements of Section 3.2 hereof but before his entry date, he
will, if he reenters Covered Employment after such entry date but before having
a one (1) year Break in Service, become a Member immediately upon such reentry
into Covered Employment.
If an Employee has a year or more of Breaks in Service, or if he leaves
Covered Employment, after he has a vested benefit hereunder, he will cease his
participation in this Plan, but will, immediately following such Break in
Service or interruption of Covered Employment, again become a Member hereunder,
provided he is in Covered Employment.
3.4 Participation Of Employees Of New Employers: If, after the Effective
Date hereof, any organization adopts the Plan and Trust as a new Employer as
herein provided, it shall specify in its adoption resolution or decision an
initial date for the application and enrollment of its eligible Employees under
the Plan and shall thereafter be governed by the provisions of this Article III.
Pages III-1 and III-2
================================================================================
for each Plan Year shall he the number of shares pledged held in the loan
suspense account prior to the release, multiplied by a fraction the numerator of
which is the amount of principal and/or interest paid on the loan obtained to
acquire the shares and the denominator of which is the sum of the numerator plus
the total payments of principal and interest to be paid on the loan. Repayments
of principal and interest on any debt obligations shall be made by the Trustee
(as directed by the Committee) only from ESOP Employer Contributions in cash to
the Trust. The proceeds of any such loan may be used only to acquire Employer
Stock, to repay such loan, or to repay a prior loan.
4.2 Member (Pre-Tax) Salary Deferral Contributions: Before he becomes a
Member hereunder and prior to each January 1 or July 1 thereafter, a Member may
enter into a written salary deferral agreement with his Employer which shall
provide that the Member elects to defer (on a pre-tax basis) a portion of his
Compensation; provided, however:
(1) The Committee may require such to be a whole dollar or
a whole percentage of Compensation.
(2) Such deferral must meet the deferral percentage test in
Section 4.5 hereof, and the Committee may require modifications in
order to meet such test.
(3) Such deferral cannot exceed the dollar limit in Section
4.4 hereof.
(4) Such deferral cannot exceed fifteen percent (15%) of
the Member's Compensation for the Plan Year.
A salary deferral agreement shall he entered into on such forms as the
Committee may prescribe, provided that changes, suspensions or discontinuance of
salary deferrals may be made by the Member in accordance with Committee
guidelines and may be made by the Committee if called for under Section 4.4 or
4.5 hereof or if the Employer's deduction limits under Code Section 404(a) would
otherwise be exceeded, or if the annual
Page IV-2
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5.4 Notification To Members: At least once annually the Committee shall
advise each Member for whom an Individual Account is held hereunder the amount
held in such account
5.5 Investment Fund Options: Separate Investment Funds will be established
in the Trust (and may be changed from time to time) and any Salary Deferral
Contributions received hereunder on or after August 1, 1994 will be eligible for
deposit in, and thereafter maintained in, such Investment Funds in accordance
with the following:
a. Investment Direction As To Contributions: Any such contribution
allocated to a Member's Individual Account hereunder on or after September
1,1994 will be invested in the Investment Fund (or Funds) designated by the
Member in accordance with Committee guidelines. All such contributions for which
no such designation is duly made shall be invested in the Investment Fund
designated by the Committee for this purpose.
b. Change Of Investment Directions: Any direction by a Member for
investment of such contributions made to his Individual Accounts under this Plan
shall be deemed to be a continuing direction until changed. A Member may change
his investment direction for future contributions, but such a change may be made
only in accordance with Committee guidelines, including any restrictions on the
number of changes permitted each year and the times for making such changes.
c. Shifts In Investments: A Member may direct that all or any part of his
Individual Account in any such Investment Fund or Funds be shifted into any
other available Investment Fund or Funds, but such a shift may be made only in
accordance with Committee guidelines, including any restrictions on the number
of changes permitted each year and the times for making such changes.
Page V-3
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to be returned to the Trustee. This form will set forth instructions as to
whether the Trustee is directed to tender into the tender offer the Employer
Stock allocated to the Member's Individual Account. Upon receipt of the
instructions from the Member, the Trustee will take such action as directed by
the Member. In the case in which valid instructions are not received from
Members with respect to any shares of Employer Stock allocated to Members'
Individual Accounts, and in the case of shares of Employer Stock held in the
suspense account under Section 4.1 hereof, the Trustee will tender into such
tender offer only that number of shares that bears the same ratio to the total
of all such shares in each such case as the number of shares for which the
Trustee has received valid instructions to tender into the tender offer bears to
the total number of shares allocated to Members' Individual Accounts.
9.3 Pass-Through Of Cash Dividends On Employer Stock: Cash dividends on
shares of Employer Stock held in the Trust may, at the discretion of the
Committee and by individual direction of the Members, be passed through to
Members, and if not passed through, shall be retained in the Trust until
distribution under the normal distribution provisions of this Plan.
Page IX-2
================================================================================
claimant, or a duly authorized representative, may review pertinent documents
and may submit issues and comments in writing to the Committee.
After the Committee reviews the claims appeal, a final decision shall be
made and communicated to the claimant within sixty (60) days of receipt of the
appeal by the Committee, unless special circumstances require an extension. Such
extension cannot extend beyond one hundred twenty (120) days after receipt of
the appeal by the Committee. The communication shall be set forth in writing in
a manner calculated to be understood by the claimant and shall identify the
reasons for the denial and shall reference any pertinent Plan provisions upon
which the denial is based.
13.4 Committee Procedures: The Committee shall adopt such bylaws as it
deems desirable. The Committee shall elect one of its members as chairman and
shall elect a secretary who may, but need not, be a member of the Committee. The
Committee shall advise the Trustee of such elections in writing. The Secretary
of the Committee shall keep a record of all meetings and forward all necessary
communications to the Trustee.
13.5 Authorization Of Benefit Payments: The Committee shall issue
directions to the Trustee concerning all benefits which are to he paid from the
Trust Fund pursuant to the provisions of the Plan. The Committee shall keep on
file, in such manner, as it may deem convenient or proper, all reports from the
Trustee.
13.6 Payment Of Expenses: All expenses incident to the administration,
termination or protection of the Plan and Trust, including but not limited to,
actuarial, legal, accounting, and Trustee's fees, shall ordinarily be paid by
the Employer, except any transaction fee charged by the Trustee for making a
distribution from a Member's account shall be paid by deduction from such
Member's account. However, if any such expense is not so paid, it shall be paid
by the Trustee from the Trust Fund and, until paid, shall constitute a first and
prior claim and lien against the Trust Fund. Any expenses paid by the
Corporation may be subject to reimbursement by Employers for their proportionate
shares.
13.7 Unclaimed Benefits: During the time when a benefit hereunder is
payable to any distributee, the Committee, upon request by the Trustee, or at
its own instance, shall mail by registered or certified mail to such
distributee, at his last known address, a written demand for his then address,
or for satisfactory evidence of his continued life, or both. If such information
is not furnished to the Committee within one year from the mailing of such
demand, then the Committee may, in its sole discretion, after the proper
statutory period, allow such unclaimed benefits to escheat to the proper
governmental unit under the applicable escheat law.
13.8 Indemnity: The Employer indemnifies and saves harmless any member of
the Board of Directors of the Employer and any Employee of the Employer from and
against any and all loss resulting from liability to which any such person may
be subjected by reason of any conduct (except willful or reckless misconduct) in
a fiduciary capacity under this Plan or Trust, or both, including all expenses
reasonably incurred in such person's defense, in case the Employer fails to
provide such defense. The indemnification provisions of this Section shall not
relieve any such person of any liability he may have under ERISA for breach of a
fiduciary duty.
Pages XIII-4 and XIII-5
================================================================================
Except as amended by this instrument, the Plan (As Restated January 1, 1989)
shall remain in full force and effect. This instrument may be executed in a
number of counterparts, each of which shall be deemed to be an original even
though the others are not produced and all of which collectively shall be deemed
to be but one instrument.
IN WITNESS WHEREOF, this Amendment has been executed this 15TH day of JUNE,
1994, effective as of August 1, 1994.
JUSTIN INDUSTRIES, INC.
By: /S/ J. T. Dickenson
J. T. Dickenson, President
and Chief Operating Officer
ATTEST:
/S/ Jon M. Bennett
Jon M. Bennett, Secretary
EMPLOYMENT CONTRACT
This Contract is entered into by and between JUSTIN INDUSTRIES, INC., a
Texas corporation, herein called "Employer", and JOHN S. JUSTIN, JR., a resident
of Tarrant County, Texas, hereinafter called "Employee".
W I T N E S S E T H:
1. Employer agrees to employ Employee and Employee agrees to undertake
and accept and perform such executive, administrative and/or managerial duties
as may be assigned to him by the Board of Directors of Employer for the term
hereinafter specified.
2. The term of employment under this Contract shall be for a period of
three (3) years beginning December 1, 1994, and ending November 30, 1997. During
the term of this Contract (unless Employee resigns, dies, becomes disabled or is
discharged for cause as defined herein), Employer shall pay Employee as
compensation for his services to be rendered hereunder a salary of not less than
Five Hundred Twenty Five Thousand and No/100 Dollars ($525,000.00) per annum
(the "Salary"), payable in regular increments not less frequently than monthly.
3. In the event Employee should die during the term of this Contract
(unless he has previously resigned or been discharged for cause as defined
herein), Employer shall pay, as a death benefit to Employee's widow, fifty
percent (50%) of the Salary, payable in regular increments not less frequently
than monthly, for twelve (12) months following the date of death; provided, that
if Employee's widow should not survive said Employee for said twelve-month
period, the balance of such payments shall be paid to Employee's estate.
4. During the term of this Contract, Employee agrees to devote so much of
his time and attention as may be necessary to perform the services herein
contemplated. Such services are to be exclusively available to Employer and its
subsidiaries and affiliates and Employee agrees that, during the term of this
Contract, he will not, without the prior permission of Employer, accept any
employment or be retained by or represent any other company or business which
will materially interfere with the services he is to render hereunder or which
competes with Employer in any of its businesses. Employee may accept
directorships in other organizations and may engage in civic and charitable
activities which do not materially conflict or interfere with his
responsibilities to Employer. Employee shall not be required to any substantial
extent to render service hereunder at any location outside Tarrant County,
Texas.
5. In the event that, prior to the expiration of the term of this
Contract, Employee should be unable to perform the services required of him
hereunder because of disability which continues for a period of six (6)
consecutive months or more, Employer shall pay to Employee, as a disability
benefit, fifty percent (50%) of the Salary, payable in regular increments not
less frequently than monthly, for twelve (12) months following the expiration of
such six (6) month period. If there should be any dispute between the parties as
to Employee's disability, such question shall be settled by the opinion of an
impartial and reputable physician, agreed upon for that purpose by the parties;
or, in the event the parties are unable to agree upon such physician within ten
(10) days after written request for such designation by either party to the
other, then each party shall, within ten (10) days, designate a physician and
the physicians so designated shall choose an impartial physician as a third
member of the panel. In the event the designated physicians are unable to agree
on a third member within ten (10) days, then such third member shall be selected
by the President of the Fort Worth Academy of Medicine. The certificate of a
single physician agreed to by both parties or of the majority of the panel of
the three physicians as to the matter in dispute shall be final and binding upon
all parties. Employee shall make himself available for examination by such
physician or physicians upon request.
6. In the event Employee should cease to be active in the actual
management of Employer and Employer's subsidiaries and affiliates, Employee
shall nevertheless during the period of this Contract render such services of an
advisory or consultative nature as Employer may reasonably request in order that
Employer may continue to have the benefits of his experience and knowledge of
the affairs of Employer and Employer's reputation and contacts in the trade, and
Employee shall be available for advice and counsel to the officers and directors
of Employer at all reasonable times by telephone, letter or in person wherever
he may be.
7. During the term hereof, Employee shall be entitled to take vacations
consistent with past practice, and to incur, for the account of Employer,
reasonable business related expenses for entertainment, travel and other similar
items. Employee shall, during the term hereof, be furnished an automobile
comparable to the make and kind heretofore furnished him by Employer, and
Employee shall receive such other benefits as may be received by executives of
Employer. The Salary to be paid to Employee during the term hereof does not
include bonuses which may be paid from time to time and is not intended to
prevent an upward adjustment of such Salary from time to time within Employer's
discretion. If the Salary is adjusted upward during the term hereof, then all
payments due under paragraphs 2, 3 and 5 hereof shall reflect such upward
adjustment in Salary.
8. If, during the term hereof, Employee should be adjudged by a court of
competent jurisdiction to be guilty of fraud or of willful or intentional
misconduct in the performance of his duty to Employer, this Contract may be
terminated and cancelled without notice by the Board of Directors of Employer,
but in such event Employee shall nonetheless remain bound by the provisions of
the second sentence of paragraph 4 hereof.
9. In case any one or more provisions contained in this Contract shall,
for any reason, be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Contract; this Contract shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
10. All covenants and agreements hereunder shall inure to the benefit of
Employee and shall be enforceable by him against the successors or assigns of
Employer. The term "successors" and "assigns" shall include any corporation that
acquires all or substantially all of Employer's stock, or with which Employer
merges or consolidates. The rights and obligations of Employee under this
Contract are personal to him, and no such rights, benefits or obligations shall
be subject to voluntary or involuntary alienation, assignment or transfer.
11. Any waiver by either party of a breach of any provision in this
Contract shall not operate as or be construed as a waiver of any subsequent
breach thereof.
12. This Contract shall be construed in accordance with the laws of the
State of Texas, and the obligations contained herein are performable in Tarrant
County, Texas.
Executed this 14th day of December, 1994.
JUSTIN INDUSTRIES, INC.
/S/ RICHARD J. SAVITZ
By:
Richard J. Savitz
Vice President
EMPLOYER
/S/ JOHN S. JUSTIN, JR.
JOHN S. JUSTIN, JR.
EMPLOYEE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS, AND IS SUBJECT TO CERTAIN RESTRICTIONS WITH
RESPECT TO ITS TRANSFER CONTAINED IN SECTION 11 HEREOF.
THIS NOTE IS SUBJECT TO CERTAIN RIGHTS OF WITHHOLDING, OFFSET AND CREDIT AS SET
FORTH IN SECTION 9 HEREOF.
SUBORDINATED PROMISSORY NOTE
U.S. $_________________ Principal Amount
Issuance Date: August 1, 1994
1. General. FOR VALUE RECEIVED, the undersigned, JUSTIN INDUSTRIES, INC.,
a Texas corporation (hereinafter called the "Maker"), upon the terms and subject
to the conditions set forth herein, hereby promises to pay to the order of
____________________________ (hereinafter, with all subsequent permitted owners
or holders of this Note, collectively called the "Payee"), the principal sum of
_________________________________, as adjusted in accordance with the provisions
set forth in Section 9 hereof (the "Principal Amount"), together with interest
on the outstanding Principal Amount owing hereunder at the interest rate
determined as provided herein.
2. Interest. Subject to Section 9 hereof, interest on the outstanding
Principal Amount shall accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from the Issuance Date. Interest
shall be computed on the basis of the actual number of days elapsed over a year
of 365 or 366 days, as the case may be.
Interest for the period from the Issuance Date to but not including
November 1, 1994 shall be at the rate of 8.25% per annum. Interest for each
subsequent period beginning on an Interest Determination Date (as such term is
hereinafter defined) and ending on but not including the next succeeding
Interest Determination Date thereafter (a "Quarterly Period") shall be at a rate
per annum equal to one percent (1%) over the Prime Rate (as such term is
hereinafter defined) in effect for such Quarterly Period as determined below.
As used herein, "Interest Determination Date" shall mean the first day of
August, November, February, and May of each year commencing on November 1, 1994,
or if any such date is not a Business Day (as such term is hereinafter defined),
then on the next succeeding day that is a Business Day.
As used herein, "Business Day" shall mean any day other than a Saturday, a
Sunday, or any other day on which banking institutions in the city of Fort
Worth, Texas are authorized or obligated by law or executive order to be closed.
The "Prime Rate" shall be fixed on each Interest Determination Date that
begins a Quarterly Period. As used herein, "Prime Rate" shall be the rate of
interest announced by NationsBank Texas, N.A., at its principal office in
Dallas, Texas, as its prime commercial lending rate in effect on such Interest
Determination Date.
Notwithstanding anything to the contrary set forth herein, no interest on
the outstanding Principal Amount shall accrue or be payable in excess of the
maximum lawful rate (the "Maximum Rate") which may be contracted for, charged,
taken, received or reserved by the Payee in accordance with the laws of the
State of Texas from time to time in effect (except to the extent Federal law
permits the Payee to contract for, charge, take, receive or reserve a greater
amount of interest), due credit being given for all charges made in connection
with the loan evidenced hereby that may be treated as interest under applicable
law.
Notwithstanding anything to the contrary set forth herein, if any amount of
the Principal Amount or interest accruing thereon (except as to any amount which
is subject to withholding or offset or credit pursuant to Section 9 hereof)
shall not be paid within 15 days after the same becomes due and payable, whether
at maturity or by acceleration, such amount, whether of the Principal Amount or
of accrued interest thereon, shall bear interest until paid at the rate of
interest per annum equal to the lesser of:
(i) two percent (2%) above the rate that would otherwise then be borne
under this Note; or
(ii) the Maximum Rate.
3. Place of Payment. The Principal Amount and interest accruing thereon
shall be payable as set forth below in lawful money of the United States of
America ___________________________ or at such other place as the Payee may from
time to time designate by written notice to the Maker.
4. Scheduled Payments. Except as otherwise provided in Sections 6 and 9
hereof, the Principal Amount shall be paid in twenty (20) equal quarterly
installments of principal in the amount of ____________________________________
each, plus all accrued and unpaid interest hereunder, on the first day of
August, November, February and May of each year commencing on November 1, 1994,
and thereafter on the first day of each succeeding February, May, August and
November through August 1, 1999. All of the Principal Amount outstanding and
any accrued and unpaid interest on August 1, 1999 shall be due and payable on
such date, except for any amount which is subject to withholding or offset or
credit pursuant to Section 9 hereof. Unless otherwise agreed or required by
applicable law, all payments made hereunder will be applied first to any unpaid
collection costs (including reasonable attorneys' fees), then to accrued but
unpaid interest, and then to the Principal Amount.
5. Prepayments of the Principal Amount.
5.1 Prepayment Without Premium or Penalty. At its option the Maker
may prepay all or any portion of the outstanding Principal Amount (and/or the
accrued and unpaid interest hereunder) at any time or from time to time, without
premium or penalty. From and after such date of prepayment, interest on such
prepaid Principal Amount shall cease to accrue.
5.2 Notation of Prepayment. Upon any partial prepayment of the
Principal Amount, at the option of the Payee, either (i) this Note shall be
surrendered to the Maker in exchange for a new Note in a principal amount equal
to the Principal Amount remaining unpaid when surrendered, and otherwise having
the same terms and provisions as the Note surrendered, or (ii) this Note shall
be made available to the Maker at the place of payment for notation thereon of
the portion of the Principal Amount so prepaid, or (iii) the Payee shall make a
notation of the Principal Amount so prepaid and supply a copy of this Note with
such notation to the Maker.
5.3 No Reissue of Prepaid or Surrendered Notes. In the case of the
prepayment in full of the Principal Amount, and payment of all accrued but
unpaid interest hereunder, this Note shall be cancelled by the Payee and shall
not be reissued, and no Note shall be issued in lieu of any prepaid Principal
Amount.
6. Events of Default; Remedies.
6.1 Events of Default. An "Event of Default" occurs if:
(a) the Maker defaults in the payment of interest or principal on
this Note (other than with respect to any amount which is subject to withholding
or offset or credit pursuant to Section 9 hereof) when the same becomes due and
payable, and such default continues for a period of 15 days; or
(b) the Maker shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or shall make a general assignment for the benefit of creditors, or
shall fail to pay its debts generally as they become due; or
(c) an involuntary case or other proceeding shall be commenced
against the Maker seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 120 days; or
(d) the Maker shall cease to exist, be dissolved or terminated,
and not reconstituted substantially simultaneously therewith in accordance with
its corporate charter.
6.2 Acceleration. If an Event of Default (other than an Event of
Default under Section 6.1(b) or (c) hereof) occurs and is continuing, the Payee,
by notice to the Maker, may declare the entire Principal Amount and accrued
interest thereon to be due and payable immediately. Upon such declaration such
Principal Amount and interest thereon shall be due and payable immediately. The
Payee may rescind such an Event of Default in writing signed by the Payee, and
may also rescind in writing an acceleration and its consequences if all existing
Events of Default have been cured or waived, and if the rescission would not
conflict with any judgment or decree. Upon any rescission of acceleration, this
Note shall be reinstated pursuant to its terms prior to acceleration, as if such
acceleration had not occurred. No such rescission shall affect any subsequent
default or impair any right consequent thereto. If an Event of Default described
in Section 6.1(b) or (c) hereof occurs, the entire Principal Amount and accrued
interest thereon shall be due and payable immediately.
6.3 Other Remedies. A delay or omission by the Payee in exercising
any right or remedy accruing upon an Event of Default shall not impair the right
or remedy or constitute a waiver of or acquiescence in the Event of Default. No
remedy is exclusive of any other remedy. All available remedies are cumulative
to the extent permitted by law.
7. Usury Savings Clause. The Maker and the Payee intend to conform to and
contract in strict compliance with applicable usury laws from time to time in
effect. All agreements between the Maker and the Payee are hereby limited by the
provisions of this Section 7 which shall override and control all such
agreements, whether now existing or hereafter arising. In no way, nor in any
event or contingency (including, but not limited to, prepayment, default, demand
for payment, or acceleration of the maturity of any obligation), shall the
interest taken, reserved, contracted for, charged, chargeable, or received under
this Note, or otherwise, exceed the maximum amount permissible under applicable
law. For purposes hereof, "interest" shall include the aggregate of all charges
which constitute interest under such laws that are contracted for, reserved,
taken, charged or received under this Note. If, from any possible construction
of any document, interest would otherwise be payable in excess of the maximum
lawful amount, any such construction shall be subject to the provisions of this
Section 7 and such document shall ipso facto be automatically reformed and the
interest payable shall be automatically reduced to the maximum amount permitted
under applicable law, without the necessity of execution of any amendment or new
document. If the Payee shall ever receive anything of value which is
characterized as interest under applicable law and which would apart from this
provision be in excess of the maximum lawful amount, an amount equal to the
amount which would have been excessive interest shall, without penalty, be
applied to the reduction of the Principal Amount in the inverse order of its
maturity and not to the payment of interest, or refunded to the Maker if and to
the extent such amount which would have been excessive exceeds such unpaid
Principal Amount. The right to accelerate maturity of this Note does not include
the right to accelerate any interest which has not otherwise accrued on the date
of such acceleration, and the Payee does not intend to charge or receive any
unearned interest in the event of acceleration. All interest paid or agreed to
be paid to the Payee shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full stated term
(including any renewal or extension) of this Note so that the amount of interest
on account of this Note does not exceed the maximum permitted by applicable law.
In determining whether or not the interest paid or payable under any specific
contingency exceeds the maximum rate permitted by applicable law, the Maker and
the Payee shall, to the maximum extent permitted under applicable law, (i) treat
all loans as but a single extension of credit, (ii) characterize any
nonprincipal payments as an expense, fee or premium rather than as interest,
(iii) exclude voluntary prepayments and the effects thereof, and (iv) "spread"
the total amount of interest throughout the entire term of this Note (including
any renewal or extension thereof). As used in this Section 7, the term
"applicable law" shall mean the laws of the State of Texas or the federal laws
of the United States, whichever laws allow the greater interest, as such laws
now exist or may be changed or amended or come into effect in the future.
8. Replacement of Note. Upon receipt of evidence satisfactory to the
Maker of the loss, theft, destruction or mutilation of this Note and, in the
case of any such loss, theft or destruction, upon delivery of a bond of
indemnity satisfactory to the Maker, or, in the case of any such mutilation,
upon surrender and cancellation of this Note, the Maker shall issue a new Note,
of like tenor, in lieu of such lost, stolen, destroyed or mutilated Note.
9. Stock Purchase Agreement; Offsets and Credits. This Note is one of a
number of promissory notes of like tenor made by the Maker on the Issuance Date
in the aggregate principal amount of $5,000,000 and all bearing interest at the
same rate and payable and maturing on the same dates as provided in this Note
(collectively, the "Subordinated Notes"). This Note has been executed and
delivered as part of the consideration for the purchase of certain capital stock
pursuant to the terms of that Stock Purchase Agreement, dated as of August 1,
1994 (the "Purchase Agreement"), by and among Clarence W. Dowdy, Rosalie Dowdy,
David W. Dowdy, David W. Dowdy Children's Trust, Dianne Poteet, Dianne Poteet
Children's Trust, Catherine Ann Eden, Catherine Ann Eden Children's Trust, Eden
Children's Present Interest Trusts, Nancy Machu, and Herman P. Waters (each of
the foregoing being herein referred to individually as a "Seller" and
collectively as the "Sellers"), the Maker, Acme Brick Company ("Acme"), American
Tile Supply, Inc., American Tile Supply of Fort Worth, Inc., American Tile
Supply of Austin, Inc., and Ceramic Trading Corporation.
Pursuant to Section 4.2 of the Purchase Agreement, each of the Sellers has
agreed, jointly and severally, to indemnify, defend, protect, save and hold
harmless the Maker, Acme and the other Buyer Indemnitees (as such term is
defined in the Purchase Agreement) against, and will reimburse the Buyer
Indemnitees on demand for, any and all Losses (as such term is defined in the
Purchase Agreement) made or incurred by or asserted against the Buyer
Indemnitees directly or indirectly arising out of, related to, caused by, or
resulting from Seller Indemnifiable Claims (as such term in hereinafter
defined). In addition to any other rights of the Buyer Indemnitees, if any
Seller Indemnifiable Claim remains unresolved as between the Maker or Acme and
such Seller on any date on which any payment of any amount is otherwise due and
payable under this Note (including the Principal Amount or any interest accrued
or accruing hereunder), and if the unpaid principal amount of the Subordinated
Notes as of such date is equal to or less than an amount equal to 150% of the
aggregate amount of all estimated Losses with respect to all unresolved Seller
Indemnifiable Claims, then the Maker shall be entitled to withhold payment of
any such amount that is otherwise due and payable under one or more of the
Subordinated Notes up to an aggregate amount equal to the estimated Losses with
respect to all such unresolved Seller Indemnifiable Claims until the earlier of
(i) such time as such Seller has paid all such Seller Indemnifiable Claims in
full or otherwise corrected or remedied all such Seller Indemnifiable Claims to
the reasonable satisfaction of the Maker and Acme or (ii) final adjudication
(including appeals) by a court of competent jurisdiction; provided, however,
that except for Seller Indemnifiable Claims by the Buyer Indemnitees relating to
any representation or warranty of Sellers set forth in Section 2.11, 2.12,
2.15.1, 2.18, 2.22 or 2.25 of the Purchase Agreement or any matter referred to
in Section 4.2(b), 4.2(c) or 4.2(d) of the Purchase Agreement, no amount
otherwise due and payable under one or more of the Subordinated Notes (including
the principal amount or any interest accrued or accruing thereunder) may be so
withheld by the Maker unless and until the aggregate of all Losses incurred by
all Buyer Indemnitees with respect to one or more Seller Indemnifiable Claims
(other than Losses incurred by the Buyer Indemnitees with respect to Seller
Indemnifiable Claims relating to any representation or warranty of Sellers set
forth in Section 2.11, 2.12, 2.15.1, 2.18, 2.22 or 2.25 of the Purchase
Agreement or any matter referred to in Section 4.2(b), 4.2(c) or 4.2(d) of the
Purchase Agreement) shall exceed the Threshold (as such term is defined in the
Purchase Agreement).
Upon a final determination (by a court of competent jurisdiction or
otherwise by agreement of the Maker and Acme and such Seller) of the value of
any Seller Indemnifiable Claim, or if such Seller has not paid such Seller
Indemnifiable Claim in full or otherwise corrected or remedied such Seller
Indemnifiable Claim to the reasonable satisfaction of the Maker and Acme by the
earlier of the fifth anniversary of the Issuance Date or the date that the
Subordinated Notes are paid in full, then the Maker shall be entitled to an
offset and credit against the unpaid payments of the Principal Amount (or the
unpaid payments of the principal amount of one or more of the other Subordinated
Notes) in an aggregate amount equal to the value of such Seller Indemnifiable
Claim. Any such offset and credit shall be retroactive to and effective as of
the Issuance Date, and no portion of the Principal Amount which is subject to
such offset and credit shall bear any interest at any time.
10. Subordination Provisions. The Payee covenants and agrees, by its
acceptance of this Note, that all Junior Claims (as such term is hereinafter
defined) are and shall be subordinated to the prior payment in full of the
Senior Claims (as such term is hereinafter defined), to the extent and in the
manner set forth below:
10.1 Certain Definitions. As used herein, the following terms shall
have the respective meanings set forth below:
(a) "Designated Senior Indebtedness" of the Maker shall mean and
include the Indebtedness of the Maker described on Attachment I attached hereto
and any additional Obligations hereafter incurred or arising relating thereto.
(b) "Indebtedness" of the Maker shall mean and include, as of any
date as of which the amount thereof is to be determined, without duplication:
(i) any Obligation, contingent or otherwise, for borrowed money (whether or not
the recourse of the lender is to the whole of the assets of the Maker or only to
a portion thereof and whether or not represented by bonds, debentures, notes or
other instruments evidencing debt (other than equity securities of the Maker));
(ii) any Obligation owed for all or any part of the purchase price of property
or other assets or for the cost of property or other assets constructed or of
improvements thereto (other than accounts payable included in current
liabilities and incurred in respect of property and services purchased in the
ordinary course of business); (iii) except to the extent supporting Indebtedness
of the Maker, any Obligation of the Maker under or in connection with any letter
of credit issued for the account of the Maker and, without duplication, all
drafts drawn, or demands for payment honored, thereunder; (iv) any Obligation
under any lease, the Obligation for rentals with respect to which is required to
be capitalized on a balance sheet of the lessee in accordance with generally
accepted accounting principles, or any other Obligation pursuant to any sale and
leaseback transaction; (v) any note payable or draft accepted representing an
extension of credit (other than extensions of credit for property or services
purchased in the ordinary course of business), representing an Obligation for
borrowed money; and (vi) any guarantee, endorsement, assumption or other
contingent Obligation (or any Obligation which is the economic effect of a
guarantee, endorsement, assumption or other contingent Obligation, regardless of
its characterization) with respect to Indebtedness (of a kind otherwise
described in this definition) of another person. The amount of Indebtedness of
the Maker at any date shall be the outstanding balance at such date of all
unconditional Obligations as described above and the liability of any such
contingent Obligations at such date required to be disclosed on the Maker's
balance sheet in accordance with generally accepted accounting principles.
(c) "Junior Claims" shall mean the Principal Amount of and all
interest on (including, without, limitation, any interest which accrues after
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Maker to the extent allowed by the tribunal
exercising jurisdiction in any such case, proceeding or action) the indebtedness
of the Maker under this Note whether now or hereafter incurred or arising, and
all other sums, whether direct or contingent, payable by the Maker under this
Note or the Purchase Agreement and any documents executed in connection with
this Note or the Purchase Agreement, whether now provided for or hereafter
provided for.
(d) "Obligations" shall mean, with respect to the Senior Claims,
all amounts of principal of, prepayment charge or premium, if any, and interest
on (including, without limitation, any interest which accrues after commencement
of any case, proceeding or other action relating to the bankruptcy, insolvency
or reorganization of the Maker to the extent allowed by the tribunal exercising
jurisdiction in any such case, proceeding or action), the Senior Claims, and all
other sums, whether direct or contingent, payable by the Maker on the Senior
Claims or under any agreement or document pursuant to which such Senior Claims
were issued or are secured.
(e) "Senior Claims" shall mean the Designated Senior Indebtedness
and all other Indebtedness of the Maker, whether now existing or incurred or
hereafter incurred or arising which by its terms or by the terms of the
instrument creating such Indebtedness provides, in substance, that it is senior
to or superior in right of payment to the Junior Claims; provided, however, that
"Senior Claims" shall not include any Indebtedness of the Maker which is owed to
a subsidiary or affiliate of the Maker. As used herein, the term "affiliate"
shall mean, with respect to any person or party, (i) any person or party
controlling, controlled by or under common control with any such person or
party; or (ii) any director or officer of any such person or party or of any
person or party referred to in clause (i) of this definition of "affiliate." As
used herein, the term "control" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person or party, whether through the ownership of voting
securities or voting interests, by contract or otherwise.
(f) "Senior Holders" shall mean any or all of the holders of any
or all of the Senior Claims, and their respective heirs, executors, personal
representatives, administrators, successors and assigns.
10.2 Subordination. Until the Senior Claims shall be paid in full, the
Payee shall not take, demand or receive, and the Maker shall not make, give or
permit, directly or indirectly, by set-off, redemption, purchase or in any other
manner, any payment on or security for the whole or any part of the Junior
Claims, and without the Senior Holders' prior written consent, the Payee shall
not take any action to enforce or collect amounts owing under the Junior Claims
or act as a petitioning creditor in any Insolvency Proceeding (as such term is
hereinafter defined) filed by or against the Maker, except as follows:
(a) The Maker may make, and the Payee may receive and retain,
payments and prepayments of the Principal Amount and accrued interest thereon
unless (i) an event of default (a "Senior Default") shall have occurred and then
be continuing (or would occur as a result of, and after giving effect to, such
payment) under any Senior Claim, and (ii) the applicable Senior Holder or the
Maker shall have given written notice of such Senior Default to the Payee at the
Payee's address set forth herein (provided that (x) only one such notice may be
given by any Senior Holder in any period of 12 consecutive months and (y) not
more than five such notices may be given by all Senior Holders collectively
during the term of this Note);
(b) If the Maker fails to make any such payment to the Payee
because payment is not permitted under the provisions of Section 10.2(a) hereof,
then the Payee may commence any default proceedings or remedies in respect of
the Junior Claims 90 days after notifying the applicable Senior Holder in
writing (any such 90-day period being referred to herein as a "Stand-Still
Period") of the Maker's failure to make such payment and of the Payee's desire
to commence proceedings or remedies under this Section 10.2(b); provided,
however, that at any time a payment is not made to the Payee and payment is
permitted under the provisions of Section 10.2(a) hereof, the Payee may commence
any default proceedings or remedies in respect of the Junior Claims; provided,
further, however, that a Stand-Still Period shall terminate if the applicable
Senior Default is rescinded or waived during such Stand-Still Period by the
applicable Senior Holder (notice of which shall be given in writing by the Maker
to the Payee) and the Payee may thereupon commence any default proceedings or
remedies in respect of the Junior Claims; and provided further, however, that no
proceedings or remedies shall be commenced by the Payee hereunder if, on the
date on which the Payee would otherwise be entitled to commence such proceedings
or remedies, the Maker shall have paid to the Payee all payments of the
Principal Amount and accrued interest thereon then due and owing.
10.3 Modifications to Senior Claims. Without notice to or consent by
the Payee, (a) any demand by the Senior Holders for payment of the Senior Claims
or any of them may be rescinded by the Senior Holders in whole or in part and
any of the Senior Claims may be continued, and the Senior Claims, or the
liability of the Maker or any other party upon or for any part thereof, or any
collateral security or guaranty therefor or right of offset with respect
thereto, or any obligation or liability of the Maker or any other party under
any of the Senior Claims may, from time to time, in whole or in part, be
renewed, extended, modified, accelerated, compromised, waived, surrendered, or
released by the Senior Holders or (b) the instruments evidencing the Senior
Claims or any loan agreements, collateral security documents, guaranties or
other documents in connection therewith may be amended, modified, supplemented
or terminated, in whole or in part, as the Senior Holders may deem advisable
from time to time, and any collateral security at any time held by the Senior
Holders for the payment of the Senior Claims may be sold, exchanged, waived,
surrendered or released, in each case all without notice to or further assent by
the Payee, which will remain bound under this Note, and all without impairing,
abridging, releasing or affecting the subordination provided for herein,
notwithstanding any such renewal, extension, modification, acceleration,
compromise, amendment, supplement, termination, sale, exchange, waiver,
surrender or release; provided, however, that the Senior Holders shall give
written notice to the Payee of any rescission or waiver of a Senior Default as
set forth in Section 10.2 hereof. The Payee waives any and all notice of the
creation, renewal, extension or accrual of any of the Senior Claims and notice
of or proof of reliance by the Senior Holders upon this Section 10, and the
Senior Claims shall conclusively be deemed to have been created, contracted or
incurred in reliance upon this Section 10, and all dealings between the Maker
and the Senior Holders shall be deemed to have been consummated in reliance upon
this Section 10.
10.4 Termination. Upon the indefeasible payment in full of all Senior
Claims, the provisions of this Section 10 shall terminate. In the event of any
termination of the provisions of this Section 10 by operation of law, this
agreement shall continue in full force and effect as to all Junior Claims and
all Senior Claims outstanding at the date of such termination, until such Senior
Claims have been fully and irrevocably paid and discharged.
10.5 Notice to Senior Holders. Any notice to the Senior Holders or any
party provided herein shall be effective only if in writing and directed to such
address as such receiving Senior Holder or party may from time to time notify
the other parties in writing.
10.6 Waiver. No delay on the Senior Holders' part in exercising any
right or rights hereunder or in failing to exercise the same shall operate as a
waiver of such right or rights; and no notice to or demand on the Maker or the
Payee shall be deemed a waiver of any obligation or duty of the Maker or the
Payee or of the Senior Holders' right to take further action without notice or
demand nor in any event shall any modification, alteration or waiver of any of
the provisions of this Section 10 be effective unless in writing and signed for
or on behalf of the Senior Holders and then only in the specific instance for
which given.
10.7 Subrogation. The Payee shall be subrogated to the Senior Holders'
rights to receive payments or distributions of cash, property or securities of
the Maker applicable to the Senior Claims to the extent that and at any time
that any of the Senior Holders shall be paid in full and until the Junior Claims
shall be paid in full; and, for the purposes of such subrogation, no payments or
distributions to the Senior Holders of any cash, property or securities to which
the Payee would be entitled, except for the provisions of this Section 10, and
no payment over pursuant to the provisions of this Section 10 to or for the
Senior Holders' benefit by the Payee, shall, as between the Maker, its creditors
(other than the Senior Holders) and the Payee, reduce the Maker's indebtedness
to the Payee hereunder or be deemed to be a payment by the Maker to or on
account of the Junior Claims. It is understood that the provisions of this
Section 10 are intended solely for the purpose of defining the relative rights
of the Payee, on the one hand, and the Senior Holders, on the other hand.
10.8 Modifications to this Note. Until the Senior Claims shall be paid
in full, the Payee shall not amend or modify the provisions of this Note, so as
to advance the dates on which payments are scheduled to be made or increase the
amounts payable on such dates.
11. Transfer Documents. Neither this Note nor any rights or interests
hereunder shall be assigned or otherwise transferred by the Payee without the
express, prior written consent of the Maker, which consent may be granted or
withheld in the sole and absolute discretion of the Maker; provided, however,
that the Payee may, without the prior written consent of the Maker (but upon
prior written notice to the Maker), assign or otherwise transfer this Note and
the Payee's rights and interests hereunder (in whole but not in part) to any
Permitted Transferee (as such term is hereinafter defined). In the event of any
permitted assignment or other transfer by the Payee of this Note or any right or
interest herein, an instrument of assignment or transfer shall be executed by
the assignee or transferee and shall expressly state that the assignee or
transferee agrees to be bound by all terms and conditions set forth herein.
As used herein, the term "Permitted Transferee" with respect to the Payee
means (i) a spouse (at the time of transfer, regardless of subsequent divorce);
(ii) a lineal ancestor or descendant; (iii) a lineal ancestor or descendant of a
spouse or former spouse; (iv) the trustee or trustees of a trust at any time
established by the Payee or any of his, her or its Permitted Transferees for the
benefit of the Payee and/or one or more of his, her or its Permitted
Transferees; (v) if the Payee is a trust, the beneficiaries of such trust; and
(vi) any entity owned entirely by the Payee or by the Payee and any combination
of the persons or entities described in (i), (ii), (iii) or (iv) above.
12. Governing Law. THIS NOTE IS MADE IN TARRANT COUNTY, TEXAS, AND THE
LAWS OF THE STATE OF TEXAS SHALL GOVERN AND CONTROL THE CONSTRUCTION AND
INTERPRETATION HEREOF (EXCEPT TO THE EXTENT APPLICABLE FEDERAL LAW PERMITS THE
PAYEE TO CONTRACT FOR, CHARGE, TAKE, RECEIVE OR RESERVE A GREATER AMOUNT OF
INTEREST).
THE PAYEE AGREES, BY ITS ACCEPTANCE OF THIS NOTE, THAT VENUE IN ANY SUIT,
PROCEEDING OR ACTION ARISING OUT OF OR INVOLVING THIS NOTE SHALL BE IN TARRANT
COUNTY, TEXAS.
13. Notices. All notices, demands and other communications provided for
hereunder shall be in writing, and, if to the Payee, shall be given by
registered or certified mail, return receipt requested, telex, telegram,
telecopy, courier service or personal delivery against return receipt, at
_________________________________, (or to such other address as the Payee may
designate to the Maker in writing) and, if to the Maker, shall be given by
similar means to the Maker at 2821 West Seventh Street, Fort Worth, Texas 76107,
Attention: Vice President-Finance, telecopy: 817/390-2477, telephone: 817/390-
2412 (or to such other address as the Maker may designate to the Payee in
writing), and shall be deemed given when received.
14. SEC Filings. The Maker has furnished to the Payee a copy of the
Maker's Annual Report on Form 10-K (without exhibits) filed with the Securities
and Exchange Commission (the "SEC") for its fiscal year ended December 31, 1993
and a copy of the Maker's Quarterly Report on Form 10-Q (without exhibits) filed
with the SEC for the fiscal quarter ended March 31, 1994. Until the Principal
Amount and all interest accrued thereon shall be paid in full, the Maker shall
provide to the Payee all Form 10-Ks and Form 10-Qs (including exhibits thereto
at the specific request of the Payee) filed with the SEC after the Issuance Date
under the Securities Exchange Act of 1934, as amended. The Maker shall, at the
written request of the Payee (but not more than once during any 12-month
period), provide to the Payee a list of all Senior Holders, including principal
amounts owed to each as of the end of the most recent fiscal quarter for which
such information is publicly available.
IN WITNESS WHEREOF, the Maker has duly executed and delivered this Note on
the Issuance Date.
JUSTIN INDUSTRIES, INC.
By:
Richard J. Savitz, Vice President-
Finance and Treasurer
ATTACHMENT I
Designated Senior Indebtedness
Principal
Balance
Industrial Revenue Bonds As of 6/30/94
Houston - Citibank $9,750,000
City of Tulsa - Bank of New York $6,500,000
Sarcoxie - Team Bank $960,000
Oklahoma Industria Authority - First Interstate $310,000
City of Perla - Second Issue - Jonesboro $600,000
Bank Loans
Revolving Credit Agreement
(a $72 million line of credit divided
among NationsBank, Citibank, Bank
of New York, BankOne and Texas
Commerce Bank/Ft. Worth) $30,000,000
NationsBank, Texas Commerce Bank,
Citibank, BankOne Term Loan $30,000,000
Texas Commerce Bank - Fort Worth $2,500,000
Overton Bank & Trust $2,000,000
Other Long Term Notes
Hornsby Note $13,000
Dellinger (Tony Lama Debt) $119,000,000
Total $82,752,000
(FRONT COVER - Picture of boots, brick and building block.)
JUSTIN INDUSTRIES
1994 ANNUAL REPORT
===============================================================================
(INSIDE FRONT COVER)
(Partial picture of USA flag)
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
1994 % Change 1993 % Change 1992 % Change
------------------------------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $483,009 + 1.7 $474,931 + 4.8 $453,267 + 23.1
Income (before change in accounting*) 36,905 + 2.4 36,035 + 33.0 27,093 + 220.5
Net Income 36,905 - .6 37,141 + 37.1 27,093 + 40.9
Earnings Per Share (before change in accounting*) 1.33 + 3.1 1.29 + 31.6 .98 + 206.3
Earnings Per Share 1.33 --- 1.33 + 35.7 .98 + 34.2
Return on Shareholders' Equity* 19.5% - 15.9 23.2% + 9.4 21.2% + 178.9
Capital Expenditures 18,627 + 7.8 17,278 + 43.9 12,006 + 12.6
Working Capital 185,722 + .3 185,193 + 12.4 164,822 + 8.7
Total Assets 374,921 + 8.1 346,680 + 9.6 316,368 + 6.9
Long-Term Debt 65,323 - 26.2 88,504 - 11.8 100,362 - 13.5
Shareholders' Equity 221,900 + 17.5 188,803 + 21.6 155,270 + 21.7
Book Value Per Share 8.15 + 17.3 6.95 + 20.9 5.75 + 17.0
Cash Dividends Per Share .16 --- .16 + 14.3 .14 + 3.7
Average Number of Shares Outstanding 27,810 - .5 27,953 + .7 27,772 + 5.3
--------------------------------------------------------------------------------------------------------------------
* before cumulative effect on prior years of in thousands, except per share data
change in accounting for income taxes
</TABLE>
CONTENTS
Letter to Shareholders, 2
Report on Operations, 5
Financial Discussion, 13
Consolidated Financial Statements, 18
Report of Independent Auditors, 27
Eleven-Year Financial Summary, 28
Shareholder Information, 30
Directors and Officers, 31
Manufacturing Locations - Map, 32
===============================================================================
(PAGE 1)
(Picture of boot, brick, and building block.)
CORPORATE PROFILE
JUSTIN INDUSTRIES, HEADQUARTERED IN FORT WORTH, TEXAS,
IS A LEADER IN EACH OF ITS PRINCIPAL BUSINESSES:
BUILDING MATERIALS -- including Acme Brick Company, one of the nation's largest
producers of face brick; Featherlite Building Products Corporation, the
Southwest leader in manufactured concrete building products; American Tile
Supply Company, a major Texas distributor of ceramic and marble floor and wall
tile; and Tradewinds Technologies, Inc., producer of Tradewinds evaporative
coolers for home and light commercial applications.
FOOTWEAR -- consisting of Justin Boot Company, Nocona Boot Company, and Tony
Lama Company, whose products give Justin Industries a national identity as the
preeminent producer of western boots, and quality work and sport footwear.
Northland Publishing, a distinguished publisher of western and southwestern
Americana, art, and Native American culture, is also part of Justin Industries.
Justin Industries common stock is traded in the Nasdaq National Market System
using the symbol "JSTN."
===============================================================================
(PAGE 2 and 3)
TO OUR SHAREHOLDERS
JANUARY 26, 1995
THE BUILDING MATERIALS SEGMENT SURGED TO NEW PERFORMANCE RECORDS AND CONTRIBUTED
HEAVILY TO OUR OVERALL RECORD-SETTING YEAR.
Justin Industries had a paradoxical year in 1994. While the Building Materials
segment, led by Acme Brick Company, surged to new performance records and
contributed heavily to our overall record-setting year, the Footwear group was
negatively affected by the general malaise of the entire retail apparel
industry. But the Footwear companies -- Justin, Nocona, and Tony Lama -- were
each successful in operating profitably for the year, while making adjustments
to streamline their operations and develop new markets.
Sales of boots, especially ladies' styles, slowed in the fashion centers on
both the East and West Coasts, while our core markets in Texas, its adjoining
states, and the rest of the Great American West have continued to function well,
with sales of traditional cowboy boots at a steady level. Chippewa, Justin's
outdoor and rugged-use line of footwear, has shown strong growth, with sales up
more than 30 percent in the past year. Justin's newly introduced Sport Lace-R
combines some of the structural features of their famed Roper with the comfort
of an athletic shoe. It has made an excellent entry into this highly competitive
market, with good prospects for strong sales in 1995 as our customers become
acquainted with the comfort, styling features, and economy of this new product.
As we reported to you a year ago, we expected for 1994 "another strong year
in the Building Materials area, with Acme Brick Company leading the way with its
robust market share, and continued growth in its purchased products operations."
This expectation was certainly borne out by an extremely successful year by Acme
Brick. Demand for brick was strong, testing our ability to produce and deliver
the record-setting quantities of brick ordered by our customers.
Featherlite Building Products Corporation likewise continued its strong
performance from 1993, with excellent growth in sales of its concrete and stone
building products. With a loyal and growing customer base, Featherlite continues
to profit from efficiencies gained during the commercial building down-cycle of
the late '80s and early '90s.
Our third Building Materials company, Tradewinds Technologies, located in
Phoenix, Arizona, contributed to the segment's success in 1994, capitalizing on
the efficiency, low operating costs, and environmentally desirable aspects of
the use of evaporative coolers. In 1995, Tradewinds will introduce an improved
new product that is expected to boost revenues and profitability.
In August 1994, the Company acquired American Tile Supply Company (ATS), which
now operates as a part of Acme Brick. All of the outstanding stock of ATS and
its affiliated companies was acquired for cash and notes totaling approximately
$16 million. From the date the acquisition was completed, ATS has been a solid
contributor of both revenue and profits. ATS -- headquartered in Dallas, and
with sales/warehouse facilities in Fort Worth, San Antonio, Austin, Longview,
and a newly opened 41,000-square-foot site in Houston -- is one of the largest
U.S. distributors of floor and wall tile and related products. Prospects for
future growth of this business are excellent.
(Picture of Chairman and President)
The past year also saw major changes set in motion in the Footwear segment,
in the consolidation of the administrative functions of Justin, Nocona, and Tony
Lama in one headquarters location in Fort Worth. Expected to be completed before
the end of 1995, the consolidation will bring together accounting, credit, data
processing, marketing, and sales administration for all three companies, with a
smaller staff and improved coordination of efforts. We expect to see even
further improvements in service to our customers, as well as meaningful cost
savings.
We also announced in late 1994 that Justin Boots' Fort Worth plant will be
reconfigured, from two factory buildings to one, in February 1995, resulting in
a downward adjustment of some 150 employees. Simultaneously, a transporter
system will be introduced in the production line, enabling the plant to operate
at a much higher level of efficiency.
In December 1994, your Board of Directors approved a resumption of the
company's program to repurchase its own stock, limited to one million shares.
Management believes that the present market price of the stock represents a
sound investment and is in the best interest of all of its shareholders.
In other financial news, more fully covered later in this annual report, we
had hoped to achieve half a billion dollars in sales this year. We reached 97
percent of that goal, at $483 million. We plan to try even harder in 1995.
Shareholders' equity surpassed $200 million in 1994, ending the year at $221.9
million, and the book value per share of common stock rose from $6.95 to $8.15,
an increase of over 17 percent.
While we are extremely pleased with the fine job done by the Building
Materials companies, the Footwear results were disappointing to us, and were
perhaps more disappointing to the Footwear employees and management group, who
worked extremely hard. For 1995, we plan to build on the foundation that has
been laid for further expansion of Footwear marketing in Europe and Asia, as
well as in Canada.
The coming year is also tinged with uncertainty surrounding interest rates
and federal monetary policy, which translates to guarded prospects for housing
starts. Acme Brick Company will follow through on its planning for further
growth by construction of its new plant at the Bennett site in Parker County,
Texas, where the first Acme Bricks were made in 1891. And Featherlite plans to
upgrade its Round Rock plant just north of Austin by installing a new concrete
block machine, which will increase capacity and reduce unit costs.
We are optimistic about the Company's prospects, for 1995 and for the years
that follow. Our optimism springs from the nature of our businesses, which
continue to prosper year after year; from our loyal and supportive customers;
from our experienced and dedicated employees and managers; and from our highly
capable Board of Directors.
/S/ John Justin /S/ J. T. Dickenson
JOHN JUSTIN J. T. DICKENSON
Chairman and Chief Executive President and Chief Operating
Officer Officer
===============================================================================
(PAGE 4)
THE BUILDING MATERIALS GROUP -- ACME BRICK, FEATHERLITE BUILDING PRODUCTS, AND
TRADEWINDS TECHNOLOGIES -- WILL BE PACESETTERS AGAIN IN 1995.
(Picture of miscellaneous building materials, including brick, concrete block,
glass block and tile.)
===============================================================================
(PAGE 5 and 6)
REPORT ON OPERATIONS
BUILDING MATERIALS
(Small picture of brick)
(Picture of Troy Aikman with caption: "TROY AIKMAN -- PRO BOWL QUARTERBACK FOR
THE DALLAS COWBOYS -- IS A SPOKESMAN FOR ACME BRICK.")
THE PREVIOUSLY established records set in 1993 for revenues and earnings of
Justin Industries' Building Materials segment were soundly beaten in 1994 as
this group recorded a 25 percent increase in revenues and 42 percent gain in
operating profits for the year. Acme Brick Company led the way again, with solid
contributions from Featherlite Building Products Corporation, Tradewinds
Technologies, Inc., and the newly acquired American Tile Supply Company.
ACME BRICK sold over three quarters of a billion bricks in 1994 as housing start
rates improved over the prior year in its trade territory. Product demand
resulted in firmer pricing and record profit margins, as well.
The purchased products division of Acme -- with its varied product mix of
building materials such as bagged goods, fireplace equipment, glass block, cast
stone, the IBP Glass Block Grid System, floor and wall tile, pavers, and glazed
tile -- also produced record sales in 1994, with an increase of almost 20
percent from 1993. Acme made a major advance in its program to increase this
segment of business with the August 1994 acquisition of American Tile Supply
Company. As one of the country's largest independent distributors of ceramic
and marble floor and wall tile, American Tile has experienced strong growth over
the last several years. Expansion is already underway, and the outlook for
future growth of this business is excellent.
Acme's brick expansion plans also progressed, as contracts were signed and
construction began on a new state-of-the-art brick manufacturing facility at
Bennett, Texas. This plant is on the site of the original plant where Acme
started in 1891. The new facility, which will primarily serve the Dallas-Fort
Worth area, adds approximately 8 percent to brick manufacturing capacity and
will include the best available production technology and environmental control
systems. In addition, major sales and distribution office renovations were
undertaken at Midland, Texas, and Springfield, Missouri, and a new facility was
acquired in San Antonio.
(Picture of tile with caption: "AMERICAN TILE SUPPLY COMPANY IS ONE OF THE
COUNTRY'S LARGEST INDEPENDENT DISTRIBUTORS OF CERAMIC AND MARBLE FLOOR AND WALL
TILE.")
While some flattening of the single family residential market is predicted for
1995, it is felt that this decline will be offset by an increase in both multi-
family and commercial construction. The company will enter 1995 with a good
sales backlog and sound prospects for another excellent year.
FEATHERLITE BUILDING PRODUCTS made intensive efforts in 1994 to improve market
penetration through emphasis on customer service, product diversity, and
quality, yielding positive results. These efforts, along with the continued
growth of commercial, institutional, and residential construction markets,
helped the company achieve record sales and generate substantially improved
earnings.
A new concrete products manufacturing system was installed at the company's
El Paso production facility in 1994, enabling Featherlite to provide high-
quality concrete brick, pavers, and landscaping products to the El Paso,
southern New Mexico, and West Texas markets. Customer response has been
tremendous, with demand outpacing production capacity thus far -- a situation
that is expected to continue in 1995 and beyond.
Another major addition will occur in 1995 as Featherlite replaces an
inefficient block manufacturing machine at its production facility in the
Austin, Texas, area. The new fully automated machine will greatly increase
capacity and enable the plant to reduce manufacturing costs and better service
the growing central Texas market.
(Small picture of concrete building block)
Featherlite's Texas Quarries division continued its steady sales and earnings
growth in 1994. A strong national market serviced by Texas Quarries' cut stone
line, coupled with the robust high-end housing market serviced by the chopped
stone and split face operation, contributed to the solid performance.
Craftsmanship has been the difference that gives Texas Quarries the advantage
when experience, attention to detail, and service are as important as the
product itself. With Texas Quarries' limestone and superior craftsmanship, the
architect can successfully capture his designs and feel confident that the
customer will appreciate the lasting beauty of Texas limestone.
Featherlite's total quality management program, which began in 1993, has
resulted in the development of many excellent ideas generated by employees.
Working together with management, "corrective action teams" have designed and
implemented programs that have improved product quality, manufacturing
efficiency, and customer service.
===============================================================================
(PAGE 7)
(Small picture of Tradewinds evaporative cooler)
INCREASED SALES and improved plant operations resulted in record profitability
for Tradewinds Technologies, Inc., in 1994. The retail segment of the business
continued to lead the way with double-digit increases, while sales through
wholesale distribution also increased during 1994. The Southwest had an
unusually long, hot summer, and the air conditioning market experienced a
particularly strong selling season. The western states continue to have a good
economic base, and consumer spending on quality durable goods also helped
increase unit sales. In addition, purchases for government buildings and housing
authorities had significant growth in 1994.
Evaporative cooling remains a highly feasible solution to the indoor-air-
quality issue in commercial buildings. Design and specification engineers have
included fresh air introduction in their plans for existing and new
construction. Building codes are increasingly addressing indoor-air-quality
matters. Tradewinds now has a complete line of evaporative coolers that can be
used in this commercial market.
Tradewinds' new commercial unit, introduced in 1993, began to gain acceptance
in the marketplace in 1994. The units replaced old, rust-prone metal coolers on
several projects, including a major Las Vegas casino and the Tony Lama boot
plant in El Paso. Increased airflow and improved cooling were achieved in all
areas. Test units were also installed on several other buildings. Tradewinds
continues to heavily promote these 8,000- to 18,000-CFM units through owners,
engineers, and specifiers in the commercial market.
THE BUILDING MATERIALS group of Justin Industries -- Acme Brick, Featherlite
Building Products, and Tradewinds Technologies -- will be the pacesetters for
1995, within the company and in their own markets. With relatively strong
demand, solid backlogs of orders, and prospects of stable pricing, the outlook
for this segment is very high and will, to a great extent, determine Justin
Industries' overall success in 1995.
(Picture of school constructed with concrete building block and caption:
"FEATHERLITE IS THE PRODUCT OF CHOICE FOR ARCHITECTS OF INSTITUTIONAL PROJECTS
LIKE SCHOOLS."
===============================================================================
(PAGE 8)
(Picture of boots and caption: "OPERATIONS OF ALL THREE FOOTWEAR COMPANIES --
JUSTIN, NOCONA, AND TONY LAMA -- WERE PROFITABLE FOR THE YEAR, WITH COMBINED
EARNINGS AMONG THE HIGHEST EVER.")
===============================================================================
(PAGE 9, 10 and 11)
REPORT ON OPERATIONS
FOOTWEAR
(Small picture of boot)
(Picture of Nolan Ryan with caption: "NOLAN RYAN -- BASEBALL'S ALL-TIME
STRIKEOUT KING AND FUTURE HALL OF FAMER -- IS A SPOKESMAN FOR JUSTIN BOOTS.")
FOLLOWING SEVEN consecutive years of growth, revenues in Justin Industries'
Footwear operations declined in 1994 as the western boot and apparel industries
experienced a general softening. Although lower volume negatively affected
margins, all operations were profitable for the year, with combined earnings
among the highest ever.
Justin, Nocona, and Tony Lama have long depended on the traditional western
boot wearer for the bulk of their business. This type of customer, who
appreciates quality workmanship and styling, has been the foundation for the
companies' success for decades, and has enabled Justin's Footwear group to
maintain and even increase its market share in periods when the fashion segment
of the business declines, as it did in 1994.
While the level of business slowed in 1994, efforts were accelerated to
improve all facets of the operations and to position the companies for future
profitable growth. The programs begun in 1993 to capitalize on synergies among
Justin, Nocona, and Tony Lama are yielding positive results. Coordinated
purchasing efforts have resulted in better overall material quality and pricing
advantages, and the use of dealer focus groups has helped to improve advertising
and promotion programs. Further major organizational changes were initiated in
the third quarter of 1994. The reorganization, which will require about a year
to fully implement, will centralize marketing and sales administration,
accounting, data processing, and credit for all three companies in one
headquarters location. Not only will significant cost savings be realized, but
enhanced levels of customer service also will be attained as overall efficiency
is improved.
(Small picture of boot)
(Picture of Sport Lace-R and caption: "THE SPORT LACE-R, INTRODUCED IN MID-
1994, HAS THE COMFORT OF THE JUSTIN ROPER AND THE SUPPORT OF THE LACE-R.")
Production levels were reduced during 1994 at all companies in order to
better match inventories with product demand. Improvements in other systems,
such as order processing and delivery, have demonstrated that the footwear
business can operate with lower inventories without sacrificing service to
customers. Justin Boot Company's Fort Worth plant will undergo major changes. A
planned February 1995 reduction of 150 production employees and a
reconfiguration of the manufacturing process will enable the facility to operate
at a much improved level of efficiency. When this adjustment takes place, total
Footwear employment will have been reduced by over 15 percent in a twelve-month
period due to production cutbacks and other cost-cutting measures. Attention to
production efficiency and quality at all three companies also brought down the
rate of product defects in 1994 to the lowest level in several years.
Not all Footwear product lines suffered sales declines in 1994. The most
notable exception was Chippewa, which had an outstanding year with unit
shipments 30 percent above a year ago. Since 1991, Chippewa sales have grown two
and a half times. Founded in 1901, Chippewa has been part of the Justin Footwear
group since 1985. Combining years of boot design and craftsmanship with
materials that have proven themselves in the most extreme conditions, Chippewa
has created footwear that is known for its ruggedness and durability. From the
United States armed services, to motorcycle enthusiasts, to municipal employees,
people who depend on footwear as a tool of the trade have counted on the quality
of Chippewa. To accommodate the growth of this product line, the Chippewa sales
force has been expanded.
In mid-1994, Justin Boot introduced the newest member of its product family:
the Sport Lace-R. Constructed on a roper and lacer mold, this innovative
addition to the footwear line has the comfort of the original Justin Roper, the
support of the Lace-R, and the feel of an athletic shoe. The upper portion of
the Sport Lace-R is made of full-grain lightweight leathers and features a steel
shank for added arch support and a roper heel for added comfort and stirrup
control. To date, orders have surpassed one hundred thousand pairs, and early
indications are that 1995 sales will dramatically increase.
(Small picture of boot)
(Picture of George Strait and caption: "GEORGE STRAIT -- GRAMMY AWARD-WINNING
COUNTRY AND WESTERN ENTERTAINER -- ENDORSES JUSTIN BOOTS.")
In 1994, Justin expanded its specialty boot product line. Styled for both men
and women, these boots offer the comfort and durability needed for rugged work
and outdoor activities. Sales of the more expensive exotic leather boots such as
alligator, ostrich, and lizard increased as a percentage of boot shipments at
Tony Lama and Nocona, resulting in increased average selling prices for these
operations. Both will continue their strong pursuit of the exotic market in
1995.
Among the goals of the Justin Industries Footwear operations is the promotion
and distribution of footwear products to foreign markets. In 1994, a Western
European base for this venture was established with the opening of a sales
office and showroom in Paris for the Justin, Nocona, Tony Lama, and Chippewa
lines. A sales force is now in place, and order processing, warehousing, and
delivery systems have been established to facilitate the anticipated growth in
this market. With the worldwide appeal of American products and the growing
international popularity of country and western music and attire, the company's
European investment should pay dividends over time.
While Footwear operating results in 1994 fell short of expectations, the year
was one of accomplishments. The company has made significant strides in many
areas that will enable it to maintain and improve upon its industry leadership
position for several years to come.
===============================================================================
(PAGE 12)
(Picture of U.S.A. flag and verbage: "RECORD RESULTS IN JUSTIN BUILDING
MATERIALS OPERATIONS OFFSET A SLOWDOWN IN FOOTWEAR, LEADING THE COMPANY TO ITS
BEST PERFORMANCE EVER.")
===============================================================================
(PAGE 13, 14, 15 and 16)
FINANCIAL DISCUSSION
(Small graph showing net sales by line of business)
JUSTIN INDUSTRIES' earnings from its operations improved for the fifth
consecutive year to a new record high in 1994 of $36.9 million. A decline in
revenues and profits in Footwear operations was more than offset by gains in the
Building Materials segment as construction activity in markets served by these
operations increased over the previous year's levels. Total net income fell just
short of 1993's $37.1 million mark. That year's amount included a $1.1 million
non-recurring credit resulting from a required accounting method change relating
to income taxes.
OPERATIONS
Consolidated net sales in 1994 increased to $483 million, up 1.7% from 1993.
Revenues of $474.9 million in 1993 were 4.8% above those of 1992.
Building Materials' sales in 1994 reached a new record high of $224.2 million,
an increase of 24.7% from 1993. All operations in this business segment recorded
gains over the previous year. In 1993, Building Materials' sales were 13.2% more
than 1992. In 1994, sales at Acme Brick Company were 26.7% above 1993. Of this
increase, 16.1% related to existing operations, with the remainder resulting
from the August 1994 acquisition of American Tile Supply Company ("American
Tile"), whose operations are included for the last five months of the year.
Among the components of Acme's 1994 revenue growth were unit brick sales gains
of 6.2%, growth in the average selling price of 7.7%, and an almost 20% gain in
the sale of purchased products (excluding American Tile). Acme's 1993 revenue
gains of 14.7% over the previous year were due to selling 1.4% more brick than
in 1992 at prices approximately 11% in excess of the prior year, plus a 15% gain
in purchased product sales. Featherlite Building Products' revenues grew 19.3%
in 1994 over 1993, following a 9% gain in 1993 due to higher levels of
commercial construction in Texas. While block pricing improved modestly
in 1994, Featherlite's gains were attributable primarily to increased volume in
all product lines, including manufactured block, cut limestone, and purchased
products. Gains in 1993 over 1992 were due mainly to higher levels of block
sales. Tradewinds Technologies, Inc., which represents only about 2% of segment
sales, realized improved revenues over the last few years due to increased
numbers of units sold.
(Small graph showing income from continuing operations)
(Small graph showing net income)
Revenues in the Company's Footwear operations fell 12.3% to $258.8 million in
1994 from the record high $295.2 million in 1993. All three companies -- Justin,
Nocona, and Tony Lama -- experienced similar sales declines for the year as the
slowdown in the fashion segment and ladies' lines, which began in late 1993,
continued throughout the year. Unit sales of Footwear products were down
approximately 15% for the year, while the average selling price increased
slightly due to Nocona's and Tony Lama's greater sales of exotic skin boots in
1994. In 1993, total Footwear sales were approximately 1% above 1992, with unit
sales growth of 2% more than offsetting a slight average price decline.
Justin Industries' Building Materials business operates primarily in an eight-
state region in the central and southwestern United States, while Footwear
segment sales are made to customers nationwide.
As a percentage of sales, cost of sales was 65.1% in 1994 compared with 66.2%
in 1993 and 69.3% in 1992. As with 1993's increase over 1992, the principal
reason for the continued margin improvement is significant volume and pricing
gains at Acme Brick Company, which have been brought about by higher levels of
construction in Acme's markets. There has been little change in Acme's
manufacturing costs over the last three years, as production levels have been at
or near capacity for most of the time. Gross profit margins at Featherlite
declined slightly in 1994 due mainly to product mix and higher maintenance
costs. Increased volume and favorable raw material pricing enabled Tradewinds to
improve its gross profit margins in 1994. Gross profit margins at both
Featherlite and Tradewinds in 1993 exceeded those of 1992 due to higher volume.
For 1994, Building Materials' gross profit margin was 41.7%, compared to 39.4%
in 1993 and 31.7% in 1992.
Footwear gross profit margins were 29.0% in 1994, 30.3% in 1993, and 30.2% in
1992. The decline in 1994 was due primarily to lower sales volume. Production
levels at all operations were reduced, also affecting profit margins. The
comparable gross profit margins of 1993 and 1992 were attributable to similar
sales levels.
Selling, general, and administrative expenses for the Company as a whole were
22.1% of net sales in 1994, compared to 21.2% in 1993 and 20.2% in 1992.
Approximately 60% of the $6.3 million increase in these expenses in 1994 was due
to the acquisition of American Tile. In addition, approximately $500,000 of
costs were incurred in connection with the Footwear administrative
consolidation. The remainder of the increase was only about $2 million (2%),
which was due to general inflation. The increase in 1993 was due primarily to
increased expenditures in Footwear operations for advertising and promotion.
Interest expense increased slightly in 1994 to $4.06 million from $4 million
in 1993. In 1992, these costs totaled $5.2 million. While average debt levels
were $17 million below those of 1993 (based on month-end averages), rates
climbed throughout 1994 as the Federal Reserve Bank made several adjustments to
the discount rate. As a result, the Company's average effective interest rate
increased to 4.7% in 1994 from 3.9% in 1993. In 1992, the average effective rate
was 4.6%. Note 4 to the Consolidated Financial Statements on page 22 describes
the Company's borrowing arrangements.
(Small graph showing capital expenditures)
(Small graph showing interest-bearing debt)
Income tax expense as a percentage of pre-tax income was 35.8% in 1994, 35.7%
in 1993 and 36.1% in 1992. The federal statutory rate was 35% in 1994 and 1993,
and 34% in 1992. See Note 7 to the Consolidated Financial Statements on page 25
for a reconciliation of the actual tax rate to the federal statutory tax rate,
and other information relating to income tax.
In the first quarter of 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." This statement,
issued in 1992, established new financial accounting reporting standards for the
effect of income taxes that result from the Company's activities during the
current and preceding years. A credit to net income of $1.106 million was
realized in 1993, resulting from the cumulative effect of the change in
accounting for income taxes under the new statement.
The table on page 30, Quarterly Financial Data, presents summarized operating
results for each quarter in the two years ended December 31, 1994. The Company's
businesses are seasonal in nature, with Building Materials operations generating
greater activity in the second and third quarters and Footwear operations
accelerating in the third and fourth. Quarterly earnings generally increase each
quarter of the year from the first to fourth. In 1994, first quarter profits
were the lowest and fourth quarter the highest, with second and third quarter
results comparable. First and second quarter earnings in 1994 also exceeded
those of the first two periods in 1993; however, 1994's third and fourth
quarter profits were less than 1993's, as Footwear declines were not fully
offset by Building Materials gains.
As discussed above, interest rates increased throughout 1994. Higher interest
rates raise the Company's borrowing costs and can reduce construction activity,
which may impact the Company's Building Materials operations in 1995.
Inflation has not had a significant impact on the Company's operations in
recent years; however, the Company attempts to recover any cost increases
through improvements to its manufacturing processes and through increases in
price where competitively feasible.
FINANCIAL CONDITION, CASH FLOW, AND LIQUIDITY
The Company ended 1994 in excellent financial condition, due primarily to the
record earnings performance for the year. The Balance Sheet Trends table on page
17 reflects the percentage relationship of the major asset, liability, and
equity accounts to total assets. In 1994, total assets grew approximately 8% to
$374.9 million. At December 31, 1994, working capital amounted to $185.7
million, compared to $185.2 million at year-end 1993. The current ratio stood at
3.5 to 1, down from 4.4 to 1 at December 31, 1993. Most of the increase in
accounts receivable and inventories from year-end 1993 to 1994 is attributable
to American Tile, acquired in August 1994. For the year, shareholders' equity
increased 17.5% to $221.9 million, while interest-bearing debt declined from
$93.4 million (49% of shareholders' equity) at December 31, 1993, to $79.3
million (36% of shareholders' equity) at year-end 1994.
(Small graph showing shareholders' equity)
(Small graph showing book value per share)
Net cash provided by operating activities totaled $45.7 million in 1994
compared to $42.8 million in 1993 and $18.7 million in 1992. The Company
expended approximately $18.6 million in 1994 investing in property, plant, and
equipment. Dividends per share were unchanged from 1993 at $.16, for total
payments of $4.3 million. The August 1994 acquisition of American Tile for
approximately $16 million was paid for by the issuance of $5 million in
subordinated debt to the selling shareholders, with the balance paid in cash
obtained from the Company's existing credit facilities.
The Company's primary source of cash is from operations. In addition, the
Company has credit facilities available from commercial banks. The Company
believes that its borrowing arrangements are adequate to support its
requirements for the foreseeable future. Unused lines of credit available to the
Company at December 31, 1994, were $56 million.
BACKLOGS
The Company maintains information on sales backlogs in order to plan for future
production levels and to project sales volume. At December 31, 1994, the backlog
for clay brick, after assuming normal levels of cancellations, was $21.2
million, compared with $19.5 million at year-end 1993. The sales backlog for
Footwear products at year-end 1994 was $13.0 million, compared with $15.9
million in 1993.
MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
The Consolidated Financial Statements for Justin Industries, Inc., and its
subsidiaries are prepared by the Company in conformity with consistently
applied, generally accepted accounting principles. Management selects
appropriate accounting principles, makes necessary estimates, and uses its
judgment to ensure the objectivity, accuracy, and integrity of the data
presented. The Company has established and does maintain systems of management
reporting and internal controls that are designed to provide reasonable
assurance that Company policies are followed and that Company assets are
safeguarded. These systems are constantly monitored and revised where necessary
to meet changing requirements and to strengthen controls while maintaining a
cost-effective method of providing credible and timely information necessary to
the operations of Justin Industries.
The Board of Directors carries out its oversight responsibility for the
financial statements through its Audit Committee. This committee is composed of
directors who are neither officers nor employees of the Company. The committee
meets periodically with the independent auditors and representatives of
management to assure that each is carrying out its responsibilities. To ensure
the integrity of the Audit Committee function, the Company's outside auditors
have complete access to the committee, without Company representatives present.
The results of their audits and their reviews of the adequacy of internal
controls and the quality of financial reporting are freely discussed during
these conferences.
===============================================================================
(PAGE 17)
BALANCE SHEET TRENDS
Percent of Total Assets
Assets: 1994 1993 1992 1991 1990
-------------------------------- ----- ----- ----- ----- -----
Receivables 22% 22% 26% 24% 25%
Inventories 43 42 41 41 40
Property, plant, and equipment 23 23 24 27 29
All other assets 12 13 9 8 6
----- ----- ----- ----- -----
100% 100% 100% 100% 100%
===== ===== ===== ===== =====
Liabilities and Equity:
--------------------------------
Interest-bearing debt 21% 27% 35% 40% 43%
All other liabilities 20 19 16 17 19
Equity 59 54 49 43 38
----- ----- ----- ----- -----
100% 100% 100% 100% 100%
===== ===== ===== ===== =====
OPERATING TRENDS
Percent of Net Sales
1994 1993 1992 1991 1990
------------------------------- ------ ------ ------ ------ ------
Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales 65.1 66.2 69.3 70.8 70.4
------ ------ ------ ------ ------
Gross profit 34.9 33.8 30.7 29.2 29.6
Operating expenses 23.0 22.0 21.4 25.4 25.9
Income taxes 4.3 4.2 3.3 1.4 1.2
------ ------ ------ ------ ------
Income from continuing
operations 7.6 7.6 6.0 2.4 2.5
Discontinued operations - - - 2.8 (.1)
Cumulative effect on prior
years of change in accounting
accounting for income taxes - .2 - - -
------ ------ ------ ------ ------
Net income 7.6% 7.8% 6.0% 5.2% 2.4%
====== ====== ====== ====== ======
<TABLE>
FIVE-YEAR ANALYSIS OF SALES AND OPERATING PROFIT FROM CONTINUING OPERATIONS BY PRODUCT LINES
(in thousands of dollars)
<CAPTION>
1994 1993 1992 1991 1990
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
--------- ------- --------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Building Materials:
Net sales $224,213 46% $179,740 38% $158,808 35% $123,004 33% $118,943 40%
Operating profit 44,600 66 31,445 48 16,423 31 4,979 18 3,698 17
Footwear:
Net sales 258,796 54 295,191 62 294,459 65 245,346 67 181,370 60
Operating profit 22,871 34 34,168 52 36,054 69 22,934 82 17,748 83
--------- ------- --------- ------- --------- ------- --------- ------- --------- -------
Totals:
Net sales $483,009 100% $474,931 100% $453,267 100% $368,350 100% $300,313 100%
Operating profit $ 67,471 100% $ 65,613 100% $ 52,477 100% $ 27,913 100% $ 21,446 100%
Less interest and parent
company operations 9,995 9,583 10,080 14,180 10,173
--------- --------- --------- --------- ---------
Income from continuing
operations before
income taxes and
cumulative effect
on prior years of
change in accounting
for income taxes $ 57,476 $ 56,030 $ 42,397 $ 13,733 $ 11,273
========= ========= ========= ========= =========
</TABLE>
===============================================================================
(PAGE 18)
CONSOLIDATED BALANCE SHEET
In Thousands of Dollars, Except Share Data, at
December 31, 1994 1993
-------- --------
Assets
Current assets:
Cash $ 6,071 $ 10,587
Accounts receivable, less allowance for doubtful
accounts of $3,219 and $3,014, respectively 82,266 76,966
Inventories 160,894 145,274
Federal and state income taxes 8,387 5,750
Prepaid expenses 1,953 1,517
-------- --------
Total current assets 259,571 240,094
Other assets, at cost 24,367 20,793
Assets held for sale 5,523 5,523
Property, plant, and equipment, at cost:
Land 17,204 16,658
Buildings and equipment 208,513 196,575
Construction in progress 3,935 2,206
-------- --------
229,652 215,439
Less accumulated depreciation 144,192 135,169
-------- --------
Net property, plant, and equipment 85,460 80,270
-------- --------
$374,921 $346,680
======== ========
Liabilities and Shareholders' Equity:
Current liabilities:
Notes payable to bank $ 5,000 $ -
Trade accounts payable 19,087 16,088
Accrued payroll items 11,775 7,702
Accrued insurance 15,839 14,594
Accrued state and local taxes 2,769 1,784
Other accrued expenses 9,359 8,742
Dividends payable 1,089 1,086
Current portion of long-term debt 8,931 4,905
-------- --------
Total current liabilities 73,849 54,901
Long-term debt, less current portion 65,323 88,504
Deferred income taxes 13,849 14,472
Shareholders' equity:
Voting preferred stock, $2.50 par value;
1,000,000 shares authorized -- Series Two
convertible, 100 shares issued and outstanding - -
Common stock, $2.50 par value; 100,000,000
shares authorized, 27,869,888 shares issued 69,674 69,674
Capital in excess of par value 16,959 17,047
Retained earnings 140,593 108,038
Treasury stock, at cost, 637,237 and 713,402
shares, respectively (5,326) (5,956)
-------- --------
Total shareholders' equity 221,900 188,803
-------- --------
$374,921 $346,680
======== ========
See accompanying notes.
===============================================================================
(PAGE 19)
CONSOLIDATED STATEMENT OF INCOME
In Thousands of Dollars, Except Per Share
Data, for Years Ending on December 31, 1994 1993 1992
-------- -------- --------
Net sales $483,009 $474,931 $453,267
Costs and expenses:
Cost of goods sold 314,661 314,431 313,961
Selling, general, and
administrative expenses 106,814 100,465 91,695
Interest expense 4,058 4,005 5,214
-------- -------- --------
425,533 418,901 410,870
-------- -------- --------
Income before income taxes and cumulative
effect on prior years of change in
accounting for income taxes 57,476 56,030 42,397
Income taxes 20,571 19,995 15,304
-------- -------- --------
Income before cumulative effect
on prior years of change in accounting
for income taxes 36,905 36,035 27,093
-------- -------- --------
Cumulative effect on prior years of change
in accounting for income taxes - 1,106 -
-------- -------- --------
Net income $ 36,905 $ 37,141 $ 27,093
======== ======== ========
Earnings per share:
Before cumulative effect on prior years of
change in accounting for income taxes $ 1.33 $ 1.29 $ .98
Cumulative effect on prior years of change
in accounting for income taxes - .04 -
-------- -------- --------
$ 1.33 $ 1.33 $ .98
======== ======== ========
See accompanying notes.
<TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<CAPTION>
Capital in
In Thousands of Dollars, Except Share Data, for Preferred Common excess of Retained Treasury ESOP loan
Years Ending on December 31, 1994, 1993 and 1992 stock stock par value earnings stock guarantee
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1992 $ - $ 23,225 $ 12,409 $ 98,311 $ (5,896) $ (500)
--------- --------- --------- --------- --------- ---------
Issuance of 4,644,789 shares in connection
with a 3-for-2 stock split effected in the form
of a 50% stock dividend - 11,612 - (11,612) - -
Purchase of 161,336 shares of stock for treasury - - - - (5,276) -
Issuance of 691,714 shares of stock from treasury
upon exercise of stock options - - 4,101 - 5,273 -
Repayment of ESOP debt - - - - - 250
Net income - - - 27,093 - -
Cash dividends declared -- $.14 per share - - - (3,720) - -
--------- --------- --------- --------- --------- ---------
Balance December 31, 1992 - 34,837 16,510 110,072 (5,899) (250)
--------- --------- --------- --------- --------- ---------
Issuance of 13,934,944 shares in connection
with a 2-for-1 stock split effected in the form
of a 100% stock dividend - 34,837 - (34,837) - -
Purchase of 92,355 shares of stock for treasury - - - - (1,886) -
Issuance of 250,023 shares of stock from treasury
upon exercise of stock options - - 537 - 1,829 -
Repayment of ESOP debt - - - - - 250
Net income - - - 37,141 - -
Cash dividends declared -- $.16 per share - - - (4,338) - -
--------- --------- --------- --------- --------- ---------
Balance December 31, 1993 - 69,674 17,047 108,038 (5,956) -
--------- --------- --------- --------- --------- ---------
Purchase of 2,046 shares of stock for treasury - - - - (30) -
Issuance of 78,211 shares of stock from treasury
upon exercise of stock options - - (88) - 660 -
Net income - - - 36,905 - -
Cash dividends declared -- $.16 per share - - - (4,350) - -
--------- --------- --------- --------- --------- ---------
Balance December 31, 1994 $ - $ 69,674 $ 16,959 $140,593 $ (5,326) $ -
========= ========= ========= ========= ========= =========
<FN>
See accompanying notes.
</TABLE>
===============================================================================
(PAGE 20)
CONSOLIDATED STATEMENT OF CASH FLOWS
In Thousands of Dollars
for Years Ending on December 31, 1994 1993 1992
------- ------- -------
Cash Flows from Operating Activities:
Net income $36,905 $37,141 $27,093
Adjustments to reconcile net income to cash
provided by operating activities:
Cumulative effect of change in accounting
method for income taxes - (1,106) -
Depreciation 13,852 13,473 13,837
Provision for losses on accounts receivable 866 1,004 1,613
Gain on sale of property, plant, and equipment (122) (589) (327)
Deferred income taxes (3,190) (2,566) (3,188)
Changes in current assets and liabilities:
(Increase) decrease in accounts receivable (1,624) 4,494 (14,254)
Increase in inventories (7,398) (17,077) (7,850)
(Increase) decrease in other current assets (240) 3,042 (1,263)
Increase in accounts payable and
accrued expenses 6,628 4,839 3,057
Effect of adoption of SFAS No. 109 - 107 -
------- ------- -------
Net cash provided by operating activities 45,677 42,762 18,718
Cash Flows from Investing Activities:
Proceeds from the sale of property, plant,
and equipment 841 1,080 664
Purchase of property, plant, and equipment (18,627) (17,278) (12,006)
(Increase) decrease in investments and
other assets (115) 1,151 (178)
Payment for purchase of business, net of
cash acquired (9,332) - -
------- ------- -------
Net cash used in investing activities (27,233) (15,047) (11,520)
Cash Flows from Financing Activities:
Borrowings 57,500 41,058 30,000
Repayment of borrowings (76,655) (56,862) (39,389)
Dividends paid (4,347) (4,197) (3,639)
Purchase of treasury stock (30) (1,886) (5,276)
Proceeds from exercise of stock options 572 2,366 9,374
------- ------- -------
Net cash used in financing activities (22,960) (19,521) (8,930)
------- ------- -------
Net increase (decrease) in cash (4,516) 8,194 (1,732)
Cash at beginning of year 10,587 2,393 4,125
------- ------- -------
Cash at end of year $ 6,071 $10,587 $ 2,393
======= ======= =======
Supplemental Disclosures of Cash Information:
Cash paid during the year for:
Interest $ 4,105 $ 4,335 $ 4,995
Income taxes, net of refunds $23,286 $17,801 $17,899
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Purchase of business (See Note 2):
Fair value of assets acquired $17,757 $ - $ -
Cash paid for assets and related costs (9,332) - -
Subordinated debt issued (5,000) - -
------- ------- -------
Liabilities assumed $ 3,425 $ - $ -
Decrease in ESOP Loan Guarantee $ - $ (250) $ (250)
======= ======= =======
See accompanying notes.
===============================================================================
(PAGE 21)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ending on December 31
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies is presented to
assist the reader in evaluating the financial statements and other information
contained in this report.
Principles of Consolidation. The consolidated financial statements include the
accounts of the Company and its subsidiaries. All material intercompany accounts
and transactions are eliminated upon consolidation.
Inventories. Inventories are valued at the lower of cost or market. Finished
products and work-in-process are costed using an average cost method, while raw
materials and manufacturing supplies are costed on the first-in, first-out
method.
Property, Plant, and Equipment. Depreciation is computed principally by the
straight-line method for financial reporting purposes. The annual depreciation
provision has been based upon the following estimated lives:
Buildings 10 to 20 years
Equipment 3 to 15 years
Intangibles Resulting from Business Acquisitions. Intangible assets resulting
from business acquisitions consist of trademarks/tradenames and the excess of
the acquisition cost over the fair value of the net assets of businesses
acquired. Intangibles are amortized on a straight-line basis over 40 years.
Accumulated amortization of intangible assets was $861,000 and $506,000 as of
December 31, 1994 and 1993, respectively.
Revenue Recognition. Revenue from sale of manufactured products is recognized
primarily upon passage of title to the customer, which generally coincides with
physical delivery and acceptance.
Earnings Per Share. Earnings per share is determined by dividing net income
by the average number of common shares outstanding, plus common stock
equivalents. Common stock equivalents include shares issuable under outstanding
stock options reduced by shares assumed to be purchased from the proceeds of
such options upon exercise and the effect of the possible conversion of the
voting preferred stock. Earnings per share, as presented, is both primary and
fully diluted.
Pension and Employee Benefit Plans. The Company and its subsidiaries have
pension plans for the benefit of substantially all employees. Benefits are
primarily based on years of service and the employees' average compensation
during the last five years of employment. The Company's policy is to fund
pension cost accrued, but not in excess of the maximum allowable deduction for
federal income tax purposes.
===============================================================================
(PAGE 22 AND 23)
Proceeds from common stock issued pursuant to the Company's employee stock
option plans are credited to common stock or treasury stock and capital in
excess of par value at the time an option is exercised. No charges are made
against income in accounting for stock options.
The Company has no postretirement health benefits and, therefore, realized no
effect from recent accounting requirements under Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions."
Statement of Cash Flows. For purposes of reporting cash flows, cash includes
cash on hand and unrestricted time deposits that have an original maturity of
three months or less.
2. ACQUISITION
Effective August 1, 1994, the Company purchased American Tile Supply Company and
its related companies ("American Tile") for a total purchase price of
approximately $16,000,000. American Tile distributes floor and wall tile
primarily in Texas and has annual revenues of approximately $32,000,000. Eleven
million dollars of the purchase price was financed through the Company's
existing credit facilities. Subordinated notes were issued to the sellers for
the remaining $5,000,000. Operations of the business, which are immaterial to
consolidated operations, are included in the Consolidated Statement of Income
from date of acquisition.
3. INVENTORIES
Inventories include the following:
(in thousands of dollars)
1994 1993
--------- ---------
Finished products $124,340 $103,261
Work-in-process 6,834 9,971
Raw materials and supplies 29,720 32,042
--------- ---------
$160,894 $145,274
========= =========
4. BORROWINGS
Long-term debt consists of the following:
(in thousands of dollars)
1994 1993
--------- ---------
Revolving credit loans $ 21,000 $ 40,000
Term loan 26,000 30,000
Industrial Revenue Bonds 17,900 18,745
Notes payable to banks 4,500 4,500
Subordinated notes payable 4,750 -
Other, unsecured 104 164
--------- ---------
74,254 93,409
Less current portion 8,931 4,905
--------- ---------
$ 65,323 $ 88,504
========= =========
The Company may borrow up to a total of $72,000,000 in revolving credit loans
pursuant to an agreement among five commercial banks originally entered into in
May 1989. The revolving credit loans are repayable beginning in April 1997 when
outstanding amounts are converted to term loans payable over three years. The
conversion date may be extended annually for an additional twelve months by
consent of all participating banks.
The $26,000,000 term loan is an agreement among four commercial banks
providing for annual principal reductions that began in November 1992 of
$2,000,000, increasing $1,000,000 each year thereafter until 1998 when the final
payment is due.
Borrowings under the revolving credit and term loan agreements bear interest
at rates determined on certain margins based on prime, certificates of deposit,
and Eurodollar auction rates. Interest on all of these borrowings at December
31, 1994, was based on Eurodollar auction rates in effect at the time of
origination plus 50 basis points, and averaged 6.6%. Interest rate margins may
fluctuate in increments of 12.5 basis points based on attaining certain
quarterly funded debt-to-equity ratios stipulated in the loan agreements. The
loans are unsecured; however, the loan agreements contain certain minimum
requirements as to working capital, cash flow from operations, and tangible net
worth, redemption of outstanding stock, and change in control of the Company. As
of December 31, 1994, the Company was in compliance with all such requirements
and restrictions.
The Industrial Revenue Bonds are payable in varying amounts through 2014,
plus interest at fixed rates of 6.6% and varying rates based on certain indices
(approximately 5.3% at December 31, 1994), secured by property, plant, and
equipment with a net book value of approximately $13,193,000. In certain
circumstances, the Company may be required to purchase up to $16,250,000 of its
Industrial Revenue Bonds prior to their maturity. In such circumstances, the
Company may borrow the purchase price under long-term standby letter of credit
agreements, and also has the right to resell the bonds.
During 1994, subordinated notes payable in the amount of $5,000,000 were
issued to American Tile's former shareholders. The unsecured notes are payable
quarterly over five years, plus interest at prime plus one percent. The Company
has the option to prepay the notes at any time prior to maturity.
Notes payable to bank are unsecured borrowings due in varying amounts through
1995. Interest is based on fixed and floating rates ranging from 4.9% to 6.0% at
December 31, 1994.
Notes payable to bank included in current liabilities in 1994 are unsecured
borrowings due in 1995 pursuant to a $10,000,000 one-year credit facility from a
commercial bank. Interest is based on the Eurodollar auction rate plus 50 basis
points and was 6.6% at December 31, 1994.
The aggregate maturities of long-term debt through 1999 are as follows: 1995,
$8,931,000; 1996, $9,436,000; 1997, $11,907,000; 1998, $16,160,000; and 1999,
$7,910,000.
At December 31, 1994, unused lines of credit for short-term, revolving, and
term credit agreements were approximately $56,000,000. Outstanding standby
letters of credit at December 31, 1994, amounted to approximately $24,300,000.
Since interest rates on the majority of the Company's borrowings float with
prevailing market rates, the fair value of such debt approximates carrying value
at December 31, 1994 and 1993. Based on fixed interest rates currently available
to the Company for bank loans and industrial revenue bonds with similar terms
and maturities, the fair value of fixed rate borrowings approximates carrying
value at December 31, 1994 and 1993.
5. SHAREHOLDERS' EQUITY
The average number of common shares outstanding plus common stock equivalents
used to calculate earnings per share was 27,810,000 in 1994, 27,953,000 in 1993,
and 27,772,000 in 1992.
The Company has options to purchase its common stock under qualified
incentive stock option plans and non-qualified stock option agreements (the
Plans) with certain of its employees. The Plans, as amended, provide for the
granting of either incentive stock options or stock options that are not
qualified under the Internal Revenue Code, at the discretion of the Compensation
Committee of the Board of Directors. The Plans, as amended, provide for exercise
of stock options without regard to the sequence of dates of original grants. All
outstanding stock options are non-qualified and expire over a period of ten
years. Options are granted at the fair market value at the date of grant and
vest over a five-year period. Stock option activity is summarized as follows:
1994 1993 1992
-------------- -------------- --------------
Outstanding at January 1 1,406,877 1,542,856 2,667,114
Granted 155,300 152,250 272,600
Canceled (2,680) (38,206) (13,408)
Exercised (78,211) (250,023) (1,383,450)
-------------- -------------- --------------
Outstanding at December 31 1,481,286 1,406,877 1,542,856
============== ============== ==============
Exercise price per share $2.42 - $18.00 $2.42 - $18.00 $2.42 - $18.00
============== ============== ==============
Aggregate purchase price
(in thousands) $ 12,376 $ 11,201 $ 10,637
============== ============== ==============
Exercisable options
outstanding 841,394 641,787 568,160
============== ============== ==============
===============================================================================
(PAGE 24, 25 AND 26)
At December 31, 1994, approximately 848,000 additional shares were reserved
for future grants.
The preferred stock is convertible into 2,826 shares of common stock at
December 31, 1994. The Board of Directors is empowered to set the dividend,
redemption, and liquidation rights pertaining to the preferred stock and to
establish the voting rights and any special rights or restrictions.
One Common Stock Purchase Right is outstanding for each share of common
stock. Following Board of Directors approval, a) the rights will be exercisable
at an exercise price of $13.33 if a person or group acquires 20% or more of the
Company's common stock or announces a tender offer that would result in
ownership of 30% or more of the common stock, or b) the rights may be redeemed
at five cents per right at any time before a 20% position has been acquired. The
rights expire on October 6, 1999.
6. RETIREMENT PLANS
The following table sets forth the plans' funded status and amounts recognized
in the Company's balance sheet at December 31, 1994 and 1993, related to the
Company's pension plans: (in thousands of dollars)
1994 1993
-------- --------
Actuarial present value of benefit obligations:
Vested $ 35,233 $ 39,009
Non-vested 2,088 1,786
-------- --------
$ 37,321 $ 40,795
======== ========
Projected benefit obligations for service
rendered to date $ (44,191) $ (48,917)
Plan assets at fair value 66,477 72,732
-------- --------
Plan assets in excess of projected benefit obligations 22,286 23,815
Unrecognized net gain from past experience
different from that assumed and effects of changes
in assumptions (11,349) (14,040)
Prior service cost not yet recognized in net periodic
pension cost (1,229) 547
Unrecognized net asset at January 1, 1985, being
recognized over 15 years (3,954) (4,745)
-------- --------
Prepaid pension cost $ 5,754 $ 5,577
======== ========
Plan assets at December 31, 1994, are invested primarily in listed stocks and
bonds or cash equivalents. The Company's own common stock at December 31, 1994
accounts for approximately 17% of plan assets.
Net pension credit includes the following components: (in thousands of
dollars)
1994 1993 1992
-------- -------- --------
Service cost - benefits earned
during the period $ 2,347 $ 1,731 $ 1,400
Interest cost on projected benefit obligations 3,531 3,439 2,960
Actual return on plan assets 4,125 (1,337) (19,174)
Net amortization and deferral (10,180) (4,191) 14,033
-------- -------- --------
Net pension credit $ (177) $ (358) $ (781)
======== ======== ========
The weighted-average discount rates used in determining the actuarial present
value of the projected benefit obligations were 9.0% in 1994 and 7.5% in 1993.
The rate of increase in future compensation was 4.5% in 1994 and 1993. The
expected long-term rate of return on assets was 9% for all years.
Contributions to the plans, limited by federal income tax regulations, were
zero in 1994; $9,400 in 1993; and $9,500 in 1992.
The Company also has an Employee Stock Ownership Plan (ESOP) for the benefit
of substantially all employees. Eligible employees may contribute up to the
lesser of 15% of their compensation or the maximum amount authorized by the
Company ($9,240 in 1994, $8,994 in 1993, and $5,000 in 1992). In 1994 and 1992,
50% of the amount contributed by all employees was matched by the Company, up to
5% of total compensation. In 1993, contributions by "highly compensated" and
"non-highly compensated" employees, as defined by the Internal Revenue Code
(IRC), were matched 25% and 50%, respectively, up to 5% of total compensation.
Pursuant to Internal Revenue Service Regulation 401(k), the employees'
contributions are on a pre-tax basis. For 1995, employees may contribute up to
the lesser of 15% of their compensation or the maximum allowable amount under
IRS regulations ($9,240).
The amount of Company contributions made to the ESOP and charged to expense
was $1,260,000, $896,000, and $830,000 in 1994, 1993, and 1992, respectively.
7. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of December 31, 1994 and
1993 are as follows: (in thousands of dollars)
1994 1993
------- -------
Deferred tax assets:
Insurance and claims accruals $6,539 $5,255
Asset valuation allowances 4,225 3,198
Employee benefit plans 318 148
Other 712 626
------- -------
$11,794 $9,227
======= =======
Deferred tax liabilities:
Intangible assets $4,412 $4,567
Depreciation 8,137 8,556
Employee benefit plans 1,300 1,349
------- -------
$13,849 $14,472
======= =======
Significant components of the provision for income taxes are as follows:
Liability Deferred
Method Method
------------------ ---------
1994 1993 1992
------- ------- -------
Current $23,761 $22,561 $18,492
Deferred (3,190) (2,566) (3,188)
------- ------- -------
Total income tax expense $20,571 $19,995 $15,304
======= ======= =======
In addition, the Company recognized income tax benefits of $221,000,
$1,420,000, and $4,535,000 in 1994, 1993, and 1992, respectively, upon the
exercise by employees of non-qualified stock options. Such benefits were
recognized as an increase in shareholders' equity when realized.
The components of the provision for deferred income taxes for the year ended
December 31, 1992, (prior to adoption of SFAS No. 109) are as follows:
(in thousands of dollars)
Depreciation methods $ (871)
Employee benefit plans 438
Asset valuation allowances (512)
Insurance and claims accruals (2,426)
Other items 183
-------
Total deferred taxes $(3,188)
=======
A reconciliation of the statutory federal income tax rate and the effective
tax rate follows:
Liability Deferred
Method Method
---------------- --------
1994 1993 1992
------ ------ ------
Statutory tax rate 35.0% 35.0% 34.0%
State taxes 1.2 .3 -
Federal income tax rate increase - .4 1.9
Other (.4) - .2
------ ------ ------
Effective tax rate 35.8% 35.7% 36.1%
====== ====== ======
In connection with the acquisition of Tony Lama Company, Inc., ("Tony Lama")
in 1990, the Company acquired a tax net operating loss carryforward. During
1992, the Company utilized approximately $2,945,000 of this carryforward, with
a corresponding net of tax adjustment to Tony Lama's net assets' values at date
of acquisition. None of the tax net operating carryforward was utilized in 1993
or 1994. Approximately $802,000 of the acquired carryforward is available to
offset future taxable income. The carryforward will expire in 2004. Future
utilization of such carryforward will also be recognized through adjustment of
the value of acquired net assets.
During 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes,"
effective January 1, 1993. Under SFAS No. 109, deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities, and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse. As of January 1, 1993, the Company recognized a one-time benefit to
consolidated income of $1,106,000 for the change in accounting for income taxes
from the deferred method to the liability method, as required by SFAS No. 109.
As permitted under the rules, the financial statements for 1992 and prior years
were not restated.
8. FINANCIAL INFORMATION BY PRODUCT LINES
The five-year analysis of sales and operating profit from continuing operations
by product lines on page 17, as it pertains to the last three years, is an
integral part of the Company's consolidated financial statements. A discussion
of the Company's products and business is located on pages 5-11. The following
additional information is presented by industry segments: (in thousands of
dollars)
Identifiable Depreciation Capital
Assets Expense Expenditures
------------ ------------ ------------
1994
Building Materials $135,857 $ 8,616 $14,725
Footwear 211,126 5,008 3,825
Corporate assets 22,415 228 77
Assets held for sale 5,523 - -
-------- ------- -------
Total $374,921 $13,852 $18,627
======== ======= =======
1993
Building Materials $110,310 $ 8,175 $11,232
Footwear 210,839 5,035 5,931
Corporate assets 20,008 263 115
Assets held for sale 5,523 - -
-------- ------- -------
Total $346,680 $13,473 $17,278
======== ======= =======
1992
Building Materials $104,300 $ 9,005 $ 6,892
Footwear 193,319 4,595 4,969
Corporate assets 10,974 237 145
Assets held for sale 6,615 - -
-------- ------- -------
Total $316,368 $13,837 $12,006
======== ======= =======
Assets held for sale relate primarily to idled facilities.
9. LEASE COMMITMENTS
At December 31, 1994, approximate future minimum rental commitments for all
noncancelable operating leases are as follows: (in thousands of dollars)
1995 $4,519
1996 3,635
1997 2,939
1998 2,169
1999 1,337
Thereafter 187
-------
$14,786
=======
Total rent expense for all operating leases amounted to approximately
$3,976,000, $3,359,000, and $3,350,000 in 1994, 1993, and 1992, respectively.
Commitments under capital leases are not significant.
===============================================================================
(PAGE 27)
REPORT OF ERNST & YOUNG LLP
Independent Auditors
Board of Directors
Justin Industries, Inc.
We have audited the accompanying consolidated balance sheets of Justin
Industries, Inc., as of December 31, 1994 and 1993, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1994. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Justin Industries,
Inc. at December 31, 1994 and 1993, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting
principles.
As discussed in Note 7 to the financial statements, in 1993 the company changed
its method of accounting for income taxes.
/S/ ERNST & YOUNG LLP
Fort Worth, Texas
January 26, 1995
===============================================================================
(PAGE 28 AND 29)
<TABLE>
ELEVEN YEAR FINANCIAL SUMMARY
<CAPTION>
Years ending on December 31, 1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Summary of operations: (see note)
(in thousands of dollars)
Net sales:
Building Materials 224,213 179,740 158,808 123,004 118,943 113,662
Footwear 258,796 295,191 294,459 245,346 181,370 142,707
-------- -------- -------- -------- -------- --------
483,009 474,931 453,267 368,350 300,313 256,369
-------- -------- -------- -------- -------- --------
Operating profit:
Building Materials 44,600 31,445 16,423 4,979 3,698 604
Footwear 22,871 34,168 36,054 22,934 17,748 15,650
-------- -------- -------- -------- -------- --------
67,471 65,613 52,477 27,913 21,446 16,254
-------- -------- -------- -------- -------- --------
Selected costs and expenses:
Cost of goods sold 314,661 314,431 313,961 260,968 211,559 182,365
Selling, general, and administrative 106,814 100,465 91,695 84,167 70,666 60,251
Interest 4,058 4,005 5,214 9,482 6,815 6,402
Depreciation 13,852 13,473 13,837 12,338 10,164 10,003
Income taxes 20,571 19,995 15,304 5,280 3,697 2,432
-------- -------- -------- -------- -------- --------
Income:
From continuing operations (before
accounting change in 1993) 36,905 36,035 27,093 8,453 7,576 5,281
Net income 36,905 37,141 27,093 19,233 7,293 7,198
-------- -------- -------- -------- -------- --------
Income per share:
From continuing operations (before
accounting change in 1993) 1.33 1.29 .98 .32 .29 .21
Net income 1.33 1.33 .98 .73 .28 .28
-------- -------- -------- -------- -------- --------
Dividends declared per share .16 .16 .14 .135 .135 .10
Capital expenditures* 18,627 17,278 12,006 10,666 12,646 7,405
-------- -------- -------- -------- -------- --------
Year-end statistics: (in thousands of dollars)
Working capital 185,722 185,193 164,822 151,588 147,307 97,983
Net property, plant, and equipment 85,460 80,270 76,544 78,750 84,653 64,261
Total assets 374,921 346,680 316,368 295,947 292,923 211,308
Long-term debt 65,323 88,504 100,362 116,040 124,724 56,238
Shareholders' equity 221,900 188,803 155,270 127,549 111,135 106,431
Key financial ratios:
Pre-tax profit margin (%)* 11.90 11.80 9.35 3.73 3.75 3.01
Income-return on sales (%)* 7.64 7.59 5.98 2.29 2.52 2.06
Return on shareholders' equity (%)* 19.55 23.21 21.24 7.61 7.12 5.35
Return on assets (%)* 10.23 10.87 8.85 2.87 3.00 2.48
Effective income tax rate (%)* 35.8 35.7 36.1 38.4 32.8 31.5
Ratio of long-term debt to shareholders' equity .29:1 .47:1 .65:1 .91:1 1.12:1 .53:1
Ratio of total interest-bearing debt to
shareholders' equity .36:1 .49:1 .70:1 .93:1 1.14:1 .56:1
Ratio of current assets to current liabilities 3.5:1 4.4:1 4.0:1 4.4:1 4.1:1 3.5:1
Other statistics:
Average number of shares
outstanding (in thousands) 27,810 27,953 27,772 26,382 26,412 25,668
Book value per share 8.15 6.95 5.75 4.92 4.31 4.15
Dividends as a percent of net income 11.8 11.7 13.7 17.9 47.1 35.1
Market price of common stock:
High 16 3/4 25 3/8 19 6 5 7/8 5 5/8
Low 9 3/4 11 3/4 5 5/8 3 5/8 3 5/8 3 3/8
<FN>
*Continuing Operations (before accounting change in 1993)
Note: Per share income amounts have been computed on the average number of
common and common equivalent shares outstanding during each year and
include preferred stock as common share equivalents. Book value per
equivalent share of common stock has been computed on the number of common
shares outstanding at December 31. All per share information has been
adjusted for 3-for-2 stock splits in 1984, 1989, and 1992, and a 2-for-1
stock split in 1993. Operating profit for the business segments is income
before interest, allocation of parent-company overhead expenses, and income
taxes.
<CAPTION>
ELEVEN YEAR FINANCIAL SUMMARY (Continued)
Years ending on December 31, 1988 1987 1986 1985 1984
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Summary of operations: (see note)
(in thousands of dollars)
Net sales:
Building Materials 108,864 113,204 119,104 134,454 139,750
Footwear 123,455 109,662 101,195 103,892 91,525
-------- -------- -------- -------- --------
232,319 222,866 220,299 238,346 231,275
-------- -------- -------- -------- --------
Operating profit:
Building Materials 4,369 6,685 7,437 17,861 22,969
Footwear 12,223 10,184 9,946 9,997 8,204
-------- -------- -------- -------- --------
16,592 16,869 17,383 27,858 31,173
-------- -------- -------- -------- --------
Selected costs and expenses:
Cost of goods sold 164,596 154,600 148,503 158,231 153,172
Selling, general, and administrative 54,590 53,590 57,682 53,565 48,751
Interest 4,574 4,369 4,140 4,975 4,347
Depreciation 10,263 10,152 10,218 8,839 8,236
Income taxes 2,696 3,121 4,131 8,980 10,200
-------- -------- -------- -------- --------
Income:
From continuing operations (before
accounting change in 1993) 5,954 7,382 5,843 16,131 13,861
Net income 7,469 752 5,033 15,050 13,720
-------- -------- -------- -------- --------
Income per share:
From continuing operations (before
accounting change in 1993) .24 .29 .22 .61 .52
Net income .30 .03 .19 .57 .52
-------- -------- -------- -------- --------
Dividends declared per share .09 .09 .09 .09 .065
Capital expenditures* 8,681 4,540 5,922 30,047 11,987
-------- -------- -------- -------- --------
Year-end statistics: (in thousands of dollars)
Working capital 105,114 90,206 87,407 78,873 67,421
Net property, plant, and equipment 67,682 75,205 80,362 84,743 62,357
Total assets 214,403 219,013 224,608 231,119 199,863
Long-term debt 69,590 70,509 69,489 68,089 64,154
Shareholders' equity 98,687 92,938 96,321 95,382 84,053
Key financial ratios:
Pre-tax profit margin (%)* 3.72 4.71 3.47 10.54 10.40
Income-return on sales (%)* 2.56 3.31 2.08 6.77 5.99
Return on shareholders' equity (%)* 6.41 7.66 4.81 19.19 18.34
Return on assets (%)* 2.75 3.33 2.01 7.49 7.43
Effective income tax rate (%)* 31.2 29.7 40.0 35.8 42.4
Ratio of long-term debt to
shareholders' equity .71:1 .76:1 .72:1 .71:1 .76:1
Ratio of total interest-bearing debt to
shareholders' equity .73:1 .79:1 .75:1 .77:1 .82:1
Ratio of current assets to current liabilities 3.9:1 2.9:1 2.8:1 2.4:1 2.6:1
Other statistics:
Average number of shares
outstanding (in thousands) 25,134 25,408 26,218 26,358 26,640
Book value per share 3.98 3.76 3.78 3.71 3.25
Dividends as a percent of net income 29.5 296.7 45.5 15.3 12.7
Market price of common stock:
High 3 5/8 3 7/8 4 5/8 4 5/8 3 1/2
Low 2 5/8 2 1/4 2 7/8 3 1/8 2 1/2
<FN>
*Continuing Operations (before accounting change in 1993)
Note: Per share income amounts have been computed on the average number of
common and common equivalent shares outstanding during each year and
include preferred stock as common share equivalents. Book value per
equivalent share of common stock has been computed on the number of common
shares outstanding at December 31. All per share information has been
adjusted for 3-for-2 stock splits in 1984, 1989, and 1992, and a 2-for-1
stock split in 1993. Operating profit for the business segments is income
before interest, allocation of parent-company overhead expenses, and income
taxes.
</TABLE>
===============================================================================
(PAGE 30)
SHAREHOLDER INFORMATION
ANNUAL MEETING
The annual meeting of shareholders will be held on Friday, March 17, 1995, at
the Fort Worth Club Building, twelfth floor, 306 West Seventh Street, Fort
Worth, Texas, at 10:30 a.m. All shareholders are cordially invited to attend
and are urged to be represented by proxy if unable to attend.
DIVIDEND REINVESTMENT AND SHAREHOLDER SAVINGS PROGRAM
Any shareholder of record may have dividends automatically reinvested, or make
voluntary investments in the company's common stock through a service offered by
Society National Bank. For additional information, contact Vice President
Finance, Justin Industries, Inc., P. O. Box 425, Fort Worth, Texas 76101 (817)
336-5125; or Society National Bank, c/o KeyCorp Shareholder Services, Inc., 1201
Elm Street, Suite 5050, Dallas, Texas 75270 (800) 527-7844 or (214) 871-8844.
FORM 10-K/10-Q
Investors who wish to receive a copy of the companyOs annual report on Form 10-K
or quarterly 10-Q reports filed with the Securities and Exchange Commission, or
other shareholder mailings, may obtain them upon request to Investor Relations,
Justin Industries, Inc., P. O. Box 425, Fort Worth, Texas 76101 (817) 336-5125.
STOCK LISTING
Justin Industries, Inc., common stock is traded over the counter using the
symbol OJSTN.O Justin Industries common stock is included in the Nasdaq
National Market System.
STOCK TRANSFER AND DIVIDEND DISBURSING AGENT
Society National Bank, c/o KeyCorp Shareholder Services, Inc., 1201 Elm Street,
Suite 5050, Dallas, Texas 75270 (800) 527-7844 or (214) 871-8844.
INDEPENDENT AUDITORS
Ernst & Young LLP, 500 Throckmorton Street, Suite 2200, Fort Worth, Texas 76102.
EXECUTIVE OFFICES
Justin Industries, Inc., 2821 West Seventh Street, Fort Worth, Texas 76107 (817)
336-5125.
QUARTERLY FINANCIAL DATA
The following table presents summarized quarterly operating results for the two-
year period ending December 31, 1994.
Unaudited - In thousands, except per share data
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------
1994 1993
-------------------------------------- --------------------------------------
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
-------- -------- -------- -------- -------- -------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C>
Net sales $109,891 $114,894 $119,692 $138,532 $110,105 $116,068 $118,328 $130,430
Gross profit 36,995 41,149 43,173 47,031 34,176 38,868 41,740 45,716
Income before
cumulative effect
on prior years
of change in
accounting for
income taxes 6,669 9,452 9,440 11,344 5,626 7,864 9,806 12,739
Net income 6,669 9,452 9,440 11,344 6,732 7,864 9,806 12,739
Per share:
Before cumulative
effect on prior
years of change in
accounting for
income taxes .24 .34 .34 .41 .20 .28 .35 .46
Net income .24 .34 .34 .41 .24 .28 .35 .46
Dividends paid .04 .04 .04 .04 .035 .04 .04 .04
</TABLE>
MARKET MAKERS
as of January 26, 1995
Bear, Stearns & Co., Inc.
Dean Witter Reynolds, Inc.
Equitable Securities Corp.
First Southwest Company
Gruntal & Co., Inc.
Herzog, Heine, Geduld, Inc.
Jefferies & Co., Inc.
Mayer & Schweitzer, Inc.
Merrill Lynch, Pierce, Fenner & Smith, Inc.
Nash, Weiss & Co.
PaineWebber, Inc.
Parker/Hunter, Inc.
Principal Financial Securities, Inc.
Rauscher Pierce Refsnes, Inc.
Sherwood Securities Corp.
Smith Barney Shearson, Inc.
Southwest Securities, Inc.
Troster Singer Corp.
MARKET PRICE
OF COMMON STOCK
Price
Year -----------------------------
Quarter High Low Close
1992
1 10 1/2 5 5/8 9 5/8
2 14 1/4 9 12 3/8
3 14 1/2 11 5/8 12 1/4
4 19 11 7/8 18 1/2
1993
1 25 3/8 17 5/8 24 3/4
2 24 7/8 16 1/2 17 1/2
3 22 1/4 15 18
4 19 11 3/4 14 3/4
1994
1 16 3/4 13 14
2 15 11 1/2 12
3 13 3/4 10 12 7/8
4 13 3/4 9 3/4 11 7/8
===============================================================================
(PAGE 31)
DIRECTORS
JOHN JUSTIN
Chairman and Chief Executive Officer of Justin Industries
J. T. DICKENSON
President and Chief Operating Officer of Justin Industries
BAYARD H. FRIEDMAN
Investment Advisor
MARVIN GEARHART
Chairman of the Board of Rock Bit International, Inc.
ROBERT E. GLAZE
Personal Investments
DEE J. KELLY
Shareholder and Director of the law firm of
Kelly, Hart & Hallman
JOSEPH R. MUSOLINO
Vice Chairman of NationsBank of Texas
JOHN V. ROACH
Chairman and Chief Executive Officer of
Tandy Corporation
DR. WILLIAM E. TUCKER
Chancellor of Texas Christian University
COMMITTEES
Audit Committee
BAYARD H. FRIEDMAN
ROBERT E. GLAZE
DR. WILLIAM E. TUCKER
Compensation Committee
BAYARD H. FRIEDMAN
MARVIN GEARHART
OFFICERS
JOHN JUSTIN
Chairman of the Board and Chief Executive Officer
J. T. DICKENSON
President and Chief Operating Officer
RICHARD J. SAVITZ
Vice President Finance and Treasurer
JON M. BENNETT
Vice President Administration and Secretary
EDWARD L. STOUT, JR.
Vice President Brick Operations
FRANK A. SCIVETTI
Vice President Footwear Operations
JUDY B. HUNTER
Controller
W. O. BURROUGH
Assistant Treasurer
===============================================================================
(PAGE 32)
MANUFACTURING LOCATIONS
(Illustrated map showing manufacturing locations)
ACME BRICK COMPANY
Bennett, Texas
Bridgeport, Texas
Denton, Texas
Elgin, Texas
Garrison, Texas
McQueeney, Texas
San Felipe (Houston), Texas
Fort Smith, Arkansas
Malvern, Arkansas
Perla, Arkansas (2)
Kanopolis, Kansas
Weir, Kansas
Jamestown, Louisiana
Oklahoma City, Oklahoma
Tulsa, Oklahoma
Concrete Block
Baton Rouge, Louisiana
TRADEWINDS TECHNOLOGIES, INC.
Phoenix, Arizona
FEATHERLITE BUILDING PRODUCTS CORPORATION
Concrete Block
Abilene, Texas
Amarillo, Texas
Austin, Texas
Beaumont/Port Arthur, Texas
Dallas, Texas
El Paso, Texas
Lubbock, Texas
San Antonio, Texas
d/b/a/ VOLCANIC CINDER COMPANY
Volcanic Cinders
New Mexico
d/b/a/ TEXAS QUARRIES
Arthitectural Stone
Cedar Park, Texas
JUSTIN BOOT COMPANY
Fort Worth, Texas
Cassville, Missouri (2)
Sarcoxie, Missouri
Carthage, Missouri
NOCONA BOOT COMPANY
Nocona, Texas
TONY LAMA COMPANY
El Paso, Texas
NORTHLAND PUBLISHING COMPANY, INC.
Flagstaff, Arizona
===============================================================================
(INSIDE BACK COVER)
(Partial picture of USA flag.)
This report was designed by Northland Publishing, a Justin Company.
Primary photographer Britt Stokes, Acme Brick Co.
===============================================================================
(BACK COVER)
(Picture of boots, brick, building block and glass block.)
JUSTIN INDUSTRIES, INC.
2821 WEST SEVENTH STREET/BOX 425
FORT WORTH, TEXAS 76101/(817)336-5125
LISTING OF SUBSIDIARIES
Percentage
of Voting
Place of Securities
Name Organization Owned
Significant subsidiaries of the
company:
Acme Brick Company Delaware 100%
American Tile Supply, Inc. Delaware 100%
Featherlite Building Products Delaware 100%
Corporation
Footwear Management Company Delaware 100%
d/b/a Justin Boot Company
d/b/a Nocona Boot Company
d/b/a Tony Lama Company, Inc.
Justin Management Company Delaware 100%
d/b/a Justin Management
Company
d/b/a Tradewinds
Technologies, Inc.
d/b/a Northland Publishing
Company, Inc.
All other subsidiaries are omitted from this list because they do not,
considered in the aggregate as a single subsidiary, constitute a significant
subsidiary. All wholly-owned subsidiaries are included in the consolidated
financial statements.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the December
31, 1994 Financial Statements included in the Company's Form 10-K and is
qualified in its entirety by reference to such Form 10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 6,071
<SECURITIES> 0
<RECEIVABLES> 85,485
<ALLOWANCES> 3,219
<INVENTORY> 160,894
<CURRENT-ASSETS> 259,571
<PP&E> 229,652
<DEPRECIATION> 144,192
<TOTAL-ASSETS> 374,921
<CURRENT-LIABILITIES> 73,849
<BONDS> 0
<COMMON> 69,674
0
0
<OTHER-SE> 152,226
<TOTAL-LIABILITY-AND-EQUITY> 374,921
<SALES> 483,009
<TOTAL-REVENUES> 483,009
<CGS> 314,661
<TOTAL-COSTS> 314,661
<OTHER-EXPENSES> 106,814
<LOSS-PROVISION> 866
<INTEREST-EXPENSE> 4,058
<INCOME-PRETAX> 57,476
<INCOME-TAX> 20,571
<INCOME-CONTINUING> 36,905
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,905
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.33
</TABLE>
