<PAGE> 1
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, 1996.
[ ] 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 0-497
New Mexico and Arizona Land Company
(Exact name of registrant as specified in its charter)
Arizona 43-0433090
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3033 North 44th Street, Suite 270, Phoenix, Arizona 85018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 602/952-8836
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class: Common stock, no 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 twelve 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 [ ].
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:
aggregate market value $20,448,000. Closing price on the American Stock Exchange
on February 25, 1997: $14.375 per share.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date. Class: Common Stock, no par
value. Outstanding at February 25, 1997: 3,012,886 shares.
Documents Incorporated by Reference: Part III of the Form 10-K incorporates by
reference certain portions of the registrant's definitive proxy statement for
the 1997 Annual Meeting of Shareholders to be filed with the Commission on or
before April 15, 1997.
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INDEX
<TABLE>
PART I
<S> <C> <C>
ITEM 1: Business............................................................ 3
ITEM 2: Properties.......................................................... 6
ITEM 3: Legal Proceedings................................................... 9
ITEM 4: Submission of Matters to a Vote of Security Holders................. 9
PART II
ITEM 5: Market for Registrant's Common Equity and Related Stockholder
Matters............................................................. 9
ITEM 6: Selected Financial Data............................................. 10
ITEM 7: Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 11
ITEM 8: Financial Statements and Supplementary Data......................... 14
ITEM 9: Changes in and disagreements with Accountants on Accounting and
Financial Disclosure................................................ 32
PART III
ITEM 10: Directors and Executive Officers of the Registrant.................. 33
ITEM 11: Executive Compensation.............................................. 33
ITEM 12: Security Ownership of Certain Beneficial Owners and Management ..... 33
ITEM 13: Certain Relationships and Related Transactions...................... 33
PART IV
ITEM 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K.... 33
General Information............................................................ 35
</TABLE>
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PART I
ITEM 1: BUSINESS
BUSINESS OVERVIEW
New Mexico and Arizona Land Company (the "Company" or "NZ") was organized
in 1908 as an Arizona corporation. The Company has 24 full-time employees and
conducts business in Arizona, Colorado, New Mexico, Texas, and Oklahoma. The
Company has four wholly-owned subsidiaries: NZ Development Corporation, NZ
Properties, Inc., NZU Inc., and Great Vacations International, Inc. The Company
owns various urban and rural real estate properties as well as extensive mineral
rights including three large uranium deposits.
This document may contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act
of 1934. Such forward-looking statements involve risks and uncertainties which
could cause actual results or outcomes to differ materially from those expressed
in such forward-looking statements. See "Significant Activities" in this Item I.
"Business", and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" beginning on page 11 for a discussion of important
factors that could cause actual results to differ from the forward-looking
statements.
SIGNIFICANT ACTIVITIES
REAL ESTATE
ARIZONA. In 1995, the Company through, a wholly-owned limited liability
company, entered into a partnership (the "Partnership") to purchase 132
undeveloped acres located near Sedona, Arizona (the "Sedona Project"). The
Company has a 90% ownership interest in the Partnership. Development plans
include an 18-hole golf course and 300 two-bedroom timeshare units.
Architectural design and engineering work is virtually complete with final
construction plans underway. The revised master plan of the Sedona Project has
been approved by planning and zoning authorities of Yavapai County . See "Sedona
Project" on page 13 for information regarding the Company's management control
of this project and a dispute that has arisen between the Company and its
partner. In conjunction with the Sedona Project, the Company has formed a
wholly-owned subsidiary, Great Vacations International, Inc., to market the
timeshare units.
In 1996, NZ purchased a parcel of land, totaling 635 acres, located near
Cottonwood, Arizona, which is zoned for the development of residential lots. The
Company has completed a full market analysis and is determining development
strategies.
The Company has recreational land sales programs in which land is sold
primarily in 40-acre parcels. The southern Arizona program first sold 688 acres
in 1993 and began again in 1995 to sell the remaining 1,377 acres.
All of this land was sold by December 31, 1996.
The northeastern Arizona program was initiated in 1980 and over the last
16 years has sold some 77,000 acres of NZ's rural land. This program has
approximately 2,500 acres remaining in inventory to be sold.
All the parcels in both programs are or were typically sold on installment
contracts, with 10 to 20% down payments with the balance of the contract carried
over 15 years.
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The Company still owns over 150,000 acres of rural land located in
northeastern Arizona and New Mexico, which were derived from 19th Century
railroad land grants.
COLORADO. In 1996, NZ purchased a 10,000 acre ranch located in Fremont
County, Colorado. This property contains a sizeable uranium deposit, which is
discussed further on page 5, under "Minerals". This property is suitable for
subdivision into recreational lots.
NEW MEXICO. The Company owns a 75% interest in three joint ventures
located in Albuquerque, New Mexico. Two of the joint ventures, Brown/NZD
(Development) Joint Venture ("7-Bar") and Manzano Mesa Limited Partnership
("MMLP") develop and sell residential lots to home builders. In 1996, 212 lots
were sold. The two joint ventures have 165 finished lots in inventory. The
majority of these lots are under contract to local builders. 7-Bar has about 100
acres remaining to be developed and MMLP has an option to purchase an additional
112 acres for residential lot development.
The third joint venture, Brown/NZ (Investment) Joint Venture holds
approximately 51 acres that may be sold in bulk or developed into lots.
Also in New Mexico, NZ owns and operates four apartment complexes,
totaling 342 units, located in four New Mexico communities. These units have
federally-subsidized rent contracts designed for the elderly or handicapped.
They maintain essentially full occupancy.
TEXAS. In 1995, the Company purchased a majority interest in a limited
liability company, Texas Elm Fork Land Co., L.C. ("Elm Fork"), that has a 20
year lease with the University of Dallas (the "University") on 160 acres located
in Irving, Texas. Although the University had represented ownership of the
entire parcel, the local flood control district owns a key 3 acre parcel
bisecting the property that has resulted in a delay in development of the
property. To protect its interests, Elm Fork has commenced litigation against
the University. Full construction plans have been completed for the development
of a family entertainment center on this leased property. However, further
development of this property has been delayed until the University can perform
under the lease and Elm Fork is compensated for its damages. See page 13 "Elm
Fork Project" for additional information.
MINERALS
NZ owns over one million acres of mineral rights in Arizona and New Mexico
which originated, like the rural lands, from 19th Century railroad land grants.
The Company also owns mineral rights in Colorado and Oklahoma. In Oklahoma, the
Company has a royalty interest in a dozen producing oil & gas wells.
In New Mexico, NZU, Inc., a wholly-owned subsidiary, owns the mineral
rights to two delineated deposits of uranium, the Crownpoint and Crown Mesa
deposits. Given adequate uranium market prices, these deposits could become
commercially viable in the future. The Crownpoint deposit is leased to a uranium
company specializing in solution mining and currently the largest domestic
producer of uranium. This lessee has just received the Final Environmental
Impact Statement from the Nuclear Regulatory Agency. The lease provides for NZU
to receive a production royalty payment of 10% of gross revenues, or product
in-kind, at NZU's discretion. Production from this deposit is not expected for
several years regardless of market conditions.
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NZU is also working on access, design, and permitting issues associated
with development of a solution mine on the Crown Mesa deposit (formerly referred
to as the Hosta Butte deposit). The permitting process could take two or more
years once baseline data is complete.
In 1996, the Company acquired a 10,000 acre ranch located in Fremont
County, Colorado that contains a sizeable and well defined uranium deposit known
as the Hansen Orebody. NZU is researching various mining strategies to mine the
Hansen deposit.
In addition, the Company formerly identified a large deposit of industrial
grade limestone on its fee lands in New Mexico that is presently leased. NZ
receives annual rental payments and the lease provides for royalty payments
should this limestone be mined.
Revenue received from the Company's mineral activities does not,
presently, constitute a significant portion of the Company's consolidated
revenue.
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ITEM 2: PROPERTIES
The following are schedules of properties owned by the Company at December
31, 1996:
<TABLE>
<CAPTION>
Year
acquired/ Encumbrance
Location Description developed (in thousands)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RENTAL PROPERTIES
ARIZONA
Scottsdale I.C.E. Buildings
13,020-square feet of buildings
on 1.6 acres 1983 $ 791
Tempe 12th Place Building
37,908-square foot building
on 2.7 acres 1983 816
Tucson 8 acres leased to
Parking Company of America;
a park and fly facility 1984-1988
NEW MEXICO
Albuquerque Brentwood Gardens Apartments
122-unit complex on 7.5 acres 1985 3,003
Airpark Building(1)
40,000-square foot office
building on 2.5 acres 1985-1986
Farmington Apple Ridge Apartments
80-unit complex on 5.7 acres 1985 1,986
Las Cruces Montana Meadows Apartments
80-unit complex on 6.1 acres 1985 1,885
Roswell Wildewood Apartments
60-unit complex on 4.3 acres 1985 1,359
PROPERTIES UNDER
DEVELOPMENT
ARIZONA
Sedona Rancho del Oro Development Joint Venture(2)(6)
Timeshare/golf course development
(Seven Canyons of Sedona)planned for
300 timeshare units and an 18-hole
golf course. A majority of the
design and engineering work has
been completed. Construction
drawings, additional golf course
design and governmental approvals
are in process. 1995-2008
</TABLE>
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<PAGE> 7
<TABLE>
<CAPTION>
Year
acquired/ Encumbrance
Location Description developed (in thousands)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NEW MEXICO
Albuquerque Manzano Mesa Ltd Partnership(3)
Residential lot development (WillowWood)
Phases I through III are sold out. Phases
IV and V have 86 lots in inventory, all
of which are under contract. The joint
venture has an option to purchase an
additional 112 acres. 1992-1996
Brown/NZD Development joint Venture(4)
Residential lot development
(Seven Bar North) 902 lots
planned, 374 lots remain to be
developed, of these, 203 are under
contract. At year end there were
79 finished lots in inventory. 1995-1999 $2,200
TEXAS
Irving Texas Elm Fork Land Co., LC.(5)(6) (Elm Fork
Ranch) 160 acres under lease with
the University of Dallas. Development
plans, engineering and building plans
have been completed for the construction
of a family entertainment center. However
due to the failure of the University to
acquire a key 3-acre parcel,development
of the property is on hold. 1995-1996
</TABLE>
(1) The property is owned by a general partnership of which the Company owns
50%.
(2) The property is owned by a general partnership of which the Company owns
90%.
(3) The property is owned by a limited partnership of which the Company owns
75%.
(4) The property is owned by a general partnership of which the Company owns
75%.
(5) The project is owned by a limited liability company of which the Company
owns 85%.
(6) See Sedona Project and Elm Fork Project on page 13 for additional
information.
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<PAGE> 8
<TABLE>
<CAPTION>
Year Encumbrance
Location Description acquired Acres (in thousands)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNDEVELOPED URBAN
PROPERTIES
ARIZONA
Gilbert Cooper and Warner Roads 1986 11.95 $ 332
Mesa Greenfield Road and Dorsey Lane 1989 56.74
Chandler Ray and McClintock Roads 1986 14.66 97
Scottsdale Carefree Highway and 104th Street 1995 107.91 536
Green Valley Continental and Frontage Roads 1986 9.53
Cottonwood Near Cottonwood Airport 1996 635.00 2,858
Flagstaff Zuni and Walapai Streets 1981 10.00
NEW MEXICO
Albuquerque Menaul and Broadway Roads 1986 17.70
Albuquerque Spain Road and Juan Tabo Blvd. 1985 5.89
Albuquerque Seven Bar Loop and Ellison Roads(1) 1993 51.21 93
Las Cruces Mesilla Hills 1990 305.00
</TABLE>
(1) Owned by a general partnership of which the Company owns 75%.
RURAL AND MINERAL PROPERTIES
<TABLE>
<CAPTION>
Acres Encumbrance
County State Surface Mineral(in thousands)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Apache Arizona 76,460 146,640
Coconino Arizona 21,191
Mohave Arizona 46,602
Navajo Arizona 80,150 474,932
Catron New Mexico 11,346
Cibola New Mexico 4,788 225,185
McKinley New Mexico 160 117,238 $80
San Juan New Mexico 5,040
Socorro New Mexico 2,399
Valencia New Mexico 43,925
Fremont Colorado 9,889 4,565
Various Oklahoma 337
- -----------------------------------------------------------------------------------------
171,447 1,099,400 $80
=========================================================================================
</TABLE>
The Company is lessor on grazing and mineral leases covering approximately
158,000 and 6,060 acres, respectively, and owns working interests in various oil
and gas joint ventures located in New Mexico, acquired from 1986 through 1988.
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<PAGE> 9
ITEM 3: LEGAL PROCEEDINGS
The Company is a party to various legal proceedings arising in the
ordinary course of business. While it is not feasible to predict the ultimate
disposition of these matters, it is the opinion of management that their outcome
will not have a material adverse effect on the financial condition of the
Company.
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 fourth quarter of 1996.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There are 3,012,886 shares of no par value common stock issued and
outstanding, at December 31, 1996. Sun NZ, L.L.C. owns 1,507,871 shares,
approximately 50.05% of the outstanding shares of the Company. The stock is
admitted to unlisted trading privileges on the American Stock Exchange under the
symbol "NZ". Shareholders of record at February 25, 1997, totaled 847. The Board
of Directors declared a 10% stock dividend on May 20, 1996 and on March 4, 1995,
with payments made on July 18, 1996 and May 1, 1995, respectively.
The Company has authority to issue up to 10,000,000 shares of serial
preferred stock. At December 31, 1996, no preferred shares were issued.
During 1996, the Company did not sell any equity securities that were not
registered under the Securities act of 1933, as amended.
THE MARKET PRICE RANGE BY QUARTER:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
1996 1995
HIGH LOW High Low
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1st quarter 18 11 5/8 11 1/4 7 5/8
2nd quarter 16 1/2 12 1/2 11 7/8 9 1/2
3rd quarter 14 11 1/2 13 5/8 10 5/8
4th quarter 13 3/4 11 12 5/8 11 3/8
</TABLE>
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ITEM 6: SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years ended December 31,
(in thousands, except per share data) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Gross revenue from
operations $23,660 $22,062 $21,440 $10,337 $ 10,494
Income (loss) before
cumulative effect of
an accounting change 4,846 5,500 3,936 1,282 (1,472)
Net income (loss) 4,846 5,500 3,936 1,282 (892)
Earnings (loss) per share
before cumulative effect
of an accounting change(1) 1.61 1.83 1.31 0.43 (0.49)
Net earnings (loss) per share(1) 1.61 1.83 1.31 0.43 (0.30)
SUMMARY OF FINANCIAL POSITION:
Total assets $66,328 $57,682 $52,307 $46,622 $ 45,772
Notes payable and lines
of credit 16,036 14,080 14,546 15,268 17,392
Shareholders' equity 35,628 30,721 25,127 21,153 19,871
OTHER SUPPLEMENTAL INFORMATION:
Weighted average number of
common shares outstanding(1) 3,008 3,001 3,001 3,001 3,005
Number of shareholders
of record 847 887 925 970 1,035
Number of full time employees 24 21 19 19 19
</TABLE>
(1) Prior years restated to reflect a 10% stock dividend paid July 18, 1996.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table summarizes the Company's revenues and earnings for the
indicated periods:
<TABLE>
<CAPTION>
Fiscal Years Ended December 31:
(in thousands, except per share data) 1996 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $23,660 $22,062 $21,440
Earnings per share of common stock(1) $ 1.61 $ 1.83 $ 1.31
</TABLE>
(1) Prior years restated to reflect a 10% stock dividend paid July 18, 1996.
YEAR ENDED DECEMBER 31, 1996 VERSUS YEAR ENDED DECEMBER 31, 1995
Although property sales generated about $1,600,000 more in gross profit in
1996 than in 1995, earnings decreased in 1996 by about 12%, from $5,500,000 in
1995 to $4,846,000 in 1996. The major reason for the decrease in income was the
sale of a note receivable and the sale of a joint venture property that produced
over $2,700,000 in before tax income in 1995.
Rental properties continue to produce steady gross profits and cash flows
of about $2,000,000 per year. The majority of the cash flow is from the four
federally-subsidized apartment complexes that NZ owns. The subsidy contracts are
scheduled to expire, one at the end of 1998 and the other three in 1999. It is
not possible to determine at this time whether HUD will renew these contracts.
If HUD does not renew the contracts when they expire, the Company may have to
adjust its rental rates. The Company does not believe that this would have an
adverse effect on the Company with respect to its apartment complex located in
Albuquerque; however, the lack of federal subsidies in the rural areas of New
Mexico could have an adverse effect on the Company.
Investment income decreased by about $400,000. A note receivable was paid
off in 1995, thereby reducing interest income in 1996. Also average cash
available for investment in 1996 was down from 1995, due to the purchase of
properties. The increase in general and administrative expense was due primarily
to an increase in officers' and directors' bonuses of about $145,000 and
increased legal fees.
Cash flow from operating activities increased by over $7,000,000 and cash
flow from investing activities decreased by essentially the same amount. The
Company sold two commercial corners for about $6,300,000 in cash and the Company
purchased two properties, a 10,000 acre ranch in Colorado and a 635 acre parcel
in Arizona. Cash on hand at December 31, 1996 was $7,100,000.
YEAR ENDED DECEMBER 31, 1995 VERSUS YEAR ENDED DECEMBER 31, 1994 Earnings in
1995 were $5,500,000 compared with $3,936,000 in 1994.
Earnings increased primarily due to increased interest income; increased revenue
from the sale in 1995 of a mortgage note and a joint venture asset; and
decreased general and administrative expenses.
Interest income increased to $373,000 in 1995 from $32,000 in 1994. This
increase resulted primarily from the fact that cash on hand during the majority
of 1995 was considerably greater than in 1994. Also in 1995, the Company
generated revenue from the sale of a note receivable for a gain of almost
$1,100,000, which is reflected in other income on the income statement. Again in
1995, one of the joint ventures in which the Company owned a 50% interest sold
its only asset, an office complex. The Company's investment in this joint
venture had been written off in prior years.
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<PAGE> 12
Revenue of $1,610,000 was recognized in 1995 and is reflected as gain from joint
ventures on the income statement. General and administrative expenses decreased
$128,000 in 1995 as compared to 1994. In 1994, there was a one-time charge of
$398,000 that resulted from a liability in connection with the resignation of a
corporate officer.
Partially offsetting these positive factors was a decrease in 1995 of
revenues generated from property sales of about $1,000,000. While revenue from
the sale of single-family lots increased by about $2,000,000 over 1994, the sale
of the Company's other properties decreased $3,000,000 from 1994.
Rental properties have continued to produce a steady cash flow and income
from year to year. In both 1995 and 1994, gross income was over $1,900,000.
Cash flow from operating activities decreased by $6,000,000 from the prior
year, due primarily to the purchase of property in the Sedona, Arizona area that
the Company is in the process of developing into a timeshare and golf course
facility.
LIQUIDITY AND CAPITAL RESOURCES
Existing cash, cash flow from sales of land, single-family, and
recreational lots, and distributions from its joint ventures and other on-going
operations, along with unused borrowing capacity, should be adequate for
continuing operations and investments during the 1997 fiscal year. When
construction and marketing begins on the Sedona and/or Elm Fork projects,
financing from outside sources will be required to fund these projects.
Cash distributions from the two Albuquerque joint ventures in 1996 were
$2,000,000. As development of these properties continues, additional cash
distributions are expected. One of the joint ventures has a loan facility, which
has required guarantees by the Company and its partner. The Company may be
required to continue to guarantee loans made to this joint venture, as
development of single-family lots continues. The Company and its partner have
guaranteed a $3,850,500 line of credit, to be utilized for lot development. As
of February 12, 1997, there was $2,020,000 borrowed against this line of credit.
In addition to regular principal payments on mortgage notes, the Company
paid the balance of $1,500,000 on a note that matured in 1996. Also two of its
commercial properties were refinanced for a total of $1,600,000, which was the
balance of the loans that matured. The Company is negotiating with two major
banks for a line of credit in the amount of $1,000,000 with each bank. These
lines will be secured by certain real estate properties.
INFLATION, DEFLATION, AND CHANGING PRICES
The results of operations and capital expenditures will continue to be
affected by inflation, deflation, and changing prices. Price changes and market
trends in real estate, rental rates, oil, gas, and uranium could have
significant effects on the Company's operations.
CURRENT ISSUES
The Company's ability to maintain and improve its current level of
earnings will depend on the current developments discussed below and several
factors, such as the development of projects (including those listed below and
in "Significant Activities" beginning on page 3 of this report); the length of
the development cycle of each project; the ability to acquire additional lands;
the actual costs associated with such developments and acquisitions; suitable
future development sites; weather; the strength of the local economies in the
sub-markets in which the Company operates; and the resolution of the disputes
discussed below. Higher than expected costs, delays in development of
communities, a downturn in the local economies,
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<PAGE> 13
and/or the lack of growth of such economies could reduce the Company's revenues
and increase its expenses, resulting in a greater burden on the Company's
liquidity than that which the Company has described above.
DEVELOPMENTS
SEDONA PROJECT. The Company, through a wholly-owned limited liability
company, has a 90% ownership interest in a partnership that is developing a golf
course and timeshare facility in Sedona, Arizona. See Page 3 "Arizona" for more
information about the Sedona Project. The Company's partner in the Sedona
Project has a 10% ownership interest in the partnership and, pursuant to the
terms of the governing agreements, had the ability to earn up to a 45% ownership
interest in the partnership. The Company's partner was initially the manager of
the Sedona Project, but the Company assumed management control in 1996. A
dispute has arisen among the Company and its partner regarding certain aspects
of the partnership and the Sedona Project. The Company does not believe,
however, that the dispute, or any potential resolution of the dispute, will have
a material adverse effect on the Sedona Project.
ELM FORK PROJECT. In 1995, the Company through its majority interest in a
limited liability company, Texas Elm Fork Land Co., L.C. ("Elm Fork"), leased
land in Irving, Texas from the University of Dallas for the purpose of
developing a family entertainment center. During the development process, it was
discovered that the University did not own a key 3 acre parcel of the land that
was a part of the property leased to Elm Fork and was subsequently unable to
acquire title to it. As a result, Elm Fork initiated litigation in 1996 against
the University of Dallas to protect its position. A standstill agreement has
been signed and progress is being made in the resolution of the situation.
Further development of this project has been delayed until the University is
able to acquire title to the 3 acre parcel and Elm Fork is adequately
compensated for its damages. Given the Company's investment in Elm Fork, the
delay will not have a material adverse effect on the Company's operations.
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<PAGE> 14
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
New Mexico and Arizona Land Company:
We have audited the accompanying consolidated balance sheets of New Mexico
and Arizona Land Company and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, shareholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1996. In
connection with our audits of the consolidated financial statements, we also
have audited financial statement schedules III and IV for each of the years in
the three-year period ended December 31, 1996. These consolidated financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of New Mexico
and Arizona Land Company and subsidiaries as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1996, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.
Phoenix, Arizona
February 17, 1997 KPMG Peat Marwick LLP
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<PAGE> 15
New Mexico and Arizona Land Company and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
(in thousands, except per share data) 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Property sales $ 18,964 $ 15,910 $ 16,868
Property rentals 3,044 2,989 3,094
Investment income 1,236 1,678 1,221
Other 416 1,485 257
- ------------------------------------------------------------------------------------------
23,660 22,062 21,440
- ------------------------------------------------------------------------------------------
Expenses:
Cost of property sales 10,569 9,159 8,949
Rental property 1,007 1,089 1,173
General and administrative 1,773 1,518 1,647
Interest 963 946 1,053
Depreciation, depletion and amortization 450 487 528
- ------------------------------------------------------------------------------------------
14,762 13,199 13,350
Income Before Joint Ventures, Minority
Interests and Income Taxes 8,898 8,863 8,090
Gain (loss) from joint ventures 20 1,582 (234)
Minority interests (872) (1,316) (1,309)
- ------------------------------------------------------------------------------------------
Income Before Income Taxes 8,046 9,129 6,547
Income taxes 3,200 3,629 2,611
- ------------------------------------------------------------------------------------------
Net Income $ 4,846 $ 5,500 $ 3,936
==========================================================================================
Earnings per Share of Common Stock(1) $ 1.61 $ 1.83 $ 1.31
==========================================================================================
Weighted Average Number of Common Shares(1) 3,008 3,001 3,001
==========================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
(1) Prior years restated to reflect a 10% stock dividend paid July 18, 1996.
-15-
<PAGE> 16
New Mexico and Arizona Land Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
(in thousands) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Properties, net $47,478 $ 41,327
Receivables, net 9,848 9,690
Investments in joint ventures 416 409
Cash and cash equivalents 7,142 5,301
Other 1,444 955
- --------------------------------------------------------------------------------
Total assets $66,328 $ 57,682
================================================================================
Liabilities and Shareholders' Equity
Notes payable and lines of credit $16,036 $ 14,080
Accounts payable and accrued liabilities 1,542 999
Deferred revenue 5,002 5,330
Deferred income taxes 5,685 4,188
- --------------------------------------------------------------------------------
Total liabilities 28,265 24,597
- --------------------------------------------------------------------------------
Minority interests 2,435 2,364
- --------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock, no par value; 10,000,000 shares
authorized, none issued
Common stock, no par value; 30,000,000 shares
authorized; 3,012,886 and 3,007,636(1) shares
issued and outstanding at December 31, 1996
and 1995, respectively 13,738 10,051
Additional paid-in capital 967 966
Retained earnings 20,923 19,736
Treasury stock, none at December 31, 1996,
and 4,908 shares at December 31, 1995 -- (32)
- --------------------------------------------------------------------------------
Total shareholders' equity 35,628 30,721
- --------------------------------------------------------------------------------
Total liabilities and shareholders' equity $66,328 $ 57,682
================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
(1) Restated to reflect a 10% stock dividend paid July 18, 1996
-16-
<PAGE> 17
New Mexico and Arizona Land Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
(in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 4,846 $ 5,500 $ 3,936
Deduct: Gain from investment property sales (3,963) (891) (3,049)
Non-cash items included above:
Depreciation, depletion and amortization 450 487 528
Deferred revenue (853) (1,234) (1,091)
Deferred income taxes 1,497 465 653
Gain from investment property sales
(Gain) loss from joint ventures (20) (1,582) 234
Minority interests 872 1,316 1,309
Employee restricted stock plan 1 13 38
Director stock awards 65 84 --
Net change in:
Receivables 367 1,604 (364)
Properties under development (969) (6,789) (1,095)
Other assets (489) 131 (155)
Accounts payable and accrued liabilities 538 (1,169) 859
- --------------------------------------------------------------------------------------------------------
Net cash flow from operating activities 2,342 (2,065) 1,803
- --------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to properties (7,709) (3,635) (814)
Proceeds from sale of properties 6,040 4,933 4,898
Distribution (contribution), joint ventures 13 1,627 (22)
- --------------------------------------------------------------------------------------------------------
Net cash flow from investing activities (1,656) 2,925 4,062
- --------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from debt 8,615 3,664 3,808
Payment of debt (6,659) (4,130) (4,780)
Distribution to minority interest partners (841) (1,443) (316)
Capital contribution, minority interest partners 40 1,239 --
- --------------------------------------------------------------------------------------------------------
Net cash flow from financing activities 1,155 (670) (1,288)
- --------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 1,841 190 4,577
- --------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 5,301 5,111 534
- --------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 7,142 $ 5,301 $ 5,111
========================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements
-17-
<PAGE> 18
New Mexico and Arizona Land Company and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Addi- Total
tional Share-
Common stock Treasury stock paid-in Retained holders'
(in thousands) Shares(1) Amount Shares Amount capital earnings Equity
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT
DECEMBER 31, 1993 3,008 $ 7,812 12 $(92) $891 $ 12,542 $ 21,153
=======================================================================================================================
Net income -- -- -- -- -- 3,936 3,936
Employee restricted
stock plan -- -- -- -- 38 -- 38
- -----------------------------------------------------------------------------------------------------------------------
BALANCES AT
DECEMBER 31, 1994 3,008 $ 7,812 12 $(92) $929 $ 16,478 $ 25,127
=======================================================================================================================
Net income -- -- -- -- -- 5,500 5,500
10% stock dividend -- 2,239 -- -- -- (2,242) (3)
Employee restricted
stock plan -- -- -- -- 13 -- 13
Director stock awards -- -- (7) 60 24 -- 84
- ------------------------------------------------------------------------------------------------------------------------
BALANCES AT
DECEMBER 31, 1995 3,008 $10,051 5 $(32) $966 $ 19,736 $ 30,721
=======================================================================================================================
Net income -- -- -- -- -- 4,846 4,846
10% stock dividend -- 3,622 (5) 32 -- (3,659) (5)
Employee restricted
stock plan -- -- -- -- 1 -- 1
Director stock awards 5 65 -- -- -- -- 65
- ------------------------------------------------------------------------------------------------------------------------
BALANCES AT
DECEMBER 31, 1996 3,013 $13,738 0 0 $967 $ 20,923 $ 35,628
=======================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
(1) Prior years restated to reflect a 10% stock dividend paid July 18, 1996.
-18-
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
Nature of Business
New Mexico and Arizona Land company was organized in 1908 as an Arizona
Corporation and is conducting business in Arizona, New Mexico, Colorado, Texas
and Oklahoma. The Company owns and develops urban real estate. It also owns
extensive rural real estate and mineral rights.
Principles of consolidation
The consolidated financial statements include the accounts of New Mexico
and Arizona Land Company, its wholly-owned subsidiaries, and majority-owned
partnerships ("the Company"). All material intercompany transactions have been
eliminated in consolidation. Certain financial statement items from prior years
have been reclassified to be consistent with the current year financial
statement presentation.
Properties
Properties are recorded at cost net of valuation allowances. Depreciation
on rental properties is provided over the estimated useful lives of the assets,
ranging from 5 to 35 years, using the straight-line method. Maintenance and
repairs are charged to income as incurred and renewals or betterments are
capitalized.
Investments in joint ventures
The Company's investments in joint ventures are accounted for using the
equity method.
Property sales and deferred revenue
Profits on property sales are recognized, subject to the assessment of
collectibility of the related receivables, when the buyer's investment amounts
to at least 20% of the sales price and when development is to commence within a
two year period or 25% of the sales price on all other sales. In all instances
the buyer remains obligated to increase this investment by a minimum amount
annually. Profits on sales that do not meet these requirements are recognized on
the installment basis provided minimum down payments are received.
Deferred revenue consists of land sales being accounted for on the
installment basis and rents collected in advance. Rents collected in advance
represent annual rental payments made in advance of the lease year and are
considered earned ratably over the lease year for financial statement purposes.
Income taxes
The Company follows Statement of Financial Accounting Standards No.109,
Accounting for Income Taxes("Statement 109"). Under the asset and liability
method of Statement 109, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
-19-
<PAGE> 20
Earnings per share
Earnings per share computations are based on the weighted average number
of common shares outstanding during the year of 3,008,211 in 1996, 3,000,943 in
1995, and 3,000,636 in 1994. The weighted average shares for 1995 and 1994 have
been restated to reflect a stock dividend paid July 18, 1996.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, cash held in trust, money
market accounts, and temporary investments, with an original maturity of three
months or less.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, Disclosures about
Fair Value of Financial Instruments, requires that a company disclose estimated
fair values for its financial instruments. The carrying amounts of the Company's
notes receivable and notes payable approximate the estimated fair value because
they are at interest rates comparable to market rates, given the terms and
maturities. The carrying amounts of the Company's cash equivalents, receivables,
accounts payable and accrued liabilities approximate the fair value of these
instruments due to their short term maturities. Considerable judgement is
required in interpreting market data to develop the estimates of fair value.
Accordingly, these fair value estimates are not necessarily indicative of the
amounts the Company might pay or receive in actual market transactions.
Impairment of Assets
The Company adopted the provisions of SFAS No 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be disposed of, on
January 1, 1996. All properties were reviewed for recoverability. Because the
sum of the expected future net cash flows (undiscounted and without interest
charges) exceeds the carrying value for assets held and used and the market
value exceeds the carrying value for assets held for sales, no impairment loss
was recognized in 1996.
Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities, and the amounts of revenue and
expenses at the date of the financial statements. Actual results could differ
from those estimates.
-20-
<PAGE> 21
NOTE 2: - PROPERTIES
<TABLE>
<CAPTION>
Properties are comprised of the following at December 31,
(in thousands) 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
Rural lands and unimproved
urban properties $23,429 $18,542
Properties under development 14,555 12,475
Rental properties 16,852 17,953
Other 1,639 1,507
Accumulated depreciation,
depletion and amortization (5,292) (4,845)
Valuation Allowance (3,705) (4,305)
- ----------------------------------------------------------------------------------
$ 47,478 $41,327
==================================================================================
</TABLE>
The future rentals on non-cancelable operating leases related to the
Company's rental properties, but excluding its four apartment complexes, are as
follows: $560,000 in 1997; $467,000 in 1998; $467,000 in 1999; $467,000 in 2000;
$469,000 in 2001; and $1,681,000 in later years. The four apartment complexes,
which are federally subsidized under the U.S. Department of Housing and Urban
Development Section 8 Housing-Assistance-Payments Program, have contributed
revenue of $2,437,000 in 1996, $2,412,000 in 1995 and $2,377,000 in 1994.
During 1996 and 1995 the Company acquired residential real estate at a
cost of $4,600,000 and $2,980,000, of which $2,900,000 and $600,000 were
financed, respectively.
-21-
<PAGE> 22
NOTE 3 - RECEIVABLES
<TABLE>
<CAPTION>
Receivables consist of the following at December 31,
(in thousands) 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
Mortgage notes receivable $9,758 $9,590
Other notes receivable -- 7
Accounts receivable 165 168
Reserve for bad debts (75) (75)
- ----------------------------------------------------------------------------------
$9,848 $9,690
==================================================================================
</TABLE>
The Company sells recreational land, principally in 40-acre parcels. Since
1980, over 75,000 acres have been sold in Arizona. The mortgage notes receivable
from these land sales, due over ten to fifteen years, bear interest at rates
ranging from 10% to 12%, and are secured by the properties sold. At December 31,
1996 and 1995 mortgage notes receivable relating to these sales totalled
$7,557,000 and $7,318,000, respectively. The Company sold land for mortgage
notes receivable in the amount of $1,910,000 and $2,045,000 during the years
ended December 31, 1996 and 1995 respectively. In 1996 and 1995 the Company
collected $1,429,000 and $903,000 in principal payments on these land sale
contracts.
The Company has a mortgage note receivable with a remaining principal
balance of $2,201,000, from a 1983 sale of an apartment complex located in
Flagstaff, Arizona. This note, which matured in September 1992, was restructured
under a bankruptcy reorganization plan. Under the reorganization plan the
maturity of the note was extended to January 13, 2000, the interest rate was
reduced from 10% to 8.75% and the payments were changed from quarterly
interest-only payments to monthly payments of principal and interest. Also in
connection with that sale, the Company remained contingently liable under a
mortgage note that was assumed by the purchaser. The estimated fair value of the
property securing the Company's mortgage note receivable exceeds the basis of
the mortgage note receivable and the mortgage assumed by the buyer.
Consequently, should the buyer default under the note, the Company would not
recognize a loss on foreclosure.
-22-
<PAGE> 23
NOTE 4 - NOTES PAYABLE AND LINES OF CREDIT
<TABLE>
<CAPTION>
Notes payable consist of the following at December 31,
(in thousands) Maturity Interest
date rate (%) Payment 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mortgage loans:
Apartment complexes 2009 8.375 monthly P&I $ 8,233 $ 8,584
Commercial buildings 2006 9.125 monthly P&I 1,607 1,666
Undeveloped land 2000-2001 9.25-10.25 annual P&I 3,394 2,143
Development loan 1997 prime(1) monthly int. 2,200 989
Other loans 1998-2004 7.125-7.6 semi-annl.P&I 602 698
- -----------------------------------------------------------------------------------------
$16,036 $14,080
=========================================================================================
</TABLE>
(1) Prime rate at December 31, 1996 was 8.25%
The Company and its partner guarantee a development line of credit for one
of its majority-owned partnerships. This line, which is secured by the real
property, expires in August 1997 and has a commitment amount of $3,850,500. At
December 31, 1996, the outstanding balance was $2,200,000. The interest rate is
at the bank's prime rate, 8.25% at December 31, 1996.
Principal payments due on all notes payable and lines of credit are as
follows: $3,547,000 in 1997; $1,299,000 in 1998; $1,304,000 in 1999; $1,323,000
in 2000; $1,224,000 in 2001; and $7,339,000 in later years. Interest paid in
1996, 1995 and 1994, amounted to $1,360,000, $1,316,000 and $1,449,000,
respectively. Interest cost incurred in 1996, 1995 and 1994, was $1,470,000,
$1,286,000 and $1,434,000, respectively, of which $507,000, $340,000 and
$381,000 was capitalized.
-23-
<PAGE> 24
NOTE 5 - INCOME TAXES
<TABLE>
<CAPTION>
Income tax expense is comprised of the following:
(in thousands) 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $1,362 $2,531 $1,566
State 341 633 392
Deferred
Federal 1,198 368 522
State 299 97 131
- -----------------------------------------------------------------------------------------
$3,200 $3,629 $2,611
=========================================================================================
</TABLE>
The reconciliation of the computed statutory income tax expense to the
effective income tax expense follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory Federal income
tax expense $2,736 $3,104 $2,226
Reconciling items:
State income taxes,
net of Federal benefit 422 474 345
Other 42 51 40
- ----------------------------------------------------------------------------------------
$3,200 $3,629 $2,611
========================================================================================
</TABLE>
-24-
<PAGE> 25
The effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31,
<TABLE>
<CAPTION>
(in thousands) 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Properties, principally due to
valuation allowances, depreciation
and amortization of costs $1,040 $ 2,764
Investments in joint ventures,
principally due to valuation allowances 167 174
Other 103 142
- ----------------------------------------------------------------------------------------
Total gross deferred tax assets $1,310 $ 3,080
- ----------------------------------------------------------------------------------------
Deferred tax liabilities:
Properties, principally due to basis
differences upon acquisition $(5,317) $(5,665)
Receivables/deferred revenue,
principally due to installment sales (1,606) (1,537)
Other (72) (66)
- ----------------------------------------------------------------------------------------
Total gross deferred tax liabilities (6,995) (7,268)
- ----------------------------------------------------------------------------------------
Net deferred tax liability $(5,685) $(4,188)
========================================================================================
</TABLE>
Income taxes paid in 1996, 1995 and 1994 amounted to $1,418,000,
$3,596,000 and $2,164,000, respectively.
-25-
<PAGE> 26
NOTE 6 - INVESTMENTS IN JOINT VENTURES:
The Company participates in a joint venture that developed an office
building. Revenues, costs and profits or losses are shared equally. In prior
years the Company reduced the carring value of its investment in this joint
venture to the estimated realizable value of its share of the building, which is
the only asset of this joint venture.
The following is a summary of the condensed balance sheet and results of
operations of this joint venture at December 31,
<TABLE>
<CAPTION>
(in thousands) 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Assets, primarily real estate $1,862 $1,865
========================================================================================
Liabilities $ 66 $ 18
Capital 1,796 1,847
- ----------------------------------------------------------------------------------------
$1,862 $1,865
========================================================================================
</TABLE>
Results of operations for years ended December 31,
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $380 $249 $223
Operating expenses (223) (173) (177)
Depreciation and amortization (101) (83) (70)
- ----------------------------------------------------------------------------------------
Net income (loss) $ 56 $ (7) $(24)
========================================================================================
</TABLE>
In addition to the above real estate joint venture, the Company has
invested in various working-interest petroleum properties principally located
in the San Juan Basin of New Mexico. The Company's interests range from 5%
to 50%. The net assets and results of operations applicable to the Company
are as follows for years ended December 31,
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets $ 11 $ 17 $37
=======================================================================================
Revenue $ 47 $ 51 $ 54
Expenses (55) (71) (276)
- ---------------------------------------------------------------------------------------
Net loss $ (8) $(20) $(222)
=======================================================================================
</TABLE>
-26-
<PAGE> 27
NOTE 7 - RETIREMENT PLANS
Pension Plan:
The Company's defined benefit retirement plan covers substantially all
full-time employees. The benefits are based on employment commencement date,
years of service and compensation. Plan restatement to conform with TRA86 and
subsequent changes was completed in December 1994. In accordance with Statement
of Financial Accounting Standards No. 87 Employers' Accounting for Pensions
(FAS87), the effect of the restatement was recognized in 1995. No additional
post-employment benefits are provided and plan assets are invested in various
mutual funds. The Plan was "frozen" on December 31, 1996. No gain or loss was
recognized by the Company. The "freeze" puts a stop on future benefit accruals.
The net periodic pension benefit is computed as follows for years ended
December 31,
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 43 $ 39 $ 41
Interest cost 47 41 41
Return on assets
Actual (175) (333) 32
Deferred gain (loss) 106 251 (115)
Amortization of unrecognized net transition asset (26) (26) (25)
- ----------------------------------------------------------------------------------------
Net periodic pension benefit $ (5) $ (28) $ (26)
========================================================================================
</TABLE>
Through December 31, 1996, the Company accrued retirement benefits based
on an independent actuarial valuation for the plan. The discount rate and the
rate of increase in future compensation levels used in determining the actuarial
present value of the projected benefit obligations were 7% and 0%, respectively,
at December 31, 1996, 1995 and 1994. The expected long-term rate of return on
plan assets was 7% for 1996, 1995 and 1994.
The following is the funded status of the Plan at December 31,
<TABLE>
<CAPTION>
(in thousands) 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $ 675 $ 672
Nonvested benefits 0 4
- ----------------------------------------------------------------------------------------
Accumulated and projected benefit obligation 675 676
Fair value of plan assets (1,464) (1,414)
- ----------------------------------------------------------------------------------------
Excess of assets over projected benefit obligation (789) (738)
Unrecognized net gain 146 104
Unrecognized net transition asset 358 383
- ----------------------------------------------------------------------------------------
Prepaid pension asset $ (285) $ (251)
========================================================================================
</TABLE>
401(k) Savings Plan:
The Company has a 401(k) Savings Plan for all of its employees. The
Company matches up to 3% of the employee's salary contributed. Total expense for
the Company under this plan was $19,700, $19,800 and $23,600 for 1996, 1995 and
1994, respectively.
-27-
<PAGE> 28
NOTE 8 - RESTRICTED STOCK PLAN
In 1988 the Company adopted a Restricted Stock Plan ("the Plan") to
distribute shares of stock to senior executives at no cost. 100,000 shares of
common stock are authorized for awards during the Plan's ten year term. No
shares were awarded in 1996, 1995 and 1994. A total of 31,400 shares have been
awarded since inception of the plan. Forfeiture restrictions lapse on the third,
fourth and fifth anniversary after award. In 1994 a special dispensation was
given due to the change of control of the Company and restrictions were lifted
on 15,334 shares. In 1995 special dispensation was given, due to internal
restructuring, and restrictions were lifted on 4,507 shares. Restrictions will
be lifted on the remaining 733 shares in 1997.
Compensation expense is recorded for the awards of stock in each period in
which services are performed. The Company recognized compensation expense of
$1,000, $13,000 and $38,000 related to these awards for the years ended December
31, 1996, 1995 and 1994, respectively.
NOTE 9 - DIRECTOR STOCK AWARDs
On November 22, 1996, at a meeting of the Board of Directors, the Board
awarded 750 shares of common stock of the Company to each director. The shares
were valued at the fair market value on the grant date. A total of 5,250 shares
was issued on December 30, 1996. The shares contain a restrictive legend as
required under Rule 144 of the Securities Act of 1933. In addition a cash award
of $3,750 was paid to each director.
On December 15, 1995, at a meeting of the Board of Directors, the Board
awarded 1,000 shares of the Company's common stock to each director. It was
determined that the stock used for these awards would be treasury stock. Of the
Company's 11,908 shares of treasury stock, 7,000 shares were reissued at 1,000
shares to each director, on December 28, 1995. The shares were valued at the
fair market value on the grant date. The reissued shares contain a restrictive
legend as required under Rule 144 of the Securities Act of 1933. In addition a
cash award of $4,750 was paid to each director.
Compensation expense of $92,000 in 1996 and $116,000 in 1995 was recorded
as a result of the above awards.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
The Company is a party to various legal proceedings arising in the
ordinary course of business. While it is not feasible to predict the ultimate
disposition of these matters, it is the opinion of management that their outcome
will not have a material adverse effect on the financial condition of the
Company.
-28-
<PAGE> 29
NOTE 11 - UNAUDITED QUARTERLY FINANCIAL INFORMATION
Certain unaudited quarterly financial information for the years ended
December 31, 1996, and 1995 is presented below:
<TABLE>
<CAPTION>
First Second Third Fourth
(in thousands, except per share data) Quarter Quarter Quarter Quarter Total
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Revenue $4,608 $3,121 $4,690 $11,241 $23,660
=========================================================================================
Net income $ 837 $ 551 $ 762 $2,696 $ 4,846
=========================================================================================
Earnings per share $ 0.28 $ 0.18 $ 0.25 $0.90 $ 1.61
=========================================================================================
1995
Revenue $4,095 $6,007 $7,665 $4,295 $22,062
=========================================================================================
Net income $1,446 $1,803 $1,404 $ 847 $ 5,500
=========================================================================================
Earnings per share(1) $ 0.48 $ 0.60 $ 0.47 $ 0.28 $ 1.83
=========================================================================================
</TABLE>
(1) Restated to reflect a 10% stock dividend paid July 18, 1996.
NOTE 12 - INDUSTRY SEGMENTS
The following information summarizes information about the Company's
industry segments for the years ended December 31,
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total revenue
Real estate $23,473 $21,881 $21,216
Minerals 187 181 224
Income before income taxes
Real estate $ 7,939 $ 9,054 $ 6,420
Minerals 107 75 127
Identifiable assets
Real estate $65,524 $56,969 $51,558
Minerals 804 713 749
</TABLE>
-29-
<PAGE> 30
New Mexico and Arizona Land Company and Subsidiaries
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
December 31, 1996 Cost
(in thousands) capi-
Initial talized Gross amount at which
cost to subse- carried at close
Company quent to of period(1)
-------------- acqui- ------------------------ Accum-
Bldgs sition Buildings ulated
and im- -------- and depre-
Encum- prove- Improve- improve- Total ciation Date
brances Land ments ments Land ments (a) (2) (b)(6) acquired
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unimproved Properties
Arizona and New Mexico(3) $961 $11,496 $ $ 890 $11,862 $ 524 $12,386 $ 77 1908-1995
Colorado 2,751 8 2,759 2,759 1996
Cottonwood, Arizona 2,858 4,584 48 4,632 4,632 1996
Chandler, Arizona 97 3,245 407 3,245 407 3,652 117 1986
Properties Under Development
40-acre lots, Arizona 6 6 6 1908
Albuquerque, New Mexico(3) 2,200 1,230 3,529 1,230 3,529 4,759 1992
Sedona, Arizona(4) 7,500 671 8,171 8,171 1995
Irving, Texas(5) 1,619 1,619 1,619 1995
Rental Properties
Commercial Buildings
Phoenix, Arizona 1,607 947 1,354 156 947 1,510 2,457 664 1986
Land Leases
Tucson, Arizona 2,130 2,130 2,130 1984
Apartments
New Mexico 8,233 1,187 10,665 413 1,187 11,078 12,265 3,728 1985
- -------------------------------------------------------------------------------------------------------------------------
$15,956 $35,076 $13,638 $6,122 $36,169 $18,667 $54,836 $4,586
=========================================================================================================================
</TABLE>
(1) Tax basis: $39,000,000
(2) A valuation allowance in the amount of $3,705,000 was established in prior
years to reflect the Company's estimated realizable value upon ultimate
disposition of certain of its properties, principally unimproved urban
real estate.
(3) Certain properties are owned by partnerships of which the Company has a
75% ownership.
(4) Owned by a partnership in which the Company has a 90% ownership.
(5) Owned by a limited liability company of which the Company has an 85%
ownership
(6) Life on which depreciation in the latest income statements is computed: 5
to 35 years.
-30-
<PAGE> 31
(a) NOTE TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Years ended December 31,
(in thousands) 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $48,970 $39,861 $40,453
Additions during year:
Acquisitions 7,459 10,580 1,438
Improvements 5,613 5,539 7,123
Deductions during year:
Cost of real estate sold (7,206) (7,010) (9,153)
- -----------------------------------------------------------------------------------------
Balance at close of year $54,836 $48,970 $39,861
=========================================================================================
</TABLE>
(b) NOTE TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Years ended December 31,
(in thousands) 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance of accumulated depreciation
at beginning of year $4,188 $3,764 $3,526
Additions during year:
Current year's depreciation 398 447 476
Deductions during year:
Real estate sold -- (23) (238)
- -----------------------------------------------------------------------------------------
Balance at close of year $4,586 $4,188 $3,764
=========================================================================================
</TABLE>
-31-
<PAGE> 32
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
<TABLE>
<CAPTION>
December 31,1996 Principal
amount of
Face Carrying loans
amount amount subject to
Final Period of of mort- delinquent
Interest maturity payment mort- gages principal
(in thousands) rate date terms gages (3) (a) & interest
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Conventional first
mortgages on
unimproved land
sales in Arizona
and New Mexico:
(predominately 40-
acre parcel sales) 6%-12% 1997-2012 Monthly(1) $13,238 $7,482(2) $375
Mortgages on the
sale of commercial
properties:
Apartment complex 8.75% 2000 Monthly(1) 2,852 2,201
- ---------------------------------------------------------------------------------------
$16,090 $9,683 $375
=======================================================================================
</TABLE>
(1) Level payments of principal and interest
(2) Net of reserve for bad debt of $75,000.
(3) Tax basis is $7,932,000
(a) NOTE TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
<TABLE>
<CAPTION>
Years ended December 31,
(in thousands) 1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $9,515 $8,757 $8,804
Additions during period:
New mortgage loans 1,910 2,045 1,285
Deduction during period:
Collections of principal (1,469) (964) (1,061)
Forfeitures on installment
contracts (273) (323) (271)
- ----------------------------------------------------------------------------------------
Balance at close of year $9,683 $9,515 $8,757
========================================================================================
</TABLE>
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
-32-
<PAGE> 33
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required under this item is contained in New Mexico and
Arizona Land Company's 1997 Proxy Statement, pursuant to Regulation 14A, and is
incorporated herein by reference.
ITEM 11: EXECUTIVE COMPENSATION
Information required under this item is contained in New Mexico and
Arizona Land Company's 1997 Proxy Statement, pursuant to Regulation 14A, and
is incorporated herein by reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required under this item is contained in New Mexico and
Arizona Land Company's 1997 Proxy Statement, pursuant to Regulation 14A, and is
incorporated herein by reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under this item is contained in New Mexico and
Arizona Land Company's 1997 Proxy Statement, pursuant to Regulation 14A, and is
incorporated herein by reference.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K The
consolidated financial statements and schedules are included in Part
III, Item 8:
Independent Auditors' Report
Balance Sheets
Statements of Income
Statements of Cash Flows
Statements of Shareholders Equity
Notes to Consolidated Financial Statements
Schedule III - Real Estate and Accumulated Depreciation
Schedule IV - Mortgage Loans on Real Estate
Exhibit 3.(i) Articles of Incorporation of Registrant amended May 20, 1996.
Exhibit 3.(ii)By-laws of Registrant revised March 8, 1996.
Exhibit 10.3 New Mexico and Arizona Land Company 401(k) Plan dated
January 1, 1992.
Exhibit 27. Financial Data Schedule
All other exhibits are omitted because they are inapplicable, contained
elsewhere in the report or have been previously filed with the Securities and
Exchange Commission.
No Form 8-K was filed in 1996.
-33-
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NEW MEXICO AND ARIZONA LAND COMPANY
(Registrant)
/s/William A Pope /s/Elizabeth M. Bedewi
- -------------------------- ----------------------------
William A. Pope Elizabeth M. Bedewi
President and Principal Senior Vice President and
Executive Officer Principal Financial Officer
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 date indicated.
/s/Stephen E. Renneckar /s/John C. Lucking
- -------------------------- ----------------------------
Stephen E. Renneckar John C. Lucking
Chairman Director
/s/William A. Pope /s/Arnold L. Putterman
- -------------------------- ----------------------------
William A. Pope Arnold L. Putterman
Director Director
/s/Ronald E. Strasburger /s/Robert Wertheim
- -------------------------- ----------------------------
Ronald E. Strasburger Robert Wertheim
Director Director
/s/Richard A. Wessman
- --------------------------
Richard A. Wessman
Director
Dated: March 14, 1997
-34-
<PAGE> 35
GENERAL INFORMATION
DIRECTORS
Term expiring in 1998:
Arnold L. Putterman(1): New York, New York, Counselor at Law
Stephen E. Renneckar(2,3) Phoenix, Arizona, Vice President, General Counsel,
SunChase Holdings, Inc.
Robert Wertheim(1) Albuquerque, New Mexico, Chairman, Charter
Companies
Richard A. Wessman(1,3) Roseville, California, President, Sterling Pacific
Assets, Inc.
Term expiring in 1997:
John C. Lucking(2,3) Phoenix, Arizona, Consulting Economist, Econ-Linc
William A. Pope Phoenix, Arizona, President and CEO of the Company
and SunChase Holdings Inc.
Ronald E. Strasburger(2) Phoenix, Arizona, Loans and Acquisitions Manager,
Sterling Pacific Management Services, Inc.
(1) Audit Committee
(2) Compensation and Nominating Committee
(3) Executive Committee
OFFICERS
William A. Pope President and Chief Executive Officer
R. Randy Stolworthy(1) Executive Vice President, Chief Operating Officer
Elizabeth M. Bedewi Senior Vice President, Treasurer and Secretary
Joe D. Sphar Vice President--Minerals and Assistant Secretary
(1) effective February 18, 1997
SHAREHOLDER INFORMATION
ANNUAL MEETING
The annual meeting of the shareholders of the Company will be held in
Phoenix, Arizona, Friday May 16, 1997. Notice of meeting and proxy will be
mailed to shareholders of record as of March 21, 1997. Please notify E. M.
Bedewi, Secretary, of any change of address.
TRANSFER AGENT AND REGISTRAR OF STOCK
American Stock Transfer & Trust Company, 40 Wall Street, New York, NY 10005,
(718) 921-8209, (800)937-5449, fax (718)921-8331
CORPORATE OFFICE
3033 N 44th Street, Suite 270, Phoenix, AZ 85018.
(602)952-8836, fax (602)952-8769, email [email protected]
web site nz-newmexariz.com
ALBUQUERQUE OFFICE
6100 Indian School Road N.E., Suite 100, Albuquerque, NM 87110.
(505)881-6644, fax (505)889-3682
-35-
<PAGE> 1
EXHIBIT 3.(i)
RESTATED ARTICLES OF INCORPORATION OF
NEW MEXICO AND ARIZONA LAND COMPANY
(AS OF MAY 20, 1996)
KNOW ALL MEN BY THESE PRESENTS that we, whose hands are hereunto affixed, do
hereby associate ourselves together for the purpose of forming a corporation
under the laws of the State of Arizona and, to that end, do adopt the following
articles of incorporation:
FIRST: The name of the corporation shall be New Mexico and Arizona Land Company.
SECOND: This corporation is organized for the purpose of transacting any or all
lawful business for which corporations may be incorporated under the laws of the
State of Arizona, as amended from time to time. The corporation is presently
engaged in the business of holding and managing land for investment purposes,
leasing real property and interests therein, and developing mineral resources.
THIRD: The Corporation shall have authority to issue a total of forty million
(40,000,000) shares of capital stock, consisting of:
(1) Thirty million (30,000,000) shares of common stock, no par value per
share; and
(2) Ten million (10,000,000) shares of serial preferred stock, no par
value per share.
Each issued and outstanding share of common stock will entitle the holder
thereof to one (1) vote on any matter submitted to a vote of or for consent of
shareholders. Issued and outstanding shares of serial preferred stock will
entitle the holders thereof only to those votes, if any, which may expressly be
fixed as hereinafter provided for the respective series thereof and to voting
rights on certain matters, and in certain circumstances, as set forth in this
Article.
The Board of Directors is authorized to provide from time to time for the
issuance of shares of serial preferred stock in series and to fix from time to
time before issuance the designation, preferences, privileges and voting powers
of the shares of each series of serial preferred stock and the restrictions or
qualifications thereof, including, without limiting the generality of the
foregoing, the following:
a) The serial designation and authorized number of shares;
b) The dividend rate, the date or dates on which such dividends will be
payable, and the extent to which such dividends may be cumulative;
c) The amount or amounts to be received by the holders in the event of
voluntary or involuntary dissolution or liquidation of the
Corporation;
d) The price or prices at which shares may be redeemed and any terms,
conditions and limitations upon such redemption;
e) Any sinking fund provisions for redemption or purchase of shares of
such series; and
f) The terms and conditions, if any, on which shares may be converted
into shares of other capital stock, or of other series of serial
preferred stock of the Corporation.
<PAGE> 2
Each series of serial preferred stock, in preference to the common stock, may be
entitled to dividends, from funds or other assets legally available therefor, at
such rates, payable at such times and cumulative to such extent as may be fixed
by the Board of Directors pursuant to the authority herein conferred upon it. In
the event of dissolution or liquidation of the Corporation, voluntary or
involuntary, the holders of the serial preferred stock, in preference to the
common stock, may be entitled to receive such amount or amounts as may be fixed
by the Board of Directors pursuant to the authority herein conferred upon it.
Preference stock of any series redeemed, converted, exchanged, purchased or
otherwise acquired by the Corporation shall be cancelled by the Corporation and
returned to the status of authorized but unissued preference stock.
All shares of any series of serial preferred stock, as between themselves, shall
rank equally and be identical; and all series of serial preferred stock, as
between themselves shall rank equally and be identical except asset forth in
resolutions of the board of directors authorizing the issuance of the series.
FOURTH: All directors of the corporation must be shareholders of the
corporation. The number of directors of the corporation shall be set by the
Board of Directors from time to time; provided, however, that the number of
directors so designated shall be no less than five (5) nor more than nine (9).
The Board of Directors shall consist of Class A directors and Class B directors.
The Class A directors shall be elected for a term of two (2) years at the annual
meeting of shareholders of the corporation held in every odd numbered year. The
Class B directors shall be elected for a term of two (2) years at the annual
meeting of shareholders of the corporation held in every even numbered year.
When an even number of directors has been set by the Board of Directors, there
shall be an even number of Class A and Class B directors. When an odd number of
directors has been set by the Board of Directors, there shall be one more Class
B director than there are Class A directors.
FIFTH: The Board of Directors may, from time to time, cause the corporation to
purchase its own shares to the extent of the unreserved and unrestricted capital
surplus of the corporation.
SIXTH: Elizabeth M. Bedewi, Senior Vice President, Treasurer and Secretary of
New Mexico and Arizona Land Company, 3033 North 44th Street, Suite 270, Phoenix,
Arizona 85018-7228, is hereby appointed statutory agent for the corporation for
the State of Arizona.
SEVENTH: The liability of a director or former director to the corporation or
its shareholders shall be eliminated to the fullest extent permitted by Section
10-202.B.1 of the Arizona Revised Statutes. If the Arizona Business Corporation
Act is amended to authorize corporate action further eliminating or limiting the
liability of directors, the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the Arizona Business
Corporation Act, as amended.
2
<PAGE> 3
Any repeal or modification of this Article Seventh shall not adversely affect
any right or protection of a director of the Corporation existing hereunder with
respect to any act or omission occurring prior to or at the time of such repeal
or modification.
The provisions of the Article Seventh shall not be deemed to limit or preclude
indemnification of a director by the Corporation for any liability of a director
which has not been eliminated by the provisions of the Article Seventh.
3
<PAGE> 1
EXHIBIT 3.(ii)
AMENDED AND RESTATED
BYLAWS
OF
NEW MEXICO AND ARIZONA LAND COMPANY
I. REFERENCES TO CERTAIN TERMS AND CONSTRUCTION
1.01. Certain References. Any reference herein made to law will be
deemed to refer to the law of the State of Arizona, including any applicable
provision of Chapters 1 through 17 of Title 10 of the Arizona Revised Statutes,
or any successor statute, as from time to time amended and in effect (sometimes
referred to herein as the "Arizona Business Corporation Act"). Any reference
herein made to the corporation's Articles will be deemed to refer to its
Articles of Incorporation and all amendments thereto as at any given time on
file with the Arizona Corporation Commission. Except as otherwise required by
law and subject to any procedures established by the corporation pursuant to
Arizona Revised Statutes Section 723, the term "shareholder" as used herein
shall mean one who is a holder of record of shares of the corporation.
References to specific sections of law herein made shall be deemed to refer to
such sections, or any comparable successor provisions, as from time to time
amended and in effect.
1.02. Seniority. The law and the Articles (in that order of precedence)
will in all respects be considered senior and superior to these Bylaws, with any
inconsistency to be resolved in favor of the law and such Articles (in that
order of precedence), and with these Bylaws to be deemed automatically amended
from time to time to eliminate any such inconsistency which may then exist.
1.03. Computation of Time. The time during which an act is required to
be done, including the time for the giving of any required notice herein, shall
be computed by excluding the first day or hour, as the case may be, and
including the last day or hour.
II. OFFICES
2.01. Principal Office. The principal office of the corporation shall be
located at any place either within or outside the State of Arizona as designated
in the corporation's most current Annual Report filed with the Arizona
Corporation Commission or in any other document executed and delivered to the
Arizona Corporation Commission for filing. If a principal office is not so
designated, the principal office of the corporation shall mean the known place
of business of the corporation. The corporation may have such other offices,
either within or without the State of Arizona, as the Board of Directors may
designate or as the business of the corporation may require from time to time.
2.02. Known Place of Business. A known place of business of the
corporation shall be located within the State of Arizona and may be, but need
not be, the address of the statutory agent of the corporation. The corporation
may change its known place of business from time to time in accordance with the
relevant provisions of the Arizona Business Corporation Act.
<PAGE> 2
III. SHAREHOLDERS
3.01. Annual Shareholder Meeting. The annual meeting of the shareholders
shall be held on or before June 30th in each year, at such time and place,
either within or without the State of Arizona, as shall be fixed by the Board of
Directors or, in the absence of action by the Board, as set forth in the notice
given or waiver signed with respect to such meeting pursuant to Section 3.03
below, for the purpose of electing directors and for the transaction of such
other business as may properly come before the meeting. If any annual meeting is
for any reason not held on the date determined as aforesaid, a deferred annual
meeting may thereafter be called and held in lieu thereof, at which the same
proceedings may be conducted. If the day fixed for the annual meeting shall be a
legal holiday in the State of Arizona such meeting shall be held on the next
succeeding business day.
3.02. Special Shareholder Meetings. Special meetings of the shareholders
may be held whenever and wherever, either within or without the State of
Arizona, called for by or at the direction of the Chairman of the Board, the
President, or the Board of Directors.
3.03. Notice of Shareholders Meetings.
(a) Required Notice. Notice stating the place, day and hour of
any annual or special shareholders meeting shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting by or at the
direction of the person or persons calling the meeting, to each shareholder
entitled to vote at such meeting and to any other shareholder entitled to
receive notice of the meeting by law or the Articles. Notices to shareholders
shall be given in accordance with, and shall be deemed to be effective at the
time and in the manner described in, Arizona Revised Statutes Section 10-141. If
no designation is made of the place at which an annual or special meeting will
be held in the notice for such meeting, the place of the meeting will be at the
principal place of business of the corporation.
(b) Adjourned Meeting. If any shareholders meeting is
adjourned to a different date, time, or place, notice need not be given of the
new date, time, and place, if the new date, time, and place is announced at the
meeting before adjournment. But if a new record date for the adjourned meeting
is fixed or must be fixed in accordance with law or these Bylaws, then notice of
the adjourned meeting shall be given to those persons who are shareholders as of
the new record date and who are entitled to such notice pursuant to Section
3.03(a) above.
(c) Waiver of Notice. Any shareholder may waive notice of a
meeting (or any notice of any other action required to be given by the Arizona
Business Corporation Act, the corporation's Articles, or these Bylaws), at any
time before, during, or after the meeting or other action, by a writing signed
by the shareholder entitled to the notice. Each such waiver shall be delivered
to the corporation for inclusion in the minutes or filing with the corporate
records. Under certain circumstances, a shareholder's attendance at a meeting
may constitute a waiver of notice, unless the shareholder takes certain actions
to preserve his/her objections as described in the Arizona Business Corporation
Act.
(d) Contents of Notice. The notice of each special
shareholders meeting shall include a description of the purpose or purposes for
which the meeting is called. Except as required by law, this Section 3.03(d), or
the corporation's Articles, the notice of an annual shareholders meeting need
not include a description of the purpose or purposes for which the meeting is
called.
2
<PAGE> 3
3.04. Fixing of Record Date. For the purpose of determining shareholders
of any voting group entitled to notice of or to vote at any meeting of
shareholders, or shareholders entitled to receive any distribution or dividend,
or in order to make a determination of shareholders for any other proper
purpose, the Board of Directors may fix in advance a date as the record date.
Such record date shall not be more than seventy (70) days prior to the date on
which the particular action requiring such determination of shareholders is to
be taken. If no record date is so fixed by the Board of Directors, the record
date for the determination of shareholders shall be as provided in the Arizona
Business Corporation Act.
When a determination of shareholders entitled to notice of or to vote at
any meeting of shareholders has been made as provided in this Section , such
determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date, which it must do if the meeting is adjourned
to a date more than one hundred twenty (120) days after the date fixed for the
original meeting.
3.05. Shareholder List. The corporation shall make a complete record of
the shareholders entitled to notice of each meeting of shareholders thereof,
arranged in alphabetical order, listing the address and the number of shares
held by each. The list shall be arranged by voting group and within each voting
group by class or series of shares. The shareholder list shall be available for
inspection by any shareholder, beginning two (2) business days after notice of
the meeting is given for which the list was prepared and continuing through the
meeting. The list shall be available at the corporation's principal office or at
another place identified in the meeting notice in the city where the meeting is
to be held. Failure to comply with this section shall not affect the validity of
any action taken at the meeting.
3.06. Shareholder Quorum and Voting Requirements.
(a) If the Articles or the Arizona Business Corporation Act
provide for voting by a single voting group on a matter, action on that matter
is taken when voted upon by that voting group.
(b) If the Articles or the Arizona Business Corporation Act
provide for voting by two (2) or more voting groups on a matter, action on that
matter is taken only when voted upon by each of those voting groups counted
separately.
(c) Shares entitled to vote as a separate voting group may
take action on a matter at a meeting only if a quorum of those shares exists
with respect to that matter. Unless the Articles or the Arizona Business
Corporation Act provide otherwise, a majority of the votes entitled to be cast
on the matter by the voting group constitutes a quorum of that voting group for
action on that matter.
(d) Once a share is represented for any purpose at a meeting,
it is deemed present for quorum purposes for the remainder of the meeting and
for any adjournment of that meeting, unless a new record date is or must be set
for that adjourned meeting.
(e) If a quorum exists, action on a matter (other than the
election of directors) by a voting group is approved if the votes cast within
the voting group favoring the action exceed the votes cast opposing the action,
unless the Articles or the Arizona Business Corporation Act require a greater
number of affirmative votes.
(f) Voting will be by ballot on any question as to which a
ballot vote is demanded prior to the time the voting begins by any person
entitled to vote on such question; otherwise,
3
<PAGE> 4
a voice vote will suffice. No ballot or change of vote will be accepted after
the polls have been declared closed following the ending of the announced time
for voting.
3.07 Manner of Bringing Business Before Meetings.
(a) At any annual or special meeting of shareholders only such
business shall be conducted as shall have been properly brought before the
meeting. In order to be properly brought before the meeting, such business must
be a proper subject for shareholder action and must have been (i) specified in
the written notice of the meeting (or any supplement thereto) given to
shareholders who were shareholders on the record date for such meeting by or at
the direction of the Board of Directors, (ii) brought before the meeting at the
direction of the Board of Directors or the Chairman of the meeting, selected as
provided in Section 3.12 hereof, or (iii) specified in a written notice given by
or on behalf of a shareholder who was a shareholder on the record date for such
meeting entitled to vote thereat or a duly authorized proxy for such
shareholder, in accordance with Section 3.07(b) and (c) hereof.
(b) A shareholder notice referred to in Section 3.07(a)(iii)
hereof must be delivered personally to, or mailed to and received at, the
principal executive office of the corporation, addressed to the attention of the
Secretary, not more than ten (10) days after the date of the initial notice
referred to in Section 3.07(a)(i) hereof, in the case of business to be brought
before a special meeting of shareholders, and not less than thirty (30) days
prior to the anniversary date of the initial notice referred to in Section
3.07(a)(i) hereof with respect to the previous year's annual meeting, in the
case of business to be brought before an annual meeting of shareholders.
(c) A shareholder notice referred to in Section 3.07(a)(iii)
hereof shall set forth:
(i) a full description of each item of business proposed to be
brought before the meeting and the reasons for conducting such
business at such meeting;
(ii) the name and address of the person proposing to bring
such business before the meeting;
(iii) the class and number of shares held of record, held
beneficially, and represented by proxy by such person as of
the record date for the meeting, if such date has been made
publicly available, or as of a date not later than thirty (30)
days prior to the delivery of the initial notice referred to
in Section 3.07(a)(i) hereof, if the record date has not been
made publicly available;
(iv) if any item of business involves a nomination for
director, all information regarding each such nominee that
would be required to be set forth in a definitive proxy
statement filed with the Securities and Exchange Commission
pursuant to Section 14 of the Securities Exchange Act of 1934,
as amended, or any successor thereto, and the written consent
of each such nominee to serve if elected;
(v) any material interest of such shareholder in the specified
business;
(vi) whether or not such shareholder is a member of any
partnership, limited partnership, syndicate, or other group
pursuant to any agreement, arrangement, relationship,
understanding, or otherwise, whether or not in writing,
organized
4
<PAGE> 5
in whole or in part for the purpose of acquiring, owning, or
voting shares of the corporation; and
(vii) all other information that would be required to be filed
with the Securities and Exchange Commission, if, with respect
to the business proposed to be brought before the meeting, the
person proposing such business was a participant in a
solicitation subject to Section 14 of the Securities Exchange
Act of 1934, as amended, or any successor thereto.
No business shall be brought before any meeting of the shareholders of the
corporation otherwise than as provided in this Section 3.07.
(d) Notwithstanding the provisions of this Section 3.07, the
Board of Directors shall not be obligated to include information as to any
shareholder nominee for director or any other shareholder proposal in any proxy
statements or other communication sent to shareholders.
(e) The Chairman of the meeting may, if the facts warrant,
determine that any proposed item of business was not brought before the meeting
in accordance with the provisions of this Section 3.07, and if he or she should
so determine, he or she shall so declare to the meeting and the defective item
of business shall be disregarded.
3.08. Proxies. At all meetings of shareholders, a shareholder may vote
in person or by proxy duly executed in writing by the shareholder or the
shareholder's duly authorized attorney-in-fact. Such proxy shall comply with law
and shall be filed with the Secretary of the corporation or other person
authorized to tabulate votes before or at the time of the meeting. No proxy
shall be valid after eleven (11) months from the date of its execution unless
otherwise provided in the proxy. The burden of proving the validity of any
undated, irrevocable, or otherwise contested proxy at a meeting of the
shareholders will rest with the person seeking to exercise the same. A facsimile
appearing to have been transmitted by a shareholder or by such shareholder's
duly authorized attorney-in-fact may be accepted as a sufficiently written and
executed proxy.
3.09. Voting of Shares. Unless otherwise provided in the Articles or the
Arizona Business Corporation Act, each outstanding share entitled to vote shall
be entitled to one (1) vote upon each matter submitted to a vote at a meeting of
shareholders.
3.10. Voting for Directors. Unless otherwise provided in the Articles,
directors are elected by a plurality of the votes cast by the shares entitled to
vote in the election at a meeting at which a quorum is present at the time of
such vote. As provided by law, shareholders shall be entitled to cumulative
voting in the election of directors.
3.11. Election Inspectors. The Board of Directors, in advance of any
meeting of the shareholders, may appoint an election inspector or inspectors to
act at such meeting (and at any adjournment thereof). If an election inspector
or inspectors are not so appointed, the chairman of the meeting may, or upon
request of any person entitled to vote at the meeting will, make such
appointment. If any person appointed as an inspector fails to appear or to act,
a substitute may be appointed by the chairman of the meeting. If appointed, the
election inspector or inspectors (acting through a majority of them if there be
more than one) will determine the number of shares outstanding, the
authenticity, validity, and effect of proxies, the credentials of persons
purporting to be shareholders or persons named or referred to in proxies, and
the number of shares represented at the meeting in person and by proxy; will
5
<PAGE> 6
receive and count votes, ballots, and consents and announce the results thereof;
will hear and determine all challenges and questions pertaining to proxies and
voting; and, in general, will perform such acts as may be proper to conduct
elections and voting with complete fairness to all shareholders. No such
election inspector need be a shareholder of the corporation.
3.12. Organization and Conduct of Meetings. Each meeting of the
shareholders will be called to order and thereafter chaired by the Chairman of
the Board of Directors if there is one, or, if not, or if the Chairman of the
Board is absent or so requests, then by the President, or if both the Chairman
of the Board and the President are unavailable, then by such other officer of
the corporation or such shareholder as may be appointed by the Board of
Directors. The corporation's Secretary or in his or her absence, an Assistant
Secretary will act as secretary of each meeting of the shareholders. If neither
the Secretary nor an Assistant Secretary is in attendance, the chairman of the
meeting may appoint any person (whether a shareholder or not) to act as
secretary for the meeting. After calling a meeting to order, the chairman
thereof may require the registration of all shareholders intending to vote in
person and the filing of all proxies with the election inspector or inspectors,
if one or more have been appointed (or, if not, with the secretary of the
meeting). After the announced time for such filing of proxies has ended, no
further proxies or changes, substitutions, or revocations of proxies will be
accepted. If directors are to be elected, a tabulation of the proxies so filed
will, if any person entitled to vote in such election so requests, be announced
at the meeting (or adjournment thereof) prior to the closing of the election
polls. Absent a showing of bad faith on his or her part, the chairman of a
meeting will, among other things, have absolute authority to fix the period of
time allowed for the registration of shareholders and the filing of proxies, to
determine the order of business to be conducted at such meeting, and to
establish reasonable rules for expediting the business of the meeting and
preserving the orderly conduct thereof (including any informal, or question and
answer portions thereof).
3.13. Shareholder Approval or Ratification. The Board of Directors may
submit any contract or act for approval or ratification of the shareholders at a
duly constituted meeting of the shareholders. Except as otherwise required by
law, if any contract or act so submitted is approved or ratified by a majority
of the votes cast thereon at such meeting, the same will be valid and as binding
upon the corporation and all of its shareholders as it would be if it were the
act of its shareholders.
3.14. Informalities and Irregularities. All informalities or
irregularities in any call or notice of a meeting of the shareholders or in the
areas of credentials, proxies, quorums, voting, and similar matters, will be
deemed waived if no objection is made at the meeting.
3.15. Shareholder Action by Written Consent. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if one (1) or more consents in writing, setting forth the action so
taken, shall be signed by all of the shareholders entitled to vote with respect
to the subject matter thereof. The consents shall be delivered to the
corporation for inclusion in the minutes or filing with the corporate record.
Action taken by consent is effective when the last shareholder signs the
consent, unless the consent specifies a different effective date, except that
if, by law, the action to be taken requires that notice be given to shareholders
who are not entitled to vote on the matter, the effective date shall not be
prior to ten (10) days after the corporation shall give such shareholders
written notice of the proposed action, which notice shall contain or be
accompanied by the same material that would have been required if a formal
meeting had been called to consider the action. A consent signed under this
section has the effect of a meeting vote and may be described as such in any
document.
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V. BOARD OF DIRECTORS
4.01. General Powers. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of, the Board of Directors.
4.02. Number, Tenure, and Qualification of Directors. Unless otherwise
provided in the Articles of Incorporation, the authorized number of directors
shall be not less than five (5) nor more than nine (9). The number of directors
in office from time to time shall be within the limits specified above, as
prescribed from time to time by resolution adopted by either the shareholders or
the Board of Directors. The Board of Directors shall consist of Class A
Directors and Class B Directors. The Class A directors shall be elected for a
term of two years at the annual meeting of shareholders of the corporation held
in every odd numbered year. The Class B directors shall be elected for a term of
two years at the annual meeting of shareholders of the corporation held in every
even numbered year. When an uneven number of directors has been set by the Board
of Directors, there shall be an even number of Class A directors and Class B
directors. All directors of the corporation shall be shareholders of the
corporation and no person who has attained the age of seventy (70) years shall
be eligible for election or appointment to the Board of Directors.
4.03. Regular Meetings of the Board of Directors. A regular annual
meeting of the Board of Directors is to be held as soon as practicable after the
adjournment of each annual meeting of the shareholders, either at the place of
the shareholders meeting or at such other place as the directors elected at the
shareholders meeting may have been informed of at or prior to the time of their
election. Additional regular meetings may be held at regular intervals at such
places and at such times as the Board of Directors may determine.
4.04. Special Meetings of the Board of Directors. Special meetings of
the Board of Directors may be held whenever and wherever called for by the
Chairman of the Board or, at the request of three members of the Board of
Directors, by the Secretary.
4.05. Notice of, and Waiver of Notice for, Directors Meetings. No notice
need be given of regular meetings of the Board of Directors. Notice of the time
and place of any special directors meeting shall be given at least 48 hours
prior thereto. Notice shall be given in accordance with and shall be deemed to
be effective at the time and in the manner described in Arizona Revised Statutes
Section 10-141. Any director may waive notice of any meeting and any adjournment
thereof at any time before, during, or after it is held. Except as provided in
the next sentence below, the waiver must be in writing, signed by the director
entitled to the notice, and filed with the minutes or corporate records. The
attendance of a director at or participation of a director in a meeting shall
constitute a waiver of notice of such meeting, unless the director at the
beginning of the meeting (or promptly upon his/her arrival) objects to holding
the meeting or transacting business at the meeting, and does not thereafter vote
for or assent to action taken at the meeting.
4.06. Director Quorum. A majority of the number of directors prescribed
according to Section 4.02 above, or if no number is so prescribed, the number in
office immediately before the meeting begins, shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors, unless the
Articles require a greater number.
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4.07. Directors, Manner of Acting.
(a) If a quorum is present when a vote is taken, the
affirmative vote of a majority of the directors present shall be the act of the
Board of Directors unless the Articles require a greater percentage.
(b) Unless the Articles provide otherwise, any or all
directors may participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.
(c) A director who is present at a meeting of the Board of
Directors or a committee of the Board of Directors when corporate action is
taken is deemed to have assented to the action taken unless: (1) the director
objects at the beginning of the meeting (or promptly upon his/her arrival) to
holding it or transacting business at the meeting; or (2) his/her dissent or
abstention from the action taken is entered in the minutes of the meeting; or
(3) he/she delivers written notice of his/her dissent or abstention to the
presiding officer of the meeting before its adjournment or to the corporation
before 5:00 p.m. on the next business day after the meeting. The right of
dissent or abstention is not available to a director who votes in favor of the
action taken.
4.08. Director Action Without a Meeting. Unless the Articles provide
otherwise, any action required or permitted to be taken by the Board of
Directors at a meeting may be taken without a meeting if the action is taken by
unanimous written consent of the Board of Directors as evidenced by one (1) or
more written consents describing the action taken, signed by each director and
filed with the minutes or corporate records. Action taken by consent is
effective when the last director signs the consent, unless the consent specifies
a different effective date. A signed consent has the effect of a meeting vote
and may be described as such in any document.
4.09. Removal of Directors by Shareholders. The shareholders may remove
one (1) or more directors at a meeting called for that purpose if notice has
been given that a purpose of the meeting is such removal. The removal may be
with or without cause unless the Articles provide that directors may only be
removed with cause. If a director is elected by a voting group of shareholders,
only the shareholders of that voting group may participate in a shareholder vote
to remove him. If less than the entire Board of Directors is to be removed, a
director may not be removed if the number of votes sufficient to elect the
director under cumulative voting is voted against the director's removal.
4.10. Board of Director Vacancies.
(a) Unless the Articles provide otherwise, if a vacancy occurs
on the Board of Directors, including a vacancy resulting from an increase in the
number of directors, either the shareholders or the Board of Directors may fill
the vacancy.
(b) If the vacant office was held by a director elected by a
voting group of shareholders, only the holders of shares of that voting group
are entitled to vote to fill the vacancy if it is filled by the shareholders.
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(c) A vacancy that will occur at a specific later date (by
reason of resignation effective at a later date) may be filled before the
vacancy occurs, but the new director may not take office until the vacancy
occurs.
(d) The term of a director elected to fill a vacancy expires
at the next shareholders meeting at which directors are elected.
4.11. Director Compensation. Unless otherwise provided in the Articles
by resolution of the Board of Directors, each director may be paid his/her
expenses, if any, of attendance at each meeting of the Board of Directors or any
committee thereof, and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the Board of Directors or any committee
thereof, or both. No such payment shall preclude any director from serving the
corporation in any capacity and receiving compensation therefor.
4.12. Director Committees.
(a) Creation of Committees. In addition to the committees set
forth in this Article IV and unless the Articles provide otherwise, the Board of
Directors may create one (1) or more other committees and appoint members of the
Board of Directors to serve on them. Each committee shall have one (1) or more
members, who serve at the pleasure of the Board of Directors.
(b) Selection of Members. The creation of a committee and
appointment of members to it shall be approved by the greater of (1) a majority
of all the directors in office when the action is taken or (2) the number of
directors required by the Articles to take such action.
(c) Required Procedures. Sections 4.03 through 4.08 of this
Article IV, which govern meetings, action without meetings, notice and waiver of
notice, and quorum and voting requirements of the Board of Directors, apply to
committees and their members.
(d) Authority. Unless limited by the Articles, each committee
may exercise those aspects of the authority of the Board of Directors which the
Board of Directors confers upon such committee in the resolution creating the
committee, provided, however, that a committee may not: (1) authorize
distributions; (2) approve or propose to shareholders action that requires
shareholder approval under the Arizona Business Corporation Act; (3) fill
vacancies on the Board of Directors or on any of its committees; (4) amend the
Articles of Incorporation without shareholder action as provided by law; (5)
adopt, amend or repeal these Bylaws; (6) approve a plan of merger not requiring
shareholder approval; (7) authorize or approve reacquisition of shares, except
according to a formula or method prescribed by the Board of Directors; (8)
authorize or approve the issuance or sale or contract for sale of shares or
determine the designation and relative rights, preferences, and limitations of a
class or series of shares, except within limits specifically prescribed by the
Board of Directors; or (9) fix the compensation of directors for serving on the
Board of Directors or any committee of the Board of Directors.
4.13. Executive Committee. The Board of Directors shall appoint an
executive committee, consisting of at least three directors, including the
Chairman of the Board, who shall be the chairman of the Committee. The committee
shall have and exercise all lawfully delegable powers of the Board of Directors
while the Board is not in session, except as such delegation of powers may be
limited from time to time by resolution of the Board of Directors.
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4.14. Audit Committee. The Board of Directors shall appoint an audit
committee, consisting of at least two directors, provided, however, that
directors who are also officers of the corporation shall not be eligible for
membership on the committee. The audit committee shall:
(a) recommend the auditors;
(b) review the overall scope of the audit and the final
opinion of the external auditors;
(c) review the financial and accounting policies and
procedures used by the corporation;
(d) approve the organization and procedures of the internal
accounting and auditing departments;
(e) prepare a report of the Board of Directors;
(f) assure compliance with ethical standards.
4.15. Compensation and Nominating Committee. The Board of Directors
shall appoint a compensation and benefits committee, consisting of a least two
non-officer directors. The committee shall recommend to the Board candidates for
membership on the Board of Directors, and shall be empowered to administer and
make final decisions concerning:
a) employees' salaries and bonuses;
b) the company's Restricted Stock Plan;
c) the company's Incentive Bonus Plan;
d) all other company compensation and benefit plans.
4.16. Retirement Plan Administrative Committee. The Board of Directors
shall appoint an administrative committee consisting of three individuals to
establish and maintain the corporation's funding policy for its Retirement Plan
and Trust for Salaries employees and to act a fiduciary thereunder. Individuals
may be eligible for membership on the administrative committee without being
directors of the corporation.
4.17. Director Resignations. Any director or committee member may resign
from his or her office at any time by written notice delivered to the Board of
Directors, the Chairman of the Board, or the corporation at its known place of
business. Any such resignation will be effective upon its receipt unless some
later time is therein fixed, and then from that time. The acceptance of a
resignation will not be required to make it effective.
V. OFFICERS
5.01. Number of Officers. The officers of the corporation shall be a
President, a Secretary, and a Treasurer, each of whom shall be appointed by the
Board of Directors. Such other officers and assistant officers as may be deemed
necessary, including any Vice Presidents, may be appointed by the Board of
Directors. If specifically authorized by the Board of Directors, an officer may
appoint one (1) or more other officers or assistant officers. The same
individual may simultaneously hold more than one (1) office in the corporation.
5.02. Appointment and Term of Office. The officers of the corporation
shall be appointed by the Board of Directors for a term as determined by the
Board of Directors. The designation
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of a specified term grants to the officer no contract rights, and the Board of
Directors can remove the officer at any time prior to the termination of such
term. If no term is specified, an officer of the corporation shall hold office
until he or she resigns, dies, or until he or she is removed in the manner
provided by law or in Section 5.03 of this Article V. The regular election or
appointment of officers will take place at each annual meeting of the Board of
Directors, but elections of officers may be held at any other meeting of the
Board.
5.03. Resignation and Removal of Officers. An officer may resign at any
time by delivering written notice to the corporation at its known place of
business. A resignation is effective when the notice is delivered unless the
notice specifies a later effective date or event. Any officer may be removed by
the Board of Directors at any time, with or without cause. Such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Appointment of an officer shall not of itself create contract rights.
5.04. Duties of Officers. Officers of the corporation shall have
authority to perform such duties as may be prescribed from time to time by law,
in these Bylaws, or by the Board of Directors, the President, or the superior
officer of any such officer. Each officer of the corporation (in the order
designated herein or by the Board) will be vested with all of the powers and
charged with all of the duties of his or her superior officer in the event of
such superior officer's absence, death, or disability.
5.05. Bonds and Other Requirements. The Board of Directors may require
any officer to give bond to the corporation (with sufficient surety and
conditioned for the faithful performance of the duties of his or her office) and
to comply with such other conditions as may from time to time be required of him
or her by the Board of Directors.
5.06. Chairman of The Board. The Chairman shall be appointed by the
Board of Directors and shall preside at all meetings of the shareholders and of
the Board of Directors. He shall have such other powers and perform such other
duties as may be assigned to him by the Board of Directors. Unless he also
serves as the Chief Executive Officer, the Chairman shall not be considered an
employee of the corporation.
5.07. Chief Executive Officer. The Chief Executive Officer shall be
appointed by the Board of Directors and shall be responsible for the general
supervision of the business and property of the corporation. He shall possess
the same power as the president to sign all documents authorized by the Board of
Directors, unless restricted by law. In the absence of the Chairman, the Chief
Executive Officer shall preside at meetings of the shareholders and of the
Board. He shall have the power, subject to the authority of the Board of
Directors, to appoint and discharge all officers (except those required by these
bylaws to be appointed by the Board), employees, and agents; to define their
duties, and to fix their compensation, provided that any compensation over
$50,000 per year must first be approved by the Board. In the absence of the
Chairman, or the President, or both, the Chief Executive Officer shall undertake
those duties and responsibilities, if so directed by the Board. The Chief
Executive Officer shall have such other powers and responsibilities as may be
assigned to him by the Board.
5.08. President. Unless otherwise specified by resolution of the Board
of Directors, the President shall be the corporation's Chief Operating Officer
and, subject to the control of the Board of Directors, shall supervise and
control all of the business and affairs of the corporation and the performance
by all of its other officers of their respective duties and in general shall
perform all duties incident to the office of President and such other duties as
may be prescribed by the Board of Directors from time to time. The President
shall, when present, and in the absence of a Chairman of the Board and the Chief
Executive
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Officer, preside at all meetings of the shareholders and of the Board of
Directors. The President will be a proper officer to sign on behalf of the
corporation any deed, bill of sale, assignment, option, mortgage, pledge, note,
bond, evidence of indebtedness, application, consent (to service of process or
otherwise), agreement, indenture, contract, or other instrument, except in each
such case where the signing and execution thereof shall be expressly delegated
by the Board of Directors or by these Bylaws to some other officer or agent of
the corporation, or shall be required by law to be otherwise signed or executed.
The President may represent the corporation at any meeting of the shareholders
or members of any other corporation, association, partnership, joint venture, or
other entity in which the corporation then holds shares of capital stock or has
an interest, and may vote such shares of capital stock or other interest in
person or by proxy appointed by him or her, provided that the Board of Directors
may from time to time confer the foregoing authority upon any other person or
persons.
5.09. The Vice-President. If appointed, in the absence of the President
or in the event of his/her death or disability, the Vice-President (or in the
event there be more than one Vice-President, the Vice-Presidents in the order
designated at the time of their election, or in the absence of any such
designation, then in the order of their appointment) shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. If there is no Vice-President or in
the event of the death or disability of all Vice-Presidents, then the Treasurer
shall perform such duties of the President in the event of his or her absence,
death, or disability. Each Vice-President will be a proper officer to sign on
behalf of the corporation any deed, bill of sale, assignment, option, mortgage,
pledge, note, bond, evidence of indebtedness, application, consent (to service
of process or otherwise), agreement, indenture, contract, or other instrument,
except in each such case where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the corporation, or shall be required by law to be otherwise
signed or executed. Any Vice-President may represent the corporation at any
meeting of the shareholders or members of any other corporation, association,
partnership, joint venture, or other entity in which the corporation then holds
shares of capital stock or has an interest, and may vote such shares of capital
stock or other interest in person or by proxy appointed by him or her, provided
that the Board of Directors may from time to time confer the foregoing authority
upon any other person or persons. A Vice-President shall perform such other
duties as from time to time may be assigned to him/her by the President or by
the Board of Directors.
5.10. The Secretary. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors and any committee
of the Board of Directors and all unanimous written consents of the
shareholders, Board of Directors, and any committee of the Board of Directors in
one (1) or more books provided for that purpose; (b) see that all notices are
duly given in accordance with the provisions of these Bylaws or as required by
law; (c) be custodian of the corporate records and of any seal of the
corporation; (d) when requested or required, authenticate any records of the
corporation; (e) keep a register of the address of each shareholder which shall
be furnished to the Secretary by such shareholder; and (f) in general perform
all duties incident to the office of Secretary and such other duties as from
time to time may be assigned to him/her by the President or by the Board of
Directors. Except as may otherwise be specifically provided in a resolution of
the Board of Directors, the Secretary will be a proper officer to take charge of
the corporation's stock transfer books and to compile the voting record pursuant
to Section 3.05 above, and to impress the corporation's seal, if any, on any
instrument signed by the President, any Vice President, or any other duly
authorized person, and to attest to the same. In the absence of the Secretary, a
secretary pro tempore may be chosen by the directors or shareholders as
appropriate to perform the duties of the Secretary.
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5.11. The Treasurer. The Treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the corporation; (b) receive
and give receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
bank, trust companies, or other depositories as shall be selected by the Board
of Directors or any proper officer; (c) keep full and accurate accounts of
receipts and disbursements in books and records of the corporation; and (d) in
general perform all of the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him/her by the President or
by the Board of Directors. The Treasurer will render to the President, the
directors, and the shareholders at proper times an account of all his or her
transactions as Treasurer and of the financial condition of the corporation. The
Treasurer shall be responsible for preparing and filing such financial reports,
financial statements, and returns as may be required by law.
5.12. Assistant Secretaries and Assistant Treasurers. The Assistant
Secretaries and the Assistant Treasurers, when authorized by the Board of
Directors, may sign with the President or a Vice-President certificates for
shares of the corporation, the issuance of which shall have been authorized by a
resolution of the Board of Directors. The Assistant Secretaries and Assistant
Treasurers, in general, shall perform such duties as shall be assigned to them
by the Secretary or the Treasurer, respectively, or by the President or the
Board of Directors.
5.13. Chairman of the Board. The Board of Directors may elect a Chairman
to serve as a general executive officer of the corporation, and, if specifically
designated as such by the Board of Directors, as the chief executive officer of
the corporation. If elected, the Chairman will preside at all meetings of the
Board of Directors and be vested with such other powers and duties as the Board
of Directors may from time to time delegate to him or her.
5.14. Salaries. The salaries of the officers of the corporation may be
fixed from time to time by the Board of Directors or (except as to the
President's own) left to the discretion of the President. No officer will be
prevented from receiving a salary by reason of the fact that he or she is also a
director of the corporation.
5.15. Additional Appointments. In addition to the officers contemplated
in this Article V, the Board of Directors may appoint other agents of the
corporation with such authority to perform such duties as may be prescribed from
time to time by the Board of Directors.
VI. EXECUTION OF DOCUMENTS
6.01. Contracts, Etc. All contracts, conveyances, leases or other
corporate instruments shall be executed on behalf of the corporation by the
Chairman of the Board, by the President, the Sr.Vice President, or by such other
officer or officers of the corporation to whom the Chairman of the Board, the
President or the Board of Directors may delegate such authority, subject to the
following:
(a) No loan greater than $1,000,000 shall be contracted on
behalf of the corporation unless authorized by the Board
of Directors.
(b) No real property of the corporation may be sold for more
than $1,000,000, nor exchanged for other property valued
at more than $1,000,000 unless authorized by the Board
of Directors.
(c) A capital expenditure in excess of $1,000,000 for any
one purpose or project shall be authorized by the Board
of Directors.
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(d) In matters of auction bidding for property or property
rights, no bids totalling over $1,000,000 per auction
shall be made without the authorization of the Board of
Directors.
The Chairman or President shall report to the Board the total capital
expenditures, the total dollar amount of sales or exchanges, and the total
dollar amount of auction bids made which did not require Board approval.
6.02. Proxies. Unless otherwise provided by resolution of the Board of
Directors, the Chairman of the Board may in the name and on behalf of the
corporation appoint an attorney or attorneys, agent or agents of the corporation
(who may be or include himself or herself), in the name and on behalf of the
corporation to cast the votes which the corporation may be entitled to cast as a
shareholder or otherwise in any other corporation any of whose shares or other
securities may be held by the corporation, at meetings of the holders of the
shares or other securities of such other corporation, or to consent in writing
to any action by such other corporation, may instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent, and may
execute or cause to be executed in the name of, on behalf of, and under the
corporate seal of, the corporation all written proxies or other instruments as
may be necessary or proper to evidence the appointment of such attorneys and
agents.
VII. CERTIFICATES FOR SHARES AND THEIR TRANSFER
7.01. Certificates for Shares.
(a) Content. Certificates representing shares of the
corporation shall, at a minimum, state on their face the name of the issuing
corporation and that it is formed under the laws of the State of Arizona, the
name of the person to whom issued, and the number and class of shares and the
designation of the series, if any, the certificate represents. Such certificates
shall be signed (either manually or by facsimile to the extent allowable by law)
by one or more officers of the corporation, as determined by the Board of
Directors, or, if no such determination is made, by any of the Chairman of the
Board (if any), the President, any Vice-President, the Secretary, or the
Treasurer of the corporation, and may be sealed with a corporate seal or a
facsimile thereof. Each certificate for shares shall be consecutively numbered
or otherwise identified and will exhibit such information as may be required by
law. If a supply of unissued certificates bearing the facsimile signature of a
person remains when that person ceases to hold the office of the corporation
indicated on such certificates, they may still be countersigned, registered,
issued, and delivered by the corporation's transfer agent and/or registrar
thereafter, as though such person had continued to hold the office indicated on
such certificate.
(b) Legend as to Class or Series. If the corporation is
authorized to issue different classes of shares or different series within a
class, the designations, relative rights, preferences, and limitations
applicable to each class and the variations in rights, preferences, and
limitations determined for each series (and the authority of the Board of
Directors to determine variations for future series) shall be summarized on the
front or back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the corporation will furnish the
shareholder this information on request in writing and without charge.
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(c) Shareholder List. The name and address of the person to
whom shares are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the corporation.
(d) Lost Certificates. In the event of the loss, theft, or
destruction of any certificate representing shares of the corporation or of any
predecessor corporation, the corporation may issue (or, in the case of any such
shares as to which a transfer agent and/or registrar have been appointed, may
direct such transfer agent and/or registrar to countersign, register, and issue)
a new certificate, and cause the same to be delivered to the registered owner of
the shares represented thereby; provided that such owner shall have submitted
such evidence showing the circumstances of the alleged loss, theft, or
destruction, and his, her, or its ownership of the certificate, as the
corporation considers satisfactory, together with any other facts that the
corporation considers pertinent; and further provided that, if so required by
the corporation, the owner shall provide a bond or other indemnity in form and
amount satisfactory to the corporation (and to its transfer agent and/or
registrar, if applicable).
7.02. Registration of the Transfer of Shares. Registration of the
transfer of shares of the corporation shall be made only on the stock transfer
books of the corporation. In order to register a transfer, the record owner
shall surrender the shares to the corporation for cancellation, properly
endorsed by the appropriate person or persons with reasonable assurances that
the endorsements are genuine and effective. Unless the corporation has
established a procedure by which a beneficial owner of shares held by a nominee
is to be recognized by the corporation as the owner, the corporation will be
entitled to treat the registered owner of any share of the capital stock of the
corporation as the absolute owner thereof and, accordingly, will not be bound to
recognize any beneficial, equitable, or other claim to, or interest in, such
share on the part of any other person, whether or not it has notice thereof,
except as may expressly be provided by applicable law.
7.03. Shares Without Certificates. The Board of Directors may authorize
the issuance of uncertificated shares by the corporation and may prescribe
procedures for the issuance and registration of transfer thereof and with
respect to such other matters as the Board of Directors shall deem necessary or
appropriate.
VIII. INDEMNIFICATION OF DIRECTORS AND OFFICERS
8.01. Indemnification. Unless otherwise provided by these bylaws, the
corporation shall hold harmless and indemnify each of its directors and officers
("indemnities") to the fullest extent permitted by Arizona law.
8.02. Effect of Repeal. No repeal or amendment of this Article shall
diminish indemnitee's right to indemnification for acts taken before the date of
repeal or amendment.
IX. DISTRIBUTIONS
9.01. Distributions. Subject to such restrictions or requirements as may
be imposed by applicable law or the corporation's Articles or as may otherwise
be binding upon the corporation, the Board of Directors may from time to time
declare, and the corporation may pay or make, dividends or other distributions
to its shareholders.
15
<PAGE> 16
X. CORPORATE SEAL
10.01. Corporate Seal. The Board of Directors may provide for a
corporate seal of the corporation that will have inscribed thereon any
designation including the name of the corporation, Arizona as the state of
incorporation, the year of incorporation, and the words "Corporate Seal."
XI. EXEMPTION
11.02. Exemption From The Arizona Corporate Takeover Act. The
corporation, pursuant to the provisions of ARS 10-1211(A)(2) and 10-1223(A)(2),
and pursuant to the approval of the shareholders on May 10, 1991, has chosen to
exempt itself from the provisions of ARS 10- 1211 through 10-1223, concerning
Control Share Acquisitions and Business Combinations. This amendment does not
apply to any "control share acquisition" as defined in ARS 10-1201(9) made on or
before May 10, 1991, or to any "business combination" as defined in ARS
10-1201(10) whose "share acquisition date" as defined in ARS 10-1201(14) is on
or before May 10, 1991.(1)
XII. AMENDMENTS
12.01. Amendments. The corporation's Board of Directors may amend or
repeal the corporation's Bylaws unless:
(a) the Articles or the Arizona Business Corporation Act
reserve this power exclusively to the shareholders in
whole or part; or
(b) the shareholders in adopting, amending, or repealing a
particular Bylaw provide expressly that the Board of
Directors may not amend or repeal that Bylaw.
The corporation's shareholders may amend or repeal the corporation's
Bylaws even though the Bylaws may also be amended or repealed by its Board of
Directors.
I certify that the foregoing is a true and correct copy of the bylaws of New
Mexico and Arizona Land Company as last amended.
DATED as of this 8th day of March, 1996.
/s/E. M. Bedewi
- ------------------------------------
- --------
(1)The statutory references in this Section 11.04 have changed as a result of
the Arizona Business Corporation Act effective January 1, 1996.
16
<PAGE> 17
Secretary
17
<PAGE> 1
EXHIBIT 10.3
SCUDDER 401(k) PROTOTYPE PLAN
-----------------------------
Summary Plan Description
Employer Instructions
After establishing a 401(k) Plan, you are required to provide a Summary
Plan Description to all of your participants within 120 days. You are also
required to provide the Summary to new participants within 90 days after they
become eligible for the plan, and to beneficiaries within 90 days after
benefits have commenced. If you ever amend the plan, you must provide
participants and beneficiaries with an updated Summary Plan Description. If you
do not amend the plan, you must provide the Summary to participants and
beneficiaries every 10 years.
In addition, you must submit a copy of the Summary to the Department of
Labor (DOL) after you adopt the plan and whenever you update and distribute the
Summary to participants. The address for the DOL is:
SPD
Pension and Welfare
Benefit Programs
U.S. Department of Labor
200 Constitution Ave., N.W., Room N4641
Washington, D.C. 20216
The Summary Plan Description that you distribute must be thorough,
accurate and complete and must follow a prescribed set of rules. To help you
comply with this requirement, you may use the attached version of the Summary.
Once you complete this with the information from your Adoption Agreement
(abbreviated as "AA" in the Summary), this "model" Summary will accurately
reflect the provisions of your plan.
<PAGE> 2
Scudder
401(k) Plan
Summary Plan Description
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. INTRODUCTION ................................................. 1
2. DEFINITIONS .................................................. 2
"Compensation" ....................................... 2
"Employer" ........................................... 3
"Highly Compensated Employee" ........................ 3
"Hours of Service" ................................... 4
"Key Employee" ....................................... 4
"One-Year Break in Service" .......................... 5
"Participant" ........................................ 5
"Plan Year" .......................................... 5
"Top Heavy" .......................................... 5
"Year of Service" .................................... 5
"Vesting Year" ....................................... 6
3. BELONGING TO THE PLAN ........................................ 7
4. CONTRIBUTIONS TO THE PLAN .................................... 9
EMPLOYEE CONTRIBUTIONS ....................................... 9
Salary Reduction Contributions ....................... 9
Deferred Cash Contributions .......................... 10
Rollover Contributions ............................... 10
Nondeductible Voluntary Contributions ................ 11
EMPLOYER CONTRIBUTIONS ....................................... 11
Profit Sharing Contributions ......................... 11
Matching Contributions ............................... 12
TAXATION OF CONTRIBUTIONS .................................... 13
VESTING OF CONTRIBUTIONS ..................................... 13
5. BENEFITS AND DISTRIBUTIONS FROM THE PLAN ..................... 14
TIMING OF DISTRIBUTIONS ...................................... 14
Normal Distribution Time ............................. 14
Hardship Distributions ............................... 15
Other Distribution Times ............................. 16
FORMS OF DISTRIBUTIONS ....................................... 16
Normal Distribution Form ............................. 16
Optional Distribution Forms .......................... 17
DISTRIBUTIONS OF BENEFITS UPON YOUR DEATH .................... 17
Pre-retirement Death Benefits ........................ 17
Post-retirement Death Benefits ....................... 17
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
6. MISCELLANEOUS ................................................ 18
Nondiscrimination Testing ............................ 18
Investment of the Trust Fund ......................... 18
Loans ................................................ 19
Amendment and Termination of Plan .................... 19
Administration ....................................... 20
Claims and Review Procedure .......................... 20
"Spendthrift" Provisions ............................. 21
Trust Fund not Insured................................ 21
Inability to Locate Person to Receive Payment,
Incompetent Beneficiary ...................... 22
Special Rights under ERISA ........................... 22
7. REFERENCES ................................................... 26
</TABLE>
<PAGE> 4
1. INTRODUCTION
This is a summary of the
New Mexico and Arizona Land Company 401(k) Plan which has
recently been established or amended. The purpose of the Plan is to provide
retirement income for those eligible. The effective date of the Plan or
amendment is l/l/92 (insert date specified in Section XIV of AA).
We prepared this Summary to comply with a legal requirement for a "summary
plan description," describing your rights and obligations as a Participant in
the Plan in language which should be easy for you to understand.
In this Summary, we may have unintentionally left out or misstated some
items. However, please remember that this Summary cannot cover all the details
of the Plan or act as a substitute for the Plan document which contains all of
the provisions of the Plan. If there is any inconsistency between this Summary
and the actual provisions of the Plan, the actual provisions will control.
If you have any questions about the Plan or about your benefits under the
Plan, please contact your Plan Administrator, NM and AZ Land Co.
Name of Plan Administrator
(the Employer unless
Employer appoints someone
else to act as Plan
Administrator)
1
<PAGE> 5
2. DEFINITIONS
Here are definitions for some terms that are used throughout this Summary
and the Plan. Since these words may have technical meanings slightly different
from their ordinary meanings, please refer to these definitions when you are
reading this summary or the Plan document.
"Compensation" means the amount paid to you by the Employer during any Plan
Year (defined below) as reported to the federal government for
purposes of withholding federal income taxes for that Plan Year plus
any salary reduction contributions you make to a 401(k), 403(b),
Salary Reduction SEP or a Cafeteria Plan.
Compensation for Purposes of Profit Sharing Contributions will
(check the appropriate box according to Sec. VIII.A. of AA):
/X/ include Salary Reduction Contributions, Deferred Cash Contributions
(which you did not elect to take in cash), and other amounts which are
excluded from your income as reported to the federal government.
/ / not include Salary Reduction Contributions, Deferred Cash
Contributions (which you did not elect to take in cash), and other
amounts which are excluded from your income as reported to the federal
government.
The maximum amount of Compensation which may be considered for
most purposes under the Plan is limited to $200,000 per Plan Year (as
indexed for inflation, $228,860 for 1992). If you are self-employed,
Compensation means earned income as defined by the Internal Revenue Code.
2
<PAGE> 6
"Employer" means the organization named in the Adoption Agreement, any successor
organization adopting this Plan, and all organizations and entities which
are required by the Internal Revenue Code to be aggregated with the
organization named in the Adoption Agreement.
"Highly Compensated Employee" is an employee who:
- owns or owned more than 5% of the Employer during the Plan
Year or the preceding Plan Year,
- earned more than $75,000 (as indexed for inflation) in annual
compensation from the Employer during the preceding Plan Year,
- earns more than $75,000 (as indexed for inflation) in annual
compensation from the Employer during the Plan Year and is
among the 100 most compensated employees during the current
year,
- earned more than $50,000 (as indexed for inflation) in annual
compensation from the Employer during the preceding Plan Year
and was in the "top-paid group" of employees for the same
year. "Top-paid group" means the top 20% of employees, based
on compensation for the year,
- earns more than $50,000 (as indexed for inflation) in annual
compensation from the Employer during the Plan Year and is
both a member of the "top-paid group" and among the l00 most
compensated employees during the Plan Year,
3
<PAGE> 7
- was an officer of the Employer and earned more than $45,000
(as indexed for inflation), during the preceding Plan Year,
or
- is an officer and earns more than $45,000 (as indexed for
inflation) for the Plan Year.
"Hours of Service" means any hours for which you are either paid or entitled to
be paid by the Employer for performing duties or for other reasons such as
vacation, holidays, sick days, maternity or paternity leave, disability,
jury or military duty, layoff or authorized leave of absence.
Hours of Service are used when determining whether you have met the
eligibility and vesting requirements of the Plan.
Please note that Hours of Service you may have accumulated for reasons
other than performing duties, such as vacation, maternity leave, etc.,
cannot exceed 501 hours for each continuous period during which you do not
perform any duties.
"Key Employee" is an employee who at any time during the Plan Year, or any of
the preceding four Plan Years, is one or more of the following:
- an individual owning more than 5% of the business
- an individual owning more than 1% of the business and earning
more than $150,000
4
<PAGE> 8
- an officer of the business earning more than $45,000 (as
indexed for inflation)
- one of the 10 employees earning more than $30,000 and owning
the largest interests in the Employer
"One-Year Break in Service" is a 12 month period during which you complete 500
or less Hours of Service (see definition above). The 12 month periods
are measured from the day you began working for the Employer or an
anniversary of that day. (Note: if a "Year of Service" is defined below
as a 12 month period during which you complete 501 or less Hours of
Service, then a One-Year Break in Service is a 12 month period during
which you do not complete the number of Hours of Service specified in
the "Year of Service" definition below.
"Participant" means an employee who has satisfied the eligibility requirements
of the Plan and is thereby eligible to participate in the Plan. See
Section 3. of this Summary for the Plan's eligibility requirements.
"Plan Year" means the 12-month period ending on the last day of
December
----------------------- over which Plan records are maintained.
(complete by referring to
Sec. XV.A. of your AA)
"Top Heavy" describes a Plan in which the sum of account balances of Key
Employees (defined above) exceeds 60% of the sum of account balances of
all Participants.
"Year of Service" is a 12-consecutive-month period during which you
have worked 1,000 Hours of Service
---------------
(complete by referring
to Sec. I.E. of your AA)
5
<PAGE> 9
beginning on the day you first complete an Hour of Service or on an
anniversary of that day. For example, if you started to work for the
Employer on October 4, a "Year of Service" would run from that October
4 to the next October 3.
"Vesting Year" means a year to be accrued on the vesting schedule (see "Vesting
of Contributions" on page 13). A Vesting Year will be credited to you
whenever you complete during the appropriate measuring period (complete
by referring to Sec. V.E. of your AA):
/X/ 1,000 Hours of Service (insert # from Sec. I.E. of your AA).
/ / ______Hours of Service (insert # from Sec. I.E. of your AA) or
receive an allocation of the Employer's Profit Sharing
Contribution for that Plan Year, or both.
A Vesting Year will be measured (complete by referring to
Sec. V.D. of your AA):
/ / on the 12-consecutive-month period beginning on the first day you
complete an Hour of Service or an anniversary of that date.
/X/ on the Plan Year.
When calculating your Vesting Years, the Employer will also include
your employment (check appropriate boxes, if any, according to Sec.
V.C. of your AA):
/X/ before this Plan or a predecessor plan was established.
/ / before the first Plan Year in which you reached the age of 18.
/ / after five consecutive One-Year Breaks in Service (but this
inclusion will apply only for the purpose of computing the
vested percentage of Employer Profit Sharing and Matching
Contributions made before such break).
6
<PAGE> 10
3. BELONGING TO THE PLAN
Before you become a Participant in the Plan, you must satisfy certain
eligibility requirements. These requirements are explained in this section.
You have the right to make Salary Reduction Contributions and/or Deferred
Cash Contributions to the Plan after you complete One Year (insert "One Hour" if
you chose immediate participation in Sec. I.A. of AA; otherwise insert the time
period specified in Sec. I.A. of AA) of Service for the Employer.
You have the right to receive Employer Profit Sharing and Matching
CONtributions made to the Plan after you complete One Year (insert "One hour" if
you chose immediate participation in Sec. I.C. of AA; otherwise insert the time
period specified in Sec. I.C. of AA) of Service for the Employer.
If you are required to complete a number of years to be eligible to
participate, for example, 1 or 2 years, you must complete 1,000 Hours of
Service (complete by referring to Sec. I.E. of AA) during each of the years in
order for the year to count as a Year of Service. The years are measured over
12-month periods beginning with the day you began working for the Employer or an
anniversary of that date. When calculating your Hours of Service for each week
during which you work at least one hour for the Employer, your Employer will
credit you with (complete by referring to Sec. I.F. of AA):
7
<PAGE> 11
/X/ the actual number of hours for which you performed services
for the Employer during that week.
/ / 45 Hours of Service.
If you are required to complete a fraction of a year to participate in the
Plan, for example, 2 1/2 years or 1 1/2 years, you do not have to complete any
specified number of Hours of Service to receive credit for the fraction of a
year.
All employees who have completed the necessary length of service stated
above and who are at least 21 years of age (complete by referring to Sec. I.G.
of AA or strike out if inapplicable) are eligible to participate except
(complete by referring to Sec. I.H. of AA):
/X/ Non-resident aliens who work for the Employer outside of the
United States.
/X/ Individuals covered by a collective bargaining contract.
(Please refer to Plan document for specific details).
You will become a Participant for Salary Reduction Contributions and/or
Deferred Cash Contributions on (complete by referring to Sec. I.B. of AA):
/ / the first day you complete all of the above applicable
requirements.
/ / the first day of the next month after you complete all of
the above applicable requirements.
/ / The first day of the next pay period after you complete all
of the above applicable requirements.
/X/ the first day of the next quarter of the Plan Year after you
complete all of the above applicable requirements.
8
<PAGE> 12
You will become a Participant for Employer Contributions on (complete by
referring to Sec. I. D. of AA) :
/ / the first day you complete all of the above applicable
requirements.
/ / the first day of the next month after you complete all of the
above applicable requirements.
/ / the first day of the next pay period after you complete all of
the above applicable requirements.
/X/ the first day of the next quarter of the Plan Year after you
complete all of the above applicable requirements.
If you leave your job with the Employer, you cease to become a Participant
on the day you leave. If you return to work with the Employer, however, you will
immediately became a Participant again and in most cases will receive credit for
any Years of Service and Vesting Years you had accumulated previously. You will
not receive credit for these years if you left your job before becoming vested
or you left for a period of time longer than all of your previous years of
service or five years, whichever is greater.
4. CONTRIBUTIONS TO THE PLAN
EMPLOYEE CONTRIBUTIONS
Salary Reduction Contributions
You may elect to have part of your Compensation contributed to the plan
through salary reduction. These contributions are called "Salary Reduction
Contributions." The minimum percent of your Compensation that you may
contribute is 0 (complete by referring to II. (A) of AA), and the maximum
percent of your Compensation that you are allowed to contribute is 20 (complete
by referring to II. (A) of your AA).
9
<PAGE> 13
Deferred Cash Contributions (refer to Sec. II. (B) of your
AA; strike out if inapplicable)
You may elect to have all or a portion of any cash bonuses you receive
from your Employer contributed to the plan as "Deferred Cash Contributions." The
Employer will give you a reasonable time to elect to contribute cash bonuses to
the plan.
Your Salary Reduction and Deferred Cash Contributions together are limited
for each calendar year to $7,000, as indexed to inflation. For 1991, the indexed
limit is $8,475, 1992, $38,728. If you contribute more than is allowed for any
year, you should notify your Employer between January and March 1 of the
following year so that the Employer will be able to have the excess removed by
April 15th of that same following year to avoid any tax penalty.
Rollover Contributions (strike out if inapplicable)
If the Plan Administrator allows it, you may make a Rollover Contribution to
the Plan from another tax-qualified plan. You must make a Rollover Contribution
within 60 days of receiving the rollover amount. In most cases, the Plan
Administrator will require that you state in writing that the amount is eligible
for a rollover according to the Internal Revenue Code requirements. Any Rollover
Contributions and their earnings are always 100% vested, and you may withdraw
all or a portion of your Rollover Contributions and any earnings on those
contributions at any time, as long as you give at least 30 days' written notice
to the Plan Administrator.
10
<PAGE> 14
Non-deductible Voluntary Contributions (refer to Sec. XI of AA; strike out
if inapplicable)
You may make Non-deductible Voluntary Contributions on your own behalf
whenever the Plan Administrator allows you to. The maximum amount you may
contribute may not exceed 10% of your total compensation while you have been a
Participant in the Plan. These voluntary contributions and their earnings are
always 100% vested. You may withdraw all or a portion of your Non-deductible
Voluntary Contributions and any earnings on those contributions at any time, as
long as you give at least 30 days, written notice to the Plan Administrator.
EMPLOYER CONTRIBUTIONS
You will qualify to receive an allocation of any Employer Profit Sharing and
Matching Contributions if you are a Participant (complete by referring to Sec.
VI.A. of AA):
/X/ at any time during the Plan Year regardless of the number of
Hours of Service you completed during the Plan Year.
/ / at any time during the Plan Year if you completed
(insert # of hours from Sec. VI.A. of AA) Hours of Service
during the Plan Year.
Profit Sharing Contributions (Refer to Sec. III. of AA; strike out if
inapplicable)
For each Plan Year, the Employer may make a contribution out of profits.
Your Employer will make Profit Sharing Contributions on behalf of
(complete by referring to VI.B. of AA) :
/X/ every Participant entitled to an allocation.
/ / only those Participants entitled to an allocation who are
Non-Highly Compensated Employees.
11
<PAGE> 15
Profit Sharing contributions will be divided among the accounts of the
Participants entitled to an allocation according to this formula:
Participant's Compensation
Total Employer X for the Plan Year = Amount
Contribution Total Compensation for Credited to
Plan Year for all Participant's
Participants Entitled Account
to a Contribution.
The explanation of how Compensation is defined for the purpose of Profit
Sharing Contributions can be found on pages 2-3 of this Summary.
Matching Contributions (see Sec. IV.A. of AA; strike out if inapplicable)
Your Employer will match your:
/X/ Salary Reduction Contributions
/ / Deferred Cash Contributions
by the following amount(s) (complete by referring to Sec. IV.B. of AA):
100% of first 3% of salary
However, your Employer will not match your contributions below 0 (indicate
dollar or percentage from. Sec. IV.C. of AA) of your Compensation and will not
match your contributions by more than 3% (indicate dollar or percentage from
Sec. IV.C. of AA) of your Compensation.
The explanation of how Compensation is defined for the purpose of Employer
Matching Contributions can be found on page 2 of this Summary.
Your Employer will make these contributions on behalf of (complete by
referring to Sec. VI.C. of AA):
12
<PAGE> 16
/X/ every Participant entitled to an allocation.
/ / only those Participants entitled to an allocation who are
Non-Highly Compensated Employees.
TAXATION OF CONTRIBUTIONS
All contributions made to your Account, other than Non-deductible Voluntary
Contributions, are not currently subject to federal tax, but will be subject to
federal income taxation along with their earnings when benefits are paid to you
or your beneficiaries.
VESTING OF CONTRIBUTIONS
All contributions you make (Salary Reduction Contributions, Deferred Cash
Contributions, Rollover, Non-deductible Voluntary Contributions) are fully
vested and nonforfeitable when made. Once assets are vested, " they are
"non-forfeitable", that is, not lost or taken away even if you leave your job.
All Profit Sharing Contributions made by the Employer on your behalf and any
earnings on those contributions will vest and become non-forfeitable (complete
by referring to Section V.A. of AA):
/X/ immediately.
/ / in 20% increments beginning after you have completed 2 Vesting
Years so that you will be 100% vested after completing 6
Vesting Years.
/ / according to this vesting schedule:
<TABLE>
<CAPTION>
Vesting Years Percent Vested
------------- --------------
<S> <C> <C>
1
---------------
2
---------------
3
---------------
4
---------------
5
---------------
6
---------------
</TABLE>
13
<PAGE> 17
All Matching Contributions and any earnings on those contributions will vest
and become non-forfeitable (complete by referring to Sec. V.B.):
/X/ immediately.
/ / in 20% increments beginning after you have completed 2 Vesting
Years so that you will be 100% vested after completing 6
Vesting Years.
/ / according to this vesting schedule:
<TABLE>
<CAPTION>
Vesting Years Percent Vested
------------- --------------
<S> <C>
1
---------------
2
---------------
3
---------------
4
---------------
5
---------------
6
---------------
</TABLE>
5. BENEFITS AND DISTRIBUTIONS FROM THE PLAN
TIMING OF DISTRIBUTIONS
Normal Distribution Time
Your Normal Retirement Date will be when you reach the age of 59 1/2 (insert
age from Sec. IX. of AA).
You may receive distributions from your account in monthly installments
beginning within 60 days after the end of the Plan year in which you either
reach your Normal Retirement Date (stated above) or when you stop working for
the Employer, Whichever is later. In most cases, these monthly installments will
be paid to you for 120 months (see "Normal Distribution Form", page 16).
However, you must begin to receive benefits when you reach the age of 70 1/2,
even if you are still working for the Employer. You are required to start
receiving benefits not later than the April 1st following the year in which you
reach age 70 1/2, and you must take minimum distributions for each following
year by December 31st of each year. If you do not receive your required minimum
distribution for any year, you will be subject to an IRS penalty of 50% of the
amount that you did not receive.
14
<PAGE> 18
Hardship Distributions (see Sec. X. of AA; strike out if inapplicable)
You are also eligible to receive distributions from your account if you
encounter financial hardship. Hardship distributions will be only granted for
an immediate and heavy financial need resulting from one or more of the
following:
1. Medical expenses for you, your spouse, or any of your
dependents but only to the extent that the expenses are
deductible from your income on your federal income tax return.
2. Purchase of a principal residence for you (this does not
include mortgage payments)
3. Payment of tuition for the next semester or quarter of
post-secondary education for you, your spouse, your children
or your dependents.
4. Payment to prevent your eviction from your principal residence
or to prevent foreclosure on the mortgage on your principal
residence.
You must also satisfy the following conditions to receive a hardship
distribution:
1. You must have taken all other permissible distributions or
nontaxable loans from this Plan or any other plan of the
Employer.
<PAGE> 19
2. You will riot be able to make Salary Reduction Contributions,
Deferred Cash Contributions, and Nondeductible Voluntary
Contributions for twelve months after you take a hardship
distribution.
3. The hardship distribution cannot exceed the amount of your
immediate and heavy financial need.
4. For the year following the year in which you took the hardship
distribution, the maximum amount that you will be able to
contribute to the Plan by Salary Reduction Contributions and
Deferred Cash Contributions will be the difference between (a)
the limit on Salary Reduction and Deferred Cash Contribution
for that year ($7,000 as indexed for inflation) and (b) the
amount you contributed to the Plan by Salary Reduction and
Deferred Cash Contributions in the year you took the hardship
distribution.
Other Distribution Times
You may elect an earlier time for distributions to begin, provided that
distributions do not begin before you have reached age 59 1/2, become disabled,
or separated from service.
FORM OF DISTRIBUTIONS
Normal Distribution Form
Under the normal distribution form, your vested account balance will be
distributed to you in substantially equal monthly installments over a ten year
period, unless you elect one of the optional forms described
16
<PAGE> 20
below . However, the normal distribution form for a Hardship Distribution is a
single payment.
Optional Distribution Forms
If you elect not to have your vested account balance distributed in the
normal method, i.e., installments for ten years, you may have your vested
account balance distributed in a lump sum or fixed installment payments to be
paid to you over a period not greater than the joint life expectancy of you and
a designated Beneficiary.
DISTRIBUTIONS OF BENEFITS UPON YOUR DEATH
Pre-retirement Death Benefits
If you are married and you die before distributions from your account have
begun, your vested account balance will be distributed to your Spouse, unless
you designate an alternative Beneficiary (or Beneficiaries) for all or a portion
of your account with your Spouse's written consent. If you are unmarried at the
time of your death, your vested account balance will be paid to your designated
Beneficiary or Beneficiaries.
Distribution(s) to your spouse or Beneficiary will be made in the form(s)
determined by each spouse or Beneficiary.
Post-retirement Death Benefits
If you die after the distribution of your vested account balance has already
commenced, the remainder of your vested account balance will be distributed to
your Spouse or the Beneficiary (or Beneficiaries) you properly designated before
your death.
17
<PAGE> 21
6. MISCELLANEOUS
Nondiscrimination Testing
Each year the Employer is required to test the plan for nondiscrimination.
The test is performed by comparing the average percentage of Compensation
contributed on behalf of the Highly Compensated Employees with the average
percentage of Compensation contributed on behalf of the non-Highly Compensated
Employees. The average percentage for the Highly Compensated cannot exceed the
average percentage for the non-Highly Compensated by more than a certain amount.
If the plan fails the nondiscrimination test, the Employer will be required
to take steps, which may include returning some of the contributions made on
behalf of the Highly Compensated Employees, to bring the plan into compliance
with the nondiscrimination rules.
Investment of the Trust Fund
All contributions in your name are held in a separate account maintained in
your name and invested by the Trustee. The Trust Fund is maintained strictly for
the benefit of Participants and their Beneficiaries; the Trustee is required to
act only in their interest. Decisions with respect to the investment of the
assets in your particular account will be made by (check appropriate box
according to Sec. XII. of AA):
/X/ you.
/ / the Plan Administrator.
18
<PAGE> 22
Loans
(Check appropriate box according to Sec. XIII. of AA):
/ / Loans are not permitted.
/X/ Loans are permitted. Loans are made only from your account and
are subject to the nondiscriminatory terms and conditions
prescribed by the Administrator, as described in the loan
policy attached to this Summary.
Amendment and Termination of Plan
The Employer has the right to amend or terminate the Plan at any time.
However, the Plan has the following provisions to protect your benefits if the
Plan is either amended or terminated: once the Employer has made a valid
contribution to the Trust, the Employer cannot recover it. Similarly, once you
have a vested benefit, it cannot be taken away. Finally, unless the law requires
it, or the government gives special permission, the amount in your account
cannot be reduced and the Plan's distribution options cannot be changed.
Once you become a Participant in the Plan, you will maintain your interest
in all future Employer contributions regardless of whether the Employer changes
the Plan's eligibility and/or vesting requirements. If the vesting schedule is
changed, Participants with 3 or more Vesting Years (5 or more Vesting Years for
Participants who have not been credited with an Hour of Service in a Plan Year
beginning after 12/31/88) may choose to keep the old vesting schedule for their
accounts.
If the Plan is combined in any way with another plan, your benefit under the
combined plan will not be less than it would have been if the Plan had
terminated, instead of being combined with the other plan.
If the Plan terminates or the Employer completely discontinues
contributions, the Administrator will instruct the Trustee as to whether and how
to distribute Participants' accounts.
19
<PAGE> 23
The Employer has delegated a limited power to amend the Plan to Scudder
Investor Services, Inc.
Administration
The Individual or entity whose name appears on page 25 will serve as
Administrator of the Plan. It is the Administrator's job to keep lists of
Participants and their Beneficiaries, to process disbursement orders, to take
care of bookkeeping, recordkeeping and to prepare reports for employees and
government agencies. The Administrator will also have the authority to decide
all questions about the interpretation of Plan provisions and to hold hearings
on disputed claims for benefits.
Claims And Review Procedure
The Administrator will administer the Plan to provide benefits to you
automatically as soon as you are entitled to receive them; however, the
following procedure is available to you if you feel that you are entitled to a
benefit you are not receiving:
(a) Making a Claim
You must make a claim to the Administrator in writing unless the
Administrator agrees that this formality is not required.
(b) Notice of Reason For Denial
If the Administrator denies your claim to a benefit, you must receive
written notice of the denial within 60 days after the day you filed your
claim. This notice must give you the reasons for the denial and a
description of what your rights are for review of the denial.
20
<PAGE> 24
(c) Review
You will have 60 days from the day you received a denial from the
Administrator to make a written application for review. You may have a
hearing at that review session if you ask for it. If you request a hearing,
you may have a lawyer with you, you may examine the Plan documents, and
you may submit your own comments in writing.
The Administrator must make a decision on the review within 60 days of
your application, except that up to 60 more days may be taken if the
Administrator finds that special circumstances exist, such as the need to
hold a hearing. You will receive the Administrator's decision in writing,
including reasons for that decision.
"Spendthrift" Provisions
Generally, the Plan does not allow you to pledge, give away or sell your
rights to your account. Except to the extent that the plan permits you to take
out loans on your account, and except as ordered by a court pursuant to a
qualified domestic relations order, your account balance may not be reduced for
any reason.
Trust Fund Not Insured
The funds in the Plan are not insured because insurance is not available for
this type of retirement plan. Pension insurance is available only for plans in
which the actual dollar amount of the benefits is known. In this Plan, the
actual dollar amount of the contributions varies from year to year, and the
amount in your account depends on the investment results in the Trust Fund. The
value in dollars of your benefits will therefore not be known until you are
entitled to receive them. Consequently, the Plan is not eligible for insurance.
21
<PAGE> 25
Inability to Locate Person to Receive Payment, Incompetent Beneficiary
If the person eligible to receive any benefit from the Plan is unable to be
located or identified, the Administrator, in his/her discretion, may direct the
Trustee to: (1) forfeit and reallocate the benefit to the remaining
Participants, (2) retain the benefit in the Trust, or (3) pay the benefit to a
court pending judicial determination of who is entitled to the benefit. However,
if the benefit is forfeited and reallocated, the Employer will be required to
reinstate the benefit if the person eligible to receive the benefit is later
located or identified.
If the Administrator decides that any person to whom a benefit is payable is
physically or mentally incapable of handling his or her financial affairs, the
Administrator may direct the Trustee to make payments that would normally be due
to that individual, either to the individual's legal representative or to any
of the individual's relatives or friends, or directly for the individual's
support and maintenance.
Special Rights under ERISA
As a participant in the Plan, you are entitled to certain rights and
protections under ERISA (Employee Retirement Income Security Act of 1974).
ERISA provides that all participants will be entitled to:
(a) Examine without charge, at the Administrator's office, all
Plan documents including insurance contracts and copies of all
documents filed by the Plan with the U.S. Department of Labor,
such as annual reports and Plan descriptions.
22
<PAGE> 26
(b) Obtain copies of all Plan documents and other Plan information
upon written request to the Administrator. The Administrator
may make a reasonable charge for the copies.
(c) Receive a summary of the Plan's annual financial report. The
Plan Administrator is required by law to furnish each
participant with a copy of this summary financial report.
(d) Obtain a statement telling you whether you have a right to
receive a pension at normal retirement age, and if so, what
your benefits would be at normal retirement age if you stop
working under the Plan now. If you do not have a right to a
benefit, the statement will tell you how many more years you
have to work to have a right to a benefit. You must request
this statement in writing. The Plan Administrator is not
required to provide this statement more than once a year, but
must provide the statement free of charge.
(e) In addition to creating rights for plan participants, ERISA
imposes duties upon the people who are responsible for the
operation of the employee benefit plan. The people who operate
your plan, the Administrator and the Trustee, are called
"Fiduciaries" of the plan, and have a duty to act prudently
and in the interest of you and other Plan Participants and
Beneficiaries.
No one, including the Fiduciaries, your Employer, your union
or any other person, may fire you or otherwise discriminate
against
23
<PAGE> 27
you in any way to prevent you from obtaining a pension benefit or
exercising your rights under ERISA. If your claim for a pension benefit
is denied in whole or in part, the Plan Administrator must provide you
with a written explanation of the reason for the denial. You also have
the right to have the Administrator review and reconsider your claim.
You can take the following steps to enforce the above rights under
ERISA:
1. if you request materials from the Plan Administrator and do
not receive them within 30 days, you may file suit in a
federal court. In such a case, the court may require the
Administrator to provide the materials and pay you up to $100
a day until you receive the materials, unless the materials
were not sent because of reasons beyond the control of the
Administrator.
2. If you have a claim for benefits which is denied or ignored,
in whole or in part, you may file suit in a state or federal
court.
3. If the Plan Fiduciaries misuse the Plan's money, or if you are
discriminated against for asserting your rights, you may ask
for assistance from the U.S. Department of Labor, or you may
file suit in a federal court. The court will decide who
should pay court costs and legal fees. If you are successful,
the court may order the person you have sued to
24
<PAGE> 28
pay these costs and fees. If you lose, the court may order you
to pay these costs and fees if, for example, it finds your
claim is frivolous.
If you have any questions about your Plan, you should contact the Plan
Administrator. If you have any questions about this statement or about your
rights under ERISA, you should contact the nearest Area Office of the U.S.
Labor-Management Services Administration, Department of Labor.
25
<PAGE> 29
7. REFERENCES
Name of Plan:
NZ 401(k) Plan
---------------------------------
Plan Number:
(enter the 3 digit number assigned by the
Employer to the Plan: it will be 001 if this
is the first plan the Employer has adopted,
002 if the second, etc. It is not the
numbers printed on the first page of the AA,
for example, 001 or 002.)
002
---------------------------------
Plan Year: The 12-month period ending on the
last day of:
(enter last month of Plan Year;
see Sec. XV.A. of AA) December
Name, Address and Phone Number
of Employer: New Mexico and Arizona Land
Company
2810 N. 3rd Street, Suite 203
Phoenix, AZ 85004
(602)266-5455
Employer Identification Number: 43 - 0433090
Employer's Fiscal Year: The 12-month period ending on the
last day of: December
Name and Address of Plan Administrator
(if Employer intends to serve as
Administrator, fill in the Employer's
name and address; otherwise insert
the name and address of the person
the Employer has designated to
serve as Administrator) New Mexico and Arizona Land Company
2810 N. 3rd Street, Suite 203
Phoenix, AZ 85004
26
<PAGE> 30
Name and Address of Agent for
Service of Legal Process:
(Complete with name and address of
an individual upon whom legal process
may be served. If such individual is
not the Administrator, also insert
"legal process may also be served
on the Administrator." W. M. Kelley, VP-Law
New Mexico and Arizona Land Company
2810 N. 3rd Street, Suite 203
Phoenix, AZ 85004
Name and Address of Trustee:
Scudder Trust Company
76 Northeastern Boulevard
Suite 34
Nashua, NH 03062
:mmm - d:\mm\forms\401kspd5 03/25/92
27
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 7,142
<SECURITIES> 0
<RECEIVABLES> 9,848
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 47,478
<DEPRECIATION> 5,293
<TOTAL-ASSETS> 52,771
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 13,738
<OTHER-SE> 21,890
<TOTAL-LIABILITY-AND-EQUITY> 66,328
<SALES> 18,964
<TOTAL-REVENUES> 23,660
<CGS> 10,569
<TOTAL-COSTS> 11,576
<OTHER-EXPENSES> 450
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 963
<INCOME-PRETAX> 8,046
<INCOME-TAX> 3,200
<INCOME-CONTINUING> 4,846
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,846
<EPS-PRIMARY> 1.61
<EPS-DILUTED> 1.61
</TABLE>
