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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED DECEMBER 31, 1994 COMMISSION FILE NUMBER 0-11688
AMERICAN ECOLOGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-3889638
(STATE OR OTHER JURISDICTION (I.R.S.EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5333 WESTHEIMER, SUITE 1000, HOUSTON, TEXAS 77056-5407
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 624-1900
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, $.01 par value per Share
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No /_/
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will be not contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/.
At March 1, 1995, Registrant had outstanding 7,818,828 shares of its Common
Stock. The aggregate market value of the Registrant's voting stock held by non-
affiliates at this date was approximately $29,630,000 based on the closing
price of $6.00 per share as reported on the National Association of Securities
Dealers Automated Quotations National Market System. For purposes of the
foregoing calculation, all directors and officers of the Registrant have been
deemed to be affiliates, but the Registrant disclaims that any of such directors
or officers is an affiliate.
Documents Incorporated by Reference
Portions of the Proxy Statement for 1995 Part III
Annual Meeting of Stockholders.
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PART I
ITEM 1. BUSINESS
American Ecology Corporation and its subsidiaries (hereinafter collectively
referred to as the "Company" unless the context indicates otherwise) provide
processing, packaging, transportation, remediation and disposal services for
generators of hazardous waste and low-level radioactive waste. Hazardous waste
consists primarily of industrial waste, including waste regulated under the
Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA" or "Superfund"), and the Toxic Substance Control Act ("TSCA"). Low-
level radioactive waste ("LLRW or "low-level waste") consists of materials
contaminated with low-levels of radioactivity and is generated by nuclear power
facilities, industry, hospitals, universities, laboratories and other research
facilities. In 1994, 65% of the Company's revenues were derived from hazardous
waste services and 35% of the Company's revenues were derived from LLRW
services.
The Company completed two acquisitions in 1994. In September 1994, the
Company acquired a LLRW processing and recycling facility (the "Recycle Center")
from Quadrex Corporation ("Quadrex") in exchange for assuming approximately
$28.4 million of the facility's net liabilities. The Recycle Center is one of
six such LLRW processing facilities in the United States and provides
decontamination, recycling, compaction and other processing services for LLRW
generated primarily by nuclear utilities and the federal government. For more
information on the Recycle Center, see "- Low-Level Radioactive Waste Services -
LLRW Processing and Recycling Services at the Recycle Center". On December 31,
1994, the Company acquired Gibraltar Chemical Resources, Inc. ("Gibraltar") from
Mobley Environmental Services, Inc. Gibraltar was subsequently renamed American
Ecology Environmental Services Corporation ("AEESC" or "Winona facility"). The
total acquisition price of $10.6 million consisted of cash, a note, working
capital advances, re-payment of debt, and other assumed liabilities. The
acquired facility, located in Winona, Texas, includes two deepwell disposal
systems and fuels blending and solvent recycling operations. For more
information on the Company's Winona facility, see "-- Hazardous Waste Services -
- -- Stabilization and Disposal Services -- Winona, Texas Facility" and "Hazardous
Waste Services -- Fuels Blending and Solvent Recycling".
The Company generally performs its operations through its wholly owned
subsidiaries. The Company's material subsidiaries are: US Ecology, Inc., a
California corporation ("US Ecology"), Texas Ecologists, Inc., a Texas
corporation wholly owned by US Ecology ("Texas Ecologists"); American Ecology
Recycle Center, Inc., a Delaware corporation ("AERC"), American Ecology
Environmental Services Corporation, a Texas corporation ("AEESC"), American
Ecology Services Corporation, a Delaware corporation ("AESC"), WPI
Transportation, Inc., a Texas corporation wholly owned by AESC ("WPI
Transportation"), Transtec Environmental, Inc., an Ohio corporation wholly
owned by AESC ("Transtec"), WPI Waste Carriers, Inc, a Texas corporation wholly
owned by AESC ("WPI Waste Carriers"), and American Liability and Excess
Insurance Company, a Vermont corporation.
The Company and its predecessors have been in business for over 40 years.
The Company was originally incorporated in California in October 1983. In May
1987, the Company was reincorporated as a Delaware corporation by merger into a
newly formed wholly-owned subsidiary incorporated in Delaware for that purpose.
HAZARDOUS WASTE SERVICES
The Company provides a variety of hazardous waste management services to
its customers including stabilization, solid waste disposal, aqueous waste
disposal, fuels blending and solvent recovery. The Company's customers are
generally in the chemical, petroleum, manufacturing, electronics and
transportation industries.
The hazardous waste management services provided by the Company are
generally performed pursuant to non-exclusive service agreements that obligate
the Company to accept hazardous waste from the customer. Fees are determined by
such factors as the chemical composition and volume or weight of the wastes
involved, the type of transportation or processing equipment used and distance
to the processing or disposal facility. The Company periodically reviews and
adjusts the fees charged for its services.
Prior to performing services for a customer, the Company's specially
trained personnel review the waste profile
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sheet prepared by the customer which contains information about the chemical
composition of the waste. A sample of the waste may be analyzed in a Company
laboratory or in an independent laboratory to enable the Company to recommend
and approve the best method of transportation, treatment and disposal. Upon
arrival at one of the Company's facilities, and prior to unloading, a sample of
the delivered waste is analyzed to confirm that it conforms to the customer's
waste profile sheet.
STABILIZATION AND DISPOSAL SERVICES
The Company operates two of the eighteen commercial hazardous waste
landfill disposal sites in the United States. The facilities are located in
Robstown, Texas and Beatty, Nevada. In addition, as a result of the Winona
facility acquisition, the Company also operates one of the nation's nine
commercial deepwell disposal facilities, located in Winona, Texas. These
operations primarily serve the needs of hazardous waste generators in the Gulf
Coast and West Coast regions of the country.
The Robstown and Beatty facilities may dispose of only solid wastes. The
two facilities also have the ability to stabilize waste for disposal.
Stabilization involves the mixing of sludges and certain wet wastes with cement,
lime or other solidifying and stabilizing agents to prevent leaching under
acidic conditions. These facilities are sited, designed, constructed, operated
and monitored to provide long-term containment of the waste in accordance with
regulatory requirements. The Winona deepwell disposal system accepts only
liquid wastes. The Company also maintains two closed hazardous waste landfills
previously operated by the Company in Sheffield, Illinois. See "-Closed
Facilities" for more detailed information about these closed facilities. The
following sections describe the Company's active hazardous waste disposal
facilities.
Beatty, Nevada Facility. The Company's Beatty, Nevada hazardous waste
landfill site is located on 80 acres of land 11 miles southeast of Beatty,
Nevada in the Amargosa Desert, approximately 100 miles northwest of Las Vegas
and 8 miles northeast of Death Valley and the California border. The Company
leases the site from the State of Nevada pursuant to a 1977 lease which provides
for an initial 20-year term, with a 10-year option for renewal. The waste site
is operated under license from the State of Nevada. The State of Nevada charges
waste fees which are deposited in state maintained trust funds for closure and
perpetual care and maintenance. These funds contained approximately $8.4
million as of December 31, 1994.
The facility has approximately 1.5 million cubic yards of remaining
capacity. In 1994, 1993 and 1992, 202,000, 147,000 and 111,000 cubic yards of
waste, respectively, were disposed of at the facility. The hazardous waste
site was opened in 1970 and operates under authority from the Nevada Department
of Conservation and Natural Resources and the Environmental Protection Agency's
("EPA") Region IX. It is also subject to regulations of the U.S. Department of
Transportation ("DOT") relating to methods of handling, packaging and
transporting chemical waste. Disposal operations at the Beatty site involve
stabilization of certain wastes to meet land disposal criteria, and the burial
of chemical waste in secure landfill cells which are engineered, constructed
operated and monitored so as to provide for the long-term containment of the
waste. During 1988, the Beatty site received its RCRA Part B five-year permit
from the EPA and the State of Nevada. The renewal application for the Part B
permit was submitted to the State of Nevada in January 1993 and is expected to
be renewed in 1995.
The Beatty site is one of seven landfill sites in the United States which
are authorized by the EPA under TSCA to receive and dispose of certain types of
solid polychlorinated biphenyls ("PCBs"). This authority was issued jointly to
the Company and the State of Nevada by EPA Region IX. The disposal of PCBs
accounted for approximately 21% and 27% of the Beatty site's total volumes in
1994 and 1993, respectively. In November 1989, the Company was issued a five-
year permit which allows the Company to continue to dispose of non-liquid PCBs
at the Beatty site. A permit renewal application was submitted to the Nevada
Department of Conservation and Natural Resources and Division of Environmental
Protection in accordance with RCRA requirements in 1994 and is expected to be
renewed for another five year period in 1995. In February 1990, the Company
received written confirmation from the EPA that the Beatty site was currently
authorized to accept CERCLA clean-up waste for disposal.
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Robstown, Texas Facility. The Company owns 400 acres of land near
Robstown, Texas, located 15 miles west of Corpus Christi, and operates a
hazardous waste disposal site on 240 acres of the land. The site is operated
under the regulations of, and a permit issued by, the Texas Natural Resource
Conservation Commission ("TNRCC"). In addition to TNRCC regulation, the site is
subject to EPA and DOT regulation. In 1988, the Robstown site was permitted
under RCRA for a five-year period. A permit renewal application was submitted
to the TNRCC in accordance with RCRA requirements and renewal for a five-year
period is expected to occur in 1995. Disposal operations at the Robstown site
involve the burial of hazardous waste in secure landfill cells which are
engineered, constructed, operated, and monitored so as to provide for the long-
term containment of the waste.
Groundwater at the Robstown site is monitored through the use of an
extensive well system. In 1978, an analysis of the non-potable aquifer
underlying the site showed the presence of chemical contamination. The Company
has no evidence that the contaminants have migrated beyond the permitted site
boundaries and continues to address corrective action plans in connection with
the permitting process. The Company is currently operating a non-commercial
deep-injection well at the facility for the disposal of contaminated groundwater
and leachate in order to comply with its groundwater cleanup program.
The facility is currently the only operating commercial landfill in Texas
with a RCRA Part B hazardous waste disposal permit. The facility serves a wide
range of industries including refining, petrochemical, agricultural and
manufacturing. In operation since 1972, the facility has disposed of more than
840,000 cubic yards of hazardous waste and there are approximately 3 million
cubic yards of remaining capacity. In 1994, 1993 and 1992, 68,000 47,000 and
51,000 cubic yards of waste, respectively, were disposed of at the facility.
Winona, Texas Facility. The Winona facility is a 179-acre fuels blending
and solvent recycling facility with two hazardous waste deepwells. The first
deepwell has been in operation since 1981 and currently can accept waste at a
rate of 50 gallons per minute. The deepwell accepts both hazardous and non-
hazardous liquid industrial wastes that are not suitable for recycling or
landfill disposal. The deepwell accepts aqueous wastestreams, including spent
acids, landfill leachates, rinse water, storm water from contaminated
containment areas, and wastewaters with heavy metal content. Wastes remaining
from the facility's fuels blending and solvent recycling processes are also
injected into its deepwell. The second deepwell, which was constructed in 1991,
is expected to receive final EPA approval and commence operation in the second
quarter of 1995. The second deepwell will have a capacity of 200 gallons per
minute and will expand the facility's capacity and increase its flexibility in
handling wastestreams. The facility's permits allow receipt of most categories
of liquid wastes except for PCBs, dioxins, radioactive materials, and biological
wastes. Prior to the injection of any wastes, the facility's laboratory
conducts tests on the wastes to ensure that the materials are compatible with
the geological characteristics of the formation surrounding the Company's two
hazardous waste deepwells. In 1994, 1993 and 1992, 11 million, 12 million and
21 million gallons of waste, respectively, were disposed of at the facility.
The Winona site was selected for its favorable geological characteristics
for deepwell injection and the absence of any nearby oil and gas production.
Its two wells are completed to a depth of approximately 5,500 feet in the
Woodbine formation, which is highly porous and permeable. The formation is
separated from sources of drinking water by impermeable layers of shale and
limestone. In order for the facility to commence deepwell operations without
incurring the added costs of treating the hazardous waste, it was required to
obtain from the EPA an exemption from the land disposal restrictions based on
proof of "no-migration". To obtain the exemption, the facility was required to
demonstrate to the satisfaction of the EPA that the wastes would not migrate
from the geological zone into which the wastes are injected for at least 10,000
years.
Competition. In the Gulf Coast market for solid hazardous waste disposal,
the Company primarily competes with a hazardous waste landfill in Oklahoma and a
landfill in Louisiana. Each of these facilities offers similar disposal
capabilities, and competition is based on the level of ongoing service provided
to the customer, distance from the waste site to the landfill and price. In the
Gulf Coast market for liquid hazardous waste disposal services, the Company
competes primarily with three other deepwell facilities, two facilities in
Houston, Texas; and a facility in Corpus Christi, Texas. In the West Coast
market for solid hazardous waste disposal, the Company competes with three
hazardous waste landfills in California, one in Utah, and one in Idaho.
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TRANSPORTATION SERVICES
General. As a complement to its disposal operations, the Company also
offers hazardous waste transportation services to its customers. The Company's
waste transportation operations focus on the Gulf Coast market. The Company
transports both hazardous and non-hazardous solid and liquid wastes generally by
truck or trailer from a waste site to a disposal or treatment facility, such as
a landfill or incinerator. Hazardous waste is transported by the Company
primarily in specially-constructed vehicles designed to comply with applicable
regulations and specifications of the DOT. The Company's hazardous waste fleet
includes 34 tractors and 43 trailers. Liquid waste is frequently transported in
bulk, but also may be transported in drums. Heavier sludges and bulk solids are
transported in sealed roll-off boxes or bulk trailers.
The Company also operates a scheduled, containerized hazardous waste
collection service in the Gulf Coast market called Surecycle(R), which provides
small quantity generators with comprehensive waste management services that
includes waste analysis, technical advice, labeling, manifesting, collecting,
transporting, treating and disposing of hazardous wastes. An important feature
of the Surecycle(R) program is the use of intermediate bulk containers as a
replacement for drums in many applications.
Competition. The hazardous and non-hazardous waste transportation business
is highly fragmented, with no company having established itself as a national
competitor. There are numerous local and regional companies providing solid or
liquid hazardous waste transportation services. Many of the large environmental
services companies have transportation divisions; however, most of these
companies with fixed-based disposal landfills or incinerators primarily use
their transportation divisions to provide services to customers where the
contract stipulates disposal or treatment at their own facilities.
REMEDIATION SERVICES
The Company also performs site remediation services and specialized
hazardous waste services to a limited extent, using a variety of equipment and
technologies to implement specific waste removal and clean-up plans. Most site
remediation projects are bid by the Company based on the customer's project
specifications, with the contract awarded to the lowest qualified bidder on a
unit price basis. Remediation services are generally provided in conjunction
with disposal services by the Company. The remediation market is highly
competitive and the Company does not have a significant presence in the market.
FUELS BLENDING AND SOLVENT RECYCLING SERVICES
As a result of its acquisition of the Winona facility in December 1994, the
Company expanded its hazardous waste services in the Gulf Coast Region to
include two important new services: fuels blending and solvent recycling. These
two new services have enabled the Company to substantially increase the range of
waste services that it provides to its existing transportation and disposal
customers and have added new customers to the Company's client base.
A substantial portion of the organic wastes received at the Winona facility
is placed into its fuels blending operations. The Company blends these wastes
into fuels to meet specifications prescribed for use in cement kilns. The
Company also employs a thinfilm evaporator for reclaiming limited quantities of
certain waste solvents. In this process, a solvent is mechanically wiped onto a
steam-heated metal surface in extremely thin layers, causing most of the solvent
to evaporate and be condensed as a liquid. Reclaimed solvents, which include
metal cleaning and paint solvents and freon, are sold to end-users or returned
to the customer who generated them. Wastes that are separated from the
reclaimed solvent are used in the fuels blending process or injected into the
Company's deepwell.
The Company also receives waste in bulk shipments through specialized
containers that are picked up at the customer,s site, placed on rail for
shipment to the railroad,s transfer facility and then delivered to the Winona
facility. This method of transportation is more efficient for long-distance
shipments than truck transportation. In addition, the Winona facility maintains
a rail spur transhipment facility nearby that provides the capability of
transferring certain wastes from railcar to the facility.
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Competition. In fuels blending services, the Company primarily competes
with several Texas competitors. Competition is generally based upon overall
services provided to the customer, distance from the customer, price and off-
site disposal fees.
LOW-LEVEL RADIOACTIVE WASTE SERVICES
Radioactive waste is generally classified as either high-level or low-
level. High-level radioactive wastes, such as spent nuclear fuel and waste
generated during the reprocessing of spent fuel from nuclear reactors, contain
substantial quantities of long-lived radioactive isotopes and require hundreds
or thousands of years to decay to safe levels.
Low-level radioactive waste consists primarily of solid materials
containing far less radioactive contamination, generally decaying to safe levels
within several decades to approximately 500 years. The Company's LLRW business
includes the packaging, transportation, disposal, treatment, recycling and
processing of low-level waste. Low-level waste is generated by nuclear power
facilities, industry, hospitals, universities, laboratories and other research
facilities. This waste consists generally of material such as contaminated
equipment, discarded glassware, tools, gloves and protective clothing, radio-
pharmaceuticals and other hospital wastes, and laboratory waste materials. This
waste generally requires minimal packaging for the protection of the public or
employees and is usually packed in metal boxes or 55-gallon drums for transport
and disposal.
The LLRW services market is generally composed of three segments: (i)
disposal, including both commercial and government markets, (ii) commercial
processing and volume reduction, and (iii) government services. The Company
operates in all three of these segments. The Company's LLRW disposal activities
involve the operation of a government-owned landfill site near Richland,
Washington. The Company's LLRW commercial processing and volume reduction
services include both fixed base processing facilities and service capabilities
located at the Oak Ridge, Tennessee Recycle Center which the Company acquired in
September 1994. The government services segment activities includes processing,
volume reduction and disposal, at US Department of Energy ("DOE") and US
Department of Defense ("DOD") locations. The Recycle Center provides these
services and intends to pursue these DOE and DOD markets.
THE COMPACT SYSTEM
The Low-Level Radioactive Waste Policy Act of 1980 and the Low-Level
Radioactive Policy Amendments of 1985 (collectively, the "Low-Level Act")
established the general framework for the management of commercial LLRW disposal
facilities. The Low-Level Act created incentives for states to form formal
regional alliances ("compacts") as ratified by the U.S. Congress, each
containing a designated landfill for use by member states. One state within
each compact is required to site and build a permitted landfill on a rotating
basis so that continuous disposal capacity for that compact can be maintained.
The Low-Level Act also provides that any compact approved by Congress may
restrict the use of its disposal facility to low-level waste generated within
the member states, and may limit the export of waste from that compact as of
January 1, 1993. As a result, in 1992 the Company saw a marked increase in LLRW
volumes disposed because of this pending limitation of disposal space
availability. Since January 1, 1993, the state of Washington, through the
Northwest Compact (Washington, Oregon, Idaho, Montana, Utah, Wyoming, Alaska,
and Hawaii), has prohibited disposal of LLRW generated from outside the
Northwest Compact at the Company's Richland, Washington facility; however, the
Northwest Compact also agreed to accept waste generated by the Rocky Mountain
Compact (Nevada, Colorado, and New Mexico). As a result, the implementation of
the Low-Level Act has resulted in a reduction of waste receipts at the Company's
low-level waste disposal site in Richland, Washington. This restriction is
expected to continue in the foreseeable future.
It is also possible that, pending the full implementation of the Low-Level
Act and the final alignment of compacts, other actions could be taken which
would further restrict the ability of LLRW facilities to continue to receive
low-level waste. Such actions could include the implementation of additional
state-imposed fees, which could further restrict volumes, or the imposition of
higher insurance or bonding requirements.
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DISPOSAL SERVICES
The Company operates one of the nation's two LLRW disposal facilities
operating within the regional compact system, located near Richland, Washington.
This facility serves the LLRW disposal needs of the states in the Northwest
Compact and the Rocky Mountain Compact. In most instances, the LLRW is
delivered to the site either by the generators of the waste or by independent
shippers or brokers. The Company is in the process of developing two additional
LLRW disposal facilities. The Company also maintains two closed LLRW landfills
in Sheffield, Illinois and Beatty, Nevada. See "-Closed Facilities" for more
detailed information about each of these closed facilities' operations. The
following sections describe the Company's active and proposed LLRW disposal
operations.
Richland, Washington Facility. This facility is located on 100 acres, 25
miles northwest of Richland, Washington on the DOE,s Hanford Nuclear Reservation
("Hanford") and is operated by the Company. The State of Washington leases the
land from the federal government and the Company subleases the land from the
State of Washington. In 1990, the Company exercised its option to renew its
sublease for another 15-year period. Under the terms of the lease, the site is
to be used for LLRW burial and related activities. The primary disposal
operations at the site are conducted under a license issued by the State of
Washington. The Company's license was renewed for a five-year period in May
1992. The Company also holds a special nuclear materials permit license,
reissued in December 1988 for a five-year period by the NRC, which permits
burial at Richland of materials containing certain radioactive elements in
amounts greater than those permitted under the license issued by the State of
Washington. The Company applied for renewal of this special nuclear materials
permit in 1993 and continues to operate under the license pending renewal by the
NRC, which is expected in 1996 or 1997. "Special nuclear material" is not
classified as LLRW and consists primarily of reactor-produced materials which
contain plutonium, uranium 235 and any material artificially enriched by these
isotopes.
The disposal rates charged at the Richland facility are regulated by the
Washington Utilities Transportation Commission ("WUTC"). Rate regulation is
designed to set disposal rates sufficient to cover the costs of operation and
provide the Company with a reasonable profit margin. In January 1994, the
Company entered into a rate settlement covering 1993, 1994 and 1995 calculated
to provide the Company with an estimated 29% operating profit margin. Under the
settlement, revenues were capped at $4.9 million and $5.1 million in 1994 and
1993, respectively, and will be capped at $5.0 million in 1995. The Company
expects to file a new rate setting case with the WUTC to establish rates
beginning in January 1996. While the Company cannot predict the exact revenue
and profit margin figures to be set by the WUTC, management believes that the
rates will not materially differ from those of previous years.
The Company charges a base rate per cubic foot for disposal at Richland,
which includes amounts for perpetual care and maintenance which are paid into a
state trust fund containing approximately $21.3 million as of December 31, 1994.
In addition, from January 1990 through December 1992, the Company charged a fee
for disposal which was paid into a state maintained site closure trust fund.
This closure fund contains approximately $21.3 million as of December 31, 1994.
Additionally, the state of Washington charges fees for burial, site
surveillance, and user fees to low-level waste generators using the Richland
site.
The Richland facility is also permitted to accept naturally occurring
radioactive materials ("NORM") waste from outside the Compact. Although NORM
waste disposal historically has represented only a small portion of the
Company's business (accounting for 2.6% of LLRW revenues in 1994), the Company
believes it may become a more significant business in the future. NORM waste
disposal revenues to the Company are not currently regulated. However, the State
of Washington has proposed regulations which would limit NORM volume to 8,600
cubic feet per year at the Richland facility and individual generator volume to
1,000 cubic feet per year. The Company has submitted its comments on the
proposed regulations to the State of Washington but it is not possible to
predict the ultimate form of such regulations or when they might be finally
issued.
Proposed Ward Valley, California Facility. In December 1985, the Company
was selected as the State of California,s license designee to site, develop and
operate a LLRW disposal facility ("Ward Valley") in that state to serve the
Southwestern Compact (California, Arizona, North Dakota and South Dakota). In
September 1993, the California Department of Health Services ("DHS") certified
its final environmental impact report, issued its
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Record of Decision on the project, issued a license to the Company to construct
and operate the facility and executed a lease of the site with the Company. The
license and lease become effective and construction can only begin once the land
for the site is conveyed from the U.S. Department of Interior to the State of
California. In connection with the development of this LLRW facility, the
Company has expended and capitalized $35.0 million, including interest, as of
December 31, 1994.
Construction and operation of the facility has been delayed in large
measure because the federal government has not yet conveyed the land for the
facility, located in California's Ward Valley, to the State of California. In
January 1993, former Secretary of the Interior in the Bush Administration,
Manuel Lujan, decided to sell the Ward Valley site to the State of California.
That sale was enjoined, however, as a result of the lawsuit described below.
Subsequently, the new Secretary of Interior in the Clinton administration, Bruce
Babbitt, rescinded Secretary Lujan's land sale decision and decided to conduct
additional federal hearings before determining whether to convey the land. In
August 1993, Secretary Babbitt requested that California Governor Pete Wilson
hold an adjudicatory hearing on behalf of the U.S. Department of the Interior to
provide information that might be relevant to the Secretary's decision on the
land transfer, and in September 1993, the Governor agreed to hold such a
hearing. In November 1993, Secretary Babbitt sent a letter to Governor Wilson
stating that he is postponing further action on his proposed hearing in order to
await the final outcome of two state court litigations that had been filed
against the project in October 1993. In 1994, Secretary Babbitt asked the
National Academy of Sciences ("NAS") to conduct an independent review of certain
geological issues related to the suitability of the Ward Valley site. The NAS
convened a panel in 1994, conducted hearings on the project in June and
September 1994, and is expected to issue its findings in May 1995. The Company
believes the Secretary of the Interior will not make a land transfer decision
until after the release of the NAS report. It is also possible that the
Secretary of the Interior will not make a decision until the state court appeal
process is concluded and additional federal hearings are conducted.
Two lawsuits challenging the decision by DHS to issue a license and a lease
to the Company for the construction and operation of the Ward Valley disposal
site were filed in the California Superior Court for the County of Los Angeles
(the "License Litigation") in October 1993. The Company was named as a real
party in interest in both lawsuits. In general, the plaintiffs in the License
Litigation alleged that the DHS violated various procedural and substantive
requirements of the California Radiation Control Law and the California
Environmental Quality Act in reaching its license decision and sought to have
the facility's license invalidated. In July 1994, one of the plaintiffs in the
License Litigation voluntarily dismissed its lawsuit. In June 1994, the judge
ruled in favor of the DHS and the Company on all issues with the exception of
one. In December 1993, nearly three months after the license had been issued,
three geologists from the US Geological Survey issued an unofficial report which
suggested that groundwater protection and protection of the Colorado River had
not been adequately evaluated by DHS. The trial court concluded this report
should be considered by the DHS in a "pre-approval setting", and remanded the
case to the DHS for reconsideration. Because the DHS determined that the report
contained no significant new information, DHS asked the court to reconsider its
decision concerning this report. The trial court refused to do so, and cross-
appeals of the judge's several rulings were taken by the plaintiffs, DHS and the
Company, among others. Briefing on these cross-appeals is expected to conclude
in May 1995.
In January 1993, a lawsuit was filed against the Secretary of the Interior
in federal district court for the Northern District of California to enjoin the
intended sale of the land for the Ward Valley site to the State of California on
the grounds that the Secretary could not sell the land until he had designated
critical habitat for the desert tortoise, a threatened species under the Federal
Endangered Species Act, and that the 1990 U.S. Fish and Wildlife Service's
("FWS") biologic opinion, which concluded that the project would not jeopardize
the continued existence of the desert tortoise, impermissibly failed to analyze
the project's potential radiological impacts on the desert tortoise. In February
1994, the U.S. Department of Interior designated approximately 6,400,000 acres
in the states of California, Nevada, Utah and Arizona as critical habitat for
the desert tortoise. The designation includes the proposed Ward Valley site.
Based on these developments, the lawsuit was dismissed without prejudice.
Inclusion of the Ward Valley as critical habitat requires the Bureau of Land
Management, the EPA and the FWS to consider and weight several factors,
including whether the project would result in the destruction or adverse
modification of critical habitat. These deliberations are ongoing, however, the
Company does not believe that the decisions concerning the project's impact on
the desert tortoise and its critical habitat will prevent conveyance of the land
to the State of California.
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<PAGE>
A second lawsuit was also filed in 1993 against the Secretary of Interior
which alleged violations of the National Environmental Policy Act by Secretary
Lujan in his decision to transfer the land to the State of California. Based on
Secretary Babbitt's decisions later in 1993 to rescind the land transfer and
supplement the project's Final Environmental Impact Statement, this action was
stayed by agreement of the parties, but technically is still pending in federal
district court. The Company is not a defendant in this matter.
Additional legal challenges and political delays could delay the opening of
the facility to between 1996 and 1999. Assuming the land is transferred and all
challenges and appeals to the land transfer and the facility license decision
are favorably resolved, the Company expects that the construction and start-up
of the facility will take approximately eight to twelve months. It is not
possible to assess the ultimate length of the delay at this time, nor can there
be any assurance that the land will be transferred. If the land is not
transferred or the facility is not established for any reason, the Company may
proceed with legal action to protect its rights. Because the reasons for not
transferring the land or otherwise preventing the establishment of the facility
are not known, the ultimate outcome of any such legal action at this time is
uncertain, and there is no assurance that the Company will recover any monetary
damages or restitution of its past expenditures. The Company expects to incur
expenses of approximately $250,000 per month, excluding interest, until
construction begins. These expenses are not currently reimbursable from the
Southwestern Compact or any other party. Once the construction period commences,
expenditures are expected to be approximately $16 million, excluding interest,
including payment for the land.
If the California LLRW facility cannot be established and if the Company is
unable to recoup its investment through legal recourse, the Company would suffer
a loss that would have a material adverse effect on its financial condition.
Proposed Butte, Nebraska Facility. In June 1987, the Company was
designated to develop and operate a LLRW disposal facility ("Butte") by the
Central Interstate Low-Level Radioactive Waste Commission ("CIC"). The facility
is on a schedule to be completed by 1999 and will cost an estimated $146 million
to license, design and construct. Project costs through 1994 totaled $66.1
million. Additional funding of approximately $21 million in the pre-licensing
phase of the contract has been authorized by the major generators of the waste
in the Central Interstate Compact (Nebraska, Kansas, Oklahoma, Arkansas and
Louisiana). The Company's portion of the project costs through 1994, which have
been capitalized, totaled $6.1 million, and the Company anticipates no
additional investment in the project development prior to construction.
In January 1993, the State of Nebraska filed suit against the CIC and the
Company asking that the court require the defendants to demonstrate community
consent for the facility or withdraw the license application. In October 1993,
the court granted the CIC's and the Company's motion for summary judgment
dismissing the lawsuit. In June 1994, the U.S. Court of Appeals for the Eight
Circuit upheld the lower court's decision. In October 1993, the State of
Nebraska filed a similar suit on the same issue of community consent. The court
also dismissed this second suit and the dismissal has not been appealed.
In December 1993, the County of Boyd, Nebraska and the Boyd County Local
Monitoring Committee sued the Company asserting fraud and misrepresentation
regarding the community consent requirement for the disposal facility. In July
1994 the federal district court granted the Company's motion for summary
judgment and dismissed the lawsuit. In February 1995, the U.S. Court of Appeals
for the Eighth Circuit upheld the lower court's decision.
In January 1993, the directors of the Nebraska Department of Environmental
Quality and the Department of Health issued a Notice of Intent to Deny the
Company's license application based on their interpretation of a regulatory
requirement. The two agencies took the position that the presence of wetlands
included in the proposed site boundaries, even though not in the area to be used
for waste disposal, precluded the issuance of the license. The Company contested
the decision by initiating an administrative review. Subsequently, the proposed
site boundaries were reconfigured to eliminate the presence of wetlands which
rendered the Notice of Intent to Deny License moot. In October 1993, the two
agencies informed the Company that the Notice of Intent to Deny License for the
proposed LLRW facility was withdrawn and the Company's administrative action was
dismissed. The Boyd County Local Monitoring Committee appeal of the dismissal
was denied in June 1994.
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<PAGE>
In August 1994, the U.S. Corps of Engineers determined that a small
wetland, less than one acre in size, exists on the reconfigured site. The
disposal of waste will not take place in the area determined to be a wetland by
the Corps. The Company does not agree with the Corps' wetland determination.
The State of Nebraska has taken no action against the Company's license
application as the result of the Corps' wetland determination. However, there
can be no assurance that some action will not be taken.
It is not presently possible to assess the length of delay that may be
experienced prior to construction of the facility. The facility is currently on
a schedule for a licensing decision in late 1996 or early 1997. However, there
can be no assurance that a license will be issued. The Company expects to incur
expenses of approximately $600,000 per month until the license is received. All
these expenses are reimbursed monthly by the CIC. Once the two year
construction period commences, expenditures are expected to be approximately $50
million excluding interest. Under the present contract with the CIC, this
construction expense will be the Company's responsibility.
Competition. The Company operates one of the two commercial low-level
waste disposal sites operating within the regional compact system in the United
States. The Company's Richland, Washington facility operates as the exclusive
LLRW disposal site for the Northwest and Rocky Mountain Compacts. The other
United States LLRW disposal facility, operated by Chem-Nuclear, a subsidiary of
WMX Technologies, Inc., is located near Barnwell, South Carolina, and serves the
states of the Southeast Compact (South Carolina, North Carolina, Virginia,
Georgia, Florida, Alabama, Mississippi and Tennessee). The Barnwell site is
scheduled to close to all generators on December 31, 1995 and a new proposed
LLRW site in North Carolina is subsequently expected to serve the Southeast
Compact.
A disposal facility located near Clive, Utah is licensed by the State of
Utah to accept NORM and certain types of LLRW. This facility has not been
designated as a regional facility under the Low-Level Act. The Clive, Utah
facility accepts principally low-level radioactive contaminated soil from clean-
up sites. The Company does not generally compete for soil clean-up waste.
LLRW PROCESSING AND RECYCLING SERVICES AT THE RECYCLE CENTER
The commercial processing and volume reduction segment of the LLRW services
market includes both fixed-based facilities and service capabilities located at
the radioactive waste generator sites. The Company's processing and volume
reduction services are conducted through its Recycle Center in Oak Ridge,
Tennessee.
The Company acquired the Recycle Center from Quadrex in September 1994.
The Recycle Center is equipped to process and recycle materials which are
contaminated with low levels of radioactivity. The Recycle Center provides
services primarily to nuclear power facilities, industrial nuclear generators
and the federal government. Historically, the Recycle Center's customers have
included a substantial number of public utilities located in the northeast
United States. The Recycle Center's principal services include the following:
Metal Waste Decontamination. Radioactive contaminated metals exist
primarily in the form of large components such as pumps, valves, fuel racks,
stream generators, and smaller items such as condensers, heat exchangers, racks,
stands, pumps and valves. The Recycle Center can decontaminate these metals
through an abrasive process, or an acid dip process expected to be operational
in the third quarter of 1995.
Dry Active Waste ("DAW") Processing. DAW processing services include
volume reduction and free release programs. This waste is primarily in the form
of wood, glass, clothing, and paper products. The Recycle Center uses its
super-compactor to reduce the volume of this waste before it is shipped for
disposal. The Recycle Center facility differentiates itself in this service by
compacting and/or baling waste prior to supercompaction. The combination of
compacting, binding and super-compacting accomplishes superior volume reduction
by reducing the resiliency of the waste material. The Recycle Center also sorts
and segregates waste prior to super-compaction.
Green is Clean Program. In 1989, the Recycle Center initiated its free
release, or Green is Clean program. Under this program, generators place
potentially contaminated waste in yellow bags and waste believed to be non-
contaminated in green bags. The bags are then shipped to the Recycle Center for
radioactivity scanning. Waste
10
<PAGE>
certified as non-radioactive undergoes super-compaction and is packaged for
disposal in an industrial waste landfill. Radioactive resin that cannot be
decontaminated is packaged for disposal in a LLRW facility.
Motor Refurbishment. Motors, valves, pumps and other components of nuclear
power facilities in the United States require periodic maintenance which
requires them to be decontaminated before they can be refurbished. The Company
can remove radioactive contaminated insulation, decontaminate the motor and
rebuild and test the motor with minimal outside service providers. The Company
believes that the Recycle Center is the only major facility in the United States
combining all of these services.
Scaffolding and Lead Management Services. During maintenance periods,
nuclear utilities require the use of scaffolding and lead blankets. The Recycle
Center maintains an inventory of approximately two million pounds of scaffolding
and 350,000 pounds of lead blankets. The scaffolding and lead blankets are
decontaminated, surveyed for release and then rented to the customer.
Competition. The Company's competitors in the commercial LLRW processing
and recycling market include Scientific Ecology Group (a division of
Westinghouse), Chem-Nuclear Systems, Inc., Allied Technology Group, Inc., Frank
Hake and Associates, Inc. and Alaron, Inc.
LLRW PACKAGING AND TRANSPORTATION SERVICES
The Company packages and transports small quantities of LLRW from
laboratories, hospitals, universities and other commercial facilities to
disposal facilities. In 1994, the Company serviced the eastern and mid-eastern
United States directly from its Canton, Ohio office. In 1995, the Company
expects to consolidate this operation with its Recycle Center operations. The
Company may contract with low-level waste generators to pick up waste which is
shipped to commercial LLRW sites. The waste is either shipped by the Company in
its own vehicles or is shipped by common carriers under subcontract. The
Company supplies many of these customers with equipment and material for the
packaging, labeling and transportation of the LLRW material. The packaging and
transportation market is highly competitive, and the Company does not have a
significant presence in the market.
CLOSED FACILITIES
The Company's closed hazardous waste and LLRW disposal facilities are
described below.
Sheffield, Illinois Facility. The Company previously operated two
hazardous waste disposal sites at Sheffield, Illinois. The sites are located on
property owned by the Company on 45 acres adjacent to a closed state-owned LLRW
site also previously operated by the Company. One hazardous waste site was
opened in 1974 and ceased accepting hazardous waste in 1983. A second closed
hazardous waste disposal site occupied less than five acres, and accepted
hazardous waste pursuant to Illinois authorization from 1968 through 1974. The
two sites were operated and are maintained under federal and state environmental
regulations.
The Company also maintains a 20-acre LLRW disposal facility three miles
southwest of Sheffield, Illinois located on land owned by the State of Illinois.
The Company has closed the facility, which last received low-level waste in
1978, and is maintaining the site pursuant to a 1988 Agreed Order settling long-
standing litigation between the Company and the State of Illinois.
In 1984, the Company submitted for approval a closure and post-closure plan
for the hazardous waste disposal sites to the Illinois EPA and to the United
States EPA. The regulatory agencies have approved the Company's detailed
program for implementation and operation of comprehensive corrective action, but
have not approved the Company's closure and post closure plan. The Company
believes that its closure and post-closure plan fully satisfies the health and
safety needs of the public and all regulatory requirements. Review of the plan
by the Illinois EPA and the United States EPA has been suspended pending further
implementation of a Remedial Investigation and Feasibility Study. The Illinois
EPA could reject the present plan or seek to impose additional closure
conditions which, if required, might have a material adverse financial effect
upon the Company.
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<PAGE>
In 1982, hazardous waste was detected in site-monitoring wells at one of
the two Sheffield facilities and as a result, the Illinois EPA requested that
the Company conduct an investigation of the site. The Company completed,
pursuant to a 1985 Consent Order, a Remedial Investigation and Feasibility Study
of the Sheffield facility. Pursuant to that order, a final Corrective Measures
Implementation Plan was issued by the United States EPA in October 1990 and the
Company is in the process of implementing this plan. The Company completed its
source isolation programs in 1994 and is planning to complete groundwater
monitoring and extraction programs in 1995. The Company initially reserved for
the estimated costs to provide for the closure and long-term care and
maintenance of the Sheffield site in 1988.
RCRA regulations also require the Company to carry environmental impairment
insurance against sudden and accidental occurrences, as well as against non-
sudden occurrences such as subsurface migration. See "--Insurance". These
coverages are not able to be maintained for the Sheffield, Illinois site due to
the history of the facility as described above.
Maxey Flats, Kentucky Facility. Between 1963 and 1978, the Company
operated the Maxey Flats, Kentucky LLRW site, a facility that was owned,
licensed and maintained by the Commonwealth of Kentucky (the "Commonwealth").
In 1978, the Commonwealth entered into an agreement with the Company to
permanently close the facility and the Commonwealth agreed, in part, to assume
any and all liabilities related to the facility and to exercise responsibility
for perpetual care and maintenance of the facility. The Commonwealth later
filed a lawsuit against the Company seeking to have that agreement declared
invalid. The Company then filed an action against the Commonwealth seeking cost
recovery and contribution and to enforce its rights under the agreement. After
several federal court decisions in favor of the Company on the issues, in July
1994, the Commonwealth and the Company settled all pending litigation regarding
the Maxey flats facility. The Company and the Commonwealth also agreed to
cooperate in the resolution of any third party indemnification claims against
the Company from potentially responsible parties involved with the facility.
The Company estimates that the maximum amount of the Company's share of these
third party claims is less than $1.1 million, and the Company has recognized
this liability in its 1994 financial statements.
LLRW Portion of Beatty, Nevada Facility. In December 1992, the governor of
Nevada, citing the federal Low-Level Act as authority, issued an executive order
for the Company's Beatty, Nevada LLRW disposal site to cease accepting LLRW for
disposal. In January 1993, the Company filed a lawsuit challenging that order.
In September 1993, the Company and the State of Nevada executed a settlement
agreement disposing of all pending litigation between the parties. The
settlement resulted in the dismissal of three lawsuits. Two of the lawsuits had
been filed by the Company challenging the authority of the Nevada Environmental
Commission to establish two new fees on disposal of waste at the Beatty
facility. The other suit dismissed was filed by Nevada seeking to obtain a
declaration from the court that it had the right to terminate the lease
agreement with the Company for the Beatty facility. The Company also dismissed
its claims against Nevada for damages associated with the Governor's executive
order closing the LLRW facility. Pursuant to the settlement agreement, the
parties also agreed that until December 31, 1996, regulatory, statutory and
lease fees for hazardous waste disposal would not exceed $40.20 per ton in the
aggregate, though subject to decrease in certain events. The settlement
agreement also provides for the permanent closure of the Company's LLRW disposal
facility at Beatty, Nevada. The state of Nevada has agreed to accelerate the
licensing process of the unused disposal acreage from the LLRW site for use in
the Company's hazardous waste disposal operations at Beatty. If the additional
capacity is licensed, the capacity of the Company's Beatty hazardous waste
disposal facility will approximately double. As a result of the above order and
settlement agreement, the Beatty facility accepted no LLRW for disposal after
January 1, 1993. The State of Nevada maintains a perpetual care and maintenance
trust fund for the Beatty, Nevada LLRW and hazardous waste facilities which is
funded by the Company. See "Business - Hazardous Waste Services - Stabilization
and Disposal Services - Beatty, Nevada Facility".
REGULATION
The environmental services industry is subject to extensive regulation by
federal, state and local authorities. In particular, the regulatory process
requires the Company to obtain and retain numerous governmental permits or other
authorizations to conduct various aspects of its operations, any of which may be
subject to revocation, modification or denial. Adverse decisions by
governmental authorities on permit applications submitted by the
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<PAGE>
Company may result in premature closure of facilities or restriction of
operations, which could have a material adverse effect on the Company's results
of operations.
Because of the heightened public awareness of environmental issues,
companies in the environmental service business, including the Company, may in
the normal course of their business be expected periodically to become subject
to judicial and administrative proceedings. The Company may also be subject to
actions brought by private parties or special interest groups in connection with
the permitting or licensing of its operations, alleging violations of such
permits, licenses or environmental laws and regulations.
The Company's business is heavily dependent upon environmental laws and
regulations which effectively require wastes to be managed in facilities of the
type owned and operated by the Company. The Company makes a continuing effort to
anticipate regulatory, political and legal developments that might affect its
operations, but is not always able to do so. Federal, state and local
governments have from time to time proposed or adopted other types of laws or
regulations which significantly affect the environmental services industry.
These have included laws and regulations to ban or restrict the interstate
shipment of hazardous wastes, impose higher taxes on out-of-state hazardous
waste shipments than in-state shipments and to reclassify certain categories of
hazardous wastes as non-hazardous. In particular, the federal government
currently is considering several fundamental changes to laws and regulations
that define which wastes are hazardous, that establish treatment standards for
certain wastes that could lead to their reclassification as non-hazardous, and
that revise the nature and extent of responsible parties, obligations to
remediate contaminated property. While the outcome of these deliberations
cannot be predicted, it is possible that some of the changes under
consideration could facilitate exemptions from hazardous waste requirements for
significant volumes of waste and alter the types of treatment and disposal that
will be required. If such changes are implemented, the overall impact on the
Company's business is likely to be unfavorable. The Company cannot predict the
extent to which any legislation or regulation that may be enacted or enforced in
the future may affect its operations.
Hazardous Waste Regulations. The Company is required to obtain federal,
state, local and foreign governmental permits for its hazardous waste treatment,
storage and disposal facilities. Such permits are difficult to obtain, and in
most instances extensive geological studies, tests and public hearings are
required before permits may be issued. In particular, the Company's operations
are subject to RCRA (as discussed below), the Safe Drinking Water Act (which
regulates deep well injection), TSCA (pursuant to which the EPA has promulgated
regulations concerning the disposal of PCBs), the Clean Water Act (which
regulates the discharge of pollutants into surface waters and sewers by
municipal, industrial and other sources) and the Clean Air Act (which regulates
emissions into the air of certain potentially harmful substances). In its
transportation operations, the Company is subject to the jurisdiction of the
Interstate Commerce Commission and is regulated by the DOT and by state
regulatory agencies. Employee safety and health standards under the
Occupational Safety and Health Act ("OSHA") are also applicable to the Company's
operations.
RCRA. Pursuant to RCRA, the EPA has established and administers a
comprehensive, "cradle-to-grave" system for the management of a wide range of
solid and "hazardous" wastes. States that have adopted hazardous waste
management programs with standards at least as stringent as those promulgated by
the EPA may be authorized by the EPA to administer their programs in lieu of the
EPA.
Under RCRA and federal transportation laws, all generators of hazardous
wastes are required to label shipments in accordance with detailed regulations
and prepare a detailed manifest identifying the material and stating its
destination before shipment offsite. A transporter must deliver the hazardous
wastes in accordance with the manifest and generally only to a treatment,
storage or disposal facility having a RCRA permit or interim status under RCRA.
Every facility that treats or disposes of hazardous wastes must obtain a RCRA
permit from the EPA or an authorized state and must comply with certain
operating standards. The RCRA permitting process involves applying for interim
status and also for a final permit. Under RCRA and the implementing
regulations, facilities which have obtained interim status are allowed to
continue operating by complying with certain minimum standards pending issuance
of a permit. The Company believes that each of its facilities is in substantial
compliance with the applicable requirements promulgated pursuant to RCRA.
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<PAGE>
It is possible that the EPA may consider a number of fundamental changes to
its regulations under RCRA that could facilitate exemptions from hazardous waste
management requirements, including policies and regulations that could implement
the following changes: redefine the criteria for determining whether wastes are
hazardous; prescribe treatment levels which, if achieved, could render wastes
non-hazardous; encourage further recycling and waste minimization; reduce
treatment requirements for certain wastes to encourage alternatives to
incineration; establish new operating standards for combustion technologies; and
indirectly encourage on-site remediation. Because many of these initiatives are
at an early stage of development, the Company cannot predict the final decisions
that the EPA might make or the extent of their impact on the Company's business.
Superfund. Superfund provides for immediate response and removal actions
coordinated by the EPA to releases of hazardous substances into the environment,
and authorizes the federal government either to clean up facilities at which
hazardous substances have created actual or potential environmental hazards or
to order persons responsible for the situation to do so. Moreover, Superfund
grants a right of recovery to private parties who incur costs in response to the
release or threatened release of hazardous substances. Superfund has been
interpreted as creating strict, joint and several liability for costs of removal
and remediation, other necessary response costs and damages for injury to
natural resources. Liability extends to owners and operators of waste disposal
facilities (and waste transportation vehicles) from which a release occurs,
persons who owned or operated such facilities at the time the hazardous
substances were disposed, persons who arranged for disposal or treatment of a
hazardous substance at or transportation of a hazardous substance to such a
facility, and waste transporters who selected such facilities for treatment or
disposal of hazardous substances.
It is possible that the U.S. Congress could revise the Superfund statute in
the future. In addition to possible changes in the statute's funding mechanisms
and provisions for allocating cleanup responsibility, it is possible that
Congress could fundamentally alter the statute's provisions governing the
selection of appropriate site cleanup remedies, conclude not to continue
Superfund's current reliance on stringent technology standards issued under
other statutes to govern removal and treatment of remediation wastes or could
adopt new approaches such as national or site-specific risk based standards.
These and other potential policy changes could significantly affect the
stringency and extent of site remediation, the types of remediation techniques
that will be employed, and the degree to which permitted hazardous waste
management facilities will be used for remediation wastes.
LLRW Regulations. The LLRW services of the Company are also subject to
extensive governmental regulation. Various phases of the Company's LLRW services
are regulated by various state agencies, the Nuclear Regulatory Commission
("NRC") and the DOT. Regulations applicable to the Company's operations include
those dealing with packaging, handling, labelling and routing of radioactive
materials, and prescribe detailed safety and equipment standards and
requirements for training, quality control and insurance, among other matters.
Employee safety and health standards under OSHA are also applicable to the
Company's operations.
Financial Assurance and Site Maintenance. The Company operates its
hazardous waste disposal sites under RCRA permits. The LLRW sites are operated
under licenses from state and, in some cases, federal agencies. When one of
these facilities reach capacity, or lease or license termination dates, the
facility must be closed and maintained for a period of time prescribed by law or
by license. In the case of the RCRA-permitted hazardous sites, federal
regulation requires that operators demonstrate the financial capability to close
sites on an immediate, unscheduled (worst-case) basis. The estimated costs of
such a closure are set forth in the operator's RCRA closure and post-closure
plan.
Financial assurance requirements for closure/post-closure plans may
generally be satisfied by various means, including insurance, letters of credit,
surety bonds, trust funds, a financial net worth test and/or a corporate
guarantee. The Company is currently satisfying such requirements through a
combination of certain of the various allowable methods. Cash and investment
securities totaling $13.2 million and $13.6 million at December 31, 1994, and
1993, respectively, have been pledged as collateral for the Company's closure
and post-closure obligations, performance of a Remedial Investigation and
Feasibility Study and performance of corrective action at the closed Sheffield,
Illinois facility, compliance with the TNRCC requirements related to the
Company's non-commercial use deepwell at its Robstown, Texas facility, closure
costs for the Beatty, Nevada LLRW site, closure costs for the Recycle Center,
closure costs for the Winona, Texas facility, test borings at the proposed LLRW
sites in Nebraska and California, settlement with generators of waste at the
Richland, Washington LLRW
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facility and other general performance bonds. The amounts pledged by the
Company generally equal the present value of its estimated future closure and
post-closure obligations.
INSURANCE
The nature of the Company's business exposes it to a risk of accidental
release of harmful substances into the environment resulting in contamination,
the cost of which could be substantial. The Company currently has liability
insurance coverage for non-nuclear related occurrences under environmental
impairment liability, primary casualty and excess liability policies. Pursuant
to RCRA, the Company is required to maintain environmental impairment liability
insurance coverage with specified minimum policy limits for sudden and non-
sudden accidental occurrences. The Company is in compliance with required
limits and coverage.
The Company has organized and funded a wholly-owned corporation, American
Liability and Excess Insurance Company, to provide for financial assurance for
the Company's site closure and post-closure responsibilities in certain
instances and to provide a source of insurance for the Company in the event that
traditional third party insurance becomes unavailable. The Company is not
currently utilizing its insurance subsidiary because of unavailability of other
insurance. The Company has funded insurance policies issued by this insurance
subsidiary with cash representing the present value of the closure or post-
closure obligation being insured. As of January 1, 1995, the Company's
insurance subsidiary had pledged $7.1 million of collateral for policies issued
to insure site closing or post-closing obligations of the Company.
CUSTOMERS
No single customer accounted for 10% of the Company's consolidated revenues
for 1994. Revenues resulting from the cost reimbursement contract with the
Central Interstate Low-Level Radioactive Waste Commission were approximately
$9,800,000 in 1994, or 14% of the Company's consolidated revenues.
PERSONNEL
The Company had a total of 491 employees as of March 2, 1995. The Company
has a collective bargaining agreement which covers 12 employees at its Richland,
Washington facility. The Company has a collective bargaining agreement which
covers 44 employees at its Winona, Texas facility. The Company believes that
its relationship with its employees is good.
Unfair labor practice charges filed by the Oil, Chemical and Atomic Workers
Union are currently pending before a regional office of the National Labor
Relations Board ("NLRB") relating to the union's allegation that a subsidiary of
the Company should be held to the terms of a collective bargaining agreement
negotiated by the union and Quadrex, the previous owner of the Oak Ridge,
Tennessee facility purchased by the Company in September 1994. The Company has
recognized the union as the collective bargaining agent of its employees and has
sought to negotiate a new collective bargaining agreement with the union. An
administrative complaint has been issued by a Regional Director of the NLRB
alleging that the Company has committed an unfair labor practice by not assuming
the prior union contract. The matter has been set to be heard by an
Administrative Law Judge of the NLRB.
ITEM 2. PROPERTIES
The Company believes that its property and equipment are well-maintained,
in good operating condition and adequate for the Company's present needs. The
Company's headquarters are located in Houston, Texas in leased office space.
The Company also leases sales and administrative offices in Washington,
California, Nebraska, Illinois, Ohio, Nevada, Texas, and Kentucky.
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The following table sets forth certain information regarding the principal
operating, treatment, processing or disposal facilities owned or leased by the
Company.
<TABLE>
<CAPTION>
LOCATION FUNCTION ACREAGE OWN/LEASE
- -------------------------------- --------------------------------- --------- ---------
<S> <C> <C> <C>
Richland, Washington LLRW Disposal Facility 100 acres Lease
Robstown, Texas Hazardous Waste Disposal Facility 400 acres Own
Beatty, Nevada Hazardous Waste Disposal Facility 80 acres Lease
Oak Ridge, Tennessee LLRW Processing Facility 16 acres Own
Winona, Texas Fuels Blending, Solvent Recycling 179 acres Own
and Deepwell Disposal Facility
</TABLE>
The Company also owns an office, warehouse and shop facility in
Pasadena, Texas to service its Gulf Coast transportation and Surecycle(R)
operations. The Company owns a transportation terminal in Robstown, Texas and
leases transportation terminals in Beaumont, Texas and Niagara Falls, New York.
The Company leases transfer facilities in El Paso and Laredo, Texas for the
transfer of wastes collected from maquiladora plants in Mexico and a facility
in Dallas, Texas to support its Surecycle(R) operations. The Company also leases
a hazardous waste drum transfer station in Anaheim, California to consolidate
waste volumes for small quantity generators.
ITEM 3. LEGAL PROCEEDINGS
The Company's business inherently involves risks of unintended or
unpermitted discharge of materials into the environment. In the ordinary course
of conducting its business activities, the Company becomes involved in judicial
and administrative proceedings involving governmental authorities at the
federal, state and local levels (including, in certain instances, proceedings
instituted by citizens or local governmental authorities seeking to overturn
governmental action where governmental officials or agencies are named as
defendants together with the Company or one or more of its subsidiaries, or
both). In the majority of the situations where regulatory enforcement
proceedings are commenced by governmental authorities the matters involved
relate to alleged technical violations of licenses or permits pursuant to which
the Company operates or of laws or regulations to which its operations are
subject, or are the result of different interpretations of the applicable
requirements.
In addition, the Company and certain of its subsidiaries are involved
in civil litigation relating to the conduct of their business. While the
outcome of any particular lawsuit or governmental investigation cannot be
predicted with certainty, the Company believes that the ultimate disposition of
these matters will not have a material adverse effect upon the consolidated
financial position of the Company.
Richland, Washington Facility. In 1964, the Washington Department of
Ecology ("WDOE") leased from the DOE a 1,000 acre portion of the Hanford
Reservation. In 1965, the WDOE subleased 100 acres of that property to the
Company for use as a LLRW disposal facility under the regulation of the
Washington Department of Health pursuant to the Atomic Energy Act. In 1990 the
DOE applied to the EPA for a permit under the RCRA and other laws and
regulations to obtain the appropriate regulatory approvals needed to proceed
with the environmental cleanup of the Hanford Reservation. In 1994, in a consent
order among the EPA, DOE and WDOE, the EPA and DOE issued a corrective action
permit that includes all of the land owned by the DOE at the Hanford
Reservation, including that portion leased to WDOE, which includes the 100 acres
subleased to the Company for its LLRW disposal facility. Thirteen trenches at
the Company's LLRW disposal facility have been included in the final permit as
solid waste management units which will require further investigation to
determine whether releases of any hazardous wastes or constituents have
occurred. Because portions of the Company's facility remains included in the
final permit issued to the DOE, the Company is potentially subject to proposed
permit conditions for site investigation and possible cleanup should any
releases be discovered even though the Company is not a permittee and though it
was not involved in the activities contributing to the
16
<PAGE>
Hanford facility contamination that are the subject of the Hanford consent
order. It is the Company's opinion that it has legal defenses to the inclusion
of its Hanford site in the DOE permit and to any corrective action that may be
proposed of the site pursuant to the DOE permit. The Company has appealed to
the Environmental Hearing Board of the EPA the terms of the permit that apply to
any of Company's facilities. By agreement of all the parties, appeals have been
stayed in order for the Company to negotiate a settlement with DOE and EPA to
resolve corrective action concerns. If the Company is unsuccessful in the
negotiation or the challenge to the permit, the cost of conducting the site
investigation and any corrective action could be material.
The Company was assessed a substantial property tax increase by the
Benton County Assessor's Office and has filed suit challenging the property tax
increase imposed by the Benton County Assessor on improvements at the Company's
leased disposal facility on the Hanford Reservation. The County Treasurer
issued tax statements based upon these assessments for payments covering the
years 1989, 1990 and 1991, which totaled $1.7 million. The Company sued Benton
County and the Assessor and Treasurer to enjoin them from collecting these
taxes. The Benton County Superior Court issued an injunction in favor of the
Company. The County appealed to the Court of Appeals. The Court of Appeals
ruled in favor of the County and reversed the decision of the Benton County
Superior Court by holding that the injunction should not have been issued
pending the Company's pursuit of administrative remedies. The Company is
appealing the Court of Appeal's decision to the Washington Supreme Court.
Management believes that the County's assessments were improper and intends to
vigorously defend this matter in the courts and through any appropriate
administrative process, if necessary.
Winona, Texas Facility. The Company purchased the stock of Gibraltar,
since renamed American Ecology Environmental Services Corporation, from Mobley
Environmental Services, Inc. ("Mobley") on December 31, 1994. The Company's
stock purchase agreement with Mobley provides that Mobley will indemnify the
Company, without limitation as to amount, for any damages or costs, including
legal fees, associated with certain pre-closing liabilities, including the
claims set forth hereunder. Pursuant to its stock purchase agreement with
Mobley, the Company has also been named as an additional insured for pre-closing
claims under Mobley's pollution liability insurance policy. The policy has a
$10 million aggregate limit and a $5 million per loss limit.
In 1992, a citizens group filed a petition with the TNRCC for
revocation of the Winona facility's deepwell permits alleging that a geological
fault exists in the vicinity of the Winona facility's deepwells and other
alleged grounds. The EPA has previously concluded in its proceedings relating
to the Winona facility's second injection well that no such fault exists. The
Company believes the petition is without merit.
A group called Mothers Organized to Stop Environmental Sins filed a
lawsuit in 1994 against the Company in the United States Eastern District Court
for the State of Texas alleging that the Winona facility violated certain
permits and regulations, and contributed to the handling, storage, treatment,
transportation and disposal of solid and hazardous waste that presents an
imminent and substantial endangerment to health and the environment. The
plaintiffs have requested that the facility be shut down and civil penalties
imposed on the Company. The Company has filed an answer denying these
allegations and a motion for summary judgment and believes the suit is without
merit. The Company intends to vigorously defend this litigation. However, if
the plaintiffs were to ultimately prevail on their claim and be awarded the
remedies sought, such outcome could have a material adverse effect on the
Company's consolidated financial position and results of operations.
Four lawsuits, including one purported class action, were filed against
Gibraltar, in 1992 and 1993 which were subsequently transferred to State
District Court in Smith County, Texas, by certain persons in Winona, Texas. The
suits assert various theories of liability including subsurface trespass,
nuisance, and negligence for alleged air emissions. The suits also allege that
the plaintiffs have experienced personal injuries, diminution in property
values, and other economic losses which are alleged to have been caused by
operation of the Winona facility. The plaintiffs assert various grounds for
recovery, including allegations that their property has been used without their
consent as a hazardous waste facility, and seek unspecified actual and punitive
damages. The Company disputes the material allegations of the plaintiffs' suits
and intends to vigorously defend this litigation. To date, the Company and
Mobley have settled certain of the plaintiff's claims in these actions for
amounts that were not material and which were funded by the Mobley insurance
policy referred to above.
17
<PAGE>
Compact Related Disputes. The Company is involved in numerous
challenges and legal proceedings in connection with its siting efforts for LLRW
facilities for the Southwest Compact and Central Interstate Compact. For a
description of these proceedings, see "Business -- Low-Level Radioactive Waste
Services -- Disposal Services -- Ward Valley, California Facility" and
"-- Butte, Nebraska Facility".
The Company has received invoices from the Southeast Compact Commission
for approximately $1.5 million and a notice that an additional $1.5 million will
be invoiced in the aggregate in the second and third quarter of 1995. The
invoices relate to an access fee for the Barnwell, South Carolina LLRW disposal
facility in the Southeast Compact utilized by Quadrex. The fee for each
generator is calculated pursuant to a Commission formula which is based on the
historical amount of LLRW shipped to the Barnwell facility by such generator.
The Company believes that it did not assume such access fees liabilities
relating to pre-acquisition volumes of Quadrex in its asset acquisition of the
Recycle Center and that the Company has legitimate defenses to this claim. The
Company appealed the Commission's invoices and in February 1995 at an appeal
hearing, the Commission again concluded that the full access fees were payable
by the Company. As a result of the fee dispute, on March 29, 1995, the
Southeast Compact Commission directed the Department of Health and Environmental
Control of the State of South Carolina to deny the Company access to the
Barnwell, South Carolina LLRW disposal facility. The Company has appealed the
Commission's action to the Department under South Carolina law. As of the date
of this report, the Department has not denied the Company access to the Barnwell
facility. While the Company continues to discuss alternate resolutions of this
dispute with the Commission, the Company believes it has no material liability
in connection with this matter and intends to vigorously defend any material
assessment or attempt to deny access to the Barnwell facility.
Other Litigation. The City of San Antonio (the "City") filed suit
against several parties related to environmental issues in connection with the
acquisition, development and construction of a bus transit station and multi-
purpose stadium and sports complex, commonly known as the Alamodome. The City
has named as the defendants: the former owner of the property, various
consultants involved in the project, the project manager, and a subsidiary of
the Company which served as the construction contractor for the project. The
City has alleged several theories of recovery, including breach of contract,
negligent misrepresentation and gross negligence. The City alleges its
consultants failed to advise the City that the selected site was contaminated,
thereby breaching their contracts and committing torts. The City alleges
further that following the discovery of actual or potential environmental
problems, the City's consultants and project manager failed to act properly in
handling allegedly contaminated soil and groundwater. The City has also alleged
that construction of the landfill did not conform to contract requirements. The
City has decided to exhume the onsite landfill and dispose of it at another
location. Minimal discovery has been taken. The Company does not believe that
the claims against its subsidiary are meritorious and intends to vigorously
defend against such claims. Furthermore, the Company intends to pursue a
counterclaim to recover sums related to its construction of the on-site
landfill.
In November 1994, the Company was named as a defendant in a purported
class action lawsuit by former employees of Quadrex that relates to unpaid
medical benefits and an underfunded pension plan of Quadrex. Based on
information available to it, the Company believes that the aggregate amount of
these claims are less than $1 million. The Company purchased the assets of the
Quadrex Recycle Center from Quadrex on September 19, 1994. However, the
asserted claims in the purported class action were specifically excluded by the
purchase agreement pursuant to which the Company purchased the assets of the
Quadrex Recycle Center. Some of the former Quadrex employees on whose behalf
the suit was brought are now employees of the Company. The Company does not
believe it has any liability in this matter and intends to contest the matter
vigorously. The Company's purchase agreement with Quadrex provides that Quadrex
will indemnify the Company for any damages or costs, including legal fees,
associated with a claim of this sort. However, because Quadrex filed for
bankruptcy protection in February 1995, it is very likely that the Company will
not realize the benefits of such indemnification.
The Company has received a notice from an individual purporting to own
debt secured by certain real property in Midlothian, Texas. The individual
alleges that a predecessor of the Company's subsidiary, Texas Ecologists, caused
environmental contamination of the property in the early 1970's. The Company
believes it has no liability in connection with the matter and intends to
contest the matter vigorously. In connection with its investigation of the
matter, the Company also conducted its own assessment of the property with an
independent environmental consultant and concluded that any contamination on the
property falls below material levels.
18
<PAGE>
Other Matters. In 1990, the Company was sued by certain landowners
owning property adjacent to the Company's Robstown, Texas disposal facility.
The landowners have alleged that there has been migration of pollutants through
groundwater which has contaminated water resources on their respective property.
These landowners have alleged theories including nuisance per se, negligence and
trespass. The Company's investigation has found no migration of pollutants onto
the adjacent landowners' properties and the Company intends to contest this
matter vigorously.
In 1992, the Company received notice from the EPA alleging that the
Company had violated financial assurance and liability insurance requirements at
the closed Sheffield, Illinois hazardous waste disposal site formerly operated
by the Company. The EPA is seeking a penalty of approximately $1 million and
ordering compliance. Both the EPA and the Company have filed cross-motions for
an accelerated decision by the administrative law judge regarding the issue of
liability. Though the ultimate outcome of this matter is uncertain, the Company
believes these insurance requirements are not applicable to this closed site and
intends to vigorously contest this matter.
In April 1995, management of the Company became aware that the Company
had held hazardous waste containers at certain of its transportation terminals
for periods greater than the 10-day temporary storage periods permitted by TNRCC
regulations. The Company has reported the matter to the TNRCC. The Company has
also put in place procedures to safeguard against future violations of this type
and, upon completion of its review of the matter, may put in place additional
safeguard procedures if so warranted. While the Company believes the steps that
it has taken are appropriate and responsive, it is possible that the TNRCC may
seek to impose a fine on the Company in connection with the matter. The Company
is not in a position to assess the amount of such a fine. However, a fine of
sufficient magnitude could have a material adverse effect upon the consolidated
financial position of the Company.
In addition to the above-described litigation, the Company and its
subsidiaries from time to time are involved in various other administrative
matters of litigation, including personal injury and other civil actions, as
well as other claims, disputes and assessments that could result in additional
litigation or other proceedings. The Company and its subsidiaries are also
involved in various other environmental matters or proceedings, including permit
application proceedings in connection with the establishment, operation, closure
and post-closure activities of certain sites, as well as other matters or claims
that could result in additional environmental proceedings.
While the final resolution of any matter may have an impact on the
Company's consolidated financial results for a particular reporting period,
management believes that the ultimate disposition of the matters described in
Item 3. will not have a material adverse effect upon the consolidated financial
position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the Company's security holders during the
fourth quarter of 1994.
19
<PAGE>
PART II
ITEM 5. MARKET FOR AMERICAN ECOLOGY CORPORATION COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
American Ecology Corporation common stock is currently listed on the
NASDAQ National Market System under the symbol ECOL. As of March 1, 1995, there
were approximately 8,000 record holders of common stock. The high and low sales
prices for the common stock on the NASDAQ and the dividends paid per common
share for each quarter in the last two years are shown below:
<TABLE>
<CAPTION>
1994 1993 Dividends Per Share
------------------ ------------------- -------------------
PERIOD High Low High Low 1994 1993
------ ----- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter 12-1/2 8-1/4 12-1/2 9-1/2 $.025 --
2nd Quarter 10-3/4 7-3/4 11-3/4 8-3/4 .025 --
3rd Quarter 9 7-3/4 12-1/4 6 .025 --
4th Quarter 8-1/2 5-7/8 12-1/4 7-1/4 .025 --
</TABLE>
Future cash dividends, if any, will be considered by the Board of Directors
based upon the Company's earnings and financial position and such other factors
as the Board of Directors considers relevant. The Company's credit facility
with its bank lender restricts cash dividends payable by the Company to $200,000
per quarter. In addition, the credit facility provides that if the Company has
not completed a debt or equity offering of at least $35 million prior to May 1,
1995, then after May 1, 1995, payment of cash dividends by the Company will be
prohibited.
20
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
AMERICAN ECOLOGY CORPORATION
This summary should be read in conjunction with the consolidated financial
statements and related notes.
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1994 1993 1992 1991 1990
-------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues $ 71,891 $ 60,312 $ 70,940 $55,811 $48,711
Increase (decrease) in revenue from prior year-percentage 19.2% (15.0)% 27.1% 14.6% 7.5%
Net income $ 3,850 $ 4,744 $ 12,556 $ 7,407 $ 3,767
Net income per share (1) $ .49 $ .60 $ 1.51 $ 1.27 $ .78
Shares used to compute income per share (000's) (1) 7,851 8,097 8,568 6,624 4,821
Working capital $ 1,563 $ 4,771 $ 14,078 $ 7,773 $ 8,372
Current ratio (current assets divided by current liabilities) 1.0:1 1.2:1 1.7:1 1.5:1 1.5:1
Total assets $155,439 $108,122 $104,166 $84,691 $79,343
Long-term debt, net of current portion $ 33,493 $ -- $ -- $ 543 $22,977
Shareholders' equity $ 67,045 $ 63,564 $ 54,730 $40,470 $ 8,765
Long-term debt to total capitalization as a percentage 33.3% --% --% 1.3% 72.4%
Return on average equity 5.9% 8.0% 26.4% 30.1% 54.8%
Dividends declared per common share $ .10 $ -- $ -- $ -- $ --
Capital spending, including capital expenditures and
site development costs $ 8,035 $ 12,558 $ 9,582 $ 9,453 $14,306
Depletion, depreciation and amortization expense $ 6,279 $ 4,356 $ 4,173 $ 4,973 $ 4,014
</TABLE>
- ------------
(1) Adjusted for July 1992 three-for-two stock split.
21
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
American Ecology provides waste management services to generators of
hazardous waste and low-level radioactive waste ("LLRW") in the United States.
The Company's services include processing, packaging, remediation, recycling,
transportation and disposal of waste. In recent years, Company volumes have
increased despite overall industry volumes of hazardous waste declining due to
waste minimization efforts reducing industrial process wastes, and to an overall
slowdown in site remediation efforts reducing clean-up wastes. The hazardous
disposal industry has experienced significant competitive pricing pressures as a
result of this trend. Disposal volumes of LLRW have been greatly impacted by the
geographical restrictions imposed by the implementation of the federally
mandated compact system. Also, the LLRW disposal industry has transitioned from
being commercially unregulated prior to 1993, to an industry economically
regulated as a monopoly by the compacts and states in which current and future
disposal sites reside.
In recognition of these industry trends, the Company developed a
strategy to broaden the Company's businesses from primarily disposal services to
include more comprehensive non-disposal services such as the treatment,
processing and recycling of hazardous waste and LLRW. In September 1994, the
Company acquired a LLRW treatment, processing and recycling facility ("Recycle
Center") in Oak Ridge, Tennessee, and on December 31, 1994, the Company acquired
a fuels blending, solvent recycling, and liquid hazardous waste deepwell
disposal facility in Winona, Texas ("Winona Facility"). In addition to these
two acquisitions, the Company has expanded its revenue base and obtained value
added hazardous waste disposal contracts by marketing and performing waste
stabilization, and by providing turnkey remediation services which include site
remediation, transportation, and ultimate disposal of wastes in the Company's
landfills. Additionally, the Company has been successful in entering the
naturally occurring radioactive materials ("NORM") disposal market which
provides attractive disposal margin opportunities at the Company's Richland,
Washington LLRW facility, and in performing profitable LLRW remediation
projects.
As a result of the changes in the industry and the implementation of
the Company's business strategies, the 1994 results reflected a 19% increase in
revenues, though income from operations and net income decreased 19% from the
prior year. Exclusive of material unusual events and non-recurring accounting
adjustments in both 1994 and 1993, income from operations increased by
approximately $2,800,000 in 1994 as compared to 1993, which is attributable, in
part, to increased revenues from NORM business and LLRW remediation projects,
and a decrease in certain operating costs due to utilizing personnel and
equipment on deferred site maintenance projects, and to a lesser degree,
headcount reductions.
The following table sets forth items in the Statements of Operations
for the three years ended December 31, 1994, as a percentage of revenue:
<TABLE>
<CAPTION>
Percentage of Revenues for the
Year Ended December 31,
1994 1993 1992
------- ------ -------
<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.0%
Operating costs 75.4 69.3 65.9
----- ----- -----
Gross profit 24.6 30.7 34.1
Selling, general and administrative expenses 17.2 19.8 14.0
----- ----- -----
Income from operations 7.4 10.9 20.1
Investment income, net (0.4) (1.7) (2.1)
Interest expense 0.0 0.1 0.1
----- ----- -----
Income before income taxes 7.8 12.5 22.1
Income taxes 2.5 4.6 4.4
----- ----- -----
Net income 5.3% 7.9% 17.7%
===== ===== =====
</TABLE>
22
<PAGE>
Revenues
Revenues for 1994 were $71,891,000, a 19% increase over 1993 revenues
of $60,312,000. Of the $11,579,000 increase in revenues, 55% was attributable
to hazardous waste businesses and 45% was attributable to LLRW businesses.
Hazardous waste revenues increased 16% compared to 1993 hazardous
waste revenues. Hazardous waste disposal revenues increased 2% in 1994 despite
a declining, very competitive, disposal market for remedial waste. Disposal
volumes increased approximately 34% due to obtaining several large volume
contracts for remedial projects on the West Coast and in Texas. However, due to
the high volume nature of these contracts and the competitive remedial pricing
environment, average disposal prices for the Company's two hazardous landfills
decreased by approximately 23%. Similar conditions were experienced in 1993
when disposal volumes increased approximately 24% and average prices fell
approximately 22% as compared to 1992. An increase in transportation revenues
of 29% in 1994 resulted from a full year of results from the operations of Waste
Processors Industries, Inc. ("WPI") acquired in March 1993, and the successful
integration of marketing transportation and disposal services with the Robstown,
Texas facility. Other significant revenue increases resulted from remediation
services and waste stabilization services. Hazardous waste remediation revenues
result from services performed at the customer's site, either directly by the
Company or subcontracted by the Company, in order to accommodate the customers'
desire to contract with one vendor for all phases of a remediation project.
Remediation revenues increased 17% in 1994 due principally to the large
remediation and disposal contracts obtained in the West Coast region with
ultimate waste disposal occurring at the Company's Beatty, Nevada facility.
Stabilization revenues nearly tripled in 1994 compared to 1993 due to state
regulatory requirements for debris treatment and to the large debris cleanup
projects requiring stabilization treatment prior to disposal. The 1994
Statement of Operations does not include any results of operations from the
acquisition of the Winona Facility purchased on December 31, 1994.
LLRW revenues increased 26% compared to 1993. LLRW disposal revenues
decreased 8% due principally to the implementation of the Federal Low-Level
Radioactive Waste Policy Amendments Act of 1985 (the "Low-Level Act") on January
1, 1993. The Low-Level Act together with state regulatory initiatives resulted
in the inactivity of the Beatty, Nevada LLRW facility and the regulatory
restrictions placed on the Richland, Washington facility and caused unusually
large volumes of waste receipts at the end of 1992 which were not buried and
recognized as revenues until the first quarter of 1993. Exclusive of the
carryover effect of volumes received in 1992, 1994 disposal revenues increased
by approximately 37% compared to 1993 due to penetration of the NORM waste
disposal market. It is uncertain whether the Company will be able to continue
unregulated disposal of NORM wastes at the Richland facility indefinitely due to
possible state regulatory restrictions. In 1994, the Company entered the LLRW
on-site remediation business generating approximately $1,900,000 of revenues by
providing technical and remedial services for several projects in various
regions of the country. Additionally, the acquisition of the Recycle Center in
September 1994, contributed approximately $2,800,000 in treatment, processing,
and recycling revenues, $1,200,000 of which is attributable to management's
estimated settlement of a fourth quarter 1994 business interruption claim for a
fire which damaged a processing building and related equipment at the Recycle
Center in July 1994. Management expects the Recycle Center's 1995 results to
include recognition of anticipated business interruption claim settlements for
the period until the facility is fully operational. Final determination of the
amounts of proceeds from business interruption claims is subject to negotiations
with the insurance carrier.
Revenues for 1993 were $60,312,000, a 15% decrease from 1992 revenues
of $70,940,000. LLRW revenues decreased $22,701,000, or 53%, while total
hazardous waste revenues increased $12,073,000, or 43%, from 1992. The LLRW
business decline was due to the Low-Level Act, which resulted in the inactivity
of the Beatty, Nevada LLRW facility and the regulatory restrictions placed on
the Richland, Washington facility. Increased hazardous waste revenues were
attributable to acquiring WPI in March, 1993, whose revenues of $10,947,000 were
comprised of transportation (70%) and remediation services (30%).
Revenues resulting from the cost reimbursement contract with the
Central Interstate Low-Level Radioactive Waste Commission were approximately
$9,800,000, $9,300,000, and $10,300,000 in 1994, 1993, and 1992, respectively.
23
<PAGE>
Operating Costs
Operating costs in fiscal 1994 increased $12,391,000, or 30%, as
compared to 1993, $1,768,000 of which was attributable to the acquisition of the
Recycle Center. As a percentage of revenues, operating costs were 75%, 69%, and
66% for the years ended 1994, 1993, and 1992, respectively. The following table
sets forth unusual events and non-recurring accounting adjustments which
affected operating costs for the years ended December 31, 1994 and 1993,
respectively. There were no such items for the year ended December 31, 1992.
<TABLE>
<CAPTION>
(Increase) decrease to
Operating Costs
-----------------------
1994 1993
---------- ----------
<S> <C> <C>
Deferred site maintenance accrual reversals due to changes in
current cost estimates and certain estimated accruals exceeding
actual costs for completed projects $3,202,000 $ 96,000
Settlements of environmental insurance claims on closed sites 505,000 2,275,000
Deferred site maintenance accrual reversal, settlement with the
Commonwealth of Kentucky, and estimated PRP settlements,
all regarding remedial liability and indemnity for the closed
Maxey Flats site 518,000 1,768,000
Writedowns of certain permitting costs and airspace costs (413,000) --
Deferred site maintenance accrual reversal due to change in
the discount rate used to compute the present value of
certain liabilities -- 1,199,000
Disposal fees and taxes payable and deferred site maintenance accrual
reversed due to settlement with the State of Nevada regarding the
Beatty, Nevada LLRW facility -- 2,792,000
Cell development cost amortization adjustment due to better than
expected cell utilization in 1992 -- 768,000
---------- ----------
Total unusual events and non-recurring adjustments included
in operating costs $3,812,000 $8,898,000
========== ==========
</TABLE>
Exclusive of these unusual events and non-recurring adjustments,
operating costs for 1994 and 1993 would have been $57,993,000 and $50,688,000,
or 81% and 84% of revenues, respectively. The improvement in operating margin
in 1994, net of unusual events and non-recurring adjustments, is attributable to
strong margins in the NORM disposal business and on certain LLRW remediation
projects, and the integration of hazardous waste transportation services since
the March 1993 acquisition of WPI which directed disposal volumes to the
Robstown, Texas facility. Operating costs were reduced as a result of maximizing
the utilization of operations personnel on deferred site maintenance projects
and to headcount reductions. The decline in operating margin in 1993 from 1992
reflected the decline in the profitable LLRW disposal business as a result of
the Low-Level Act and the trend toward lower margins in the hazardous waste
disposal business.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (SG&A) for 1994 were
$12,362,000, an increase of $430,000 compared to 1993. The increase is
attributable principally to incremental selling costs and amortization of
intangible assets resulting from acquired businesses. As a percentage of
revenues, SG&A was 17%, 20%, and 14% for 1994, 1993, and 1992, respectively.
The 1994 decrease in SG&A as a percentage of revenue was due principally to the
revenue increase in 1994 as compared to 1993. SG&A for 1993 was $11,932,000, an
increase of $2,037,000 from 1992. SG&A for 1992 included a non-recurring charge
of $1,250,000 for costs of relocating
24
<PAGE>
the Company's corporate office from Louisville, Kentucky to Houston, Texas which
was completed during the second quarter of 1993. Exclusive of this charge in
1992, SG&A in 1993 increased due principally to the acquisition of WPI in March
1993, legal fees incurred for certain corporate matters, and various costs
related to establishing the corporate office in Houston. These costs included
additional depreciation on new computer hardware and software development costs
for financial and operational reporting systems and on newly acquired office
furniture and equipment, greater rental expenses for operating two offices
during the transition to Houston, and various start-up and temporary duplicate
items such as office supplies, communications and travel.
Investment Income
Net investment income is comprised of interest income earned on
various debt securities, certificates of deposit and other interest bearing
deposits, and dividend income and capital gains and losses earned on the
Company's preferred stock portfolio. Investment income recognized in 1994
decreased from 1993 due to lower preferred stock portfolio performance as a
result of rising interest rates and to the decrease in interest bearing
investments outstanding. This portfolio is principally the Company's captive
insurance investments reinsuring the present value of certain long-term closure
and post closure liabilities. The amount of investment income in 1993 decreased
from 1992 due principally to a lower weighted average of outstanding investments
in 1993 as compared to 1992.
Interest Expense
Interest expense is the total interest expense incurred by the Company
on outstanding indebtedness less capitalized amounts. For the year ended
December 31, 1994, the Company incurred $968,000 in interest cost, all of which
was capitalized for the development of the Company's LLRW facilities in
California and Nebraska in accordance with Statement of Financial Accounting
Standards No. 34, Capitalization of Interest Cost. Substantially all of the
interest cost incurred for 1994 related to borrowings under the Company's credit
agreement with its bank lender.
Income Taxes
The Company's effective income tax rates were 32%, 37%, and 20% for
the fiscal years 1994, 1993, and 1992, respectively. The effective rate of 32%
in 1994 includes the benefit of the recognition of an estimated state income tax
settlement of $300,000. Exclusive of this amount, the year's effective rate
would have been 37%. The lower effective rate in 1992 was due to the benefit of
the recognition of certain deferred tax assets as determined under applicable
income tax accounting standards in effect during that period. Effective January
1, 1993, the Company prospectively adopted Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. The effect of the adoption was
not material to the Company.
Capital Resources and Liquidity
During 1994, the Company invested in acquisitions to diversify and
enable the Company to provide more comprehensive hazardous and LLRW services in
response to the changing environmental services markets. Principally as a result
of the acquisitions of the Recycle Center and the Winona facility, the Company's
consolidated total assets at December 31, 1994 increased $47,317,000 and total
liabilities increased $43,836,000 as compared to December 31, 1993. Working
capital at December 31, 1994 and 1993 was $1,563,000 and $4,771,000,
respectively. The decrease in working capital was attributable to acquisition
expenditures of $27,871,000, capital and site development expenditures of
$8,035,000, and cash used in operating activities of $1,800,000, most of which
was financed with borrowings from the bank credit facility, all of which was
classified non-current on the consolidated balance sheet at December 31, 1994.
In addition to payments for assumed liabilities of the Recycle Center,
which amounted to $17,014,000 at the September 19, 1994 acquisition date and
were comprised principally of processing and burial costs for waste stockpiled
at the facility prior to 1994, the Company has accrued for additional
obligations relating to the Recycle Center at December 31, 1994 as follows:
accruals for waste processing and burial costs and associated deferred revenues
of approximately $9,547,000; accruals for sales tax settlements of $950,000; and
other accounts payable and accruals. The liabilities for waste processing and
burial costs is based on management estimates of
25
<PAGE>
anticipated waste treatment methods and associated volume reductions. Should
estimated volume reductions not be attainable, the costs for processing and
burial could increase materially. The Southeast Compact, in which the Recycle
Center is located, charges disposal site access fees to waste generators for
development of the Southeast Compact's future disposal site. The Compact has
assessed the Company with fees based on volumes disposed of prior to the Recycle
Center acquisition. For the period from October 1, 1993 to September 30, 1994,
the potential assessment related to pre-acquisition waste volumes is estimated
at $3 million. The Company intends to vigorously challenge this assessment, and
accordingly, has accrued the estimated assessment related to post-acquisition
disposal volumes. (See Note 10 to the consolidated financial statements.)
The Company's bank credit agreement, as amended, provides for
borrowings up to $35,000,000. At December 31, 1994, borrowings under the credit
facility totaled $32,905,000. The secured credit facility matures on January 31,
1996 and is comprised of a $30,000,000 term loan, a $5,000,000 revolving credit
facility, and $5,000,000 in standby letters of credit. Interest is payable
quarterly and the interest rate is equal to either a base rate (the greater of
the bank's prime rate or the federal funds rate plus .5%) plus a margin of 0% to
.75%, or a Eurodollar rate plus a margin of 2% to 3%. The marginal rate
increases are based on a debt coverage ratio. The Company's actual interest rate
as of December 31, 1994 was approximately 8.7%. These rates are subject to
increase by .25% to .75% and the bank may enforce financial and other
restrictions on the Company if the Company is unable to refinance the facility
by May 1, 1995 or is unable to comply with financial covenants of the credit
agreement. Subsequent to December 31, 1994, the Company was not in compliance
with a financial covenant requiring the maintenance of a specified amount of
accounts receivable and obtained a waiver from the bank regarding such non-
compliance. The Company subsequently requested that the required level of
accounts receivable be adjusted to a lower amount and that certain financial
covenants be adjusted to a level in which the Company would remain in compliance
based on the Company's projected financial position through 1995. The bank
approved this request on April 12, 1995. Under the terms of the credit
agreement, the bank may accelerate the maturity of the debt in the event a
material adverse effect is deemed by the bank to have occurred. If the Company
is unable to remain in compliance with the terms of the credit agreement or
obtain waivers in the event of a default and the bank accelerates maturity of
the credit agreement, the Company does not have adequate financial resources to
extinguish the loan and the Company's operations may be negatively impacted.
The Company is in process of arranging for long-term refinancing for
the credit facility and, if successful, anticipates a closing of a private
placement debt offering in the second quarter of 1995. If the private debt
placement is not successful, management will seek alternative financing which
may include an equity offering or an offering combining debt and equity. Absent
new financing in the anticipated timeframe, forbearance will be required from
the Company's bank lender to meet obligations as they become due. There is no
certainty that the refinancing will be obtained or that the Company's existing
lender will provide such forebearance. Management believes that the Company will
be able to remain in compliance with the terms of the credit agreement. (See
Note 6 to the consolidated financial statements.)
In addition to working capital funding, the Company anticipates
capital expenditures of approximately $4,600,000, expenditures for deferred site
development, excluding capitalized interest, of approximately $3,000,000, and
expenditures of approximately $2,400,000 for remedial costs, cell capping, and
various site maintenance projects in 1995. The Company believes that funds
generated from operations and available borrowing capacity will be sufficient
to meet the Company's current capital and operating requirements. As discussed
above, the Company will need to obtain long-term refinancing for the credit
facility prior to its maturity on January 31, 1996.
26
<PAGE>
The following table sets forth the Company's summary cash flows for
the last three fiscal years:
<TABLE>
<CAPTION>
Summary Cash Inflows (Outflows)
Year Ended December 31,
--------------------------------------------
1994 1993 1992
------------ ------------- ------------
<S> <C> <C> <C>
Cash flows from operating activities before deferred site
maintenance expenditures $ 4,083,000 $ 9,063,000 $14,824,000
Deferred site maintenance expenditures (5,883,000) (2,364,000) (979,000)
------------ ------------ -----------
Net cash provided by (used in) operating activities (1,800,000) 6,699,000 13,845,000
------------ ------------ -----------
Capital expenditures, including site development costs (8,035,000) (12,558,000) (9,582,000)
Acquisition expenditures (27,871,000) (3,305,000) --
Other investing activities, net 1,184,000 4,526,000 1,471,000
------------ ------------ -----------
Net cash used in investing activities (34,722,000) (11,337,000) (8,111,000)
------------ ------------ -----------
Borrowing (repayments) under bank credit agreement, net 32,816,000 (2,121,000) (1,334,000)
Other financing activities, net (479,000) 341,000 1,384,000
------------ ------------ -----------
Net cash provided by (used in) financing activities 32,337,000 (1,780,000) 50,000
------------ ------------ -----------
Net increase (decrease) in cash $ (4,185,000) $ (6,418,000) $ 5,784,000
============ ============ ===========
</TABLE>
Financial Assurance and Site Maintenance
The Company operates its chemical waste disposal sites under Resource
Conservation and Recovery Act of 1976 ("RCRA") permits. The LLRW sites are
operated under licenses from state and, in some cases, federal agencies. When
these facilities reach capacity, or lease or license termination dates, as the
case may be, they must be closed and maintained for a period of time prescribed
by law or by license. In the case of the RCRA-permitted chemical sites, federal
regulation requires that operators demonstrate the financial capability to close
sites on an immediate, unscheduled (worst-case) basis. The estimated costs of
such a closure are set forth in the operator's RCRA closure/post-closure plan.
To secure closure/post-closure obligations of its chemical waste
disposal sites under federal and state regulations, the Company has provided
letters of credit, certificates of insurance, and corporate guarantees as
financial assurance. Cash and investment securities totaling $13,175,000 and
$13,632,000 at December 31, 1994, and 1993, respectively, have been pledged as
collateral for the Company's closure/post-closure obligations, performance of a
Remedial Investigation and Feasibility Study ("RI/FS") and performance of
corrective action at the closed Sheffield, Illinois chemical waste facility,
compliance with the Texas Natural Resources Conservation Commission requirements
related to a deepwell at the Company's Robstown, Texas chemical disposal site,
closure costs for the Beatty, Nevada LLRW site, closure costs for the Recycle
Center, closure costs for the Winona facility, test borings at the proposed LLRW
sites in Nebraska and California, settlement with generators of waste at the
Richland, Washington facility and performance bonds.
The RI/FS for the closed Sheffield facility was completed and approved
by the U.S. Environmental Protection Agency in 1990. The Company is in the
remedial phase of the Sheffield program as set forth in the EPA's corrective
measures implementation plan. During 1994, the Company spent approximately
$4,100,000 on remediation at the closed Sheffield chemical disposal site.
The nature of the hazardous material handled by the Company and its
subsidiaries could give rise to substantial damages if spills, accidents or
migration of hazardous material occurs. The occurrence of such events could
have a material adverse effect upon the Company's liquidity and operating
results.
Corporate Development Considerations
See "Business -- Low-Level Radioactive Waste Services -- Disposal
Services -- Ward Valley, California Facility" and "Butte, Nebraska Facility" for
a description of the Company's and the impact of such facilities and other
future considerations on the Company's financial condition and results of
operations.
27
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
of American Ecology Corporation
We have audited the accompanying consolidated balance sheets of
American Ecology Corporation (a Delaware Corporation) and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 6, the terms of the Credit Agreement call for a
principal maturity date of January 31, 1996. Management's current projections
indicate that there will not be sufficient cash flow from operations to fund
that obligation. Management is currently seeking long term re-financing
arrangements that would enable the Company to repay amounts outstanding under
the Credit Agreement before its maturity and to enable the Company to continue
to meet its obligations as they become due from funds generated by operations.
Management's plans in regard to these matters are discussed in Note 6.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of American Ecology
Corporation and subsidiaries as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
April 13, 1995
28
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
AMERICAN ECOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
($ IN 000'S)
<TABLE>
<CAPTION>
As of December 31,
----------------------------
1994 1993
-------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 231 $ 4,416
Investment securities 1,703 900
Receivables, net of allowance for doubtful
accounts of $1,749 and $977, respectively 32,019 18,698
Deferred income taxes 991 1,497
Prepayments and other 2,854 1,765
-------- --------
Total current assets 37,798 27,276
Cash and investment securities, pledged 13,175 13,632
Property and equipment, net 30,122 19,925
Deferred site development costs 41,239 36,918
Intangible assets relating to acquired businesses, net 31,313 6,661
Other assets 1,792 3,710
-------- --------
$155,439 $108,122
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 850 $ --
Accounts payable 12,464 7,931
Accrued liabilities 19,397 8,446
Deferred site maintenance, current portion 3,524 6,128
-------- --------
Total current liabilities 36,235 22,505
Long term debt, excluding current portion 33,493 --
Deferred site maintenance, excluding current portion 18,666 22,053
Commitments and contingencies (Note 11)
Shareholders' equity:
Convertible preferred stock, $.01 par value,
1,000,000 shares authorized, none issued
and outstanding in 1994 and 1993 -- --
Common stock, $.01 par value,
20,000,000 shares authorized, 7,818,828
and 7,783,639 shares issued and
outstanding, respectively 78 78
Additional paid-in capital 41,880 41,469
Retained earnings 25,087 22,017
-------- --------
Total shareholders' equity 67,045 63,564
-------- --------
$155,439 $108,122
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
AMERICAN ECOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
($ IN 000'S EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1994 1993 1992
-------- -------- -------
<S> <C> <C> <C>
Revenues $71,891 $60,312 $70,940
Operating costs 54,181 41,790 46,783
------- ------- -------
Gross profit 17,710 18,522 24,157
Selling, general and administrative expenses 12,362 11,932 9,895
------- ------- -------
Income from operations 5,348 6,590 14,262
Investment income (287) (973) (1,535)
Interest expense -- 31 89
------- ------- -------
Income before income taxes 5,635 7,532 15,708
Income taxes 1,785 2,788 3,152
------- ------- -------
Net income $ 3,850 $ 4,744 $12,556
======= ======= =======
Net income per share, primary $ .49 $ .60 $ 1.51
======= ======= =======
Dividends paid per common share $ .10 $ -- $ --
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
AMERICAN ECOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
($ IN 000'S)
<TABLE>
<CAPTION>
CONVERTIBLE ADDITIONAL
PREFERRED COMMON PAID-IN RETAINED
STOCK STOCK CAPITAL EARNINGS
----------- ------- ---------- ---------
<S> <C> <C> <C> <C>
Balance, December 31, 1991 $ 2 $69 $35,682 $ 4,717
Net income -- -- -- 12,556
Common stock issued,
net of repurchases -- 1 603 --
Income tax benefit of stock
options exercised -- -- 320 --
Conversion of preferred stock (2) 3 (1) --
Exercise of warrant -- 1 779 --
--- --- ------- -------
Balance, December 31, 1992 $-- $74 $37,383 $17,273
Net income -- -- -- 4,744
Common stock issued for
acquisition -- 3 3,464 --
Other common stock issuances,
net of repurchases -- 1 340 --
Income tax benefit of stock
options exercised -- -- 282 --
--- --- ------- -------
Balance, December 31, 1993 $-- $78 $41,469 $22,017
Net income -- -- -- 3,850
Common stock issuances -- -- 301 --
Income tax benefit of stock
options exercised -- -- 67 --
Cash dividends -- -- -- (780)
Other -- -- 43 --
--- --- ------- -------
Balance, December 31, 1994 $-- $78 $41,880 $25,087
=== === ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
AMERICAN ECOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ IN 000'S)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1994 1993 1992
---------- -------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,850 $ 4,744 $12,556
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,279 4,356 4,173
Deferred income tax provision (benefit) 3,044 2,232 (2,843)
Gain on sale of assets (65) (24) (4)
Changes in assets and liabilities, excluding
effects of acquisitions:
Receivables (4,534) 4,437 (6,419)
Investment securities classified as trading 472 -- --
Other assets (411) (1,456) (475)
Deferred site maintenance (7,041) (5,249) 452
Other liabilities (3,394) (2,341) 6,405
-------- -------- -------
Total adjustments (5,650) 1,955 1,289
-------- -------- -------
Net cash provided by (used in) operating activities (1,800) 6,699 13,845
-------- -------- -------
Cash flows from investing activities:
Capital expenditures, excluding site development costs (3,714) (8,943) (5,477)
Site development costs (4,321) (3,615) (4,105)
Payments for businesses acquired (27,871) (3,305) --
Payments received on notes from sale of assets -- -- 600
Proceeds from sale of assets 299 24 2
Transfers from cash and investment
securities, pledged 885 4,502 869
-------- -------- -------
Net cash used in investing activities (34,722) (11,337) (8,111)
-------- -------- -------
Cash flows from financing activities:
Proceeds from issuances of indebtedness 56,555 1,100 --
Payments of indebtedness (23,739) (3,221) (1,334)
Proceeds from common stock issuances 301 341 605
Exercise of warrant -- -- 779
Payment of cash dividends (780) -- --
-------- -------- -------
Net cash provided by (used in)
financing activities 32,337 (1,780) 50
-------- -------- -------
Increase (decrease) in cash and cash equivalents (4,185) (6,418) 5,784
Cash and cash equivalents at beginning of year 4,416 10,834 5,050
-------- -------- -------
Cash and cash equivalents at end of year $ 231 $ 4,416 $10,834
======== ======== =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest, net of amounts capitalized $ -- $ 31 $ 89
Income taxes 123 2,338 3,916
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
AMERICAN ECOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Principles of Consolidation. The accompanying financial statements
present the consolidated accounts of American Ecology Corporation and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
Revenue Recognition. Generally, revenues are recognized as services
are performed and as waste materials are buried or processed.
Cash Equivalents. Cash equivalents consist of short-term, highly
liquid investments with original maturities of three months or less, which are
readily convertible into cash.
Investments in Debt and Equity Securities. The Company has adopted
Statement of Financial Accounting Standards No. 115 (SFAS 115), "Accounting for
Certain Investments in Debt and Equity Securities", effective January 1, 1994.
Debt and equity securities that the Company has the intent and ability to hold
to maturity are classified as "securities held-to-maturity" and reported at
amortized cost. Debt and equity securities that are held for current resale are
classified as "trading securities" and reported at fair value with unrealized
holding gains and losses included in earnings. Debt and equity securities not
classified as either "securities held-to-maturity" or "trading securities" are
classified as "securities available-for-sale" and reported at estimated fair
value with net unrealized holding gains and losses reported as a component of
shareholders' equity. The adoption of SFAS 115 did not have a material effect
on the Company's financial position or results of operations. The Company uses
the specific identification method to determine the cost basis used in computing
realized gains or losses.
Property and Equipment. Property and equipment are recorded at cost
and depreciated on straight-line and declining balance methods over estimated
useful lives. Land is comprised of land owned at the processing and disposal
sites. Land owned at disposal sites is depleted over the estimated useful life
of the disposal site on a straight-line basis. Cell development costs represent
waste disposal site preparation costs which are capitalized and charged to
operating costs as disposal space is utilized. Cell development costs include
direct costs related to site preparation, including legal, engineering,
construction, and the direct cost of Company personnel dedicated for these
purposes. The estimated useful lives of buildings and improvements is fifteen
to thirty-one years. The estimated useful lives of vehicles, decontamination,
processing and other equipment is three to ten years. See Note 3. for major
categories of property and equipment. Expenditures for major renewals and
betterments are capitalized and expenditures for maintenance and repairs are
charged to expense as incurred. During 1994, 1993 and 1992, maintenance and
repairs expense was $750,000, $642,000, and $506,000, respectively.
Deferred Site Development Costs. The Company has been selected to
locate, develop and operate the low-level radioactive waste ("LLRW") facilities
for the Southwestern Compact ("Ward Valley facility") and the Central Interstate
Compact ("Butte facility").
The license application for the Southwestern Compact was approved by
the California Department of Health Services ("DHS") in September 1993. All
costs related to the development of the Ward Valley facility have been paid and
capitalized by the Company. As of December 31, 1994, the Company had deferred
$35,020,000 of pre-operational facility development costs of which $841,000 was
capitalized interest. These deferred costs relating to the development of the
Ward Valley facility are expected to be recovered during the facility's 20 year
operating period from future waste disposal revenues based upon disposal fees
approved by the DHS in accordance with existing state rate-base regulations.
Hearings on the established rates must be conducted upon the request of any
interested person. The disposal fee approval process is expected to include an
independent prudency review of all the pre-operational costs incurred by the
Company prior to their inclusion in the rate-base. The Company expects all of
the costs which it has deferred for this facility, excluding capitalized
interest, to be included as a component in the rate-base as well as their
associated costs of capital.
33
<PAGE>
Allowable costs incurred by the Company for the development of the
Butte facility are reimbursed under a contract with the Central Interstate LLRW
Compact Commission and are recognized as revenues. Substantially all funding to
develop the Butte facility is being provided by the major generators of the
waste in the Central Interstate LLRW Compact. To date the Company has
contributed and capitalized approximately $6,219,000, of which $127,000 was
capitalized interest, toward the development of the Butte facility and no
additional capital investment is expected to be required from the Company prior
to granting of the license. All unreimbursed costs and fees relating to the
Butte facility have been deferred and are also expected to be realized from the
revenue of the LLRW site when operational.
The construction and operation of the Ward Valley and Butte facilities
are currently being delayed by various political and environmental opposition
toward the development of the sites and by various legal proceedings as further
discussed under "Business - Low-Level Radioactive Waste Services - Disposal
Services - Ward Valley, California Facility" and "- Butte, Nebraska Facility".
At this time, it is not possible to assess the length of these delays or when,
or if, the Butte facility license will be granted, and when, or if, the land for
the Ward Valley facility will be obtained, and whether the validity of the Ward
Valley facility's license will be upheld on judicial review. Although the
timing and outcome of the proceedings referred to above are not presently
determinable, the Company continues to actively urge the conveyance of the land
from the federal government to the State of California so that construction may
begin, and to actively pursue licensing of the Butte facility. The Company
believes that the Butte facility license will be granted, operations of both
facilities will commence and that the deferred site development costs for both
facilities will be realized.
In 1994, the Company began to capitalize interest in accordance with
Statement of Financial Accounting Standards No. 34, Capitalization of Interest
Cost, on the site development projects and will continue to do so while the
facilities being developed are undergoing activities to ready them for their
intended use. Interest capitalized during 1994 was $968,000.
Intangible Assets. Intangible assets relating to acquired businesses
consist primarily of the cost of purchased businesses in excess of fair value of
net assets acquired ("goodwill"). Intangible assets are being amortized on the
straight-line method over periods not exceeding 40 years with the majority being
amortized over 25 years. The accumulated amortization of intangible assets
amounted to $962,000 and $442,000 at December 31, 1994 and 1993, respectively.
On an ongoing basis, the Company measures realizability of goodwill by the
ability of the acquired business to generate current and expected future
operating income in excess of annual amortization. If realizability is in doubt,
an adjustment is made to reduce the carrying value of the goodwill. There were
no such adjustments for the three years ended December 31, 1994.
Permitting Costs. Permitting costs, which are primarily comprised of
outside engineering and legal expenses, are capitalized and amortized over the
life of the applicable permits. At December 31, 1994 and 1993, there were
$1,389,000 and $937,000, respectively, of such costs included in other assets in
the accompanying consolidated balance sheet.
Deferred Site Maintenance. Deferred site maintenance includes the
accruals associated with obligations for closure and post-closure of the
Company's operating and closed disposal sites and for corrective actions and
remediation. The portion of these obligations expected to be spent within the
following twelve month period is classified as deferred site maintenance,
current portion in the accompanying consolidated balance sheet. The Company
generally provides accruals for the estimated costs of closures and post-closure
monitoring and maintenance as permitted airspace of such sites is consumed.
Liabilities are recorded when environmental assessments and/or remedial efforts
are probable, and the costs can be reasonably estimated. The Company performs
routine periodic reviews of closed operating sites and revises accruals for
estimated post-closure, remediation or other costs related to these locations as
deemed necessary. The Company's recorded liabilities are based on best
estimates of current costs and are updated periodically to include the effects
of existing technology, presently enacted laws and regulations, inflation and
other economic factors. The Company estimates its future cost requirements for
closure and post-closure monitoring and maintenance for operating chemical
disposal sites based on RCRA and the respective site permits. RCRA requires
that companies provide financial assurance for the closure and post-closure care
and maintenance of their chemical sites for at least thirty years following
closure. Where both the amount of a particular environmental liability and the
timing of the payments
34
<PAGE>
are reliably determinable, the cost is discounted to present value at a discount
rate of 2.5%, net of inflation. See Note 5 and the discussion of Operating Costs
included in Management's Discussion and Analysis of Financial Condition and
Results of Operations for information concerning certain adjustments recorded in
1994 and 1993.
Net Income Per Share. The calculation of net income per common and
common equivalent share is in accordance with the treasury stock method for the
year ended December 31, 1994 and the modified treasury stock method for the
years ended December 31, 1993 and 1992. The change in methods relates to the
reductions in common stock equivalents due to the expiration of an outstanding
warrant in 1993.
<TABLE>
<CAPTION>
(000's except per share amounts)
Year Ended December 31,
---------------------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Net income $ 3,850 $ 4,744 $12,556
Adjustments to net income:
Investment income on assumed investment
of excess proceeds from exercise of
common stock equivalents -- 137 325
Elimination of interest upon assumed
retirement of existing debt -- -- 68
------ ------- -------
Adjusted net income available for
common shareholders $3,850 $ 4,881 $12,949
Weighted average shares outstanding -
Common shares outstanding at year end 7,819 7,784 7,381
Effect of using weighted average common
and common equivalent shares outstanding (6) (88) (119)
Effect of shares issuable under stock
option plans based on the treasury stock method 38 632 610
Effect of shares issuable under warrant
based on the treasury stock method -- 1,327 2,172
Modified treasury stock, 20% repurchase
limit -- (1,558) (1,476)
------ ------- -------
Shares used in computing earnings
per share 7,851 8,097 8,568
------ ------- -------
Net income per common and common
equivalent share, primary $ .49 $ .60 $ 1.51
====== ======= =======
</TABLE>
There was no difference between the primary and fully diluted earnings
per share calculations in 1994, 1993 and 1992.
Stock Split. On May 28, 1992, the Board of Directors of the Company
approved a 3-for-2 stock split, effective July 15, 1992. Retroactive effect has
been given to the 3-for-2 stock split in shareholders' equity and in all share
and per share data in the accompanying consolidated financial statements and
notes thereto.
Reclassification. Certain reclassifications have been made to prior
year financial statements to conform to the fiscal 1994 presentation.
35
<PAGE>
Note 2. Cash and Investment Securities
Cash and investment securities at December 31, 1994 and 1993, were as
follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
------- ------
<S> <C> <C>
Cash $ 1,425 $ 2,286
Trading securities 6,640 7,023
Securities held-to-maturity 5,341 9,639
Securities available-for-sale 1,703 --
------- -------
$15,109 $18,948
======= =======
</TABLE>
Investments in trading securities consist principally of preferred
stocks, which are held by a captive insurance company wholly-owned by the
Company. The change in net unrealized holding loss on trading securities was
$177,000 in 1994. Investments in securities available-for-sale consist of
common stock of Perma-Fix, Inc. (see Note 10) which has an original cost value
of $1,635,000, fair value of $1,703,000 and a gross unrealized holding gain of
$68,000 at December 31, 1994. There were no sales of securities available-for-
sale during 1994. Investments in securities held-to-maturity mature over various
dates during 1995 and are reported at their amortized cost basis, all of which
approximates fair value at December 31, 1994. Investments in securities held-
to-maturity at December 31, 1994, and 1993 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
U.S. Government securities $5,140 $3,390
Certificates of deposit 43 973
Money market accounts and other 158 5,276
------ ------
$5,341 $9,639
====== ======
</TABLE>
Certain cash accounts and substantially all investments in securities
held-to-maturity and trading securities totaling $13,175,000 and $13,632,000 at
December 31, 1994 and 1993, respectively, have been classified as non-current
assets as cash and investment securities, pledged. The pledged cash and
investment securities represent collateral for the Company's closure/post
closure obligations, performance of a Remedial Investigation and Feasibility
Study ("RI/FS") and performance of corrective action at the closed Sheffield,
Illinois facility, compliance with Texas Natural Resource Conservation
Commission requirements related to the Company's non-commercial use deepwell at
the Company's Robstown, Texas, facility, closure costs for the Beatty, Nevada
LLRW site, test borings at the proposed LLRW facilities in Nebraska and
California, settlement with generators of waste at the Richland, Washington
facility, and various performance bonds. Also, a portion of the pledged cash and
investment securities at December 31, 1994 is pledged as collateral for closure
costs relating to the two facilities acquired in 1994 (see Note 10). The amounts
pledged by the Company generally equal the present value of its estimated future
closure and post-closure obligations.
Note 3. Property and Equipment
Property and equipment at December 31, 1994 and 1993, was as follows
(in thousands):
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Land $ 1,818 $ 777
Cell development costs 10,172 9,442
Buildings and improvements 8,143 4,492
Decontamination and processing equipment 4,281 --
Vehicles and other equipment 24,732 19,076
-------- --------
49,146 33,787
Less: Accumulated depletion, depreciation and amortization (19,024) (13,862)
-------- --------
$ 30,122 $ 19,925
======== ========
</TABLE>
36
<PAGE>
Note 4. Accrued Liabilities
Accrued liabilities at December 31, 1994 and 1993 were as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993
-------- ---------
<S> <C> <C>
Waste processing and burial $10,063 $ --
State disposal fees and taxes 1,384 2,672
Regulated rate settlements 1,331 2,399
Compensation costs 1,541 1,623
Other 5,078 1,752
------- ------
$19,397 $8,446
======= ======
</TABLE>
Note 5. Deferred Site Maintenance
Deferred site maintenance accruals at December 31, 1994 and 1993 were
as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
------- --------
<S> <C> <C>
Accrued costs associated with open facilities $10,108 $10,060
Accrued costs associated with closed facilities 12,082 18,121
------- -------
Total 22,190 28,181
Less: current portion (3,524) (6,128)
------- -------
Deferred site maintenance, excluding current portion $18,666 $22,053
======= =======
</TABLE>
Accrued costs associated with open facilities principally relate to
closure and post-closure for the permitted and developed portion of the
Robstown, Texas facility, groundwater contamination remediation at the Robstown
and Winona, Texas facilities, and to capping of active cells at the chemical
waste disposal facilities in Robstown, Texas and Beatty, Nevada and the LLRW
facility in Richland, Washington. The Company is in process of re-permitting
the Robstown facility to include development of an additional portion of the
site. The Company's current estimate of the Robstown site's closure and post-
closure costs of approximately $4.9 million does not include the incremental
closure and post-closure costs for this undeveloped portion of the site.
The Company is in the process of addressing corrective action plans at
the Robstown, Texas site. A 1978 analysis showed the presence of chemical
contamination in the shallow, non-potable aquifer underlying the site. The
Company operates a deep-injection well for the disposal of contaminated
groundwater and leachate generated at the facility. The Company has recorded an
accrual for the estimated costs of the groundwater remediation program based
upon a compliance plan agreed to with the state's regulatory authority in 1992.
Based on remediation results to date, the reduction in contamination levels
outlined in the compliance plan are not being achieved. In 1993, the state's
regulatory rules were amended to base clean-up requirements upon reasonable
standards criteria. The Company believes that the standards upon which the
costs are estimated should be reduced and has proposed an alternative plan to
the State which could substantially mitigate future groundwater remediation
costs. The Company is unable to predict the outcome of the state's response to
the Company's proposal. If the Company's proposal is not accepted, significant
costs may be required to remediate the site to the state's specifications in the
current compliance plan.
The Winona facility, acquired on December 31, 1994, has on-site,
underground chemical contamination for which the facility has developed a
corrective action plan and is in process of remediating. Groundwater is
recovered and disposed of in the facility's deep-injection well. The estimated
cost of the remediation of approximately $1.1 million was included in the
Company's deferred site maintenance accruals at December 31, 1994.
The State of Nevada and the State of Washington have responsibility
for the costs of closure and post-closure care and maintenance of the respective
Beatty, Nevada and Richland, Washington sites. The Company currently submits
waste volume-based fees to state maintained funds. Such fees are periodically
negotiated with, or
37
<PAGE>
established by, the states and are based upon engineering cost estimates
provided by the Company and approved by the state. The estimated additional
cell capping costs to be expensed over the remaining developed cell space at the
Company's disposal facilities was approximately $803,000 at December 31, 1994.
Accrued costs associated with closed facilities relate to remediation,
closure and post-closure of the Sheffield, Illinois chemical facility,
maintenance of the Sheffield LLRW facility, and agreed to and estimated
settlements with potentially responsible parties for the remediation of the LLRW
disposal facility at Maxey Flats, Kentucky.
The Company is in the process of remediating the closed chemical waste
disposal facility in Sheffield, Illinois under a final corrective measures
implementation plan issued by the U.S. EPA in 1990 pursuant to the Remedial
Investigation and Feasibility Study completed by the Company. The Company has
submitted for approval a closure/post closure plan for the site to the Illinois
EPA and to the U.S. EPA. The plan has not been approved by the agencies pending
further implementation of the RI/FS. The estimated term of the closure plan
combined with the required thirty years post-closure monitoring is forty years.
Additionally, the Company is maintaining until 1998 a closed LLRW disposal
facility adjacent to the closed chemical waste disposal facility pursuant to a
May 25, 1988 Agreed Order with the State of Illinois. The estimated costs of
the remediation and closure program, maintenance and post-closure monitoring of
the Sheffield facilities with the expected timing of future payments at December
31, 1994 were as follows (in thousands):
<TABLE>
<S> <C>
1995 $ 1,774
1996 2,233
1997 1,121
1998 847
1999 684
Thereafter 7,296
-------
Total estimated costs 13,955
Discount amount at 2.5% (2,937)
-------
Amount accrued, net of discount $11,018
=======
</TABLE>
During 1994, the Company settled its litigation with the Commonwealth of
Kentucky regarding cost recovery and contribution from the Commonwealth in
connection with the closed Maxey Flats LLRW site of which the Company was named
a potentially responsible party ("PRP"). This settlement resulted in the
Company's receipt of $1,000,000 from the Commonwealth and a $500,000
indemnification by the Commonwealth for claims made by other PRP's against the
Company. At December 31, 1994, the Company had settlement agreements or was
negotiating settlement with three PRP's and had recorded a liability of
approximately $1 million for such settlements. The Company recorded a
receivable of $500,000 for indemnification due from the Commonwealth.
38
<PAGE>
Note 6. Long Term Debt
Long term debt at December 31, 1994 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1994
--------
<S> <C>
Secured bank credit facility $32,905
Acquisition note payable 550
Capital lease obligations and other 888
-------
34,343
Less: Current maturities (850)
-------
Long term debt $33,493
=======
</TABLE>
The secured bank credit facility, as amended, ("Credit Agreement")
matures on January 31, 1996 and is comprised of a $30,000,000 term loan, a
$5,000,000 revolving credit facility and $5,000,000 in standby letters of
credit. Interest is payable quarterly and the interest rate is equal to either
the base rate (the greater of the bank's prime rate or the federal funds rate
plus .5%) plus a margin of 0% to .75%, or a Eurodollar rate plus a margin of 2%
to 3%. The marginal rate increases are based on a debt coverage ratio. The
Company's actual interest rate as of December 31, 1994 was approximately 8.7%.
These rates are subject to increase by .25% to .75% and the bank may enforce
financial and other restrictions on the Company if the Company is unable to
refinance the facility by May 1, 1995. Commitment fees of .25% are payable on
the unused portion of the revolving credit facility. The Credit Agreement
includes maintenance of debt coverage and other financial covenants, which,
among other things, could restrict payment of dividends, and is secured by
substantially all of the Company's assets. Subsequent to December 31, 1994, the
Company was not in compliance with a financial covenant requiring the
maintenance of a specified amount of accounts receivable and obtained a waiver
from the bank regarding such non-compliance. The Company subsequently requested
that the required level of accounts receivable be adjusted to a lower amount and
that certain financial covenants be adjusted to a level in which the Company
would remain in compliance based on the Company's projected financial position
through 1995. The bank approved this request on April 12, 1995. Under the terms
of the Credit Agreement, the bank may accelerate the maturity of the debt in the
event a material adverse effect is deemed by the bank to have occurred. If the
Company is unable to remain in compliance with the terms of the Credit Agreement
or obtain waivers in the event of a default and the bank accelerates maturity of
the Credit Agreement, the Company does not have adequate financial resources to
extinguish the loan and the Company's operations may be negatively impacted. See
"Capital Resources and Liquidity" elsewhere herein.
The Company is in process of arranging for long-term refinancing for
the credit facility and, if successful, anticipates the successful closing of a
private placement debt offering in the second quarter of 1995. If the private
debt placement is not successful, management will seek alternative financing
which may include an equity offering or an offering combining debt and equity.
Absent new financing in the anticipated timeframe, forbearance will be required
from the Company's existing bank lender to meet obligations as they become due.
There is no certainty that the refinancing will be obtained or that the
Company's existing lender will provide such forbearance. Management believes
that the Company will be able to remain in compliance with the terms of the
Credit Agreement.
The acquisition note payable matures on December 31, 1995 and
represents a note payable to Mobley Environmental Services, Inc. ("Mobley").
This note was incurred as part of the acquisition of Gibraltar Chemical
Resources, Inc. on December 31, 1994. This note is non-interest bearing and
payment of the note is subject to set-off of any indemnification amounts owed by
Mobley.
At December 31, 1994, the Company had $4,466,995 of issued letters of
credit outstanding, including $1,951,995 of letters of credit issued under the
bank credit facility, of which the most significant relate to site operating
permits for licenses and guarantees for site closure and post-closure required
in obtaining operating permits for the disposal sites. The issued letters of
credit are secured by cash and investment securities.
Note 7. Income Taxes
Effective January 1, 1993, the Company prospectively adopted Financial
Accounting Standards No. 109, Accounting for Income Taxes ("Statement 109").
The effect of the adoption was not material to the Company's
39
<PAGE>
financial position or results of operations. The Company previously accounted
for income taxes under Statement of Financial Accounting Standards No. 96.
The components of the income tax provision (benefit) were as follows
(in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Current - Federal $(1,184) $ 192 $ 5,072
- State (75) 364 923
------- ------- -------
(1,259) 556 5,995
------- ------- -------
Deferred - Federal 3,044 2,232 (2,843)
------- ------- -------
$ 1,785 $ 2,788 $ 3,152
======= ======= =======
</TABLE>
The following is a reconciliation between the effective income tax
rate and the applicable statutory federal income tax rate:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Income tax - statutory rate 34.0% 34.0% 34.0%
State income taxes, net of federal tax benefit (.1) 3.1 3.9
Dividend income excluded from taxable income (2.2) (1.2) --
Non-deductible goodwill amortization 1.6 -- --
Utilization of net operating loss carryforward
for financial reporting purposes -- -- (17.1)
Other, net (1.6) 1.1 (.7)
------ ------ ------
Total 31.7% 37.0% 20.1%
====== ====== ======
</TABLE>
40
<PAGE>
The tax effects of temporary differences between income for financial
reporting and taxes that gave rise to significant portions of the deferred tax
assets and liabilities and their changes during the year were as follows (in
thousands):
<TABLE>
<CAPTION>
January 1, Deferred December 31,
1994 Provision Acquisitions 1994
---------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Deferred tax assets:
Environmental compliance and
other site related costs,
principally due to accruals for
financial reporting purposes $ 8,251 $ (2,953) $ 357 $ 5,655
Net operating loss carryforward 1,112 45 1,020 2,177
Other 655 2,164 984 3,803
---------- --------- ------------ ------------
Total gross deferred tax assets 10,018 (744) 2,361 11,635
Less valuation allowance (3,256) -- (2,010) (5,266)
---------- --------- ------------ ------------
Net deferred tax assets 6,762 (744) 351 6,369
---------- --------- ------------ ------------
Deferred tax liabilities:
Site development costs (789) (85) -- (874)
Depreciation and amortization (398) (668) (173) (1,239)
Other (1,715) (1,547) (178) (3,440)
---------- --------- ------------ ------------
Total gross deferred tax liabilities (2,902) (2,300) (351) (5,553)
---------- --------- ------------ ------------
Net deferred tax assets $ 3,860 $ (3,044) $ -- $ 816
========== ========= ============ ============
</TABLE>
The Company has established a valuation allowance for certain deferred tax
assets due to realization uncertainties inherent with the long-term nature of
deferred site maintenance costs and for limitations on utilization of acquired
net operating loss carryforwards for tax purposes. The realization of a
significant portion of net deferred tax assets is based in part on the Company's
estimates of the timing of reversals of certain temporary differences and on the
generation of taxable income before such reversals. The net operating loss
carryforward of approximately $6,271,000 at December 31, 1994, begins to expire
in the year 2007 and its utilization is limited pursuant to the net operating
loss limitation rules of Internal Revenue Code Section 382. The portion of the
valuation allowance for which future recognized tax benefits will be allocated
to reduce goodwill was approximately $2,754,000 at December 31, 1994.
The Company is currently in process of negotiating a settlement for the
audit of its 1991 federal income tax return by the Internal Revenue Service.
Management believes the results of this settlement will not have a material
adverse effect on the Company's consolidated results of operations or financial
condition.
Note 8. Employee's Benefit Plans
Retirement Plan. The Company has a defined contribution retirement plan
covering substantially all of the Company's full-time employees after one full
year of employment. The Company makes contributions to the plan equal to 5% of
the participant's monthly compensation, as defined. The Company also makes an
additional 5% contribution for employees who earn in excess of the prior year's
FICA base compensation, as defined. The Company's contributions vest to the
employees at 20% per year, beginning with the first full year of employment.
41
<PAGE>
401(k) Plan. The Company maintains a 401(k) plan for employees who
voluntarily contribute a portion of their compensation, thereby deferring income
for federal income tax purposes. The plan covers substantially all of the
Company's employees. Participants may contribute between 1% and 10% of their
compensation. The Company matches 55% of participant contributions up to 6% of
an employee's compensation. The Company's matching contributions vest to the
employee over a three year period.
The Company's total contribution for both the retirement plan and 401(k)
plan was $946,000, $783,000 and $610,000, for the years ended December 31, 1994,
1993, and 1992, respectively. The Company has no post-retirement or post-
employment benefit plans.
Note 9. Stock Option Plans
The Company presently maintains four stock option plans affording employees
and outside directors of the Company the right to purchase shares of its common
stock. The exercise price, term and other conditions applicable to each option
granted under the Company's plans are generally determined by the Compensation
Committee of the Board of Directors at the time of the grant of each option and
may vary with each option granted. No option may be granted at a price less
than the fair market value of the shares when the option is granted, and no
options may have a term longer than ten years. The following is a summary of
the transactions under the plans:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Under option:
Options outstanding, beginning of year 611,450 612,550 390,950
Granted 125,000 119,150 365,000
Exercised (35,000) (120,250) (143,400)
Canceled (9,500) -- --
-------- -------- --------
Options outstanding, end of year 691,950 611,450 612,550
======== ======== ========
Price range per share of outstanding options $ 2.79- $ 2.79- $ 2.79-
$ 14.75 $ 14.75 $ 14.75
======== ======== ========
Price range per share of options exercised $ 8.00- $ 2.79- $ 2.79-
$ 8.58 $ 8.00 $ 8.67
======== ======== ========
Options exercisable at end of year 521,660 401,300 413,050
======== ======== ========
Options available for future grant
at end of year 310,900 226,400 345,550
======== ======== ========
</TABLE>
Note 10. Acquisitions
On September 19, 1994, the Company acquired the assets of Quadrex
Recycle Center, ("Recycle Center"), a business segment of Quadrex Corporation
("Quadrex") that provides recycling, decontamination, volume reduction of
radioactive waste and related equipment rental services to government,
commercial and nuclear power industries. The purchase consideration was
comprised of payments by the Company for assumed liabilities and working capital
for the Recycle Center through the closing date, additional unpaid liabilities
assumed as of the closing date, and direct acquisition costs, all of which total
approximately $27,686,000. The purchase method of accounting has been used for
this asset acquisition, therefore, the Recycle Center's results of operations
are consolidated with the Company's since September 19, 1994. The excess of
acquisition cost over fair value of net tangible assets of the Recycle Center of
approximately $21,704,000 is to be amortized on a straight-line basis over a 25
year period. The acquisition cost has been reduced by the estimated fair value
of 545,000 common shares of Perma-Fix, Inc. ("Perma-Fix") which Quadrex
transferred to the Company effective September 30, 1994. The Company has the
right to receive up to 355,000 additional common shares of Perma-Fix, Inc. from
Quadrex pending certain regulatory approvals and approval of the bankruptcy
court where Quadrex has filed its bankruptcy proceedings. The fair value of
these additional shares will reduce the acquisition cost when received.
42
<PAGE>
At the date of acquisition, the Company recorded a liability for the
waste processing and burial of waste on-site at the Recycle Center. The
liability is based on management estimates of anticipated waste treatment
methods and associated volume reductions. Should estimated volume reductions not
be attainable, the costs for processing and burial could increase materially.
Additionally, the Company has recorded receivables totaling $2,937,000 at
December 31, 1994 for anticipated insurance claim settlements relating to a fire
which damaged a processing building and related equipment at the Recycle Center
in July 1994. The amount of proceeds from business interruption and other damage
claims is subject to negotiations and final determination. See Note 11 for
discussion of other material contingent liabilities related to the Recycle
Center.
On December 31, 1994, the Company acquired Gibraltar Chemical
Resources, Inc. ("the Winona facility"), a wholly-owned subsidiary of Mobley.
The Winona facility provides fuels blending, solvent recycling, and deepwell
injection services to the hazardous and industrial waste disposal markets with a
fixed base facility in Winona, Texas and collections and technical operations in
El Paso, Texas and Laredo, Texas. The total acquisition cost of $10,628,000
included cash, a $550,000 note payable to Mobley, assumed liabilities, and
direct acquisition costs. The excess of cost over fair market of net assets of
the Winona facility of approximately $3,468,000 is to be amortized on a
straight-line basis over a 25 year period. Since the acquisition was effective
the last day of the year and since the purchase method of accounting has been
used for this acquisition, no results of operations of the Winona facility were
included in the Company's 1994 consolidated results.
In allocating purchase price of acquisitions, the assets acquired and
liabilities assumed have been initially assigned and recorded based on
preliminary estimates of fair value and may be revised as additional information
concerning the valuation of such assets and liabilities becomes available. As a
result, the financial information included in the Company's consolidated
financial statements is subject to adjustment as subsequent revisions in
estimates of fair value, if any, are necessary.
The consolidated results of operations on an unaudited proforma basis
as though the businesses acquired in 1994 and 1993 had been acquired on January
1, 1993 are as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Revenues $ 91,335 $ 96,357
Net loss $(16,356) $(19,170)
Net loss per share $ (2.09) $ (2.49)
</TABLE>
The pro forma financial information is presented for information
purposes only and is not necessarily indicative of the operating results that
would have occurred had the acquisitions been consummated as of the above dates,
nor are they necessarily indicative of future operating results.
Note 11. Commitments and Contingencies
Richland, Washington Facility. In 1964, the Washington Department of
Ecology ("WDOE") leased from the DOE a 1,000 acre portion of the Hanford
Reservation. In 1965, the WDOE subleased 100 acres of that property to the
Company for use as a LLRW disposal facility under the regulation of the
Washington Department of Health pursuant to the Atomic Energy Act. In 1990 the
DOE applied to the EPA for a permit under the RCRA and other laws and
regulations to obtain the appropriate regulatory approvals needed to proceed
with the environmental cleanup of the Hanford Reservation. In 1994, in a consent
order among the EPA, DOE and WDOE, the EPA and DOE issued a corrective action
permit that includes all of the land owned by the DOE at the Hanford
Reservation, including that portion leased to WDOE, which includes the 100 acres
subleased to the Company for its LLRW disposal facility. Thirteen trenches at
the Company's LLRW disposal facility have been included in the final permit as
solid waste management units which will require further investigation to
determine whether releases of any hazardous wastes or constituents have
occurred. Because portions of the Company's facility remains included in the
final permit issued to the DOE, the Company is potentially subject to proposed
permit conditions for site investigation and possible cleanup should any
releases be discovered even though the Company is not a permittee and though it
was not involved in the activities contributing to the
43
<PAGE>
Hanford facility contamination that are the subject of the Hanford consent
order. It is the Company's opinion that it has legal defenses to the inclusion
of its Hanford site in the DOE permit and to any corrective action that may be
proposed of the site pursuant to the DOE permit. The Company has appealed to
the Environmental Hearing Board of the EPA the terms of the permit that apply to
any of the Company's facilities. By agreement of all the parties, appeals have
been stayed in order for the Company to negotiate a settlement with DOE and EPA
to resolve corrective action concerns. If the Company is unsuccessful in the
negotiation or the challenge to the permit, the cost of conducting the site
investigation and any corrective action could be material.
The Company was assessed a substantial property tax increase by the
Benton County Assessor's Office and has filed suit challenging the property tax
increase imposed by the Benton County Assessor on improvements at the Company's
leased disposal facility on the Hanford Reservation. The County Treasurer
issued tax statements based upon these assessments for payments covering the
years 1989, 1990 and 1991, which totaled $1.7 million. The Company sued Benton
County and the Assessor and Treasurer to enjoin them from collecting these
taxes. The Benton County Superior Court issued an injunction in favor of the
Company. The County appealed to the Court of Appeals. The Court of Appeals
ruled in favor of the County and reversed the decision of the Benton County
Superior Court by holding that the injunction should not have been issued
pending the Company's pursuit of administrative remedies. The Company is
appealing the Court of Appeal's decision to the Washington Supreme Court.
Management believes that the County's assessments were improper and intends to
vigorously defend this matter in the courts and through any appropriate
administrative process, if necessary.
Winona, Texas Facility. The Company purchased the stock of Gibraltar,
since renamed American Ecology Environmental Services Corporation, from Mobley
on December 31, 1994. The Company's stock purchase agreement with Mobley
provides that Mobley will indemnify the Company, without limitation as to
amount, for any damages or costs, including legal fees, associated with certain
pre-closing liabilities, including the claims set forth hereunder. Pursuant to
its stock purchase agreement with Mobley, the Company has also been named as an
additional insured for pre-closing claims under Mobley's pollution liability
insurance policy. The policy has a $10 million aggregate limit and a $5 million
per loss limit.
In 1992, a citizens group filed a petition with the TNRCC for
revocation of the Winona facility's deepwell permits alleging that a geological
fault exists in the vicinity of the Winona facility's deepwells and other
alleged grounds. The EPA has previously concluded in its proceedings relating
to the Winona facility's second injection well that no such fault exists. The
Company believes the petition is without merit.
A group called Mothers Organized to Stop Environmental Sins filed a
lawsuit in 1994 against the Company in the United States Eastern District Court
for the State of Texas alleging that the Winona facility violated certain
permits and regulations, and contributed to the handling, storage, treatment,
transportation and disposal of solid and hazardous waste that presents an
imminent and substantial endangerment to health and the environment. The
plaintiffs have requested that the facility be shut down and civil penalties
imposed on the Company. The Company has filed an answer denying these
allegations and a motion for summary judgment and believes the suit is without
merit. The Company intends to vigorously defend this litigation. However, if
the plaintiffs were to ultimately prevail on their claim and be awarded the
remedies sought, such outcome could have a material adverse effect on the
Company's consolidated financial position and results of operations.
Four lawsuits, including one purported class action, were filed
against Gibraltar, in 1992 and 1993 which were subsequently transferred to State
District Court in Smith County, Texas, by certain persons in Winona, Texas. The
suits assert various theories of liability including subsurface trespass,
nuisance, and negligence for alleged air emissions. The suits also allege that
the plaintiffs have experienced personal injuries, diminution in property
values, and other economic losses which are alleged to have been caused by
operation of the Winona facility. The plaintiffs assert various grounds for
recovery, including allegations that their property has been used without their
consent as a hazardous waste facility, and seek unspecified actual and punitive
damages. The Company disputes the material allegations of the plaintiffs' suits
and intends to vigorously defend this litigation. To date, the Company and
Mobley have settled certain of the plaintiffs' claims in these actions for
amounts that were not material and which were funded by the Mobley insurance
policy referred to above.
44
<PAGE>
Compact Related Disputes. The Company is involved in numerous
challenges and legal proceedings in connection with its siting efforts for LLRW
facilities for the Southwest Compact and Central Interstate Compact. For a
description of these proceedings, see "Business - Low-Level Radioactive Waste
Services - Disposal Services - Ward Valley, California Facility" and "-Butte,
Nebraska Facility".
The Company has received invoices from the Southeast Compact
Commission for approximately $1.5 million and a notice that an additional $1.5
million will be invoiced in the aggregate in the second and third quarter of
1995. The invoices relate to an access fee for the Barnwell, South Carolina
LLRW disposal facility in the Southeast Compact utilized by Quadrex. The fee
for each generator is calculated pursuant to a Commission formula which is based
on the historical amount of LLRW shipped to the Barnwell facility by such
generator. The Company believes that it did not assume such access fees
liabilities relating to pre-acquisition volumes of Quadrex in its asset
acquisition of the Recycle Center and that the Company has legitimate defenses
to this claim. The Company appealed the Commission's invoices and in February
1995 at an appeal hearing, the Commission again concluded that the full access
fees were payable by the Company. As a result of the fee dispute, on March 29,
1995, the Southeast Compact Commission directed the Department of Health and
Environmental Control of the State of South Carolina to deny the Company access
to the Barnwell, South Carolina LLRW disposal facility. The Company has appealed
the Commission's action to the Department under South Carolina law. As of the
date of this report, the Department has not denied the Company access to the
Barnwell facility. While the Company continues to discuss alternate resolutions
of this dispute with the Commission, the Company believes it has no material
liability in connection with this matter and intends to vigorously defend any
material assessment or attempt to deny access to the Barnwell facility.
Other Litigation. The City of San Antonio (the "City") filed suit
against several parties related to environmental issues in connection with the
acquisition, development and construction of a bus transit station and multi-
purpose stadium and sports complex, commonly known as the Alamodome. The City
has named as the defendants: the former owner of the property, various
consultants involved in the project, the project manager, and a subsidiary of
the Company which served as the construction contractor for the project. The
City has alleged several theories of recovery, including breach of contract,
negligent misrepresentation and gross negligence. The City alleges its
consultants failed to advise the City that the selected site was contaminated,
thereby breaching their contracts and committing torts. The City alleges
further that following the discovery of actual or potential environmental
problems, the City's consultants and project manager failed to act properly in
handling allegedly contaminated soil and groundwater. The City has also alleged
that construction of the landfill did not conform to contract requirements. The
City has decided to exhume the onsite landfill and dispose of it at another
location. Minimal discovery has been taken. The Company does not believe that
the claims against its subsidiary are meritorious and intends to vigorously
defend against such claims. Furthermore, the Company intends to pursue a
counterclaim to recover sums related to its construction of the on-site
landfill.
In November 1994, the Company was named as a defendant in a purported
class action lawsuit by former employees of Quadrex that relates to unpaid
medical benefits and an underfunded pension plan of Quadrex. Based on
information available to it, the Company believes that the aggregate amount of
these claims are less than $1 million. The Company purchased the assets of the
Quadrex Recycle Center from Quadrex on September 19, 1994. However, the
asserted claims in the purported class action were specifically excluded by the
purchase agreement pursuant to which the Company purchased the assets of the
Quadrex Recycle Center. Some of the former Quadrex employees on whose behalf
the suit was brought are now employees of the Company. The Company does not
believe it has any liability in this matter and intends to contest the matter
vigorously. The Company's purchase agreement with Quadrex provides that Quadrex
will indemnify the Company for any damages or costs, including legal fees,
associated with a claim of this sort. However, because Quadrex filed for
bankruptcy protection in February 1995, it is very likely that the Company will
not realize the benefits of such indemnification.
The Company has received a notice from an individual purporting to own
debt secured by certain real property in Midlothian, Texas. The individual
alleges that a predecessor of the Company's subsidiary, Texas Ecologists, caused
environmental contamination of the property in the early 1970's. The Company
believes it has no liability in connection with the matter and intends to
contest the matter vigorously. In connection with its investigation of the
matter, the Company also conducted its own assessment of the property with an
independent environmental consultant and concluded that any contamination on the
property falls below material levels.
45
<PAGE>
Other Matters. In 1990, the Company was sued by certain landowners
owning property adjacent to the Company's Robstown, Texas disposal facility. The
landowners have alleged that there has been migration of pollutants through
groundwater which has contaminated water resources on their respective property.
These landowners have alleged theories including nuisance per se, negligence and
trespass. The Company's investigation has found no migration of pollutants onto
the adjacent landowners' properties and the Company intends to contest this
matter vigorously.
In 1992, the Company received notice from the EPA alleging that the
Company had violated financial assurance and liability insurance requirements at
the closed Sheffield, Illinois hazardous waste disposal site formerly operated
by the Company. The EPA is seeking a penalty of approximately $1 million and
ordering compliance. Both the EPA and the Company have filed cross-motions for
an accelerated decision by the administrative law judge regarding the issue of
liability. Though the ultimate outcome of this matter is uncertain, the Company
believes these insurance requirements are not applicable to this closed site and
intends to vigorously contest this matter.
In April 1995, management of the Company became aware that the Company
had held hazardous waste containers at certain of its transportation terminals
for periods greater than the 10-day temporary storage periods permitted by TNRCC
regulations. The Company has reported the matter to the TNRCC. The Company has
also put in place procedures to safeguard against future violations of this type
and, upon completion of its review of the matter, may put in place additional
safeguard procedures if so warranted. While the Company believes the steps that
it has taken are appropriate and responsive, it is possible that the TNRCC may
seek to impose a fine on the Company in connection with the matter. The Company
is not in a position to assess the amount of such a fine. However, a fine of
sufficient magnitude could have a material adverse effect upon the consolidated
financial position of the Company.
In addition to the above-described litigation and the litigation
related to the Southwestern and Central Interstate compacts referred to in Note
1, the Company and its subsidiaries are involved in various other administrative
matters of litigation, including personal injury and other civil actions, as
well as other claims, disputes and assessments that could result in additional
litigation or other proceedings. The Company and its subsidiaries are also
involved in various other environmental matters or proceedings, including permit
application proceedings in connection with the establishment, operation, closure
and post-closure activities of certain sites, as well as other matters or claims
that could result in additional environmental proceedings.
Financial Assurance and Insurance. Under RCRA, the Company is
required to develop closure and post-closure plans for each of its chemical
waste disposal sites. In conjunction with these plans, the Company must prepare
closure and post-closure cost estimates and give financial assurance that the
planned actions will be completed. Financial assurance must be given by either
funding a trust, posting a bond, providing a letter of credit, providing a
certificate of insurance, or if the operator meets certain financial tests,
giving a corporate guarantee. The Company currently covers these requirements
by pledging letters of credit, providing certificates of insurance and by
corporate guarantee. Cash and investment securities have been pledged as
collateral for these instruments (See Note 2.). The Company could be required
to fund additional monies for financial assurance if the Company was to fail to
meet certain financial tests under existing corporate guarantees, or if a
regulatory entity requires additional funding.
RCRA regulations require the Company to carry environmental impairment
insurance against sudden and accidental occurrences, as well as against non-
sudden occurrences such as subsurface migration. While the Company's current
level of coverage meets the requirements (except for the Sheffield chemical
site), there is no assurance that insurance carriers will continue to provide
such coverage to operators, or that such coverage will be obtainable in future
years.
While the final resolution of any matter may have an impact on the
Company's consolidated financial results for a particular reporting period,
management believes that the ultimate disposition of the matters discussed in
Note 11 will not have a materially adverse effect upon the consolidated
financial position of the Company. See Item 3 "Legal Proceedings" elsewhere
herein.
46
<PAGE>
Lease Commitments. The Company leases substantial portions of its
office and other facilities under various lease agreements. Future minimum
lease commitments under noncancellable operating leases as of December 31, 1994,
were as follows (in thousands):
<TABLE>
<S> <C>
1995 $ 915
1996 840
1997 820
1998 770
1999 726
Thereafter 2,413
------
Total minimum payments $6,484
======
</TABLE>
Rental expense, which also includes month-to-month equipment rentals, was
$2,307,000, $1,848,000, and $1,186,000, for the years ended December 31, 1994,
1993, and 1992, respectively.
Note 12. Stockholder Rights Plan
During December 1993, the Company adopted a Stockholder Rights Plan (the
"Plan"). Pursuant to the Plan each outstanding share of the Company's Common
Stock on December 17, 1993, received one Right as a dividend that becomes
exercisable upon certain triggering events. On March 29, 1995, the Company
terminated the Plan and authorized the redemption of all outstanding Rights
issued under the Plan. The redemption price is $.01 per Right and is payable on
April 15, 1995 to stockholders of record on April 10, 1995.
Note 13. Fair Value of Financial Instruments
Effective December 31, 1994, the Company adopted Statement of Financial
Accounting Standards No. 107, Disclosures about Fair Value of Financial
Instruments. This statement requires disclosure of fair market value
information for financial instruments. The book values of investment
securities, excluding investments in common and preferred stocks, receivables,
accounts payable and financial instruments included in other assets and accrued
liabilities approximate their fair values principally because of the short-term
maturities of these instruments. Investments in common and preferred stocks are
stated at fair market values. The quoted market price was used to determine the
fair market value of the investment in common stock and estimated market values
were used to determine the fair market value of the investments in preferred
stocks. The carrying value of long-term debt approximates fair value
principally because of the variable interest rates terms set forth in the bank
credit facility agreement.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Items 10, 11, 12 and 13 of Part III have been omitted from this report
because the Company will file with the Securities and Exchange Commission, not
later than 120 days after the close of its fiscal year, a definitive proxy
statement. The information required by Items 10, 11, 12 and 13 of this report,
which will appear in the definitive proxy statement, is incorporated by
reference into Part III of this report.
47
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
1. Financial statements and reports of Arthur Andersen LLP
Reports of Independent Auditors
Consolidated Balance Sheets - December 31, 1994 and 1993
Consolidated Statements of Operations for the years ended
December 31, 1994,1993, 1992
Consolidated Statements of Shareholders, Equity for the years
ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993, and 1992
Notes to Consolidated Financial Statements
2. Financial statement schedules
Report of Independent Public Accountants
Schedule II - Valuation Accounts and Reserves
Other schedules are omitted because they are not required or
because the information is included in the financial statements
or notes thereto.
3. Exhibits
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION INCORPORATED BY REFERENCE
NO. FROM REGISTRANT'S
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
3.1 Restated Certificate of Incorporation, as amended 1989 Form 10-K
- -----------------------------------------------------------------------------------------------------------------------------
3.2 Certificate of Amendment to Restated Certificate of Incorporation dated June 4, Form S-4 dated 12-24-92
1992
- -----------------------------------------------------------------------------------------------------------------------------
3.3 Amended and Restated Bylaws dated February 28, 1995
- -----------------------------------------------------------------------------------------------------------------------------
10.1 Sublease dated February 26, 1976, between the State of Washington, the United Form 10 filed 3-8-84
States Dept. of Commerce and Economic Development, and Nuclear Engineering
Company with Amendments dated January 11, 1980, and January 14, 1982.
- -----------------------------------------------------------------------------------------------------------------------------
10.2 Lease dated May 1, 1977 ("Nevada Lease"), between the State of Nevada, Dept. Form 10 filed 3-8-84
of Human Resources and Nuclear Engineering Company, with Addendum
thereto, dated December 7, 1982
- -----------------------------------------------------------------------------------------------------------------------------
10.3 Addendum to Nevada Lease dated March 28, 1988 1989 Form 10-K
- -----------------------------------------------------------------------------------------------------------------------------
10.4 Nevada State Health Division, Radioactive Material License issued to 1989 Form 10-K
US Ecology, Inc. dated December 29, 1989
- -----------------------------------------------------------------------------------------------------------------------------
10.5 Administrative Order by Consent between the United States Environmental 1985 Form 10-K
Protection Agency and US Ecology, Inc. ("USE") dated September 30, 1985
- -----------------------------------------------------------------------------------------------------------------------------
10.6 State of Washington Radioactive Materials License issued to US Ecology, Inc. 1986 Form 10-K
dated January 21, 1987
- -----------------------------------------------------------------------------------------------------------------------------
10.7 American Ecology Corporation 1986 Stock Option Plan * Form S-8 filed 1-30-87
- -----------------------------------------------------------------------------------------------------------------------------
10.8 Termination Agreement between the Commonwealth of Kentucky and Nuclear 1986 Form 10-K
Engineering Co., Inc. as related to the operation of the Maxey Flats Low-Level
Waste Disposal Facility
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION INCORPORATED BY REFERENCE
NO. FROM REGISTRANT'S
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
10.9 Administrative Order by Consent between the United States Environmental 2nd Quarter 1987 10-Q
Protection Agency and the consenting members of the Maxey Flats Steering
Committee signed by US Ecology May 28, 1987
- -----------------------------------------------------------------------------------------------------------------------------
10.10 Maxey Flats Steering Committee Participation Agreement dated May 29, 1987 2nd Quarter 1987 10-Q
- -----------------------------------------------------------------------------------------------------------------------------
10.11 Agreement between The Central Interstate Low-Level Radioactive Waste 2nd Quarter 1988 10-Q
Compact Commission and US Ecology. Inc. for the development of a facility for
the disposal of low-level radioactive waste dated January 28, 1988 ("Central
Interstate Compact Agreement")
- -----------------------------------------------------------------------------------------------------------------------------
10.12 Amendment to Central Interstate Compact Agreement dated May 1, 1990
- -----------------------------------------------------------------------------------------------------------------------------
10.13 Second Amendment to Central Interstate Compact Agreement dated June 24,
1991
- -----------------------------------------------------------------------------------------------------------------------------
10.14 Third Amendment to Central Interstate Compact Agreement dated July 1, 1994
- -----------------------------------------------------------------------------------------------------------------------------
10.15 Settlement Agreement dated May 25, 1988 among the Illinois Department of Form 8-K dated 6-7-88
Nuclear Safety, US Ecology, Inc. and American Ecology Corporation of a
December 1978 action related to the closure, care and maintenance of the
Sheffield, Illinois LLRW disposal site
- -----------------------------------------------------------------------------------------------------------------------------
10.16 Nevada Division of Environmental Protection Permit for Hazardous Waste 1988 Form 10-K
Treatment, Storage and Disposal (Part B) issued to US Ecology, Inc. dated
June 24, 1988
- -----------------------------------------------------------------------------------------------------------------------------
10.17 Texas Water Commission Permit for Industrial Solid Waste Management Site 1988 Form 10-K
(Part B) issued to Texas Ecologists, Inc. dated December 5, 1988
- -----------------------------------------------------------------------------------------------------------------------------
10.18 Memorandum of Understanding between American Ecology Corporation and the 1989 Form 10-K
State of California dated August 15, 1988
- -----------------------------------------------------------------------------------------------------------------------------
10.19 United States Environmental Protection Agency approval to dispose of non-liquid 1989 Form 10-K
polychlorinated biphenyl (PCB) wastes at the Beatty, Nevada chemical waste
disposal facility
- -----------------------------------------------------------------------------------------------------------------------------
10.20 Employment Agreement between American Ecology Corporation and C. Clifford 1993 Form 10-K
Wright, Jr. dated April 1, 1994 *
- -----------------------------------------------------------------------------------------------------------------------------
10.21 Employment Agreement between American Ecology Corporation and William P. 1993 Form 10-K
McCaughey dated April 1, 1994 *
- -----------------------------------------------------------------------------------------------------------------------------
10.22 Employment Agreement between American Ecology Corporation and Stephen W. 1993 Form 10-K
Travers dated April 1, 1994 *
- -----------------------------------------------------------------------------------------------------------------------------
10.23 Employment Agreement between American Ecology Corporation and Harry O. 1993 Form 10-K
Nicodemus, IV dated April 1, 1994 *
- -----------------------------------------------------------------------------------------------------------------------------
10.24 Employment Agreement between American Ecology Corporation and Ronald K. 1993 Form 10-K
Gaynor dated April 1, 1994 *
- -----------------------------------------------------------------------------------------------------------------------------
10.25 American Ecology Corporation Amended and Restated 1988 Stock Option Plan * Form S-8 filed 12-16-92
- -----------------------------------------------------------------------------------------------------------------------------
10.26 Amended and Restated American Ecology Corporation 1992 Stock Option Plan * Proxy Statement dated 4-26-94
- -----------------------------------------------------------------------------------------------------------------------------
10.27 Amended and Restated American Ecology Corporation 1992 Outside Director Proxy Statement dated 4-26-94
Stock Option Plan *
- -----------------------------------------------------------------------------------------------------------------------------
10.28 American Ecology Corporation 401 (k) Savings Plan *
- -----------------------------------------------------------------------------------------------------------------------------
10.29 American Ecology Corporation Retirement Plan *
- -----------------------------------------------------------------------------------------------------------------------------
10.30 Credit Agreement between American Ecology Corporation, its subsidiaries and
Texas Commerce Bank National Association dated December 1, 1994
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION INCORPORATED BY REFERENCE
NO. FROM REGISTRANT'S
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
10.31 Security Agreement dated as of December 1, 1994 by American Ecology
Corporation in favor of Texas Commerce Bank, National Association
- -----------------------------------------------------------------------------------------------------------------------------
10.32 Security Agreement by subsidiaries of American Ecology Corporation dated as of
December 1, 1994 in favor of Texas Commerce Bank, National Association
- -----------------------------------------------------------------------------------------------------------------------------
10.33 Lease Agreement between American Ecology Corporation and VPM 1988-1, Ltd. Form S-4 filed 12-24-92
dated October 14, 1992
- -----------------------------------------------------------------------------------------------------------------------------
10.34 Rights Agreement dated as of December 7, 1993 between American Ecology Form 8-K dated 12-7-93
Corporation and Chemical Shareholders Services Group, Inc., as Rights Agent
- -----------------------------------------------------------------------------------------------------------------------------
10.35 Agreement and Plan of Merger by and between American Ecology Corporation Form S-4 dated 12-24-92
and Waste Processor Industries, Inc.
- -----------------------------------------------------------------------------------------------------------------------------
10.36 Settlement Agreement dated September 24, 1993 by US Ecology, Inc., the State 1993 Form 10-K
of Nevada, the Nevada State Environmental Commission, and the Nevada Dept.
of Human Resources
- -----------------------------------------------------------------------------------------------------------------------------
10.37 Settlement Agreement dated as of January 19, 1994 by and among US Ecology, 1993 Form 10-K
Inc., Staff of the Washington Utilities and Transportation Commission, Precision
Castparts Corp., Teledyne Wah Chang, Portland General Electric Company, the
Washington Public Power Supply System and Public Service Company of
Colorado.
- -----------------------------------------------------------------------------------------------------------------------------
10.38 Agreement dated January 28, 1994 between American Ecology Corporation, Form 8-K dated 2-3-94
Edward F. Heil, Edward F. Heil as trustee for Edward F. Heil, Jr., Sandra Heil,
and Karen Heil Irrevocable Trust Agreement #2, Thomas W. McNamara and
Thomas W. McNamara as a trustee of the Jenner & Block Profit Sharing Trust
No. 082.
- -----------------------------------------------------------------------------------------------------------------------------
10.39 Agreement of Purchase and Sale dated as of April 7, 1994 by and among 1st Quarter 1994 Form 10-Q,
American Ecology Corporation, American Ecology Recycle Center, Inc., Schedule 13D dated 9-27-94
Quadrex Environmental Company and Quadrex Corporation, as amended by
Amendments dated June 14, 1994 and August 22, 1994.
- -----------------------------------------------------------------------------------------------------------------------------
10.40 Stock Purchase Agreement dated as of May 10, 1994 by and between American 1st Quarter 1994 Form 10-Q, 3rd
Ecology Corporation and Mobley Environmental Services, Inc., as amended by Quarter 1994 Form 10-Q
Amendment dated September 21, 1994.
- ------------------------------------------------------------------------------------------------------------------------------
11.1 Statement Re: Computation of Per Share Earnings
- ------------------------------------------------------------------------------------------------------------------------------
21 List of Subsidiaries
- ------------------------------------------------------------------------------------------------------------------------------
23 Consent of Arthur Andersen LLP
- ------------------------------------------------------------------------------------------------------------------------------
27 Financial Data Schedule
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Management contract or compensatory plan.
(B) REPORTS ON FORM 8-K
A Form 8-K reporting the closing of the acquisition of the Recycle
Center was filed on October 4, 1994. Amendment No. 1 to that Form 8-K
with historical and pro-forma financial information on the Recycle
Center was filed on December 5, 1994.
50
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
The Board of Directors and Shareholders
of American Ecology Corporation
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements of American Ecology Corporation
(a Delaware Corporation) and subsidiaries as of December 31, 1994 and 1993, and
for each of the three years in the period ended December 31, 1994, and have
issued our report thereon dated April 13, 1995, included in this Form 10-K.
Reference is made to said report in which the opinion contains an emphasis of a
matter paragraph with respect to the maturity of the Company's Credit Agreement
in January 1996. Our audits were made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The following
Schedule II for American Ecology Corporation and subsidiaries is the
responsibility of the Company's management and is presented for the purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein, as it relates to the three years ended
December 31, 1994, in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Houston, Texas
April 13, 1995
51
<PAGE>
SCHEDULE II
AMERICAN ECOLOGY CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
($ IN 000'S)
<TABLE>
<CAPTION>
Balance at Addition Additions
Beginning of Acquired Charged to Balance at
of Year Companies Expense Write-offs End of Year
--------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Reserve for Doubtful Accounts:
1994 $977 $984 $313 $(525) $1,749
1993 $514 $457 $500 $(494) $ 977
1992 $337 $ -- $489 $(312) $ 514
</TABLE>
The notes to consolidated financial statements are an integral part of this
schedule.
52
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this annual report to be signed
on its behalf by the undersigned, thereunto duly authorized.
AMERICAN ECOLOGY CORPORATION
Dated: April 13, 1995
By: /s/ Jack K. Lemley
------------------------
Jack K. Lemley
Chief Executive Officer, President
and Chief Operating Officer
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Jack K. Lemley Chief Executive Officer, President, April 13, 1995
- ----------------------------- Chief Operating Officer and Director
JACK K. LEMLEY
/s/ C. Clifford Wright, Jr. Vice President and April 13, 1995
- ------------------------------- Chief Financial Officer
C. CLIFFORD WRIGHT, JR.
/s/ Harry O. Nicodemus, IV Vice President and April 13, 1995
- --------------------------- Chief Accounting Officer
HARRY O. NICODEMUS, IV
/s/ Jack J. Agresti Director April 13, 1995
- ----------------------------------
JACK J. AGRESTI
/s/ George L. Ball Director April 13, 1995
- -----------------------------
GEORGE L. BALL
/s/ John H. Harris, Jr. Director April 13, 1995
- ------------------------------
JOHN H. HARRIS, JR.
/s/ Edward F. Heil Director April 13, 1995
- -----------------------------
EDWARD F. HEIL
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ John T. Lurcott Director April 13, 1995
- -----------------------------
JOHN T. LURCOTT
/s/ Harry J. Phillips, Jr. Chairman of the Board April 13, 1995
- ------------------------------
HARRY J. PHILLIPS, JR.
/s/ Paul F. Schutt Director April 13, 1995
- -----------------------------
PAUL F. SCHUTT
/s/ John J. Scoville Director April 13, 1995
- ------------------------------
JOHN J. SCOVILLE
</TABLE>
54
<PAGE>
================================================================================
AMENDED AND RESTATED BYLAWS
OF
AMERICAN ECOLOGY CORPORATION
February 28, 1995
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
ARTICLE I............................................................ 3
OFFICES......................................................... 3
Section 1 Registered Office............................ 3
Section 2 Other Offices................................ 3
ARTICLE II........................................................... 3
MEETING OF STOCKHOLDERS......................................... 3
Section 1 Place of Meetings............................ 3
Section 2 Annual Meetings.............................. 3
Section 3 Special Meetings............................. 3
Section 4 Notice of Meetings........................... 3
Section 5 Quorum: Adjournment......................... 4
Section 6 Proxies and Voting........................... 4
Section 7 Stock List................................... 4
Section 8 Actions by Stockholders...................... 5
Section 9 Written Consents............................. 5
ARTICLE III.......................................................... 6
BOARD OF DIRECTORS.............................................. 6
Section 1 Duties and Powers............................ 6
Section 2 Number and Term of Office.................... 6
Section 3 Chairman of the Board........................ 6
Section 4 Vacancies.................................... 7
Section 5 Meetings..................................... 7
Section 6 Quorum....................................... 7
Section 7 Actions of Board Without a Meeting........... 7
Section 8 Meetings by Means of Conference Telephone.... 7
Section 10 Compensation................................. 8
Section 11 Removal...................................... 8
ARTICLE IV........................................................... 9
OFFICERS........................................................ 9
Section 1 General...................................... 9
Section 2 Election: Term of Office.................... 9
Section 3 Chief Executive Officer...................... 9
Section 4 President.................................... 9
Section 5 Vice President-Finance....................... 10
Section 6 Vice Presidents.............................. 10
Section 7 Treasurer.................................... 10
Section 8 Secretary.................................... 10
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C> <C>
Section 9 Assistant Treasurer.......................... 11
Section 10 Assistant Secretaries........................ 11
Section 11 Other Officers............................... 11
Section 12 Voting Securities Owned by the Corporation... 11
ARTICLE V............................................................ 11
STOCK........................................................... 11
Section 1 Form of Certificates......................... 11
Section 2 Signatures................................... 12
Section 3 Lost Certificates............................ 12
Section 4 Transfers.................................... 12
Section 5 Record Date.................................. 12
Section 6 Beneficial Owners............................ 12
ARTICLE VI........................................................... 13
NOTICES......................................................... 13
Section 1 Notices...................................... 13
Section 2 Waiver of Notice............................. 13
ARTICLE VII.......................................................... 13
GENERAL PROVISIONS.............................................. 13
Section 1 Dividends.................................... 13
Section 2 Disbursements................................ 13
Section 3 Corporation Seal............................. 13
ARTICLE VIII......................................................... 14
AMENDMENTS...................................................... 14
</TABLE>
(ii)
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
AMERICAN ECOLOGY CORPORATION
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1 Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2 Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 1 Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2 Annual Meetings. The Annual Meetings of Stockholders shall be
held on the third Saturday of May of each year at 10:00 a.m. or at such other
date and time as may be designated by the Board of Directors; provided, however,
that should said day fall upon a legal holiday, the annual meeting of
stockholders shall be held at the same time on the next day thereafter ensuing
which is a full business day. At each annual meeting directors shall be
elected, and any other proper business may be transacted.
Section 3 Special Meetings. Special meetings of the stockholders, for any
purpose or purposes prescribed in the notice of the meeting, may be called by
the Board of Directors pursuant to a resolution adopted by a majority of the
directors then in office, and shall be held at such place, on such date, and at
such time as the resolution shall fix. Business transacted at any special
meeting of stockholders shall be limited to the purposes stated in the notice of
the meeting.
Section 4 Notice of Meetings. Written notice of the place, date, and time
of all meetings of the stockholders shall be given, not less than ten (10) nor
more than sixty (60) days before the date on which the meeting is to be held, to
each stockholder entitled to vote at such meeting, except
3
<PAGE>
as otherwise provided herein or as required from time to time by the Delaware
General Corporation Law or the Certificate of Incorporation.
Section 5 Quorum: Adjournment. At any meeting of the stockholders, the
holders of a majority of all of the shares of the stock entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for all
purposes, unless or except to the extent that the presence of a larger number
may be required by law or the Certificate of Incorporation. If a quorum shall
fail to attend any meeting, the chairman of the meeting or the holders of a
majority of the shares of stock entitled to vote who are present, in person or
by proxy, may adjourn the meeting to another place, date, or time without notice
other than announcement at the meeting, until a quorum shall be present or
represented.
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date, and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 6 Proxies and Voting. At any meeting of the stockholders, every
stockholder entitled to vote may vote in person or by proxy authorized by an
instrument in writing filed in accordance with the procedure established for the
meeting.
Each stockholder shall have one vote for every share of stock entitled to
vote which is registered in his name on the record date for the meeting, except
as otherwise provided herein or required by law or the Certificate of
Incorporation.
All voting, except where otherwise provided herein or required by law or
the Certificate of Incorporation, may be by a voice vote; provided, however,
that upon demand therefor by a stockholder entitled to vote or such
stockholder's proxy, a stock vote shall be taken. Every stock vote shall be
taken by ballots, each of which shall state the name of the stockholder or proxy
voting and such other information as may be required under the procedure
established for the meeting. Every vote taken by ballots shall be counted by an
inspector or inspectors appointed by the chairman of the meeting.
Except as otherwise required by law or the Certificate of Incorporation,
all matters shall be determined by a majority of the votes cast.
Section 7 Stock List. A complete list of stockholders entitled to vote at
any meeting of stockholders, arranged in alphabetical order for each class of
stock and showing the address of each such stockholder and the number of shares
registered in such stockholder's name, shall be open to the examination of any
such stockholder, for any purpose germane to the meeting, during ordinary
business hours for a period of at least ten (10) days prior to the meeting,
either at a place within the
4
<PAGE>
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or if not so specified, at the place where the meeting is
to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
Section 8 Actions by Stockholders. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meetings of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
Section 9 Written Consents. In order that the Corporation may determine
the stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors, and which date shall not be more than ten (10) days
after the date upon which the resolution fixing the record date is adopted by
the Board of Directors. Any stockholder of record seeking to have the
stockholders authorize or take corporate action by written consent shall, by
written notice to the Secretary, request the Board of Directors to fix a record
date. The Board of Directors shall promptly, but in all events within ten (10)
days after the date on which such a request is received, adopt a resolution
fixing the record date. If no record date has been fixed by the Board of
Directors within ten (10) days after the date on which such a request is
received, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is required by applicable law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or any officer or agent of the
Corporation having custody of the book in which proceedings of stockholders
meetings are recorded. Delivery shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board
of Directors and prior action by the Board of Directors is required by
applicable law, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting shall be at the close of
business on the date on which the Board of Directors adopts the resolution
taking such prior action.
In the event of the delivery to the Corporation of a written consent or
consents purporting to authorize or take corporate action and/or related
revocations (each such written consent and related revocation is referred to in
this paragraph as a "Consent"), the Secretary of the Corporation shall provide
for the safe-keeping of such Consents and shall conduct such reasonable
investigation
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as he deems necessary or appropriate of the purpose of ascertaining the validity
of such consent and all matters incident thereto, including, without
limitation, whether stockholders having the requisite voting power to authorize
or take the action specified in the Consent have given consent; provided,
however, that if the corporate action to which the Consent relates is the
removal or replacement of one or more members of the Board of Directors, the
Secretary of the Corporation shall designate two persons, who shall not be
members of the Board of Directors or officers or employees of the Corporation,
to serve as Inspectors with respect to such Consent and such Inspectors shall
discharge the functions of the Secretary of the Corporation under this
paragraph. If after such investigation the Secretary or the Inspectors (as the
case may be) shall determine that the Consent is valid, that fact shall be
certified on the records of the Corporation for the purpose of recording the
proceedings of meetings of the stockholders, and the Consent shall be filed with
such records, at which time the Consent shall become effective as stockholder
action.
In conducting the investigation required by this Section 9, the Secretary
or the Inspectors (as the case may be) may, but are not required to (a) at the
expense of the Company, retain any necessary or appropriate to assist them and
(b) allow any officers and representatives of the Company, stockholders
soliciting consents or revocations, and any other interested parties to propose
challenges and pose questions relating to the preliminary results of such
investigation following the availability of such preliminary results.
ARTICLE III
BOARD OF DIRECTORS
Section 1 Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by law or by the Certificate of Incorporation or by these Bylaws directed or
required to be exercised or done by the stockholders.
Section 2 Number and Term of Office. The Board of Directors shall consist
of not less than five (5) nor more than nine (9) members. Such set number of
directors or the limits herein set forth may be changed from time to time by
resolution of the Board of Directors or the stockholders, except as otherwise
provided by law or the Certificate of Incorporation. Except as provided in
Sections 3 and 4 of this Article, directors shall be elected by the holders of
record at Annual Meetings of Stockholders, and each director so elected shall
hold office until the next Annual Meeting and until his or her successor is duly
elected and qualified, or until his or her earlier resignation or removal. Any
director may resign at any time upon written notice to the Corporation.
Directors need not be stockholders.
Section 3 Chairman of the Board. The Board of Directors at its first
meeting held after each Annual Meeting of Stockholders, or thereafter, may
designate one of its members as Chairman of the Board to serve for the ensuing
year or until his successor is designated. The Chairman of the Board, if any,
shall preside at all meetings of the stockholders and the Board of Directors in
the
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event that the Chief Executive Officer of the Company is not a director and
able to perform such functions. The Chairman of the Board shall have such
duties and powers as may be prescribed by the Board of Directors or Chief
Executive Officer from time to time but shall not have executive duties or
responsibilities.
Section 4 Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director or by the stockholders entitled to vote at any Annual or
Special Meeting held in accordance with Article II, and the directors so chosen
shall hold office until the next Annual or Special Meeting duly called for that
purpose and until their successors are duly elected and qualified, or until
their earlier resignation or removal.
Section 5 Meetings. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. The first meeting of each newly-elected Board of Directors shall be
held immediately following the Annual Meeting of Stockholders and no notice of
such meeting shall be necessary to be given the newly-elected directors in order
legally to constitute the meeting, provided a quorum shall be present. Regular
meetings of the Board of Directors may be held without notice at such time and
at such place as may from time to time be determined by the Board of Directors.
Special meetings of the Board of Directors may be called by the Chief Executive
Officer, the President or a majority of the directors then in office. Notice
thereof stating the place, date and hour of the meeting shall be given to each
director either by mail not less than forty-eight (48) hours before date of the
meeting, b telephone, telegram or telecopy on twenty-four (24) hours' notice, or
on such shorter notice as the person or persons calling such meeting may deem
necessary or appropriate in the circumstances. Meetings may be held at any time
without notice if all the directors are present or if all those not present
waive such notice in accordance with Section 2 of the Article VI of these
Bylaws.
Section 6 Quorum. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these Bylaws, at all meetings of the
Board of Directors, a majority of the directors then in office shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 7 Actions of Board Without a Meeting. Unless otherwise provided
by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board of
Directors or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or committee.
Section 8 Meetings by Means of Conference Telephone. Unless otherwise
provided by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors of the
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Corporation, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or such committee by means of
a conference telephone or similar communications equipment by means of which all
persons participating in the meeting can have each other, and participation in a
meeting pursuant to this Section 8 shall constitute presence in person at such
meeting.
Section 9 Committees. The Board of Directors may, by resolution passed by
a majority of the directors then in office, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of any such committee. In the absence or disqualification of a member
of a committee, and in the absence of a designation by the Board of Directors of
an alternate member to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such members constitute a quorum, may unanimously appoint another member
of he Board of Directors to act at the meeting in the place of any such absent
or disqualified member. Any committee, to the extent allowed by law and
provided in the Bylaws or resolution establishing such committee, shall have an
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it. Each
committee shall keep regular minutes and report to the Board of Directors when
required.
Section 10 Compensation. Unless otherwise restricted by the Certificate
of Incorporation or these Bylaws, the Board of Directors shall have the
authority to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors or a
stated salary as a director. The directors may also be compensated in such
other manner as determined by the Board of Directors. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed compensation for attending committee meetings as determined by the
Board of Directors.
Section 11 Removal. Unless otherwise restricted by the Certificate of
Incorporation or Bylaws, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
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ARTICLE IV
OFFICERS
Section 1 General. The officers of the Corporation shall be
appointed by the Board of Directors and shall be a Chief Executive Officer, a
President, a Vice President-Finance, one or more other Vice Presidents, a
Treasurer, and a Secretary. The Board of Directors may also choose one or more
assistant secretaries and assistant treasurers, and such other officers and
agents as the Board of Directors, in its sole discretion , shall deem necessary
or appropriate from time to time. Any number of offices may be held by the same
person, unless the Certificate of Incorporation or these Bylaws otherwise
provide.
Section 2 Election: Term of Office. The Board of Directors at its
first meeting held after each Annual Meeting of Stockholders shall elect a Chief
Executive Officer, a President, a Vice President-Finance, a Treasurer and a
Secretary and may also elect at that meeting or any other meeting, such other
officers and agents as it shall deem necessary or appropriate. Each officer of
the Corporation shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors together with the powers
and duties customarily exercised by such officer; and each officer of the
Corporation shall hold office until such officer's successor is elected and
qualified or until such officer's earlier resignation or removal. Any officer
may resign at any time upon written notice to the Corporation. The Board of
Directors may at any time, with or without cause, by the affirmative vote of a
majority of directors then in office, remove any officer. Such removal shall be
without prejudice to and shall not diminish such officer's contractual rights,
if any.
Section 3 Chief Executive Officer. The Chief Executive Officer of
the Corporation shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. Subject to the powers of the Board of
Directors, the Chief Executive Officer shall have general executive charge,
management and control of the properties and operations of the Corporation with
all such powers with respect to such properties and operations as may be
reasonably incident to such responsibilities. The Chief Executive Officer, if a
director, shall preside at all meetings of stockholders and the Board of
Directors. The Chief Executive Officer shall possess the power to execute all
bonds, mortgages, certificates, contracts and other instruments except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation. The Chief
Executive Officer shall have and exercise such further powers and duties as may
be specifically delegated to or vested in the Chief Executive Officer from time
to time by these Bylaws or the Board of Directors.
Section 4 President. The President shall be the Chief Operating
Officer of the Corporation and shall have general and active charge of the
operations of the Corporation, subject to the powers of the Board of Directors
and the Chief Executive Officer. Subject to the powers and direction of the
Chief Executive Officer, the President shall possess the power to execute all
bonds, mortgages, certificates, contracts and other instruments except where the
signing and execution
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thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the Corporation. In the absence of the Chief Executive
Officer, or in the event of his inability or refusal to act, the President shall
perform the duties of the Chief Executive Officer, and when so acting, shall
have and exercise such further powers and duties as the Board of Directors or
the Chief Executive Officer may from time to time prescribe.
Section 5 Vice President-Finance. The Vice President-Finance shall
be the chief financial officer of the Corporation and shall have responsibility
for all financial operations of the Corporation. The Vice President-Finance
shall oversee the Treasurer and any Assistant Treasurers, and the Treasurer and
any Assistant Treasurers shall report to the Vice President-Finance. The Vice
President-Finance shall have an exercise such further powers and duties as the
Board of Directors or the Chief Executive Officer may from time to time
prescribe.
Section 6 Vice Presidents. In addition to the Vice President-
Finance, the Board of Directors may elect such other Vice President as it shall
from time to time deem necessary or appropriate. Each Vice President shall have
and perform such powers and duties as the Board of Directors, the Chief
Executive Officer, or the President may from time to time prescribe.
Section 7 Treasurer. Subject to the oversight of the Vice President-
Finance, the Treasurer shall have the custody of the corporate funds and
securities and shall keep complete and accurate accounts of all receipts and
disbursements of the Corporation, and shall deposit all monies and other
valuable effects of the Corporation in its name and to its credit in such banks
and other depositories as may be designated from time to time by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation, taking
proper vouchers and receipts for such disbursements, and shall render to the
Board of Directors, at its regular meetings, or when the Board of Directors so
requires, an account of all his or her transactions as Treasurer and of the
financial condition of the Corporation. The Treasurer shall have such other
powers and perform such other duties as the Board of Directors, the Chief
Executive Officer or the Vice President-Finance shall from time to time
prescribe.
Section 8 Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of al meetings
of the stockholders and special meetings of the Board of Directors, and shall
have and exercise such further powers and duties as may be prescribed by the
Board of Directors or the Chief Executive Officer. If the Secretary shall be
unable or shall refuse to cause to be given notice of all meetings of the
stockholders and special meetings of the Board of Directors, and if there be no
Assistant Secretary, then either the Board of Directors or the Chief Executive
Officer may choose another officer to cause such notice to be given. The
Secretary shall have custody of the seal of the Corporation and the Secretary or
any Assistant Secretary, if there by one, shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by the
signature of the Secretary or by the signature of any such Assistant Secretary.
The Board of Directors may give general authority to any other officer to affix
the seal of the Corporation and to attest the affixing by his or her
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signature. The Secretary shall see that all books, statements, certificates and
other documents and records required by law to be kept or filed are properly
kept or filed, as the case may be.
Section 9 Assistant Treasurer. Except as may be otherwise provided
in these Bylaws, Assistant Treasurers, if there be any, shall perform such
duties and have such powers as from time to time may be assigned to them by the
Board of Directors, the Chief Executive Officer, the Vice President-Finance or
the Treasurer, and shall have the authority to perform all functions of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions of the Treasurer.
Section 10 Assistant Secretaries. Except as may be otherwise
provided in these Bylaws, Assistant Secretaries, if there be any, shall perform
such duties and have such powers as from time to time may be assigned to them by
the Board of Directors, the Chief Executive Officer or the Secretary, and shall
have the authority to perform all functions of the Secretary, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the Secretary.
Section 11 Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
Section 12 Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waives of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the Chief Executive Officer, the President,
the Vie President-Finance, any other Vice President or the Secretary and any
such officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and power incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
ARTICLE V
STOCK
Section 1 Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chief Executive Officer, the President or a Vice
President and (ii) the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary of the Corporation, certifying the number of shares owned
by such holder in the Corporation.
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Section 2 Signatures. Any or all the signatures on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has ben placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if such
person were such officer, transfer agent or registrar at the date of issue.
Section 3 Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or such owner's legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 4 Transfers. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these Bylaws. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by such person's attorney lawfully constituted in writing and
upon the surrender of the certificate therefor, which shall be cancelled before
a new certificate shall be issued.
Section 5 Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty (60) days nor less than ten (10) days
before the date of such meeting, nor more than sixty (60) days prior to any
other action. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 6 Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
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ARTICLE VI
NOTICES
Section 1 Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Written notice may also
be given personally or by telegram, telex, telecopy or cable and such notice
shall be deemed to be given at the time of receipt thereof, if given personally,
and at the time of transmission thereof if given by telegram, telex, telecopy or
cable.
Section 2 Waiver of Notice. Whenever any notice is required by law,
the Certificate of Incorporation or these Bylaws to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to notice.
ARTICLE VII
GENERAL PROVISIONS
Section 1 Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special meeting
or by any committee of the Board of Directors having such authority at any
meeting thereof, and may be paid in cash, in property, in shares of the capital
stock or in any combination thereof. Before payment of any dividend, there may
be set aside out of any funds of the Corporation available for dividends such
sum or sums as the Board of Directors from time to time, in its absolute
discretion, deems proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for any proper purpose, and the Board of Directors may modify or
abolish any such reserve.
Section 2 Disbursements. All notes, checks, drafts and orders for
the payment of money issued by the Corporation shall be signed in the name of
the Corporation by such officers or such other persons as the Board of Directors
may from time to time designate.
Section 3 Corporation Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware." The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
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ARTICLE VIII
AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted at any meeting of the Board of Directors or of the stockholders,
provided notice of the proposed change was given in the notice of the meeting.
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This is an AMENDMENT to the AGREEMENT BETWEEN THE CENTRAL INTERSTATE LOW-LEVEL
RADIOACTIVE WASTE COMPACT COMMISSION AND US ECOLOGY, INC. FOR THE DEVELOPMENT OF
A FACILITY FOR THE DISPOSAL OF LOW-LEVEL RADIOACTIVE WASTE (PRIME CONTRACT),
made and entered into with an effective date of May 1, 1990, by and between the
Central Interstate Low-Level Radioactive Waste Compact Commission (The
Commission) and US ECOLOGY, INC. (US ECOLOGY). The purpose of this AMENDMENT is
to provide for continued prelicensing funding of the project as detailed in the
PRIME CONTRACT and to provide for other purposes.
In accordance with Article III, Section 3.02, of the PRIME CONTRACT, the parties
have met and upon the mutual promises and considerations contained herein agree
to AMEND the Prime Contract as follows.
Article II of the PRIME CONTRACT is amended to include the following new
section:
"2.08 Filing of a License Application and Penalties for Failure to File.
Unless otherwise excused by the Commission, or prevented or delayed as a
result of an Unforeseen Circumstance, Litigation, Change In Law, or other
occurrence, act or omission beyond the reasonable control of US Ecology (the
failure of a subcontractor of US Ecology to timely perform shall not be
deemed to be out of the reasonable control of US Ecology), then US Ecology
shall by July 31, 1990, file with the Nebraska Department of Environmental
Control a License Application for the construction and operation of the
Facility. Such Application shall generally include the information and
support documentation required under NUREG 1199, with the exception that US
Ecology may be required to subsequently furnish environmental data that it
was unable to collect or document prior to the filing of the application or
any other
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data that may be required by Nebraska as part of the state's completeness
review process. US Ecology shall incur the following penalties for failure
to timely file an application in accordance with this section:
(i) If by August 15, 1990, US Ecology has not filed a License
Application with the appropriate state agencies it shall be penalized by
the Commission in the amount of $100,000, and;
(ii) If by August 16, 1990, US Ecology has not filed a License
Application with the appropriate state agencies it shall be penalized by
the Commission as follows:
a. for the period August 16 thru August 31, 1990, US Ecology shall
be assessed $2,500 per day that an Application has not been filed,
and;
b. for the period September 1, thru September 30, 1990, US Ecology
shall be assessed $5,000 per day that an Application has not been
filed, and;
c. for the period after October 1, 1990 US Ecology shall be assessed
$10,000 per day that an Application has not been filed.
If US Ecology incurs a penalty under paragraphs (i) or (ii) above, the
Commission shall require that US Ecology either pay the amount of the total
penalty into the Project Account or that US Ecology reduce the amount due to
US Ecology (as shown on the next invoice submitted to the Commission
pursuant to Section 4.06), by an amount equal to the total penalty. The
total amount of any penalties incurred by US Ecology and assessed by the
Commission shall neither be reimbursable nor recoverable under the terms of
this Agreement, and the Prelicensing Financing provided by the Commission
shall be reduced by the amount of such penalty."
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Article III of the PRIME CONTRACT is amended to include the following new
Sections:
"3.02(c) By the Commission. After the Commission has provided $10,100,000 in
accordance with Section 3.02(a), and after US Ecology has provided
$1,100,000 in accordance with Section 3.02(b)(i), and $2,450,000 in
accordance with Section 3.02(b)(ii), the Commission shall further provide up
to $15,400,000 of financing for the payment of reimbursable costs
necessarily incurred by US Ecology in connection with US Ecology's
performance of the services and tasks set forth in the certain Annual Work
Plan dated March, 1990, as revised and attached hereto and incorporated
herein by reference."
"3.02(d) Those obligations of US Ecology as previously specified in Section
3.02(b)(iii) above are hereby eliminated as they were therein specified. US
Ecology shall provide $2,710,000 of financing on a pro rata basis with the
financing provided by the Commission pursuant to Section 3.02(c), which
shall be reflected as a 14.96% credit to each monthly invoice submitted to
the Commission; provided, however, that upon the Commission's request US
Ecology's pro rata contribution may be delayed until the later stages of
Pre-Licensing."
Article IV of the PRIME CONTRACT is amended by striking Section 4.01(d) of the
PRIME CONTRACT and inserting the following new Section 4.01(d):
"4.01(d) Extraordinary Legal Fees. In addition to the expenses described in
Section 4.01(a), (b) and (c), US Ecology shall be entitled to be reimbursed
for Extraordinary Legal Fees. Extraordinary Legal Fees are those legal fees
and expenses incurred by US Ecology, after prior consultation with and
approval by the Commission, in defending any lawsuit filed by any person
other than the Commission or a Party State (i) which is not based on any
negligence or breach of contract by US Ecology, and (ii) which attacks the
constitutionality of the
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Act or the methodology used for site selection, or (iii) constitutes some
other attempt to disrupt the Project."
Article IV of the PRIME CONTRACT is amended by striking Section 4.01 (c) of the
PRIME CONTRACT and inserting the following new Section 4.01 (c):
"4.01 (c) Fee. US Ecology shall be entitled to a Fee equal to five percent
of subcontract costs (except that no fee shall accrue on subcontracts
related to lobbying activities or on any costs related to Extraordinary
Legal Fees), and eight percent of all other costs described in Section 4.01
(a) and (b) which are reimbursed by the Commission."
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IN WITNESS WHEREOF, each of the Parties has agreed to, executed and
delivered this AMENDMENT to the PRIME CONTRACT on the date set forth beside its
signature below:
Central Interstate Low-Level
Radioactive Waste Compact
Commission
By: /s/ Norman W. Thorson This 10th day of May, 1990
-------------------------------- ---------
Norman W. Thorson
Chairman
By: /s/ Raymond J. Peery This 10th day of May, 1990
-------------------------------- ---------
Raymond J. Peery
Executive Director
US Ecology, Inc.
By: /s/ Richard J. Paton This 10th day of May, 1990
-------------------------------- ---------
Title: Vice-President
----------------------------
Attest:
[Corporate Seal]
Robert I. Ash
-----------------------------------
Controller, Secretary & Treasurer
-----------------------------------
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This is a second AMENDMENT to the AGREEMENT BETWEEN THE CENTRAL INTERSTATE LOW-
LEVEL RADIOACTIVE WASTE COMPACT COMMISSION AND US ECOLOGY FOR THE DEVELOPMENT OF
A FACILITY FOR THE DISPOSAL OF LOW-LEVEL RADIOACTIVE WASTE (PRIME CONTRACT),
made and entered into with an effective date of June 24, 1991, by and between
the Central Interstate Low-Level Radioactive Waste Compact Commission (The
Commission) and US Ecology, Inc. (US Ecology). The purpose of this AMENDMENT is
to provide for continued prelicensing funding of the project as detailed in the
PRIME CONTRACT and the FIRST AMENDMENT of MAY 1, 1990, and to provide for other
purposes.
In accordance with Article III, Section 3.02 of the PRIME CONTRACT, the parties
have met and upon the mutual promises and considerations herein agree to AMEND
the Prime Contract as follows:
Article III of the PRIME CONTRACT is amended to include the following new
section:
"3.02(e) After the Commission has provided $10,100,000.00 in accordance
with section 3.02(a), and $15,400,000.00 in accordance with Section
3.02(c), and after US Ecology has provided $1,100,000.00 in accordance with
section 3.02(b)(i), $2,450,000.00 in accordance with section 3.02(b)(ii),
and $2,710,000.00 in accordance with section 3.02(d), the Commission shall
further provide up to $3,000,000.00 of financing for the payment of
reimbursable costs necessarily incurred by US Ecology in connection with US
Ecology's performance of the services and tasks set forth in the approved
funding requests for the second and third quarters of 1991. Additional
funding will be agreed upon by further amendment."
Article IV of the PRIME CONTRACT is amended by striking Section 4.01 of the
PRIME CONTRACT and inserting the following new Section 4.01:
"The Commission, consistent with the provisions of Article III of this
Agreement, shall reimburse US Ecology up to a maximum amount of
$28,500,000 for the following costs which are necessarily incurred from
the Effective Date of this Agreement in the proper performance of US
Ecology's work as authorized under Phases I through IV of the Work Plan,
provided, however, that additional funding will be necessary to complete
Phases I through IV."
<PAGE>
Article X of the PRIME CONTRACT is amended by changing the address of the
Commission in 10.15 of the PRIME CONTRACT to the following:
To the Commission: Central Interstate Low-Level Radioactive
Waste Compact Commission
233 South 13th Street, Suite 1200
Lincoln, NE 68508
Attention: Chairman"
IN WITNESS WHEREOF, each of the Parties has agreed to, executed and
delivered this SECOND AMENDMENT to the PRIME CONTRACT on the date set forth
beside its signature below:
Central Interstate Low-Level
Radioactive Waste Compact
Commission
By: /s/ L. Hall Bohlinger This 28th day of June, 1991
-------------------------- ----
L. Hall Bohlinger
Chairman
By: /s/ A. Eugene Crump This 27th day of June, 1991
-------------------------- ----
A. Eugene Crump
Interim Executive Director
US Ecology, Inc.
By: /s/ Richard F. Daton This 25th day of June, 1991
-------------------------- ----
Title: Vice-President
-------------------
<PAGE>
THIRD AMENDMENT TO CONTRACT
THIS THIRD AMENDMENT is made and entered into this 1st day of July, 1994 by
and between the Central Interstate Low-Level Radioactive Waste Compact
Commission (the "Commission"), having its principal offices at 233 South 13th
Street, Lincoln, Nebraska, 68508, and US Ecology, Inc., a California
corporation, having its principal offices at 5333 Westheimer, Suite 1000,
Houston, Texas 77056 ("US Ecology").
W I T N E S S E T H:
WHEREAS, the parties have previously entered into a contract for the
development of a facility for the disposal of low-level radioactive waste, which
contract was effective July 6, 1987, and have subsequently amended that contract
by written agreements effective May 1, 1990 and effective June 24, 1991 (the
"Contract");
WHEREAS, the parties originally estimated that the cost of purchasing the
real property and constructing the Facility would be $30,466,000.00, and that an
additional $13,650,000.00 would be expended pursuant to an approved original
work plan that identified specific work tasks necessary to obtain the license
from the Host State;
WHEREAS, the parties originally estimated that, consistent with the
assumptions, schedules and work tasks identified in the original approved work
plan the Facility could be in operation on or before January 1, 1993;
WHEREAS, the parties have periodically modified the work plan to
accommodate work scope changes, changes in law, schedule delays and changed
circumstances;
WHEREAS, US Ecology filed an application for a license in July of 1990;
WHEREAS, as of the date of this Third Amendment, a final licensing decision
has not been made by the Host State;
WHEREAS, the parties hereto desire to continue to make a good faith effort
to have the Facility licensed;
WHEREAS, the parties, based on the assumptions identified in the July 1993
Preconstruction Work Plan, now estimate that a final licensing decision may not
be made until January 1, 1997;
WHEREAS, the parties now estimate that it may be necessary to spend up to
an additional $31,100,000.00 on pre-licensing work in order to obtain a decision
by the Host State on whether or not a final license will be issued;
WHEREAS, the parties recognize and acknowledge that the Commission does
not, itself, have necessary funds in hand to continue to fund the pre-licensing
work, but has entered into a contract of even date herewith ("Amendment No. 5")
with certain anticipated users of the Facility (the "Major Generators") in an
effort to obtain funds in the form of pre-paid disposal fees ("Prepayments")
necessary to fund the anticipated cost of completing the pre-licensing work;
1
<PAGE>
WHEREAS, the parties now desire to amend the Contract in an effort to
obtain the continued funding in the manner and to the extent hereinafter set
forth;
NOW, THEREFORE, the Commission and US Ecology, do, pursuant to the express
terms of Section 10.18 of the Contract, hereby agree to amend the Contract as
follows:
1. From and after the date of this Third Amendment, US Ecology agrees to
perform all actions and to provide all services described in the July 1993
Preconstruction Work Plan, as the same now exists or may from time to time
hereinafter be amended in accord with the provisions of Section 2.04 and Article
V of the Contract (the "Work Plan") which are necessary to complete prelicensing
work on the Facility.
2. The Commission agrees to reimburse US Ecology in an aggregate amount of
up to $31,100,000.00 for prelicensing work performed under this Contract, as
herein amended to the extent reimbursement is for work performed or expenses
incurred (including fees) after December 1, 1993, which are (a) reimbursable
costs as defined in Section 4.01 of the Contract as herein amended and which are
performed or incurred in accordance with either the July 1993 Preconstruction
Work Plan or such amendments thereto as may hereinafter be adopted and approved
by the Commission in accord with Article V of the Contract; or (b) reimbursable
costs which consist of the actual cost billed to USE by the Host State for Host
State prelicensing costs as set forth in Section 4.01(e) of the Contract.
The parties recognize that the Commission anticipates that it will pay US
Ecology under the terms of this Third Amendment to Contract with funds received
from the Major Generators under Amendment No. 5. In the event the Commission is
unable to pay US Ecology the amounts due under this Third Amendment to Contract,
as the same become due and owing, then, subject to the Commission's right to
terminate under the Contract and under this Third Amendment to Contract, and the
rights of the Major Generators to cease funding to the Commission under the
provisions of their Agreement with the Commission, the Commission agrees to
immediately undertake and diligently pursue such rights and remedies as are
reasonably available to it in order to obtain, on a best efforts basis, funding
necessary to pay US Ecology for work performed and expense incurred by US
Ecology hereunder.
3. In the event the Commission has expended the additional $31,100,000
identified in paragraph 2 above, and in the further event that a final licensing
decision, which for the purposes of this Amendment means the decision made by
applicable Host State licensing authorities on whether to issue a final license
following the public hearing on the decision of whether or not to issue a draft
license, has not then been made and the Major Generators have either ceased
funding or thereafter notified the Commission pursuant to Amendment No. 5 that
the Major Generators' intend to cease funding the Project, the Commission shall
have the option, upon 10 days prior written notice to US Ecology, to terminate
the Contract and, in that event, then, notwithstanding the provisions of Article
VIII of the Contract to the contrary, the Commission shall have no further
obligation to make any further or additional payments of any kind to US Ecology
excepting only payment to US Ecology for reimbursable costs (including accrued
fees and interest thereon as provided in Paragraph 5 hereof) for work performed
by US Ecology in accordance with the Contract as herein amended and the Work
Plan up to and including the date on which the Contract termination is
2
<PAGE>
effective and such reasonable and necessary expenses as may be actually
incurred by US Ecology during the ninety day period immediately following the
date on which notice of termination is given to US Ecology in connection with
the winding up and closing down of the Project.
In the event the Commission shall elect to terminate the contract as
provided above, then US Ecology shall within ten (10) days of receipt of such
notice submit to the Commission for the Commission's approval a proposed plan of
demobilization which shall include the steps which US Ecology proposes to take
to cancel or assign all purchase orders, subcontracts or agreements pertaining
to the project, and the action US Ecology proposes to take to protect, maintain
and transfer to the Commission all plant, tools, equipment, property and
materials acquired or furnished by US Ecology and/or its subcontractors under
the Contract. For purposes of this paragraph, reasonable expense incurred by US
Ecology in winding up and closing down the project shall be deemed to be the
actual costs and expenses reasonably incurred by US Ecology in performing the
work tasks identified in the demobilization plan approved by the Commission and
shall include but not be limited to the following: attorneys' fees, if any,
state ordered land restoration costs, administrative costs of settling and
paying claims arising out of the termination of work under subcontracts or
purchase orders and costs incurred in connection with the disposition of any
plant tools, equipment or materials.
In the event the Commission shall elect to terminate the Contract under the
provisions of this Paragraph, then, unless US Ecology or the Commission is then
in breach of this Third Amendment or the Contract, the Commission and US Ecology
shall execute and deliver mutual releases of all claims except for fraud or
intentional misconduct. In the event the Commission shall elect to terminate the
contract under this Paragraph, US Ecology shall have no further claim or right
of any kind to reimbursement of its contribution or any interest which may have
otherwise accrued thereon provided, however, should the Commission and US
Ecology agree to go forward with the Facility, then US Ecology shall retain its
rights under the Contract, as modified by this Third Amendment, to recover its
contribution together with any accrued interest from the rate base in the event
the Facility becomes operational.
4. Anything in the Contract to the contrary notwithstanding, the rate of
return on or capitalization of US Ecology's Contribution toward the cost of
prelicensing work on the Facility as provided for in Section 3.02(b) of the
Contract shall for all purposes under the Contract, specifically including but
not limited to, the computation of the rate of return under Section 3.02(b);
and/or the computation of the rate of return on US Ecology's Contributions under
Section 8.06(a) be computed as follows:
a. US Ecology's contribution of up to $6,260,000.00 as provided pursuant to
Section 3.02(b) of the Contract (herein "US Ecology's Contribution") shall
bear interest at a rate of 20% from the date of contribution to the date on
which a final license decision is made or January 1, 1997, whichever shall
first occur.
b. Thereafter, US Ecology's Contribution shall bear interest at the rate of
prime plus 3% until commencement of Facility operation unless, the
additional $31,100,000.00 identified in Paragraph 2 hereof is expended and a
final licensing decision has not then been made by the Host State, in which
event, US Ecology's Contribution shall bear interest at prime rate
3
<PAGE>
from the date on which $31,100,000.00 is expended until commencement of
Facility operation.
5. For purposes of computing and paying fees due US Ecology pursuant to
Article IV, Section 4.01(c) of the Contract, the following shall apply:
a. Fees shall be earned as provided in Article IV, Section 4.01(c) of the
Contract. However, fees which are earned shall become due to US Ecology as
of the date on which the following milestones are reached, and shall be
paid upon the Commission's receipt of the next invoice:
(i) submittal by US Ecology of Safety Analysis Report Revision 7;
(ii) Submission of US Ecology's complete responses to each round of
Host State review questions (rounds 3, 4, etc.);
(iii) US Ecology's receipt of the Host State's intent to issue a
license decision;
(iv) The Host State's issuance of a draft license decision;
(v) A final license decision is issued by the Host State.
(vi) Termination of the Project as provided in Paragraph 3 hereof or
completion, whichever occurs first.
b. No interest will be charged on fees which become due and payable upon
completion of milestones (i), (ii), or (iii) above. Interest at a rate of
prime from the date on which the same are earned until the date of payment
shall be paid with respect to accrued fees which become due and payable
upon the completion of milestones (iv), (v) and (vi) above.
c. Anything herein or in the Contract to the contrary notwithstanding, no
fees shall be earned by US Ecology with respect to any pre-licensing work
that occurs after the Commission has incurred costs (calculated as provided
in Paragraph 16 hereof) totaling the $31,100,000.00 identified in Paragraph
2 hereof.
6. Article IV of the Contract shall be and the same hereby is amended by
adding the following Section 4.01(e):
(e) Host State Prelicensing Costs. The actual costs billed to US Ecology by
the Host State for license review, licensing, state oversight and
monitoring during prelicensing, and the costs of funding for a local
monitoring committee, shall be reimbursable costs under this Section 4.01;
provided, however, that nothing herein shall be interpreted to allow US
Ecology reimbursement for any costs imposed by the Host State that are in
the nature of fines or penalties. Any such costs which are paid by US
Ecology and invoiced to the Commission shall not be subject to US Ecology's
Fee provided for in Section 4.01(c). All reimbursable Host State
prelicensing costs payable by US Ecology shall be due and payable to US
Ecology on or before the due date of the Host State's invoice for such
costs.
4
<PAGE>
7. a. Article IV, Section 4.08 shall be and the same hereby is amended by
deleting the same as it now appears and substituting the following in its place:
4.08 Accounting Records. US Ecology and, to the extent US Ecology has
the contractual right to require same, its subcontractors/consultants,
shall keep such full and detailed accounts as may be necessary for proper
financial management under this Agreement. The accounting system shall be
maintained in a manner consistent with generally accepted accounting
principles. The Commission shall, upon written notice, be afforded access
during normal business hours to all of US Ecology's or its
subcontractors'/consultants' records, books, correspondence, instructions,
drawings, receipts, vouchers, memoranda and similar data directly
pertaining to transactions relating to this Agreement. US Ecology and its
subcontractors/consultants shall preserve all such records until three
years beyond the duration of this Agreement or for such longer period as
may be required by law; and, if requested by the Commission or the Host
State, shall deliver copies of such materials, at the expense of the
Commission or Host State, at the end of such period, to the Commission or
the Host State for safekeeping. US Ecology agrees that it shall not
relinquish or alter any rights implementing the purpose and effect of this
paragraph under the provisions of any existing contract or agreement with
subcontractors or consultants, and further agrees to obtain contract
language implementing the purpose and effect of this paragraph in all
subsequent contracts or agreements with subcontractors or consultants.
b. Article IV, Section 4.09 shall be and the same hereby is amended by
deleting the same as it now appears and substituting the following in its place:
4.09 Audits. The Commission may have any of the accounting records
maintained by US Ecology and, to the extent US Ecology has the contractual
right to same, of its subcontractors/consultants, and directly pertinent to
transactions relating to this Agreement, inspected during normal business
hours, audited and certified to by a firm of certified public accountants
or other representatives selected by the Commission. US Ecology and its
subcontractors/consultants shall reasonably cooperate fully with any such
accounting firm or representative in completing any such audit or
certification. The expense of such inspections and audit shall be paid by
the Commission, except that in the event such audit and certification
reveals a materially significant error in such accounting records, the
costs of such audit or certification shall be borne by US Ecology. US
Ecology agrees that it shall not relinquish or alter any rights
implementing the purpose and effect of this paragraph under the provisions
of any existing contract or agreement with subcontractors or consultants,
and further agrees to obtain contract language implementing the purpose and
effect of this paragraph in all subsequent contracts or agreements with
subcontractors or consultants.
8. The Commission shall have the option, at any time, to purchase all, but
not less than all, of US Ecology's Contribution upon payment to US Ecology of
the principal amount of said US Ecology Contribution, together with all accrued
interest thereon, computed in accordance with the provisions of Paragraph 4
hereof, from the date of expenditure to the date of purchase. The Commission
shall have the right, upon demand by the Major Generators and after
5
<PAGE>
10 days prior written notice to US Ecology, to assign this option to the Major
Generators. Anything herein to the contrary, notwithstanding, the purchase of US
Ecology's contribution pursuant to the terms of this Paragraph shall not modify
or otherwise limit US Ecology's rights to develop, construct, and operate the
Facility under the Contract provided, that, any amounts paid or payable to US
Ecology pursuant to the terms of this Paragraph shall be credited against and
serve to reduce the purchase price otherwise due and payable to US Ecology
pursuant to the terms of Section 8.07 of the Contract.
9. Article VI, Section 6.01(a) shall be and the same is hereby amended by
deleting Section 6.01(a) in its entirety and substituting the following in its
place:
6.01 Disposal Rates. Pursuant to Article III.c. of the Compact, the
Commission hereby establishes the following criteria for rates to be
assessed against users of the Facility for the Disposal of Waste. After the
License is issued, a rate structure should be established in a manner
designed to generate revenues for US Ecology that are consistent with the
following criteria. The Commission agrees to appear at such Host State rate
proceedings in support of the criteria established in this document.
a. The rate structure each year the Facility is in operation shall be
reasonably designed to permit US Ecology to recover for the applicable
year's operation the following amounts, as adjusted up or down to
account for shortfalls or overages in such amounts experienced during
the preceding year's operation as a result of (i) variations between
projected volume and actual volume or (ii) variations between budgeted
operating expenses and actual operating expenses:
1. An amount equal to the operating expenses (as determined pursuant
to Sections 6.02(a)(i), (ii) and (iii) of the Contract) which US
Ecology reasonably anticipates incurring in operating the Facility for
the applicable year, plus 10% of said amount as a management fee.
2. The amount necessary to pay the annual amortization for the
applicable year of the unreimbursed portion of US Ecology's
Contributions together with accrued interest, if any, determined by
amortizing such amounts in equal annual installments over the useful
life of the Facility at an interest rate of prime plus 2%.
3. If US Ecology itself, directly provides its own funds for all or
any portion of the construction costs for the Facility, an amount
necessary to pay the annual amortization for the applicable year of US
Ecology's remaining, unreimbursed expenditure determined by amortizing
such amounts, if any, in equal annual installments over the useful
life of the project at an interest rate of prime plus 2%.
4. If US Ecology obtains construction financing for the Facility, an
amount equal to the principal and interest payments which US Ecology
will be required to pay during the year for such financing plus an
amount equal to two percent (2%) of the interest portion of said
payments which is due and payable during the year. It is agreed that
any such financing shall be obtained on the basis of a
6
<PAGE>
level amortization over the longest period commercially available
subject only to adjustment for a variable interest rate, if applicable.
5. An amount equal to US Ecology's depreciation for tax purposes on new
capital expenditures reasonably and necessarily made by US Ecology for
the Facility during the useful life of the project, provided such
expenditures are approved in advance by the Commission and reduced by
the amount, if any, of the proceeds in excess of adjusted basis,
realized by US Ecology from the sale during the immediately preceding
year of capital assets purchased for the Facility.
US Ecology shall present to the Commission and the Host State an annual budget
setting forth the expected costs and expenses to be incurred in connection with
the operation of the Facility and estimating the volume of waste to be disposed
at the Facility during the upcoming annual rate period at least 120 days prior
to the beginning of such rate period for which rates will be established by the
Host State based on Commission criteria. For purposes of this Paragraph, the
Prime Rate shall be determined as of the date on which US Ecology presents its
annual budget to the Commission, except for expenditures made prior to the
operational date of the Facility, in which event the prime rate in effect at the
time of the expenditures were made shall apply.
10. The provisions of Section 6.02(a) of the Contract shall be and are
hereby amended as follows: Section 6.02(a)(iv) and Section 6.02(a)(v) shall be
deleted in their entirety.
11. The provisions of Section 6.02(b) of the Contract shall be and are
hereby amended by deleting Section 6.02(b) in its entirety.
12. The provisions of Section 6.02(c) of the Contract shall be and are
hereby amended by deleting Section 6.02(c) in its entirety.
13. The provisions of Section 5.02 of the Contract shall be amended by
adding the following sentence at the end of the Section:
US Ecology will provide to the Facility Review Committee its opinions,
analyses, observations and thoughts, but, however, for all purposes
hereunder, US Ecology shall be a nonvoting member of the Committee.
14. For purposes of this Third Amendment and the Contract, interest shall
be compounded annually. Prime rate shall be the base rate on corporate loans
posted by at least 75% of the nation's 30 largest banks as published in the Wall
Street Journal, and, unless otherwise specifically provided, where the Contract
contemplates a variable rate, the prime rate, once established, shall when
required, be adjusted annually on the anniversary date of the event triggering
its use.
15. For purposes of this Third Amendment and the Contract, the term "useful
life," in relation to the Facility, shall mean the period commencing with the
date the Facility becomes operational and ending on the thirtieth anniversary
thereof. The Parties acknowledge and agree that the useful life may be adjusted
by amendment to this Contract in the event the licensable capacity for the
7
<PAGE>
Facility (not less than five million cubic feet) would be reached sooner than
the thirtieth anniversary of the date the Facility becomes operational.
16. For the purposes of this Third Amendment and the Contract, all
references to the expenditure of the $31,100,000.00 contemplated to be spent
under Paragraph 2 hereof shall include at all times all fees which may be then
earned together with any interest which may have accrued thereon, whether or not
the same have been paid or may be then due and payable. By way of illustration:
in the event an amount of $100,000.00 in accrued and unpaid fees and interest is
earned and remains unpaid, and if an amount of $31,000,000.00 has been spent,
then the entire $31,100,000.00 contemplated by Paragraph 2 shall be deemed to
have been expended even though the $100,000.00 has not then been paid to US
Ecology.
17. US Ecology expressly acknowledges and agrees that the individual
Commissioners, officers or employers or employees of the Commission shall have
no personal liability to US Ecology under the provisions of this Amendment or
under the Contract specifically including, but not limited to any liability
under the default provisions set forth in Article VIII of the Contract.
18. All rights and remedies provided to either Party under the Contract
(including this Third Amendment to Contract) are cumulative and may be enforced
individually or concurrently. Except to the extent expressly provided for
herein, nothing in this Third Amendment to Contract shall be deemed or construed
to waive any breach of the Contract or to in any way modify or affect any of the
rights, duties, privileges or obligations of the respective Parties as set forth
in the Contract. Except as amended herein all provisions of the Contract shall
be and remain in full force and effect.
CENTRAL INTEREST LOW-LEVEL
RADIOACTIVE WASTE COMPACT
COMMISSION
This 1st day of July, 1994 By: /s/
___________________
Chairman
this 1st day of July, 1994 By: /s/
___________________
Executive Director
US ECOLOGY, INC.
this 11th day of July, 1994 By: /s/
______________________
President
Attest:
(Corporate Seal)
/s/
__________________________
Secretary
8
<PAGE>
AMERICAN ECOLOGY CORPORATION
401(K) SAVINGS PLAN
[RESTATED: JANUARY 1, 1993]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<C> <S> <C>
ARTICLE I. DEFINITIONS 2
ARTICLE II. TOP HEAVY AND ADMINISTRATION........................ 17
2.1 TOP HEAVY PLAN REQUIREMENTS....................... 17
2.2 DETERMINATION OF TOP HEAVY STATUS................. 17
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER....... 21
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY........... 21
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES..... 22
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR............ 22
2.7 RECORDS AND REPORTS............................... 23
2.8 APPOINTMENT OF ADVISERS........................... 23
2.9 INFORMATION FROM EMPLOYER......................... 24
2.10 PAYMENT OF EXPENSES............................... 24
2.11 MAJORITY ACTIONS.................................. 24
2.12 CLAIMS PROCEDURE.................................. 24
2.13 CLAIMS REVIEW PROCEDURE........................... 24
ARTICLE III. ELIGIBILITY........................................ 25
3.1 CONDITIONS OF ELIGIBILITY......................... 25
3.2 APPLICATION FOR PARTICIPATION..................... 25
3.3 EFFECTIVE DATE OF PARTICIPATION................... 26
3.4 DETERMINATION OF ELIGIBILITY...................... 26
3.5 TERMINATION OF ELIGIBILITY........................ 26
3.6 OMISSION OF ELIGIBLE EMPLOYEE..................... 26
3.7 INCLUSION OF INELIGIBLE EMPLOYEE.................. 26
3.8 ELECTION NOT TO PARTICIPATE....................... 27
ARTICLE IV. CONTRIBUTION AND ALLOCATION......................... 27
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION... 27
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION........... 28
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION........ 32
4.4 ALLOCATION OF CONTRIBUTION AND EARNINGS........... 32
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS.................. 36
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS.... 38
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS.............. 40
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE
TESTS............................................. 43
4.9 MAXIMUM ANNUAL ADDITIONS.......................... 45
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS......... 49
4.11 TRANSFERS FROM QUALIFIED PLANS.................... 50
4.12 DIRECTED INVESTMENT ACCOUNT....................... 52
ARTICLE V. VALUATIONS........................................... 53
5.1 VALUATION OF THE TRUST FUND....................... 53
5.2 METHOD OF VALUATION............................... 53
ARTICLE VI. DETERMINATION AND DISTRIBUTION OF BENEFITS.......... 53
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT......... 53
6.2 DETERMINATION OF BENEFITS UPON DEATH.............. 54
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY.. 55
6.4 DETERMINATION OF BENEFITS UPON TERMINATION........ 55
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
6.5 DISTRIBUTION OF BENEFITS.......................... 58
6.6 DISTRIBUTION OF BENEFITS UPON DEATH............... 63
6.7 TIME OF SEGREGATION OR DISTRIBUTION............... 66
6.8 DISTRIBUTION FOR MINOR BENEFICIARY................ 67
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN.... 67
6.10 PRE-RETIREMENT DISTRIBUTION....................... 67
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP................. 68
6.12 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION... 69
6.13 DIRECT ROLLOVER DISTRIBUTIONS..................... 70
ARTICLE VII. TRUSTEE............................................ 71
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE............. 71
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE....... 71
7.3 OTHER POWERS OF THE TRUSTEE....................... 72
7.4 DUTIES OF THE TRUSTEE REGARDING PAYMENTS.......... 74
7.5 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES..... 75
7.6 ANNUAL REPORT OF THE TRUSTEE...................... 75
7.7 AUDIT............................................. 76
7.8 RESIGNATION....................................... 76
7.9 TRANSFER OF INTEREST.............................. 77
7.10 EMPLOYER SECURITIES AND REAL PROPERTY............. 78
ARTICLE VIII. AMENDMENT, TERMINATION AND MERGERS................ 78
8.1 AMENDMENT......................................... 78
8.2 TERMINATION....................................... 79
8.3 MERGER OR CONSOLIDATION........................... 79
ARTICLE IX. MISCELLANEOUS....................................... 80
9.1 PARTICIPANT'S RIGHTS.............................. 80
9.2 ALIENATION........................................ 80
9.3 CONSTRUCTION OF PLAN.............................. 80
9.4 GENDER AND NUMBER................................. 81
9.5 LEGAL ACTION...................................... 81
9.6 PROHIBITION AGAINST DIVERSION OF FUNDS............ 81
9.7 BONDING........................................... 81
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE........ 82
9.9 INSURER'S PROTECTIVE CLAUSE....................... 82
9.10 RECEIPT AND RELEASE FOR PAYMENTS.................. 82
9.11 ACTION BY THE EMPLOYER............................ 82
9.12 NAMED FIDUCIARIES AND ALLOCATION OF
RESPONSIBILITY.................................... 83
9.13 HEADINGS.......................................... 83
9.14 APPROVAL BY INTERNAL REVENUE SERVICE.............. 83
9.15 UNIFORMITY........................................ 84
ARTICLE X. PARTICIPATING EMPLOYERS ............................. 84
10.1 ADOPTION BY OTHER EMPLOYERS....................... 84
10.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS........... 84
10.3 DESIGNATION OF AGENT.............................. 85
10.4 EMPLOYEE TRANSFERS................................ 85
10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION............. 86
10.6 AMENDMENT......................................... 86
10.7 DISCONTINUANCE OF PARTICIPATION................... 86
10.8 ADMINISTRATOR'S AUTHORITY......................... 87
10.9 EMPLOYER INDEMNITY................................ 87
</TABLE>
<PAGE>
AMERICAN ECOLOGY CORPORATION
401(K) SAVINGS PLAN
THIS AGREEMENT, hereby made and entered into this 13th day of
November, 1994, by and between American Ecology Corporation (herein referred to
as the "Employer") and William P. McCaughey, John D. Held and Harry O. Nicodemus
IV (herein referred to as the "Trustee").
W I T N E S S E T H:
WHEREAS, the Employer heretofore established a Profit Sharing Plan and
Trust effective January 1, 1987, (hereinafter called the "Effective Date") known
as American Ecology Corporation Retirement Savings Plan and which plan shall
hereinafter be known as American Ecology Corporation 401(k) Savings Plan (herein
referred to as the "Plan") in recognition of the contribution made to its
successful operation by its employees and for the exclusive benefit of its
eligible employees; and
WHEREAS, the Plan was previously amended and restated which restated
Plan was generally effective as of January 1, 1989, except as otherwise provided
in such document or except as with respect to statutory changes required by
DEFRA, REA, TRA of 1986, OBRA 86, OBRA 87, TAMRA 88 and the various final
regulations issued through 1988, all of which such statutory changes were
effective as of the dates specified in such laws or such regulations;
WHEREAS, on January 27, 1993 the Employer amended and restated the
Plan to (i) conform to all statutory and regulatory requirements in effect as of
January 1, 1993, (ii) permit participants to direct the investments of their
Plan accounts in accordance with ERISA (S)404(c), and (iii) make certain other
such changes;
WHEREAS, as part of the restatement of the Plan generally effective as
of January 1, 1993, the Employer has determined to make certain other
miscellaneous clean-up changes to such document;
WHEREAS, under the terms of the Plan, the Employer has the ability to
amend the Plan, provided the Trustee joins in such amendment if the provisions
of the Plan affecting the Trustee are amended;
NOW, THEREFORE, effective January 1, 1993, except as otherwise
specifically provided in the Plan or as otherwise required by applicable law
(including, but not limited to, the Tax Reform Act of 1986 and all subsequent
legislation and regulations), the Employer and the Trustee in accordance with
the provisions of the Plan pertaining to amendments thereof, hereby amend the
Plan in its entirety and restate the Plan so that it will continue to qualify as
a profit sharing plan under the Internal Revenue Code of 1986 and all amendments
thereto through January 1, 1993, to provide as follows:
<PAGE>
ARTICLE I.
DEFINITIONS
1.1 "Act" means the Employee Retirement Income Security Act of 1974,
as it may be amended from time to time.
1.2 "Administrator" means the person designated by the Employer
pursuant to Section 2.4 to administer the Plan on behalf of the Employer.
1.3 "Affiliated Employer" means any corporation which is a member of a
controlled group of corporations (AS defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer; and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(0).
1.4 "Aggregate Account" means, with respect to each Participant, the
value of all accounts maintained on behalf of a Participant, whether
attributable to Employer or Employee contributions, subject to the provisions of
Section 2.2.
1.5 "Anniversary Date" means December 31st.
1.6 "Beneficiary" means the person to whom the share of a deceased
Participant's total account is payable, subject to the restrictions of Sections
6.2 and 6.6.
1.7 "Code" means the Internal Revenue Code of 1986, as amended or
replaced from time to time.
1.8 "Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments of
compensation by the Employer (in the course of the Employer's trade or business)
for a Plan Year for which the Employer is required to furnish the Participant a
written statement under Code Sections 6041(d), 6051(a)(3) and 6052.
Compensation must be determined without regard to any rules under Code Section
3401(a) that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the exception for
agricultural labor in Code Section 3401(a)(2)).
For purposes of this Section, the determination of Compensation shall
be made by:
(a) excluding overtime.
(b) excluding commissions.
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<PAGE>
(c) excluding discretionary bonuses.
(d) including amounts which are contributed by the Employer pursuant
to a salary reduction agreement and which are not includible in the gross
income of the Participant under Code Sections 125, 402(a)(8), 402(h),
403(b) or 457, and Employee contributions described in Code Section
414(h)(2) that are treated as Employer contributions.
For a Participant's initial year of participation, Compensation shall
be recognized as of such Employee's effective date of participation pursuant to
Section 3.3.
Compensation in excess of $200,000 shall be disregarded. Such amount
shall be adjusted at the same time and in such manner as permitted under Code
Section 415(d), except that the dollar increase in effect on January 1 of any
calendar year shall be effective for the Plan Year beginning with or within such
calendar year and the first adjustment to the $200,000 limitation shall be
effective on January 1, 1990. For any short Plan Year the Compensation limit
shall be an amount equal to the Compensation limit for the calendar year in
which the Plan Year begins multiplied by the ratio obtained by dividing the
number of full months in the short Plan Year by twelve (12). In applying this
limitation, the family group of a Highly Compensated Participant who is subject
to the Family Member aggregation rules of Code Section 414(q)(6) because such
Participant is either a "five percent owner" of the Employer or one of the ten
(10) Highly Compensated Employees paid the greatest "415 Compensation" during
the year, shall be treated as a single Participant, except that for this purpose
Family Members shall include only the affected Participant's spouse and any
lineal descendants who have not attained age nineteen (19) before the close of
the year. If, as a result of the application of such rules the adjusted
$200,000 limitation is exceeded, then the limitation shall be prorated among the
affected Family Members in proportion to each such Family Member's Compensation
prior to the application of this limitation, or the limitation shall be adjusted
in accordance with any other method permitted by Regulation.
If, as a result of such rules, the maximum "annual addition" limit of
Section 4.9(a) would be exceeded for one or more of the affected Family Members,
the prorated Compensation of all affected Family Members shall be adjusted to
avoid or reduce any excess. The prorated Compensation of any affected Family
Member whose allocation would exceed the limit shall be adjusted downward to the
level needed to provide an allocation equal to such limit. The prorated
Compensation of affected Family Members not affected by such limit shall then be
adjusted upward on a pro rata basis not to exceed each such affected Family
Member's compensation as determined prior to application of the Family Member
rule. The resulting allocation shall not exceed such individual's maximum
3
<PAGE>
"annual addition" limit. If, after these adjustments, an "excess amount" still
results, such "excess amount" shall be disposed of in the manner described in
Section 4.10(a) pro rata among all affected Family Members.
For purposes of this Section, if the Plan is a plan described in Code
Section 413(c) or 414(f) (a plan maintained by more than one Employer), the
$200,000 limitation applies separately with respect to the Compensation of any
Participant from each Employer maintaining the Plan.
If, in connection with the adoption of this amendment and restatement,
the definition of Compensation has been modified, then, for Plan Years prior to
the Plan Year which includes the adoption date of this amendment and
restatement, compensation means compensation determined pursuant to the Plan
then in effect.
For Plan Years beginning prior to January 1, 1989, the $200,000 limit
(without regard to Family Member aggregation) shall apply only for Top Heavy
Plan Years and shall not be adjusted.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect
for a calendar year applies to any period, not exceeding 12 months over which
compensation is determined (determination period) beginning in such calendar
year. If a determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the denominator
of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Section 401(a)(17) of the Code shall mean the
OBRA '93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current Plan Year,
the compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
4
<PAGE>
1.9 "Contract" or "Policy" means any life insurance policy, retirement
income or annuity policy, or annuity contract (group or individual) issued
pursuant to the terms of the Plan.
1.10 "Deferred Compensation" with respect to any Participant means the
amount of the Participant's total Compensation which has been contributed to the
Plan in accordance with the Participant's deferral election pursuant to Section
4.2 excluding any such amounts distributed as excess "annual additions" pursuant
to Section 4.10(a).
1.11 "Early Retirement Date" means the first day of any month (prior to the
Normal Retirement Date) after such Participant ceases to be an Employee of the
Employer and has attained age 55.
A Former Participant who terminates employment and who thereafter
reaches the age requirement contained herein shall be entitled to receive his
benefits under this Plan.
1.12 "Elective Contribution" means the Employer's contributions to the Plan
of Deferred Compensation excluding any such amounts distributed as excess
"annual additions" pursuant to Section 4.10(a). In addition, any Employer
Qualified Non-Elective Contribution made pursuant to Section 4.1(c) and Section
4.6 shall be considered an Elective Contribution for purposes of the Plan. Any
such contributions deemed to be Elective Contributions shall be subject to the
requirements of Sections 4.2(b) and 4.2(c) and shall further be required to
satisfy the discrimination requirements of Regulation 1.401(k)-1(b)(5), the
provisions of which are specifically incorporated herein by reference.
1.13 "Eligible Employee" means any Employee other than an Employee hired by
the Employer (i) on a specific project basis or (ii) as a specified part-time
employee. For purposes of the Plan, a specified part-time employee means any
Employee who is hired in a job category which will not result in 1,000 hours of
service in any 12-month period beginning on such Employee's date of hire or any
subsequent calendar year.
Employees of Affiliated Employers shall not be eligible to participate
in this Plan unless such Affiliated Employers have specifically adopted this
Plan in writing.
1.14 "Employee" means any person who is employed by the Employer or
Affiliated Employer, but excludes any person who is an independent contractor.
Employee shall include Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) unless such Leased Employees are covered by a plan
described in Code Section 414(n)(5) and such Leased Employees do not constitute
more than 20% of the recipient's non-highly compensated work force.
5
<PAGE>
1.15 "Employer" means American Ecology Corporation and any
Participating Employer (see Appendix A) (as defined in Section 10.1) which shall
adopt this Plan; any successor which shall maintain this Plan; and any
predecessor which has maintained this Plan. The Employer is a corporation, with
principal offices in the State of Texas.
1.16 "Excess Aggregate Contributions" means, with respect to any Plan Year,
the excess of the aggregate amount of the Employer matching contributions made
pursuant to Section 4.1(b) and any qualified non-elective contributions or
elective deferrals taken into account pursuant to Section 4.7(c) on behalf of
Highly Compensated Participants for such Plan Year, over the maximum amount of
such contributions permitted under the limitations of Section 4.7(a).
1.17 "Excess Contributions" means, with respect to a Plan Year, the excess
of Elective Contributions made on behalf of Highly Compensated Participants for
the Plan Year over the maximum amount of such contributions permitted under
Section 4.5(a). Excess Contributions shall be treated as an "annual addition"
pursuant to Section 4.9(b).
1.18 "Excess Deferred Compensation" means, with respect to any taxable year
of a Participant, the excess of the aggregate amount of such Participant's
Deferred Compensation and the elective deferrals pursuant to Section 4.2(f)
actually made on behalf of such Participant for such taxable year, over the
dollar limitation provided for in Code Section 402(g), which is incorporated
herein by reference. Excess Deferred Compensation shall be treated as an
"annual addition" pursuant to Section 4.9(b) when contributed to the Plan unless
distributed to the affected Participant not later than the first April 15th
following the close of the Participant's taxable year. Additionally, for
purposes of Sections 2.2 and 4.4(g), Excess Deferred Compensation shall continue
to be treated as Employer contributions even if distributed pursuant to Section
4.2(f). However, Excess Deferred Compensation of Non-Highly Compensated
Participants is not taken into account for purposes of Section 4.5(a) to the
extent such Excess Deferred Compensation occurs pursuant to Section 4.2(d).
1.19 "Family Member" means, with respect to an affected Participant, such
Participant's spouse, such Participant's lineal descendants and ascendants and
their spouses, all as described in Code Section 414(q)(6)(B).
1.20 "Fiduciary" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan
6
<PAGE>
or has any authority or responsibility to do so, or (c) has any discretionary
authority or discretionary responsibility in the administration of the Plan,
including, but not limited to, the Trustee, the Employer and its representative
body, and the Administrator.
1.21 "Fiscal Year" means the Employer's accounting year of 12 months
commencing on January 1st of each year and ending the following December 31st.
1.22 "Forfeiture" means that portion of a Participant's Account that is not
Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested portion of a
Participant's Account, or
(b) the last day of the Plan Year in which the Participant incurs
five (5) consecutive 1-Year Breaks in Service.
Furthermore, for purposes of paragraph (a) above, in the case of a
Terminated Participant whose Vested benefit is zero, such Terminated Participant
shall be deemed to have received a distribution of his Vested benefit upon his
termination of employment. Restoration of such amounts shall occur pursuant to
Section 6.4(f)(2). In addition, the term Forfeiture shall also include amounts
deemed to be Forfeitures pursuant to any other provision of this Plan.
1.23 "Former Participant" means a person who has been a Participant, but
who has ceased to be a Participant for any reason.
1.24 "415 Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments of
compensation by the Employer (in the course of the Employer's trade or business)
for a Plan Year for which the Employer is required to furnish the Participant a
written statement under Code Sections 6041(d), 6051(a)(3) and 6052. "415
Compensation" must be determined without regard to any rules under Code Section
3401(a) that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the exception for
agricultural labor in Code Section 3401(a)(2)).
If, in connection with the adoption of this amendment and restatement,
the definition of "415 Compensation" has been modified, then, for Plan Years
prior to the Plan Year which includes the adoption date of this amendment and
restatement, "415 Compensation" means compensation determined pursuant to the
Plan then in effect.
7
<PAGE>
1.25 "414(s) Compensation" with respect to any Participant means such
Participant's "415 Compensation" paid during a Plan Year. The amount of "414(s)
Compensation" with respect to any Participant shall include "414(s)
Compensation" for the entire twelve (12) month period ending on the last day of
such Plan Year, except that "414(s) Compensation" shall only be recognized for
that portion of the Plan Year during which an Employee was a Participant in the
Plan.
For purposes of this Section, the determination of "414(s)
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(a)(8),
402(h), 403(b) or 457, and Employee contributions described in Code Section
414(h)(2) that are treated as Employer contributions.
"414(s) Compensation" in excess of $200,000 shall be disregarded.
Such amount shall be adjusted at the same time and in such manner as permitted
under Code Section 415(d), except that the dollar increase in effect on January
1 of any calendar year shall be effective for the Plan Year beginning with or
within such calendar year and the first adjustment to the $200,000 limitation
shall be effective on January 1, 1990. For any short Plan Year the "414(s)
Compensation" limit shall be an amount equal to the "414(s) Compensation" limit
for the calendar year in which the Plan Year begins multiplied by the ratio
obtained by dividing the number of full months in the short Plan Year by twelve
(12). In applying this limitation, the family group of a Highly Compensated
Participant who is subject to the Family Member aggregation rules of Code
Section 414(q)(6) because such Participant is either a "five percent owner" of
the Employer or one of the ten (10) Highly Compensated Employees paid the
greatest "415 Compensation" during the year, shall be treated as a single
Participant, except that for this purpose Family Members shall include only the
affected Participant's spouse and any lineal descendants who have not attained
age nineteen (19) before the close of the year.
If, in connection with the adoption of this amendment and restatement,
the definition of "414(s) Compensation" has been modified, then, for Plan Years
prior to the Plan Year which includes the adoption date of this amendment and
restatement, "414(s) Compensation" means compensation determined pursuant to the
Plan then in effect.
1.26 "Highly Compensated Employee" means an Employee described in Code
Section 414(q) and the Regulations thereunder, and generally means an Employee
who performed services for the Employer during the "determination year" and is
in one or more of the following groups:
8
<PAGE>
(a) Employees who at any time during the "determination year" or
"look-back year" were "five percent owners" as defined in Section 1.32(c).
(b) Employees who received "415 Compensation" during the "look-back
year" from the Employer in excess of $75,000.
(c) Employees who received "415 Compensation" during the "look-back
year" from the Employer in excess of $50,000 and were in the Top Paid Group
of Employees for the Plan Year.
(d) Employees who during the "look-back year" were officers of the
Employer (as that term is defined within the meaning of the Regulations
under Code Section 416) and received "415 Compensation" during the "look-
back year" from the Employer greater than 50 percent of the limit in effect
under Code Section 415(b)(1)(A) for any such Plan Year. The number of
officers shall be limited to the lesser of (i) 50 employees; or (ii) the
greater of 3 employees or 10 percent of all employees. For the purpose of
determining the number of officers, Employees described in Section 1.57(a),
(b), (c) and (d) shall be excluded, but such Employees shall still be
considered for the purpose of identifying the particular Employees who are
officers. If the Employer does not have at least one officer whose annual
"415 Compensation" is in excess of 50 percent of the Code Section
415(b)(1)(A) limit, then the highest paid officer of the Employer will be
treated as a Highly Compensated Employee.
(e) Employees who are in the group consisting of the 100 Employees
paid the greatest "415 Compensation" during the "determination year" and
are also described in (b), (c) or (d) above when these paragraphs are
modified to substitute "determination year" for "look-back year".
The "determination year" shall be the Plan Year for which testing is
being performed, and the "look-back year" shall be the immediately preceding
twelve-month period.
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts that would otherwise be excluded from a
Participant's gross income by reason of the application of Code Sections 125,
402(a)(8), 402(h)(1)(B) and, in the case of Employer contributions made pursuant
to a salary reduction agreement, by including amounts that would otherwise be
excluded from a Participant's gross income by reason of the application of Code
Section 403(b). Additionally, the dollar threshold amounts specified in (b) and
(c) above shall be adjusted at such time and in such manner as is provided in
Regulations. In the case of such an adjustment, the dollar limits which shall
be applied are those for the calendar year in which the "determination year" or
"look-back year" begins.
9
<PAGE>
In determining who is a Highly Compensated Employee, Employees who are
non-resident aliens and who received no earned income (within the meaning of
Code Section 911(d)(2)) from the Employer constituting United States source
income within the meaning of Code Section 861(a)(3) shall not be treated as
Employees. Additionally, all Affiliated Employers shall be taken into account
as a single employer and Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) shall be considered Employees unless such Leased
Employees are covered by a plan described in Code Section 414(n)(5) and are not
covered in any qualified plan maintained by the Employer. The exclusion of
Leased Employees for this purpose shall be applied on a uniform and consistent
basis for all of the Employer's retirement plans. Highly Compensated Former
Employees shall be treated as Highly Compensated Employees without regard to
whether they performed services during the "determination year".
1.27 "Highly Compensated Former Employee" means a former Employee who had a
separation year prior to the "determination year" and was a Highly Compensated
Employee in the year of separation from service or in any "determination year"
after attaining age 55. Notwithstanding the foregoing, an Employee who
separated from service prior to 1987 will be treated as a Highly Compensated
Former Employee only if during the separation year (or year preceding the
separation year) or any year after the Employee attains age 55 (or the last year
ending before the Employee's 55th birthday), the Employee either received "415
compensation" in excess of $50,000 or was a "five percent owner". For purposes
of this Section, "determination year" "415 compensation" and "five percent
owner" shall be determined in accordance with Section 1.26. Highly Compensated
Former Employees shall be treated as Highly Compensated Employees. The method
set forth in this Section for determining who is a "Highly Compensated Former
Employee" shall be applied on a uniform and consistent basis for all purposes
for which the Code Section 414(q) definition is applicable.
1.28 "Highly Compensated Participant" means any Highly Compensated Employee
who is eligible to participate in the Plan.
1.29 "Hour of Service" means (1) each hour for which an Employee is
directly or indirectly compensated or entitled to compensation by the Employer
for the performance of duties during the applicable computation period; (2) each
hour for which an Employee is directly or indirectly compensated or entitled to
compensation by the Employer (irrespective of whether the employment
relationship has terminated) for reasons other than performance of duties (such
as vacation, holidays, sickness, jury duty, disability, lay-off, military duty
or leave of absence) during the applicable computation period; (3) each hour for
which back pay is awarded or agreed to by the Employer without regard to
mitigation of damages. These hours will be credited to the Employee for the
computation period or periods to which the award
10
<PAGE>
or agreement pertains rather than the computation period in which the award,
agreement or payment is made. The same Hours of Service shall not be credited
both under (1) or (2), as the case may be, and under (3).
1.30 "Income" means the income or losses allocable to Excess Deferred
Compensation which amount shall be allocated in the same manner as income or
losses are allocated pursuant to Section 4.4(f).
1.31 "Investment Manager" means an entity that (a) has the power to manage,
acquire, or dispose of Plan assets and (b) acknowledges fiduciary responsibility
to the Plan in writing. Such entity must be a person, firm, or corporation
registered as an investment adviser under the Investment Advisers Act of 1940, a
bank, or an insurance company.
1.32 "Key Employee" means an Employee as defined in Code Section 416(i) and
the Regulations thereunder. Generally, any Employee or former Employee (as well
as each of his Beneficiaries) is considered a Key Employee if he, at any time
during the Plan Year that contains the "Determination Date" or any of the
preceding four (4) Plan Years, has been included in one of the following
categories:
(a) an officer of the Employer (as that term is defined within the
meaning of the Regulations under Code Section 416) having annual "415
Compensation" greater than 50 percent of the amount in effect under Code
Section 415(b)(1)(A) for any such Plan Year.
(b) one of the ten employees having annual "415 Compensation" from the
Employer for a Plan Year greater than the dollar limitation in effect under
Code Section 415(c)(1)(A) for the calendar year in which such Plan Year
ends and owning (or considered as owning within the meaning of Code Section
318) both more than one-half percent interest and the largest interests in
the Employer.
(c) a "five percent owner" of the Employer. "Five percent owner"
means any person who owns (or is considered as owning within the meaning of
Code Section 318) more than five percent (5%) of the outstanding stock of
the Employer or stock possessing more than five percent (5%) of the total
combined voting power of all stock of the Employer or, in the case of an
unincorporated business, any person who owns more than five percent (5%) of
the capital or profits interest in the Employer. In determining percentage
ownership hereunder, employers that would otherwise be aggregated under
Code Sections 414(b), (c), (m) and (o) shall be treated as separate
employers.
11
<PAGE>
(d) a "one percent owner" of the Employer having an annual "415
Compensation" from the Employer of more than $150,000. "One percent owner"
means any person who owns (or is considered as owning within the meaning of
Code Section 318) more than one percent (1%) of the outstanding stock of
the Employer or stock possessing more than one percent (1%) of the total
combined voting power of all stock of the Employer or, in the case of an
unincorporated business, any person who owns more than one percent (1%) of
the capital or profits interest in the Employer. In determining percentage
ownership hereunder, employers that would otherwise be aggregated under
Code Sections 414(b), (c), (m) and (o) shall be treated as separate
employers. However, in determining whether an individual has "415
Compensation" of more than $150,000, "415 Compensation" from each employer
required to be aggregated under Code Sections 414(b), (c), (m) and (o)
shall be taken into account.
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts that would otherwise be excluded from a
Participant's gross income by reason of the application of Code Sections 125,
402(a)(8), 402(h)(1)(B) and, in the case of Employer contributions made pursuant
to a salary reduction agreement, by including amounts that would otherwise be
excluded from a Participant's gross income by reason of the application of Code
Section 403(b).
1.33 "Late Retirement Date" means the first day of the month coinciding
with or next following a Participant's actual Retirement Date after having
reached his Normal Retirement Date.
1.34 "Leased Employee" means any person (other than an Employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at least one year,
and such services are of a type historically performed by employees in the
business field of the recipient employer. Contributions or benefits provided a
Leased Employee by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by the
recipient employer. A Leased Employee shall not be considered an Employee of
the recipient:
(a) if such employee is covered by a money purchase pension plan
providing:
(1) a non-integrated employer contribution rate of at least 10%
of compensation, as defined in Code Section 415(c)(3), but
including amounts contributed pursuant to a salary reduction
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<PAGE>
agreement which are excludable from the employee's gross income
under Code Sections 125, 402(a)(8), 402(h) or 403(b);
(2) immediate participation; and
(3) full and immediate vesting; and
(b) if Leased Employees do not constitute more than 20% of the
recipient's non-highly compensated work force.
1.35 "Month of Service" means a calendar month during any part of which an
Employee completed an Hour of Service. Except, however, a Participant shall be
credited with a Month of Service for each month during the 12 month computation
period in which he has not incurred a 1-Year Break in Service.
1.36 "Non-Elective Contribution" means the Employer's contributions to the
Plan excluding, however, contributions made pursuant to the Participant's
deferral election provided for in Section 4.2 and any Qualified Non-Elective
Contribution.
1.37 "Non-Highly Compensated Participant" means any Participant who is
neither a Highly Compensated Employee nor a Family Member.
1.38 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
1.39 "Normal Retirement Age" means the Participant's 65th birthday. A
Participant shall become fully Vested in his Participant's Account upon
attaining his Normal Retirement Age.
1.40 "Normal Retirement Date" means the first day of the month coinciding
with or next following the Participant's Normal Retirement Age.
1.41 "1-Year Break in Service" means the applicable computation period of
12 consecutive months during which an Employee fails to accrue a Month of
Service. Further, solely for the purpose of determining whether a Participant
has incurred a 1-Year Break in Service, Hours of Service shall be recognized for
"authorized leaves of absence" and "maternity and paternity leaves of absence."
Years of Service and 1-Year Breaks in Service shall be measured on the same
computation period.
An Employee shall not be deemed to have incurred a 1-Year Break in
Service if he completes an Hour of Service within 12 months following the last
day of the month during which his employment terminated.
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"Authorized leave of absence" means an unpaid, temporary cessation
from active employment with the Employer pursuant to an established
nondiscriminatory policy, whether occasioned by illness, military service, or
any other reason.
A "maternity or paternity leave of absence" means, for Plan Years
beginning after December 31, 1984, an absence from work for any period by reason
of the Employee's pregnancy, birth of the Employee's child, placement of a child
with the Employee in connection with the adoption of such child, or any absence
for the purpose of caring for such child for a period immediately following such
birth or placement. For this purpose, Hours of Service shall be credited for
the computation period in which the absence from work begins, only if credit
therefore is necessary to prevent the Employee from incurring a 1-Year Break in
Service, or, in any other case, in the immediately following computation period.
1.42 "Participant" means any Eligible Employee who participates in the Plan
as provided in Sections 3.2 and 3.3, and has not for any reason become
ineligible to participate further in the Plan.
1.43 "Participant's Account" means the account established and maintained
by the Administrator for each Participant with respect to his total interest in
the Plan and Trust resulting from the Employer's Non-Elective Contributions.
1.44 "Participant's Combined Account" means the total aggregate amount of
each Participant's Elective Account and Participant's Account.
1.45 "Participant's Elective Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer's Elective
Contributions. A separate accounting shall be maintained with respect to that
portion of the Participant's Elective Account attributable to Elective
Contributions pursuant to Section 4.2 and any Employer Qualified Non-Elective
Contributions.
1.46 "Plan" means this instrument, including all amendments thereto.
1.47 "Plan Year" means the Plan's accounting year of twelve (12) months
commencing on January 1st of each year and ending the following December 31st.
1.48 "Pre-Retirement Survivor Annuity" is an immediate annuity with an
installment refund for the life of the Participant's spouse the payments under
which must be equal to the amount of benefit which can be purchased with the
accounts of a Participant used to provide the death benefit under the Plan. In
the case of a
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Participant who does not have a surviving spouse, this benefit shall be paid in
the form of a lump sum distribution to his Beneficiary.
1.49 "Qualified Non-Elective Contribution" means the Employer's
contributions to the Plan that are made pursuant to Section 4.1(c) and Section
4.6. Such contributions shall be considered an Elective Contribution for the
purposes of the Plan and used to satisfy the "Actual Deferral Percentage" tests.
In addition, the Employer's contributions to the Plan that are made
pursuant to Section 4.8(h) which are used to satisfy the "Actual Contribution
Percentage" tests shall be considered Qualified Non-Elective Contributions and
be subject to the provisions of Sections 4.2(b) and 4.2(c).
1.50 "Regulation" means the Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, and as amended from time to time.
1.51 "Retired Participant" means a person who has been a Participant, but
who has become entitled to retirement benefits under the Plan.
1.52 "Retirement Date" means the date as of which a Participant retires for
reasons other than Total and Permanent Disability, whether such retirement
occurs on a Participant's Normal Retirement Date, Early or Late Retirement Date
(see Section 6.1).
1.53 "Super Top Heavy Plan" means a plan described in Section 2.2(b).
1.54 "Terminated Participant" means a person who has been a Participant,
but whose employment has been terminated other than by death, Total and
Permanent Disability or retirement.
1.55 "Top Heavy Plan" means a plan described in Section
2.2(a).
1.56 "Top Heavy Plan Year" means a Plan Year during which the Plan is a Top
Heavy Plan.
1.57 "Top Paid Group" means the top 20 percent of Employees who performed
services for the Employer during the applicable year, ranked according to the
amount of "415 Compensation" (determined for this purpose in accordance with
Section 1.26) received from the Employer during such year. All Affiliated
Employers shall be taken into account as a single employer, and Leased Employees
within the meaning of Code Sections 414(n)(2) and 414(o)(2) shall be considered
Employees unless such Leased Employees are covered by a plan described in Code
Section 414(n)(5) and are not covered in any
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qualified plan maintained by the Employer. Employees who are non-resident
aliens and who received no earned income (within the meaning of Code Section
911(d)(2)) from the Employer constituting United States source income within the
meaning of Code Section 861(a)(3) shall not be treated as Employees.
Additionally, for the purpose of determining the number of active Employees in
any year, the following additional Employees shall also be excluded; however,
such Employees shall still be considered for the purpose of identifying the
particular Employees in the Top Paid Group:
(a) Employees with less than six (6) months of service;
(b) Employees who normally work less than 17 1/2 hours per week;
(c) Employees who normally work less than six (6) months during a
year; and
(d) Employees who have not yet attained age 21.
In addition, if 90 percent or more of the Employees of the Employer
are covered under agreements the Secretary of Labor finds to be collective
bargaining agreements between Employee representatives and the Employer, and the
Plan covers only Employees who are not covered under such agreements, then
Employees covered by such agreements shall be excluded from both the total
number of active Employees as well as from the identification of particular
Employees in the Top Paid Group.
The foregoing exclusions set forth in this Section shall be applied on
a uniform and consistent basis for all purposes for which the Code Section
414(q) definition is applicable.
1.58 "Total and Permanent Disability" means a physical or mental condition
of a Participant resulting from bodily injury, disease, or mental disorder which
renders him incapable of continuing any gainful occupation and which condition
constitutes total disability under the federal Social Security Acts.
1.59 "Trustee" means the person or entity named as trustee herein or in any
separate trust forming a part of this Plan, and any successors.
1.60 "Trust Fund" means the assets of the Plan and Trust as the same shall
exist from time to time.
1.61 "Vested" means the nonforfeitable portion of any account maintained on
behalf of a Participant.
1.62 "Year of Service" means twelve (12) consecutive Months of Service.
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For vesting purposes, the computation period shall be the Plan Year.
For all other purposes, the computation period shall be the Plan Year.
Years of Service with any Affiliated Employer shall be recognized.
ARTICLE II.
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special vesting
requirements of Code Section 416(b) pursuant to Section 6.4 of the Plan and the
special minimum allocation requirements of Code Section 416(c) pursuant to
Section 4.4 of the Plan.
2.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year in which, as
of the Determination Date, (1) the Present Value of Accrued Benefits of Key
Employees and (2) the sum of the Aggregate Accounts of Key Employees under
this Plan and all plans of an Aggregation Group, exceeds sixty percent
(60%) of the Present Value of Accrued Benefits and the Aggregate Accounts
of all Key and Non-Key Employees under this Plan and all plans of an
Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year, but such
Participant was a Key Employee for any prior Plan Year, such Participant's
Present Value of Accrued Benefit and/or Aggregate Account balance shall not
be taken into account for purposes of determining whether this Plan is a
Top Heavy or Super Top Heavy Plan (or whether any Aggregation Group which
includes this Plan is a Top Heavy Group). In addition, if a Participant or
Former Participant has not performed any services for any Employer
maintaining the Plan at any time during the five year period ending on the
Determination Date, any accrued benefit for such Participant or Former
Participant shall not be taken into account for the purposes of determining
whether this Plan is a Top Heavy or Super Top Heavy Plan.
(b) This Plan shall be a Super Top Heavy Plan for any Plan Year in
which, as of the Determination Date, (1) the Present Value of Accrued
Benefits of Key Employees and (2) the sum of the Aggregate Accounts of Key
Employees under this Plan and all plans of an Aggregation Group, exceeds
ninety percent (90%) of the Present Value of Accrued Benefits and the
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Aggregate Accounts of all Key and Non-Key Employees under this Plan and all
plans of an Aggregation Group.
(c) Aggregate Account: A Participant's Aggregate Account as of the
Determination Date is the sum of:
(1) his Participant's Combined Account balance as of the most recent
valuation occurring within a twelve (12) month period ending on the
Determination Date;
(2) an adjustment for any contributions due as of the Determination
Date. Such adjustment shall be the amount of any contributions
actually made after the valuation date but due on or before the
Determination Date, except for the first Plan Year when such
adjustment shall also reflect the amount of any contributions made
after the Determination Date that are allocated as of a date in that
first Plan Year.
(3) any Plan distributions made within the Plan Year that includes the
Determination Date or within the four (4) preceding Plan Years.
However, in the case of distributions made after the valuation date
and prior to the Determination Date, such distributions are not
included as distributions for top heavy purposes to the extent that
such distributions are already included in the Participant's Aggregate
Account balance as of the valuation date. Notwithstanding anything
herein to the contrary, all distributions, including distributions
made prior to January 1, 1984, and distributions under a terminated
plan which if it had not been terminated would have been required to
be included in an Aggregation Group, will be counted. Further,
distributions from the Plan (including the cash value of life
insurance policies) of a Participant's account balance because of
death shall be treated as a distribution for the purposes of this
paragraph.
(4) any Employee contributions, whether voluntary or mandatory.
However, amounts attributable to tax deductible qualified voluntary
employee contributions shall not be considered to be a part of the
Participant's Aggregate Account balance.
(5) with respect to unrelated rollovers and plan-to-plan transfers
(ones which are both initiated by the Employee and made from a plan
maintained by one employer to a plan maintained by another employer),
if this Plan provides the rollovers or plan-to-plan transfers, it
shall always consider such rollovers or plan-to-plan transfers as a
distribution for the purposes of this Section. If this Plan is the
plan accepting such rollovers or plan-to-plan
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<PAGE>
transfers, it shall not consider such rollovers or plan-to-plan
transfers as part of the Participant's Aggregate Account balance.
(6) with respect to related rollovers and plan-to-plan transfers (ones
either not initiated by the Employee or made to a plan maintained by
the same employer), if this Plan provides the rollover or plan-to-plan
transfer, it shall not be counted as a distribution for purposes of
this Section. If this Plan is the plan accepting such rollover or
plan-to-plan transfer, it shall consider such rollover or plan-to-plan
transfer as part of the Participant's Aggregate Account balance,
irrespective of the date on which such rollover or plan-to-plan
transfer is accepted.
(7) For the purposes of determining whether two employers are to be
treated as the same employer in (5) and (6) above, all employers
aggregated under Code Section 414(b), (c), (m) and (o) are treated as
the same employer.
(d) "Aggregation Group" means either a Required Aggregation Group or a
Permissive Aggregation Group as hereinafter determined.
(1) Required Aggregation Group: In determining a Required Aggregation
Group hereunder, each plan of the Employer in which a Key Employee is
a participant in the Plan Year containing the Determination Date or
any of the four preceding Plan Years, and each other plan of the
Employer which enables any plan in which a Key Employee participates
to meet the requirements of Code Sections 401(a)(4) or 410, will be
required to be aggregated. Such group shall be known as a Required
Aggregation Group.
In the case of a Required Aggregation Group, each plan in the
group will be considered a Top Heavy Plan if the Required Aggregation
Group is a Top Heavy Group. No plan in the Required Aggregation Group
will be considered a Top Heavy Plan if the Required Aggregation Group
is not a Top Heavy Group.
(2) Permissive Aggregation Group: The Employer may also include any
other plan not required to be included in the Required Aggregation
Group, provided the resulting group, taken as a whole, would continue
to satisfy the provisions of Code Sections 401(a)(4) and 410. Such
group shall be known as a Permissive Aggregation Group.
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In the case of a Permissive Aggregation Group, only a plan that
is part of the Required Aggregation Group will be considered a Top
Heavy Plan if the Permissive Aggregation Group is a Top Heavy Group.
No plan in the Permissive Aggregation Group will be considered a Top
Heavy Plan if the Permissive Aggregation Group is not a Top Heavy
Group.
(3) Only those plans of the Employer in which the Determination Dates
fall within the same calendar year shall be aggregated in order to
determine whether such plans are Top Heavy Plans.
(4) An Aggregation Group shall include any terminated plan of the
Employer if it was maintained within the last five (5) years ending on
the Determination Date.
(e) "Determination Date" means (a) the last day of the preceding Plan
Year, or (b) in the case of the first Plan Year, the last day of such Plan
Year.
(f) Present Value of Accrued Benefit: In the case of a defined benefit
plan, the Present Value of Accrued Benefit for a Participant other than a
Key Employee, shall be as determined using the single accrual method used
for all plans of the Employer and Affiliated Employers, or if no such
single method exists, using a method which results in benefits accruing not
more rapidly than the slowest accrual rate permitted under Code Section
411(b)(1)(C). The determination of the Present Value of Accrued Benefit
shall be determined as of the most recent valuation date that falls within
or ends with the 12-month period ending on the Determination Date except as
provided in Code Section 416 and the Regulations thereunder for the first
and second plan years of a defined benefit plan.
(g) "Top Heavy Group" means an Aggregation Group in which, as of the
Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key Employees under all
defined benefit plans included in the group, and
(2) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the group,
exceeds sixty percent (60%) of a similar sum determined for all
Participants.
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2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) The Employer shall be empowered to appoint and remove the Trustee
and the Administrator from time to time as it deems necessary for the
proper administration of the Plan to assure that the Plan is being operated
for the exclusive benefit of the Participants and their Beneficiaries in
accordance with the terms of the Plan, the Code, and the Act.
(b) The Employer shall establish a "funding policy and method", i.e.,
it shall determine whether the Plan has a short run need for liquidity
(e.g., to pay benefits) or whether liquidity is a long run goal and
investment growth (and stability of same) is a more current need, or shall
appoint a qualified person to do so. The Employer or its delegate shall
communicate such needs and goals to the Trustee, who shall coordinate such
Plan needs with its investment policy. The communication of such a
"funding policy and method" shall not, however, constitute a directive to
the Trustee as to investment of the Trust Funds. Such "funding policy and
method" shall be consistent with the objectives of this Plan and with the
requirements of Title I of the Act.
(c) The Employer shall periodically review the performance of any
Fiduciary or other person to whom duties have been delegated or allocated
by it under the provisions of this Plan or pursuant to procedures
established hereunder. This requirement may be satisfied by formal
periodic review by the Employer or by a qualified person specifically
designated by the Employer, through day-to-day conduct and evaluation, or
through other appropriate ways.
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall appoint one or more Administrators. Any person,
including, but not limited to, the Employees of the Employer, shall be
eligible to serve as an Administrator. Any person so appointed shall
signify his acceptance by filing written acceptance with the Employer. An
Administrator may resign by delivering his written resignation to the
Employer or be removed by the Employer by delivery of written notice of
removal, to take effect at a date specified therein, or upon delivery to
the Administrator if no date is specified.
The Employer, upon the resignation or removal of an Administrator,
shall promptly designate in writing a successor to this position. If the
Employer does not appoint an Administrator, the Employer will function as
the Administrator.
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2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the
responsibilities of each Administrator may be specified by the Employer and
accepted in writing by each Administrator. In the event that no such
delegation is made by the Employer, the Administrators may allocate the
responsibilities among themselves, in which event the Administrators shall
notify the Employer and the Trustee in writing of such action and specify
the responsibilities of each Administrator. The Trustee thereafter shall
accept and rely upon any documents executed by the appropriate
Administrator until such time as the Employer or the Administrators file
with the Trustee a written revocation of such designation.
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to administer the
Plan for the exclusive benefit of the Participants and their Beneficiaries,
subject to the specific terms of the Plan. The Administrator shall
administer the Plan in accordance with its terms and shall have the power
and discretion to construe the terms of the Plan and to determine all
questions arising in connection with the administration, interpretation,
and application of the Plan. Any such determination by the Administrator
shall be conclusive and binding upon all persons. The Administrator may
establish procedures, correct any defect, supply any information, or
reconcile any inconsistency in such manner and to such extent as shall be
deemed necessary or advisable to carry out the purpose of the Plan;
provided, however, that any procedure, discretionary act, interpretation or
construction shall be done in a nondiscriminatory manner based upon uniform
principles consistently applied and shall be consistent with the intent
that the Plan shall continue to be deemed a qualified plan under the terms
of Code Section 401(a), and shall comply with the terms of the Act and all
regulations issued pursuant thereto. The Administrator shall have all
powers necessary or appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:
(a) the discretion to determine all questions relating to the
eligibility of Employees to participate or remain a Participant hereunder
and to receive benefits under the Plan;
(b) to compute, certify, and direct the Trustee with respect to the
amount and the kind of benefits to which any Participant shall be entitled
hereunder;
(c) to authorize and direct the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the Trust;
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<PAGE>
(d) to maintain all necessary records for the administration of the
Plan;
(e) to interpret the provisions of the Plan and to make and publish
such rules for regulation of the Plan as are consistent with the terms
hereof;
(f) to determine the size and type of any Contract to be purchased
from any insurer, and to designate the insurer from which such Contract
shall be purchased;
(g) to compute and certify to the Employer and to the Trustee from
time to time the sums of money necessary or desirable to be contributed to
the Plan;
(h) to consult with the Employer and the Trustee regarding the short
and long-term liquidity needs of the Plan in order that the Trustee can
exercise any investment discretion in a manner designed to accomplish
specific objectives;
(i) to prepare and distribute to Employees a procedure for notifying
Participants and Beneficiaries of their rights to elect joint and survivor
annuities and Pre-Retirement Survivor Annuities as required by the Act and
Regulations thereunder;
(j) to prepare and implement a procedure to notify Eligible Employees
that they may elect to have a portion of their Compensation deferred or
paid to them in cash;
(k) to assist any Participant regarding his rights, benefits, or
elections available under the Plan.
2.7 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and shall
keep all other books of account, records, and other data that may be
necessary for proper administration of the Plan and shall be responsible
for supplying all information and reports to the Internal Revenue Service,
Department of Labor, participants, Beneficiaries and others as required by
law.
2.8 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the
Administrator, may appoint counsel, specialists, advisers, and other
persons as the Administrator or the Trustee deems necessary or desirable in
connection with the administration of this Plan.
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2.9 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions, the Employer
shall supply full and timely information to the Administrator on all
matters relating to the Compensation of all participants, their Hours of
Service, their Years of Service, their retirement, death, disability, or
termination of employment, and such other pertinent facts as the
Administrator may require; and the Administrator shall advise the Trustee
of such of the foregoing facts as may be pertinent to the Trustee's duties
under the Plan. The Administrator may rely upon such information as is
supplied by the Employer and shall have no duty or responsibility to verify
such information.
2.10 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust Fund
unless paid by the Employer. Such expenses shall include any expenses
incident to the functioning of the Administrator, including, but not
limited to, fees of accountants, counsel, and other specialists and their
agents, and other costs of administering the Plan. Until paid, the
expenses shall constitute a liability of the Trust Fund. However, the
Employer may reimburse the Trust Fund for any administration expense
incurred.
2.11 MAJORITY ACTIONS
Except where there has been an allocation and delegation of
administrative authority pursuant to Section 2.5, if there shall be more
than one Administrator, they shall act by a majority of their number, but
may authorize one or more of them to sign all papers on their behalf.
2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed with the Administrator
on forms supplied by the Employer. Written notice of the disposition of a
claim shall be furnished to the claimant within 90 days after the
application is filed. In the event the claim is denied, the reasons for
the denial shall be specifically set forth in the notice in language
calculated to be understood by the claimant, pertinent provisions of the
Plan shall be cited, and, where appropriate, an explanation as to how the
claimant can perfect the claim will be provided. In addition, the claimant
shall be furnished with an explanation of the Plan's claims review
procedure.
2.13 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who has been
denied a benefit by a decision of the Administrator pursuant to Section
2.12 shall be entitled to request the
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<PAGE>
Administrator to give further consideration to his claim by filing with the
Administrator (on a form which may be obtained from the Administrator) a
request for a hearing. Such request, together with a written statement of
the reasons why the claimant believes his claim should be allowed, shall be
filed with the Administrator no later than 60 days after receipt of the
written notification provided for in Section 2.12. The Administrator shall
then conduct a hearing within the next 60 days, at which the claimant may
be represented by an attorney or any other representative of his choosing
and at which the claimant shall have an opportunity to submit written and
oral evidence and arguments in support of his claim. At the hearing (or
prior thereto upon 5 business days written notice to the Administrator) the
claimant or his representative shall have an opportunity to review all
documents in the possession of the Administrator which are pertinent to the
claim at issue and its disallowance. Either the claimant or the
Administrator may cause a court reporter to attend the hearing and record
the proceedings. In such event, a complete written transcript of the
proceedings shall be furnished to both parties by the court reporter. The
full expense of any such court reporter and such transcripts shall be borne
by the party causing the court reporter to attend the hearing. A final
decision as to the allowance of the claim shall be made by the
Administrator within 60 days of receipt of the appeal (unless there has
been an extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are communicated to the
claimant within the 60 day period). Such communication shall be written in
a manner calculated to be understood by the claimant and shall include
specific reasons for the decision and specific references to the pertinent
Plan provisions on which the decision is based.
ARTICLE III.
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee shall be eligible to participate hereunder on
the later of the date of his employment with the Employer or attainment of
age 21. However, any Employee who was a Participant in the Plan prior to
the effective date of this amendment and restatement shall continue to
participate in the Plan.
3.2 APPLICATION FOR PARTICIPATION
In order to become a Participant hereunder, each Eligible Employee
shall make application to the Employer for participation in the Plan and
agree to the terms hereof. Upon the acceptance of any benefits under this
Plan, such Employee shall automatically be deemed to have made application
and shall be bound by the terms and conditions of the Plan and all
amendments hereto.
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3.3 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as of the
first day of the payroll period coinciding with or next following the date
on which such Employee met the eligibility requirements of Section 3.1.
3.4 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each Employee for
participation in the Plan based upon information furnished by the Employer.
Such determination shall be conclusive and binding upon all persons, as
long as the same is made pursuant to the Plan and the Act. Such
determination shall be subject to review per Section 2.13.
3.5 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a classification of an
Eligible Employee to an ineligible Employee, such Former Participant shall
continue to vest in his interest in the Plan for each Year of Service
completed while a noneligible Employee, until such time as his
Participant's Account shall be forfeited or distributed pursuant to the
terms of the Plan. Additionally, his interest in the Plan shall continue
to share in the earnings of the Trust Fund.
(b) In the event a Participant is no longer a member of an eligible
class of Employees and becomes ineligible to participate but has not
incurred a 1-Year Break in Service, such Employee will participate
immediately upon returning to an eligible class of Employees. If such
Participant incurs a 1-Year Break in Service, eligibility will be
determined under the break in service rules of the Plan.
3.6 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such
omission is not made until after a contribution by his Employer for the
year has been made, the Employer shall make a subsequent contribution with
respect to the omitted Employee in the amount which the said Employer would
have contributed with respect to him had he not been omitted. Such
contribution shall be made regardless of whether or not it is deductible in
whole or in part in any taxable year under applicable provisions of the
Code.
3.7 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been included as
a Participant in the Plan is erroneously included and
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discovery of such incorrect inclusion is not made until after a
contribution for the year has been made, the Employer shall not be entitled
to recover the contribution made with respect to the ineligible person
regardless of whether or not a deduction is allowable with respect to such
contribution. In such event, the amount contributed with respect to the
ineligible person shall constitute a Forfeiture (except for Deferred
Compensation which shall be distributed to the ineligible person) for the
Plan Year in which the discovery is made.
3.8 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer, elect
voluntarily not to participate in the Plan. The election not to
participate must be communicated to the Employer, in writing, at least
thirty (30) days before the beginning of a Plan Year.
ARTICLE IV.
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
For each Plan Year, the Employer shall contribute to
the Plan:
(a) The amount of the total salary reduction elections of all
Participants made pursuant to Section 4.2(a), which amount shall be deemed
an Employer's Elective Contribution.
(b) On behalf of each Participant who is eligible to share in matching
contributions for the Plan Year, a matching contribution equal to 55% of
each such Participant's Deferred Compensation, which amount shall be deemed
an Employer's Non-Elective Contribution.
Except, however, in applying the matching percentage specified
above, only salary reductions up to 6% of Compensation shall be considered.
(c) On behalf of each Non-Highly Compensated Participant who is
eligible to share in the Qualified Non-Elective Contribution for the Plan
Year, a discretionary Qualified Non-Elective Contribution equal to a
percentage of each eligible individual's Compensation, the exact percentage
to be determined each year by the Employer. The Employer's Qualified Non-
Elective Contribution shall be deemed an Employer's Elective Contribution.
(d) Notwithstanding the foregoing, however, the Employer's
contributions for any Plan Year shall not exceed the maximum amount
allowable as a deduction to the Employer under the provisions of Code
Section 404. All contributions
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by the Employer shall be made in cash or in such property as is acceptable
to the Trustee.
(e) Except, however, to the extent necessary to provide the top heavy
minimum allocations, the Employer shall make a contribution even if it
exceeds the amount which is deductible under Code Section 404.
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION
(a) Each Participant may elect to defer from 1% to 10% of his
Compensation which would have been received in the Plan Year, but for the
deferral election. A deferral election (or modification of an earlier
election) may not be made with respect to compensation which is currently
available on or before the date the Participant executed such election.
The amount by which Compensation is reduced shall be that
Participant's Deferred Compensation and be treated as an Employer Elective
Contribution and allocated to that Participant's Elective Account.
(b) The balance in each Participant's Elective Account shall be fully
Vested at all times and shall not be subject to Forfeiture for any reason.
(c) Amounts held in the Participant's Elective Account may not be
distributable earlier than:
(1) a Participant's termination of employment, Total and
Permanent Disability, or death;
(2) a Participant's attainment of age 59 1/2;
(3) the termination of the Plan without the establishment or
existence of a "successor plan", as that term is described in
Regulation 1.401(k)-1(d)(3);
(4) the date of disposition by the Employer to an entity that is
not an Affiliated Employer of substantially all of the assets
(within the meaning of Code Section 409(d)(2)) used in a trade or
business of such corporation if such corporation continues to
maintain this Plan after the disposition with respect to a
Participant who continues employment with the corporation
acquiring such assets;
(5) the date of disposition by the Employer or an Affiliated
Employer who maintains the Plan of its interest in a subsidiary
(within the meaning of
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Code Section 409(d)(3)) to an entity which is not an Affiliated
Employer but only with respect to a Participant who continues
employment with such subsidiary; or
(6) the proven financial hardship of a Participant, subject to
the limitations of Section 6.11.
(d) For each Plan Year beginning after December 31, 1987, a
Participant's Deferred Compensation made under this Plan and all other
plans, contracts or arrangements of the Employer maintaining this Plan
shall not exceed, during any taxable year of the Participant, the
limitation imposed by Code Section 402(g), as in effect at the beginning of
such taxable year. If such dollar limitation is exceeded, a Participant
will be deemed to have notified the Administrator of such excess amount
which shall be distributed in a manner consistent with 4.2(f). The dollar
limitation shall be adjusted annually pursuant to the method provided in
Code Section 415(d) in accordance with Regulations.
(e) In the event a Participant has received a hardship distribution
from his Participant's Elective Account pursuant to Section 6.11 or
pursuant to Regulation 1.401(k)-l(d)(2)(iv)(B) from any other plan
maintained by the Employer, then such Participant shall not be permitted to
elect to have Deferred Compensation contributed to the Plan on his behalf
for a period of twelve (12) months following the receipt of the
distribution. Furthermore, the dollar limitation under Code Section 402(g)
shall be reduced, with respect to the Participant's taxable year following
the taxable year in which the hardship distribution was made, by the amount
of such Participant's Deferred Compensation, if any, pursuant to this Plan
(and any other plan maintained by the Employer) or the taxable year of the
hardship distribution.
(f) If a Participant's Deferred Compensation under this Plan together
with any elective deferrals (as defined in Regulation 1.402(g)-l(b)) under
another qualified cash or deferred arrangement (as defined in Code Section
401(k)), a simplified employee pension (as defined in Code Section 408(k)),
a salary reduction arrangement (within the meaning of Code Section
3121(a)(5)(D)), a deferred compensation plan under Code Section 457, or a
trust described in Code Section 501(c)(18) cumulatively exceed the
limitation imposed by Code Section 402(g) (as adjusted annually in
accordance with the method provided in Code Section 415(d) pursuant to
Regulations) for such Participant's taxable year, the Participant may, not
later than March 1 following the close of the Participant's taxable year,
notify the Administrator in
29
<PAGE>
writing of such excess and request that his Deferred Compensation under
this Plan be reduced by an amount specified by the Participant. In such
event, the Administrator may direct the Trustee to distribute such excess
amount (and any Income allocable to such excess amount) to the Participant
not later than the first April 15th following the close of the
Participant's taxable year. Distributions in accordance with this
paragraph may be made for any taxable year of the Participant which begins
after December 31, 1986. Any distribution of less than the entire amount
of Excess Deferred Compensation and Income shall be treated as a pro rata
distribution of Excess Deferred Compensation and Income. The amount
distributed shall not exceed the participant's Deferred Compensation under
the Plan for the taxable year. Any distribution on or before the last day
of the Participant's taxable year must satisfy each of the following
(1) the distribution must be made after the date on which the Plan
received the Excess Deferred Compensation;
(2) the Participant shall designate the distribution as Excess
Deferred Compensation; and
(3) the Plan must designate the distribution as a distribution of
Excess Deferred Compensation.
Any distribution made pursuant to this Section 4.2(f) shall be
made first from unmatched Deferred Compensation and, thereafter,
simultaneously from Deferred Compensation which is matched and matching
contributions which relate to such Deferred Compensation. However, any
such matching contributions which are not Vested shall be forfeited in lieu
of being distributed.
(g) Notwithstanding Section 4.2(f) above, a Participant's Excess
Deferred Compensation shall be reduced, but not below zero, by any
distribution of Excess Contributions pursuant to Section 4.6(a) for the
Plan Year beginning with or within the taxable year of the Participant.
(h) At Normal Retirement Date, or such other date when the Participant
shall be entitled to receive benefits, the fair market value of the
Participant's Elective Account shall be used to provide additional benefits
to the Participant or his Beneficiary.
(i) All amounts allocated to a Participant's Elective Account may be
treated as a Directed Investment Account pursuant to Section 4.12.
(j) Employer Elective Contributions made pursuant to this Section may
be segregated into a separate account for
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each Participant in a federally insured savings account, certificate of
deposit in a bank or savings and loan association, money market
certificate, or other short-term debt security acceptable to the Trustee
until such time as the allocations pursuant to Section 4.4 have been made.
(k) The Employer and the Administrator shall implement the salary
reduction elections provided for herein in accordance with the following:
(1) A Participant may commence making elective deferrals to the Plan
only after first satisfying the eligibility and participation
requirements specified in Article III. However, the Participant must
make his initial salary deferral election within a reasonable time,
not to exceed thirty (30) days, after entering the Plan pursuant to
Section 3.3. If the Participant fails to make an initial salary
deferral election within such time, then such Participant may
thereafter make an election in accordance with the rules governing
modifications. The Participant shall make such an election by
entering into a written salary reduction agreement with the Employer
and filing such agreement with the Administrator. Such election shall
initially be effective beginning with the pay period following the
acceptance of the salary reduction agreement by the Administrator,
shall not have retroactive effect and shall remain in force until
revoked.
(2) A Participant may modify a prior election during the Plan Year and
concurrently make a new election by filing a written modification with
the Administrator. Such modification shall become effective beginning
with the pay period following the Administrator's receipt and
acceptance of such modification. Any modification shall not have
retroactive effect and shall remain in force until revoked unless
otherwise specified therein.
(3) A Participant may elect to prospectively revoke his salary
reduction agreement in its entirety at any time during the Plan Year
by providing the Administrator with written notice of such revocation.
Such revocation shall become effective immediately following the close
of the pay period within which such revocation is received and
accepted by the Administrator. Furthermore, the termination of the
Participant's employment, or the cessation of participation for any
reason, shall be deemed to revoke any salary reduction agreement then
in effect, effective immediately following the close of the pay period
within which such termination or cessation occurs.
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<PAGE>
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
The Employer shall generally pay to the Trustee its contribution to the
plan for each plan Year within the time prescribed by law, including extensions
of time, for the filing of the Employer's federal income tax return for the
Fiscal Year.
However, Employer Elective Contributions accumulated through payroll
deductions shall be paid to the Trustee as of the earliest date on which such
contributions can reasonably be segregated from the Employer's general assets,
but in any event within ninety (90) days from the date on which such amounts
would otherwise have been payable to the Participant in cash. The provisions of
Department of Labor regulations 2510.3-102 are incorporated herein by reference.
Furthermore, any additional Employer contributions which are allocable to the
Participant's Elective Account for a Plan Year shall be paid to the Plan no
later than the twelve-month period immediately following the close of such Plan
Year.
4.4 ALLOCATION OF CONTRIBUTION AND EARNINGS
(a) The Administrator shall establish and maintain an account in the
name of each Participant to which the Administrator shall credit as of each
Anniversary Date all amounts allocated to each such Participant as set
forth herein.
(b) The Employer shall provide the Administrator with all information
required by the Administrator to make a proper allocation of the Employer's
contributions for each Plan Year. Within a reasonable period of time after
the date of receipt by the Administrator of such information, the
Administrator shall allocate such contribution as follows:
(1) With respect to the Employer's Elective Contribution made pursuant
to Section 4.1(a), to each Participant's Elective Account in an amount
equal to each such Participant's Deferred Compensation for the year.
(2) With respect to the Employer's Non-Elective Contribution made
pursuant to Section 4.1(b), to each Participant's Account in
accordance with Section 4.;(b).
Any Participant actively employed during the Plan Year shall be
eligible to share in the matching contribution for the Plan Year.
(3) With respect to the Employer's Qualified Non-Elective Contribution
made pursuant to Section 4.1(c), to each Participant's Elective
Account in accordance with Section 4.1(c).
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Only Non-Highly Compensated Participants who are actively
employed on the last day of the Plan Year shall be eligible to share
in the Qualified Non-Elective Contribution for the year.
(c) As of each Anniversary Date any amounts which became Forfeitures
since the last Anniversary Date shall first be made available to reinstate
previously forfeited account balances of Former Participants, if any, in
accordance with Section 6.4(i)(2). The remaining Forfeitures, if any, may
be applied to pay expenses under the Plan which would otherwise be paid by
the Employer or the Plan. Forfeitures not used as otherwise provided above
shall be applied to reduce the contribution of the Employer hereunder for
the Plan Year in which such Forfeitures occur.
(d) For any Top Heavy Plan Year, Non-Key Employees not otherwise
eligible to share in the allocation of contributions as provided above,
shall receive the minimum allocation provided for in Section 4.4(g) if
eligible pursuant to the provisions of Section 4.4(i).
(e) Notwithstanding the foregoing, Participants who are not actively
employed on the last day of the Plan Year due to Retirement (Early, Normal
or Late), Total and Permanent Disability or death shall share in the
allocation of contributions for that Plan Year.
(f) As of each Anniversary Date or other valuation date, before
allocation of one-half of the report period Employer contributions, any
earnings or losses (net appreciation or net depreciation) of the Trust Fund
shall be allocated in the same proportion that each Participant's and
Former Participant's nonsegregated accounts bear to the total of all
Participants' and Former Participants' nonsegregated accounts as of such
date.
Participants' transfers from other qualified plans deposited in the
general Trust Fund shall share in any earnings and losses (net appreciation
or net depreciation) of the Trust Fund in the same manner provided above.
Each segregated account maintained on behalf of a Participant shall be
credited or charged with its separate earnings and losses.
(g) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of the
Employer's contributions allocated to the Participant's Combined Account of
each Non-Key Employee shall be equal to at least three percent (3%) of such
Non-Key Employee's "415 Compensation" (reduced by contributions and
forfeitures, if any, allocated to each Non-Key Employee in any defined
contribution plan included with this plan in a
33
<PAGE>
Required Aggregation Group). However, if (1) the sum of the Employer's
contributions allocated to the Participant's Combined Account of each Key
Employee for such Top Heavy Plan Year is less than three percent (3%) of
each Key Employee's "415 Compensation" and (2) this Plan is not required to
be included in an Aggregation Group to enable a defined benefit plan to
meet the requirements of Code Section 401(a)(4) or 410, the sum of the
Employer's contributions allocated to the Participant's Combined Account of
each Non-Key Employee shall be equal to the largest percentage allocated to
the Participant's Combined Account of any Key Employee. However, in
determining whether a Non-Key Employee has received the required minimum
allocation, such Non-Key Employee's Deferred Compensation and matching
contributions needed to satisfy the "Actual Contribution Percentage" tests
pursuant to Section 4.7(a) shall not be taken into account.
However, no such minimum allocation shall be required in this Plan for
any Non-Key Employee who participates in another defined contribution plan
subject to Code Section 412 providing such benefits included with this Plan
in a Required Aggregation Group.
(h) For purposes of the minimum allocations set forth above, the
percentage allocated to the Participant's Combined Account of any Key
Employee shall be equal to the ratio of the sum of the Employer's
contributions allocated on behalf of such Key Employee divided by the "415
Compensation" for such Key Employee.
(i) For any Top Heavy Plan Year, the minimum allocations set forth
above shall be allocated to the Participant's Combined Account of all Non-
Key Employees who are Participants and who are employed by the Employer on
the last day of the Plan Year, including Non-Key Employees who have (1)
failed to complete a Year of Service; and (2) declined to make mandatory
contributions (if required) or, in the case of a cash or deferred
arrangement, elective contributions to the Plan.
(j) For the purposes of this Section, "415 Compensation" shall be
limited to $200,000. Such amount shall be adjusted at the same time and in
the same manner as permitted under Code Section 415(d), except that the
dollar increase in effect on January 1 of any calendar year shall be
effective for the Plan Year beginning with or within such calendar year and
the first adjustment to the $200,000 limitation shall be effective on
January 1, 1990. For any short Plan Year the "415 Compensation" limit
shall be an amount equal to the "415 Compensation" limit for the calendar
year in which the Plan Year begins multiplied by the ratio obtained by
dividing the number of full months in the short Plan Year by twelve (12).
However, for Plan Years beginning prior to January 1, 1989,
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<PAGE>
the $200,000 limit shall apply only for Top Heavy Plan Years and shall not
be adjusted.
(k) Notwithstanding anything herein to the contrary, Participants who
terminated employment for any reason during the Plan Year shall share in
the salary reduction contributions made by the Employer for the year of
termination without regard to the Hours of Service credited.
(l) If a Former Participant is reemployed after five (5) consecutive
1-Year Breaks in Service, then separate accounts shall be maintained as
follows:
(1) one account for nonforfeitable benefits attributable to pre-break
service; and
(2) one account representing his status in the Plan attributable to
post-break service.
(m) Notwithstanding anything to the contrary, for Plan Years beginning
after December 31, 1989, if this is a Plan that would otherwise fail to
meet the requirements of Code Sections 401(a)(26), 410(b)(1) or
410(b)(2)(A)(i) and the Regulations thereunder because Employer
contributions would not be allocated to a sufficient number or percentage
of Participants for a Plan Year, then the following rules shall apply:
(1) The group of Participants eligible to share in the Employer's
contribution for the Plan Year shall be expanded to include the
minimum number of Participants who would not otherwise be eligible as
are necessary to satisfy the applicable test specified above. The
specific Participants who shall become eligible under the terms of
this paragraph shall be those who are actively employed on the last
day of the Plan Year and, when compared to similarly situated
Participants, have completed the greatest number of Hours of Service
in the Plan Year.
(2) If after application of paragraph (1) above, the applicable test
is still not satisfied, then the group of Participants eligible to
share in the Employer's contribution for the Plan Year shall be
further expanded to include the minimum number of Participants who are
not actively employed on the last day of the Plan Year as are
necessary to satisfy the applicable test. The specific Participants
who shall become eligible to share shall be those Participants, when
compared to similarly situated Participants, who have completed the
greatest number of Hours of Service in the Plan Year before
terminating employment.
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<PAGE>
(3) Nothing in this Section shall permit the reduction of a
Participant's accrued benefit. Therefore any amounts that have
previously been allocated to Participants may not be reallocated to
satisfy these requirements. In such event, the Employer shall make an
additional contribution equal to the amount such affected Participants
would have received had they been included in the allocations, even if
it exceeds the amount which would be deductible under Code Section
404. Any adjustment to the allocations pursuant to this paragraph
shall be considered a retroactive amendment adopted by the last day of
the Plan Year.
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) Maximum Annual Allocation: For each Plan Year beginning after
December 31, 1986, the annual allocation derived from Employer Elective
Contributions to a Participant's Elective Account shall satisfy one of the
following tests:
(1) The "Actual Deferral Percentage" for the Highly Compensated
Participant group shall not be more than the "Actual Deferral
Percentage" of the Non-Highly Compensated Participant group multiplied
by 1.25, or
(2) The excess of the "Actual Deferral Percentage" for the Highly
Compensated Participant group over the "Actual Deferral Percentage"
for the Non-Highly Compensated Participant group shall not be more
than two percentage points. Additionally, the "Actual Deferral
Percentage" for the Highly Compensated Participant group shall not
exceed the "Actual Deferral Percentage" for the Non-Highly Compensated
Participant group multiplied by 2. The provisions of Code Section
401(k)(3) and Regulation 1.401(k)-l(b) are incorporated herein by
reference.
However, for Plan Years beginning after December 31, 1988, in
order to prevent the multiple use of the alternative method described
in (2) above and in Code Section 401(m)(9)(A), any Highly Compensated
Participant eligible to make elective deferrals pursuant to Section
4.2 and to make Employee contributions or to receive matching
contributions under this Plan or under any other plan maintained by
the Employer or an Affiliated Employer shall have his actual
contribution ratio reduced pursuant to Regulation 1.401(m)-2, the
provisions of which are incorporated herein by reference.
(b) For the purposes of this Section "Actual Deferral Percentage"
means, with respect to the Highly Compensated Participant group and Non-
Highly Compensated Participant group
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<PAGE>
for a Plan Year, the average of the ratios, calculated separately for each
Participant in such group, of the amount of Employer Elective Contributions
allocated to each Participant's Elective Account for such Plan Year, to
such Participant's "414(s) Compensation" for such Plan Year. The actual
deferral ratio for each Participant and the "Actual Deferral Percentage"
for each group shall be calculated to the nearest one-hundredth of one
percent for Plan Years beginning after December 31, 1988. Employer
Elective Contributions allocated to each Non-Highly Compensated
Participant's Elective Account shall be reduced by Excess Deferred
Compensation to the extent such excess amounts are made under this Plan or
any other plan maintained by the Employer.
(c) For the purpose of determining the actual deferral ratio of a
Highly Compensated Employee who is subject to the Family Member aggregation
rules of Code Section 414(q)(6) because such Participant is either a "five
percent owner" of the Employer or one of the ten (10) Highly Compensated
Employees paid the greatest "415 Compensation" during the year, the
following shall apply:
(1) The combined actual deferral ratio for the family group (which
shall be treated as one Highly Compensated Participant) shall be
determined by aggregating Employer Elective Contributions and "414(s)
Compensation" of all eligible Family Members (including Highly
Compensated Participants). However, in applying the $200,000 limit to
"414(s) Compensation", for Plan Years beginning after December 31,
1988, Family Members shall include only the affected Employee's spouse
and any lineal descendants who have not attained age 19 before the
close of the Plan Year. Notwithstanding the foregoing, with respect
to Plan Years beginning prior to January 1, 1990, compliance with the
Regulations then in effect shall be deemed to be compliance with this
paragraph.
(2) The Employer Elective Contributions and "414(s) Compensation" of
all Family Members shall be disregarded for purposes of determining
the "Actual Deferral Percentage" of the Non-Highly Compensated
Participant group except to She extent taken into account in paragraph
(1) above.
(3) If a Participant is required to be aggregated as a member of more
than one family group in a plan, all Participants who are members of
those family groups that include the Participant are aggregated as one
family group in accordance with paragraphs (1) and (2) above.
(d) For the purposes of Sections 4.5(a) and 4.6, a Highly Compensated
Participant and a Non-Highly Compensated
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Participant shall include any Employee eligible to make a deferral election
pursuant to Section 4.2, whether or not such deferral election was made or
suspended pursuant to Section 4.2.
(e) For the purposes of this Section and Code Sections 401(a)(4),
410(b) and 401(k), if two or more plans which include cash or deferred
arrangements are considered one plan for the purposes of Code Section
401(a)(4) or 410(b) (other than Code Section 410(b)(2)(A)(ii) as in effect
for Plan Years beginning after December 31, 1988), the cash or deferred
arrangements included in such plans shall be treated as one arrangement.
In addition, two or more cash or deferred arrangements may be considered as
a single arrangement for purposes of determining whether or not such
arrangements satisfy Code Sections 401(a)(4), 410(b) and 401(k). In such a
case, the cash or deferred arrangements included in such plans and the
plans including such arrangements shall be treated as one arrangement and
as one plan for purposes of this section and Code Sections 401(a)(4),
410(b) and 401(k). Plans may be aggregated under this paragraph (e) only
if they have the same plan year.
Notwithstanding the above, for Plan Years beginning after December 31,
1988, an employee stock ownership plan described in Code Section 4975(e)(7)
or 409 may not be combined with this Plan for purposes of determining
whether the employee stock ownership plan or this Plan satisfies this
Section and Code Sections 401(a)(4)
(f) For the purposes of this Section, if a Highly Compensated
Participant is a Participant under two or more cash or deferred
arrangements (other than a cash or deferred arrangement which is part of an
employee stock ownership plan as defined in Code Section 4975(e)(7) or 409
for Plan Years beginning after December 31, 1988) of the Employer or an
Affiliated Employer, all such cash or deferred arrangements shall be
treated as one cash or deferred arrangement for the purpose of determining
the actual deferral ratio with respect to such Highly Compensated
Participant. However, for Plan Years beginning after December 31, 1988, if
the cash or deferred arrangements have different plan years, this paragraph
shall be applied by treating all cash or deferred arrangements ending with
or within the same calendar year as a single arrangement.
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event that the initial allocations of the Employer's Elective
Contributions made pursuant to Section 4.4 do not satisfy one of the tests
set forth in Section 4.5(a) for Plan Years
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<PAGE>
beginning after December 31, 1986, the Administrator shall adjust Excess
Contributions pursuant to the options set forth below:
(a) On or before the fifteenth day of the third month following the
end of each Plan Year, the Highly Compensated Participant having the
highest actual deferral ratio shall have his portion of Excess
Contributions distributed to him until one of the tests set forth in
Section 4.5(a) is satisfied, or until his actual deferral ratio equals the
actual deferral ratio of the Highly Compensated Participant having the
second highest actual deferral ratio. This process shall continue until
one of the tests set forth in Section 4.5(a) is satisfied. For each Highly
Compensated Participant, the amount of Excess Contributions is equal to the
Elective Contributions on behalf of such Highly Compensated Participant
(determined prior to the application of this paragraph) minus the amount
determined by multiplying the Highly Compensated Participant's actual
deferral ratio (determined after application of this paragraph) by his
"414(s) compensation". However, in determining the amount of Excess
Contributions to be distributed with respect to an affected Highly
Compensated Participant as determined herein, such amount shall be reduced
by any Excess Deferred Compensation previously distributed to such affected
Highly Compensated Participant for his taxable year ending with or within
such Plan Year.
(1) With respect to the distribution of Excess Contributions pursuant
to (a) above, such distribution:
(i) may be postponed but not later than the close of the Plan
Year following the Plan Year to which they are allocable;
(ii) shall be made first from unmatched Deferred Compensation
and, thereafter, simultaneously from Deferred Compensation which
is matched and matching contributions which relate to such
Deferred Compensation. However, any such matching contributions
which are not Vested shall be forfeited in lieu of being
distributed;
(iii) shall be adjusted for Income; and
(iv) shall be designated by the Employer as a distribution of
Excess Contributions (and Income).
(2) Any distribution of less than the entire amount of Excess
Contributions shall be treated as a pro rata distribution of Excess
Contributions and Income.
(3) The determination and correction of Excess Contributions of a
Highly Compensated Participant whose
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<PAGE>
actual deferral ratio is determined under the family aggregation rules
shall be accomplished by reducing the actual deferral ratio as
required herein, and the Excess Contributions for the family unit
shall then be allocated among the Family Members in proportion to the
Elective Contributions of each Family Member that were combined to
determine the group actual deferral ratio. Notwithstanding the
foregoing, with respect to Plan Years beginning prior to January 1,
1990, compliance with the Regulations then in effect shall be deemed
to be compliance with this paragraph.
(b) Within twelve (12) months after the end of the Plan Year, the
Employer may make a special Qualified Non-Elective Contribution on behalf
of Non-Highly Compensated Participants in an amount sufficient to satisfy
one of the tests set forth in Section 4.5(a). Such contribution shall be
allocated to the Participant's Elective Account of each Non-Highly
Compensated Participant in the same proportion that each Non-Highly
Compensated Participant's Compensation for the year bears to the total
Compensation of all Non-Highly Compensated Participants.
(c) If during a Plan Year the projected aggregate amount of Elective
Contributions to be allocated to all Highly Compensated Participants under
this Plan would, by virtue of the tests set forth in Section 4.5(a), cause
the Plan to fail such tests, then the Administrator may automatically
reduce proportionately or in the order provided in Section 4.6(a) each
affected Highly Compensated Participant's deferral election made pursuant
to Section 4.2 by an amount necessary to satisfy one of the tests set forth
in Section 4.5(a).
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) The "Actual Contribution Percentage" for Plan Years beginning
after December 31, 1986 for the Highly Compensated Participant group shall
not exceed the greater of:
(1) 125 percent of such percentage for the Non-Highly Compensated
Participant group; or
(2) the lesser of 200 percent of such percentage for the Non-Highly
Compensated Participant group, or such percentage for the Non-Highly
Compensated Participant group plus 2 percentage points. However, for
Plan Years beginning after December 31, 1988, to prevent the multiple
use of the alternative method described in this paragraph and Code
Section 401(m)(9)(A), any Highly Compensated Participant eligible to
make elective deferrals pursuant to Section 4.2 or any other cash or
deferred arrangement maintained by the Employer or an
40
<PAGE>
Affiliated Employer and to make Employee contributions or to receive
matching contributions under this Plan or under any other plan
maintained by the Employer or an Affiliated Employer shall have his
actual contribution ratio reduced pursuant to Regulation 1.401(m)-2.
The provisions of Code Section 401(m) and Regulations 1.401(m)-l(b)
and 1.401(m)-2 are incorporated herein by reference.
(b) For the purposes of this Section and Section 4.8, "Actual
Contribution Percentage" for a Plan Year means, with respect to the Highly
Compensated Participant group and Non-Highly Compensated Participant group,
the average of the ratios (calculated separately for each Participant in
each group) of:
(1) the sum of Employer matching contributions made pursuant to
Section 4.1(b) on behalf of each such Participant for such Plan Year;
to
(2) the Participant's "414(s) Compensation" for such Plan Year.
(c) For purposes of determining the "Actual Contribution Percentage"
and the amount of Excess Aggregate Contributions pursuant to Section
4.8(d), only Employer matching contributions (excluding Employer matching
contributions forfeited or distributed pursuant to Sections 4.2(f) and
4.6(a)(1) or forfeited pursuant to Section 4.8(a)) contributed to the Plan
prior to the end of the succeeding Plan Year shall be considered. In
addition, the Administrator may elect to take into account, with respect to
Employees eligible to have Employer matching contributions pursuant to
Section 4.1(b) allocated to their accounts, elective deferrals (as defined
in Regulation 1.402(g)-l(b)) and qualified non-elective contributions (as
defined in Code Section 401(m)(4)(C)) contributed to any plan maintained by
the Employer. Such elective deferrals and qualified non-elective
contributions shall be treated as Employer matching contributions subject
to Regulation 1.401(m)-1(b)(5) which is incorporated herein by reference.
However, for Plan Years beginning after December 31, 1988, the Plan Year
must be the same as the plan year of the plan to which the elective
deferrals and the qualified non-elective contributions are made.
(d) For the purpose of determining the actual contribution ratio of a
Highly Compensated Employee who is subject to the Family Member aggregation
rules of Code Section 414(q)(6) because such Employee is either a "five
percent owner" of the Employer or one of the ten (10) Highly Compensated
Employees paid the greatest "415 Compensation" during the year, the
following shall apply:
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(1) The combined actual contribution ratio for the family group (which
shall be treated as one Highly Compensated Participant) shall be
determined by aggregating Employer matching contributions made
pursuant to Section 4.1(b) and "414(s) Compensation" of all eligible
Family Members (including Highly Compensated Participants). However,
in applying the $200,000 limit to "414(s) Compensation" for Plan Years
beginning after December 31, 1988, Family Members shall include only
the affected Employee's spouse and any lineal descendants who have not
attained age 19 before the close of the Plan Year. Notwithstanding
the foregoing, with respect to Plan Years beginning prior to January
1, 1990, compliance with the Regulations then in effect shall be
deemed to be compliance with this paragraph.
(2) The Employer matching contributions made pursuant to Section
4.1(b) and "414(s) Compensation" of all Family Members shall be
disregarded for purposes of determining the "Actual Contribution
Percentage" of the Non-Highly Compensated Participant group except to
the extent taken into account in paragraph (1) above.
(3) If a Participant is required to be aggregated as a member of more
than one family group in a plan, all Participants who are members of
those family groups that include the Participant are aggregated as one
family group in accordance with paragraphs (1) and (2) above.
(e) For purposes of this Section and Code Sections 401(a)(4), 410(b) and
401(m), if two or more plans of the Employer to which matching
contributions, Employee contributions, or both, are made are treated as one
plan for purposes of Code Sections 401(a)(4) or 410(b) (other than the
average benefits test under Code Section 410(b)(2)(A)(ii) as in effect for
Plan Years beginning after December 31, 1988), such plans shall be treated
as one plan. In addition, two or more plans of the Employer to which
matching contributions, Employee contributions, or both, are made may be
considered as a single plan for purposes of determining whether or not such
plans satisfy Code Sections 401(a)(4), 410(b) and 401(m). In such a case,
the aggregated plans must satisfy this Section and Code Sections 401(a)(4),
410(b) and 401(m) as though such aggregated plans were a single plan.
Plans may be aggregated under this paragraph (e) for Plan Years beginning
after December 31, 1988, only if they have the same plan year.
Notwithstanding the above, for Plan Years beginning after December 31,
1988, an employee stock ownership plan described in Code Section 4975(e)(7)
or 409 may not be aggregated with this Plan for purposes of determining
whether the employee
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stock ownership plan or this Plan satisfies this Section and Code Sections
401(a)(4), 410(b) and 401(m).
(f) If a Highly Compensated Participant is a Participant under two or
more plans (other than an employee stock ownership plan as defined in Code
Section 4975(e)(7) or 409 for Plan Years beginning after December 31, 1988)
which are maintained by the Employer or an Affiliated Employer to which
matching contributions, Employee contributions, or both, are made, all such
contributions on behalf of such Highly Compensated Participant shall be
aggregated for purposes of determining such Highly Compensated
Participant's actual contribution ratio. However, for Plan Years beginning
after December 31, 1988, if the plans have different plan years, this
paragraph shall be applied by treating all plans ending with or within the
same calendar year as a single plan.
(g) For purposes of Sections 4.7(a) and 4.8, a Highly Compensated
Participant and Non-Highly Compensated Participant shall include any
Employee eligible to have Employer matching contributions pursuant to
Section 4.1(b) (whether or not a deferral election was made or suspended
pursuant to Section 4.2(e)) allocated to his account for the Plan Year.
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event that, for Plan Years beginning after December 31,
1986, the "Actual Contribution Percentage" for the Highly Compensated
Participant group exceeds the "Actual Contribution Percentage" for the Non-
Highly Compensated Participant group pursuant to Section 4.7(a), the
Administrator (on or before the fifteenth day of the third month following
the end of the Plan Year, but in no event later than the close of the
following Plan Year) shall direct the Trustee to distribute to the Highly
Compensated Participant having the highest actual contribution ratio, his
Vested portion of Excess Aggregate Contributions (and Income allocable to
such contributions) and, if forfeitable, forfeit such non-Vested Excess
Aggregate Contributions attributable to Employer matching contributions
(and Income allocable to such forfeitures) until either one of the tests
set forth in Section 4.7(a) is satisfied, or until his actual contribution
ratio equals the actual contribution ratio of the Highly Compensated
Participant having the second highest actual contribution ratio. This
process shall continue until one of the tests set forth in Section 4.7(a)
is satisfied.
If the correction of Excess Aggregate Contributions attributable to
Employer matching contributions is not in proportion to the Vested and non-
Vested portion of such contributions, then the Vested portion of the
Participant's
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Account attributable to Employer matching contributions after the
correction shall be subject to Section 6.5(h).
(b) Any distribution and/or forfeiture of less than the entire amount
of Excess Aggregate Contributions (and Income) shall be treated as a pro
rata distribution and/or forfeiture of Excess Aggregate Contributions and
Income. Distribution of Excess Aggregate Contributions shall be designated
by the Employer as a distribution of Excess Aggregate Contributions (and
Income). Forfeitures of Excess Aggregate Contributions shall be treated in
accordance with Section 4.4.
(c) Excess Aggregate Contributions, including forfeited matching
contributions, shall be treated as Employer contributions for purposes of
Code Sections 404 and 415 even if distributed from the Plan.
Forfeited matching contributions that are reallocated to Participants'
Accounts for the Plan Year in which the forfeiture occurs shall be treated
as an "annual addition" pursuant to Section 4.9(b) for the Participants to
whose Accounts they are reallocated and for the Participants from whose
Accounts they are forfeited.
(d) For each Highly Compensated Participant, the amount of Excess
Aggregate Contributions is equal to the Employer matching contributions
made pursuant to Section 4.1(b) and any qualified non-elective
contributions or elective deferrals taken into account pursuant to Section
4.7(c) on behalf of the Highly Compensated Participant (determined prior to
the application of this paragraph) minus the amount determined by
multiplying the Highly Compensated Participant's actual contribution ratio
(determined after application of this paragraph) by his "414(s)
Compensation". The actual contribution ratio must be rounded to the
nearest one-hundredth of one percent for Plan Years beginning after
December 31, 1988. In no case shall the amount of Excess Aggregate
Contribution with respect to any Highly Compensated Participant exceed the
amount of Employer matching contributions made pursuant to Section 4.1(b)
and any qualified non-elective contributions or elective deferrals taken
into account pursuant to Section 4.7(c) on behalf of such Highly
Compensated Participant for such Plan Year.
(e) The determination of the amount of Excess Aggregate Contributions
with respect to any Plan Year shall be made after first determining the
Excess Contributions, if any, to be treated as voluntary Employee
contributions due to recharacterization for the plan year of any other
qualified cash or deferred arrangement (as defined in Code Section 401(k))
maintained by the Employer that ends with or within the Plan Year.
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(f) If the determination and correction of Excess Aggregate
Contributions of a Highly Compensated Participant whose actual contribution
ratio is determined under the family aggregation rules, then the actual
contribution ratio shall be reduced and the Excess Aggregate Contributions
for the family unit shall be allocated among the Family Members in
proportion to the sum of Employer matching contributions made pursuant to
Section 4.1(b) and any qualified non-elective contributions or elective
deferrals taken into account pursuant to Section 4.7(c) of each Family
Member that were combined to determine the group actual contribution ratio.
Notwithstanding the foregoing, with respect to Plan Years beginning prior
to January 1, 1990, compliance with the Regulations then in effect shall be
deemed to be compliance with this paragraph.
(g) If during a Plan Year the projected aggregate amount of Employer
matching contributions to be allocated to all Highly Compensated
Participants under this Plan would, by virtue of the tests set forth in
Section 4.7(a), cause the Plan to fail such tests, then the Administrator
may automatically reduce proportionately or in the order provided in
Section 4.8(a) each affected Highly Compensated Participant's projected
share of such contributions by an amount necessary to satisfy one of the
tests set forth in Section 4.7(a).
(h) Notwithstanding the above, within twelve (12) months after the end
of the Plan Year, the Employer may make a special Qualified Non-Elective
Contribution on behalf of Non-Highly Compensated Participants in an amount
sufficient to satisfy one of the tests set forth in Section 4.7(a). Such
contribution shall be allocated to the Participant's Elective Account of
each Non-Highly Compensated Participant in the same proportion that each
Non-Highly Compensated Participant's Compensation for the year bears to the
total Compensation of all Non-Highly Compensated Participants. A separate
accounting shall be maintained for the purpose of excluding such
contributions from the "Actual Deferral Percentage" tests pursuant to
Section 4.5(a).
4.9 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual additions"
credited to a Participant's accounts for any "limitation year" shall equal
the lesser of: (1) $30,000 (or, if greater, one-fourth of the dollar
limitation in effect under Code Section 415(b)(1)(A)) or (2) twenty-five
percent (25%) of the Participant's "415 Compensation" for such "limitation
year". For any short "limitation year", the dollar limitation in (1) above
shall be reduced by a fraction, the numerator of which is the number of
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full months in the short "limitation year" and the denominator of which is
twelve (12).
(b) For purposes of applying the limitations of Code Section 415,
"annual additions" means the sum credited to a Participant's accounts for
any "limitation year" of (1) Employer contributions, (2) Employee
contributions, (3) forfeitures, (4) amounts allocated, after March 31,
1984, to an individual medical account, as defined in Code Section
415(1)(2) which is part of a pension or annuity plan maintained by the
Employer and (5) amounts derived from contributions paid or accrued after
December 31, 1985, in taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated to the separate
account of a key employee (as defined in Code Section 419A(d)(3)) under a
welfare benefit plan (as defined in Code Section 419(e)) maintained by the
Employer. Except, however, the "415 Compensation" percentage limitation
referred to in paragraph (a)(2) above shall not apply to: (1) any
contribution for medical benefits (within the meaning of Code Section
419A(f)(2)) after separation from service which is otherwise treated as an
"annual addition", or (2) any amount otherwise treated as an "annual
addition" under Code Section 415(1)(1).
(c) For purposes of applying the limitations of Code Section 415, the
transfer of funds from one qualified plan to another is not an "annual
addition". In addition, the following are not Employee contributions for
the purposes of Section 4.9(b)(2): (1) rollover contributions (as defined
in Code Sections 402(a)(5), 403(a)(4), 403(b)(8) and 408(d)(3)); (2)
repayments of loans made to a Participant from the Plan; (3) repayments of
distributions received by an Employee pursuant to Code Section 411(a)(7)(B)
(cash-outs); (4) repayments of distributions received by an Employee
pursuant to Code Section 411(a)(3)(D) (mandatory contributions); and (5)
Employee contributions to a simplified employee pension excludable from
gross income under Code Section 408(k)(6).
(d) For purposes of applying the limitations of Code Section 415, the
"limitation year" shall be the Plan Year.
(e) The dollar limitation under Code Section 415(b)(1)(A) stated in
paragraph (a)(l) above shall be adjusted annually as provided in Code
Section 415(d) pursuant to the Regulations. The adjusted limitation is
effective as of January 1st of each calendar year and is applicable to
"limitation years" ending with or within that calendar year.
(f) For the purpose of this Section, all qualified defined benefit
plans (whether terminated or not) ever maintained by the Employer shall be
treated as one defined
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benefit plan, and all qualified defined contribution plans (whether
terminated or not) ever maintained by the Employer shall be treated as one
defined contribution plan.
(g) For the purpose of this Section, if the Employer is a member of a
controlled group of corporations, trades or businesses under common control
(as defined by Code Section 1563(a) or Code Section 414(b) and (c) as
modified by Code Section 415(h)), is a member of an affiliated service
group (as defined by Code Section 414(m)), or is a member of a group of
entities required to be aggregated pursuant to Regulations under Code
Section 414(o), all Employees of such Employers shall be considered to be
employed by a single Employer.
(h) For the purpose of this Section, if this Plan is a Code Section
413(c) plan, all Employers of a Participant who maintain this Plan will be
considered to be a single Employer.
(i)(l) If a Participant participates in more than one defined
contribution plan maintained by the Employer which have different
Anniversary Dates, the maximum "annual additions" under this Plan shall
equal the maximum "annual additions" for the "limitation year" minus any
"annual additions" previously credited to such Participant's accounts
during the "limitation year".
(2) If a Participant participates in both a defined contribution plan
subject to Code Section 412 and a defined contribution plan not
subject to Code Section 412 maintained by the Employer which have the
same Anniversary Date, "annual additions" will be credited to the
Participant's accounts under the defined contribution plan subject to
Code Section 412 prior to crediting "annual additions" to the
Participant's accounts under the defined contribution plan not subject
to Code Section 412.
(3) If a Participant participates in more than one defined
contribution plan not subject to Code Section 412 maintained by the
Employer which have the same Anniversary Date, the maximum "annual
additions" under this Plan shall equal the product of (A) the maximum
"annual additions" for the "limitation year" minus any "annual
additions" previously credited under subparagraphs (1) or (2) above,
multiplied by (B) a fraction (i) the numerator of which is the "annual
additions" which would be credited to such Participant's accounts
under this Plan without regard to the limitations of Code Section 415
and (ii) the denominator of which is such "annual additions" for all
plans described in this subparagraph.
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(j) If an Employee is (or has been) a Participant in one or more
defined benefit plans and one or more defined contribution plans maintained
by the Employer, the sum of the defined benefit plan fraction and the
defined contribution plan fraction for any "limitation year" may not exceed
1.0.
(k) The defined benefit plan fraction for any "limitation year" is a
fraction, the numerator of which is the sum of the Participant's projected
annual benefits under all the defined benefit plans (whether or not
terminated) maintained by the Employer, and the denominator of which is the
lesser of 125 percent of the dollar limitation determined for the
"limitation year" under Code Sections 415(b) and (d) or 140 percent of the
highest average compensation, including any adjustments under Code Section
415(b).
Notwithstanding the above, if the Participant was a Participant as of
the first day of the first "limitation year" beginning after December 31,
1986, in one or more defined benefit plans maintained by the Employer which
were in existence on May 6, 1986, the denominator of this fraction will not
be less than 125 percent of the sum of the annual benefits under such plans
which the Participant had accrued as of the close of the last "limitation
year" beginning before January 1, 1987, disregarding any changes in the
terms and conditions of the plan after May 5, 1986. The preceding sentence
applies only if the defined benefit plans individually and in the aggregate
satisfied the requirements of Code Section 415 for all "limitation years"
beginning before January 1, 1987.
(l) The defined contribution plan fraction for any "limitation year"
is a fraction, the numerator of which is the sum of the annual additions to
the Participant's Account under all the defined contribution plans (whether
or not terminated) maintained by the Employer for the current and all prior
"limitation years" (including the annual additions attributable to the
Participant's nondeductible Employee contributions to all defined benefit
plans, whether or not terminated, maintained by the Employer, and the
annual additions attributable to all welfare benefit funds, as defined in
Code Section 419(e), and individual medical accounts, as defined in Code
Section 415(1)(2), maintained by the Employer), and the denominator of
which is the sum of the maximum aggregate amounts for the current and all
prior "limitation years" of service with the Employer (regardless of
whether a defined contribution plan was maintained by the Employer). The
maximum aggregate amount in any "limitation year" is the lesser of 125
percent of the dollar limitation determined under Code Sections 415(b) and
(d) in effect under Code Section 415(c)(1)(A) or 35 percent of the
Participant's Compensation for such year.
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If the Employee was a Participant as of the end of the first day of
the first "limitation year" beginning after December 31, 1986, in one or
more defined contribution plans maintained by the Employer which were in
existence on May 6, 1986, the numerator of this fraction will be adjusted
if the sum of this fraction and the defined benefit fraction would
otherwise exceed 1.0 under the terms of this Plan. Under the adjustment, an
amount equal to the product of (1) the excess of the sum of the fractions
over 1.0 times (2) the denominator of this fraction, will be permanently
subtracted from the numerator of this fraction. The adjustment is
calculated using the fractions as they would be computed as of the end of
the last "limitation year" beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the Plan made after
May 5, 1986, but using the Code Section 415 limitation applicable to the
first "limitation year" beginning on or after January 1, 1987. The annual
addition for any "limitation year" beginning before January 1, 1987 shall
not be recomputed to treat all Employee contributions as annual additions.
(m) Notwithstanding the foregoing, for any "limitation year" in which
the Plan is a Top Heavy Plan, 100 percent shall be substituted for 125
percent in Sections 4.9(k) and 4.9(1) unless the extra minimum allocation
is being provided pursuant to Section 4.4. However, for any "limitation
year" in which the Plan is a Super Top Heavy Plan, 100 percent shall be
substituted for 125 percent in any event.
(n) Notwithstanding anything contained in this Section to the
contrary, the limitations, adjustments and other requirements prescribed in
this Section shall at all times comply with the provisions of Code Section
415 and the Regulations thereunder, the terms of which are specifically
incorporated herein by reference.
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of a reasonable error in estimating a
Participant's Compensation, a reasonable error in determining the amount of
elective deferrals (within the meaning of Code Section 402(g)(3)) that may
be made with respect to any Participant under the limits of Section 4.9 or
other facts and circumstances to which Regulation 1.415-6(b)(6) shall be
applicable, the "annual additions" under this Plan would cause the maximum
"annual additions" to be exceeded for any Participant, the Administrator
shall (1) distribute any elective deferrals (within the meaning of Code
Section 402(g)(3)) or return any voluntary Employee contributions credited
for the "limitation year" to the extent that the return would reduce the
"excess amount" in the Participant's accounts (2) hold any "excess amount"
remaining
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after the return of any elective deferrals or voluntary Employee
contributions in a "Section 415 suspense account" (3) use the "Section 415
suspense account" in the next "limitation year" (and succeeding "limitation
years" if necessary) to reduce Employer contributions for that Participant
if that Participant is covered by the Plan as of the end of the "limitation
year", or if the Participant is not so covered, allocate and reallocate the
"Section 415 suspense account" in the next "limitation year" (and
succeeding "limitation years" if necessary) to all Participants in the Plan
before any Employer or Employee contributions which would constitute
"annual additions" are made to the Plan for such "limitation year" (4)
reduce Employer contributions to the Plan for such "limitation year" by the
amount of the "Section 415 suspense account" allocated and reallocated
during such "limitation year".
(b) For purposes of this Article, "excess amount" for any Participant
for a "limitation year" shall mean the excess, if any, of (1) the "annual
additions" which would be credited to his account under the terms of the
Plan without regard to the limitations of Code Section 415 over (2) the
maximum "annual additions" determined pursuant to Section 4.9.
(c) For purposes of this Section, "Section 415 suspense account" shall
mean an unallocated account equal to the sum of "excess amounts" for all
Participants in the Plan during the "limitation year". The "Section 415
suspense account" shall not share in any earnings or losses of the Trust
Fund.
(d) The Plan may not distribute "excess amounts", other than voluntary
Employee contributions, to Participants or Former Participants.
4.11 TRANSFERS FROM QUALIFIED PLANS
(a) With the consent of the Administrator, amounts may be transferred
from other qualified plans by Employees, provided that the trust from which
such funds are transferred permits the transfer to be made and the transfer
will not jeopardize the tax exempt status of the Plan or Trust or create
adverse tax consequences for the Employer. The amounts transferred shall
be set up in a separate account herein referred to as a "Participant's
Rollover Account". Such account shall be fully Vested at all times and
shall not be subject to Forfeiture for any reason.
(b) Amounts in a Participant's Rollover Account shall be held by the
Trustee pursuant to the provisions of this Plan and may not be withdrawn
by, or distributed to the Participant, in whole or in part, except as
provided in paragraphs (c) and (d) of this Section.
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(c) Except as permitted by Regulations (including Regulation 1.411(d)-
4), amounts attributable to elective contributions (as defined in
Regulation 1.401(k)-1(g)(3)), including amounts treated as elective
contributions, which are transferred from another qualified plan in a plan-
to-plan transfer shall be subject to the distribution limitations provided
for in Regulation 1.401(k)-l(d).
(d) At Normal Retirement Date, or such other date when the Participant
or his Beneficiary shall be entitled to receive benefits, the fair market
value of the Participant's Rollover Account shall be used to provide
additional benefits to the Participant or his Beneficiary. Any
distributions of amounts held in a Participant's Rollover Account shall be
made in a manner which is consistent with and satisfies the provisions of
Section 6.5, including, but not limited to, all notice and consent
requirements of Code Sections 417 and 411(a)(11) and the Regulations
thereunder. Furthermore, such amounts shall be considered as part of a
Participant's benefit in determining whether an involuntary cash-out of
benefits without Participant consent may be made.
(e) The Administrator may direct that employee transfers made after a
valuation date be segregated into a separate account for each Participant
in a federally insured savings account, certificate of deposit in a bank or
savings and loan association, money market certificate, or other short term
debt security acceptable to the Trustee until such time as the allocations
pursuant to this Plan have been made, at which time they may remain
segregated or be invested as part of the general Trust Fund, to be
determined by the Administrator.
(f) All amounts allocated to a Participant's Rollover Account may be
treated as a Directed Investment Account pursuant to Section 4.12.
(g) For purposes of this Section, the term "qualified plan" shall mean
any tax qualified plan under Code Section 401(a). The term "amounts
transferred from other qualified plans" shall mean: (i) amounts
transferred to this Plan directly from another qualified plan; (ii) lump-
sum distributions received by an Employee from another qualified plan which
are eligible for tax free rollover to a qualified plan and which are
transferred by the Employee to this Plan within sixty (60) days following
his receipt thereof; (iii) amounts transferred to this Plan from a conduit
individual retirement account provided that the conduit individual
retirement account has no assets other than assets which (A) were
previously distributed to the Employee by another qualified plan as a lump-
sum distribution (B) were eligible for tax-free rollover to a qualified
plan and (C) were deposited in such conduit individual retirement account
within
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sixty (60) days of receipt thereof and other than earnings on said assets;
and (iv) amounts distributed to the Employee from a conduit individual
retirement account meeting the requirements of clause (iii) above, and
transferred by the Employee to this Plan within sixty (60) days of his
receipt thereof from such conduit individual retirement account.
(h) Prior to accepting any transfers to which this Section applies,
the Administrator may require the Employee to establish that the amounts to
be transferred to this Plan meet the requirements of this Section and may
also require the Employee to provide an opinion of counsel satisfactory to
the Employer that the amounts to be transferred meet the requirements of
this Section.
(i) Notwithstanding anything herein to the contrary, a transfer
directly to this Plan from another qualified plan (or a transaction having
the effect of such a transfer) shall only be permitted if it will not
result in the elimination or reduction of any "Section 411(d)(6) protected
benefit" as described in Section 8.1.
4.12 DIRECTED INVESTMENT ACCOUNT
(a) The Administrator, in his sole discretion, may determine that all
Participants be permitted to direct the Trustee as to the investment of all
or a portion of the interest in any one or more of their individual account
balances. If such authorization is given, Participants may, subject to a
procedure established by the Administrator and applied in a uniform
nondiscriminatory manner, direct the Trustee in writing to invest any
portion of their account in specific assets, specific funds or other
investments permitted under the Plan and the directed investment procedure.
The Trustee shall invest in a money market account that portion of a
Participant's accounts with respect to which the Participant fails to
provide investment directions to the Trustee under this Section. That
portion of the account of any Participant so directing will thereupon be
considered a Directed Investment Account, which shall not share in Trust
Fund earnings.
(b) A separate Directed Investment Account shall be established for
each Participant who has directed an investment. Transfers between the
Participant's regular account and his Directed Investment Account shall be
charged and credited as the case may be to each account. The Directed
Investment Account shall not share in Trust Fund earnings, but it shall be
charged or credited as appropriate with the net earnings, gains, losses and
expenses as well as any appreciation or depreciation in market value during
each Plan Year attributable to such account.
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(c) To the extent a Participant's Directed Investment Account is
invested in securities of the Employer, the Participant is authorized to
direct the Trustee with respect to all voting and tender issues relating to
such securities. The Trustee shall generally follow such direction provided
such instructions are timely received by the Trustee and further provided
that compliance with such directions is otherwise consistent with the
Trustee's ERISA fiduciary duties.
ARTICLE V.
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as to each Anniversary Date,
and at such other date or dates deemed necessary by the Administrator, herein
called "valuation date", to determine the net worth of the assets comprising the
Trust Fund as it exists on the "valuation date." In determining such net worth,
the Trustee shall value the assets comprising the Trust Fund at their fair
market value as of the "valuation date" and shall deduct all expenses for which
the Trustee has not yet obtained reimbursement from the Employer or the Trust
Fund.
5.2 METHOD OF VALUATION
In determining the fair market value of securities held in the Trust Fund
which are listed on a registered stock exchange, the Administrator shall direct
the Trustee to value the same at the prices they were last traded on such
exchange preceding the close of business on the "valuation date". If such
securities were not traded on the "valuation date", or if the exchange on which
they are traded was not open for business on the "valuation date", then the
securities shall be valued at the prices at which they were last traded prior to
the "valuation date". Any unlisted security held in the Trust Fund shall be
valued at its bid price next preceding the close of business on the "valuation
date", which bid price shall be obtained from a registered broker or an
investment banker. In determining the fair market value of assets other than
securities for which trading or bid prices can be obtained, the Trustee may
appraise such assets itself, or in its discretion, employ one or more appraisers
for that purpose and rely on the values established by such appraiser or
appraisers.
ARTICLE VI.
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer and retire
for the purposes hereof on his Normal
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Retirement Date or Early Retirement Date. However, a Participant may postpone
the termination of his employment with the Employer to a later date, in which
event the participation of such Participant in the Plan, including the right to
receive allocations pursuant to Section 4.4, shall continue until his Late
Retirement Date. Upon a Participant's Retirement Date or attainment of his
Normal Retirement Date without termination of employment with the Employer, or
as soon thereafter as is practicable, the Trustee shall distribute all amounts
credited to such Participant's Combined Account in accordance with Section 6.5.
6.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Retirement Date or
other termination of his employment, all amounts credited to such
Participant's Combined Account shall become fully Vested. The
Administrator shall direct the Trustee, in accordance with the provisions
of Sections 6.6 and 6.7, to distribute the value of the deceased
Participant's accounts to the Participant's Beneficiary.
(b) Upon the death of a Former Participant, the Administrator shall
direct the Trustee, in accordance with the provisions of Sections 6.6 and
6.7, to distribute any remaining Vested amounts credited to the accounts of
a deceased Former Participant to such Former Participant's Beneficiary.
(c) The Administrator may require such proper proof of death and such
evidence of the right of any person to receive payment of the value of the
account of a deceased Participant or Former Participant as the
Administrator may deem desirable. The Administrator's determination of
death and of the right of any person to receive payment shall be
conclusive.
(d) Unless otherwise elected in the manner prescribed in Section 6.6,
the Beneficiary of the death benefit shall be the Participant's spouse, who
shall receive such benefit in the form of a Pre-Retirement Survivor Annuity
pursuant to Section 6.6. Except, however, the Participant may designate a
Beneficiary other than his spouse if:
(1) the Participant and his spouse have validly waived the Pre-
Retirement Survivor Annuity in the manner prescribed in Section 6.6,
and the spouse has waived his or her right to be the Participant's
Beneficiary, or
(2) the Participant is legally separated or has been abandoned (within
the meaning of local law) and the Participant has a court order to
such effect (and there is no "qualified domestic relations order" as
defined in Code Section 414(p) which provides otherwise), or
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(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a Beneficiary shall be made on a
form satisfactory to the Administrator. A Participant may at any time
revoke his designation of a Beneficiary or change his Beneficiary by filing
written notice of such revocation or change with the Administrator.
However, the Participant's spouse must again consent in writing to any
change in Beneficiary unless the original consent acknowledged that the
spouse had the right to limit consent only to a specific Beneficiary and
that the spouse voluntarily elected to relinquish such right. In the event
no valid designation of Beneficiary exists at the time of the Participant's
death, the death benefit shall be payable to his estate.
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability prior
to his Retirement Date or other termination of his employment, all amounts
credited to such Participant's Combined Account shall become fully Vested. In
the event of a Participant's Total and Permanent Disability, the Trustee, in
accordance with the provisions of Sections 6.5 and 6.7, shall distribute to such
Participant all amounts credited to such Participant's Combined Account as
though he had retired.
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date coinciding with or subsequent to
the termination of a Participant's employment for any reason other than
death, Total and Permanent Disability or retirement, the Administrator may
direct the Trustee to segregate the amount of the Vested portion of such
Terminated Participant's Combined Account and invest the aggregate amount
thereof in a separate, federally insured savings account, certificate of
deposit, common or collective trust fund of a bank or a deferred annuity.
In the event the Vested portion of a Participant's Combined Account is not
segregated, the amount shall remain in a separate account for the
Terminated Participant and share in allocations pursuant to Section 4.4
until such time as a distribution is made to the Terminated Participant.
Distribution of the funds due to a Terminated Participant shall be
made on the occurrence of an event which would result in the distribution
had the Terminated Participant remained in the employ of the Employer (upon
the Participant's death, Total and Permanent Disability, Early or Normal
Retirement). However, at the election of the Participant, the
Administrator shall direct the Trustee to cause the entire Vested portion
of
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the Terminated Participant's Combined Account to be payable to such
Terminated Participant. Any distribution under this paragraph shall be
made in a manner which is consistent with and satisfies the provisions of
Section 6.5, including, but not limited to, all notice and consent
requirements of Code Sections 417 and 411(a)(11) and the Regulations
thereunder.
If the value of a Terminated Participant's Vested benefit derived from
Employer and Employee contributions does not exceed $3,500 and has never
exceeded $3,500 at the time of any prior distribution, the Administrator
shall direct the Trustee to cause the entire Vested benefit to be paid to
such Participant in a single lump sum.
For purposes of this Section 6.4, if the value of a Terminated
Participant's Vested benefit is zero, the Terminated Participant shall be
deemed to have received a distribution of such Vested benefit.
(b) The Vested portion of any Participant's Account shall be a
percentage of the total amount credited to his Participant's Account
determined on the basis of the Participant's number of Years of Service
according to the following schedule:
Vesting Schedule
Years of Service Percentage
1 20%
2 60%
3 100%
(c) Notwithstanding the vesting schedule above, the Vested percentage
of a Participant's Account shall not be less than the Vested percentage
attained as of the later of the effective date or adoption date of this
amendment and restatement.
(d) Notwithstanding the vesting schedule above, upon the complete
discontinuance of the Employer's contributions to the Plan or upon any full
or partial termination of the Plan, all amounts credited to the account of
any affected Participant shall become 100% Vested and shall not thereafter
be subject to Forfeiture.
(e) The computation of a Participant's nonforfeitable percentage of
his interest in the Plan shall not be reduced as the result of any direct
or indirect amendment to this Plan. For this purpose, the Plan shall be
treated as having been amended if the Plan provides for an automatic change
in vesting due to a change in top heavy status. In the event that the Plan
is amended to change or modify any vesting
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schedule, a Participant with at least three (3) Years of Service as of the
expiration date of the election period may elect to have his nonforfeitable
percentage computed under the Plan without regard to such amendment. If a
Participant fails to make such election, then such Participant shall be
subject to the new vesting schedule. The Participant's election period
shall commence on the adoption date of the amendment and shall end 60 days
after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of the amendment
from the Employer or Administrator.
(f)(1) If any Former Participant shall be reemployed by the Employer
before a 1-Year Break in Service occurs, he shall continue to participate
in the Plan in the same manner as if such termination had not occurred.
(2) If any Former Participant shall be reemployed by the Employer
before five (5) consecutive 1-Year Breaks in Service, and such Former
Participant had received, or was deemed to have received, a
distribution of his entire Vested interest prior to his reemployment,
his forfeited account shall be reinstated only if he repays the full
amount distributed to him before the earlier of five (5) years after
the first date on which the Participant is subsequently reemployed by
the Employer or the close of the first period of five (5) consecutive
1-Year Breaks in Service commencing after the distribution, or in the
event of a deemed distribution, upon the reemployment of such Former
Participant. In the event the Former Participant does repay the full
amount distributed to him, or in the event of a deemed distribution,
the undistributed portion of the Participant's Account must be
restored in full, unadjusted by any gains or losses occurring
subsequent to the Anniversary Date or other valuation date coinciding
with or preceding his termination. The source for such reinstatement
shall first be any Forfeitures occurring during the year. If such
source is insufficient, then the Employer shall contribute an amount
which is sufficient to restore any such forfeited Accounts.
(3) If any Former Participant is reemployed after a 1-Year Break in
Service has occurred, Years of Service shall include Years of Service
prior to his 1-Year Break in Service subject to the following rules:
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(i) If a Former Participant has a 1-Year Break in Service, his
pre-break and post-break service shall be used for computing
Years of Service for eligibility and for vesting purposes only
after he has been employed for one (1) Year of Service following
the date of his reemployment with the Employer;
(ii) Any Former Participant who under the Plan does not have a
nonforfeitable right to any interest in the Plan resulting from
Employer contributions shall lose credits otherwise allowable
under (i) above if his consecutive 1-Year Breaks in Service equal
or exceed the greater of (A) Five (5) or (B) the aggregate number
of his pre-break Years of Service;
(iii) After five (5) consecutive 1-Year Breaks in Service, a
Former Participant's Vested Account balance attributable to pre-
break service shall not be increased as a result of post-break
service;
(iv) If a Former Participant who has not had his Years of Service
before a 1-Year Break in Service disregarded pursuant to (ii)
above completes one (1) Year of Service for eligibility purposes
following his reemployment with the Employer, he shall
participate in the Plan retroactively from his date of
reemployment;
(v) If a Former Participant who has not had his Years of Service
before a 1-Year Break in Service disregarded pursuant to (ii)
above completes a Year of Service (a 1-Year Break in Service
previously occurred, but employment had not terminated), he shall
participate in the Plan retroactively from the first day of the
Plan Year during which he completes one (1) Year of Service.
(g) In determining Years of Service for purposes of vesting under the
Plan, Years of Service prior to the Effective Date of the Plan shall be
excluded.
6.5 DISTRIBUTION OF BENEFITS
(a)(1) Unless otherwise elected as provided below, a Participant who
is married on the "annuity starting date" and who does not die before the
"annuity starting date" shall receive the value of all of his benefits in
the form of a joint and survivor annuity. The joint and survivor annuity
is an annuity that commences immediately and shall be equal in value to a
single life annuity. Such joint and survivor
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benefits following the Participant's death shall continue to the spouse
during the spouse's lifetime at a rate equal to 50% of the rate at which
such benefits were payable to the Participant. This joint and 50% survivor
annuity shall be considered the designated qualified joint and survivor
annuity and automatic form of payment for the purposes of this Plan and it
shall include an installment refund feature. An unmarried Participant
shall receive the value of his benefit in the form of a life annuity with
an installment refund. Such unmarried Participant, however, may elect in
writing to waive the life annuity. The election must comply with the
provisions of this Section as if it were an election to waive the joint and
survivor annuity by a married Participant, but without the spousal consent
requirement. The Participant may elect to have any annuity provided for in
this Section distributed upon the attainment of the "earliest retirement
age" under the Plan. The "earliest retirement age" is the earliest date on
which, under the Plan, the Participant could elect to receive retirement
benefits.
(2) Any election to waive the joint and survivor annuity must be made by
the Participant in writing during the election period and be consented to
by the Participant's spouse. If the spouse is legally incompetent to give
consent, the spouse's legal guardian, even if such guardian is the
Participant, may give consent. Such election shall designate a Beneficiary
(or a form of benefits) that may not be changed without spousal consent
(unless the consent of the spouse expressly permits designations by the
Participant without the requirement of further consent by the spouse).
Such spouse's consent shall be irrevocable and must acknowledge the effect
of such election and be witnessed by a Plan representative or a notary
public. Such consent shall not be required if it is established to the
satisfaction of the Administrator that the required consent cannot be
obtained because there is no spouse, the spouse cannot be located, or other
circumstances that may be prescribed by Regulations. The election made by
the Participant and consented to by his spouse may be revoked by the
Participant in writing without the consent of the spouse at any time during
the election period. The number of revocations shall not be limited. Any
new election must comply with the requirements of this paragraph. A former
spouse's waiver shall not be binding on a new spouse.
(3) The election period to waive the joint and survivor annuity shall be
the 90 day period ending on the "annuity starting date."
(4) For purposes of this Section, the "annuity starting date" means the
first day of the first period for which an amount is paid as an annuity,
or, in the case of a benefit not payable
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in the form of an annuity, the first day on which all events have occurred
which entitle the Participant to such benefit.
(5) With regard to the election, the Administrator shall provide to the
Participant no less than 30 days and no more than 90 days before the
"annuity starting date" a written explanation of:
(i) the terms and conditions of the joint and survivor annuity,
and
(ii) the Participant's right to make, and the effect of, an
election to waive the joint and survivor annuity, and
(iii) the right of the Participant's spouse to consent to any
election to waive the joint and survivor annuity, and
(iv) the right of the Participant to revoke such election, and
the effect of such revocation.
(b) In the event a married Participant duly elects pursuant to
paragraph (a)(2) above not to receive his benefit in the form of a joint
and survivor annuity, or if such Participant is not married, in the form of
a life annuity, the Administrator, pursuant to the election of the
Participant, shall direct the Trustee to distribute to a Participant or his
Beneficiary any amount to which he is entitled under the Plan in one of the
following methods:
(1) One lump-sum payment in cash or in property;
(2) A straight life annuity; single life annuities with certain
periods of five, ten or fifteen years; a single life annuity with
installment refund; survivorship annuities with installment refund and
survivorship percentages of 50, 66 2/3, or 100; fixed period annuities
for any period of whole months which is not less than 60 and does not
exceed the life expectancy of the participant and the named
Beneficiary where the life expectancy is not recalculated; and a
series of installments chosen by the Participant (with a minimum
payment each year beginning with the year the Participant turns
70 1/2), with the balance of the Participant's Vested Account, if any,
being payable on the Participant's death to his Beneficiary in a
single sum.
(3) Purchase of or providing an annuity. However, such annuity may
not be in any form that will provide for payments over a period
extending beyond either the life of the Participant (or the lives of
the Participant and
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his designated Beneficiary) or the life expectancy of the Participant
(or the life expectancy of the Participant and his designated
Beneficiary).
(c) The present value of a Participant's joint and survivor annuity
derived from Employer and Employee contributions may not be paid without
his written consent if the value exceeds, or has ever exceeded, $3,500 at
the time of any prior distribution. Further, the spouse of a Participant
must consent in writing to any immediate distribution. If the value of the
Participant's benefit derived from Employer and Employee contributions does
not exceed $3,500 and has never exceeded $3,500 at the time of any prior
distribution, the Administrator may immediately distribute such benefit
without such Participant's consent. No distribution may be made under the
preceding sentence after the "annuity starting date" unless the Participant
and his spouse consent in writing to such distribution. Any written
consent required under this paragraph must be obtained not more than 90
days before commencement of the distribution and shall be made in a manner
consistent with Section 6.5(a)2.
(d) Any distribution to a Participant who has a benefit which exceeds,
or has ever exceeded, $3,500 at the time of any prior distribution shall
require such Participant's consent if such distribution commences prior to
his Normal Retirement Age. With regard to this required consent:
(1) No consent shall be valid unless the Participant has received a
general description of the material features and an explanation of the
relative values of the optional forms of benefit available under the
Plan that would satisfy the notice requirements of Code Section 417.
(2) The Participant must be informed of his right to defer receipt of
the distribution. If a participant fails to consent, it shall be
deemed an election to defer the commencement of payment of any
benefit. However, any election to defer the receipt of benefits shall
not apply with respect to distributions which are required under
Section 6.5(e).
(3) Notice of the rights specified under this paragraph shall be
provided no less than 30 days and no more than 90 days before the
"annuity starting date".
(4) Written consent of the Participant to the distribution must not be
made before the Participant receives the notice and must not be made
more than 90 days before the "annuity starting date".
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(5) No consent shall be valid if a significant detriment is imposed
under the Plan on any Participant who does not consent to the
distribution.
(e) Notwithstanding any provision in the Plan to the contrary, the
distribution of a Participant's benefits, whether under the Plan or through
the purchase of an annuity contract, shall be made in accordance with the
following requirements and shall otherwise comply with Code Section
401(a)(9) and the Regulations thereunder (including Regulation 1.401(a)(9)-
2), the provisions of which are incorporated herein by reference:
(1) A Participant's benefits shall be distributed to him not later
than April 1st of the calendar year following the later of (i) the
calendar year in which the Participant attains age 70 1/2 or (ii) the
calendar year in which the Participant retires, provided, however,
that this clause (ii) shall not apply in the case of a Participant who
is a "five (5) percent owner" at any time during the five (5) Plan
Year period ending in the calendar year in which he attains age 70 1/2
or, in the case of a Participant who becomes a "five (5) percent
owner" during any subsequent Plan Year, clause (ii) shall no longer
apply and the required beginning date shall be the April 1st of the
calendar year following the calendar year in which such subsequent
Plan Year ends. Alternatively, distributions to a Participant must
begin no later than the applicable April 1st as determined under the
preceding sentence and must be made over the life of the Participant
(or the lives of the Participant and the Participant's designated
Beneficiary) or the life expectancy of the Participant (or the life
expectancies of the Participant and his designated Beneficiary) in
accordance with Regulations. Notwithstanding the foregoing, clause
(ii) above shall not apply to any Participant unless the Participant
had attained age 70 1/2 before January 1, 1988 and was not a "five (5)
percent owner" at any time during the Plan Year ending with or within
the calendar year in which the Participant attained age 66 1/2 or any
subsequent Plan Year.
(2) Distributions to a Participant and his Beneficiaries shall only be
made in accordance with the incidental death benefit requirements of
Code Section 401(a)(9)(G) and the Regulations thereunder.
Additionally, for calendar years beginning before 1989,
distributions may also be made under an alternative method which
provides that the then present value of the payments to be made over
the period of the Participant's life expectancy exceeds fifty percent
(50%) of the then
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present value of the total payments to be made to the Participant and
his Beneficiaries.
(f) For purposes of this Section, the life expectancy of a Participant
and a Participant's spouse (other than in the case of a life annuity) may,
at the election of the Participant or the Participant's spouse, be
redetermined in accordance with Regulations. The election, once made,
shall be irrevocable. If no election is made by the time distributions
must commence, then the life expectancy of the Participant and the
Participant's spouse shall not be subject to recalculation. Life
expectancy and joint and last survivor expectancy shall be computed using
the return multiples in Tables V and VI of Regulation 1.72-9.
(g) All annuity Contracts under this Plan shall be non-transferable
when distributed. Furthermore, the terms of any annuity Contract purchased
and distributed to a Participant or spouse shall comply with all of the
requirements of the Plan.
(h) If a distribution is made at a time when a Participant is not
fully Vested in his Participant's Account (employment has not terminated)
and the Participant may increase the Vested percentage in such account:
(1) a separate account shall be established for the Participant's
interest in the Plan as of the time of the distribution; and
(2) at any relevant time, the Participant's Vested portion of the
separate account shall be equal to an amount ("X") determined by the
formula:
X equals P(AB plus (R x D)) - (R x D)
For purposes of applying the formula: P is the Vested percentage at
the relevant time, AB is the account balance at the relevant time, D
is the amount of distribution, and R is the ratio of the account
balance at the relevant time to the account balance after
distribution.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
(a) Unless otherwise elected as provided below, a Vested Participant
who dies before the annuity starting date and who has a surviving spouse
shall have his death benefit paid to his surviving spouse in the form of a
Pre-Retirement Survivor Annuity. The Participant's spouse may direct that
payment of the Pre-Retirement Survivor Annuity commence within a reasonable
period after the Participant's death. If the
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spouse does not so direct, payment of such benefit will commence at the
time the Participant would have attained his Normal Retirement Age.
However, the spouse may elect a later commencement date. Any distribution
to the Participant's spouse shall be subject to the rules specified in
Section 6.6(g).
(b) Any election to waive the Pre-Retirement Survivor Annuity before
the Participant's death must be made by the Participant in writing during
the election period and shall require the spouse's irrevocable consent in
the same manner provided for in Section 6.5(a)(2). Further, the spouse's
consent must acknowledge the specific nonspouse Beneficiary.
Notwithstanding the foregoing, the nonspouse Beneficiary need not be
acknowledged, provided the consent of the spouse acknowledges that the
spouse has the right to limit consent only to a specific Beneficiary and
that the spouse voluntarily elects to relinquish such right.
(c) The election period to waive the Pre-Retirement Survivor Annuity
shall begin on the first day of the Plan Year in which the Participant
attains age 35 and end on the date of the Participant's death. An earlier
waiver (with spousal consent) may be made provided a written explanation of
the Pre-Retirement Survivor Annuity is given to the Participant and such
waiver becomes invalid at the beginning of the Plan Year in which the
Participant turns age 35. In the event a Vested Participant separates from
service prior to the beginning of the election period, the election period
shall begin on the date of such separation from service.
(d) With regard to the election, the Administrator shall provide each
Participant within the applicable period, with respect to such Participant
(and consistent with Regulations), a written explanation of the Pre-
Retirement Survivor Annuity containing comparable information to that
required pursuant to Section 6.5(a)(5). For the purposes of this
paragraph, the term "applicable period" means, with respect to a
Participant, whichever of the following periods ends last:
(1) The period beginning with the first day of the Plan Year in which
the Participant attains age 32 and ending with the close of the Plan
Year preceding the Plan Year in which the Participant attains age 35;
(2) A reasonable period after the individual becomes a Participant;
(3) A reasonable period ending after the Plan no longer fully
subsidizes the cost of the pre-Retirement Survivor Annuity with
respect to the Participant;
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(4) A reasonable period ending after Code Section 401(a)(11) applies
to the Participant; or
(5) A reasonable period after separation from service in the case of a
Participant who separates before attaining age 35. For this purpose,
the Administrator must provide the explanation beginning one year
before the separation from service and ending one year after such
separation. If such a Participant thereafter returns to employment
with the Employer, the applicable period for such Participant shall be
redetermined.
For purposes of applying this Section 6.6(d), a reasonable period
ending after the enumerated events described in paragraphs (2), (3) and (4)
is the end of the two year period beginning one year prior to the date the
applicable event occurs, and ending one year after that date.
(e) If the present value of the Pre-Retirement Survivor Annuity
derived from Employer and Employee contributions does not exceed $3,500 and
has never exceeded $3,500 at the time of any prior distribution, the
Administrator shall direct the immediate distribution of such amount to the
Participant's spouse. No distribution may be made under the preceding
sentence after the annuity starting date unless the spouse consents in
writing.
(f)(1) In the event the death benefit is not paid in the form of a
Pre-Retirement Survivor Annuity, it shall be paid to the Participant's
Beneficiary by either of the following methods, as elected by the
Participant (or if no election has been made prior to the Participant's
death, by his Beneficiary), subject to the rules specified in Section
6.6(g):
(i) One lump-sum payment in cash or in property;
(ii) In any of the forms available under Section 6.5(b), except
that installments shall not be available if the Beneficiary is
not the spouse.
(2) In the event the death benefit payable pursuant to Section 6.2 is
payable in installments, then, upon the death of the Participant, the
Administrator may direct the Trustee to segregate the death benefit
into a separate account, and the Trustee shall invest such segregated
account separately, and the funds accumulated in such account shall be
used for the payment of the installments.
(g) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a Participant shall
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be made in accordance with the following requirements and shall otherwise
comply with Code Section 401(a)(9) and the Regulations thereunder. If it
is determined pursuant to Regulations that the distribution of a
Participant's interest has begun and the Participant dies before his entire
interest has been distributed to him, the remaining portion of such
interest shall be distributed at least as rapidly as under the method of
distribution selected pursuant to Section 6.5 as of his date of death. If
a Participant dies before he has begun to receive any distributions of his
interest under the Plan or before distributions are deemed to have begun
pursuant to Regulations, then his death benefit shall be distributed to his
Beneficiaries by December 31st of the calendar year in which the fifth
anniversary of his date of death occurs.
However, in the event that the Participant's spouse (determined as of
the date of the Participant's death) is his Beneficiary, then in lieu of
the preceding rules, distributions must be made over the life of the spouse
(or over a period not extending beyond the life expectancy of the spouse)
and must commence on or before the later of: (1) December 31st of the
calendar year immediately following the calendar year in which the
Participant died; or (2) December 31st of the calendar year in which the
Participant would have attained age 70 1/2. If the surviving spouse dies
before distributions to such spouse begin, then the 5-year distribution
requirement of this Section shall apply as if the spouse was the
Participant.
(h) For purposes of this Section, the life expectancy of a Participant
and a Participant's spouse (other than in the case of a life annuity) may,
at the election of the Participant or the Participant's spouse, be
redetermined in accordance with Regulations. The election, once made,
shall be irrevocable. If no election is made by the time distributions
must commence, then the life expectancy of the Participant and the
Participant's spouse shall not be subject to recalculation. Life
expectancy and joint and last survivor expectancy shall be computed using
the return multiples in Tables V and VI of Regulation 1.72-9.
6.7 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever the Trustee is to make
a distribution or to commence a series of payments on or as of an Anniversary
Date, the distribution may be made or begun on such date or as soon thereafter
as is practicable. However, unless a Former Participant elects in writing to
defer the receipt of benefits (such election may not result in a death benefit
that is more than incidental), the payment of benefits shall begin not later
than the 60th day after the close of the Plan Year in which the latest of the
following events occurs: (a) the
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date on which the Participant attains the earlier of age 65 or the Normal
Retirement Age specified herein; (b) the 10th anniversary of the year in which
the Participant commenced participation in the Plan; or (c) the date the
Participant terminates his service with the Employer.
6.8 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by the laws of the state in which said Beneficiary resides. Such a payment to
the legal guardian, custodian or parent of a minor Beneficiary shall fully
discharge the Trustee, Employer, and Plan from further liability on account
thereof.
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, at the Participant's Normal
Retirement Age, remain unpaid solely by reason of the inability of the
Administrator, after sending a registered letter, return receipt requested, to
the last known address, and after further diligent effort, to ascertain the
whereabouts of such Participant or his Beneficiary, the amount so distributable
shall be treated as a Forfeiture pursuant to the Plan. In the event a
Participant or Beneficiary is located subsequent to his benefit being
reallocated, such benefit shall be restored.
6.10 PRE-RETIREMENT DISTRIBUTION
At such time as a Participant shall have attained the age of 59 1/2 years,
the Administrator, at the election of the Participant, shall direct the Trustee
to distribute all or a portion of the amount then credited to the accounts (less
earnings) maintained on behalf of the Participant. However, no distribution from
the Participant's Account shall occur prior to 100% vesting. In the event that
the Administrator makes such a distribution, the Participant shall continue to
be eligible to participate in the Plan on the same basis as any other Employee.
Any distribution made pursuant to this Section shall be made in a manner
consistent with Section 6.5, including, but not limited to, all notice and
consent requirements of Code Sections 417 and 411(a)(11) and the Regulations
thereunder. A Participant may make only two such withdrawals in any 12-month
period.
Notwithstanding the above, pre-retirement distributions from a
Participant's Elective Account shall not be permitted prior to
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the Participant attaining age 59 1/2 except as otherwise permitted under the
terms of the Plan.
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) The Administrator, at the election of the Participant, shall
direct the Trustee to distribute to any Participant in any one Plan Year up
to the lesser of 100% of his Participant's Elective Account valued as of
the last Anniversary Date or other valuation date or the amount necessary
to satisfy the immediate and heavy financial need of the Participant. Any
distribution made pursuant to this Section shall be deemed to be made as of
the first day of the Plan Year or, if later, the valuation date immediately
preceding the date of distribution, and the Participant's Elective Account
shall be reduced accordingly. Withdrawal under this Section shall be
authorized only if the distribution is on account of:
(1) Expenses for medical care described in Code Section 213(d)
previously incurred by the Participant, his spouse, or any of his
dependents (as defined in Code Section 152) or necessary for these
persons to obtain medical care;
(2) The costs directly related to the purchase of a principal
residence for the Participant (excluding mortgage payments);
(3) Payment of tuition and related educational fees for the next
twelve (12) months of post-secondary education for the Participant,
his spouse, children, or dependents; or
(4) Payments necessary to prevent the eviction of the Participant from
his principal residence or foreclosure on the mortgage of the
Participant's principal residence.
(b) No distribution shall be made pursuant to this Section unless the
Administrator, based upon the Participant's representation and such other
facts as are known to the Administrator, determines that all of the
following conditions are satisfied:
(1) The distribution is not in excess of the amount of the immediate
and heavy financial need of the Participant. The amount of the
immediate and heavy financial need may include any amounts necessary
to pay any federal, state, or local income taxes or penalties
reasonably anticipated to result from the distribution;
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(2) The Participant has obtained all distributions, other than
hardship distributions, and all nontaxable (at the time of the loan)
loans currently available under all plans maintained by the Employer;
(3) The Plan, and all other plans maintained by the Employer, provide
that the Participant's elective deferrals and voluntary Employee
contributions will be suspended for at least twelve (12) months after
receipt of the hardship distribution or, the Participant, pursuant to
a legally enforceable agreement, will suspend his elective deferrals
and voluntary Employee contributions to the Plan and all other plans
maintained by the Employer for at least twelve (12) months after
receipt of the hardship distribution; and
(4) The Plan, and all other plans maintained by the Employer, provide
that the Participant may not make elective deferrals for the
Participant's taxable year immediately following the taxable year of
the hardship distribution in excess of the applicable limit under Code
Section 402(g) for such next taxable year less the amount of such
Participant's elective deferrals for the taxable year of the hardship
distribution.
(c) Notwithstanding the above, for Plan Years beginning after December
31, 1988, distributions from the Participant's Elective Account pursuant to
this Section shall be limited, as of the date of distribution, to the
Participant's Elective Account as of the end of the last Plan Year ending
before July 1, 1989, plus the total Participant's Deferred Compensation
after such date, reduced by the amount of any previous distributions
pursuant to this Section and Section 6.10.
(d) Any distribution made pursuant to this Section shall be made in a
manner which is consistent with and satisfies the provisions of Section
6.5, including, but not limited to, all notice and consent requirements of
Code Sections 417 and 411(a)(11) and the Regulations thereunder.
6.12 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided to a Participant in
this Plan shall be subject to the rights afforded to any "alternate payee" under
a "qualified domestic relations order." Furthermore, a distribution to an
"alternate payee" shall be permitted if such distribution is authorized by a
"qualified domestic relations order," even if the affected Participant has not
separated from service and has not reached the "earliest retirement age" under
the Plan. For the purposes of this Section, "alternate payee," "qualified
domestic relations order" and "earliest
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retirement age" shall have the meaning set forth under Code Section 414(p).
6.13 DIRECT ROLLOVER DISTRIBUTIONS
(a) This Section applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a distributee's election under this Section, a distributee
may elect, at the time and in the manner prescribed by the Committee, to
have any portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct rollover.
(b) Eligible rollover distribution: An eligible rollover distribution
is any distribution of all or any portion of the balance to the credit of
the distributee, except that an eligible rollover distribution does not
include: any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or
life expectancy) of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated
beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under Section
401(a)(9) of the Code; and the portion of any distribution that is not
includible in gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer securities).
(c) Eligible retirement plan: Any eligible retirement plan is an
individual retirement account described in Section 408(a) of the Code, an
individual retirement annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code, or a qualified trust
described in Section 401(a) of the Code, that accepts the distributees'
eligible rollover distribution. However, in the case of an eligible
rollover distribution to the surviving spouse, an eligible retirement plan
is an individual retirement account or individual retirement annuity.
(d) Distributee: A distributee includes an Employee or former
employee. In addition, the Employee's or former employee's surviving
spouse and the Employee's or former employee's spouse or former spouse who
is the alternate payee under a qualified domestic relations order, as
defined in Section 414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
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(e) Direct rollover: A direct rollover is a payment by the Plan to
the eligible retirement plan specified by the distributee.
ARTICLE VII.
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of responsibilities:
(a) Consistent with the "funding policy and method" determined by the
Employer, to invest, manage, and control the Plan assets subject (i) to the
direction of an Investment Manager if the Administrator should appoint such
manager as to all or a portion of the assets of the Plan and (ii) in the
case of a Participant's Directed Investment Account, to the provisions of
Section 7.3(s);
(b) At the direction of the Administrator, to pay benefits required
under the Plan to be paid to Participants, or, in the event of their death,
to their Beneficiaries;
(c) To maintain records of receipts and disbursements and furnish to
the Employer and/or Administrator for each Plan Year a written annual
report per Section 7.6; and
(d) If there shall be more than one Trustee, they shall act by a
majority of their number, but may authorize one or more of them to sign
papers on their behalf.
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) The Trustee shall invest and reinvest the Trust Fund to keep the
Trust Fund invested without distinction between principal and income and in
such securities or property, real or personal, wherever situated, as the
Trustee shall deem advisable, including, but not limited to, stocks, common
or preferred, bonds and other evidences of indebtedness or ownership, and
real estate or any interest therein. The Trustee shall at all times in
making investments of the Trust Fund consider, among other factors, the
short and long-term financial needs of the Plan on the basis of information
furnished by the Employer. In making such investments, the Trustee shall
not be restricted to securities or other property of the character
expressly authorized by the applicable law for trust investments; however,
the Trustee shall give due regard to any limitations imposed by the Code or
the Act so that at all times the Plan may qualify as a qualified Profit
Sharing Plan and Trust.
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(b) The Trustee may employ a bank or trust company pursuant to the
terms of its usual and customary bank agency agreement, under which the
duties of such bank or trust company shall be of a custodial, clerical and
record-keeping nature.
7.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under common law,
statutory authority, including the Act, and other provisions of the Plan, shall
have the following powers and authorities, to be exercised in the Trustee's sole
discretion:
(a) To purchase, or subscribe for, any securities or other property
and to retain the same. In conjunction with the purchase of securities,
margin accounts may be opened and maintained;
(b) To sell, exchange, convey, transfer, grant options to purchase, or
otherwise dispose of any securities or other property held by the Trustee,
by private contract or at public auction. No person dealing with the
Trustee shall be bound to see to the application of the purchase money or
to inquire into the validity, expediency, or propriety of any such sale or
other disposition, with or without advertisement;
(c) To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without power of
substitution; to exercise any conversion privileges, subscription rights or
other options, and to make any payments incidental thereto; to oppose, or
to consent to, or otherwise participate in, corporate reorganizations or
other changes affecting corporate securities, and to delegate discretionary
powers, and to pay any assessments or charges in connection therewith; and
generally to exercise any of the powers of an owner with respect to stocks,
bonds, securities, or other property;
(d) To cause any securities or other property to be registered in the
Trustee's own name or in the name of one or more of the Trustee's nominees,
and to hold any investments in bearer form, but the books and records of
the Trustee shall at all times show that all such investments are part of
the Trust Fund;
(e) To borrow or raise money for the purposes of the Plan in such
amount, and upon such terms and conditions, as the Trustee shall deem
advisable; and for any sum so borrowed, to issue a promissory note as
Trustee, and to secure the repayment thereof by pledging all, or any part,
of the Trust Fund; and no person lending money to the Trustee shall be
bound to see to the application of the money lent or to
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inquire into the validity, expediency, or propriety of any borrowing;
(f) To keep such portion of the Trust Fund in cash or cash balances as
the Trustee may, from time to time, deem to be in the best interests of the
Plan, without liability for interest thereon;
(g) To accept and retain for such time as the Trustee may deem
advisable any securities or other property received or acquired as Trustee
hereunder, whether or not such securities or other property would normally
be purchased as investments hereunder;
(h) To make, execute, acknowledge, and deliver any and all documents
of transfer and conveyance and any and all other instruments that may be
necessary or appropriate to carry out the powers herein granted;
(i) To settle, compromise, or submit to arbitration any claims, debts,
or damages due or owing to or from the Plan, to commence or defend suits or
legal or administrative proceedings, and to represent the Plan in all suits
and legal and administrative proceedings;
(j) To employ suitable agents and counsel and to pay their reasonable
expenses and compensation, and such agent or counsel may or may not be
agent or counsel for the Employer;
(k) To apply for and procure from responsible insurance companies, to
be selected by the Administrator, as an investment of the Trust Fund such
annuity, or other Contracts (on the life of any Participant) as the
Administrator shall deem proper; to exercise, at any time or from time to
time, whatever rights and privileges may be granted under such annuity, or
other Contracts; to collect, receive, and settle for the proceeds of all
such annuity or other Contracts as and when entitled to do so under the
provisions thereof;
(l) To invest funds of the Trust in time deposits or savings accounts
bearing a reasonable rate of interest in the Trustee's bank;
(m) To invest in Treasury Bills and other forms of United States
government obligations;
(n) To invest in shares of investment companies registered under the
Investment Company Act of 1940;
(o) To sell, purchase and acquire put or call options if the options
are traded on and purchased through a national securities exchange
registered under the Securities Exchange
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Act of 1934, as amended, or, if the options are not traded on a national
securities exchange, are guaranteed by a member firm of the New York Stock
Exchange;
(p) To deposit monies in federally insured savings accounts or
certificates of deposit in banks or savings and loan associations;
(q) To pool all or any of the Trust Fund, from time to time, with
assets belonging to any other qualified employee pension benefit trust
created by the Employer or an affiliated company of the Employer, and to
commingle such assets and make joint or common investments and carry joint
accounts on behalf of this Plan and such other trust or trusts, allocating
undivided shares or interests in such investments or accounts or any pooled
assets of the two or more trusts in accordance with their respective
interests;
(r) To do all such acts and exercise all such rights and privileges,
although not specifically mentioned herein, as the Trustee may deem
necessary to carry out the purposes of the Plan.
(s) Directed Investment Account. The powers granted to the Trustee
shall be exercised in the sole fiduciary discretion of the Trustee.
However, if Participants are so empowered by the Administrator, each
Participant may direct the Trustee to separate and keep separate all or a
portion of his account; and further each Participant is authorized and
empowered, in his sole and absolute discretion, to give directions to the
Trustee pursuant to the procedure established by the Administrator and in
such form as the Trustee may require concerning (i) the investment of the
Participant's Directed Investment Account and (ii) any voting and tender
issues involving Employer securities then held in the Participant's
Directed Investment Account. The Trustee shall comply as promptly as
practicable with directions given by the Participant hereunder. The
Trustee may refuse to comply with any direction from the Participant in the
event the Trustee, in its sole and absolute discretion, deems such
directions improper by virtue of applicable law. The Trustee shall not be
responsible or liable for any loss or expense which may result from the
Trustee's refusal or failure to comply with any directions from the
Participant. Any costs and expenses related to compliance with the
Participant's directions may, within the Administrator's sole discretion,
be borne by the Participant's Directed Investment Account.
7.4 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
At the direction of the Administrator, the Trustee shall, from time to
time, in accordance with the terms of the Plan, make
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payments out of the Trust Fund. The Trustee shall not be responsible in any way
for the application of such payments.
7.5 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as shall from time
to time be agreed upon in writing by the Employer and the Trustee. An individual
serving as Trustee who already receives full-time pay from the Employer shall
not receive compensation from the Plan. In addition, the Trustee shall be
reimbursed for any reasonable expenses, including reasonable counsel fees
incurred by it as Trustee. Such compensation and expenses shall be paid from the
Trust Fund unless paid or advanced by the Employer. All taxes of any kind and
all kinds whatsoever that may be levied or assessed under existing or future
laws upon, or in respect of, the Trust Fund or the income thereof, shall be paid
from the Trust Fund.
7.6 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of the Anniversary Date
or receipt of the Employer's contribution for each Plan Year, the Trustee shall
furnish to the Employer and Administrator a written statement of account with
respect to the Plan Year for which such contribution was made setting forth:
(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust Fund upon sales or
other disposition of the assets;
(c) the increase, or decrease, in the value of the Trust Fund;
(d) all payment and distributions made from the Trust Fund; and
(e) such further information as the Trustee and/or Administrator deems
appropriate. The Employer, forthwith upon its receipt of each such
statement of account, shall acknowledge receipt thereof in writing and
advise the Trustee and/or Administrator of its approval or disapproval
thereof. Failure by the Employer to disapprove any such statement of
account within thirty (30) days after its receipt thereof shall be deemed
an approval thereof. The approval by the Employer of any statement of
account shall be binding as to all matters embraced therein as between the
Employer and the Trustee to the same extent as if the account of the
Trustee had been settled by judgment or decree in an action for a judicial
settlement of its account in a court of competent jurisdiction in which the
Trustee, the Employer and all persons having or claiming an interest in the
Plan were
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parties; provided, however, that nothing herein contained shall deprive the
Trustee of its right to have its accounts judicially settled if the Trustee
so desires.
7.7 AUDIT
(a) If an audit of the Plan's records shall be required by the Act and
the regulations thereunder for any Plan Year, the Administrator shall
direct the Trustee to engage on behalf of all Participants an independent
qualified public accountant for that purpose. Such accountant shall, after
an audit of the books and records of the Plan in accordance with generally
accepted auditing standards, within a reasonable period after the close of
the Plan Year, furnish to the Administrator and the Trustee a report of his
audit setting forth his opinion as to whether any statements, schedules or
lists that are required by Act Section 103 or the Secretary of Labor to be
filed with the Plan's annual report, are presented fairly in conformity
with generally accepted accounting principles applied consistently. All
auditing and accounting fees shall be an expense of and may, at the
election of the Administrator, be paid from the Trust Fund.
(b) If some or all of the information necessary to enable the
Administrator to comply with Act Section 103 is maintained by a bank,
insurance company, or similar institution, regulated and supervised and
subject to periodic examination by a state or federal agency, it shall
transmit and certify the accuracy of that information to the Administrator
as provided in Act Section 103(b) within one hundred twenty (120) days
after the end of the Plan Year or by such other date as may be prescribed
under regulations of the Secretary of Labor.
7.8 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the Employer,
at least thirty (30) days before its effective date, a written notice of
his resignation.
(b) The Employer may remove the Trustee by mailing by registered or
certified mail, addressed to such Trustee at his last known address, at
least thirty (30) days before its effective date, a written notice of his
removal.
(c) Upon the death, resignation, incapacity, or removal of any
Trustee, a successor may be appointed by the Employer; and such successor,
upon accepting such appointment in writing and delivering same to the
Employer, shall, without further act, become vested with all the estate,
rights, powers, discretions, and duties of his predecessor with like
respect as if he were originally named as a Trustee herein. Until
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such a successor is appointed, the remaining Trustee or Trustees shall have
full authority to act under the terms of the Plan.
(d) The Employer may designate one or more successors prior to the
death, resignation, incapacity, or removal of a Trustee. In the event a
successor is so designated by the Employer and accepts such designation,
the successor shall, without further act, become vested with all the
estate, rights, powers, discretions, and duties of his predecessor with the
like effect as if:he were originally named as Trustee herein immediately
upon the death, resignation, incapacity, or removal of his predecessor.
(e) Whenever any Trustee hereunder ceases to serve as such, he shall
furnish to the Employer and Administrator a written statement of account
with respect to the portion of the Plan Year during which he served as
Trustee. This statement shall be either (i) included as part of the annual
statement of account for the Plan Year required under Section 7.6 or (ii)
set forth in a special statement. Any such special statement of account
should be rendered to the Employer no later than the due date of the annual
statement of account for the Plan Year. The procedures set forth in
Section 7.6 for the approval by the Employer of annual statements account
shall apply to any special statement of account rendered hereunder and
approval by the Employer of any such special statement in the manner
provided in Section 7.6 shall have the same effect upon the statement as
the Employer's approval of an annual statement of account. No successor to
the Trustee shall have any duty or responsibility to investigate the acts
or transactions of any predecessor who has rendered all statements of
account required by Section 7.6 and this subparagraph.
7.9 TRANSFER OF INTEREST
Notwithstanding any other provision contained in this Plan, the Trustee at
the direction of the Administrator shall transfer the Vested interest, if any,
of such Participant in his account to another trust forming part of a pension,
profit sharing or stock bonus plan maintained by such Participant's new employer
and represented by said employer in writing as meeting the requirements of Code
Section 401(a), provided that the trust to which such transfers are made permits
the transfer to be made.
Notwithstanding the above, with respect to distributions made after
December 31, 1992, if the distributee of any "eligible rollover distribution"
(as defined in Code Section 402(f)(2)(A)) (1) elects to have such distribution
paid directly to an "eligible retirement plan", and (2) specifies the "eligible
retirement plan" to which such distribution is to be paid (in such form and at
such
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time as the Administrator may prescribe), then the distribution shall be made in
the form of a direct trustee-to-trustee transfer to the specified eligible
retirement plan. Moreover, the amount subject to the direct trustee-to-trustee
transfer shall be limited to the amount of the distribution that would be
includible in gross income if not transferred in accordance with the preceding
(determined without regard to Code Sections 402(c) and 403(a)(4)).
For purposes of this section, the term "eligible retirement plan" has the
meaning given such term by Code Section 402(c)(8)(B), except that a qualified
trust shall be considered an eligible retirement plan only if it is a defined
contribution plan, the terms of which permit the acceptance of rollover
distributions.
7.10 EMPLOYER SECURITIES AND REAL PROPERTY
The Trustee shall be empowered to acquire and hold "qualifying Employer
securities" and "qualifying Employer real property," as those terms are defined
in the Act, provided, however, that the Trustee shall not be permitted to
acquire any qualifying Employer securities or qualifying Employer real property
if, immediately after the acquisition of such securities or property, the fair
market value of all qualifying Employer securities and qualifying Employer real
property held by the Trustee hereunder should amount to more than 100% of the
fair market value of all the assets in the Trust Fund.
ARTICLE VIII.
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT
(a) The Employer shall have the right at any time to amend the Plan,
subject to the limitations of this Section. However, any amendment which
affects the rights, duties or responsibilities of the Trustee and
Administrator may only be made with the Trustee's and Administrator's
written consent. Any such amendment shall become effective as provided
therein upon its execution. The Trustee shall not be required to execute
any such amendment unless the Trust provisions contained herein are a part
of the Plan and the amendment affects the duties of the Trustee hereunder.
(b) No amendment to the Plan shall be effective if it authorizes or
permits any part of the Trust Fund (other than such part as is required to
pay taxes and administration expenses) to be used for or diverted to any
purpose other than for the exclusive benefit of the Participants or their
Beneficiaries or estates; or causes any reduction in the amount credited to
the account of any Participant; or causes or permits any portion of the
Trust Fund to revert to or become property of the Employer.
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(c) Except as permitted by Regulations, no Plan amendment or
transaction having the effect of a Plan amendment (such as a merger, plan
transfer or similar transaction) shall be effective to the extent it
eliminates or reduces any "Section 411(d)(6) protected benefit" or adds or
modifies conditions relating to "Section 411(d)(6) protected benefits" the
result of which is a further restriction on such benefit unless such
protected benefits are preserved with respect to benefits accrued as of the
later of the adoption date or effective date of the amendment. "Section
411(d)(6) protected benefits" are benefits described in Code Section
411(d)(6)(A), early retirement benefits and retirement-type subsidies, and
optional forms of benefit.
8.2 TERMINATION
(a) The Employer shall have the right at any time to terminate the
plan by delivering to the Trustee and Administrator written notice of such
termination. Upon any full or partial termination, all amounts credited to
the affected Participants' Combined Accounts shall become 100% Vested as
provided in Section 6.4 and shall not thereafter be subject to forfeiture,
and all unallocated amounts shall be allocated to the accounts of all
Participants in accordance with the provisions hereof.
(b) Upon the full termination of the Plan, the Employer shall direct
the distribution of the assets of the Trust Fund to Participants in a
manner which is consistent with and satisfies the provisions of Section
6.5. Distributions to a Participant shall be made in cash or in property
or through the purchase of irrevocable nontransferable deferred commitments
from an insurer. Except as permitted by Regulations, the termination of
the Plan shall not result in the reduction of "Section 411(d)(6) protected
benefits" in accordance with Section 8.1(c).
8.3 MERGER OR CONSOLIDATION
This Plan and Trust may be merged or consolidated with, or its assets
and/or liabilities may be transferred to any other plan and trust only if the
benefits which would be received by a Participant of this Plan, in the event of
a termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation, and such transfer, merger or consolidation does not otherwise
result in the elimination or reduction of any "Section 411(d)(6) protected
benefits" in accordance with Section 8.1(c).
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ARTICLE IX.
MISCELLANEOUS
9.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between the
Employer and any Participant or to be a consideration or an inducement for the
employment of any Participant or Employee. Nothing contained in this Plan shall
be deemed to give any Participant or Employee the right to be retained in the
service of the Employer or to interfere with the right of the Employer to
discharge any Participant or Employee at any time regardless of the effect which
such discharge shall have upon him as a Participant of this Plan.
9.2 ALIENATION
(a) Subject to the exceptions provided below, no benefit which shall
be payable out of the Trust Fund to any person (including a Participant or
his Beneficiary) shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and
any attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber, or charge the same shall be void; and no such benefit shall in
any manner be liable for, or subject to, the debts, contracts, liabilities,
engagements, or torts of any such person, nor shall it be subject to
attachment or legal process for or against such person, and the same shall
not be recognized by the Trustee, except to such extent as may be required
by law.
(b) This provision shall not apply to a "qualified domestic relations
order" defined in Code Section 414(p), and those other domestic relations
orders permitted to be so treated by the Administrator under the provisions
of the Retirement Equity Act of 1984. The Administrator shall establish a
written procedure to determine the qualified status of domestic relations
orders and to administer distributions under such qualified orders.
Further, to the extent provided under a "qualified domestic relations
order", a former spouse of a Participant shall be treated as the spouse or
surviving spouse for all purposes under the Plan.
9.3 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced according to the
Act and the laws of the State of Texas, other than its laws respecting choice of
law, to the extent not preempted by the Act.
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9.4 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply, and whenever any words are used herein
in the singular or plural form, they shall be construed as though they were also
used in the other form in all cases where they would so apply.
9.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding the Trust
and/or Plan established hereunder to which the Trustee or the Administrator may
be a party, and such claim, suit, or proceeding is resolved in favor of the
Trustee or Administrator, they shall be entitled to be reimbursed from the Trust
Fund for any and all costs, attorney's fees, and other expenses pertaining
thereto incurred by them for which they shall have become liable.
9.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically permitted by
law, it shall be impossible by operation of the Plan or of the Trust, by
termination of either, by power of revocation or amendment, by the
happening of any contingency, by collateral arrangement or by any other
means, for any part of the corpus or income of any trust fund maintained
pursuant to the Plan or any funds contributed thereto to be used for, or
diverted to, purposes other than the exclusive benefit of Participants,
Retired Participants, or their Beneficiaries.
(b) In the event the Employer shall make an excessive contribution
under a mistake of fact pursuant to Act Section 403(c)(2)(A), the Employer
may demand repayment of such excessive contribution at any time within one
(1) year following the time of payment and the Trustees shall return such
amount to the Employer within the one (1) year period. Earnings of the
Plan attributable to the excess contributions may not be returned to the
Employer but any losses attributable thereto must reduce the amount so
returned.
9.7 BONDING
Every Fiduciary, except a bank or an insurance company, unless exempted by
the Act and regulations thereunder, shall be bonded in an amount not less than
10% of the amount of the funds such Fiduciary handles; provided, however, that
the minimum bond shall be $1,000 and the maximum bond, $500,000. The amount of
funds handled shall be determined at the beginning of each Plan Year by the
amount of funds handled by such person, group, or class to be covered and their
predecessors, if any, during the preceding Plan Year, or if there is no
preceding Plan Year, then by the amount of
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the funds to be handled during the then current year. The bond shall provide
protection to the Plan against any loss by reason of acts of fraud or dishonesty
by the Fiduciary alone or in connivance with others. The surety shall be a
corporate surety company (as such term is used in Act Section 412(a)(2)), and
the bond shall be in a form approved by the Secretary of Labor. Notwithstanding
anything in the Plan to the contrary, the cost of such bonds shall be an expense
of and may, at the election of the Administrator, be paid from the Trust Fund or
by the Employer.
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer nor the Trustee, nor their successors, shall be
responsible for the validity of any Contract issued hereunder or for the failure
on the part of the insurer to make payments provided by any such Contract, or
for the action of any person which may delay payment or render a Contract null
and void or unenforceable in whole or in part.
9.9 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall not have any
responsibility for the validity of this Plan or for the tax or legal aspects of
this Plan. The insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see to the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the insurer shall not be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues hereunder, or the rules of the insurer.
9.10 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative, Beneficiary, or
to any guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of the Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and the Employer,
either of whom may require such Participant, legal representative, Beneficiary,
guardian or committee, as a condition precedent to such payment, to execute a
receipt and release thereof in such form as shall be determined by the Trustee
or Employer.
9.11 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or required
to do or perform any act or matter or thing, it shall be done and performed by a
person duly authorized by its legally constituted authority.
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9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the Employer, (2) the
Administrator and (3) the Trustee. The named Fiduciaries shall have only those
specific powers, duties, responsibilities, and obligations as are specifically
given them under the Plan. In general, the Employer shall have the sole
responsibility for making the contributions provided for under Section 4.1; and
shall have the sole authority to appoint and remove the Trustee and the
Administrator; to formulate the Plan's "funding policy and method"; and to amend
or terminate, in whole or in part, the Plan. The Administrator shall have the
sole responsibility for the administration of the Plan, which responsibility is
specifically described in the Plan. The Trustee shall have the sole
responsibility of management of the assets held under the Trust, except those
assets, the management of which has been assigned to an Investment Manager, who
shall be solely responsible for the management of the assets assigned to it, all
as specifically provided in the Plan. Each named Fiduciary warrants that any
directions given, information furnished, or action taken by it shall be in
accordance with the provisions of the Plan, authorizing or providing for such
direction, information or action. Furthermore, each named Fiduciary may rely
upon any such direction, information or action of another named Fiduciary as
being proper under the Plan, and is not required under the Plan to inquire into
the propriety of any such direction, information or action. It is intended under
the Plan that each named Fiduciary shall be responsible for the proper exercise
of its own powers, duties, responsibilities and obligations under the Plan. No
named Fiduciary shall guarantee the Trust Fund in any manner against investment
loss or depreciation in asset value. Any person or group may serve in more than
one Fiduciary capacity. In the furtherance of their responsibilities hereunder,
the "named Fiduciaries" shall be empowered to interpret the Plan and Trust and
to resolve ambiguities, inconsistencies and omissions, which findings shall be
binding, final and conclusive.
9.13 HEADINGS
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
9.14 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary, contributions to
this Plan are conditioned upon the initial qualification of the Plan under
Code Section 401. If the Plan receives an adverse determination with
respect to its initial qualification, then the Plan may return such
contributions to the Employer within one year after such determination,
provided the application for the determination is made by the
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time prescribed by law for filing the Employer's return for the taxable
year in which the Plan was adopted, or such later date as the Secretary of
the Treasury may prescribe.
(b) Notwithstanding any provisions to the contrary, except Sections
3.6, 3.7, and 4.1(e), any contribution by the Employer to the Trust Fund is
conditioned upon the deductibility of the contribution by the Employer
under the Code and, to the extent any such deduction is disallowed, the
Employer may, within one (1) year following the disallowance of the
deduction, demand repayment of such disallowed contribution and the Trustee
shall return such contribution within one (1) year following the
disallowance. Earnings of the Plan attributable to the excess contribution
may not be returned to the Employer, but any losses attributable thereto
must reduce the amount so returned.
9.15 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a uniform,
nondiscriminatory manner. In the event of any conflict between the terms of this
Plan and any Contract purchased hereunder, the Plan provisions shall control.
ARTICLE X.
PARTICIPATING EMPLOYERS
10.1 ADOPTION BY OTHER EMPLOYERS
Notwithstanding anything herein to the contrary, with the consent of the
Employer and Trustee, any other corporation or entity, whether an affiliate or
subsidiary or not, may adopt this Plan and all of the provisions hereof, and
participate herein and be known as a Participating Employer, by a properly
executed document evidencing said intent and will of such Participating
Employer.
10.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS
(a) Each such Participating Employer shall be required to use the same
Trustee as provided in this Plan.
(b) The Trustee may, but shall not be required to, commingle, hold and
invest as one Trust Fund all contributions made by Participating Employers,
as well as all increments thereof. However, the assets of the Plan shall,
on an ongoing basis, be available to pay benefits to all Participants and
Beneficiaries under the Plan without regard to the Employer or
Participating Employer who contributed such assets.
(c) The transfer of any Participant from or to an Employer
participating in this Plan, whether he be an Employee
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of the Employer or a Participating Employer, shall not affect such
Participant's rights under the Plan, and all amounts credited to such
Participant's Combined Account as well as his accumulated service time with
the transferor or predecessor, and his length of participation in the Plan,
shall continue to his credit.
(d) All rights and values forfeited by termination of employment shall
inure only to the benefit of the Participants of the Employer or
participating Employer by which the forfeiting Participant was employed,
except if the Forfeiture is for an Employee whose Employer is an Affiliated
Employer, then said Forfeiture shall inure to the benefit of the
Participants of those Employers who are Affiliated Employers. Should an
Employee of one ("First") Employer be transferred to an associated
("Second") Employer which is an Affiliated Employer, such transfer shall
not cause his account balance (generated while an Employee of "First"
Employer) in any manner, or by any amount to be forfeited. Such Employee's
Participant Combined Account balance for all purposes of the Plan,
including length of service, shall be considered as though he had always
been employed by the "Second" Employer and as such had received
contributions, forfeitures, earnings or losses, and appreciation or
depreciation in value of assets totaling the amount so transferred.
(e) Any expenses of the Trust which are to be paid by the Employer or
borne by the Trust Fund shall be paid by each Participating Employer in the
same proportion that the total amount standing to the credit of all
Participants employed by such Employer bears to the total standing to the
credit of all Participants.
10.3 DESIGNATION OF AGENT
Each Participating Employer shall be deemed to be a party to this Plan;
provided, however, that with respect to all of its relations with the Trustee
and Administrator for the purpose of this Plan, each Participating Employer
shall be deemed to have designated irrevocably the Employer as its agent. Unless
the context of the Plan clearly indicates the contrary, the word "Employer"
shall be deemed to include each Participating Employer as related to its
adoption of the Plan.
10.4 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred between Participating
Employers, and in the event of any such transfer, the Employee involved shall
carry with him his accumulated service and eligibility. No such transfer shall
effect a termination of employment hereunder, and the Participating Employer to
which the Employee is transferred shall thereupon become obligated hereunder
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with respect to such Employee in the same manner as was the Participating
Employer from whom the Employee was transferred.
10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION
Any contribution subject to allocation during each Plan Year shall be
allocated only among those Participants of the Employer or Participating
Employer making the contribution, except if the contribution is made by an
Affiliated Employer, in which event such contribution shall be allocated among
all Participants of all Participating Employers who are Affiliated Employers in
accordance with the provisions of this Plan. On the basis of the information
furnished by the Administrator, the Trustee shall keep separate books and
records concerning the affairs of each Participating Employer hereunder and as
to the accounts and credits of the Employees of each Participating Employer. The
Trustee may, but need not, register Contracts so as to evidence that a
particular participating Employer is the interested Employer hereunder, but in
the event of an Employee transfer from one Participating Employer to another,
the employing Employer shall immediately notify the Trustee thereof.
10.6 AMENDMENT
Amendment of this Plan by the Employer at any time when there shall be a
Participating Employer hereunder shall only be by the written action of each and
every Participating Employer and with the consent of the Trustee where such
consent is necessary in accordance with the terms of this Plan.
10.7 DISCONTINUANCE OF PARTICIPATION
Any Participating Employer shall be permitted to discontinue or revoke its
participation in the Plan. At the time of any such discontinuance or revocation,
satisfactory evidence thereof and of any applicable conditions imposed shall be
delivered to the Trustee. The Trustee shall thereafter transfer, deliver and
assign Contracts and other Trust Fund assets allocable to the Participants of
such Participating Employer to such new Trustee as shall have been designated by
such Participating Employer, in the event that it has established a separate
pension plan for its Employees provided, however, that no such transfer shall be
made if the result is the elimination or reduction of any "Section 411(d)(6)
protected benefits" in accordance with Section 8.1(c). If no successor is
designated, the Trustee shall retain such assets for the Employees of said
Participating Employer pursuant to the provisions of Article VII hereof. In no
such event shall any part of the corpus or income of the Trust as it relates to
such Participating Employer be used for or diverted to purposes other than for
the exclusive benefit of the Employees of such Participating Employer.
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10.8 ADMINISTRATOR'S AUTHORITY
The Administrator shall have authority to make any and all necessary rules
or regulations, binding upon all Participating Employers and all Participants,
to effectuate the purpose of this Article.
10.9 EMPLOYER INDEMNITY
The Employer shall indemnify and hold harmless each member of the Plan
Committee (if any), the Trustee and the Administrator, from and against any and
all costs, liabilities, losses and expenses, including without limitation, any
and all reasonable attorneys' fees, incurred by each such member as a result of,
arising in connection with or in any way related to, directly or indirectly, the
performance in good faith of his or its duties as a member of the Plan Committee
(if any), the Trustee or the Administrator.
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IN WITNESS WHEREOF, this Plan has been executed the day and year first
above written.
American Ecology Corporation
By__________________________________
EMPLOYER
____________________________________
TRUSTEE
____________________________________
TRUSTEE
____________________________________
TRUSTEE
88
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APPENDIX A
AMERICAN ECOLOGY SERVICES CORPORATION
(and its subsidiaries which previously adopted
the American Ecology Services Corporation 401(k) Plan)
<PAGE>
AMENDMENT TO THE AMERICAN
ECOLOGY CORPORATION 401(K) SAVINGS PLAN
WHEREAS, American Ecology Corporation (the "Employer") has heretofore
adopted the American Ecology Corporation 401(k) Savings Plan ("Plan"); and
WHEREAS, pursuant to Section 8.1 of the Plan, the Employer has reserved the
right to amend the Plan; and
WHEREAS, the Employer desires to amend the Plan to authorize the merger of
the 401(k) plan sponsored by American Ecology Services Corporation ("AESC")
(which plan was previously known as the Waste Processor Industries, Inc. 401(k)
Retirement Savings Plan) (such plan is referred to as the "AESC Plan") into the
Plan effective on or about May 1, 1993.
NOW, THEREFORE, effective on or about May 1, 1993, the Plan is hereby
amended as follows:
1. The assets of the AESC Plan shall be merged with and become part of the
assets of the Plan.
2. American Ecology Services Corporation and each of its subsidiaries
which have previously adopted the AESC Plan shall be considered a "Participating
Employer" under the terms of the Plan.
3. Appendix A shall be modified to add American Ecology Services
Corporation and each of its subsidiaries which have previously adopted the AESC
Plan as a Participating Employer.
4. A new Section 10.10 shall be added to the Plan as follows:
"10.10 AMERICAN ECOLOGY SERVICES CORPORATION
MERGER
Notwithstanding any other provisions of the Plan to the contrary, all
years of service credited to Participants under the 401(k) Plan previously
sponsored by American Ecology Services Corporation ("AESC Plan") shall be
treated as service with the Employer under the Plan. In addition, for
purposes of computing the vested portion of any Participant's Account under
the Plan where such Participant previously participated in the AESC Plan,
the vesting schedule provided for in the Plan shall be utilized for all
purposes. For purposes of the foregoing, assets transferred from the AESC
Plan shall not be treated as rollover contributions and/or transfers to the
Plan under Section 4.11 of the Plan, but instead shall be treated as a
merger of the AESC Plan's assets with the Plan's assets pursuant to the
provisions of Section 8.3 of the Plan."
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IN WITNESS WHEREOF, the Employer has executed this amendment effective on
or about May 1, 1993.
AMERICAN ECOLOGY CORPORATION
/s/
By:___________________________________
Vice President
Its:__________________________________
94
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AMERICAN ECOLOGY CORPORATION 401(K) SAVINGS PLAN
SUPPLEMENTAL ADOPTION AGREEMENT
The undersigned Employer is authorized to execute this Supplemental
Adoption Agreement on its own behalf and on behalf of each of its subsidiaries.
By executing this Supplemental Adoption Agreement, the Employer (as well as each
of its subsidiaries) hereby agree to each be considered a "Participating
Employer" under the terms and conditions of the American Ecology Corporation
401(k) Savings Plan ("Plan") and to be bound by all such terms and conditions of
the Plan.
In addition, assets previously held under the 401(k) Plan sponsored by
American Ecology Services Corporation (which plan was previously known as the
Waste Processor Industries, Inc. 401(k) Retirement Savings Plan) will be
transferred to and merged into the Plan effective as of the date set forth
below.
IN WITNESS WHEREOF, the Employer has executed this Supplemental Adoption
Agreement effective as of May 1, 1993.
"EMPLOYER"
AMERICAN ECOLOGY SERVICES
CORPORATION
/s/
By:________________________
Vice President
Title:_____________________
AGREED TO AND ACCEPTED BY
AMERICAN ECOLOGY CORPORATION
AND THE TRUSTEES OF THE PLAN:
TRUSTEES:
/s/ William P. McCaughey
___________________________________
William P. McCaughey
/s/ C. Clifford Wright, Jr.
___________________________________
C. Clifford Wright, Jr.
American Ecology Corporation
/s/
By:______________________________
Vice President
Title:___________________________
95
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AMERICAN ECOLOGY CORPORATION
RETIREMENT PLAN
[Effective: January 1, 1994]
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page(s)
-------
<C> <S> <C>
ARTICLE I. DEFINITIONS........................................... 1
1.1 "Act"............................................. 1
1.2 "Administrator"................................... 1
1.3 "Affiliated Employer"............................. 1
1.4 "Aggregate Account"............................... 2
1.5 "Anniversary Date"................................ 2
1.6 "Beneficiary"..................................... 2
1.7 "Code"............................................ 2
1.8 "Compensation".................................... 2
1.9 "Contract" or "Policy"............................ 4
1.10 "Early Retirement Date"........................... 4
1.11 "Eligible Employee"............................... 5
1.12 "Employee"........................................ 5
1.13 "Employer"........................................ 5
1.14 "Excess Aggregate Contributions".................. 5
1.15 "Excess Compensation"............................. 5
1.16 "Family Member"................................... 5
1.17 "Fiduciary"....................................... 6
1.18 "Fiscal Year"..................................... 6
1.19 "Forfeiture"...................................... 6
1.20 "Former Participant".............................. 6
1.21 "415 Compensation"................................ 6
1.22 "414(s) Compensation"............................. 7
1.23 "Highly Compensated Employee"..................... 7
1.24 "Highly Compensated Former Employee".............. 9
1.25 "Highly Compensated Participant".................. 9
1.26 "Hour of Service"................................. 9
1.27 "Income".......................................... 10
1.28 "Investment Manager".............................. 10
1.29 "Key Employee".................................... 10
1.30 "Late Retirement Date"............................ 11
1.31 "Leased Employee"................................. 11
1.32 "Month of Service"................................ 12
1.33 "Non-Highly Compensated Participant".............. 12
1.34 "Non-Key Employee"................................ 12
1.35 "Normal Retirement Age"........................... 12
1.36 "Normal Retirement Date".......................... 12
1.37 "1-Year Break in Service"......................... 12
1.38 "Participant"..................................... 13
1.39 "Participant's Account"........................... 13
1.40 "Plan"............................................ 13
1.41 "Plan Year"....................................... 13
1.42 "Pre-Retirement Survivor Annuity"................. 13
1.43 "Regulation"...................................... 13
1.44 "Retired Participant"............................. 14
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
1.45 "Retirement Date"................................. 14
1.46 "Super Top Heavy Plan"............................ 14
1.47 "Taxable Wage Base"............................... 14
1.48 "Terminated Participant".......................... 14
1.49 "Top Heavy Plan".................................. 14
1.50 "Top Heavy Plan Year"............................. 14
1.51 "Top Paid Group".................................. 14
1.52 "Total and Permanent Disability".................. 15
1.53 "Trustee"......................................... 15
1.54 "Trust Fund"...................................... 15
1.55 "Vested".......................................... 15
1.56 "Voluntary Contribution Account".................. 15
1.57 "Year of Service"................................. 15
ARTICLE II. TOP HEAVY AND ADMINISTRATION......................... 16
2.1 TOP HEAVY PLAN REQUIREMENTS....................... 16
2.2 DETERMINATION OF TOP HEAVY STATUS................. 16
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER....... 20
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY........... 20
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES..... 21
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR............ 21
2.7 RECORDS AND REPORTS............................... 22
2.8 APPOINTMENT OF ADVISERS........................... 23
2.9 INFORMATION FROM EMPLOYER......................... 23
2.10 PAYMENT OF EXPENSES............................... 23
2.11 MAJORITY ACTIONS.................................. 23
2.12 CLAIMS PROCEDURE.................................. 23
2.13 CLAIMS REVIEW PROCEDURE........................... 24
ARTICLE III. ELIGIBILITY......................................... 24
3.1 CONDITIONS OF ELIGIBILITY......................... 24
3.2 EFFECTIVE DATE OF PARTICIPATION................... 25
3.3 DETERMINATION OF ELIGIBILITY...................... 25
3.4 TERMINATION OF ELIGIBILITY........................ 25
3.5 OMISSION OF ELIGIBLE EMPLOYEE..................... 26
3.6 INCLUSION OF INELIGIBLE EMPLOYEE.................. 26
3.7 ELECTION NOT TO PARTICIPATE....................... 26
ARTICLE IV. CONTRIBUTION AND ALLOCATION.......................... 26
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION... 26
4.2 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION........ 28
4.3 ACCOUNTING AND ALLOCATIONS........................ 28
4.4 MAXIMUM ANNUAL ADDITIONS.......................... 31
4.5 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS......... 35
4.6 TRANSFERS FROM QUALIFIED PLANS.................... 36
4.7 VOLUNTARY CONTRIBUTIONS........................... 38
4.8 DIRECTED INVESTMENT ACCOUNT....................... 40
4.9 ACTUAL CONTRIBUTION PERCENTAGE TESTS.............. 41
4.10 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE
TESTS............................................. 44
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
ARTICLE V. VALUATIONS............................................ 46
5.1 VALUATION OF THE TRUST FUND....................... 46
5.2 METHOD OF VALUATION............................... 46
ARTICLE VI. DETERMINATION AND DISTRIBUTION OF BENEFITS........... 47
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT......... 47
6.2 DETERMINATION OF BENEFITS UPON DEATH.............. 47
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY.. 48
6.4 DETERMINATION OF BENEFITS UPON TERMINATION........ 48
6.5 DISTRIBUTION OF BENEFITS.......................... 52
6.6 DISTRIBUTION OF BENEFITS UPON DEATH............... 58
6.7 TIME OF SEGREGATION OR DISTRIBUTION............... 61
6.8 DISTRIBUTION FOR MINOR BENEFICIARY................ 62
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN.... 62
6.10 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION... 62
ARTICLE VII. TRUSTEE............................................. 63
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE............. 63
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE....... 63
7.3 OTHER POWERS OF THE TRUSTEE....................... 64
7.4 DUTIES OF THE TRUSTEE REGARDING PAYMENTS.......... 67
7.5 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES..... 67
7.6 ANNUAL REPORT OF THE TRUSTEE...................... 67
7.7 AUDIT............................................. 68
7.8 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE.... 69
7.9 TRANSFER OF INTEREST.............................. 70
7.10 DIRECT ROLLOVER................................... 70
7.11 EMPLOYER SECURITIES AND REAL PROPERTY............. 71
ARTICLE VIII. AMENDMENT, TERMINATION AND MERGERS................. 71
8.1 AMENDMENT......................................... 71
8.2 TERMINATION....................................... 72
8.3 MERGER OR CONSOLIDATION........................... 73
ARTICLE IX. MISCELLANEOUS........................................ 73
9.1 PARTICIPANT'S RIGHTS.............................. 73
9.2 ALIENATION........................................ 73
9.3 CONSTRUCTION OF PLAN.............................. 74
9.4 GENDER AND NUMBER................................. 74
9.5 LEGAL ACTION...................................... 74
9.6 PROHIBITION AGAINST DIVERSION OF FUNDS............ 74
9.7 BONDING........................................... 75
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE........ 75
9.9 INSURER'S PROTECTIVE CLAUSE....................... 75
9.10 RECEIPT AND RELEASE FOR PAYMENTS.................. 76
9.11 ACTION BY THE EMPLOYER............................ 76
9.12 NAMED FIDUCIARIES AND ALLOCATION OF
RESPONSIBILITY.................................... 76
9.13 HEADINGS.......................................... 77
9.14 APPROVAL BY INTERNAL REVENUE SERVICE.............. 77
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
9.15 UNIFORMITY........................................ 77
9.16 WAIVER OF FUNDING................................. 78
ARTICLE X. PARTICIPATING EMPLOYERS............................... 79
10.1 ADOPTION BY OTHER EMPLOYERS....................... 79
10.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS........... 79
10.3 DESIGNATION OF AGENT.............................. 80
10.4 EMPLOYEE TRANSFERS................................ 80
10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION............. 80
10.6 AMENDMENT......................................... 80
10.7 DISCONTINUANCE OF PARTICIPATION................... 81
10.8 ADMINISTRATOR'S AUTHORITY......................... 81
10.9 INDEMNITY......................................... 81
</TABLE>
<PAGE>
AMERICAN ECOLOGY CORPORATION
RETIREMENT PLAN
THIS AGREEMENT, hereby made and entered into this 13th day of
November, 1994, by and between American Ecology Corporation
(herein referred to as the "Employer") and William P. McCaughey, John D. Held
and Harry O. Nicodemus IV (herein referred to as the "Trustee").
W I T N E S S E T H:
WHEREAS, the Employer heretofore established a Money Purchase Pension
Plan and Trust effective January 1, 1972 (hereinafter called the "Effective
Date") known as American Ecology Corporation Retirement Income Plan and which
plan shall hereinafter be known as American Ecology Corporation Retirement Plan
(herein referred to as the "Plan") in recognition of the contribution made to
its successful operation by its employees and for the exclusive benefit of its
eligible employees; and
WHEREAS, this restated Plan is intended to replace the prior Plan
description (which utilized a Principal Mutual Life Insurance Company document)
and is intended to reflect statutory requirements as of January 1, 1994;
NOW, THEREFORE, effective January 1, 1994, except as otherwise
provided, the Employer hereby amends the Plan in its entirety and restates the
Plan to provide as follows:
ARTICLE I.
DEFINITIONS
1.1 "Act" means the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.
1.2 "Administrator" means the person or entity designated by the Employer
pursuant to Section 2.4 to administer the Plan on behalf of the Employer.
1.3 "Affiliated Employer" means any corporation which is a member of a
controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes
<PAGE>
the Employer; and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o).
1.4 "Aggregate Account" means, with respect to each Participant, the value
of all accounts maintained on behalf of a Participant, whether attributable to
Employer or Employee contributions, subject to the provisions of Section 2.2.
1.5 "Anniversary Date" means December 31st.
1.6 "Beneficiary" means the person to whom the share of a deceased
Participant's total account is payable, subject to the restrictions of Sections
6.2 and 6.6.
1.7 "Code" means the Internal Revenue Code of 1986, as amended or replaced
from time to time.
1.8 "Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments of
compensation by the Employer (in the course of the Employer's trade or business)
for a Plan Year for which the Employer is required to furnish the Participant a
written statement under Code Sections 6041(d), 6051(a)(3) and 6052.
Compensation must be determined without regard to any rules under Code Section
3401(a) that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the exception for
agricultural labor in Code Section 3401(a)(2)).
For purposes of this Section, the determination of Compensation shall
be made by:
(a) excluding overtime;
(b) excluding commissions;
(c) excluding discretionary bonuses;
(d) excluding other special compensation payments;
(e) including amounts which are contributed by the Employer pursuant
to a salary reduction agreement and which are not includible in the gross
income of the Participant under Code Sections 125, 402(e)(3), 402(h),
403(b) or 457, and Employee contributions described in Code Section
414(h)(2) that are treated as Employer contributions.
For a Participant's initial year of participation, Compensation shall
be recognized as of such Employee's effective date of participation pursuant to
Section 3.3.
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Compensation in excess of $200,000 shall be disregarded. Such amount
shall be adjusted at the same time and in such manner as permitted under Code
Section 415(d), except that the dollar increase in effect on January 1 of any
calendar year shall be effective for the Plan Year beginning with or within such
calendar year and the first adjustment to the $200,000 limitation shall be
effective on January 1, 1990. For any short Plan Year the Compensation limit
shall be an amount equal to the Compensation limit for the calendar year in
which the Plan Year begins multiplied by the ratio obtained by dividing the
number of full months in the short Plan Year by twelve (12). In applying this
limitation, the family group of a Highly Compensated Participant who is subject
to the Family Member aggregation rules of Code Section 414(q)(6) because such
Participant is either a "five percent owner" of the Employer or one of the ten
(10) Highly Compensated Employees paid the greatest "415 Compensation" during
the year, shall be treated as a single Participant, except that for this purpose
Family Members shall include only the affected Participant's spouse and any
lineal descendants who have not attained age nineteen (19) before the close of
the year. If, as a result of the application of such rules the adjusted $200,000
limitation is exceeded, then the limitation shall be prorated among the affected
Family Members in proportion to each such Family Member's Compensation prior to
the application of this limitation, or the limitation shall be adjusted in
accordance with any other method permitted by Regulation. However, for purposes
of Section 4.1, the preceding sentence shall not apply in determining the
portion of the Compensation of a Participant which is below Excess Compensation.
If, as a result of such rules, the maximum "annual addition" limit of
Section 4.4(a) would be exceeded for one or more of the affected Family Members,
the prorated Compensation of all affected Family Members shall be adjusted to
avoid or reduce any excess. The prorated Compensation of any affected Family
Member whose allocation would exceed the limit shall be adjusted downward to the
level needed to provide an allocation equal to such limit. The prorated
Compensation of affected Family Members not affected by such limit shall then be
adjusted upward on a pro rata basis not to exceed each such affected Family
Member's Compensation as determined prior to application of the Family Member
rule. The resulting allocation shall not exceed such individual's maximum
"annual addition" limit. If, after these adjustments, an "excess amount" still
results, such "excess amount" shall be disposed of in the manner described in
Section 4.5(a) pro rata among all affected Family Members.
For purposes of this Section, if the Plan is a plan described in Code
Section 413(c) or 414(f) (a plan maintained by more than one Employer), the
$200,000 limitation applies separately
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with respect to the Compensation of any Participant from each Employer
maintaining the Plan.
If, in connection with the adoption of this amendment and restatement,
the definition of Compensation has been modified, then, for Plan Years prior to
the Plan Year which includes the adoption date of this amendment and
restatement, Compensation means compensation determined pursuant to the Plan
then in effect.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 194, the annual compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect
for a calendar year applies to any period, not exceeding 12 months over which
compensation is determined (determination period) beginning in such calendar
year. If a determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the denominator
of which is 12.
For Plan Years beginning on or after January 1, 194, any reference in
this Plan to the limitation under Section 401(a)(17) of the Code shall mean the
OBRA '93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current Plan Year,
the compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
For Plan Years beginning prior to January 1, 1989, the $200,000 limit
(without regard to Family Member aggregation) shall apply only for Top Heavy
Plan Years and shall not be adjusted.
1.9 "Contract" or "Policy" means any life insurance policy, retirement
income or annuity policy, or annuity contract (group or individual) issued
pursuant to the terms of the Plan.
1.10 "Early Retirement Date" means the first day of the month (prior to the
Normal Retirement Date) coinciding with or following the date on which a
Participant or Former Participant attains age
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55. A Participant shall become fully Vested upon satisfying this requirement if
still employed at his Early Retirement Age.
A Former Participant who terminates employment and who thereafter
reaches the age requirement contained herein shall be entitled to receive his
benefits under this Plan.
1.11 "Eligible Employee" means any Employee other than an Employee hired by
the Employer on a specific project basis, or as a specified part-time employee
(for purposes of the Plan, a specified part-time employee means any Employee who
is hired in a job category which will not result in 1,000 hours of service in
any 12-month period beginning on such Employee's date of hire or any subsequent
calendar year), or as a Union Employee. However, Employees at the American
Ecology Corporation, Richland, Washington facility and represented for
collective bargaining purposes by the Oil, Chemical and Atomic Works
International Local 1-369 shall be eligible to participate.
1.12 "Employee" means any person who is employed by the Employer or
Affiliated Employer, but excludes any person who is an independent contractor.
Employee shall include Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) unless such Leased Employees are covered by a plan
described in Code Section 414(n)(5) and such Leased Employees do not constitute
more than 20% of the recipient's non-highly compensated work force.
1.13 "Employer" means American Ecology Corporation and any Participating
Employer (as defined in Section 10.1) which shall adopt this Plan; any successor
which shall maintain this Plan; and any predecessor which has maintained this
Plan. The Employer is a corporation, with principal offices in the State of
Texas.
1.14 "Excess Aggregate Contributions" means, with respect to any Plan Year,
the excess of the aggregate amount of the voluntary Employee contributions made
pursuant to Section 4.7 and any qualified non-elective contributions or elective
deferrals taken into account pursuant to Section 4.9(c) on behalf of Highly
Compensated Participants for such Plan Year, over the maximum amount of such
contributions permitted under the limitations of Section 4.9(a).
1.15 "Excess Compensation" with respect to any Participant means the
Participant's Compensation which is in excess of the Taxable Wage Base. For any
short year, the Taxable Wage Base shall be reduced by a fraction, the numerator
of which is the number of full months in the short year and the denominator of
which is twelve (12).
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1.16 "Family Member" means, with respect to an affected Participant, such
Participant's spouse and such Participant's lineal descendants and ascendants
and their spouses, all as described in Code Section 414(q)(6)(B).
1.17 "Fiduciary" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan or has any
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan, including, but
not limited to, the Trustee, the Employer and its representative body, and the
Administrator.
1.18 "Fiscal Year" means the Employer's accounting year of 12 months
commencing on January 1st of each year and ending the following December 31st.
1.19 "Forfeiture" means that portion of a Participant's Account that is not
Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested portion of a Participant's
Account, or
(b) the last day of the Plan Year in which the Participant incurs five
(5) consecutive 1-Year Breaks in Service.
Furthermore, for purposes of (a) above, in the case of a Terminated Participant
whose Vested benefit is zero, such Terminated Participant shall be deemed to
have received a distribution of his Vested benefit upon his termination of
employment. Restoration of such amounts shall occur pursuant to Section
6.4(f)(1). In addition, the term Forfeiture shall also include amounts deemed
to be Forfeitures pursuant to any other provision of this Plan.
1.20 "Former Participant" means a person who has been a Participant, but
who has ceased to be a Participant for any reason.
1.21 "415 Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments of
compensation by the Employer (in the course of the Employer's trade or business
for a Plan Year for which the Employer is required to furnish the Participant a
written statement under Code Sections 6041(d), 6051(a)(3) and 6052. "415
Compensation" must be determined without regard to any rules under Code Section
3401(a) that limit the remuneration included in wages
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<PAGE>
based on the nature or location of the employment or the services performed
(such as the exception for agricultural labor in Code Section 3401(a)(2)).
If, in connection with the adoption of this amendment and restatement,
the definition of "415 Compensation" has been modified, then, for Plan Years
prior to the Plan Year which includes the adoption date of this amendment and
restatement, "415 Compensation" means compensation determined pursuant to the
Plan then in effect.
1.22 "414(s) Compensation" with respect to any Participant means such
Participant's "415 Compensation" paid during a Plan Year. The amount of "414(s)
Compensation" with respect to any Participant shall include "414(s)
Compensation" for the entire twelve (12) month period ending on the last day of
such Plan Year, except that "414(s) Compensation" shall only be recognized for
that portion of the Plan Year during which an Employee was a Participant in the
Plan.
For purposes of this Section, the determination of "414(s)
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(e)(3),
402(h), 403(b) or 457, and Employee contributions described in Code Section
414(h)(2) that are treated as Employer contributions.
"414(s) Compensation" in excess of $150,000, subject to Code Section
401(a)(17) adjustments, shall be disregarded. For any short Plan Year the
"414(s) Compensation" limit shall be an amount equal to the "414(s)
Compensation" limit for the calendar year in which the Plan Year begins
multiplied by the ratio obtained by dividing the number of full months in the
short Plan Year by twelve (12). In applying this limitation, the family group
of a Highly Compensated Participant who is subject to the Family Member
aggregation rules of Code Section 414(q)(6) because such Participant is either a
"five percent owner" of the Employer or one of the ten (10) Highly Compensated
Employees paid the greatest "415 Compensation" during the year, shall be treated
as a single Participant, except that for this purpose Family Members shall
include only the affected Participant's spouse and any lineal descendants who
have not attained age nineteen (19) before the close of the year.
If, in connection with the adoption of this amendment and restatement,
the definition of "414(s) Compensation" has been modified, then, for Plan Years
prior to the Plan Year which includes the adoption date of this amendment and
restatement,
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"414(s) Compensation" means compensation determined pursuant to the
Plan then in effect.
1.23 "Highly Compensated Employee" means an Employee described in Code
Section 414(q) and the Regulations thereunder, and generally means an Employee
who performed services for the Employer during the "determination year" and is
in one or more of the following groups:
(a) Employees who at any time during the "determination year" or
"look-back year" were "five percent owners" as defined in Section
1.29(c).
(b) Employees who received "415 Compensation" during the "look-
back year" from the Employer in excess of $75,000.
(c) Employees who received "415 Compensation" during the "look-
back year" from the Employer in excess of $50,000 and were in the Top
Paid Group of Employees for the Plan Year.
(d) Employees who during the "look-back year" were officers of
the Employer (as that term is defined within the meaning of the
Regulations under Code Section 416) and received "415 Compensation"
during the "look-back year" from the Employer greater than 50 percent
of the limit in effect under Code Section 415(b)(1)(A) for any such
Plan Year. The number of officers shall be limited to the lesser of
(i) 50 employees; or (ii) the greater of 3 employees or 10 percent of
all employees. For the purpose of determining the number of officers,
Employees described in Section 1.51(a), (b), (c) and (d) shall be
excluded, but such Employees shall still be considered for the purpose
of identifying the particular Employees who are officers. If the
Employer does not have at least one officer whose annual "415
Compensation" is in excess of 50 percent of the Code Section
415(b)(1)(A) limit, then the highest paid officer of the Employer will
be treated as a Highly Compensated Employee.
(e) Employees who are in the group consisting of the 100
Employees paid the greatest "415 Compensation" during the
"determination year" and are also described in (b), (c) or (d) above
when these paragraphs are modified to substitute "determination year"
for "look-back year."
The "determination year" shall be the Plan Year for which testing is
being performed, and the "look-back year" shall be the immediately preceding
twelve-month period.
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For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Participant under Code Sections 125, 402(e)(3), 402(h),
403(b) or 457, and Employee contributions described in Code Section 414(h)(2)
that are treated as Employer contributions. Additionally, the dollar threshold
amounts specified in (b) and (c) above shall be adjusted at such time and in
such manner as is provided in Regulations. In the case of such an adjustment,
the dollar limits which shall be applied are those for the calendar year in
which the "determination year" or "look-back year" begins.
In determining who is a Highly Compensated Employee, Employees who are
non-resident aliens and who received no earned income (within the meaning of
Code Section 911(d)(2)) from the Employer constituting United States source
income within the meaning of Code Section 861(a)(3) shall not be treated as
Employees. Additionally, all Affiliated Employers shall be taken into account
as a single employer and Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) shall be considered Employees unless such Leased
Employees are covered by a plan described in Code Section 414(n)(5) and are not
covered in any qualified plan maintained by the Employer. The exclusion of
Leased Employees for this purpose shall be applied on a uniform and consistent
basis for all of the Employer's retirement plans. Highly Compensated Former
Employees shall be treated as Highly Compensated Employees without regard to
whether they performed services during the "determination year."
1.24 "Highly Compensated Former Employee" means a former Employee who had a
separation year prior to the "determination year" and was a Highly Compensated
Employee in the year of separation from service or in any "determination year"
after attaining age 55. Notwithstanding the foregoing, an Employee who
separated from service prior to 1987 will be treated as a Highly Compensated
Former Employee only if during the separation year (or year preceding the
separation year) or any year after the Employee attains age 55 (or the last year
ending before the Employee's 55th birthday), the Employee either received "415
Compensation" in excess of $50,000 or was a "five percent owner." For purposes
of this Section, "determination year," "415 Compensation" and "five percent
owner" shall be determined in accordance with Section 1.23. Highly Compensated
Former Employees shall be treated as Highly Compensated Employees. The method
set forth in this Section for determining who is a "Highly Compensated Former
Employee" shall be applied on a uniform and consistent basis for all purposes
for which the Code Section 414(q) definition is applicable.
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1.25 "Highly Compensated Participant" means any Highly Compensated Employee
who is eligible to participate in the Plan.
1.26 "Hour of Service" means (1) each hour for which an Employee is
directly or indirectly compensated or entitled to compensation by the Employer
for the performance of duties during the applicable computation period; (2) each
hour for which an Employee is directly or indirectly compensated or entitled to
compensation by the Employer (irrespective of whether the employment
relationship has terminated) for reasons other than performance of duties (such
as vacation, holidays, sickness, jury duty, disability, lay-off, military duty
or leave of absence) during the applicable computation period; (3) each hour for
which back pay is awarded or agreed to by the Employer without regard to
mitigation of damages. These hours will be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or payment is made.
The same Hours of Service shall not be credited both under (1) or (2), as the
case may be, and under (3).
1.27 "Income" means the income or losses allocable to Excess Aggregate
Contributions which amount shall be allocated in the same manner as income or
losses are allocated pursuant to Section 4.3(e).
1.28 "Investment Manager" means an entity that (a) has the power to manage,
acquire, or dispose of Plan assets and (b) acknowledges fiduciary responsibility
to the Plan in writing. Such entity must be a person, firm, or corporation
registered as an investment adviser under the Investment Advisers Act of 1940, a
bank, or an insurance company.
1.29 "Key Employee" means an Employee as defined in Code Section 416(i) and
the Regulations hereunder. Generally, any Employee or former Employee (as well
as each of his Beneficiaries) is considered a Key Employee if he, at any time
during the Plan Year that contains the "Determination Date" or any of the
preceding four (4) Plan Years, has been included in one of the following
categories:
(a) an officer of the Employer (as that term is defined within the
meaning of the Regulations under Code Section 416) having annual "415
Compensation" greater than 50 percent of the amount in effect under Code
Section 415(b)(1)(A) for any such Plan Year.
(b) one of the ten employees having annual "415 Compensation" from the
Employer for a Plan Year greater than the dollar limitation in effect under
Code Section
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415(c)(1)(A) for the calendar year in which such Plan Year
ends and owning (or considered as owning within the meaning of Code Section
318) both more than one-half percent interest and the largest interests in
the Employer.
(c) a "five percent owner" of the Employer. "Five percent owner"
means any person who owns (or is considered as owning within the meaning of
Code Section 318) more than five percent (5%) of the outstanding stock of
the Employer or stock possessing more than five percent (5% of the total
combined voting power of all stock of the Employer or, in the case of an
unincorporated business, any person who owns more than five
percent (5%) of the capital or profits interest in the Employer. In
determining percentage ownership hereunder, employers that would otherwise
be aggregated under Code Sections 414(b), (c), (m) and (o) shall be treated
as separate employers.
(d) a "one percent owner" of the Employer having an annual "415
Compensation" from the Employer of more than $150,000. "One percent owner"
means any person who owns (or is considered as owning within the meaning of
Code Section 318) more than one percent (1%) of the outstanding stock of
the Employer or stock possessing more than one percent (1%) of the total
combined voting power of all stock of the Employer or, in the case of an
unincorporated business, any person who owns more than one percent (1%) of
the capital or profits interest in the Employer. In determining percentage
ownership hereunder, employers that would otherwise be aggregated under
Code Sections 414(b), (c), (m) and (o) shall be treated as separate
employers. However, in determining whether an individual has a "415
Compensation" of more than $150,000, "415 Compensation" from each employer
required to be aggregated under Code Sections 414(b), (c), (m) and (o)
shall be taken into account.
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Participant under Code Sections 125, 402(e)(3), 402(h),
403(b) or 457, and Employee contributions described in Code Section 414(h)(2)
that are treated as Employer contributions.
1.30 "Late Retirement Date" means the first day of the month coinciding
with or next following a Participant's actual Retirement Date after having
reached his Normal Retirement Date.
1.31 "Leased Employee" means any person (other than an Employee of the
recipient) who pursuant to an agreement between the
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recipient and any other person ("leasing organization") has performed services
for the recipient (or for the recipient and related persons determined in
accordance with Code Section 414(n)(6)) on a substantially full time basis for a
period of at least one year, and such services are of a type historically
performed by employees in the business field of the recipient employer.
Contributions or benefits provided a Leased Employee by the leasing organization
which are attributable to services performed for the recipient employer shall be
treated as provided by the recipient employer. A Leased Employee shall not be
considered an Employee of the recipient:
(a) if such employee is covered by a money purchase pension plan
providing:
(1) a non-integrated employer contribution rate of at least 10%
of compensation, as defined in Code Section 415(c)(3), but including
amounts which are contributed by the Employer pursuant to a salary
reduction agreement and which are not includible in the gross income
of the Participant under Code Sections 125, 402(e)(3), 402(h), 403(b)
or 457, and Employee contributions described in Code Section 414(h)(2)
that are treated as Employer contributions.
(2) immediate participation; and
(3) full and immediate vesting; and
(b) if Leased Employees do not constitute more than 20% of the
recipient's non-highly compensated work force.
1.32 "Month of Service" means a calendar month during any part of which an
Employee completed an Hour of Service. Except, however, a Participant shall be
credited with a Month of Service for each month during the 12 month computation
period in which he has not incurred a 1-Year Break in Service.
1.33 "Non-Highly Compensated Participant" means any Participant who is
neither a Highly Compensated Employee nor a Family Member.
1.34 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
1.35 "Normal Retirement Age" means the Participant's 65th birthday. A
Participant shall become fully Vested in his Participant's Account upon
attaining his Normal Retirement Age.
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1.36 "Normal Retirement Date" means the first day of the month coinciding
with or next following the Participant's Normal Retirement Age.
1.37 "1-Year Break in Service" means the applicable computation period of
12 consecutive months during which an Employee fails to accrue a Month of
Service. Further, solely for the purpose of determining whether a Participant
has incurred a 1-Year Break in Service, Hours of Service shall be recognized for
"authorized leaves of absence" and "maternity and paternity leaves of absence."
Years of Service and 1-Year Breaks in Service shall be measured on the same
computation period.
An Employee shall not be deemed to have incurred a 1-Year Break in
Service if he completes an Hour of Service within 12 months following the last
day of the month during which his employment terminated.
"Authorized leave of absence" means an unpaid temporary cessation from
active employment with the Employer pursuant to an established nondiscriminatory
policy, whether occasioned by illness, military service, or any other reason.
A "maternity or paternity leave of absence" means, for Plan Years
beginning after December 31, 1984, an absence from work for any period by reason
of the Employee's pregnancy, birth of the Employee's child, placement of a child
with the Employee in connection with the adoption of such child, or any absence
for the purpose of caring for such child for a period immediately following such
birth or placement. For this purpose, Hours of Service shall be credited for
the computation period in which the absence from work begins, only if credit
therefore is necessary to prevent the Employee from incurring a 1-Year Break in
Service, or, in any other case, in the immediately following computation period.
1.38 "Participant" means any Eligible Employee who participates in the Plan
as provided in Sections 3.2 and 3.3, and has not for any reason become
ineligible to participate further in the Plan.
1.39 "Participant's Account" means the account established and maintained
by the Administrator for each Participant with respect to his total interest in
the Plan and Trust resulting from the Employer's contributions.
1.40 "Plan" means this instrument, including all amendments thereto.
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1.41 "Plan Year" means the Plan's accounting year of twelve (12) months
commencing on January 1st of each year and ending the following December 31st.
1.42 "Pre-Retirement Survivor Annuity" is an immediate single life annuity
with an installment refund for the life of the Participant's spouse, the
payments under which must be equal to the amount of benefit which can be
purchased with the accounts of a Participant used to provide a death benefit
under the Plan. In the case of a Participant who does not have a surviving
spouse, this benefit shall be paid in the form of a lump sum distribution to his
Beneficiary.
1.43 "Regulation" means the Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, and as amended from time to time.
1.44 "Retired Participant" means a person who has been a Participant, but
who has become entitled to retirement benefits under the Plan.
1.45 "Retirement Date" means the date as of which a Participant retires for
reasons other than Total and Permanent Disability, whether such retirement
occurs on a Participant's Normal Retirement Date, Early or Late Retirement Date
(see Section 6.1).
1.46 "Super Top Heavy Plan" means a plan described in Section 2.2(b).
1.47 "Taxable Wage Base" means, with respect to any Plan Year, the
contribution and benefit base in effect under Section 230 of the Social Security
Act at the beginning of the prior Plan Year.
1.48 "Terminated Participant" means a person who has been a Participant,
but whose employment has been terminated other than by death, Total and
Permanent Disability or retirement.
1.49 "Top Heavy Plan" means a plan described in Section 2.2(a).
1.50 "Top Heavy Plan Year" means a Plan Year commencing after December 31,
1983 during which the plan is a Top Heavy Plan.
1.51 "Top Paid Group" means the top 20 percent of Employees who performed
services for the Employer during the applicable year, ranked according to the
amount of "415 Compensation" (determined for this purpose in accordance with
Section 1.23) received from the Employer during such year. All Affiliated
Employers shall be taken into account as a single employer, and Leased Employees
within the
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meaning of Code Sections 414(n)(2) and 414(o)(2) shall be considered
Employees unless such Leased Employees are covered by a plan described in Code
Section 414(n)(5) and are not covered in any qualified plan maintained by the
Employer. Employees who are non-resident aliens and who received no earned
income (within the meaning of Code Section 911(d)(2)) from the Employer
constituting United States source income within the meaning of Code Section
861(a)(3) shall not be treated as Employees. Additionally, for the purpose of
determining the number of active Employees in any year, the following additional
Employees shall also be excluded; however, such Employees shall still be
considered for the purpose of identifying the particular Employees in the Top
Paid Group:
(a) Employees with less than six (6) months of service;
(b) Employees who normally work less than 17-1/2 hours per week;
(c) Employees who normally work less than six (6) months during a
year; and
(d) Employees who have not yet attained age 21.
In addition, if 90 percent or more of the Employees of the Employer
are covered under agreements the Secretary of Labor finds to be collective
bargaining agreements between Employee representatives and the Employer, and the
Plan covers only Employees who are not covered under such agreements, then
Employees covered by such agreements shall be excluded from both the total
number of active Employees as well as from the identification of particular
Employees in the Top Paid Group.
The foregoing exclusions set forth in this Section shall be applied on
a uniform and consistent basis for all purposes for which the Code Section
414(q) definition is applicable.
1.52 "Total and Permanent Disability" means a physical or mental condition
of a Participant resulting from bodily injury, disease, or mental disorder which
renders him incapable of continuing any gainful occupation and which condition
constitutes total disability under the federal Social Security Acts.
1.53 "Trustee" means the person or entity named as trustee herein or in any
separate trust forming a part of this Plan, and any successors.
1.54 "Trust Fund" means the assets of the Plan and Trust as the same shall
exist from time to time.
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1.55 "Vested" means the nonforfeitable portion of any account maintained on
behalf of a Participant.
1.56 "Voluntary Contribution Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan resulting from the Participant's nondeductible voluntary
contributions made pursuant to Section 4.7.
1.57 "Year of Service" means twelve (12) consecutive Months of Service.
For vesting purposes, the computation period shall be the Plan Year.
For all other purposes, the computation period shall be the Plan Year.
Years of Service with any Affiliated Employer shall be recognized.
ARTICLE II.
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special
vesting requirements of Code Section 416(b) pursuant to Section 6.4 of the Plan
and the special minimum allocation requirements of Code Section 416(c) pursuant
to Section 4.3 of the Plan.
2.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year
commencing after December 31, 1983 in which, as of the Determination
Date, (1) the Present Value of Accrued Benefits of Key Employees and
(2) the sum of the Aggregate Accounts of Key Employees under this Plan
and all plans of an Aggregation Group, exceeds sixty percent (60%) of
the Present Value of Accrued Benefits and the Aggregate Accounts of
all Key and Non-Key Employees under this Plan and all plans of an
Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year,
but such Participant was a Key Employee for any prior Plan Year, such
Participant's Present Value of Accrued Benefit and/or Aggregate
Account balance shall not be taken into account for purposes of
determining whether this Plan is a Top Heavy or Super Top
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Heavy Plan or (whether any Aggregation Group which includes this Plan
is a Top Heavy Group). In addition, for Plan Years beginning after
December 31, 1984, if a Participant or Former Participant has not
performed any services for any Employer maintaining the Plan at any
time during the five year period ending on the Determination Date, any
accrued benefit for such Participant or Former Participant shall not
be taken into account for the purposes of determining whether this
Plan is a Top Heavy or Super Top Heavy Plan.
(b) This Plan shall be a Super Top Heavy Plan for any Plan Year
commencing after December 31, 1983 in which, as of the Determination
Date, (1) the Present Value of Accrued Benefits of Key Employees and
(2) the sum of the Aggregate Accounts of Key Employees under this Plan
and all plans of an Aggregation Group, exceeds ninety percent (90%) of
the Present Value of Accrued Benefits and the Aggregate Accounts of
all Key and Non-Key Employees under this Plan and all plans of an
Aggregation Group.
(c) Aggregate Account: A Participant's Aggregate Account as of
the Determination Date is the sum of:
(1) his Participant's Account balance as of the most recent
valuation occurring within a twelve (12) month period ending on
the Determination Date.
(2) contributions that would be allocated as of a date not later
than the Determination Date, even though those amounts are not
yet made or required to be made.
(3) any Plan distributions made within the Plan Year that
includes the Determination Date or within the four (4) preceding
Plan Years. However, in the case of distributions made after the
valuation date and prior to the Determination Date, such
distributions are not included as distributions for top heavy
purposes to the extent that such distributions are already
included in the Participant's Aggregate Account balance as of the
valuation date. Notwithstanding anything herein to the contrary,
all distributions, including distributions made prior to January
1, 1984, and distributions under a terminated plan which if it
had not been terminated would have been required to be included
in an Aggregation Group, will be counted. Further, distributions
from the Plan
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(including the cash value of life insurance policies) of a
Participant's account balance because of death shall be treated
as a distribution for the purposes of this paragraph.
(4) any Employee contributions, whether voluntary or mandatory.
However, amounts attributable to tax deductible qualified
voluntary employee contributions shall not be considered to be a
part of the Participant's Aggregate Account balance.
(5) with respect to unrelated rollovers and plan-to-plan
transfers (ones which are both initiated by the Employee and made
from a plan maintained by one employer to a plan maintained by
another employer), if this Plan provides the rollovers or plan-
to-plan transfers, it shall always consider such rollovers or
plan-to-plan transfers as a distribution for the purposes of this
Section. If this Plan is the plan accepting such rollovers or
plan-to-plan transfers, it shall not consider such rollovers or
plan-to-plan transfers as part of the Participant's Aggregate
Account balance. However, rollovers or plan-to-plan transfers
accepted prior to January 1, 1984 shall be considered as part of
the Participant's Aggregate Account balance.
(6) with respect to related rollovers and plan-to-plan transfers
(ones either not initiated by the Employee or made to a plan
maintained by the same employer), if this Plan provides the
rollover or plan-to-plan transfer, it shall not be counted as a
distribution for purposes of this Section. If this Plan is the
plan accepting such rollover or plan-to-plan transfer, it shall
consider such rollover or plan-to-plan transfer as part of the
Participant's Aggregate Account balance, irrespective of the date
on which such rollover or plan-to-plan transfer is accepted.
(7) For the purposes of determining whether two employers are to
be treated as the same employer in (5) and (6) above, all
employers aggregated under Code Section 414(b), (c), (m) and (o)
are treated as the same employer.
(d) "Aggregation Group" means either a Required Aggregation Group
or a Permissive Aggregation Group as hereinafter determined.
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(1) Required Aggregation Group: In determining a Required
Aggregation Group hereunder, each plan of the Employer in which a
Key Employee is a participant in the Plan Year containing the
Determination Date or any of the four preceding Plan Years, and
each other plan of the Employer which enables any plan in which a
Key Employee participates to meet the requirements of Code
Sections 401(a)(4) or 410, will be required to be aggregated.
Such group shall be known as a Required Aggregation Group.
In the case of a Required Aggregation Group, each plan in the
group will be considered a Top Heavy Plan if the Required
Aggregation Group is a Top Heavy Group. No plan in the Required
Aggregation Group will be considered a Top Heavy Plan if the
Required Aggregation Group is not a Top Heavy Group.
(2) Permissive Aggregation Group: The Employer may also include
any other plan not required to be included in the Required
Aggregation Group, provided the resulting group, taken as a
whole, would continue to satisfy the provisions of Code Sections
401(a)(4) and 410. Such group shall be known as a Permissive
Aggregation Group.
In the case of a Permissive Aggregation Group, only a plan that
is part of the Required Aggregation Group will be considered a
Top Heavy Plan if the Permissive Aggregation Group is a Top Heavy
Group. No plan in the Permissive Aggregation Group will be
considered a Top Heavy Plan if the Permissive Aggregation Group
is not a Top Heavy Group.
(3) Only those plans of the Employer in which the Determination
Dates fall within the same calendar year shall be aggregated in
order to determine whether such plans are Top Heavy Plans.
(4) An Aggregation Group shall include any terminated plan of the
Employer if it was maintained within the last five (5) years
ending on the Determination Date.
(e) "Determination Date" means (a) the last day of the preceding
Plan Year, or (b) in the case of the first Plan Year, the last day of
such Plan Year.
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(f) Present Value of Accrued Benefit: In the case of a defined
benefit plan, the Present Value of Accrued Benefit for a Participant
other than a Key Employee, shall be as determined using the single
accrual method used for all plans of the Employer and Affiliated
Employers, or if no such single method exists, using a method which
results in benefits accruing not more rapidly than the slowest accrual
rate permitted under Code Section 411(b)(1)(C). The determination of
the Present Value of Accrued Benefit shall be determined as of the
most recent valuation date that falls within or ends with the 12-month
period ending on the Determination Date except as provided in Code
Section 416 and the Regulations thereunder for the first and second
plan years of a defined benefit plan.
(g) "Top Heavy Group" means an Aggregation Group in which, as of
the Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key Employees under
all defined benefit plans included in the group, and
(2) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the group,
exceeds sixty percent (60%) of a similar sum determined for
all Participants.
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) The Employer shall be empowered to appoint and remove the
Trustee and the Administrator from time to time as it deems necessary
for the proper administration of the Plan to assure that the Plan is
being operated for the exclusive benefit of the Participants and their
Beneficiaries in accordance with the terms of the Plan, the Code, and
the Act.
(b) The Employer shall establish a "funding policy and method,"
i.e., it shall determine whether the Plan has a short run need for
liquidity (e.g., to pay benefits) or whether liquidity is a long run
goal and investment growth (and stability of same) is a more current
need, or shall appoint a qualified person to do so. The Employer or
its delegate shall communicate such needs and goals to the Trustee,
who shall coordinate such Plan needs with its investment policy. The
communication of such a "funding policy and method" shall not,
however,
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constitute a directive to the Trustee as to investment of the
Trust Funds. Such "funding policy and method" shall be consistent
with the objectives of this Plan and with the requirements of Title I
of the Act.
(c) The Employer shall periodically review the performance of any
Fiduciary or other person to whom duties have been delegated or
allocated by it under the provisions of this Plan or pursuant to
procedures established hereunder. This requirement may be satisfied
by formal periodic review by the Employer or by a qualified person
specifically designated by the Employer, through day-to-day conduct
and evaluation, or through other appropriate ways.
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall appoint one or more Administrators. Any person,
including, but not limited to, the Employees of the Employer, shall be eligible
to serve as an Administrator. Any person so appointed shall signify his
acceptance by filing written acceptance with the Employer. An Administrator may
resign by delivering his written resignation to the Employer or be removed by
the Employer by delivery of written notice of removal, to take
effect at a date specified therein, or upon delivery to the Administrator if no
date is specified.
The Employer, upon the resignation or removal of an Administrator,
shall promptly designate in writing a successor to this position. If the
Employer does not appoint an Administrator, the Employer will function as the
Administrator.
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the
responsibilities of each Administrator may be specified by the Employer and
accepted in writing by each Administrator. In the event that no such delegation
is made by the Employer, the Administrators may allocate the responsibilities
among themselves, in which event the Administrators shall notify the Employer
and the Trustee in writing of such action and specify the responsibilities of
each Administrator. The Trustee thereafter shall accept and rely upon any
documents executed by the appropriate Administrator until such time as the
Employer or the Administrators file with the Trustee a written revocation of
such designation.
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to administer the
Plan for the exclusive benefit of the Participants
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and their Beneficiaries, subject to the specific terms of the Plan. The
Administrator shall administer the Plan in accordance with its terms and shall
have the power and discretion to construe the terms of the Plan and to determine
all questions arising in connection with the administration, interpretation, and
application of the Plan. Any such determination by the Administrator shall be
conclusive and binding upon all persons. The Administrator may establish
procedures, correct any defect, supply any information, or reconcile any
inconsistency in such manner and to such extent as shall be deemed necessary or
advisable to carry out the purpose of the Plan; provided, however, that any
procedure, discretionary act, interpretation or construction shall be done in a
nondiscriminatory manner based upon uniform principles consistently applied and
shall be consistent with the intent that the Plan shall continue to be deemed a
qualified plan under the terms of Code Section 401(a), and shall comply with the
terms of the Act and all regulations issued pursuant thereto. The Administrator
shall have all powers necessary or appropriate to accomplish his duties under
this Plan.
The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:
(a) the discretion to determine all questions relating to the
eligibility of Employees to participate or remain a Participant
hereunder and to receive benefits under the Plan;
(b) to compute, certify, and direct the Trustee with respect to
the amount and the kind of benefits to which any Participant shall be
entitled hereunder;
(c) to authorize and direct the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the Trust;
(d) to maintain all necessary records for the administration of
the Plan;
(e) to interpret the provisions of the Plan and to make and
publish such rules for regulation of the Plan as are consistent with
the terms hereof;
(f) to determine the size and type of any Contract to be
purchased from any insurer, and to designate the insurer from which
such Contract shall be purchased;
(g) to compute and certify to the Employer and to the Trustee
from time to time the sums of money necessary or desirable to be
contributed to the Plan;
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<PAGE>
(h) to consult with the Employer and the Trustee regarding the
short and long-term liquidity needs of the Plan in order that the
Trustee can exercise any investment discretion in a manner designed to
accomplish specific objectives.
(i) to prepare and distribute to Employees a procedure for
notifying Participants and Beneficiaries of their rights to elect
joint and survivor annuities and Pre-Retirement Survivor Annuities as
required by the Act and Regulations thereunder;
(j) to assist any Participant regarding his rights, benefits, or
elections available under the Plan.
2.7 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and shall
keep all other books of account, records, and other data that may be necessary
for proper administration of the Plan and shall be responsible for supplying all
information and reports to the Internal Revenue Service, Department of Labor,
Participants, Beneficiaries and others as required by law.
2.8 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the
Administrator, may appoint counsel, specialists, advisers, and other persons as
the Administrator or the Trustee deems necessary or desirable in connection with
the administration of this Plan. The Plan Administrator has appointed a Plan
Coordinator who is responsible for the routine administration of the Plan.
2.9 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions, the Employer
shall supply full and timely information to the Administrator on all matters
relating to the Compensation of all Participants, their Hours of Service, their
Years of Service, their retirement, death, disability, or termination of
employment, and such other pertinent facts as the Administrator may require; and
the Administrator shall advise the Trustee of such of the foregoing facts as may
be pertinent to the Trustee's duties under the Plan. The Administrator may rely
upon such information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.
2.10 PAYMENT OF EXPENSES
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All expenses of administration may be paid out of the Trust Fund
unless paid by the Employer. Such expenses shall include any expenses incident
to the functioning of the Administrator, including, but not limited to, fees of
accountants, counsel, and other specialists and their agents, and other costs of
administering the Plan. Until paid, the expenses shall constitute a liability
of the Trust Fund. However, the Employer may reimburse the Trust Fund for any
administration expense incurred.
2.11 MAJORITY ACTIONS
Except where there has been an allocation and delegation of
administrative authority pursuant to Section 2.5, if there shall be more than
one Administrator, they shall act by a majority of their number, but may
authorize one or more of them to sign all papers on their behalf.
2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed in writing with the
Administrator. Written notice of the disposition of a claim shall be furnished
to the claimant within 90 days after the application is filed. In the event the
claim is denied, the reasons for the denial shall be specifically set forth in
the notice in language calculated to be understood by the claimant, pertinent
provisions of the Plan shall be cited, and, where appropriate, an explanation as
to how the claimant can perfect the claim will be provided. In addition, the
claimant shall be furnished with an explanation of the Plan's claims review
procedure.
2.13 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who has been
denied a benefit by a decision of the Administrator pursuant to Section 2.12
shall be entitled to request the Administrator to give further consideration to
his claim by filing with the Administrator (on a form which may be obtained from
the Administrator) a request for a hearing. Such request, together with a
written statement of the reasons why the claimant believes his claim should be
allowed, shall be filed with the Administrator no later than 60 days after
receipt of the written notification provided for in Section 2.12. The
Administrator shall then conduct a hearing within the next 60 days, at which the
claimant may be represented by an attorney or any other representative of his
choosing and at which the claimant shall have an opportunity to submit written
and oral evidence and arguments in support of his claim. At the hearing (or
prior thereto upon 5 business days written notice to the Administrator) the
claimant or his representative shall have an opportunity to review all documents
in
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<PAGE>
the possession of the Administrator which are pertinent to the claim at issue
and its disallowance. Either the claimant or the Administrator may cause a
court reporter to attend the hearing and record the proceedings. In such event,
a complete written transcript of the proceedings shall be furnished to both
parties by the court reporter. The full expense of any such court reporter and
such transcripts shall be borne by the party causing the court reporter to
attend the hearing. A final decision as to the allowance of the claim shall be
made by the Administrator within 60 days of receipt of the appeal (unless there
has been an extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are communicated to the
claimant within the 60 day period). Such communication shall be written in a
manner calculated to be understood by the claimant and shall include specific
reasons for the decision and specific references to the pertinent Plan
provisions on which the decision is based.
ARTICLE III.
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee who has completed one (1) Year of Service shall
be eligible to participate in the Plan. However, any Employee who was a
Participant in the Plan prior to the effective date of this amendment and
restatement shall continue to participate in the Plan. The Employer shall give
each prospective Eligible Employee written notice of his eligibility to
participate in the Plan prior to the close of the Plan Year in which he first
becomes an Eligible Employee.
3.2 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as of the
first day of the payroll period coinciding with or next following the date on
which the Employee met the eligibility requirements of Section 3.1.
In the event an Employee who is not a member of an eligible class of
Employees becomes a member of an eligible class, such Employee will participate
immediately if such Employee has satisfied the minimum age and service
requirements and would have otherwise previously become a Participant.
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3.3 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each Employee for
participation in the Plan based upon information furnished by the Employer.
Such determination shall be conclusive and binding upon all persons, as long as
the same is made pursuant to the Plan and the Act. Such determination shall be
subject to review per Section 2.13.
3.4 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a classification of
an Eligible Employee to an ineligible Employee, such Former
Participant shall continue to vest in his interest in the Plan for
each Year of Service completed while a noneligible Employee, until
such time as his Participant's Account shall be forfeited or
distributed pursuant to the terms of the Plan. Additionally, his
interest in the Plan shall continue to share in the earnings of the
Trust Fund.
(b) In the event a Participant is no longer a member of an
eligible class of Employee and becomes ineligible to participate but
has not incurred a 1-Year Break in Service, such Employee will
participate immediately upon returning to an eligible class of
Employees. If such Participant incurs a 1-Year Break in Service,
eligibility will be determined under the break in service rules of the
Plan.
3.5 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission is
not made until after a contribution by his Employer for the year has been made,
the Employer shall make a subsequent contribution with respect to the omitted
Employee in the amount which the said Employer would have contributed with
respect to him and he not been omitted. Such contribution shall be made
regardless of whether or not it is deductible in whole or in part in any taxable
year under applicable provisions of the Code.
3.6 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been included as
a Participant in the Plan is erroneously included and discovery of such
incorrect inclusion is not made until after a contribution for the year has been
made, the Employer shall not be entitled to recover the contribution made with
respect to the ineligible person regardless of whether or not a deduction is
26
<PAGE>
allowable with respect to such contribution. In such event, the amount
contributed with respect to the ineligible person shall constitute a Forfeiture
for the Plan Year in which the discovery is made.
3.7 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer, elect
voluntarily not to participate in the Plan. The election not to participate
must be communicated to the Employer, in writing, at least thirty (30) days
before the beginning of a Plan Year.
ARTICLE IV.
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
(a) The Employer shall make contributions (including Past Service
Contributions) over such period of years as the Employer may determine
on the following basis. The Employer shall contribute for each
Participant eligible to share in allocations for the year an amount
equal to 5% of the Participant's Monthly Compensation not in excess of
the Taxable Wage Base, plus 10% of such Monthly Compensation in excess
of the Participant's Taxable Wage Base.
For these purposes, a Participant's Monthly Compensation means,
on any given date, the Employee's Compensation for the latest calendar
month ending on or before the given date.
The Employer contribution under the Plan shall be made at least
annually, but may be made as of the first day of each calendar month.
The amount of the Past Service Contribution for each Participant
who became an Active Participant on January 1, 1972 will be equal to
the quotient of (1) divided by (2) where:
(1) is equal to 5% of such Participant's Past Service
Compensation times the number of complete months of his
continuous service (excluding his first year of service)
with the Employer immediately preceding January 1, 1972; and
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(2) is equal to his vesting service between January 1, 1972
and his Normal Retirement Date.
For purposes of calculating the Past Service Contribution, Past
Service Compensation means for a Participant on December 31, 1971,
one-twelfth of his annual pay as of such date.
(b) Should the Employer, for any reason, fail to make a
contribution for any year or should the Employer fail to make a
contribution as provided for herein, then such deficiency shall be
made up in subsequent years pursuant to Section 9.16.
(c) Notwithstanding the foregoing, the Employer's contribution
for any Plan Year shall not exceed the maximum amount allowable as a
deduction to the Employer under the provisions of Code Section 404.
However, to the extent necessary to provide the top heavy minimum
allocations, the Employer shall make a contribution even if it exceeds
the amount which is deductible under Code Section 404.
(d) The Employer shall not contribute on behalf of any
Participant who is not entitled to share in the allocation of the
Employer's contribution as provided in Section 4.3(d) unless otherwise
required pursuant to Section 4.3(g).
4.2 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
The Employer shall pay to the Trustee its contribution to the Plan for
each Plan Year within the time prescribed by law, including extensions of time,
for the filing of the Employer's federal income tax return for the Fiscal Year.
4.3 ACCOUNTING AND ALLOCATIONS
(a) The Administrator shall establish and maintain an account in
the name of each Participant to which the Administrator shall credit
as of each Anniversary Date all amounts allocated to each such
Participant as set forth herein.
(b) The Employer shall provide the Administrator with all
information required by the Administrator to make a proper allocation
of the Employer's contribution for each Plan Year. Within a
reasonable period of time after the date of receipt by the
Administrator of such
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<PAGE>
information, the Administrator shall allocate such contribution to
each Participant's Account in accordance with Section 4.1.
(c) As of each Anniversary Date any amounts which became
Forfeitures since the last Anniversary Date shall first be made
available to reinstate previously forfeited account balance of Former
Participants, if any, in accordance with the applicable provisions of
the Plan. The remaining forfeitures, if any, shall be used to reduce
the contributions of the Employer hereunder for the Plan year in which
such Forfeitures occur.
(d) Participants shall be eligible to share in the allocation of
contributions for a Plan Year in accordance with the following:
(1) Any Participant actively employed during the Plan Year shall
be eligible to share in the allocation of contributions for that
Plan Year.
(2) Notwithstanding the foregoing, Participants who are not
actively employed on the last day of the Plan Year due to
Retirement (Early, Normal or Late), Total and Permanent
Disability or death shall be eligible to share in the allocation
of contributions for that Plan Year.
(3) For any Top Heavy Plan Year, Non-Key Employees not otherwise
eligible to share in the allocation of contributions as provided
above, shall receive the minimum allocation provided for in
Section 4.3(f) if eligible pursuant to the provisions of Section
4.3(g).
(e) As of each Anniversary Date or other valuation date, before
allocation of one-half of the report period Employer contributions,
any earnings or losses (net appreciation or net depreciation) of the
Trust Fund shall be allocated in the same proportion that each
Participant's and Former Participant's nonsegregated accounts bear to
the total of all Participants' and Former Participants' nonsegregated
accounts as of such date.
Participants' transfers from other qualified plans and
voluntary contributions deposited in the general Trust Fund shall
share in any earnings and losses (net appreciation or net
depreciation) of the Trust Fund in the same manner provided above.
Each segregated
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account maintained on behalf of a Participant shall be credited or
charged with its separate earnings and losses.
(f) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of
the Employer's contributions allocated to the Participant's Account of
each Non-Key Employee shall be equal to at least three percent (3%) of
such Non-Key Employee's "415 Compensation" (reduced by contributions
and forfeitures, if any, allocated to each Non-Key Employee in any
defined contribution plan included with this plan in a Required
Aggregation Group). However, if (1) the sum of the Employer's
contributions allocated to the Participant's Account of each Key
Employee for such Top Heavy Plan Year is less than three percent (3%)
of each Key Employee's "415 Compensation" and (2) this Plan is not
required to be included in an Aggregation Group to enable a defined
benefit plan to meet the requirements of Code Section 401(a)(4) or
410, the sum of the Employer's contributions allocated to the
Participant's Account of each Non-Key Employee shall be equal to the
largest percentage allocated to the Participant's Account of any Key
Employee.
(g) For any Top Heavy Plan Year, the minimum allocations set
forth above shall be allocated to the Participant's Account of all
Non-Key Employees who are Participants and who are employed by the
Employer on the last day of the Plan Year, including Non-Key Employees
who have (1) failed to complete a Year of Service, and
(2) declined to make mandatory contributions (if required) to the
Plan.
(h) For the purposes of this Section, "415 Compensation" shall be
limited to $150,000, as adjusted under Code Section 401(a)(17). For
any short Plan year the "415 Compensation" limit shall be an amount
equal to the "415 Compensation" limit for the calendar year in which
the Plan Year begins multiplied by the ratio obtained by dividing the
number of full months in the short Plan Year by twelve (12).
(i) If a Former Participant is reemployed after five (5)
consecutive 1-Year Breaks in Service, then separate accounts shall be
maintained as follows:
(1) one account for nonforfeitable benefits attributable to pre-
break service; and
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(2) one account representing his status in the Plan attributable
to post-break service.
(j) Notwithstanding anything to the contrary, for Plan Years
beginning after December 31, 1989, if this is a Plan that would
otherwise fail to meet the requirements of Code Sections 401(a)(26),
410(b)(1) or 410(b)(2)(A)(i) and the Regulations thereunder because
Employer contributions would not be allocated to a sufficient number
or percentage of Participants for a Plan Year, then the following
rules shall apply:
(1) The group of Participants eligible to share in the Employer's
contribution for the Plan Year shall be expanded to include the
minimum number of Participants who would not otherwise be
eligible as are necessary to satisfy the applicable test
specified above. The specific Participants who shall become
eligible under the terms of this paragraph shall be those who are
actively employed on the last day of the Plan Year and, when
compared to similarly situated Participants, have completed the
greatest number of Hours of Service in the Plan Year.
(2) If after application of paragraph (1) above, the applicable
test is still not satisfied, then the group of Participants
eligible to share in the Employer's contribution for the Plan
Year shall be further expanded to include the minimum number of
Participants who are not actively employed on the last day of the
Plan Year as are necessary to satisfy the applicable test. The
specific Participants who shall become eligible to share shall be
those Participants, when compared to similarly situated
Participants, who have completed the greatest number of Hours of
Service in the Plan Year before terminating employment.
(3) Nothing in this Section shall permit the reduction of a
Participant's accrued benefit. Therefore any amounts that have
previously been allocated to Participants may not be reallocated
to satisfy these requirements. In such event, the Employer shall
make an additional contribution equal to the amount such affected
Participants would have received had they been included in the
allocations, even if it exceeds the amount which would be
deductible under Code Section 404. Any adjustment to the
allocations pursuant to this
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paragraph shall be considered a retroactive amendment adopted by
the last day of the Plan Year.
4.4 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual additions"
credited to a Participant's accounts for any "limitation year" shall
equal the lesser of: (1) $30,000 (or, if greater, one-fourth of the
dollar limitation in effect under Code Section 415(b)(1)(A)) or (2)
twenty-five percent (25%) of the Participant's "415 Compensation" for
such "limitation year." For any short "limitation year," the dollar
limitation in (1) above shall be reduced by a fraction, the numerator
of which is the number of full months in the short "limitation year"
and the denominator of which is twelve (12).
(b) For purposes of applying the limitations of Code Section 415,
"annual additions" means the sum credited to a Participant's accounts
for any "limitation year" of (1) Employer contributions, (2) Employee
contributions for "limitation years" beginning after December 31,
1986, (3) forfeitures, (4) amounts allocated, after March 31, 1984, to
an individual medical account, as defined in Code Section 415(1)(2)
which is part of a pension or annuity plan maintained by the Employer
and (5) amounts derived from contributions paid or accrued after
December 31, 1985, in taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated to the
separate account of a key employee (as defined in Code Section
419A(d)(3)) under a welfare benefit plan (as defined in Code Section
419(e)) maintained by the Employer. Except, however, the "415
Compensation" percentage limitation referred to in paragraph (a)(2)
above shall not apply to: (1) any contribution for medical benefits
(within the meaning of Code Section 419A(f)(2)) after separation from
service which is otherwise treated as an "annual addition," or (2) any
amount otherwise treated as an "annual addition," or (2) any amount
otherwise treated as an "annual addition" under Code Section
415(l)(1).
(c) For purposes of applying the limitations of Code Section 415,
the transfer of funds from one qualified plan to another is not an
"annual addition." In addition, the following are not Employee
contributions for the purposes of Section 4.4(b)(2): (1) rollover
contributions (as defined in Code Sections 402(a)(5), 403(a)(4),
403(b)(8) and 408(d)(3)); (2) repayments of loans made to a
Participant from the Plan; (3) repayments
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of distributions received by an Employee pursuant to Code Section
411(a)(7)(B) (cash-outs); (4) repayments of distributions received by
an Employee pursuant to Code Section 411(a)(3)(D) (mandatory
contributions); and (5) Employee contributions to a simplified
employee pension excludable from gross income under Code Section
408(k)(6).
(d) For purposes of applying the limitations of Code Section 415,
the "limitation year" shall be the Plan Year.
(e) The dollar limitation under Code Section 415(b)(1)(A) stated
in paragraph (a)(1) above shall be adjusted annually as provided in
Code Section 415(d) pursuant to the Regulations. The adjusted
limitation is effective as of January 1st of each calendar year and is
applicable to "limitation years" ending with or within that calendar
year.
(f) For the purpose of this Section, all qualified defined
benefit plans (whether terminated or not) ever maintained by the
Employer shall be treated as one defined benefit plan, and all
qualified defined contribution plans (whether terminated or not) ever
maintained by the Employer shall be treated as one defined
contribution plan.
(g) For the purpose of this Section, if the Employer is a member
of a controlled group of corporations, trades or businesses under
common control (as defined by Code Section 1563(a) or Code Section
414(b) and (c) as modified by Code Section 415(h)), is a member of an
affiliated service group (as defined by Code
Section 414(m)), or is a member of a group of entities required to be
aggregated pursuant to Regulations under Code Section 414(o), all
Employees of such Employers shall be considered to be employed by a
single Employer.
(h) For the purpose of this Section, if this Plan is a Code
Section 413(c) plan, all Employers of a Participant who maintain this
Plan will be considered to be a single Employer.
(i)(1) If a Participant participates in more than one defined
contribution plan maintained by the Employer which have different
Anniversary Dates, the maximum "annual additions" under this Plan
shall equal the maximum "annual additions" for the "limitation year"
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minus any "annual additions" previously credited to such Participant's
accounts during the "limitation year."
(2) If a Participant participates in both a defined contribution
plan subject to Code Section 412 and a defined contribution plan
not subject to Code Section 412 maintained by the Employer which
have the same Anniversary Date, "annual additions" will be
credited to the Participant's accounts under the defined
contribution plan subject to Code Section 412 prior to crediting
"annual additions" to the Participant's accounts under the
defined contribution plan not subject to Code Section 412.
(3) If a Participant participates in more than one defined
contribution plan subject to Code Section 412 maintained by the
Employer which has the same Anniversary Date, the maximum "annual
additions" under this Plan shall equal the product of (A) the
maximum "annual additions" for the "limitation year" minus any
"annual additions" previously credited under subparagraphs (1) or
(2) above, multiplied by (B) a fraction (i) the numerator of
which is the "annual additions" which would be credited to such
Participant's accounts under this Plan without regard to the
limitations of Code Section 415 and (ii) the denominator of which
is such "annual additions" for all plans described in this
subparagraph.
(j) If an Employee is (or has been) a Participant in one or more
defined benefit plans and one or more defined contribution plans
maintained by the Employer, the sum of the defined benefit plan
fraction and the defined contribution plan fraction for any
"limitation year" may not exceed 1.0.
(k) The defined benefit plan fraction for any "limitation year"
is a fraction, the numerator of which is the sum of the Participant's
projected annual benefits under all the defined benefit plans (whether
or not terminated) maintained by the Employer, and the denominator of
which is the lesser of 125 percent of the dollar limitation determined
for the "limitation year" under Code Sections 415(b) and (d) or 140
percent of the highest average compensation, including any adjustments
under Code Section 415(b).
Notwithstanding the above, if the Participant was a
Participant as of the first day of the first
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"limitation year" beginning after December 31, 1986, in one or more
defined benefit plans maintained by the Employer which were in
existence on May 6, 1986, the denominator of this fraction will not be
less than 125 percent of the sum of the annual benefits under such
plans which the Participant had accrued as of the close of the last
"limitation year" beginning before January 1, 1987, disregarding any
changes in the terms and conditions of the plan after May 5, 1986. The
preceding sentence applies only if the defined plans individually and
in the aggregate satisfied the requirements of Code Section 415 for
all "limitation years" beginning before January 1, 1987.
(l) The defined contribution plan fraction for any "limitation
year" is a fraction, the numerator of which is the sum of the annual
additions to the Participant's Account under all the defined
contribution plans (whether or not terminated) maintained by the
Employer for the current and all prior "limitation years" (including
the annual additions attributable to the Participant's nondeductible
Employee contributions to all defined benefit plans, whether or not
terminated, maintained by the Employer, and the annual additions
attributable to all welfare benefit funds, as defined in Code Section
419(e), and individual medical accounts, as defined in Code Section
415(l)(2), maintained by the Employer), and the denominator of which
is the sum of the maximum aggregate amounts for the current and all
prior "limitation years" of service with the Employer (regardless of
whether a defined contribution plan was maintained by the Employer).
The maximum aggregate amount in any "limitation year" is the lesser of
125 percent of the dollar limitation determined under Code Sections
415(b) and (d) in effect under Code Section 415(c)(1)(A) or 35 percent
of the Participant's Compensation for such year.
If the Employee was a Participant as of the end of the first
day of the first "limitation year" beginning after December 31, 1986,
in one or more defined contribution plans maintained by the Employer
which were in existence on May 6, 1986, the numerator of this fraction
will be adjusted if the sum of this fraction and the defined benefit
fraction would otherwise exceed 1.0 under the terms of this Plan.
Under the adjustment, an amount equal to the product of (1) the excess
of the sum of the fractions over 1.0 times (2) the denominator of this
fraction, will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated
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<PAGE>
using the fractions as they would be computed as of the end of the
last "limitation year" beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the Plan made
after May 5, 1986, but using the Code Section 415 limitation
applicable to the first "limitation year" beginning on or after
January 1, 1987. The annual addition for any "limitation year"
beginning before January 1, 1987 shall not be recomputed to treat all
Employee contributions as annual additions.
(m) Notwithstanding the foregoing, for any "limitation year" in
which the Plan is a Top Heavy Plan, 100 percent shall be substituted
for 125 percent in Sections 4.4(k) and 4.4(l) unless the extra minimum
allocation is being provided pursuant to Section 4.3. However, for
any "limitation year" in which the Plan is a Super Top Heavy Plan, 100
percent shall be substituted for 125 percent in any event.
(n) Notwithstanding anything contained in this Section to the
contrary, the limitations, adjustments and other requirements
prescribed in this Section shall at all times comply with the
provisions of Code Section 415 and the Regulations thereunder, the
terms of which are specifically incorporated herein by reference.
4.5 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of the allocation of Forfeitures, a
reasonable error in estimating a Participant's Compensation, a
reasonable error in determining the amount of elective deferrals
(within the meaning of Code Section 402(g)(3)) that may be made with
respect to any Participant under the limits of Section 4.4 or other
facts and circumstances to which Regulation 1.415-6(b)(6) shall be
applicable, the "annual additions" under this Plan would cause the
maximum "annual additions" to be exceeded for any Participant, the
Administrator shall (1) distribute any elective deferrals (within the
meaning of Code Section 402(g)(3)) or return any voluntary Employee
contributions credited for the "limitation year" to the extent that
the return would reduce the "excess amount" in the Participant's
accounts (2) hold any "excess amount" remaining after the return of
any elective deferrals or voluntary Employee contributions in the
"Section 415 suspense account" (3) allocate and reallocate the
"Section 415 suspense account" in the next "limitation year" (and
succeeding "limitation years" if necessary) to all Participants in
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<PAGE>
the Plan before any Employer or Employee contributions which would
constitute "annual additions" are made to the Plan for such
"limitation year" (4) reduce Employer contributions to the Plan for
such "limitation year" by the amount of the "Section 415 suspense
account" allocated and reallocated during such "limitation year."
(b) For purposes of this Article, "excess amount" for any
Participant for a "limitation year" shall mean the excess, if any, of
(1) the "annual additions" which would be credited to his account
under the terms of the Plan without regard to the limitations of Code
Section 415 over (2) the maximum "annual additions" determined
pursuant to Section 4.4.
(c) For purposes of this Section, "Section 415 suspense account"
shall mean an unallocated account equal to the sum of "excess amounts"
for all Participants in the Plan during the "limitation year." The
"Section 415 suspense account" shall not share in any earnings or
losses of the Trust Fund.
(d) The Plan may not distribute "excess amounts," other than
voluntary Employee contributions, to Participants or Former
Participants.
4.6 TRANSFERS FROM QUALIFIED PLANS
(a) With the consent of the Administrator, amounts may be
transferred from other qualified plans by Participants, provided that
the trust from which such funds are transferred permits the transfer
to be made and the transfer will not jeopardize the tax exempt status
of the Plan or Trust or create adverse tax consequences for the
Employer. The amounts transferred shall be set up in a separate
account herein referred to as a "Participant's Rollover Account."
Such account shall be fully Vested at all times and shall not be
subject to Forfeiture for any reason.
(b) Amounts in a Participant's Rollover Account shall be held by
the Trustee pursuant to the provisions of this Plan and may not be
withdrawn by, or distributed to the Participant, in whole or in part,
except as provided in paragraphs (c) and (d) of this Section.
(c) Except as permitted by Regulations (including Regulation
1.411(d)-4), amounts attributable to elective contributions (as
defined in Regulation 1.401(k)-1(g)(3)), including amounts treated as
elective
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<PAGE>
contributions, which are transferred from another qualified plan in a
plan-to-plan transfer shall be subject to the distribution limitations
provided for in Regulation 1.401(k)-1(d). However, the foregoing shall
not otherwise permit any distributions from this Plan by reason of a
Participant's hardship.
(d) At Normal Retirement Date, or such other date when the
Participant or his Beneficiary shall be entitled to receive benefits,
the fair market value of the Participant's Rollover Account shall be
used to provide additional benefits to the Participant or his
Beneficiary. Any distributions of amounts held in a Participant's
Rollover Account shall be made in a manner which is consistent with
and satisfies the provisions of Section 6.5, including, but not
limited to, all notice and consent requirements of Code Sections 417
and 411(a)(11) and the Regulations thereunder. Furthermore, such
amounts shall be considered as part of a Participant's benefit in
determining whether an involuntary cash-out of benefits without
Participant consent may be made.
(e) The Administrator may direct that employee transfers made
after a valuation date be segregated into a separate account for each
Participant in a federally insured savings account, certificate of
deposit in a bank or savings and loan association, money market
certificate, or other short term debt security acceptable to the
Trustee until such time as the allocations pursuant to this Plan have
been made, at which time they may remain segregated or be invested as
part of the general Trust Fund, to be determined by the Administrator.
(f) All amounts allocated to a Participant's Rollover Account may
be treated as a Directed Investment Account pursuant to Section 4.8.
(g) For purposes of this Section, the term "qualified plan" shall
mean any tax qualified plan under Code Section 401(a). The term
"amounts transferred from other qualified plans" shall mean: (i)
amounts transferred to this Plan directly from another qualified plan;
(ii) distributions from another qualified plan which are eligible
rollover distributions and which are either transferred by the
Employee to this Plan within sixty (60) days following his receipt
thereof or are transferred pursuant to a direct rollover; (iii)
amounts transferred to this Plan from a conduit individual
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<PAGE>
retirement account provided that the conduit individual retirement
account has no assets other than assets which (A) were previously
distributed to the Employee by another qualified plan as a lump-sum
distribution (B) were eligible for tax-free rollover to a qualified
plan and (C) were deposited in such conduit individual retirement
account within sixty (60) days of receipt thereof and other than
earnings on said assets; and (iv) amounts distributed to the Employee
from a conduit individual retirement account meeting the requirements
of clause (iii) above, and transferred by the Employee to this Plan
within sixty (60) days of his receipt thereof from such conduit
individual retirement account.
(h) Prior to accepting any transfers to which this Section
applies, the Administrator may require the Employee to establish that
the amounts to be transferred to this Plan meet the requirements of
this Section and may also require the Employee to provide an opinion
of counsel satisfactory to the Employer that the amounts to be
transferred meet the requirements of this Section.
(i) Notwithstanding anything herein to the contrary, a transfer
directly to this Plan from another qualified plan (or a transaction
having the effect of such a transfer) shall only be permitted if it
will not result in the elimination or reduction of any "Section
411(d)(6) protected benefit" as described in Section 8.1.
4.7 VOLUNTARY CONTRIBUTIONS
(a) In order to allow Participants the opportunity to increase
their retirement income, each Participant may, at the discretion of
the Administrator, elect to voluntarily contribute a portion of his
compensation earned while a Participant under this Plan. Such
contributions shall be paid to the Trustee within a reasonable period
of time but in no event later than ninety (90) days after the receipt
of the contribution. The balance in each Participant's Voluntary
Contribution Account shall be fully Vested at all times and shall not
be subject to Forfeiture for any reason.
(b) A Participant may elect to withdraw his voluntary
contributions from his Voluntary Contribution Account and the actual
earnings thereon in a manner which is consistent with and satisfies
the provisions of Section 6.5, including, but not limited to, all
notice and consent requirements of Code Sections 417 and 411(a)(11)
and the Regulations thereunder. If the
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<PAGE>
Administrator maintains sub-accounts with respect to voluntary
contributions (and earnings thereon) which were made on or before a
specified date, a Participant shall be permitted to designate which
sub-account shall be the source for his withdrawal.
In the event such a withdrawal is made, or in the event a
Participant has received a hardship distribution pursuant to
Regulation 1.401(k)-1(d)(2)(iv)(B) from any other plan maintained by
the Employer, then such Participant shall be barred from making any
voluntary contributions to the Trust Fund for a period of twelve (12)
months after receipt of the withdrawal or distribution.
(c) At Normal Retirement Date, or such other date when the
Participant or his Beneficiary shall be entitled to receive benefits,
the fair market value of the Voluntary Contribution Account shall be
used to provide additional benefits to the Participant or his
Beneficiary.
(d) The Administrator may direct that voluntary contributions
made after a valuation date be segregated into a separate account for
each Participant in a federally insured savings account, certificate
of deposit in a bank or savings and loan association, money market
certificate, or other short term debt security acceptable to the
Trustee until such time as the allocations pursuant to this Plan have
been made, at which time they may remain segregated or be invested as
part of the general Trust Fund, to be determined by the Administrator.
(e) All amounts allocated to a Voluntary Contribution Account may
be treated as a Directed Investment Account pursuant to Section 4.8.
4.8 DIRECTED INVESTMENT ACCOUNT
(a) The Plan Administrator shall permit all Participants to
direct the Trustee as to the investment of all of their accounts under
the Plan which are held by the Trustee in trust. Such Participant
directed accounts shall be considered a Directed Investment Account.
Participants shall be subject to the procedures adopted by the Plan
Administrator for implementation of investment selection and such
procedures shall be established and applied to all Participants in a
uniform and nondiscriminatory manner. The Trustee shall comply
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<PAGE>
as promptly as practicable with directions given by the Participants
thereunder. The Trustee may refuse to comply with any direction from
the Participant in the event the Trustee, in its sole and absolute
discretion, deems such directions improper by virtue of applicable
law. The Trustee shall not be responsible or liable for any loss or
expense which may result from the Trustee's refusal or failure to
comply with any directions from the Participant. Any costs and
expenses related to compliance with the Participant's directions may,
in the sole discretion of the Plan Administrator, be borne by the
Participant's individual accounts.
(b) To the extent so directed, the Trustee is relieved of its
fiduciary responsibilities as provided in Section 404(c) of ERISA and
the applicable regulations thereunder. Each Participant's individual
accounts will at all times be considered a directed investment account
as that term is defined in ERISA, the Code and applicable regulations
thereunder.
(c) The Employer shall have the authority in accordance with
ERISA and the Code, and the regulations issued thereunder, to select a
broad range of investment alternatives and to add or delete any
investment alternatives as are deemed appropriate in the discretion of
the Employer, from time to time; provided that the Employer shall at
all times have available for Participant's direction, a minimum of
three investment alternatives. Those assets to which a Participant
fails to provide the Trustee with a proper investment designation
shall be automatically invested by the Trustee in a money market type
account pending investment directions from the Participant.
(d) Each Participant's investment accounts shall be charged or
credited, as appropriate, with the net earnings, gains, losses and
expenses as well as any appreciation or depreciation in market value
attributable to each account as determined by the Plan Administrator.
(e) The Trustee shall be empowered to acquire and hold as an
investment under the Plan "qualifying employer securities" as that
term is defined in ERISA, provided, however, that the Trustee shall
not be permitted to acquire any qualifying employer securities, if,
immediately after the acquisition of such securities, the fair market
value of all qualifying employer securities held by the Trustee
hereunder should amount to more than
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10% of the fair market value of all the assets in the Trust.
4.9 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) The "Actual Contribution Percentage" for Plan Years beginning
after December 31, 1986 for the Highly Compensated Participant group
shall not exceed the greater of:
(1) 125 percent of such percentage for the Non-Highly Compensated
Participant group; or
(2) the lesser of 200 percent of such percentage for the Non-
Highly Compensated Participant group, or such percentage for the
Non-Highly Compensated Participant group plus 2 percentage
points. However, for Plan Years beginning after December 31,
1988, to prevent the multiple use of the alternative method
described in this paragraph and Code Section 401(m)(9)(A), any
Highly Compensated Participant eligible to make elective
deferrals pursuant to any cash or deferred arrangement maintained
by the Employer or an Affiliated Employer and to make Employee
contributions or to receive matching contributions under this
Plan or under any plan maintained by the Employer or an
Affiliated Employer shall have his actual contribution ratio
reduced pursuant to Regulation 1.401(m)-2. The provisions of
Code Section 401(m) and Regulations 1.401(m)-1(b) and 1.401(m)-2
are incorporated herein by reference.
(b) For the purposes of this Section and Section 4.10, "Actual
Contribution Percentage" for a Plan Year means, with respect to the
Highly Compensated Participant group and Non-Highly Compensated
Participant group, the average of the ratios (calculated separated for
each Participant in each group) of:
(1) the sum of voluntary Employee contributions made pursuant to
Section 4.7 on behalf of each such Participant for such Plan
Year; to
(2) the Participant's "414(s) Compensation" for such Plan Year.
(c) For purposes of determining the "Actual Contribution
Percentage" and the amount of Excess Aggregate Contributions pursuant
to Section 4.10(c), the
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Administrator may elect to take into account, with respect to
Employees eligible to have voluntary Employee contributions made
pursuant to Section 4.7 allocated to their accounts, elective
deferrals (as defined in Regulation 1.402(g)-1(b)) and qualified non-
elective contributions (as defined in Code Section 401(m)(4)(C))
contributed to any plan maintained by the Employer. Such elective
deferrals and qualified non-elective contributions shall be treated as
Employer matching contributions subject to Regulation 1.401(m)-1(b)(5)
which is incorporated herein by reference. However, for Plan Years
beginning after December 31, 1988, the Plan Year must be the same as
the plan year of the plan to which the elective deferrals and the
qualified non-elective contributions are made.
(d) For the purpose of determining the actual contribution ratio
of a Highly Compensated Employee who is subject to the Family Member
aggregation rules of Code Section 414(q)(6) because such Employee is
either a "five percent owner" of the Employer or one of the ten (10)
Highly Compensated Employees paid the greatest "415 Compensation"
during the year, the following shall apply:
(1) The combined actual contribution ratio for the family group
(which shall be treated as one Highly Compensated Participant)
shall be determined by aggregating voluntary Employee
contributions made pursuant to Section 4.7 and "414(s)
Compensation" of all eligible Family Members (including Highly
Compensated Participants). However, in applying the $200,000
limit to "414(s) Compensation" for Plan Years beginning after
December 31, 1988, Family Members shall include only the affected
Employee's spouse and any lineal descendants who have not
attained age 19 before the close of the Plan Year.
Notwithstanding the foregoing, with respect to Plan Years
beginning prior to January 1, 1990, compliance with the
Regulations then in effect shall be deemed to be compliance with
this paragraph.
(2) The voluntary Employee contributions made pursuant to
Section 4.7 and "414(s) Compensation" of all Family Members shall
be disregarded for purposes of determining the "Actual
Contribution Percentage" of the Non-Highly Compensated
Participant group except to the extent taken into account in
paragraph (1) above.
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<PAGE>
(3) If a Participant is required to be aggregated as a member of
more than one family group in a plan, all Participants who are
members of those family groups that include the Participant are
aggregated as one family group in accordance with paragraphs (1)
and (2) above.
(e) For purposes of this Section and Code Sections 401(a)(4),
410(b) and 401(m), if two or more plans of the Employer to which
matching contributions, Employee contributions, or both, are made are
treated as one plan for purposes of Code Sections 401(a)(4) or 410(b)
(other than the average benefits test under Code Section
410(b)(2)(A)(ii) as in effect for Plan Years beginning after December
31, 1988), such plans shall be treated as one plan. In addition, two
or more plans of the Employer to which matching contributions,
Employee contributions, or both, are made may be considered as a
single plan for purposes of determining whether or not such plans
satisfy Code Sections 401(a)(4), 410(b) and 401(m). In such a case,
the aggregated plans must satisfy this Section and Code Sections
401(a)(4), 410(b) and 401(m) as though such aggregated plans were a
single plan. Plans may be aggregated under this paragraph (e) for
Plan Years beginning after December 31, 1988, only if they have the
same plan year.
Notwithstanding the above, for Plan Years beginning after
December 31, 1988, an employee stock ownership plan described in Code
Section 4975(e)(7) or 409 may not be aggregated with this Plan for
purposes of determining whether the employee stock ownership plan or
this Plan satisfies this Section and Code Sections 401(a)(4), 410(b)
and 401(m).
(f) If a Highly Compensated Participant is a Participant under
two or more plans (other than an employee stock ownership plan as
defined in Code Section 4975(e)(7) or 409 for Plan Years beginning
after December 31, 1988) which are maintained by the Employer or an
Affiliated Employer to which matching contributions, Employee
contributions, or both, are made, all such contributions on behalf of
such Highly Compensated Participant shall be aggregated for purposes
of determining such Highly Compensated Participant's actual
contribution ratio. However, for Plan Years beginning after December
31, 1988, if the plans have different plan years, this paragraph shall
be applied by treating all plans ending with or within the same
calendar year as a single plan.
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(g) For purposes of Sections 4.9(a) and 4.10, a Highly
Compensated Participant and Non-Highly Compensated Participant shall
include any Employee eligible to have voluntary Employee contributions
pursuant to Section 4.7 (whether or not voluntary Employee
contributions are made) allocated to his account for the Plan Year.
4.10 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event that, for Plan Years beginning after December
31, 1986, the "Actual Contribution Percentage" for the Highly
Compensated Participant group exceeds the "Actual Contribution
Percentage" for the Non-Highly Compensated Participant group pursuant
to Section 4.9(a), the Administrator (on or before the fifteenth day
of the third month following the end of the Plan Year, but in no event
later than the close of the following Plan Year) shall direct the
Trustee to distribute to the Highly Compensated Participant having the
highest actual contribution ratio, his portion of Excess Aggregate
Contributions (and Income allocable to such contributions) until
either one of the tests set forth in Section 4.9(a) is satisfied, or
until his actual contribution ratio equals the actual contribution
ratio of the Highly Compensated Participant having the second highest
actual contribution ratio. This process shall continue until one of
the tests set forth in Section 4.9(a) is satisfied.
(b) Any distribution of less than the entire amount of Excess
Aggregate Contributions (and Income) shall be treated as a pro rata
distribution of Excess Aggregate Contributions and Income.
Distribution of Excess Aggregate Contributions shall be designated by
the Employer as a distribution of Excess Aggregate Contributions (and
Income).
(c) For each Highly Compensated Participant, the amount of Excess
Aggregate Contributions is equal to the voluntary Employee
contributions made pursuant to Section 4.7 and any qualified non-
elective contributions or elective deferrals taken into account
pursuant to Section 4.9(c) on behalf of the Highly Compensated
Participant (determined prior to the application of this paragraph)
minus the amount determined by multiplying the Highly Compensated
Participant's actual contribution ratio (determined after application
of this paragraph) by his "414(s) Compensation." The actual
contribution ratio must be rounded to the nearest one-hundredth of one
percent for Plan Years beginning after December 31, 1988.
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In no case shall the amount of Excess Aggregate Contribution with
respect to any Highly Compensated Participant exceed the amount of
voluntary Employee contributions made pursuant to Section 4.7 and any
qualified non-elective contributions or elective deferrals taken into
account pursuant to Section 4.9(c) on behalf of such Highly
Compensated Participant for such Plan Year.
(d) The determination of the amount of Excess Aggregate
Contributions with respect to any Plan Year shall be made after first
determining the Excess Contributions (as defined in Regulation
1.401(k)-1(g)(7)(i), if any, to be treated as voluntary Employee
contributions due to recharacterization for the plan year of any
qualified cash or deferred arrangement (as defined in Code Section
401(k)) maintained by the Employer that ends with or within the Plan
Year.
(e) If the determination and correction of Excess Aggregate
Contributions of a Highly Compensated Participant whose actual
contribution ratio is determined under the family aggregation rules,
then the actual contribution ratio shall be reduced and the Excess
Aggregate Contributions for the family unit shall be allocated among
the Family Members in proportion to the sum of voluntary Employee
contributions made pursuant to Section 4.7 and any qualified non-
elective contributions or elective deferrals taken into account
pursuant to Section 4.9(c) of each Family Member that were combined to
determine the group actual contribution ratio. Notwithstanding the
foregoing, with respect to Plan Years beginning prior to January 1,
1990, compliance with the Regulations then in effect shall be deemed
to be compliance with this paragraph.
(f) If during a Plan Year the projected aggregate amount of
voluntary Employee contributions to be allocated to all Highly
Compensated Participants under this Plan would, by virtue of the tests
set forth in Section 4.9(a), cause the Plan to fail such tests, then
the Administrator may automatically reduce proportionately or in the
order provided in Section 4.10(a) each affected Highly Compensated
Participant's projected share of such contributions by an amount
necessary to satisfy one of the tests set forth in Section 4.9(a).
(g) Notwithstanding the above, within twelve (12) months after
the end of the Plan Year, the Employer may
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make a qualified non-elective contribution (as defined in Code Section
401(m)(4)(C) on behalf of Non-Highly Compensated Participants in an
amount sufficient to satisfy one of the tests set forth in Section
4.9(a). Such contribution shall be allocated to the Participant's
Account of each Non-Highly Compensated Participant in the same
proportion that each Non-Highly Compensated Participant's Compensation
for the year bears to the total Compensation of all Non-Highly
Compensated Participants. A separate accounting shall be maintained
with respect to such contributions.
ARTICLE V.
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Anniversary
Date, and at such other date or dates deemed necessary by the Administrator,
herein called "valuation date," to determine the net worth of the assets
comprising the Trust Fund as it exists on the "valuation date." In determining
such net worth, the Trustee shall value the assets comprising the Trust Fund at
their fair market value as of the "valuation date" and shall deduct all expenses
for which the Trustee has not yet obtained reimbursement from the Employer or
the Trust Fund.
5.2 METHOD OF VALUATION
In determining the fair market value of securities held in the Trust
Fund which are listed on a registered stock exchange, the Administrator shall
direct the Trustee to value the same at the prices they were last traded on such
exchange preceding the close of business on the "valuation date." If such
securities were not traded on the "valuation date," or if the exchange on which
they are traded was not open for business on the "valuation date," then the
securities shall be valued at the prices at which they were last traded prior to
the "valuation date." Any unlisted security held in the Trust Fund shall be
valued at its bid price next preceding the close of business on the "valuation
date," which bid price shall be obtained from a registered broker or an
investment banker. In determining the fair market value of assets other than
securities for which trading or bid prices can be obtained, the Trustee may
appraise such assets itself, or in its discretion, employ one or more appraisers
for that purpose and rely on the values established by such appraiser or
appraisers.
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ARTICLE VI.
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer and
retire for the purposes hereof on his Normal Retirement Date or Early Retirement
Date. However, a Participant may postpone the termination of his employment
with the Employer to a later date, in which event the participation of such
Participant in the Plan, including the right to receive allocations pursuant to
Section 4.3, shall continue until his Late Retirement Date. Upon a
Participant's Retirement Date or attainment of his Normal Retirement Date
without termination of employment with the Employer, or as soon thereafter as is
practicable, the Trustee shall distribute all amounts credited to such
Participant's Account in accordance with Section 6.5.
6.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Retirement Date or
other termination of his employment, all amounts credited to such
Participant's Account shall become fully Vested. The Administrator
shall direct the Trustee, in accordance with the provisions of
Sections 6.6 and 6.7, to distribute the value of the deceased
Participant's accounts to the Participant's Beneficiary.
(b) Upon the death of a Former Participant, the Administrator
shall direct the Trustee, in accordance with the provisions of
Sections 6.6 and 6.7, to distribute any remaining Vested amounts
credited to the accounts of a deceased Former Participant to such
Former Participant's Beneficiary.
(c) The Administrator may require such proper proof of death and
such evidence of the right of any person to receive payment of the
value of the account of a deceased Participant or Former Participant
as the Administrator may deem desirable. The Administrator's
determination of death and of the right of any person to receive
payment shall be conclusive.
(d) Unless otherwise elected in the manner prescribed in Section
6.6, the Beneficiary of the death benefit shall be the Participant's
spouse, who shall receive such benefit in the form of a Pre-Retirement
Survivor Annuity pursuant to Section 6.6. Except, however, the
Participant may designate a Beneficiary other than his spouse if:
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(1) The Participant and his spouse have validly waived the Pre-
Retirement Survivor Annuity in the manner prescribed in Section
6.6, and the spouse has waived his or her right to be the
Participant's Beneficiary; or
(2) the Participant is legally separated or has been abandoned
(within the meaning of local law) and the Participant has a court
order to such effect (and there is no "qualified domestic
relations order" as defined in Code Section 414(p) which provides
otherwise); or
(3) the Participant has no spouse; or
(4) the spouse cannot be located.
In such event, the designation of a Beneficiary shall be
made on a form satisfactory to the Administrator. A Participant may
at any time revoke his designation of a Beneficiary or change his
Beneficiary by filing written notice of such revocation or change with
the Administrator. However, the Participant's spouse must again
consent in writing to any change in Beneficiary unless the original
consent acknowledged that the spouse had the right to limit consent
only to a specific Beneficiary and that the spouse voluntarily elected
to relinquish such right. In the event no valid designation of
Beneficiary exists at the time of the Participant's death, the death
benefit shall be payable to his estate.
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability prior
to his Retirement Date or other termination of his employment, all amounts
credited to such Participant's Account shall become fully Vested. In the event
of a Participant's Total and Permanent Disability, the Trustee, in accordance
with the provisions of Sections 6.5 and 6.7, shall distribute to such
Participant all amounts credited to such Participant's Account as though he had
retired.
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date coinciding with or
subsequent to the termination of a Participant's employment for any
reason other than death, Total and Permanent Disability or retirement,
the Administrator may direct the Trustee to segregate the amount of
the Vested
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portion of such Terminated Participant's Account and invest
the aggregate amount thereof in a separate, federally insured savings
account, certificate of deposit, common or collective trust fund of a
bank or a deferred annuity. In the event the Vested portion of a
Participant's Account is not segregated, the amount shall remain in a
separate account for the Terminated Participant and share in
allocations pursuant to Section 4.3 until such time as a distribution
is made to the Terminated Participant.
Distribution of the funds due to a Terminated Participant
shall be made on the occurrence of an event which would result in the
distribution had the Terminated Participant remained in the employ of
the Employer (upon the Participant's death, Total and Permanent
Disability, Early or Normal Retirement). However, at the election of
the Participant, the Administrator shall direct the Trustee to cause
the entire Vested portion of the Terminated Participant's Account to
be payable to such Terminated Participant prior to the occurrence of
those distribution events previously described. Any distribution
under this paragraph shall be made in a manner which is consistent
with and satisfies the provisions of Section 6.5, including, but not
limited to, all notice and consent requirements of Code Sections 417
and 411(a)(11) and the Regulations thereunder.
If the value of a Terminated Participant's Vested benefit
derived from Employer and Employee contributions does not exceed
$3,500 and has never exceeded $3,500 at the time of any prior
distribution, the Administrator shall direct the Trustee to cause the
entire Vested benefit to be paid to such Participant in a single lump
sum.
(b) The Vested portion of any Participant's Account shall be a
percentage of the total amount credited to his Participant's Account
determined on the basis of the Participant's number of Years of
Service according to the following schedule:
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Vesting Schedule
Years of Service Percentage
1 20 %
2 40 %
3 60 %
4 80 %
5 100 %
(c) Notwithstanding the vesting schedule above, the Vested
percentage of a Participant's Account shall not be less than the
Vested percentage attained as of the later of the effective date or
adoption date of this amendment and restatement.
(d) Notwithstanding the vesting schedule above, upon any full or
partial termination of the Plan, all amounts credited to the account
of any affected Participant shall become 100% Vested and shall not
thereafter be subject to Forfeiture.
(e) The computation of a Participant's nonforfeitable percentage
of his interest in the Plan shall not be reduced as the result of any
direct or indirect amendment to this Plan. For this purpose, the Plan
shall be treated as having been amended if the Plan provides for an
automatic change in vesting due to a change in top heavy status. In
the event that the Plan is amended to change or modify any vesting
schedule, a Participant with at least three (3) Years of Service as of
the expiration date of the election period may elect to have his
nonforfeitable percentage computed under the Plan without regard to
such amendment. If a Participant fails to make such election, then
such Participant shall be subject to the new vesting schedule. The
Participant's election period shall commence on the adoption date of
the amendment and shall end 60 days after the latest of:
(1) The adoption date of the amendment;
(2) the effective date of the amendment; or
(3) the date the Participant receives written notice of the
amendment from the Employer or Administrator.
(f)(1) If any Former Participant shall be reemployed by the
Employer before a 1-Year Break in
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Service occurs, he shall continue to participate in the Plan in the
same manner as if such termination had not occurred.
If any Former Participant shall be reemployed by the
Employer before five (5) consecutive 1-Year Breaks in Service, and
such Former Participant had received, or was deemed to have received,
a distribution of his entire Vested interest prior to his
reemployment, his forfeited account shall be reinstated only if he
repays the full amount distributed to him before the earlier of five
(5) years after the first date on which the Participant is
subsequently reemployed by the Employer or the close of the first
period of five (5) consecutive 1-Year Breaks in Service commencing
after the distribution, or in the event of a deemed distribution, upon
the reemployment of such Former Participant. In the event the Former
Participant does repay the full amount distributed to him, or in the
event of a deemed distribution, the undistributed portion of the
Participant's Account must be restored in full, unadjusted by any
gains or losses occurring subsequent to the Anniversary Date or other
valuation date coinciding with or preceding his termination. The
source for such reinstatement shall first be any Forfeitures occurring
during the year. If such source is insufficient, then the Employer
shall contribute an amount which is sufficient to restore any such
forfeited Accounts.
(2) If any Former Participant is reemployed after a 1-Year Break
in Service has occurred, Years of Service shall include Years of
Service prior to his 1-Year Break in Service subject to the
following rules:
(i) if a Former Participant has a 1-Year Break in Service,
his pre-break and post-break service shall be used for
computing Years of Service for eligibility and for vesting
purposes only after he has been employed for one (1) Year of
Service following the date of his reemployment with the
Employer;
(ii) Any Former Participant who under the Plan does not have
a nonforfeitable right to any interest in the Plan resulting
from Employer contributions shall lose credits otherwise
allowable under (i) above if his consecutive 1-Year Breaks
in Service equal or exceed the
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greater of (A) five (5) or (B) the aggregate number of his
pre-break Years of Service;
(iii) After five (5) consecutive 1-Year Breaks in Service,
a Former Participant's Vested Account balance attributable
to pre-break service shall not be increased as a result of
post-break service;
(iv) If a Former Participant who has not had his Years of
Service before a 1-Year Break in Service disregarded
pursuant to (ii) above completes one (1) Year of Service for
eligibility purposes following his reemployment with the
Employer, he shall participate in the Plan retroactively
from his date of reemployment;
(v) If a Former Participant who has not had his Years of
Service before a 1-Year Break in Service disregarded
pursuant to (ii) above completes a Year of Service (a 1-Year
Break in Service previously occurred, but employment had not
terminated), he shall participate in the Plan retroactively
from the first day of the Plan Year during which he
completes one (1) Year of Service.
6.5 DISTRIBUTION OF BENEFITS
(a)(1) Unless otherwise elected as provided below, a Participant
who is married on the "annuity starting date" and who does not die
before the "annuity starting date" shall receive the value of all of
his benefits in the form of a joint and survivor annuity. The joint
and survivor annuity is an annuity that commences immediately and
shall be equal in value to a single life annuity. Such joint and
survivor benefits following the Participant's death shall continue to
the spouse during the spouse's lifetime at a rate equal to 50% of the
rate at which such benefits were payable to the Participant. This
joint and 50% survivor annuity shall be considered the designated
qualified joint and survivor annuity and automatic form of payment for
the purposes of this Plan and shall include an installment refund
feature. An unmarried Participant shall receive the value of his
benefit in the form of a life annuity with an installment refund
feature. Such unmarried Participant, however, may elect in writing to
waive the life annuity. The election must comply with the
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provisions of this Section as if it were an election to waive the
joint and survivor annuity by a married Participant, but without the
spousal consent requirement. The Participant may elect to have any
annuity provided for in this Section distributed upon the attainment
of the "earliest retirement age" under the Plan. The "earliest
retirement age" is the earliest date on which, under the Plan, the
Participant could elect to receive retirement benefits.
(2) Any election to waive the joint and survivor annuity must be
made by the Participant in writing during the election period and
be consented to by the Participant's spouse. If the spouse is
legally incompetent to give consent, the spouse's legal guardian,
even if such guardian is the Participant, may give consent. Such
election shall designate a Beneficiary (or a form of benefits)
that may not be changed without spousal consent (unless the
consent of the spouse expressly permits designations by the
Participant without the requirement of further consent by the
spouse). Such spouse's consent shall be irrevocable and must
acknowledge the effect of such election and be witnessed by a
Plan representative or a notary public. Such consent shall not
be required if it is established to the satisfaction of the
Administrator that the required consent cannot be obtained
because there is no spouse, the spouse cannot be located, or
other circumstances that may be prescribed by Regulations. The
election made by the Participant and consented to by his spouse
may be revoked by the Participant in writing without the consent
of the spouse at any time during the election period. The number
of revocations shall not be limited. Any new election must
comply with the requirements of this paragraph. A former
spouse's waiver shall not be binding on a new spouse.
(3) The election period to waive the joint and survivor annuity
shall be the 90 day period ending on the "annuity starting date."
(4) For purposes of this Section, the "annuity starting date"
means the first day of the first period for which an amount is
paid as an annuity, or, in the case of a benefit not payable in
the form of an annuity, the first day on which all events have
occurred which entitle the Participant to such benefit.
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(5) With regard to the election, the Administrator shall provide
to the Participant no less than 30 days and no more than 90 days
before the "annuity starting date" a written explanation of:
(i) The terms and conditions of the joint and survivor
annuity; and
(ii) the Participant's right to make, and the effect of, an
election to waive the joint and survivor annuity; and
(iii) the right of the Participant's spouse to consent to
any election to waive the joint and survivor annuity; and
(iv) the right of the Participant to revoke such election,
and the effect of such revocation.
(b) In the event a married Participant duly elects pursuant to
paragraph (a)(2) above not to receive his benefit in the form of a
joint and survivor annuity, or if such Participant is not married, in
the form of a life annuity, the Administrator, pursuant to the
election of the Participant, shall direct the Trustee to distribute to
a Participant or his Beneficiary any amount to which he is entitled
under the Plan in one or more of the following methods:
(1) One lump-sum payment in cash or in property;
(2) A straight life annuity; single life annuities with certain
periods of five, ten or fifteen years; a single life annuity with
installment refund; survivorship annuities with installment
refund and survivorship percentages of 50, 66-2/3 or 100; fixed
period annuities for any period of whole months which is not less
than 60 and does not exceed the life expectancy of the
Participant and the named Beneficiary where the life expectancy
is not recalculated; and a series of installments chosen by the
Participant (with a minimum payment each year beginning with the
year the Participant turns 70-1/2), with the balance of the
Participant's Vested Account, if any, being payable on the
Participant's death to his Beneficiary in a single sum;
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(3) Purchase of or providing an annuity. However, such annuity
may not be in any form that will provide for payments over a
period extending beyond either the life of the Participant (or
the lives of the Participant and his designated Beneficiary) or
the life expectancy of the Participant (or the life
expectancy of the Participant and his designated Beneficiary).
(c) The present value of a Participant's joint and survivor
annuity derived from Employer and Employee contributions may not be
paid without his written consent if the value exceeds, or has ever
exceeded, $3,500 at the time of any prior distribution. Further, the
spouse of a Participant must consent in writing to any immediate
distribution. If the value of the Participant's benefit derived from
Employer and Employee contributions does not exceed $3,500 and has
never exceeded $3,500 at the time of any prior distribution, the
Administrator may immediately distribute such benefit without such
Participant's consent. No distribution may be made under the
preceding sentence after the "annuity starting date" unless the
Participant and his spouse consent in writing to such distribution.
Any written consent required under this paragraph must be obtained not
more than 90 days before commencement of the distribution and shall be
made in a manner consistent with Section 6.5(a)2.
(d) Any distribution to a Participant who has a benefit which
exceeds, or has ever exceeded, $3,500 at the time of any prior
distribution shall require such Participant's consent if such
distribution commences prior to the later of his Normal Retirement Age
or age 62. With regard to this required consent:
(1) No consent shall be valid unless the Participant has received
a general description of the material features and an explanation
of the relative values of the optional forms of benefit available
under the Plan that would satisfy the notice requirements of Code
Section 417.
(2) The Participant must be informed of his right to defer
receipt of the distribution. If a Participant fails to consent,
it shall be deemed an election to defer the commencement of
payment of any benefit. However, any election to defer the
receipt of benefits shall not apply with respect to distributions
which are required under Section 6.5(e).
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(3) Notice of the rights specified under this paragraph shall be
provided no less than 30 days and no more than 90 days before the
"annuity starting date."
(4) Written consent of the Participant to the distribution must
not be made before the Participant receives the notice and must
not be made more than 90 days before the "annuity starting date."
(5) No consent shall be valid if a significant detriment is
imposed under the Plan on any Participant who does not consent to
the distribution.
(e) Notwithstanding any provision in the Plan to the contrary,
the distribution of a Participant's benefits made on or after
January 1, 1985, whether under the Plan or through the purchase
of an annuity contract, shall be made in accordance with the
following requirements and shall otherwise comply with Code
Section 401(a)(9) and the Regulations thereunder (including
Regulation 1.401(a)(9)-2), the provisions of which are
incorporated herein by reference:
(1) A Participant's benefits shall be distributed to him not
later than April 1st of the calendar year following the
later of (i) the calendar year in which the Participant
attains age 70-1/2, or (ii) the calendar year in which the
Participant retires, provided, however, that this clause
(ii) shall not apply in the case of a Participant who is a
"five (5) percent owner" at any time during the five (5)
Plan Year period ending in the calendar year in which he
attains age 70-1/2 or, in the case of a Participant who
becomes a "five (5) percent owner" during any subsequent
Plan Year, clause (ii) shall no longer apply and the
required beginning date shall be the April 1st of the
calendar year following the calendar year in which such
subsequent Plan Year ends. Alternatively, distributions to
a Participant must begin no later than the Applicable April
1st as determined under the preceding sentence and must be
made over the life of the Participant (or the lives of the
Participant and the Participant's designated
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Beneficiary) or the life expectancy of the Participant (or
the life expectancies of the Participant and his designated
Beneficiary) in accordance with Regulations. Notwithstanding
the foregoing, clause (ii) above shall not apply to any
Participant unless the Participant had attained age 70-1/2
before January 1, 1988 and was not a "five (5) percent
owner" at any time during the Plan Year ending with or
within the calendar year in which the Participant attained
age 66-1/2 or any subsequent Plan Year.
(2) Distributions to a Participant and his Beneficiaries
shall only be made in accordance with the incidental death
benefit requirements of Code Section 401(a)(9)(G) and the
Regulations thereunder.
(f) For purposes of this Section, the life expectancy of a
Participant and a Participant's spouse (other than in the case of a
life annuity) shall not be redetermined in accordance with Code
Section 401(a)(9)(D). Life expectancy and joint and last survivor
expectancy shall be computed using the return multiples in Tables V
and VI of Regulation 1.72-9.
(g) Subject to the spouse's right of consent afforded under the
Plan, the restrictions imposed by this Section shall not apply if a
Participant has, prior to January 1, 1984, made a written designation
to have his retirement benefit paid in an alternative method
acceptable under Code Section 401(a) as in effect prior to the
enactment of the Tax Equity and Fiscal Responsibility Act of 1982.
(h) All annuity Contracts under this Plan shall be non-
transferable when distributed. Furthermore, the terms of any annuity
Contract purchased and distributed to a Participant or spouse shall
comply with all of the requirements of the Plan.
(i) If a distribution is made at a time when a Participant is not
fully Vested in his Participant's Account (employment has not
terminated) and the Participant may increase the Vested percentage in
such account:
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(1) a separate account shall be established for the Participant's
interest in the Plan as of the time of the distribution; and
(2) at any relevant time, the Participant's Vested portion of the
separate account shall be equal to an amount ("X") determined by
the formula:
X equals P(AB plus (R x D)) - (R x D)
For purposes of applying the formula: P is the Vested
percentage at the relevant time, AB is the account balance at the
relevant time, D is the amount of distribution, and R is the
ratio of the account balance at the relevant time to the account
balance after distribution.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
(a) Unless otherwise elected as provided below, a Vested
Participant who dies before the annuity starting date and who has a
surviving spouse shall have his death benefit paid to his surviving
spouse in the form of a Pre-Retirement Survivor Annuity. The
Participant's spouse may direct that payment of the Pre-Retirement
Survivor Annuity commence within a reasonable period after the
Participant's death. If the spouse does not so direct, payment of
such benefit will commence at the time the Participant would have
attained the later of his Normal Retirement Age or age 62. However,
the spouse may elect a later commencement date. Any distribution to
the Participant's spouse shall be subject to the rules specified in
Section 6.6(g).
(b) Any election to waive the Pre-Retirement Survivor Annuity
before the Participant's death must be made by the Participant in
writing during the election period and shall require the spouse's
irrevocable consent in the same manner provided for in Section
6.5(a)(2). Further, the spouse's consent must acknowledge the
specific nonspouse Beneficiary. Notwithstanding the foregoing, the
nonspouse Beneficiary need not be acknowledged, provided the consent
of the spouse acknowledges that the spouse has the right to limit
consent only to a specific Beneficiary and that the spouse voluntarily
elects to relinquish such right.
(c) The election period to waive the Pre-Retirement Survivor
Annuity shall begin on the first day of the Plan Year in which the
Participant attains age 35 and end on
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the date of the Participant's death. An earlier waiver (with spousal
consent) may be made provided a written explanation of the Pre-
Retirement Survivor Annuity is given to the Participant and such
waiver becomes invalid at the beginning of the Plan Year in which the
Participant turns age 35. In the event a Vested Participant separates
from service prior to the beginning of the election period, the
election period shall begin on the date of such separation from
service.
(d) With regard to the election, the Administrator shall provide
each Participant within the applicable period, with respect to such
Participant (and consistent with Regulations), a written explanation
of the Pre-Retirement Survivor Annuity containing comparable
information to that required pursuant to Section 6.5(a)(5). For the
purposes of this paragraph, the term "applicable period" means, with
respect to a Participant, whichever of the following periods ends
last:
(1) The period beginning with the first day of the Plan Year in
which the Participant attains age 32 and ending with the close of
the Plan Year preceding the Plan Year in which the Participant
attains age 35;
(2) A reasonable period after the individual becomes a
Participant;
(3) A reasonable period ending after the Plan no longer fully
subsidizes the cost of the Pre-Retirement Survivor Annuity with
respect to the Participant;
(4) A reasonable period ending after Code Section 401(a)(11)
applies to the Participant; or
(5) A reasonable period after separation from service in the case
of a Participant who separates before attaining age 35. For this
purpose, the Administrator must provide the explanation beginning
one year before the separation from service and ending one year
after such separation. If such a Participant thereafter returns
to employment with the Employer, the applicable period for such
Participant shall be redetermined.
For purposes of applying this Section 6.6(d), a reasonable
period ending after the enumerated events described in paragraphs (2),
(3) and (4) is the end of
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the two year period beginning one year prior to the date the
applicable event occurs, and ending one year after that date.
(e) If the present value of the Pre-Retirement Survivor Annuity
derived from Employer and Employee contributions does not exceed
$3,500 and has never exceeded $3,500 at the time of any prior
distribution, the Administrator shall direct the immediate
distribution of such amount to the Participant's spouse. No
distribution may be made under the preceding sentence after the
annuity starting date unless the spouse consents in writing. If the
value exceeds, or has ever exceeded, $3,500 at the time of any prior
distribution, an immediate distribution of the entire amount may be
made to the surviving spouse, provided such surviving spouse consents
in writing to such distribution. Any written consent required under
this paragraph must be obtained not more than 90 days before
commencement of the distribution and shall be made in a manner
consistent with Section 6.5(a)(1).
(f)(1) In the event the death benefit is not paid in the form of
a Pre-Retirement Survivor Annuity, it shall be paid to the
Participant's Beneficiary by either of the following methods, as
elected by the Participant (or if no election has been made prior to
the Participant's death, by his Beneficiary), subject to the rules
specified in Section 6.6(g):
(i) One lump-sum payment in cash or in property;
(ii) Payment in monthly, quarterly, semi-annual, or annual
cash installments over a period to be determined by the
Participant or his Beneficiary. After periodic installments
commence, the Beneficiary shall have the right to direct the
Trustee to reduce the period over which such periodic
installments shall be made, and the Trustee shall adjust the
cash amount of such periodic installments accordingly.
(2) In the event the death benefit payable pursuant to Section
6.2 is payable in installments, then, upon the death of the
Participant, the Administrator may direct the Trustee to
segregate the death benefit into a separate account, and the
Trustee shall invest such segregated account separately,
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and the funds accumulated in such accounts shall be used for the
payment of the installments.
(g) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a Participant made on or after January
1, 1985 shall be made in accordance with the following requirements
and shall otherwise comply with Code Section 401(a)(9) and the
Regulations thereunder. If it is determined pursuant to Regulations
that the distribution of a Participant's interest has begun and the
Participant dies before his entire interest has been distributed to
him, the remaining portion of such interest shall be distributed at
least as rapidly as under the method of distribution selected pursuant
to Section 6.5 as of his date of death. If a Participant dies before
he has begun to receive any distributions of his interest under the
Plan or before distributions are deemed to have begun pursuant to
Regulations, then his death benefit shall be distributed to his
Beneficiaries by December 31st of the calendar year in which the fifth
anniversary of his date of death occurs.
However, in the event that the Participant's spouse
(determined as of the date of the Participant's death) is his
Beneficiary, then in lieu of the preceding rules, distributions must
be made over the life of the spouse (or over a period not extending
beyond the life expectancy of the spouse) and must commence on or
before the later of: (1) December 31st of the calendar year
immediately following the calendar year in which the Participant died;
or (2) December 31st of the calendar year in which the Participant
would have attained age 70-1/2. If the surviving spouse dies before
distributions to such spouse begin, then the 5-year distribution
requirement of this Section shall apply as if the spouse was the
Participant.
(h) For purposes of this Section, the life expectancy of a
Participant and a Participant's spouse (other than in the case of a
life annuity) shall not be redetermined in accordance with Code
Section 401(a)(9)(D). Life expectancy and joint and last survivor
expectancy shall be computed using the return multiples in Tables V
and VI of Regulation 1.72-9.
(i) Subject to the spouse's right of consent afforded under the
Plan, the restrictions imposed by this Section shall not apply if a
Participant has, prior to
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January 1, 1984, made a written designation to have his death benefits
paid in an alternative method acceptable under Code Section 401(a) as
in effect prior to the enactment of the Tax Equity and Fiscal
Responsibility Act of 1982.
6.7 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever the
Trustee is to make a distribution or to commence a series of payments
on or as of an Anniversary Date, the distribution or series of
payments may be made or begun on such date or as soon thereafter as is
practicable. However, unless a Former Participant elects in writing to
defer the receipt of benefits (such election may not result in a death
benefit that is more than incidental), the payment of benefits shall
begin not later than the 60th day after the close of the Plan Year in
which the latest of the following events occurs: (a) the date on which
the Participant attains the earlier of age 65 or the Normal Retirement
Age specified herein; (b) the 10th anniversary of the year in which
the Participant commenced participation in the Plan; or (c) the date
the Participant terminates his service with the Employer.
6.8 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then
the Administrator may direct that such distribution be paid to the
legal guardian, or if none, to a parent of such Beneficiary or a
responsible adult with whom the Beneficiary maintains his residence,
or to the custodian for such Beneficiary under the Uniform Gift to
Minors Act or Gift to Minors Act, if such is permitted by the laws of
the state in which said Beneficiary resides. Such a payment to the
legal guardian, custodian or parent of a minor Beneficiary shall fully
discharge the Trustee, Employer, and Plan from further liability on
account thereof.
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution
payable to a Participant or his Beneficiary hereunder shall, at the
later of the Participant's attainment of age 62 or his Normal
Retirement Age, remain unpaid solely by reason of the inability of the
Administrator, after sending a registered letter, return receipt
requested, to the last known address, and after further diligent
effort, to ascertain the whereabouts of such Participant or his
Beneficiary, the amount so distributable shall be treated as a
Forfeiture pursuant to the Plan. In the event a Participant or
Beneficiary is located subsequent to his benefit being reallocated,
such benefit shall be restored.
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6.10 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided to a
Participant in this Plan shall be subject to the rights afforded to
any "alternate payee" under a "qualified domestic relations order."
Furthermore, a distribution to an "alternate payee" shall be permitted
if such distribution is authorized by a "qualified domestic relations
order," even if the affected Participant has not separated from
service and has not reached the "earliest retirement age" under the
Plan. For the purposes of this Section, "alternate payee," "qualified
domestic relations order" and "earliest retirement age" shall have the
meaning set forth under Code Section 414(p).
ARTICLE VII.
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of responsibilities:
(a) Consistent with the "funding policy and method" determined by
the Employer, to invest, manage, and control the Plan assets subject,
(i) to the direction of an Investment Manager if the Administrator
should appoint such manager as to all or a portion of the assets of
the Plan and (ii) in the case of a Participant's Directed Investment
Account, to the provisions of Section 7.3(s);
(b) At the direction of the Administrator, to pay benefits
required under the Plan to be paid to Participants, or, in the event
of their death, to their Beneficiaries;
(c) To maintain records of receipts and disbursements and furnish
to the Employer and/or Administrator for each Plan Year a written
annual report per Section 7.6; and
(d) If there shall be more than one Trustee, they shall act by a
majority of their number, but may authorize one or more of them to
sign papers on their behalf.
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7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) The Trustee shall invest and reinvest the Trust Fund to keep the
Trust Fund invested without distinction between principal and income
and in such securities or property, real or personal, wherever
situated, as the Trustee shall deem advisable, including, but not
limited to, stocks, common or preferred, bonds and other evidences of
indebtedness or ownership, and real estate or any interest therein.
The Trustee shall at all times in making investments of the Trust Fund
consider, among other factors, the short and long-term financial needs
of the Plan on the basis of information furnished by the Employer. In
making such investments, the Trustee shall not be restricted to
securities or other property of the character expressly authorized by
the applicable law for trust investments; however, the Trustee shall
give due regard to any limitations imposed by the Code or the Act so
that at all times the Plan may qualify as a qualified Money Purchase
Pension Plan and Trust.
(b) The Trustee may employ a bank or trust company pursuant to the
terms of its usual and customary bank agency agreement, under which
the duties of such bank or trust company shall be of a custodial,
clerical and record-keeping nature.
7.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under common
law, statutory authority, including the act, and other provisions of the Plan,
shall have the following powers and authorities, to be exercised in the
Trustee's sole discretion:
(a) To purchase, or subscribe for, any securities or other
property and to retain the same. In conjunction with the purchase of
securities, margin accounts may be opened and maintained;
(b) To sell, exchange, convey, transfer, grant options to
purchase, or otherwise dispose of any securities or other property
held by the Trustee, by private contract or at public auction. No
person dealing with the Trustee shall be bound to see to the
application of the purchase money or to inquire into the validity,
expediency, or propriety of any such sale or other disposition, with
or without advertisement;
(c) To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers
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of attorney with or without power of substitution; to exercise any
conversion privileges, subscription rights or other options, and to
make any payments incidental thereto; to oppose, or to consent to, or
otherwise participate in, corporate reorganizations or other changes
affecting corporate securities, and to delegate discretionary powers,
and to pay any assessments or charges in connection therewith; and
generally to exercise any of the powers of an owner with respect to
stocks, bonds, securities, or other property.
(d) To cause any securities or other property to be registered in
the Trustee's own name or in the name of one or more of the Trustee's
nominees, and to hold any investments in bearer form, but the books
and records of the Trustee shall at all times show that all such
investments are part of the Trust Fund;
(e) To borrow or raise money for the purposes of the Plan in such
amount, and upon such terms and conditions, as the Trustee shall deem
advisable; and for any sum so borrowed, to issue a promissory note as
Trustee, and to secure the repayment thereof by pledging all, or any
part, of the Trust Fund; and no person lending money to the Trustee
shall be bound to see to the application of the money lent or to
inquire into the validity, expediency, or propriety of any borrowing;
(f) To keep such portion of the Trust Fund in cash or cash
balances as the Trustee may, from time to time, deem to be in the best
interests of the Plan, without liability for interest thereon;
(g) To accept and retain for such time as the Trustee may deem
advisable any securities or other property received or acquired as
Trustee hereunder, whether or not such securities or other property
would normally be purchased as investments hereunder;
(h) To make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other instruments
that may be necessary or appropriate to carry out the powers herein
granted;
(i) To settle, compromise, or submit to arbitration any claims,
debts, or damages due or owing to or from the Plan, to commence or
defend suits or legal or administrative proceedings, and to represent
the Plan in all suits and legal and administrative proceedings;
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(j) To employ suitable agents and counsel and to pay their
reasonable expenses and compensation, and such agent or counsel may or
may not be agent or counsel for the Employer;
(k) To apply for and procure from responsible insurance
companies, to be selected by the Administrator, as an investment of
the Trust Fund such annuity, or other contracts (on the life of any
Participant) as the Administrator shall deem proper; to exercise, at
any time or from time to time, whatever rights and privileges may be
granted under such annuity, or other Contracts; to collect, receive,
and settle for the proceeds of all such annuity or other Contracts as
and when entitled to do so under the provisions thereof;
(l) To invest funds of the Trust in time deposits or savings
accounts bearing a reasonable rate of interest in the Trustee's bank;
(m) To invest in Treasury Bills and other forms of United States
government obligations;
(n) To invest in shares of investment companies registered under
the Investment Company Act of 1940;
(o) To sell, purchase and acquire put or call options if the
options are traded on and purchased through a national securities
exchange registered under the Securities Exchange Act of 1934, as
amended, or, if the options are not traded on a national securities
exchange, are guaranteed by a member firm of the New York Stock
Exchange;
(p) To deposit monies in federally insured savings accounts or
certificates of deposit in banks or savings and loan associations;
(q) To pool all or any of the Trust Fund, from time to time, with
assets belonging to any other qualified employee pension benefit trust
created by the Employer or an affiliated company of the Employer, and
to commingle such assets and make joint or common investments and
carry joint accounts on behalf of this Plan and such other trust or
trusts, allocating undivided shares or interests in such investments
or accounts or any pooled assets of the two or more trusts in
accordance with their respective interests;
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(r) To do all such acts and exercise all such rights and
privileges, although not specifically mentioned herein, as the Trustee
may deem necessary to carry out the purposes of the Plan.
(s) Directed Investment Account. The powers granted to the
Trustee shall be exercised in the sole fiduciary discretion of the
Trustee. However, if Participants are so empowered by the
Administrator, each Participant may direct the Trustee to separate and
keep separate all or a portion of his account; and further each
Participant is authorized and empowered in his sole and absolute
discretion, to give directions to the Trustee pursuant to the
procedure established by the Administrator and in such form as the
Trustee may require concerning (i) the investment of the Participant's
Directed Investment Account and (ii) any voting and tender issues
involving Employer securities then held in the Participant's Directed
Investment Account. The Trustee shall comply as promptly as
practicable with directions given by the Participant hereunder. The
Trustee may refuse to comply with any direction from the Participant
in the event the Trustee, in its sole and absolute discretion, deems
such directions improper by virtue of applicable law. The Trustee
shall not be responsible or liable for any loss or expense which may
result from the Trustee's refusal or failure to comply with any
directions from the Participant. Any costs and expenses related to
compliance with the Participant's directions may, within the
Administrator's sole discretion, be borne by the Participant's
Directed Investment Account.
7.4 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
At the direction of the Administrator, the Trustee shall,
from time to time, in accordance with the terms of the Plan, make
payments out of the Trust Fund. The Trustee shall not be responsible
in any way for the application of such payments.
7.5 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as
shall from time to time be agreed upon in writing by the Employer and
the Trustee. An individual serving as Trustee who already receives
full-time pay from the Employer shall not receive compensation from
the Plan. In addition, the Trustee shall be reimbursed for any
reasonable expenses, including reasonable counsel fees incurred by it
as Trustee. Such compensation and expenses shall be paid from the
Trust Fund unless paid or advanced
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by the Employer. All taxes of any kind and all kinds whatsoever that maybe
levied or assessed under existing or future laws upon, or in respect of, the
Trust Fund or the income thereof, shall be paid from the Trust Fund.
7.6 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of the
Anniversary Date or receipt of the Employer's contribution for each
Plan Year, the Trustee shall furnish to the Employer and Administrator
a written statement of account with respect to the Plan Year for which
such contribution was made setting forth:
(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust Fund upon sales
or other disposition of the assets;
(c) the increase, or decrease, in the value of the Trust Fund;
(d) all payments and distributions made from the Trust Fund; and
(e) such further information as the Trustee and/or Administrator
deems appropriate. The Employer, forthwith upon its receipt of each
such statement of account, shall acknowledge receipt thereof in
writing and advise the Trustee and/or Administrator of its approval or
disapproval thereof. Failure by the Employer to disapprove any such
statement of account within thirty (30) days after its receipt thereof
shall be deemed an approval thereof. The approval by the Employer of
any statement of account shall be binding as to all matters embraced
therein as between the Employer and the Trustee to the same extent as
if the account of the Trustee had been settled by judgment or decree
in an action for a judicial settlement of its account in a court of
competent jurisdiction in which the Trustee, the Employer and all
persons having or claiming an interest in the Plan were parties;
provided, however, that nothing herein contained shall deprive the
Trustee of its right to have its accounts judicially settled if the
Trustee so desires.
7.7 AUDIT
(a) If an audit of the Plan's records shall be required by the
Act and the regulations thereunder for any Plan Year, the
Administrator shall direct the Trustee
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to engage on behalf of all Participants an independent qualified
public accountant for that purpose. Such accountant shall, after an
audit of the books and records of the Plan in accordance with
generally accepted auditing standards, within a reasonable period
after the close of the Plan Year, furnish to the Administrator and the
Trustee a report of his audit setting forth his opinion as to whether
any statements, schedules or lists that are required by Act Section
103 or the Secretary of Labor to be filed with the Plan's annual
report, are presented fairly in conformity with generally accepted
accounting principles applied consistently. All auditing and
accounting fees shall be an expense of and may, at the election of the
Administrator, be paid from the Trust Fund.
(b) If some or all of the information necessary to enable the
Administrator to comply with Act Section 103 is maintained by a bank,
insurance company, or similar institution, regulated and supervised
and subject to periodic examination by a state or federal agency, it
shall transmit and certify the accuracy of that information to the
Administrator as provided in Act Section 103(b) within one hundred
twenty (120) days after the end of the Plan Year or by such other date
as may be prescribed under regulations of the Secretary of Labor.
7.8 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the
Employer, at least thirty (30) days before its effective date, a
written notice of his resignation.
(b) The Employer may remove the Trustee by mailing by registered
or certified mail, addressed to such Trustee at his last known
address, at least thirty (30) days before its effective date, a
written notice of his removal.
(c) Upon the death, resignation, incapacity, or removal of any
Trustee, a successor may be appointed by the Employer; and such
successor, upon accepting such appointment in writing and delivering
same to the Employer, shall, without further act, become vested with
all the estate, rights, powers, discretions, and duties of his
predecessor with like respect as if he were originally named as a
Trustee herein. Until such a successor is appointed, the remaining
Trustee or Trustees
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shall have full authority to act under the terms of the Plan.
(d) The Employer may designate one or more successors prior to
the death, resignation, incapacity, or removal of a Trustee. In the
event a successor is so designated by the Employer and accepts such
designation, the successor shall, without further act, become vested
with all the estate, rights, powers, discretions, and duties of his
predecessor with the like effect as if he were originally named as
Trustee herein immediately upon the death, resignation, incapacity, or
removal of his predecessor.
(e) Whenever any Trustee hereunder ceases to serve as such, he
shall furnish to the Employer and Administrator a written statement of
account with respect to the portion of the Plan Year during which he
served as Trustee. This statement shall be either (i) included as
part of the annual statement of account for the Plan Year required
under Section 7.6 or (ii) set forth in a special statement. Any such
special statement of account should be rendered to the Employer no
later than the due date of the annual statement of account for the
Plan Year. The procedures set forth in Section 7.6 for the approval
by the Employer of annual statements of account shall apply to any
special statement of account rendered hereunder and approval by the
Employer of any such special statement in the manner provided in
Section 7.6 shall have the same effect upon the statement as the
Employer's approval of an annual statement of account No successor to
the Trustee shall have any duty or responsibility to investigate the
acts or transactions of any predecessor who has rendered all
statements of account required by Section 7.6 and this subparagraph.
7.9 TRANSFER OF INTEREST
Notwithstanding any other provision contained in this Plan,
the Trustee at the direction of the Administrator shall transfer the
Vested interest, if any, of such Participant in his account to another
trust forming part of a pension, profit sharing or stock bonus plan
maintained by such Participant's new employer and represented by said
employer in writing as meeting the requirements of Code Section
401(a), provided that the trust to which such transfers are made
permits the transfer to be made.
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7.10 DIRECT ROLLOVER
(a) This Section applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under
this Section, a distributee may elect, at the time and in the manner
prescribed by the Plan Administrator, to have any portion of an
eligible rollover distribution paid directly to an eligible retirement
plan specified by the distributee in a direct rollover.
(b) For purposes of this Section the following definitions shall
apply:
(1) An eligible rollover distribution is any distribution of all
or any portion of the balance to the credit of the distributee,
except that an eligible rollover distribution does not include:
any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period
of ten years or more; any distribution to the extent such
distribution is required under Code Section 401(a)(9); and the
portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(2) An eligible retirement plan is an individual retirement
account described in Code Section 408(a), an individual
retirement annuity described in Code Section 408(b), an annuity
plan described in Code Section 403(a), or a qualified trust
described in Code Section 401(a), that accepts the distributee's
eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account or
individual retirement annuity.
(3) A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse
and the Employee's or former Employee's spouse or former spouse
who is the alternate payee under a qualified domestic
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relations order, as defined in code Section 414(p), are
distributees with regard to the interest of the spouse or former
spouse.
(4) A direct rollover is a payment by the Plan to the eligible
retirement plan specified by the distributee.
7.11 EMPLOYER SECURITIES AND REAL PROPERTY
The Trustee shall be empowered to acquire and hold "qualifying
Employer securities" and "qualifying Employer real property," as those terms are
defined in the Act, provided, however, that the Trustee shall not be permitted
to acquire any qualifying Employer securities or qualifying Employer real
property if, immediately after the acquisition of such securities or property,
the fair market value of all qualifying Employer securities and qualifying
Employer real property held by the Trustee hereunder should amount to more than
10% of the fair market value of all the assets in the Trust Fund.
ARTICLE VIII.
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT
(a) The Employer (acting through its Board of Directors) shall
have the right at any time to amend the Plan, subject to the
limitations of this Section. However, any amendment which affects the
rights, duties or responsibilities of the Trustee and Administrator
may only be made with the Trustee's and Administrators' written
consent. Any such amendment shall become effective as provided
therein upon its execution. The Trustee shall not be required to
execute any such amendment unless the Trust provisions contained
herein are a part of the Plan and the amendment affects the duties of
the Trustee hereunder.
(b) No amendment to the Plan shall be effective if it authorizes
or permits any part of the Trust Fund (other than such part as is
required to pay taxes and administration expenses) to be used for or
diverted to any purpose other than for the exclusive benefit of the
Participants or their Beneficiaries or estates; or causes any
reduction in the amount credited to the account of any Participant; or
causes or permits any portion of the Trust Fund to revert to or become
property of the Employer.
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(c) Except as permitted by Regulations, no Plan amendment or
transaction having the effect of a Plan amendment (such as a merger,
plan transfer or similar transaction) shall be effective to the extent
it eliminates or reduces any "Section 411(d)(6) protected benefit" or
adds or modifies conditions relating to "Section 411(d)(6) protected
benefits" the result of which is a further restriction on such benefit
unless such protection benefits are preserved with respect to benefits
accrued as of the later of the adoption date or effective date of the
amendment. "Section 411(d)(6) protected benefits" are benefits
described in Code Section 411(d)(6)(A), early retirement benefits and
retirement-type subsidies, and optional forms of benefit.
8.2 TERMINATION
(a) The Employer (acting through its Board of Directors) shall
have the right at any time to terminate the Plan be delivering to the
Trustee and Administrator written notice of such termination. Upon
any full or partial termination, all amounts credited to the affected
Participants' Accounts shall become 100% Vested as provided in Section
6.4 and shall not thereafter be subject to forfeiture, and all
unallocated amounts shall be allocated to the accounts of all
Participants in accordance with the provisions hereof.
(b) Upon the full termination of the Plan, the Employer shall
direct the distribution of the assets of the Trust Fund to
Participants in a manner which is consistent with and satisfies the
provisions of Section 6.5. Distributions to a Participant shall be
made in cash or in property or through the purchase of irrevocable
nontransferable deferred commitments from an insurer. Except as
permitted by Regulations, the termination of the Plan shall not result
in the reduction of "Section 411(d)(6) protected benefits" in
accordance with Section 8.1(c).
8.3 MERGER OR CONSOLIDATION
This Plan and Trust may be merged or consolidated with, or its assets
and/or liabilities may be transferred to any other plan and trust only if the
benefits which would be received by a Participant of this Plan, in the event of
a termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation, and such transfer, merger or consolidation does not
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otherwise result in the elimination or reduction of any "Section 411(d)(6)
protected benefits" in accordance with Section 8.1(c).
ARTICLE IX.
MISCELLANEOUS
9.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between the
Employer and any Participant or to be a consideration or an inducement for the
employment of any Participant or Employee. Nothing contained in this Plan shall
be deemed to give any Participant or Employee the right to be retained in the
service of the Employer or to interfere with the right of the Employer to
discharge any Participant or Employee at any time regardless of the effect which
such discharge shall have upon him as a Participant of this Plan.
9.2 ALIENATION
(a) Subject to the exceptions provided below, no benefit which
shall be payable out of the Trust Fund to any person (including a
Participant or his Beneficiary) shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, or charge the same shall be void;
and no such benefit shall in any manner be liable for, or subject to,
the debts, contracts, liabilities, engagements, or torts of any such
person, nor shall it be subject to attachment or legal process for or
against such person, and the same shall not be recognized by the
Trustee, except to such extent as may be required by law.
(b) This provision shall not apply to a "qualified domestic
relations order" defined in Code Section 414(p), and those other
domestic relations orders permitted to be so treated by the
Administrator under the provisions of the Retirement Equity Act of
1984. The Administrator shall establish a written procedure to
determine the qualified status of domestic relations orders and to
administer distributions under such qualified orders. Further, to the
extent provided under a "qualified domestic relations order," a former
spouse of a Participant shall be treated as the spouse or surviving
spouse for all purposes under the Plan.
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9.3 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced according to the
Act and the laws of the State of Texas, other than its laws respecting choice of
law, to the extent not preempted by the Act.
9.4 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or
neuter gender, they shall be construed as though they were also used in another
gender in all cases where they would so apply, and whenever any words are used
herein in the singular or plural form, they shall be construed as though they
were also used in the other form in all cases where they would so apply.
9.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding the
Trust and/or Plan established hereunder to which the Trustee or the
Administrator may be a party, and such claim, suit, or proceeding is resolved in
favor of the Trustee or Administrator, they shall be entitled to be reimbursed
from the Trust Fund for any and all costs, attorney's fees, and other expenses
pertaining thereto incurred by them for which they shall have become liable.
9.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically permitted
by law, it shall be impossible by operation of the Plan or of the
Trust, by termination of either, by power of revocation or amendment,
by the happening of any contingency, by collateral arrangement or by
any other means, for any part of the corpus or income of any trust
fund maintained pursuant to the Plan or any funds contributed thereto
to be used for, or diverted to, purposes other than the exclusive
benefit of Participants, Retired Participants, or their Beneficiaries.
(b) In the event the Employer shall make an excessive
contribution under a mistake of fact pursuant to Act Section
403(c)(2)(A), the Employer may demand repayment of such excessive
contribution at any time within one (1) year following the time of
payment and the Trustees shall return such amount to the Employer
within the one (1) year period. Earnings of the Plan attributable to
the excess contributions may not be returned to the Employer but any
losses attributable thereto must reduce the amount so returned.
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9.7 BONDING
Every Fiduciary, except a bank or an insurance company, unless
exempted by the Act and regulations thereunder, shall be bonded in an amount not
less than 10% of the amount of the funds such Fiduciary handles; provided,
however, that the minimum bond shall be $1,000 and the maximum bond, $500,000.
The amount of funds handled shall be determined at the beginning of each Plan
Year by the amount of funds handled by such person, group, or class to be
covered and their predecessors, if any, during the preceding Plan Year, or if
there is no preceding Plan Year, then by the amount of the funds to be handled
during the then current year. The bond shall provide protection to the Plan
against any loss by reason of acts of fraud or dishonesty by the Fiduciary alone
or in connivance with others. The surety shall be a corporate surety company
(as such term is used in Act Section 412(a)(2)), and the bond shall be in a form
approved by the Secretary of Labor. Notwithstanding anything in the Plan to the
contrary, the cost of such bonds shall be an expense of and may, at the election
of the Administrator, be paid from the Trust Fund or by the Employer.
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer nor the Trustee, nor their successors, shall be
responsible for the validity of any Contract issued hereunder or for the failure
on the part of the insurer to make payments provided by any such Contract, or
for the action of any person which may delay payment or render a Contract null
and void or unenforceable in whole or in part.
9.9 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall not have any
responsibility for the validity of this Plan or for the tax or legal aspects of
this Plan. The insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see to the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the insurer shall not be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues hereunder, or the rules of the insurer.
9.10 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative, Beneficiary,
or to any guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of the Plan, shall, to the extent thereof, be in
full satisfaction of all
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claims hereunder against the Trustee and the Employer, either of whom may
require such Participant, legal representative, Beneficiary, guardian or
committee, as a condition precedent to such payment, to execute a receipt and
release thereof in such form as shall be determined by the Trustee or Employer.
9.11 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or
required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the Employer, (2) the
Administrator and (3) the Trustee. The named Fiduciaries shall have only those
specific powers, duties, responsibilities, and obligations as are specifically
given them under the Plan. In general, the Employer shall have the sole
responsibility for making the contributions provided for under Section 4.1; and
shall have the sole authority to appoint and remove the Trustee and the
Administrator; to formulate the Plan's "funding policy and method"; and to amend
or terminate, in whole or in part, the Plan. The Administrator shall have the
sole responsibility for the administration of the Plan, which responsibility is
specifically described in the Plan. The Trustee shall have the sole
responsibility of management of the assets held under the Trust, except those
assets, the management of which has been assigned to an Investment Manager, who
shall be solely responsible for the management of the assets assigned to it, all
as specifically provided in the Plan. Each named Fiduciary warrants that any
directions given, information furnished, or action taken by it shall be in
accordance with the provisions of the Plan, authorizing or providing for such
direction, information or action. Furthermore, each named Fiduciary may rely
upon any such direction, information or action of another named Fiduciary as
being proper under the Plan, and is not required under the Plan to inquire into
the propriety of any such direction, information or action. It is intended
under the Plan that each named Fiduciary shall be responsible for the proper
exercise of its own powers, duties, responsibilities and obligations under the
Plan. No named Fiduciary shall guarantee the Trust Fund in any manner against
investment loss or depreciation in asset value. Any person or group may serve
in more than one Fiduciary capacity. In the furtherance of their
responsibilities hereunder, the "named Fiduciaries" shall be empowered to
interpret the Plan and Trust and to resolve ambiguities, inconsistencies and
omissions, which findings shall be binding, final and conclusive.
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9.13 HEADINGS
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
9.14 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary,
contributions to this Plan are conditioned upon the initial
qualification of the Plan under Code Section 401. If the Plan
receives an adverse determination with respect to its initial
qualification, then the Plan may return such contributions to the
Employer within one year after such determination, provided the
application for the determination is made by the time prescribed by
law for filing the Employer's return for the taxable year in which the
Plan was adopted, or such later date as the Secretary of the Treasury
may prescribe.
(b) Notwithstanding any provisions to the contrary, except
Sections 3.6 and 3.7, any contribution by the Employer to the Trust
Fund is conditioned upon the deductibility of the contribution by the
Employer under the Code and, to the extent any such deduction is
disallowed, the Employer may, within one (1) year following the
disallowance of the deduction, demand repayment of such disallowed
contribution and the Trustee shall return such contribution within one
(1) year following the disallowance. Earnings of the Plan
attributable to the excess contribution may not be returned to the
Employer, but any losses attributable thereto must reduce the amount
so returned.
9.15 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a
uniform, nondiscriminatory manner. In the event of any conflict between the
terms of this Plan and any Contract purchased hereunder, the Plan provisions
shall control.
9.16 WAIVER OF FUNDING
(a) In the event that the minimum funding requirement for a
particular Plan Year has been waived in whole or in part, then, an
Adjusted Account Balance shall be established for each Participant
which shall reflect the Account balance the Participant would have
had, had the waived amount been contributed. The Adjusted Account
Balance shall remain in effect until such time as the
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value of the Participant's Account equals the value of the
Participant's Adjusted Account Balance:
(1) The excess of the value of each Participant's Adjusted
Account Balance over the value of the Participant's Account
balance will be credited with earnings equal to 150 percent of
the Federal mid-term rate (as in effect under Code Section 1274
for the first month of such Plan Year).
(2) The waiver payment to be made by the Employer in the year
after the waiver is granted shall at least equal the amount
necessary to amortize over 5 years, at the appropriate interest
rate, the excess of the sum of the Adjusted Account Balances over
the total value of the Trust Fund attributable to Employer
contributions. In the next year, the excess for such subsequent
year, if any, is amortized over 4 years. In each succeeding year
the amortization period is reduced by one year. The Employer
may, however, make such larger payments at any time as the
Employer shall deem appropriate.
(3) An unallocated Waiver Suspense Account shall be created, to
which shall be made all payments designed to reduce the waived
deficiency. If at the time of a distribution, the nonforfeitable
portion of a Participant's Adjusted Account Balance exceeds that
Participant's actual Account balance, that Participant will
receive the larger amount to the extent that there are then funds
in the unallocated Waiver Suspense Account to cover the excess.
If at any time, a Participant may not be able to receive a total
distribution of the entire nonforfeitable portion of his Adjusted
Account Balance, such Participant would receive subsequent
distributions derived from future waiver payments.
(b) When the total value of the Trust Fund equals the sum of the
Adjusted Account Balances, the Waiver Suspense Account shall be
allocated to the affected Participants so that each Participant's
actual Account balance equals that Participant's Adjusted Account
Balance.
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ARTICLE X.
PARTICIPATING EMPLOYERS
10.1 ADOPTION BY OTHER EMPLOYERS
Notwithstanding anything herein to the contrary, with the consent of
the Employee and Trustee, any other corporation or entity, whether an affiliate
or subsidiary or not, may adopt this Plan and all of the provisions hereof, and
participate herein and be known as a Participating Employer, by a properly
executed document evidencing said intent and will of such Participating
Employer.
10.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS
(a) Each such Participating Employer shall be required to use the
same Trustee as provided in this Plan.
(b) The Trustee may, but shall not be required to, commingle,
hold and invest as one Trust Fund all contributions made by
Participating Employers, as well as all increments thereof. However,
the assets of the Plan shall, on an ongoing basis, be available to pay
benefits to all Participants and Beneficiaries under the Plan without
regard to the Employer or Participating Employer who contributed such
assets.
(c) The transfer of any Participant from or to an Employer
participating in this Plan, whether he be an Employee of the Employer
or a Participating Employer, shall not affect such Participant's
rights under the Plan, and all amounts credited to such Participant's
Account as well as his accumulated service time with the transferor or
predecessor, and his length of participation in the Plan, shall
continue to his credit.
(d) All rights and values forfeited by termination of employment
shall inure only to the benefit of the Employer or Participating
Employer by which the forfeiting Participant was employed.
(e) Any expenses of the Trust which are to be paid by the
Employer or borne by the Trust Fund shall be paid by each
Participating Employer in the same proportion that the total amount
standing to the credit of all Participants employed by such Employer
bears to the total standing to the credit of all Participants.
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10.3 DESIGNATION OF AGENT
Each Participating Employer shall be deemed to be a party to this
Plan; provided, however, that with respect to all of its relations with the
Trustee and Administrator for the purpose of this Plan, each Participating
Employer shall be deemed to have designated irrevocably the Employer as its
agent. Unless the context of the Plan clearly indicates the contrary, the word
"Employer" shall be deemed to include each Participating Employer as related to
its adoption of the Plan.
10.4 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred between
Participating Employers, and in the event of any such transfer, the Employee
involved shall carry with him his accumulated service and eligibility. No such
transfer shall effect a termination of employment hereunder, and the
Participating Employer to which the Employee is transferred shall thereupon
become obligated hereunder with respect to such Employee in the same manner as
was the Participating Employer from whom the Employee was transferred.
10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION
All contributions made by a Participating Employer, as provided for in
this Plan, shall be determined separately by each Participating Employer, and
shall be allocated only among the Participants eligible to share of the Employer
or Participating Employer making the contribution. On the basis of the
information furnished by the Administrator, the Trustee shall keep separate
books and records concerning the affairs of each Participating Employer
hereunder and as to the accounts and credits of the Employees of each
Participating Employer. The Trustee may, but need not, register Contracts so as
to evidence that a particular Participating Employer is the interested Employer
hereunder, but in the event of an Employee transfer from one Participating
Employer to another, the employing Employer shall immediately notify the Trustee
thereof.
10.6 AMENDMENT
Amendment of this Plan by the Employer at any time when there shall be
a Participating Employer hereunder shall only be by the written action of each
and every Participating Employer and with the consent of the Trustee where such
consent is necessary in accordance with the terms of this Plan.
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10.7 DISCONTINUANCE OF PARTICIPATION
Any Participating Employer shall be permitted to discontinue or revoke
its participation in the Plan. At the time of any such discontinuance or
revocation, satisfactory evidence thereof and of any applicable conditions
imposed shall be delivered to the Trustee. The Trustee shall thereafter
transfer, deliver and assign Contracts and other Trust Fund assets allocable to
the Participants of such Participating Employer to such new Trustee as shall
have been designated by such Participating Employer, in the event that it has
established a separate pension plan for its Employees, provided however, that no
such transfer shall be made if the result is the elimination or reduction of any
"Section 411(d)(6) protected benefits" in accordance with Section 8.1(c). If no
successor is designated, the Trustee shall retain such assets for the Employees
of said Participating Employer pursuant to the provisions of Article VII hereof.
In no such event shall any part of the corpus or income of the Trust as it
relates to such Participating Employer be used for or diverted to purposes other
than for the exclusive benefit of the Employees of such Participating Employer.
10.8 ADMINISTRATOR'S AUTHORITY
The Administrator shall have authority to make any and all necessary
rules or regulations, binding upon all Participating Employers and all
Participants, to effectuate the purpose of this Article.
10.9 INDEMNITY
The Employer shall indemnify and hold harmless each member of the Plan
Committee (if any), the Trustee, the Plan Administrator, and the Plan
Coordinator from and against any and all costs, liabilities, losses and
expenses, including without limitation, any and all reasonable attorneys' fees,
incurred by each such member as a result of arising in connection with or in any
way related to, directly or indirectly, the performance in good faith of his or
its duties as member of the Plan Committee (if any), the Trustee, the Plan
Administrator or the Plan Coordinator.
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IN WITNESS WHEREOF, this Plan has been executed the day and year first
above written.
AMERICAN ECOLOGY CORPORATION
By: (SIGNATURE OF C. CLIFFORD WRIGHT APPEARS HERE)
-------------------------------------
EMPLOYER
(SIGNATURE OF JOHN HELD APPEARS HERE)
----------------------------------------
TRUSTEE
(SIGNATURE OF HARRY O. NEWLING IV APPEARS HERE)
----------------------------------------
TRUSTEE
(SIGNATURE OF WILLIAM P. McCAUGHEY APPEARS HERE)
----------------------------------------
TRUSTEE
<PAGE>
AMENDED AND RESTATED
CREDIT AGREEMENT
$33,000,000.00 TERM LOAN
FROM THE BANKS
$5,000,000.00 REVOLVING CREDIT LOAN
FROM THE BANKS
$5,000,000.00 LETTER OF CREDIT FACILITY
FROM THE AGENT
AMONG
AMERICAN ECOLOGY CORPORATION,
AS THE COMPANY
THE SUBSIDIARIES OF THE COMPANY
LISTED AS GUARANTORS HEREIN
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
AS THE AGENT
AND
THE BANKS NAMED HEREIN,
AS THE BANKS
DATED AS OF
DECEMBER 1, 1994
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
ARTICLE I DEFINITIONS.............................................. 1
Section 1.01 Definitions.............................................. 1
ARTICLE II MAKING AND REPAYING THE LOANS........................ 14
Section 2.01 The Revolving Credit Loan................................ 14
Section 2.02 The Term Loan............................................ 14
Section 2.03 Syndication.............................................. 14
Section 2.04 Notice of Revolving Credit Loan.......................... 15
Section 2.05 Minimum Amount of Each Loan.............................. 15
Section 2.06 Notes and Disbursements.................................. 15
Section 2.07 Conversions and Continuances............................. 16
Section 2.08 Payment of Interest...................................... 16
Section 2.09 Interest Periods......................................... 18
Section 2.10 Interest Rate Not Ascertainable.......................... 18
Section 2.11 Required Payments of Principal........................... 19
Section 2.12 Voluntary Prepayments.................................... 19
Section 2.13 Method and Place of Payment.............................. 19
Section 2.14 Voluntary Reduction of Commitment........................ 19
Section 2.15 Mandatory Reduction of Commitment........................ 20
Section 2.16 Increased Taxes or Costs................................. 20
Section 2.17 Change in Legality....................................... 21
Section 2.18 Failure of Company to Make or Repay Loans................ 21
ARTICLE III LETTERS OF CREDIT........................................ 22
Section 3.01 Letters of Credit........................................ 22
Section 3.02 Application for Letter of Credit......................... 22
Section 3.03 Letter of Credit Note.................................... 23
Section 3.04 Rights of Agent Regarding Letters of Credit.............. 23
Section 3.05 Increased Letter of Credit Costs......................... 23
Section 3.06 Acknowledgement of the Company and the Other Banks....... 24
ARTICLE IV FEES..................................................... 24
Section 4.01 Fees..................................................... 24
Section 4.02 Letter of Credit Fees.................................... 25
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
ARTICLE V CONDITIONS PRECEDENT..................................... 25
Section 5.01 Conditions Precedent to the Initial Credit Event......... 25
Section 5.02 Conditions Precedent to All Credit Events................ 26
Section 5.03 Conditions Precedent to Issuance of Letter of Credit..... 27
ARTICLE VI REPRESENTATIONS AND WARRANTIES........................... 27
Section 6.01 Organization and Qualification........................... 27
Section 6.02 Authorization and Validity............................... 27
Section 6.03 Governmental Consents.................................... 28
Section 6.04 Conflicting or Adverse Agreements or Restrictions........ 28
Section 6.05 Title to Assets.......................................... 28
Section 6.06 Litigation............................................... 28
Section 6.07 Financial Statements..................................... 28
Section 6.08 Default.................................................. 28
Section 6.09 Investment Company Act................................... 29
Section 6.10 Public Utility Holding Company Act....................... 29
Section 6.11 ERISA.................................................... 29
Section 6.12 Tax Returns and Payments................................. 29
Section 6.13 Environmental Matters.................................... 29
Section 6.14 Purpose of Loans......................................... 30
Section 6.15 Franchises and Other Operating Rights.................... 30
Section 6.16 Subsidiaries............................................. 30
ARTICLE VII AFFIRMATIVE COVENANTS.................................... 31
Section 7.01 Information Covenants.................................... 31
Section 7.02 Books, Records and Inspections........................... 33
Section 7.03 Insurance and Maintenance of Properties.................. 33
Section 7.04 Payment of Taxes......................................... 33
Section 7.05 Corporate Existence...................................... 33
Section 7.06 Compliance with Statutes................................. 33
Section 7.07 ERISA.................................................... 33
Section 7.08 Additional Guaranties................................... 34
Section 7.09 Proceeds of Private Placement............................ 34
ARTICLE VIII NEGATIVE COVENANTS....................................... 34
Section 8.01 Change in Business....................................... 34
Section 8.02 Consolidation, Merger or Sale Assets..................... 35
Section 8.03 Liens.................................................... 35
Section 8.04 Indebtedness............................................. 35
Section 8.05 Investments.............................................. 36
Section 8.06 Restricted Payments...................................... 36
Section 8.07 Change in Accounting; Fiscal Year........................ 36
Section 8.08 Debt to Capitalization Ratio............................. 36
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
Section 8.09 Interest Coverage Ratio.................................. 36
Section 8.10 Fixed Charge Coverage Ratio.............................. 36
Section 8.11 Coverage Ratio........................................... 36
Section 8.12 Capital Expenditures..................................... 36
Section 8.13 Deferred Site Development Expenditures................... 37
Section 8.14 Minimum Eligible Receivables............................. 37
Section 8.15 Transactions with Affiliates............................. 37
Section 8.16 Change of Certain Indebtedness........................... 37
ARTICLE IX GUARANTY................................................. 37
Section 9.01 Guaranty................................................. 37
Section 9.02 Continuing Guaranty...................................... 37
Section 9.03 Effect of Debtor Relief Laws............................. 39
Section 9.04 Waiver of Subrogation.................................... 39
Section 9.05 Subordination............................................ 40
Section 9.06 Waiver................................................... 40
Section 9.07 Full Force and Effect.................................... 41
ARTICLE X EVENTS OF DEFAULT AND REMEDIES........................... 41
Section 10.01 Events of Default and Remedies........................... 41
Section 10.02 Primary Remedies......................................... 43
Section 10.03 Other Remedies........................................... 43
ARTICLE XI THE...................................................... 44
Section 11.01 Authorization and Action................................. 44
Section 11.02 Agent's Reliance......................................... 44
Section 11.03 Agent and Affiliates; Texas Commerce Bank
National Association and Affiliates..................... 45
Section 11.04 Bank Credit Decision..................................... 46
Section 11.05 Agent's Indemnity........................................ 46
Section 11.06 Successor Agent.......................................... 47
Section 11.07 Notice of Default........................................ 47
ARTICLE XII MISCELLANEOUS............................................ 47
Section 12.01 Amendments............................................... 47
Section 12.02 Notices.................................................. 48
Section 12.03 No Waiver; Remedies...................................... 48
Section 12.04 Costs, Expenses and Taxes................................ 49
Section 12.05 Indemnity................................................ 49
Section 12.06 Right of Setoff.......................................... 50
Section 12.07 Governing Law............................................ 50
Section 12.08 Maximum Interest......................................... 50
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
Section 12.09 Survival of Representations and Warranties............... 52
Section 12.10 Binding Effect........................................... 52
Section 12.11 Successors and Assigns; Participations................... 52
Section 12.12 Accounting Terms......................................... 52
Section 12.13 Independence of Covenants................................ 52
Section 12.14 Separability............................................. 52
Section 12.15 Execution in Counterparts................................ 52
Section 12.16 Interpretation........................................... 52
Section 12.17 Submission to Jurisdiction............................... 53
Section 12.18 Waiver of Jury Trial..................................... 54
Section 12.19 Final Agreement of the Parties........................... 54
</TABLE>
List of Exhibits and Schedules:
- ------------------------------
Exhibit 2.04 Form of Notice of Loan Request
Exhibit 2.06A Form of Revolving Credit Note
Exhibit 2.06B Form of Term Note
Exhibit 3.03 Form of Letter of Credit Note
Exhibit 7.01(e) Certificate Regarding No Default (and Status of Subsidiaries)
Schedule 6.05 Encumbrances on Title
Schedule 6.06 Pending Litigation
Schedule 6.13 Environmental Compliance
Schedule 8.03 Permitted Liens
Schedule 8.04 Indebtedness
Schedule 8.05 Permitted Investments
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 1, 1994
(this "Agreement") is among AMERICAN ECOLOGY CORPORATION, a Delaware corporation
(the "Company"), the subsidiaries of the Company listed on the signature pages
hereof under the caption "Guarantors" (together with each other Person (as
hereinafter defined) who becomes a Guarantor pursuant to Section 7.08,
collectively, the "Guarantors"), the banks and other financial institutions
listed on the signature pages hereof on the date hereof or subsequent hereto
pursuant to the Syndication (as hereinafter defined, and together with each
other Person who becomes a Bank pursuant to the terms hereof, the "Banks") and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association having
its principal place of business in Houston, Texas, individually as a Bank and as
Agent for the other Banks (in such capacity, the "Agent").
WHEREAS, the Company and the Agent, as Bank, entered into that one certain
Credit Agreement dated as of April 22, 1994, as amended by First Amendment dated
July 12, 1994 and by Second Amendment dated September 30, 1994 (as amended the
"Original Agreement"); and
WHEREAS, the Company has requested the Agent to renew, extend and modify
the Original Agreement, to increase the total of the loans thereunder to
$38,000,000.00, to provide Letters of Credit of an additional $5,000,000.00, to
extend the maturity date and to make certain other changes to the Original
Agreement; and
WHEREAS, the Agent has agreed to do so upon certain terms and conditions;
and
WHEREAS, the Company, the Agent, the Guarantors and the Persons who are
becoming Banks wish to execute this document for the purpose of evidencing this
agreement and these terms and conditions and restating the Original Agreement in
its entirety.
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the below signed parties do hereby amend and restate the Original Agreement as
hereinafter set forth and do agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. As used in this Agreement, the following
terms shall have the following meanings:
"Additional Guaranties" has the meaning specified in Section 7.08.
"Adjusted Net Worth" shall mean, with respect to a Guarantor, as of any
date of determination thereof, the excess of (a) the amount of the present fair
saleable value of the assets of such Guarantor as of the date of such
determination, over (b) the amount of all liabilities of such Guarantor,
contingent or otherwise, as of the date of such determination, as such terms are
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determined in accordance with applicable federal and state laws governing
determinations of the insolvency of debtors.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling (including all directors and officers of such Person),
controlled by, or under direct or indirect common control with such Person, and
any other Person in which such Person's direct or indirect equity interest is
10% or more of the total outstanding equity interests of such Person.
"Agent" has the meaning specified in the introduction to this Agreement.
"Agreement" has the meaning specified in the introduction to this
Agreement.
"Alternate Base Rate" means, for any date, a rate per annum (rounded
upwards, if necessary, to the next /1//\\16 \\of 1%) equal to the greater of (a)
the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in
effect on such day plus /1//\\2\\ of 1%. For purposes hereof, the term "Prime
Rate" shall mean, as of a particular date, the prime rate most recently
determined by the Agent and thereafter entered in the minutes of the Agent's
Loan and Discount Committee, automatically fluctuating upward and downward with
and at the time specified in each such announcement without notice to the
Company or any other Person, which prime rate may not necessarily represent the
lowest or best rate actually charged to a customer. "Federal Funds Effective
Rate" means, for any day, the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Agent from three federal funds brokers of recognized standing
selected by it. If for any reason the Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is unable to
ascertain the Federal Funds Effective Rate for any reason, including the
inability or failure of the Agent to obtain sufficient quotations in accordance
with the terms hereof, the Alternate Base Rate shall be determined without
regard to clause (b) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"Alternate Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Application For Letter of Credit" has the meaning specified in Section
3.02.
"Bank" has the meaning specified in the introduction to this Agreement.
"Bankruptcy Code" has the meaning specified in Section 10.01(e).
"Board" means the Board of Governors of the Federal Reserve System of the
United States (or any successor).
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<PAGE>
"Business Day" means any day (other than a day which is a Saturday, Sunday
or legal holiday in the State of Texas) on which the Agent is open for business
in Houston, Texas; provided, that, when used in connection with a Eurodollar
Rate Loan, the term "Business Day" shall also exclude any day on which banks are
not open for dealings in dollar deposits in the London interbank market.
"Capital Lease" means, as to any Person, any lease in respect of which the
rental obligations of such Person constitute Capitalized Lease Obligations.
"Capitalized Lease Obligations" means, as to any Person, all rental
obligations of such Person which, in accordance with GAAP, are or will be
required to be capitalized on the books of such Person.
"Code" means the Internal Revenue Code of 1986 and the regulations
promulgated thereunder.
"Commitment" means the obligations of each of the Banks to make the Loans
in the amounts or percentages designated on the signature page hereto for each
Bank.
"Company" has the meaning specified in the introduction to this Agreement.
"Consolidated EBITDA" means, for any period, Consolidated Net Income for
such period, plus Consolidated Interest Expense actually deducted in arriving at
Consolidated Net Income, Deferred Site Maintenance Expense, depreciation,
depletion, amortization and provision for taxes, without giving effect to any
extraordinary gains or gains from sales of assets or write downs in the value of
assets owned by any of the Loan Parties.
"Consolidated Fixed Charges" means, as to the Company and its Subsidiaries
and for any period, actual cash payments of interest, plus the total aggregate
scheduled principal payments for the immediately preceding twelve-month period
(including the principal portion of payments made in respect of obligations
under Capital Leases), plus Deferred Site Development Expenditures for such
period, plus all capital expenditures for such period plus all declared and paid
dividends for such period, determined on a consolidated basis.
"Consolidated Funded Indebtedness" means, as to the Company and its
Subsidiaries determined on a consolidated basis, all Indebtedness of such
Persons, excluding accounts payable in the ordinary course of business which are
not accruing interest.
"Consolidated Indebtedness" means Indebtedness of the Company and its
Subsidiaries determined on a consolidated basis.
"Consolidated Interest Expense" means, as to the Company and its
Subsidiaries and for any period, the total consolidated gross interest expense,
including all amortization of debt discount and imputed interest for such
period.
"Consolidated Net Income" means, for any period, the net income (or loss)
of the Company and its Subsidiaries for such period, determined on a
consolidated basis.
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"Consolidated Net Worth" means the sum of the par value or stated value of
the capital stock (excluding treasury stock), capital in excess of par or stated
value of shares of capital stock, retained earnings (or minus accumulated
deficit) and any other account which, in accordance with GAAP, constitutes
stockholders' equity, of the Company and its Subsidiaries, determined on a
consolidated basis.
"Coverage Ratio" means, for any Financial Statement Delivery Date, the
ratio of Consolidated Funded Indebtedness to Consolidated EBITDA.
"Credit Event" means the making of any Loan or the issuance or the
extension of any Letter of Credit.
"Default" means the occurrence of any event which with the giving of
notice or the passage of time or both could become an Event of Default.
"Default Rate" means the lesser of the Maximum Permissible Rate or the
Alternate Base Rate plus 4% per annum.
"Deferred Site Development Expenditure" means all costs (other than the
acquisition cost of the property and improvements) incurred in connection with
the preparation and opening of new sites for the purpose of storing hazardous
wastes, including, without limitation, all costs for legal, environmental,
sales, licensing, promotional work and similar items.
"Deferred Site Maintenance Expense" means the amount of money allocated on
the Company,s consolidated statement of income to the Deferred Site Maintenance
Reserve.
"Deferred Site Maintenance Reserve" means the amount shown on the
Company,s consolidated balance sheet as a reserve to be utilized in connection
with closing, preparing to close and maintaining closed disposal sites.
"Designated Payment Date" means March 31, June 30, September 30 and
December 31 in any year; provided, if in any such year a Designated Payment Date
shall be a day which is not a Business Day, such Designated Payment Date shall
be the next succeeding Business Day, and such extension of time shall be
included in determining the amount to be paid on such date.
"Effective Date" means the date on which all conditions to borrowing set
forth in Section 5.01 are first met or waived in accordance with Section 12.01.
"Eligible Receivable" means as to any Person on a consolidated basis and
at any time, all Receivables of such Person, each of which meets all of the
following criteria on the date of any determination of Eligible Receivables:
(a) the Receivable arose in the ordinary course of business from the sale
of goods by such Person in which such Person had the sole and complete
ownership;
(b) the Receivable is owned by such Person free and clear of any and all
Liens and or rights of others, other than Permitted Liens;
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<PAGE>
(c) the Receivable is not more than ninety (90) days past due (120 days if
owing from a Person rated BBB- or above by Standard & Poor,s Rating Group);
(d) not more than thirty (30) days have elapsed since (i) the date the
service was provided and (ii) the date of the invoice for such goods;
(e) the Receivable is not evidenced by a promissory note, chattel paper or
other instrument;
(f) the account debtor has made no claim that the Receivable is subject to
set-off, counterclaim, defense, allowance or adjustment and there has been no
dispute, objection or complaint by the account debtor concerning its liability
on the Receivable, provided that if any such claim has been made in regard to a
portion of a receivable, the remainder may still be considered to be an Eligible
Receivable;
(g) no notice of bankruptcy, insolvency or financial distress of the
account debtor has been received by the Company;
(h) the Banks have a valid and perfected Lien in the Receivable;
(i) the account debtor is domiciled in the United States of America or any
of its possessions and the Receivable is denominated in dollars; and
(j) with respect to any Receivable, such Person shall not have received
notification from the Agent that, in the reasonable discretion of the Agent,
such Receivable is not acceptable.
"Environmental Laws" means federal, state or local laws, rules or
regulations, and any judicial, arbitral or administrative interpretations
thereof, including any judicial, arbitral or administrative order, judgment,
permit, approval, decision or determination pertaining to conservation or
protection of the environment in effect at the time in question, including the
Clean Air Act, the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), the Federal Water Pollution Control Act, the
Occupational Safety and Health Act, the Resource Conservation and Recovery Act,
the Safe Drinking Water Act, the Toxic Substances Control Act, the Superfund
Amendment and Reauthorization Act of 1986, the Hazardous Materials
Transportation Act, and comparable state and local laws, and other environmental
conservation and protection laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.
"ERISA Affiliate" means (a) any trade or business (whether or not
incorporated) which is either a member of the same "controlled group" or under
"common control," within the meaning of Section 414 of the Code and the
regulations thereunder, with a Loan Party and (b) any Subsidiary.
"Eurocurrency Liabilities" has the meaning specified in Regulation D as in
effect from time to time.
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"Eurodollar Rate" means with respect to any Loan for any Interest Period,
the rate (rounded to 1/16 of 1%) at which dollar deposits approximately equal in
principal amount to the entire portion of such Loan and for a maturity equal to
the applicable Interest Period are offered in immediately available funds to the
Agent by prime banks in whatever Eurodollar interbank market may be selected by
the Agent in its sole and absolute discretion, acting in good faith, at the time
of determination and in accordance with the then usual practice in such market
at approximately 10:00 a.m. (Houston, Texas time) two Business Days prior to the
commencement of such Interest Period.
"Eurodollar Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Eurodollar Rate in accordance with the provisions
of Article II.
"Events of Default" has the meaning specified in Section 10.01.
"Excess Cash Flow" means, for any quarter, an amount equal to Consolidated
Net Income plus depreciation and amortization items, minus: (i) all capital
expenditures, (ii) principal payments, (iii) Deferred Site Development
Expenditure and (iv) cash expenditures charged to the Deferred Site Maintenance
Reserve and (v) plus (minus) decreases (increases) in working capital.
"FDIC" means the Federal Deposit Insurance Corporation (or any successor).
"Federal Funds Effective Rate" has the meaning specified in the definition
of the term "Alternate Base Rate."
"Fees" means all amounts payable pursuant to Sections 4.01, 4.02 or 4.03.
"Financial Statement Delivery Date" means the date on which the quarterly
or annual financial statements of the Company are delivered pursuant to Section
7.01(a) or Section 7.01(b), as the case may be.
"Financials" has the meaning specified in Section 6.07.
"GAAP" means generally accepted accounting principles as in effect from
time to time as set forth in the opinions, statements and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants, the Financial Accounting Standards Board and such other Persons who
shall be approved by a significant segment of the accounting profession and
concurred in by the independent certified public accountants certifying any
audited financial statements of the Company.
"Guaranteed Obligations" has the meaning specified in Section 9.01.
"Guarantors" has the meaning specified in the introduction to this
Agreement.
"Guaranty" means the guaranty of the Guarantors contained in Article IX
and shall include any Additional Guaranty.
"Hazardous Materials" means (a) hazardous waste as defined in the Resource
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Conservation and Recovery Act of 1976, or in any applicable federal, state or
local law or regulation, (b) hazardous substances, as defined in CERCLA, or in
any applicable state or local law or regulation, (c) gasoline, or any other
petroleum product or by-product, (d) toxic substances, as defined in the Toxic
Substances Control Act of 1976, or in any applicable federal, state or local law
or regulation or (e) insecticides, fungicides, or rodenticides, as defined in
the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any
applicable federal, state or local law or regulation, as each such Act, statute
or regulation may be amended from time to time.
"Highest Lawful Rate" means the maximum nonusurious rate of interest that,
under applicable law, may be contracted for, taken, reserved, charged or
received by the Agent on the Loans or under the Loan Documents at any time or
from time to time. If the maximum rate of interest which, under applicable law,
the Agent is permitted to charge the Company on the Loans shall change after the
date hereof, to the extent permitted by applicable law, the Highest Lawful Rate
shall be automatically increased or decreased, as the case may be, as of the
effective time of such change without notice to the Company or any other Person.
"Indebtedness" means, when used with respect to any Person, without
duplication (a) all indebtedness of such Person for borrowed money (whether by
loan or the issuance and sale of debt securities) or for the deferred purchase
price of property or services (excluding, however, accounts payable and other
accrued liabilities arising in the ordinary course of such Person's business
that are a current liability under GAAP and payments or benefits in the nature
of compensation for services of employees, officers and directors), (b) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person, (c) all
Capitalized Lease Obligations of such Person, (d) all guaranties or other
contingent obligations of any kind of such Person in respect of the Indebtedness
of any other Person of the type referred to in clause (a), (b) or (c) above and
(e) all Indebtedness of the type referred to in clause (a), (b) or (c) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise to be secured by) any Lien upon or interest in property
owned by such Person, even though such Person has not assumed or become liable
for the payment of such indebtedness, to the extent any of the foregoing
described in clauses (a) through (e) above constitute a liability on such
Person's balance sheet prepared in accordance with GAAP.
"Interest Period" has the meaning specified in Section 2.09.
"Investment" means, as applied to any Person, any direct or indirect
purchase or other acquisition by such Person of the assets, stock or other
securities of any other Person, or any direct or indirect loan, advance or
capital contribution by such Person to any other Person, and any other item
which would be classified as an "investment" on a balance sheet of such Person,
including any direct or indirect contribution by such Person of property or
assets to a joint venture, partnership or other business entity in which such
Person retains an interest.
"Letter of Credit Collateral" means cash, securities issued or directly
and fully guaranteed or issued by the United States, deposits in the Agent or
other securities, which other securities are, in the Agent,s sole discretion,
satisfactory collateral.
"Letter of Credit Commitment" means the Agent's obligation to issue
Letters of Credit hereunder.
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"Letter of Credit Fee" has the meaning specified in Section 4.03.
"Letter of Credit Note" has the meaning specified in Section 3.03 hereof.
"Letter of Credit Note Maturity Date" means April 22, 1996, or the earlier
acceleration of said Note pursuant hereto.
"Letter of Credit Termination Date" means the date that is (a) one year
subsequent to the Letter of Credit Note Maturity Date or (b) the earlier
acceleration of the Obligations pursuant hereto, provided that, for Letters of
Credit which renew automatically on an annual basis, as agreed upon at time of
issuance, such date shall be five years subsequent to the Letter of Credit Note
Maturity Date.
"Letters of Credit" has the meaning provided in Section 3.01.
"Lien" means, when used with respect to any Person, any mortgage, lien,
charge, pledge, security interest or encumbrance of any kind (whether voluntary
or involuntary and whether imposed or created by operation of law or otherwise)
upon, or pledge of, any of its property or assets, whether now owned or
hereafter acquired, or any lease intended as security, any Capital Lease in the
nature of the foregoing, any conditional sale agreement or other title retention
agreement, in each case, for the purpose, or having the effect, of protecting a
creditor against loss of securing the payment or performance of an obligation.
"Loans" has the meaning provided in Section 2.02.
"Loan Date" means, with respect to each Loan, the Business Day upon which
the proceeds of such Loan are to be made available to the Company.
"Loan Documents" means this Agreement (including the Guaranty), the Notes,
the Security Agreements, the Syndication Agreement and all other documents
executed in connection therewith.
"Loan Party" means the Company or any Guarantor and "Loan Parties" means
the Company and the Guarantors.
"Margin" means, with respect to any Loan for any Margin Period, except as
otherwise set forth in Section 2.07(c) hereof, the rate of interest per annum
determined as set forth below for the Type of such Loan:
(a) during the period from the Effective Date through the delivery of
Financials sufficient to determine the Margin, and for any period when there are
no Financials sufficient to determine the Margin, the Margin shall be:
Eurodollar Alternate Base
Rate Rate
---- ----
3.0% .75%
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<PAGE>
(b) at all other times the margin shall be determined as follows:
(i) if, at the end of the fiscal quarter immediately preceding such period,
the Coverage Ratio is less than 1.25 to 1.0, the margin shall be:
Eurodollar Alternate Base
Rate Rate
---- ----
2.0% 0%
(ii) if, at the end of the fiscal quarter immediately preceding such period,
the Coverage Ratio is equal to or greater than 1.25 to 1.0 but less than 2.00 to
1.0, the margin shall be:
Eurodollar Alternate Base
Rate Rate
---- ----
2.5% .25%
(iii) if, at the end of the fiscal quarter immediately preceding such
period, the Coverage Ratio is equal to or greater than 2.00 to 1.0, the margin
shall be
Eurodollar Alternate Base
Rate Rate
---- ----
3.0% .75%
"Margin Period" means a period commencing on a Financial Statement
Delivery Date and ending on the next succeeding Financial Statement Delivery
Date.
"Material Adverse Effect" means, relative to any occurrence of whatever
nature (including any adverse determination in any litigation, arbitration or
governmental investigation or proceeding), (a) a material adverse effect on the
financial condition, business or operations of the Company and its Subsidiaries
taken as a whole or (b) an event which materially impairs the ability of the
Company to make payment hereunder or under the Notes or the right of any Bank to
enforce any of its remedies to collect any amounts owing under the Loan
Documents.
"Maximum Guaranteed Amount" for each Guarantor shall mean the greater of
(a) ninety-five percent (95%) of the Adjusted Net Worth of such Guarantor as of
the date hereof and (b) ninety-five percent (95%) of the Adjusted Net Worth of
such Guarantor at the earlier of (i) the date of the commencement of a case
under Title 11 of the United States Code in which such Guarantor is a debtor and
(ii) the date enforcement of the Guaranty is sought.
"Maximum Permissible Rate" has the meaning provided in Section 12.08.
"Multiemployer Plan" means any plan which is a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA).
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"Notes" means the Term Note(s), the Revolving Credit Note(s) and the
Letter of Credit Note.
"Notice of Conversion" has the meaning provided in Section 2.07.
"Notice of Default" has the meaning specified in Section 10.01.
"Notice of Loan Request" has the meaning provided in Section 2.03.
"Obligations" means all the obligations of the Company and the other Loan
Parties now or hereafter existing under the Loan Documents, whether for
principal, interest, Letter of Credit reimbursement liability, Fees, expenses,
indemnification or otherwise.
"Other Activities" / "Other Financings" shall have the respective meanings
assigned to them in Section 11.03.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Permitted Investments" means, as to any Person,
(a) securities issued or directly and fully guaranteed or insured by the
United States or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than twelve months from the date of acquisition thereof,
(b) time deposits and certificates of deposit with maturities of not more
than twelve months from the date of acquisition by such Person in any of the
Banks or other commercial bank incorporated in the United States or any U.S.
branch of any other commercial bank, in each case having capital, surplus and
undivided profits aggregating $100,000,000 or more with a long term unsecured
debt rating of at least A- from Standard & Poor,s Ratings Group or A3 from
Moody's Investors Service,
(c) commercial paper issued by any Person incorporated in the United
States rated at least A 1 or the equivalent thereof by Standard & Poor's Ratings
Group or at least P 1 or the equivalent thereof by Moody's Investors Service
and, in each case, maturing not more than 270 days after the date of issuance,
(d) investments in money market mutual funds having assets in excess of
$2,000,000,000 substantially all of whose assets are comprised of securities of
the types described in clauses (a) through (c) above,
(e) repurchase or reverse purchase agreements respecting obligations with
a term of not more than seven days for underlying securities of the types
described in clause (a) above entered into with any bank listed in or meeting
the qualifications specified in clause (b) above, and
(f) banker's acceptances maturing within one year from the date of origin
issued by
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a bank or trust company organized under the law of the United States having
capital, surplus and undivided profits aggregating at least $100,000,000 and a
long-term deposit rating of A- or higher by Standard & Poor's Ratings Group.
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a foreign or
domestic state or political subdivision thereof or any agency of such state or
subdivision.
"Plan" means any employee pension benefit plan (as defined in Section 3(2)
of ERISA), subject to Title IV of ERISA or Section 412 of the Code, other than a
Multiemployer Plan, with respect to which a Loan Party or an ERISA Affiliate
contributes or has an obligation or liability to contribute, including any such
plan that may have been terminated.
"Private Placement" means that certain sale of the Company's notes, other
debt obligations or other equity securities to various Persons in an approximate
amount of $35,000,000.00 or more, which process is currently underway with an
expected consummation date of on or about May 1, 1995.
"Regulation D" means Regulation D of the Board (respecting reserve
requirements), as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof.
"Regulation U" means Regulation U of the Board (respecting margin credit
extended by banks), as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof.
"Regulation X" means Regulation X of the Board (respecting borrowers who
obtain margin credit), as the same is from time to time in effect, and all
official rulings and interpretations thereunder or thereof.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment (including the abandonment or discarding of barrels, containers
and other closed receptacles).
"Reportable Event" means an event described in Section 4043(b) of ERISA
with respect to a Plan as to which the 30 day notice requirement has not been
waived by the PBGC.
"Required Banks" means 100% of the Banks hereunder.
"Requirements of Environmental Laws" means, as to any Person, the
requirements of any applicable Environmental Law relating to or affecting such
Person or the condition or operation of such Person,s business or its
properties, both real and personal.
"Reserve Percentage" means, the reserve percentage applicable during such
Interest Period under regulations issued from time to time by the Board (or if
more than one such percentage is so applicable, the daily average for such
percentages for those days in such Interest Period during
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<PAGE>
which any such percentage shall be so applicable) for determining the maximum
reserve requirement (including any marginal, supplemental or emergency reserves)
in respect of liabilities or assets consisting of or including Eurocurrency
Liabilities.
"Responsible Officer" means, with respect to any Loan Party, the
president, chief executive officer, treasurer or chief financial officer of such
Loan Party.
"Restricted Payment" means (a) any dividend or other distribution, direct
or indirect, on account of any shares of any class of stock of the Company now
or hereafter outstanding, except a dividend payable solely in shares of stock or
warrants, rights or options to acquire shares of stock of the Company and (b)
any redemption, retirement, purchase or other acquisition, direct or indirect,
of any shares of any class of stock of the Company, now or hereafter
outstanding, or of any warrants, rights or options to acquire any such shares,
except to the extent that the consideration therefor consists of shares of stock
(including warrants, rights or options relating thereto) of the Company.
"Revolving Credit Commitment" means the total of each Bank's obligation to
make Revolving Credit Loans hereunder.
"Revolving Credit Commitment Fee" has the meaning specified in Section
4.01(b).
"Revolving Credit Loan" has the meaning specified in Section 2.01.
"Revolving Credit Note" has the meaning specified in Section 2.06(a).
"Revolving Credit Note Maturity Date" means January 31, 1996 or the
earlier date of the acceleration of said Note pursuant to Section 10.01.
"Security Agreements" means those certain Security Agreements dated as of
the date hereof, executed by each of the Loan Parties, except for American
Liability and Excess Insurance Company, in favor of the Agent, on behalf of the
Banks, granting a security interest in all of the accounts and general
intangibles of each of the Loan Parties, all of the capital stock of each of the
Subsidiaries and all of the material assets of all of the remaining Loan Parties
other than the Company, all as described therein, and all proceeds thereof.
"Subsidiary" means and includes, with respect to any Person, (a) any
corporation more than 50% of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person, directly
or indirectly and (b) any partnership, association, joint venture or other
entity in which such Person, directly or indirectly, has greater than 50% of (i)
the directors (or Persons performing similar functions) thereof or (ii) equity
interest.
"Syndication" has the meaning specified in Section 2.03.
"Syndication Agreement" means that certain agreement of even date herewith
between the Agent and the Company regarding said parties' joint efforts to
solicit additional Banks.
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"Term Loan" has the meaning specified in Section 2.02.
"Term Note" has the meaning specified in Section 2.06(b).
"Term Note Maturity Date" means January 31, 1996, or the earlier
acceleration of said Note pursuant to Section 10.01.
"Unfunded Current Liability" means, with respect to any Plan, the amount,
if any, by which the present value of the accrued benefits under the Plan as of
the close of its most recent Plan year exceeds the fair market value of the
assets allocable thereto, determined in accordance with Section 412 of the Code.
ARTICLE II
MAKING AND REPAYING THE LOANS
SECTION 2.01. The Revolving Credit Loan. Subject to the terms and
conditions herein set forth, each Bank agrees at any time and from time to time
on and after the Effective Date and prior to the Revolving Credit Note Maturity
Date, to make and maintain a loan or loans (each a "Revolving Credit Loan" and
collectively, the "Revolving Credit Loans") to the Company for general working
capital purposes in the amount for each Bank on its signature page hereto, which
Revolving Credit Loan shall, at the option of the Company, be made and
maintained pursuant to one or more Loans comprised of Alternate Base Rate Loans
or Eurodollar Rate Loans. Revolving Credit Loans may be repaid and reborrowed
at any time by the Company in accordance with the provisions hereof and shall,
in the aggregate, not exceed $5,000,00.00. There shall be no further advances
of any Revolving Credit Loans after the Revolving Credit Note Maturity Date.
SECTION 2.02. The Term Loan. (a) Subject to the terms and conditions
herein set forth, each Bank agrees to lend to the Company a term loan in an
aggregate principal amount not to exceed (i) $30,000,000.00 so long as the Agent
is the only Bank hereunder and (ii) $33,000,000.00 thereafter (the "Term Loan"
and, together with the Revolving Credit Loan, the "Loans"). The Term Loan shall
be advanced in a single draw on or after the Effective Date; provided, however,
that should another Bank become a party hereto after the Term Loan has been
advanced, then the additional portion of the Term Loan in the amount of
$3,000,000.00 may be advanced in a second draw. The Term Loan may be comprised
of Alternate Base Rate Loans and Eurodollar Rate Loans at the option of the
Company.
(b) Notwithstanding anything else herein contained, prior to February 17,
1995, the Agent, as a Bank, individually agrees to lend to the Company up to
$30,000,000.00 of the Term Loan.
SECTION 2.03. Syndication. The Agent agrees to use its best efforts to
solicit Persons to become Banks hereunder (the "Syndication") in the approximate
amount of $10,000,000.00. All Loan Parties acknowledge that the Agent shall
have no liability if it is unable to effect the Syndication and that its only
obligation is to attempt to do so on a best efforts basis. All Loan Parties and
the Agent recognize that the Syndication is not complete as of the date hereof
and that
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<PAGE>
the Agent will be continuing to work on the Syndication subsequent hereto. The
Loan Parties agree to cooperate with the Agent's efforts to achieve a successful
Syndication in all reasonable respects. Notwithstanding anything else herein
contained, in the event no other Banks become parties hereto, the maximum amount
of the Term Loan shall be $30,000,000.00.
SECTION 2.04. Notice of Revolving Credit Loan. Whenever the Company
desires to make a Revolving Credit Loan hereunder, the Company shall give
written notice (a "Notice of Loan Request") to the Agent (i) in the case of
Alternate Base Rate Loans, not later than 12:00 noon (Houston, Texas time) on
the date for such Revolving Credit Loan and (ii) in the case of Eurodollar Rate
Loans, not later than 12:00 noon (Houston, Texas time) three Business Days prior
to the date for such Revolving Credit Loan. Each Notice of Loan Request shall
be irrevocable and shall be in the form of Exhibit 2.04 specifying (A) the
aggregate principal amount of the Loans to be made, (B) the date for such Loans
(which shall be a Business Day), (C) whether such Loans are to be initially
maintained as Alternate Base Rate Loans or Eurodollar Rate Loans and (D) if the
proposed Loan is to be comprised of Eurodollar Rate Loans, the initial Interest
Period to be applicable thereto. The Company may submit one or more Notices of
Loan Request on any Business Day.
SECTION 2.05. Minimum Amount of Each Loan. The aggregate principal
amount of each Loan shall not be less than $200,000.00 and, if greater, shall
be an integral multiple of $100,000.00. More than one Loan may occur on the
same day but at no time shall there be outstanding more than ten Eurodollar Rate
Loans.
SECTION 2.06. Notes and Disbursements. (a) The Company,s obligation to
pay the Revolving Credit Loans shall be evidenced by revolving promissory notes
in favor of each Bank in the original principal sum of each Bank's pro rata
share of the total of the Revolving Credit Loan (individually, the "Revolving
Credit Note" and collectively, the "Revolving Credit Notes") duly executed and
delivered by the Company substantially in the form of Exhibit 2.06A hereto. The
Agent's original Revolving Credit Note shall be modified or reexecuted as the
Agent shall request, following the addition of new Banks as a result of the
Syndication.
(b) The Company's obligation to repay the Term Loan shall be evidenced by
term promissory notes in favor of each Bank in the original principal sum of
each Bank's pro rata share of the total of the Term Loan (individually, the
"Term Note" and collectively, the "Term Notes") duly executed and delivered by
the Company substantially in the form of Exhibit 2.06B hereto. The Agent's
original Term Note shall be modified or re-executed as the Agent shall request,
following the addition of new Banks as a result of the Syndication.
(c) No later than 1:00 p.m. (Houston, Texas time) on the date of any Loan
each Bank will make available its pro rata portion of the amount of such Loan in
U.S. dollars and in immediately available funds at the designated office of the
Agent. The Agent will credit the amounts so received to the general deposit
account of the Company with the Agent.
(d) Unless the Agent shall have been notified by any Bank prior to
disbursement of the Loan by the Agent that such Bank does not intend to make
available to the Agent such Bank's portion of the Loan to be made on such date,
the Agent may assume that such Bank has made such amount available to the Agent
on such date of the Loan and the Agent may, in reliance upon such assumption,
make available to the Company a corresponding amount. If such corresponding
amount
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<PAGE>
is not in fact made available to the Agent by such Bank and the Agent has made
available same to the Company, the Agent shall be entitled to recover such
corresponding amount on demand from such Bank. If such Bank does not pay such
corresponding amount forthwith upon the Agent's demand therefor, the Agent shall
promptly notify the Company, and the Company shall pay such corresponding amount
to the Agent within two (2) Business Days after demand therefor. The Agent
shall also be entitled to recover from such Bank or the Company, as the case may
be, interest on such corresponding amount from the date such corresponding
amount was made available by the Agent to the Company to the date such
corresponding amount is recovered by the Agent, at a rate per annum equal to (i)
if paid by such Bank, the Federal Funds Effective Rate or (ii) if paid by the
Company the lesser of (A) the Highest Lawful Rate or (B) the Alternate Base
Rate in effect from time to time, plus the Applicable Margin. Nothing herein
shall be deemed to relieve any Bank from its obligation to fulfill its
commitments hereunder or to prejudice any rights which the Company may have
against any Bank as a result of any default by such Bank hereunder.
(e) All Loans under this Agreement shall be made by the Banks pro rata on
the basis of their respective Commitments. It is understood that no Bank shall
be responsible for any default by any other Bank in its obligation to make Loans
hereunder and that each Bank shall be obligated to make the Loans provided to be
made by it hereunder, regardless of the failure of any other Bank to fulfill its
commitments hereunder.
SECTION 2.07. Conversions and Continuances. Subject to Sections 2.11 and
2.15, the Company shall have the option to convert on any Business Day all or a
portion of the outstanding principal amounts under the Revolving Credit Note,
the Term Note and the Letter of Credit Note from Eurodollar Rate Loans to
Alternate Base Rate Loans or vice versa; provided, that Alternate Base Rate
Loans may only be converted into Eurodollar Rate Loans, and Eurodollar Rate
Loans may only be continued as further Eurodollar Rate Loans, if no Default or
Event of Default is in existence on the date of the conversion. Each such
conversion shall be effected by the Company giving the Agent notice (each a
"Notice of Conversion") prior to 11:00 a.m. (Houston, Texas time) at least (a)
three Business Days prior to the date of such conversion in the case of a
conversion into or continuation as Eurodollar Rate Loans and (b) one Business
Day in the case of a conversion into or continuation as Alternate Base Rate
Loans, specifying each Type of Loan (or portions thereof) to be so converted
and, if to be converted into or continued as Eurodollar Rate Loans, the Interest
Period to be initially applicable thereto. A Notice of Conversion may be given
verbally or by telephone but will, upon request of the Agent, be confirmed in
writing.
SECTION 2.08. Payment of Interest. (a) Subject to Paragraph (c)
hereof and to Section 12.08, the Company agrees to pay interest in respect of
the unpaid principal amount of each Alternate Base Rate Loan from the date of
the making of the Loan to maturity (whether by acceleration or otherwise) at a
rate per annum which shall at all times be equal to the lesser of (i) the
Highest Lawful Rate and (ii) the applicable Margin plus the Alternate Base Rate
in effect from time to time. If the Alternate Base Rate is based on the Prime
Rate, interest shall be computed on the basis of the actual number of days
elapsed over a year of 365 or 366 days, as the case may be. If the Alternate
Base Rate is based on the Federal Funds Effective Rate, interest shall be
computed on the basis of the actual number of days elapsed over a year of 360
days.
(b) Subject to Paragraph (c) hereof and to Section 12.08, the Company
agrees to pay interest in respect of the unpaid principal amount of each
Eurodollar Rate Loan from the date of the
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respective Loan to maturity (whether by acceleration or otherwise) at a rate per
annum (computed on the basis of the actual number of days elapsed over a year of
360 days) which shall, during each Interest Period applicable thereto, be equal
to the lesser of (i) the Highest Lawful Rate and (ii) the applicable Margin plus
the relevant Eurodollar Rate for such Interest Period.
(c) Notwithstanding Paragraphs (a) and (b) above, if, on May 1, 1995 the
Private Placement is not consummated and the Revolving Credit Loans and the Term
Loans are not repaid in full, the Agent shall have the absolute right, in its
sole and arbitrary discretion to increase the Margin by an additional .25% for
all Loans for each fiscal quarter until the Private Placement is completed,
provided the maximum total interest rate increase under this subparagraph shall
be .75%.
(d) Subject to Section 12.08, overdue principal and, to the extent
permitted by law, overdue interest in respect of each Loan and all other overdue
amounts owing hereunder shall bear interest for each day that such amounts are
overdue at a rate per annum equal to the Highest Lawful Rate.
(e) Interest on each Loan shall accrue from the date of such Loan to the
date of any repayment thereof and shall be payable (i) in respect of Eurodollar
Rate Advances (A) on the last day of the Interest Period applicable thereto and
in the case of any Interest Period in excess of three months on each Designated
Payment Date occurring during such Interest Period and (B) on the date of any
voluntary or mandatory prepayment or any conversion, (ii) in respect of each
Alternate Base Rate Loan (A) on each Designated Payment Date and (B) on the date
of any voluntary or mandatory prepayment and (iii) in respect of each Loan, at
maturity.
(f) Subject to Section 12.08, the Company shall pay to any Bank, which is
required under regulations of the Board to maintain reserves with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities,
additional interest on the unpaid principal amount of each such Eurodollar Rate
Loan of such Bank, from the date of such Loan until such principal amount is
paid in full, at an interest rate per annum equal to the remainder obtained by
subtracting the Eurodollar Rate for such Interest Period from the rate obtained
by dividing such Eurodollar Rate by a percentage equal to 100% minus the
relevant Reserve Percentage. Such additional interest shall be payable five
calendar days after demand therefor.
(g) The applicable rate shall be adjusted effective on the first day of
each Margin Period whether or not said adjustment occurs at a time other than
the beginning of an Interest Period.
SECTION 2.09. Interest Periods. (a) At the time the Company gives any
Notice of Loan Request or Notice of Conversion in respect of the making of, or
conversion into, a Eurodollar Rate Loan, the Company shall have the right to
elect, by giving the Agent on the dates and at the times specified herein,
notice of the interest period (each an "Interest Period") applicable to such
Eurodollar Rate Loan, which Interest Period shall be either a one, two, three or
six month period; provided, that:
(i) the initial Interest Period for any Eurodollar Rate Loan shall commence on
the date of such Loan (including the date of any conversion thereto) and each
Interest Period occurring thereafter in respect of such Loan shall commence on
the day on which the next
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preceding Interest Period expires;
(ii) if any Interest Period relating to a Eurodollar Rate Loan begins on a day
for which there is no numerically corresponding day in the calendar month at the
end of such Interest Period, such Interest Period shall end on the last Business
Day of such calendar month;
(iii) if any Interest Period would otherwise expire on a day which is not a
Business Day, such Interest Period shall expire on the next succeeding Business
Day; provided, that if any Interest Period in respect of a Eurodollar Rate Loan
would otherwise expire on a day which is not a Business Day, but is a day of the
month after which no further Business Day occurs in such month, such Interest
Period shall expire on the next preceding Business Day;
(iv) no Interest Period shall extend beyond the maturity date for the Note
under which said Loan is made; and
(v) at no time shall there be more than ten Interest Periods in effect under
this Agreement.
(b) If upon the expiration of any Interest Period applicable to a
Eurodollar Rate Loan, the Company has failed to elect a new Interest Period to
be applicable to such Loan as provided above, the Company shall be deemed to
have elected to convert such Loan into an Alternate Base Rate Loan effective as
of the expiration date of such current Interest Period.
SECTION 2.10. Interest Rate Not Ascertainable. In the event that the
Agent shall have reasonably determined (which determination shall, absent
manifest error, be final, conclusive and binding upon all parties) that on any
date for determining the Eurodollar Rate for any Interest Period, by reason of
any changes arising after the date of this Agreement affecting the Eurodollar
interbank market or any Bank,s position in such market, adequate and fair means
do not exist for ascertaining the applicable interest rate on the basis provided
for in the definition of Eurodollar Rate, then, and in any such event, the Agent
shall forthwith give notice to the Company of such determination. Until the
Agent notifies the Company that the circumstances giving rise to the suspension
described herein no longer exist, the obligations of any such Bank to make
Eurodollar Rate Loans shall be suspended.
SECTION 2.11. Required Payments of Principal. (a) Subject to the
provisions of Section 7.09, all outstanding principal and any accrued, unpaid
interest on the Revolving Credit Note and the Letter of Credit Note shall be due
and payable on the Revolving Credit Note Maturity Date and the Letter of Credit
Note Maturity Date, respectively.
(b) All outstanding principal (and any accrued, unpaid interest) on the
Term Note shall be due and payable on the Term Note Maturity Date.
(c) In addition to the payments required by Paragraphs (a) and (b) above,
the Agent may, in its sole and arbitrary discretion, require the Company to pay
to the Agent, for the benefit of the Banks, pro rata, on each Financial
Statement Delivery Date so long as the Private Placement has not been fully
consummated on or before May 1, 1995 and the proceeds used as provided herein,
of up to one hundred percent (100%) of all Excess Cash Flow, which amount shall
reduce the principal
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balance owing on the Term Notes.
(d) Each repayment pursuant to this Section shall be applied first, to the
payment of accrued and unpaid interest, then, in the case of all Loans, to the
outstanding principal of such Loans.
SECTION 2.12. Voluntary Prepayments. The Company shall have the right
to voluntarily prepay the Loans in whole or in part from time to time on the
following terms and conditions: (a) no Eurodollar Rate Loan may be prepaid
prior to the last day of its Interest Period unless, simultaneously therewith,
the Company pays to the Agent, all sums necessary to compensate the Agent for
all costs and expenses resulting from such prepayment, including, but not
limited to, those costs described in Section 2.16 and Section 2.18 hereof; (b)
each partial prepayment shall be in an initial aggregate principal amount of
$200,000 and, if greater, an integral multiple of $100,000; and (c) each
prepayment pursuant to this Section shall be applied first, to the payment of
accrued and unpaid interest, then, to the outstanding principal of such Loans in
the inverse order of maturity thereof.
SECTION 2.13. Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement shall be made to
the Agent, for the account of the Banks, pro rata, not later than 12:00 noon
(Houston, Texas time) on the date when due and shall be made in lawful money of
the United States in immediately available funds. Whenever any payment to be
made hereunder or under any Note shall be stated to be due on a day which is not
a Business Day, the due date thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest shall be
payable at the applicable rate during such extension.
SECTION 2.14. Voluntary Reduction of Commitment. Upon at least five
Business Days' prior telephonic notice confirmed in writing to the the Agent,
the Company shall have the right, without premium or penalty, to terminate any
portion of the Revolving Credit Commitment or the Letter of Credit Commitment.
Any reduction of either of said commitments shall be in the amount of
$500,000.00 or, if greater, an integral multiple of $100,000.00.
SECTION 2.15. Mandatory Reduction of Commitment. Unless sooner
terminated pursuant to Article X hereof, the Revolving Credit Commitment shall
terminate on the Revolving Credit Note Maturity Date and the Letter of Credit
Commitment shall terminate on the Letter of Credit Note Maturity Date.
SECTION 2.16. Increased Taxes or Costs. (a) Notwithstanding any other
provision herein, but subject to Section 11.08, if the application or
effectiveness of any applicable law or regulation or any change in applicable
law or regulation or in the interpretation or administration thereof, or
compliance by any Bank with any applicable guideline or request from any central
bank or governmental authority (whether or not having the force of law) shall
change the basis of taxation of payments to any Bank of the principal of or
interest on any Eurodollar Rate Loan or any other fees or amounts payable
hereunder (other than taxes imposed on the overall net income of such Bank or
franchise taxes imposed upon it by the jurisdiction in which such Bank has an
office), shall impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, any Bank (without duplication of any amounts paid pursuant
to Section 2.08(f)) or shall impose on any Bank or any Eurodollar interbank
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market any other condition affecting this Agreement or any Eurodollar Rate Loan,
and the result of any of the foregoing shall be to increase the cost to such
Bank of making or maintaining any Eurodollar Rate Loan or to reduce the amount
of any sum received or receivable by such Bank hereunder (whether of principal,
interest or otherwise) in respect thereof by an amount deemed in good faith by
the Bank to be material, then the Company shall pay such additional amount or
amounts as will compensate such Bank for such increase or reduction upon demand.
(b) If any Bank shall have determined in good faith that any law, rule,
regulation or guideline regarding capital adequacy, or any change therein, or
any change in the interpretation or administration thereof or compliance by it
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency has
or would have the effect of reducing the rate of return on the capital of such
Bank as a consequence of its obligations hereunder to a level below that which
it could have achieved but for such adoption, change or compliance by an amount
deemed to be material, then, from time to time, the Company shall pay such
additional amount or amounts as will reasonably compensate such Bank for such
reduction.
(c) Any affected Bank will notify the Company of any event which will
entitle it to compensation pursuant to this Section, promptly provided, the
Company shall not be obligated hereunder for any such amounts in respect of
changes occurring more than ninety (90) days prior to the date of such notice.
A certificate setting forth in reasonable detail (i) such amount or amounts as
shall be necessary to compensate such Bank as specified in paragraph (a) or (b)
above, as the case may be, and (ii) the calculation of such amount or amounts
under clause (a)(i), shall be delivered to the Company and shall be conclusive
absent manifest error. The Company shall pay to any Bank so affected the amount
shown as due on any such certificate as will reasonably compensate it for such
matters within 30 days after its receipt of the same.
(d) Failure on the part of any Bank to demand compensation for any
increased costs or reduction in amounts received or receivable or reduction in
return on capital with respect to any Interest Period shall not constitute a
waiver of the rights to demand compensation for any increased costs or reduction
in amounts received or receivable or reduction in return on capital with respect
to such Interest Period or any other Interest Period, provided the Bank shall be
entitled to collect such costs or expenses only in regard to change in
circumstances occurring after the Effective Date.
SECTION 2.17. Change in Legality. (a) Notwithstanding anything to the
contrary herein contained, if any change in any law or regulation or in the
interpretation thereof by any governmental authority charged with the
administration or interpretation thereof shall make it unlawful for any Bank to
make or maintain any Eurodollar Rate Loan or to give effect to its obligations
as contemplated hereby, then, by prompt written notice to the Company, such Bank
may:
(i) declare that Eurodollar Rate Loans will not thereafter be made hereunder,
whereupon the Company shall be prohibited from requesting Eurodollar Rate Loans
unless such declaration is subsequently withdrawn; and
(ii) require that all outstanding Eurodollar Rate Loans made by it be
converted to Alternate Base Rate Loans, in which event (A) all such Eurodollar
Rate Loans shall be automatically converted to Alternate Base Rate Loans as of
the effective date of such notice
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as provided in paragraph (b) below and (B) all payments and prepayments of
principal which would otherwise have been applied to repay the converted
Eurodollar Rate Loans shall instead be applied to repay the Alternate Base Rate
Loans resulting from such conversion.
(b) For purposes of this Section, a notice to the Company pursuant to
paragraph (a) above shall be effective on the date of receipt thereof by the
Company.
SECTION 2.18. Failure of Company to Make or Repay Loans. The Company
hereby indemnifies the Banks against any loss or expense which the Banks may
sustain or incur (a) if, for any reason, a Loan of or a conversion from or into
Eurodollar Rate Loans does not occur on the date specified therefor in a Notice
of Loan Request or Notice of Conversion, or, (b) for any payment, prepayment or
conversion of a Eurodollar Rate Loan required by this Agreement or otherwise
made on a date other than the last day of the applicable Interest Period,
including any loss or reasonable expense sustained or incurred or to be
sustained or incurred in liquidating or employing deposits from third parties
acquired to effect or maintain such Loan or any part thereof as a Eurodollar
Rate Loan. Such loss or reasonable expense shall include an amount equal to the
excess, if any, as reasonably determined by any Bank for (i) its cost of
obtaining the funds for the Advance being paid, prepaid or converted or not
borrowed (based on the Eurodollar Rate) for the period from the date of such
payment, prepayment or conversion or failure to borrow to the last day of the
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for the Loan which would have commenced on the date of such
failure to borrow) over (ii) the amount of interest (as reasonably determined by
such Bank) that would be realized in reemploying the funds so paid, prepaid or
converted or not borrowed for such period or Interest Period, as the case may
be. A certificate setting forth any such amount or amounts shall be delivered
to the Company and shall be conclusive absent manifest error. The Company shall
pay to such Bank the amount shown as due on any certificate within 30 days after
its receipt of the same.
ARTICLE III
LETTERS OF CREDIT
SECTION 3.01. Letters of Credit. (a) Subject to and upon the terms
and conditions herein set forth, but independent of the Revolving Credit Loan,
the Term Loan or the other Banks and strictly for its own account, the Agent
agrees that it will, at any time and from time to time on or after the Effective
Date and prior to the Letter of Credit Note Maturity Date, following its receipt
of an appropriate Application for Letter of Credit, and satisfaction of the
conditions described in Sections 3.02 and 5.03 below, issue, on behalf of itself
only, for the account of the Company and in support of the obligations of the
Company, one or more irrevocable letters of credit (all such letters of credit
together with any existing letters of credit previously issued by the Agent,
collectively, the "Letters of Credit"), up to a maximum total outstanding and/or
drawn upon at any one time of $5,000,000.00. All Letters of Credit shall have a
maturity date not later than the Letter of Credit Termination Date.
(b) The Agent shall not issue, renew nor permit the renewal of any Letter
of Credit if (i) any of the conditions precedent to such issuance or renewal set
forth in Sections 5.02 and 5.03 are not satisfied, (ii) after giving effect to
such renewal, the expiry date of such Letter of Credit
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would be a date that is later than the Letter of Credit Termination Date or
(iii) if the Letter of Credit Collateral for such Letter of Credit is not
received by and pledged to the Agent in a manner satisfactory to the Agent in
its sole discretion.
SECTION 3.02. Application for Letter of Credit. Whenever the Company
desires that a Letter of Credit be issued for its account or that the existing
expiry date of a Letter of Credit shall be extended, it shall give the Agent at
least two Business Days' prior written request therefor. Each such request shall
be in the form of an Application for Letter of Credit (the "Application for
Letter of Credit") on the Agent's standard form therefor, completed to the
satisfaction of the Agent, shall be accompanied by the Letter of Credit
Collateral, pledged to the Agent in a manner satisfactory to the Agent in its
sole discretion, and such other certificates, documents and other papers and
information as the Agent may reasonably request. Each Letter of Credit shall be
in such form as may be reasonably approved from time to time by the Agent and
the Company.
SECTION 3.03. Letter of Credit Note.(a) All obligations of the
Company for repayment of funded Letters of Credit shall be evidenced by a note
(the "Letter of Credit Note") payable to the order of the Agent, substantially
in the form of Exhibit 3.03 hereto. Upon presentation of any Letter of Credit
for payment by any beneficiary thereof and agreement by the Agent to such
payment, any amount so paid shall automatically be considered as an advance
under the Letter of Credit Note. The issuance of a Letter of Credit shall
reduce the amount available for future Letters of Credit by the face amount of
the Letter of Credit issued. In no event shall the total of outstanding Letters
of Credit plus the outstanding balance of the Letter of Credit Note ever exceed
the sum of $5,000,000.00.
(b) Any sum advanced under the Letter of Credit Note shall accrue interest
at the same rates provided for in regard to the Revolving Credit Note, subject
to any modification required by Section 3.05 hereof. All outstanding principal
and any accrued, unpaid interest on the Letter of Credit Note shall be due and
payable on the Letter of Credit Note Maturity Date.
SECTION 3.04. Rights of Agent Regarding Letters of Credit. The Agent
shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or
omissions caused by the Agent's willful misconduct. IT IS THE EXPRESS INTENTION
OF THE PARTIES HERETO THAT THE AGENT, ITS OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS SHALL BE INDEMNIFIED AND HELD HARMLESS FROM ANY ACTION TAKEN OR OMITTED
BY SUCH PERSON UNDER OR IN CONNECTION WITH ANY LETTER OF CREDIT OR ANY RELATED
DRAFT OR DOCUMENT ARISING OUT OF OR RESULTING FROM SUCH PERSON,S SOLE OR
CONTRIBUTORY NEGLIGENCE. The Company agrees that any action taken or omitted by
the Agent under or in connection with any Letter of Credit or the related drafts
or documents, if done in accordance with the standards of care specified in the
Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce, Publication No. 500 (and any subsequent
revisions thereof approved by a Congress of the International Chamber of
Commerce and adhered to by the Agent) and, to the extent not inconsistent
therewith, the Uniform Commercial Code of the State of Texas, shall not result
in any liability of the Agent to the Company or any other Loan Party.
SECTION 3.05. Increased Letter of Credit Costs . Notwithstanding any
other provision herein, but subject to Section 11.08, if the Agent shall
determine in good faith that any
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change in any law, rule, regulation or guideline (whether or not having the
force of law) either (i) shall impose, modify or make applicable any reserve,
deposit, capital adequacy or similar requirement against letters of credit
issued, or participated in, by the Agent or (ii) shall impose on any other
conditions affecting this Agreement or any Letter of Credit; and the result of
any of the foregoing is to increase the cost of issuing, maintaining or
participating in any Letter of Credit, or reduce the amount received or
receivable by the Agent hereunder with respect to Letters of Credit, by an
amount deemed to be material, then, from time to time, the Company shall pay to
the Agent such additional amount or amounts as will reasonably compensate it for
such increased cost, provided the Bank shall notify the Company of such change
promptly and the Company shall not be obligated hereunder for any such amounts
in respect of changes occurring more than ninety (90) days prior to the date of
any such notice.
SECTION 3.06. Acknowledgement of the Company and the Other Banks. (a)
The Banks, other than the Agent, recognize that the Agent is extending credit to
the Company in the form of the Letters of Credit, that the Agent will be issuing
the Letters of Credit individually, earning all of the fees associated with the
Letters of Credit, taking the credit risk of the Letters of Credit and taking
and perfecting a security interest in the Letter of Credit Collateral. The
Banks, other than the Agent, specifically disclaim any interest in the Letter of
Credit Note, the Letter of Credit Collateral or the Letters of Credit and
acknowledge that such undertakings are the sole and independent project of the
Agent, notwithstanding anything else herein contained. The Agent agrees to use
its best efforts to notify the other Banks of the issuance of each Letter of
Credit but will have no liability if it fails to do so.
(b) The Company agrees that, while the Agent is issuing the Letters of
Credit independently of the other Banks, that, to the extent relevant, all other
terms and provisions of this Agreement, including, specifically, without
limitation, all definitions, all Guaranties under Article IX hereof, all
covenants, representations, warranties, obligations to pay principal and
interest at the rates and times set forth herein, all provisions regarding
Defaults, Events of Default and Remedies and all terms of Article XII hereof are
and shall be applicable to the Letters of Credit and the indebtedness evidenced
by the Letter of Credit Note and that all references to such items herein,
except where specifically stated inapplicable or in a context which render them
inapplicable, shall apply to the Letters of Credit, the Letter of Credit Note
and the Letter of Credit Collateral. A default under the Letter of Credit Note,
the Revolving Credit Notes or the Term Notes shall constitute a default
hereunder and under all of the Notes.
ARTICLE IV
FEES
SECTION 4.01. Fees. The Company agrees to pay the Agent a commitment
fee (the "Revolving Credit Commitment Fee") for the period from January 31, 1995
to the Revolving Credit Note Maturity Date, computed at a rate equal to .25% per
annum on the daily average undrawn balance of the Revolving Credit Note.
Accrued Revolving Credit Commitment Fees shall be calculated to the day
immediately preceding each Designated Payment Date and to the date immediately
preceding the Revolving Credit Note Maturity Date and shall be due and payable
in arrears on each Designated Payment Date commencing March 31, 1995 and on the
Revolving Credit
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Note Maturity Date. The Revolving Credit Commitment Fee (i) shall be paid in
immediately available funds and (ii) shall be calculated on the basis of a
360-day year.
SECTION 4.02. Letter of Credit Fees. The Company agrees to pay the
Agent a fee in respect of each Letter of Credit issued for the account of the
Company (the "Letter of Credit Fee"), for the period from the date of issuance
of such Letter of Credit to the expiry date of such Letter of Credit, computed
at the rate of (i) 0.5% per annum for any Letter of Credit secured by cash
securities issued or directly and fully guaranteed or insured by the United
States or certificates of deposit issued by and held by the Agent and (ii) at
the rate of 1% per annum on the daily average stated amount of each Letter of
Credit secured by other Letter of Credit Collateral. Accrued Letter of Credit
Fees shall be due and payable in arrears on each Designated Payment Date
commencing March 31, 1995, and on the Letter of Credit Note Maturity Date. The
Letter of Credit Fees (i) will be in lieu of all commissions and fees for the
Letters of Credit other than customary administrative, issuance, amendment,
payment and negotiation charges, (ii) shall be paid in immediately available
funds and (iii) shall be calculated on the basis of the actual number of days
elapsed over a year of 365 or 366 days, as the case may be.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01. Conditions Precedent to the Initial Credit Event. The
obligation of the Banks to make the initial Loan to the Company is subject to
receipt by the Agent of the following, each in form satisfactory to the Agent,
executed by the appropriate party:
(a) this Agreement;
(b) the Revolving Credit Note(s);
(c) the Term Note(s);
(d) the Security Agreements;
(e) the Guaranties;
(f) the Financing Statements;
(g) a certificate of an officer and of the secretary or an assistant
secretary of each Loan Party certifying, inter alia, (A) true and correct copies
of the articles or certificate of incorporation, as amended and in effect, of
such Person and, the bylaws, as amended and in effect, of each Loan Party, as
well as resolutions adopted by the Board of Directors of such Person (1)
authorizing the execution, delivery and performance by such Person of this
Agreement and the other Loan Documents to which it is or will be a party and, in
the case of the Company, the Loans to be made hereunder, (2) approving the forms
of the Loan Documents to which it is a party and which will be delivered at or
prior to the initial Borrowing Date and (3) authorizing officers of such Person
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to execute and deliver the Loan Documents to which it is or will be a party and
any related documents, and (B) the incumbency and specimen signatures of the
officers of such Person executing any documents on its behalf;
(h) favorable, signed opinions dated the Effective Date and addressed to
the Agent from Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., counsel to the Loan
Parties, in form and substance satisfactory to the Agent and its counsel;
(i) the payment to the Agent, as applicable, of all Fees and all expenses
incurred (including the fees and disbursements of Andrews & Kurth L.L.P.) and
agreed upon by such parties to be paid on or prior to the Effective Date;
(j) certificates of appropriate public officials as to the existence, good
standing and qualification to do business as a foreign corporation, as
applicable, of each Loan Party in each jurisdiction in which the ownership of
its properties or the conduct of its business requires such qualifications and
where the failure to so qualify would have a Material Adverse Effect; and
(k) a certificate from the Company's insurance broker describing in detail
all insurance by the Company and its Subsidiaries on its property and its
business as of the Effective Date in form and amounts satisfactory to the Agent
and naming the Agent as an additional insured of liability insurance maintained
by the Company and its Subsidiaries.
SECTION 5.02. Conditions Precedent to All Credit Events. The
obligation of the Banks to make any Loan is subject to the further conditions
precedent that on the date of such Credit Event (other than any conversion of
existing Loans into Alternate Base Rate Loans):
(a) The conditions precedent set forth in Section 5.01 shall have
theretofore been satisfied or waived.
(b) The representations and warranties set forth in Article VI shall be
true and correct in all material respects as of, and as if such representations
and warranties were made on, the date of the proposed Loan or Letter of Credit,
as the case may be (unless such representation and warranty expressly relates to
an earlier date or are no longer true and correct solely as a result of
transactions permitted by the Loan Documents), and the Company shall be deemed
to have certified to the Agent that such representations and warranties are true
and correct in all material respects by submitting a Notice of Loan Request or a
Letter of Credit Request, as the case may be.
(c) The Company shall have appropriately requested the Loan.
(d) No Default or Event of Default shall have occurred and be continuing
or would result from such Credit Event.
(e) No Material Adverse Effect shall have occurred since the delivery of
the Financials.
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(f) The Agent shall have received such other approvals, opinions or
documents as the Agent may reasonably request.
SECTION 5.03. Conditions Precedent to Issuance of Letter of Credit.
The obligation of the Agent to issue any Letter of Credit is subject to the
further conditions that the Agent shall have received, on or prior to the date
of any such issuance, in form and substance satisfactory to the Agent:
(a) the Letter of Credit Note;
(b) the Letter of Credit Collateral, pledged to it in a manner
satisfactory to it;
(c) an Application for Letter of Credit;
(d) such other supporting documentation traditionally required by the
Agent in respect of the issuance of Letters of Credit;
(e) appropriate Resolutions from the Board of Directors of the Company,
authorizing the execution of the Letter of Credit Note and the pledging of the
Letter of Credit Collateral; and
(f) the fulfillment of all the conditions contained in Section 5.02 above.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Banks to enter into this Agreement and to make the
Loans provided for herein and issue Letters of Credit, each Loan Party makes to
the extent applicable and relevant, the following representations and warranties
to the Banks.
SECTION 6.01. Organization and Qualification. Each Loan Party (a) is
a corporation or partnership duly organized, validly existing and in good
standing under the laws of the state of its incorporation or organization, (b)
has the corporate or partnership power to own its property and to carry on its
business as now conducted and (c) is duly qualified as a foreign corporation or
foreign partnership to do business and is in good standing in every jurisdiction
in which the failure to be so qualified would have a Material Adverse Effect.
SECTION 6.02. Authorization and Validity. Each Loan Party has the
corporate power and authority to execute, deliver and perform its obligations
hereunder and under the other Loan Documents, and all such action has been duly
authorized by all necessary proceedings on its part. This Agreement has been
duly and validly executed and delivered by each Loan Party and constitutes a
valid and legally binding agreement of such Loan Party enforceable in accordance
with its terms, and the Notes and the other Loan Documents to which such Loan
Party is a party, when duly executed and delivered by such Loan Party, will
constitute valid and legally binding obligations of such Loan Party enforceable
in accordance with the respective terms thereof and of this Agreement, except,
in each case, as such enforceability may be limited by bankruptcy, insolvency,
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reorganization, moratorium, fraudulent transfer or other similar laws relating
to or affecting the enforcement of creditors' rights generally, and by general
principles of equity.
SECTION 6.03. Governmental Consents. No authorization, consent,
approval, license or exemption of or filing or registration with, any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is necessary for the valid execution, delivery or
performance by any Loan Party of any Loan Document.
SECTION 6.04. Conflicting or Adverse Agreements or Restrictions. No
Loan Party is a party to any contract or agreement or subject to any restriction
which would reasonably be expected to have a Material Adverse Effect. Neither
the execution nor delivery of the Loan Documents nor compliance with the terms
and provisions hereof or thereof will be contrary to the provisions of, or
constitute a default under (a) the charter or bylaws of such Loan Party or (b)
any applicable law (including Regulation U) or any applicable regulation, order,
writ, injunction or decree of any court or governmental instrumentality or (c)
any material agreement to which such Loan Party is a party or by which it is
bound or to which it is subject.
SECTION 6.05. Title to Assets. Each Loan Party has good and
indefeasible title to all of its assets, subject to no Liens, except as set
forth in Schedule 6.05. All of such assets have been and are being maintained
by the appropriate Person in good working condition in accordance with industry
standards.
SECTION 6.06. Litigation. Except as disclosed on Schedule 6.06, no
proceedings against or affecting any Loan Party are pending or, to the knowledge
of any Loan Party, threatened before any court or governmental agency or
department which involve a material risk of having a Material Adverse Effect.
SECTION 6.07. Financial Statements. The Company has furnished to the
Agent its audited consolidated balance sheet, income statement and statement of
cash flow for itself and its consolidated Subsidiaries as of December 31, 1993
(the "Financials") and its interim quarterly statements, unaudited, for the
quarter ending September 30, 1994. The Financials have been prepared in
conformity with GAAP consistently applied (except as otherwise disclosed in such
financial statements) throughout the periods involved and present fairly, in all
material respects, the consolidated financial position of the Company and its
consolidated Subsidiaries as of December 31, 1993 and the results of their
operations for the period then ended. As of the Effective Date, no Material
Adverse Effect has occurred in the consolidated financial condition of the
Company and its consolidated Subsidiaries since the date of said Financials.
SECTION 6.08. Default. No Loan Property is in default under the
provisions of any instrument evidencing any Indebtedness or of any agreement
relating thereto, or in default in any respect under any order, writ, injunction
or decree of any court, or in default in any respect under or in violation of
any order, injunction or decree of any governmental instrumentality, which
defaults or violations would reasonably be expected to have a Material Adverse
Effect. No Loan Party is a party to any material agreement evidencing any
Indebtedness of such Person with an outstanding principal amount in excess of
$250,000.00 on the date of the execution of this Agreement.
SECTION 6.09. Investment Company Act. No Loan Party is, or is
directly or
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indirectly controlled by or acting on behalf of any Person which is, an
"investment company," as such term is defined in the Investment Company Act of
1940, as amended.
SECTION 6.10. Public Utility Holding Company Act. No Loan Party is a
non-exempt "holding company," or subject to regulation as such, or, to the
knowledge of any Loan Party's officers, an "affiliate" of a "holding company" or
a "subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
SECTION 6.11. ERISA. No accumulated funding deficiency (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived, exists
or is expected to be incurred with respect to any Plan(s). No liability to the
PBGC (other than required premium payments) has been or is expected by the Loan
Parties to be incurred with respect to any Plan(s) by the Loan Parties or any
ERISA Affiliate which would reasonably be expected to have a Material Adverse
Effect. Neither the Company nor any ERISA Affiliate has incurred any withdrawal
liability under Title IV of ERISA with respect to any Multi-Employer Plans which
would reasonably be expected to have a Material Adverse Effect.
SECTION 6.12. Tax Returns and Payments. Each Loan Party has filed all
federal income tax returns and other material tax returns, statements and
reports (or obtained extensions with respect thereto) which, are required to be
filed and have paid or deposited or made adequate provision in accordance with
GAAP for the payment of all taxes (including estimated taxes shown on such
returns, statements and reports) which are shown to be due pursuant to such
returns, except for such taxes as are being contested in good faith and by
appropriate proceedings.
SECTION 6.13. Environmental Matters. Each Loan Party and each of its
Subsidiaries (a) possesses all environmental, health and safety licenses,
permits, authorizations, registrations, approvals and similar rights necessary
under law or otherwise for such Loan Party or such Subsidiary to conduct its
operations as now being conducted (other than those with respect to which the
failure to possess or maintain would not, individually or in the aggregate for
all Loan Parties and such Subsidiaries, have a Material Adverse Effect) and (b)
each of such licenses, permits, authorizations, registrations, approvals and
similar rights is valid and subsisting, in full force and effect and enforceable
by such Loan Party or such Subsidiary, and each Loan Party and each of its
Subsidiaries is in compliance with all terms, conditions or other provisions of
such permits, authorizations, registrations, approvals and similar rights except
for such failure or noncompliance that, individually or in the aggregate for all
Loan Parties and such Subsidiaries, would not have a Material Adverse Effect.
Except as disclosed on Schedule 6.13, no Loan Party nor any of its Subsidiaries
has received any notices of any violation of, noncompliance with, or remedial
obligation under, Requirements of Environmental Laws (which violation or
non-compliance has not been cured, and there are no writs, injunctions, decrees,
orders or judgments outstanding, or lawsuits, claims, proceedings,
investigations or inquiries pending or, to the knowledge of such Loan Party,
threatened, relating to the ownership, use, condition, maintenance or operation
of, or conduct of business related to, any property owned, leased or operated by
such Loan Party or such Subsidiary or other assets of such Loan Party or such
Subsidiary, other than those violations, instances of noncompliance,
obligations, writs, injunctions, decrees, orders, judgments, lawsuits, claims,
proceedings, investigations or inquiries that, individually or in the aggregate
for all Loan Parties and such Subsidiaries, would not have a Material Adverse
Effect. Except as disclosed on Schedule 6.13, there are no material
obligations, undertakings or liabilities arising out of or relating to
Environmental Laws to which any
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Loan Party or any of its Subsidiaries has agreed, assumed or retained, or by
which any Loan Party or any of its Subsidiaries is adversely affected, by
contract or otherwise, which would have a Material Adverse Effect. Except as
disclosed on Schedule 6.13, no Loan Party or any of its Subsidiaries has
received a written notice or claim to the effect that such Person is or may be
liable to any other Person as the result of a Release or threatened Release of a
Hazardous Material, which liability would have a Material Adverse Effect.
SECTION 6.14. Purpose of Loans. The Loans shall be used for general
working capital and for expenses incurred in connection with two of the
Company's Subsidiaries, American Ecology Environmental Services Corporation and
American Ecology Recycle Center, Inc. None of the proceeds of the Loans will be
used directly or indirectly for the purpose of purchasing or carrying any
"margin stock" within the meaning of Regulation U (herein called "margin stock")
or for the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry a margin stock, or for any other purpose which
might constitute this transaction a "purpose" credit within the meaning of
Regulation U. Neither any Loan Party nor any agent acting on its behalf has
taken or will take any action which might cause this Agreement or any other Loan
Document to violate Regulation U, Regulation X, or any other regulation of the
Board or to violate the Securities Exchange Act of 1934.
SECTION 6.15. Franchises and Other Operating Rights. Each Loan Party
and each of its Subsidiaries have all franchises, permits, licenses and other
authority as are necessary to enable them to carry on their respective
businesses as now being conducted.
SECTION 6.16. Subsidiaries. The Subsidiaries executing this Agreement
are all the Subsidiaries owned by the Company as of the Effective Date, except
for: (i) American Liability and Excess Insurance Company and National Triple R,
Inc.. National Triple R, Inc. does not have total assets in excess of
$1,000.00.
ARTICLE VII
AFFIRMATIVE COVENANTS
Each Loan Party covenants and agrees for itself, that on and after the
date hereof and for so long as this Agreement is in effect and until all Loans
have been paid in full and each Letter of Credit shall have terminated:
SECTION 7.01. Information Covenants. The Company will furnish or cause
to be furnished to the Agent:
(a) As soon as available, and in any event within 45 days after the close
of each of the first three quarterly accounting periods in each fiscal year of
the Company, the consolidated balance sheet of the Company and its consolidated
Subsidiaries as of the end of such quarterly period and the related consolidated
statements of income, retained earnings and cash flows for such quarterly
period, setting forth, in each case, comparative consolidated figures for the
related periods in the prior fiscal year, together with all Form 10-Q filings
and any other reports filed with the Securities and Exchange Commission and all
proposed budgets for the next succeeding quarter or
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year, all of which shall be certified by the chief financial officer or chief
executive officer of the Company as fairly presenting in all material respects,
the financial position of the Company and its consolidated Subsidiaries as of
the end of such period and the results of their operation for the period then
ended in accordance with GAAP, subject to changes resulting from normal year end
audit adjustments and the inclusion of abbreviated footnotes.
(b) As soon as available, and in any event within 90 days after the close
of each fiscal year of the Company, the consolidated balance sheet of the
Company and its consolidated Subsidiaries as at the end of such fiscal year and
the related consolidated statements of income, retained earnings and cash flows
for such fiscal year, setting forth, in each case, comparative figures for the
preceding fiscal year and certified by Arthur Andersen & Co. or other
independent certified public accountants of recognized national standing
reasonably acceptable to the Agent, whose report shall be without limitation as
to the scope of the audit and reasonably satisfactory in substance to the Agent
along with the Annual Report on Form 10-K of the Company for such year filed
with the Securities and Exchange Commission.
(c) Simultaneously with the delivery of the financial statements described
in paragraph (a) above and in any event within 45 days after the end of each
month, a summary report of all Receivables of the Company and its Subsidiaries.
(d) Immediately after any Responsible Officer of any Loan Party obtains
knowledge thereof, notice of
(i) any material violation of, noncompliance with, or remedial obligations
under, Requirements of Environmental Laws,
(ii) any material Release or threatened material Release of Hazardous
Materials affecting any property owned, leased or operated by such Loan Party
or any of its Subsidiaries,
(iii) any event or condition which constitutes a Default or an Event of
Default,
(iv) any condition or event which, in the opinion of management of the
Company, would be expected to have a Material Adverse Effect,
(v) any Person having given any written notice to any Loan Party or taken
any other action with respect to a claimed material default or event under
any material instrument or material agreement, or
(vi) the institution of any litigation which might reasonably be expected
either to have a Material Adverse Effect or result in a final, non-appealable
judgment or award in excess of $1,000,000 with respect to any single cause of
action.
A notice of such event or condition will be delivered to the Agent specifying
the nature and period of existence thereof and specifying the notice given or
action taken by such Person and the nature of any such claimed default, event or
condition and, in the case of an Event of Default or Default, what action has
been taken, is being taken or is proposed to be taken with respect thereto.
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(e) At the time of the delivery of the financial statements provided for
in paragraphs (a) and (b), a certificate of the chief financial officer,
treasurer or the controller of the Company, substantially in the form of Exhibit
7.01(e) hereto, to the effect that no Default or Event of Default exists or, if
any Default or Event of Default does exist, specifying the nature and extent
thereof and the action that is being taken or that is proposed to be taken with
respect thereto, which certificate shall set forth among other matters, the
calculations required to establish whether the Company was in compliance with
the provisions of Section 8.08 through Section 8.12 as at the end of such fiscal
period or year, as the case may be.
(f) Upon request by the Agent, but not more often than semi-annually, such
environmental reports, studies and audits (all of which shall be reasonable in
scope) of any Loan Party's procedures and policies, assets and operations in
respect of Environmental Laws as the Agent may request.
(g) Promptly upon transmission thereof, copies of any filings and
registrations with, and reports to, the SEC, and copies of all financial
statements, proxy statements, notices and reports as the Company shall send to
its public shareholder.
(h) From time to time and with reasonable promptness, such other
information or documents as the Agent may reasonably request.
SECTION 7.02. Books, Records and Inspections. The Company will
maintain, and will permit, or cause to be permitted, any Person designated by
the Agent in writing upon one Business Day's notice and without materially
disrupting the operations of any Loan Party to visit and inspect any of the
properties of such Loan Party, to examine the corporate books and financial
records of such Loan Party and make copies thereof or extracts therefrom and to
discuss the affairs, finances and accounts of any such corporations with the
officers, employees and agents of such Loan Parties and with their independent
public accountants, all at such reasonable times and as often as the Agent may
reasonably request.
SECTION 7.03. Insurance and Maintenance of Properties. (a) Each Loan
Party will keep adequately insured by financially sound and reputable insurers
all of its property of a character, and in amounts and against such risks,
usually insured by similar Persons engaged in the same or similar businesses,
including insurance against fire, casualty and any other hazards normally
insured against. Each Loan Party will at all times maintain insurance against
its liability for injury to Persons or property, which insurance shall be by
financially sound and reputable insurers (which shall, for purposes of this
Agreement, include American Liability and Excess Insurance Company) and in such
amounts and form as are customary for corporations of established reputation
engaged in the same or similar businesses and owning and operating similar
properties.
(b) Each Loan Party will cause all of its material properties used or
useful in the conduct of its business to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals and replacements
thereof, all as in the judgment of such Person may be reasonably necessary so
that the business carried on in connection therewith may be properly conducted
at all times.
SECTION 7.04. Payment of Taxes. Each Loan Party will pay and discharge
all taxes,
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assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which penalties attach thereto, except for such amounts that are being contested
in good faith and by appropriate proceedings.
SECTION 7.05. Corporate Existence. Each Loan Party will do all things
necessary to preserve and keep in full force and effect the corporate or
partnership existence of such Person, and the rights and franchises of such Loan
Party.
SECTION 7.06. Compliance with Statutes. Each Loan Party will comply
with all material applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property.
SECTION 7.07. ERISA. As soon as possible and, in any event, within ten
days after any Responsible Officer of any Loan Party knows or has reason to know
any of the following items are true, such Loan Party will deliver or cause to be
delivered to the Agent a certificate of the chief financial officer of the
Company setting forth details as to such occurrence and such action, if any,
which the Loan Party or its ERISA Affiliate is required or proposes to take,
together with any notices required or proposed to be given to or filed with or
by such Loan Party or ERISA Affiliate with respect thereto: that a Reportable
Event has occurred or that an application may be or has been made to the
Secretary of the Treasury for a waiver or modification of the minimum funding
standard; that a Multiemployer Plan has been or may be terminated, reorganized,
partitioned or declared insolvent under Title IV of ERISA; that any required
contribution to a Plan or Multiemployer Plan has not been or may not be timely
made; that proceedings may be or have been instituted under Section 4069(a) of
ERISA to impose liability on a Loan Party or an ERISA Affiliate or under Section
4042 of ERISA to terminate a Plan or appoint a trustee to administer a Plan;
that a Loan Party or any ERISA Affiliate has incurred or may incur any liability
(including any contingent or secondary liability) on account of the termination
of or withdrawal from a Plan or a Multiemployer Plan; and that a Loan Party or
an ERISA Affiliate may be required to provide security to a Plan under Section
401(a)(29) of the Code; or any other condition(s) exist(s) or may occur with
respect to one or more Plans and/or Multiemployer Plans.
SECTION 7.08, Additional Guaranties. Whenever the Company acquires
any new Subsidiary, the Company shall, within ten (10) working days, cause such
Subsidiary to deliver to the Agent (A) a guaranty agreement in form and
substance reasonably satisfactory to the Agent (an "Additional Guaranty") and
(B) a certificate of an officer and of the secretary or an assistant secretary
of such Subsidiary certifying a true and correct copy of the resolutions adopted
by the Board of Directors of such Subsidiary authorizing the execution, delivery
and performance of the Additional Guaranty.
SECTION 7.09. Proceeds of Private Placement. The Company shall use
its best good faith efforts to finalize the Private Placement by May 1, 1995 and
will use one hundred percent (100%), or such lesser amount as is required, of
the net proceeds thereof, and the proceeds of any sale of any Loan Parties'
assets in excess of $100,000.00 per each sale, to repay the total outstanding
balance owing on the Notes. If the proceeds of the Private Placement are
sufficient to reduce the balance outstanding on the Notes to zero, the Revolving
Credit Loan and Term Loan shall terminate. In the event the Private Placement is
not consummated by May 1, 1995, the provisions of Section
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2.08(c) shall apply immediately.
ARTICLE VIII
NEGATIVE COVENANTS
Each Loan Party covenants and agrees for itself, that on and after the
date hereof and for so long as this Agreement is in effect and until the Notes
and each Letter of Credit shall have terminated, and the Obligations are paid in
full:
SECTION 8.01. Change in Business. No Loan Party will engage in any
business not of the same general type as that conducted by it on the date of
this Agreement.
SECTION 8.02. Consolidation, Merger or Sale Assets. No Loan Party
will wind up, liquidate or dissolve its affairs, or enter into any transaction
of merger or consolidation, unless a Loan Party is the surviving entity, or sell
or otherwise dispose of all or any part of its property or assets (other than
sales of inventory or surplus or obsolete assets in the ordinary course of
business).
SECTION 8.03. Liens. No Loan Party, except for American Liability and
Excess Insurance Company, will create, incur, assume or suffer to exist any Lien
upon or with respect to any of its property or assets of any kind whether now
owned or hereafter acquired, except:
(a) Liens for taxes or assessments or other governmental charges or
levies, either not yet due and payable or being contested in good faith and by
appropriate proceedings for which adequate reserves have been established;
(b) minor defects, irregularities and deficiencies in title to, and
easements, rights of way, zoning restrictions and other similar restrictions,
charges or encumbrances on, real property of such Person which do not interfere
with the ordinary conduct of the business of such Person and which do not
materially detract from the value of the real property which they affect;
(c) Liens existing on the Effective Date, which are described in the
Financials or listed on Schedule 8.03 and approved by the Agent; and
(d) any renewal, extension or replacement of any Lien referred to in the
foregoing clauses; provided that no Lien arising as a result of such extension
or renewal shall cover any property not theretofore subject to the Lien being
extended or secure any increased Indebtedness.
SECTION 8.04. Indebtedness. No Loan Party will create, incur, assume
or permit to exist any Indebtedness other than Indebtedness created hereby,
including renewals and extensions thereof (in the same amounts or less), except:
(a) Indebtedness existing on the Effective Date and described in the
Financials or, if not so shown, listed on Schedule 8.04;
(b) current accounts payable incurred in the ordinary course of business,
which
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accounts payable are not outstanding for a period of ninety (90) days after the
same became due;
(c) Indebtedness arising as a result of the endorsement in the ordinary
course of business of negotiable instruments in the course of collection;
(d) liabilities for taxes, assessments, governmental charges or liens; and
(e) renewals and extensions (in the same or lesser principal amount on similar
terms and conditions) of any Indebtedness listed in the foregoing clauses.
SECTION 8.05. Investments. No Loan Party will, directly or
indirectly, make or own any Investment in any Person, except:
(a) Permitted Investments owned on the date hereof as set forth on
Schedule 8.05; and
(b) Endorsements of negotiable instruments for collection in the ordinary
course of business.
SECTION 8.06. Restricted Payments. The Company will not make or
declare any Restricted Payment; provided that prior to any Default hereunder,
the Company may pay dividends on its common stock up to a maximum of $200,000.00
per fiscal quarter; provided further, if the Private Placement is not
consummated prior to May 1, 1995, said maximum amount shall decrease to zero.
SECTION 8.07. Change in Accounting; Fiscal Year. No Loan Party will
change its method of accounting except for immaterial changes in methods,
changes permitted by GAAP in which such Loan Party's auditors concur and changes
required by GAAP. The Company shall advise the Agent in writing promptly upon
making any such change to the extent same is not disclosed in the financial
statements required hereunder.
SECTION 8.08. Debt to Capitalization Ratio. The Company will not
permit the ratio of (a) Consolidated Funded Indebtedness to (b) the sum of (i)
Consolidated Funded Indebtedness plus (ii) Consolidated Net Worth to be greater
than 0.40 to 1.00, at any time computed on a rolling four quarters basis.
SECTION 8.09. Interest Coverage Ratio. The Company will not permit
the ratio of (a) (i) Consolidated EBITDA minus (ii) Deferred Site Development
Expenditures to (b) actual cash payments of interest to be less than 3.5 to 1.0,
at any time computed on a rolling four quarter basis; provided, such ratio may
decrease to 3.0 to 1.0 for any one (1) quarter only during the term hereof, but
such increase cannot be maintained beyond said one (1) quarter period.
SECTION 8.10. Fixed Charge Coverage Ratio. The Company will not permit
the ratio of (a) Consolidated EBITDA to (b) Consolidated Fixed Charges, computed
quarterly on a rolling four quarter basis, to be less than (i) 0.8 to 1.0 until
June 30, 1995 or less than (ii) 1.0 to 1.0 at any time thereafter.
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SECTION 8.11. Coverage Ratio. The Company will not permit the ratio of
(a) Consolidated Funded Indebtedness to (b) Consolidated EBITDA for the previous
four quarters, to be greater than (i) 3.5 to 1.0 at any time during the term
hereof, provided such ratio may increase to a maximum of 4.0 to 1.0 for any one
(1) quarter only during the term hereof, but such increase cannot be maintained
beyond said one (1) quarter period.
SECTION 8.12. Capital Expenditures. The Company will not permit total
Consolidated Capital Expenditures (excluding Deferred Site Development
Expenditures) to be greater than $5,000,000.00 per year, commencing January 1,
1995, provided if the Private Placement is not consummated prior to May 1, 1995,
said maximum amount may, in the sole and absolute discretion of the Required
Banks, be decreased by up to 100%.
SECTION 8.13. Deferred Site Development Expenditures. The Company will
not permit Deferred Site Development Expenditures to be greater than the total
of $3,000,000.00 during the term hereof; provided if the Private Placement is
not consummated prior to May 1, 1995, said maximum amount may, in the sole and
absolute discretion of the Required Banks, be decreased by up to 100%.
SECTION 8.14. Minimum Eligible Receivables. The Company will not
permit minimum Eligible Receivables to be less than (i) $19,000,000.00 prior to
March 1, 1995 and (ii) $20,000,000.00 on or after March 1, 1995 and during the
term hereof, provided if the Private Placement is not consummated prior to May
1, 1995, such minimum level may, in the sole and absolute discretion of the
Required Banks, be increased each month during the remainder of the term hereof
by an amount determined by the Required Banks in their sole and absolute
discretion but not to exceed an increase of ten percent (10%) per month of the
previous month,s total of minimum required Eligible Receivables.
SECTION 8.15. Transactions with Affiliates. No Loan Party will,
directly or indirectly, engage in any transaction with any Affiliate of such
Loan Party, including the purchase, sale or exchange of assets or the rendering
of any service, except in the ordinary course of business or pursuant to the
reasonable requirements of such Loan Party's business and, in each case, upon
terms that are no less favorable to such Loan Party than those which might be
obtained in an arm's length transaction at the time from non-Affiliates.
Specifically, no Loan Party will transfer any of its assets to any Subsidiary of
the Company that is not a Guarantor, provided that Loan Parties may pay to
American Liability and Excess Insurance Company annual premiums for closing
and/or post closure obligations and for performance bonds (including, without
limitation, payments of premiums to Steadfast Insurance Company which are
thereafter delivered to American Liability and Excess Insurance Company for
reinsurance) up to a maximum of $500,000.00, per year.
SECTION 8.16. Change of Certain Indebtedness. No Loan Party will,
after the occurrence and during the continuance of any Event of Default, (i)
make any voluntary prepayments of principal of or interest on any Consolidated
Funded Indebtedness (whether or not subordinated) or (ii) alter, amend, modify
or otherwise change the terms, conditions and provisions of any Consolidated
Funded Indebtedness to accelerate the scheduled payments of principal of such
Indebtedness.
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ARTICLE IX
GUARANTY
SECTION 9.01. Guaranty. In consideration of, and in order to induce
the Banks to make the Loans and to issue Letters of Credit hereunder, each
Guarantor hereby absolutely, unconditionally and irrevocably, jointly and
severally guarantees the punctual payment and performance when due, whether at
stated maturity, by acceleration or otherwise, of the Obligations, and all other
obligations and covenants of the Company now or hereafter existing under this
Agreement, the Notes and the other Loan Documents whether for principal,
interest (including interest accruing or becoming owing both prior to and
subsequent to the commencement of any proceeding against or with respect to the
Company under any chapter of the Bankruptcy Code), fees, commissions, expenses
(including reasonable attorneys' fees and expenses) or otherwise, and all
reasonable costs and expenses, if any, incurred by the Agent in connection with
enforcing any rights under this Guaranty (all such obligations being the
"Guaranteed Obligations"), and agrees to pay any and all reasonable expenses
incurred by the Agent in enforcing this Guaranty; provided that anything herein
or in any other Loan Document to the contrary notwithstanding, the maximum
liability of each Guarantor hereunder and under the other Loan Documents shall
in no event exceed such Guarantor's Maximum Guaranteed Amount as determined at
the earlier of the date of the commencement of a case under Title 11 of the
United States Code in which the said Guarantor is a debtor and the date
enforcement hereunder is sought. This Guaranty is an absolute, unconditional,
present and continuing guaranty of payment and not of collectibility and is in
no way conditioned upon any attempt to collect from the Company or any other
action, occurrence or circumstance whatsoever. Each Guarantor agrees that the
Guaranteed Obligations may at any time and from time to time exceed the Maximum
Guaranteed Amount of such Guarantor without impairing this Guaranty or affecting
the rights and remedies of any Bank hereunder.
SECTION 9.02. Continuing Guaranty. Each Guarantor guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms of
this Agreement, the Notes and the other Loan Documents. Each Guarantor agrees
that the Guaranteed Obligations and Loan Documents may be extended or renewed,
and Loans repaid and reborrowed in whole or in part, without notice to or assent
by such Guarantor, and that it will remain bound upon this Guaranty
notwithstanding any extension, renewal or other alteration of any Guaranteed
Obligations or Loan Documents, or any repayment and reborrowing of Loans. To
the maximum extent permitted by applicable law, the obligations of each
Guarantor under this Guaranty shall be absolute, unconditional and irrevocable,
and shall be performed strictly in accordance with the terms hereof under any
circumstances whatsoever, including:
(a) any extension, renewal, modification, settlement, compromise, waiver or
release in respect of any Guaranteed Obligations;
(b) any extension, renewal, amendment, modification, rescission, waiver or
release in respect of any Loan Documents;
(c) any release, exchange, substitution, non-perfection or invalidity of, or
failure to exercise rights or remedies with respect to, any direct or indirect
security for any Guaranteed Obligations, including the release of any Guarantor
or other Person liable on any Guaranteed
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Obligations;
(d) any change in the corporate existence, structure or ownership of the
Company, any Guarantor, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting the Company, such Guarantor, any other Guarantor or
any of their respective assets;
(e) the existence of any claim, defense, set off or other rights or remedies
which such Guarantor at any time may have against the Company, or the Company or
such Guarantor may have at any time against any Bank, any other Guarantor or any
other Person, whether in connection with this Guaranty, the Loan Documents, the
transactions contemplated thereby or any other transaction other than by the
payment in full by the Company of the Guaranteed Obligations after the
termination of the commitments of the Banks and the expiration or termination of
all Letters of Credit;
(f) any invalidity or unenforceability for any reason of this Agreement or
other Loan Documents, or any provision of law purporting to prohibit the payment
or performance by the Company, such Guarantor or any other Guarantor of the
Guaranteed Obligations or Loan Documents, or of any other obligation to the
Banks; or
(g) any other circumstances or happening whatsoever, whether or not similar to
any of the foregoing.
SECTION 9.03. Effect of Debtor Relief Laws. If after receipt of
any payment of, or proceeds of any security applied (or intended to be applied)
to the payment of all or any part of the Guaranteed Obligations, any Bank is for
any reason compelled to surrender or voluntarily surrenders, such payment or
proceeds to any Person (a) because such payment or application of proceeds is or
may be avoided, invalidated, declared fraudulent, set aside, determined to be
void or voidable as a preference, fraudulent conveyance, fraudulent transfer,
impermissible set-off or a diversion of trust funds or (b) for any other reason,
including (i) any judgment, decree or order of any court or administrative body
having jurisdiction over any Bank, or any of its properties or (ii) any
settlement or compromise of any such claim effected by any Bank with any such
claimant (including the Company), then the Guaranteed Obligations or part
thereof intended to be satisfied shall be reinstated and continue, and this
Guaranty shall continue in full force as if such payment or proceeds have not
been received, notwithstanding any revocation thereof or the cancellation of any
Note or any other instrument evidencing any Guaranteed Obligations or otherwise;
and each Guarantor, jointly and severally, shall be liable to pay such Bank, and
hereby does indemnify such Bank and hold it harmless for the amount of such
payment or proceeds so surrendered and all expenses (including reasonable
attorneys' fees, court costs and expenses attributable thereto) incurred by it
in the defense of any claim made against it that any payment or proceeds
received by it in respect of all or part of the Guaranteed Obligations must be
surrendered. The provisions of this paragraph shall survive the termination of
this Guaranty, and any satisfaction and discharge of the Company by virtue of
any payment, court order or any federal or state law.
SECTION 9.04. Waiver of Subrogation. Notwithstanding any payment
or payments made by any Guarantor hereunder, or any set off or application by
any Bank of any security or of any credits or claims, no Guarantor will assert
or exercise any rights of such Bank or of such Guarantor against the Company to
recover the amount of any payment made by such Guarantor to
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such Bank hereunder by way of any claim, remedy or subrogation, reimbursement,
exoneration, contribution, indemnity, participation or otherwise arising by
contract, by statute, under common law or otherwise, and such Guarantor shall
not have any right of recourse to or any claim against assets or property of the
Company, until the obligations of the Company guaranteed hereby have been fully
and finally satisfied. Until such time, each Guarantor hereby expressly waives
any right to exercise any claim, right or remedy which such Guarantor may now
have or hereafter acquire against the Company or any other Guarantor that arises
under this Agreement or any other Loan Document or from the performance by any
Guarantor of the Guaranty hereunder including any claim, remedy or right of
subrogation, reimbursement, exoneration, contribution, indemnification or
participation in any claim, right or remedy of any Bank against the Company or
any Guarantor, or any security that any Bank now has or hereafter acquires,
whether or not such claim, right or remedy arises in equity, under contract, by
statute, under common law or otherwise, and each Guarantor agrees not to seek
contribution or indemnity or other recourse from any other Guarantor or other
Person until such time. If any amount shall nevertheless be paid to a Guarantor
by the Company or another Guarantor prior to payment in full of the Guaranteed
Obligations, such amount shall be held in trust for the benefit of such Bank and
shall forthwith be paid to such Bank to be credited and applied to the
Guaranteed Obligations, whether matured or unmatured.
SECTION 9.05. Subordination. If any Guarantor becomes the holder
of any indebtedness payable by the Company or another Guarantor, each Guarantor
hereby subordinates all indebtedness owing to it from the Company to all
indebtedness of the Company to any Bank, and agrees that during the continuance
of any Default or Event of Default it shall not accept any payment on the same
until payment in full of the Obligations of the Company under this Agreement and
the other Loan Documents after the termination of the commitments and the
termination or expiration of the Letters of Credit, the Notes and all other Loan
Documents, and shall in no circumstance whatsoever attempt to set off or reduce
any obligations hereunder because of such indebtedness. If any amount shall
nevertheless be paid to a Guarantor by the Company or another Guarantor prior to
payment in full of the Guaranteed Obligations, such amount shall be held in
trust and shall forthwith be paid to the Agent to be credited and applied to the
Guaranteed Obligations, whether matured or unmatured.
SECTION 9.06. Waiver. Each Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Guaranteed Obligations and this Guaranty and waives presentment, demand of
payment, notice of intent to accelerate or of acceleration, notice of dishonor
or nonpayment and any requirement that the Agent institute suit, collection
proceedings or take any other action to collect the Guaranteed Obligations,
including any requirement that the Agent protect, secure, perfect or insure any
Lien against any property subject thereto or exhaust any right or take any
action against the Company or any other Person or any collateral (it being the
intention of the Bank and each Guarantor that this Guaranty is to be a guaranty
of payment and not of collection). It shall not be necessary for the Agent, in
order to enforce any payment by any Guarantor hereunder, to institute suit or
exhaust its rights and remedies against the Company, any other Guarantor or any
other Person, including others liable to pay any Guaranteed Obligations, or to
enforce its rights against any security ever given to secure payment thereof.
Each Guarantor hereby expressly waives to the maximum extent permitted by
applicable law each and every right to which it may be entitled by virtue of the
suretyship laws of the State of Texas, including any and all rights it may have
pursuant to Rule 31, Texas Rules of Civil Procedure, Section 17.001 of the Texas
Civil Practice and Remedies Code and Chapter 34 of the Texas Business
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and Commerce Code. Each Guarantor hereby waives marshaling of assets and
liabilities, notice by the Agent of any indebtedness or liability to which the
Agent applies or may apply any amounts received, and of the creation,
advancement, increase, existence, extension, renewal, rearrangement or
modification of the Guaranteed Obligations. Each Guarantor expressly waives, to
the extent permitted by applicable law, the benefit of any and all laws
providing for exemption of property from execution or for valuation and
appraisal upon foreclosure.
SECTION 9.07. Full Force and Effect. This Guaranty is a
continuing guaranty and shall remain in full force and effect until all of the
Obligations of the Company under this Agreement and the other Loan Documents and
all other amounts payable under this Guaranty have been paid in full (after the
termination of the commitments of the Banks and the termination or expiration of
the Letters of Credit). All rights, remedies and powers provided in this
Guaranty may be exercised, and all waivers contained in this Guaranty may be
enforced, only to the extent that the exercise or enforcement thereof does not
violate any provisions of applicable law which may not be waived.
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
SECTION 10.01. Events of Default and Remedies. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) any installment of principal or payment of interest on any Note or any
Fee shall not be paid on the date on which such payment is due as required under
this Agreement; or
(b) any representation or warranty made or, for purposes of Article V,
deemed made by or on behalf of any Loan Party herein or in any of the Loan
Documents or other document, certificate or financial statement delivered in
connection with this Agreement or any other Loan Document shall prove to have
been incorrect in any material respect when made or deemed made or reaffirmed,
as the case may be; or
(c) the Company shall fail to perform or observe or cause any Subsidiary
to fail to perform or observe any duty or covenant contained in this Agreement
including the Exhibits and Schedules hereto; or
(d) any Loan Party fails to make (whether as primary obligor or as
guarantor or other surety) any principal payment of or interest or premium, if
any, on any Indebtedness (other than the Notes or the Guaranty) with an
aggregate principal amount in excess of $250,000.00 outstanding beyond any
period of grace provided with respect thereto or fails to duly observe, perform
or comply with any agreement with any Person or any term or condition of any
such instrument, if such failure is to cause, or to permit the holder or holders
to cause, such obligations to become due prior to any stated maturity; or
(e) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of any Loan Party, or of a substantial part of the property or assets
of such Loan Party, under Title 11 of the United States Code, as now or
hereafter in effect, or any successor thereto (the "Bankruptcy Code"), or any
other
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federal or state bankruptcy, insolvency, receivership or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for any Loan Party or for a substantial part of the property or
assets of such Loan Party or (iii) the winding-up or liquidation of any Loan
Party; and such proceeding or petition shall continue undismissed for 60 days or
an order or decree approving or ordering any of the foregoing shall be entered;
or
(f) any Loan Party shall (i) voluntarily commence any proceeding or file
any petition seeking relief under the Bankruptcy Code or any other federal or
state bankruptcy, insolvency, receivership or similar law, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or the filing of any petition described in clause (e) above, (iii)
apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for any Loan Party or for a
substantial part of the property or assets of such Loan Party, (iv) file an
answer admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of creditors,
(vi) become unable, admit in writing its inability or fail generally to pay its
debts as they become due or (vii) take any action for the purpose of effecting
any of the foregoing; or
(g) any Plan shall incur an "accumulated funding deficiency" (as defined
in Section 412 of the Code or Section 302 of ERISA), whether or not waived, or a
waiver of the minimum funding standard or extension of any amortization period
is sought or granted under Section 412 of the Code with respect to a Plan; any
proceeding shall have occurred or is reasonably likely to occur by the PBGC
under Section 4069(a) of ERISA to impose liability on the Company, any
Subsidiary or an ERISA Affiliate; any Plan shall have an Unfunded Current
Liability; any required contribution to a Plan or Multiemployer Plan shall not
have been timely made; or the Company, any Subsidiary or any ERISA Affiliate has
incurred or is reasonably likely to incur a liability to or on account of a Plan
or Multiemployer Plan under Section 515, 4062, 4063, 4064, 4201 or 4204 of
ERISA, and there shall result (individually or collectively) from any such event
or events a material risk of either (i) the imposition of a Lien(s) upon, or the
granting of a security interest(s) in, the assets of the Company, any Subsidiary
and/or an ERISA Affiliate in an amount(s) equal to or exceeding $1,000,000.00 or
(ii) the Company, any Subsidiary and/or an ERISA Affiliate incurring a
liability(ies) or obligation(s) with respect thereto equal to or exceeding $
1,000,000.00; or
(h) a judgment or order, which with other outstanding judgments and orders
against any Loan Party equals or exceeds $250,000.00 in the aggregate (to the
extent not covered by insurance as to which the respective insurer has
acknowledged coverage), shall be entered against any Loan Party and (i) within
30 days after entry thereof such judgment shall not have been discharged or
execution thereof stayed pending appeal or, within 30 days after the expiration
of any such stay, such judgment shall not have been discharged or (ii) any
enforcement proceeding shall have been commenced (and not stayed) by any
creditor or upon such judgment; or
(i) (i) the Private Placement shall not be consummated by May 1, 1995 and
(ii) the Company shall not have provided the Agent and the Banks, by June 1,
1995, with an alternative plan, satisfactory to and approved by the Required
Banks, to generate funds sufficient to repay the Notes in full.
SECTION 10.02. Primary Remedies. In such event, and at any time
thereafter, if any Event of Default shall then be continuing, the Agent may, by
written notice to the Company (a
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"Notice of Default") take any or all of the following actions, without prejudice
to the rights of the Agent or other holder of any of the Obligations to enforce
its claims against any Loan Party (provided that, if an Event of Default
specified in Section 10.01(e) or Section 10.01(f) shall occur with respect to
any Loan Party, the result of which would occur upon the giving of a Notice of
Default as specified in clauses (i), (ii) and (v) below and shall occur
automatically without the giving of any Notice of Default): (i) declare the
Agent's Revolving Credit Commitment and the Letter of Credit Commitment
terminated; (ii) declare the principal of and any accrued and unpaid interest in
respect of all Loans, and all obligations owing hereunder, to be, whereupon the
same shall become, forthwith due and payable without presentment, demand, notice
of demand or of dishonor and non-payment, protest, notice of protest, notice of
intent to accelerate, declaration or notice of acceleration or any other notice
of any kind, all of which are hereby waived by each Loan Party; (iii) exercise
any rights or remedies under any document securing or guaranteeing any of the
obligations; (iv) terminate any Letter of Credit which may be terminated in
accordance with its terms (whether by the giving of written notice to the
beneficiary or otherwise); and (v) direct the Company to pay, and the Company
agrees that upon receipt of such notice (or upon the occurrence of an Event of
Default specified in Section 10.01(e) or Section 10.01(f)), it will pay to the
Agent, to the extent permitted by law, such additional amount of cash as is
equal to the aggregate Stated Amount of all Letters of Credit then outstanding
to be held in an interest bearing account with the Agent as security for the
Obligations and the other obligations of the Loan Parties hereunder and under
the Notes and the other Loan Documents.
SECTION 10.03. Other Remedies. Upon the occurrence and during the
continuance of any Event of Default, the Agent, may proceed to protect and
enforce its rights, either by suit in equity or by action at law or both,
whether for the specific performance of any covenant or agreement contained in
this Agreement or in any other Loan Document or in aid of the exercise of any
power granted in this Agreement or in any other Loan Document; or may proceed to
realize on any collateral securing the Loans or to enforce the payment of all
amounts owing to the Agent under the Loan Documents and any accrued and unpaid
interest thereon in the manner set forth herein or therein; it being intended
that no remedy conferred herein or in any of the other Loan Documents is to be
exclusive of any other remedy, and each and every remedy contained herein or in
any other Loan Document shall be cumulative and shall be in addition to every
other remedy given hereunder and under the other Loan Documents now or hereafter
existing or provided it at law or in equity or by statute or otherwise.
ARTICLE XI
THE AGENT
SECTION 11.01. Authorization and Action. Each Bank hereby irrevocably
appoints and authorizes the Agent to act on its behalf and to exercise such
powers under this Agreement and the other Loan Documents as are specifically
delegated to or required of the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. The Agent may perform any of its
duties hereunder by or through its agents and employees. The duties of the
Agent shall be mechanical and administrative in nature; the Agent shall not have
by reason of this Agreement or any other Loan Documents a fiduciary relationship
in respect of any Bank; and nothing in this Agreement or any other Loan
Document, expressed or implied, is intended to, or shall be so
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construed as to, impose upon the Agent any obligations in respect of this
Agreement or any other Loan Document except as expressly set forth herein or
therein. As to any matters not expressly provided for by this Agreement, the
Notes or the other Loan Documents (including enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Banks, and such instructions shall be binding upon the Banks and
all holders of Notes and the Obligations; provided, however, that the Agent
shall not be required to take any action which exposes the Agent to personal
liability or which is contrary to this Agreement or applicable law.
SECTION 11.02. AGENT'S RELIANCE. (A) NEITHER THE AGENT NOR ANY OF ITS
DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES SHALL BE LIABLE FOR ANY ACTION TAKEN OR
OMITTED TO BE TAKEN BY IT OR THEM UNDER OR IN CONNECTION WITH THIS AGREEMENT,
THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS (I) WITH THE CONSENT OR AT THE
REQUEST OF THE REQUIRED BANKS OR (II) IN THE ABSENCE OF ITS OR THEIR OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT (IT BEING THE EXPRESS INTENTION OF THE PARTIES
HERETO THAT THE AGENT AND ITS DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES SHALL
HAVE NO LIABILITY FOR ACTIONS AND OMISSIONS UNDER THIS SECTION RESULTING FROM
THEIR SOLE ORDINARY OR CONTRIBUTORY NEGLIGENCE).
(b) Without limitation of the generality of the foregoing, the Agent: (i)
may treat the payee of each Note and the Obligations as the holder thereof until
the Agent receives written notice of the assignment or transfer thereof signed
by such payee and in form satisfactory to the Agent; (ii) may consult with legal
counsel (including counsel for the Company), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (iii) makes no warranty or representation to
any Bank and shall not be responsible to any Bank for any statements, warranties
or representations made in or in connection with this Agreement, any Note or any
other Loan Document; (iv) except as otherwise expressly provided herein, shall
not have any duty to ascertain or to inquire as to the performance or observance
of any of the terms, covenants or conditions of this Agreement, any Note or any
other Loan Document or to inspect the property (including the books and records)
of the Company; (v) shall not be responsible to any Bank for the due execution,
legality, validity, enforceability, collectibility, genuineness, sufficiency or
value of this Agreement, any Note, any other Loan Document or any other
instrument or document furnished pursuant hereto or thereto; (vi) shall not be
responsible to any Bank for the perfection or priority of any Lien securing the
Obligations; and (vii) shall incur no liability under or in respect of this
Agreement, any Note or any other Loan Document by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telegram,
telecopier, cable or telex) reasonably believed by it to be genuine and signed
or sent by the proper party or parties.
SECTION 11.03. Agent and Affiliates; Texas Commerce Bank National
Association and Affiliates. Without limiting the right of any other Bank to
engage in any business transactions with the Company or any of its Affiliates,
with respect to their commitments, the Loans made by them and the Notes issued
to them, Texas Commerce Bank National Association and each other Bank who may
become the Agent shall have the same rights and powers under this Agreement and
its Notes as any other Bank and may exercise the same as though it was not the
Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly
indicated, include Texas Commerce Bank National Association and any such other
Bank, in their individual capacities. Texas Commerce Bank
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National Association, each other Person who becomes the Agent and their
respective Affiliates may be engaged in, or may hereafter engage in, one or more
loan, letter of credit, leasing or other financing activities not the subject of
this Agreement (collectively, the "Other Financings") with the Company, any
Subsidiary or any of its Affiliates, or may act as trustee on behalf of, or
depositary for, or otherwise engage in other business transactions with the
Company, any Subsidiary or any of its Affiliates (all Other Financings and
other such business transactions being collectively, the "Other Activities")
with no responsibility to account therefor to the Banks. Without limiting the
rights and remedies of the Banks specifically set forth herein, no other Bank by
virtue of being a Bank hereunder shall have any interest in (a) any Other
Activities, (b) any present or future guaranty by or for the account of the
Company not contemplated or included herein, (c) any present or future offset
exercised by the Agent in respect of any such Other Activities, (d) any present
or future property taken as security for any such Other Activities or (e) any
property now or hereafter in the possession or control of the Agent which may be
or become security for the obligations of the Company, any Subsidiary or any of
its Affiliates hereunder and under the Notes by reason of the general
description of indebtedness secured, or of property contained in any other
agreements, documents or instruments related to such Other Activities; provided,
however, that if any payment in respect of such guaranties or such property or
the proceeds thereof shall be applied to reduction of the obligations evidenced
hereunder and by the Notes, then each Bank shall be entitled to share in such
application according to its pro rata portion of such obligations.
SECTION 11.04. Bank Credit Decision. Each Bank acknowledges and
agrees that it has, independently and without reliance upon the Agent or any
other Bank and based on the financial statements referred to in Section 7.01 and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges and agrees that it will, independently and without reliance upon
the Agent or any other Bank and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents.
SECTION 11.05. Agent's Indemnity. (a) The Agent shall not be required
to take any action hereunder or to prosecute or defend any suit in respect of
this Agreement, the Notes or any other Loan Document unless indemnified to the
Agent's satisfaction by the Banks against loss, cost, liability and expense. If
any indemnity furnished to the Agent shall become impaired, it may call for
additional indemnity and cease to do the acts indemnified against until such
additional indemnity is given. In addition, the Banks agree to indemnify the
Agent (to the extent not reimbursed by the Company), ratably according to the
respective aggregate principal amounts of the Notes then held by each of them
(or if no Notes are at the time outstanding, ratably according to the respective
amounts of their Revolving Credit Commitments, or if no Revolving Credit
Commitments are outstanding, the respective amounts of the Revolving Credit
Commitments immediately prior to the time the Revolving Credit Commitments
ceased to be outstanding), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Agent in any way relating to or arising
out of this Agreement or any action taken or omitted by the Agent under this
Agreement, the Notes and the other Loan Documents (including any action taken or
omitted under Article II of this Agreement). Without limitation of the
foregoing, each Bank agrees to reimburse the Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including reasonable counsel fees)
incurred by the Agent in connection with
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the preparation, execution, administration, or enforcement of, or legal advice
in respect of rights or responsibilities under, this Agreement, the Notes and
the other Loan Documents to the extent that the Agent is not reimbursed for such
expenses by the Company. The provisions of this Section shall survive the
termination of this Agreement, the payment of the Obligations and/or the
assignment of any of the Notes.
(b) Notwithstanding the foregoing, no Bank shall be liable under this
Section to the Agent for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
due to the Agent resulting from the Agent's gross negligence or willful
misconduct. Each Bank agrees, however, that it expressly intends, under this
Section, to indemnify the Agent ratably as aforesaid for all such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements arising out of or resulting from the Agent,s sole
ordinary or contributory negligence.
SECTION 11.06. Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Banks and the Company and may be removed as
Agent under this Agreement, the Notes and the other Loan Documents at any time
with or without cause by the Required Banks. Upon any such resignation or
removal, the Required Banks shall have the right to appoint a successor Agent.
If no successor Agent shall have been so appointed by the Required Banks, and
shall have accepted such appointment, within 30 calendar days after the retiring
Agent,s giving of notice of resignation or the Required Banks' removal of the
retiring Agent, then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent, which shall be a commercial bank organized under the laws of
the United States of America or of any state thereof and having a combined
capital and surplus of at least $50,000,000. Upon the acceptance of any
appointment as Agent hereunder and under the Notes and the other Loan Documents
by a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement, the Notes and the other Loan Documents. After any retiring
Agent,s resignation or removal as Agent hereunder and under the Notes and the
other Loan Documents, the provisions of this Article XI shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement, the Notes and the other Loan Documents.
SECTION 11.07. Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent shall have received notice from a Bank or the Company
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default." If the Agent receives such
notice, the Agent shall give notice thereof to the Banks; provided, however, if
such notice is received from a Bank, the Agent also shall give notice thereof to
the Company. The Agent shall be entitled to take action or refrain from taking
action with respect to such Default or Event of Default as provided in Article
X.
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ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Amendments. No amendment or waiver of any provision of
this Agreement, any Note or any other Loan Document, nor consent to any
departure by any Loan Party herefrom or therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Company, as to
amendments, and by the Agent in all cases, and then, in any case, such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given, provided, no such amendment shall be effective unless
signed by all of the Banks if it attempts to: (a) change the definition of
"Designated Payment Date", "Required Banks", "Margin", "Revolving Credit
Commitment", "Revolving Credit Note Maturity Date" or "Term Note Maturity Date",
(b) modify Sections 2.01, 2.02 and 2.08 or this Section, or (c) in any other
manner change the Notes or the repayment terms of the Loans, including required
principal payments or amount or time of interest payments.
SECTION 12.02. Notices. All notices, consents, requests, approvals,
demands and other communications provided for herein shall be in writing
(including telecopy communications) and mailed, telecopied, sent by overnight
courier or delivered:
(a) If to the Loan Parties, to them at:
5333 Westheimer, Suite 1000
Houston, Texas 77056-5407
Telecopy No: (713) 624-1999
Attention: Mr. William P. McCaughey
(b) If to the Agent, to it at:
712 Main Street, 5 TCB-E 78
Houston, Texas 77002 Telecopy No.: (713) 216 6004
Attention: Mr. Michael D. Pickerd
Mr. Ernest L. Smith
With a copy to:
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Telecopy No.: (713) 220-4285
Attention: Mr. Thomas J. Perich
(c) If to any Bank, to the address specified by such Bank (or the Agent on
behalf of any Bank) to the Company.
All communications shall, when mailed, telecopied or delivered, be effective
when mailed by certified mail, return receipt requested to any party at its
address specified herein (or other address designated by such party in a
communication to the other parties hereto), or telecopied to any party
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to the telecopy number set forth herein, or delivered personally to any party at
its address herein specified; provided, that communications to the Agent
pursuant to Article II and Article III shall not be effective until received.
SECTION 12.03. No Waiver; Remedies. No failure on the part of the
Agent to exercise, and no delay in exercising, any right hereunder, under any
Note or under any other Loan Document shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, or any abandonment or
discontinuance of any steps to enforce such right, preclude any other or further
exercise thereof or the exercise of any other right. No notice to or demand on
the Company in any case shall entitle the Company to any other or further notice
or demand in similar or other circumstances. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 12.04. Costs, Expenses and Taxes. The Company agrees to pay
on demand: (a) all reasonable out of pocket costs and expenses of the Agent in
connection with the preparation, execution, delivery, interpretation or
enforcement of the Loan Documents and the other documents to be delivered
hereunder, including the reasonable fees and out of pocket expenses of counsel
for the Agent with respect thereto, (b) all reasonable out of pocket costs and
expenses of the Agent in connection with the syndication of the credit evidenced
by this Agreement and the other Loan Documents, and (c) reasonable costs and
expenses incurred in connection with other third party professional services
required by the Agent. In addition, the Company shall pay any and all stamp and
similar taxes payable or determined to be payable in connection with the
execution and delivery of the Loan Documents and the other documents to be
delivered hereunder, and agrees to save the Banks harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of this Agreement, any
Note or any other Loan Document. Without prejudice to the survival of any other
obligations of the Company hereunder and under the Notes, the obligations of the
Company under this Section shall survive the termination of this Agreement and
the payment of the Obligations or the assignment of the Notes.
SECTION 12.05. Indemnity. (a) The Loan Parties jointly and severally
shall indemnify the Banks and each Affiliate thereof and their respective
directors, officers, employees and agents from, and hold each of them harmless
against, any and all losses, liabilities, claims or damages (including
reasonable legal fees and expenses) to which any of them may become subject,
insofar as such losses, liabilities, claims or damages arise out of or result
from (i) any actual or proposed use by the Company of the proceeds of any
extension of credit by any Bank hereunder or (ii) any investigation, litigation
or other proceeding (including any threatened investigation or proceeding)
relating to the foregoing or any of the other Loan Documents, and the Loan
Parties jointly and severally shall reimburse any Bank and each Affiliate
thereof and their respective directors, officers, employees and agents, upon
demand for any expenses (including legal fees) reasonably incurred in connection
with any such investigation or proceeding; but excluding any such losses,
liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified.
(B) WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT, IT IS THE EXPRESS
INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED HEREUNDER OR
THEREUNDER SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND ALL LOSSES,
LIABILITIES, CLAIMS OR DAMAGES ARISING
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OUT OF OR RESULTING FROM THE ORDINARY SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH
PERSON. WITHOUT PREJUDICE TO THE SURVIVAL OF ANY OTHER OBLIGATIONS OF THE LOAN
PARTIES HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS, THE OBLIGATIONS OF THE
LOAN PARTIES UNDER THIS SECTION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS AND THE PAYMENT OF THE OBLIGATIONS OR THE
ASSIGNMENT OF THE NOTES.
SECTION 12.06. Right of Setoff. If any Event of Default shall have
occurred and be continuing, each Bank is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (time or demand, provisional or final) at any time held and
other indebtedness at any time owing by it, or any branch, subsidiary or
Affiliate, to or for the credit or the account of any Loan Party against any and
all the Obligations of the Loan Parties now or hereafter existing under this
Agreement and the other Loan Documents and other obligations of the Loan Parties
held by each Bank, irrespective of whether or not it shall have made any demand
under this Agreement, such Note, the Obligations or such other obligations and
although the Obligations or such other obligations may be unmatured. Each Bank
agrees promptly to notify the Company after any such setoff and application, but
the failure to give such notice shall not affect the validity of such setoff and
application. The rights of the Banks under this section are in addition to
other rights and remedies (including other rights of setoff) which such Bank may
have.
SECTION 12.07. Governing Law. This Agreement, all Notes, the other
Loan Documents and all other documents executed in connection herewith and
therewith, shall be deemed to be contracts and agreements executed under the
laws of the State of Texas and of the United States of America and for all
purposes shall be construed in accordance with, and governed by, the laws of
said state and of the United States of America. Without limitation of the
foregoing, nothing in this Agreement, or in the Notes or in any other Loan
Document shall be deemed to constitute a waiver of any rights which any Bank may
have under applicable federal legislation relating to the amount of interest
which such Bank may contract for, take, receive or charge in respect of any
Loans or other Obligations to such Bank hereunder and under the other Loan
Documents, including any right to take, receive, reserve and charge interest at
the rate allowed by the law of the state where such Bank is located. The Agent
and the Loan Parties further agree that insofar as the provisions of Article
1.04, Subtitle 1, Title 79, of the Revised Civil Statutes of Texas, 1925, as
amended, are applicable to the determination of the Highest Lawful Rate with
respect to the Notes and the Obligations hereunder and under the other Loan
Documents, the indicated rate ceiling computed from time to time pursuant to
Section (a)(1) and Section (b) of such Article shall be applicable; provided,
however, that to the extent permitted by such Article, the Agent may from time
to time by notice from the Agent to the Company revise the election of such
interest rate ceiling as such ceiling affects the then current or future
balances of the Loans outstanding under the Notes and the Obligations hereunder
and under the other Loan Documents. The provisions of Chapter 15 of Subtitle 3
of the said Title 79 do not apply to this Agreement, any Note issued hereunder
or the Obligations hereunder and under the other Loan Documents.
SECTION 12.08. Maximum Interest. Each provision in this Agreement and
each other Loan Document is expressly limited so that in no event whatsoever
shall the amount paid, or otherwise agreed to be paid, to any Bank, or charged,
contracted for, reserved, taken or received by any Bank, for the use,
forbearance or detention of the money to be loaned under this Agreement or any
Loan Document or otherwise (including any sums paid as required by any covenant
or obligation contained herein or in any other Loan Document which is for the
use, forbearance or detention of
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such money), exceed that amount of money which would cause the effective rate of
interest to exceed the Highest Lawful Rate, and all amounts owed under this
Agreement and each other Loan Document shall be held to be subject to reduction
to the effect that such amounts so paid or agreed to be paid, charged,
contracted for, reserved, taken or received which are for the use, forbearance
or detention of money under this Agreement or such Loan Document shall in no
event exceed that amount of money which would cause the effective rate of
interest to exceed the Highest Lawful Rate. Anything in any Note or any other
Loan Document to the contrary notwithstanding, the Company shall not be required
to pay unearned interest on any Note and no Loan Party shall be required to pay
interest on its Obligations hereunder and under the Loan Documents to which it
is a party at a rate in excess of the Highest Lawful Rate, and if the effective
rate of interest which would otherwise be payable under such Note, such
Obligations and such Loan Documents would exceed the Highest Lawful Rate, or if
the holder of such Note or such Obligations shall receive any unearned interest
or shall receive monies that are deemed to constitute interest which would
increase the effective rate of interest payable by the Company under such Note
and the Loan Parties under such Obligations and the Loan Documents to which it
is a party to a rate in excess of the Highest Lawful Rate, then (a) the amount
of interest which would otherwise be payable by such Loan Party under such
Obligations and such Loan Documents shall be reduced to the amount allowed under
applicable law and (b) any unearned interest paid by such Loan Party or any
interest paid by such Loan Party in excess of the Highest Lawful Rate shall in
the first instance be credited on the principal of the Obligations of such Loan
Party (or if all such Obligations shall have been paid in full, refunded to the
Loan Party paying such unearned interest). It is further agreed that, without
limitation of the foregoing, all calculations of the rate of interest contracted
for, reserved, taken, charged or received by any Bank under the Notes and the
Obligations of the Loan Parties hereunder and under this Agreement and the other
Loan Documents held by it are made for the purpose of determining whether such
rate exceeds the Highest Lawful Rate applicable to such Bank (such Highest
Lawful Rate being such Bank's "Maximum Permissible Rate"), and shall be made, to
the extent permitted by usury laws applicable to such Bank (now or hereafter
enacted), by amortizing, prorating and spreading in equal parts during the
period of the full stated term of the Loans evidenced by said Notes and the
other Obligations all interest at any time contracted for, charged or received
by such Bank in connection therewith. If at any time and from time to time (y)
the amount of interest payable to any Bank on any date shall be computed at such
Bank's Maximum Permissible Rate pursuant to this Section and (z) in respect of
any subsequent interest computation period the amount of interest otherwise
payable to such Bank would be less than the amount of interest payable to such
Bank computed at such Bank's Maximum Permissible Rate, then the amount of
interest payable to such Bank in respect of such subsequent interest computation
period shall continue to be computed at such Bank's Maximum Permissible Rate
until the total amount of interest payable to such Bank shall equal the total
amount of interest which would have been payable to such Bank if the total
amount of interest had been computed without giving effect to this Section.
SECTION 12.09. Survival of Representations and Warranties. All
representations, warranties and covenants contained herein or made in writing by
the Loan Parties in connection herewith and the other Loan Documents shall
survive the execution and delivery of this Agreement, the Notes and the other
Loan Documents until two years and one day after payment in full of the
Obligations, the termination of the commitments of the Banks, and will bind and
inure to the benefit of the respective successors and assigns of the parties
hereto, whether so expressed or not, provided, that the Revolving Credit
Commitment of the Banks shall not inure to the benefit of any successor or
assign of the Company.
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SECTION 12.10. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Loan Parties and the Banks and shall
inure to the benefit of the Loan Parties, Banks and their respective permitted
successors and assigns.
SECTION 12.11. Successors and Assigns; Participations. The Loan
Parties may not assign or transfer any of their rights or obligations hereunder
without the written consent of the Agent. The Banks may, without the consent of
any Loan Party, assign to or sell participations to one or more banks in all or
a portion of its rights and obligations under this Agreement and the other Loan
Documents.
SECTION 12.12. Accounting Terms. All accounting terms not otherwise
defined herein shall be construed in accordance with GAAP.
SECTION 12.13. Independence of Covenants. All covenants contained in
this Agreement and in the other Loan Documents shall be given independent effect
so that if a particular action or condition is not permitted by any of such
covenants, the fact that such action or condition would be permitted by an
exception to, or otherwise be within the limitations of, another covenant, shall
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.
SECTION 12.14. Separability. Should any clause, sentence, paragraph
or Section of this Agreement be judicially declared to be invalid, unenforceable
or void, such decision will not have the effect of invalidating or voiding the
remainder of this Agreement, and the parties hereto agree that the part or parts
of this Agreement so held to be invalid, unenforceable or void will be deemed to
have been stricken herefrom and the remainder will have the same force and
effectiveness as if such part or parts had never been included herein.
SECTION 12.15. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 12.16. Interpretation. (a) In this Agreement, unless a clear
contrary intention appears:
(i) the singular number includes the plural number and vice versa;
(ii) reference to any gender includes each other gender;
(iii) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision;
(iv) reference to any Person includes such Person's successors and assigns
but, if applicable, only if such successors and assigns are permitted by this
Agreement, and reference to a Person in a particular capacity excludes such
Person in any other capacity or individually, provided that nothing in this
clause is intended to authorize any assignment not otherwise permitted by this
Agreement;
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(v) except as expressly provided to the contrary herein, reference to any
agreement, document or instrument (including this Agreement) means such
agreement, document or instrument as amended, supplemented or modified and in
effect from time to time in accordance with the terms thereof and, if
applicable, the terms hereof, and reference to any Note or other note includes
any note issued pursuant hereto in extension or renewal thereof and in
substitution or replacement therefor;
(vi) unless the context indicates otherwise, reference to any Article,
Section, Schedule or Exhibit means such Article or Section hereof or such
Schedule or Exhibit hereto;
(vii) the words "including" (and with correlative meaning "include") means
including, without limiting the generality of any description preceding such
term;
(viii) with respect to the determination of any period of time, except as
expressly provided to the contrary, the word "from" means "from and including"
and the word "to" means "to but excluding"; and
(ix) reference to any law, rule or regulation means such as amended, modified,
codified or reenacted, in whole or in part, and in effect from time to time.
(b) The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
(c) No provision of this Agreement shall be interpreted or construed
against any Person solely because that Person or its legal representative
drafted such provision.
SECTION 12.17. SUBMISSION TO JURISDICTION. (A) ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE
BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF TEXAS AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH LOAN PARTY HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT
TO ANY SUCH ACTION OR PROCEEDING. EACH LOAN PARTY FURTHER IRREVOCABLY CONSENTS
TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN SECTION 11.02, SUCH
SERVICE TO BECOME EFFECTIVE THIRTY DAYS AFTER SUCH MAILING. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF THE AGENT OR ANY BANK TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST ANY LOAN PARTY IN ANY OTHER JURISDICTION.
(B) EACH OF THE LOAN PARTIES HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID
ACTIONS OR PROCEEDINGS ARISING OUT
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OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN
CLAUSE (A) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD
OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 12.18. Waiver of Jury Trial. THE COMPANY HEREBY WAIVES, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM OR RELATING TO ANY
BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 12.19. Final Agreement of the Parties. THIS AGREEMENT
(INCLUDING THE SCHEDULES AND EXHIBITS HERETO), THE NOTES AND THE OTHER LOAN
DOCUMENTS CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(A) OF THE
TEXAS BUSINESS AND COMMERCE CODE, AND REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
Borrower:
AMERICAN ECOLOGY CORPORATION
By: /s/ William P. McCaughey
----------------------------
William P. McCaughey
Treasurer
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Agent:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: /s/ Ernest L. Smith
---------------------------------
Ernest L. Smith
Vice President
Guarantors:
AMERICAN ECOLOGY RECYCLE CENTER, INC.
AMERICAN ECOLOGY SERVICES
CORPORATION
AMERICAN ECOLOGY ENVIRONMENTAL SERVICES
CORPORATION
AMERICAN ECOLOGY MANAGEMENT CORPORATION
AMERICAN ECOLOGY INTERNATIONAL, INC.
TEXAS ECOLOGISTS, INC.
TRANSTEC ENVIRONMENTAL, INC.
US ECOLOGY, INC.
WPI TRANSPORTATION, INC.
WPI WASTE CARRIERS, INC.
By: /s/ William P. McCaughey
------------------------------
William P. McCaughey
Treasurer
51
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Term Loan: $30,000,000.00 Banks:
Revolving Credit Loan: $5,000,000.00 TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
Letter of Credit Loan: $5,000,000.00
By: /s/ Ernest L. Smith
------------------------------
Ernest L. Smith
Vice President
52
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TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
April 12, 1995
Michael D. Pickerd P.O. Box 2558
Senior Vice President Houston, Texas 77252-8078
(713) 216-5799
Fax (713) 216-6004
Mr. Bill McCaughey
American Ecology
5333 Westheimer, Suite 1000
Houston, Texas 77056
Dear Bill:
Reference is made to the Amended and Restated Credit Agreement between Texas
Commerce Bank National Association and American Ecology Corporation ("AEC")
dated December 1, 1994 ("Credit Agreement"). Unless otherwise defined herein,
capitalized terms used herein shall have the meanings assigned to them in the
Agreement.
The Bank hereby waives non compliance and hereby amends the following Sections
of the Credit Agreement:
1. SECTION 7.01(b) This section is hereby amended to allow AEC to provide that
the audited consolidated financial statements be delivered
prior to April 17, 1995 and that the draft of AEC's
December 31, 1994 auditor's report, which contains an
"emphasis of a matter" paragraph related to AEC's maturity
of debt in January 1996, is considered "reasonably
satisfactory" to TCB.
2. SECTION 8.09 For the period ending June 30, 1995, AEC's interest
coverage ratio is hereby amended to 2.7 to 1.0 and the
interest coverage ratio will return to the requirement of a
3.5 to 1.0 ratio thereafter.
3. SECTION 8.10 For the period ending June 30, 1995, AEC's fixed charge
coverage ratio is hereby amended to 0.7 to 1.0 and the
fixed charge coverage ratio will return to the requirement
of 0.8 to 1.0 thereafter.
4. SECTION 8.14 The definition of Eligible Receivables is hereby deleted
and gross receivables will be reported instead. Section
8.14 is hereby amended to require AEC to maintain gross
receivables greater than $16,000,000 for the quarter ending
June 30, 1995; greater than $16,500,000 for the quarter
ending September 30, 1995; and $17,500,000 for the quarter
ending December 31, 1995.
<PAGE>
This waiver shall be effective solely with respect to the matters described
above and solely for the periods set forth above, and shall not be deemed to be
a waiver of any other covenant, term or condition of the Credit Agreement or any
covenant, term or condition of any of the instruments or agreements referred to
therein or to prejudice any other right or rights that the Bank may now have or
may have in the future under or in connection with the Credit Agreement or the
instruments or agreement referred to therein.
Except as expressly waived hereby, all of the covenants, terms and conditions of
the Credit Agreement are and shall continue to be in full force and effect. This
waiver will become effective upon execution by the Borrower and the Bank. After
giving effect to the items noted above, AEC represents that they are in
compliance with the Credit Agreement.
Sincerely,
[SIGNATURE OF MICHAEL D. PICKERD APPEARS HERE]
Michael D. Pickerd
American Ecology Corporation agrees to and acknowledges the above statements
with respect to the Credit Agreement.
By: [SIGNATURE OF C. CLIFFORD WRIGHT, JR. APPEARS HERE]
---------------------------------------------------
Printed Name: C. Clifford Wright, Jr.
-----------------------------------------
Title: Vice President
------------------------------------------------
Date: 4/12/95
-------------------------------------------------
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") dated as of December
1, 1994 is made by AMERICAN ECOLOGY CORPORATION, a Delaware corporation, having
its offices at 5333 Westheimer, Suite 1000, Houston, Texas 77056 (the
"Grantor"), in favor of TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national
banking association, in its capacity as Agent (in such capacity, the "Agent")
for the banks (the "Banks") party to the Credit Agreement (as defined below).
PRELIMINARY STATEMENT
The Banks and the Agent have entered into an Amended and Restated Credit
Agreement dated of even date herewith (the "Credit Agreement", the capitalized
terms used herein but not defined herein shall have the meanings set forth in
the Credit Agreement) with the Grantor and certain of its subsidiaries as
Guarantor (the "Guarantors") pursuant to which the Agent and the Banks,
collectively, have agreed to make various loans to the Grantor up to a total of
$43,000,000.00 (the "Loans"). It is a condition precedent to the obligation of
the Banks to make the Loans under the Credit Agreement that the Grantor shall
have granted the security interest contemplated by this Agreement. The Banks
presently include Texas Commerce Bank National Association, Houston, Texas and
may hereafter include other Persons as contemplated by the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Banks to make the Loans and issue the Letter of Credit, the Grantor hereby
agrees as follows:
SECTION 1. Defined Terms and Interpretations. (a) The term "UCC"
means the Uniform Commercial Code as in effect on the date hereof in the State
of Texas; provided that if by mandatory provisions of law, the perfection or the
effect of perfection or non-perfection of the security interests granted
pursuant to Section 2 hereof, as well as all other security interests created or
assigned as additional security for the Obligations pursuant to the provisions
of this Security Agreement, in any Collateral is governed by the UCC as in
effect in such other jurisdiction other than Texas, "UCC" means the UCC as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection.
(b) In this Security Agreement, unless a clear contrary intention appears:
(i) the singular number includes the plural number and vice versa;
(ii) reference to any gender includes each other gender;
(iii) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Security Agreement as a whole and not to any
particular Article, Section or other subdivision;
(iv) reference to any Person includes such Person's successors and assigns
but, if applicable, only if such successors and assigns are permitted by this
Security Agreement, and reference to a Person in a particular capacity excludes
such Person in any other capacity or
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<PAGE>
individually, provided that nothing in this clause (iv) is intended to
authorize any assignment not otherwise permitted by this Security Agreement;
(v) reference to any agreement, document or instrument means such agreement,
document or instrument as amended, supplemented or modified and in effect from
time to time in accordance with the terms thereof and, if applicable, the terms
hereof, and reference to any Note includes any Note issued pursuant hereto in
extension or renewal thereof and in substitution or replacement therefor;
(vi) unless the context indicates otherwise, reference to any Article,
Section, Schedule or Exhibit means such Article or Section hereof or such
Schedule or Exhibit hereto;
(vii) the words "including" (and with correlative meaning "include") means
including, without limiting the generality of any description preceding such
term;
(viii) with respect to the determination of any period of time, the word
"from" means "from and including" and the word "to" means "to but excluding;"
and
(ix) reference to any law means such as amended, modified, codified or
reenacted, in whole or in part, and in effect from time to time.
(c) The Article and Section headings herein are for convenience only and
shall not affect the construction hereof.
(d) No provision of this Security Agreement shall be interpreted or
construed against any Person solely because that Person or its legal
representative drafted such provision.
SECTION 2. Grant of Security. The Grantor hereby assigns and pledges
to the Agent for the benefit of the Banks, and hereby grants to the Agent for
the benefit of the Banks, a security interest in all of the Grantor's right,
title and interest in and to the following, whether presently held or hereafter
acquired (the "Collateral"):
(a) All accounts, receivables, accounts receivable, lease receivables,
contract rights, chattel paper, drafts, acceptances, instruments, writings
evidencing a monetary obligation or a security interest or a lease of goods,
general intangibles and other obligations of any kind, now or hereafter
existing, whether or not arising out of or in connection with the sale or lease
of goods or the rendering of services, and all rights now or hereafter existing
in and to all security agreements, leases, and other contracts securing or
otherwise relating to any such accounts, receivables, accounts receivable, lease
receivables, contract rights, chattel paper, drafts, acceptances, instruments,
writings evidencing a monetary obligation or a security interest or a lease of
goods, general intangibles or obligations (any and all such accounts,
receivables, accounts receivable, contract rights, chattel paper, drafts,
acceptances, instruments, general intangibles and obligations being the
"Receivables", and any and all such leases, security agreements and other
contracts being the "Related Contracts"); and
(b) All proceeds of any and all of the foregoing Collateral and, to the
extent not otherwise included, all payments under insurance or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or otherwise with
respect to any of the foregoing Collateral.
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<PAGE>
The inclusion of proceeds in this Agreement does not authorize the Grantor
to sell, dispose of or otherwise use the Collateral in any manner not
specifically authorized hereby.
SECTION 3. Security for Obligations. This Security Agreement secures
the prompt and complete (a) payment of all obligations of the Grantor to the
Banks now or hereafter existing under the Revolving Credit Note and the Term
Note and any duties or obligations of the Grantor under the Credit Agreement and
the other Loan Documents and (b) performance and observance by the Grantor and
the Guarantors of all covenants and conditions contained in the Loan Documents
to which such Person is a party (including, without limitation, the covenants
and conditions contained herein), and in any case whether for principal,
interest, fees, expenses or otherwise (all such obligations, covenants and
conditions described in the foregoing clauses (a) and (b) being hereinafter
collectively referred to as the "Secured Obligations"), provided, that the Agent
agrees that all the Collateral shall not secure any Indebtedness owing to it in
respect of Letters of Credit unless and until all of the obligations to the
Banks under the Advance Note and the Loan Agreement, other than Article III
thereof, have been fully and finally paid.
SECTION 4. Grantor Remains Liable. Anything herein to the contrary
notwithstanding, (a) the Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Security Agreement had not been executed, (b) the exercise by the Agent for the
benefit of the Banks of any of the rights hereunder shall not release the
Grantor from any of its duties or obligations under the contracts and agreements
included in the Collateral, and (c) neither the Agent nor any Bank shall have
any obligation or liability under the contracts and agreements included in the
Collateral by reason of this Security Agreement, nor shall the Agent or any Bank
be obligated to perform any of the obligations or duties of the Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
SECTION 5. Representations and Warranties. The Grantor represents and
warrants as follows:
(a) The chief place of business and chief executive office of the Grantor
and the office where the Grantor keeps its records concerning the Receivables,
and all originals of all chattel paper which evidence Receivables, is located at
the address first specified above for the Grantor. All originals of all chattel
paper which evidence Receivables have been delivered to the Agent. None of the
Receivables is evidenced by a promissory note or other instrument.
(b) The Grantor owns the Collateral free and clear of any lien, security
interest, charge or encumbrance, except security interests created in favor of
the Agent. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed in favor of the Agent. The Grantor
has no trade names.
(c) This Security Agreement creates a valid and perfected priority
security interest in the Collateral securing the payment of the Secured
Obligations, subject only to security interests created in favor of the Agent
and all filings and other actions necessary or desirable to perfect and protect
such security interest have been duly taken.
(d) No authorization, approval or other action by, and no notice to or
filing with, any
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governmental authority or regulatory body is required either (i) for the grant
by the Grantor of the security interest granted hereby or for the execution,
delivery or performance of this Security Agreement by the Grantor or (ii) for
the perfection of or the exercise by the Agent or any Bank of its rights and
remedies hereunder, other than the filing of financing statements with the
Secretary of State of the States of Texas and Delaware.
(e) The Grantor has full power and authority to pledge all of its right,
title and interest in and to the Collateral pursuant to this Security Agreement.
(f) This Security Agreement has been duly authorized, executed and
delivered by the Grantor and constitutes a legal, valid and binding obligation
of the Grantor enforceable in accordance with its terms.
SECTION 6. Further Assurances. (a) The Grantor agrees that from time
to time, at the expense of the Grantor, the Grantor will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Agent or any Bank may request, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Agent or any Bank to exercise and enforce its
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, the Grantor will: (i) mark conspicuously each
chattel paper included in the Receivables and, at the request of the Agent, each
of its records pertaining to the Collateral with a legend indicating that such
document or chattel paper is subject to the security interest granted hereby;
(ii) if any Receivable shall be evidenced by a promissory note or other
instrument or chattel paper, upon request of the Agent, the Grantor shall
deliver and pledge to the Agent such note, instrument or chattel paper, duly
endorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to the Agent; and (iii) execute and file
such financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as the Agent may
request, in order to perfect and preserve the security interests granted or
purported to be granted hereby.
(b) The Grantor hereby authorizes the Agent for the benefit of the Banks
to file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Collateral without the signature of
the Grantor where permitted by law. A carbon, photographic or other
reproduction of this Security Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
(c) The Grantor will furnish to the Agent from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Agent or any Bank may
reasonably request, all in reasonable detail.
(d) Grantor will promptly notify the Agent of any change of its name,
corporate structure, federal tax identification number or the address of its
principal place of business or chief executive office.
SECTION 7. Grantor's Rights and Duties. (a) The Grantor shall keep its
chief place of business and chief executive office and the office where it keeps
its records concerning the Receivables, and all originals of all chattel paper
which evidence Receivables, at the location therefor specified in Section 5(a)
or, upon 30 days, prior written notice to the Agent, at such other
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locations in a jurisdiction where all action required by Section 6 shall have
been taken with respect to the Receivables. The Grantor will hold and preserve
such records and chattel paper and will permit representatives of the Agent or
any Bank at any time during normal business hours to inspect and make abstracts
from such records and chattel paper.
(b) Except as otherwise provided in this subsection (b), the Grantor shall
continue to collect, at its own expense, all amounts due or to become due the
Grantor under the Receivables. In connection with such collections, the Grantor
may take (and, at the Agent,s direction, shall take) such action as the Grantor
or the Agent may deem necessary or advisable to enforce collection of the
Receivables; provided, however, that the Agent shall have the right upon the
occurrence and during the continuance of an Event of Default or an event which,
with the giving of notice or the lapse of time, or both, would become an Event
of Default and upon written notice to the Grantor of its intention to do so, to
notify the account debtors or obligors under any Receivables of the assignment
of such Receivables to the Agent for the benefit of the Banks and to direct such
account debtors or obligors to make payment of all amounts due or to become due
to the Grantor thereunder directly to the Agent and, upon such notification and
at the expense of the Grantor, to enforce collection of any such Receivables,
and to adjust, settle or compromise the amount or payment thereof, in the same
manner and to the same extent as the Grantor might have done. After receipt by
the Grantor of the notice from the Agent referred to in the proviso to the
preceding sentence, (i) all amounts and proceeds (including instruments)
received by the Grantor in respect of the Receivables shall be received in trust
for the benefit of the Banks hereunder, shall be segregated from other funds of
the Grantor and shall be forthwith paid over to the Agent for the benefit of the
Banks in the same form as so received (with any necessary endorsement) to be
held as cash collateral and either (A) released to the Grantor so long as no
Event of Default shall have occurred and be continuing or (B) if any Event of
Default shall have occurred and be continuing, applied as provided by Section
12(b), and (ii) the Grantor shall not adjust, settle or compromise the amount or
payment of any Receivable, or release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon, except with the prior
written consent of the Agent.
SECTION 8. Transfers and Other Liens. The Grantor shall not: (a)
sell, assign (by agreement, operation of law or otherwise) or otherwise dispose
of any of the Collateral, (other than in the ordinary course of business) or (b)
create or suffer to exist any lien or security interest upon or with respect to
any of the Collateral, except for the security interests created by this
Security Agreement.
SECTION 9. Agent Appointed Attorney-in-Fact. Effective upon the
occurrence of and continuance of an Event of Default, the Grantor hereby
irrevocably appoints the Agent the Grantor,s attorney-in-fact, with full
authority in the place and stead of the Grantor and in the name of the Grantor,
the Agent or any Bank or otherwise, from time to time in the Agent,s sole
discretion, to take any action and to execute any instrument which the Agent or
any Bank may deem necessary or advisable to accomplish the purposes of this
Security Agreement (subject to the rights of the Grantor under Section 7),
including:
(a) to obtain and adjust any insurance required to be paid to the Agent
pursuant hereto,
(b) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the
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Collateral,
(c) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) or (b) above,
(d) to file any claims or take any action or institute any proceedings
which the Agent may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of the Agent with respect to any
of the Collateral, and
(e) to sell, transfer, assign, or otherwise deal in or with the Collateral
or the proceeds or avails thereof, as provided herein and subject to applicable
law, as fully and effectually as if the Agent were the absolute owner thereof;
provided, that the Agent shall give the Grantor not less than ten (10) days'
prior written notice of the time and place of any sale or other intended
disposition of any of the Collateral, except any Collateral which is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market. The Grantor agrees that such notice constitutes "reasonable
notification" with the meaning of (S) 9.504(c) of the UCC.
SECTION 10. Agent May Perform. If the Grantor fails to perform any
agreement contained herein, the Agent may itself perform, or cause performance
of, such agreement, and the expenses of the Agent incurred in connection
therewith shall be payable by the Grantor under Section 13.
SECTION 11. The Agent's Duties. The powers conferred on the Agent
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for reasonable care
in the custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Agent shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral. The Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
any Collateral in it possession if such Collateral is accorded treatment
substantially equal to that which the Agent accords its own property, it being
understood that the Agent shall not have any responsibility for taking any
necessary steps to preserve rights against any parties with respect to any
Collateral.
SECTION 12. Remedies. If any Event of Default shall have occurred and
be continuing:
(a) The Agent for the benefit of the Bank may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral) and the Agent may also (i) require the Grantor to, and the Grantor
hereby agrees that it will at its expense and upon request of the Agent
forthwith, assemble all or part of the Collateral as directed by the Agent and
make it available to the Agent at a place to be designated by the Agent which is
reasonably convenient to both parties and (ii) without notice except as
specified below, sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any of the Agent's offices or elsewhere, for cash,
on credit or for future delivery, and upon such other terms as the Agent may
deem commercially reasonable. The Grantor agrees that, to the extent notice of
sale shall be required by law, at least ten (10) days' notice to the Grantor of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable
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notification thereof. The Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Agent may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
(b) Any cash held by the Agent as Collateral and all cash proceeds
received by the Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral may, in the sole discretion
of the Agent, be held by the Agent as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to the Agent pursuant
hereto) in whole or in part by the Agent against, all or any part of the
Obligations in such order as the Agent shall elect. Any surplus of such cash or
cash proceeds held by the Agent and remaining after payment in full of all the
Obligations shall be paid over to the Grantor or to whomsoever may be lawfully
entitled to receive such surplus.
SECTION 13. Indemnity and Expenses. (a) The Grantor shall indemnify
the Agent and each Bank, any Affiliate thereof and their respective directors,
officers, employees and agents from and hold each of them harmless against any
and all losses, liabilities, claims or damages (including reasonable legal fees
and expenses) to which any of them may become subject, insofar as such losses,
liabilities, claims or damages arise out of or result from (i) this Security
Agreement (including enforcement of this Security Agreement) or (ii) any
investigation, litigation or other proceeding (including any threatened
investigation or proceeding) relating to the foregoing, and the Grantor shall
reimburse the Agent and each Bank, each Affiliate thereof and their respective
directors, officers, employees and agents, upon demand for any expenses
(including legal fees) reasonably incurred in connection with any such
investigation or proceeding, but excluding any such losses, liabilities, claims,
damages or expenses incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified. IT IS THE EXPRESS INTENTION OF THE
GRANTOR THAT EACH PERSON TO BE INDEMNIFIED HEREUNDER SHALL BE INDEMNIFIED AND
HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS OR DAMAGES ARISING
OUT OF OR RESULTING FROM THE ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH
PERSON. Without prejudice to the survival of any other obligations of the
Grantor hereunder and under the other Loan Documents, the obligations of the
Grantor under this Section shall survive the termination of this Security
Agreement.
(b) The Grantor agrees to pay within 10 days after demand to the Bank the
amount of any and all reasonable expenses, including the fees and disbursements
of its counsel and of any experts and agents, that the Agent may incur in
connection with (i) the administration of this Security Agreement, (ii) the
evaluation, appraisal, custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of the Agent hereunder or (iv) the
failure by the Grantor to perform or observe any of the provisions hereof.
Grantor agrees to pay interest on any expenses or other sums payable to the
Agent hereunder that are not paid when due at a rate per annum equal to the
Highest Lawful Rate.
SECTION 14. Amendments. No amendment or waiver of any provision of
this Agreement, nor consent to any departure by the Grantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Agent, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
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SECTION 15. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and, if to the
Grantors, mailed or telecopied or delivered to them, addressed to them at the
addresses provided for the Grantors in the introductory paragraph to this
Security Agreement, Attention: Mr. William P. McCaughey, Telecopy No. (713)
624-1999, if to the Agent to it at 712 Main Street, Houston, Texas 77002,
Attention: Mr. Ernest L. Smith, Telecopy No. (713) 216-6004, or as to any party
at such other address as shall be designated by such party in a written notice
to each other party complying as to delivery with the terms of this Section.
All such notices and other communications shall, when mailed or telecopied, or
delivered respectively, be effective when mailed by certified mail return
receipt requested to any party as its address specified herein, or telecopied to
any party to the telecopy number set forth herein, as applicable, or delivered
personally to any party at its address specified above.
SECTION 16. Waiver of Marshalling. All rights of marshalling of assets
of Grantor, including any such right with respect to the Collateral, are hereby
waived by Grantor.
SECTION 17. Termination; Reinstatement. (a) The Grantor agrees that
this Security Agreement and the liens and security interest granted herein shall
terminate only when all Secured Obligations have been fully paid and performed
at which time the Agent upon the Grantor's request shall reassign and redeliver,
including the termination of any financing statements or cause to be reassigned
and redelivered) to the Grantor, or to such Person or Persons as the Grantor
shall designate in writing, against receipt, such of the Collateral (if any) as
shall not have been sold or otherwise applied by the Agent pursuant to the terms
hereof and shall still be held by it hereunder. Any such reassignment shall be
without recourse upon, or representation or warranty by the Agent (other than
that the Agent has not sold, encumbered or otherwise transferred any interest in
the Collateral except as provided in this Security Agreement) and shall be at
the sole cost and expense of the Grantor.
(b) This Security Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any amount received by the Agent
in respect of the Secured Obligations is rescinded or must otherwise be restored
or returned by the Agent upon the filing of any bankruptcy proceeding by or of
the Grantor or upon the appointment of any intervenor or conservator of, or
trustee or similar official for, the Grantor or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
SECTION 18. Limitation by Law. All rights, remedies and powers
provided in this Security Agreement may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of law, and all the
provisions of this Security Agreement are intended to be subject to all
applicable mandatory provisions of law which may be controlling and to be
limited to the extent necessary so that they will not render this Security
Agreement invalid, unenforceable, in whole or in part, or not entitled to be
recorded, registered or filed under the provisions of any applicable law.
SECTION 19. Separability. Should any clause, sentence, paragraph,
subsection or Section of this Security Agreement be judicially declared to be
invalid, unenforceable or void, such decision will not have the effect of
invalidating or voiding the remainder of this Security Agreement, and the
parties hereto agree that the part or parts of this Security Agreement so held
to be invalid, unenforceable or void will be deemed to have been stricken
herefrom by the parties hereto, and the remainder will have the same force and
effectiveness as if such stricken part or parts had never been
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included herein.
SECTION 20. No Waiver; Remedies. No failure on the part of the Agent
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 21. Execution in Counterparts. This Security Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
agreement.
SECTION 22. Continuing Security Interest. This Security Agreement
shall create a continuing security interest in the Collateral and shall (a)
remain in full force and effect until payment in full of the Secured
Obligations, (b) be binding upon the Grantor, its successors and assigns and (c)
inure to the benefit of the Banks and their successors, transferees and assigns.
Without limiting the generality of the foregoing clause (c), the Agent may
assign or otherwise transfer all or a portion of any of the Notes held by it to
any other Person, and such other Person shall thereupon become vested with all
the benefits in respect thereof granted to each Bank herein or otherwise. Upon
the payment in full of the Secured Obligations, the security interest granted
hereby shall terminate and all rights to the Collateral shall revert to the
Grantor. Upon any such termination, the Agent will, at the Grantor,s expense,
execute and deliver to the Grantor such documents as the Grantor shall
reasonably request to evidence such termination.
SECTION 23. Appraisals. The Grantor agrees that at its expense,upon
request of the Agent, it shall deliver to the Agent an appraisal of the
Collateral, in form and substance satisfactory to the Agent.
SECTION 24. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement or made in writing by
or on behalf of the Grantor in connection herewith shall survive the execution
and delivery of this Agreement and repayment of the Obligations. Any
investigation by the Agent shall not diminish in any respect whatsoever its
rights to rely on such representations and warranties.
SECTION 25. Security Interest Absolute. All rights of the Agent and
security interests hereunder, and all obligations of the Grantor hereunder,
shall be absolute and unconditional, irrespective of:
(i) any lack of validity or enforceability of the Credit Agreement, the Notes
or any other agreement or instrument relating thereto;
(ii) any change in the time, manner, or place of payment of, or in any other
term of, all or any of the Obligations or any other amendment or waiver of or
any consent to any departure from the Credit Agreement or any of the Notes;
(iii) any exchange, release or non-perfection of any other collateral, or
any release or amendment or waiver of or consent to departure from any guaranty,
for all or any of the
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Secured Obligations; or
(iv) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Partnership or a third party grantor of a
security interest.
SECTION 26. Governing Law; Terms. THIS SECURITY AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS ,
EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF TEXAS.
SECTION 27. Submission To Jurisdiction. (A) ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS
MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES FOR
THE SOUTHERN DISTRICT OF TEXAS AND, BY EXECUTION AND DELIVERY OF THIS SECURITY
AGREEMENT, THE GRANTOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, UNCONDITIONALLY, THE NON EXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING. THE GRANTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN
SECTION 15, SUCH SERVICE TO BECOME EFFECTIVE THIRTY DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE BANK TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST ANY LOAN PARTY IN ANY OTHER JURISDICTION.
(B) THE GRANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN THE
COURTS REFERRED TO IN CLAUSE (A) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND
AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 28. Waiver of Jury Trial. THE GRANTOR, HEREBY WAIVES, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS SECURITY AGREEMENT OR
UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM OR RELATING TO
ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS SECURITY AGREEMENT,
AND AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED
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BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 29. Final Agreement of the Parties. THIS SECURITY AGREEMENT
(INCLUDING THE SCHEDULES AND EXHIBITS HERETO), THE NOTES, THE CREDIT AGREEMENT
AND THE OTHER LOAN DOCUMENTS CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION
26.02(A) OF THE TEXAS BUSINESS AND COMMERCE CODE, AND REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be duly
executed and delivered by its officer duly authorized as of the date first above
written.
AMERICAN ECOLOGY CORPORATION
By: /s/ William P. McCaughey
__________________________________
William P. McCaughey
Treasurer
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Each Subsidiary of
American Ecology Corporation
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") dated as of December
1, 1994 is made by AMERICAN ECOLOGY RECYCLE CENTER, INC., a Delaware
corporation, AMERICAN ECOLOGY SERVICES CORPORATION, a Delaware corporation,
AMERICAN ECOLOGY MANAGEMENT CORPORATION, a Delaware corporation, AMERICAN
ECOLOGY INTERNATIONAL, INC., a Delaware corporation, AMERICAN ECOLOGY
ENVIRONMENTAL SERVICES CORPORATION, a Texas corporation, TEXAS ECOLOGISTS, INC.,
a Texas corporation, TRANSTEC ENVIRONMENTAL, INC., a Ohio corporation, US
ECOLOGY, INC., a California corporation, WPI TRANSPORTATION, INC., a Texas
corporation, and WPI WASTE CARRIERS, INC., a Texas corporation (individually,
the "Grantor" and collectively, the "Grantors") with offices located at 5333
Westheimer, Suite 1000, Houston, Texas 77056, in favor of TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, in its capacity as Agent (in such capacity, the "Agent")
for the banks (the "Banks") party to the Credit Agreement (as defined below).
PRELIMINARY STATEMENT
The Banks, the Agent, American Ecology Corporation, a Delaware corporation
(the "Borrower") and the Grantors, as guarantors, have entered into an Amended
and Restated Credit Agreement dated of even date herewith date (said Credit
Agreement, as it may hereafter be amended or otherwise modified from time to
time, being the "Credit Agreement") under the terms of which the Agent and the
Banks, collectively, have agreed to make various loans to the Borrower up to a
total of $43,000,000.00. It is a condition precedent to the obligation of the
Banks to make the loans to the Borrower under the Credit Agreement that each
Grantor shall have granted the security interest contemplated by this Security
Agreement. The Banks presently include Texas Commerce Bank National
Association, Houston, Texas and may hereafter include other Persons as
contemplated by the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Banks to make the loans to the Borrower under the Credit Agreement, the
Grantors hereby agree as follows:
SECTION 1. Defined Terms. "UCC" means the Uniform Commercial Code as
in effect on the date hereof in the State of Texas; provided that if by
mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of the security interests granted pursuant to Section 2 hereof,
as well as all other security interests created or assigned as additional
security for the Obligations pursuant to the provisions of this Security
Agreement, in any Collateral is governed by the UCC as in effect in such other
jurisdiction other than Texas, "UCC" means the UCC as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such perfection
or effect of perfection or non-perfection.
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SECTION 2. Grant of Security. Each Grantor hereby assigns and pledges
to the Agent for the benefit of the Banks, and hereby grants to the Agent for
the benefit of the Banks a security interest in, all of such Grantor's right,
title and interest in and to the following, whether presently held or hereafter
acquired (the "Collateral"):
(a) All accounts (as defined in the UCC), receivables, accounts
receivable, lease receivables, contract rights, chattel paper, drafts,
acceptances, instruments, writings evidencing a monetary obligation or a
security interest or a lease of goods, general intangibles and other obligations
of any kind, now or hereafter existing, whether or not arising out of or in
connection with the sale or lease of goods or the rendering of services, and all
rights now or hereafter existing in and to all security agreements, leases, and
other contracts securing or otherwise relating to any such accounts,
receivables, accounts receivable, lease receivables, contract rights, chattel
paper, drafts, acceptances, instruments, writings evidencing a monetary
obligation or a security interest or a lease of goods, general intangibles or
obligations (any and all of the foregoing being the "Receivables"); and
(b) All equipment (as defined in the UCC) and all machinery, chattels,
tools, dies, jigs, molds, parts, machine tools, furniture, furnishings, fixtures
and supplies of every nature wherever located, including all additions,
accessories and improvements thereto and substitutions therefor (any and all of
the foregoing being the "Equipment"); and
(c) All inventory (as defined in the UCC) in all of its forms, wherever
located, now or hereafter existing and whether acquired by purchase, merger or
otherwise and all raw materials and work in process therefor, all finished goods
thereof and all materials used or consumed in the manufacture, packing,
shipping, advertising, selling, leasing or production thereof, goods in which
each Grantor has an interest in mass or joint or other interest or right of any
kind and goods which are returned to or repossessed by each Grantor, and all
accessions thereto and products thereof and documents therefor (any and all of
the foregoing being the "Inventory"); and
(d) All products and proceeds of any and all of the foregoing Collateral
and, to the extent not otherwise included, all payments under insurance or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral.
The inclusion of proceeds in this Security Agreement does not authorize
the Grantors to sell, dispose of or otherwise use the Collateral in any manner
not specifically authorized hereby.
SECTION 3. Security for Obligations. This Security Agreement secures
the prompt and complete (a) payment and performance of all obligations of the
Borrower and the Grantors to the Banks now or hereafter existing under the
Revolving Credit Note and the Term Note and any duties or obligations of the
Borrower and the Grantors under the Credit Agreement and the other Loan
Documents, and (b) performance and observance by the Borrower and the Grantors
of all covenants and conditions contained in the Credit Agreement, this Security
Agreement and any other Loan Document to which it is a party, and in any case
whether for principal, interest, fees, expenses or otherwise, including, without
limitation, Article IX of the Credit Agreement (all such obligations, covenants
and conditions described in the foregoing clauses (a) and (b) being hereinafter
collectively referred to as the "Secured Obligations"), provided, that the Agent
agrees that all the Collateral shall not secure any Indebtedness owing to it in
respect of Letters of Credit unless and until all of the obligations to the
Banks under the Revolving Credit Note, the Term Note and the Credit Agreement,
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<PAGE>
other than Article III thereof, have been fully and finally paid.
SECTION 4. Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) the Grantors shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Security Agreement had not been executed, (b) the exercise by the Agent for the
benefit of the Banks of any of the rights hereunder shall not release the
Grantors from any of their duties or obligations under the contracts and
agreements included in the Collateral, and (c) neither the Agent nor any Bank
shall have any obligation or liability under the contracts and agreements
included in the Collateral by reason of this Security Agreement, nor shall the
Agent or any Bank be obligated to perform any of the obligations or duties of
the Grantors thereunder or to take any action to collect or enforce any claim
for payment assigned hereunder.
SECTION 5. Representations and Warranties. Each Grantor represents and
warrants as follows:
(a) All of the Collateral is located at the places specified on Schedule I
hereto. The chief place of business and chief executive office of each Grantor
and the office where each Grantor keeps its records concerning the Collateral is
located at the address specified in the introductory paragraph to this Security
Agreement.
(b) The Grantors own the Collateral free and clear of any lien or security
interest except for the lien and security interest created by this Security
Agreement and Liens existing in favor of the Agent for the benefit of the Banks.
No effective financing statement or other instrument similar in effect covering
all or any part of the Collateral is on file in any recording office, except
such as may have been filed in favor of the Agent for the benefit of the Banks
relating to this Security Agreement. The Grantors have no trade names except as
shown on Schedule I hereto.
(c) This Security Agreement has been duly executed and delivered by the
Grantors and creates a valid and perfected first priority lien and security
interest in the Collateral, securing the payment of the Secured Obligations, and
all filings and other actions necessary or desirable to perfect and protect such
lien and security interest have been duly taken.
(d) No consent of, or notice to, any other persons and no authorization,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required either (i) for the grant by the
Grantors of the lien and security interest granted hereby or for the execution,
delivery or performance of this Security Agreement by the Grantors or (ii) for
the perfection of or the exercise by the Agent or any Bank of its rights and
remedies hereunder, other than the filing of financing statements with the
Secretary of State of the States of Texas and Delaware.
(e) All information with respect to the Collateral and the obligors under
the Receivables set forth in any Schedule (including Schedule I hereto),
certificate or other writing at any time heretofore or hereafter furnished by
the Grantors to the Agent or any Bank is and will be true, correct and complete
in all material respects as of the date specified therein.
SECTION 6. Further Assurances. (a) The Grantors agree that from
time to time, at the expense of the Grantors, the Grantors will promptly execute
and deliver all further
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instruments and documents, and take all further action, that may be necessary or
desirable, or that the Agent or any Bank may request, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable the Agent or any Bank to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of the
foregoing, the Grantors will: (i) mark conspicuously, at the request of the
Agent, each of their records pertaining to the Collateral with a legend
indicating that such document, chattel paper, or Collateral is subject to the
security interest granted hereby; (ii) if any Receivable shall be evidenced by
a promissory note or other instrument or chattel paper, upon the request of the
Agent, the Grantors shall, deliver and pledge to the Agent for the benefit of
the Banks such note, instrument or chattel paper duly endorsed and accompanied
by duly executed instruments of transfer or assignment, all in form and
substance satisfactory to the Agent and (iii) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as the Agent may request, in order
to perfect and preserve the security interests granted or purported to be
granted hereby.
(b) The Grantors hereby authorize the Agent for the benefit of the Banks
to file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Collateral without the signatures of
the Grantors where permitted by law. A carbon, photographic or other
reproduction of this Security Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
(c) The Grantors will furnish to the Agent from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Agent or any Bank may
reasonably request, all in reasonable detail.
(d) Each Grantor will promptly notify the Agent of any change of its name,
corporate structure or federal tax identification number.
(e) Each Grantor shall keep its chief place of business and chief
executive office and the office where it keeps its books and records concerning
the Collateral, and all originals of all chattel paper, instruments and
documents which evidence Receivables, at the location therefor specified in
Section 5(a) or, upon 30 days' prior written notice to the Agent, at such other
locations in a jurisdiction where all action required by Section 6 shall have
been taken with respect to the Receivables. Each Grantor will hold and preserve
such records and chattel paper and will upon reasonable notice permit
representatives of the Agent or any Bank at any time during normal business
hours to inspect and make abstracts from such records and chattel paper.
(f) Except as otherwise provided in this subsection (f), each Grantor
shall continue to collect, at its own expense, all amounts due or to become due
such Grantor under the Receivables. In connection with such collections, each
Grantor may take (and, upon the occurrence and continuance of an Event of
Default at the Agent's direction, shall take) such action as such Grantor or the
Agent may deem necessary or advisable to enforce collection of the Receivables;
provided, that the Agent for the benefit of the Banks shall have the right at
any time, upon the occurrence and during the continuance of an Event of Default
and upon written notice to each Grantor of its intention to do so, to notify the
account debtors or obligors under any Receivables of the assignment of such
Receivables to the Agent for the benefit of the Banks and to direct such account
debtors or obligors to make payment of all amounts due or to become due to each
Grantor thereunder directly to the Agent and, upon such notification and at the
expense of each such Grantor, to enforce
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<PAGE>
collection of any such Receivables, and to adjust, settle or compromise the
amount or payment thereof, in the same manner and to the same extent as each
such Grantor might have done. After receipt by the Grantors of the notice from
the Agent referred to in the proviso to the preceding sentence, (i) all amounts
and proceeds (including instruments) received by the Grantors in respect of the
Receivables shall be received in trust for the benefit of the Banks hereunder,
shall be segregated from other funds of the Grantors and shall be forthwith paid
over to the Agent for the benefit of the Banks in the same form as so received
(with any necessary endorsement) to be held as cash collateral and either (A)
released to the Grantors so long as no Event of Default shall have occurred and
be continuing or (B) if any Event of Default shall have occurred and be
continuing, applied as provided in Section 9, and (ii) the Grantors shall not
adjust, settle or compromise the amount or payment of any Receivable, or release
wholly or partly any account debtor or obligor thereof, or allow any credit or
discount thereon, except with the prior written consent of the Agent.
(g) The Grantors shall keep the Inventory (other than Inventory sold in
the ordinary course of business or Inventory in transit to a buyer) at the
places therefor specified in Section 5(a) or, upon at least 30 days' prior
written notice to the Agent, at such other places in jurisdictions where all
action required by Section 6 shall have been taken with respect to the
Inventory.
(h) Not permit anything to be done that may impair the value of any of the
Collateral or the lien and security interest to be afforded by this Security
Agreement.
SECTION 7. Insurance. The Grantors shall, at their own expense,
maintain insurance as provided in Section 7.03 of the Credit Agreement.
SECTION 8. Transfers and Other Liens. The Grantors shall not: (a)
sell, assign (by agreement, operation of law or otherwise) or otherwise dispose
of any of the Collateral (other than in the ordinary course of business) or (b)
create or suffer to exist any lien or security interest upon or with respect to
any of the Collateral, except for the lien or security interest created by this
Security Agreement and liens and security interests in favor of the Agent for
the benefit of the Banks as previously disclosed to the Banks.
SECTION 9. Remedies and Application of Proceeds. If any Event of
Default shall have occurred and be continuing, the Agent for the benefit of the
Banks may exercise in respect of the Collateral, in addition to other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the UCC (whether or not the UCC
applies to the affected Collateral) and the Agent may also (a) require the
Grantors to, and the Grantors hereby agree that they will at their expense and
upon request of the Agent forthwith, assemble all or part of the Collateral as
directed by the Agent and make it available to the Agent at a place to be
designated by the Agent which is reasonably convenient to both parties and (b),
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, for cash, on credit or
for future delivery, and upon such other terms as the Agent may deem
commercially reasonable. The Grantors will execute and deliver such documents
and take such other action as the Agent deems necessary or advisable in order
that any sale may be made. Upon any such sale the Agent shall have the right to
deliver and transfer to the purchaser thereof the Collateral sold. The Grantors
agree that, to the extent notice of sale shall be required by law, at least ten
(10) days' prior written notice to the Grantors of the time and place of any
public sale or the time after which any private sale is to be made or other
intended disposition of any of the Collateral shall constitute reasonable
notifica tion thereof, except any Collateral which is perishable
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<PAGE>
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market. The Grantors agree that such notice constitutes "reasonable
notification" within the meaning of (S) 9.504(c) of the UCC. The Agent shall
not be obligated to make any sale of Collateral regardless of notice of sale
having been given. The Agent may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
SECTION 10. Agent Appointed Attorney-in-Fact. Effective upon the
occurrence of and continuance of an Event of Default, the Grantors hereby
irrevocably appoint the Agent the Grantors, attorney-in-fact, with full
authority in the place and stead of the Grantors and in the name of the
Grantors, the Agent or any Bank or otherwise, from time to time after the
occurrence and during the continuance of an Event of Default in the Agent's sole
discretion, to take any action and to execute any instrument which the Agent or
any Bank may deem necessary or advisable to accomplish the purposes of this
Security Agreement, including:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral,
(b) to settle, compromise, prosecute or defend any action or proceeding
with respect thereto,
(c) to extend the time of payment thereof and to make any allowance or
adjustment with reference thereto, and
(d) to sell, transfer, assign, or otherwise deal in or with the Collateral
or the proceeds or avails thereof, as fully and effectually as if the Agent were
the absolute owner thereof.
SECTION 11. Agent May Perform. If any Grantor fails to perform any
agreement contained herein, the Agent may itself perform, or cause performance
of, such agreement, and the expenses of the Agent incurred in connection
therewith shall be payable by such Grantor under Section 13.
SECTION 12. Limitations of the Agent's Duties. The powers conferred on
the Agent hereunder are solely to protect its interest in the Collateral and
shall not impose any duty upon it to exercise any such powers. Except for
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Agent shall have no
duty as to any Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or any other rights pertaining to any Collateral.
The Agent shall be deemed to have exercised reasonable care in the custody and
preservation of any Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which the Agent accords its own property,
it being understood that the Agent shall not have any responsibility for taking
any necessary steps to preserve rights against any parties with respect to any
Collateral.
SECTION 13. Indemnity and Expenses. (a) The Grantors shall indemnify
the Agent and each Bank and any Affiliate thereof and their respective
directors, officers, employees and agents from, and hold each of them harmless
against, any and all losses, liabilities, claims or damages (including
reasonable legal fees and expenses) to which any of them may become subject,
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<PAGE>
insofar as such losses, liabilities, claims or damages arise out of or result
from (i) this Security Agreement, the Credit Agreement or any of the loan
documents executed in connection herewith or (ii) any investigation, litigation
or other proceeding (including any threatened investigation or proceeding)
relating to the foregoing, and the Grantors shall reimburse the Agent and each
Bank and each Affiliate thereof and their respective directors, officers,
employees and agents, upon demand for any expenses (including legal fees)
reasonably incurred in connection with any such investigation or proceeding, but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the person to be
indemnified. IT IS THE EXPRESS INTENTION OF THE GRANTORS THAT EACH PERSON TO BE
INDEMNIFIED HEREUNDER SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND ALL
LOSSES, LIABILITIES, CLAIMS OR DAMAGES AS LIMITED IN THE PRECEDING SENTENCE
ARISING OUT OF OR RESULTING FROM THE ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE
OF THE SUCH PERSON. Without prejudice to the survival of any other obligations
of the Grantors hereunder, the obligations of the Grantors under this Section
shall survive the termination of this Security Agreement.
(b) The Grantors agree to pay within ten (10) Business Days (as such term
is defined in the Credit Agreement) after demand, to the Agent the amount of any
and all reasonable expenses, including the fees and disbursements of its counsel
and of any experts and agents, that the Agent or any Bank may incur in
connection with (i) the administration of this Security Agreement, (ii) the
evaluation, appraisal, custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of the Agent for the benefit of the
Banks hereunder or (iv) the failure by the Grantors to perform or observe any of
the provisions hereof. The Grantors agree to pay interest on any expenses or
other sums payable to the Agent for the benefit of the Banks hereunder that are
not paid when due at a rate per annum equal to the Default Rate (as such term is
defined in the Credit Agreement).
SECTION 14. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and, if to the
Grantors, mailed or telecopied or delivered to them, addressed to them at the
addresses provided for the Grantors in the introductory paragraph to this
Security Agreement, Attention: Mr. William P. McCaughey, Telecopy No. (713)
624-1999, if to the Agent to it at 712 Main Street, Houston, Texas 77002,
Attention: Mr. Ernest L. Smith, Telecopy No. (713) 216-6004, or as to any party
at such other address as shall be designated by such party in a written notice
to each other party complying as to delivery with the terms of this Section.
All such notices and other communications shall, when mailed or telecopied, or
delivered respectively, be effective when mailed by certified mail return
receipt requested to any party as its address specified herein, or telecopied to
any party to the telecopy number set forth herein, as applicable, or delivered
personally to any party at its address specified above.
SECTION 15. Concerning the Agent. The provisions of Article XI of the
Credit Agreement shall inure to the benefit of the Agent in respect of this
Security Agreement and shall be binding upon the parties to the Credit Agreement
in such respect. In furtherance and not in derogation of the rights, privileges
and immunities of the Agent therein set forth:
(a) The Agent is authorized to take all such action as is provided to be
taken by it as Agent hereunder and all other action reasonably incidental
thereto. As to any matters not expressly provided for herein (including the
timing and methods of realization upon the Collateral) the Agent shall act or
refrain from acting in accordance with written instructions from the Banks or,
in the absence of such instructions, in accordance with its discretion.
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<PAGE>
(b) The Agent shall not be responsible for the existence, genuineness or
value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Lien in any of the Collateral, whether impaired by
operation of law or by reason of any action or omission to act on its part
hereunder. The Agent shall have no duty to ascertain or inquire as to the
performance or observance of any of the terms of this Security Agreement by the
Grantors.
SECTION 16. Termination; Reinstatement. (a) The Grantors agree that
this Security Agreement and the liens and security interests granted hereunder
shall terminate only when all Obligations have been fully paid and performed, at
which time the Agent upon the Grantors, request shall reassign and redeliver,
including the termination of any financing statements (or cause to be reassigned
and redelivered) to the Grantors, or to such person as the Grantors shall
designate in writing, against receipt, such of the Collateral (if any) as shall
not have been sold or otherwise applied by the Agent for the benefit of the
Banks pursuant to the terms hereof and shall still be held by it hereunder. Any
such reassignment shall be without recourse upon, or representation or warranty
by, the Agent (other than that the Agent for the benefit of the Banks has not
sold, encumbered or otherwise transferred any interest in the Collateral except
as provided in this Security Agreement) and shall be at the sole cost and
expense of the Grantors.
(b) This Security Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any amount received by the Agent
or any other Bank in respect of the Obligations is rescinded or must otherwise
be restored or returned by the Agent or such other Bank upon the filing of any
bankruptcy proceeding by or of the Grantors or upon the appointment of any
intervenor or conservator of, or trustee or similar official for, the Grantors
or any substantial part of their assets, or otherwise, all as though such
payments had not been made.
SECTION 17. Miscellaneous.
(a) No amendment or waiver of any provision of this Security Agreement,
nor consent to any departure by the Grantors herefrom, shall in any event be
effective unless the same shall be in writing and signed by the Agent and the
Grantors, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
(b) All rights of marshalling of assets of the Grantors, including any
such right with respect to the Collateral, are hereby waived by the Grantors.
(c) All rights, remedies and powers provided in this Security Agreement
may be exercised only to the extent that the exercise thereof does not violate
any applicable provision of law, and all the provisions of this Security
Agreement are intended to be subject to all applicable mandatory provisions of
law which may be controlling and to be limited to the extent necessary so that
they will not render this Security Agreement invalid, unenforceable, in whole or
in part, or not entitled to be recorded, registered or filed under the
provisions of any applicable law.
(d) Should any clause, sentence, paragraph, subsection or Section of this
Security Agreement be judicially declared to be invalid, unenforceable or void,
such decision will not have the effect of invalidating or voiding the remainder
of this Security Agreement, and the parties hereto agree that the part or parts
of this Security Agreement so held to be invalid, unenforceable or void will be
deemed to have been stricken herefrom by the parties hereto, and the remainder
will have the same force and effectiveness as if such stricken part or parts had
never been included herein.
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(e) No failure on the part of the Agent to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
(f) This Security Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute but one and the same agreement.
(g) This Security Agreement shall create a continuing security interest in
the Collateral and shall (a) remain in full force and effect until payment in
full of the Obligations, (b) be binding upon the Grantors, their successors and
assigns and (c) inure to the benefit of the Agent for the benefit of the Banks
and their successors, transferees and assigns. Upon the payment in full of the
Obligations, the lien and security interest granted hereby shall terminate and
all rights to the Collateral shall revert to the Grantors. Upon any such
termination, the Agent will, at the Grantors' expense, promptly execute and
deliver to the Grantors such documents as the Grantors shall reasonably request
to evidence such termination.
(h) All representations and warranties contained in this Security
Agreement or made in writing by or on behalf of the Grantors in connection
herewith shall survive the execution and delivery of this Security Agreement and
repayment of the Obligations. Any investigation by the Agent or any Bank shall
not diminish in any respect whatsoever its rights to rely on such
representations and warranties.
(i) The Grantors hereby expressly waive, to the extent permitted by
applicable law, (1) notice of the acceptance by the Agent or any Bank of this
Security Agreement, (2) notice of the existence or creation or non-payment of
all or any of the Secured Obligations, (3) presentment, demand, notice of
dishonor, protest, intent to accelerate, acceleration and all other notices
whatsoever, and (4) all diligence in collection or protection of or realization
upon the Secured Obligations or any thereof, any obligation hereunder, or any
security for or guaranty of any of the foregoing.
(j) In this Security Agreement, unless a clear contrary intention
appears:
(i) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Security Agreement as a whole and not to any particular
Article, Section or other subdivision;
(ii) reference to any person includes such person's successors and assigns and
reference to a person in a particular capacity excludes such person in any other
capacity or individually;
(iii) reference to any agreement, document or instrument means such
agreement, document or instrument as amended, supplemented or modified and in
effect from time to time in accordance with the terms thereof;
(iv) unless the context indicates otherwise, reference to any Article,
Section, Schedule or Exhibit means such Article or Section hereof or such
Schedule or Exhibit hereto;
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<PAGE>
(v) the words "including" (and "include") means including, without
limiting the generality of any description preceding such term;
(vi) with respect to the determination of any period of time, the word "from"
means "from and including" and the word "to" means "to but excluding;" and
(vii) reference to any law means such as amended, modified, codified or
reenacted, in whole or in part, and in effect from time to time.
(k) The Article and Section headings herein are for convenience only and
shall not affect the construction hereof.
(l) No provision of this Security Agreement shall be interpreted or
construed against any Person solely because that person or its legal
representative drafted such provision.
SECTION 18. Governing Law; Terms. THIS SECURITY AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF TEXAS.
SECTION 19. Waiver of Jury Trial. THE GRANTORS HEREBY WAIVE, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS SECURITY AGREEMENT OR
UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM OR RELATING TO
ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS SECURITY AGREEMENT AND
AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 20. Submission To Jurisdiction. (A) ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS
MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES FOR
THE SOUTHERN DISTRICT OF TEXAS AND, BY EXECUTION AND DELIVERY OF THIS SECURITY
AGREEMENT, EACH GRANTOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING. EACH GRANTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN
SECTION 14, SUCH SERVICE TO BECOME EFFECTIVE THIRTY DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF
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THE AGENT OR ANY BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY LOAN PARTY IN ANY
OTHER JURISDICTION.
(B) EACH GRANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN THE
COURTS REFERRED TO IN CLAUSE (A) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND
AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 21. Final Agreement of the Parties. THIS SECURITY AGREEMENT
(INCLUDING THE SCHEDULES HERETO), THE NOTES, THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(A) OF
THE TEXAS BUSINESS AND COMMERCE CODE, AND REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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IN WITNESS WHEREOF, each Grantor has caused this Security Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
AMERICAN ECOLOGY RECYCLE CENTER, INC.
AMERICAN ECOLOGY SERVICES CORPORATION
AMERICAN ECOLOGY MANAGEMENT
CORPORATION
AMERICAN ECOLOGY INTERNATIONAL, INC
AMERICAN ECOLOGY ENVIRONMENTAL
SERVICES CORPORATION
TEXAS ECOLOGISTS, INC.
TRANSTEC ENVIRONMENTAL, INC.
US ECOLOGY, INC.
WPI TRANSPORTATION, INC.
WPI WASTE CARRIERS, INC.
By:_______________________________________
William P. McCaughey
Treasurer
12
<PAGE>
SCHEDULE I
Locations of Inventory and Equipment
Trade Names
13
<PAGE>
EXHIBIT 11.1
AMERICAN ECOLOGY CORPORATION
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Primary Computation Fully Diluted Computation
--------------------------- ----------------------------------
Year Ended December 31, Year Ended December 31,
--------------------------- ----------------------------------
1994 1993 1992 1994 1993 1992
------- -------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net income $3,850 $ 4,744 $12,556 $3,850 $ 4,744 $12,556
Adjustments to net income:
Investment income on assumed investment of excess
proceeds from exercise of common stock equivalents -- 137 325 -- 137 325
Elimination of interest upon assumed retirement
of existing debt -- -- 68 -- -- 68
------ ------- ------- ------ ------- -------
Adjusted net income available for common shareholders $3,850 $ 4,881 $12,949 $3,850 $ 4,881 $12,949
====== ======= ======= ====== ======= =======
Weighted average shares outstanding:
Common shares outstanding at end of period 7,819 7,784 7,381 7,819 7,784 7,381
Effect of using weighted average common and
common equivalent shares outstanding (6) (88) (119) (6) (88) (119)
Effect of shares issuable under stock option plans
based on the treasury stock method 38 632 610 44 632 610
Effect of shares issuable under warrant based on the
treasury stock method -- 1,327 2,172 -- 1,327 2,172
Modified treasury stock, 20% repurchase limit -- (1,558) (1,476) -- (1,558) (1,476)
------ ------- ------- ------ ------- -------
Shares used in computing earnings per share 7,851 8,097 8,568 7,857 8,097 8,568
====== ======= ======= ====== ======= =======
Earnings per share $0.49 $0.60 $1.51 $0.49 $0.60 $1.51
====== ======= ======= ====== ======= =======
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF
AMERICAN ECOLOGY CORPORATION
<TABLE>
<CAPTION>
Name State of Incorporation Other Names
---- ---------------------- -----------
<S> <C> <C>
American Ecology Recycle Delaware None
Center, Inc.
- --------------------------------------------------------------------------------
US Ecology, Inc. California None
- --------------------------------------------------------------------------------
Texas Ecologists, Inc. Texas None
- --------------------------------------------------------------------------------
American Ecology Environmental Texas None
Services Corporation
- --------------------------------------------------------------------------------
American Ecology Services Delaware None
Corporation
- --------------------------------------------------------------------------------
WPI Transportation, Inc. Texas American Ecology
Transportation, Inc.
- --------------------------------------------------------------------------------
WPI Waste Carriers, Inc. Texas None
- --------------------------------------------------------------------------------
Transtec Environmental, Inc. Ohio American Ecology
Environmental, Inc.
- --------------------------------------------------------------------------------
American Liability and Excess Vermont None
Insurance Company
- --------------------------------------------------------------------------------
American Ecology Management Delaware None
Corporation
- --------------------------------------------------------------------------------
American Ecology International, Inc. Delaware None
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
of American Ecology Corporation
As independent public accountants, we hereby consent to the
incorporation by reference of our report dated April 13, 1995, included in this
Form 10-K, into the Company's previously filed Registration Statements on Form
S-8 File Nos. 33-55762, 33-58076, 33-11578, each as filed with the Securities
and Exchange Commission. Reference is made to said report in which the opinion
contains an emphasis of a matter paragraph with respect to the maturity of the
Company's Credit Agreement in January 1996.
ARTHUR ANDERSEN LLP
Houston, Texas
April 13, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet as of December 31,1994 and the Consolidated Statement
of Operations for the Year Ended December 31, 1994 and is qualified in its
entirety by reference to such financial statements.</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 231
<SECURITIES> 1,703
<RECEIVABLES> 33,768
<ALLOWANCES> 1,749
<INVENTORY> 0
<CURRENT-ASSETS> 37,798
<PP&E> 49,146
<DEPRECIATION> 19,024
<TOTAL-ASSETS> 155,439
<CURRENT-LIABILITIES> 36,235
<BONDS> 33,493
<COMMON> 78
0
0
<OTHER-SE> 66,967
<TOTAL-LIABILITY-AND-EQUITY> 155,439
<SALES> 71,891
<TOTAL-REVENUES> 71,891
<CGS> 54,181
<TOTAL-COSTS> 54,181
<OTHER-EXPENSES> 12,049
<LOSS-PROVISION> 313
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,635
<INCOME-TAX> 1,785
<INCOME-CONTINUING> 3,850
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,850
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
</TABLE>
