<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-4197
United States Lime & Minerals, Inc.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Texas 75-0789226
------------- ----------------
(State of incorporation) (I.R.S. Employer Identification Number)
12221 Merit Drive, Suite 500, Dallas, Texas 75251
- ---------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 991-8400
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class Name of Each Exchange on
Which Registered
------------------- ------------------------
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.10 par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by a check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment of this Form 10-K. [X]
The aggregate market value of Common Stock held by non-affiliates as of
March 10, 1998: $13,940,263.
Number of shares of Common Stock outstanding as of March 10, 1998: 3,951,853.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the Registrant's
definitive Proxy Statement to be filed for its 1998 Annual Meeting of
Shareholders. Part IV incorporates certain exhibits by reference from the
Registrant's previous filings.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I
ITEM I. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . 1
General . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Business and Products . . . . . . . . . . . . . . . . . . . 1
Product Sales . . . . . . . . . . . . . . . . . . . . . . . 1
Order Backlog . . . . . . . . . . . . . . . . . . . . . . . 2
Seasonality . . . . . . . . . . . . . . . . . . . . . . . . 2
Limestone Reserves . . . . . . . . . . . . . . . . . . . . 2
Mining . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Plant and Facilities . . . . . . . . . . . . . . . . . . . 3
Employees . . . . . . . . . . . . . . . . . . . . . . . . . 3
Competition . . . . . . . . . . . . . . . . . . . . . . . . 4
Environmental Matters . . . . . . . . . . . . . . . . . . . 4
Disposition of Assets . . . . . . . . . . . . . . . . . . . 4
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . 5
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . 5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . 5
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . 5
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . 6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . 7
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK . . . . . . . . . . . . . . . . . . . . 11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . 12
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . 13
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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UNITED STATES LIME & MINERALS, INC.
FORM 10-K
For the Year Ended December 31, 1997
PART I
ITEM 1. BUSINESS.
---------
General. The business of United States Lime & Minerals, Inc. (the
"Company" or the "Registrant"), which was incorporated in 1950, is the
production and sale of lime and limestone products. The Company extracts
high-quality limestone from its quarries and then processes the limestone for
sale as aggregate, pulverized limestone, quicklime and hydrated lime. In
1997, these operations were conducted through three wholly-owned subsidiaries
of the Company: Arkansas Lime Company, Corson Lime Company and Texas Lime
Company. References to the Company herein include references to its
subsidiaries. The Company sold substantially all of the assets of its
subsidiary, Corson Lime Company on June 21, 1997. See "Business - Disposition
of Assets."
The Company's principal corporate office is located at 12221 Merit Drive,
Suite 500, Dallas, Texas 75251.
Business and Products. The Company extracts raw limestone and then
processes it for sale as aggregate, pulverized limestone, quicklime and
hydrated lime. Aggregate is raw limestone that has been crushed to specified
sizes. Pulverized limestone, also referred to as ground calcium carbonate, is
a dried product ground to granular and finer sizes. Quicklime is produced
when carbon dioxide is removed from limestone in a heat process called
calcination. Hydrated lime is formed in a process called hydration in which
water is added to quicklime to produce a soft powder.
Aggregate is used by the construction industry in concrete, asphalt and
road base. Pulverized limestone is used primarily in the production of
construction materials such as asphalt paving and roofing shingles, as an
additive to agriculture feeds and as a soil enhancement. Quicklime is used
primarily in the manufacturing of paper products, in sanitation and water
filtering systems, in metal processing and in soil stabilization for highway
and building construction. Hydrated lime is used primarily in municipal
sanitation and water treatment, in soil stabilization for highway and building
construction, in the production of chemicals and in the production of
construction materials such as stucco, plaster and mortar.
Product Sales. In 1997, the Company sold its lime and limestone products
primarily in the states of Arkansas, Connecticut, Delaware, Kansas, Louisiana,
Mississippi, Missouri, New Jersey, New Mexico, New York, Oklahoma,
Pennsylvania, South Carolina, Tennessee, Texas and Virginia. Sales at
Arkansas Lime Company and Texas Lime Company are made primarily by the
Company's six sales employees. Sales personnel call on potential customers
and solicit orders which are generally made on a purchase-order basis. The
Company also receives orders in response to bids that it prepares and submits
to potential customers.
Principal customers for the Company's lime and limestone products are
highway, street and parking lot contractors, chemical producers, paper
manufacturers, roofing shingle manufacturers, glass manufacturers, municipal
sanitation and water treatment facilities, poultry and cattle feed producers,
governmental agencies, steel producers and electrical utility companies.
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Excluding Corson Lime Company sales, approximately 650 customers
accounted for the Company's sales of lime and limestone products during the
year ended December 31, 1997. No single customer accounted for more than 10%
of such sales. The Company is not subject to significant customer risks as
its customers are considerably diversified as to geographic location and
industrial concentration. However, given the nature of the lime and limestone
industry, the Company's profits are very sensitive to changes in volume.
Lime and limestone products are transported by rail and truck to
customers generally within a radius of 400 miles of each of the Company's
processing plants. Sales of lime and limestone products are highest during
the months of March through November.
Substantially all of the Company's sales are made within the United
States.
Order Backlog. The Company does not believe that backlog information
accurately reflects anticipated annual revenues or profitability from year to
year.
Seasonality. The Company's sales have historically reflected seasonal
trends, with the largest percentage of total annual revenues being realized in
the second and third quarters. Lower seasonal demand normally results in
reduced shipments and revenues in the first and fourth quarters. Inclement
weather conditions generally have a negative impact on the demand for lime and
limestone products.
Limestone Reserves. The Company currently extracts limestone from two
open-pit quarries, both of which are Company-owned. The Cleburne Quarry is
located 14 miles from Cleburne, Texas; the Batesville Quarry is located near
Batesville, Arkansas. Access to each location is provided by paved roads.
Texas Lime Company operates out of the Cleburne Quarry, which is situated
upon a tract of land containing approximately 460 acres. In addition, the
Company owns approximately 2,300 acres of land adjacent to the Cleburne tract
containing known high-quality limestone reserves in a bed averaging 28 feet in
thickness, with an overburden which ranges from 0 to 50 feet. The Company
also has mineral interests in approximately 560 acres of land adjacent to the
Northwest boundary of the Company's property. The total calculated reserves
are approximately 115,000,000 tons. Assuming the present level of production
at the quarry is maintained, the Company estimates the reserves are sufficient
to sustain operations for approximately 100 years.
Arkansas Lime Company operates out of the Batesville Quarry, which is
situated on a tract of approximately 725 acres of land that contains a known
deposit of high-quality limestone. The average thickness of the high-quality
limestone deposit is approximately 70 feet, with an average overburden of 35
feet. Total calculated reserves are approximately 25,500,000 tons on this
tract of land. In 1997, the Company purchased approximately 325 additional
acres adjacent to the present quarry containing additional high-quality
limestone. Prior to the purchase, the Company conducted a study that
determined that this tract contains high-quality limestone reserves of
approximately 31,000,000 tons with an average thickness of approximately 75
feet, with an average overburden of 20 feet. The Company estimates that,
with the purchase of the additional reserves and assuming present quarry
production levels are maintained, the total reserves are sufficient to
sustain operations for approximately 100 years.
Mining. The Company extracts limestone by the open-pit method at its two
operating quarries. The open-pit method, which consists of removing the top
layer of soil, trees and other substances and then extracting the exposed
limestone, is generally less expensive than underground mining. The principal
disadvantage of the open-pit method is that operations are subject to
inclement weather. To extract limestone, the Company utilizes standard mining
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equipment which is Company-owned. After extraction, limestone is crushed,
screened and ground in the case of aggregate and pulverized limestone, or
further processed in kilns and hydrators in the case of quicklime and hydrated
lime, before shipment. The Company has no knowledge of any recent changes in
the physical quarrying conditions on any of its properties which have
materially affected its mining operations, and no such changes are
anticipated.
Plants and Facilities. The Company produces lime and limestone products
in the following plants:
The Texas plant is located adjacent to the Cleburne Quarry on a tract of
land covering approximately 10 acres. This plant is equipped with three
rotary kilns and has a daily-rated capacity of 1,200 tons of quicklime. The
plant has pulverized limestone equipment which has a capacity to produce
550,000 tons of pulverized limestone annually, depending on the product mix.
The Company is currently undertaking a major modernization and expansion
project at the Texas facility. The Texas project includes the installation of
a new stone crushing and handling system, the addition of a preheater to one
of the existing kilns, additional storage, screening and shipping capacity and
a new support building which will house a laboratory and administrative and
shop facilities. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources." In
addition to this plant, the Company owns a plant which is located near Blum,
Texas on a tract of land covering approximately 40 acres. It is equipped with
two vertical kilns and has a daily-rated capacity of 600 tons of quicklime.
The Blum plant was acquired in 1989 and its kilns have not been operated since
that time; however, the plant's storage and shipment facilities are currently
being utilized.
The Arkansas plant, situated on a tract of approximately 290 acres, is
located roughly two miles from the Batesville Quarry and is connected to the
quarry by a Company-owned railway. Utilizing six vertical kilns, this plant
has a daily-rated capacity of 300 tons of quicklime. The plant has two
grinding systems which, depending on the product mix, have the capacity to
produce 700,000 tons of pulverized limestone annually. The Company has
completed an evaluation of, and has determined to proceed wit, a planned
major modernization and expansion project at the Arkansas facility. The
Arkansas plan includes the addition of a new 1,200 ton per day rotary kiln,a
new stone crushing, handling and transport system, a new hydrator and
additional lime and ground calcium carbonate storage and loadout facilities.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity and Capital Resources."
The Company maintains lime hydrating equipment and limestone drying
equipment at both plants. Storage facilities for lime and pulverized limestone
products at each plant consist primarily of cylindrical tanks, which are
considered by the Company to be adequate to protect its lime and limestone
products and to provide an available supply for customers' needs at the
existing volume of shipments. Equipment is maintained at each plant to load
trucks and at the Arkansas and Blum plants to load railroad cars.
The Company believes that its processing plants are adequately maintained
and insured. Much of the equipment in the plants is aging and therefore will
require future maintenance and repair. However, the Texas and Arkansas
modernization and expansion projects will improve the overall reliability of
the plants' equipment. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources"
regarding the Company's expected capital expenditures for modernizing,
expanding and re-equipping the plants.
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Employees. The Company employed, at December 31, 1997, 201 persons, 30
of whom are engaged in sales, administrative and management activities. Of
the Company's 171 production employees, 131 are covered by collective
bargaining agreements. These agreements expire as follows:
Texas facility in November 1999
Arkansas facility in December 1999
Competition. The lime and limestone industry has certain limiting
factors, including: the availability of high-quality limestone (calcium
carbonate) reserves, the ability to secure mining and operating permits for a
facility, the cost of building processing plants to create the lime and
limestone products and the transportation costs associated with delivering the
products to customers. There is not a large number of producers in the United
States as a whole, but producers tend to concentrate on known limestone
formations where competition takes place on a local basis. The industry as a
whole has expanded its customer base and, while still selling heavily to the
steel industry, also counts paper producers and road builders among its major
customers. In recent years, the environmental-related uses for lime have been
expanding, including use in flue gas desulfurization and the treatment of both
waste and potable water.
There is a continuing trend of consolidation in the lime and limestone
industry. In addition to the consolidations, and often in conjunction with
consolidations, many lime producers have undergone modernization and expansion
projects to upgrade their processing equipment in an effort to improve their
operating efficiency. The Company's current modernization and expansion
projects should allow it to continue to be competitive in the future. In
addition, the Company will continue to evaluate external opportunities for
expansion.
Environmental Matters. The Company's operations are subject to various
federal, state and local environmental laws and regulations, including the
Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act
and the Comprehensive Environmental Response, Compensation, and Liability Act,
as well as the Toxic Substances Control Act. Management does not believe that
any lack of compliance by the Company with applicable environmental laws would
have a materially adverse effect on the Company. In part in response to
requirements of environmental regulatory agencies, the Company incurred
capital expenditures of approximately $117,000 in 1997 and $200,000 in 1996 on
environmental compliance and is planning to incur approximately $100,000 in
1998 excluding major capital projects. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources." In the judgment of management, forecastable expenditure
requirements for the future are not of such dimension as to have a materially
adverse effect on the Company's financial condition, results of operations,
liquidity or competitive position. The Company's recurring costs associated
with managing and disposing of potentially hazardous substances (such as fuels
and lubricants used in operations) and maintaining pollution control equipment
amounted to approximately $80,000 in 1997 and $100,000 in 1996. The Company
has not been named as a potentially responsible party in any superfund cleanup
site.
Disposition of Assets. Effective June 21, 1997, Corson Lime Company, a
wholly owned subsidiary of the Company, ceased operations and sold
substantially all of its aggregate and lime assets for $8,231,000 in cash,
including a $376,000 note collected in October 1997. The proceeds, net of
expenses, generated by the sale were used to partially fund the Texas plant
modernization and expansion project. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Note 7 of Notes
to Consolidated Financial Statements for discussions regarding the
disposition.
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ITEM 2. PROPERTIES.
-----------
Reference is made to Item 1 of this Report for a description of the
properties of the Company, and such description is hereby incorporated by
reference in answer to this Item 2. As discussed in Note 2 of Notes to
Consolidated Financial Statements, plant facilities and mineral reserves are
subject to encumbrances to secure the Company's loans.
ITEM 3. LEGAL PROCEEDINGS.
------------------
Information regarding legal proceedings is set forth in Note 6 of Notes
to Consolidated Financial Statements and is hereby incorporated by reference
in answer to this Item 3.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
----------------------------------------------------
The Company did not submit any matters to a vote of security holders
during the fourth quarter of 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
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The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol "USLM." As of March 10, 1998, the Company had 882 stockholders of
record.
As of December 31, 1997, 500,000 shares of $5.00 par value preferred
stock were authorized, and none was issued.
The high and low sales prices for the Company's Common Stock for the
periods indicated, as well as dividends declared, were:
<TABLE>
<CAPTION>
1997 1996
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Market Price Dividends Market Price Dividends
Low High Declared Low High Declared
------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $ 6 1/4 $ 9 $0.025 $ 8 $11 3/4 $0.025
Second Quarter $ 6 5/8 $ 9 1/8 $0.025 $11 3/8 $14 3/4 $0.025
Third Quarter $ 7 1/2 $ 9 1/4 $0.025 $ 8 3/4 $13 3/4 $0.025
Fourth Quarter $ 6 5/8 $ 9 1/2 $0.025 $ 7 3/4 $ 9 1/4 $0.025
</TABLE>
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ITEM 6. SELECTED FINANCIAL DATA.
------------------------
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Operating Results
Revenues from
continuing operations $32,404 40,159 41,419 36,865 32,359
======= ======= ======= ======= =======
Net income (loss)
From continuing operations $ 3,096 a 2,602 4,260 1,916 b (441)
From discontinued operations - - - - 480
------- ------- ------- ------- -------
$ 3,096 2,602 4,260 1,916 39
======= ======= ======= ======= =======
Income (loss) per share of common stock
Basic earnings per common share:
From continuing operations $ 0.79 0.67 1.11 0.50 (0.11)
From discontinued operations - - - - 0.12
------- ------- ------- ------- -------
$ 0.79 0.67 1.11 0.50 0.01
======= ======= ======= ======= =======
Diluted earnings per common share:
From continuing operations $ 0.78 0.66 1.11 0.50 (0.11)
From discontinued operations - - - - 0.12
------- ------- ------- ------- -------
$ 0.78 0.66 1.11 0.50 0.01
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
-------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total assets $33,520 31,319 29,793 27,397 29,937
Long-term debt, excluding
current installments $ 2,167 3,238 4,381 6,225 9,622
Stockholders' equity per
outstanding share $ 6.11 5.40 4.89 3.86 3.32
Cash dividends per share $ 0.10 0.10 0.075 - -
Employees at year-end 201 318 338 313 302
</TABLE>
___________________________________
a. Includes a loss on sale of Corson Lime Company assets of $405, net of
related tax benefit ($506 gross), and the recognition of $2,300 in
previously reserved deferred tax assets.
b. Includes a gain of $372, net of related taxes ($425 gross), due to
the expiration of certain potential post-closing obligations relating
to the sale of Virginia Lime Company assets.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations," and Notes to Consolidated Financial Statements.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
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RESULTS OF OPERATIONS.
- ----------------------
The following table sets forth selected financial information of the
Company expressed as a percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Revenues 100 % 100 % 100 %
Cost of revenues
Labor and other operating expenses (73) (71) (67)
Depreciation, depletion and amortization (10) (9) (8)
------ ------ ------
Gross profit 17 20 25
Selling, general and administrative expenses (14) (11) (12)
------ ------ ------
Operating profit 3 9 13
Other (deductions) income:
Interest expense (1) (1) (2)
Other, net 2 - 1
Federal and state income tax benefit (expense) 6 (2) (2)
------ ------ ------
Net income 10 % 6 % 10 %
====== ====== ======
</TABLE>
1997 vs 1996
Revenues decreased from $40,159,000 in 1996 to $32,404,000 in 1997, a
decrease of $7,755,000 or 19.3%. This decrease was a result of a 17.9%
decrease in sales volume, due to the sale of the Corson Lime Company assets in
the second quarter of 1997 as well as a reduction in sales at the Arkansas
plant, and a 1.4% decrease in sales prices. Excluding Corson, revenues
decreased by $825,000, or 2.9%, from 1996, resulting from a 1.9% decrease in
sales volume and 1.0% decrease in sales prices. The decreased sales volume at
Arkansas was partially due to the loss of a large pulverized limestone
customer in 1996 as well as the loss of certain quicklime customers due to
an inability to meet customer demand and increased competition in the area.
The Company's gross profit was $5,419,000 for 1997 compared to $7,883,000
for 1996, a 31.3%, or $2,464,000 decrease. The decrease was the result of a
number of factors. The lower sales volume, particularly at Arkansas, reduced
the gross profit as fixed costs, including increased depreciation expense,
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<PAGE>
were absorbed by fewer units. The increased cost of fuel, particularly
natural gas prices, impacted all three plants. Corson's continued operating
and productivity problems up to the date of sale, as well as the $506,000 loss
on the sale of its assets, also contributed to the reduction in gross profit.
Selling, general and administrative ("SG&A") expenses increased from
$4,359,000 in 1996 to $4,520,000 in 1997, a 3.7% increase. SG&A expenses
increased as a percent of revenues to 13.9% in 1997, from 10.9% in 1996.
While SG&A expenses were reduced as a result of the sale of Corson's assets,
SG&A was negatively impacted by a one-time severance payment due to a former
employee under an employment agreement and additional professional consulting
fees in 1997.
Interest expense decreased by $195,000 in 1997 from 1996, due to lower
debt outstanding and the capitalization of $85,000 in 1997 interest costs
related to the modernization and expansion project at the Texas facility.
Other, net, increased by $243,000 in 1997 from 1996. This increase is
primarily due to increased interest income resulting from increased cash
reserves, certain royalty income on stone sales from the Blum facility and
the sale of certain surplus Texas assets.
Income tax (benefit) expense was impacted by the reduction in the
deferred tax asset valuation allowance which produced a corresponding income
tax benefit of $2,300,000 recorded in the second quarter of 1997. See Note 3
of Notes to Consolidated Financial Statements.
The Company's net income for 1997 increased $494,000, or 19.0%, from
$2,602,000 ($0.67 basic earnings per share and $0.66 diluted) in 1996, to
$3,096,000 ($0.79 basic earnings per share and $0.78 diluted). This increase
is attributable principally to the 1997 recognition of $2,300,000 ($0.59 basic
earnings per share and $0.58 diluted) in previously reserved deferred tax
assets, but was partially offset by the reduction in gross profit which
includes a $405,000, net of tax benefit ($0.10 basic and diluted earnings per
share), loss on the sale of the Corson assets.
1996 vs 1995
Revenues decreased from $41,419,000 in 1995 to $40,159,000 in 1996, a
decrease of $1,260,000, or 3.0%. This decrease was a result of a 6.9%
decrease in sales volume, which was partially offset by a 3.9% increase in
sales prices. Sales volumes were down at all plants, with the largest
percentage of reductions attributed to the Arkansas and Texas plants. The
single largest reason for Arkansas' reduced sales volume was the loss of a
large pulverized limestone customer in 1996. The increase in sales prices
was attributed principally to the Texas plant.
The Company's gross profit was $7,883,000 for 1996 compared to
$10,543,000 for 1995, a 25.2% decrease. The decrease was the result of a
number of factors. The lower sales volume reduced the gross profit as fixed
costs, including greater depreciation expense, were absorbed by fewer units.
The increased cost of fuel, particularly natural gas prices, impacted all
three plants, but particularly the Corson plant. The Corson plant's continued
operating and productivity problems accounted for approximately 50% of the
reduction in gross profit. The 9% reduction in sales volume at the Arkansas
plant also contributed to the decrease in gross profit.
SG&A expenses decreased from $4,881,000 in 1995 to $4,359,000 in 1996, a
10.7% decrease. SG&A expenses declined as a percent of revenues to 10.9% in
1996, from 11.8% in 1995. The reduction in SG&A was primarily the result of
lower bonus payments, professional fees and insurance costs.
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<PAGE>
Interest expense decreased by $160,000 in 1996 from 1995, primarily due
to lower debt outstanding.
The Company's net income for 1996 decreased $1,658,000, or 38.9%, from
$4,260,000 ($1.11 basic and diluted earnings per share) in 1995, to $2,602,000
($0.67 basic earnings per share and $0.66 diluted), principally due to the
decrease in gross profit.
FINANCIAL CONDITION.
- --------------------
Liquidity and Capital Resources. The Company's financial condition is
reflected by the following key financial measurements (dollars in thousands):
<TABLE>
<CAPTION>
December 31,
------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Total bank debt $ 3,238 4,381 5,524
Ratio of total bank debt
to total capitalization .12 .17 .23
Ratio of total liabilities to
stockholders' equity .39 .48 .59
Working capital $ 2,421 5,439 6,156
Current ratio 1.34 1.88 2.01
</TABLE>
In 1997, cash flow from operations was $7,264,000, an increase of
$214,000, or 3.0%, from 1996. In 1997, this cash flow, in conjunction with
the proceeds of the sale of the Corson assets, fully funded the Company's
capital expenditure program and reduced the Company's bank debt by $1,143,000.
The Company has a financing agreement with a commercial bank. The
agreement, as amended and restated in December 1997, provides for a
$15,000,000 five-year secured term loan with monthly principal repayments of
$179,000 beginning no later than July 1998 and maturing in June 2003. From
January 1998 through June 1998, interest only payments are required. This
facility is secured by substantially all of the Company's property, plant and
equipment. The agreement also provides for a $4,000,000 unsecured revolving
credit facility which matures in December 1999. Both loans bear interest at
the bank's prime rate but may, at the option of the Company, be converted into
LIBOR-based loans that bear interest at LIBOR plus 1.65% for the term loan and
LIBOR plus 1.5% for the revolving credit facility. The agreement also allows
the Company to convert all or a portion of the outstanding loans to a fixed
rate loan by establishing a fixed rate with the bank or through the use of
interest rate protection agreements with the bank. Fixed interest rates will
be quoted by the bank at the time of the request and will be based upon then-
current market conditions. The terms of the agreement contain, among other
provisions, requirements for maintaining a defined net worth and certain
financial ratios. The covenants also restrict incurrance of debt, liens and
lease obligations, mergers, and consolidations and acquisitions of assets.
As part of the same amended and restated loan agreement, the Company
negotiated a $25,000,000 secured line of credit to provide temporary financing
for capital expenditures and acquisitions until such time as permanent
financing can be arranged. Any borrowings under this facility would be at the
bank's prime rate or, at the discretion of the Company, may be converted into
a LIBOR-based loan bearing interest at LIBOR plus 2%. The capital expenditure
and acquisition line of credit is available, if not extended, through
September 1998 and is subject to approval by the bank.
Capital expenditures for 1997 totaled $11,872,000 compared to $6,121,000
in 1996. Of the 1997 expenditures, approximately $6,720,000 were related to
-9-
<PAGE>
the modernization and expansion project at the Texas facility. Excluding
expenditures for major modernization and expansion projects, the Company
expects to spend $2,000,000 to $3,000,000 per year over the next several
years. These expenditures are considered normal recurring maintenance and re-
equipping projects at the plant facilities to improve efficiency and reduce
costs, to effect environmental improvements and to ensure that capacity is in
place to meet market demand.
In addition to the above recurring capital expenditures, the Company is
currently undertaking a major modernization and expansion project at the Texas
facility and has approved a similar project for the Arkansas facility. The
Texas project includes the installation of a new stone crushing and handling
system, the addition of a preheater to one of the existing kilns, additional
storage, screening and shipping capacity, and a new support building which
will house a laboratory and administrative and shop facilities.
The Texas improvements should allow the Company to better serve its
customers by improving both quality and service. With the improvements, the
Company expects to be in a better position to compete for customers who
currently cannot use the Company's lime in their processes. The stone
crushing system will significantly reduce the amount of fines (undersized
pebbles and dust) generated by the existing system, thereby increasing yields
while providing a more consistently sized stone for the kiln feed system which
will increase production yield and improve fuel efficiency. The new stone
handling system will significantly reduce trucking and labor costs in the
quarry, as well as improve the reliability of the feed systems to both the
kilns and the ground calcium carbonate systems. The additional storage will
improve both kiln utilization and the plant's ability to meet peak customer
demand. The storage, screening and load-out facilities will also
substantially reduce the amount of time required for the loading of bulk
quicklime trucks. The preheater addition to a current kiln along with the
improvement in the crushing system will reduce fuel consumption and will also
increase the plant's quicklime capacity by approximately 25%. These
improvements will result in lower operating costs and in a more efficient
utilization of the work force. The cost of the Texas modernization and
expansion project is expected to be approximately $22,000,000. Although
delays or changes in the cost of the project could occur due to inclement
weather, changes in the design or cost overruns, none is anticipated at this
time. This project is being financed through a combination of internally
generated funds from operations, the proceeds from the sale of the Corson
assets and the previously discussed banking facilities.
The Texas project is being constructed in phases and significant progress
has been made. The new support building has been completed and the stone
crushing and handling system should be completed by the second quarter of
1998. The storage, screening and loadout improvements as well as the
preheater should be complete by the fourth quarter of 1998. The Company has
secured all the necessary permits for construction, with the exception of the
permit for the preheater addition which is in the final stages of the approval
process. Although delays in the final approval for the construction of the
preheater could occur, none is expected.
The Arkansas improvements will be constructed in two phases. The first
phase, scheduled for completion in 1999, includes the addition of a new
1,200-ton per day rotary kiln, a new stone crushing and handling
system, and new lime and ground calcium carbonate storage and loadout
facilities. The second phase of the project includes a new hydrator, a rock
transportation system and additional lime storage facilities. The second
phase of the project is currently scheduled for completion in 2002. However,
significant increases in product sales could result in an earlier
implementation of the second phase of the plan. Kiln system design and permit
applications are currently being finalized and bid proposals have been
requested for key components of the project. The preliminary cost estimates
for the project phases are approximately $27,000,000 and $5,000,000,
respectively. The project is contingent upon satisfactory permitting from the
various regulatory agencies. The Company expects to finance this project
through a combination of internally generated funds from operations and/or
alternative sources of financing.
The Arkansas improvements should allow the Company to better serve its
customers by improving both quality and service while increasing the
production capacity of quicklime and hydrated lime. With the improvements,
-10-
<PAGE>
the Company expects to be in a better position to compete for customers who
currently cannot use the Company's lime in their processes due to insufficient
production capacity at the plant or quality constraints. The new rotary kiln
will have lower operating costs and a greater capacity than the six shaft
kilns currently in use. In addition to increasing capacity, this kiln will
also be able to consistently produce high-quality lime for use by certain
manufacturing customers who currently do not buy lime from the Arkansas
facility. The new stone crushing system will allow the Company to increase
quarry capacity and produce aggregate products with materials that are not
suitable for the production of lime. This system will be designed
to produce the appropriate size feed for the rotary kiln and will increase
handling and transport capacity while significantly reducing labor
requirements. The new hydrator will increase capacity and produce
hydrated lime more efficiently than the current systems. The storage,
screening and load-out facilities will also substantially reduce the amount of
time required for the loading of bulk quicklime trucks and railcars. The
planned modernization and expansion project will increase both production and
shipping capacity, will lower operating costs and will allow for a more
efficient utilization of the work force.
The Company is not contractually committed to any planned capital
expenditures until actual orders are placed for equipment. As of February 28,
1998, the Company's liability for open equipment and construction orders, all
of which were related to the Texas modernization and expansion project,
totaled approximately $2,300,000. This amount, as well as other future
billings related to the Texas modernization and expansion project, will be
recorded as work is performed and billed to the Company.
As of March 17, 1998, the Company had approximately $8,140,000 in long-
term debt outstanding under the amended and restated term loan, up from the
$3,238,000 at December 31, 1997. The additional borrowings in 1998 have been
used to fund the modernization and expansion project at the Texas facility.
Environmental Matters. The Company's operations are subject to various
environmental laws and regulations. In part in response to requirements of
environmental regulatory agencies, the Company incurred capital expenditures
of approximately $117,000 in 1997 and $200,000 in 1996. In the judgment of
management, forecastable environmental expenditure requirements for the future
are not of such dimension as to have a materially adverse effect on the
Company's financial condition, results of operations, liquidity or competitive
position. See "Business--Environmental Matters."
-11-
<PAGE>
Year 2000 Compliance. The Company has conducted a review of its computer
systems to identify the systems that could be affected by the year 2000 issue
and is developing an implementation plan to resolve the issue. The Company
presently believes that, with modifications to existing software in
conjunction with conversion to new year 2000 compliant software, the year 2000
problem will not pose significant operational problems for the Company's
computer systems. The Company believes that the costs associated with
ensuring year 2000 compliance will not materially affect the Company's future
operating results or financial condition.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
-----------------------------------------------------------
NOT APPLICABLE
-12-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
--------------------------------------------
Index to Consolidated Financial Statements.
-------------------------------------------
<TABLE>
<S> <C>
Report of Independent Auditors F1
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1997 and 1996 F2
Consolidated Statements of Income for the Years Ended
December 31, 1997, 1996 and 1995 F4
Consolidated Statements of Stockholders' Equity for
the Years Ended December 31, 1997, 1996 and 1995 F5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1997, 1996 and 1995 F6
Notes to Consolidated Financial Statements F7
</TABLE>
-13-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
United States Lime & Minerals, Inc.
We have audited the consolidated balance sheets of United States Lime &
Minerals, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated 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 our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of United States Lime & Minerals, Inc. and subsidiaries at December 31, 1997
and 1996, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Dallas, Texas
January 30, 1998
-F1-
<PAGE>
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
December 31,
----------------------
ASSETS Notes 1997 1996
------- -------- --------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 2,787 1,000
Trade receivables, net 1 3,624 5,152
Inventories 1 3,001 5,054
Prepaid expenses and other assets 111 434
-------- --------
Total current assets 9,523 11,640
Property, plant and equipment, at cost: 1
Land 2,764 2,338
Building and building improvements 736 2,073
Machinery and equipment 47,631 53,816
Furniture and fixtures 556 753
Automotive equipment 615 805
-------- --------
52,302 59,785
Less accumulated depreciation (30,896) (41,045)
-------- --------
Property, plant and equipment, net 21,406 18,740
Deferred tax assets, net 3 2,537 -
Other assets, net 1, 4 54 939
-------- --------
Total assets $ 33,520 31,319
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
-F2-
<PAGE>
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
(dollars in thousands)
<TABLE>
<CAPTION>
December 31,
LIABILITIES AND ----------------------
STOCKHOLDERS' EQUITY Notes 1997 1996
------- -------- --------
<S> <C> <C> <C>
Current liabilities:
Current installments of long-term debt 2 $ 1,071 1,143
Accounts payable - trade 4,437 3,117
Accrued expenses:
Salaries and wages 447 238
Insurance costs 461 228
Other expenses 686 1,475
-------- --------
Total current liabilities 7,102 6,201
Long-term debt, excluding current installments 2 2,167 3,238
Other liabilities 4 101 714
-------- --------
Total liabilities 9,370 10,153
Commitments and contingencies 6 - -
Stockholders' equity: 2, 4
Preferred stock, $5 par value;
authorized 500,000 shares; none issued - -
Common stock, $0.10 par value; authorized
15,000,000 shares; issued 5,294,065 shares 529 529
Additional paid-in capital 15,135 15,311
Retained earnings 22,729 19,888
Less treasury stock at cost; 1,342,212 shares
and 1,372,212 shares of common stock (14,243) (14,562)
-------- --------
Total stockholders' equity 24,150 21,166
-------- --------
Total liabilities and stockholders' equity $ 33,520 31,319
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
-F3-
<PAGE>
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
Notes 1997 1996 1995
------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 32,404 40,159 41,419
Cost of revenues:
Labor and other operating expenses 23,548 28,684 27,679
Depreciation, depletion and amortization 3,437 3,592 3,197
-------- -------- --------
26,985 32,276 30,876
-------- -------- --------
Gross profit 5,419 7,883 10,543
Selling, general and administrative expenses 4,520 4,359 4,881
-------- -------- --------
Operating profit 899 3,524 5,662
Other deductions (income):
Interest expense 2 368 563 723
Loss (gain) on sale of assets, net 14 (21) (127)
Other, net (477) (234) (216)
-------- -------- --------
(95) 308 380
-------- -------- --------
Income before taxes 994 3,216 5,282
Income tax (benefit) expense, net 3 (2,102) 614 1,022
-------- -------- --------
Net income $ 3,096 2,602 4,260
======== ======== ========
Income per share of common stock: 1, 8
Basic earnings per common share $ 0.79 0.67 1.11
======== ======== ========
Diluted earnings per common share $ 0.78 0.66 1.11
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
-F4-
<PAGE>
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(dollars in thousands)
Years Ended December 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
Common Stock
---------------- Addt'l
Shares Paid-In Retained Treasury
Outstanding Amt. Capital Earnings Stock Total
----------- ---- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1995 3,836,063 $529 15,848 13,897 (15,472) 14,802
Common stock dividends - - - (286) - (286)
Adjustments to reflect minimum
pension liability (Note 4) - - - (27) - (27)
Net income - - - 4,260 - 4,260
--------- ---- ------- -------- -------- -------
Balances at December 31, 1995 3,836,063 $529 15,848 17,844 (15,472) 18,749
Stock options exercised 85,790 - (537) - 910 373
Common stock dividends - - - (389) - (389)
Adjustments to reflect minimum
pension liability (Note 4) - - - (169) - (169)
Net income - - - 2,602 - 2,602
--------- ---- ------- -------- -------- -------
Balances at December 31, 1996 3,921,853 $529 15,311 19,888 (14,562) 21,166
Stock options exercised 30,000 - (176) - 319 143
Common stock dividends - - - (394) - (394)
Adjustments to reflect minimum
pension liability (Note 4) - - - 139 - 139
Net income - - - 3,096 - 3,096
--------- ---- ------- -------- -------- -------
Balances at December 31, 1997 3,951,853 $529 15,135 22,729 (14,243) 24,150
========= ==== ======= ======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements
-F5-
<PAGE>
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,096 2,602 4,260
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation, depletion and amortization 3,503 3,757 3,354
Amortization of financing costs 50 101 139
Increase in deferred income tax benefit (2,537) - -
Loss (gain) on sale of assets 14 (21) (127)
Loss on sale of Corson Lime Company assets 506 - -
Changes in assets and liabilities:
(Increase)/decrease in trade receivables 1,528 357 493
(Increase)/decrease in inventories 332 278 (562)
(Increase)/decrease in prepaid expenses (19) (200) 86
(Increase)/decrease in other assets 292 93 34
Increase/(decrease) in accounts payable
and accrued expenses 973 121 408
Increase/(decrease) in other liabilities (474) (38) (142)
-------- -------- --------
Total adjustments 4,168 4,448 3,683
-------- -------- --------
Net cash provided by operations $ 7,264 7,050 7,943
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property, plant and equipment $(11,872) (6,121) (4,851)
Proceeds from sale of Corson Lime Company
assets, net of expenses 7,745 - -
Proceeds from sales of
property, plant and equipment 44 69 176
-------- -------- --------
Net cash used in investing activities $ (4,083) (6,052) (4,675)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Proceeds from exercise of stock options $ 143 373 -
Payment of common stock dividends (394) (389) (286)
Proceeds from borrowings 2,900 800 2,200
Repayments of debt (4,043) (1,943) (4,044)
-------- -------- --------
Net cash used in financing activities $ (1,394) (1,159) (2,130)
-------- -------- --------
Net increase (decrease) in cash and
cash equivalents 1,787 (161) 1,138
Cash and cash equivalents at beginning of period 1,000 1,161 23
-------- -------- --------
Cash and cash equivalents at end of period $ 2,787 1,000 1,161
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
-F6-
<PAGE>
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)
Years Ended December 31, 1997, 1996 and 1995
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) Organization
The Company is a manufacturer of lime and limestone products
supplying primarily the steel, paper, agriculture, municipal
sanitation and water treatment and construction industries. The
Company is headquartered in Dallas, Texas and operates lime and
aggregate plants in Arkansas and Texas through its wholly owned
subsidiaries, Arkansas Lime Company and Texas Lime Company,
respectively. Through June 21, 1997, the Company also operated in
Pennsylvania through a wholly owned subsidiary, Corson Lime Company
(see Note 7 of Notes to Consolidated Financial Statements).
(b) Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All material intercompany balances and
transactions have been eliminated.
(c) Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
(d) Statements of Cash Flows
For purposes of reporting cash flows, the Company considers all
certificates of deposit and highly-liquid debt instruments, such as
U.S. treasury bills and notes, with original maturities of three
months or less to be cash equivalents. Cash equivalents are carried
at cost plus accrued interest, which approximates fair market value.
Supplemental cash flow information is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
Cash paid during the period for: ---- ---- ----
<S> <C> <C> <C>
Interest (net of amounts capitalized) $ 321 450 597
==== ==== ====
Income taxes $ 654 902 789
==== ==== ====
</TABLE>
(e) Trade Receivables
Trade receivables are presented net of the related allowance for
doubtful accounts, which totaled $80 and $71 at December 31, 1997 and
1996, respectively.
-F7-
<PAGE>
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)
(f) Inventories
Inventories are valued principally at the lower of cost or market
determined using the average cost method. Such costs include
materials, labor and production overhead.
A summary of inventories is as follows:
<TABLE>
<CAPTION>
December 31,
------------------
1997 1996
Lime and limestone inventories: ------- -------
<S> <C> <C>
Raw materials $ 624 860
Finished goods 844 2,190
------- -------
1,468 3,050
Service parts inventories 1,533 2,004
------- -------
$ 3,001 5,054
======= =======
</TABLE>
(g) Property, Plant and Equipment
For constructed assets, the capitalized cost includes the cash price
paid by the Company for labor and materials plus interest and project
management costs that are directly related to the constructed assets.
Total interest costs of $85 were capitalized for the year ended
December 31, 1997. No interest was capitalized in 1996 or 1995.
Depreciation of property, plant and equipment is being provided for
by the straight-line and declining-balance methods over estimated
useful lives as follows:
Buildings and building improvements 3 - 40 years
Machinery and equipment 3 - 20 years
Furniture and fixtures 3 - 10 years
Automotive equipment 3 - 8 years
Maintenance and repairs are charged to expense as incurred; renewals
and betterments are capitalized. When units of property are retired
or otherwise disposed of, their cost and related accumulated
depreciation are removed from the accounts, and any resulting gain or
loss is credited or charged to income.
The Company reviews its long-term assets for impairment in accordance
with the guidelines of Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" ("SFAS 121"). SFAS 121 requires
that when changes in circumstances indicate that the carrying amount
of an asset may not be recoverable, the Company should determine if
impairment of value exists. Impairment is measured as the amount by
which the carrying amount of the asset exceeds the expected future
undiscounted cash flows from the use and eventual disposal of the
assets under review. Any write-downs are treated as a permanent
reduction in the carrying value of the assets.
-F8-
<PAGE>
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)
(h) Other Assets
Other assets consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------
1997 1996
---- ----
<S> <C> <C>
Assets held for sale $ - 33
Deferred stripping costs - 717
Intangible asset, pension - 138
Deferred financing costs 54 51
---- ----
$ 54 939
==== ====
</TABLE>
It is the Company's policy to make available for sale assets
considered excess and no longer necessary for operations. The
carrying values of such assets are periodically reviewed and adjusted
downward to market, when appropriate.
The deferred stripping costs, all of which were related to Corson
Lime Company ("Corson"), were amortized by the unit-of-production
method based on the estimated recoverable reserves in the underlying
area. The deferred stripping costs were written-off in 1997 in
conjunction with the sale of the Corson assets. See Note 7 of Notes
to Consolidated Financial Statements.
Deferred financing costs are expensed over the shorter of the life of
the debt or expected life of the loan using the straight-line method.
(i) Environmental Expenditures
Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Expenditures that relate to
an existing condition caused by past operations, and which do not
contribute to current or future revenue generation, are expensed.
Liabilities are recorded when environmental assessments and/or
remedial efforts are probable, and the costs can be reasonably
estimated. Generally, the timing of these accruals will coincide
with completion of a feasibility study or the Company's commitment to
a formal plan of action.
(j) Stock Options
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), in
accounting for its employee stock options. Under APB 25, if the
exercise price of an employee's stock options equals or exceeds the
market price of the underlying stock on the date of grant, no
compensation expense is recognized. The Company adopted Statement
of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), in 1996. SFAS 123 requires
companies that elect to continue applying the provisions of APB 25
to provide pro forma disclosures for employee stock compensation
awards as if the fair-value-based method defined in SFAS 123 had
been applied. See Note 5 of Notes to Consolidated Financial
Statements.
-F9-
<PAGE>
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)
(k) Earnings Per Share of Common Stock
Effective December 31, 1997, Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("SFAS 128"), was implemented
by the Company. SFAS 128 requires the presentation of basic and
diluted earnings per share for all periods presented. As such,
earnings per share for prior years have been recalculated and are
presented in accordance with the guidelines of SFAS 128. See Note 8
of Note to Consolidated Financial Statements.
(l) Reclassifications
Certain previously reported amounts have been reclassified to conform
with the current presentation.
(2) Long-Term Debt
--------------
The Company has a financing agreement with a commercial bank. The
agreement, as amended and restated in December 1997, provides for a
$15,000 five-year secured term loan with monthly principal repayments of
$179 beginning no later than July 1998 and maturing in June 2003. From
January 1998 through June 1998, interest only payments are required.
This facility is secured by substantially all of the Company's property,
plant and equipment. The agreement also provides for a $4,000 unsecured
revolving credit facility which matures in December 1999. Both loans
bear interest at the bank's prime rate but may, at the option of the
Company, be converted into LIBOR-based loans that bear interest at LIBOR
plus 1.65% for the term loan and LIBOR plus 1.5% for the revolving credit
facility. The agreement also allows the Company to convert all or a
portion of the outstanding loans to a fixed rate loan by establishing a
fixed rate with the bank or through the use of interest rate protection
agreements with the bank. Fixed interest rates will be quoted by the
bank at the time of the request and will be based upon then-current
market conditions. The terms of the agreement contain, among other
provisions, requirements for maintaining a defined net worth and certain
financial ratios. The covenants also restrict incurrance of debt, liens
and lease obligations, mergers, and consolidations and acquisitions of
assets.
As part of the same amended and restated agreement, the Company
negotiated a $25,000 secured line of credit to provide temporary
financing for capital expenditures and acquisitions until such time as
permanent financing can be arranged. Any borrowings under this facility
would be at the bank's prime rate or, at the discretion of the Company,
may be converted into a LIBOR-based loan bearing interest at LIBOR plus
2%. The capital expenditure and acquisition line of credit is available,
if not extended, through September 1998 and is subject to approval by the
bank.
-F10-
<PAGE>
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
December 31,
-----------------
1997 1996
------- -------
<S> <C> <C>
Term loan $ 3,238 4,381
Revolving credit facility - -
------- -------
Subtotal 3,238 4,381
Less current installments 1,071 1,143
------- -------
Long-term debt, excluding current installments $ 2,167 3,238
======= =======
</TABLE>
Amounts payable on the $3,238 of long-term debt outstanding as of
December 31, 1997 to be paid in 1998 and thereafter are: 1998, $1,071;
1999, $2,143; 2000, $24. Additional amounts the Company will draw under
the amended and restated loan agreement will be paid out in accordance
with the description above and are not included in this payment schedule.
The carrying amount of the Company's long-term debt approximates its fair
value.
(3) Income Taxes
------------
Income tax (benefit) expense for the years ended December 31, 1997, 1996
and 1995 was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current income tax expense $ 435 614 1,022
Deferred income tax benefit (237) - -
------- ------- -------
Income tax expense 198 614 1,022
Recognition of previously reserved
deferred tax assets (2,300) - -
------- ------- -------
Income tax (benefit) expense, net $ (2,102) 614 1,022
======= ======= =======
</TABLE>
-F11-
<PAGE>
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)
A reconciliation of income taxes computed at the federal statutory rate
to income tax (benefit) expense for the years ended December 31, 1997,
1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- ---------------
Percent Percent Percent
of pretax of pretax of pretax
Amount income Amount income Amount income
------ ------- ------ ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Income taxes computed at
the federal statutory rate $ 338 34.0% 1,093 34.0% 1,796 34.0%
Increase (reductions) in
taxes resulting from:
Recognition of previously
reserved deferred
tax assets (2,300) (231.4) - - - -
General business credit
carryforwards - - (162) (5.0) (248) (4.6)
Statutory depletion in
excess of cost depletion (431) (43.4) (415) (12.9) (612) (11.6)
State income taxes, net of
federal income tax benefit 191 19.2 131 4.0 176 3.3
Other 100 10.1 (33) (1.0) (90) (1.7)
------ ------- ------ ------- ------ -------
Income tax (benefit)
expense, net $(2,102) (211.5)% 614 19.1% 1,022 19.4%
======= ======= ====== ======= ====== =======
</TABLE>
As reported in the Company's consolidated financial statements and notes
contained in its Form 10-K for the year ended December 31, 1996, the
Company had deferred tax assets which were previously fully reserved by a
valuation allowance in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). The
unrecognized deferred tax assets related primarily to net operating loss
carryforwards, general business credit carryforwards and alternative
minimum tax credit carryforwards.
Generally, the provisions of SFAS 109 require deferred tax assets to be
reduced by a valuation allowance if, based on the weight of available
evidence, it is "more likely" than not that some portion or all of the
deferred tax assets will not be realized. SFAS 109 requires an
assessment of all available evidence, both positive and negative, to
determine the amount of any required valuation allowance. No benefit
was given to the deferred tax assets at December 31, 1996 due to
uncertainties related to their utilization.
As a result of the sale of the Corson assets (see Note 7 of Notes to
Consolidated Financial Statements), the Company reviewed the deferred tax
assets and concluded that the uncertainties as to their realization had
been favorably resolved, in that the net operating loss carryforwards and
-F12-
<PAGE>
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)
the general business credit carryforwards are expected to be fully
utilized. The Company's future taxable income, enhanced by the sale of
the Corson assets, indicates future utilization of the alternative
minimum tax credit carryforwards in the upcoming years. The post-Corson
sale assessment as to the ultimate realization of the deferred tax assets
indicates that it is more likely than not that the deferred tax assets
will be realized.
As a result, the Company reduced the deferred tax assets' valuation
allowance in the second quarter of 1997 by $2,300, recording the deferred
tax assets and recognizing that amount in federal and state income tax
(benefit) expense, net .
At December 31, 1997, the Company had deferred tax liabilities of $629
and deferred tax assets of $3,166. The principal temporary difference
related to the deferred tax liabilities was depreciation ($344). The
principal temporary differences related to the deferred tax assets were
the tax benefit of net operating loss ("NOL") carryforwards ($279) and
alternative minimum tax credit carryforwards ($2,777).
At December 31, 1996, the Company had deferred tax liabilities of $555,
deferred tax assets of $3,657 and a valuation allowance of $3,102. The
principal temporary difference related to the deferred tax liabilities
was depreciation ($555). The principal temporary differences related
to the deferred tax assets were the tax benefit of NOL carryforwards
($109) and alternative minimum tax credit carryforwards ($2,593).
Included in deferred tax assets were the tax benefit of NOL carryforwards
for tax purposes of $279, which, if unused, will expire from 2008 through
2012. Also included were general business credits of $55 that are
available to reduce the Company's federal income tax, which, if unused,
expire in 2001.
(4) Employee Retirement Plans
-------------------------
The Company has a noncontributory defined benefit pension plan covering
substantially all union employees previously employed by its wholly-owned
subsidiary, Corson. Benefits for the Corson Lime Union Pension Plan (the
"Corson Plan") are based on certain multiples of years of service. In
June 1997, the Company sold substantially all of the assets of Corson to
an unrelated third party. In connection with the sale of the assets, the
Board of Directors resolved that all active participants in the Corson
Plan as of July 31, 1997 shall be fully vested and that no employee shall
be admitted to the Corson Plan after July 31, 1997. The Board of
Directors further resolved that all benefit accruals under the Corson
Plan shall cease as of July 31, 1997. There is no material impact on the
net assets of the Corson Plan as of December 31, 1997 as a result of the
freezing of the Plan.
In conjunction with the freezing of the Corson Plan, the Company
determined that it was in its best interest to fully fund the Corson Plan
-F13-
<PAGE>
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)
so as to minimize any future impact on the Company's results of
operations. The 1997 contributions were intended to provide for all
benefits earned for the participants' vested benefits under the Corson
Plan. The Company funded pension costs of $607 for 1997, $162 for 1996
and $127 for 1995.
A summary of the funding status of the Corson Plan and the amounts
recognized in the consolidated balance sheets is as follows:
<TABLE>
<CAPTION>
December 31,
----------------
1997 1996
------- -------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation:
Vested $ 1,480 1,417
Non-vested - 13
------- -------
Total $ 1,480 1,430
======= =======
Projected benefit obligation $(1,480) (1,430)
Plan assets at fair value, primarily listed
securities and short-term investments 1,488 776
------- -------
Projected benefit obligation in excess of plan assets - (654)
Plan assets in excess of projected benefit obligation 8 -
Unrecognized net loss from past experience
different from that assumed 345 426
Unrecognized net obligation at transition, being
recognized over 15 years - 8
Prior service cost not yet recognized in net
periodic pension cost - 131
Adjustments to recognize minimum liability (353) (565)
------- -------
Liability recognized in the consolidated balance sheets $ - (654)
======= =======
</TABLE>
A summary of the components of net periodic pension expense for the
Corson Plan follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 21 40 41
Interest cost on projected benefit obligations 116 108 100
Actual return on plan assets (168) 117 (32)
Liability deferred for later recognition, net 64 (186) (33)
Amortization of unrecognized net liability 11 11 10
Amortization of unrecognized prior service cost 13 25 23
------ ------ ------
Net periodic pension expense $ 57 115 109
====== ====== ======
Significant assumptions used in determination of
pension expense consist of the following:
Discount rate 8% 8% 8%
Long-term rate of return on plan assets 9% 9% 9%
</TABLE>
-F14-
<PAGE>
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)
The Company also has a contributory retirement (401(k)) savings plan for
nonunion employees. The Company contributions to the plan were $46
during 1997, $61 during 1996 and $58 during 1995. The Company has a
contributory retirement (401(k)) savings plan for union employees of
Texas Lime Company. The Company contributions to this plan were $13 in
1997, $14 in 1996 and $12 in 1995.
In December 1986, the Company purchased 1,550,000 shares of its
outstanding common stock, accounted for as treasury stock in the
consolidated balance sheets, for $10.50 per share. Subsequent to that
purchase, 300,000 shares, after stock split, were sold to the Employee
Stock Ownership Plan ("ESOP") for $8.20 per share. The ESOP covers
substantially all full-time nonunion employees and is designed to invest
primarily in the Company's common stock. Contributions to the ESOP are
currently made at the option of the Company. The Company did not make a
contribution during 1997, 1996 or 1995.
(5) Stock Option Plan
-----------------
The Company has a stock option plan under which options for shares of
common stock may be granted to key employees. The options expire ten
years from the date of grant and generally become exercisable after the
expiration of one year from the grant date. As of December 31, 1997,
70,000 shares were available for future grant under this plan.
A summary of the Company's stock option activity and related information
for the years ended December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 252,210 $6.83 355,000 $6.34 215,000 $4.77
Granted - - - - 160,000 8.25
Exercised (30,000) 4.75 (92,790) 4.80 - -
Forfeited (35,000) 8.25 (10,000) 8.25 (20,000) 4.75
------- ----- ------- ----- ------- -----
Outstanding at end of year 187,210 6.90 252,210 6.83 355,000 6.34
======= ===== ======= ===== ======= =====
Exercisable at end of year 187,210 6.90 252,210 6.83 195,000 4.78
======= ===== ======= ===== ======= =====
Weighted average fair value of
options granted during the year $ - $ - $2.15
===== ===== =====
Weighted average remaining
contractual life in years 7.12 8.13
===== =====
</TABLE>
-F15-
<PAGE>
SFAS 123 requires the disclosure of pro forma net income and income per
share of common stock information computed as if the Company had
accounted for its employee stock options granted subsequent to December
31, 1994 under the fair-value-based method set forth in SFAS 123. The
fair value for these options was estimated at the date of grant using the
Black-Scholes option valuation model with the following weighted average
assumptions for the 1995 grant: a risk-free interest rate of 6%; a
dividend yield of 2%; and a volatility factor of 0.34. In addition, the
fair value of these options was estimated based on an expected life of
three years.
The Black-Scholes options valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions, including
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion the
existing models do not necessarily provide a reliable single measure of
the fair value of its employee stock options. In addition, because SFAS
123 is applicable only to options granted subsequent to December 31,
1994, the pro forma information does not reflect the pro forma effect of
all previous stock option grants of the Company, and thus the pro forma
information is not necessarily indicative of future amounts.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the expected life of the options.
The Company's pro forma information follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Pro forma net income $ 3,035 2,495 4,246
Pro forma earnings per share:
Basic earnings per share $ 0.77 0.64 1.11
Diluted earnings per share $ 0.77 0.63 1.10
</TABLE>
(6) Commitments and Contingencies
-----------------------------
The Company leases some of the equipment used in its operations.
Generally, the leases are for periods varying from one to five years and
are renewable at the option of the Company. Total rent expense was $280
for 1997, $75 for 1996 and $232 for 1995. As of December 31, 1997,
future minimum payments under noncancelable operating leases are as
follows: 1998, $75; and 1999, $36.
The Company has placed purchase orders for certain pieces of constructed
equipment related to the Texas plant's modernization and expansion
project. Under the terms of the construction agreements, the Company
receives periodic billings for work performed to date. As of December
31, 1997, approximately $6,700 of billings related to the Texas project
had been received and paid by the Company. As of December 31, 1997, the
Company's liability for open equipment and construction orders, all of
which were related to the Texas modernization and expansion project,
-F16-
<PAGE>
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)
totaled approximately $2,500. This amount, as well as other future
billings related to the Texas and Arkansas modernization and expansion
project, will be recorded as work is performed and billed to the Company.
The Company is party to lawsuits and claims arising in the normal course
of business, none of which, in the opinion of management, is expected to
have a material adverse effect on the Company's financial condition,
results of operation, liquidity or competitive position.
(7) Sale of Corson Lime Company Assets
----------------------------------
Effective June 21, 1997, Corson, a wholly owned subsidiary of the
Company, sold substantially all of its aggregate and lime assets for
$8,231 in cash, including a $376 note collected in October 1997. A
portion of the proceeds from the sale was used to pay down the
outstanding balance under the Company's revolving credit facility of
$2,900. The remainder of the proceeds was used to partially fund the
Texas plant's modernization and expansion project. The sale resulted in
a loss of $506 ($405 net of tax benefit), which is included in labor and
other operating expenses in the accompanying consolidated statements of
operations.
(8) Earnings Per Share
------------------
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1997 1996 1995
Numerator: --------- --------- ---------
<S> <C> <C> <C>
Net income for basic and diluted
earnings per common share $ 3,096 2,602 4,260
Denominator:
Denominator for basic earnings per
common share - weighted-average shares 3,929,579 3,890,646 3,836,063
Effect of dilutive securities:
Employee stock options 15,928 55,071 10,966
--------- --------- ---------
Denominator for diluted earnings per
common share - adjusted weighted-average
shares and assumed conversions 3,945,507 3,945,717 3,847,029
========= ========= =========
Basic earnings per common share $ 0.79 0.67 1.11
========= ========= =========
Diluted earnings per common share $ 0.78 0.66 1.11
========= ========= =========
</TABLE>
-F17-
<PAGE>
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands, except per share amounts)
(9) Summary of Quarterly Financial Data (unaudited)
-----------------------------------------------
<TABLE>
<CAPTION>
March 31, June 30, Sept 30, Dec 31,
1997 1997 1997 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 7,808 10,350 7,725 6,521
-------- -------- -------- --------
Gross profit 595 1,118 2,521 1,185
-------- -------- -------- --------
Net income (488) 2,176 1,321 87
======== ======== ======== ========
Net income per common share:
Basic earnings per share $ (0.12) 0.55 0.34 0.02
======== ======== ======== ========
Diluted earnings per share $ (0.12) 0.55 0.33 0.02
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
March 31, June 30, Sept 30, Dec 31,
1996 1996 1996 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 8,523 11,583 10,452 9,601
-------- -------- -------- --------
Gross profit 1,810 3,063 1,890 1,120
-------- -------- -------- --------
Net income 503 1,471 571 57
======== ======== ======== ========
Net income per common share:
Basic earnings per share $ 0.13 0.38 0.15 0.01
======== ======== ======== ========
Diluted earnings per share $ 0.13 0.37 0.14 0.01
======== ======== ======== ========
</TABLE>
-F18-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
---------------------------------------------------------------
NONE
PART III
The information required in response to Items 10, 11, 12 and 13 is hereby
incorporated by reference to the information under the captions "Election of
Directors", "Executive Officers of the Company Who Are Not Also Directors",
"Executive Compensation", "Voting Securities and Principal Shareholder" and
"Shareholdings of Company Directors and Executive Officers" in the definitive
Proxy Statement for the Company's 1998 Annual Meeting of Shareholders. The
Company anticipates that it will file the definitive Proxy Statement with the
Securities and Exchange Commission on or before April 30, 1998.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
----------------------------------------------------------------
(a) 1. The following financial statements are included in Item 8:
Report of Independent Auditors
Consolidated Financial Statements:
Consolidated Balance Sheets as of December, 31, 1997 and 1996;
Consolidated Statements of Income for the Years Ended December
31, 1997, 1996, and 1995;
Consolidated Statements of Stockholders' Equity for the Years
Ended December, 31, 1997, 1996 and 1995;
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995; and
Notes to Consolidated Financial Statements.
2. All financial statement schedules are omitted because they are
not applicable or the required information is presented in the
consolidated financial statements or the related notes.
-13-
<PAGE>
3. The following documents are filed with or incorporated by
reference into this Report:
3(a) Articles of Amendment to the Articles of Incorporation of
Scottish Heritable, Inc. dated January 25th, 1994
(incorporated by reference to Exhibit 3(a) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, File Number 0-4197).
3(b) Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, File number 0-4197).
3(c) Composite Copy of Bylaws of the Company, as currently in
effect (incorporated by reference to Exhibit 3(b) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1991, File Number 0-4197).
10(a) United States Lime & Minerals, Inc. Employee Stock
Ownership Plan, as restated and amended effective August 1,
1989 (incorporated by reference to Exhibit 10 (b) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, File Number 0-4197).
10(b) Amendment No. Two to United States Lime & Minerals, Inc.
Employee Stock Ownership Plan effective August 1, 1996
(incorporated by reference to Exhibit 10(b) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, File Number 0-4197).
10(c) United States Lime & Minerals, Inc. 401(k) Profit Sharing
Plan effective August 1, 1983, as amended and restated
effective January 1, 1997 (incorporated by reference to
Exhibit 10(c) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996, File Number
0-4197).
10(d) Texas Lime Company Bargaining Unit 401(k) Plan effective as
of January 1, 1992 (incorporated by reference to Exhibit
19(f) to the Company's Quarterly Report on Form 10-Q for
the quarter ended June, 30, 1992, File Number 0-4197).
10(e) Executive Retention Agreement dated as of June 10, 1992
between the Company and Timothy W. Byrne (incorporated by
reference to Exhibit 19(b) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1992,
File Number 0-4197).
10(f) Employment Agreement between the Company and Timothy W.
Byrne (incorporated by reference to Exhibit 19(c) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1992, File Number 0-4197).
10(g) United States Lime & Minerals, Inc. 1992 Stock Option Plan
(incorporated by reference to Exhibit A to the Company's
definitive Proxy Statement for its 1992 Annual Meeting of
Shareholders held on June 9, 1992, File Number 0-4197).
10(h) Employment Agreement dated as of September 27, 1993 between
the Company and Robert F. Kizer (incorporated by reference
to Exhibit 10(a) to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1994, File
Number 0-4197).
-14-
<PAGE>
10(i) Consulting Agreement dated April 18, 1996 between the
Company and Wallace G. Irmscher (incorporated by reference
to Exhibit 10(t) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996,
File Number 0-4197).
10(j) Amendment to the Texas Lime Company Bargaining Unit 401(k)
Plan dated January 1, 1992, effective November 9, 1997.
10(k) Asset Purchase Agreement among Corson Lime Company, United
States Lime & Minerals, Inc., and Highway Materials, Inc.,
dated as of April 22, 1997 (incorporated by reference to
Exhibit 2 to the Company's Current Report on Form 8-K dated
June 21, 1997, File Number 0-4197).
10(l) Amended and Restated Loan and Security Agreement dated
December 30, 1997 among United States Lime & Minerals,
Inc., Arkansas Lime Company and Texas Lime Company and
CoreStates Bank, N.A.
10(m) Arkansas Lime Company Bargaining Unit 401(k) Plan effective
as of January 1, 1998.
10(n) Mutual Release Agreement dated as of February 27, 1998
between the Company and Robert F. Kizer.
10(o) Employment Agreement dated as of April 17, 1997 between
the Company and Johnney G. Bowers.
21 Subsidiaries of the Company.
23 Consent of Independent Auditors
27 Financial Data Schedule.
_______________________________
Exhibits 10(a) through 10(j), and 10(m) through 10(o) are management
contracts or compensatory plans or arrangements required to be filed as
exhibits.
(b) The Company did not file any Current Reports on Form 8-K during the
fourth quarter of 1997.
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
UNITED STATES LIME & MINERALS, INC.
Date: March 20, 1998 By: \s\ Timothy W. Byrne
-----------------------------------
Timothy W. Byrne, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: March 20, 1998 By: \s\ Timothy W. Byrne
-----------------------------------
Timothy W. Byrne, President, Chief
Executive Officer, Chief Financial
Officer and Director
(Principal Executive and Financial
Officer)
Date: March 20, 1998 By: \s\ Larry T. Ohms
-----------------------------------
Larry T. Ohms, Corporate Controller
and Assistant Treasurer
(Principal Accounting Officer)
Date: March 20, 1998 By: \s\ Edward A. Odishaw
-----------------------------------
Edward A. Odishaw, Director and
Chairman of the Board
Date: March 20, 1998 By: \s\ Antoine M. Doumet
-----------------------------------
Antoine M. Doumet, Director and
Vice Chairman of the Board
Date: March 20, 1998 By: \s\ John J. Brown
-----------------------------------
John J. Brown, Director
Date: March 20, 1998 By: \s\ Wallace G. Irmscher
-----------------------------------
Wallace G. Irmscher, Director
-16-
<PAGE>
UNITED STATES LIME & MINERALS, INC.
Annual Report on Form 10-K
Index to Exhibits
Certain exhibits to this Annual Report on Form 10-K have been
incorporated by reference. For the list of these exhibits see Item 14 hereof.
The following exhibits are being filed herewith:
Exhibit No. Exhibit
---------- ---------------------------------------------------------------
10(j) Amendment to the Texas Lime Company Bargaining Unit 401(k) Plan
dated January 1, 1992, effective November 9, 1997.
10(l) Amended and Restated Loan and Security Agreement dated December
30, 1997 among United States Lime & Minerals, Inc., Arkansas
Lime Company and Texas Lime Company and CoreStates Bank, N.A.
10(m) Arkansas Lime Company Bargaining Unit 401(k) Plan effective as
of January 1, 1998.
10(n) Mutual Release Agreement dated as of February 27, 1998 between
the Company and Robert F. Kizer.
10(o) Employment Agreement dated as of April 17, 1997 between the
Company and Johnney G. Bowers.
21 Subsidiaries of the Company.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
AMENDMENT TO THE
Texas Lime Company Bargaining Unit 401(k) Plan
Pursuant to Article XX, Section 20.01, of the Texas Lime Company Bargaining
Unit 401(k) Plan (the "Plan"), Texas Lime Company (the "Employer"), hereby
amends the Plan, effective November 9, 1997, as follows:
Section II, subsection A. of the Adoption Agreement is amended in the
following manner:
The maximum percentage of Compensation which a Participant may
contribute to the Plan through Salary Reduction Contributions shall be
increased to 20% from the current maximum of 6%.
Section IV, subsection B. and C. of the Adoption Agreement are amended by
substituting the following selection:
The Employer Matching Contribution shall equal 100% of the first 1% of
an Employee's Compensation plus 50% of the next 1% of Compensation on which
Salary Reductions are made. Each Employee's aggregate contributions in
excess of 2% of Compensation shall not be matched.
Effective November 9, 1998, the Employer Matching Contribution shall
equal 100% of the first 100% of an Employee's Compensation plus 50% of the
next 2% of Compensation on which Salary Reduction Contributions are made.
Each Employee's aggregate contributions in excess of 3% of Compensation shall
not be matched.
As evidence of the adoption of this amendment, Texas Lime Company have caused
this amendment to be executed by the appropriate officers as of January 12,
1998.
Texas Lime Company Scudder Investor Services, Inc.
By: /s/ Timothy W. Byrne By: /s/ Sydney S. Tucker
------------------------- -------------------------
Title: President Title: Vice President
Date: January 12, 1998 Date: January 20, 1998
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
CORESTATES BANK, N.A.
("Bank")
UNITED STATES LIME & MINERALS, INC.
ARKANSAS LIME COMPANY
TEXAS LIME COMPANY
("Borrowers")
$15,000,000 Term Loan
$4,000,000 Revolving Credit
$25,000,000 Line of Credit
December 30, 1997
<PAGE>
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT ("Agreement") is
made this 30th day of December, 1997 by and among UNITED STATES LIME &
MINERALS, INC., a Texas corporation (formerly known as Scottish Heritable,
Inc.) ("U.S. Lime"), TEXAS LIME COMPANY, a Texas corporation ("TLC"), ARKANSAS
LIME COMPANY, an Arkansas corporation ("ALC") (U.S. Lime, TLC and ALC being
collectively referred to as the "Borrowers" and individually as a "Borrower";
TLC and ALC being sometimes collectively referred to as the "Subsidiaries"),
and CORESTATES BANK, N.A., a national banking association ("Bank").
Background
A. Each of the Subsidiaries is in the business of quarrying, crushing
and pyroprocessing native limestone by burning in kilns to produce quick lime,
hydrated lime, pulverized limestone and aggregate for agricultural,
construction and industrial purposes. TLC owns and operates a quarry and
processing facility in Cleburne, Johnson County, Texas. ALC owns and operates
a quarry and processing facility in Batesville, Independence County, Arkansas.
B. U.S. Lime owns all of the issued and outstanding capital stock of
each of the Subsidiaries.
C. This Agreement is a continuation of, and amends and restates, that
certain Loan and Security Agreement dated October 20, 1993, as amended by
Amendment No. 1 to Loan and Security Agreement dated as of December 23, 1994,
Amendment No. 2 to Loan and Security Agreement dated April 28, 1995, Amendment
No. 3 to Loan and Security Agreement dated September 29, 1995, a letter
agreement dated October 26, 1995, and Amendment No. 5 to Loan and Security
Agreement dated November 27, 1996, pursuant to which Bank has made available
to Borrowers certain credit facilities specifically described therein
(collectively, the "Prior Loan Agreement," and including all documents and
instruments delivered in connection with the Prior Loan Agreement, the "Prior
Documents").
D. Bank and Borrowers agree hereby to amend and restate the Prior
Documents as follows: (i) the term loan facility shall be continued and
restated as a five-year $15,000,000 secured amortizing term loan; (ii) the
revolving credit facility shall be continued and restated as a two-year
$4,000,000 unsecured revolving credit facility, with a provision for the
issuance by Bank of up to $750,000 in the aggregate face amount of standby
letters of credit; and (iii) there shall be established a nine-month
$25,000,000 secured discretionary line of credit facility to be used for
acquisitions and capital expenditures. Bank has agreed to extend such credit
facilities to Borrowers, subject to the terms and conditions hereinafter more
particularly set forth.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants set forth herein, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. DEFINITIONS; CERTAIN RULES OF CONSTRUCTION
1.1 Defined Terms. Each of the terms listed below shall have
the meaning herein ascribed to it for the purposes hereof and for each of the
Loan Documents. Initially capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Uniform Commercial Code as
enacted in Pennsylvania.
"Adjusted LIBOR" means the LIBOR finally adjusted and determined in
accordance with the following formula:
[LIBOR]*
Adj. LR = -----------
[1.00 - RP]
Adj. LR = Adjusted LIBOR
LIBOR = London Interbank Offered Rate
RP = Reserve Percentage pertaining to
eurocurrency liabilities
_______________
* the amount in brackets shall be rounded upwards if necessary, to the next
higher 1/16 of 1%
"Adjusted LIBOR Loans" mean Cash Advances or applicable portions of
the Revolving Credit Loan, Line of Credit Loan or the Term Loan bearing
interest at a rate determined with reference to the Adjusted LIBOR.
"Affiliate" means and refers to, as applied to any Person, any other
person directly or indirectly controlling, or who through one or more Persons
is controlled by or under common control with that Person. "Control"
(including with correlative meanings the terms "controlling," "controlled by,"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and/or policies of that Person, whether through
the ownership of voting securities, by contract, or otherwise.
"Agreement" means this Amended and Restated Loan and Security
Agreement, any schedules, exhibits, riders, extensions, supplements,
amendments, or modifications hereto, and any further restatements hereof.
"ALC" means Arkansas Lime Company, an Arkansas corporation.
"Application and Agreement for Standby Letter of Credit" means the
Application and Agreement for Standby Letter of Credit substantially in the
form of Schedule 1.1(a) attached hereto and made a part hereof.
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"Authorized Officer" means any of the officers of any Borrower
selected by Borrowers to represent them in dealings with Bank, which officers
are listed on the certificate to be delivered to Bank at Closing or any
replacement certificate with respect thereto subsequently delivered to Bank.
"Bank" means CoreStates Bank, N.A., a national banking association,
and its successors and assigns.
"Bank's Costs" means all reasonable out of pocket costs and expenses
of any kind paid or incurred by Bank in connection with the preparation,
execution, delivery, amendment, modification, administration or termination of
this Agreement or any other Loan Document, any amendments, modifications,
extensions hereto or thereto or any forbearance hereof or thereof, any
transaction contemplated herein and the preservation, enforcement, defense and
protection of Bank's rights, remedies, obligations and liabilities in any
manner concerning this Agreement or any other Loan Document, any transaction
contemplated herein or therein, including, but not limited to: (a)
expenditures of every nature and kind of Borrowers paid or incurred by Bank
pursuant to Section 3.1.4 hereof with respect to maintenance of Collateral;
(b) filing, recording, publication, appraisal, search and title insurance
costs related to the Collateral, including, but not limited to, costs paid to
perfect, maintain perfected and preserve the existence of the liens on the
Collateral and to search the public record to ensure the absence of liens
thereon; (c) costs incurred in collecting and gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale and advertising to sell the Collateral; (d) out of pocket expenses,
including without limitation reasonable attorneys' fees, paid or incurred by
Bank in enforcing, obtaining legal advice in preparing, reviewing,
consummating, amending, restructuring, extending, terminating, defending, or
preserving or protecting Bank's rights, remedies, obligations or liabilities
in any manner concerning, this Agreement, any Loan Document or any amendments
hereto or thereto, any transaction contemplated herein or therein; and (e)
wire transfer charges incurred in connection with advances and repayments
hereunder in such amounts as Bank may from time to time establish for such
service consistent with the Bank's normal and customary charges at the time.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now or hereafter in effect, or any successor statute.
"Base Rate" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the Prime Rate
(computed on the basis of the actual number of days elapsed over a year of
360 days) in effect on such day.
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"Base Rate Loans" mean Cash Advances or applicable portions of the
Revolving Credit Loan, the Line of Credit Loan, or the Term Loan bearing
interest at a rate with reference to the Base Rate.
"Borrowers" means collectively U.S. Lime and all of the
Subsidiaries.
"Business Day" means any day other than a Saturday, a Sunday, or
another day on which national banks are closed.
"Calendar Quarter" means the three month period ending on the last
day of March, June, September and December of each year.
"Capital Expenditures" mean any plant or equipment expenditure or
other expenditure which, in accordance with GAAP, is classified as a capital
expenditure.
"Capital Lease" means any lease of any property (real, personal or
mixed) which, in conformity with GAAP, is or should be accounted for as a
capital lease on the consolidated balance sheet of Borrowers.
"Capital Lease Expense" means, with respect to any Person for any
period, the aggregate, with respect to all Capital Leases of such Person, of
the portions of the rental payments payable in respect of such period under
such Leases which are accounted for as principal in accordance with GAAP.
"Cash" means money, currency or a credit balance in a Deposit
Account.
"Cash Advance" means any advance of cash to any Borrower under the
Revolving Credit (including draws under Letters of Credit), and under the Line
of Credit, subject to and in accordance with the provisions of Article 2
hereof.
"Cash Equivalents" means (i) marketable direct obligations issued or
unconditionally guarantied by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof,
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having the highest rating obtainable
from either Standard & Poor's Corporation or Moody's Investors Service, Inc.,
(iii) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having the highest rating
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc., (iv) certificates of deposit, demand accounts or bankers'
acceptances maturing within one year from the date of acquisition thereof
issued by Bank or commercial banks organized under the laws of the United
States of America or any state thereof or the District of Columbia, each
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having combined capital and surplus of not less than $100,000,000, (v) the
dollar value of shares of money market mutual funds governed by the Investment
Company Act of 1940, and (vi) repurchase agreements and reverse repurchase
agreements with securities dealers of recognized national standing relating to
any of the obligations referred to in the foregoing clause (i); provided that
the terms of such agreement comply with the guidelines set forth in the
Federal Financial Institutions Examination Council Supervisory Policy --
Repurchase Agreements of Depository Institutions with Securities Dealers and
Others as adopted by the Comptroller of the Currency on October 31, 1985 (the
"Supervisory Policy"); and further provided that possession or control of the
underlying securities is established as provided in the Supervisory Policy.
"Cash Flow" means Net Income after provision for all taxes, plus:
(i) changes in deferred taxes; (ii) depreciation and amortization; (iii)
Interest Expense, including the interest and principal portions of Capital
Leases; (iv) Operating Lease Expense; and (v) other non-cash charges to
income.
"Closing" and "Closing Date" means the day on which the Term Loan is
funded hereunder.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor code or statute.
"Collateral" with respect to each Borrower shall mean the assets and
Real Estate of the Borrower in which a security interest or lien is granted by
such Borrower to the Bank pursuant to Section 3.1 hereof.
"Debt" means for any Person at any date, without duplication and as
determined in accordance with GAAP, (i) all obligations of such Person for
borrowed money, (ii) all indebtedness of such Person evidenced by bonds
(other than surety, appeal, payment, performance and similar types of bonds),
debentures, notes or other similar instruments with an original maturity in
excess of one year, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable and
accrued liabilities, in each case arising in the ordinary course of business,
(iv) the capitalized amounts of all obligations of such Person as lessee under
Capital Leases, (v) all obligations of others secured by a lien on any asset
of such Person, whether or not such obligation is assumed by such Person, but
in each case not to exceed the lesser of the amount of such obligation or the
fair market value at the time of the liened asset, and (vi) the net liability
of such Person on all Debt of others which is guaranteed by such Person.
"Deposit Account" means a demand, time, savings, passbook or like
account with a federally insured bank or savings and loan association, other
than an account evidenced by a negotiable certificate of deposit.
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"Designated Officer" means Clifford W. Kewley or any other person
designated in writing by the Bank as its representative for the purpose of
receiving notice hereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Event of Default" means each of the events or circumstances set
forth in Section 8.1 hereof.
"Financial Statements" means the consolidated financial statements
of the Borrowers of the type described in Section 6.1.1 hereof, together with
all notes pertaining thereto.
"Fiscal Year" means the twelve-month period ending on December 31
of each year.
"Fixed Obligations" means in respect of any Calendar Quarter the
sum of the following, except in each case to the extent payable to another
Borrower, (i) all principal payments payable during such Calendar Quarter by
a Borrower on account of any Debt plus (ii) the Borrowers' aggregate Operating
Lease Expense and Interest Expense for such Calendar Quarter including,
without limitation or duplication, the aggregate of all amounts payable by the
Borrowers or any of them during such Calendar Quarter under any Capital Lease
except the portion thereof included under clause (i) above as Capital Lease
Expense, and except that in all events amounts payable at maturity on the
Revolving Credit Note and the Line of Credit Note, or otherwise in respect of
the Revolving Credit and the Line of Credit, respectively, shall not be deemed
to be Fixed Obligations for purposes hereof.
"Fixed Rate" means, in the event that Borrowers have elected to pay
interest on all or a portion of the Term Loan at a fixed rate pursuant to
Section 2.1.1 hereof, a rate of interest per annum determined in Bank's
reasonable sole discretion, pursuant to Section 2.1.4 hereof with respect to
Bank's quotation of the Fixed Rate.
"Fixed Rate Loan" means a Loan bearing interest at the Fixed Rate.
"Funding Date" means the Business Day, other than the Closing Date,
on which a Cash Advance is made.
"GAAP" means generally accepted accounting principles as set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board. In the event of
any change in GAAP after the date hereof, the parties agree to amend any and
all of the financial covenants contained in this Agreement which may be
affected by the change in such manner or manners as may be necessary to avoid
the existence or threat of an Event of Default or Unmatured Event of Default
which would or might otherwise result from such change.
6
<PAGE>
"Governmental Approvals" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with, and
reports to, all governmental bodies, including without limitation, permits
issued by the United States Environmental Protection Agency, the Texas Natural
Resources Conservation Commission and the Arkansas Department of Pollution
Control and Ecology.
"Indebtedness" means all amounts due from Borrowers or any Borrower
to Bank pursuant to Article 2, Section 1.6 or otherwise arising out of or in
connection with this Agreement or any other agreement, understanding,
relationship or arrangement between Borrowers and Bank, now existing or
hereafter incurred.
"Interest Expense" means all payments by Borrowers with respect to
interest on the Indebtedness or any other obligation of Borrowers, other than
an obligation owing to another Borrower, on which interest is paid.
"Interest Period" means that period of time applicable to an
Adjusted LIBOR Loan as determined pursuant to Section 2.4.4 hereof.
"Interest Rate Determination Date" means each date for determining
the interest rate on an Adjusted LIBOR Loan in respect of an Interest Period.
The Interest Rate Determination Date shall be the second London Business Day
prior to the first day of the related Interest Period for an Adjusted LIBOR
Loan.
"Interest Rate Option" means the Fixed Rate, the Base Rate or the
Adjusted LIBOR selected by Borrowers as permitted by this Agreement.
"Letter of Credit" means any letter of credit issued by Bank
pursuant to Section 2.2 hereof.
"LIBOR" means the rate per annum at which deposits of dollars are
offered to Bank by prime banks in the London Eurodollar interbank market at
or about 11:00 A.M. London time in such interbank market, two London Business
Days prior to the first day of the applicable Interest Period for a period
equal to the period of such Interest Period in an amount substantially equal
to the principal amount requested to be lent at, maintained as or converted
to an Adjusted LIBOR Loan.
"Line of Credit" means the aggregate secured line of credit facility
under which Bank may make Cash Advances to one or more of the Borrowers, in
the maximum principal amount outstanding at any one time of $25,000,000, as
more fully described in and subject to the terms of Section 2.3 hereof.
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"Line of Credit Loans" means Loans made under the Line of Credit.
"Line of Credit Note" means each promissory note of Borrowers
payable to the order of Bank to evidence Borrowers' joint and several
repayment obligations under this Agreement with respect to the Line of Credit.
"Line of Credit Termination Date" means, with respect to the Line of
Credit, the date that is nine months after the Closing Date, and all
extensions of such date agreed to in writing by Bank pursuant to Section 2.3.1
hereof.
"Loans" means collectively the Term Loan, the Revolving Credit Loan
and the Line of Credit Loan, and a "Loan" means any one of the Term Loan, the
Revolving Credit Loan or the Line of Credit Loan.
"Loan Documents" means this Agreement, the Notes, the individual
Mortgages, as amended and confirmed by the Mortgage Confirmations, all
financing statements and fixture filings filed or recorded in connection with
this Agreement, and all certificates of Borrowers, or any Borrower, delivered
pursuant to this Agreement.
"London Business Day" means any Business Day on which commercial
banks are open for international business (including dealings in Dollar
deposits) in London and Philadelphia.
"Materially Adverse Effect" means a substantial adverse effect upon
the financial condition, results of operations or business prospects of any
Borrower or upon the ability of any Borrower to perform, punctually when due
in each case, all of its obligations under the Loan Documents.
"Maximum Available Credit" means the maximum amount of the Loans
which may be outstanding under this Agreement as determined in accordance with
Section 2.4.13 hereof.
"Mortgage Confirmations" means the Acknowledgment and Confirmation
of Mortgage, Assignment of Leases, Rents and Profits, Security Agreement,
Financing Statement and Fixture Filing of even date herewith, executed by ALC
in favor of Bank, and the Acknowledgment, Confirmation of, and Amendment to
Deed of Trust, Assignment of Rents, Security Agreement, Financing Statement
and Fixture Filing, each of even date herewith, executed by TLC in favor of
Bank, which Mortgage Confirmations shall be substantially in the forms set
forth in Schedule 1.1(b) attached hereto and made a part hereof.
"Mortgages" means collectively the mortgage granted by ALC and TLC
individually to Bank, each dated as of October 20, 1993 and executed in
connection with the Prior Documents, as confirmed and amended by the Mortgage
Confirmations.
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"Net Income" means for any period the consolidated net income of
U.S. Lime and its subsidiaries for such period, as determined in accordance
with GAAP.
"Net Worth" means the sum of each Borrower's (i) capital stock, (ii)
cumulative retained earnings; (iii) additions to capital; (iv) capital in
excess of par or stated value; and (v) any other account which, in accordance
with GAAP constitutes shareholders' equity; less the sum of each Borrower's
(a) treasury stock, and (b) any capital write-down resulting from any
re-appraisal of assets or investments previously recorded on Borrowers'
consolidated balance sheet at the lower amount.
"Notes" means the Revolving Credit Note, the Line of Credit Note and
the Term Note, and any substitution therefor and any extension, supplement,
amendment or addendum thereto.
"Notice of Borrowing" means a notice substantially in the form of
Schedule 2.4.1, attached hereto and made a part hereof.
"Notice of Rate Election" means a notice substantially in the form
of Schedule 2.4.2 attached hereto and made a part hereof.
"Operating Lease" means any lease of any property (real, personal or
mixed) which is not a Capital Lease and on which a Borrower is the lessee and
a Person other than a Borrower is the lessor or assignee thereof.
"Operating Lease Expense" with respect to any period means the
aggregate of all rental payments required to be made by or on behalf of any
Borrower as lessee under an Operating Lease in respect of such period.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" means all permits, licenses and approvals required by law
and sufficient for the operation of each Borrower's Real Estate for the use
and in the manner presently used and operated by such Borrower, including
without limitation the business of quarrying, crushing and pyro-processing
native limestone, which permits are listed on Schedule 1.1(c) hereto; such
Permits shall include, without limitation, mining and extraction permits, and
air and water quality permits.
"Permitted Liens" means (i) liens for taxes, assessments or
governmental charges or claims which are not overdue or which are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, if a reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made therefor; (ii) statutory liens
of landlords and liens of carriers, warehousemen, materialmen, repairmen,
suppliers and other like liens incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith by appropriate
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proceedings promptly instituted and diligently conducted, if a reserve or
other appropriate provision, if any, as shall be required by GAAP shall have
been made therefor; (iii) liens (other than any lien imposed by ERISA)
incurred or deposits made in the ordinary course of business in connection
with workers' compensation or unemployment insurance and other types of social
security; (iv) liens incurred or deposits made to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and other similar
obligations incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) any judgment lien;
provided that, within 45 days after the entry of the judgment secured thereby,
such judgment shall be discharged or execution thereof shall be stayed pending
appeal; and further provided that such judgment shall be discharged within 60
days after the expiration of any such stay; (vi) the rights of tenants under
leases or subleases not interfering with the ordinary conduct of any
Borrower's business; (vii) minor irregularities of title, easements,
rights-of-way, encroachments, zoning provisions, covenants, conditions,
restrictions and other similar charges, encumbrances and governmental
restrictions not interfering with the ordinary conduct of the business of any
Borrower; (viii) purchase money security interests permitted pursuant to
Section 7.1.2 hereof; (ix) the interest of the lessor under leases permitted
hereunder under which a Borrower is the lessee; and (x) liens set forth on
Schedule 5.1.3 hereto.
"Person" means an individual, corporation, partnership, joint
venture, trust or unincorporated organization, or a government or any agency
or political subdivision thereof.
"Prime Rate" means that rate of interest per annum announced by Bank
from time to time as its "Prime Rate", which may not represent the lowest rate
charged by Bank to other borrowers, or to any class of borrowers at any time,
or from time to time, calculated on a 360 day basis but charged for the number
of days actually elapsed during any year or part thereof.
"Prior Documents" and "Prior Loan Agreement" each shall have the
meaning ascribed to it in Paragraph C of the "Background" hereof.
"Real Estate" means all of the real property owned individually or
collectively by Borrowers as set forth, together with the name and record
titleholder thereof, on Schedule 1.1(d) attached hereto and made a part
hereof, all easements appurtenant to or benefitting the real property, all
improvements, fixtures, machinery and equipment necessary or incidental to the
general operation and maintenance thereof and all replacements thereof and
additions thereto, all as more particularly described on Schedule 1.1(d), it
being agreed, however, that the term "Real Estate" shall not include any of
the excepted parcels of real estate identified on Schedule 3.1.1 hereto.
"Reserve Percentage" means for any day that maximum percentage
(expressed as a decimal), whether or not incurred, which is in effect on such
day, as prescribed by the Board of Governors of the Federal Reserve System,
for determining the reserve requirement for a member bank of the Federal
Reserve System in Philadelphia with respect to Adjusted LIBOR "Eurocurrency
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liabilities" (as such term is defined in Regulation D) (or in respect of any
other category of liabilities which includes deposits by reference to which
the interest rate on Adjusted LIBOR Loans is determined or any category of
extensions of credit or other assets which includes loans by a non-United
States office of Bank to United States residents).
"Revolving Credit" means the aggregate unsecured revolving credit
facility under which Bank makes Cash Advances to one or more of the Borrowers,
and issues Letters of Credit, in the maximum principal amount outstanding at
any one time of $4,000,000 as more fully described in and subject to the terms
of Section 2.2 hereof.
"Revolving Credit Loans" means Loans made under the Revolving
Credit.
"Revolving Credit Note" means the amended and restated promissory
note of Borrowers payable to the order of the Bank to evidence Borrowers'
joint and several repayment obligations under the Revolving Credit.
"Revolving Credit Termination Date" means, with respect to the
Revolving Credit, the date that is 24 months after the Closing Date, or such
later date as may be agreed to in writing by Bank.
"RICO" means the Racketeer Influenced and Corrupt Organizations Act,
as amended by the Comprehensive Crime Control Act of 1984, 18 U.S.C.
Sections 1961-68.
"Rule" means and includes any law, rule or regulation binding upon
the Bank as well as any guideline or similar directive issued by a
governmental agency having regulatory jurisdiction over the Bank which the
Bank observes or with which it complies, whether or not such guideline or
directive technically has the force of law.
"Term Loan" means the secured term loan in the maximum principal
amount of $15,000,000 as more fully described in and subject to the terms of
Section 2.1 hereof.
"Term Loan Amortization Date" means, with respect to the Term Loan,
the date that is the earlier of: (i) the date that construction is completed
and Borrowers have commenced pyro-processing of limestone for commercial sale
from the modified number 6 kiln located at Cleburne, Johnson County, Texas, or
(ii) July 1, 1998.
"Term Loan Indebtedness" means all amounts due from Borrowers or any
Borrower to Bank arising under or in connection with the Term Loan and the
Term Note, including without limitation Bank's Costs.
"Term Loan Termination Date" means, with respect to the Term Loan,
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the date that is 60 months after the Term Loan Amortization Date.
"Term Note" means the amended and restated term note of Borrowers
payable to the order of the Bank to evidence Borrowers' joint and several
repayment obligations under the Term Loan.
"TLC" means Texas Lime Company, a Texas corporation.
"Total Liabilities" means, with respect to a Person, the sum of all
liabilities reflected on such Person's balance sheet and as otherwise required
by GAAP.
"Unmatured Event of Default" means and refers to any event, act, or
occurrence which with the passage of time or giving of notice or both would
become an Event of Default.
"Unused Fee" means, with respect to the Revolving Credit, the fees
provided for in Section 2.2.8 hereof.
"Working Capital" as of any date means Borrowers' consolidated
current assets less Borrowers' consolidated current liabilities consolidated
as of such date, all determined, both as to classification of items and
amounts, in accordance with GAAP, provided that for these purposes in no event
shall consolidated current liabilities include the principal amount owing on
the Revolving Credit Note or the Line of Credit Note, or otherwise in respect
of the Revolving Credit or the Line of Credit.
1.2 Construction of Definitions. All terms defined herein shall be
construed to include the plural or the singular, and references to persons in
the masculine or neuter gender shall refer to all genders, as the context
requires.
1.3 Accounting Reports and Principles. The character or amount of
any asset, liability, account or reserve and of any item of income or expense
to be determined, and any consolidation or other accounting computation to be
made, and the construction of any definition containing a financial term,
pursuant to this Agreement or any other Loan Document, shall be construed,
determined or made, as the case may be, in accordance with GAAP, consistently
applied and in effect as of the date of such determination, computation or
construction, unless such principles are inconsistent with any express
provision of this Agreement.
1.4 Business Day. Whenever any payment or other obligation
hereunder or under any other Loan Document is due on a day other than a
Business Day, such shall be paid or performed on the Business Day next
following the prescribed due date, except as otherwise specifically provided
for herein to the contrary, and such extension of time shall be included in
the computation of interest and charges. Any reference made herein or in any
other Loan Document to an hour of day shall refer to the then prevailing
Philadelphia, Pennsylvania time, unless specifically provided herein to the
contrary.
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1.5 Charging Accounts. Whenever Borrowers are obligated, pursuant
to Article 2 or Section 1.6 hereof, or pursuant to the Notes, or any other
Loan Document, to make payments of any nature to Bank, Bank shall be entitled,
and each Borrower hereby authorizes Bank to draw against any deposit account
owned by such Borrower at Bank on account of such fees and expenses or
payments due. Upon such drawing, Bank shall deliver to each Borrower a notice
setting forth, in reasonable detail, the amount of the fees, expenses and/or
payments to be satisfied by such draw, and the name or number of the account
or accounts from which the draw was made.
1.6 Bank's Costs. Borrowers shall pay the amount of all unpaid
Bank's Costs within ten (10) days after receipt of a detailed written notice
thereof from Bank. If not paid within such ten (10) day period, all past due
and owing interest payments, fees and all past due Bank's Costs shall bear
interest at the then applicable Base Rate.
1.7 Prior Documents. This Agreement shall be a continuation of,
and shall amend and restate, the Prior Loan Agreement. The parties hereto
agree that the provisions of the Prior Loan Agreement with respect to security
for the Term Loan shall not be terminated hereby, but shall remain in full
force and effect for the term hereof.
2. THE LOANS
2.1 Term Loan. The maximum principal amount of the Term Loan, as
continued, amended and restated hereby, shall be $15,000,000. On the date of
Closing, Bank shall continue the principal balance of the Term Loan
outstanding on the date of Closing under the Prior Loan Agreement as a portion
of the Term Loan hereunder. Subject to Borrower's satisfaction of the
conditions precedent set forth in Section 4.1 hereof prior to any additional
advance, Bank shall fund the portion of the Term Loan not outstanding under
the Prior Loan Agreement from time to time, but not more frequently then four
times in any calendar month, in amounts not less than $100,000 or integral
multiples of $50,000 in excess of such amount, upon Borrower's submission to
Bank of a summary of costs and expenses incurred to date in connection with
Borrower's plant modernization and expansion project in Cleburne, Texas and a
completed and executed Notice of Borrowing.
2.1.1 Term Loan Interest Rate. The Term Loan shall bear
interest at the Interest Rate Options selected by Borrowers pursuant to a
Notice of Borrowing delivered to Bank within the applicable time period(s) for
such desired Interest Rate Option (or at the Base Rate if notice is not given
within the applicable time period(s) for other Interest Rate Options). The
Term Loan shall bear interest on the unpaid principal balance thereof, (i)
with respect to Base Rate Loans, at the Base Rate, (ii) with respect to
Adjusted LIBOR Loans at the Adjusted LIBOR plus 1.65% per annum on the
relevant Interest Rate Determination Date, and (iii) with respect to Fixed
Rate Loans, at the Fixed Rate. During the term of the Term Loan, Borrowers may
request, by submitting to Bank a Notice of Rate Election, to change or
continue the Interest Rate Option on all or a portion of the Term Loan to a
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rate based on the applicable Base Rate, Adjusted LIBOR, or the Fixed Rate.
2.1.2 Payment of Principal and Interest. Principal with
respect to the Term Loan shall be paid in 59 equal monthly installments of
$178,571 each, commencing on the first Business Day of the month next
following the Term Loan Amortization Date, with a final balloon payment of the
remaining outstanding principal balance of the Term Loan, together with all
accrued and unpaid interest and Bank's Costs pertaining thereto, due on the
Term Loan Termination Date. Each installment of principal hereunder,
including the final balloon payment, shall be due on the first Business Day of
each month. Interest on the Term Loan shall be payable as set forth in
Section 2.4.5 hereof, at the Interest Rate Option selected pursuant to Section
2.4.2 hereof.
2.1.3 Term Note. To evidence Borrowers' joint and several
obligations under the Term Loan, Borrowers shall execute and deliver to Bank
the Term Note.
2.1.4 Quotations of Fixed Rate. Upon the joint written
request of the Borrowers from time to time, the Bank agrees to quote to the
Borrowers a fixed rate per annum to which the Bank would be willing to
convert the interest rate under the Term Loan for the remaining term thereof,
or a portion of such remaining term, all as specified in the Borrowers'
written request for such quotation. If the quoted rate is acceptable to the
Borrowers (it being understood that nothing contained in this Section shall
obligate the Borrowers to borrow from the Bank, or the Bank to lend to the
Borrowers, on any terms, other than those set forth in this Agreement, which
are not mutually agreeable to all parties at the time), the Borrowers shall
so notify the Bank by submitting to Bank a properly completed and executed
Notice of Rate Election. At any time when the Term Loan bears interest at the
Fixed Rate, Borrowers may not convert the interest rate under the Term Loan
to the Base Rate or the Adjusted LIBOR, unless Borrowers shall have paid to
Bank the conversion premium set forth in Section 2.4.8.3 hereof.
2.2 Revolving Credit.
2.2.1 Revolving Credit. Provided that no Event of Default or
Unmatured Event of Default has occurred and is continuing and subject to the
terms and conditions set forth herein, commencing on the Closing Date and
expiring on the Revolving Credit Termination Date, Bank shall extend to
Borrowers the Revolving Credit, pursuant to which Bank: (i) shall extend Cash
Advances to Borrowers, in amounts not to exceed $4,000,000, and which, if not
exhausting the unadvanced portion of the Revolving Credit, shall be at least
$50,000 or integral multiples thereof requested by the Borrowers (within the
limits of the Revolving Credit), which the Borrowers may, from time to time,
repay, and, subject to the terms hereof, reborrow; and (ii) shall, within the
limits of the Revolving Credit, issue Letters of Credit in the aggregate face
amount issued at any one time not to exceed the sum of $750,000. Borrowers
may not reborrow under the Revolving Credit after the Revolving Credit
Termination Date.
2.2.2 Revolving Credit Interest Rate. Cash Advances under the
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Revolving Credit shall bear interest on the unpaid principal balance thereof
from the Funding Date of each Cash Advance until paid in full (whether by
acceleration or otherwise), with respect to Base Rate Loans at the Base Rate,
and with respect to Adjusted LIBOR Loans at the Adjusted LIBOR plus 1.5% per
annum on the relevant Interest Rate Determination Date. The applicable basis
for determining the Interest Rate Option with respect to each Revolving Credit
Loan shall be selected by Borrowers at the time a Notice of Borrowing or
Notice of Rate Election is given pursuant to Sections 2.4.1 and 2.4.2 hereof.
2.2.3 Payment of Principal and Interest. The outstanding
principal balance of, and any accrued and unpaid interest on, all Cash
Advances under the Revolving Credit, and all Bank's Costs pertaining thereto,
shall be payable on the earlier to occur of (i) the Revolving Credit
Termination Date, or (ii) the date on which the same is payable as provided in
Section 8.2 hereof. Interest on the Revolving Credit shall be payable as
provided in Section 2.4.5 hereof.
2.2.4 Revolving Credit Note. To evidence Borrowers' joint and
several obligations under the Revolving Credit, Borrowers shall execute and
deliver to Bank the Revolving Credit Note.
2.2.5 Renewal. Upon being so requested by Borrowers in
writing at least 90 days prior to the Revolving Credit Termination Date, Bank
may, but shall not be obligated to, renew the Revolving Credit for one year by
giving written notice to Borrowers in the manner set forth in Section 9.3
hereof on or before 60 days prior to the Revolving Credit Termination Date.
In the event Bank fails to provide any notice to Borrowers regarding renewal
of the Revolving Credit, the Revolving Credit Termination Date shall not be
extended and all outstanding Cash Advances under the Revolving Credit and all
interest and Bank's Costs pertaining thereto shall become due and payable as
provided in Section 2.2.3 hereof.
2.2.6 Letters of Credit. Upon Bank's receipt of any
Borrower's completed and executed Application and Agreement for Irrevocable
Standby Letter of Credit, specifying the face amount, the expiration date, and
the payment terms of the intended Letter of Credit at least two (2) Business
Days before the proposed date of issuance, Bank shall issue a Letter of Credit
to a beneficiary designated by such Borrower for the purpose of
collateralizing such of that Borrower's obligations arising in the ordinary
course of business as are required to be secured by a Letter of Credit. The
maximum aggregate face amounts of issued Letters of Credit hereunder shall not
exceed $750,000 at any one time. No Letter of Credit hereunder shall be
issued with an expiration date exceeding one year, and no Letter of Credit
shall be issued after the Revolving Credit Termination Date. Each Letter of
Credit shall be renewable at the option of such Borrower, provided however
that no Letter of Credit may be renewed for a term exceeding the Revolving
Credit Termination Date.
2.2.6.1 Reduction of Revolving Credit. Letters of Credit
issued by Bank shall be considered a use of the Revolving Credit and shall
reduce, dollar-for-dollar, the available borrowings thereunder, and, upon the
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termination or reduction of a Letter of Credit, shall increase the available
borrowings dollar-for-dollar, subject to the provisions of Section 2.2.7
hereof, with respect to the maximum available credit under the Revolving
Credit.
2.2.6.2 Draws Under Letter of Credit. All draws paid
under Letters of Credit shall be deemed to be Cash Advances under the
Revolving Credit to be repaid in accordance with the provisions of Section
2.2.3 hereof, and shall bear interest from the date of such draw at the Base
Rate unless and until Borrowers have provided Bank with a properly completed
and executed Notice of Rate Election selecting an alternate rate of interest
for all or a portion of such Letter of Credit.
2.2.6.3 Letter of Credit Fees. Borrowers agree to pay to
Bank a fee at an annual rate of 1.5% of the face amount of each Letter of
Credit issued by Bank, payable quarterly in arrears by the Borrower which is
the account party thereof, commencing on the last day of the Calendar Quarter
containing the date of issuance and continuing quarterly thereafter. If any
Letter of Credit shall be subject to a variable face amount schedule, the fee
for such Letter of Credit shall be determined on a daily average basis.
2.2.7 Maximum Revolving Credit. If the outstanding principal
balance of all Cash Advances under the Revolving Credit, plus the face amount
of all issued and outstanding Letters of Credit (as the same may have been
reduced), exceeds $4,000,000 at any time, Borrowers shall immediately repay
such excess to Bank without demand or notice.
2.2.8 Unused Fee. Borrowers agree to pay to Bank a fee at an
annual rate of 35/100 of one percent (.35%) per annum of the aggregate daily
average unused portion of the Revolving Credit from the Closing Date to the
Revolving Credit Termination Date, payable in arrears on the last day of each
Calendar Quarter and on the Revolving Credit Termination Date.
2.3 Line of Credit.
2.3.1 Line of Credit. Subject to the terms and conditions set
forth herein, and provided that no Event of Default or Unmatured Event of
Default has occurred and is continuing, commencing on the Closing Date and
terminating on the Line of Credit Termination Date, Bank may in its sole
discretion, from time to time on Borrowers' written request, extend to
Borrowers the Line of Credit pursuant to which Bank may make Cash Advances to
Borrowers in an aggregate amount not to exceed $25,000,000, which amounts
shall be in the sole discretion of Bank and shall be at least $250,000 or
integral multiples thereof, and which Borrowers may, from time to time,
borrow, repay and reborrow. Upon being so requested in writing by Borrowers,
Bank may, but shall not be obligated to, extend the Line of Credit Termination
Date for additional 3 month periods by giving notice to Borrowers on or before
the final day of the month next preceding the then existing Line of Credit
Termination Date. If no request is made by Borrowers, or if request is made
but no notice of extension is given by Bank on or before the aforementioned
date, on the Line of Credit Termination Date all Cash Advances under the Line
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of Credit shall become due and payable in accordance with Section 2.3.3 hereof
and the Line of Credit shall terminate.
2.3.2 Line of Credit Interest Rate. The Line of Credit Loans
shall bear interest on the unpaid principal balance thereof from the Funding
Date until paid in full (whether by acceleration or otherwise): with respect
to Base Rate Loans at the Base Rate, and with respect to Adjusted LIBOR Loans
at the Adjusted LIBOR plus 2% per annum on the relevant Interest Rate
Determination Date. The applicable basis for determining the Interest Rate
Option with respect to each Line of Credit Loan shall be selected by Borrowers
at the time a Notice of Borrowing or Notice of Rate Election is given pursuant
to Sections 2.4.1 and 2.4.2 hereof.
2.3.3 Payment of Principal and Interest. The outstanding
principal balance of, and any accrued and unpaid interest on, each Cash
Advance under the Line of Credit, and all Bank's Costs pertaining thereto,
shall be payable at the date determined by Bank, after consulting with
Borrowers, in Bank's reasonable sole discretion exercised at the Funding Date
of the applicable Line of Credit Loan, provided that each Line of Credit Loan
shall be paid in full on the earliest to occur of: (i) the date on which
permanent financing is obtained for the acquisition or Capital Expenditure
funded by such Line of Credit Loan, (ii) the Line of Credit Termination Date,
or (iii) the date on which the same is payable as provided in Section 8.2
hereof. Interest on the Line of Credit shall be payable as provided in
Section 2.4.5 hereof.
2.3.4 Line of Credit Note. To evidence Borrowers' joint and
several obligations under the Line of Credit, Borrowers shall execute and
deliver Line of Credit Note(s) to Bank. The terms of each Line of Credit Note
shall reflect the terms of payment determined by Bank in accordance with this
Section 2.3.
2.3.5 Maximum Line of Credit. If the outstanding principal
balance of all Cash Advances under the Line of Credit exceeds $25,000,000,
Borrowers shall immediately repay such excess to Bank without demand or
notice.
2.3.6 Conditions Precedent. In addition to the terms and
conditions set forth in this Section 2.3, as conditions precedent to the
extension by Bank of each Line of Credit Loan, Borrowers agree to provide to
Bank, in form and substance satisfactory to Bank and Bank's counsel, the
following:
2.3.6.1 a Line of Credit Note.
2.3.6.2 resolutions adopted by the Boards of Directors of
each Borrower authorizing the execution, delivery and performance of the Line
of Credit Note, certified by each Borrower's Secretary to be in full force and
effect as of the applicable Funding Date.
2.3.6.3 a copy of the definitive or proposed agreement
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for the acquisition or Capital Expenditure to which such Line of Credit Loan
relates, together with copies of all other relevant documentation relating
thereto.
2.3.6.4 such additional documents or instruments as Bank
may reasonably require.
2.4 General Provisions.
2.4.1 Notice of Borrowing. Subject to Sections 2.1, 2.2 and
2.3 hereof, whenever Borrowers desire to borrow under this Agreement,
including the unadvanced portion of the Term Loan to be funded at Closing,
Borrowers shall deliver by facsimile to Bank a properly completed and executed
Notice of Borrowing; with respect to Adjusted LIBOR Loans, such Notice of
Borrowing shall be delivered no later than 11:00 A.M. (Philadelphia time) at
least three London Business Days in advance of the proposed Funding Date, and
with respect to Base Rate Loans, such Notice of Borrowing shall be delivered
no later than 11:00 A.M. (Philadelphia time) at least one Business Day in
advance of the proposed Funding Date.
The Notice of Borrowing shall specify (i) the proposed
Funding Date (which shall be a Business Day), (ii) the amount of the proposed
Cash Advance (or loan under the Term Loan) , (iii) whether the amount to be
loaned is initially to consist of a Fixed Rate Loan (solely with respect to
the Term Loan), Base Rate Loan or Adjusted LIBOR Loan or a combination
thereof, and (iv) if such amount or any portion thereof is initially to be an
Adjusted LIBOR Loan, the initial Interest Period therefor. Cash Advances may
be continued as or converted into another Interest Rate Option in the manner
provided in Section 2.4.2 hereof upon the submission to Bank of a properly
completed and executed Notice of Rate Election.
A Notice of Borrowing or a Notice of Rate Election for
an Adjusted LIBOR Loan shall be irrevocable on and after the related Interest
Rate Determination Date, and Borrowers shall be bound to make, continue or
convert a Loan in accordance therewith.
2.4.2 Notice of Rate Election; Failure to Give Notice.
Whenever Borrowers desire to change or continue the Interest Rate Option on
all or a portion of any Loan under this Agreement, Borrowers shall deliver to
Bank a Notice of Rate Election. Borrowers shall deliver such Notice of Rate
Election: (i) with respect to Base Rate Loans and Fixed Rate Loans, at least
one Business Day in advance of the proposed change or continuation, and (ii)
with respect to Adjusted LIBOR Loans, no later than 11:00 A.M. (Philadelphia
time) at least three London Business Days in advance of the proposed change or
continuation. The Notice of Rate Election shall specify: (a) the proposed date
of change or continuation (which shall be a Business Day); (b) the type of
Loan and amount thereof affected; (c) the Interest Rate Option being selected;
and (d) with respect to Adjusted LIBOR Loans, the Interest Periods therefor;
provided that the minimum amount of any Adjusted LIBOR Loan shall be $100,000
and integral multiples of $50,000 in excess of that amount. If at the
termination of any Interest Period, Borrowers have failed to submit a Notice
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of Rate Election, as aforesaid, to convert or to continue Adjusted LIBOR
Loans, then such Loans shall automatically be and become Base Rate Loans as of
the termination of the relevant Interest Period.
Upon the expiration of any Interest Period applicable to
Revolving Credit Loans or Line of Credit Loans bearing interest based on the
Adjusted LIBOR, such Loans shall be deemed repaid and reborrowed upon the
submission to Bank of a properly completed and executed Notice of Rate
Election pertaining thereto within the requisite time periods for a change or
continuation of an Interest Rate Option, and the succeeding Interest Period(s)
of such continued Loans shall commence on the first day of the Interest Period
of the Loans deemed to be reborrowed and continued.
Adjusted LIBOR Loans may only be converted into Base
Rate Loans or Fixed Rate Loans on the expiration date of an Interest Period
applicable thereto. In addition, no outstanding Loans may be continued after
the expiration of the Interest Period applicable thereto as, or be converted
into: (i) Fixed Rate Loans or Adjusted LIBOR Loans, when any Event of Default
or Unmatured Event of Default has occurred and is continuing; and (ii)
Adjusted LIBOR Loans, if the Interest Period relating to such conversion or
continuation would extend beyond the maturity date of such Loan.
If on any day a Loan is outstanding with respect to
which a Notice of Rate Election has not been delivered to Bank in accordance
with the terms of this Agreement specifying the basis for determining the
Interest Rate Option, then that Loan shall bear interest at the rate based on
the Base Rate for such type of Loan as determined pursuant to this Agreement.
2.4.3 Funding. Upon satisfaction of the conditions precedent
specified in Section 4.1 (in the case of the initial Cash Advances and the
unadvanced portion of the Term Loan) and Section 4.2 (in the case of all
subsequent Cash Advances under the Revolving Credit and the Line of Credit),
Bank shall cause such Cash Advances and loan under the Term Loan to be made
available to Borrowers on the Funding Date pertaining thereto by depositing
the amount thereof in the designated account of Borrowers with Bank.
2.4.4 Interest Periods. In connection with each Adjusted
LIBOR Loan, Borrowers shall elect an Interest Period to be applicable to such
Loan, which Interest Period shall be either a 30, 60, 90 or 180 day period;
provided that:
2.4.4.1 the first Interest Period for any Loan shall
commence on the Funding Date of such Loan;
2.4.4.2 if an 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 however that for any Interest Period in
respect of an Adjusted LIBOR Loan which: (i) begins on the last Business Day
of a calendar month (or a day for which there is no numerically corresponding
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day in the calendar month at the end of such Interest Period) shall end on the
last Business Day of the relevant calendar month, or (ii) would 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 that month, such Interest Period shall expire
on the last Business Day of the month;
2.4.4.3 with respect to any Term Loan, Revolving Credit
Loan or Line of Credit Loan, no Interest Period shall extend beyond the Term
Loan Termination Date, Revolving Credit Termination Date or Line of Credit
Termination Date, respectively;
2.4.4.4 there shall be no more than nine total Interest
Periods outstanding at any time;
2.4.4.5 no Interest Period with respect to any Adjusted
LIBOR Loan may extend beyond a date on which Borrowers are required to make a
scheduled payment of principal which would require a payment to be made with
respect to such Adjusted LIBOR Loan.
2.4.5 Interest Payments. Subject to Section 2.4.8 hereof with
respect to prepayments, interest shall be payable on the Loans as follows:
2.4.5.1 interest on each Base Rate Loan and Fixed Rate
Loan shall be payable monthly in arrears on the first day of each month; the
first payment shall be made on the first day of the month next following the
Closing Date or the Funding Date, as the case may be, and the final payment
shall be made at maturity.
2.4.5.2 interest on each Adjusted LIBOR Loan shall be
payable in arrears on the last day of the Interest Period applicable to that
Loan; provided however that interest on Adjusted LIBOR Loans with Interest
Periods of 180 days shall be paid in arrears on the 90th day and on the last
day of the relevant Interest Period.
2.4.6 Post-Maturity Interest. Any principal payments on the
Loans not paid when due and, to the extent permitted by applicable law, any
interest payment on the Loans not paid when due, and any other amount due to
Bank under this Agreement or any other Loan Document not paid when due, in any
case whether at stated maturity, by notice of prepayment, by acceleration or
otherwise, shall thereafter bear interest payable upon demand at a rate which
is, with respect to Adjusted LIBOR Loans only, 5% per annum in excess of the
Adjusted LIBOR until the expiration of the then applicable Interest Period,
and after the expiration of the then applicable Interest Period, and in all
cases with respect to Base Rate Loans and Fixed Rate Loans, at a rate which is
2.75% per annum in excess of the Base Rate for Revolving Credit Loans and Line
of Credit Loans, and 3% per annum in excess of the Base Rate for the Term
Loan.
2.4.7 Adjusted LIBOR and Base Rate.
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2.4.7.1 Bank shall give Borrowers prompt notice of the
Adjusted LIBOR determined for an Interest Period, and absent manifest error,
each determination of such rates by Bank shall be conclusive and binding for
all purposes hereof.
2.4.7.2 If Borrowers request that all or any portion of
the Loans bear interest at the Adjusted LIBOR, and Bank determines that, by
reason of circumstances affecting the interbank Eurodollar market generally,
deposits in U.S. Dollars (in the applicable amounts) are not being offered to
banks in the interbank Eurodollar market for the selected Interest Period,
then Bank shall forthwith give notice thereof to Borrowers, whereupon until
Bank notifies Borrowers that the circumstances giving rise to such suspension
no longer exist, (a) the obligation of Bank to permit the Loans to bear
interest at the Adjusted LIBOR shall be suspended so long as such
circumstances exist, and (b) Borrowers shall convert the interest rates on the
applicable portions of the outstanding Loans to the Base Rate on the last day
of the then current Interest Period.
2.4.7.3 If, after the date of this Agreement, the
adoption of or any change in Rules, or change in the interpretation or
administration thereof, by a governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by Bank with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency shall
make it unlawful or impossible for Bank to make or maintain or fund loans at
the Adjusted LIBOR, the interest rates on the applicable portions of the
outstanding Loans shall be deemed to have been converted to the rate
determined for the type of Loan with reference to the Base Rate on either (i)
the last day of the then current Interest Period if Bank may lawfully continue
to maintain loans at the Adjusted LIBOR to such day, or (ii) immediately if
Bank may not lawfully continue to maintain loans at the Adjusted LIBOR to such
day.
2.4.7.4 If any governmental authority, central bank or
other comparable authority shall at any time impose, modify or deem applicable
any reserve (including, without limitation, any imposed by the Board of
Governors of the Federal Reserve System), any tax (including without
limitation, any United States interest equalization tax or similar tax however
named applicable to the acquisition or holding of debt obligations and any
interest or penalties with respect thereto), duty, charge, fee, deduction,
withholding special deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by, Bank, or shall impose on
Bank or the interbank Eurodollar market any other condition affecting loans at
the Adjusted LIBOR, and the result of any of the foregoing is to increase the
cost to Bank of making or maintaining the interest rate at the Adjusted LIBOR
or to reduce the amount of any sum received or receivable by Bank under this
Agreement, any of the Notes by an amount deemed by Bank to be material, then
within five days after demand by Bank, Borrowers shall pay to Bank such
additional amount or amounts as will compensate Bank for such increased cost
or reduction. Bank will promptly notify Borrowers of any event of which it has
knowledge occurring after the date hereof, which will entitle Bank to
compensation pursuant to this Section. A certificate of Bank claiming
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compensation under this Section and setting forth the additional amount or
amounts to be paid to Bank hereunder shall be conclusive in the absence of
manifest error.
2.4.7.5 The Adjusted LIBOR shall be adjusted
automatically on and as of the effective day of any change in the relevant
Reserve Percentage.
2.4.7.6 Promptly upon notice from Bank to Borrowers,
Borrowers will pay, prior to the date on which penalties attach thereto, all
present and future stamp, documentary and other similar taxes, levies, or
costs and charges whatsoever imposed, assessed, levied or collected on or in
respect of the Loans solely as a result of the interest rate being determined
by reference to the Adjusted LIBOR and/or the provisions of this Agreement
relating to the Adjusted LIBOR and/or the recording, registration,
notarization or other formalization of any thereof and/or payments of
principal, interest or other amounts made on or in respect of a Loan or
portion of a Loan when the interest rate is determined by reference to the
Adjusted LIBOR (all such taxes, levies, costs and charges being herein
collectively called "Eurodollar Rate Tax"). Bank shall, upon request of
Borrowers, provide evidence to Borrowers of the imposition of any such
Eurodollar Rate Tax. Promptly after the date on which payment of any such
Eurodollar Rate Tax is due pursuant to applicable law, Borrowers will, at the
request of Bank, furnish to Bank evidence, in form and substance satisfactory
to Bank, that Borrowers have met their obligations under this Section.
Borrowers will indemnify Bank against, and reimburse Bank on demand for, any
Eurodollar Rate Tax, as determined by Bank in its good faith discretion. Bank
shall provide Borrowers with appropriate receipts for any payments or
reimbursements made by Borrowers pursuant to this Section. A certificate of
Bank as to any amount payable pursuant to this Section shall, absent manifest
error, be final, conclusive and binding on all parties hereto.
2.4.7.7 If Bank shall determine that (i) any current
Rule, law, regulation, or guideline, the adoption or imposition of any Rules,
law, regulation, or guideline any change in any Rules, law, regulation or
guideline, or the adoption, imposition or change in the interpretation or
administration thereof by a governmental authority, central bank or comparable
agency charged with the interpretation and administration thereof, or (ii)
compliance by Bank (or any lending office or any holding company of Bank) with
any request, guideline or directive whether or not having the force of law
regarding special deposit, capital adequacy, risk based capital, capital or
reserve maintenance, capital ratio, or similar requirements against loans or
loan commitments or any commitments to extend credit or other assets of or any
deposits or other liabilities taken or entered into by Bank (including the
capital adequacy guidelines promulgated by the Board of Governors of the
Federal Reserve System) and the result of any event referred to in clauses
(i) or (ii) above (x) shall be to increase the cost to Bank of making or
maintaining, or to impose upon Bank or increase any capital requirement
applicable as a result of the making or maintenance of, the Loans or the
obligations of Borrowers hereunder or (y) has or would have the effect of
reducing the rate of return or amounts receivable hereunder on any Loan as a
consequence of its obligations pursuant to this Agreement or Loans made by
Bank pursuant hereto to a level below that which Bank (or Bank's holding
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company) could have achieved but for such adoption, imposition, change or
compliance (taking into consideration such Bank's policies and the policies of
Bank's holding company with respect to capital adequacy) by an amount deemed
by such holder to be material (which adoption, imposition, change, or increase
in capital requirements or reduction in amounts receivable may be determined
by Bank's good faith allocation of the aggregate of such cost increase,
capital increase or imposition or reductions in amounts receivable resulting
from such events), then, from time to time, Borrowers shall pay to Bank, on
demand by Bank as set forth below, such additional amount or amounts as will
be necessary to restore the rate of return to Bank from the date of such
change, together with interest on such amount from the date demanded until
payment thereof in full at the rate provided in this Agreement. Bank (or
Bank's holding company) shall be entitled to compensation pursuant to this
Section. A certificate of Bank claiming compensation under this Section and
setting forth the increased cost, reduction in amounts receivable additional
amount or amounts necessary to compensate Bank (or Bank's holding company)
hereunder shall be delivered to Borrowers and shall be conclusive in the
absence of manifest error. Borrowers shall pay Bank the amount shown as due on
any such certificate delivered by Bank within 10 days after Borrowers' receipt
of same. If Bank demands compensation under this Section, Borrowers may, upon
30 Business Days' prior notice to Bank, prepay in full, in accordance with
Section 2.4.8 hereof, the then outstanding: (i) Base Rate Loans and/or the
Fixed Rate Loan, together with accrued interest thereon to the date of
prepayment, and with respect to Fixed Rate Loans, together with the respective
prepayment premium as provided in Section 2.4.8.3; and/or (ii) Adjusted LIBOR
Loans together with accrued interest thereon to the date of prepayment along
with the respective prepayment penalty as provided in Section 2.4.8.2 hereof.
Concurrently with prepaying such Base Rate Loans, Fixed Rate Loan and Adjusted
LIBOR Loans, Borrowers may borrow from Bank Cash Advances at an Interest Rate
Option not so affected.
2.4.7.8 Failure on the part of 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 period shall
not constitute a waiver of Bank's right to demand such compensation with
respect to such period or any other period; provided however that Bank shall
demand such compensation not later than six months after Bank has received
notice of such increased costs or reduction in amounts received or receivable
or reduction in return on capital. The protection of this Section shall be
available to Bank regardless of any possible contention of the invalidity or
inapplicability of the law, rule, regulation, guideline or other change or
condition which shall have occurred or been imposed.
2.4.7.9 The Base Rate shall be determined and adjusted
daily.
2.4.8 Prepayment.
2.4.8.1 Voluntary Prepayments. Any Base Rate Loan or
Fixed Rate Loan may be prepaid at any time upon one Business Day's written
notice to Bank, in whole or in integral multiples of $50,000. Borrowers'
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prepayment of a Base Rate Loan shall be without premium or penalty.
Borrowers' prepayment of a Fixed Rate Loan shall be subject to the prepayment
premium set forth in Section 2.4.8.3 hereof. Any Adjusted LIBOR Loan may be
prepaid prior to the expiration date of the Interest Period applicable thereto
subject to the provisions of Section 2.4.8.2 hereof, in integral multiples of
$50,000, and then only upon 2 days prior notice to Bank. In the event that
Borrowers do not specify the Loan to which a prepayment is to be applied, such
prepayment shall be applied (first to interest then to principal) first to the
Revolving Credit Loans, second to the Term Loan, and third to the Line of
Credit Loans.
2.4.8.2 Prepayment Premium For Adjusted LIBOR Loans.
Adjusted LIBOR Loans may be prepaid as set forth in Section 2.4.8.1 hereof
only upon payment to Bank of a prepayment premium determined as follows: (i)
on the prepayment date, the remaining payments of principal and interest that
would otherwise have become payable at the expiration of the Interest Period
pertaining to the principal being prepaid shall be discounted to a present
value at a rate per annum equal to the "Prepayment Yield to Maturity", as
hereinafter defined, plus any costs for reserves or assessments or for
reinvesting the amount being prepaid, and if such discounted value shall
exceed the unpaid principal amount being prepaid, then the prepayment premium
shall be an amount equal to such excess; otherwise no prepayment premium shall
be payable; and (ii) for purposes of this Section 2.4.8.2, the "Prepayment
Yield to Maturity" shall mean the yield to maturity of the debt obligation of
the United States Treasury (excluding those commonly known as "Flower Bonds")
maturing nearest in time to the expiration of the relevant Interest Period.
The maturity date and yield to maturity of such United States Treasury
obligation shall be determined on the basis of quotations published in the
Wall Street Journal on the prepayment date. If there shall be more than one
such debt obligation of the United States Treasury maturing nearest in time
to the expiration of the relevant Interest Period, the Prepayment Yield to
Maturity shall be the arithmetic average of the yields to maturity of all such
obligations. Notwithstanding the foregoing, no amount so prepaid may be
reborrowed prior to the last day of the Interest Period pertaining to the Loan
prepaid.
2.4.8.3 Prepayment and Conversion Premium for Fixed Rate
Loans. Fixed Rate Loans may be prepaid as set forth in Section 2.4.8.1
hereof, and may be converted to a Base Rate Loan or an Adjusted LIBOR Loan as
set forth in Sections 2.1.4 and 2.4.2 hereof, only upon payment to Bank of a
prepayment or conversion premium, determined on the prepayment or conversion
date, as follows: (i) the remaining payments of principal and interest that
would otherwise have been payable over the remainder of the period for which
Borrowers have elected for the Term Loan to bear interest at the Fixed Rate,
pertaining to the principal being prepaid, shall be discounted to a present
value at a rate per annum equal to the "Prepayment Yield to Maturity," plus
any costs for reserves or assessments or for reinvesting the amount being
prepaid, and if such discounted value shall exceed the unpaid principal amount
being prepaid, then the prepayment or conversion premium shall be an amount
equal to such excess; otherwise no prepayment or conversion premium shall be
payable; and (ii) for purposes of this Section 2.4.8.3, the "Prepayment Yield
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to Maturity" shall mean the yield to maturity of the debt obligation of the
United States Treasury (excluding those commonly known as "Flower Bonds")
maturing nearest in time to the expiration of the period for which Borrowers
have elected for the Term Loan to bear interest at the Fixed Rate. The
maturity date and yield to maturity of such United States Treasury obligation
shall be determined on the basis of quotations published in the Wall Street
Journal on the conversion date. If there shall be more than one such debt
obligation of the United States Treasury maturing nearest in time to the
expiration of the period for which Borrowers have elected for the Term Loan to
bear interest at the Fixed Rate, the Prepayment Yield to Maturity shall be the
arithmetic average of the yields to maturity of all such obligations.
2.4.9 Funding Losses. If the Borrowers fail to borrow any
Adjusted LIBOR Loans after a Notice of Borrowing or Notice of Rate Election
has been given to Bank as provided in this Article 2, Borrowers shall
reimburse Bank on demand for any resulting loss or expense incurred by it (or
by any existing or prospective participant in the related Loan), including
(without limitation) any loss incurred in obtaining, liquidating or employing
deposits from third parties, provided that Bank shall use commercially
reasonable efforts to mitigate any such loss and Bank shall have delivered to
the Borrowers a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error.
2.4.10 Manner and Time of Payment. All payments of principal,
interest and fees hereunder and under the Notes shall be made by Borrowers
without notice, set off or counterclaim and in immediately available same day
funds and delivered to Bank not later than 12:00 noon (Philadelphia time) on
the date due at the address set forth in Section 9.3 hereof, for the account
of Bank; funds received by Bank after that time shall be deemed to have been
paid by Borrowers on the next succeeding Business Day.
2.4.11 Use of Proceeds. The proceeds of the Term Loan shall
be used by Borrowers for construction, equipping and operating of their
respective plants. The proceeds of the Revolving Credit Loan shall be used by
Borrowers for working capital and other corporate purposes. The proceeds of
the Line of Credit Loan shall be used by Borrowers as temporary, initial
financing for acquisitions of entities and/or assets, and other Capital
Expenditures, in the construction materials, limestone products or related
industries.
2.4.12 Conditional Payment. Borrowers agree that checks and
other instruments received by Bank in payment or on account of the
Indebtedness constitute only conditional payment until such items are actually
paid to Bank. Subject to Section 2.4.8.1 hereof, Borrowers waive any right
they may have to direct the application of any and all payments at any time or
times hereafter received by Bank on account of the Indebtedness. Borrowers
agree that Bank shall have the continuing exclusive right to apply and reapply
such payments in any manner as Bank may deem advisable, notwithstanding any
entry by Bank upon its books.
2.4.13 Maximum Available Credit for All Loans.
Notwithstanding anything herein to the contrary, the sum of (i) the
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outstanding principal balance of the Term Loan, and (ii) the outstanding
principal balance of all outstanding Cash Advances, including the aggregate
face amount of all issued Letters of Credit, shall not exceed $44,000,000.
The maximum available credit under this Agreement shall not exceed the sum of
(a) $44,000,000, plus (b) all interest, Bank's Costs and any other amount due
from Borrowers to Bank hereunder or pursuant to any other Loan Document.
2.4.14 Mandatory Payments. In the event that the principal
amount outstanding under (i) the Revolving Credit shall at any time exceed
$4,000,000, (ii) the Term Loan shall at any time exceed $15,000,000, or (iii)
the Line of Credit shall at any time exceed $25,000,000, then in any such
case, Borrowers shall immediately pay such excess to Bank.
2.4.15 SWAP Agreements. Borrowers and Bank may, but shall not
be obligated to, enter into one or more interest rate protection agreements on
terms mutually agreeable to all parties at the time, to permit Borrowers to
hedge their interest rate liabilities hereunder.
3. SECURITY
3.1 Collateral Generally.
3.1.1 Security Interest in Assets. The parties hereto hereby
ratify and confirm all terms in the Prior Documents with respect to security
for the Term Loan, which shall secure payment of the Term Loan Indebtedness
hereunder. As additional security for payment of the Term Loan Indebtedness,
each Borrower hereby grants to Bank a security interest in and lien on all of
such entity's right, title and interest in, as, to and under all of the
following assets whether now owned or hereafter created, acquired or
reacquired:
3.1.1.1 Equipment wherever located, and all parts thereof
and all accessions, additions, attachments, improvements, substitutions and
replacements thereto and therefor (including without limitation, all special
mobile equipment, all dozers, graders, scrapers, forklifts, loaders, drilling
rigs, scales, railcars, screens, hoppers, conveyors, generators, trailers,
dollies, crushing, grinding, and sizing plants, kilns, baggers, and all other
machinery, equipment and fixtures used or useful in quarrying, transporting,
burning and processing limestone and related products for sale);
3.1.1.2 all motor vehicles, supplies, stores of fuel and
lubricants, parts, engines, tires, and treads;
3.1.1.3 all General Intangibles;
3.1.1.4 all replacements and accessions to any of the
foregoing;
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3.1.1.5 all policies of insurance covering any of the
foregoing and all insurance proceeds in connection therewith; and
3.1.1.6 all products, rents, profits, returns and income
of and from any of the foregoing and all cash and noncash proceeds of the
foregoing (including proceeds which constitute property of the types described
in Sections 3.1.1.1 -- 3.1.1.5 above).
In addition, each Subsidiary, pursuant to the Mortgages, has granted to Bank
a first mortgage and lien on the Real Estate identified on Schedule 1.1(d)
owned by each of them, respectively, which Mortgages have been amended and
confirmed by the Mortgage Confirmations. Notwithstanding anything to the
contrary herein, Bank has not encumbered and the parties agree that the
Collateral shall not include the parcels of real property which are identified
on Schedule 3.1.1 hereof. Except for dispositions of worn out and obsolete
equipment and equipment which the applicable Borrower certifies is no longer
used or useful in the conduct of such Borrower's business and vehicles in the
ordinary course of business, no Collateral shall be released from the security
interests, mortgages and liens granted hereby and by the Mortgages, as amended
and confirmed by the Mortgage Confirmations, until the Term Loan has been paid
in full.
3.1.2 Financing Statements and Other Documents. Each Borrower
agrees to execute and deliver to Bank any and all Financing Statements and
other documents and instruments requested by Bank to perfect or keep perfected
any security interest, created under this Agreement or under any other Loan
Document, under the Uniform Commercial Code as adopted in any state having
jurisdiction over the Collateral, and any such additional security agreements,
financing statements, continuation statements and other security instruments
creating or continuing a lien upon the Collateral as Bank may reasonably
require in connection with the security interests created by this Agreement.
Each Borrower hereby appoints Bank as such Borrower's attorney-in-fact to
execute, upon the Borrower's failure to do so within 15 days following the
Bank's reasonable request, and file in such Borrower's name all documents and
instruments which Bank may deem necessary or appropriate to perfect and
continue perfected the security interests in the Collateral created by this
Agreement.
3.1.3 Mortgages and Leasehold Mortgage. ALC and TLC each
agrees to execute, convey and deliver to Bank, a Mortgage Confirmation
amending and confirming the Mortgages. The Mortgages, as amended and
confirmed by the Mortgage Confirmations, shall be continuing liens for such
portion of the current outstanding Term Loan Indebtedness indicated in the
Mortgage Confirmations, on good and marketable fee simple title to the Real
Estate described therein, free and clear of all prior liens, except Permitted
Liens and title exceptions approved by Bank, and shall be insured at
Borrowers' expense by a reputable title insurance company or companies
reasonably satisfactory to Bank.
3.1.4 Maintenance of Collateral. Upon the failure of the
applicable Borrower to do so within 20 days following the Bank's reasonable
request, and except as may be contested in good faith with adequate reserves,
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as determined in the sole reasonable discretion of Bank, having been set aside
therefore, the Bank may at its option pay and discharge taxes, liens, security
interests and other encumbrances pertaining to the Collateral (except
Permitted Liens), and may pay for the repair of any damage to the Collateral,
the maintenance and preservation thereof and for insurance thereon required by
the terms of Section 6.1.6 hereof not paid by Borrowers pursuant to the terms
hereof. Borrowers agree to reimburse Bank, within three Business Days after
notice thereof from Bank to Borrowers, for any such payment made. Until paid,
all costs incurred by Bank under this Section 3.1.4 shall be deemed to be
additional principal under the Term Loan, bear interest at the per annum rate
set forth in Section 2.1.1 hereof and be secured by the Collateral.
3.1.5 Security for Line of Credit. As security for the
repayment of each Cash Advance under the Line of Credit, each Borrower shall
grant to Bank a purchase money security interest in and lien on the asset
purchased with the proceeds of such Cash Advance contemporaneously with the
funding thereof.
4. CONDITIONS PRECEDENT
4.1 Conditions to Funding. As conditions precedent to the initial
borrowing hereunder, Borrowers shall deliver to Bank, in form and substance
satisfactory to Bank and its counsel, in addition to this Agreement, the
following documents and instruments:
4.1.1 the Term Note;
4.1.2 the Revolving Credit Note;
4.1.3 the Mortgage Confirmations;
4.1.4 Intentionally deleted.
4.1.5 title insurance commitments satisfactory to Bank
endorsing the policies of title insurance in favor of Bank delivered with
respect to each of the Mortgages, insuring the continuing priority of the
liens of the Mortgages, as amended and confirmed by the Mortgage
Confirmations, in the dollar amounts set forth in the Mortgages;
4.1.6 A copy of the respective articles or certificate of
incorporation, By-laws, and resolutions adopted by each Borrower's Board of
Directors authorizing such Borrower to execute, deliver and perform this
Agreement, the Notes and each of the other Loan Documents to which such
Borrower is a party, and appointing the Authorized Officers for purposes of
this Agreement, all certified by each Borrower's Secretary, Treasurer or
Assistant Secretary to be true and correct copies of the originals and to be
in full force and effect as of the date of Closing;
4.1.7 An incumbency and signature certificate with respect to
the officers of each of the Borrowers authorized to execute and deliver this
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Agreement, the Notes, and any other Loan Documents to which such Borrower is a
party;
4.1.8 Original certificate(s) of insurance meeting the
criteria set forth in Section 6.1.6 hereof;
4.1.9 Such security interest, lien and judgment searches
pertaining to Borrowers as Bank may reasonably request;
4.1.10 Such Financing Statements and Fixture Filings and other
evidence of Bank's security interest in and lien on the Collateral as Bank may
reasonably request;
4.1.11 The opinion of Borrowers' counsel, dated the date of
Closing, in all respects reasonably satisfactory to Bank and Bank's counsel;
4.1.12 A good standing or subsistence certificate, as
applicable, or telegram from the Secretaries of State of the states of
incorporation of each of the Borrowers to that effect, and certificates or
telegrams indicating that each Borrower is duly qualified as a foreign
corporation in each state in which such qualification is required;
4.1.13 A Notice of Borrowing with respect to the Term Loan and
any Cash Advance, including any Letter of Credit, requested as of the Closing
Date;
4.1.14 A certificate dated the Closing Date executed by U.S.
Lime's chief financial officer confirming U.S. Lime's solvency as provided in
Section 5.1.9 hereof;
4.1.15 The consolidated Financial Statements of Borrowers as
at and for the nine months ended September 30, 1997 and 1996 (unaudited),
certified by the chief financial officer of U.S. Lime as having been prepared
in all material respects in accordance with all applicable requirements of
Form 10-Q of the Securities and Exchange Commission under the Securities
Exchange Act of 1934 and as reflecting, in the opinion of the Borrowers'
managements, all adjustments of a normal and recurring nature necessary to
present fairly the financial position, results of operations and cash flows of
U.S. Lime and its subsidiaries on a consolidated basis for the periods
presented in accordance with GAAP;
4.1.16 A certificate executed by the Vice President and Chief
Financial Officer of each Borrower confirming that: (i) each of the
representations and warranties made herein by such Borrower is true and
correct; (ii) such Borrower has fully performed each and every covenant to be
performed by such Borrower on or prior to the Closing Date; and (iii) such
Borrower has satisfied each of the unwaived conditions set forth in this
Section 4.1;
4.1.17 A mineral reserve study of recent date, with respect to
the quantity and quality of mineral reserves of TLC, prepared by a qualified
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independent geologist, satisfactory to Bank;
4.1.18 Copies of the Permits; and
4.1.19 Such additional documents or instruments as Bank may
reasonably require.
4.2 Conditions Precedent to Each Cash Advance. Provided no Event
of Default or Unmatured Event of Default has occurred and is continuing, Bank
will make Cash Advances hereunder only upon the fulfillment of the following
conditions: (i) all representations and warranties made by Borrowers in
Article 5 hereof or in any other Loan Document shall be true, complete and
correct with the same force and effect as if made on the date of the proposed
Cash Advance, except (a) the representations and warranties contained in
Section 5.1.4 shall apply to the most recent Financial Statements delivered
pursuant to Section 6.1.1 hereof, and (b) any other representation and
warranty contained in Article 5 which relate to facts which have changed to an
extent permitted by this Agreement or to an extent consented to by the Bank
shall apply to the facts as so changed; (ii) Borrowers shall be in compliance
with all of the terms and conditions hereof, of the Notes, and of all other
Loan Documents, in each case on and as of the Funding Date; and (iii) Bank
shall have received, within the times therefor set forth in Section 2.4.1, a
fully-completed and executed Notice of Borrowing.
5. REPRESENTATIONS AND WARRANTIES.
5.1 Each Borrower, for itself and for all Borrowers where so
indicated, represents and warrants to Bank as follows:
5.1.1 Good Standing; Ownership of Subsidiaries. Each Borrower
is a corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation; has the corporate power and
authority to own and operate its respective assets and Real Estate and to
carry on such Borrower's business where and as contemplated; is duly qualified
as a foreign corporation to do business in, and is in good standing in, every
jurisdiction where the nature of such Borrower's business requires such
qualification. Each Borrower's chief executive office is located at 12221
Merit Drive, Suite 500, Dallas, Texas. U.S. Lime owns all of the issued and
outstanding capital stock of the Subsidiaries, and except for the
Subsidiaries, U.S. Lime does not have any subsidiaries and does not conduct
business under any other trade name, or in joint venture or partnership with
any Person. None of the Subsidiaries has any subsidiary.
5.1.2 Power and Authority. The making, execution, issuance
and performance by the Borrowers of this Agreement, the Notes, and the other
Loan Documents, have been duly authorized respectively by all necessary
corporate action of each Borrower and will not violate any provision of law or
regulation or of the respective charters or by-laws of the Borrowers; will not
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violate any agreement, trust or other indenture or instrument to which
Borrowers or any of them is a party or by which Borrowers or any of them or
any of its or their property is bound, so that this Agreement, the Notes, and
all of the other Loan Documents when executed and delivered will be valid and
binding obligations of the Borrowers and each of them, enforceable in
accordance with their respective terms.
5.1.3 Priority of Liens; Location and Condition of Collateral.
With the exception of Permitted Liens and except as provided in Schedule 5.1.3
hereto, (i) each Borrower owns its respective Collateral free and clear of all
liens, encumbrances, security interests or other rights of third parties,
excepting only the rights and interests granted Bank herein and in the Loan
Documents, and (ii) upon perfection of Bank's security interest in the
Collateral, Bank will have a first priority security interest in the
Collateral owned by Borrowers. Except for moveable equipment such as
trailers, equipment in repair off-premises or otherwise in transit, warehoused
equipment, all in the ordinary course of business, all tangible assets of
Borrowers constituting Collateral will be located on each Borrower's
respective Real Estate. None of the personal property or fixtures located on
any parcel of the Real Estate is owned by any Person other than the Borrower
which is the record titleholder to such parcel of Real Estate, except for
interests in such personal property and fixtures which constitute Permitted
Liens and except for matters disclosed in Schedule 5.1.3 hereto.
5.1.4 Financial Condition. The consolidated balance sheets of
U.S. Lime and its subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996,
together with the notes thereto and the accompanying opinion of Ernst & Young,
LLP, independent certified public accountants, all heretofore furnished to the
Bank, present fairly, in all material respects, the consolidated financial
position of U.S. Lime and its subsidiaries at December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity with GAAP. The
condensed consolidated balance sheets of U.S. Lime and its subsidiaries as of
September 30, 1997 (unaudited) and December 31, 1996 and the related condensed
consolidated statements of operations and of cash flows of U.S. Lime and its
subsidiaries for the nine months ended September 30, 1997 and September 30,
1996 (unaudited), all heretofore furnished to the Bank, have been prepared in
all material respects in accordance with all applicable requirements of Form
10-Q of the Securities and Exchange Commission under the Securities Exchange
Act of 1934 and, in the opinion of the Borrowers' managements, reflect all
adjustments of a normal and recurring nature necessary to present fairly the
financial position, results of operations and cash flows of U.S. Lime and its
subsidiaries on a consolidated basis for the periods presented in accordance
with GAAP, except that certain information and footnote disclosures normally
included in financial statements prepared in accordance with GAAP have been
condensed or omitted. Except as set forth on such Financial Statements and on
Schedule 5.1.4 hereto, the Borrowers do not have any material fixed, accrued
or contingent obligation or liability for taxes or otherwise that is not
disclosed or reserved against on its balance sheets. The Borrowers have
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filed all tax returns required to be filed by them with any taxing authority
and have paid all taxes with respect thereto. Since December 31, 1996,
there have been no changes in the condition of the Borrowers' financial
position or otherwise, from that set forth in the Consolidated Balance Sheets
as of said date that would have a Materially Adverse Effect upon the
Borrowers, other than changes, if any, previously disclosed to Bank in
writing. The Borrowers do not believe, and have no reason to believe, that
there has been or will be a change relating to the business of the Borrowers
that would cause a Materially Adverse Effect on the Borrowers or any of them.
5.1.5 No Litigation. Except (i) those matters referred to in
the notes to Borrowers' consolidated Financial Statements, (ii) those matters
on Schedule 5.1.5 hereto, and (iii) worker's compensation claims covered by
insurance, there are no suits or proceedings pending, or, to the knowledge of
Borrowers, or any of them, threatened against or affecting the Borrowers, or
any of them, and neither any Borrower nor the Borrowers are in default in the
performance of any agreement to which any Borrower or Borrowers may be a party
or by which any Borrower or Borrowers are bound, or with respect to any order,
writ, injunction, or any decree of any court, or any federal, state, municipal
or other government agency or instrumentality, domestic or foreign, which
suits, proceedings and defaults in the aggregate could have a Materially
Adverse Effect on any Borrower or Borrowers.
5.1.6 Compliance. To the best of its knowledge, each Borrower
has all Governmental Approvals necessary for the conduct of such Borrower's
business, except for Governmental Approvals the failure to obtain which could
not have a Materially Adverse Effect on such Borrower, and the conduct of each
Borrower's business is not and has not been in violation of any such
Governmental Approvals or any applicable federal or state law, rule or
regulation, which violation could have a Materially Adverse Effect on such
Borrower or Borrowers. No Borrower requires any Governmental Approvals to
enter into, or perform under, this Agreement, the Notes, or any other Loan
Document.
5.1.7 Compliance with Regulations U and X. No Borrower is
engaged principally, or as one of such Borrower's important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meanings of Regulations U and X of the Board of Governors of
the Federal Reserve System).
5.1.8 ERISA. With respect to each employee pension benefit
plan (within the meaning of Section 3(2) of ERISA other than any
"multiemployer plan" within the meaning of Section 3(37) of ERISA)
(hereinafter, a "Plan"), maintained for employees of any Borrower or of any
trade or business (whether or not incorporated) which is under common control
with such Borrower (within the meaning of Section 4001(b)(1) of ERISA), and
except as disclosed in Schedule 5.1.8 or as heretofore disclosed to the Bank
in writing (i) there is no accumulated funding deficiency (within the meaning
of Section 302 of ERISA or Section 412 of the Code), as of the last day of the
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most recent plan year of such Plan heretofore ended, taking into account
contributions made or to be made within the time prescribed by Section 412(c)
(10) of the Code; (ii) to the best of the Borrower's knowledge, each such Plan
has been maintained in accordance with its terms and ERISA; and (iii) there
has been no "reportable event" within the meaning of Section 4043 of ERISA and
the regulations thereunder for which the 30-day notice requirement has not
been waived. No Borrower has incurred any liability to the PBGC other than
required insurance premiums, all of which that have become due as of the date
hereof have been paid. Schedule 5.1.8 hereto sets forth all multiemployer
plans to which Borrowers or any Borrower is a party and the most recent
information received by Borrowers or such Borrower from any multiemployer
plan (within the meaning of Section 3(37) of ERISA), regarding the estimated
amount of potential liability for a complete withdrawal from any such
multiemployer plan based on the assumptions used by any such multiemployer
plan for purposes of providing the estimate.
5.1.9 Solvency.
5.1.9.1 The aggregate present fair saleable value of the
assets of Borrowers (sold as a whole) after giving effect to the funding of
all Loans hereunder exceeds the amount that will be required to be paid on or
in respect of the Debts and other liabilities (including contingent
liabilities) of Borrowers as they mature.
5.1.9.2 The assets of Borrowers do not in the aggregate
constitute unreasonably small capital for Borrowers to conduct their business
as now conducted and as proposed to be conducted, including the capital needs
of Borrowers.
5.1.9.3 Borrowers do not intend to, nor do Borrowers
believe that they will, incur Debts beyond their ability to pay as such Debts
mature (taking into account the timing and amounts of cash to be received by
Borrowers and of amounts to be payable on or in respect of Debt of Borrowers).
The cash available to Borrowers, after taking into account all other
anticipated sources and uses of the cash of Borrowers, is anticipated to be
sufficient to pay all amounts on or in respect of the Indebtedness when the
Indebtedness or any part thereof is required to be paid.
5.1.9.4 The aggregate fair value of Borrowers' assets
exceeds the aggregate of all their liabilities.
5.1.10 RICO. Neither Borrowers nor any Borrower have engaged
in any conduct or taken or omitted any actions which will, or could, if the
facts and circumstances relative thereto were discovered, give rise to a
criminal indictment or civil action against Borrowers or any Borrower under
RICO.
5.1.11 Labor Matters. Except to the extent set forth on
Schedule 5.1.11 hereto, (i) no Borrower is a party to any collective
bargaining agreement; (ii) no Borrower has experienced any strike, labor
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dispute, slowdown or work stoppage due to labor disagreements which could have
a Materially Adverse Effect on such Borrower or Borrowers or on the value of
the Collateral or on the enforceability of the Indebtedness (including
realizing on the Collateral); (iii) to the best knowledge of each Borrower,
after due inquiry, there is no such strike, dispute, slowdown or work stoppage
threatened against any Borrower which would have a Materially Adverse Effect
on such Borrower, and (iv) no labor petitions have been filed or union
organizing activity conducted during the past six months pertaining to any
Borrower.
5.1.12 Business. Borrowers enjoy peaceful and undisturbed
possession under all leases of real or personal property of which any Borrower
is lessee, to the extent material to the business of such Borrower. Borrowers
or the applicable Borrower own or possess the right to use all the franchises,
rights, licenses, goodwill and trademarks necessary for the conduct of their
business as now conducted or as contemplated to be conducted. Borrowers own,
lease or have the right to use, all assets, franchises, rights, licenses,
goodwill and trademarks, and employ all employees and/or engage such
independent contractors, as are necessary to operate the business conducted by
each Borrower; and all of such tangible assets are in good working order,
normal wear and tear excepted.
5.1.13 Vehicle Title and Registration. All of each Borrower's
motor vehicles which under applicable law are required to be registered, are
properly registered (or such registration has been properly applied for) in
the name of such Borrower, and such motor vehicles and related equipment are
fit for use and available for use without repair (except for maintenance and
repair in the ordinary course of business and except for deterioration or
obsolescence of such motor vehicles and other equipment not, taken as a whole,
material to the conduct of Borrower's Business), and the ownership of such
motor vehicles which, under applicable law, is evidenced by a Certificate of
Title is properly titled in the name of the applicable Borrower.
5.1.14 Environmental.
5.1.14.1 Except as set forth in Schedule 5.1.14 or where
failure to comply would not have or result in a Materially Adverse Effect on
any Borrower or Borrowers, or the conduct of Borrowers' or any Borrower's
Business, each Borrower has, to such Borrower's knowledge, in the conduct of
its business, and the ownership and use of its properties, complied with all
federal, state and local laws, rules, regulations, judicial decisions and
decrees pertaining to the use, storage or disposal of hazardous waste or toxic
materials.
5.1.14.2 To each Borrower's knowledge, except as set
forth in Schedule 5.1.14 or where the presence of a hazardous substance,
pollutant, contaminant, waste or residue waste or solid waste would not have
or result in a Materially Adverse Effect on such Borrower or on the conduct of
such Borrower's business: (i) no hazardous substance, pollutant or contaminant
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(as defined in Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA), 42 U.S.C. '9601, as amended by the
Superfund Amendments and Re-authorization Act of 1986 (Pub. L. No. 99-499, 100
Stat. 1613 (1986) (SARA) or 40 CFR Part 261, whichever is applicable) is
present on any of the Real Estate in any quantity in excess of those allowed
by applicable law; (ii) as to Real Estate located in Arkansas, Texas and any
other jurisdiction: no hazardous substance or waste is present on such Real
Estate in excess of amounts permitted under applicable state or local
environmental laws, rules, regulations or ordinances; (iii) no Borrower has
been identified in any litigation, administrative proceedings or investigation
as a responsible party for any liability under the above referenced laws; and
(iv) all materials that are located on any of the Real Estate in lawful
amounts are properly stored and maintained in containers appropriate for such
purposes.
5.1.15 Debt and Guaranties. Except as reflected in the
Financial Statements furnished pursuant to Section 5.1.4 hereof or in the
notes thereto or in Schedule 5.1.15 hereto, no Borrower has any Debt in excess
of $100,000 in the aggregate nor has guarantied the payment or performance of
any material debts or obligations of any other Person except for the guaranty
of checks or other negotiable instruments for collection or as permitted
pursuant to Section 7.1.1 hereof.
5.1.16 Real Estate. With respect to the Real Estate:
5.1.16.1 Except as set forth on Schedule 5.1.5 hereto,
there is no litigation pending or threatened which would in any way affect any
of the following: title to any parcel of the Real Estate or any part thereof;
the validity or priority of the lien of any Mortgage; issuance or validity of
any zoning variance or other zoning or subdivision approval affecting any
parcel of the Real Estate; any building permit or certificate of occupancy
which has been issued in connection with any Real Estate or any part thereof;
5.1.16.2 Except for Permits the lack of which would not
result in a Materially Adverse Effect, each Borrower has obtained all Permits,
and all appeal periods allowed with respect thereto have expired without any
appeal having been filed by any person; all Permits are in full force and
effect and all parcels of the Real Estate comply, in all material respects,
with all requirements of law including those relating to building, zoning,
subdivision and environmental protection;
5.1.16.3 No part of any of the parcels of Real Estate has
during the period of its ownership by a Borrower been damaged or taken by, or
is under cloud of, eminent domain proceedings;
5.1.16.4 Except as set forth on Schedule 5.1.16.4 hereto,
none of the parcels of Real Estate is now damaged or injured as a result of
any fire, explosion, accident, flood or other casualty;
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5.1.16.5 All parcels of the Real Estate have unqualified
access to and from a public road; and
5.1.16.6 Except as set forth on Schedule 5.1.16.6 hereto,
none of the parcels of Real Estate is located within the 100-year flood line
of any river, stream or body of water.
5.1.17 Trademarks. Except as set forth in Schedule 5.1.17
hereto, each Borrower owns its respective trademarks free and clear of all
liens, claims, encumbrances and security interests, maintains such trademarks
in the principal register of the United States Patent and Trademark Office and
the applicable registry of all states listed on Schedule 5.1.17 hereto, and
has the unrestricted right to grant to Bank the trademark liens and other
rights granted in this Agreement with respect thereto.
5.1.18 Other Contractual Obligations. The Loans do not
violate any other contractual obligation of Borrowers or any of them.
5.1.19 Investment Company Act. None of the Borrowers is an
Investment Company within the meaning of the Investment Company Act of 1940.
5.1.20 Public Utility Holding Company Act. None of the
Borrowers is a Public Utility Holding Company within the meaning of the Public
Utility Holding Company Act.
5.1.21 Title to Assets. Borrowers have title to their
respective Collateral and good and marketable fee simple title to their
respective parcels of the Real Estate, free and clear of all liens,
encumbrances, security interests or other rights of third parties, except for
Permitted Liens.
5.1.22 Capitalization. The authorized capital stock of U.S.
Lime consists of: (i) 15,000,000 shares of Common Stock, $.10 par value per
share, of which 3,951,853 shares are issued and outstanding as of the Closing
Date; and (ii) 500,000 shares of Preferred Stock, $5.00 par value per share,
[none] of which shares have been issued. Except to the extent issued under
employee stock option plans, there are no outstanding agreements, options,
warrants, convertible securities or rights pursuant to which shares of U.S.
Lime's capital stock, or securities, warrants, options or rights, convertible
into or exercisable, directly or indirectly, for shares of capital stock of
U.S. Lime, are issuable by U.S. Lime.
5.1.23 Texas Real Estate. To the best of each Borrower's
knowledge after due inquiry, (i) from the date of TLC's acquisition of its
Real Estate, neither TLC nor any other Borrower has received any claim for, or
paid any, royalties, fees or other payments for the extraction of oil, gas, or
other hydrocarbons, limestone, gravel, crushed rock, sand or other minerals of
any kind or character over, under or produced from Real Estate owned by TLC,
and (ii) none of the mineral rights reserved or conveyed to third parties
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listed on Schedule B to Commonwealth Land Title Insurance Company Commitment
for the Real Estate owned by TLC delivered pursuant to Section 4.1.5 hereof
has interfered in any material respect with the operations of TLC's business.
5.2 Accuracy of Representations; No Default. The information set
forth herein, in the Notes, on each of the Schedules hereto, and all of the
other Loan Documents and each document previously delivered by a Borrower to
Bank in connection herewith is complete and accurate and contains full and
true disclosure of pertinent financial and other information in connection
with the Loans. None of the foregoing contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
information contained herein or therein not misleading or incomplete. No
Event of Default or Unmatured Event of Default hereunder, under the Notes, any
other Loan Document, or under any of them has occurred.
6. AFFIRMATIVE COVENANTS
6.1 Borrowers' Covenants. As long as any portion of the
Indebtedness remains outstanding and unpaid or Bank has any credit facility
available to Borrowers or any Borrower, Borrowers covenant and agree that, in
the absence of prior written consent of Bank, Borrowers will:
6.1.1 Financial Statements. Furnish to Bank, not later than
one hundred twenty-five (125) days after the close of each Fiscal Year, U.S.
Lime's Annual Report containing a consolidated balance sheet, of U.S. Lime and
its subsidiaries as of the last day of such Fiscal Year and related
consolidated statements of operations, stockholders' equity and cash flow for
such Fiscal Year, audited by Ernst & Young, LLP or other independent certified
public accountants of recognized standing in the financial community. In
addition, Borrowers will furnish to Bank, within fifty (50) days of the close
of each Calendar Quarter other than the last quarter of each Fiscal Year, a
condensed consolidated balance sheet of U.S. Lime and its subsidiaries as of
the last day of such Calendar Quarter and related condensed consolidated
statements of operations and of cash flow of U.S. Lime and its subsidiaries
for such Calendar Quarter. Each set of Financial Statements delivered to Bank
pursuant to this Section 6.1.1 shall be certified by an Authorized Officer of
U.S. Lime as having been prepared in all material respects in accordance with
all applicable requirements of Form 10-Q of the Securities and Exchange
Commission under the Securities Exchange Act of 1934 and as reflecting, in the
opinion of the Borrowers' managements, all adjustments of a normal and
recurring nature necessary to present fairly the financial position, results
of operations and cash flows of U.S. Lime and its subsidiaries on a
consolidated basis for the periods presented in accordance with GAAP. Each
Borrower shall furnish Bank together with all Financial Statements a
certificate, substantially in the form of Schedule 6.1.1 hereto, executed by
an Authorized Officer, which certificate shall state that the signer: (i) has
reviewed the terms of this Agreement and has made, or caused to be made under
his supervision, a review in reasonable detail of the transactions and
condition of Borrowers during the accounting period covered by such Financial
Statements and that such review has not disclosed the existence during or at
the end of such accounting period, and (ii) does not have knowledge of the
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existence as at the date of the certificate, of any condition or event which
constitutes an Event of Default or Unmatured Event of Default, or if any such
condition or event existed or exists, specifying the nature and period of
existence thereof and what action such Borrower has taken, is taking and
proposes to take with respect thereto, it being agreed that so long as the
Borrowers have a common Authorized Officer the substance of such certificate
may be combined into a single certificate. Borrowers shall deliver to Bank,
within 30 days of Bank's request, copies of any internal supporting schedules
and other information regarding the consolidation of Borrower's Financial
Statements;
6.1.2 Other Financial Information. With reasonable promptness
furnish to Bank all financial and business information provided to
stockholders of U.S. Lime, the Securities and Exchange Commission, the NASDAQ,
and such additional information and data concerning the business and financial
condition of Borrowers as may be reasonably requested by Bank. Each Borrower
shall afford Bank or its agents access to the financial books, records,
computer tapes and properties of such Borrower at all reasonable times and
permit Bank or its agents to make copies and abstracts of same and to remove
such copies and abstracts from such Borrower's premises. Bank shall with
respect to any and all financial statements or other reports, documents, data
and materials delivered by a Borrower to Bank pursuant to this Agreement, to
the extent that the information contained therein has not otherwise been
disclosed in such a manner as to render the same no longer confidential,
maintain the confidential nature of the information contained therein;
provided, however, that Bank may disclose such information to: (a) its
employees, agents, attorneys and accountants who would ordinarily have access
to the same in the normal course of the performance of their duties; (b)
prospective participating lenders who shall maintain the confidential nature
of such information; and (c) such third parties as may be necessary in
connection with or in response to (i) compliance with any Rule, subpoena or
investigation or (ii) any order, decree, judgment, subpoena, notice of
discovery or similar ruling or pleading issued, filed or served (x) by or
under authority of any court, tribunal, arbitration panel or any governmental
agency, commission, authority, board or similar entity or (y) in connection
with any proceeding, case or other matter pending before any court, tribunal,
arbitration panel or any governmental agency, commission, authority, board or
similar entity; provided, however, that in connection with the submission of
any information to any commiss ion, authority, board or similar entity, the
Bank shall request that the information submitted be kept confidential;
6.1.3 Deposits at Bank. U.S. Lime shall maintain its
principal operating accounts (excepting locally maintained payroll, petty cash
and local collection accounts) with Bank;
6.1.4 Taxes and Claims. Promptly pay and discharge all taxes,
governmental charges and assessments levied and assessed or imposed upon any
Borrower's assets or any portion thereof, or upon the purchase, ownership,
delivery, leasing, possession, use, operation, return or other disposition
thereof, or upon the rentals, receipts or earnings therefrom, or upon or with
respect to this Agreement, the Notes, or any other Loan Document, and pay all
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other claims which, if unpaid, might become liens or charges, other than
Permitted Liens, upon the assets of any Borrower, provided, however, that
nothing in this Section 6.1.4 shall require Borrowers or any Borrower to pay
any such taxes or assessments prior to the date on which they otherwise would
become delinquent or as long as Borrowers or such Borrower shall in good
faith contest the amount or validity thereof and shall establish reserves
against such taxes and assessments in kind and amount satisfactory to Bank
and, in the case of Federal tax liens, cause same to be extinguished or
bonded;
6.1.5 Existence. Except in each case to the extent that the
failure to do so would not have a Materially Adverse Effect on the Borrowers
as a whole, (i) maintain the corporate existence of each Borrower and all
necessary foreign qualifications in good standing, (ii) continue to comply
with all applicable statutes, Rules and regulations with respect to the
conduct of such Borrower's business and (iii) maintain all Permits, provided
that the foregoing shall not be deemed to prohibit the merger or consolidation
of any Borrower or subsidiary of a Borrower into or with a Borrower or another
subsidiary of a Borrower;
6.1.6 Insurance. Maintain personal liability, casualty,
workers' compensation, property damage, flood and business interruption
insurance with respect to each Borrower's business and assets, in such
amounts, against such hazards and liabilities, and with such companies as may
be reasonably satisfactory to Bank, all such policies covering the Collateral
to insure Bank as its interests may appear. Each Borrower shall, unless Bank
shall otherwise agree in writing to the contrary, maintain insurance as
follows:
(i) Insurance against loss or damage to the Real Estate
and to all of each Borrower's inventory, equipment, furniture, fixtures and
machinery wherever located, by fire and any of the risks covered by insurance
of the type now known as "all risk" coverage in an amount not less than that
percentage of the full replacement cost of all buildings and improvements now
or hereafter erected thereon (exclusive of the cost of excavations,
foundations, and footings below the lowest basement floor), required to
satisfy any applicable coinsurance requirement in such policy and with not
more than $100,000 deductible from the loss payable for any casualty. The
policies of insurance carried in accordance with this subparagraph (i) shall
contain the "Replacement Cost Endorsement";
(ii) Business interruption insurance for the period of
time needed for restoration with 90 days coverage for ordinary payroll in such
amounts as are satisfactory to Bank;
(iii) Comprehensive public liability insurance (including
coverage for elevators and escalators, if any, on any Real Estate and, if any
construction of new improvements thereon occurs after execution of this
Agreement, completed operations coverage for one year after construction of
the improvements has been completed) on an "occurrence basis" against claims
for "personal injury", including without limitation bodily injury, death or
property damage occurring on, in or about such Real Estate and the adjoining
streets, sidewalks and passageways, such insurance to afford immediate minimum
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protection to a limit of not less than that required by Bank with respect to
personal injury or death to any one or more persons or damage to property;
(iv) Worker's compensation insurance (including employer's
liability insurance) for all employees of each Borrower in such amount as is
reasonably satisfactory to Bank, or, if minimum amounts are established by
law, in such amounts;
(v) During the course of any construction or repair of
improvements on any Real Estate, builder's completed value risk insurance
against "all risks of physical loss", including collapse and transit coverage,
during such construction or repair, with deductibles not to exceed $100,000,
in non-reporting form, covering the total value of work performed and
equipment, supplies and materials furnished. If requested by Bank, such
policy of insurance shall contain the "permission to occupy upon completion of
work or occupancy" endorsement;
(vi) Boiler and machinery insurance covering pressure
vessels, air tanks, boilers, machinery, pressure piping, heating, air
conditioning and elevator equipment and escalator equipment, with respect to
such portions of the Real Estate as contain equipment of such nature, and
insurance against loss of occupancy or use arising from any breakdown of such
equipment, in such amounts as are reasonably satisfactory to Bank.
6.1.6.1 Each policy of insurance required by the terms of
this Section shall contain an endorsement or agreement by the insurer that any
loss shall be payable in accordance with the terms of such policy
notwithstanding any act or negligence of such Borrower which might otherwise
result in forfeiture of such insurance, and also an agreement by the insurer
waiving all rights of setoff, counterclaims or deductions against such
Borrower.
6.1.6.2 Each policy of insurance required by the terms of
this Section shall be issued by a company reasonably satisfactory to Bank,
shall be in an amount reasonably satisfactory to Bank, and if insuring against
damage to any of the Real Estate, shall have attached to it, in forms
satisfactory to Bank, both a mortgagee clause in favor of Bank, not subject to
contribution, and a lender's loss payable endorsement for the benefit of Bank.
Each Borrower shall furnish Bank, with a copy of the original with respect to
all required insurance coverage. Bank consents to each Borrower providing any
of the required insurance through blanket policies carried by Borrowers and
covering more than one location, provided that Borrowers furnish Bank with a
signed certificate of insurance for each such policy setting forth the
coverage, the limits of liability, the name of the carrier, the policy number,
and the expiration date. Borrowers shall make appropriate provisions whereby
the applicable insurance carriers will furnish to Bank at least thirty (30)
days prior to the expiration of each such policy, written notice in the event
that any of the coverages required to be maintained under this Section 6.1.6
will not be renewed upon expiration and ten (10) days prior written notice of
the cancellation of all or any portion of such coverages. All such policies,
including policies for any amounts carried in excess of the required minimum
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and policies not specifically required by Bank, shall be in form reasonably
satisfactory to Bank, shall be maintained in full force and effect, shall be
delivered (or a certificate with respect thereto shall be delivered) to Bank,
shall contain a provision that such policies will not be cancelled or
materially amended, which term shall include any reduction in the scope or
limits of coverage, without at least thirty (30) days prior written notice to
Bank. If the insurance, or any part thereof, shall expire, or be withdrawn,
or become void or unsafe by reason of any Borrower's breach of any condition
thereof, or become void or unsafe by reason of the value or impairment of the
capital of any company in which the insurance may then be carried, or if for
any reason whatever the insurance shall be unsatisfactory to Bank in its
reasonable judgment, such Borrower or Borrowers shall place new insurance
reasonably satisfactory to Bank. Borrowers shall make appropriate provisions
with the applicable insurance carriers to name Bank as additional loss payee
for the coverages required by this Section 6.1.6.
6.1.6.3 In the event any Borrower fails to provide,
maintain, keep in force or deliver and furnish to Bank the policies of
insurance required by this Agreement, Bank may upon notice to the Borrower
procure such insurance or single-interest insurance for such risks covering
Bank's interest, and such Borrower will pay all premiums thereon promptly upon
demand by Bank.
6.1.6.4 In the event of loss in excess of $350,000 in the
case of any single incident, each affected Borrower will give immediate notice
thereof to Bank, and Bank may make proof of loss if not made promptly by such
Borrower. Each insurance company concerned is hereby authorized and directed
to make payment under its respective policy or policies in respect of any such
loss, including return of unearned premiums, directly to Bank instead of to
such Borrower and Bank jointly, and such Borrower appoints Bank, irrevocably,
as such Borrower's attorney-in-fact to endorse any draft therefor. Subject to
the provisions of Section 6.1.6.5 of this Agreement, Bank shall have the right
to retain and apply the proceeds of any such insurance on account of any such
loss, at its election, to reduction of the indebtedness secured hereby, or to
restoration or repair of the property damaged. If Bank becomes the owner of
the Real Estate, or any part thereof by foreclosure or otherwise, such
policies, including all right, title and interest of the Borrowers thereunder,
shall become the absolute property of Bank.
6.1.6.5 Notwithstanding the provisions of Section 6.1.6.4
hereof, in the event of any damage by fire or other casualty covered by
insurance wherein the insurance proceeds are not in excess of $1,000,000, the
Bank will immediately release the insurance proceeds to the affected Borrower
for either repair or reconstruction, or both. If the amount of the insurance
proceeds exceeds $1,000,000, such proceeds shall be made available to the
affected Borrower for such purposes upon the following terms and conditions:
(i) The work will be performed by a reputable
general contractor satisfactory to Bank in the exercise of reasonable business
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judgment, pursuant to plans and specifications satisfactory to Bank, in the
exercise of reasonable business judgment.
(ii) The insurance proceeds will be held by Bank (or
at the request of either the Bank or the affected Borrower by an escrowee
satisfactory to Bank and such Borrower) in trust, to be disbursed periodically
as the work progresses in amounts not exceeding 90% of the value of labor and
materials incorporated into the work. The remaining 10% will be released to
such Borrower upon final completion of the work in accordance with the
aforesaid plans and specifications, and upon a receipt of a release of liens
from all contractors and subcontractors engaged in the work.
(iii) If the entire insurance proceeds are not used
for restoration, the excess proceeds shall be disbursed to such Borrower. If
the cost of the work will exceed the available insurance proceeds, the
affected Borrower will pay for restoration work in an amount equal to such
excess prior to the disbursement of the insurance proceeds.
(iv) Notwithstanding the foregoing, if at the time of
occurrence there exists an Event of Default, this subsection shall not apply
and the provisions of Section 6.1.6.4 above, shall apply instead and if at the
time of the occurrence an Unmatured Event of Default exists the proceeds shall
be held by the Bank until the same either is cured or becomes an Event of
Default.
6.1.7 Defense of Actions. Promptly defend all actions,
proceedings or claims affecting the Borrowers or any Borrower or its or their
business property which, if adversely determined, could cause a Materially
Adverse Effect on Borrowers or such Borrower and promptly notify Bank of the
institution of, or any change in, any such action, proceeding or claim
(except in the case of a workers compensation or general liability claim) if
the same is in excess of $75,000 for any single action, proceeding or claim
and $350,000 in the aggregate, or would have a Materially Adverse Effect on
the financial condition of Borrowers or such Borrower or its or their
property, if adversely determined;
6.1.8 Maintenance of Assets. Maintain, preserve, protect and
keep in good order and condition all of the Collateral and all other property
used or useful in the conduct of each Borrower's business and, from time to
time, make all necessary or appropriate repairs, replacements and improvements
thereto;
6.1.9 Further Assurances. Provide Bank at any time or from
time to time on request with such mortgages, assignments, certificates of
title or Financing Statements and such additional instruments or documents as
Bank may, in Bank's sole discretion, deem necessary in order to perfect,
protect and maintain the security interest in and lien on the Collateral
granted to Bank pursuant to the terms hereof and the other Loan Documents;
6.1.10 Notice of Events. Promptly give written notice to Bank
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of the occurrence of any Event of Default and any event which causes any
representation or warranty made in Article 5 hereof to be untrue at any time
or which would cause Borrowers or any Borrower to be in default hereunder,
under the Notes or any other Loan Document for any other reason, or of any
material casualty to any of Borrowers' or such Borrower's assets;
6.1.11 Compliance with Agreements. Comply in all material
respects with all material agreements (including, but not limited to,
collective bargaining agreements with all labor unions) to which any Borrower
is a party the failure to do so could result in a Materially Adverse Effect.
6.1.12 ERISA. Comply in all material respects with the
requirements of ERISA applicable to any employee pension benefit plan (within
the meaning of Section 3(2) of ERISA), sponsored by Borrowers or any Borrower.
With respect to any such plan, other than any "multiemployer plan" (within the
meaning of Section 3(37) of ERISA), in the case of a "reportable event" within
the meaning of Section 4043 of ERISA and the regulations thereunder for which
the 30-day notice requirement has not been waived, or in the case of any other
event or condition which presents a material risk of the termination of any
such plan by action of the PBGC, Borrowers, or any Borrower, Borrowers shall
furnish to Bank a certificate of the chief financial officer of U.S. Lime
identifying such reportable event or such other event or condition and setting
forth the action, if any, that Borrowers or such Borrower intends to take or
has taken with respect thereto, together with a copy of any notice of such
reportable event or such other event or condition filed with the PBGC or any
notice received by Borrowers or such Borrower from the PBGC evidencing the
intent of the PBGC to institute proceedings to terminate any such plan. Such
certificate of the chief financial officer or such other notice to be
furnished to Bank in accordance with the preceding sentence shall be given in
the manner provided for in Section 9.3 hereof: (i) within 30 days after any
Borrower knows of such reportable event or such other event or condition; (ii)
as soon as possible upon receipt of any such notice from the PBGC; or (iii)
concurrently with the filing of any such notice with the PBGC, as the case may
be. For purposes of this Section, Borrowers shall be deemed to have all
knowledge attributable to the administrator of any such plan.
6.1.13 Financial Covenants. Comply with the following
financial covenants:
6.1.13.1 Minimum Net Worth. Maintain at all times a
consolidated Net Worth of not less than an amount which during the Calendar
Quarter of the Borrowers ending December 31, 1997 shall be $20,000,000 and
which in each subsequent Calendar Quarter shall be at least the sum of (i) the
minimum consolidated Net Worth required to be maintained by the Borrowers
under this Section 6.1.13.1 during the immediately preceding Calendar Quarter
plus (ii) an amount equal to 50% of the consolidated Net Income of the
Borrowers for such immediately preceding Calendar Quarter. Net Worth shall be
tested quarterly upon Bank's receipt of Borrowers' quarterly consolidated
Financial Statements;
6.1.13.2 Ratio of Total Liabilities to Net Worth.
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Maintain at all times the ratio of Borrowers' consolidated Total Liabilities
to consolidated Net Worth at no greater than 1.5 to 1.0. Borrowers' ratio of
Total Liabilities to Net Worth shall be tested quarterly upon Bank's receipt
of Borrowers' quarterly consolidated Financial Statements;
6.1.13.3 Ratio of Cash Flow to Fixed Obligations.
Maintain at all times the ratio of Borrowers' Cash Flow to Fixed Obligations
at no less than 1.25 to 1.0. Borrowers' ratio of Cash Flow to Fixed
Obligations shall be tested quarterly upon receipt of Borrower's quarterly
consolidated Financial Statements, on a rolling four-quarter historical basis
commencing with the four consecutive Calendar Quarters ending December 31,
1997.
6.1.14 Equipment; Motor Vehicles. Cause all Equipment which,
under applicable law, is required to be registered, to be registered properly
in the name of the applicable Borrower, and cause all motor vehicles or other
equipment the ownership of which, under applicable law, is evidenced by a
certificate of title to be properly titled in the applicable Borrower's name,
and, except in the case of automobiles and pickup trucks, to have Bank's lien
on such motor vehicles and other equipment properly noted on the certificate
of title with respect thereto.
6.1.15 Mortgages. Perform, as and when due, all of such
Borrower's obligations (both monetary and non-monetary) under all mortgages
and deeds of trust that encumber any part of the Real Estate but are not one
of the Loan Documents, within such applicable notice or cure period as may be
allowed such Borrower pursuant to the relevant mortgage or deed of trust, and
pay and discharge, at or before maturity, all of such Borrower's material
obligations and liabilities under such mortgages and deeds of trust, except
where the same may be contested in good faith by appropriate proceedings, and
will maintain, in accordance with GAAP, appropriate reserves for the accrual
of any of the same.
6.1.16 Notice of Changes. Immediately upon learning of the
same notify Bank of: (i) the occurrence or imminent occurrence of any event
which causes or would imminently cause (A) any material adverse change in the
business, property, prospects or financial condition of any Borrower, (B) any
representation or warranty made by any Borrower hereunder to be untrue,
incomplete or misleading when made, or (C) the occurrence of any Event of
Default or Unmatured Event of Default hereunder; (ii) the institution of, or
the issuance of any order, judgment, decree or other process in, any
litigation, investigation, prosecution, proceeding or other action by any
governmental authority or other Person against any Borrower which does, or
could, materially adversely affect such Borrower; (iii) any material casualty
to any material part of the Collateral or other property of any Borrower; and
(iv) any change in the number or identity of any of the Borrowers' directors
or executive officers.
6.1.17 Audits. Permit Bank to audit such Borrower's premises,
books and records from time to time, including without limitation, audits of
the Permits, and reimburse Bank's expenses and fees therefor for one such
audit during any calendar year. Bank intends to cause its internal audit
department personnel to perform such audits, but in the event Bank desires, or
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is required, to employ independent auditors, the reimbursable costs for such
auditors shall not exceed $10,000 per audit.
6.1.18 Term Loan Amortization Date. Use their best efforts to
complete construction and commence pyro-processing of limestone for
commercial sale from the modified number 6 kiln located at TLC's plant in
Cleburne, Texas, prior to July 1, 1998.
6.2 Indemnification. Each Borrower hereby indemnifies and agrees
to protect, defend, and hold harmless Bank and Bank's directors, officers,
employees, agents, attorneys and shareholders from and against any and all
losses, damages, expenses or liabilities of any kind or nature and from any
suits, claims, or demands, including all reasonable counsel fees incurred in
investigating, evaluating or defending such claim, suffered by any of them and
caused by, relating to, arising out of, resulting from, or in any way
connected with the gross negligence or willful misconduct of such Borrower
under this Agreement, the Notes, or any other Loan Documents and any
transaction contemplated herein or therein (other than actions also arising
out of or connected with the willful misconduct or gross negligence of Bank or
actions brought in good faith by Borrowers against Bank), including, but not
limited to, claims based upon any act or failure to act by Bank in connection
with any Loan Document and any transaction contemplated therein. If any
Borrower shall have knowledge of any claim or liability hereby indemnified
against, it shall give prompt written notice thereof to Bank. THIS COVENANT
SHALL SURVIVE PAYMENT OF THE INDEBTEDNESS.
6.2.1 Bank shall give Borrowers prompt notice of all suits or
actions instituted against Bank with respect to which Borrowers have
indemnified Bank, and Borrowers shall timely proceed to defend any such suit
or action. Bank shall also have the right, at Bank's expense to participate
in or, at Bank's election, if Borrowers have not timely defended such suit or
action to assume the defense or prosecution of such suit, action, or
proceeding, and in the latter event Borrowers may employ counsel and
participate therein. If Bank assumes the defense of any suit or action under
the terms hereof, Bank shall have the right to adjust, settle, or compromise
any claim, suit, or judgment after notice to Borrowers, and the right of Bank
to indemnification under this Agreement shall extend to any money paid by the
Bank in settlement or compromise of any such claims, suits, and judgments in
good faith, after notice to Borrowers. The Bank will not adjust, settle or
compromise any claim or suit involving an allegation of fraud, breach of
fiduciary duty, criminal activity or other misconduct on the part of a
Borrower or any of its directors or officers without the written consent of
the Borrower which consent shall not be unreasonably withheld.
6.2.2 If any suit, action, or other proceeding is brought by
Bank against any Borrower or Borrowers for breach of its or their covenant of
indemnity herein contained, separate suits may be brought as causes of action
accrue, without prejudice or bar to the bringing of subsequent suits on any
other cause or causes of action, whether theretofore or thereafter accruing.
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7. NEGATIVE COVENANTS
7.1 Covenants of Borrower. As long as any portion of the
Indebtedness shall remain outstanding and unpaid or Bank has any credit
facility available to Borrowers hereunder, each Borrower covenants and agrees
that, in the absence of prior written consent of the Bank, such Borrower will
not:
7.1.1 Create, assume, incur or become liable under any
guaranty for, any indebtedness for borrowed money to, any Person, other than:
(i) Loans from Bank to Borrowers; (ii) trade indebtedness for the purchase of
supplies and services in the ordinary course of business; (iii) indebtedness
existing as of the date hereof and disclosed in Schedule 5.1.15 attached
hereto; (iv) indebtedness arising in connection with a Permitted Lien or other
encumbrance permitted by Section 7.1.2 hereof; (v) the guaranty in the
ordinary course of business of checks or other negotiable instruments for
collection; and (vi) inter-company indebtedness;
7.1.2 Except as set forth on Schedule 5.1.3 attached hereto,
create, incur, assume or permit to exist any mortgage, lien, pledge, charge,
security interest or other encumbrance upon any of its properties or assets,
whether now owned or hereafter acquired, except: (i) mortgages or other
security interests granted to secure money borrowed from Bank; and (ii) liens
for taxes or governmental claims not yet due or which are being duly contested
and reserved in accordance with Section 6.1.4 hereof; (iii) liens or security
interests in equipment or other assets used in such Borrower's business not
yet paid for in full in favor of the manufacturer or seller thereof, which
secures the obligation to pay the purchase price for such equipment or assets
and which, at any one time outstanding in the aggregate do not exceed
$250,000; and (iv) Permitted Liens.
7.1.3 Except for Permitted Liens, salvage dispositions and
other dispositions in the ordinary course of business, sales of assets in the
ordinary course of business, the sale or other disposition of "other assets
held for sale", sell, enter into an agreement of sale for, convey, lease,
assign, transfer, pledge, grant a security interest, mortgage or lien in,
otherwise encumber or dispose of, the Collateral other than sales to another
Borrower or a subsidiary thereof;
7.1.4 Except as set forth on Schedule 5.1.15 attached hereto,
and except for miscellaneous employee travel and other advances and guarantees
not to exceed $20,000 in each case and $100,000 in the aggregate, and as
otherwise permitted under Section 7.1.10, make loans to, invest in the
securities of, or endorse, guaranty, or otherwise become a surety except in
the ordinary course of business for the payment or performance of any
liability or obligation of, any individual, firm or corporation other than a
Borrower or a subsidiary thereof, except that Borrowers may invest in Cash
Equivalents;
7.1.5 Change the general character of any Borrower's business
from that in which it is currently engaged or proposes to be engaged; remove
any of such Borrower's tangible assets with a book value of more than $150,000
that are now located on such Borrower's Real Estate to a location other than
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another parcel of such Borrower's or another Borrower's Real Estate and any
Borrower may, in the ordinary course of business, cause or permit the removal
of moveable equipment, or equipment in repair or the like off-premises or
otherwise in transit and may have inventory or equipment in transit or in
warehouses; enter into proceedings in total or partial dissolution; merge or
consolidate with or into any other corporation, or permit another corporation
to merge into it, or acquire all or substantially all of the assets or
securities of any other Person; pay or declare any dividends or distribution
on any of such Borrower's capital stock; except for dividends and other
distributions payable in stock and except for dissolutions into, mergers and
consolidations with, acquisitions of assets or securities of, and dividends
and other distributions to, another Borrower or a subsidiary thereof and
except that the Bank will not unreasonably withhold its consent to any
proposed acquisition in which the consideration and liabilities assumed does
not exceed $250,000; provided however that, subject to the financial covenants
contained in Section 6.1.13 hereof, U.S. Lime may declare and pay dividends on
its common stock if at the time of declaration and after giving effect thereto
(as if then paid), the aggregate amount of all dividends so declared and paid
by U.S. Lime in any Fiscal Year shall not exceed 25% of the average of the
Borrowers' consolidated Net Incomes for the two immediately preceding Fiscal
Years;
7.1.6 Use any part of the proceeds of the Loans to purchase or
carry, or to reduce, retire or refinance any credit incurred to purchase or
carry, any margin stock (within the meaning of Regulations U and X of the
Board of Governors of the Federal Reserve System) or to extend credit to
others for the purpose of purchasing or carrying any margin stock. If
requested by Bank, the Borrower will furnish to Bank statements in conformity
with the requirements of Federal Reserve Form U-1 referred to in said
Regulation;
7.1.7 Engage in any conduct or take or fail to take any
actions which will, or could, if the facts and circumstances relative thereto
were discovered, give rise to any criminal indictment or civil action against
Borrowers or any Borrower under RICO;
7.1.8 Amend its Articles of Incorporation or Bylaws in a
manner adverse to interests of the Bank or the Collateral;
7.1.9 Except for dividends and distributions and other
transactions permitted under Section 7.1.5 and except as part of a reasonable
overall compensation structure, enter into any transaction with any officer,
director or shareholder (other than another Borrower) of any entity comprising
a Borrower, or any Affiliate (other than another Borrower) of any of them, for
less than full value or on terms or conditions not consistent with
transactions in similar circumstances with other Persons;
7.1.10 Make any loan or guaranty any loan to any of such
Borrower's or another Borrower's officers and directors except for advances
made in the ordinary course of business with respect to relocation, travel,
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entertainment or like expenses incurred in the discharge of their duties to
such Borrower and except as otherwise permitted by Section 7.1.4;
7.1.11 Except as provided in Schedule 5.1.14, use, generate,
treat, store, dispose of, or otherwise introduce any hazardous substances,
pollutants, contaminants, hazardous waste, residual waste, or solid waste (as
defined above in Section 5.1.14) into or on any of the Real Estate beyond the
levels permitted by applicable law and will not cause, suffer, allow or permit
anyone else to do so in violation of any applicable statute, law, ordinance,
rule or regulation;
7.1.12 Incur any Operating Lease Expense in excess of $500,000
in any Fiscal Year, unless otherwise consented to in writing by Bank, which
consent will not be unreasonably withheld.
8. DEFAULT
8.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" hereunder, under the
Notes, the Mortgages, as amended and confirmed by the Mortgage Confirmations,
and under each of the other Loan Documents:
8.1.1Failure by Borrowers to pay any principal or interest on
the Loans, or any portion thereof as the same becomes due, and with respect to
any other Indebtedness, such failure shall continue unremedied for 10 days
following written notice thereof;
8.1.2 Failure by a Borrower to observe or perform any
agreement, condition, undertaking or covenant in this Agreement or any other
Loan Document, or in any other agreement by, between, or among Borrowers and
Bank, and such failure shall continue for a period of thirty (30) days after
notice from Bank or for such longer period of grace, if any, not to exceed 90
days except as may be provided under the circumstances in the Loan Document
and provided, further, that if such failure is incapable of a complete cure
within such 30-day period, the grace period shall be extended as necessary to
permit the completion of the cure so long as the Borrower shall within the
grace period specified have commenced the cure thereof and shall thereafter
prosecute the same to completion with diligence and continuity; or a failure
by a Borrower to observe or perform any material agreement, condition,
undertaking or covenant in any other instrument evidencing or securing payment
of an obligation for borrowed money if the effect of such failure is to permit
the creditor or a trustee therefor to accelerate the maturity of any material
indebtedness of a Borrower;
8.1.3 Any representation or warranty made in this Agreement or
any other Loan Document or any statement or information in any report,
certificate, Financial Statement or other instrument furnished by any Borrower
in connection with the making of this Agreement or the making of the Loans
hereunder or in compliance with the provisions hereof shall have been
materially false or erroneous in any material respect when made, deemed made,
or furnished;
8.1.4 Any Borrower shall become insolvent or unable to pay its
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debts as they mature, or file a voluntary petition or proceeding seeking
liquidation, reorganization or other relief with respect to itself under any
provision of any state or Federal bankruptcy or insolvency statute, or make an
assignment or any other transfer of assets for the benefit of its creditors,
or apply for or consent to the appointment of a receiver for its assets, or
suffer the filing against its property of any attachment or garnishment or
take any corporate action to authorize any of the foregoing; or an involuntary
case or other proceeding shall be commenced against any Borrower seeking
liquidation, reorganization or other relief with respect to its debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
attachment, garnishment, involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty days (it being understood that
no delay period applies with respect to any default hereunder by reason of the
filing of a voluntary petition by any Borrower under any state or federal
Bankruptcy or insolvency statute or the making of an assignment or other
transfer of assets for the benefit of any Borrower's creditors or by reason of
any Borrower applying for or consenting to the appointment of a receiver for
such Borrower's assets); or an order for relief shall be entered against any
Borrower under any provision of any state or federal Bankruptcy or insolvency
statute as now or hereafter in effect;
8.1.5 Any Borrower shall cease to conduct its business
substantially as it is now conducted (except for seasonal plant closures for
vacations and other reasons); and Bank reasonably determines that such event
materially and adversely affects Borrower's ability to repay the Indebtedness;
8.1.6 Entry of a final judgment or judgments against any
Borrower by a court of law or equity in an amount exceeding an aggregate of
$1,000,000, enforcement of which judgment or judgments has not been stayed,
vacated, bonded or satisfied within 45 days after entry and which is not
covered by insurance;
8.1.7 Except for Permitted Liens and as otherwise permitted
in Section 7.1.2 hereof, imposition of any lien or series of liens against any
Borrower or such Borrower's property, arising by operation of law in an amount
in excess of an aggregate of, $500,000 which are not discharged, bonded or
stayed pending appeal within thirty (30) days of entry;
8.1.8 Except for mergers, consolidations, dissolutions and
other transactions permitted by Section 7.1.5, loss or partial invalidity of
any Borrower's corporate existence which existence is not restored within 30
days or loss of substantially all of such Borrower's assets which loss is not
covered by insurance;
8.1.9 Regardless of the intent or knowledge of any Borrower,
if the validity, binding nature or enforceability of any material term,
provision, condition, covenant or agreement contained in this Agreement, any
other Loan Document or in any other existing or future agreement between
Borrowers or such Borrower on the one hand and Bank on the other shall be
wrongfully disputed by, on behalf of, or in the right or name of such Borrower
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or if any such material term, provision, condition, covenant or agreement
shall be found or declared to be invalid, non-binding, unenforceable or
avoidable by any governmental authority or court and the parties cannot agree
upon substitutions therefor within 30 days; or
8.1.10 Inberdon Enterprises, Ltd., shall cease to own at least
25% of the issued and outstanding capital stock of U.S. Lime, except that Bank
may, upon the request of Inberdon Enterprises, Ltd., consent from time to time
to its ownership of lesser percentages of U.S. Lime's issued and outstanding
capital stock, which consent the Bank will not unreasonably withhold;
8.2 Remedies on Default. Upon the occurrence and during the
continuation of any Event of Default, Bank may forthwith declare all
Indebtedness to be immediately due and payable, without protest, demand or
other notice (which are hereby expressly waived by Borrowers) and, in addition
to the rights specifically granted hereunder or now or hereafter existing in
equity, at law, by virtue of statute or otherwise (each of which rights may be
exercised at any time and from time to time), may exercise the rights and
remedies available to Bank at law or in equity or under this Agreement, the
Notes and any of the other Loan Documents or any other agreement between
Borrowers and Bank in accordance with the respective provisions thereof.
8.3 Assembly of Collateral. Upon the occurrence and during the
continuation of any Event of Default, Bank may require each Borrower, at such
Borrower's expense, to assemble the Collateral and make it available to Bank
at the place or places to be designated by Bank and with respect to the Real
Estate, to vacate each premises upon thirty day's written notice. Each
Borrower will pay, as part of the Indebtedness and obligations hereby secured,
all amounts (including but not limited to Bank's reasonable attorneys' fees,
where permitted by applicable law) reasonably incurred by the Bank: (i) for
taxes, levies, and insurance on, or maintenance of, such Collateral; and (ii)
in taking possession of, disposing of, or preserving such Collateral, with
interest on all of same at the Base Rate plus 3.5% following demand for the
payment thereof until paid. The requirement of reasonable notice of the time
and place of disposition of such Collateral by Bank shall be conclusively met
if such notice is personally delivered, delivered by overnight courier,
facsimile telecopied or mailed, postage prepaid, to such Borrower's address as
specified in this Agreement at least ten days before the time of the sale or
disposition. Bank may bid upon and purchase any or all of such Collateral at
any public sale thereof. Bank may dispose of all or any part of such
Collateral in one or more lots or parcels and at one or more times and from
time to time, and upon such terms and conditions, including a credit sale, as
it determines in its sole discretion. Bank shall apply the net proceeds of
any such disposition of such Collateral or any part thereof, after deducting
all costs of Bank incurred in connection therewith, or incidental to the
holding, preparing for sale, in whole or part, of the Collateral, including
attorneys' fees, and with interest thereon at the Base Rate plus 3% in such
order as Bank may elect, to the Indebtedness and obligations secured
hereunder, subject to the provisions of this Agreement, whereupon the
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remaining proceeds shall be paid to such Borrower or any other party
entitled thereto.
8.4 Set-Off Rights Upon Default. Upon the occurrence and during
the continuance of any Event of Default, in addition to any remedies set forth
above, Bank shall have the right at any time and from time to time without
notice to Borrowers (any such notice being expressly waived by Borrowers), and
to the fullest extent permitted by applicable Rules, to set off, to exercise
any banker's lien or any right of attachment or garnishment and apply any and
all balances, credits, deposits (time or demand, provisional or final),
accounts or monies at any time held by Bank and other indebtedness at any time
owing by Bank to or for the account of Borrowers, against any and all
Indebtedness or other obligations of Borrowers now or hereafter existing under
this Agreement or any other Loan Document, whether or not Bank shall have made
any demand hereunder or thereunder.
8.5 Singular or Multiple Exercise; Non-Waiver. The remedies
provided herein, and in each of the other Loan Documents, or otherwise
available to Bank at law or in equity and any warrants of attorney therein
contained, shall be cumulative and concurrent, and may be pursued singly,
successively or together at the sole discretion of Bank, and may be exercised
as often as occasion therefor shall occur; and the failure to exercise any
such right or remedy shall in no event be construed as a waiver or release of
the same.
9. MISCELLANEOUS
9.1 Integration. This Agreement and the other Loan Documents shall
be construed as one agreement, and in the event of any inconsistency, the
provisions of the Notes shall control over the provision of this Agreement or
the other Loan Documents, and the provisions of this Agreement shall control
the provisions of any other Loan Document except the Notes. This Agreement
and the other Loan Documents contain all the agreements of the parties hereto
with respect to the subject matter of each thereof and supersede all prior or
contemporaneous agreements with respect to such subject matter.
9.2 Modification. Modifications, waivers or amendments of or to
the provisions of this Agreement or any other Loan Document shall be effective
only if set forth in a written instrument signed by Bank and the Borrowers.
9.3 Notices. Any notice or other communication by one party hereto
to the other shall be in writing and shall be deemed to have been validly
given if delivered or mailed, first class mail, postage prepaid, addressed as
follows, or to such other address as may be designated by the addressee from
time to time or telecopied to the numbers set forth below or to any such other
number as may be designated by the addressee in a written notice to the other
parties hereto:
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If to any Borrower or Borrowers:
c/o United States Lime & Minerals, Inc.
12221 Merit Drive, Suite 500
Dallas, TX 75251
Attn: Timothy W. Byrne, President
Facsimile: (972) 385-1340
With a copy to:
Morgan Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103-6993
Attn: James A. Hunter, Jr., Esq.
Facsimile: (215) 963-5299
If to Bank:
CoreStates Bank, N.A.
1339 Chestnut Street
Transportation, Leasing and Construction Industry Services
11th Floor, Widener Building
FC #1-8-11-24
Philadelphia, PA 19101
Attn: Clifford Kewley, Vice President
Facsimile: (215) 786-7704
With a copy to:
Mesirov Gelman Jaffe Cramer & Jamieson
1735 Market Street
38th Floor
Philadelphia, PA 19103-7598
Attn: Jeffrey O. Greenfield, Esquire
Facsimile: (215) 994-1111
9.4 Survival. The terms of this Agreement and all agreements,
representations, warranties and covenants herein made by Borrowers, and in any
other Loan Document shall survive the issuance and payment of the Notes and
shall continue as long as any portion of the Indebtedness shall remain
outstanding and unpaid; provided, however, that Borrowers' covenants set forth
in Sections 1.6 and 6.2 above shall survive the payment of the Indebtedness.
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Borrowers hereby acknowledge that Bank has relied upon the foregoing in making
the Loans.
9.5 Closing. Closing hereunder shall be made at such time and
place as the parties hereto may determine.
9.6 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the respective successors and assigns of the
parties hereto; provided, however that Borrowers shall not assign this
Agreement, or any rights or duties arising hereunder, without the express
prior written consent of Bank.
9.7 Governing Law. This Agreement shall be construed and enforced
in accordance with the internal laws of the Commonwealth of Pennsylvania.
9.8 Jurisdiction. Any and all and actions at law or in equity
relating to this Agreement and the Indebtedness shall be brought, and
jurisdiction shall be had exclusively, in the courts of the Commonwealth of
Pennsylvania or the United States District Court for the Eastern District of
Pennsylvania. Each Borrower consents in advance to service of process by
registered or certified mail, return receipt requested, to the address of such
Borrower listed in Section 9.3 hereof.
9.9 Waiver of Jury Trial. EACH BORROWER AND BANK EXPRESSLY WAIVE
ANY RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT BY ANY PARTY WITH RESPECT TO
THIS AGREEMENT OR THE INDEBTEDNESS.
9.10 Excess Payments. If Borrowers shall pay any interest under
the terms of the Notes at a rate higher than the maximum rate allowed by
applicable law, then such excess payment shall be credited as a payment of
principal unless Borrowers notify Bank in writing to return the excess payment
to Borrowers.
9.11 Partial Invalidity. If any provision of this Agreement shall
for any reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof, but this
Agreement shall be construed as if such invalid or unenforceable provision had
never been contained herein.
9.12 Headings. The heading of any Article or Section contained in
this Agreement is for convenience of reference only and shall not be deemed to
amplify, limit, modify or give full notice of the provisions thereof.
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9.13 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts taken together, shall constitute but
one and the same agreement.
IN WITNESS WHEREOF, Borrowers and Bank have executed this Agreement
under seal, intending to be legally bound hereby, and Bank has received this
Agreement in Philadelphia, Pennsylvania, the day and year first above written.
BANK:
CORESTATES BANK, N.A.
By: \s\ Clifford W. Keweley
____________________________
Clifford W. Kewley,
Vice President
BORROWERS:
UNITED STATES LIME & MINERALS, INC.
By: \s\ Timothy W. Byrne
____________________________
Timothy W. Byrne, President
TEXAS LIME COMPANY
By: \s\ Timothy W. Byrne
____________________________
Timothy W. Byrne, President
ARKANSAS LIME COMPANY
By: \s\ Timothy W. Byrne
____________________________
Timothy W. Byrne, President
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AMENDED AND RESTATED
TERM NOTE
$15,000,000 December 30, 1997
FOR VALUE RECEIVED, UNITED STATES LIME & MINERALS, INC., a Texas
corporation (formerly known as Scottish Heritable, Inc.), TEXAS LIME COMPANY,
a Texas corporation, and ARKANSAS LIME COMPANY, an Arkansas corporation
(collectively referred to herein as "Borrowers"), jointly and severally
promise to pay to the order of CORESTATES BANK, N.A., a national banking
association, its successors and assigns ("Bank"), the principal sum of Fifteen
Million Dollars ($15,000,000) together with interest thereon at (i) with
respect to Base Rate Loans, the Base Rate per annum, (ii) with respect to
Adjusted LIBOR Loans, the Adjusted LIBOR per annum on the relevant Interest
Rate Determination Date plus one and sixty-five one-hundredths of a percent
(1.65%), and (iii) with respect to Fixed Rate Loans, the Fixed Rate per annum,
payable in accordance with Section 2.1 of the Amended and Restated Loan and
Security Agreement dated of even date herewith (the "Loan Agreement") by and
among Bank and Borrowers.
This Amended and Restated Term Note (this "Term Note") replaces
Borrowers' Term Note dated October 20, 1993 in the original principal amount
of $8,000,000, but does not evidence repayment thereof. This Term Note is
issued pursuant to and entitled to the benefits of the Loan Agreement to which
reference is hereby made for a more complete statement of the terms and
conditions with respect hereto. All initially capitalized terms not otherwise
defined herein shall have the same meanings as ascribed to them in the Loan
Agreement unless the context clearly requires to the contrary.
Principal shall be paid in 59 equal monthly installments of $178,571
each, commencing on the date (the "Term Loan Amortization Date") that is the
earlier of: (i) the date that construction is completed and Borrowers commence
pyro-processing of limestone for commercial sale from the modified number 6
kiln located at Cleburne, Johnson County, Texas, or (ii) July 1, 1998, with a
final balloon payment of the remaining outstanding principal balance of the
Term Loan, together with all accrued and unpaid interest and Bank's Costs
pertaining thereto, due on the date that is 60 months after the Term Loan
Amortization Date. Each installment of principal hereunder, including the
final balloon payment, shall be due on the first Business Day of each month.
Interest shall be payable on the outstanding principal balance hereof as
set forth in Section 2.4.5 of the Loan Agreement, at the Interest Rate Option
selected pursuant to Section 2.4.2 of the Loan Agreement. Interest shall be
calculated on the basis of a 360 day year, and charged for the number of days
actually elapsed during any year or part thereof.
This Term Note may be prepaid at the times, in the amounts and with the
prepayment premiums set forth in Section 2.4.8 of the Loan Agreement.
<PAGE>
All payments of principal, interest, and fees hereunder shall be made by
Borrowers jointly and severally without defense, set off, or counterclaim and
in same day funds and delivered to Bank not later than 12:00 noon
(Philadelphia time) on the date due at Bank's office located at 1339 Chestnut
Street, Transportation, Leasing and Construction Industry Services, 11th
Floor, Widener Building, FC #1-8-11-24, Philadelphia, PA 19101, or such other
place as shall be designated in writing for such purpose in accordance with
the terms of the Loan Agreement.
Each Borrower authorizes Bank to charge such Borrower's demand deposit
account with Bank in order to cause timely payment to be made to Bank of all
principal, interest and fees hereunder as provided in Section 1.5 of the Loan
Agreement.
Whenever any payment on this Term Note shall be stated to be due on a
day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of interest on this Term Note.
Any principal payment hereon not paid when due, and to the extent
permitted by applicable law, any interest payment hereon not paid when due,
and any other amount due to Bank hereunder, under the Loan Agreement or under
any other Loan Document not paid when due, in any case whether at stated
maturity, by notice of prepayment, by acceleration or otherwise, shall
thereafter bear interest payable upon demand at a rate which is, with respect
to Adjusted LIBOR Loans only, 5% per annum in excess of the Adjusted LIBOR
until the expiration of the then applicable Interest Period, and after the
expiration of the then applicable Interest Period, and in all cases with
respect to Base Rate Loans and Fixed Rate Loans, at a rate which is 3% per
annum in excess of the Base Rate.
It shall be an event of default hereunder if an Event of Default shall
have occurred under the Loan Agreement (a "Default"). In addition to other
remedies of Bank as set forth in this Term Note, the Loan Agreement, or any
other Loan Document, upon the occurrence of a Default which shall be
continuing, Bank may, without demand, by written notice to Borrowers, cause
this Term Note to become immediately due and payable in the manner, upon the
conditions and with the effect provided in the Loan Agreement.
THE FOLLOWING SETS FORTH A WARRANT OF ATTORNEY TO CONFESS JUDGMENT
AGAINST BORROWERS OR ANY BORROWER. IN GRANTING THIS WARRANT OF ATTORNEY TO
CONFESS JUDGMENT AGAINST BORROWERS OR ANY BORROWER, EACH BORROWER, FOLLOWING
CONSULTATION WITH (OR DECISION NOT TO CONSULT WITH) SEPARATE COUNSEL FOR SUCH
BORROWER, AND WITH KNOWLEDGE OF THE LEGAL EFFECT HEREOF, HEREBY WAIVES ANY AND
ALL RIGHTS SUCH BORROWER HAS, OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY
TO BE HEARD UNDER THE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE
COMMONWEALTH OF PENNSYLVANIA. EACH BORROWER SPECIFICALLY ACKNOWLEDGES THAT
BANK HAS RELIED ON THIS WARRANT OF ATTORNEY IN GRANTING THE FINANCIAL
(2)
<PAGE>
ACCOMMODATIONS DESCRIBED HEREIN.
EACH BORROWER IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY
COURT OF RECORD TO APPEAR FOR SUCH BORROWER IN ANY AND ALL ACTIONS, AND UPON
THE OCCURRENCE OF A DEFAULT TO: (I) ENTER JUDGMENT AGAINST SUCH BORROWER FOR
THE PRINCIPAL SUM HEREOF; OR (II) SIGN FOR SUCH BORROWER AN AGREEMENT FOR
ENTERING IN ANY COMPETENT COURT AN AMICABLE ACTION OR ACTIONS TO CONFESS
JUDGMENT AGAINST SUCH BORROWER FOR ALL OR ANY PART OF THE INDEBTEDNESS; AND IN
EITHER CASE FOR INTEREST AND COSTS TOGETHER WITH A REASONABLE COLLECTION FEE.
EACH BORROWER FURTHER IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY
COURT OF RECORD TO APPEAR FOR AND ENTER JUDGMENT AGAINST SUCH BORROWER AND IN
FAVOR OF BANK OR ANY HOLDER HEREOF WITH RESPECT TO AN AMICABLE ACTION OF
REPLEVIN OR ANY OTHER ACTION TO RECOVER POSSESSION OF ANY COLLATERAL. EACH
BORROWER WAIVES ALL RELIEF FROM ANY AND ALL APPRAISEMENT OR EXEMPTION LAWS NOW
IN FORCE OR HEREAFTER ENACTED. IF A COPY OF THIS NOTE, VERIFIED BY AFFIDAVIT
OF AN OFFICER OF BANK OR ANY OTHER HOLDER HEREOF, SHALL BE FILED IN ANY
PROCEEDING OR ACTION WHEREIN JUDGMENT IS TO BE CONFESSED, IT SHALL NOT BE
NECESSARY TO FILE THE ORIGINAL HEREOF AND SUCH VERIFIED COPY SHALL BE
SUFFICIENT WARRANT FOR ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR AND
CONFESS JUDGMENT AGAINST EACH BORROWER AS PROVIDED HEREIN. JUDGMENT MAY BE
CONFESSED FROM TIME TO TIME UNDER THE AFORESAID POWERS WHICH SHALL NOT BE
EXHAUSTED BY ONE EXERCISE THEREOF.
Borrowers hereby individually and collectively waive presentment, demand
for payment, notice of dishonor, protest or notice of protest and any and all
notices or demands and, to the full extent permitted by law, the right to
plead any statute of limitations as a defense to any demand hereunder in
connection with the delivery, acceptance or performance of this Term Note.
The joint and several liabilities and obligations of Borrowers hereunder
shall be unconditional without regard to the liability or obligations of any
other party and shall not be in any manner affected by any indulgence
whatsoever granted or consented to by Bank, including, but not limited to, any
extension of time, renewal, waiver or other modification. Any failure of Bank
to exercise any right hereunder shall not be construed as a waiver of the
right to exercise the same or any other right at any time and from time to
time thereafter.
This Term Note shall be governed as to its validity, interpretation and
effect by the internal laws of the Commonwealth of Pennsylvania. Any and all
actions at law or in equity relating to this Term Note and the Indebtedness
shall be brought, and jurisdiction may be had, in the courts of Philadelphia
County, Pennsylvania, or at the election of the holder hereof, the United
States District Court for the Eastern District of Pennsylvania. Borrowers
(3)
<PAGE>
consent in advance to service of process by registered mail, return receipt
requested, to the address set forth in Section 9.3 of the Loan Agreement.
EACH BORROWER AND BANK EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION BROUGHT BY ANY PARTY WITH RESPECT TO THE INDEBTEDNESS OR ANY LOAN
DOCUMENT.\
This Term Note may not be changed or amended orally but only by an
agreement in writing and signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought.
This Term Note is secured by and entitled to the benefits of certain
other Loan Documents. If any provision of this Term Note shall for any reason
be held to be invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision hereof, but this Term Note shall be
construed as if such invalid or unenforceable provision had never been
contained herein. Borrowers promise to pay all Bank's Costs and expenses,
including reasonable attorneys' fees, as provided in Section 1.6 of the Loan
Agreement, incurred in the collection and enforcement of this Term Note. Each
Borrower and endorsers of this Term Note hereby consent to renewals and
extensions of time at or after the maturity hereof, without notice.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrowers
have executed this Term Note, as an instrument under seal, the day and year
first above written.
UNITED STATES LIME & MINERALS, INC.
By: \s\ Timothy W. Byrne
-----------------------------
Timothy W. Byrne, President
TEXAS LIME COMPANY
By: \s\ Timothy W. Byrne
-----------------------------
Timothy W. Byrne, President
ARKANSAS LIME COMPANY
By: \s\ Timothy W. Byrne
-----------------------------
Timothy W. Byrne, President
(4)
<PAGE>
AMENDED AND RESTATED
NOTE
$4,000,000 December 30, 1997
FOR VALUE RECEIVED, UNITED STATES LIME & MINERALS, INC., a Texas
corporation (formerly known as Scottish Heritable, Inc.), TEXAS LIME COMPANY,
a Texas corporation, and ARKANSAS LIME COMPANY, an Arkansas corporation
(collectively referred to herein as "Borrowers"), jointly and severally
promise to pay to the order of CORESTATES BANK, N.A., a national banking
association, its successors and assigns ("Bank"), the lesser of (x) Four
Million Dollars ($4,000,000) or (y) the aggregate unpaid principal amount of
all Cash Advances made by Bank to Borrowers or any Borrower under the Amended
and Restated Loan and Security Agreement of even date herewith, by and among
Borrowers and Bank ("Loan Agreement"), which principal amount and all accrued
and unpaid interest thereon and Bank's Costs pertaining thereto shall be
payable on the date that is 24 months after the date hereof, or such later
date as may be agreed to in writing by Bank.
This Amended and Restated Note (this "Note") replaces Borrowers' Note
dated October 20, 1993 in the original principal amount of $6,000,000, but
does not evidence repayment thereof. This Note is issued pursuant to and
entitled to the benefits of the Loan Agreement to which reference is hereby
made for a more complete statement of the terms and conditions with respect
hereto. All initially capitalized terms used herein shall have the same
meanings as ascribed to them in the Loan Agreement unless the context clearly
requires to the contrary.
Borrowers promise to pay interest on the unpaid principal amount of all
Cash Advances from the date made to maturity (whether by acceleration or
otherwise) or earlier repayment, with respect to Base Rate Loans at the Base
Rate per annum, and with respect to Adjusted LIBOR Loans at the Adjusted LIBOR
on the relevant Interest Rate Determination Date plus 1.5% per annum, payable
in accordance with Section 2.2 of the Loan Agreement.
Interest shall be payable on the outstanding principal balance hereof as
set forth in Section 2.4.5 of the Loan Agreement, at the Interest Rate Option
selected pursuant to Section 2.4.2 of the Loan Agreement. Interest shall be
calculated on the basis of a 360 day year, and charged for the number of days
actually elapsed during any year or part thereof.
This Note may be prepaid at the times, in the amounts and with the
prepayment premiums set forth in Section 2.4.8 of the Loan Agreement.
All payments hereunder shall be made by Borrowers jointly and severally
without defense, set off, or counterclaim and in same day funds and delivered
to Bank not later than 12:00 noon (Philadelphia time) on the date due at
Bank's office located at 1339 Chestnut Street, Transportation, Leasing and
1
<PAGE>
Construction Industry Services, 11th Floor, Widener Building, FC #1-8-11-24,
Philadelphia, PA 19101, or such other place as shall be designated in writing
for such purpose in accordance with the terms of the Loan Agreement.
Each Borrower authorizes Bank to charge such Borrower's demand deposit
account with Bank in order to cause timely payment to be made to Bank of all
principal, interest and fees hereunder as provided in Section 1.5 of the Loan
Agreement.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation
of interest on this Note.
Any principal payment hereon not paid when due, and to the extent
permitted by applicable law, any interest payment hereon not paid when due,
and any other amount due to Bank hereunder, under the Loan Agreement or under
any other Loan Document not paid when due, in any case whether at stated
maturity, by notice of prepayment, by acceleration or otherwise, shall
thereafter bear interest payable upon demand at a rate which is, with respect
to Adjusted LIBOR Loans only, 5% per annum in excess of the Adjusted LIBOR
until the expiration of the then applicable Interest Period, and after the
expiration of the then applicable Interest Period, and in all cases with
respect to Base Rate Loans, at a rate which is 2.75% per annum in excess of
the Base Rate.
It shall be an event of default hereunder if an Event of Default shall
have occurred under the Loan Agreement (a "Default"). In addition to other
remedies of Bank as set forth in this Note, the Loan Agreement, or any other
Loan Document, upon the occurrence of a Default which shall be continuing,
Bank may, without demand, by written notice to Borrowers, cause this Note to
become immediately due and payable in the manner, upon the conditions and with
the effect provided in the Loan Agreement.
THE FOLLOWING SETS FORTH A WARRANT OF ATTORNEY TO CONFESS JUDGMENT
AGAINST BORROWERS OR ANY BORROWER. IN GRANTING THIS WARRANT OF ATTORNEY TO
CONFESS JUDGMENT AGAINST BORROWERS OR ANY BORROWER, EACH BORROWER, FOLLOWING
CONSULTATION WITH (OR DECISION NOT TO CONSULT WITH) SEPARATE COUNSEL FOR SUCH
BORROWER, AND WITH KNOWLEDGE OF THE LEGAL EFFECT HEREOF, HEREBY WAIVES ANY AND
ALL RIGHTS SUCH BORROWER HAS, OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY
TO BE HEARD UNDER THE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE
COMMONWEALTH OF PENNSYLVANIA. EACH BORROWER SPECIFICALLY ACKNOWLEDGES THAT
BANK HAS RELIED ON THIS WARRANT OF ATTORNEY IN GRANTING THE FINANCIAL
ACCOMMODATIONS DESCRIBED HEREIN.
EACH BORROWER IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY
2
<APGE>
COURT OF RECORD TO APPEAR FOR SUCH BORROWER IN ANY AND ALL ACTIONS, AND UPON
THE OCCURRENCE OF A DEFAULT TO: (I) ENTER JUDGMENT AGAINST SUCH BORROWER FOR
THE PRINCIPAL SUM HEREOF; OR (II) SIGN FOR SUCH BORROWER AN AGREEMENT FOR
ENTERING IN ANY COMPETENT COURT AN AMICABLE ACTION OR ACTIONS TO CONFESS
JUDGMENT AGAINST SUCH BORROWER FOR ALL OR ANY PART OF THE INDEBTEDNESS; AND IN
EITHER CASE FOR INTEREST AND COSTS TOGETHER WITH A REASONABLE COLLECTION FEE.
EACH BORROWER FURTHER IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY
COURT OF RECORD TO APPEAR FOR AND ENTER JUDGMENT AGAINST SUCH BORROWER AND IN
FAVOR OF BANK OR ANY HOLDER HEREOF WITH RESPECT TO AN AMICABLE ACTION OF
REPLEVIN OR ANY OTHER ACTION TO RECOVER POSSESSION OF ANY COLLATERAL. EACH
BORROWER WAIVES ALL RELIEF FROM ANY AND ALL APPRAISEMENT OR EXEMPTION LAWS NOW
IN FORCE OR HEREAFTER ENACTED. IF A COPY OF THIS NOTE, VERIFIED BY AFFIDAVIT
OF AN OFFICER OF BANK OR ANY OTHER HOLDER HEREOF, SHALL BE FILED IN ANY
PROCEEDING OR ACTION WHEREIN JUDGMENT IS TO BE CONFESSED, IT SHALL NOT BE
NECESSARY TO FILE THE ORIGINAL HEREOF AND SUCH VERIFIED COPY SHALL BE
SUFFICIENT WARRANT FOR ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR AND
CONFESS JUDGMENT AGAINST EACH BORROWER AS PROVIDED HEREIN. JUDGMENT MAY BE
CONFESSED FROM TIME TO TIME UNDER THE AFORESAID POWERS WHICH SHALL NOT BE
EXHAUSTED BY ONE EXERCISE THEREOF.
Borrowers hereby individually and collectively waive presentment, demand
for payment, notice of dishonor, protest or notice of protest and any and all
notices or demands and, to the full extent permitted by law, the right to
plead any statute of limitations as a defense to any demand hereunder in
connection with the delivery, acceptance or performance of this Note.
The joint and several liabilities and obligations of Borrowers hereunder shall
be unconditional without regard to the liability or obligations of any other
party and shall not be in any manner affected by any indulgence whatsoever
granted or consented to by Bank, including, but not limited to, any extension
of time, renewal, waiver or other modification. Any failure of Bank to
exercise any right hereunder shall not be construed as a waiver of the right
to exercise the same or any other right at any time and from time to time
thereafter.
This Note shall be governed as to its validity, interpretation and
effect by the internal laws of the Commonwealth of Pennsylvania. Any and all
actions at law or in equity relating to this Note and the Indebtedness shall
be brought, and jurisdiction may be had, in the courts of Philadelphia County,
Pennsylvania, or at the election of the holder hereof, the United States
District Court for the Eastern District of Pennsylvania. Borrowers consent in
advance to service of process by registered mail, return receipt requested, to
the address set forth in Section 9.3 of the Loan Agreement.
3
<PAGE>
EACH BORROWER AND BANK EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION BROUGHT BY ANY PARTY WITH RESPECT TO THE INDEBTEDNESS OR ANY LOAN
DOCUMENT.
This Note may not be changed or amended orally but only by an agreement
in writing and signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
This Note is entitled to the benefits of certain other Loan Documents.
If any provision of this Note shall for any reason be held to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any
other provision hereof, but this Note shall be construed as if such invalid or
unenforceable provision had never been contained herein.
Borrowers promise to pay all Bank's Costs and expenses, including reasonable
attorneys' fees, as provided in Section 1.6 of the Loan Agreement, incurred in
the collection and enforcement of this Note. Each Borrower and endorsers of
this Note hereby consent to renewals and extensions of time at or after the
maturity hereof, without notice.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrowers
have executed this Note, as an instrument under seal, the day and year first
above written.
UNITED STATES LIME & MINERALS, INC.
By: \s\ Timothy W. Byrne
-----------------------------
Timothy W. Byrne, President
TEXAS LIME COMPANY
By: \s\ Timothy W. Byrne
-----------------------------
Timothy W. Byrne, President
ARKANSAS LIME COMPANY
By: \s\ Timothy W. Byrne
-----------------------------
Timothy W. Byrne, President
4
PROTOTYPE 401(k) PLAN
ARTICLE I. INTRODUCTION
The Employer has established this Plan (the "Plan"), consisting of the
Adoption Agreement and the following provisions (the "Prototype 401(k) Plan")
for the exclusive benefit of Participants and their Beneficiaries.
ARTICLE II. DEFINITIONS
Where the following words and phrases appear in this Plan, they shall
have the respective meanings set forth below, unless their context clearly
indicates a contrary meaning. The singular herein shall include the plural,
and vice versa, and the masculine gender shall include the feminine gender,
and vice versa, where the context requires.
2.01 "Account" shall mean the Trust assets held by the Trustee for the
benefit of a Participant, which shall be the sum of the Participant's Salary
Reduction Contribution Account, Deferred Cash Contribution Account, Employer
Profit Sharing Contribution Account, Employer Matching Contribution Account,
Nondeductible Voluntary Contribution Account, Deductible Voluntary
Contribution Account, Rollover Account and Qualified Nonelective Contribution
Account and any transfer account established pursuant to Section 4.07 hereof
with respect to funds transferred to the Trust on the Participant's behalf.
2.02 "Act" shall mean the Employee Retirement Income Security Act of
1974, as amended.
2.03 "Administrator" shall mean the person or persons specified in
Section 14.01 hereof.
2.04 "Adoption Agreement" shall mean the agreement by which the
Employer has most recently adopted or amended the Plan.
2.05 "Annuity Starting Date" shall mean the first day of the first
period for which an amount is paid to a Participant (other than loan(s) or
in-service withdrawal(s)) from the Trust (whether or not such distributions
are received in the form of an annuity).
2.06 "Applicable Life Expectancy" shall mean the life expectancy of the
Participant or the joint life and last survivor expectancy of the Participant
and Beneficiary calculated using the return multiples specified in
Section 1.72-9 of the Treasury Regulations. Unless the Participant elects
otherwise, life expectancies determined as of the First Required Distribution
Year shall be calculated using the attained age of the Participant and, if
applicable, the Beneficiary as of his or her birth date in the First Required
Distribution Year. Life expectancies for subsequent calendar years shall be
determined by reducing the life expectancy determined as of the First Required
Distribution Year by one for each calendar year that has elapsed; provided,
however, that the Participant may elect prior to April 1 of the year
immediately following his or her First Required Distribution Year to have his
or her life expectancy and, if the Participant's Beneficiary is his or her
Spouse, the life expectancy of such Beneficiary, recalculated annually. If a
Participant elects recalculation, life expectancies for each subsequent
calendar year shall be determined using the attained ages of the Participant
and, if applicable, his or her Beneficiary, as of their respective birth dates
in such calendar year.
With respect to a Beneficiary who is entitled to receive a distribution
after the death of a Participant, "Applicable Life Expectancy" shall mean the
life expectancy of the Beneficiary calculated using the return multiples
specified in Section 1.72-9 of the Treasury Regulations as of the
Beneficiary's birth date in the calendar year in which distributions are
required to commence, and reduced by one for each subsequent calendar year.
If the Beneficiary is the Participant's Spouse, he or she may elect, prior to
the time distributions are required to commence, to have his or her life
<PAGE>
expectancy recalculated annually. If a Spouse so elects, his or her life
expectancy for each subsequent calendar year shall be determined as of his or
her birth date in such calendar year.
2.07 "Beneficiary" shall mean any person or legal representative
effectively designated by the Participant as a person entitled to receive
benefits on or after the death of a Participant. Such term shall also include
any person or legal representative designated by a Beneficiary as a person
entitled to receive benefits on or after the death of such Beneficiary.
2.08 "Code" shall mean the Internal Revenue Code of 1986, as amended.
Reference to a section of the Code shall include any comparable section or
sections of future legislation that amends, supplements or supersedes such
section.
2.09 "Compensation" shall mean:
(a) except as provided in subsection (b), (c), and (d) and
subject to the limitation of subsection (e), one of the following as elected
by the Employer in the Adoption Agreement:
(i) W-2 Compensation. Information required to be reported
under Sections 6041, 6051 and 6052 of the Code (Wages, tips and other
compensation as reported on Form W-2). Compensation is defined as wages
within the meaning of Section 3401(a) and all other payments of compensation
to an Employee by the Employer (in the course of the Employer's trade or
business) for which the Employer is required to furnish the Employee a written
statement under Sections 6041(d), 6051(a)(3) and 6052. Compensation must be
determined without regard to any rules under 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 Section 3401(a)(2)).
(ii) 415 Safe Harbor Compensation. "Compensation" as
defined in Section 5.05(b)(ii) of this Plan.
(iii) Safe Harbor Alternative Definition. Compensation as
defined in Section 2.09(a)(ii) above, reduced by all of the following items
(even if includible in gross income): reimbursements or other expense
allowances, fringe benefits (cash and non-cash), moving expenses, deferred
compensation, and welfare benefits.
(iv) In the case of a Self-Employed Individual, the
determination of Compensation shall be made on the basis of the Self-Employed
Individual's Earned Income.
(b) If so specified in the Adoption Agreement, the Employer may
elect to include in the definition of Compensation the Participant's Salary
Reduction Contributions, Deferred Cash Contributions and any other amount
which is contributed by the Employer pursuant to a salary reduction agreement
and which is not includible in the gross income of the employee under sections
125, 402(e)(3), 402(h) or 403(b) of the Code.
(c) If so specified in the Adoption Agreement, an Employer may
elect to exclude from the definition any one or more of the following types of
compensation:
(i) additional compensation for Participants working
outside their regularly scheduled tour of duty such as overtime pay, premiums
for shift differential and call-in premiums;
(ii) bonuses;
(iii) commissions;
(iv) such other items as specified in the Adoption
Agreement;
provided, however, that if the Employer elects an alternative definition of
Compensation pursuant to this Section 2.09(c) for purposes of allocating
Employer Profit Sharing Contributions and forfeitures thereof, then such
alternative definition must be tested by the Administrator to show that it
<PAGE>
meets the nondiscrimination requirements of Section 414(s)(3) of the Code.
Such alternative definition of Compensation may not be used for purposes of
Articles V, VI and XXIII.
(d) If this Plan is adopted, (i) as an amendment to an existing
plan, (ii) to remove a disqualifying provision which results from a change in
the qualification requirements of the Code made by the Tax Reform Act of 1986
and such other legislation as set forth in Section 1.401(b)-1(b)(2)(ii) of the
regulations under Code Section 401(b), and (iii) within the remedial amendment
period applicable to such disqualifying provision, then for Plan Years
beginning before the date such amendment is adopted, "Compensation" shall,
subject to the limitation of subsection (e), mean compensation as defined
under the terms of the plan prior to its amendment.
(e) 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 Participant taken into account under the Plan for any determination
period 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) of the
Code. The cost-of-living adjustment in effect for a calendar year applies to
any period, not to exceed 12 months, beginning in such calendar year over
which Compensation is determined ("determination period"). If a determination
period is a short Plan Year (i.e., shorter 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.
In determining the Compensation of a Participant for purposes of this
limitation, the rules of Section 414(q)(6) of the Code shall apply, except in
applying such rules, the term "family" shall include only the Spouse of the
Participant and any lineal descendants of the Participant who have not
attained age 19 before the close of the year. If, as a result of the
application of such rules the OBRA '93 annual compensation limit is exceeded,
then (except for purposes of determining the portion of Compensation up to the
integration level if this Plan provides for permitted disparity), the
limitation shall be prorated among the affected individuals in proportion to
each such individual's Compensation as determined under this Section prior to
the application of this limitation.
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.
(f) Compensation shall be based on the amount actually paid to
the Participant during the Plan Year. To the extent elected by the Employer
in the Adoption Agreement, for purposes of allocating Employer Profit Sharing
Contributions and/or Employer Matching Contributions and/or applying the
Section 401(m) non-discrimination test, Compensation shall be based on the
amounts paid during that portion of the Plan Year during which the Employee is
eligible to participate with respect to the allocation of such contributions.
To the extent elected by the Employer in the Adoption Agreement, for purposes
of applying the Section 401(k) non-discrimination test, Compensation shall be
based on the amount paid during that portion of the Plan Year during which the
Employee is eligible to make a salary reduction election and/or to receive
allocations of Deferred Cash Contributions. Notwithstanding the preceding
sentence, compensation for the purposes of Article V (Code Section 415
Limitations on Allocations) shall be based on the amount actually paid or made
available to the Participant during the Limitation Year. Compensation for the
initial Plan Year for a new plan shall be based upon eligible Participants'
<PAGE>
Compensation, subject to the Adoption Agreement, from the Effective Date
through the end of the first Plan Year.
2.10 "Deductible Voluntary Contribution Account" shall mean the
separate account maintained pursuant to Section 7.03(g) for any deductible
voluntary contributions under Code Section 219 that the Participant made for
1986 and earlier calendar years and the income, expenses, gains and losses
attributable thereto.
2.11 "Deferred Cash Allocation" shall mean the contribution payable by
the Employer to the Trust on behalf of a Participant subject to the
Participant's right to elect to receive all or a portion of such contribution
in cash in lieu of having it contributed to the Trust on his or her behalf.
2.12 "Deferred Cash Contribution Account" shall mean the separate
account maintained pursuant to Section 7.03(b) hereof for Deferred Cash
Contributions allocated to the Participant and the income, expenses, gains and
losses attributable thereto.
2.13 "Deferred Cash Contributions" shall mean contributions to the
Trust by the Employer in accordance with Section 4.02 hereof.
2.14 "Designated Investment" shall mean either a collective investment
trust for the collective investment of assets of employee pension or profit
sharing trusts pursuant to Revenue Ruling 81-100, a commingled investment
vehicle for the collective investment of assets of institutional investors, or
a regulated investment company, for which Scudder, Stevens & Clark, Inc., its
successor or any of its affiliates, acts as investment adviser and any of
which are designated by Scudder Investor Services, Inc. or its successors as
eligible for investment under the Plan.
2.15 "Designation of Beneficiary" or "Designation" shall mean the
document executed by a Participant under Article XVII.
2.16 "Disabled" or "Disability" shall mean the inability to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or last
for a continuous period of 12 months or more, as certified by a licensed
physician selected by the Participant and approved by the Employer.
2.17 "Distributor" shall mean Scudder Investor Services, Inc. or its
successor.
2.18 "Earned Income" shall mean the net earnings from self-employment
in the trade or business with respect to which the Plan is established, for
which personal services of the Owner-Employee or Self-Employed Individual are
a material income-producing factor. Net earnings will be determined without
regard to items not included in gross income and the deductions allocable to
such items, except that, for taxable years beginning after December 31, 1989,
net earnings shall be determined with regard to the deduction allowed by Code
Section 164(f). Net earnings are reduced by contributions by the Employer to
a qualified plan, including this Plan, to the extent deductible under Code
Section 404.
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 Earned Income of each
Participant taken into account under the Plan for any determination period
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) of the Code. The
cost-of-living adjustment in effect for a calendar year applies to any period,
not to exceed 12 months, beginning in such calendar year over which Earned
Income is determined ("determination period"). If a determination period is a
short Plan Year (i.e., shorter than 12 months), the OBRA '93 annual
compensation limit will be multiplied by a fraction, the numerator of which is
<PAGE>
the number of months in the determination period, and the denominator of which
is 12.
In determining the Earned Income of a Participant for purposes of this
limitation, the rules of Section 414(q)(6) of the Code shall apply, except in
applying such rules, the term "family" shall include only the Spouse of the
Participant and any lineal descendants of the Participant who have not
attained age 19 before the close of the year. If, as a result of the
application of such rules the OBRA '93 annual compensation limit is exceeded,
then (except for purposes of determining the portion of Earned Income up to
the integration level if this Plan provides for permitted disparity), the
limitation shall be prorated among the affected individuals in proportion to
each such individual's Earned Income as determined under this Section prior to
the application of this limitation.
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.
2.19 "Effective Date" shall mean the date specified by the Employer in
the Adoption Agreement.
2.20 "Employee" shall mean any individual who performs services in any
capacity in the business of the Employer (including any individual deemed to
be an employee of the Employer under Code Section 414(n) or (o)).
2.21 "Employer" shall mean the organization or other entity named as
such in the Adoption Agreement and any successor organization or entity which
adopts the Plan. If the organization or other entity named as Employer in the
Adoption Agreement is a sole proprietorship or a professional corporation and
the sole proprietor of such proprietorship or the sole shareholder of the
professional corporation dies, then the legal representative of the estate of
such sole proprietor or shareholder shall be deemed to be the Employer until
such time as, through the disposition of such sole proprietor's or sole
shareholder's estate or otherwise, any organization or other entity succeeds
to the interests of the sole proprietor in the proprietorship or the sole
shareholder in the professional corporation.
Unless the adopting organization or entity elects otherwise in the
Adoption Agreement, any two or more organizations or entities which are
members of (a) a controlled group of corporations (as defined under Code
Section 414(b)) which includes the adopter, (b) a group of trades or
businesses (whether or not incorporated) which are under common control (as
defined under Code Section 414(c)) which includes the adopter, or (c) an
affiliated service group (as defined under Code Section 414(m)) which includes
the adopter, will be considered to be the Employer for the purposes of the
Plan. Similarly, any other organization or entity which is required to be
aggregated with the adopter pursuant to Code Section 414(o) and the
regulations thereunder will be considered to be the Employer for the purposes
of the Plan.
2.22 "Employer Contributions" shall mean Employer Profit Sharing
Contributions, Employer Matching Contributions, Salary Reduction
Contributions, Deferred Cash Contributions, Qualified Matching Contributions
and Qualified Nonelective Contributions.
2.23 "Employer Profit Sharing Contribution Account" shall mean the
separate account maintained pursuant to Section 7.03(c) hereof for Employer
Profit Sharing Contributions allocated to the Participant and the income,
expenses, gains and losses attributable thereto.
2.24 "Employer Profit Sharing Contributions" shall mean contributions
to the Trust by the Employer in accordance with Section 4.03 hereof. Employer
Profit Sharing Contributions may be fixed or discretionary as provided in the
Adoption Agreement.
<PAGE>
2.25 "Employer Matching Contribution Account" shall mean the separate
account maintained pursuant to Section 7.03(d) hereof for Employer Matching
Contributions allocated to the Participant and the income, expenses, gains and
losses attributable thereto.
2.26 "Employer Matching Contributions" shall mean the contributions
made to the Trust by the Employer in accordance with Section 4.04 hereof as
matching contributions.
2.27 "Family Member" shall mean, with respect to a particular Employee,
any individual who is a Spouse, lineal ascendant, lineal descendent, or a
Spouse of a lineal ascendant or descendent of the Employee. "Family Member"
as used in this Plan refers to an individual who is, or was during the Plan
Year in question, an Employee.
2.28 "First Required Distribution Year" shall mean:
(a) in the case of a Participant whose date of birth is July 1,
1917 or a later date, the calendar year during which the Participant attains
age 70 1/2;
(b) in the case of a Participant (i) whose date of birth is
June 30, 1917 or an earlier date and (ii) who is not, and has not been at any
time since the calendar year during which he or she attained age 65 1/2, a "5%
owner" (as defined in Code Section 416(i)(1)(B)(i)) of the Employer
(hereinafter a "5% owner"), the calendar year during which occurs the later of
the Participant's separation from Service or the Participant's attainment of
age 70 1/2, provided that if the Participant continues in Service after he or
she attains age 70 1/2 and later becomes a 5% owner, such Participant's First
Required Distribution Year shall be the calendar year during which the
Participant attains the status of a 5% owner;
(c) in the case of a Participant (i) whose date of birth is
June 30, 1917 or an earlier date and (ii) who is, or has been at sometime
since the calendar year during which he or she attained age 65 1/2, a 5%
owner, the calendar year during which the Participant attains age 70 1/2.
2.29 "Highly Compensated Employee" shall mean:
(a) any Employee who was, at any time in the look-back year or
determination year, a 5% owner;
(b) any Employee who, in the look-back year:
(i) earned more than $75,000 (as adjusted by the Secretary
of the Treasury to reflect rises in the cost of living in accordance with Code
Section 415(d)) in annual compensation,
(ii) was an officer and earned more than 50% of the dollar
limitation in effect for such year under Code Section 415(b)(1)(A); or
(iii) earned more than $50,000 (as adjusted by the Secretary
of the Treasury to reflect rises in the cost of living in accordance with Code
Section 415(d)) in annual compensation and was among the top 20% of Employees
when ranked on the basis of compensation paid during such year.
For purposes of calculating the top 20% of Employees when ranked on the
basis of compensation paid during the look-back year, there shall be excluded
from the total number of Employees: (A) Employees with less than six months
of Service, (B) Employees who normally work less than 17 1/2 hours per week,
(C) Employees who normally work less than six months per year, (D) except as
provided in Treasury Regulations, Employees covered by a collective bargaining
agreement, (E) Employees who have not attained 21 years of age, and
(F) Employees who are nonresident aliens and who receive no earned income from
the Employer that constitutes income from sources within the United States;
(c) any Employee not described in paragraph (b) above but who is
described in clause (i), (ii) or (iii) of paragraph (b) if the term
"determination year" is substituted for the term "look-back year," and the
Employee is among the 100 Employees who received the most compensation from
the Employer during the determination year; and
<PAGE>
(d) any former Employee who has separated from Service but who
was a Highly Compensated Employee as described in paragraph (a), (b) or (c)
above when he separated from Service or at any time after he attained age 55.
For purposes of this Section, "compensation" shall mean the amount paid
during the look-back year or determination year, whichever is applicable, by
the Employer to the Employee for services rendered (regardless of whether the
individual was a Participant at the time) as reportable to the Federal
Government for the purpose of withholding federal income taxes and increased
by any amount to which Code Sections 125, 402(e)(3), 402(h)(1)(B) or 403(b)
apply. Also for purposes of this Section, no more than 50 Employees or, if
lesser, the greater of three Employees or 10% of Employees shall be treated as
officers; however, if no officer has compensation in excess of the applicable
stated dollar amount above in any year, the officer with the highest
compensation shall be treated as described in paragraph (b) or (c), as
applicable.
For this purpose, the determination year shall be the Plan Year. The
look-back year shall be the 12-month period immediately preceding the
determination year. The Employer may elect to make the look-back year
calculation for a determination on the basis of the calendar year ending with
or within the applicable determination year, as prescribed by Section 414(q)
of the Code and the regulations issued thereunder.
If an Employee is, during a determination year or look-back year, a
Family Member of either a 5% owner who is an active or former Employee or a
Highly Compensated Employee who is one of the ten most Highly Compensated
Employees ranked on the basis of compensation paid by the Employer during such
year, then the Family Member and the 5% owner or top-ten Highly Compensated
Employee shall be aggregated. In such case, the Family Member and the 5%
owner or top-ten Highly Compensated Employee shall be treated as a single
Employee receiving compensation and Plan contributions or benefits equal to
the sum of such compensation and contributions or benefits of the Family
Member and 5% owner or top-ten Highly Compensated Employee. Finally, all
interpretative questions concerning whether an individual constitutes a Highly
Compensated Employee shall be resolved in a manner consistent with Department
of Treasury and Internal Revenue Service interpretations of Code Section
414(q).
2.30 "Highly Compensated Participant" shall mean a Highly Compensated
Employee who was, at any time during the Plan Year in question, eligible to
participate in the Plan.
2.31 "Hour of Service" shall mean each hour credited to an Employee in
the applicable computation period (a 12-consecutive month period) pursuant to
subsection (a) or (b) below, as the case may be.
(a) If the Employer has so selected in the Adoption Agreement,
Hours of Service shall be credited on the basis of weeks of employment and the
rules in paragraphs (i) through (iii) below shall apply as modified by
paragraphs (iv) and (v) below.
(i) Each Employee shall be credited with 45 Hours of
Service for each week in which the Employee would be credited with at least
one hour of service under Section 2530.200b-2 of the Department of Labor
Regulations which are incorporated herein by reference. In the case of a week
which extends into two computation periods, the Hours of Service for such week
shall be allocated between the two computation periods on a pro rata basis.
(ii) In the case of a payment made or due to an Employee
which is not calculated on the basis of units of time, the number of Hours of
Service to be credited shall be equal to the amount of the payment divided by
the Employee's most recent hourly rate of compensation as determined under
Section 2530.200b-2 of the Department of Labor Regulations.
<PAGE>
(iii) No more than 501 Hours of Service shall be credited
under this Section for any single continuous period (whether or not such
period occurs in a single computation period) during which no duties or
services are performed for the Employer (or any other corporation during a
time when such corporation was related to the Employer within the meaning of
Code Section 414), but for which the individual is paid.
(iv) The following hours shall be considered to be hours of
service for which an Employee would be credited under Section 2530.200b-2 of
the Department of Labor Regulations for the purposes of subsection (a)(i) of
this Section:
(A) An hour for which an Employee is paid, or
entitled to payment, for the performance of duties or services for the
Employer.
(B) An hour for which an Employee is paid, or
entitled to payment, by the Employer (or any other corporation during a time
when such corporation was related to the Employer within the meaning of Code
Section 414) on account of a period of time during which no duties are
performed (irrespective of whether the employment relationship has terminated)
due to vacation, holiday, illness, incapacity (including Disability), layoff,
jury duty, military duty or leave of absence (unless such payment is made or
due solely to comply with applicable workman's compensation, unemployment
compensation or disability insurance laws or solely as reimbursement for the
Employee's medical expenses).
(C) An hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by the Employer (or any
other corporation during a time when such corporation was related to the
Employer within the meaning of Code Section 414). The same hours shall not be
considered both under paragraph (iv)(A) or paragraph (iv)(B), as the case may
be, and under this paragraph (iv)(C). Such hours shall be treated under
paragraphs (i) through (iii) as occurring in 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.
(v) Solely for the purpose of determining whether a
One-Year Break in Service has occurred, an Employee shall be credited with any
Hours of Service which would otherwise have been credited to such Employee but
for such absence from work during a Plan Year which commences after
December 31, 1984 because of: such Employee's pregnancy, birth of a child of
the Employee, placement of an adopted child with the Employee, or caring for a
natural or an adopted child for a period beginning immediately following birth
or placement.
Hours of Service shall be credited to an Employee pursuant to this
paragraph in the manner indicated in paragraphs (i) through (iii) above for
the computation period during which such absence begins, if the Employee would
otherwise have suffered a One-Year Break in Service and, in all other cases,
in the next following computation period. No more than 501 Hours of Service
shall be credited under this paragraph by reason of any one placement or
pregnancy. Notwithstanding any implication of this paragraph (v) to the
contrary, no credit shall be given pursuant to this paragraph (v) unless the
Employee makes a timely, written filing with the Administrator which
establishes valid reasons for the absence and enumerates the days for which
there was such an absence.
(b) If the Employer has not selected in the Adoption Agreement
to have Hours of Service credited on the basis of weeks of employment, Hours
of Service shall mean:
(i) Each hour for which an Employee is paid, or entitled
to payment, for the performance of duties for the Employer. These hours shall
<PAGE>
be credited to the Employee for the computation period in which the duties are
performed;
(ii) Each hour for which an Employee is paid, or entitled
to payment, by the Employer on account of a period of time during which no
duties are performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
Disability), layoff, jury duty, military duty or leave of absence. No more
than 501 Hours of Service shall be credited under this paragraph for any
single continuous period (whether or not such period occurs in a single
computation period). Hours under this subsection shall be calculated and
credited pursuant to section 2530.200b-2 of the Department of Labor
Regulations which are incorporated herein by this reference;
(iii) Solely for the purpose of determining whether a
One-Year Break in Service has occurred, each hour which normally would have
been credited to an Employee (or in any case in which such hours cannot be
determined, eight hours per day of such absence) but for an absence from work
during a Plan Year which commences after December 31, 1984 because of such
individual's pregnancy, birth of a child of the Employee, placement of an
adopted child with the Employee, or caring for an adopted or a natural child
following placement or birth. Hours of Service shall be credited to an
Employee pursuant to this paragraph for the computation period during which
such absence begins if the individual would otherwise have suffered a One-Year
Break in Service, and in all other cases, in the immediately following
computation period. No more than 501 Hours of Service shall be credited under
this paragraph by reason of any one placement or pregnancy. Notwithstanding
any implication of this paragraph (iii) to the contrary, no credit shall be
given under this paragraph (iii) unless the Employee makes a timely, written
filing with the Administrator which establishes valid reasons for the absence
and enumerates the days for which there was such an absence;
(iv) Each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by the Employer. The
same Hours of Service shall not be credited both under paragraph (i), (ii) or
(iii), as the case may be, and under this paragraph (iv). These hours shall
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.
(c) (i) Where the Employer maintains the plan of a predecessor
employer, service for such predecessor employer shall be treated as Service of
the Employer. Where the Employer does not maintain the plan of a predecessor
employer, employment by a predecessor employer, upon the written election of
the Employer made in a uniform and non-discriminatory manner, shall be treated
as Service for the Employer.
(ii) If the Employer is a member of (A) a controlled group
of corporations (as defined under Code Section 414(b)), (B) a group of trades
or businesses (whether or not incorporated) which are under common control (as
defined under Code Section 414(c)), or (C) an affiliated service group (as
defined under Code Section 414(m)), all service of an Employee for any member
of such a group, or for any other entity required to be aggregated with the
Employer pursuant to Code Section 414(o) and the regulations thereunder, shall
be treated as if it were Service for the Employer for purposes of this
Section.
(iii) Except as provided below, service of any Employee who
is considered a leased employee of the Employer under Code Section 414(n)(2)
shall be treated as if it were Service for the Employer for purposes of this
Section. However, qualified plan contributions or benefits provided by the
leasing organization which are attributable to services performed for the
<PAGE>
Employer shall be treated as provided by the Employer. The provisions of this
paragraph shall not apply to any leased employee if such individual:
(A) is covered by a money purchase pension plan
maintained by the leasing organization 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 by the Employer pursuant to a salary
reduction agreement which are excludable from the Employee's gross income
under Code Section 125, 402(e)(3), 402(h), or 403(b),
(2) immediate participation for leasing
organization employees who earn more than $1,000 in a year (other than
employees who perform substantially all their services for the organization),
and
(3) full and immediate vesting, and
(B) is a member of a group of leased employees which
in the aggregate does not constitute more than 20% of the Employer's
non-highly compensated work force (within the meaning of Code Section
414(n)(5)(C)(ii)).
(C) For purposes of this Section, the term "leased employee"
means any person who is not an Employee and who, pursuant to an agreement
between the recipient and any other person, has performed services for the
Employer (or for the Employer 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 Employer.
2.32 "Integration Level" for a Plan Year shall mean the lesser of the
Social Security Wage Base (as in effect on the first day of the Plan Year) or
the dollar amount specified in the Adoption Agreement.
2.33 "Integration Rate" for the Plan Year shall mean the lesser of the
Maximum Disparity Rate (as in effect on the first day of the Plan Year) or the
rate specified in the Adoption Agreement.
2.34 "Loan Trustee" shall mean the person named in the Adoption
Agreement to act as trustee solely for the purpose of administering the
provisions of Article XII and holding the Trust assets to the extent that they
are invested in loans pursuant to such Article. Loan assets shall be held in
a separate trust if the person named as Loan Trustee is not the same person as
the person named as Trustee. Scudder Trust Company will not act as Loan
Trustee unless it specifically agrees in writing to act as such.
2.35 "Maximum Disparity Rate" shall mean the rate determined in
accordance with paragraphs (a), (b) or (c) and (d) below.
(a) If the Integration Level selected by the Employer in the
Adoption Agreement is equal to the Social Security Wage Base or does not
exceed the greater of $10,000 or 20 percent of the Social Security Wage Base,
then, except as provided in (d) below, the Maximum Disparity Rate is equal to
the greater of (i) 5.7 percent or (ii) the OASDI Rate.
(b) If the Integration Level selected by the Employer in the
Adoption Agreement exceeds the greater of $10,000 or 20 percent of the Social
Security Wage Base but is less than or equal to 80 percent of the Social
Security Wage Base, then, except as provided in (d) below, the Maximum
Disparity Rate is equal to the greater of (i) 4.3 percent or (ii) the OASDI
Rate multiplied by a fraction the numerator of which is 4.3 and the
denominator of which is 5.7.
(c) If the Integration Level selected by the Employer in the
Adoption Agreement exceeds 80 percent of the Social Security Wage Base but is
less than the Social Security Wage Base, then, except as provided in (d)
below, the Maximum Disparity Rate is equal to the greater of (i) 5.4 percent
<PAGE>
or (ii) the OASDI Rate multiplied by a fraction the numerator of which is 5.4
and the denominator of which is 5.7.
(d) If allocations for a Plan Year are made on an integrated
basis pursuant to Section 4.03(b)(ii) and the provisions of Section 23.03 are
applicable for such Plan Year, then for purposes of determining the
Integration Rate as applied to limit allocations under Section 4.03(b)(ii),
the Maximum Disparity Rate determined in accordance with paragraph (a), (b) or
(c) above shall be reduced by 3 percent. If the Employer has elected in the
Adoption Agreement to make a 4 percent minimum allocation pursuant to Section
23.07(b), then 4 percent shall be substituted for 3 percent in the preceding
sentence.
2.36 "Nondeductible Voluntary Contribution Account" shall mean the
separate account maintained pursuant to the Section 7.03(e) hereof for
Nondeductible Voluntary Contributions made by the Participant and the income,
expenses, gains and losses attributable thereto.
2.37 "Nondeductible Voluntary Contributions" shall mean all
contributions by Participants which are not deductible voluntary contributions
under Code Section 219, Rollover Contributions, or contributions of
accumulated deductible employee contributions (as defined in Code Section
72(o)(5)).
2.38 "Non-Highly Compensated Employee" shall mean an Employee who is
neither a Highly Compensated Employee nor a Family Member of a Highly
Compensated Employee.
2.39 "Non-Highly Compensated Participant" shall mean a Non-Highly
Compensated Employee who was, at any time during the Plan Year in question,
eligible to participate in the Plan.
2.40 "Normal Retirement Date" or "Normal Retirement Age" shall mean the
date selected by the Employer in the Adoption Agreement.
2.41 "OASDI Rate" for a Plan Year shall mean that portion of the tax
rate under Code Section 3111(a) in effect on the first day of the Plan Year
which is attributable to old-age insurance.
2.42 "One-Year Break in Service" shall mean a 12-consecutive-month
period in which an Employee does not complete more than 500 Hours of Service
unless the number of Hours of Service specified in the Adoption Agreement for
purposes of determining a Year of Service is less than 501, in which case a
12-consecutive-month period in which an Employee has fewer than that number of
Hours of Service shall be a One-Year Break in Service. The computation period
over which One-Year Breaks in Service shall be measured shall be the same
computation period over which Years of Service are measured.
2.43 "Owner-Employee" shall mean an Employee who is a sole proprietor
adopting this Plan as the Employer, or who is a partner owning more than 10%
of either the capital or profits interest of a partnership adopting this Plan
as the Employer. Solely for the purposes of Article XII hereof, an
Owner-Employee shall also mean an Employee who owns (or is considered as
owning within the meaning of Code Section 318(a)(1)) on any day during the
Year, more than 5% of the Employer if the Employer is an electing small
business corporation.
2.44 "Participant" shall mean an Employee who is eligible to
participate in the Plan under Article III (other than, if this Plan is adopted
as a nonstandardized plan, a Self-Employed Individual who elects not to be a
Participant in the Plan) and any other person (including former Employees)
with respect to whom any Account exists under the Plan.
2.45 "Plan" shall mean this 401(k) Plan and Adoption Agreement.
2.46 "Plan Year" shall mean the fiscal year of the Employer or a
different 12-consecutive-month period as specified in the Adoption Agreement.
A Plan Year may consist of less than a 12-consecutive-month period in the case
<PAGE>
of the initial Plan Year or a short Plan Year resulting from a change in Plan
Year.
2.47 "Prototype 401(k) Plan" shall mean these Articles I to XXV.
2.48 "Qualified Matching Contributions" shall mean contributions made
to the Trust by the Employer in accordance with Section 6.03(c) hereof on
behalf of Non-Highly Compensated Participants to enable the Plan to satisfy
one or more of the non-discrimination tests set forth in Article VI.
Qualified Matching Contributions are subject to full and immediate vesting and
are distributable only in accordance with the distribution provisions, other
than hardship distributions, that are applicable to Deferred Cash
Contributions and Salary Reduction Contributions. The term "Qualified
Matching Contributions" could, at the election of the Administrator, also
apply to Employer Matching Contributions if such contributions are subject to
full and immediate vesting and are distributable only in accordance with the
distribution provisions, other than hardship distributions, that are
applicable to Deferred Cash Contributions and Salary Reduction Contributions.
2.49 "Qualified Nonelective Contributions" shall mean contributions
made to the Trust by the Employer in accordance with Section 6.02(c) hereof on
behalf of Non-Highly Compensated Participants to enable the Plan to satisfy
one or more of the non-discrimination tests set forth in Article VI.
Qualified Nonelective Contributions are subject to full and immediate vesting
and are distributable only in accordance with the distribution provisions,
other than hardship distributions, that are applicable to Deferred Cash
Contributions and Salary Reduction Contributions. The term "Qualified
Nonelective Contributions" could, at the election of the Administrator, also
apply to Employer Profit Sharing Contributions if such contributions are
subject to full and immediate vesting and are distributable only in accordance
with the distribution provisions, other than hardship distributions, that are
applicable to Deferred Cash Contributions and Salary Reduction Contributions.
2.50 "Qualified Nonelective Contribution Account" shall mean the
separate account maintained pursuant to Section 7.03(f) hereof for Qualified
Matching Contributions and Qualified Nonelective Contributions allocated to
the Participant and the income, expenses, gains and losses attributable
thereto.
2.51 "Rollover Account" shall mean the separate account maintained
pursuant to Section 7.03(h) hereof for any Rollover Contributions made by the
Participant and the income, expenses, gains and losses attributable thereto.
2.52 "Rollover Contributions" shall mean contributions made to the
Trust by Participants in accordance with Section 4.06 hereof.
2.53 "Salary Reduction Contribution Account" shall mean the separate
account maintained pursuant to Section 7.03(a) hereof for Salary Reduction
Contributions made on behalf of the Participant and the income, expenses,
gains and losses attributable thereto.
2.54 "Salary Reduction Contributions" shall mean contributions made to
the Trust by the Employer in accordance with Section 4.01 hereof as a result
of the election by Participants to contribute part of their Compensation.
2.55 "Self-Employed Individual" shall mean an Employee who has Earned
Income for the taxable year from the trade or business for which the Plan is
established or would have had earned income but for the fact that the trade or
business had no net profits for such year.
2.56 "Service" shall mean employment by the Employer and, if the
Employer is maintaining the plan of a predecessor employer, or if the Employer
is not maintaining the plan of a predecessor employer but has so elected in
the manner described in Section 2.31 above, employment by such predecessor
employer.
2.57 "Social Security Wage Base" for a Plan Year shall mean the maximum
amount of annual earnings which may be considered wages under Code
<PAGE>
Section 3121(a)(1) as in effect on the first day of such Plan Year for
purposes of the old-age, survivors, and disability insurance under Code
Section 3111(a).
2.58 "Sponsor" shall mean any of the organizations (a) which have
requested a favorable opinion letter from the National Office of the Internal
Revenue Service for this Plan or (b) to which a favorable opinion letter for
this Plan has been issued by the National Office of the Internal Revenue
Service.
2.59 "Spouse" shall mean the Spouse or surviving Spouse of the
Participant, provided that a former Spouse will be treated as the Spouse and a
current Spouse will not be treated as the Spouse to the extent provided under
a qualified domestic relations order (as defined in Code Section 414(p)).
2.60 "Trust" shall mean any trust established under Article XIII of
this Plan for investment of the assets of the Plan. If more than one Trust is
established under Article XIII, references herein to the Trust shall, as the
context requires, refer to each such Trust, separately or all such Trusts,
collectively.
2.61 "Trust Fund" shall mean with respect to a Trust the contributions
to such Trust and any assets into which such contributions shall be invested
or reinvested in accordance with Sections 13.01 and 13.03 of this Plan. If
more than one Trust is established under Article XIII, references herein to
the Trust Fund shall refer to the Trust Fund of each such Trust, separately,
or all such Trusts, collectively, as the context requires.
2.62 "Trustee" shall mean, with respect to each Trust, the person or
persons, including any successor or successors thereto, named in the Adoption
Agreement to act as trustee of the such Trust and hold the assets of such
Trust in accordance with Article XIII hereof. If more than one Trust is
established under Article XIII, references herein to the Trustee shall, as the
context requires, refer to the Trustee or Trustees of each such Trust.
2.63 "Valuation Date" shall mean the last day of each Plan Year and
such other date(s) as may be designated by the Administrator from time to
time.
2.64 "Vesting Years" shall be measured on the 12-consecutive-month
computation period specified in the Adoption Agreement.
(a) A Participant will have a Vesting Year during any such
computation period if the Participant completes the number of Hours of Service
selected in the Adoption Agreement for purposes of computing a Year of
Service.
(b) When determining Vesting Years, unless the Employer has
otherwise specified in the Adoption Agreement, there shall be excluded: (i)
if this Plan is a continuation of an earlier plan which would have disregarded
such service, Service before the first Plan Year to which the Act is
applicable; (ii) Service before the first Plan Year in which the Participant
attained age 18 and (iii) Service before the Employer maintained this Plan or
a predecessor plan.
2.65 "Year" shall mean the fiscal year of the Employer.
2.66 "Year of Service" shall be measured on the 12-consecutive-month
period computation period specified in the Adoption Agreement during which the
Employee completes the number of Hours of Service specified in the Adoption
Agreement. The initial date of employment or reemployment is the first day on
which the Employee performs an Hour of Service. If the Employer specifies in
the Adoption Agreement that the computation period after the initial
computation period shall be the Plan Year which begins after the Employee's
initial date of employment or reemployment, an Employee who is credited with
the requisite number of Hours of Service in both the initial computation
period and in the Plan Year which begins after the Employee's date of
employment or reemployment shall be credited with two Years of Service.
<PAGE>
ARTICLE III. ELIGIBILITY
3.01 Entry. Each Employee of the Employer, who on the Effective Date
of this Plan meets the conditions specified in the Adoption Agreement, shall
become eligible to participate in the Plan commencing with the Effective Date.
Each other Employee of the Employer, including future Employees, shall become
eligible to participate in the Plan when the eligibility requirements
specified in the Adoption Agreement are met. For the purposes of this Plan's
eligibility requirements, the exclusion concerning Employees who are covered
by collective bargaining agreements applies to individuals who are covered by
a collective bargaining contract between the Employer and Employee
Representatives if contract negotiations considered retirement benefits in
good faith, unless such contract specifically provides for participation in
the Plan. For the purposes of this Section, "Employee Representatives" shall
mean the representatives of an employee organization which engages in
collective bargaining negotiations with the Employer provided that, owners,
officers, and executives of the Employer do not comprise more than 50% of the
employee organization's membership.
3.02 Interrupted Service. All Years of Service with the Employer are
counted towards eligibility except that if the Employer has specified in the
Adoption Agreement that more than one Year of Service is required before
becoming a Participant eligible to receive allocations of Employer Matching
Contributions and/or Employer Profit Sharing Contributions, and if the
individual has a One-Year Break in Service before satisfying the relevant
eligibility requirement, Service before such break will not be taken into
account for purposes of determining when the individual is eligible to receive
allocations of Employer Matching Contributions and/or Employer Profit Sharing
Contributions once the individual returns to the employ of the Employer. A
former Employee who has met the entry requirements and who terminates Service
with the Employer prior to becoming a Participant, or a former Participant,
shall become a Participant immediately upon return to the employ of the
Employer as a member of an eligible class of Employees.
3.03 Transfer to Eligible Class. 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 shall participate immediately if such Employee has
satisfied the minimum age and Service requirements and would have previously
become a Participant had he or she been a member of an eligible class
throughout the period of employment with the Employer.
3.04 Determination by Administrator. The Administrator shall have the
discretionary authority to determine an Employee's eligibility to participate
in the Plan and shall notify each Employee upon his or her admission as a
Participant in the Plan.
ARTICLE IV. CONTRIBUTIONS
4.01 Salary Reduction Contributions. If selected by the Employer in
the Adoption Agreement, the Employer will make a Salary Reduction Contribution
(for allocation to the eligible Participant's Salary Reduction Account) on
behalf of each Participant who both has elected to have a portion of the
Compensation which would otherwise have been paid to him or her for the Plan
Year contributed to the Trust and has received Compensation during the Plan
Year. With respect to such elective contributions, the following provisions
shall apply:
(a) an Employee shall be given an opportunity to elect, prior to
the date as of which he or she becomes eligible in accordance with procedures
set by the Administrator, to have Salary Reduction Contributions made on his
or her behalf or, in the case of an Employee who becomes eligible immediately
upon becoming an Employee, as soon as is administratively possible following
his or her initial date of eligibility;
<PAGE>
(b) Participants shall be given opportunities to elect to
commence having Salary Reduction Contributions made on their respective
behalves at such other time or times as the Administrator designates;
(c) such elections may only be made on a prospective basis and
pursuant to written, salary reduction agreements between the Employee and the
Employer;
(d) each such written, salary reduction agreement shall be in
such form and subject to such rules as the Administrator may prescribe, and
the agreement shall specify the percentage or amount of Compensation that the
Participant desires to contribute (but in no event may such contribution
exceed the percentage of Compensation specified in the Adoption Agreement);
(e) a salary reduction agreement may be amended or terminated
prospectively during the Plan Year at such times and in such manner as
permitted by rules prescribed by the Administrator;
(f) Salary Reduction Contributions made on behalf of a
Participant shall be in an amount equal to the percentage or amount of
Compensation specified in the eligible Participant's salary reduction
agreement; provided, however, that at any time during a Plan Year the
Administrator may reduce the rate of Salary Reduction Contributions to be made
on behalf of any Participant for the remainder of the Plan Year to the extent
the Administrator determines necessary to comply with the limitations of
Section 4.08, and Articles V and VI hereof. Any amount which cannot be
contributed to the Trust because of those limitations shall be paid to the
Participant in cash and such payment shall be subject to federal income and
other tax withholding by the Employer.
4.02 Deferred Cash Contributions. If selected by the Employer in the
Adoption Agreement, the Employer will make a Deferred Cash Contribution on
behalf of each eligible Participant (as determined in accordance with the
Adoption Agreement), in an amount equal to the Deferred Cash Allocation
specified in the Adoption Agreement, as expressed as a percentage of such
Participant's Compensation.
With respect to Participants' elections not to have amounts contributed,
the following provisions shall apply:
(a) each Participant shall be afforded a reasonable opportunity
to elect not to have Deferred Cash Allocations contributed to the Trust on his
or her behalf at least once during each Plan Year and at such other time or
times as the Administrator elects;
(b) such elections may only be made pursuant to written
agreements between the Participant and the Employer;
(c) each such written agreement shall be in such form and
subject to such rules as the Administrator may prescribe, and the election
shall specify the amount of the Deferred Cash Allocation that the Participant
desires to receive in cash; and
(d) the amount which a Participant has elected to receive in
cash pursuant to such an election shall be paid to the Participant by the
Employer no later than the last day on which the Deferred Cash Contributions
for the Plan Year in question must be paid to the Trust under Section 7.02
hereof.
Notwithstanding the above, the Deferred Cash Contribution otherwise to
be made for a Participant may be reduced to the extent necessary to comply
with the limitations of Section 4.08 hereof and shall be reduced to the extent
necessary to comply with the limitations of Articles V and VI hereof. Any
amount which cannot be contributed to the Trust because of those limitations
shall be paid to the Participant in cash and such payment shall be subject to
federal income and other tax withholding by the Employer.
4.03 Employer Profit Sharing Contributions. If selected by the
Employer in the Adoption Agreement, for each Plan Year, the Employer will
<PAGE>
contribute, as Employer Profit Sharing Contributions, either a fixed amount or
the amount determined by it in its discretion. Employer Profit Sharing
Contributions, plus any forfeitures under Section 8.02 hereof, for a Plan Year
shall be allocated as of the last day of such Plan Year among the Employer
Profit Sharing Contribution Accounts of eligible Participants (as determined
in accordance with the Adoption Agreement), as follows:
(a) If a non-integrated formula is elected in the Adoption
Agreement, such contribution and forfeitures shall be allocated to the
Employer Profit Sharing Contribution Account of each eligible Participant in
the ratio that each such Participant's Compensation for the Plan Year bears to
the total Compensation paid to all eligible Participants for the Plan Year;
and
(b) If an integrated formula is elected in the Adoption
Agreement, such contributions and forfeitures shall be allocated in the
following steps:
(i) First, Employer Profit Sharing Contributions and
forfeitures will be allocated to the Employer Profit Sharing Contribution
Account of each eligible Participant in the ratio that the sum of each such
Participant's Compensation and Compensation in excess of the Integration Level
for the Plan Year bears to the sum of Compensation and Compensation in excess
of the Integration Level for all such eligible Participants for the Plan Year,
provided that the amount so credited to any such Participant's Employer Profit
Sharing Contribution Account for the Plan Year shall not exceed the product of
the Integration Rate times the sum of the Participant's Compensation and
Compensation in excess of the Integration Level for the Plan Year. For
purposes of this step, in the case of any Participant who has exceeded the
cumulative permitted disparity limit described below, two times such
Participant's Compensation for the Plan Year will be taken into account.
(ii) Next, any remaining Employer Profit Sharing
Contributions and forfeitures will be allocated to the Employer Profit Sharing
Contribution Account of each eligible Participant in the ratio that each such
Participant's Compensation for the Plan Year bears to the total Compensation
paid to all eligible Participants for the Plan Year.
(c) Overall permitted disparity limits.
(i) Annual overall permitted disparity limit:
Notwithstanding the preceding paragraphs, for any Plan Year this Plan benefits
any Participant who benefits under another qualified plan or simplified
employee pension, as defined in Section 408(k) of the Code, maintained by the
Employer that provides for permitted disparity (or imputes disparity),
Employer contributions and forfeitures will be allocated pursuant to the
provisions of Section 4.03(a) rather than 4.03(b).
(ii) Cumulative permitted disparity limit: Effective for
Plan Years beginning on or after January 1, 1995, the cumulative permitted
disparity limit for a Participant is 35 total cumulative permitted disparity
years. Total cumulative permitted years means the number of years credited to
the Participant for allocation or accrual purposes under this Plan, any other
qualified plan or simplified employee pension plan (whether or not terminated)
ever maintained by the Employer. For purposes of determining the
Participant's cumulative permitted disparity limit, all years ending in the
same calendar year are treated as the same year. If the Participant has not
benefited under a defined benefit or target benefit plan for any year
beginning on or after January 1, 1994, the Participant has no cumulative
disparity limit.
4.04 Employer Matching Contributions.
(a) If selected by the Employer in the Adoption Agreement, the
Employer will make an Employer Matching Contribution (for allocation together
with forfeitures under Section 8.02 below) to the Participant's Employer
<PAGE>
Matching Contribution Account on behalf of each eligible Participant (as
determined in accordance with the Adoption Agreement) for each Plan Year that
a contribution within one or more of the contribution categories selected by
the Employer in the Adoption Agreement (i.e., Salary Reduction Contributions,
Deferred Cash Contributions, or Nondeductible Voluntary Contributions) is
allocated to such Participant's Account. The Employer Matching Contribution
made for an eligible Participant shall be in an amount determined in
accordance with the Adoption Agreement and shall be allocated in the manner
specified in the Adoption Agreement.
(b) Notwithstanding any implication of the preceding
subsection (a) to the contrary, the Employer Matching Contribution otherwise
to be made for a Participant may be reduced to the extent necessary to comply
with the limitations of Section 4.08 hereof and shall be reduced to the extent
necessary to comply with the limitations of Articles V. Any amount which
cannot be contributed to the Trust because of these limitations will be
retained by the Employer, and the Employer shall have no obligation to
contribute such amount to the Trust.
4.05 Nondeductible Voluntary Contributions. If, in the Adoption
Agreement, the Employer has specified that Participants may make Nondeductible
Voluntary Contributions, a Participant may make such contributions to his or
her Account; provided, however, that a Participant's right to make such
contributions shall be subject to the conditions and limitations specified
below:
(a) The aggregate amount of a Participant's Nondeductible
Voluntary Contributions shall not cause the Annual Addition (as defined in
Section 5.05(a) hereof) to his or her Account to exceed the limitations set
forth in Article V.
(b) A Participant's Nondeductible Voluntary Contributions shall
be allocated to his or her Nondeductible Voluntary Contribution Account under
Section 7.03(e) hereof.
(c) At any time during a Plan Year, the Administrator may cause
a Participant to reduce the rate of his or her Nondeductible Voluntary
Contributions for the remainder of the Plan Year to the extent the
Administrator determines necessary to comply with the limitations of Article V
and VI hereof.
4.06 Rollover Contributions. The Administrator may, in its discretion,
direct the Trustee to accept a Rollover Contribution upon the express request
of an Employee wishing to make such Rollover Contribution, subject to the
consent of the Trustee if the contribution includes property other than cash.
A Rollover Contribution shall mean a contribution which is an "eligible
rollover distribution" within the meaning of Code Section 402(c)(4) or a
"rollover contribution" within the meaning of Code Section 408(d)(3)(A)(ii)
and which satisfies all applicable provisions of the Code. Each Rollover
Contribution made by an Employee shall be allocated to his or her Rollover
Account pursuant to Section 7.03(h) hereof. Such Rollover Account shall be
invested by the Trustee as part of the Trust Fund, pursuant to Article XIII
hereafter. An Employee may make a contribution under this Section 4.06
whether or not he or she has satisfied the age and service participation
requirements set forth in the Adoption Agreement. An Employee who makes a
contribution under this Section 4.06 and does not otherwise qualify as a
Participant is, nevertheless, deemed to be a Participant for the limited
purpose of administering that contribution.
The Administrator may, in its discretion, accept accumulated deductible
employee contributions (as defined in Code Section 72(o)(5)) that were
distributed from a qualified retirement plan and rolled over pursuant to Code
Sections 402(c), 403(a)(4), or 408(d)(3). The rolled over amount will be
added to the Participant's Deductible Voluntary Contribution Account.
<PAGE>
4.07 Transfers from Other Qualified Plans. The Administrator may, in
its discretion, direct the Trustee to accept the transfer of any assets held
for a Participant's benefit under a qualified retirement plan of a former
employer of such Participant. Such a transfer shall be made directly between
the trustee or custodian of the former employer's plan and the Trustee in the
form of cash or its equivalent, and shall be accompanied by written
instruction showing separately the portion of the transfer attributable to
types of contributions made by the former employer and pre-tax and after-tax
contributions made by the Participant, respectively. Separate written
instructions delivered by the Administrator shall identify the portion of the
transferred funds, if any, attributable to any period during which the
Participant participated in a defined benefit plan, money purchase pension
plan (including a target benefit plan), stock bonus plan or profit sharing
plan which would otherwise have provided a life annuity form of payment to the
Participant. The Trustee and recordkeeper shall be entitled to rely on such
written instructions with respect to the character of the transferred funds.
Except as otherwise provided in Article XXIV, the amounts transferred shall be
allocated to separate accounts as provided in Section 7.03 that match the
character of the transferred funds.
4.08 Limitations on Contributions. During a Plan Year, Employer Profit
Sharing Contributions and Employer Matching Contributions may not, in the
aggregate, exceed (a) 15% (or such larger percentage as may be permitted by
the Code as a current deduction to the Employer with respect to any Plan Year)
of the total Compensation (disregarding any exclusion from Compensation
specified by the Employer in the Adoption Agreement) paid to, or accrued by
the Employer for, Participants for the Year ending in the Plan Year, less
(b) any amounts contributed as Salary Reduction Contributions and Deferred
Cash Contributions, plus (c) any unused pre-'87 credit carryovers. For this
purpose, a "pre-'87 credit carryover" is the amount by which Employer
Contributions for a previous Year which commenced before January 1, 1987 were
less than 15% of the total Compensation (disregarding any exclusion from
Compensation specified by the Employer in the Adoption Agreement) paid or
accrued by the Employer to Participants for such Year, but such unused pre-'87
credit carryover shall in no event permit the Employer Contributions for a
Year to exceed 25% (or such larger percentage as may be permitted by the Code
as a deduction to the Employer) of the total Compensation (disregarding any
exclusion from Compensation specified by the Employer in the Adoption
Agreement) paid or accrued by the Employer to Participants for the Year ending
in the Plan Year in question.
4.09 Deductible Voluntary Contributions. This Plan will not accept
deductible voluntary contributions for taxable years beginning after
December 31, 1986. Deductible voluntary contributions made in prior taxable
years shall be maintained in the Participant's Deductible Voluntary
Contribution Account and shall share in the gains and losses of the Trust Fund
in accordance with Section 8.02(e). No part of a Participant's Deductible
Voluntary Contribution Account may be used to purchase life insurance. A
Participant may withdraw all or a portion of his or her Deductible Voluntary
Contribution Account in accordance with Section 11.01.
ARTICLE V. CODE SECTION 415 LIMITATIONS ON ALLOCATIONS
5.01 Employers Maintaining No Other Plan.
(a) If a Participant does not participate in, and has never
participated in another qualified plan, a welfare benefit fund (as defined in
Code Section 419(e)), an individual medical account (as defined in Code
Section 415(1)(2)), or a simplified employee pension (as defined in Code
Section 408(k)) maintained by the Employer, the amount of the Annual Addition
which may be credited to the Participant's Account for any Limitation Year
<PAGE>
shall not exceed the lesser of the Maximum Permissible Amount or any other
limitation contained in the Plan.
(b) If the Employer Contribution (including any forfeitures)
that would otherwise be allocated to a Participant's Account would cause the
Annual Addition for the Limitation Year to exceed the Maximum Permissible
Amount, the amount allocated will be reduced so that any Excess Amount shall
be eliminated and, consequently, the Annual Addition for the Limitation Year
will equal the Maximum Permissible Amount.
(i) Prior to determining the Participant's actual
Compensation for the Limitation Year, the Employer may determine the Maximum
Permissible Amount for a Participant on the basis of a reasonable estimation
of the Participant's Compensation for the Limitation Year, uniformly
determined for all Participants similarly situated.
(ii) As soon as is administratively feasible after the end
of each Limitation Year, the Maximum Permissible Amount for the Limitation
Year will be determined on the basis of Participants' actual Compensation for
the Limitation Year.
(c) If the allocation of forfeitures or the use by the Employer
of the estimation described in Section 5.01(b)(i) above results in an Excess
Amount, such Excess Amount shall be eliminated pursuant to the following
procedure:
(i) The portion of the Excess Amount consisting of
Nondeductible Voluntary Contributions which are a part of the Annual Addition
shall be returned to the Participant (with any income or gains attributable
thereto) as soon as administratively feasible;
(ii) At the election of the Administrator, if after the
application of Subparagraph (i) an Excess Amount still exists, the portion of
the Excess Amount consisting of Salary Reduction Contributions and Deferred
Cash Contributions (with any income or gains attributable thereto) shall be
returned to the Participant;
(iii) If after the application of subparagraph (ii) an
Excess Amount still exists and the Participant is covered by the Plan at the
end of a Limitation Year, the Excess Amount in the Participant's Account will
be used to reduce Employer Contributions (including any allocation of
forfeitures) for such Participant in the next Limitation Year, and each
succeeding Limitation Year if necessary;
(iv) If after the application of subparagraph (iii) an
Excess Amount still exists and the Participant is not covered by the Plan at
the end of a Limitation Year, the Excess Amount will be held unallocated in a
suspense account. The suspense account will be applied to reduce
proportionately future Employer Contributions (including any allocation of
forfeitures) for all remaining Participants in the next Limitation Year, and
each succeeding Limitation Year, if necessary. If a suspense account is in
existence at any time during a Limitation Year pursuant to this subparagraph,
it will not participate in the allocation of the Trust's investment gains and
losses. In the event of termination of the Plan, the suspense account shall
revert to the Employer to the extent it may not then be allocated to any
Participant's Account.
(v) If a suspense account is in existence at any time
during a particular Limitation Year, all amounts in the suspense account must
be allocated and reallocated to Participants' Accounts before any Employer
Contributions or Nondeductible Voluntary Contribution may be made to the Plan
for that Limitation Year.
(d) Notwithstanding any other provision in subsections (a)
through (c), the Employer shall not contribute any amount that would cause an
allocation to the suspense account as of the date the contribution is
allocated.
<PAGE>
5.02 Employers Maintaining Other Master or Prototype Defined
Contribution Plans.
(a) This Section applies if, in addition to this Plan, a
Participant is covered under another qualified Master or Prototype defined
contribution plan, a welfare benefit fund (as defined in Code Section 419(e)),
an individual medical account (as defined in Code Section 415(1)(2)), or a
simplified employee pension (as defined in Code Section 408(k)) maintained by
the Employer during any Limitation Year. The Annual Addition which may be
allocated to any Participant's Account for any such Limitation Year shall not
exceed the Maximum Permissible Amount, reduced by the sum of any portion of
the Annual Addition credited to the Participant's account under such other
plans, welfare benefit funds, and individual medical accounts for the same
Limitation Year.
(b) If the Annual Addition with respect to a Participant under
other defined contribution plans, welfare benefit funds, individual medical
accounts and simplified employee pensions maintained by the Employer of what
would be portions of the Annual Addition (if the allocations were made under
the Plan) are less than the Maximum Permissible Amount and the Employer
Contribution that would otherwise be contributed or allocated to the
Participant's Account under this Plan would cause the Annual Addition for the
Limitation Year to exceed this limitation, the amount contributed or allocated
will be reduced so that the Annual Addition under all such plans and funds for
the Limitation Year will equal the Maximum Permissible Amount.
(c) If the Annual Addition with respect to the Participant under
such other defined contribution plans, welfare benefit funds, individual
medical accounts and simplified employee pensions in the aggregate are equal
to or greater than the Maximum Permissible Amount, no amount will be
contributed or allocated to the Participant's Account under this Plan for the
Limitation Year.
(d) Prior to determining the Participant's actual Compensation
for the Limitation Year, the Employer may determine the Maximum Permissible
Amount for a Participant in the manner described in Section 5.01(b)(i)
provided the Employer complies with the provisions of Section 5.01(b)(ii).
(e) If, pursuant to Section 5.02(d) or as a result of the
allocation of forfeitures, a Participant's Annual Addition under this Plan and
such Participant's annual additions under such other defined contributions
plans, welfare benefit funds, individual medical accounts and simplified
employee pensions would result in an Excess Amount for a Limitation Year, the
Excess Amount will be deemed to consist of the annual additions last
allocated, except that annual additions attributable to a simplified employee
pension will be deemed to have been allocated first, followed by annual
additions to a welfare benefit fund or individual medical account, regardless
of the actual allocation date.
(f) If an Excess Amount was allocated to a Participant under
this Plan on a date which coincides with the date an allocation was made under
another plan, the Excess Amount attributed to this Plan will be the product
of:
(i) the total Excess Amount allocated as of such date,
multiplied by (ii) the quotient obtained by dividing
(A) the portion of the Annual Addition allocated to
the Participant for the Limitation Year as of such date by
(B) the total Annual Addition allocated to the
Participant for the Limitation Year as of such date under this and all the
other qualified Master or Prototype defined contribution plans maintained by
the Employer.
(g) Any Excess Amount attributed to the Plan will be disposed in
the manner described in Section 5.01.
<PAGE>
5.03 Employers Maintaining Other Defined Contribution Plans. If a
Participant is covered under another qualified defined contribution plan which
is not a Master or Prototype plan, the Annual Addition credited to the
Participant's Account under this Plan for any Limitation Year will be limited
in accordance with the provisions of Section 5.02 above as though the plan
were a Master or Prototype Plan, unless the Employer provides other
limitations pursuant to the Adoption Agreement.
5.04 Employers Maintaining Defined Benefit Plans. If the Employer
maintains, or at any time maintained, a qualified defined benefit plan
covering any Participant in this Plan, the sum of the Participant's Defined
Benefit Plan Fraction and Defined Contribution Plan Fraction will not exceed
l.0 in any Limitation Year. The Annual Addition which may be credited to the
Participant's Account under this Plan for any Limitation Year will be limited
in accordance with the provisions of Section 5.02 above, unless the Employer
provides other limitations pursuant to the Adoption Agreement.
5.05 Definitions. For purposes of this Article, the following terms
shall be defined as follows:
(a) Annual Addition. With respect to any Participant, the
"Annual Addition" shall be the sum of the following amounts credited to a
Participant's Account for the Limitation Year:
(i) Employer Contributions;
(ii) forfeitures; and
(iii) Nondeductible Voluntary Contributions.
For the purposes of calculating the amount of Employer Contributions
credited to a Participant's Account, Excess Elective Deferrals distributed on
or before the April 15 deadline described in Section 6.01(b) below shall not
be considered to be amounts credited to the Participant's Account but Excess
Contributions distributed to the Participant pursuant to Section 6.02 below,
and Excess Aggregate Contributions distributed to, or forfeited by, the
Participant pursuant to Section 6.03, 6.04 or 6.05 below shall be considered
to be amounts credited to a Participant's Account.
Any Excess Amount applied under Section 5.01(c)(iii) or (iv) or Section
5.02(e) hereof in a Limitation Year to reduce Employer Contributions will be
considered part of the Annual Addition for such Limitation Year. 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 an annuity plan
maintained by the Employer, or to a simplified employee pension (as defined in
Code Section 408(k)) maintained by the Employer, are treated as part of the
Annual Addition. Also, 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 Section 23.02(a) hereof) under a
welfare benefit fund (as defined in Code Section 419(e)) maintained by the
Employer, are treated as part of the Annual Addition but only for the purpose
of determining whether the dollar limitation portion of the definition of
Maximum Permissible Amount has been exceeded.
(b) Compensation. For the purposes of this Article V, the term
"Compensation" shall mean one of the following as selected by the Employer in
the Adoption Agreement:
(i) W-2 Compensation. Information required to be reported
under Sections 6041, 6051 and 6052 of the Code (Wages, tips and other
compensation as reported on Form W-2). Compensation is defined as wages
within the meaning of Section 3401(a) and all other payments of compensation
to an Employee by the Employer (in the course of the Employer's trade or
business) for which the Employer is required to furnish the Employee a written
statement under Sections 6041(d), 6051(a)(3) and 6052. Compensation must be
determined without regard to any rules under Section 3401(a) that limit the
<PAGE>
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 Section 3401(a)(2)).
(ii) 415 Safe Harbor Compensation. Wages, salaries, and
fees for professional services and other amounts received for personal
services actually rendered in the course of employment with the Employer
maintaining the Plan (including, but not limited to commissions paid salesmen,
compensation for services on the basis of a percentage of profits, commissions
on insurance premiums, tips and bonuses), and excluding the following:
(A) Employer contributions to a plan of deferred
compensation which are not includible in the Participant's gross income for
the taxable year in which contributed, or Employer contributions under a
simplified employee pension plan, or any distributions from a plan of deferred
compensation;
(B) Amounts realized from the exercise of a
non-qualified stock option, or when property transferred to the Participant in
connection with the performance of services either becomes freely transferable
or is no longer subject to a substantial risk of forfeiture;
(C) Amounts realized from the sale, exchange or
other disposition of stock acquired under an incentive stock option; and
(D) Other amounts which received special tax
benefits, or contributions made by the Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity described in Code
Section 403(b) (whether or not the amounts are actually excludable from the
gross income of the Participant).
(iii) Safe Harbor Alternative Definition. Compensation as
defined in (ii) above, reduced by all of the following items (even if
includible in gross income): reimbursements or other expenses allowances,
fringe benefits (cash and non-cash) moving expenses, deferred compensation and
welfare benefits.
For any Self-Employed Individual, Compensation shall mean Earned Income.
For purposes of applying the limitations of this Article V, Compensation
for a Limitation Year is the Compensation actually paid or made available in
gross income during such year.
Notwithstanding the preceding sentence, Compensation for a Participant
in a defined contribution plan who is permanently and totally disabled (as
defined in Code Section 22(e)(3)) is the Compensation such Participant would
have received for the Limitation Year if the Participant was paid at the rate
of Compensation paid immediately before becoming permanently and totally
disabled; such imputed compensation for the disabled Participant may be taken
into account only if the Participant is not a Highly Compensated Employee, and
contributions made on behalf of such a Participant are nonforfeitable when
made.
(c) Defined Benefit Fraction. The "Defined Benefit Fraction"
shall be 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% of the dollar limitation in effect for the Limitation Year
under Code Section 415(b)(l)(A) or 140% of the Participant's Highest Average
Compensation (including any adjustments required by 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% of the sum of the annual benefits under such plans which the
Participant had accrued as of the end of the last Limitation Year beginning
before January 1, 1987 (disregarding any changes in the terms and conditions
<PAGE>
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.
(d) Defined Contribution Dollar Limitation. The "Defined
Contribution Dollar Limitation" shall be the greater of: (i) $30,000; or
(ii) one-fourth (1/4) of the defined benefit dollar limitation set forth in
Code Section 415(b)(i) as in effect for the Limitation Year.
(e) Defined Contribution Fraction. The "Defined Contribution
Fraction" shall be 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)), individual medical accounts (as defined in Code
Section 415(1)(2)) and simplified employee pensions (as defined in Code
Section 408(k)), 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% of the dollar limitation in effect under Code
Section 415(c)(l)(A) or 35% of the Participant's Compensation for such year.
If the Participant 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 Defined Contribution Fraction and the Defined Benefit Fraction would
otherwise exceed l.0 under the terms of this Plan. Under the adjustment, an
amount equal to the product of:
(i) the excess of the sum of the fractions over l.0,
multiplied by
(ii) the denominator of this Defined Contribution 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
(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). This adjustment also
will be made if at the end of the last Limitation Year beginning before
January 1, 1984, the sum of the fractions exceeds 1.0 because of accruals or
additions that were made before the limitations of this Section 5 became
effective to any plans of the Employer in existence on July 1, 1982. For
purposes of this paragraph, a Master or Prototype plan with an opinion letter
issued before January 1, 1983, which was adopted by the Employer on or before
September 30, 1983, is treated as a plan in existence on July 1, 1982.
(f) Employer. "Employer" means the Employer that adopts this
Plan and all members of (i) a controlled group of corporations (as defined in
Code Section 414(b) as modified by Code Section 415(h)), (ii) commonly
controlled trades or businesses (whether or not incorporated) (as defined in
Code Section 414(c) as modified by Code Section 415(h)), or (iii) affiliated
service groups (as defined in Code Section 414(m)) of which the Employer is a
part and (iv) any other entity required to be aggregated with the employer
pursuant to Code Section 414(o) and the regulations thereunder.
(g) Excess Amount. The "Excess Amount" is the excess of what
would otherwise be a Participant's Annual Addition for the Limitation Year
<PAGE>
over the Maximum Permissible Amount. If at the end of a Limitation Year when
the Maximum Permissible Amount is determined on the basis of the Participant's
actual Compensation for the year, an Excess Amount results, the Excess Amount
will be deemed to consist of the portion of the Annual Addition last
allocated, except that the portion of the Annual Addition attributable to a
welfare benefit fund will be deemed to have been allocated first regardless of
the actual allocation date.
(h) Highest Average Compensation. A Participant's "Highest
Average Compensation" is his or her average Compensation for the three
consecutive Years of Service with the Employer that produces the highest
average.
(i) Limitation Year. A "Limitation Year" is the Plan Year or
any other 12-consecutive-month period specified by the Employer in the
Adoption Agreement. All qualified plans maintained by the Employer must use
the same Limitation Year. If the Limitation Year is amended to a different
12-consecutive-month period, the new Limitation Year must begin on a date
within the Limitation Year in which the amendment is made.
(j) Master or Prototype Plan. A "Master or Prototype" plan is a
plan the form of which is the subject of a favorable opinion letter from the
Internal Revenue Service.
(k) Maximum Permissible Amount. For a Limitation Year, the
"Maximum Permissible Amount" with respect to any Participant shall be the
lesser of
(i) the Defined Contribution Dollar Limitation or
(ii) 25% of the Participant's Compensation for the
Limitation Year.
The compensation limitation referred to in (ii) above shall not apply to
contribution for medical benefits (within the meaning of Code Section 401(h)
or Section 419A(f)(2)) which is otherwise treated as an Annual Addition under
Code Section 415(l)(1) or 419A(d)(2).
(l) Projected Annual Benefit. The "Projected Annual Benefit" is
the annual retirement benefit (adjusted to an actuarial equivalent straight
life annuity if such benefit is expressed in a form other than a straight life
annuity or qualified joint and survivor annuity) to which the Participant
would be entitled under the terms of the plan assuming:
(i) the Participant will continue employment until normal
retirement date under the plan (or current age, if later), and
(ii) the Participant's compensation for the current
Limitation Year and all other relevant factors used to determine benefits
under the plan will remain constant for all future Limitation Years.
ARTICLE VI. LIMITATIONS ON DEFERRALS,
MATCHING ALLOCATIONS AND VOLUNTARY CONTRIBUTIONS.
6.01 Maximum Amount of Elective Deferrals. For each calendar year, the
sum of (i) the Salary Reduction Contributions, (ii) Deferred Cash
Contributions (together "Elective Deferrals") made on behalf of any
Participant under this Plan, and (iii) similar contributions made under all
other plans of the Employer with a cash or deferred feature shall not exceed
the dollar limitation contained in Code Section 402(g) in effect at the
beginning of such calendar year. Elective Deferrals shall not include amounts
properly distributed to a Participant as an Excess Amount pursuant to
Section 6.01(b). If, during any calendar year, more than the maximum
permissible amount under Code Section 402(g) is allocated pursuant to one or
more cash or deferred arrangements to a Participant's accounts under the Plan
and any other plan described in Code Sections 401(k), 408(k), 403(b), 457, or
501(c)(18), the following provisions shall apply:
<PAGE>
(a) The Participant may, but is not required to, assign to this
Plan all or part of such contributions in excess of the maximum permissible
amount (hereinafter "Excess Elective Deferrals") by notifying the
Administrator by March 1 of the calendar year next succeeding the calendar
year in which such contributions are made. To be effective, such notice must
be in writing, state that Excess Elective Deferrals have been made on behalf
of such Participant for the preceding calendar year, and be submitted to the
Administrator. A Participant is deemed to notify the Administrator of any
Excess Elective Deferrals that arise by taking into account only those Excess
Elective Deferrals made to this Plan and any other plans of this Employer.
(b) To the extent a Participant timely assigns, or is deemed to
assign, Excess Elective Deferrals to the Plan pursuant to (a) above, the
Administrator shall direct the Trustee to distribute such Excess Elective
Deferrals, adjusted for income or loss allocable thereto pursuant to
Section 6.01(c) below, to the Participant no later than the April 15 of the
calendar year next succeeding the calendar year in which such Excess Elective
Deferrals were made.
(c) Excess Elective Deferrals shall be adjusted for any income
or loss up to the last day of the calendar year in which such Excess Elective
Deferrals were made. The income or loss allocable to Excess Elective
Deferrals is (i) the income or loss allocable to the Participant's Salary
Reduction Contribution Account and/or Deferred Cash Contribution Account, as
the case may be, for the taxable calendar year multiplied by a fraction, the
numerator of which is such Participant's Excess Elective Deferrals for the
year and the denominator is the balance of such account or accounts, as the
case may be, determined as the beginning of the calendar year plus any Salary
Reduction Contributions or Deferred Cash Contributions made during the
calendar year without regard to any income or loss occurring during such
calendar year or (ii) such other amount determined under any reasonable
method, provided that such method is used consistently for all Participants in
calculating the distributions required under this Article VI for the Plan
Year, and is used by the Plan to allocate income or loss to Participants'
Accounts. Income or loss allocable to the period between the end of the
calendar year and the date of distribution shall be disregarded in determining
income or loss. Excess Elective Deferrals shall be treated as an Annual
Addition under the Plan, unless such amounts are distributed no later than the
first April 15 following the close of the calendar year.
6.02 Limitation on Elective Deferrals.
(a) For each Plan Year, the Average Deferral Percentage of the
group of Highly Compensated Participants for the Plan Year may not exceed the
greater of (i) 1.25 times the Average Deferral Percentage of the group of
Non-Highly Compensated Participants for the same Plan Year; or (ii) the lesser
of 2 times the Average Deferral Percentage of all such Non-Highly Compensated
Participants, or such Average Deferral Percentage plus 2 percentage points.
For purposes of this Section 6.02, the "Average Deferral Percentage" of
a specified group of Participants for a Plan Year shall be the average of the
ratios (calculated separately for each Participant in such group) of (A) the
amount of the Contributions actually paid over to the Trust on behalf of each
Participant for each Plan Year to (B) the Participant's Compensation for the
Plan Year. For purposes of this Section 6.02, "Compensation" shall have the
same meaning as in Section 2.09(a); provided, however, that to the extent
elected by the Employer in the Adoption Agreement "Compensation" shall exclude
amounts paid for the period when the Participant was not eligible to make
Elective Deferrals and/or shall include the amounts set forth in Section
2.09(b). For purposes of this Section 6.02, "Contributions" shall include
both Elective Deferrals (including Excess Elective Deferrals of Highly
Compensated Participants) and Qualified Nonelective Contributions, if any.
<PAGE>
Such Contributions shall not include (1) Excess Elective Deferrals of
Non-Highly Compensated Participants that arise solely from Elective Deferrals
made under this Plan or other plans of the Employer, and (2) Elective
Deferrals that are taken into account in the Contribution Percentage Test
(provided the Average Deferral Percentage test is satisfied both with and
without exclusion of these Elective Deferrals). For purposes of computing
Average Deferral Percentages, each Employee who would be a Participant but for
the failure to make Elective Deferrals shall be treated as a Participant on
whose behalf no Elective Deferrals are made.
(b) Special Rules:
(i) The deferral percentage of a Highly Compensated
Participant for the Plan Year who is eligible to have Elective Deferrals
allocated to his or her accounts under two or more arrangements described in
Code Section 401(k), that are maintained by the Employer, shall be determined
as if such Elective Deferrals were made under a single arrangement. If a
Highly Compensated Participant participates in two or more cash or deferred
arrangements that have different Plan Years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a single
arrangement. Notwithstanding the foregoing, certain plans shall be treated as
separate if mandatorily disaggregated under regulations promulgated under Code
Section 401(k).
(ii) In the event that this Plan satisfies the requirements
of Code Section 401(k), 401(a)(4), or 410(b) only if aggregated with one or
more other plans, or if one or more other plans satisfy the requirements of
such Code sections only if aggregated with this Plan, then this Section 6.02
shall be applied by determining the Average Deferral Percentages of Employees
as if all such plans were a single plan. For Plan Years beginning after
December 31, 1989, plans may be aggregated in order to satisfy Code
Section 401(k) only if they have the same Plan Year.
(iii) For purposes of determining the deferral percentage of
a Participant who is a 5% owner or one of the top ten Highly Compensated
Employees, the Elective Deferrals (and, if applicable, Qualified Nonelective
Contributions) and Compensation of such Participant shall include the Elective
Deferrals (and, if applicable, Qualified Nonelective Contributions) and
Compensation for the Plan Year of his Family Members. Such Family Members
shall be disregarded as separate Participants in determining the Average
Deferral Percentage both for Non-Highly Compensated Participants and for
Highly Compensated Participants.
(iv) For purposes of applying the Average Deferral
Percentage test, Elective Deferrals and Qualified Nonelective Contributions
must be made before the last day of the 12-month period immediately following
the Plan Year to which contributions relate.
(v) The Employer shall maintain records sufficient to
demonstrate satisfaction of the Average Deferral Percentage test and the
amount of Qualified Nonelective Contributions, if any, used in such test.
(vi) The determination and treatment of the deferral
percentage of any Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(vii) If, in any Plan Year, the Plan benefits Employees
otherwise excludable from the Plan if the Plan had imposed the greatest
minimum age and service conditions permissible under Section 410(a) of the
Code, and the Employer applies Section 410(b) of the Code separately to the
portion of the Plan that benefits only Employees who satisfy age and service
conditions under the Plan that are lower than the greatest minimum age and
service conditions permissible under Section 410(a) and to the portion of the
Plan that benefits Employees who have satisfied the greatest minimum age and
service conditions permissible under Section 410(a), the Plan shall be treated
<PAGE>
as comprising two separate Plans and the Average Deferral Percentage test set
forth in subsection (a) shall be applied separately for each group of
Employees in each Plan.
(c) If, for any Plan Year, the Plan is unable to satisfy the
Average Deferral Percentage test set forth in subsection (a) above, the
Employer may make a Qualified Nonelective Contribution to the Trust in an
amount determined at the discretion of the Employer on behalf of the group of
Non-Highly Compensated Participants who were actively employed on the last day
of the Plan Year and who were eligible to participate in the Plan for the
entire Plan Year. The Qualified Nonelective Contribution will be allocated as
follows:
(i) The lowest paid Participant in the group will be
allocated an amount equal to the lowest of (1) 25% of the Participant's
Compensation for the Plan Year; (2) the Maximum Permissible Amount applicable
to the Participant; or (3) the full amount of the Qualified Nonelective
Contribution.
(ii) The next lowest paid Participant will be allocated an
amount equal to the lowest of (1) 25% of the Participant's Compensation for
the Plan Year; (2) the Maximum Permissible Amount applicable to the
Participant; or (3) the balance of the Qualified Nonelective Contribution
after the above allocation.
(iii) The allocation in step (ii) will be applied
individually to each remaining Participant in the group, in ascending order of
Compensation, until the Qualified Nonelective Contribution is fully allocated.
Once the Qualified Nonelective Contribution is fully allocated, no further
allocation will be made to the remaining Participants in the group.
(d) If, for any Plan Year, after taking into account the
Qualified Nonelective Contributions made by the Employer pursuant to
Subsection (c) above, if any, the Administrator shall determine the aggregate
amount of Elective Deferrals of Highly Compensated Participants for such Plan
Year exceeds the maximum amount of such contributions permitted by the Average
Deferral Percentage test set forth in subsection (a) above, the Administrator
shall reduce such excess contributions made on behalf of Highly Compensated
Participants in order of their deferral percentages, beginning with the
highest of such percentages (hereinafter "Excess Contributions"). For each
Highly Compensated Participant who is so affected, the Administrator shall
reduce amounts credited to his or her Salary Reduction Contribution Account
and Deferred Cash Contribution Account in proportion to the Participant's
Salary Reduction Contributions and Deferred Cash Contributions for the Plan
Year. Excess Contributions of each Participant who is subjected to the Family
Member aggregation rules shall be allocated among the Family Members of such
Participant in proportion to the Elective Deferrals (and amounts treated as
Elective Deferrals) of each Family Member that is combined to determine the
combined deferral percentage. Such Excess Contributions, plus any income and
minus any loss allocable thereto, shall be distributed to each affected Highly
Compensated Participant no later than the last day of the Plan Year following
the Plan Year in which such Excess Contributions were made. If Excess
Contributions are not distributed before the date which is 2-1/2 months after
the last day of the Plan Year in which such Excess Contributions arose, a 10%
excise tax shall be imposed on the Employer maintaining the Plan with respect
to such amounts. Excess Contributions shall be treated as an Annual Addition
under the Plan.
(e) Excess Contributions shall be adjusted for any income or
loss up to and including the last day of the Plan Year for which such Excess
Contributions were made. The income or loss allocable to Excess Contributions
is (i) the income or loss allocable to the Participant's Salary Reduction
Contribution Account and/or Deferred Cash Contribution Account, as the case
<PAGE>
may be, for the Plan Year multiplied by a fraction, the numerator of which is
such Participant's Excess Contributions for the year and the denominator is
the balance of such Account or Accounts, as the case may be, determined as of
the beginning of the Plan Year plus any Salary Reduction Contributions and/or
Deferred Cash Contributions made during the Plan Year without regard to any
income or loss occurring during such Plan Year, or (ii) such other amount
determined under any reasonable method, provided that such method is used
consistently for all Participants in calculating any distributions required
under this Article VI for the Plan Year and is used by the Plan in allocating
income or loss to Participants' Accounts. Income or loss allocable to the
period between the end of the Plan Year and the date of distribution shall be
disregarded.
6.03 Limitation on Voluntary Nondeductible Contributions and Employer
Matching Contributions.
(a) For each Plan Year, the Average Contribution Percentage of
the group of Highly Compensated Participants for the Plan Year may not exceed
the greater of (i) 1.25 times the Average Contribution Percentage of the group
of Non-Highly Compensated Participants for the same Plan Year, or (ii) the
lesser of 2 times the Average Contribution Percentage of all such Non-Highly
Compensated Participants, or such Average Contribution Percentage plus 2
percentage points.
For purposes of this Section 6.03, the "Average Contribution Percentage"
of a specified group of Participants for a Plan year shall be the average of
the ratios (expressed as a percentage and calculated separately for each
Participant in such group) of (A) the Contribution Percentage Amounts actually
paid over to the Trust on behalf of each Participant to (B) the Participant's
Compensation for the Plan Year. For purposes of this Section 6.03,
"Compensation" shall have the same meaning as in Section 2.09; provided,
however, that to the extent elected by the Employer in the Adoption Agreement,
"Compensation" shall exclude amounts paid for the period when the Participant
was not eligible to participate in the Plan with respect to the allocation of
Employer Matching Contributions or with respect to the making of Voluntary
Nondeductible Contributions and/or shall include the amounts set forth in
Section 2.09(b). For purposes of this Section 6.03, "Contribution Percentage
Amounts" shall be the sum of Voluntary Nondeductible Contributions and
Employer Matching Contributions. Such Contribution Percentage Amounts shall
not include Employer Matching Contributions that are forfeited either to
correct Excess Aggregate Contributions or because the contributions to which
they related are Excess Deferrals, Excess Contributions, or Excess Aggregate
Contributions. In determining the Contribution Percentage Amounts, the
Administrator may include Qualified Nonelective Contributions that are not
used in satisfying the Average Deferral Percentage test of Section 6.02 and
Qualified Matching Contributions. The Administrator also may elect to use
Elective Deferrals in the Contribution Percentage Amounts so long as the
Average Deferral Percentage test is met before the Elective Deferrals are used
in the Average Contribution Percentage test and continues to be met following
the exclusion of those Elective Deferrals that are used to meet the Average
Contribution Percentage test. For purposes of computing Average Contribution
Percentages, each Employee who is eligible to make Voluntary Nondeductible
Contributions or Elective Deferrals or to receive an Employer Matching
Contribution shall be taken into account as a Participant, whether or not he
is actually making, or entitled to receive, such contributions to the Trust.
(b) Special Rules:
(i) For purposes of this Section 6.03, the contribution
percentage of a Highly Compensated Participant for the Plan Year who is
eligible to have Contribution Percentage Amounts allocated to his or her
accounts under two or more plans described in Code Section 401(a), or
<PAGE>
arrangements described in Code Section 401(m) that are maintained by the
Employer, shall be determined as if the total of such Contribution Percentage
Amounts was made under each plan. Notwithstanding the foregoing, certain
plans shall be treated as separate if mandatorily disaggregated under
regulations under Code Section 401(m).
(ii) In the event that this Plan satisfies the requirements
of Code Section 401(m), 401(a)(4) or 410(b) only if aggregated with one or
more other plans, or if one or more other plans satisfy the requirements of
such sections of the Code only if aggregated with this Plan, then this Section
6.03 shall be applied by determining the Contribution Percentage of
Participants as if all such plans were a single plan. For Plan Years
beginning after December 31, 1989, plans may be aggregated in order to satisfy
Code Section 401(m) only if they have the same Plan Year.
(iii) For purposes of determining the Contribution
Percentage of a Participant who is a 5% owner or one of the top-ten Highly
Compensated Employees, the Contribution Percentage Amounts and Compensation of
such Participant shall include the Contribution Percentage Amounts and
Compensation for the Plan Year of his Family Members. Such Family Members
shall be disregarded as separate Employees in determining the Average
Contribution Percentage both for Non-Highly Compensated Participants and for
Highly Compensated Participants.
(iv) For purposes of applying the Average Contribution
Percentage test, Voluntary Nondeductible Contributions are considered to have
been made in the Plan Year in which contributed to the Trust. Employer
Matching Contributions, Elective Deferrals, Qualified Matching Contributions
and Qualified Nonelective Contributions will be considered made for a Plan
Year if made no later than the end of the 12-month period immediately
following the Plan Year to which such Contributions relate.
(v) The Employer shall maintain records sufficient to
demonstrate satisfaction of the Average Contribution Percentage test and the
amount of Qualified Matching Contributions and Qualified Nonelective
Contributions, if any, used in such test.
(vi) The determination and treatment of the contribution
percentage of any Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(vii) If, in any Plan Year, the Plan benefits Employees
otherwise excludable from the Plan if the Plan had imposed the greatest
minimum age and service conditions permissible under Section 410(a) of the
Code, and the Employer applies Section 410(b) of the Code separately to the
portion of the Plan that benefits only Employees who satisfy age and service
conditions under the Plan that are lower than the greatest minimum age and
service conditions permissible under Section 410(a) and to the portion of the
Plan that benefits Employees who have satisfied the greatest minimum age and
service conditions permissible under Section 410(a), the Plan shall be treated
as comprising two separate Plans and the Average Contribution Percentage test
set forth in subsection (a) shall be applied separately for each group of
Employees in each Plan.
(c) If, for any Plan Year, the Plan is unable to satisfy the
Average Contribution Percentage test set forth in subsection (a) above, in
lieu of distributing excess Contribution Percentage Amounts to Highly
Compensated Participants as provided in subsection (d) below, the Employer may
make a Qualified Matching Contribution to the Trust on behalf of Non-Highly
Compensated Participants in an amount sufficient to enable the Plan to meet
the Average Contribution Percentage test set forth in subsection (a) above.
Such Qualified Matching Contribution shall be allocated to the Qualified
Nonelective Contribution Account of each Non-Highly Compensated Participant
<PAGE>
who is eligible to participate in the Plan at any time during the Plan Year in
the same manner as the allocation of Employer Matching Contributions.
(d) If, for any Plan Year, the Administrator shall determine
that the aggregate Contribution Percentage Amounts of Highly Compensated
Participants for such Plan Year exceeds the maximum amount permitted by the
Average Contribution Percentage test in subsection (a) above, the
Administrator shall reduce such excess Contribution Percentage Amounts made on
behalf of Highly Compensated Participants in order of their contribution
percentages, beginning with the highest of such percentages (hereinafter
"Excess Aggregate Contributions"). The foregoing determination shall be made
after first determining Excess Elective Deferrals pursuant to Section 6.01,
and then determining Excess Contributions pursuant to Section 6.02. For each
Highly Compensated Participant who is affected, the Administrator shall
reduce, on a pro rata basis, amounts credited to his or her Voluntary
Nondeductible Contribution Account and his or her Employer Matching
Contribution Account. Excess Aggregate Contributions of each Highly
Compensated Participant who is subject to the Family Member aggregation rules
shall be allocated among the Family Members in proportion to the Voluntary
Nondeductible Contributions and Employer Matching Contributions (and amounts
treated as Contribution Percentage Amounts) of each Family Member that is
combined to determine the combined contribution percentage. Subject to the
provisions of Section 6.05, Excess Aggregate Contributions which are
attributable to the sum of Voluntary Nondeductible Contributions and fully
vested Employer Matching Contributions plus any income and minus any loss
allocable thereto, shall be distributed to each affected Highly Compensated
Participant no later than the last day of the Plan Year following the Plan
Year in which such Excess Aggregate Contributions were made. If such Excess
Aggregate Contributions are not distributed within 2-1/2 months after the last
day of the Plan Year in which such Excess Aggregate Contributions arose, a 10%
excise tax shall be imposed on the Employer maintaining the Plan with respect
to those amounts. Excess Aggregate Contributions which are attributable to
Employer Matching Contributions which are not fully vested, plus any income
and minus any loss allocable thereto, shall be forfeited and shall be applied
to reduce future Employer Matching Contributions. Excess Aggregate
Contributions shall be treated as an Annual Addition under the Plan.
(e) Excess Aggregate Contributions shall be adjusted for any
income or loss up to and including the last day of the Plan Year for which
such Excess Aggregate Contributions were made. The income or loss allocable
to Excess Aggregate Contributions is (i) the income or loss allocable to the
Participant's Voluntary Nondeductible Contribution Account and/or Employer
Matching Contribution Account, as the case may be, for the Plan Year
multiplied by a fraction, the numerator of which is such Participant's Excess
Aggregate Contributions for the year and the denominator is the balance of
such Account or Accounts, as the case may be, determined as of the beginning
of the Plan Year plus any Voluntary Nondeductible Contributions and/or
Employer Matching Contributions made during the Plan without regard to any
income or loss occurring during such Plan Year, or (ii) such other amount
determined under any reasonable method, provided that such method is used
consistently for all Participants in calculating any distributions required
under this Article VI for the Plan Year and is used by the Plan in allocating
income or loss to Participants' Accounts. Income or loss allocable to the
period between the end of the Plan Year and the date of distribution shall be
disregarded.
6.04 Multiple Use Test. If one or more Highly Compensated Participants
participate in both a cash or deferred arrangement and a plan subject to the
Average Contribution Percentage test maintained by the Employer and the sum of
the Average Deferral Percentage and Average Contribution Percentage of those
<PAGE>
Highly Compensated Participants subject to either or both tests exceeds the
Aggregate Limit, then unless the Employer elects to make a Qualified
Nonelective Contribution or a Qualified Matching Contribution to the Trust to
the extent necessary to enable the Plan to satisfy the Aggregate Limit, the
Contribution Percentage Amounts of those Highly Compensated Participants who
also participate in a cash or deferred arrangement will be reduced (beginning
with such Highly Compensated Participant whose contribution percentage is the
highest) so that the Aggregate Limit is not exceeded. The amount by which
each Highly Compensated Participant's Contribution Percentage Amount is
reduced shall be treated as an Excess Aggregate Contribution. The Average
Deferral Percentage and Average Contribution Percentage of the Highly
Compensated Participants are determined after any corrections required to meet
the Average Deferral Percentage and Average Contribution Percentage tests in
Sections 6.02 and 6.03. Multiple use does not occur if both the Average
Deferral Percentage and Average Contribution Percentage of the Highly
Compensated Employees do not exceed 1.25 multiplied by the Average Deferral
Percentage and Average Contribution Percentage of the Non-Highly Compensated
Employees.
For purposes of this Section 6.04, the "Aggregate Limit" shall mean the
sum of (i) 125 percent of the greater of the Average Deferral Percentage of
the Non-Highly Compensated Participants for the Plan Year or the Average
Contribution Percentage of the Non-Highly Compensated Participants under the
Plan subject to Code Section 401(m) for the Plan Year beginning with or within
the Plan Year of the cash or deferred arrangement and (ii) the lesser of 200%
of, or two percentage points plus the lesser of such Average Deferral
Percentage or Average Contribution Percentage. "Lesser" shall be substituted
for "greater" in (i) and "greater" shall be substituted for "lesser" after
"two percentage points plus the" in (ii) if such substitution would result in
a larger Aggregate Limit.
6.05 Further Limitations on Employer Matching Contributions.
Notwithstanding anything to the contrary in the foregoing, any Employer
Matching Contributions related to a Participant's Excess Deferrals, Excess
Contributions and/or Excess Aggregate Contributions shall be forfeited by such
Participant and such amounts shall be applied to reduce future Employer
Matching Contributions.
6.06 Special Rules. Any amount distributed to a Highly Compensated
Participant pursuant to this Article VI shall not be subject to any of the
consent rules for Participants and sponsors contained in Articles IX, X and
XXIV, below. Amounts distributed pursuant to this Article VI shall be
allocated on a pro rata basis among the Designated Investments in which a
Participant's Account is invested; provided, however, that the Administrator
or the Participant may specify an alternative manner in which distributions
shall be allocated.
ARTICLE VII. TIME AND MANNER OF MAKING CONTRIBUTIONS
7.01 Manner. Unless otherwise agreed to by the Trustee, contributions
to said Trustee shall be made only in cash. All contributions may be made in
one or more installments.
7.02 Time. Employer Contributions (other than Salary Reduction
Contributions and Deferred Cash Contributions) with respect to a Plan Year
shall be made before the time limit, including extensions thereof, for filing
the Employer's federal income tax return for the Year with or within which the
particular Plan Year ends (or such later time as is permitted by regulations
authorized by the Secretary of the Treasury or delegate or such earlier time
as the Secretary of the Treasury or delegate prescribes with respect to
contributions used to satisfy the nondiscrimination tests set forth in
Article VI above). Unless the Secretary of the Treasury prescribes a later
date in regulations, Salary Reduction and Deferred Cash Contributions shall be
<PAGE>
made within 30 days after the date on which, in the absence of the
Participant's election to make such contributions, such amounts would have
been payable to the Participant as cash compensation. Nondeductible Voluntary
Contributions for a given Limitation Year (as defined in Section 5.05(i)
above) must be made during such Limitation Year or within 30 days of the end
of the Limitation Year. Rollover Contributions may be made at any time
acceptable to the Administrator in accordance with Section 4.06 hereof.
All contributions shall be paid to the Administrator for transfer to the
Trustee, as soon as possible, or, if acceptable to the Administrator and the
Trustee, such contributions may be paid directly to the Trustee. The
Administrator shall transfer such contributions to the Trustee as soon as
possible. The Administrator may establish a payroll deduction system or other
procedure to assist the making of Nondeductible Voluntary Contributions to the
Trust, and the Administrator may from time to time adopt rules or policies
governing the manner in which such contributions may be made so that the Plan
may be conveniently administered.
7.03 Separate Accounts. For each Participant, a separate account shall
be maintained for each of the following types of contributions and the income,
expenses, gains and losses attributable thereto:
(a) Salary Reduction Contributions, if selected in the Adoption
Agreement;
(b) Deferred Cash Contributions, if selected in the Adoption
Agreement;
(c) Employer Profit Sharing Contributions, if selected in the
Adoption Agreement;
(d) Employer Matching Contributions, if selected in the Adoption
Agreement;
(e) Nondeductible Voluntary Contributions, if selected in the
Adoption Agreement, with separate accounts maintained for pre-1987
Nondeductible Voluntary Contributions and post-1986 Nondeductible Voluntary
Contributions;
(f) Qualified Nonelective Contributions and Qualified Matching
Contributions, if selected in the Adoption Agreement;
(g) Deductible Voluntary Contributions, if Participants made
such contributions in past years; and
(h) Rollover Contributions, if, pursuant to Section 4.06 hereof,
the Administrator directs the Trustee to accept such contributions.
In addition, pursuant to Section 8.03 hereof, separate accounts will be
maintained for the pre-break and post-break Employer Contributions made on
behalf of a Participant who has Service excluded from the calculations of
Vesting Years. Notwithstanding the above, if a Participant's rights to one or
more types of Employer Contributions are immediately and fully nonforfeitable
and are subject to the same distribution rules, such types of contributions
may be maintained in a single account.
ARTICLE VIII. VESTING
8.01 When Vested. A Participant shall always have a fully vested and
nonforfeitable interest in his or her Nondeductible Voluntary Contribution
Account, Deductible Voluntary Contribution Account, Salary Reduction
Contribution Account, Deferred Cash Contribution Account, Qualified
Nonelective Contribution Account and Rollover Account. A Participant's
interest in his or her Employer Profit Sharing Contribution Account and
Employer Matching Contribution Account shall be vested and nonforfeitable at
Normal Retirement Date, death while in Service, Disability, upon termination
(including a complete discontinuance of Employer Contributions) or partial
termination of the Plan and otherwise only to the extent specified in the
Adoption Agreement.
<PAGE>
8.02 Employer Profit Sharing Contribution and Employer Matching
Contribution Forfeitures. If a Participant's employment with the Employer is
terminated before his or her Employer Profit Sharing Contribution Account
and/or Employer Matching Contribution Account is (are) fully vested in
accordance with Section 8.01, this Section 8.02 shall apply.
(a) The portion of the Participant's Employer Profit Sharing
Contribution Account and/or Employer Matching Contribution Account which is to
be forfeited pursuant to subsection (b) below shall be treated as follows:
(i) if the Employer has not specified otherwise in the
Adoption Agreement, the forfeiture shall be allocated as if it were an
Employer Profit Sharing Contribution or Employer Matching Contribution, as the
case may be, for the Plan Year following the Plan Year in which such
forfeiture occurs, or
(ii) if the Employer so specifies in the Adoption
Agreement, the forfeiture(s) shall be applied to reduce the Employer's
obligation to make Employer Matching Contributions for the Plan Year following
the Plan Year in which the forfeiture occurs, provided that if the amount of
the forfeiture to be reallocated exceeds the Employer's then unsatisfied
obligation to make Employer Matching Contributions for the Plan Year, the
forfeiture shall be applied to reduce the Employer's obligation to make fixed
Employer Profit Sharing Contributions for the Plan Year following the Plan
Year in which the forfeiture occurs. If the Plan does not provide for fixed
Employer Profit Sharing Contributions, or the amount of forfeiture to be
reallocated exceeds the Employer's then unsatisfied obligation to make fixed
Employer Profit Sharing Contributions, the forfeiture shall be reallocated as
if it were an additional discretionary Employer Profit Sharing Contribution
made for the Plan Year following the Plan Year in which the forfeiture occurs.
(b) If the Participant elects to receive a distribution of the
value of his vested account balances in his or her Employer Profit Sharing
Contribution and Employer Matching Contribution Accounts in a lump sum
pursuant to the provisions of Section 10.02(a)(ii) or receives a nonconsensual
distribution pursuant to Section 10.04, the nonvested portion of his or her
Employer Profit Sharing Contribution and Employer Matching Contribution
Accounts shall be treated as a forfeiture and reallocated pursuant to the
provisions of Section 8.02(a). For this purpose, if the value of a
Participant's vested account balance in his or her Employer Profit Sharing
Contribution and Employer Matching Contribution Accounts is zero, the
Participant shall be deemed to have received a distribution of such vested
account balance. A Participant's vested account balance shall not include
accumulated deductible employee contributions within the meaning of Code
Section 72(o)(5)(B) for Plan Years beginning prior to January 1, 1989.
In all other cases, the nonvested portion of a Participant's Employer
Profit Sharing Contribution and Employer Matching Contribution Accounts shall
be treated as a forfeiture and reallocated pursuant to the provisions of
Section 8.02(a) when such Participant incurs five consecutive One-Year Breaks
in Service.
(c) No forfeitures shall occur solely as a result of withdrawal
of Deductible Voluntary Contributions, Nondeductible Voluntary Contributions,
or Rollover Contributions.
8.03 Reemployment
(a) If a former Participant who was not fully vested in his or
her Employer Profit Sharing Contribution and/or Employer Matching Contribution
Accounts at termination of employment is reemployed after incurring five
consecutive One-Year Breaks in Service, he or she shall have no right to any
forfeited account balance. Any undistributed vested portion of his or her
Employer Profit Sharing Contribution Account shall be held in a separate
vested Employer Profit Sharing Contribution Account, and future Employer
<PAGE>
Profit Sharing Contributions on his or her behalf shall be credited to a new
Employer Profit Sharing Contribution Account until such Participant becomes
fully vested in such Account where upon such Participant's old and new
Employer Profit Sharing Contribution Accounts shall be merged. Any
undistributed vested portion of his or her Employer Matching Contribution
Account shall be held in a separate vested Employer Matching Contribution
Account, and future Employer Matching Contributions on his or her behalf shall
be credited to a new Employer Matching Contribution Account until such
Participant becomes fully vested in such Account whereupon such Participant's
old and new Employer Matching Contribution Accounts shall be merged.
(b) The following provisions shall apply with respect to a
former Participant who was not fully vested in his or her Employer Profit
Sharing Contribution and/or Employer Matching Contribution Accounts at
termination of employment, and who is reemployed before he or she incurs five
consecutive One-Year Breaks in Service:
(i) If no amounts have been forfeited from his or her
Employer Profit Sharing Contribution Account and/or Employer Matching
Contribution Account, the amounts remaining in his or her Employer Profit
Sharing Contribution Account and/or Employer Matching Contribution Account
shall be restored to his or her credit.
(ii) If the nonvested portion of the Participant's Employer
Profit Sharing Contribution Account and/or Employer Matching Contribution
Account has been forfeited, and the Participant has previously received the
vested portions of his or her Employer Profit Sharing Contribution Account
and/or Employer Matching Contribution Account, he or she shall have the right
to repay to the Plan the full amount of such prior distribution. Such
repayment must be made on or before the earlier of five years after the first
date on which the Participant is subsequently reemployed by the Employer, or
the close of the first period of five consecutive One-Year Breaks in Service
following the date of distribution. Upon such repayment, the amount of any
such repayment plus the value of the forfeited portion of such Accounts as of
the date of forfeiture shall be credited to such Accounts.
(iii) If the Participant is deemed to have received a
distribution from his Employer Profit Sharing Contribution Account and/or
Employer Matching Contribution Account pursuant to Section 8.02(b), and his
entire Employer Profit Sharing Contribution Account and/or Employer Matching
Contribution Account has been forfeited, upon the reemployment of such
Participant, the value of his Employer Profit Sharing Contribution Account
and/or Employer Matching Contribution Account as of the date of the forfeiture
shall be restored to his credit within a reasonable time after his or her
reemployment.
(iv) Restoration of the previously forfeited amount shall
be funded by current unallocated forfeitures, additional Employer
contributions, or any combination thereof at the Employer's discretion. Such
restoration shall not be treated as an Annual Addition under Article V.
(v) Any Employer Profit Sharing Contributions to which
such Participant becomes entitled after reemployment shall be credited to his
or her Employer Profit Sharing Contribution Account. Any Employer Matching
Contributions to which such Participant becomes entitled after reemployment
shall be credited to his or her Employer Matching Contribution Account. The
portion of such Accounts to which he or she will be entitled upon subsequent
termination of employment will be based upon his or her aggregate Vesting
Years before and after the break.
<PAGE>
ARTICLE IX. DISTRIBUTIONS UPON DEATH
9.01 Distributions at Death. If a Participant dies at a time when he
or she has a vested Account balance, this Section shall apply with respect to
such vested Account balance.
(a) The Trustee shall, at the direction of the Administrator,
distribute a Participant's vested Account balance in accordance with the
provisions of this Article IX. The Administrator's direction shall include
notification of the Participant's death, the existence or non-existence of a
surviving spouse; the amounts, or method of calculating the amounts, to be
distributed on given dates; and such other information required by the
Trustee.
(b) If the Participant has validly named a Beneficiary or
Beneficiaries in compliance with Article XVII, his or her vested Account
balance shall be distributed to the Beneficiary or Beneficiaries so named. To
the extent that any portion of a vested Account balance of a deceased
Participant is not governed by an effective Designation of Beneficiary, that
portion of the vested Account balance shall be distributed to the deceased
Participant's Spouse or if that is not possible, to the estate of the deceased
Participant.
(c) If the Participant has validly elected a form of
distribution permitted under Section 10.02 which complies with the applicable
provisions of subsection (d) below (a "permissible form of distribution") with
respect to his or her vested Account balance, such vested Account balance
shall be distributed in accordance with such election whether or not
distributions have commenced prior to the Participant's death. With respect
to any portion of a deceased Participant's vested Account balance for which
the Participant had not validly elected a permissible form of distribution
prior to his or her death, distribution shall be made in such permissible form
as the Participant's Beneficiary (or Beneficiaries) may elect in writing with
the Trustee. In the absence of such a valid election by the Beneficiary, the
Participant's vested Account balance shall be distributed as follows:
(i) if distributions have commenced prior to the
Participant's death, in the form selected by the Participant,
(ii) if distributions have not commenced prior to the
Participant's death, and if the Beneficiary is the Spouse, in substantially
equal installment payments over the Spouse's Applicable Life Expectancy, or,
if the Beneficiary is not the Spouse, in a lump sum.
(d) Distribution to the Participant's Beneficiary shall be made
according to the following provisions:
(i) If the Participant dies before distributions have
commenced on account of the Participant's attainment of his or her First
Required Distribution Year and if the Beneficiary is not the Spouse, the
Participant's entire vested Account balance must be distributed to the
Participant's Beneficiary either (A) on or before December 31 of the calendar
year during which occurs the fifth anniversary of the Participant's death, or
(B) in substantially equal annual or more frequent installments over a period
not exceeding the Applicable Life Expectancy of the oldest Beneficiary (as
determined as of the date of the Participant's death) provided that such
distributions commence before the second January 1 which follows the
Participant's death.
(ii) If the Participant dies before distributions have
commenced on account of the Participant's attainment of his or her First
Required Distribution Year and if the Beneficiary is the Spouse, the
Participant's entire vested Account balance must be distributed to the
Participant's Spouse either (A) in a lump sum payable, or in installments
which will be completely paid, on or before December 31 of the calendar year
during which occurs the fifth anniversary of the date of the Participant's
<PAGE>
death, or (B) in annual installments over the Spouse's life or a period not
longer than the Spouse's Applicable Life Expectancy provided that such
distribution is commenced before the later of (1) the first January 1
following the calendar year during which the Participant would have attained
age 70 1/2 had the Participant not died or (2) the second January 1 which
follows the Participant's death.
(iii) If a Participant dies after distributions have
commenced on account of the Participant's attainment of his or her First
Required Distribution Year, distributions to the Participant's Spouse,
Beneficiary or estate shall continue over a period at least as rapid as the
period selected by the Participant.
(e) If a Beneficiary dies after the Participant (or in the case
of a Beneficiary designated by another Beneficiary, after such other
Beneficiary) and before such deceased Beneficiary receives full payment of the
portion of the vested Account balance to which he or she is entitled, the
Trustee shall, upon direction of the Administrator, distribute the funds to
which the deceased Beneficiary is entitled to the Beneficiary or Beneficiaries
validly named on the most recent Designation of Beneficiary filed by the
deceased Beneficiary. To the extent that any portion of the funds to which
the deceased Beneficiary was entitled are not governed by an effective
Designation of Beneficiary, the funds shall be distributed to the deceased
Beneficiary's surviving Spouse, or if that is not possible, to the estate of
the deceased Beneficiary. The Administrator's direction shall include
notification of the Beneficiary's death and the existence or non-existence of
a surviving Spouse and such other information required by the Trustee. Such
funds shall be distributed as follows:
(i) If distributions had commenced before the
Participant's death, distribution to the beneficiary of a deceased Beneficiary
shall continue over a period at least as rapid as that selected by the
Participant.
(ii) If the deceased Beneficiary was the surviving Spouse
of the Participant and had not begun to receive distributions from the
Participant's Account at the time of his or her death, the Participant's
vested Account balance shall be distributed to the deceased Beneficiary's
Beneficiary according to the provisions of Sections 9.01(c) - (d) applied as
if the deceased Beneficiary were the Participant. In addition, the surviving
Spouse's Beneficiaries shall be treated as Beneficiaries during any future
application of this Section.
(iii) If neither subparagraph (i) nor (ii) above apply, the
Participant's vested Account balance shall be distributed to the deceased
Beneficiary's Beneficiary either (A) on or before December 31 of the calendar
year during which occurs the fifth anniversary of the Participant's death or
(B) in substantially equal annual or more frequent installments over the
remainder of the Applicable Life Expectancy of the oldest Beneficiary of the
Participant as determined at the Participant's death provided that
distributions commence before the second January 1 which follows the
Participant's death.
9.02 Children as Beneficiaries. For the purposes of Section 9.01, to
the extent provided by Treasury regulations, any distribution paid to a
Participant's child shall be treated as paid to the Participant's surviving
Spouse if the remaining portion of the Participant's vested Account balance
with respect to which such child is a Beneficiary becomes payable to the
surviving Spouse when the child reaches the age of majority (or such other
designated event permitted under the Treasury regulations).
9.03 Nonconsensual Distributions to Beneficiaries. Notwithstanding any
provision of this Article, Article X or Article XXIV to the contrary, the
Administrator may direct the entire vested Account balance of a deceased
<PAGE>
Participant (exclusive of his or her Rollover Account and Deductible Voluntary
Contribution Account) be distributed if the amount distributed will be equal
to $3,500 or less. The Administrator may make such direction without
obtaining the consent of any Beneficiary.
9.04 Eligible Rollover Distributions. If the Participant's Beneficiary
is a surviving Spouse, the provisions of Section 10.07 shall apply to
distributions made pursuant to Article IX.
ARTICLE X. DISTRIBUTIONS AFTER SEPARATION FROM SERVICE
10.01 Commencement of Distributions. The Trustee shall, at the
direction of the Administrator, distribute a Participant's vested Account
balance in accordance with the provisions of this Article X. The
Administrator's direction shall include the amounts, or method of calculating
the amounts, to be distributed on given dates and such other information
required by the Trustee. In the event distribution is to be made in the form
of an annuity contract, the Administrator shall also direct the Trustee with
regard to the purchase of such a contract, including the selection of an
appropriate insurance carrier. Except as otherwise provided in this
Article X, distributions of a Participant's vested Account balance shall
commence within 60 days after the close of the Plan Year during which occurs
the later of (a) the Participant's Normal Retirement Date or (b) the earlier
of (i) the Participant's separation from Service or (ii) the end of his or her
First Required Distribution Year. Payment of benefits may, at the discretion
of the Trustee, be paid directly to the Participant or to the Administrator,
as payee agent. If the Participant's vested Account balance (exclusive of his
or her Rollover Account and Deductible Voluntary Contribution Account) is
greater than $3,500, written consent of the Participant is required for any
earlier distribution. A Participant may file an election with the
Administrator to request that distributions commence in accordance with one of
the following options provided that the distribution shall otherwise comply
with the requirements of the Plan (including, but not limited to, Section
10.03):
(A) Distributions commencing before the Participant's Normal
Retirement Date if the Participant is Disabled or experiences a separation
from Service.
(B) Distributions commencing after the normal time of
distribution described above; provided, however, that any such deferred
distribution must commence no later than 60 days after the end of the
Participant's First Required Distribution Year.
10.02 Forms of Distribution.
(a) Upon a Participant's separation from Service (for reasons
other than death), he or she may file an election with the Administrator to
request to receive a distribution of his or her vested Account balance in one
or more of the following optional forms, provided that the distribution shall
otherwise comply with the requirements of this Plan and provided that the
optional forms have been designated by the Employer in the Adoption Agreement:
(i) Distribution of the Participant's entire vested
Account balance in monthly installments over a period equal to the shorter of
120 months or the Applicable Life Expectancy. The monthly amount shall
normally be the balance of the Participant's vested Account balance divided by
the remaining number of months in such period, all rounded to the nearest
cent. However, the amount of each monthly installment may be recomputed and
adjusted from time to time no more frequently than monthly as the Trustee may
reasonably determine.
(ii) Distribution of the Participant's entire vested
Account balance in a lump sum.
<PAGE>
(iii) Distribution of the Participant's entire vested
Account balance in installment payments of a fixed amount, such payments to be
made until exhaustion of the Participant's vested Account balance.
(iv) Distribution in kind.
(v) Any reasonable combination of the foregoing or any
reasonable time or manner of distribution within the above-stated limitations.
(vii) Any distribution option that is a "protected benefit"
under Code Section 411(d)(6).
(b) To the extent permitted by applicable law and consistent
with the provisions of this Article X, amounts distributed pursuant to this
Article X shall be allocated on a pro rata basis among the Participant's
Accounts and among the Designated Investments in which each Account is
invested; provided, however, that the Participant may specify to the
Administrator an alternative manner in which distributions shall be so
allocated.
10.03 Required Minimum Distributions. In the case of each Participant,
the annual distribution from his or her Account shall be determined by the
Administrator in accordance with the regulations under Code Section 401(a)(9),
including the minimum distribution incidental benefit requirement of
Section 1.401(c)(9)-2 of such regulations and must equal or exceed the amount
equal to the quotient obtained by dividing the Participant's Account balance
at the beginning of the calendar year by the lesser of (a) the Applicable Life
Expectancy, or (b) if the Participant's Spouse is not the Beneficiary, the
applicable divisor determined from the table set forth in Q&A-4 of
Section 1.401(a)(9)-2 of the regulations under Code Section 401(a)(9).
10.04 Nonconsensual Distributions. Notwithstanding any provision of
Article IX, this Article or Article XXIV to the contrary, the Administrator
may direct that the entire vested Account balance of a Participant (exclusive
of his or her Rollover Account and Deductible Voluntary Contribution Account)
be distributed if the amount distributed will be equal to $3,500 or less. The
Administrator may make such direction (a) only if the Participant has not
previously attained his or her Annuity Starting Date and (b) regardless of
whether the Participant requests or otherwise consents to such distribution.
10.05 Special One-Time Distribution Election. Notwithstanding any Plan
provision to the contrary, distribution on behalf of any Participant,
including a 5% owner, may be made in accordance with the following
requirements (regardless of when such distribution commences):
(a) The distribution is one which would not have disqualified
the Plan under Code Section 401(a)(9) as it was in effect prior to its
amendment by the Deficit Reduction Act of 1984.
(b) The distribution is in accordance with a method of
distribution designated by the Participant whose interest in the Plan is being
distributed or, if the Participant has died, by a beneficiary of such
Participant.
(c) Such designation was in writing, was signed by the
Participant or the beneficiary, and was made before January 1, 1984.
(d) The Participant had accrued a benefit under the Plan as of
December 31, 1983.
(e) The method of distribution designated by the Participant or
the beneficiary specifies the time at which distribution will commence, the
period over which distributions will be made, and in the case of any
distribution upon the Participant's death, the Beneficiaries of the
Participant are listed in order of priority.
(f) If the distribution is one to which the provisions of
Article XXIV hereof would otherwise have applied and the Participant is
married, the Participant's Spouse consents to the election in a writing filed
with the Administrator.
<PAGE>
A distribution upon death will not be covered by this Section unless the
information in the designation contains the required information described
above with respect to the distributions to be made upon the death of the
Participant.
For any distribution which commenced before January 1, 1984, but
continues after December 31, 1983, the Participant, or the Beneficiary, to
whom such distribution is being made, will be presumed to have designated the
method of distribution under which the distribution is being made if the
method of distribution was specified in writing and the distribution satisfies
the requirement in subsections (a) and (e) above.
If a designation is revoked, any subsequent distribution must satisfy
the requirements of Code Section 401(a)(9) as amended. Any changes in the
designation will be considered to be a revocation of the designation.
However, the mere substitution or addition of another Beneficiary (one not
named in the designation) under the designation will not be considered to be a
revocation of the designation, so long as such substitution or addition does
not alter the period over which distributions are to be made under the
designation, directly or indirectly (for example, by altering the relevant
measuring life).
10.06 Distribution on Account of Plan Termination. Subject to the
provisions of Section 11.04, if the Employer terminates the Plan or completely
discontinues making Employer Contributions to the Trust, the Administrator has
discretion pursuant to Section 20.03 below to distribute, or retain in the
Trust, Participants' Account balances.
10.07 Eligible Rollover Distribution.
(a) This Section applies to distributions made by the Trustee 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 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) 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 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).
(c) 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.
(d) 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.
<PAGE>
(e) A Direct Rollover is a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
If a distribution is one to which Code Sections 401(a)(11) and 417
do not apply, such distribution may commence less than 30 days after the
notice required under Section 1.411(a)-11(c) of the Income Tax Regulations is
given, provided that:
(i) the Administrator clearly informs the Participant that
the Participant has a right to a period of at least 30 days after receiving
the notice to consider the decision of whether or not to elect a distribution
(and, if applicable, a particular distribution option), and
(ii) the Participant, after receiving the notice,
affirmatively elects a distribution.
ARTICLE XI. IN-SERVICE WITHDRAWALS
11.01 In-service Withdrawal from Participant's Accounts. This Section
11.01 shall apply only to Participants who remain in the employ of the
Employer.
(a) Nondeductible Voluntary Contribution Account. A Participant
may withdraw all or a portion of his or her Nondeductible Voluntary
Contribution Account upon notice to the Administrator; provided, however, that
a Participant who withdraws any amount from his or her Nondeductible Voluntary
Contribution Account which previously generated an Employer Matching
Contribution shall be prohibited from making a nondeductible voluntary
contribution for six calendar months, beginning with the calendar month
immediately following the date of withdrawal.
(b) Rollover Account. A Participant may withdraw all or a
portion of his or her Rollover Account upon notice to the Administrator.
(c) Deductible Voluntary Contribution Account. A Participant
may withdraw all or a portion of his or her Deductible Voluntary Contribution
Account upon notice to the Administrator.
(d) Employer Profit Sharing Contribution Account. Upon
attainment of his or her Normal Retirement Date, a Participant may withdraw
all or a portion of his or her Employer Profit Sharing Contribution Account
upon notice to the Administrator. If elected by the Employer in the Adoption
Agreement, a Participant who has not attained his or her Normal Retirement
Date but who is fully vested in his or her Employer Profit Sharing
Contribution may submit a request to the Administrator for a withdrawal of all
or a portion of his or her Employer Profit Sharing Contribution Account. The
Administrator may permit such a withdrawal only if the Participant can
demonstrate to the satisfaction of the Administrator that he or she is
suffering from "hardship" as defined in Section 11.02 below.
(e) Employer Matching Contribution Account. Upon attainment of
his or her Normal Retirement Date, a Participant may withdraw all or a portion
of his or her Employer Matching Contribution Account upon notice to the
Administrator. If elected by the Employer in the Adoption Agreement, a
Participant who has not attained his or her Normal Retirement Date but who is
fully vested in his or her Employer Matching Contribution Account may submit a
request to the Administrator for a withdrawal of all or a portion of his or
her Employer Matching Contribution Account. The Administrator may permit such
a withdrawal only if the Participant can demonstrate to the satisfaction of
the Administrator that he or she is suffering from "hardship" as defined in
Section 11.02 below.
(f) Salary Reduction Contribution Account, Deferred Cash
Contribution Account and Qualified Nonelective Contribution Account. Upon
attainment of his or her Normal Retirement Date, a Participant may withdraw
all or a portion of his or her Salary Reduction Contribution Account, Deferred
Cash Contribution Account and/or Qualified Nonelective Contribution Account
<PAGE>
upon notice to the Administrator. If elected by the Employer in the Adoption
Agreement, a Participant who has not attained his or her Normal Retirement
Date may submit a request to the Administrator for a withdrawal of all or a
portion of his or her Salary Reduction Contribution Account or Deferred Cash
Contribution Account (but not earnings on such accounts after December 31,
1988). The Administrator may permit such a withdrawal only if the Participant
can demonstrate that he or she is suffering from "hardship" as defined in
Section 11.02 below.
11.02 Rules Governing Hardship Withdrawals. A Participant shall be
considered to be suffering from "hardship" only if the distribution is both
made on account of an immediate and heavy financial need of the Participant
and is necessary to satisfy such financial need, determined in accordance with
objective, nondiscretionary standards as set forth in this Section.
(a) An "immediate and heavy financial need" shall be deemed to
include, and shall be limited to, the following:
(i) Expenses incurred or necessary for medical care
described in Code Section 213(d) of the Participant, his or her Spouse, or any
dependents of the Participant (as defined in Code Section 152);
(ii) Purchase (excluding mortgage payments) of a principal
residence for the Participant;
(iii) Payment of tuition, related educational fees and room
and board for the next 12 months of post-secondary education for the
Participant, his or her Spouse, children, or dependents; or
(iv) The need to prevent the eviction of the Participant
from his or her principal residence or foreclosure on the mortgage of the
Participant's principal residence.
(b) A distribution will be treated as "necessary" to satisfy an
immediate and heavy financial need of the Participant only if:
(i) The Participant has obtained all distributions, other
than hardship distributions, and all nontaxable loans under all plans
maintained by the Employer;
(ii) All plans maintained by the Employer provide that the
Participant's Salary Reduction Contributions and/or Deferred Cash
Contributions (and Nondeductible Voluntary Contributions) will be suspended
for 12 months after the receipt of the hardship distribution;
(iii) The distribution is not in excess of the amount of an
immediate and heavy financial need (including amounts necessary to pay any
federal, state or local income taxes or penalties reasonably anticipated to
result from the distribution); and
(iv) All plans maintained by the Employer provide that the
Participant may not make Salary Reduction Contribution and/or Deferred Cash
Contributions 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 taxable year less the amount of such
Participant's Salary Reduction Contributions and/or Deferred Cash
Contributions for the taxable year of the hardship distribution.
11.03 Manner of Distribution. A distribution under this Article shall
be made in a lump-sum payment to the Participant. In each case in which a
partial distribution is made from a Participant's Account, the amount
distributed from such Account pursuant to this Article XI shall be allocated
on a pro rata basis among the Designated Investments in which such Account is
invested; provided, however, that the Administrator or the Participant may
specify an alternative manner in which such distribution shall be so
allocated.
11.04 Limitation on Distributions. Notwithstanding anything to the
contrary elsewhere herein, the amounts credited to a Participant's Salary
Reduction Contribution Account and Deferred Cash Contribution Account, and
<PAGE>
Qualified Nonelective Contribution Account shall not be distributable to a
Participant or his or her Beneficiary until the Participant separates from
Service on account of retirement, disability, death or termination of
employment or upon the occurrence of one of the following events:
(a) Termination of the Plan without the establishment of another
defined contribution plan, other than an employee stock ownership plan (as
defined in Code Section 4975(e) or Section 409) or a simplified pension plan
as defined in Code Section 408(k).
(b) The disposition by a corporation to an unrelated corporation
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, but only with respect
to Participants who continue employment with the corporation acquiring such
assets.
(c) The disposition by a corporation to an unrelated entity of
such corporation interest in a subsidiary (within the meaning of Code Section
409(d)(3)) if such corporation continues to maintain this Plan, but only with
respect to Participants who continue employment with such subsidiary.
(d) The attainment of age 59-1/2 by the Participant.
(e) In the case of the Participant's Salary Reduction
Contribution Account and Deferred Cash Contribution Account, the hardship of
the Participant as described in Section 11.02.
All distributions that may be made pursuant to one or more of the
foregoing distributable events are subject to the spousal and Participant
consent requirements (if applicable) contained in Code Sections 411(a)(11) and
417. In addition, distributions made after March 31, 1988, that are triggered
by an event enumerated in Sections 11.04(a)-(c) must be made in a lump sum.
ARTICLE XII. LOANS
12.01 Availability of Loans. If, in the Adoption Agreement, the
Employer has specified that loans to Participants are permitted, the Loan
Trustee shall, upon the direction of the Administrator, make one or more
loans, including any renewal thereof, to a Participant who is an Employee or,
in the discretion of the Administrator, a former Employee (other than a
Participant who is an Owner-Employee). Any such loan shall be subject to such
terms and conditions as the Administrator shall determine pursuant to a
written uniform policy adopted by the Administrator for this purpose, which
policy shall be incorporated herein as part of the Plan, at least as
restrictive as required by this Article, and, contain specific provisions
setting forth: (a) the identity of the person or positions authorized to
administer the loan program; (b) a procedure for applying for loans; (c) the
basis upon which loans will be approved or denied; (d) limitations, in
addition to those described in this Article XII, on the types and amount of
loans offered; (e) the procedure under the program for determining a
reasonable rate of interest; (f) the types of collateral which may secure a
loan; and (g) the events constituting default and the steps that will be taken
to preserve plan assets in the event of such default.
12.02 Spousal Consent Required. If this Plan is adopted as a plan which
is subject to the special annuity rules discussed in Article XXIV below, to
obtain a loan, a Participant must obtain the consent of his or her Spouse, if
any, within the 90-day period before the time his or her Account balance is
used as security for the loan. Furthermore, a new consent is required if an
increase in the amount of the security is necessary and any of the remaining
balance of the Account is used. A spousal consent to a loan must be in
writing, witnessed by a Plan representative or notary public, and acknowledge
that as a result of a default in repayment of the loan the Spouse may be
entitled to a lesser death benefit than he or she would otherwise receive
<PAGE>
under the Plan. A Spouse shall be deemed to consent to any loan which is
outstanding at the time of his or her marriage to the Participant.
12.03 Equivalent Basis. No such loan may be made to a disqualified
person within the meaning of Code Section 4975(e), unless such loans are
available to all active Participants on a reasonably equivalent basis and are
not made available to Highly Compensated Employees in an amount which, when
stated as a percentage of any such Participant's Account, is greater than is
available to any other Participants.
12.04 Limitation on Amount. The amount of any such loan, when added to
the outstanding balance of all other loans from the Trust (and any other
qualified retirement plans of the Employer) to the Participant, shall not
exceed the lesser of:
(a) $50,000 reduced by the amount by which (i) the highest
outstanding balance of all such loans to the Participant during the one-year
period ending on the day before the date on which the loan is made exceeds
(ii) the outstanding balance of such loans to the Participant on the date on
which such loan is made; or
(b) the amount determined pursuant to the following chart:
Vested Maximum
Account Balance Amount of Loan
$0 - $100,000 50% of vested Account balance
over $100,000 $50,000.
The value of the Participant's Account balance shall be as determined by
the Administrator; provided, however, that such determination shall in no
event take into account the portion of the Participant's Account attributable
to the Participant's Deductible Voluntary Contribution Account.
12.05 Maximum Term. The term of any such loan shall not exceed five
years; provided, however, that such limitation shall not apply to any loan
used for the purchase of a dwelling unit which within a reasonable time is to
be used (determined at the time the loan is made) as a principal residence of
the Participant.
12.06 Promissory Note. Any such loan shall be evidenced by a promissory
note executed by the Participant and payable to the Loan Trustee, on the
earliest of (i) a fixed maturity date meeting the requirements of Section
12.05 above, (ii) the Participant's death (iii) the Participant's separation
from service if the loan policy does not permit loans to former Employees.
Such promissory note shall evidence such terms as are required by this
Article.
12.07 Adequate Security. Each loan and related promissory note shall
be secured by an assignment of no more than 50 percent of the Participant's
Account to the Loan Trustee. A Participant may also provide such other or
additional security for the loan as the Loan Trustee may require or permit.
12.08 Repayment By Payroll Reduction. In addition to executing a
promissory note, the Participant who desires to take out a loan shall enter
into a payroll reduction agreement with the Employer or such other form of
repayment agreement with the Employer as the Administrator permits from time
to time. The Participant shall enter into such agreement on or before the
date when the loan is made. Such agreement shall provide that, if the
Participant defaults on the loan while he or she is still an Employee, the
Employer shall be entitled to reduce the Participant's pay in sufficient
increments to ensure that, over a reasonable period of time, the amount with
respect to which the Participant has defaulted plus any interest owed and any
costs of collection incurred by the Loan Trustee will be repaid to the Trust.
The Employer shall promptly pay to the Loan Trustee all amounts that the
Employer withholds from a Participant's pay pursuant to such a payroll
<PAGE>
reduction agreement or other repayment agreement. The Administrator and/or
Loan Trustee shall credit all amounts withheld from a Participant's pay or
collected pursuant to a repayment agreement to the relevant Participant's
Account as payments of amounts owed on the note.
12.09 Interest. Any such loan shall be subject to a reasonable rate
of interest.
12.10 Level Amortization. A Participant shall repay the principal of
any loan according to a schedule which shall provide for level amortization
over a period of the loan, with payments to be made no less frequently than
quarterly.
12.11 Additional Repayment Rules. If a Participant fails to make a
payment in accordance with the schedule developed in accordance with the
requirements of Section 12.10 above, the Administrator shall notify the
Participant in writing that if the relevant loan principal and accumulated and
unpaid interest thereon is not paid within 30 days, action will be taken to
collect such amounts plus any cost of collection. When collecting such
amounts, the Loan Trustee may utilize any of the remedies available to it
including those provided by the promissory note, a payroll reduction agreement
entered into pursuant to Section 12.08 and applicable law. If a note is not
paid when the Participant's benefits hereunder are to be distributed, then any
unpaid portion of such loan, and unpaid interest thereon, and any costs of
collection incurred by the Loan Trustee shall be deducted by the Loan Trustee
from the Participant's Account before benefits are paid from or purchased out
of the Account. Such deduction shall, to the extent thereof, cancel the
indebtedness of the Participant. Notwithstanding any implication of the
preceding sentence to the contrary, no attachment of the Participant's Account
which is subject to Section 11.04 shall occur until a distributable event
occurs as specified in Section 11.04.
12.12 Accounting. Loans shall be made on a pro rata basis among the
Participant's Accounts and among the Designated Investments in which each
Account is invested and shall be treated as an investment of each such
Account, provided, however, that the Administrator or the Participant may
specify an alternative manner in which such loan shall be so allocated.
Notwithstanding the foregoing, no loans shall be made from the Participant's
Deductible Voluntary Contribution Account, and without the consent of the
Distributor, no loans shall be made from the Participant's Accounts invested
in qualifying employer securities.
12.13 Administration of Loans. Except as expressly provided otherwise
in this Article XII, the Administrator shall have the sole responsibility for
all administrative tasks relating to loans made pursuant hereto including, but
not limited to, the issuance of any appropriate notices or information returns
required under the Code or other applicable law.
12.14 Precedence. This Article overrides Section 18.01 below.
ARTICLE XIII. TRUST PROVISIONS
13.01 Manner of Investment. Except as expressly provided otherwise
herein, all contributions made pursuant to the Plan and any assets in which
such contributions shall be invested or reinvested shall be held in trust by
one or more Trustee pursuant to the provisions of this Agreement of Trust.
Certain assets of the Plan (including, but not limited to, insurance contracts
and shares of securities of an Employer that are not publicly traded) may be
held by the Administrator or such other entity as the Trustee may appoint as
subcustodian on behalf of the Trustee. Except to the extent that a
Participant's Account is invested in a loan pursuant to Article XII hereof,
the Account of a Participant may only be invested and reinvested in Designated
Investments, unless the Distributor consents to such other investments. If
the Administrator or the Participant, as the case may be, has elected to have
<PAGE>
a portion of an Account invested in investments other than Designated
Investments, and the Distributor has given its consent, the Trustee shall
invest such amount in such investments, directed by the Administrator or other
person with investment discretion and in accordance with Section 13.03 hereof.
Both the Designated Investments and investments other than Designated
Investments available for investment may be limited by the Administrator who
may impose separate rules for separate accounts or for terminated
Participants. Investment in more than one Designated Investment is not
permitted unless the value of the Participant's Account and the value of the
investment in each additional Designated Investment exceed amounts from time
to time determined by the Distributor.
If the Trustee invests in one or more collective investment funds
(whether or not the Trustee acts as trustee thereof) for the collective
investment of assets of employee pension or profit-sharing trusts pursuant to
Revenue Ruling 81-100, and such collective investment fund constitutes a
qualified trust under the applicable provisions of the Code, such collective
investment funds shall constitute part of the Plan, and the instrument
creating such funds shall constitute part of this Agreement of Trust while any
portion of the Trust is so invested.
13.02 Investment Decision.
(a) The decision as to the investment of an Account shall be
made by the person designated in the Adoption Agreement or as provided in this
Section 13.02, and the Trustee shall have no responsibility for determining
how an Account is to be invested or to see that investment directions
communicated to it comply with the terms of the Plan. Each such person,
including the Administrator, a Participant or a Beneficiary, is hereby
designated a "named fiduciary" within the meaning of Sections 402(a)(2) and
403(a)(1) of the Act, with respect to the Accounts over which he or she may
exercise investment control. If the decision is made by the Participant, then
(subject to Section 13.02(d) below) the Participant shall convey investment
instructions to the Administrator and the Administrator shall promptly
transmit those instructions to the Trustee. Further, if the decision is to be
made by the Participant, the right to make such a decision shall remain with
the Participant upon retirement and shall pass to his or her Beneficiary upon
death; provided, however, that upon termination of Service by a Participant,
the Administrator shall have the right to make investment decisions with
respect to the portion of such Participant's Account which is not vested
pursuant to Article VIII and any suspense account maintained under the Plan.
In the event that all or a portion of a Participant's Account is assigned to
an "alternate payee" pursuant to a "qualified domestic relations order," such
alternate payee shall have the right to make investment decisions with respect
to such portion and any earnings thereon to the same extent as the
Participant.
(b) The person designated to make the decision as to the
investment of an Account may direct that the investment medium of an Account
be changed, provided that no such change may be made from or to an investment
other than a Designated Investment except to the extent permitted under
Section 13.01 above and by the terms of that other investment vehicle.
Notwithstanding the foregoing, the Administrator may from time to time
establish uniform, nondiscretionary rules with respect to the frequency or
times at which changes in the investment medium of the Account may be made.
If the Distributor determines in its own judgment that there has been trading
of Designated Investments in the Accounts of the Participants, any Designated
Investment may refuse to sell to such Accounts. When an investment is being
made or changed, the person designated to do so shall specify the type of
Account to which the change refers.
<PAGE>
(c) Except as provided in subsection (a) above, if any decision
as to investments is to be made by the Administrator, it shall be made on a
uniform basis with respect to all Participants.
(d) The Administrator and the Trustee may adopt procedures
permitting Participants to convey their investment instructions directly to
the Trustee or to the transfer agent for the Designated Investment or for any
other investment permitted by the Distributor.
(e) Whenever a Participant is the person designated to make the
decision as to the investment of an Account, the Administrator shall ascertain
that the Participant has received a copy of the current prospectus relating to
any Designated Investment in which such Account is to be invested where
required by any state or federal law. With respect to contributions
designated for investment by a Participant, by remitting such a contribution
to the Trustee, the Administrator shall be deemed to warrant to the Trustee
for the benefit of the appropriate Designated Investment and its principal
underwriter (if applicable) that the Participant has received all such
prospectuses. By remitting any other contribution to the Trustee, the
Administrator shall be deemed to warrant to the Trustee for the benefit of the
appropriate Designated Investment and its principal underwriter (if
applicable) that the Administrator has received a current prospectus of any
Designated Investment in which the contribution is to be invested where
required by any state or federal law.
13.03 Directed Powers of the Trustee. To the extent that a portion of
the Trust assets are invested other than in Designated Investments pursuant to
Section 13.01 above, the Trustee shall have the following powers and authority
in the administration of the Trust to be exercised at the direction of the
Administrator or other person with investment discretion:
(a) To purchase, receive or subscribe for any securities or
other property and to retain in trust such securities or other property.
(b) To sell for cash or credit, to convert, redeem, or exchange
securities for other securities or other property, to tender securities
pursuant to tender offers, or otherwise to dispose of any securities or other
property at any time held by the Trustee.
(c) To settle, compromise, or submit to arbitration any claims,
debts or damages, due or owing to or from the Trust Fund, to commence or
defend suits or legal proceedings and to represent the Trust Fund in all suits
or legal proceedings; provided, however, that the Trustee shall have the
right, in its sole discretion, to bring, join in or oppose any such suits or
legal proceedings where it may be adversely affected by the outcome,
individually or as Trustee, or where it is advised by counsel that such action
is required on its part by the Act or other applicable law.
(d) To exercise any conversion privilege and/or subscription
right available in connection with any securities or other property at any
time held by it; to oppose or to consent to the reorganization, consolidation,
merger or readjustment of the finances of any corporation, company or
association, or to the sale, mortgage, pledge or lease of the property of any
corporation, company or association, the securities of which may at any time
be held by it and to do any act with reference thereto, including the exercise
of options, the making of agreements or subscriptions and the payment of
expenses, assessments or subscriptions which may be deemed necessary or
advisable in connection therewith, and to hold and retain any securities or
other property which it may so acquire, and to deposit any property with any
protective, reorganization or similar committee or with depositories
designated thereby, to delegate power thereto, and to pay or agree to pay part
of the expenses and compensation of any such committee and any assessments
levied with respect to property so deposited; provided, however, that the
Trustee shall not be responsible for taking any action or exercising any right
<PAGE>
described in this subsection (d) with respect to securities or other property
of the Trust Fund unless, at least three business days prior to the date on
which such power is to be exercised, it or its agents (i) are in actual
possession or control of such securities or property (if such possession or
control is necessary to exercise any such power) and (ii) have received
instructions from the Administrator to exercise any such power.
(e) To exercise, personally, by proxy or by general or limited
power of attorney, any right appurtenant to any securities or other property
held by it at any time.
(f) To invest and reinvest all or any part of the assets of the
Trust Fund, and to hold part of the Trust Fund uninvested.
(g) To employ suitable agents and counsel and to pay their
reasonable expenses and compensation as expenses of the Trust.
(h) To purchase, enter into, sell, hold and generally deal in
any manner in and with contracts for the immediate delivery of financial
instruments of any issuer or of any other property, to grant, purchase, sell,
exercise, permit to exercise, permit to be held in escrow and otherwise to
acquire, dispose of, hold and generally deal in any manner with or in all
forms of options in any combination; and, in connection with its exercise of
the powers hereinabove granted, to deposit any securities or other property as
collateral with any broker-dealer or other person, and to take all other
appropriate action in connection with such contracts.
(i) To deposit or pledge any securities or other property as
collateral with any broker-dealer or other person (including the Trustee), and
to permit securities or other property to be held by or in the name of others
or in transferable form.
(j) To borrow money, with or without security, from any legally
permissible source, to encumber property of the Trust Fund to secure repayment
of such indebtedness, to assume liens on properties acquired by the Trust, and
to acquire properties subject to liens.
(k) To form corporations and to create trusts to hold title to
any securities or other property of the Trust Fund.
(l) To acquire and hold securities which constitute qualifying
employer securities with respect to a Plan (as such term is defined in Section
407 of the Act); provided that the Trustee shall have no responsibility for
determining whether such acquisition or holding complies with the Act; and
provided further that the Administrator shall be responsible for filing all
reports required under federal or state securities laws with respect to the
Trust Fund's ownership of qualifying employer securities (including without
limitation any reports required under Section 13 or 16 of the Securities
Exchange Act of 1934, as amended) and shall immediately notify the Trustee in
writing of any requirement to stop purchases or sales of employer securities
pending the filing of any report, and the Trustee shall provide to the
Administrator such information on the Trust Fund's ownership of qualifying
employer securities as the Administrator may reasonably request in order to
comply with federal or state securities laws and the Act;
(m) To convert any monies into any currency through foreign
exchange transactions (which may be effected with the Trustee or an affiliate
of the Trustee to the extent permitted under the Act); and
(n) Generally, to do all acts, whether or not expressly
authorized, which may be considered necessary or desirable for the protection
or enhancement of the Trust Fund or to carry out any of the foregoing powers
and the purposes of the Trust Fund.
13.04 Discretionary Powers of the Trustee. The Trustee shall have
the following powers and authority in the administration of the Trust to be
exercised in its sole discretion:
<PAGE>
(a) To register any securities held by it hereunder in its own
name or in the name of a nominee with or without the addition of words
indicating that such securities are held in a fiduciary capacity and to hold
any securities in bearer form and to deposit any securities or other property
in a depository, clearing corporation, or similar corporation, either domestic
or foreign.
(b) To make, execute and deliver, as Trustee hereunder, any and
all instruments in writing necessary or proper for the accomplishment of any
of the powers referred to in Section 13.03 or in this Section 13.04.
(c) To employ suitable agents, custodians, subcustodians, and
counsel including but not limited to entities which are affiliates of the
Trustee and, subject to applicable law, to pay their reasonable compensation
and expenses as expenses of the Trust.
(d) With the consent of the Administrator, to loan securities
held in the Trust to brokers or dealers or other borrowers under such terms
and conditions as the Trustee, in its absolute discretion, deems advisable, to
secure the same in any manner permitted by law and the provisions of this
Agreement, and during the term of any such loan, to permit the loaned
securities to be transferred into the name of and voted by the borrowers or
others, and, in connection with the exercise of the powers hereinabove
granted, to hold any property deposited as collateral by the borrower pursuant
to any master loan agreement in bulk, together with the unallocated interests
of other lenders, and to retain any such property upon the default of the
borrower, whether or not investment in such property is authorized under this
Agreement, and to receive compensation therefor out of any amounts paid by or
charged to the account of the borrower.
13.05 Limitations in Investments. Notwithstanding the above, the
following restrictions on the investment of a Participant's Account shall
apply:
(a) No part of a Participant's Deductible Voluntary Contribution
Account may be used to purchase life insurance.
(b) At most, less than one-half of the aggregate Employer
Contributions allocated to a Participant's Employer Contribution Account may
be used to pay premiums attributable to the purchase of ordinary life
insurance contracts (life insurance contracts with both nondecreasing death
benefits and non-increasing premiums).
(c) No more than one-quarter of aggregate Employer Contributions
allocated to a Participant's Account may be used to pay premiums on term life
insurance contracts, universal life insurance contracts, and all other life
insurance contracts which are not ordinary life insurance contracts.
(d) One-half of the amount used to pay premiums on ordinary life
insurance contracts plus the amount used to pay premiums on all other life
insurance contracts may not exceed an amount equal to one-quarter of the
aggregate Employer Contributions allocated to a Participant's Account.
(e) No part of a Participant's Account shall be applied towards
the purchase of any insurance contract unless (i) the Trustee applies for and
is the owner of such contract, (ii) the contract provides that all contract
proceeds shall be paid to the Trustee, and (iii) the contract provides for
distributions to the Participant's Spouse, as necessary to ensure compliance
with the applicable requirements of Articles IX, X, and XXIV.
(f) Amounts used to pay premiums on, or purchase, any insurance
contract(s) on the life of a Participant shall be paid first from that portion
of the Participant's Nondeductible Voluntary Contribution Account which
represents Nondeductible Voluntary Contributions made by the Participant prior
to January 1, 1987, provided that the Plan, as of May 5, 1986, permitted
withdrawal of Nondeductible Voluntary Contributions before separation from
Service. Amounts used to pay premiums on, or purchase, any insurance
<PAGE>
contract(s) on the life of a Participant which exceed that portion of the
Participant's Nondeductible Voluntary Contribution Account described in the
preceding sentence shall be paid first from the portion of the Participant's
Nondeductible Voluntary Contribution Account which represents the remaining
Nondeductible Voluntary Contributions made by the Participant and then, except
as provided in paragraph (a) above, from such other of the Participant's
Accounts as the Administrator directs pursuant to the Participant's election.
(g) Except as provided in Section 22.01, any insurance
contract(s) on the life of a Participant will be converted to cash or
distributed to the Participant as of the Participant's Annuity Starting Date.
(h) Any dividends or credits earned on insurance contract(s)
will be allocated to the Account of the Participant for whose benefit the
contract is held, provided, however, that if an insurance contract was
purchased with a Participant's Nondeductible Voluntary Contributions, such
dividends or credits which are attributable to the Participant's Nondeductible
Voluntary Contributions shall, to the extent treated as a return of premium,
be credited to the Participant's Nondeductible Voluntary Contribution Account.
If a Participant's Account is invested in one or more insurance
contracts, the Trustee is required to pay over all proceeds of the contract(s)
to the Participant's Beneficiary or Beneficiaries in accordance with the terms
of this Plan and under no circumstances shall the Trust retain any contract
proceeds.
13.06 Appointment of Investment Manager. Subject to Sections 13.01
and 13.03 above, the Administrator may designate, and the Employer may
contract with, Scudder, Stevens & Clark Inc., or its successor or any
affiliate, or any other qualified entity to act as investment manager (within
the meaning of the Act), and may at any time revoke such designation. If an
investment manager is so designated, the Trustee shall follow all investment
directions given by the investment manager with respect to the retention,
investment and reinvestment of the Plan assets to the extent they are under
the control of such investment manager. If permitted by the Trustee, the
investment manager may issue orders for the purchase and sale of securities,
including orders through any affiliate of such investment manager. Such an
investment manager is specifically allowed to direct or make investments in
any Designated Investment and any other investments to which the Distributor
has given its consent. The Trustee shall not be liable for following any
direction given by, or any actions of, an investment manager so appointed.
13.07 Trustee: Number, Qualifications and Majority Action.
(a) The Employer shall designate one or more Trustees for each
Trust. Any natural person and any corporation having power under applicable
law to act as a trustee of a pension or profit sharing plan may be a Trustee.
No person shall be disqualified from being a Trustee by being employed by the
Employer, by being the Administrator, by being a trustee under any other
qualified retirement plan of the Employer or by being a Participant in this
Plan or such other qualified plan.
(b) A Trustee holding office as sole Trustee with respect to a
Trust hereunder shall have all the powers and duties herein given to the
Trustees hereunder. When the number of Trustees with respect to a Trust is
three, any two of them may act, but the third Trustee shall be promptly
informed of the action. When there are two or more Trustees with respect to a
Trust, they may, by written instrument communicated to the Employer and the
Administrator, allocate among themselves the powers and duties herein given to
the Trustee hereunder. If such an allocation is made, to the extent permitted
by applicable law, no Trustee shall be liable either individually or as a
trustee for loss to the Plan from the acts or omissions of another Trustee
with respect to duties allocated to such other Trustee.
<PAGE>
13.08 Change of Trustee.
(a) Any Trustee may resign as Trustee upon notice in writing to
the Employer, and the Employer may remove any Trustee upon notice in writing
to each Trustee. The removal of a Trustee shall be effective immediately,
except that a corporation serving as a Trustee shall be entitled to 60 days'
notice which it may waive, and the resignation of a Trustee shall be effective
immediately, provided that, if the Trustee is the sole Trustee, neither a
removal nor a resignation of a Trustee shall be effective until a successor
Trustee has been appointed and has accepted the appointment. If within 60
days of the delivery of the written resignation or removal of a sole Trustee,
another Trustee shall not have been appointed and have accepted, the resigning
or removed Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee or may terminate the Plan pursuant to
Section XVIII of the Prototype Plan. The Trustee shall not be liable for the
acts and omissions of any successor Trustee.
(b) At any time when the number of Trustees is one or two the
Employer may but need not appoint, respectively two or one additional
Trustees. Such an appointment and the acceptance thereof shall be in writing,
and shall take effect upon the delivery of written notice thereof to all the
Trustees and the Administrator and such acceptance by the appointed Trustee,
provided that if a corporation is a Trustee then in the absence of its
consent, such an appointment of an additional or successor Trustee shall not
become effective until 60 days after its receipt of notice.
(c) Although any Employer adopting the Plan may choose any
Trustee who is willing to accept the Trust, the Distributor or its successor
may make or may have made tentative standard arrangements with any bank or
trust company with the expectation it will be used as the Trustee by a
substantial group of Employers. It is also contemplated that more favorable
results can be obtained with a substantial volume of business, and that it may
become advisable to remove such bank or trust company as Trustee and
substitute another Trustee. Therefore, anything in the prior two subsections
notwithstanding, each Employer adopting this Plan hereby agrees that the
Distributor may, upon a date specified in a notice of at least 30 days to the
affected Employer and in the absence of written objection by the Employer
received by the Distributor before such date, (i) remove any Trustee and in
that case, or if such a Trustee has resigned as to a group of Employers, (ii)
appoint a successor Trustee, provided such action is taken with respect to all
Employers similarly circumstanced of which the Distributor has knowledge, and
provided such notice is given in writing and mailed postage prepaid to the
Employer at the latest address furnished to the Distributor directly or
supplied to it by such Trustee which is to be succeeded. If within 60 days
after a Trustee's resignation or removal pursuant to this subsection (i), the
Distributor has not appointed a successor which has accepted such appointment
the resigning or removed Trustee may petition an appropriate court for the
appointment of its successor. The resigning or removed Trustee shall not be
liable for the acts and omissions of such successor.
(d) Successor Trustees qualifying under this Section shall have
all rights and powers and all the duties and obligations of original Trustees.
13.09 Valuation. Annually, on the Valuation Date, or more frequently
in the discretion of the Trustee, the assets of each Trust shall be valued at
fair market value and the accounts of the Trust shall be proportionately
adjusted to reflect income, gains, losses or expenses, if the system of
accounting does not directly accomplish all such adjustments. Each account
shall share in income gains, losses, or expenses connected with an asset in
which it is invested according to the proportion which the account's
investment in the asset bears to the total amount of the Trust Fund invested
in the asset. Any dividends or credits earned on insurance contracts shall be
<PAGE>
allocated to the specific account of the Participant from which the funds
originated for investment in the contract.
The Trust Fund shall be administered separately from, and shall not
include any assets being administered under, any other plan of an Employer.
Interim valuations, if any, shall be applied uniformly and in a
non-discriminatory manner for all Employees.
13.10 Registration. Any assets in the Trust Fund may be registered
in the name of the Trustee or any nominee designated by the Trustee.
13.11 Certifications and Instructions.
(a) Any pertinent vote or resolution of the Board of Directors
of the Employer (if it is a corporation) shall be certified to the Trustee
over the signature of the Secretary or an Assistant Secretary of the Employer
and under its corporate seal. The Employer shall promptly furnish to the
Trustee appropriate certification evidencing the appointment and termination
of the individual or individuals serving as Administrator under Section 14.01
of the Plan.
(b) The Administrator shall furnish to the Trustee appropriate
certification of the individual or individuals authorized to give notice on
behalf of the Administrator and providing specimens of their signatures. All
requests, directions, requisitions for money and instructions by the
Administrator to the Trustee shall be in writing and signed. There may be
standing requests, directions, requisitions or instructions to the extent
acceptable to the Trustee.
13.12 Accounts and Approval.
(a) The Trustee shall keep accurate and detailed accounts of all
investments, receipts and disbursements and other transactions hereunder, and
all books and records relating thereto shall be open at all reasonable times
to inspection and audit by any person or persons designated by the
Administrator or by the Employer.
(b) Within 90 days following the close of each Plan Year the
Trustee may, and upon the request of the Employer or the Administrator shall,
file with the Administrator and the Employer a written report setting forth
all securities or other investments (including insurance contracts) purchased
and sold, all receipts, disbursements and other transactions effected by it
during the period since the date covered by the next prior report, and showing
the securities and other property held at the end of such period, and such
other information about the Trust Fund as the Administrator shall request.
Unless the Employer or Administrator, within 90 days from the date of mailing
of such report, objects to the contents of such report, the report shall be
deemed approved. Any such objections shall set forth the specific grounds on
which they are based.
13.13 Taxes. The Trustee may assume that any taxes assessed on or in
respect of the Trust Fund are lawfully assessed unless the Administrator shall
in writing advise the Trustee that in the opinion of counsel for the Employer
such taxes are not lawfully assessed. In the event that the Administrator
shall so advise the Trustee, the Trustee, if so requested by the Administrator
and suitable provision for their indemnity having been made, shall contest the
validity of such taxes in any manner deemed appropriate by the Administrator
or counsel for the Employer. The word "taxes" in this Article shall be deemed
to include any interest or penalties that may be levied or imposed in respect
to any taxes assessed. Any taxes, including transfer taxes incurred in
connection with the investment or reinvestment of the assets of the Trust Fund
that may be levied or assessed in respect to such assets shall, if allocable
to the Accounts of specific Participants, be charged to such Accounts, and if
not so allocable, they shall be equitably apportioned among all such
Participants' Accounts.
<PAGE>
13.14 Employment of Counsel. The Trustee may employ legal counsel
(who may be counsel for the Employer) and shall be fully protected in acting
or refraining from acting, upon such counsel's advice in respect to any legal
questions.
13.15 Compensation of Trustee. An individual Trustee who is an
Employee of the Employer shall not be compensated for services as Trustee. A
corporation, or an individual who is not an Employee of the Employer, serving
as a Trustee shall be entitled to reasonable compensation for services; such
compensation shall be paid in accordance with Article XV.
13.16 Limitation of Trustee's Liability.
(a) The Trustee shall have no duty to take any action other than
as herein specified, unless the Administrator shall furnish it with
instructions in proper form and such instructions shall have been specifically
agreed to by it, or to defend or engage in any suit unless it shall have first
agreed in writing to do so and shall have been fully indemnified to its
satisfaction.
(b) The Trustee may conclusively rely upon and shall be
protected in acting in good faith upon any written representation or order
from the Administrator or any other notice, request, consent, certificate or
other instrument or paper believed by the Trustee to be genuine and properly
executed, or any instrument or paper if the Trustee believes the signature
thereon to be genuine.
(c) The Trustee shall not be liable for interest on any
reasonable cash balances maintained in the Trust.
(d) The Trustee shall not be obligated to, but may, in its
discretion, receive a contribution directly from a Participant.
(e) The Employer shall indemnify and save harmless the Trustee
from and against any and all liability to which the Trustee may be subjected
by reason of any act, conduct or failure to act (except willful misconduct or
gross negligence) in its capacity as Trustee, including all expenses
reasonably incurred in its defense.
13.17 Successor Trustee. Any corporation into which a corporation
acting as a Trustee hereunder may be merged or with which it may be
consolidated, or any corporation resulting from any merger, reorganization or
consolidation to which such Trustee may be a party, shall be the successor of
the Trustee hereunder, without the necessity of any appointment or other
action, provided the Trustee does not resign and is not removed.
13.18 Enforcement of Provisions. To the extent permitted by
applicable law, the Employer and the Administrator shall have the exclusive
right to enforce any and all provisions of this Agreement on behalf of all
Employees or former Employees of the Employer or their Beneficiaries or other
persons having or claiming to have an interest in the Trust Fund or under the
Plan. In any action or proceeding affecting the Trust Fund or any property
constituting a part or all thereof, or the administration thereof or for
instructions to the Trustee, the Employer, the Administrator and the Trustee
shall be the only necessary parties and shall be solely entitled to any notice
of process in connection therewith; any judgment that may be entered in such
action or proceeding shall be binding and conclusive on all persons having or
claiming to have any interest in the Trust Fund or under the Plan.
13.19 Voting. The Trustee shall deliver, or cause to be executed and
delivered, to the Administrator, or to such individuals designated by the
Administrator, all notices, prospectuses, financial statements, proxies and
proxy soliciting materials received by the Trustee relating to securities held
by the Trust. The Administrator shall deliver these to the individuals
entitled to make investment decisions pursuant to Section 13.02 hereof (if the
Adoption Agreement so provides this may be the Participant or a Beneficiary)
to the extent that the Administrator has decided to pass-through voting to
<PAGE>
such individuals. Each individual, including the Administrator, with voting
rights, is hereby designated a "named fiduciary," within the meaning of
Section 402(a)(2) and 403(a)(1) of the Act, with respect to the Accounts over
which he or she may exercise voting rights. With respect to proxies, proxy
solicitation materials, and other voting matters, the Trustee shall vote
securities held by the Trust in accordance with the written instructions (as
expressed in a properly completed and executed proxy) of the Administrator or
of the individuals entitled to make investment decisions pursuant to Section
13.02 as expressed in a properly completed and executed proxy. Such
instructions shall be delivered to the Trustee by the Administrator, or such
person designated by the Administrator. With respect to securities issued by
the Employer, voting instructions shall be delivered directly to the Trustee
by the individuals entitled to make investment decisions with respect to such
securities and the Trustee shall maintain the confidentiality, and shall not
disclose the contents, of any such vote except as otherwise required by law or
a court of competent jurisdiction. The Trustee and the Administrator may
establish a procedure whereby any votes relating to securities issued by the
Employer are delivered by the Administrator to the Trustee provided that the
contents of such votes are not made known to the Administrator. If, however,
the Trustee has not received instructions with respect to how to vote given
securities at least five full business days (or such shorter period as the
Trustee, in its discretion, may determine) prior to the meeting at which such
securities are to be voted, the Trustee shall not vote such securities unless
otherwise required by law.
13.20 Applicability to Loan Trustee. Where appropriate, the foregoing
provisions of this Article shall apply to the Loan Trustee on the same basis
as if the Loan Trustee were the Trustee.
13.21 Applicability to Other Trust. The provisions of this Article XIII
shall apply with respect to a separate trust which is created hereby but shall
not apply to a separate trust created pursuant to a separate trust agreement.
ARTICLE XIV. ADMINISTRATION
14.01 Appointment of Administrator. From time to time, the Employer
may, by identifying such person(s) in writing to both the Trustee and the
Participants, appoint one or more persons as Administrator (hereinafter
referred to in the singular). Such Administrator shall have all power and
authority necessary to carry out the terms of the Plan. A person appointed as
Administrator may also serve in any other fiduciary capacity, including that
of Trustee, with respect to the Plan. The Administrator may resign upon 15
days' advance written notice to the Employer, and the Employer may at any time
revoke the appointment of the Administrator with or without cause. The
Employer shall exercise the power and fulfill the duties of the Administrator
if at any time an Administrator has not been properly appointed in accordance
with this Section or the position is otherwise vacant.
14.02 Named Fiduciaries. The "Named Fiduciaries" within the meaning
of the Act shall be the Administrator, each Trustee and each Participant and
Beneficiary with voting rights and/or investment rights.
14.03 Allocation of Responsibilities. Responsibilities under the
Plan shall be allocated among the Trustee, the Administrator and the Employer
as follows:
(a) Trustee: The Trustee shall have exclusive responsibility to
hold, manage and invest, pursuant to instructions communicated to it in
accordance with Section 13.02 above, the funds received by it subject to the
powers granted to it under Article XIII hereof. Notwithstanding the preceding
sentence, to the extent that loans are made to Participants in accordance with
Article XII hereof, the Trustee shall not be responsible for management of the
portion of Trust assets subject to such loans and the Loan Trustee shall be
<PAGE>
responsible for administering such Trust assets in accordance with provisions
of Article XII.
(b) The Administrator: The Administrator shall have the
responsibility and authority to control the operation and administration of
the Plan in accordance with its terms including, without limiting the
generality of the foregoing, (i) any investment decisions assigned to it under
the Adoption Agreement or the Plan or transmission to the Trustee of any
Participant investment decision under Section 13.02; (ii) interpretation of
the Plan, conclusive determination of all questions of eligibility, status,
benefits and rights under the Plan and certification to the Trustee of all
benefit payments under the Plan; (iii) hiring of persons to provide necessary
services to the Plan not provided by Employees; (iv) preparation and filing of
all statements, returns and reports required to be filed by the Plan with any
agency of government; (v) compliance with all disclosure requirements of all
state or federal law; (vi) maintenance and retention of all Plan records as
required by law, except those required to be maintained by the Trustee; and
(vii) all functions otherwise assigned to it under the terms of the Plan.
(c) Employer: The Employer shall be responsible for the design
of the Plan, as adopted or amended, the designation of the Administrator and
each Trustee (and, if appropriate, the Loan Trustee) as provided in the Plan,
the delivery to the Administrator and the Trustee of employee information
necessary for operation of the Plan (including, without limitation, dates of
birth, hire, and death; compensation amounts; and dates of death of
beneficiaries), the timely making of the Employer Contributions pursuant to
Articles IV and VII, and the exercise of all functions provided in or
necessary to the Plan except those assigned in the Plan to other persons.
(d) This Section is intended to allocate individual
responsibility for the prudent execution of the functions assigned to each of
the Trustees, the Loan Trustee, the Administrator and the Employer and none of
such responsibilities or any other responsibility shall be shared among them
unless specifically provided in the Plan. Whenever one such person is
required by the Plan to follow the directions of another, the two shall not be
deemed to share responsibility, but the person who gives the direction shall
be responsible for giving it and the responsibility of the person receiving
the direction shall be to follow it insofar as it is on its face proper under
applicable law.
14.04 More Than One Administrator. If more than one individual is
appointed as Administrator, such individuals shall either exercise the duties
of the Administrator in concert, acting by a majority vote or allocate such
duties among themselves by written agreement delivered to the Employer and the
Trustee. In such a case, the Trustee may rely upon the instruction of any one
of the individuals appointed as Administrator regardless of the allocation of
duties among them.
14.05 No Compensation. The Administrator shall not be entitled to
receive any compensation from the funds held under the Plan for its services
in that capacity unless so determined by the Employer or required by law.
14.06 Record of Acts. The Administrator shall keep a record of all
its proceedings, acts and decisions, and all such records and all instruments
pertaining to Plan administration shall be subject to inspection by the
Employer at any time. The Employer shall supply, and the Administrator may
rely on the accuracy of, all Employee data and other information needed to
administer the Plan.
14.07 Bond. The Administrator shall be required to give bond for the
faithful performance of its duties to the extent, if any, required by the Act,
the expense to be borne by the Employer.
14.08 Agent for Service of Legal Process. The Administrator shall be
agent for service of legal process on the Plan.
<PAGE>
14.09 Rules. The Administrator may adopt or amend and shall publish
to the Employees such rules and forms for the administration of the Plan, and
may employ or retain such attorneys, accountants, physicians, investment
advisors, consultants and other persons to assist in the administration of the
Plan as it deems necessary or advisable.
14.10 Delegation. To the extent permitted by applicable law, the
Administrator may delegate all or part of its responsibilities hereunder and
at any time revoke such delegation, by written statement communicated to the
delegate and the Employer. The Trustee may, but need not, act on the
instructions of such a delegate. The Administrator shall annually review the
performance of all such delegates.
14.11 Claims Procedure. It is anticipated that the Administrator
will administer the Plan to provide Plan benefits without waiting for them to
be claimed, but the following procedure is established to provide additional
protection to govern unless and until a different procedure is established by
the Administrator and published to the Participants and Beneficiaries.
(a) Manner of Making Claim. A claim for benefits by a
Participant or Beneficiary to be effective under this procedure must be made
to the Administrator and must be in writing unless the Administrator formally
or by course of conduct waives such requirements.
(b) Notice of Reason for Denial. If an effective claim is
wholly or partially denied, the Administrator shall furnish such Participant
or Beneficiary with written notice of the denial within 60 days after the
original claim was filed. This notice of denial shall set forth in a manner
calculated to be understood by the claimant (i) the reason or reasons for
denial, (ii) specific reference to pertinent plan provisions on which the
denial is based, (iii) a description of any additional information needed to
perfect the claim and an explanation of why such information is necessary, and
(iv) an explanation of the Plan's claims procedure.
(c) The Participant or Beneficiary shall have 60 days from
receipt of the denial notice in which to make written application for review
by the Administrator. The Participant or Beneficiary may request that the
review be in the nature of a hearing. The Participant or Beneficiary shall
have the rights (i) to have representation, (ii) to review pertinent
documents, and (iii) to submit comments in writing.
(d) The Administrator shall issue a decision on such review
within 60 days after receipt of an application for review, except that such
period may be extended for a period of time not to exceed an additional 60
days if the Administrator determines that special circumstances (such as the
need to hold a hearing) requires such extension. The decision on review shall
be in writing and shall include specific reasons for the decision, written in
a manner calculated to be understood by the claimant, and specific references
to the pertinent Plan provisions on which the decision is based.
(e) The Employer shall indemnify and hold harmless the
Administrator, if the Administrator is not the Employer, and any employees of
the Employer who performs the function of the Administrator for the Employer,
if the Administrator is the Employer, (collectively, an "Indemnitee"), from
any and all claims, loss, damages, expenses (including reasonable counsel fees
approved by the Employer) and liability (including any reasonable amounts paid
in settlement with the Employer's approval), arising from any act or omission
of such Indemnitee, except when the same is judicially determined to be due to
the willful misconduct or gross negligence of such Indemnitee.
ARTICLE XV. FEES AND EXPENSES
All reasonable fees and expenses of the Administrator or Trustee
incurred in the performance of their duties hereunder or under the Trust may
be paid by the Employer; and to the extent not so paid by the Employer, said
<PAGE>
fees and expenses shall be deemed to be an expense of the Trust and shall be
charged against the assets of the Trust, including any forfeitures that have
not been reallocated or applied to reduce Employer Contributions. In
addition, if the Plan permits Participant-directed investment of Accounts,
expenses that are allocable to the Accounts of specific Participants shall be
charged against the respective Participants' Accounts in accordance with
procedures adopted by the Administrator from time to time.
ARTICLE XVI. BENEFIT RECIPIENT INCOMPETENT
OR DIFFICULT TO ASCERTAIN OR LOCATE
16.01 Incompetency. If any portion of the Trust Fund becomes
distributable to a minor or to a Participant or Beneficiary who, as determined
in the sole discretion of the Administrator, is physically or mentally
incapable of handling his or her financial affairs, the Administrator may
direct the Trustee to make such distribution either to the legal
representative or custodian of the incompetent or to apply such distribution
directly for the incompetent's support and maintenance. Payments which are
made in good faith shall completely discharge the Employer, Administrator and
Trustee from liability therefor.
16.02 Difficulty to Ascertain or Locate. If it is impossible or
difficult to ascertain or locate the person who is entitled to receive any
benefit under the Plan, the Administrator in its discretion may direct that
such benefit (a) be retained in the Trust, (b) be paid to a court pending
judicial determination of the right thereto, or (c) be forfeited and
reallocated pursuant to the provisions of Section 8.02(a)(i) or (ii) above, as
the case may be, provided that as a result the Employer shall incur an
obligation to restore the individual's Account balance or otherwise pay the
individual his or her benefit if the individual is subsequently ascertained or
located.
ARTICLE XVII. DESIGNATION OF BENEFICIARY
Each Participant and Beneficiary may submit a properly executed
Designation of Beneficiary to the person designated under this Article XVII to
keep such records. In order to be effective, such designation must have been
properly executed and submitted to the appropriate person before the death of
the Participant or Beneficiary, as the case may be; and, for a Participant who
is survived by his or her Spouse, unless the Participant leaves 100% of his or
her benefit to such Spouse, must be accompanied, or preceded, by the consent
of such Spouse. Such consent of the Spouse must (a) be in writing;
(b) acknowledge that the effect of such consent is that the Spouse may receive
no benefits under the Plan; (y) be witnessed by a Plan representative or a
notary public; and (c) be either (i) a limited consent to the payment of death
benefits to a specific person or persons or (ii) expressly permit the
Participant to designate another person or other persons without obtaining
further consent of the Spouse. The last effective Designation accepted by the
appropriate person shall be controlling, and whether or not fully dispositive
of the Participant's Account, thereupon shall revoke all Designations
previously submitted by the Participant or Beneficiary, as the case may be.
If a Participant's Beneficiary(ies) predeceases the Participant, the remaining
living Beneficiary(ies) shall receive their proportionate share of the
Participant's Account as if such deceased Beneficiary(ies) had never been
designated. Similar rules shall apply with respect to contingent
Beneficiaries. Each such executed Designation is hereby specifically
incorporated herein by reference and shall be construed and enforced in
accordance with the laws of the state in which the Trustee has its principal
place of business. The Administrator shall be the person responsible for
<PAGE>
accepting and safekeeping Designation of Beneficiary Forms unless the Trustee
agrees in writing to accept and safekeep such forms.
ARTICLE XVIII. SPENDTHRIFT PROVISION AND DISTRIBUTIONS
PURSUANT TO QUALIFIED DOMESTIC RELATIONS ORDERS
18.01 General Spendthrift Rule. No interest of any Participant or
Beneficiary shall be assigned, anticipated or alienated in any manner nor
shall it be subject to attachment, to bankruptcy proceedings or to any other
legal process or to the interference or control of creditors or others, except
(a) to the extent that Participants may secure loans from the Trust with their
Accounts pursuant to Article XII hereof and (b) pursuant to Section 18.02
hereof.
18.02 Account Division and Distribution Pursuant to Qualified Domestic
Relations Orders. A Participant's vested Account may be assigned pursuant to
a qualified domestic relations order as defined in Code Section 414(p). If,
and to the extent that, any portion of a Participant's vested Account is
payable to an alternate payee pursuant to a qualified domestic relations order
within the meaning of Sections 401(a)(13)(B) and 414(p) of the Code, the
provisions of said order shall govern the payment thereof. An order shall not
fail to constitute a qualified domestic relations order within the meaning of
Sections 401(a)(13)(B) and 414(p) of the Code if the order provides for a
payment to be made to an alternate payee prior to the time the Participant
would be entitled to receive a benefit payment hereunder. The Administrator
shall be responsible for determining whether an order constitutes a qualified
domestic relations order.
ARTICLE XIX. NECESSITY OF QUALIFICATION
This Plan is established with the intent that it shall qualify under
Code Section 401(a) as that Section exists at the time the Plan is
established. If the Plan as adopted by the Employer fails to attain such
qualification, the Plan will no longer participate in the relevant sponsor's
prototype 401(k) plan and will be considered an individually designed plan.
If the Plan as adopted by the Employer fails to attain or retain such
qualification, the Employer shall promptly either amend the Plan under Code
Section 401(b) so that it does qualify, or direct the Trustee to terminate the
Trust, and distribute all the assets of the Trust equitably among the
contributors thereto in proportion to their contributions, and the Plan and
Trust shall be considered to be rescinded and of no force and effect.
ARTICLE XX. AMENDMENT AND TERMINATION
20.01 Amendment or Termination by the Employer. The Employer by action
of the Board of Directors, other governing board, general partner or sole
proprietor, as the case may be, may at any time, and from time to time amend
this Prototype Plan and the Adoption Agreement (including a change in any
election it has made in the Adoption Agreement), or suspend or terminate this
Plan by giving written notice to the Trustee, but the Trust may not thereby be
diverted from the exclusive benefit of the Participants, their Beneficiaries,
survivors or estates, or the administrative expenses of the Plan, nor revert
to the Employer, nor may an allocation or contribution theretofore made be
changed thereby, nor may any amendment directly or indirectly deprive a
Participant of such Participant's nonforfeitable rights to benefits accrued to
the date of the amendment.
No amendment to the Plan shall be effective to the extent that it would
have the effect of decreasing a Participant's Account balance or eliminating
an optional form of distribution. Notwithstanding the preceding sentence, a
Participant's Account balance may be reduced to the extent permitted under
<PAGE>
Code Section 412(c)(8). Furthermore, if the vesting schedule of the Plan is
amended, in the case of an Employee who is a Participant as of the later of
the date such amendment is adopted or the date it becomes effective, the
nonforfeitable percentage (determined as of such date) of such Employee's
right to his Employer-derived Account balance will not be less than his
percentage computed under the Plan without regard to such amendment.
The Employer may (a) change the choice of options in the Adoption
Agreement, (b) add overriding language in the Adoption Agreement when such
language is necessary to satisfy the requirements of Code Section 415 or to
avoid duplication of minimum benefits or accruals under Code Section 416
because of the required aggregation of multiple plans, or (c) adopt a model
amendment published by the Internal Revenue Service which specifically
provides that the adoption of such a model amendment will not cause the Plan
to be treated as an individually designed plan. Any other amendment by the
Employer will constitute a substitution by the Employer of an individually
designed plan for the sponsor's prototype plan. After such an amendment, the
Plan shall no longer participate in the sponsor's prototype plan and the
general amendment procedure of the Internal Revenue Service governing
individually designed plans will be applicable.
If an amendment changing the vesting schedule is executed (including
execution of this Adoption Agreement as an amendment to an existing plan),
Participants with three or more Vesting Years (five or more Vesting Years for
Participants who have not been credited with an Hour of Service in a Plan Year
beginning after December 31, 1988) before the expiration of the election
period described in the next sentence shall have the right to elect the
vesting schedule in effect on the day before the election period. The
election period shall commence on the date the amendment is adopted and end on
the latest of (x) 60 days after the amendment is adopted, (y) 60 days after
the Effective Date, or (z) 60 days after the Participant is issued written
notice of the amendment by the Administrator. Failure to so elect shall be
treated as a rejection and such election or rejection shall be final.
Nothing contained herein shall constitute an agreement or representation
by any Sponsor or the Distributor that it will continue to maintain its
sponsorship of the Plan indefinitely.
20.02 Delegation. The Employer hereby delegates to the Sponsor the
authority to amend so much of the Adoption Agreement and this Prototype 401(k)
Plan as is in prototype form and, to the extent to which the Employer could
effect such amendment, the Employer shall be deemed to have consented to any
amendment so made. When an election within the prototype form has been made
by the Employer, it shall be deemed to continue after amendment of the
prototype form unless and until the Employer expressly further amends the
election, notwithstanding that the provision for the election in the amended
prototype form is in a different form or place; provided, however, that if the
amended form inadvertently fails to provide means to duplicate exactly the
earlier election, such earlier election shall continue until such further
amendment. The immediately preceding sentence is subject to the qualification
that each Employer hereby delegates to the Sponsor, in the event of such an
amendment of the prototype form, authority to determine conclusively that such
a continuation of an earlier election by the Employer is not advisable and to
make the election for the Employer in the amended prototype form which in the
judgment of the Sponsor most nearly corresponds with the election made by the
Employer before the amendment of the prototype form, provided the following
procedure is followed: the election for the Employer may be made with respect
to any specified Employers as to whom it may be made applicable singly, or
such election may be made with respect to all Employers as to whom it may be
made applicable as a group; and the election shall be made as of an effective
date which has been specified in a notice mailed or delivered, at the last
<PAGE>
address(es) of the Employer(s) on the records of the Distributor, to the
Employer(s) at least 20 days before the end of the remedial amendment period.
Such notice may be mailed to Employers to whom it cannot be applicable by
reason of a previous election made by the Employer or otherwise, but it shall
be effective only as to those Employers who have received the notice and have
not themselves made a new election with respect to that item since the
amendment of the prototype form and previous to the effective date of such
election by the Sponsor. In the case of a mass submitter plan, the Sponsor
delegates its authority to make elections, or to make amendments, to the mass
submitter who shall make such elections or amendments on behalf of the Sponsor
and the Sponsor shall be deemed to have consented to any such election or
amendment so made. The foregoing delegations of authority to make elections,
or to make amendments, shall not impose any duty on the Sponsor or, if
applicable, the mass submitter to make a given election or amendment and shall
not affect the interpretation of the Plan if any so delegated authority is not
used.
20.03 Distribution of Accounts Upon Termination. Upon termination or
partial termination of the Plan or complete discontinuance of Employer
Contributions under it, the rights of all Participants (or, in the case of a
partial termination, the Participants affected thereby) to amounts theretofore
credited to their Accounts under the Plan shall be fully vested and
nonforfeitable. Upon any such termination or discontinuance, the
Administrator shall determine whether to pay the interests of Participants,
and Beneficiaries immediately, to retain such interest in the Trust and pay
them in the future according to Articles IX and X (or Article XXIV, if
applicable) or to use what other methods the Administrator deems advisable in
order to furnish whatever benefits the Trust will provide; provided any such
distributions pursuant to this Section shall comply with the requirements of
Articles IX or X (or Article XXIV, if applicable) hereof.
ARTICLE XXI. TRANSFERS
Nothing contained herein shall prevent the merger or consolidation of
the Plan with, or transfer of assets or liabilities of the Plan to, another
plan meeting the requirements of Code Section 401(a) or the transfer to the
Plan of assets or liabilities of another such plan so qualified under the
Code. Any such merger, consolidation or transfer shall be accompanied by the
transfer of such existing records and information as may be necessary to
properly allocate such assets among Participants, including any tax or other
information necessary for the Participants or persons administering the plan
which is receiving the assets. The terms of such merger, consolidation or
transfer must be such that if this Plan is then terminated, the requirements
of Section 20.01 hereof would be satisfied and each Participant would receive
a benefit immediately after the merger, consolidation or transfer equal to or
greater than the benefit he or she would have received if the Plan had
terminated immediately before the merger, consolidation or transfer. If this
Plan is a transferee plan with respect to all or a portion of a Participant's
Account, the optional forms of distribution described in Article X shall
include any optional form of distribution which the Participant could have
elected under the transferor plan and which would otherwise comply with the
provisions of this Plan.
ARTICLE XXII. OWNER-EMPLOYEE PROVISIONS
22.01 Purpose of Section. This Section is intended to insure that
the Plan complies with Code Section 401(d). Any ambiguity herein will be
construed to that end, and this Article will override any other provision of
the Plan with which it may be inconsistent.
<PAGE>
22.02 Control. For purposes of this Article, "Control" means the
ownership directly or indirectly of the entire interest in an unincorporated
trade or business or more than 50% of either the capital interest or the
profits interest in a partnership. For the purposes of applying the preceding
sentence, an Owner-Employee, or two or more Owner-Employees shall be treated
as owning any interest in a partnership which is owned, directly or
indirectly, by a partnership which such Owner-Employee, or such two or more
Owner-Employees, are considered to Control.
22.03 Limitations. No benefits shall be provided to an
Owner-Employee under this Plan unless:
(a) if an Owner-Employee or group of Owner-Employees Controls
the trade or business covered by this Plan and also Control as an
Owner-Employee or Owner-Employees one or more other trades or businesses, this
Plan and the plans established for such other trades or businesses, when taken
together, form a single plan which satisfies the requirements of Code Sections
401(a) and (d) with respect to the employees of all the controlled trades or
businesses;
(b) if an Owner-Employee or group of Owner-Employees Controls
another trade or business but does not Control the trade or business covered
by this Plan, the employees of such other trades or businesses are included in
a plan which satisfies the requirements of Sections 401(a) and (d) of the Code
and which provides contributions and benefits for such employees which are not
less favorable than those provided for Owner-Employees under this Plan; and
(c) if an Owner-Employee is covered under the qualified
retirement plans of two or more trades or businesses which he or she does not
Control and the Owner-Employee Controls a trade or business, contributions or
benefits for the employees under the plan of the trade or business which the
Owner-Employee Controls are not less favorable than those provided for the
Owner-Employee in the most favorable qualified retirement plan of the trade(s)
or business(es) which the Owner-Employee does not Control.
ARTICLE XXIII. TOP-HEAVY PROVISIONS
23.01 Purpose of Section. This Article is intended to insure that
the Plan complies with Code Section 416. If the Plan is or becomes Top-Heavy
in any Plan Year, the provisions of this Section will supersede any
conflicting provision in the Plan.
23.02 Definitions. The terms used in this Section shall have the
following meanings:
(a) Key Employee: Any Employee or former Employee (and the
Beneficiaries of such Employee) who at any time during the determination
period was (i) an officer of the Employer having an annual compensation
greater than 50% of the amount in effect under Code Section 415(b)(1)(A) for
the Plan Year (subject to the limitation that no more than the lesser of (A)
50 Employees or (B) the greater of 3 Employees or 10% of the Employees shall
be deemed to be officers), (ii) an owner (or considered an owner under Code
Section 318) of 1 of the 10 largest interests in the Employer if both such
individual was an owner of more than a .5% interest in the Employer
(aggregated with the Employer for this purpose are all members of (A) a
controlled group of corporations (as defined in Code Section 414(b) as
modified by Code Section 415(h)), (B) commonly controlled trades or businesses
(whether or not incorporated) (as defined in Code Section 414(c) as modified
by Code Section 415(h)), or (C) affiliated service groups (as defined in Code
Section 414(m)) of which the Employer is a part) and such individual's
compensation exceeds the dollar limitation under Code Section 415(c)(1)(A),
(iii) a 5% owner of the Employer, or (iv) a 1-percent owner of the Employer
who has an annual compensation of more than $150,000. The determination
period is the Plan Year containing the Determination Date and the 4 preceding
<PAGE>
Plan Years. The determination of who is a Key Employee will be made in
accordance with Code Section 416(i)(1) and the regulations thereunder.
(b) Top-Heavy Plan. This Plan is Top-Heavy if any of the
following conditions exist:
(i) If the Top-Heavy Ratio for this Plan exceeds 60% and
this Plan is not part of any Required Aggregation Group or Permissive
Aggregation Group of plans.
(ii) If this Plan is a part of a Required Aggregation Group
of plans but not part of a Permissive Aggregation Group and the Top-Heavy
Ratio for the Required Aggregation Group of plans exceeds 60%.
(iii) If this Plan is a part of a Required Aggregation Group
and part of a Permissive Aggregation Group of plans and the Top-Heavy Ratio
for the Permissive Aggregation Group exceeds 60%.
(c) Top-Heavy Ratio.
(i) If the Employer maintains one or more defined
contribution plans (including any Simplified Employee Pension Plan within the
meaning of Code Section 408(k)) and the Employer has not maintained any
defined benefit plan which during the five-year period ending on the
Determination Date(s) has or has had accrued benefits, Top-Heavy Ratio for
this Plan alone or for the Required Aggregation Group or Permissive
Aggregation Group, as appropriate, is a fraction, the numerator of which is
the sum of the account balances under all of the plans as of the Determination
Date(s) (including any part of any account balance distributed in the
five-year period ending on the Determination Date(s)) of all Key Employees who
have received compensation from the Employer (other than benefits under a
qualified retirement plan) at any time during the five-year period ending on
the Determination Date(s), and the denominator of which is the sum of all
account balances as of the Determination Date(s) (including any part of any
account balance distributed in the five-year period ending on the
Determination Date(s)), of all Participants who have received compensation
from the Employer (other than benefits under a qualified retirement plan) at
any time during the five-year period ending on the Determination Date(s).
Both the numerator and denominator of the fraction shall be computed in
accordance with Code Section 416 and the Treasury Regulations promulgated
thereunder. In addition, both the numerator and denominator of the Top-Heavy
Ratio shall be increased to reflect any contribution which is not actually
made as of the Determination Date(s), but which is required to be taken into
account on that date under Code Section 416 and the Treasury Regulations
promulgated thereunder.
(ii) If the Employer maintains one or more defined
contribution plans (including any Simplified Employee Pension Plan within the
meaning of Code Section 408(k)) and the Employer maintains or has maintained
one or more defined benefit plans which during the five-year period ending on
the Determination Date(s) has or has had accrued benefits, the Top-Heavy Ratio
for any Required Aggregation Group or Permissive Aggregation Group, as
appropriate, is a fraction, the numerator of which is the sum of (A) account
balances under the defined contribution plans as of the Determination Date(s)
(including any part of any account balance distributed in the five-year period
ending on the Determination Date(s)) of all Key Employees who have received
compensation from the Employer (other than benefits under a qualified
retirement plan) at any time during the five-year period ending on the
Determination Date(s) and (B) the present value of accrued benefits under the
defined benefit plans for all Key Employees, who have received compensation
from the Employer (other than benefits under a qualified retirement plan) at
any time during the five-year period ending on the Determination Date(s) and
the denominator of which is the sum of (A) the account balances under the
defined contribution plans as of the Determination Date(s) (including any part
<PAGE>
of any account balance distributed in the five-year period ending on the
Determination Date(s)) of all participants who have received compensation from
the Employer (other than benefits under this Plan) at any time during the
five-year period ending on the Determination Date(s) and (B) the present value
of accrued benefits under the defined benefit plans for all participants who
have received compensation from the Employer (other than benefits under this
Plan) at any time during the five-year period ending on the Determination
Date(s). Both the numerator and denominator of the fraction shall be computed
in accordance with Code Section 416 and Treasury Regulations promulgated
thereunder. In addition, both the numerator and denominator of the Top-Heavy
Ratio shall be increased for aggregate distribution(s) of an account balance
or an accrued benefit made during the five-year period ending on the
Determination Date(s) and any contribution to a defined contribution plan not
actually made as of the Determination Date(s), but which is required to be
taken into account on that date under Code Section 416 and the Treasury
Regulations promulgated thereunder.
(iii) For purposes of (i) and (ii) above, the value of
account balances and the present value of accrued benefits will 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 Treasury Regulations promulgated thereunder for the first
and second plan years of a defined benefit plan. The account balances and
accrued benefits of a Participant who has not been credited with at least one
Hour of Service at any time during the five-year period ending on the
Determination Date, will be disregarded. The calculation of the Top-Heavy
Ratio, and the extent to which distributions, rollovers, and transfers are
taken into account will be made in accordance with Code Section 416 and the
Treasury Regulations promulgated thereunder. Deductible employee
contributions under any qualified plan maintained by the Employer will not be
taken into account for purposes of computing the Top-Heavy Ratio. When
aggregating plans the value of account balances and accrued benefits will be
calculated with reference to the Determination Dates that fall within the same
calendar year.
For Plan Years commencing after December 31, 1986 for the purpose of
determining the Top-Heavy Ratio, if any target benefit or defined benefit plan
is included in the Required Aggregation Group, the accrued benefit of an
Employee other than a Key Employee shall be determined under the method that
uniformly applies for accrual purposes under all qualified retirement plans
maintained by the Employer, or if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted under the
fractional accrual rate of Code Section 411(b)(1)(C).
(d) Permissive Aggregation Group. The Required Aggregation
Group of plans plus any other plan or plans of the Employer which, when
considered as a group with the Required Aggregation Group, would continue to
satisfy the requirements of Code Sections 401(a)(4) and 410.
(e) Required Aggregation Group. (i) Each qualified plan of the
Employer in which at least one Key Employee participates or participated at
any time during the determination period (regardless of whether the plan has
terminated), and (ii) any other qualified plan of the Employer which enables a
plan described in (i) to meet the requirements of Code Sections 401(a)(4) or
410.
(f) Determination Date. For any Plan Year subsequent to the
first Plan Year, the Determination Date shall be the last day of the preceding
Plan Year. For the first Plan Year of the Plan, the Determination Date shall
be the last day of that year.
(g) Valuation Date. Shall be the last day of the Plan Year.
<PAGE>
(h) Present Value. Present Value shall be based only on the
interest rate and the mortality table specified by the Employer in the
Adoption Agreement.
23.03 Minimum Allocation.
(a) In any Plan Year in which this Plan is Top-Heavy, except as
otherwise provided in subsections (c) and (d) below, the Employer
Contributions and forfeitures allocated, or during a Plan Year which begins
after December 31, 1988, Employer Profit Sharing Contributions and forfeitures
allocated to the Participant's Employer Profit Sharing Contribution Account,
on behalf of any Participant who is not a Key Employee shall not be less than
the lesser of 3% of such Participant's Compensation or, in the case where the
Employer has no defined benefit plan which designates this Plan to satisfy
Code Section 401, the largest percentage of Employer Contributions and
forfeitures stated as a percentage of a Key Employee's Compensation, allocated
on behalf of any Key Employee for that Plan Year. The minimum allocation is
determined without regard to any Social Security contribution by the Employer.
Salary Reduction Contributions, Employer Matching Contributions and Qualified
Matching Contributions may not be taken into account to satisfy this minimum
allocation. This minimum allocation shall be made even though, under other
provisions of this Plan, the Participant would not otherwise be entitled to
receive an allocation, or would have received a lesser allocation for the year
because (i) the Participant failed to complete the minimum number of Hours of
Service specified in the Adoption Agreement for receiving an allocation, (ii)
the Participant's Compensation was less than a stated amount, or (iii) the
Participant made insufficient mandatory contributions to receive an Employer
Matching Contribution.
(b) For purposes of computing the minimum allocation,
"Compensation" shall have the same meaning as in Section 5.05(b) hereof.
(c) The provision in subsection (a) above shall not apply to any
Participant who was not employed by the Employer on the last day of the Plan
Year.
(d) The provision in subsection (a) above shall not apply to any
Participant to the extent the Participant is covered under any other plan or
plans of the Employer, and the Employer has provided in the Adoption Agreement
that the minimum allocation or benefit requirement applicable to Top-Heavy
Plans will be met in such other plan or plans.
23.04 Nonforfeitability of Minimum Allocation. The minimum allocation
required (to the extent required to be nonforfeitable under Code Section
416(b)) may not be forfeited under Code Section 411(a)(3)(B) or 411(a)(3)(D).
23.05 Limitation on Compensation. For Plan Years beginning after
January 1, 1994, only the first $150,000 (or such other amount as may be
prescribed by the Secretary of the Treasury or his or her delegate) of a
Participant's Compensation for the Plan Year shall be taken into account for
purposes of allocating Employer Contributions under this Article XXIII.
23.06 Minimum Vesting Schedule. Unless the Employer has specified a
more rapid vesting schedule in the Adoption Agreement, for any Plan Year in
which this Plan is Top-Heavy, the following minimum vesting schedule shall
apply:
Nonforfeitable Percentage of
Employer Profit Sharing and
<PAGE>
Vesting Years Matching Contribution Accounts
1 0%
2 20
3 40
4 60
5 80
6 or more 100
The minimum vesting schedule applies to all benefits within the meaning of
Code Section 411(a)(7) attributable to Employer Contributions and forfeitures,
including benefits accrued before the effective date of Code Section 416 and
benefits accrued before the Plan became Top-Heavy. Further, no reduction in a
Participant's nonforfeitable percentage may occur in the event the Plan's
status as Top-Heavy changes for any Plan Year. If conversion of the Plan into
a Top-Heavy Plan has resulted in a change of the Plan's vesting schedule to
the minimum vesting schedule discussed above, the change shall be treated as
an amendment to the Plan and the election referred to in Section 20.01 hereof
shall apply.
This Section does not apply to the Employer Profit Sharing Contribution
Account and Employer Matching Contribution Account balances of any Participant
who does not have an Hour of Service after the Plan has initially become
Top-Heavy and such Participant's vested Employer Profit Sharing Contribution
Account and Employer Matching Contribution Account balance will be determined
without regard to this Section.
23.07 Effect on Code Section 415 Limitations. Notwithstanding
anything to the contrary in Article V above, the following provisions apply
if the Plan is Top-Heavy:
(a) In any Plan Year in which the Top-Heavy Ratio exceeds 90%
(and the Plan therefore becomes super Top-Heavy) the denominators of the
Defined Benefit Fraction (as defined in Section 5.05(c) above) and the Defined
Contribution Fraction (as defined in Section 5.05(d) above) shall be computed
using 100% of the dollar limitation stated therein instead of 125%.
(b) In any Plan Year in which the Top-Heavy Ratio exceeds 60%,
but is less than 90%, the denominators of the Defined Benefit Fraction (as
defined in Section 5.05(c) above) and the Defined Contribution Fraction (as
defined in Section 5.05(e) above) shall be computed using 100% of the dollar
limitation described therein instead of 125%, unless the Employer has
specified in the Adoption Agreement that the minimum allocation provisions of
Section 23.03 above shall be computed using 4% of a Participant's
Compensation, in which case the dollar limitations of the Defined Benefit
Fraction (as defined in Section 5.05(c) above) and the Defined Contribution
Fraction (as defined in Section 5.05(e) above) shall continue to be computed
using 125% of the dollar limitations.
23.08 Termination of Top-Heavy Status. If the Plan ceases to be
Top-Heavy for any Plan Year and if the Employer has not specified otherwise in
the Adoption Agreement, the minimum vesting schedule described in
Section 23.06 shall continue to apply. If the Employer has specified in the
Adoption Agreement that, upon conversion of the Plan to non-Top-Heavy status,
Participants' vested benefits are to be determined according to a schedule
other than the minimum vesting schedule described in Section 23.06 hereof,
such change in vesting schedules shall be treated as an amendment, and the
election referred to in Section 20.01 hereof shall apply.
ARTICLE XXIV. SPECIAL DISTRIBUTION RULES
24.01 Special Distribution Rules for Certain Participants. If (a) it
is determined that this Plan is a direct or indirect transferee (where such
<PAGE>
transfer occurred after December 31, 1984) of a defined benefit plan, money
purchase pension plan (including a target benefit plan), stock bonus or profit
sharing plan which would otherwise provide a life annuity form of payment with
respect to a Participant (including a plan which was amended into this Plan),
(b) the Plan is amended so as to allow a Participant to elect to receive his
or her benefits in the form of a life annuity and a Participant elects to
receive his or her benefits in such form, (c) the Plan is amended to provide
that absent a Qualified Election of a Participant's surviving Spouse, someone
other than the Participant's surviving Spouse becomes entitled to the
Participant's vested Account balance, or (d) if someone other than the
Participant's surviving Spouse is the beneficiary of any insurance purchased
with funds from the Participant's Account, then the provisions of Sections
24.03 to 24.05 below shall apply in lieu of Article IX above and Sections
10.01 and 10.02 above. The Administrator shall specify in writing to the
Trustee the Participants' Accounts (or frozen amounts in such Accounts) to
which the provisions of Section 24.03 to 24.05 shall apply.
For the purposes of determining whether the provisions of this Article
apply, the Trustee shall be entitled to rely conclusively on written
instructions, if any, received by the Trustee from the Administrator
concurrent with the transfer. Furthermore, where the transfer is, or was, not
accompanied by written instructions specifying conditions under which specific
provisions of this Article would apply, the Trustee shall be entitled to
conclusively presume that this Article does not apply.
24.02 Definitions. For the purpose of this Section, the following
terms shall have the specified meanings:
(a) "Election Period" shall mean the period which begins on the
first day of the Plan Year in which the Participant attains age 35 and which
ends on the date of the Participant's death. If a Participant separates from
Service prior to the first day of the Plan Year in which he or she attains age
35, the Election Period with respect to his or her Vested Account Balance (as
of his or her date of separation) shall begin on his or her date of
separation.
(b) "Qualified Election" shall mean a valid waiver of a
Qualified Joint and Survivor Annuity or Qualified Preretirement Survivor
Annuity, as the case may be. To be valid, the waiver must be in writing and
Participant's Spouse must consent to it in writing. The Spouse's consent to
the waiver (i) must be witnessed by a Plan representative or notary public and
(ii) must be (A) a general consent to the provision of a form (or forms) of
distribution to any alternative person (or alternative persons); (B) a limited
consent to the provision of a specific form (or specific forms) of
distribution to a specific alternate person (or specific alternate persons);
or (iii) a limited consent which is specific with respect to form or
alternative payee. Notwithstanding the foregoing consent requirement, if the
Participant establishes to the satisfaction of a Plan representative that such
written consent may not be obtained because there is no Spouse or the Spouse
cannot be located, a waiver will nonetheless be deemed a Qualified Election.
Any consent necessary for a Qualified Election will be valid only with respect
to the Spouse who signs the consent, or in the event of a deemed Qualified
Election, the Spouse whose consent could not be obtained or who could not be
located. Additionally, a revocation of a prior waiver may be made by a
Participant without the consent of the Spouse at any time before the
commencement of distributions or benefits. The number of revocations shall be
unlimited. Each such revocation shall once again make the Qualified Joint and
Survivor Annuity or Qualified Preretirement Survivor Annuity applicable, as
the case may be. No consent obtained pursuant to this Section shall be valid
unless the Participant has received the relevant notice as provided in
Sections 24.09 and 24.10.
<PAGE>
(c) "Qualified Joint and Survivor Annuity" shall mean, in the
case of a married Participant, an annuity which can be purchased with the
Participant's Vested Account Balance for the life of the Participant with a
survivor annuity for the life of the Spouse equal to 50% of the amount of the
annuity which is payable during the joint lives of the Participant and the
Spouse. In the case of an unmarried Participant, Qualified Joint and Survivor
Annuity shall mean an annuity which can be purchased with a Participant's
Vested Account Balance for the life of the Participant.
(d) "Special Qualified Election" shall mean a valid waiver of a
Qualified Preretirement Survivor Annuity for the period beginning on the date
of such election and ending on the first day of the Plan Year in which the
Participant attains age 35. To be valid, the waiver must be (i) in writing,
(ii) made prior to the first day of the Plan Year in which the Participant
attains age 35, and (iii) preceded by a written explanation to the Participant
of the Qualified Preretirement Survivor Annuity in such terms as are
comparable to the explanation required by Section 24.09 and 24.10. Any
election made pursuant to this Section shall be void as of the first day of
the Plan Year in which the Participant attains age 35 and Qualified
Preretirement Survivor Annuity coverage shall be automatically reinstated as
of such date. Any future election to waive the Qualified Preretirement
Survivor Annuity must be a Qualified Election.
(e) "Vested Account Balance" shall mean the Participant's vested
portion of his or her Account consisting of the sum of the balances of
Participant's Nondeductible Voluntary Contributions Account, Deductible
Voluntary Contribution Account, Rollover Account, Salary Reduction
Contributions Account, Deferred Cash Contribution Account and Nonelective
Contribution Account and the vested portions of a Participant's Employer
Profit Sharing Account and Employer Matching Account, reduced by any loans
outstanding on the Annuity Starting Date which are secured by the
Participant's Account balance.
24.03 Distributions upon Death.
(a) Qualified Preretirement Survivor Annuity.
(i) Unless either paragraph (ii) below applies or the
Participant has selected an optional form of distribution within the Election
Period pursuant to a Qualified Election or a Special Qualified Election, if
the Participant dies before the earlier of (A) his or her Annuity Starting
Date or (B) his or her First Required Distribution Date, then the Trustee
shall, upon the direction of the Administrator, apply 50% of the Participant's
Vested Account Balance toward the purchase of an annuity contract for the life
of the Spouse.
(ii) Notwithstanding the provisions of paragraph (i) above,
prior to the earlier of (A) Spouse's Annuity Starting Date or (B) the Spouse's
First Required Distribution Year, the Spouse of a Participant may deliver a
written election to the Administrator whereby the Spouse elects not to have
50% of the Participant's Vested Account Balance applied toward the purchase of
an annuity contract for the Spouse's life. Similarly, after the earlier of
(A) the Spouse's Annuity Starting Date or (B) the Spouse's First Required
Distribution Year, the Spouse may deliver a written election to the
Administrator whereby the Spouse elects to terminate distributions pursuant to
the Qualified Preretirement Survivor Annuity and to receive the liquidated
value of the remainder of the Qualified Preretirement Survivor Annuity in an
alternative form. In the case where a Spouse makes either of such elections,
the portion of the deceased Participant's Vested Account Balance which would
otherwise have been distributed pursuant to this subsection shall be
distributed pursuant to the provisions of subsection (b) below.
(iii) In the case of a Spouse of a deceased Participant who
is scheduled to receive a Qualified Preretirement Survivor Annuity and who
<PAGE>
does not otherwise elect, at the instruction of the Administrator, the Trustee
shall apply 50% of the deceased Participant's Vested Account Balance toward an
annuity under which payments begin as of the later of the Participant's
separation from Service or (what would have been) the Participant's Normal
Retirement Date. A Spouse of a deceased Participant may elect a commencement
date which is earlier than the date discussed in the previous sentence by
filing a written election to that effect with the Administrator; the Trustee
shall begin to make payments on such earlier date upon instruction from the
Administrator.
(b) Other Distributions at Death. If the Participant dies after
he or she has begun to receive distributions pursuant to Section 24.04 below,
this subsection shall apply with respect to the Participant's entire Vested
Account Balance. With respect to any Vested Account Balance, or portion
thereof, to which subsection (a) did not apply, the provisions of Article IX
shall govern the distribution thereof.
24.04 Timing of Annuity Payments and Normal Distributions. Payment of
benefits under the Qualified Joint and Survivor Annuity or distributions
pursuant to the normal form of distribution discussed in Section 24.05(b)
below shall commence within 60 days after the close of the Plan Year during
which occurs the later of (a) the Participant's Normal Retirement Date or
(b) the earlier of (i) the Participant's separation from Service or (ii) the
end of his or her First Required Distribution Year. Payment of benefits may,
at the discretion of the Trustee, be paid directly to the Participant or to
the Administrator, as payee agent. If the Participant's vested Account
balance (exclusive of his or her Rollover Account and Deductible Voluntary
Contribution Account) is greater than $3,500, written consent of the
Participant is required for any earlier distribution. A Participant may file
an election with the Administrator to request that distributions commence in
accordance with one of the following options provided that the distribution
shall otherwise comply with the requirements of the Plan (including, but not
limited to, Section 10.03):
(A) Distributions commencing before the Participant's Normal
Retirement Date if the Participant is Disabled or experiences a separation
from Service.
(B) Distributions commencing after the normal time of
distribution described above; provided, however, that any such deferred
distribution must commence no later than 60 days after the end of the
Participant's First Required Distribution Year.
24.05 Form of Distribution and Optional Times for Commencement of
Distribution. The Vested Account Balance of a Participant to which
Section 24.03 above does not apply, shall be distributed in a form determined
according to this Section.
(a) Unless the Participant elects an optional form of
distribution pursuant to a Qualified Election or a Special Qualified Election
within 90 days before his or her Annuity Starting Date, the Participant's
Vested Account Balance shall be paid in the form of a Qualified Joint and
Survivor Annuity.
(b) If the Participant was eligible to receive a Qualified Joint
and Survivor Annuity and he or she elects an optional form of distribution set
forth in Article X pursuant to a Qualified Election or a Special Qualified
Election within 90 days before his or her Annuity Starting Date, then the
Participant's Vested Account Balance will be distributed in the form selected
by the Participant and the provisions of Article X shall apply.
(c) All annuity contracts purchased and distributed by the Plan
to a Participant or a Beneficiary shall be nontransferable when distributed
and the terms of such contracts shall comply with the requirements of the
Plan.
<PAGE>
24.06 Elections for Former Participants. An opportunity to make the
applicable distribution elections discussed in this Section must be given to
any living former Participant who had not begun receiving benefits from this
Plan on August 23, 1984 and who would not otherwise receive the benefit forms
prescribed by Section 24.05 above.
(a) In the case of a former Participant who:
(i) would have been entitled to receive his or her
benefits in the form of a life annuity had he or she completed an Hour of
Service during a Plan Year commencing after December 31, 1984,
(ii) was credited with Service under this Plan or a
predecessor plan in a plan year beginning after December 31, 1975, and
(iii) had at least ten years of Vesting Service when he or
she separated from Service,
the former Participant must be given an opportunity to elect to receive his or
her benefits in accordance with the provisions of Section 24.05 above.
(b) In the case of a former Participant:
(i) who was credited with service under this Plan or a
predecessor plan after September 1, 1974;
(ii) who was not credited with service under this plan or a
predecessor plan in a plan year beginning after December 31, 1975; and
(iii) whose benefits would have been payable in the form of
a life annuity, the Participant must be given an opportunity to elect to
receive his or her benefits in accordance with the provisions of Section 24.08
below.
(c) In the case of a former Participant who:
(i) satisfies the requirements of subsection (a) but does
not exercise the election made available to him or her in subsection (a), or
(ii) satisfies the requirements of subsection (a) other
than the requirement of paragraph (iii), the former Participant shall have his
or her benefits distributed in accordance with the provisions of Section 24.08
below.
24.07 Election Period for Certain Elections by Separated Participants.
The period during which a former Participant entitled to make an election
pursuant to Section 24.06 above shall commence on August 23, 1984 and end on
the earlier of the former Participant's death or the date benefits would
otherwise commence to said former Participant.
24.08 Benefit Form for Certain Former Participants. The benefits of
a former Participant who is entitled to elect, and has elected to have his or
her benefits distributed pursuant to this Section or a former Participant
whose benefits are required to be distributed in accordance with the
provisions of this Section shall be distributed in accordance with the
following provisions:
(a) If benefits in the form of a life annuity become payable to
a married former Participant who:
(i) begins to receive payments under the Plan on or after
Normal Retirement Age; or
(ii) dies on or after Normal Retirement Age while still
working for the Employer; or
(iii) begins to receive payments prior to Normal Retirement
Age; or
(iv) separates from Service on or after attaining Normal
Retirement Age (or the qualified early retirement age) after satisfying the
eligibility requirement for the payment of benefits under the Plan and
thereafter dies before beginning to receive such benefits; then such benefits
will be received under this plan in the form of a Qualified Joint and Survivor
Annuity, unless the former Participant has elected otherwise during the
election period. For this purpose, the election period must begin at least
<PAGE>
six months before the Participant attains qualified early retirement age and
end not more than 90 days before the commencement of benefit distributions.
Any election hereunder must be in writing and delivered to the Administrator;
such election may be changed by the former Participant at any time by delivery
of written notification of such change and/or a separate written election to
the Administrator.
(b) A former Participant who is employed at the start of the
election period defined below will be given the opportunity to elect, during
such election period, to have a survivor annuity payable on death. If the
former Participant elects the survivor annuity, payments under such annuity
must not be less than the payments which would have been made to the Spouse
under the Qualified Joint and Survivor Annuity if the former Participant had
retired on the day before his or her death. Any election under this provision
must be in writing and delivered to the Administrator; such election may be
changed by the former Participant at any time by delivery of written
notification of such change and/or a separate written election to the
Administrator. The election period begins on the later of (i) the 90th day
before the former Participant attains the qualified early retirement age or
(ii) the date on which participation begins, and ends on the date the former
Participant terminates employment with the Employer.
(c) The qualified early retirement age referred to in this
Section shall mean the latest of:
(i) the earliest date, under the Plan, on which the former
Participant may elect to receive retirement benefits:
(ii) the first day of the 120th month beginning before the
former Participant reaches Normal Retirement Age: or
(iii) the date the former Participant began participation.
24.09 Notice of Waivability of Qualified Preretirement Survivor Annuity.
(a) In the case of a Participant who is scheduled to receive
Qualified Preretirement Survivor Annuity coverage pursuant to Section 24.03
hereof, the Administrator shall provide to the Participant within the
applicable period as determined pursuant to subsection (b) below, a written
explanation of: (i) the terms and conditions of a Qualified Preretirement
Survivor Annuity; (ii) the Participant's right to make, and the effect of, an
election to waive Qualified Preretirement Survivor Annuity coverage; (iii) the
rights of a Participant's Spouse; and (iv) the Participant's right to make,
and the effect of, a revocation of a previous election to waive Qualified
Preretirement Survivor Annuity coverage.
(b) The applicable period during which the Administrator shall
provide the written explanation described in subsection (a) above shall mean,
with respect to a given Participant, whichever of the following periods ends
last:
(i) The period beginning when the individual becomes a
Participant and ending a reasonable period of time thereafter;
(ii) The period beginning on the first day of the Plan Year
during which the Participant attains age 32 and ending on the last day of the
Plan Year during which the Participant attains age 34;
(iii) The period that begins with a Participant's separation
from Service when the Participant separates from Service before attaining age
35 and ends a reasonable period of time after such separation from Service;
(iv) The period of time that begins on the effective date
of a Plan amendment which causes the Plan to no longer fully subsidize the
cost of the Qualified Preretirement Survivor Annuity and ends a reasonable
period of time after the effective date of such an amendment; or
(v) The period of time which begins when Section 24.03(a)
above first applies in the case of the Participant and ends a reasonable
period of time thereafter.
<PAGE>
For purposes of applying the preceding paragraph, a reasonable period
ending after the enumerated events described in (i), (iv) and (v) 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. In the case of a
Participant who separates from service before the Plan Year in which age 35 is
attained, notice shall be provided within the two-year period beginning one
year prior to separation and ending one year after separation. If such a
Participant thereafter returns to employment with the Employer, the applicable
period for such Participant shall be redetermined.
24.10 Notice of Waivability of Qualified Joint and Survivor Annuity.
In the case of a Participant who is scheduled to receive a Qualified Joint
and Survivor Annuity pursuant to the provisions of Section 24.05 hereof, the
Administrator shall provide to the Participant, no less than 30 days and no
more than 90 days prior to the annuity starting date, a written explanation
of: (a) the terms and conditions of a Qualified Joint and Survivor Annuity;
(b) the Participant's right to make, and the effect of, an election to waive
distribution in the form of a Qualified Joint and Survivor Annuity; (c) the
rights of the Participant's Spouse; and (d) the Participant's right to make,
and the effect of, a revocation of a previous election to waive distribution
in the form of the Qualified Joint and Survivor Annuity. Distribution to a
Participant may commence seven days after the foregoing explanation is given,
provided that:
(i) the Administrator clearly informs the Participant that
the Participant has a right to a period of at least 30 days after receiving
the notice to consider the decision of whether or not to elect a distribution
(and, if applicable, a particular distribution option), and
(ii) the Participant, after receiving the explanation,
affirmatively elects a distribution.
ARTICLE XXV. MISCELLANEOUS
25.01 Misrepresentation. Notwithstanding any other provision herein,
if an Employee misrepresents his or her age or any other fact, any benefit
payable hereunder shall be the smaller of: (a) the amount that would be
payable if no facts had been misrepresented, or (b) the amount that would be
payable if the facts were as misrepresented.
25.02 No Enlargement of Plan Rights. It is a condition of the Plan,
and each Participant by participating herein expressly agrees, that he or she
shall look solely to the assets of the Trust for the payment of any benefit
under the Plan.
25.03 No Enlargement of Employment Rights. Nothing appearing in or
done pursuant to the Plan shall be construed (a) to give any person a legal
or equitable right or interest in the assets of the Trust or distribution
therefrom, nor against the Employer, except as expressly provided herein or
(b) to create or modify any contract of employment between the Employer and
any Employee or obligate the Employer to continue the services of any
Employee.
25.04 Written Orders. In taking or omitting to take any action under
this Plan, the Trustee may conclusively rely upon and shall be protected in
acting upon any written orders from or determinations by the Employer or the
Administrator as appropriate, or upon any other notices, requests, consents,
certificates or other instruments or papers believed by it to be genuine and
to have been properly executed, and so long as it acts in good faith, in
taking or omitting to take any other action.
25.05 No Release from Liability. Nothing in the Plan shall relieve
any person from liability for any responsibility under Part 4 of Title I of
the Act. Subject thereto, neither Trustee, Loan Trustee, Administrator or
Distributor nor any other person shall have any liability under the Plan,
<PAGE>
except as a result of negligence or willful misconduct, and in any event the
Employer shall fully indemnify and save harmless all persons from any
liability except that resulting from their negligence or willful misconduct.
25.06 Discretionary Actions. The Administrator shall have discretionary
authority to determine eligibility for benefits and construe the terms of the
Plan. Any discretionary action, including the granting of a loan pursuant to
Article XII hereof, to be taken by the Employer or the Administrator under
this Plan shall be non-discriminatory in nature and all Employees similarly
situated shall be treated in a uniform manner.
25.07 Headings. Headings herein are primarily for convenience of
reference, and if they conflict with the text, the text shall control.
25.08 Applicable Law. This Plan and Trust shall, to the extent state
law is applicable, be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the state in which (a)
if the Trustee is a corporation, the Trustee has its principal place of
business; (b) if the Trustee is an individual, the Trustee resides; or (c) if
the Trustee is individuals, where a majority of the individuals serving as
Trustee reside. The Employer's execution of the Adoption Agreement may be
acknowledged where required by applicable law.
25.09 No Reversion. Notwithstanding any other contrary provision of the
Plan, but subject nevertheless to Articles V and XVIII, no part of the assets
in the Trust shall revert to the Employer, and no part of such assets, other
than that amount required to pay taxes or administrative expenses, shall be
used for any purpose other than exclusive benefit of Employees or their
Beneficiaries. However, the Employer may request a return, and this Section
shall not prohibit return, of an amount to the Employer under any of the
following circumstances:
(a) if the amount was all or part of an Employer Contribution
which was made as a result of a mistake of fact and the amount contributed or,
if less, the then current value is returned to the Employer within one year
after the date on which the mistaken payment of the contribution was made, or
(b) if the amount was all or part of an Employer Contribution
which was conditioned on deductibility under Code Section 404, such deduction
was disallowed with respect to such amount and this condition is not satisfied
and the amount is returned to the Employer within one year after the date on
which the deduction is disallowed, or
(c) if the amount was all or part of an Employer Contribution
which was conditioned on the initial qualification of the Plan under Code
Section 401(a), the Plan receives an adverse determination with respect to
this qualification and the amount is returned to the Employer within one year
after the date on which such adverse determination is made, but only if 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 Treasury may prescribe.
For the purposes of this Section, all Employer Contributions are
conditioned on initial qualification of the Plan under Code Section 401(a),
qualification of the Plan as amended under Code Section 401(a), and
deductibility under Code Section 404.
25.10 Notices. The Employer will provide the notice to other interested
parties contemplated under Code Section 7476 before requesting a determination
by the Secretary of the Treasury or his or her delegate with respect to the
qualification of the Plan.
25.11 Conflict. In the event of any conflict between the provisions
of this Plan and the terms of any contract or agreement issued thereunder or
with respect thereto, the provisions of the Plan shall control. In
particular, the proceeds of any life insurance contract purchased by the
Trustee and not governed by an effective Designation of Beneficiary form
<PAGE>
shall be paid to the Participant's Spouse regardless of who is named as the
beneficiary or beneficiaries in the contract.
25.12 Prior Benefits. If the optional form of benefits under the
Plan prior to adoption of the Prototype 401(k) Plan (the "Prior Benefits")
were different than the optional form of benefits as provided in the Prototype
401(k) Plan, then the portion of a Participants' Account which are
attributable to participation in the Plan prior to adoption of the Prototype
401(k) Plan shall be subject to such Prior Benefits and, in the discretion of
the Administrator the remaining portion of the Participants' Account shall
also be subject to such Prior Benefits. The Administrator shall notify the
Trustee as to what portion, if any, of the Participants' Account is subject to
such Prior Benefits and give a full description of such Prior Benefits; and,
separate accounts shall be maintained for each type of contribution (as
provided in Section 7.03) for such portion.
N O T I C E
Various state and federal laws prohibit employment discrimination based
on age, sex, race, color, national origin, religion, handicap or veteran's
status. These laws include, without limitation: (1) Title VII of the Civil
Rights Act of 1964; (2) the Age Discrimination in Employment Act of 1967; (3)
the Employee Retirement Income Security Act of 1974; and (4) various Texas
state and local employment statutes, regulations and ordinances. These laws
are enforced through the Equal Employment Opportunity Commission, the
Department of Labor and Texas state and local employment rights agencies.
In addition, you are hereby advised to consult with an attorney prior
to executing this Mutual Release Agreement, being sure that you thoroughly
review and understand the effects of the Agreement before executing it.
MUTUAL RELEASE AGREEMENT
This MUTUAL RELEASE AGREEMENT (this "Agreement") is between UNITED
STATES LIME & MINERALS, INC., a Texas corporation (the "Company"), and ROBERT
F. KIZER, a former director, officer and employee of the Company ("Kizer"),
and has been executed on this 27th day of February, 1998 (the "Settlement
Date").
On December 6, 1997, the Company terminated Kizer's employment as an
officer, employee and agent of the Company under Kizer's Employment Agreement
dated as of September 27, 1993, a copy of which is attached hereto (the
"Employment Agreement"). Capitalized terms used in this Agreement but not
defined herein are used as defined in the Employment Agreement
The Company and Kizer now wish to compromise, settle and resolve all
actual and potential differences and disputes between them, without the
uncertainties, risk and expense of arbitration or litigation. Each of the
parties has agreed, intending to be legally bound, as follows:
1. Termination. The Company and Kizer agree that, effective
December 6, 1997, the Company terminated Kizer's employment as an officer,
<PAGE>
employee and agent of the Company without cause pursuant to Section 2(b) of
the Employment Agreement. The Company and Kizer further agree that Kizer is,
therefore, entitled, pursuant to Section 2(f) of the Employment Agreement, to
be paid the Severance Amount on the Effective Date of this Agreement (as
defined below). The Company and Kizer also agree that Kizer has resigned as
a Director of the Company effective upon his receipt of the Severance Amount
on the Effective Date of this Agreement.
2. Mutual General Releases. Kizer hereby releases, acquits and
discharges the Company and its subsidiaries and their respective affiliates,
shareholders, directors, officers, employees and agents (collectively, the
"Company Releasees") from, and agrees not to sue any of the Company Releasees
for, and the Company hereby releases, acquits and discharges Kizer and his
executors, administrators and heirs (collectively, the "Kizer Releasees")
from, and agrees not to sue any of the Kizer Releasees for, any and all
claims, actions, causes of action, suits, demands, judgments, costs, fees
(including attorneys' fees), charges, damages, losses and other liabilities
and obligations of any manner whatsoever, from the beginning of time through
the Settlement Date, including without limitation claims arising out of or
related to the Civil Rights Act of 1964, the Age Discrimination in Employment
Act of 1967 (the "ADEA"), and the Employee Retirement Income Security Act of
1974 (collectively, "Claims"), excluding only Claims directly arising out of
or related to a breach of this Agreement or of those provisions of the
Employment Agreement that continue to apply after termination of Kizer's
employment occurring after the Settlement Date, or any Claims under the
Company's Employee Stock Ownership Plan or Section 401(k) Plan arising after
the Settlement Date. In addition, Kizer and the Company agree that he or it
will not assist or encourage anyone else in the filing or prosecution of any
Claims against the Company Releasees or the Kizer Releasees, respectively.
2
<PAGE>
3. Additional Consideration to Kizer
(a) Subject to and in reliance on the terms and conditions
hereof, the Company agrees as follows:
(i) to pay to Kizer his Base Salary and other benefits
for service through December 6, 1997, which payment in full
is hereby acknowledged by Kizer;
(ii) to pay to Kizer his Base Salary and benefits through
January 5, 1998, which payment in full is hereby
acknowledged by Kizer;
(iii) to treat January 5, 1998 as the date on which Kizer's
health coverage caused for purposes of Kizer's COBRA
rights;
(iv) to treat February 25, 1998 as the date on which
Kizer's employment with the Company's subsidiaries
terminated for purposes of Kizer's outstanding options to
purchase shares of the Company's Common Stock granted under
the Company's 1992 Stock Option Plan, with the three-month
post-termination exercise period expiring at close of
business on May 25, 1998; and
(v) to pay to Kizer, on the Effective Date of this
Agreement, the aggregate sum of Two Hundred, Seventy
Thousand Dollars and No Cents ($270,000.00) (the
"Settlement Payment"), less One-Hundred, One Thousand,
Thirty-Five Dollars and No Cents ($101,035.00) of
withholding for all applicable taxes and other amounts
which may properly be withheld, including additional
federal income tax withholding at Kizer's request, for a
net amount of One Hundred, Sixty-Eight Thousand, Nine
3
<PAGE>
Hundred, Sixty-Five Dollars and No Cents ($168,965.00), (A)
in full and total satisfaction of the Company's obligation
to pay the Severance Amount, and (B) in full and total
satisfaction and settlement of any Claims, including
without limitation under the ADEA, that Kizer may have
against the Company Releasees, including in such Settlement
Payment certain consideration for the release of such
Claims in addition to anything of value to which Kizer is
otherwise already entitled under the Employment Agreement
or otherwise.
(b) The Company further agrees that Kizer shall continue to be
indemnified by the Company against third-party claims arising by
reason of his service as a director and officer of the Company
and its subsidiaries to the fullest extent provided by applicable
law and the Company's By-laws as in effect on the Settlement
Date. The Company further agrees that it shall take no steps
that would impair Kizer's coverage for his service as a director
and officer of the Company and its subsidiaries under the
Company's directors' and officers' liability insurance as in
effect on the Settlement Date.
(c) Kizer acknowledges and agrees that the Settlement Payment
includes the full amount of the Base Salary and benefits to which
he is entitled as the Severance Amount under Section 2(f) of the
Employment Agreement. Kizer further acknowledges and agrees that
the Settlement Payment includes an amount for the full and total
satisfaction and settlement of any Claims, including without
limitation under the ADEA, that Kizer may have against the
Company Releasees, including in such Settlement Payment certain
additional consideration for the release of such Claims in
4
<PAGE>
addition to anything of value to which Kizer is otherwise already
entitled under the Employment Agreement or otherwise.
4. No Admission. By executing this Agreement, neither the Company
nor Kizer, directly or indirectly, or by implication, admits any violation of
any law, statute, regulation or ordinance.
5 Enforceability.
(a) Kizer acknowledges and agrees that he has been considering
and negotiating the terms of this Agreement with the Company for
at least twenty-one (21) calendar days, and that he has asked the
Company to finalize and execute this Agreement not later than the
date hereof in order to conclude the negotiating process as soon
as possible. Kizer further acknowledges and agrees that he has
been advised by an attorney throughout the 21-day period, and
that Kizer has read and fully understands all of the provisions
of this Agreement.
(b) Kizer also acknowledges that, for a period of seven (7)
calendar days following the Settlement Date, he may revoke this
Agreement. This Agreement shall be effective on March 6, 1998,
once the Company receives an executed letter from Kizer, dated
such date in the form attached hereto, confirming that he has not
revoked and does not intend to revoke this Agreement and that it
is enforceable (the "Effective Date of this Agreement"). If such
letter is not received by the Company by 5:00 p.m. Dallas time on
March 6, 1998, this Agreement shall become null and void.
6. Governing Law. This Agreement shall be interpreted and applied
under the laws of the State of Texas.
5
<PAGE>
7. Entire Agreement. Both parties agree that this Agreement and
those provisions of the Employment Agreement that continue to apply after
termination of Kizer's employment constitute the entire agreement of the
parties.
8. Notices. Any notice, statement, payment or other communication
required or permitted to be given hereunder shall be in writing and shall be
delivered in person, by certified or registered United States or Canada mail,
return receipt requested, by overnight delivery service, or by telecopy, at
the address set forth below. Either party may by notice to the other party
hereto change the address of the party to whom notice is to be given. The
date of notice shall be the date delivered, if delivered in person, or the
date received, if delivered by mail, by overnight delivery service, or by
telecopy.
9. Waiver. No waiver by any party to this Agreement of any breach
or default shall be effective unless the same shall be in writing and signed.
No waiver by any party of any breach or default of any term or provision of
this Agreement shall be construed to constitute a waiver of, or consent to,
the present or future breach or default of that or any other term or
provision hereof.
10. Severability of Provisions. If any term or provision of this
Agreement is held to be invalid or unenforceable, and cannot be amended or
reformed such that such term or provision is thereafter valid and
enforceable, such term or provision shall be severed and stricken from this
Agreement, and in all other respects this Agreement shall remain in full
force and effect.
6
<PAGE>
11. Counterpart Execution. This Agreement may be executed in
separate counterparts, and all executed counterparts together shall
constitute one and the same counterpart.
EXECUTED the date first above written.
Witness:
/s/ Mary Beth Hughes /s/ Robert F. Kizer
- --------------------- ---------------------
Name: Robert F. Kizer
5924 Cast1ebar Lane
Plano, Texas 75093
TELECOPY: (972) 403-9003
UNITED STATES LIME & MINERALS, INC.
By: /s/ Edward A. Odishaw
---------------------
Edward A. Odishaw, Chairman of the
Board of Directors
12221 Merit Drive, Suite 500
Dallas, Texas 75251
TELECOPY: (972) 385-1340
7
<PAGE>
Robert F. Kizer
5924 Castlebar Lane
Plano, Texas 75093
March 6, 1998
Edward A. Odishaw, Chairman
Board of Directors
United States Lime & Minerals, Inc.
12221 Merit Drive, Suite 500
Dallas, TX 75251
Dear Ed:
This is to confirm that I have not taken, and do not intend to take, any
action to revoke the Mutual Release Agreement executed by me and United
States Lime & Minerals, Inc. on February 27, 1998 (the "Agreement"). I
further confirm my understanding that the Agreement is enforceable.
Pursuant to the Agreement, I hereby request that the net amount of the
Settlement Payment be paid to me immediately.
Sincerely yours,
/s/ Robert F. Kizer
Robert F. Kizer
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made on April 17, 1997, by and
between United States Lime & Minerals, Inc. (the "Employer"), 12221 Merit
Drive, Suite 500, Dallas, TX 75251 and Johnney G. Bowers (the "Employee").
A. Employer is engaged in the business of lime and limestone.
B. Employer desires to have the services of Employee.
C. Employee is willing to be employed by Employer. Therefore, the parties
agree as follows:
1. Best Efforts of Employee. Employee agrees to perform faithfully,
industriously and to the best of Employee's ability, experience and
talents, all of the duties that may be required by the express and
implicit terms of this Agreement, to the reasonable satisfaction of
Employer. Such duties shall be provided at Dallas, Texas and at such
other place(s) as the needs, business or opportunities of the
Employer may require from time to time.
2. Compensation of Employee. As compensation for the services provided
by Employee under this Agreement, Employer will pay Employee the
following:
a. The annual salary paid to Employee shall be $130,000 per annum to
be paid in periodic monthly installments.
b. Employee shall be supplied with a motor vehicle. Employer shall
bear the reasonable acquisition, repair, and running expenses
relating thereto. The non-business use of the motor vehicle shall
be added to the taxable wages of Employee pursuant to the
Employer's policy.
c. Employee shall be entitled to participate in all employer
retirement, insurance, long-term disability and other fringe
benefit programs of Employer.
d. Employee shall be eligible to participate in stock option programs
as may be issued by the Board of Directors from time to time, but
any such stock option program shall be at the sole discretion of
the Board of Directors.
e. Employer shall conduct an annual job performance review for the
mutual benefit of Employer and Employee, and Employee shall be
eligible to receive an annual performance bonus based on both
Employee's job performance and the Company's financial performance
but any such bonus amount shall be at the sole discretion of the
Employer.
<PAGE>
Employment Agreement
April 17, 1997
Page 2
f. Employee shall be entitled to four weeks of paid vacation per
year. Such vacation must be taken at a time mutually convenient to
Employer and Employee and must be approved by Employer. Requests
for vacation shall be submitted to Employee's immediate supervisor
in advance of the requested date such vacation would commence.
Unused vacation time may not be accumulated and carried over to
the next year.
3. Title of Employee. The Employee will hold the title of Vice President
of Manufacturing and currently report to the President and CEO.
4. Reimbursement for Expenses in Accordance With Employer Policy. The
Employer will reimburse Employee for "out-of-pocket" expenses in
accordance with Employer policies in effect from time to time.
5. Relocation Expenses. Employer shall reimburse Employee for moving
expenses to move Employee from his residence to the Dallas, Texas
vicinity. Employer will also pay for the Employee's Real Estate fees
on the sale of his residence.
6. Termination.
a. Employer shall have the right to terminate Employee's employment
hereunder without cause at any time; except that immediately upon
such termination, Employer shall make a payment to Employee in the
amount of fifty percent of his then annual salary as defined in
Paragraph 2a above (currently $130,000) in a form mutually
agreeable to both parties in compliance with IRS rules and
regulations. Upon any such termination defined above, Employee
agrees to provide Employer with a general release agreeable to
both parties.
b. Company shall have the right to terminate Employee's employment
hereunder for cause without making termination payment to Employee
in the event Employee (i) engages in any competition with any
business of Employer without the prior written approval of
Employer; (ii) commits fraud, theft, larceny or any other crime
(other than minor misdemeanors); (iii) fails or refuses to obey
lawful instructions or commits an act of willful misconduct or
disloyalty; (iiii) is guilty of habitual insobriety, inattention
to his duties or negligence in the performance of his duties; or
(iiiii) is unable to perform his duties because of death or
disability. Employee shall be deemed to be disabled under
Employer's disability policy for executive officers as in effect
at that time.
<PAGE>
Employment Agreement
April 17, 1997
Page 3
7. Confidentiality. Employee recognizes that Employer has and will have
inventions, business affairs, products, fixture plans, machinery,
trade secrets, apparatus, process information, prices, customer
lists, discounts, technical information, costs, product design
information, and other vital information (collectively,
"Information") which are valuable, special and unique assets of
Employer. Employee agrees that Employee will not at any time or in
any manner, either directly or indirectly, divulge, disclose or
communicate in any manner any Information to any third party without
the prior written consent of the Employer. Employee will protect the
Information and treat it as strictly confidential. A violation by
Employee of this paragraph shall be a material violation of this
Agreement and will justify legal and/or equitable relief.
a. Unauthorized Disclosure of Information. If it appears that
Employee has disclosed (or has threatened to disclose) information
in violation of this Agreement, Employer shall be entitled to an
injunction to restrain Employee from disclosing, in whole or in
part, such Information, or from providing any services to any
party to whom such information has been disclosed or may be
disclosed. Employer shall not be prohibited by this provision from
pursuing other remedies, including a claim for losses and damages.
b. Confidentiality After Termination of Employment. The
confidentiality provisions of this Agreement shall remain in full
force and effect for a period of 3 years after the termination of
Employee's employment.
8. Entire Agreement. This Agreement contains the entire agreement of the
parties and there are no other promises or conditions in any other
agreement whether oral or written. This Agreement supersedes any
prior written or oral agreements between the parties.
9. Amendment. This Agreement may be modified or amended, if the
amendment is made in writing and is signed by both parties.
10. Miscellaneous.
a. Notice. Any notice contemplated hereunder shall be by personal
service and effective upon the date of such service.
b. Texas Law. This agreement and any disputes thereunder shall be
construed under the laws of Texas.
<PAGE>
Employment Agreement
April 17, 1997
Page 4
c. Arbitration. Any dispute hereunder shall be resolved by binding
arbitration according to the rules of the American Arbitration
Association, and any such arbitration shall be held within 50
miles of the office to which Employee is or was assigned at the
time of the arising of such dispute.
Accepted By Johnney G. Bowers
By: \s\ Johnney G. Bowers
---------------------------
Johnney G. Bowers
Accepted by United States Lime & Minerals, Inc.
By: \s\ Robert F. Kizer
---------------------------
Robert F. Kizer, President & CEO
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
Arkansas Lime Company, an Arkansas Corporation
Texas Lime Company, a Texas Corporation
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-58311) pertaining to the United States Lime & Minerals, Inc.
1992 Stock Option Plan, as amended, of our report dated January 30, 1998,
with respect to the consolidated financial statements of United States Lime &
Minerals, Inc. and subsidiaries included in the Annual Report on Form 10-K
for the year ended December 31, 1997.
ERNST & YOUNG LLP
Dallas, Texas
March 16, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,787
<SECURITIES> 0
<RECEIVABLES> 3,624
<ALLOWANCES> 0
<INVENTORY> 3,001
<CURRENT-ASSETS> 9,523
<PP&E> 52,302
<DEPRECIATION> 30,896
<TOTAL-ASSETS> 33,520
<CURRENT-LIABILITIES> 7,102
<BONDS> 0
0
0
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