-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P3jLsrIEuDDsUrHyklUSQ6cCM+ap0WHi0JE6ilJzJfsAReV/w7wp749A/ndJfL1n qwdhq5qAq0ruIFcX5f+5mA== 0000950134-96-000590.txt : 19960301 0000950134-96-000590.hdr.sgml : 19960301 ACCESSION NUMBER: 0000950134-96-000590 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960229 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED STATES LIME & MINERALS INC CENTRAL INDEX KEY: 0000082020 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 750789226 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-04197 FILM NUMBER: 96529174 BUSINESS ADDRESS: STREET 1: 12221 MERIT DRIVE SUITE 500 CITY: DALLAS STATE: TX ZIP: 75251 BUSINESS PHONE: 2149918400 MAIL ADDRESS: STREET 1: 12221 MERIT DRIVE STREET 2: SUITE 500 CITY: DALLAS STATE: TX ZIP: 75251 FORMER COMPANY: FORMER CONFORMED NAME: SCOTTISH HERITABLE INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: RANGAIRE CORP DATE OF NAME CHANGE: 19900405 FORMER COMPANY: FORMER CONFORMED NAME: ROBERTS MANUFACTURING CO INC DATE OF NAME CHANGE: 19690311 10-K 1 FORM 10-K FOR YEAR ENDED DECEMBER 31, 1995 1 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, 1995 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: (214) 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. [ ] The aggregate market value of Common Stock held by non-affiliates as of February 1, 1996: $18,554,065. Number of shares of Common Stock outstanding as of February 1, 1996: 3,836,063. DOCUMENTS INCORPORATED BY REFERENCE Part III incorporates information by reference from the Registrant's definitive proxy statement to be filed for its 1996 Annual Meeting of Shareholders. Part IV incorporates certain exhibits by reference from the Registrant's previous filings. 2 TABLE OF CONTENTS PART I ITEM I. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Business and Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Product Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Order Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Seasonality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Limestone Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Plant and Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Discontinued Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . 11 PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . 11 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-i- 3 UNITED STATES LIME & MINERALS, INC. FORM 10-K For the Year Ended December 31, 1995 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. These operations are conducted through three wholly-owned subsidiaries of the Company: Arkansas Lime Company, Corson Lime Company and Texas Lime Company. The Company sold substantially all of the assets and business of its Virginia Lime Company ("VLC") subsidiary on July 15, 1992. See "Disposition of Assets." References to the Company herein include references to its subsidiaries. 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 which has been crushed to specified sizes. Pulverized limestone 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 and in metal processing. Hydrated lime is used primarily in municipal sanitation/water treatment, soil stabilization in highway and building construction, the production of chemicals and the production of construction materials such as stucco, plaster and mortar. PRODUCT SALES. The Company sells its lime and limestone products primarily in the states of Arkansas, Connecticut, Delaware, Kansas, Louisiana, Mississippi, New Jersey, New Mexico, New York, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas and Virginia. Sales are made primarily by the Company's 10 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/water treatment facilities, poultry and cattle feed producers, governmental agencies, steel producers and electrical utility companies. -1- 4 During the year ended December 31, 1995, approximately 1,500 customers accounted for the Company's sales of lime and limestone products. 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. Low seasonal demand normally results in reduced shipments and revenues in the first quarter. Inclement weather conditions have a negative impact on the demand for lime and limestone products. LIMESTONE RESERVES. The company extracts limestone from three open-pit quarries, all of which are Company-owned. The Cleburne Quarry is located 14 miles from Cleburne, Texas; the Batesville Quarry is located near Batesville, Arkansas; and the Corson Quarry is located at Plymouth Meeting, Pennsylvania. 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 459 acres. In addition, the Company owns 2,149 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 interest in the 560 acres of land adjacent to the northwest boundary of the Company's property. This tract of land has 531 acres of proven limestone reserves. The calculated reserves are approximately 118,000,000 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 upon a tract of approximately 420 acres, 100 of which contain known deposits of high-quality limestone reserves. The average thickness of the limestone bed in this deposit is approximately 60 feet, with an overburden averaging 20 feet. Reserves are calculated at approximately 20,000,000 tons. Assuming the present level of production at the Quarry is maintained, the Company estimates that reserves are sufficient to sustain operations in excess of 40 years. In addition, the Company owns approximately 353 acres with certain reserves in three tracts of land, which are located adjacent to the Quarry on its northern, western and southern boundaries. It is probable that these additional reserves would extend the life of the Quarry by approximately 25 years. Corson Lime Company operates out of the Corson Quarry, which is situated at Plymouth Meeting, Pennsylvania upon a tract of land containing approximately 315 acres, approximately 153 acres of which are underlain by dolomitic limestone reserves. Permitted reserves are calculated to be approximately 81,000,000 tons at the Quarry. The overburden averages approximately 39 feet. The Company estimates that, assuming the present level of production at the Quarry is maintained, the reserves are sufficient to sustain operations for approximately 50 years. -2- 5 MINING. The Company extracts limestone by the open-pit method at its three 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 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 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 8.4 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. 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 has 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 345 tons of quicklime. The plant has two grinding systems which, depending on the product mix, has the capacity to produce 700,000 tons of pulverized limestone annually. The Pennsylvania plant is located adjacent to the Corson Quarry on a tract of land covering approximately 147 acres. It is equipped with a dual crushing system and six vertical kilns and has a daily-rated capacity of 8,000 tons of aggregate and 300 tons of quicklime. The Company also maintains a distribution terminal in Mer Rouge, Louisiana, to service customers in this region. The Company maintains lime hydrating equipment and limestone drying equipment at all three plants. Storage facilities at each of its plants 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 currently being properly maintained to meet its current needs and are adequately insured. Much of the equipment in the plants is aging and will require maintenance and repair in the future. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's expected capital expenditures for modernizing and re-equipping the plants. EMPLOYEES. The Company employed, at December 31, 1995, 338 persons, 45 of whom are engaged in sales, administrative and management activities. Of the Company's 293 production employees, 235 are covered by collective bargaining agreements. These agreements expire as follows: Pennsylvania facility in July 1998 Texas facility in November 1996 Arkansas facility in December 1996 -3- 6 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 contraction of the U.S. steel industry in the late 1970's and the early 1980's created an excess of supply over demand, thus impacting prices and profit levels. 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. Recently, the environmental-related uses for lime have been expanding, including use in flue gas desulfurization and the treatment of both waste and potable water. 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, 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 will have a material adverse effect on the Company. In part in response to requirements of environmental regulatory agencies, the Company incurred capital expenditures of approximately $220,000 in 1995 on environmental compliance and is planning to incur approximately $600,000 in 1996. 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 $150,000 in both 1995 and 1994. The Company has not been named as a potentially responsible party in any superfund cleanup site. As discussed in Notes 2 and 9 of Notes to Consolidated Financial Statements, the Company entered into a settlement agreement with Rangaire Company and Cameron Energy Company in December 1993. Under the settlement, the Company received a secured subordinated promissory note for $530,000 and cash of $200,000. In turn, the Company agreed to reimburse Cameron Energy Company, up to a maximum of $200,000, for clean-up costs incurred with regard to a parcel of land sold in 1989. In this regard, the Company accrued $170,000 at December 31, 1993. In 1994, the Company reimbursed Cameron Energy $165,000 for the clean-up of this parcel of land. DISPOSITION OF ASSETS. Effective July 15, 1992, substantially all of the assets and business of VLC, a wholly owned subsidiary of the Company, were sold to Eastern Ridge Lime Company, L.P. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 3 of Notes to Consolidated Financial Statements for a discussion regarding the disposition. DISCONTINUED OPERATIONS. Pursuant to an agreement dated June 6, 1989, the Company sold, effective May 31, 1989, to an unrelated joint venture, all of the assets of the Company's manufacturing division, which designed, manufactured and sold appliances and equipment for use in homes and for use in the construction of homes and commercial buildings. See Notes 2 and 9 of Notes to Consolidated Financial Statements for a further discussion with respect to this discontinued operation. -4- 7 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 4 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 9 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 1995. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock is quoted on the Nasdaq National Market under the symbol "USLM." As of February 1, 1996, the Company had 943 stockholders of record. As of December 31, 1995, 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 in 1995, were:
1995 1994 ----------------------------------- ------------------- MARKET PRICE MARKET PRICE ------------ ------------ LOW HIGH DIVIDENDS LOW HIGH --- ---- --------- --- ---- DECLARED -------- First Quarter $5 1/2 $6 1/4 _ $4 3/4 $5 1/4 Second Quarter $5 1/2 $6 3/4 .025 $4 1/2 $5 3/8 Third Quarter $6 1/4 $8 1/4 .025 $4 1/2 $6 Fourth Quarter $7 $8 3/4 .025 $5 1/2 $6 1/4
-5- 8 ITEM 6. SELECTED FINANCIAL DATA. (dollars in thousands, except per share amounts)
YEARS ENDED DECEMBER 31, ----------------------------------------------------------------------- 1995 1994 1993 1992 1991 --------- ------- ------- -------- -------- Operating Results Revenues from continuing operations $ 41,419 36,865 32,359 35,950 39,741 ========= ======= ======= ======== ======== Net income (loss) From continuing operations $ 4,260 1,916(1) (441) 9,930 (2) (424) From discontinued operations - - 480 (462) (550) --------- ------- ------- -------- -------- $ 4,260 1,916 39 9,468 (974) ========= ======= ======= ======== ======== Income (loss) per share of common stock From continuing operations $ 1.11 0.50 (0.11) 2.59 (0.11) From discontinued operations - - 0.12 (0.12) (0.14) --------- ------- ------- -------- -------- $ 1.11 0.50 0.01 2.47 (0.25) ========= ======= ======= ======== ========
AS OF DECEMBER 31, ----------------------------------------------------------------------- 1995 1994 1993 1992 1991 ---------- -------- ------- ------- ------- Total Assets $ 29,793 27,397 29,937 30,182 38,034 ========== ======== ======= ======= ======= Long-Term Debt $ 4,381 6,225 9,622 - 28,666 ========== ======== ======= ======= ======= Stockholders' Equity Per Share $ 4.89 3.86 3.32 3.32 0.83 ========== ======== ======= ======= ======= Cash Dividends Declared Per Share $ 0.075 - - - - ========== ======== ======= ======= ======= Employees at Year-End 338 313 302 317 399 ========== ======== ======= ======= =======
1. Includes a gain of $372,000, net of related taxes ($425,000 gross), due to the expiration of certain potential post-closing obligations relating to the sale of VLC assets. 2. Includes a gain on sale of VLC assets of $10,679, net of related taxes. See Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes to Consolidated Financial Statements. -6- 9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS The following table sets forth selected financial information of the Company expressed as a percentage of revenues for the periods indicated:
YEARS ENDED DECEMBER 31, -------------------------------------- 1995 1994 1993 ----- ----- ----- Revenues 100 % 100 % 100 % Cost of revenues: Labor and other operating expenses (66) (70) (69) Depreciation, depletion and amortization (8) (9) (10) Amortization of costs in excess of net assets acquired - (1) (2) ----- ----- ----- GROSS PROFIT 26 20 19 Selling, general and administrative expenses (13) (14) (18) ----- ----- ----- OPERATING PROFIT 13 6 1 Other (deductions) income: Interest expense (2) (2) (2) Gain on sale of VLC assets - 1 - Other - net 1 1 - Federal and state income tax (2) (1) - ----- ----- ----- Net income (loss) from continuing operations 10 % 5 % (1)% ===== ===== =====
1995 VS 1994 Revenues increased from $36,865,000 in 1994 to $41,419,000 in 1995, an increase of $4,554,000 or 12.4%. This resulted from a 12.0% increase in sales volume and a 0.4% increase in sales prices. Volume was up at all plants in 1995. Prices received for lime and limestone products at the Arkansas and Texas plants slightly increased in 1995 compared to 1994. Prices received for lime and limestone products, including aggregates, at the Pennsylvania plant were down slightly when compared to 1994. The Company's gross profit was $10,847,000 for 1995 compared to $7,629,000 for 1994, a 42.2% increase. In addition to increased revenues, gross profit was enhanced by improved efficiencies at the plants and lower amortization of costs in excess of net assets acquired. Selling, general and administrative ("SG&A") expenses increased by $60,000 in 1995 compared to 1994. SG&A expenses declined as a percent of revenues to 12.5% in 1995, from 13.9% in 1994. Interest expense decreased by $161,000 in 1995 over 1994. This decrease was due to lower debt outstanding. The Company's Revolving Credit loan was completely paid down in September 1995. The Company's net income for 1995 increased $2,344,000 or 122.3% from $1,916,000 ($0.50 per share) in 1994, to $4,260,000 ($1.11 per share). -7- 10 1994 VS 1993 CONTINUING OPERATIONS. Revenues increased from $32,359,000 in 1993 to $36,865,000 in 1994, an increase of $4,506,000 or 13.9%. This resulted from a 10.8% increase in sales volume and a 3.1% increase in sales prices. Volume was up at all plants except at Texas, which was down compared to 1993. Prices received for lime and limestone products at all plants improved in 1994 compared to 1993 except the prices received for aggregates at the Pennsylvania plant, which were down slightly when compared to 1993. Volume of shipments were up for aggregate at all plants in 1994. The Company's gross profit was $7,629,000 for 1994 compared to $6,073,000 for 1993, a 25.6% increase. In addition to increased revenues, gross profit was enhanced by lower depreciation costs and lower amortization of costs in excess of net assets acquired. SG&A expenses decreased by $730,000 in 1994 compared to 1993. This decrease was primarily the result of both a $325,000 charge included in the third quarter of 1993 for a payment due under an employment agreement and a $392,000 charge in the first quarter of 1993 relating to resolution of the Company's control and stockholder situation. Excluding these charges, SG&A expenses decreased by $13,000 in 1994 from 1993, declining as a percent of revenues to 13.9% in 1994 from 15.9% in 1993. Interest expense increased by $84,000 in 1994 over 1993. This increase was due to higher prevailing interest rates, which were partially offset by lower debt outstanding. The Company's net income for 1994 increased $2,357,000 from a loss of $441,000 ($0.11 per share) in 1993, to $1,916,000 ($0.50 per share). Included in 1994 income was $425,000 ($372,000 net of taxes) due to the expiration of certain potential post-closing obligations relating to the sale of VLC assets. See Note 3 of Notes to Consolidated Financial Statements for more information. DISCONTINUED OPERATIONS. During 1993, income of $480,000 (net of taxes) was recorded, primarily attributable to a new subordinated secured promissory note for $530,000 received from the buyer of the discontinued manufacturing operations. See Notes 2 and 9 of Notes to Consolidated Financial Statements. FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES The Company's financial condition is reflected by the following key financial measurements:
(dollars in thousands) ------------------------------------------- 1995 1994 1993 ---- ---- ---- Total bank debt $ 5,524 7,368 10,765 Total liabilities to stockholders' equity .59 .85 1.35 Working capital 6,156 5,443 6,094 Current ratio 2.01 1.96 1.96
In 1995, cash flow from operations was $7,943,000, an improvement of $2,535,000 or 46.9% over 1994. In 1995, this cash flow fully funded the Company's capital expenditure program and reduced the Company's bank debt by $1,844,000. -8- 11 In October 1993, the Company entered into a financing agreement with a commercial bank to replace its then-existing borrowings. The agreement provided for a 5-year $8,000,000 Term Loan with a monthly principal repayment of $95,238, with the remaining principal due in September 1998. The agreement also provided for a 2-year $6,000,000 Revolving Credit. Both are secured by substantially all of the Company's assets. The Term Loan originally carried an interest rate of Prime plus 1%, and the Revolving Credit carried an interest rate of Prime plus 3/4%, with a 1/2% fee on the unused Revolving Credit loan. In February 1994, the Company fixed the interest rate on the Term Loan at 7.95% per annum through February 1997. In September 1995, the loan agreements were amended to extend the Revolving Credit maturity date to November 1997. For the period of January 1 to September 29, 1995, the Term Loan, as amended, carried an interest rate of Prime plus 1/2%, and the Revolving Credit carried an interest rate of Prime plus 1/4%. In addition, effective September 29, 1995, the Term Loan carries an interest rate of Prime plus 1/4%, and the Revolving Credit carries an interest rate of Prime. The new Term Loan rate will go into effect after the fixed term rate of 7.95% ends in February 1997. The terms of the financing agreements contain, among other provisions, requirements for maintaining defined levels of working capital, net worth, financial ratios and capital expenditure limitations. The covenants restrict incurrence of debt, liens and lease obligations, mergers, and consolidation or acquisition of assets. Capital expenditures for 1995 totaled $4,851,000 compared to $2,682,000 in 1994. The Company expects to spend $15-25 million over the next several years to modernize and re-equip plant facilities to improve efficiency and reduce costs, to effect environmental improvements and to ensure that capacity is in place to meet market demand. Management believes that the necessary funds will be obtained through operations. The Company is not contractually committed to any planned capital expenditures until actual orders are placed for equipment. In addition, the Company has completed the feasibility studies for a new kiln at the Arkansas plant and has decided to proceed with this project. The new kiln will complement the existing shaft kilns by allowing the Company to expand its customer base. The lime produced on the new kiln will meet the specific chemical needs of both the existing customer base and customers the Company currently is unable to serve. The project is expected to cost approximately $9-10 million. The Company's progress on this project has been slowed due to the state regulatory authorities requiring the Arkansas plant to apply for and obtain a new plant wide permit. This new permit replaced the existing permit and now allows the Company to proceed with the permitting process of the new kiln. This permit is expected to be secured by the end of 1996. The new kiln will be financed by internally generated funds and/or alternative sources of financing. 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 $220,000 in 1995. 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. See "Business--Environmental Matters." -9- 12 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Auditors F1 Report of Independent Auditors F2 Consolidated Financial Statements: Consolidated Balance Sheets as of December 31, 1995 and 1994 F3 Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993 F5 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1995, 1994 and 1993 F6 Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 F7 Notes to Consolidated Financial Statements F9
-10- 13 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, 1995 and 1994, and the related consolidated statements of income, stockholders' equity, and cash flows for the years then ended. 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 audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the years then ended in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Dallas, Texas January 22,1996 -F1- 14 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders United States Lime & Minerals, Inc. We have audited consolidated statements of income, stockholders' equity and cash flows of United States Lime & Minerals, Inc. and subsidiaries for the year ended December 31, 1993. These consolidated 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 audits to obtain reasonable assurance about whether the consolidated 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 consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects the results of operations and cash flows of United States Lime & Minerals, Inc. for the year ended December 31, 1993, in conformity with generally accepted accounting principles. ARONSON, FETRIDGE & WEIGLE Rockville, Maryland February 1, 1994 -F2- 15 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands)
DECEMBER 31, ---------------------------------- ASSETS Notes 1995 1994 ------ ----------- ----------- ----------- Current Assets: Cash and cash equivalents $ 1,161 23 Trade receivables 5,509 6,002 Inventories 1 5,332 4,770 Prepaid expenses and other assets 234 320 ------------ --------- Total current assets 12,236 11,115 Property, plant and equipment, at cost: Land 2,280 2,240 Buildings and building improvements 2,057 2,030 Machinery and equipment 48,104 44,095 Furniture and fixtures 724 711 Automotive equipment 762 952 ------------ --------- 53,927 50,028 Less accumulated depreciation (37,503) (35,052) ------------ --------- Net property, plant and equipment 16,424 14,976 Note receivable 2 - 343 Other assets, net 1,6 1,133 963 ------------ --------- Total assets $ 29,793 27,397 ============ =========
See accompanying notes to consolidated financial statements -F3- 16 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) (dollars in thousands)
LIABILITIES AND DECEMBER 31, --------------- ---------------------------------- STOCKHOLDERS' EQUITY Notes 1995 1994 -------------------- -------- ------------ ---------- Current Liabilities: Current installments of long-term debt 4 $ 1,143 1,143 Accounts payable - trade 2,568 2,671 Accrued expenses: Salaries and wages 383 206 Insurance costs 436 487 Other expenses 1,550 1,165 ------------ --------- Total current liabilities 6,080 5,672 Long-term debt, excluding current installments 4 4,381 6,225 Other liabilities 3,6 583 698 ------------ --------- Total liabilities 11,044 12,595 Commitments and contingencies 9 Stockholders' equity: 6,8 Preferred stock, $5 par value, Authorized 500,000 shares; none issued - - Common stock, $.10 par value, authorized 15,000,000 shares; issued 5,294,065 529 529 shares Additional paid-in capital 15,848 15,848 Retained earnings 17,844 13,897 Less treasury stock at cost; 1,458,002 shares of common stock (15,472) (15,472) ------------ --------- Total stockholders' equity 18,749 14,802 ------------ --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 29,793 27,397 ============ =========
See accompanying notes to consolidated financial statements -F4- 17 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per share amounts)
YEAR ENDED DECEMBER 31, ------------------------------------------------ Notes 1995 1994 1993 -------- ----------- ----------- ------------ Revenues $ 41,419 36,865 32,359 Cost of revenues: Labor and other operating expenses 27,375 25,753 22,135 Depreciation, depletion and amortization 3,197 3,191 3,495 Amortization of costs in excess of net assets acquired - 292 656 ----------- --------- ---------- 30,572 29,236 26,286 ----------- --------- ---------- GROSS PROFIT 10,847 7,629 6,073 Selling, general and administrative expenses 7 5,185 5,125 5,855 ----------- --------- ---------- OPERATING PROFIT 5,662 2,504 218 Other deductions (income): Interest expense 4 723 884 800 Gain on sale of Virginia Lime Company assets 3 - (425) - Other - net (343) (143) (65) ----------- --------- ---------- 380 316 735 Income (loss) from continuing operations before income taxes 5,282 2,188 (517) Federal and state income tax: 5 1,022 272 (76) ----------- --------- ---------- Income (loss) from continuing operations 4,260 1,916 (441) Discontinued operations, net of taxes: Income from discontinued operations 2,5 - - 480 ----------- --------- ---------- NET INCOME $ 4,260 1,916 39 =========== ========= ========== Income (loss) per share of common stock: Continuing operations $ 1.11 0.50 (0.11) Discontinued operations - - 0.12 ----------- --------- ---------- NET INCOME $ 1.11 0.50 0.01 =========== ========= ==========
See accompanying notes to consolidated financial statements -F5- 18 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (dollars in thousands) Years ended December 31, 1995, 1994 and 1993
Common Stock --------------------- Additional Amount Shares Paid-In Retained Treasury Due From Outstanding Amount Capital Earnings Stock ESOP TOTAL ----------- -------- ---------- -------- --------- -------- -------- BALANCES AT JANUARY 1, 1993 3,836,063 $529 15,848 12,092 (15,472) (277) 12,720 Reduction of amount due from ESOP (Note 6) - - - - - 92 92 Adjustment to reflect minimum pension liability (Note 6) - - - (109) - - (109) Net income - - - 39 - - 39 ----------- ------- --------- -------- --------- ------ -------- BALANCES AT DECEMBER 31, 1993 3,836,063 529 15,848 12,022 (15,472) (185) 12,742 Reduction of amount due from ESOP (Note 6) - - - - - 185 185 Adjustment to reflect minimum pension liability (Note 6) - - - (41) - - (41) Net income - - - 1,916 - - 1,916 ----------- ------- --------- -------- --------- ------ -------- BALANCES AT DECEMBER 31, 1994 3,836,063 529 15,848 13,897 (15,472) - 14,802 Common stock dividends - - - (286) - - (286) Adjustment to reflect minimum pension liability (Note 6) - - - (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 =========== ======= ========= ======== ========= ====== ========
See accompanying notes to consolidated financial statements -F6- 19 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
YEARS ENDED DECEMBER 31, --------------------------------- 1995 1994 1993 --------- -------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) from continuing operations $ 4,260 1,916 (441) Adjustments to reconcile net income (loss) from continuing operations to net cash provided by continuing operations: Depreciation, depletion and amortization 3,354 3,661 4,420 Gain on sale of Virginia Lime Company assets - (425) - (Gain) / loss on sale of property (127) (11) 47 Amortization of financing costs 139 74 98 Changes in assets and liabilities: (Increase) / decrease in trade receivables 493 (1,031) (421) (Increase) / decrease in inventories (562) 1,747 (701) (Increase) / decrease in prepaid expenses 86 241 (166) (Increase) / decrease in other assets 34 55 (467) Increase / (decrease) accounts payable and accrued expenses 408 (272) 796 Increase / (decrease) other liabilities (142) (547) (54) ----------- -------- ------- Total adjustments 3,683 3,492 3,552 ----------- -------- ------- Net cash provided by continuing operations 7,943 5,408 3,111 ----------- -------- ------- Net income from discontinued operations - - 480 Adjustment to reconcile net income from discontinued operations to net cash used in discontinued operations - - (315) ----------- -------- ------- Net cash provided by discontinued operations - - 165 ----------- -------- ------- Net cash provided by operations $ 7,943 5,408 3,276 ----------- -------- -------
See accompanying notes to consolidated financial statements. -F7- 20 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (dollars in thousands)
YEARS ENDED DECEMBER 31, --------------------------------- 1995 1994 1993 --------- -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment $ (4,851) (2,682) (3,440) Proceeds from sales of property, plant and equipment 176 95 55 Decrease in restricted cash - - 129 --------- -------- -------- Net cash used in investing activities (4,675) (2,587) (3,256) --------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of common stock dividends (286) - - Proceeds from borrowings 2,200 1,400 500 Principal payments of debt (4,044) (4,797) (1,592) Amount due from ESOP, net of income tax - 185 92 --------- -------- -------- Net cash used in financing activities (2,130) (3,212) (1,000) --------- -------- -------- Net increase (decrease) in cash and cash equivalents 1,138 (391) (980) Cash and cash equivalents at beginning of period 23 414 1,394 --------- -------- -------- Cash and cash equivalents at end of period $ 1,161 23 414 ========= ======== ========
See accompanying notes to consolidated financial statements. -F8- 21 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Years ended December 31, 1995, 1994, and 1993 (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/water treatment and construction industries. The Company is headquartered in Dallas, Texas and operates lime and aggregate plants in Arkansas, Pennsylvania and Texas through its wholly owned subsidiaries, Arkansas Lime Company, Corson Lime Company and Texas Lime Company, respectively. (b) Principles of Consolidation The consolidated financial statements include the accounts of the Company and all of 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. Supplemental cash flow information is presented below:
1995 1994 1993 ---- ---- ---- Cash paid during the period for: Interest (net of amounts capitalized) $ 597 $ 811 $ 761 ====== ====== ====== Income taxes $ 789 $ 261 $ 58 ====== ====== ======
Supplemental information regarding non-cash investing and financing activities is present as follows: A secured promissory note for $530 was recorded in 1993. This transaction has been excluded from the consolidated statements of cash flows. (e) Trade Receivables Trade receivables are presented net of the related allowance for doubtful accounts, which totaled $115 and $231 at December 31, 1995, and 1994, respectively. -F9- 22 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:
1995 1994 ------ ------ Lime and limestone inventories: Raw materials $ 1,000 $ 714 Finished goods 2,436 2,440 ------- ------- 3,436 3,154 Service parts inventories 1,896 1,616 ------- ------- $ 5,332 $ 4,770 ======= =======
(g) Property, Plant and Equipment 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. (h) Other Assets Other assets consist of the following:
1995 1994 ------- ------- Assets held for sale $ 33 $ 34 Deferred stripping costs 783 472 Intangible asset, pension 165 166 Deferred financing costs 152 291 ------- ------ $ 1,133 $ 963 ======= ======
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. Deferred stripping costs are amortized by the unit-of-production method based on the estimated recoverable reserves in the underlying area. Deferred financing costs are expensed over the shorter of the life of the debt or expected life of the loan using the interest method. -F10- 23 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) (i) Earnings Per Share of Common Stock Earnings per share of common stock are based on the weighted average number of shares outstanding during each year, which amounted to 3,836,063 for the years ended December 31, 1995, 1994 and 1993. (j) 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. (2) Discontinued Operations In June 1989, the Company sold the net assets of its manufacturing division to an unrelated joint venture (Purchaser). As part of this sale, the Company received a $955 subordinated promissory note, the repayment of which was contingent upon the Purchaser having sufficient excess cash flow (as defined). The Company was not receiving interest on the note, collection of the principal was considered to be doubtful and, accordingly, at that time the note was not recorded. Subsequent to December 31, 1993, the Company recorded $200 in cash and a new subordinated note for $530 in substitution of the old note. The new note was secured by all of the assets of the Purchaser, and carried an interest rate of 6% per annum. The new note called for a monthly payment of $10 in interest and principal, and a final payment of $17 at the end of the 60th month. The new note was recorded as income from discontinued operations in 1993. The Purchaser paid the balance of the note in the fourth quarter of 1995. (3) Gain on Sale of Virginia Lime Company Assets Effective July 15, 1992, substantially all of the assets and business of Virginia Lime Company (VLC) were sold to Eastern Ridge Lime Company, L.P. (Eastern Ridge), an unrelated company. At the time of the sale, a $500 reserve for post-closing adjustments was established. Potential post-closing adjustments included possible additional expenditures for claims relating to a water supply system, workers' compensation matters, environmental matters, representations and warranties made to Eastern Ridge on various issues, employee benefit matters, legal fees and other professional charges. Other than a $50 payment in 1993, in connection with the water supply system, Eastern Ridge asserted no claims for adjustment. The Company recorded a benefit of $425 in the second quarter of 1994, upon payment of certain legal and other expenses and expiration of the post-closing obligations. The Company dissolved this subsidiary in 1995. -F11- 24 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) (4) Long-Term Debt In October 1993, the Company entered into a financing agreement with a commercial bank to replace its then-existing borrowings. The agreement provided for a 5-year $8,000 Term Loan with a monthly principal repayment of $95, with the remaining principal due in September 1998. The agreement also provided for a 2-year $6,000 Revolving Credit. Both are secured by substantially all of the Company's assets. The Term Loan originally carried an interest rate of Prime plus 1%, and the Revolving Credit carried an interest rate of Prime plus 3/4%, with a 1/2% fee on the unused Revolving Credit loan. In February 1994, the Company fixed the interest rate on the Term Loan at 7.95% per annum through February 1997. In September 1995, the loan agreements were amended to extend the Revolving Credit maturity date to November 1997. For the period of January 1 to September 29, 1995, the Term Loan, as amended, carried an interest rate of Prime plus 1/2%, and the Revolving Credit carried an interest rate of Prime plus 1/4%. In addition, effective September 29, 1995, the Term Loan carries an interest rate of Prime plus 1/4%, and the Revolving Credit carries an interest rate of Prime. The new Term Loan rate will go into effect after the fixed term rate of 7.95% ends in February 1997. The terms of the financing agreements contain, among other provisions, requirements for maintaining defined levels of working capital, net worth, financial ratios and capital expenditure limitations. The covenants restrict incurrence of debt, liens and lease obligations, mergers, and consolidation or acquisition of assets. A summary of Long-term debt is as follows:
1995 1994 ------- ------- Term Loan $ 5,524 $ 6,667 Revolving Credit - 701 ------- ------- Subtotal 5,524 7,368 Less current installments 1,143 1,143 ------- ------- Long-term debt, excluding current installments $ 4,381 $ 6,225 ======= =======
Amounts payable on long-term debt in 1996 and thereafter are: 1996, $1,143; 1997, $1,143; 1998, $3,238. (5) Federal and State Income Taxes Income tax expense (benefit) for the years ended December 31, 1995, 1994 and 1993 were as follows:
1995 1994 1993 ------- ------ ------ Current - federal $ 743 $ 156 $ - Current - state and local 279 116 27 ------- ----- ----- 1,022 272 27 ======= ===== ===== Income tax expense (benefit) on income (loss) from continuing operations 1,022 272 (76) Income tax expense on income from discontinued operations - - 103 ------- ----- ----- $ 1,022 $ 272 $ 27 ======= ===== =====
-F12- 25 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) A reconciliation of the computed "expected" federal and state income tax expense (benefit) on income (loss) from continuing operations to income taxes at the effective tax rates is as follows:
Year Ended Year Ended Year Ended December 31, 1995 December 31, 1994 December 31, 1993 ------------------- -------------------- ----------------------- Percent Percent Percent of pretax of pretax of pretax Amount income Amount income Amount loss -------- ---------- --------- ---------- ---------- ---------- Computed "expected" tax expense (benefit) $1,796 34.0 % $ 745 34.0 % $ (176) 34.0 % Increase (reductions) in taxes resulting from: General business credits carryforwards (248) (4.6) (130) (6.0) - - Tax benefit not currently utilizable - - - - 413 79.8 Excess of statutory depletion over cost depletion (612) (11.6) (408) (18.6) (340) (65.7) State income taxes, net of federal income tax benefit 176 3.3 77 3.5 18 3.4 Other (90) (1.7) (12) (0.5) 9 1.8 ------ ------ ----- ------ ------ ------ Taxes on income (loss) from continuing operations $1,022 19.4 % 272 12.4 % (76) (14.7)% ====== ====== ===== ====== ====== ======
At December 31, 1995, the Company had deferred tax liabilities of $653, deferred tax assets of $4,188 and a valuation allowance of $3,535. The principal temporary difference related to the deferred tax liabilities is depreciation ($653). The principal temporary differences related to the deferred tax assets were net operating loss (NOL) carryforwards ($1,047), general business credits ($510), certain financial statement accruals ($656) and alternative minimum tax credit carryforwards ($1,975). At December 31, 1994, the Company had deferred tax liabilities of $700, deferred tax assets of $4,508 and a valuation allowance of $3,808. The principal temporary difference related to the deferred tax liability is depreciation ($700). The principal temporary differences related to the deferred tax assets were NOL carryforwards ($1,983), general business credit ($756), certain financial statement accruals ($785) and alternative minimum tax credit carryforwards ($984). The Company has NOL carryforwards for tax purposes of $2,755 which will, if unused, expire in 2006 ($1,387), and 2008 ($1,368). General business credits of $510 are available to reduce the Company's federal income tax, which expire starting 1997 through 2001. Deferred tax assets have been reduced by a valuation allowance as realization of some portion of these future tax benefits is dependent on generating sufficient taxable income. Favorable resolution of these uncertainties would result in the reduction of the valuation allowance. -F13- 26 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) (6) Employee Retirement Plans The Company has a noncontributory defined benefit pension plan covering substantially all union employees of its wholly-owned subsidiary, Corson Lime Company. Benefits for the Corson Lime Union Pension Plan (Corson Plan) are based on certain multiples of years of service. The Company's funding policy is to contribute annually not less than the minimum required nor more than the maximum amount that can be deducted for Federal income tax purposes. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future. The Company funded pension costs of $127 for 1995, $96 for 1994 and $96 for 1993. A summary of the funding status of the Corson Plan and the amounts recognized in the consolidated balance sheets are as follows:
1995 1994 -------- -------- Actuarial present value of accumulated benefit obligation: Vested $ 1,347 $ 1,243 Non-vested 6 1 ------- ------- Total $ 1,353 $ 1,244 ======= ======= Projected benefit obligation $(1,353) $(1,244) Plan assets at fair value, primarily listed securities and short-term investments 800 700 ------- ------- Projected benefit obligation in excess of plan assets (553) (544) Unrecognized net loss from past experience different from that assumed 252 223 Unrecognized net obligation at transition, being recognized over 15 years 9 11 Prior service cost not yet recognized in net periodic pension cost 156 155 Adjustment to recognize minimum liability (417) (389) ------- ------- Liability recognized in the consolidated balance sheet $ (553) $ (544) ======= =======
A summary of the components of net periodic pension expense for the Corson Plan follows:
December 31, ----------------------------------- 1995 1994 1993 ------ ------- ------- Service cost - benefits earned during the period $ 41 $ 48 $ 43 Interest cost on projected benefit obligation 100 95 91 Actual return on plan assets (32) (30) (71) Net liability deferred for later recognition (33) (30) 18 Amortization of unrecognized net liability 10 5 2 Amortization of unrecognized prior service cost 23 23 23 ------ ------ ------- Net periodic pension expense $ 109 $ 112 $ 106 ====== ====== ======= 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%
The Company also has a contributory retirement (401k) savings plan for nonunion employees. The Company contributions to the plan were $58 during 1995, $23 during 1994 and $26 during 1993. The Company has a contributory retirement (401k) savings plan for union employees of Texas Lime Company. The Company contributions to this plan were $12 in 1995, $11 in 1994 and $12 in 1993. -F14- 27 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) In December 1986, the Company purchased 1,550,000 shares of its outstanding common stock for $10.50 per share. Subsequent to that purchase, 200,000 shares (300,000 shares after stock split) were sold to the Employee Stock Ownership Plan (ESOP) for $8.20 per share. The Company obtained a note receivable from the ESOP for the purchase of the shares, which was classified as a reduction of stockholders' equity. As of December 1994, the Company made all of the necessary contributions to the ESOP to repay all principal and interest due on the note. Through December 31, 1994, the Company contributed to the ESOP which covers substantially all full-time nonunion employees. The ESOP is designed to invest primarily in the Company's common stock. Contributions to the ESOP are made at the option of the Company, except for certain contributions which were required in order for the ESOP to repay the note receivable to the Company. The Company did not make a contribution in 1995 and contributed $205 during each of the years 1994 and 1993. (7) Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses for 1993 include $391 for payments related to the termination of employees. In 1993, SG&A includes $215 of bank fees and professional charges incurred in connection with a proposed ESOP offer to buy the then-majority owner's shares in the Company and the related financing of the then-existing borrowings. In May 1993, the then-majority shareholder sold its shares, and, as a consequence, the proposed ESOP offer was abandoned. SG&A expense also includes change-in-control payments of $177 made in May 1993. (8) Stock Option Plan The Company has a stock option plan under which options for shares of common stock may be granted to key employees. As of December 31, 1995, the Company has granted options to purchase a total of 355,000 shares at a range of $4.75 to $8.25 per share, the fair market value of the Company's common stock on the date of grant. 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, 1995, 25,000 shares are available for future grant. (9) 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 $232 for 1995, $134 for 1994 and $213 for 1993. As of December 31, 1995, future minimum payments under noncancelable operating leases are as follows: 1996, $81; 1997, $77; 1998, $75; and 1999, $36. -F15- 28 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) As of December 31, 1993, the Company reached agreements to settle two lawsuits styled Rangaire Company v. Rangaire Corporation and Cameron Energy Company v. Scottish Heritable, Inc. In settlement of both lawsuits, the Company and the plaintiffs entered into mutual releases and agreement for dismissal with prejudice of all litigation for claims of any kind. In exchange, the Company (a) agreed to the substitution for an existing unsecured subordinated cash flow promissory note of $955 payable to it by Rangaire Company, bearing interest at 10% per annum, of a new secured subordinated promissory note for $530, bearing interest at 6% per annum, and (b) received $200 in cash from Rangaire Company to be reimbursed to Cameron Energy up to $200 for clean-up costs incurred with regard to a parcel of land sold in 1989. In 1993, the Company accrued $170 for potential claims by Cameron Energy. The unsecured $955 cash flow promissory note previously was not recognized as income. The new $530 secured promissory note and the $200 cash payment were recorded in discontinued operations income in 1993. In 1994, the Company reimbursed Cameron Energy $165,000 for the clean-up costs. The balance remaining on the promissory note as of December 31, 1994 of $447 was completely repaid in the fourth quarter of 1995. The Company is party to other lawsuit 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. (10) Summary of Quarterly Financial Data (unaudited)
March 31, June 30, Sep. 30, Dec. 31, 1995 1995 1995 1995 -------- -------- -------- -------- Revenues $8,649 $ 11,458 $ 11,106 $ 10,206 ====== ======== ======== ======== Gross profit 1,993 3,242 3,001 2,611 ====== ======== ======== ======== Net income 426 1,440 1,535 860 ====== ======== ======== ======== Net income per share of common stock $ .11 $ .38 $ .40 $ .22 ====== ======== ======== ========
March 31, June 30, Sep. 30, Dec. 31, 1994 1994 1994 1994 -------- -------- -------- ---------- Revenues $ 6,763 $ 10,165 $ 10,534 $ 9,403 ======= ======== ======== ======= Gross profit 709 2,327 2,910 1,683 ======= ======== ======== ======= Net income (loss) (726) 1,154 1,099 389 ======= ======== ======== ======= Net income (loss) per share of common stock $ (.19) $ .30 $ .29 $ .10 ======= ======== ======== =======
-F16- 29 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. The information required in response to Item 9 was previously reported in the Company's Current Report on Form 8-K dated October 28, 1994. 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 Shareholders", and "Shareholdings of Company Directors and Executive Officers" in the Proxy Statement for the Company's 1996 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, 1996. 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 Report of Independent Auditors Consolidated Financial Statements: Consolidated Balance Sheets as of December, 31, 1995 and 1994; Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993; Consolidated Statements of Stockholders' Equity for the years ended December, 31, 1995, 1994 and 1993; Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993; 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. -11- 30 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) Summary of the Company's Profit Sharing Bonus Plan (incorporated by reference to Exhibit 10(c) to the Company's Annual Report on Form 10-K for the fiscal year ended July 31,1981, File Number 0-4197). 10(b) United States Lime & Minerals, Inc. Employee Stock Ownership Plan, as restated effective August 1, 1989. 10(c) Rangaire Employee 401(k) Profit Sharing Plan effective as of August 1, 1983 (incorporated by reference to Exhibit 10(d) to the Company's Annual Report on Form l0-K for the fiscal year ended July, 31, 1983, File Number 0-4197). 10(d) Amendments Nos. First, Second, and Third to Rangaire Employee 401(k) Profit Sharing Plan (incorporated by reference to Exhibit 10(e) to the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 1986, File Number 0-4197). 10(e) Amendment No. Fourth to Rangaire Employee 401(k) Profit Sharing Plan effective March 1, 1987 (incorporated by reference to Exhibit 10(g) to the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 1987, File Number 0-4197). 10(f) Amendment No. Fifth to Rangaire Employees 401(k) Profit Sharing Plan effective as of July 14, 1992 (incorporated by reference to Exhibit 19(g) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File Number 0-4197). 10(g) 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(h) Executive Retention Agreements dated as of June 10, 1992 between the Company and certain officers of the Company (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(i) Employment Agreements between the Company and certain officers of the Company (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(j) 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). -12- 31 10(k) Loan and Security Agreement dated October 20, 1993 among Scottish Heritable, Inc. and subsidiaries and CoreStates Bank, N.A. (incorporated by reference to Exhibit 10(u) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File Number 0-4197). 10(l) Stock Purchase Agreement dated October 23,1986 between Rangaire Corporation and InterFirst Bank Fort Worth, N.A. as trustee of the Rangaire Corporation Employee Stock Ownership Trust (incorporated by reference to Exhibit (c) (2) to the Company's Tender Offer Statement on Schedule 13E-4 for a tender offer first published sent or given to security holders on October 30, 1986, File Number 0-4197). 10(m) Purchase and Assumption Agreement dated as of May 31, 1989 between Rangaire Corporation and Rangaire Company (incorporated by reference to Exhibit A to the Company's Current Report on Form 8-K dated June 5, 1989, File Number 0-4197). 10(n) Asset Purchase Agreement dated as of June 5, 1989 by and between Dravo Lime Company and Texas Lime Company (incorporated by reference to Exhibit B to the Company's Current Report on Form 8-K dated June 5, 1989, File Number 0-4197). 10(o) Asset Purchase Agreement dated as of July 6, 1989 by and between Cadenhead Construction Company, Inc., Cadenhead Rangaire, Inc. and Rangaire Corporation (incorporated by reference to Exhibit A to the Company's Current Report on Form 8-K dated July 7, 1989, File Number 0-4197). 10(p) Asset Purchase Agreement dated as of July 13, 1992 among Eastern Ridge Lime Company, L.P., Virginia Lime Company, Eastern Ridge Lime, Inc., and Scottish Heritable, Inc. (incorporated by reference to Exhibit 2 to the Company's Current Report on Form 8-K dated July 15, 1992, File Number 0-4197). 10(q) Agreement and Release dated October 29, 1993 between Scottish Heritable, Inc. and Peter C. Timms (incorporated by reference to Exhibit 10(w) to the Company's Annual Report on Form 10-K for the fiscal year ended December, 31, 1993, File Number 0-4197). 10(r) Employment Agreement dated as of September 27, 1993 between Scottish Heritable, Inc. 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). 10(s) Employment Agreement dated November 24, 1993 between Scottish Heritable, Inc. and Robert K. Murray (incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994, File Number 0-4197). 10(t) First Amendment to Term Note dated as of March 1, 1994, among United States Lime & Minerals, Inc. and subsidiaries and CoreStates Bank, N.A. (incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,1994, File Number 0-4197). 10(u) Amendment No. 1 to Loan and Security Agreement dated as of December 23, 1994, among United States Lime & Minerals, Inc. and subsidiaries and CoreStates Bank, N.A. (incorporated by reference to Exhibit 10(y) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, File Number 0-4197). -13- 32 10(v) Amendment No. 2 to Loan and Security Agreement dated as of April 28, 1995, among United States Lime & Minerals, Inc. and subsidiaries and CoreStates Bank, N.A. (incorporated by reference to Exhibit 10(z) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, File Number 0-4197). 10(w) Amendment No. 3 to Loan and Security Agreement dated as of September 29, 1995, among United States Lime & Minerals, Inc. and subsidiaries and CoreStates Bank, N.A. (incorporated by reference to Exhibit 10(aa) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, File Number 0-4197). 11 Statement regarding computation of per share earnings (loss). 16 Letter dated November 3, 1994, from Aronson, Fetridge & Weigle to the Securities and Exchange Commission, stating whether it agrees with the statements made by the Company in the Company's Current Report on Form 8-K dated October 28, 1994, concerning its dismissal as the Company's principal accountant (incorporated by reference to Exhibit 16 to the Company's Current Report on Form 8-K dated October 28, 1994, File Number 0-4197). 21 Subsidiaries of the Company. 23(a) Consent of Independent Auditors 23(b) Consent of Independent Auditors 27 Financial Data Schedule - ----------------------- Exhibits 10(a) through 10(j) and 10(q) through 10(s) 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 1995. -14- 33 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: February 28, 1996 By: /s/ Robert F. Kizer -------------------------------------- Robert F. Kizer, 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: February 28, 1996 By: /s/ Robert F. Kizer --------------------------------------- Robert F. Kizer, President, Chief Executive Officer, and Director (Principal Executive Officer) Date: February 28, 1996 By: /s/ Timothy W. Byrne --------------------------------------- Timothy W. Byrne, Senior Vice President of Finance & Admin., Chief Financial Officer, Treasurer, Secretary and Director (Principal Financial Officer) Date: February 28, 1996 By: /s/ Larry T. Ohms --------------------------------------- Larry T. Ohms, Corporate Controller and Assistant Treasurer (Principal Accounting Officer) Date: February 28, 1996 By: /s/ Edward A. Odishaw --------------------------------------- Edward A. Odishaw, Director and Chairman of the Board Date: February 28, 1996 By: /s/ Antoine M. Doumet --------------------------------------- Antoine M. Doumet, Director and Vice Chairman of the Board Date: February 28, 1996 By: /s/ John J. Brown --------------------------------------- John J. Brown, Director Date: February 28, 1996 By: /s/ Wallace G. Irmscher --------------------------------------- Wallace G. Irmscher, Director Date: February 28, 1996 By: /s/ Robert J. Smith --------------------------------------- Robert J. Smith, Director
-15- 34 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 a list of these exhibits see Item 14 hereof. The following exhibits are being filed herewith:
Exhibit No. Exhibit ------------------------------------------------------ 10(b) United States Lime & Minerals, Inc. Employee Stock Ownership Plan, as restated effective August 1, 1989. 11 Statement regarding computation of per share earnings (loss). 21 Subsidiaries of the Company. 23(a) Consent of Independent Auditors. 23(b) Consent of Independent Auditors. 27 Financial Data Schedule.
EX-10.(B) 2 EMPLOYEE STOCK OWNERSHIP PLAN 1 EXHIBIT 10(b) UNITED STATES LIME & MINERALS, INC. EMPLOYEE STOCK OWNERSHIP PLAN 2 UNITED STATES LIME & MINERALS, INC. EMPLOYEE STOCK OWNERSHIP PLAN TABLE OF CONTENTS ARTICLE I INTRODUCTION 1 Section 1.01 Background and Effective Date 1 Section 1.02 Purpose 1 Section 1.03 Interpretation 2 ARTICLE II DEFINITIONS 2 ARTICLE III ELIGIBILITY AND PARTICIPATION 13 Section 3.01 Eligibility Requirements 13 Section 3.02 Excluded Employees 13 Section 3.03 Participation 13 Section 3.04 Special Provisions for Participants Who Enter the Armed Forces 14 ARTICLE IV CONTRIBUTIONS 14 Section 4.01 Employer Contributions 14 Section 4.02 Employee Contributions 15 Section 4.03 Rollover Contributions 15 Section 4.04 Trustee-to-Trustee Transfers 15 Section 4.05 Deduction Limitation 15 Section 4.06 Investment of Employer Contributions 15 Section 4.07 Diversification of Rights 16 Section 4.08 Acquisition Loans 18 Section 4.09 Accounting for Financed Shares 21 ARTICLE V ALLOCATIONS, VALUATION, AND VESTING 21 Section 5.01 Allocation of Employer Contributions and Forfeitures 21
i 3 Section 5.02 Participants Eligible to Receive and Allocation 21 Section 5.03 Allocation Limitations 21 Section 5.04 Allocation of Financed Shares 27 Section 5.05 Allocation of Cash Dividends 28 Section 5.06 Allocation of Stock Dividends 28 Section 5.07 Allocation of Income 29 Section 5.08 Adjustments for Allocation Error 29 Section 5.09 Valuations 29 Section 5.10 Vesting 29 ARTICLE VI DISTRIBUTIONS 32 Section 6.01 Distributions While In-Service 32 Section 6.02 Distributions Upon Separation from Service - Small Account Balances 32 Section 6.03 Distributions Upon Separation from Service - Account Balances of $3,500 33 Section 6.04 Distributions Upon Retirement 33 Section 6.05 Distributions Upon Death 33 Section 6.06 Distributions Upon Disability 34 Section 6.07 Beneficiary Provisions 34 Section 6.08 Consent of the Participant Required for Distribution of Account Balances Greater than $3,500 35 Section 6.09 Commencement of Benefits 36 Section 6.10 Required Distributions 36 Section 6.11 Financed Shares 36 Section 6.12 Form of Distribution 36 Section 6.13 Method of Payment 37 Section 6.14 Trustee-to-Trustee Transfers 37 Section 6.15 Rollovers to Other Plans or IRAS 38 ARTICLE VII VOTING RIGHTS OF COMPANY STOCK 39 Section 7.01 Voting Rights 39 Section 7.02 Notice Required 39 ARTICLE VIII PLAN ADMINISTRATION 39
ii 4 Section 8.01 Duties of the Company 39 Section 8.02 The Committee 40 Section 8.03 Appointment of Advisor 40 Section 8.04 Powers and Duties of the Committee 40 Section 8.05 Organization and Operation 41 Section 8.06 Claims Procedure 41 Section 8.07 Records and Reports 42 Section 8.08 Liability 43 Section 8.09 Reliance and Statements 43 Section 8.10 Remuneration and Bonding 43 Section 8.11 Committee Decisions Final 44 ARTICLE IX TRUST AGREEMENT 44 Section 9.01 Establishment of Trust 44 Section 9.02 Contributions to Trustee 44 Section 9.03 Purpose of the Trust 44 Section 9.04 Distributions 45 Section 9.05 Exclusive Benefit 45 Section 9.06 Expenses of the Plan and Trust 46 Section 9.07 Duties and Responsibilities of Trustee 46 Section 9.08 Specific Powers and Duties of Trustee 47 Section 9.09 Investment Manager 50 Section 9.10 Compensation of Trustee and Agents 50 Section 9.11 Reports of Trustee 50 Section 9.12 Resignation, Removal, and Substitution of Trustee 51 Section 9.13 The Committee 51 Section 9.14 Amendment and Termination 51 Section 9.15 Irrevocability 52
iii 5 Section 9.16 Parties to the Trust Agreement 52 Section 9.17 Trustee Action 53 ARTICLE X AMENDMENT, TERMINATION, AND MERGER 53 Section 10.01 Amendment 53 Section 10.02 Termination 53 Section 10.03 Merger, Consolidation, Transfer 54 ARTICLE XI TOP-HEAVY PROVISIONS 54 Section 11.01 Applicability 54 Section 11.02 Top-Heavy Definitions 54 Section 11.03 Minimum Allocation 57 Section 11.04 Nonforfeitability of Minimum Allocation 58 Section 11.05 Allocation Limitations 58 Section 11.06 Top-Heavy Vesting 58 ARTICLE XII GENERAL PROVISIONS 59 Section 12.01 Governing Law 59 Section 12.02 Power to Enforce 59 Section 12.03 Alienation of Benefits 59 Section 12.04 Not an Employment Contract 59 Section 12.05 Discretionary Acts 60 Section 12.06 Interpretation 60 ARTICLE XIII PARTICIPATING EMPLOYERS 60 Section 13.01 Adoption by Other Employers 60 Section 13.02 Requirements of Participating Employers 60 Section 13.03 Designation of Agent 61 Section 13.04 Participating Employer's Contribution 61 Section 13.05 Discontinuance of Participation 61
iv 6 Section 13.06 Committee's Authority 62 ARTICLE XIV SIGNATURE PAGE 62
v 7 ARTICLE I INTRODUCTION SECTION 1.01 BACKGROUND AND EFFECTIVE DATE. The Company established the Rangaire Corporation Employee Stock Ownership Plan (the "Plan") to enable Participants to share in the growth and prosperity of the Company and to provide Participants with an opportunity to accumulate capital for their future economic security effective as of August 1, 1975. The Plan has been amended from time to time, with a total of five amendments through 1984, and was restated and amended to comply with the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code of 1954, as amended, effective August 1, 1985. The Company now desires to restate and amend the Plan to reflect applicable changes in the law and to change the name of the Plan to reflect the change in corporate name.Therefore, the Company hereby amends and restates the Plan as the United States Lime & Minerals, Inc. Employee Stock Ownership Plan, effective as of August 1, 1989 (except as otherwise provided herein). The terms of this document set forth the controlling provisions of the Plan for all persons who are eligible Employees on or after the Effective Date; provided, however, that to the extent required under section 411(d)(6) of the Code and related Regulations, the applicable provisions of the preceding Plan documents are incorporated herein by reference. Except as may be required by ERISA or the Code, the rights of any person whose status as an Employee has terminated shall be determined pursuant to the Plan as in effect on the date such employment terminated, unless a subsequently adopted provision of the Plan is made specifically applicable to such person. SECTION 1.02 PURPOSE. The purpose of the Plan is to reward eligible Employees of the Employers for their loyal and faithful service by providing them with an opportunity to become stockholders of the Company. The Plan is designed to invest primarily in Company Stock. The benefits provided by the Plan will be paid from the Trust and will be in addition to the benefits eligible Employees are entitled to receive under any other programs of the Employers and from the federal Social Security Act. The Plan and the Trust are established and shall be maintained for the exclusive benefit of the eligible Employees of the Employers and their Beneficiaries. The Plan is intended to be qualified under section 401(a) of the Code and the Trust under the Plan is intended to be exempt from tax under section 501(a) of the Code. The Plan also is intended to be a stock bonus plan qualified under section 401(a) of the Code and an ESOP. The Plan is permitted to borrow funds to finance the acquisition of Company Stock. Any loans made to the Plan to finance the acquisition of Company Stock must meet the requirements of an Acquisition Loan, as defined in Section 2.02 of the Plan. 1 8 SECTION 1.03 INTERPRETATION. Throughout the Plan, certain words and phrases have meanings which are specifically defined for purposes of the Plan. These words and phrases can be identified in that the first letter of the word or words in the phrase are capitalized. The definitions of these words and phrases are principally set forth in Article II of the Plan. Wherever appropriate, pronouns of any gender shall be deemed synonymous as shall singular and plural pronouns. ARTICLE II DEFINITIONS When used herein the following words and phrases shall have the meaning set forth below: SECTION 2.01 ACCOUNTS. "Accounts" or "Account" means the interest of a Participant in the assets of the Trust. Each Participant's interest shall be segregated into the following account(s) which shall reflect, in addition to contributions allocated thereto, earnings, gains, losses, and expenses: a. Company Stock Account. The separate account maintained for a Participant reflecting Company Stock allocated to the Participant and any earnings, gains, losses, and expenses thereon. b. Other Investments Account. The separate account maintained for a Participant reflecting investments of the Plan other than Company Stock, attributable to Employer Contributions contributed to the Plan after the Effective Date which are not invested in Company Stock and any earnings, gains, losses, and expenses thereon. c. Special Stock Account. The portion of the Company Stock Account maintained for Participants to whom shares of Company Stock attributable to specially designated Employer contributions were allocated. The Special Stock Account was initially established and maintained to qualify the Plan as a tax credit employee stock ownership plan. Contributions are no longer allocated to the Special Stock Account, and the balance of the Special Stock Account is 100% vested notwithstanding any provision of this Plan to the contrary. The Committee may in its discretion, establish additional accounts and subaccounts within each separate account. 2 9 SECTION 2.02 ACQUISITION LOAN. "Acquisition Loan" means a loan (or other extension of credit) made to the Trust to finance the acquisition of Company Stock, which satisfies the requirements of section 2550.408b-3 of the Department of Labor regulations, section 54.4975-7(b) of the Regulations and Section 4.08 of the Plan. SECTION 2.03 AFFILIATE. "Affiliate" means a member of a "controlled group of corporations," within the meaning of section 414(b) of the Code which includes the Company; any unincorporated trade or business which is in common control with the Company as determined in accordance with section 414(c) of the Code; or any organization which is a member of an affiliated service group with the Company within the meaning of section 414(m) of the Code; and any other organization required to be aggregated with the Company pursuant to section 414(o) of the Code. SECTION 2.04 ALLOCATED SHARES. "Allocated Shares" mean shares of Company Stock that have been allocated to and are held in Participants' Company Stock Accounts. SECTION 2.05 BENEFICIARY. "Beneficiary" means the person or persons or a trust affirmatively designated by the Participant to receive all or a portion of such Participant's benefits, in accordance with the provisions of Article VI, in the event the Participant dies. SECTION 2.06 CODE. "Code" means the Internal Revenue Code of 1986, as amended from time to time. SECTION 2.07 COMMITTEE. "Committee" means the person or persons described in Section 8.02 of the Plan. 3 10 SECTION 2.08 COMPANY. "Company" means United States Lime & Minerals, Inc., and any successor through merger, consolidation, or purchase of substantially all of the assets of United States Lime & Minerals, Inc. which, within ninety (90) days after such succession, agrees to continue the Plan. SECTION 2.09 COMPANY STOCK. "Company Stock" means shares of common stock issued by the Company or by an Affiliate which is readily tradable on an established securities market. If there is no common stock which meets these requirements, "Company Stock" means shares of common stock issued by the Company or by an Affiliate having the greatest voting power and dividend rights and which constitute "employer securities" under section 409(l) of the Code and "qualifying employer securities" under section 4975(e)(8) of the Code and section 54.4975-12 of the Regulations. Noncallable preferred stock shall also constitute "Company Stock," if such stock is convertible at any time into stock which constitutes "Company Stock" and, if such conversion is at a conversion price which (as of the date of acquisition by the Plan) is reasonable. SECTION 2.10 COMPENSATION. "Compensation" means all remuneration paid to a Participant by the Employer during the Plan Year as wages within the meaning of section 3401(a) and all other payments of compensation to an Employee by the Employer during the Plan Year for which the Employer is required to furnish a Form W-2. Compensation is determined without regard to any rules under section 3401(a) of the Code that limit the remuneration included in wages based on the nature or location of the employment or the services performed. Compensation shall include any amount that, as a result of a salary reduction agreement, is not includible in a Participant's gross income under sections 125, 402(e)(3), 402(h) or 403(b) of the Code. Effective for Plan Years beginning on or after August 1, 1995, Compensation shall not include the amount of any bonus paid to a Participant during such Plan Year. The annual Compensation of each Participant taken into account under the Plan for any Plan Year beginning prior to January 1, 1994 shall not exceed $200,000, as adjusted by the Secretary of the Treasury in accordance with section 401(a)(17) of the Code. For Plan Years beginning on or after January 1, 1994, the Compensation Limit shall be $150,000 as adjusted by the Secretary of the Treasury in accordance with section 401(a)(17) of the Code ("Compensation Limit"). The Compensation Limit for a Plan Year shall be the Compensation Limit in effect for the calendar year in which the Plan Year begins. If Compensation is determined on the basis of a period of less than twelve (12) calendar months, then the 4 11 Compensation Limit is the Compensation Limit in effect for the calendar year in which the period begins multiplied by the ratio obtained by dividing the number of full months in the period by twelve (12). In determining the Compensation of a Participant for purposes of the Compensation Limit, 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 nineteen (19) before the close of the Plan Year. If as a result of the application of such rules the Compensation Limit is exceeded, then the limitation shall be prorated among the affected individuals in proportion to each such individual's Compensation as determined prior to the application of this limitation. SECTION 2.11 DEFINED BENEFIT PLAN. "Defined Benefit Plan" means a defined benefit plan within the meaning of section 3(35) of ERISA maintained by the Company or an Affiliate which is intended to meet the requirements of section 401(a) of the Code. SECTION 2.12 DEFINED CONTRIBUTION PLAN. "Defined Contribution Plan" means a defined contribution plan within the meaning of section 3(34) of ERISA maintained by the Company or an Affiliate which is intended to meet the requirements of section 401(a) of the Code. SECTION 2.13 DISABILITY. "Disability" means a physical or mental condition which, in the opinion of the Committee, totally and presumably permanently prevents a Participant from performing substantially the same duties assigned to such Participant by the Participant's Employer at the time such condition develops. A determination that a Disability exists shall be based upon competent medical evidence satisfactory to the Committee. The date any Participant's Disability occurs shall be deemed to be the date such condition is determined to exist by the Committee. SECTION 2.14 EARLY RETIREMENT DATE. "Early Retirement Date" means the first day of the month coinciding with or following the date on which a Participant attains fifty-five and (55) years of age and has completed at least ten (10) Years of Service with the Employer. "Early Retirement" shall refer to a Participant's retirement after his Early Retirement Date, but before attaining Normal Retirement Age. SECTION 2.15 EFFECTIVE DATE. Unless otherwise provided, "Effective Date" of this Plan means August 1, 1989. 5 12 SECTION 2.16 EMPLOYEE. "Employee" means any common law employee of the Employer. The term Employee shall not include any individual who is a Leased Employee. A "Leased Employee" means any person (other than an Employee of an Employer) who pursuant to an agreement between an Employer and any other person ("Leasing Organization") has performed services for such Employer (or for the recipient and related persons determined in accordance with section 414(n)(6) of the Code) 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 such Employer. SECTION 2.17 EMPLOYER. "Employer" means the Company and any Affiliate which adopts the Plan pursuant to Article XIV. The Company shall act as agent for each other participating Affiliate for purposes of this Plan. SECTION 2.18 EMPLOYER CONTRIBUTIONS. "Employer Contributions" means the contributions by the Employer as described in Section 4.01. SECTION 2.19 EMPLOYMENT COMMENCEMENT DATE. "Employment Commencement Date" means the date an Employee first performs an Hour of Service for an Employer. SECTION 2.20 ERISA. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. SECTION 2.21 ESOP. "ESOP" means an employee stock ownership plan that meets the requirements of section 4975(e)(7) of the Code and section 54.4975-11 of the Regulations. 6 13 SECTION 2.22 FINANCED SHARES. "Financed Shares" means shares of Company Stock acquired by the Trust with the proceeds of an Acquisition Loan. SECTION 2.23 FORFEITURES. "Forfeitures" means the non-Vested portion of a Participant's Account which is allocated to other Participants on account of a termination of employment by the Participant prior to the time such Participant becomes one hundred percent (100%) Vested in the Account. A Forfeiture occurs on the earlier of the last day of the Plan Year following the distribution of the entire Vested portion of a Participant's Account, or the last day of the Plan Year in which the fifth (5th) consecutive One-Year Break in Service occurs. SECTION 2.24 HIGHLY COMPENSATED EMPLOYEE. For purposes of this definition, Employer includes Affiliates that have not adopted the Plan. a. For Plan Years beginning prior to August 1, 1994, the term "Highly Compensated Employee" means any Employee who performs service for the Employer during the determination year (defined herein) and who, during the look-back year (defined herein): (1) received Compensation from the Employer in excess of $75,000 (as adjusted pursuant to section 415(d) of the Code); (2) received Compensation from the Employer in excess of $50,000 (as adjusted pursuant to section 415(d) of the Code) and was a member of the "top-paid group" as defined in section 414(q)(4) of the Code, for such year; or (3) was an officer of the Employer and received Compensation during such year that is greater than fifty percent (50%) of the dollar limitation in effect under section 415(b)(1)(A) of the Code. The term "Highly Compensated Employee" also includes: (1) Employees who are both described in the preceding sentence, if the term "determination year" is substituted for the term "look-back year" and the Employee is one of the one hundred (100) Employees who received the most Compensation from the Employer during the determination year; and (2) Employees who are five percent owners at any time during the look-back year or determination year. If no officer has satisfied the Compensation requirement of (3) above during either a determination year or look-back year, the highest paid officer for such year shall be treated as a Highly Compensated Employee. For this purpose, the "determination year" shall be the calendar year ending within the Plan Year. The "look-back year" shall be the twelve-month period immediately preceding the determination year. 7 14 The term "Highly Compensated Employee" also means any Employee who separated from service (or was deemed to have separated) prior to the determination year, performs no service for the Employer during the determination year, and was a highly compensated active Employee for either the separation year or any determination year ending on or after the Employee's fifty-fifth (55th) birthday. If any Employee is, during a determination year or look-back year, a family member of either a five percent (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 five-percent owner or top-ten Highly Compensated Employee shall be aggregated. In such case, the family member and five percent 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 five percent owner or top-ten Highly Compensated Employee. For purposes of this Section 2.24, family member includes the Spouse, lineal ascendants and descendants of the Employee or former Employee, and the Spouses of such lineal ascendants and descendants. The determination of who is a Highly Compensated Employee, including the determination of the number and identity of Employees in the top-paid group, the top one hundred (100) Employees, the number of Employees treated as officers and the Compensation that is considered, will be made in accordance with section 414(q) of the Code and the Regulations thereunder. b. For Plan Years beginning on August 1, 1994 and after, the term "Highly Compensated Employee" means any Employee who performs service for the Employer as of each July 31 who: (1) was a five percent owner of the Employer; (2) received Compensation from the Employer in excess of $75,000 (as adjusted pursuant to section 415(d) of the Code); (3) received Compensation from the Employer in excess of $50,000 (as adjusted pursuant to section 415(d) of the Code) and was a member of the "top-paid group" as defined in section 414(q)(4) of the Code, for such year; or (4) was an officer of the Employer and received Compensation during such year that is greater than fifty percent (50%) of the dollar limitation in effect under section 415(b)(1)(A) of the Code. If any Employee is a family member of either a five percent (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 five-percent owner or top- ten Highly Compensated Employee shall be aggregated. In such case, the family member and five percent 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 five percent owner or top-ten Highly Compensated Employee. For 8 15 purposes of this Section 2.24, family member includes the Spouse, lineal ascendants and descendants of the Employee or former Employee, and the Spouses of such lineal ascendants and descendants. The determination of who is a Highly Compensated Employee, including the determination of the number and identity of Employees in the top-paid group, the top one hundred (100) Employees, the number of Employees treated as officers and the Compensation that is considered, will be made in accordance with section 414(q) of the Code and the Regulations thereunder. SECTION 2.25 HOUR OF SERVICE. For purposes of this definition, Employer includes Affiliates which have not adopted the Plan. "Hour of Service" means: a. Each hour for which an Employee is paid or entitled to payment for the performance of duties for the Employer. However, for Plan Years ending on or prior to July 31, 1995, salaried Employees shall be credited with forty-five (45) Hours of Service for each week that such Employees are entitled to be credited with one Hour of Service under this Section 2.25. Beginning August 1, 1995, salaried Employees shall be credited with an Hour of Service for each hour such Employee is paid or entitled to payment for the performance of services. These hours will be credited to the Employee for the computation period in which the duties are performed. b. 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 five hundred one (501) Hours of Service will be credited under this paragraph for any single continuous period (whether or not such period occurs in a single computation period). Hours under this paragraph will be calculated and credited pursuant to section 2530.200b-2 of the Department of Labor regulations which is incorporated herein by this reference; and c. 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 will not be credited both under paragraph (a) or paragraph (b), as the case may be, and under this paragraph (c). These hours will be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement, or payment is made. 9 16 SECTION 2.26 LOAN SUSPENSE ACCOUNT. "Loan Suspense Account" means the Account to which the Company Stock acquired with the proceeds of an Acquisition Loan are initially allocated, as described in Section 5.04. SECTION 2.27 NON-HIGHLY COMPENSATED EMPLOYEE. The term "Non-Highly Compensated Employee" means an Employee who is not a Highly Compensated Employee. SECTION 2.28 NORMAL RETIREMENT AGE. "Normal Retirement Age" means age sixty-five (65). "Normal Retirement Date" shall mean the first day of the month which coincides with or, if none, next follows the sixty-fifth (65th) birthday of a Participant. "Normal Retirement" shall refer to a Participant's retirement after his Normal Retirement Date. SECTION 2.29 ONE-YEAR BREAK IN SERVICE. "One-Year Break in Service" means a twelve-consecutive-month period during which the Participant does not complete more than five hundred (500) Hours of Service. For purposes of this definition, Employer includes Affiliates which have not adopted the Plan. Solely for purposes of determining whether a break in service for participation and vesting purposes has occurred in a computation period, an individual who is absent from work for maternity or paternity reasons shall receive credit for the Hours of Service which would otherwise have been credited to such individual but for such absence, or in any case in which such hours cannot be determined, eight (8) Hours of Service per day of such absence. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (1) by reason of the pregnancy of the individual, (2) by reason of a birth of a child of the individual, (3) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement. The Hours of Service credited under this paragraph shall be credited (1) in the computation period in which the absence begins, if the crediting is necessary to prevent a break in service in that period, or (2) in all other cases, in the following computation period. However, no credit will be given for such absences from work, unless the Employee furnishes to the Committee such timely information as it may reasonably require to establish that the absence from work is for the reason(s) referred to above, and the number of days for which there was such an absence. 10 17 SECTION 2.30 PARTICIPANT. "Participant" means an Employee of the Employer who participates in the Plan under Article III; a former Employee who had participated in the Plan under Article III, and who continues to be entitled to a Vested benefit under the Plan; or a former Employee who has participated in the Plan under Article III, and who has not yet incurred a One-Year Break in Service. SECTION 2.31 PLAN. "Plan" means the United States Lime & Minerals, Inc. Employee Stock Ownership Plan and Trust, as set forth herein, and as may be amended from time to time. SECTION 2.32 PLAN YEAR. "Plan Year" means the twelve-consecutive-month period which begins on August 1, and each anniversary thereof. SECTION 2.33 REGULATIONS. "Regulations" means the regulations promulgated by the Secretary of the Treasury that pertain to the Code. SECTION 2.34 REQUIRED DISTRIBUTIONS. "Required Distribution" means the minimum required distribution to a Participant upon attaining age 70 1/2, as required under section 401(a)(9) of the Code and set forth in Section 6.10. SECTION 2.35 SPOUSE. "Spouse" means the Spouse or surviving Spouse of the Participant, provided that a former Spouse shall be treated as the Spouse or Surviving Spouse to the extent provided under a qualified domestic relations order as defined in section 414(p) of the Code. SECTION 2.36 TOP-HEAVY. For the definition of Top-Heavy and related terms, see Article XI. 11 18 SECTION 2.37 TRUST. "Trust" means the Trust as established in Article IXand maintained for purposes of the Plan which is administered by the Trustee in accordance with the provisions of the Trust agreement between the Company and the Trustee. SECTION 2.38 TRUSTEE. "Trustee" means the party or parties named under the Trust who shall have exclusive authority and discretion to manage and control the assets of the Plan, except to the extent the Plan expressly provides that the Trustee is subject to the direction of the Committee in accordance with a comprehensive basis of accounting determined by the Committee. SECTION 2.39 TRUST FUND. "Trust Fund" means all money and other property received or held by the Trustee, plus all income and gains and minus all losses, expenses, and distributions chargeable to the Trust. SECTION 2.40 UNALLOCATED SHARES. "Unallocated Shares" means shares of Company Stock that are being held in the Loan Suspense Account. SECTION 2.41 VALUATION DATE. "Valuation Date" means the last day of the Plan Year, and any other date specifically designated by the Committee, in its sole discretion, which is deemed appropriate or necessary in order to establish the current value of the Trust Fund under ERISA section 3(26) to value Trust assets, on which date the fair market value of Trust assets shall be determined. The designation of a special date by the Committee for valuation purposes shall not change the Valuation Date from the last day of the Plan Year and shall be in addition to such date, unless otherwise determined by the Employer or Committee. SECTION 2.42 VESTED. "Vested" means the nonforfeitable portion of any Account maintained on behalf of a Participant. 12 19 SECTION 2.43 YEAR OF SERVICE. For purposes of vesting, "Year of Service" means a Plan Year during which an Employee is credited with at least 1,000 Hours of Service. ARTICLE III ELIGIBILITY AND PARTICIPATION SECTION 3.01 ELIGIBILITY REQUIREMENTS. Except for Employees described in Section 3.02, all Employees shall be eligible to participate in the Plan. SECTION 3.02 EXCLUDED EMPLOYEES. Employees in a unit of Employees covered by a collective bargaining agreement between the Employer and Employee representatives, if retirement benefits were the subject of good faith bargaining, shall be excluded from the Plan. For this purpose, the term "employee representatives" does not include any organization more than half of whose members are Employees who are owners, officers, or executives of the Employer. SECTION 3.03 PARTICIPATION. a. An Employee shall become a Participant in the Plan on the first day of the Plan Year coinciding with or next following the Employee's Employment Commencement Date. b. In the event an Employee who is not a member of an eligible class of Employees becomes a member of an eligible class, such Employee will participate immediately. c. In the case of a Participant who terminates employment with the Employer and is subsequently reemployed by the Employer before a One-Year Break in Service occurs, such Participant shall continue to participate in the Plan in the same manner as if such termination had not occurred. 13 20 d. In the case of a Participant who terminates employment with the Employer and is subsequently reemployed by the Employer after incurring a One-Year Break in Service, such Participant shall begin participating in the Plan immediately upon such Participant's Employment Commencement Date. If the former Participant received a distribution of such Participant's entire Vested interest (including where the Participant had no Vested amount in such Participant's account) prior to reemployment, such Participant's forfeited Accounts shall be restored only if the Participant repays the full amount distributed before the earlier of five (5) years after the first date on which the Participant is subsequently reemployed by the Employer or the close of the first period of five (5) consecutive One-Year Breaks in Service commencing after the distribution. If a distribution occurs for any reason other than a separation from service, the time for repayment may not end earlier than five (5) years after the date of the distribution. In the event the former Participant repays the full amount distributed, the undistributed portion of the Participant's Accounts must be restored in full, unadjusted by gains or losses occurring after the Valuation Date preceding the distribution. SECTION 3.04 SPECIAL PROVISIONS FOR PARTICIPANTS WHO ENTER THE ARMED FORCES. If a Participant is absent from employment for voluntary or involuntary military service with the armed forces of the United States and returns to employment as an Employee within the period required under the law pertaining to veterans' reemployment rights, the Participant shall receive service credit for the period of absence from employment. ARTICLE IV CONTRIBUTIONS SECTION 4.01 EMPLOYER CONTRIBUTIONS. Each Plan Year the Employer, in its discretion, may make an Employer Contribution to the Trust, as the Board of Directors of such Employer shall determine. At the time of determining and authorizing any contribution hereunder, the Board of Directors of the Employer shall determine what portion, of such contribution is to be allocated between the other Investments Accounts and the Company Stock Account. Notwithstanding the ability of the Employer to make discretionary contributions to the Plan, the Employer shall be required to make cash contributions to the Plan in such amounts and at such times as may be needed to provide the Trustee with cash to pay any currently maturing obligations under an Acquisition Loan. Employer Contributions will be paid in cash, Company Stock, or other property as the Employer may, from time to time, determine. Company Stock and other property will be valued at their then fair market value. Notwithstanding the Employer's discretion with respect to the form of Employer Contribution, an Employer Contribution shall not be paid in any form which would make such contribution a prohibited transaction under section 406 of ERISA or section 4975 of the Code. 14 21 Notwithstanding any other Employer Contributions for any Plan Year, the Employer shall make such additional contributions as necessary to reinstate former Participant's Accounts pursuant to Section 3.03(d), and to meet the special dividend allocation requirement on Company Stock under Section 5.05(b). The Employer shall pay to the Trustee any discretionary contributions to the Plan for each Plan Year no later than the time prescribed for filing the Employer's federal income tax return, including extensions, for the tax year ending with or within such Plan Year. SECTION 4.02 EMPLOYEE CONTRIBUTIONS. Employee contributions are neither required nor permitted under the Plan. SECTION 4.03 ROLLOVER CONTRIBUTIONS. The Committee may in its discretion accept rollover contributions of assets from another plan, if the Participant demonstrates to the satisfaction of the Committee that such Plan satisfies the applicable requirements of section 401(a) of the Code. SECTION 4.04 TRUSTEE-TO-TRUSTEE TRANSFERS. The Committee may in its discretion accept a transfer of assets from another plan if the Participant demonstrates to the satisfaction of the Committee that such plan satisfies the applicable requirements of section 401(a) of the Code. However, transfers of funds to this Plan shall not be permitted, if such transfer is from a defined benefit plan, or from a defined contribution plan that is either subject to the funding standards of Code section 412 or other wise subject to the requirements of Code section 401(a)(11). SECTION 4.05 DEDUCTION LIMITATION. Employer Contributions for any Plan Year under this Article IV are conditioned on such contributions being deductible for such Plan Year under section 404 of the Code. SECTION 4.06 INVESTMENT OF EMPLOYER CONTRIBUTIONS. a. The Plan is designed to invest primarily in Company Stock. b. Employer contributions in cash and other cash received by the Trust Fund shall first be applied to pay any current obligations of the Trust. 15 22 c. With due regard to subparagraph (a) above, the Committee may also direct the Trustee to invest funds under the Plan in other property described in the Trust or in life insurance policies to the extent permitted by Article VII, or the Trustee may hold such funds in cash or cash equivalents. d. The Plan may not obligate itself to acquire Company Stock from a particular holder thereof at an indefinite time determined upon the happening of an event such as the death of the holder. e. The Plan may not obligate itself to acquire Company Stock under a put option binding upon the Plan. However, at the time a put option is exercised, the Plan may be given an option to assume the rights and obligations of the Employer under a put option binding upon the Employer pursuant to Section 4.08(i). f. The protections and rights set forth in Section 4.08(h) and 4.08(i) with respect to Company Stock acquired with the proceeds of an Acquisition Loan are nonterminable as set forth in section 54.4975-11(a)(3)(ii) of the Regulations. g. All purchases of Company Stock shall be made at a price which, in the judgment of the Committee, does not exceed the fair market value thereof. All sales of Company Stock shall be made at a price which, in the judgment of the Committee, is not less than the fair market value thereof. The valuation rule set forth in Section 5.09 shall be applicable. h. The Trustee may time the execution of purchases and sales of shares of Company Stock, for the purpose of limiting or spreading daily volume, or otherwise, as deemed in the best interests of the Participants and their Beneficiaries. SECTION 4.07 DIVERSIFICATION RIGHTS. a. Each Qualified Participant, as defined below, shall be permitted to direct the Plan as to the investment of up to twenty-five percent (25%) of such Participant's Accounts within ninety (90) days after the last day of each Plan Year during the Participant's Qualified Election Period, as defined below. Within ninety (90) days after the close of the last Plan Year in the Participant's Qualified Election Period, a Qualified Participant may direct the Plan as to the investment of up to fifty percent (50%) of the value of such Account balance. For the purposes of this Section 4.07: 1. "Qualified Participant" means a Participant who has attained age fifty-five (55) and who has completed at least ten (10) years of participation in the Plan and. 2. "Qualified Election Period" means the Plan Year and the five successive Plan Year periods following the Plan Year in which the Participant becomes a Qualified Participant. 16 23 b. The Qualified Participant's direction shall be provided to the Committee in writing; shall be effective no later than one hundred eighty (180) days after the close of the Plan Year to which the direction applies; and shall specify which, if any, of the options set forth in this Section 4.07 the Participant selects and the portion of his Vested Account balance to be invested in accordance with direction. c. The Qualified Participant, making the election provided in this Section 4.07 may select any of the following options: 1. At the election of the Qualified Participant, the Plan shall distribute (notwithstanding section 409(d) of the Code) the portion of the Participants Vested Account that is covered by the election made within ninety (90) days after the last day of the period during which the election can be made. Such distributions shall be subject to such requirements of the Plan concerning put options as would otherwise apply to a distribution of Company Stock from the Plan. This subsection (c)(1) shall apply notwithstanding any other provisions of the Plan other than such provisions as require the consent of the Participant to a distribution with a present value in excess of $3,500. If the Participant does not consent, such amount shall be retained in this Plan. 2. In lieu of a distribution under subsection (c)(1), the Qualified Participant who has the right to receive a cash distribution under subsection (c)(1) above may direct the Plan to transfer the portion of the Participant's Account that is covered by the election to any qualified plan of the Company which accepts such transfers, provided that such plan permits employee directed investment, such plan offers at least three (3) investment options other than Company Stock consistent with regulations to be issued by the Secretary of the Department of Labor and such plan does not invest in Company Stock to a substantial degree. Such transfer shall be made no later than ninety days after the last day of the period during which the election can be made. d. Pursuant to this Section 4.07, each Participant is authorized and empowered, in such Participant's sole and absolute discretion, to give directions to the Trustee in such form as the Trustee may require concerning the investment of the Participant's Account, which directions must be followed by the Trustee. Neither the Trustee nor any other persons including Committee or otherwise shall be under any duty to question any such direction of the Participant or to make any suggestions to the Participant in connection therewith, and the Trustee shall comply as promptly as practicable with directions given by the Participant hereunder. Any such direction may be of a continuing nature or otherwise and may be revoked by the Participant at any time in such form as the Trustee may require. The Trustee may refuse to comply with any direction from the Participant in the event the Trustee, in its sole and absolute discretion, deems such direction improper by virtue of applicable law. The Trustee shall not be responsible or liable for any loss or expense which may result from the Trustee's refusal or failure to 17 24 comply with any directions from the Participant. Any costs and expenses related to compliance with the Participant's directions shall be borne by the Participant's Account. SECTION 4.08 ACQUISITION LOANS. The Company may direct the Trustee to incur Acquisition Loans from time to time to finance the acquisition of Company Stock for the Trust or to repay a prior Acquisition Loan, provided such loan is primarily for the benefit of Participants and their Beneficiaries and such Acquisition Loan meets the following requirements: a. The terms of an Acquisition Loan, at the time the Acquisition Loan is made, must be at least as favorable to the Plan as the terms of a comparable loan resulting from arm's-length negotiations between independent parties. b. The Acquisition Loan shall be for a specific term, shall bear a reasonable rate of interest, and, except in the event of default, shall not be payable on demand. In determining what is a reasonable rate of interest, all relevant factors will be considered, including the amount and duration of the loan, the security and guarantee (if any) involved, the credit standing of the Plan and Trust and the guarantor (if any) and the interest rate prevailing for comparable loans. A variable rate of interest is permissible if determined to be reasonable. c. In the event of a default on the Acquisition Loan, the value of Trust Funds transferred in satisfaction of the loan shall not exceed the amount of the default. If the lender is a "disqualified person" (within the meaning of Code section 4975(e)(2)), or a party in interest (within the meaning of ERISA section 3(14)), the Acquisition Loan must provide for a transfer of Trust Funds, or plan assets upon default only upon and to the extent of the failure of the Plan to meet the payment schedule of the Acquisition Loan. d. The Acquisition Loan may require that the Company or an Affiliate guarantee repayment, and the Acquisition Loan may be secured by a collateral pledge of the Financed Shares so acquired (or Financed Shares acquired with a previous Acquisition Loan now repaid with the current Acquisition Loan proceeds). No other Trust Funds, or any assets of the Plan, may be pledged as collateral for an Acquisition Loan, and no lender shall have recourse against Trust Funds, or any assets of the plan, other than Financed Shares remaining subject to a pledge, other collateral given for the Acquisition Loan, Employer Contributions (other than contributions of Company Stock) made for the purpose of satisfying the Acquisition Loan, and earnings on such Financed Shares, Employer Contributions, and such other assets of the Plan, if any, as permitted recourse under Code section 4975. Any pledge of Financed Shares must specifically provide for the release of shares so pledged in accordance with Section 5.04. Such Financed Shares shall be allocated to Participants' Accounts, as provided in Article V. 18 25 e. Repayments of principal and interest on any Acquisition Loan shall be made by the Trustee (as directed by the Company or Committee) only from (1) Employer Contributions, paid in cash to enable the repayment of such Acquisition Loan; (2) Financed Shares or other collateral given for the loan; (3) earnings on such Employer Contributions and any cash dividends or other earnings received by the Trust on such Financed Shares; (4) earnings attributable to such permissible collateral other than Financed Shares; and (5) the proceeds of a subsequent Acquisition Loan incurred to repay an existing Acquisition Loan. The Committee shall instruct the Trustee as to the priority and source of Acquisition Loan repayments. f. The repayments made with respect to an Acquisition Loan during a Plan Year must not exceed an amount equal to the sum of Employer Contributions and earnings received during or prior to such Plan Year, less such payments in prior Plan Years. Such Employer Contributions and earnings must be accounted for separately in the books of account of the Plan until the Acquisition Loan is repaid. g. All proceeds of an Acquisition Loan shall be used within a reasonable time after receipt by the Trustee only to purchase Company Stock, or to repay amounts under any Acquisition Loan. h. Except as provided herein or in Section 4.08(i) below, no Company Stock acquired with the proceeds of a loan described herein may be subject to a put, call, or other option, or buy-sell or similar arrangement while held by and when distributed from the Plan or its related Trust, whether or not the Plan is then an "ESOP" within the ambit of section 54.4975-7(b)(4) of the Regulations, unless specifically required or permitted by such Regulations. A holder ("Shareholder") of shares of Company Stock which have been distributed by the Trustee, may not, for valuable consideration, sell, assign, pledge, convey in trust, or otherwise transfer or encumber in any manner or by any means whatever ("Transfer") any interest in all or any part of Company Stock held by him, except in accordance with the terms and conditions of this Section 4.08(h), if at the time of such Transfer the Company Stock is not publicly traded. Provided, however, "Transfer" shall not include any transfer of such shares by reason of a Participant's death, any transfer to an alternate payee, or the transfer by a Participant or his surviving Spouse of the shares to an individual retirement account described in Code section 408(a) in a transaction described in Code section 402(a)(5). Upon the receipt of the Notice described below, the Company shall have the first option to purchase the shares to be Transferred by the Shareholder, and, if that option is not exercised in full by the Company, then Trustee shall have the option to purchase shares not purchased by the Company. Prior to any proposed Transfer, the Shareholder must first give written notice ("Notice") to the Committee that he intends to Transfer his shares of Company Stock or any interest therein, which Notice shall state the number of shares to be Transferred, the name of the proposed transferee, the consideration for the proposed Transfer and the terms and conditions of the Transfer. The Shareholder shall also submit with the Notice copies of all papers and other documents to be used in 19 26 connection with the proposed Transfer. Any deviation in the terms of such Transfer, however slight, shall require a new Notice thereby effecting a new option under this Section 4.08(h). i. Any Company Stock acquired with the proceeds of an Acquisition Loan, if it is not publicly traded when distributed or is subject to a trading limitation when distributed, must be subject to a put option. The put option is to be exercisable only by the Participant, the Participant's donees, an alternate payee, a person (including an estate or its distributee) to whom the Company Stock passes by reason of a Participant's death, or the custodian or trustee of an individual retirement account described in Code section 408(a) established by the Participant or such Participant's surviving Spouse. The put option must permit the Participant to put the Company Stock to the Company. The put option must be exercisable during the sixty (60) consecutive days beginning on the date that the Company Stock subject to the put option is distributed by the Plan, and for another sixty (60) consecutive days during the Plan Year next following the Plan Year in which the shares were distributed. The put option may be exercised by the holder notifying the Company in writing that the put option is being exercised. The period during which a put option is exercisable does not include any period when a distributee is unable to exercise it because the party bound by the put option is prohibited from honoring it by applicable federal or state law. The price at which the put option is exercisable is the fair market value of the Company Stock determined in good faith based on all relevant factors, determined as of the most recent Valuation Date. The fair market value of each share shall, for this purpose, be determined on an enterprise basis without minority discount. Payment pursuant to the put option shall be made: (1) in the case of distribution of the Participant's entire Account within one taxable year of the recipient, no less rapidly than in substantially equal installments at least annually over a period beginning no later than thirty (30) days after the exercise of the put option and not exceeding five (5) years in all; adequate security shall be provided and reasonable interest shall be paid on any installments outstanding after thirty (30) days after exercise of the put option; and (2) in the case of any other form of distribution not described in (1), within thirty (30) days of the exercise of the put option. Payment pursuant to the put option shall be made no less rapidly than in substantially equal installments at least annually over a period beginning no later than thirty (30) days after the put option and not exceeding five (5) years in all, except that the repayment period may be extended to a date no later than ten (10) years after the earlier of the date the put option is exercised or the date of final repayment of any debt incurred in connection with the acquisition of the Company Stock. The provisions described in this Section 4.08(i) are nonterminable, even if the Acquisition Loan is repaid or the Plan ceases to be an employee stock ownership plan. 20 27 SECTION 4.09 ACCOUNTING FOR FINANCED SHARES. If Financed Shares are acquired by the Trustee with the proceeds of an Acquisition Loan, such Financed Shares shall be credited to the Loan Suspense Account and accounted for separately both before and after their release from the Loan Suspense Account. ARTICLE V ALLOCATIONS, VALUATION, AND VESTING SECTION 5.01 ALLOCATION OF EMPLOYER CONTRIBUTIONS AND FORFEITURES. As of the Valuation Date, Employer Contributions and Forfeitures for the Plan Year shall be allocated to the Accounts of each Participant described in Section 5.02 in the ratio that each Participant's Compensation bears to the sum of the Compensation of all Participants eligible to receive an allocation for that Plan Year in accordance with Section 5.02 of the Plan. SECTION 5.02 PARTICIPANTS ELIGIBLE TO RECEIVE AN ALLOCATION. Each Plan Year, Employer Contributions made pursuant to Section 4.01 shall be allocated to the Accounts of those Participants who either (i) are employed on the last day of the Plan Year (including those Participants who are on a temporary seasonal lay-off) or (ii) ceased to be an Employee during the year because of death, Disability or attainment of Early or Normal Retirement Age. SECTION 5.03 ALLOCATION LIMITATIONS. The following sets forth limitations as to amounts which may be allocated to a Participant's Accounts for a given Plan Year. a. This subsection (a) applies if the Participant does not participate in, and has never participated in another qualified plan maintained by the Employer, or a welfare benefit fund, as defined in section 419(e) of the Code maintained by the Employer, or an individual medical account, as defined in section 415(l)(2) of the Code, maintained by the Employer, which provides an Annual Addition as defined in Subsection (d)(1). 1. The amount of Annual Additions which may be credited to the Participant's Accounts for any Limitation Year, as defined in Subsection (d)(8), shall not exceed the lesser of the Maximum Permissible Amount, as defined in Subsection (d)(9), or any other limitation contained in this Plan. If the contributions that would otherwise be contributed or allocated to the Participant's Accounts would cause the Annual Additions for the Limitation 21 28 Year to exceed the Maximum Permissible Amount, the amount contributed or allocated will be reduced, so that the Annual Additions for the Limitation Year shall equal the Maximum Permissible Amount. 2. As soon as is administratively feasible after the end of the Limitation Year, the Maximum Permissible Amount for the Limitation Year will be determined on the basis of the Participant's actual Compensation, as defined in Subsection (d)(2), for the Limitation Year. 3. If there is an excess Annual Addition due to a calculation error, Employee contributions, the allocation of Forfeitures, or other facts and circumstances, as determined by the Committee, the Excess Amount will be corrected as follows: A. The Excess Amount in the Participant's Accounts must be allocated and reallocated to other Participants' Accounts, to the extent permitted under this Section 5.03; B. Remaining Excess Amounts will be held unallocated in a suspense account. The suspense account will be allocated and reallocated to all Participants in the next Limitation Year, and each succeeding Limitation Year if necessary; C. If a suspense account is in existence at any time during a Limitation Year pursuant to this Section 5.03, it will not participate in the allocation of the Trust's investment gains and losses. 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 or any Employee contributions may be made to the Plan for that Limitation Year. Excess amounts may not be distributed to Participants or former Participants. b. This subsection (b) applies if, in addition to this Plan, the Participant is covered under another qualified Defined Contribution Plan maintained by the Employer, a welfare benefit fund, as defined in section 419(e) of the Code maintained by the Employer, or an individual medical account, as defined in section 415(l)(2) of the Code, maintained by the Employer, which provides an Annual Addition, during any Limitation Year. 1. The Annual Additions which may be credited to a Participant's Accounts under this Plan for any such Limitation Year will not exceed the Maximum Permissible Amount reduced by the Annual Additions credited to a Participant's account under the other plans and welfare benefit funds for the same Limitation Year. If the Annual Additions with respect to the Participant under other Defined Contribution Plans and welfare benefit funds maintained by the Employer are less than the Maximum Permissible Amount and the Employer contribution that would otherwise be contributed or allocated to the Participant's 22 29 Accounts under the other Defined Contribution Plans would cause the Annual Additions for the Limitation Year to exceed this limitation, the amount contributed or allocated will be reduced so that the Annual Additions under all such plans and funds for the limitation year will equal the Maximum Permissible Amount. If the Annual Additions with respect to the Participant under this Plan are equal to or greater than the Maximum Permissible Amount, no amount will be contributed or allocated to the Participant's Account under other Defined Contribution Plans and welfare benefit funds for the Limitation Year. 2. As soon as is administratively feasible after the end of the Limitation Year, the Maximum Permissible Amount for the Limitation Year will be determined on the basis of the Participant's actual Compensation for the Limitation Year. 3. If, as a result of a calculation error, Employee contributions, the allocation of Forfeitures, or other facts and circumstances as determined by the Committee, a Participant's Annual Additions under this Plan and such other plans would result in an Excess Amount for a Limitation Year, the Excess Amount will be disposed of as follows: A. The Excess Amount shall be reduced or eliminated by refunding any contributions made by the Participant under the other plan, together with earnings thereon; B. The remaining Excess Amount will be deemed to consist of the Annual Additions last allocated, except that Annual Additions attributable to a welfare benefit fund or individual medical account will be deemed to have been allocated first, regardless of the actual allocation date; C. If an Excess Amount was allocated to a Participant on an allocation date of this Plan which coincides with an allocation date of another plan, the excess amount attributed to the Plan will be the product of, i. the total excess amount allocated as of such date, times ii. the ratio of (a) the Annual Additions allocated to the Participant for the Limitation Year as of such date under this Plan to (b) the total Annual Additions allocated to the Participant for the Limitation Year as of such date under this and all other qualified Defined Contributions Plans; D. Any Excess Amount attributed to this Plan will be disposed in the manner described in Subsection (a)(3). 23 30 4. If an excess amount was allocated to a Participant on an allocation date of this Plan which coincides with an allocation date of another plan, the excess amount attributed to this Plan will be the product of, A. the total excess amount allocated as of such date, times B. the ratio of (i) the annual additions allocated to the Participant for the Limitation Year as of such date under this Plan to (ii) the total Annual Additions allocated to the Participant for the Limitation Year as of such date under this and all other qualified Defined Contribution Plans. 5. Any excess amount attributed to this Plan will be disposed in the manner described in Subsection (a)(3). c. 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 1.0 in any limitation year. If the sum of the fractions exceeds 1.0, the annual benefit provided under the Defined Benefit Plan will be reduced until the sum of the fractions equals 1.0. d. Throughout this Section 5.03, certain words and phrases have meanings which are specifically defined for purposes of Section 5.03 of the Plan. These words and phrases can be identified in that the first letter of the word or words in the phrase are capitalized. The definitions of these words and phrases are set forth below and, to the extent inconsistent, supersede the definitions of any such words and phrases which are set forth in Article II or any other Article of the Plan: 1. "Annual Additions" means the sum of the following amounts credited to a Participant's Account for the Limitation Year: A. Employer Contributions; B. Employee after-tax contributions; C. Forfeitures; D. amounts allocated, to an individual medical account, as defined in section 415(l)(2) of the Code, which is part of a pension or annuity plan maintained by the Employer; and E. 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 416(i)(1) of the Code, under a 24 31 welfare benefit fund, as defined in section 419(e) of the Code, maintained by the Employer. For this purpose, any excess amount applied under Subsections (a)(3) or (b)(3) in the Limitation Year to reduce Employer Contributions will be considered Annual Additions for such Limitation Year. Notwithstanding the above, if no more than one-third of the Employer Contributions which are used to repay the principal of Acquisition Loans are allocated to Highly Compensated Employees, Forfeitures of Company Stock acquired with the proceeds of an Acquisition Loan and Employer Contributions used to pay interest on an Acquisition Loan shall not be considered Annual Additions for the purpose of this Section 5.03. 2. "Compensation" means all amounts paid or made available to a Participant during a Plan Year which amounts are treated as compensation under Treasury Regulation section 1.415-2(d)(10) and which amounts are not excluded from compensation under Treasury Regulation section 1.415-2(d)(3). Compensation for a Limitation Year is the Compensation actually paid or includible in gross income during such Limitation Year. 3. "Defined Benefit Fraction" means 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 (i) one hundred twenty-five percent (125%) of the dollar limitation determined for the limitation year under sections 415(b)(1)(A) and (d) of the Code or (ii) one hundred forty percent (140%) of the Highest Average Compensation, including any adjustments under section 415(b) of the Code. 4. "Defined Contribution Dollar Limitation" means $30,000 or if greater, one-fourth (1/4) of the defined benefit dollar limitation set forth in section 415(b)(1)(A) of the Code as indexed as in effect for the Limitation Year. 5. "Defined Contribution Fraction" means 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 section 419(e) of the Code, and individual medical accounts, as defined in section 415(1)(2) of the Code, maintained by the Employer), and the denominator of which is the sum of the maximum aggregate amounts for the current and all prior Limitation Years with the Employer (regardless of whether 25 32 a Defined Contribution Plan was maintained by the Employer). The maximum aggregate amount in any Limitation Year is the lesser of (i) one hundred twenty-five percent (125%) of the dollar limitation in effect under section 415(c)(1)(A) of the Code, without regard to section 415(c)(6), or (ii) one hundred forty percent (140%) times twenty-five percent (25%) of the Participant's Compensation for such year. 6. "Employer" means the Company and all Affiliates that adopt this Plan, and all members of a controlled group of corporations (as defined in section 414(b) of the Code as modified by section 415(h)), all commonly controlled trades or businesses (as defined in section 414(c) as modified by section 415(h)) or affiliated service groups (as defined in section 414(m)) of which the Company is part, and any other entity required to be aggregated with the Company pursuant to Regulations under section 414(o) of the Code. 7. "Excess Amount" means the excess of the Participant's Annual Additions for the Limitation Year over the Maximum Permissible Amount. 8. "Limitation Year" means the Plan Year. If the limitation year is amended to a different twelve-consecutive-month period, the new limitation year must begin on a date within the limitation year in which the amendment is made. 9. "Maximum Permissible Amount" means the maximum Annual Addition that may be contributed or allocated to a Participant's Accounts under the Plan for any Limitation Year which shall not exceed the lesser of: A. the Defined Contribution Dollar Limitation (i.e., $30,000, or if greater, twenty-five percent (25%) of the Code section 415(b)(1)(A) amount), or B. twenty-five percent (25%) of the Participant's Compensation for the Limitation Year. The Compensation limitation referred to in (B) shall not apply to any contribution for medical benefits (within the meaning of section 401(h) or section 419A(f)(2) of the Code) which is otherwise treated as an Annual Addition under sections 415(l)(1) or 419A(d)(2) of the Code. If a short limitation year is created because of an amendment changing the limitation year to a different twelve-consecutive-month period, the Maximum Permissible Amount shall not exceed the defined contribution dollar limitation multiplied by the following fraction: Number of months in the short limitation year --------------------------------------------- 12 26 33 10. "Projected Annual Benefit" means the annual retirement benefit (adjusted to an actuarially 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: A. The Participant will continue employment until Normal Retirement Age under the Plan (or current age, if later); and B. 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. SECTION 5.04 ALLOCATION OF FINANCED SHARES. All Company Stock acquired by the Trust with the proceeds of an Acquisition Loan must be added to and maintained in the Loan Suspense Account. Such Company Stock shall be released and withdrawn from that account as if all Company Stock in that account were encumbered. For each Plan Year during the duration of the Acquisition Loan, the number of shares of Company Stock released from the Loan Suspense Account for allocation to Participant Accounts as set forth in writing in the pledge of the Financed Shares shall equal the number of Financed Shares in the Loan Suspense Account immediately before release for that Plan Year multiplied by the ratio that the payments of principal and interest on the Acquisition Loan for that Plan Year bear to the total projected payments of principal and interest over the duration of the Acquisition Loan repayment period (including the principal and interest on the Acquisition Loan for that Plan Year). If interest under any loan is variable, then for purposes of this paragraph, interest to be paid in future periods shall be determined by using the rate thereof applicable at the end of the Plan Year. Notwithstanding the preceding paragraph, in the sole discretion of the Committee, the number of shares of Company Stock released from the Loan Suspense Account for any Acquisition Loan, as set forth in writing in the pledge of the Financed Shares, may be determined using the principal-only method set forth in section 54.4975-7(b)(8)(ii) of the Regulations. The shares released pursuant to the repayment of an Acquisition Loan with funds from Employer Contributions shall be allocated to the Participants' Company Stock Accounts in the same manner as Employer Contributions are allocated under Section 5.02. The shares released pursuant to the repayment of an Acquisition Loan with funds from cash dividends on Company Stock shall be allocated in the manner set forth in Section 5.05. The shares released pursuant to the repayment of an Acquisition Loan with funds from Participants' Other Investments Accounts or net income from such Accounts shall be allocated in the manner set forth in Section 5.07. 27 34 SECTION 5.05 ALLOCATION OF CASH DIVIDENDS. Allocation of cash dividends paid with respect to Company Stock held in the Trust shall be made as follows: a. Except as provided in Section 5.05(b), pursuant to the Committee's direction to the Trustee, all or a portion of the cash dividends on Allocated Shares shall be paid to the Plan and distributed in cash to the Participants and Beneficiaries no later than ninety (90) days after the close of the Plan Year in which paid. To the extent not distributed, cash dividends shall be credited as earnings to the Company Stock Account holding the Company Stock to which they relate, or used to repay the Acquisition Loan with respect to such shares of Company Stock. b. For any Plan Year during which repayment of an Acquisition Loan is made in whole or in part with dividends paid on shares of Company Stock that have been allocated to Participants' Accounts, a special dividend allocation shall be determined for each Participant and such Employer Contribution shall be in addition to any other contribution or allocation required under the Plan. The special dividend allocation shall be in the form of Company Stock with a fair market value of not less than the amount of such dividends. c. Pursuant to the Committee's direction to the Trustee, cash dividends paid on Unallocated Shares shall be used to make payments on an Acquisition Loan. Shares released due to cash dividends paid on Unallocated Shares used to make payments on an Acquisition Loan shall be allocated as follows: 1. first, to the Participant's Company Stock Accounts to the extent necessary to satisfy subparagraph (b) of this Section 5.05; and 2. then, to the Participants' Accounts in the same manner as Employer Contributions are allocated pursuant to Section 5.02. SECTION 5.06 ALLOCATION OF STOCK DIVIDENDS. Except as provided in section 5.05(b), any Company Stock received by the Trustee as a result of a stock split, dividend, conversion, or as a result of a reorganization or other recapitalization of a Company shall be allocated as Trust Fund earnings as of the day on which the Company Stock is received by the Trustee to each Participant's Company Stock Account and to the Loan Suspense Account in the ratio that each such Account bears to the sum of all such Accounts. 28 35 SECTION 5.07 ALLOCATION OF INCOME. The assets of the Trust shall be valued on the Valuation Date at fair market value. On such date, the earnings, gains, losses, and expenses attributable to the assets in all of the Participants' Accounts shall be allocated to each Participant's Other Investment Account in the ratio that such Participant's Other Investment Account bears to all Other Investment Account balances. SECTION 5.08 ADJUSTMENTS FOR ALLOCATION ERROR. If, in any Plan Year, any Employee who should be considered a Participant is omitted from receiving an allocation or receives less than such Participant is entitled, and such omission is determined to be erroneous, the Employer shall then make a subsequent contribution with respect to the omitted Employee in the amount which the Employer would have contributed with respect to such Employee had the omission not occurred. SECTION 5.09 VALUATIONS. The Committee shall direct the Trustee, as of the Valuation Date, and at such other date or dates deemed necessary by the Committee, to determine the net worth of the assets comprising the Trust Fund, as it exists on such date prior to taking into consideration any contribution to be allocated for that Plan Year. In determining such net worth, the Trustee shall value the assets comprising each Trust Fund at their fair market value as of the such date and shall deduct all expenses for which the Trustee has not yet obtained reimbursement from the Employer or the Trust Fund. Valuations must be made in good faith and based on all relevant factors for determining the fair market value of securities. In the case of a transaction between a Plan and a disqualified person as defined in section 4975(e)(2) of the Code, value must be determined as of the date of the transaction. For all other Plan purposes, value must be determined as of the most recent Valuation Date under the Plan. An independent appraisal will not in itself be a good faith determination of value in the case of a transaction between the Plan and a disqualified person. However, in other cases, a determination of fair market value based on at least an annual appraisal independently arrived at by a person who customarily makes such appraisals and who is independent of any party to the transaction will be deemed to be a good faith determination of value. Company Stock not readily tradable on an established securities market shall be valued by an independent appraiser meeting requirements similar to the requirements of the Regulations prescribed under section 170(a)(1) of the Code. SECTION 5.10 VESTING. This Section 5.10 sets forth rules for determining a Participant's Vested interest in his or her Accounts. 29 36 a. The Vested percentage of a Participant's Accounts is determined as follows:
Vested Years of Service: Percentage: ----------------- ----------- Less than 3 years 0% At least 3, but less than 4 years 20% At least 4, but less than 5 years 40% At least 5, but less than 6 years 60% At least 6, but less than 7 years 80% 7 or more years 100%
b. Notwithstanding the Vesting specified above, each Participant shall be one hundred percent (100%) Vested in the full balance of such Participant's Accounts upon Normal Retirement, Early Retirement, death, and Disability. c. For purposes of computing a Participant's Vested right to such Participant's Accounts, Years of Service and breaks in service will be measured by the Plan Year. All of a Participant's Years of Service with the Company or an Affiliate are counted to determine the nonforfeitable percentage of the Participant's Accounts. d. A Participant's Years of Service before a Break in Service shall be treated as follows: 1. In the case of a Participant who has incurred a One-Year Break in Service, Years of Service before such break will not be taken into account until the Participant has completed a Year of Service after such break in service. 2. In the case of any Participant who has five (5) or more One-Year Breaks in Service, all service after such Breaks in Service will be disregarded for the purposes of vesting the portion of his Account balance that accrued before such breaks in service. 3. In the case of a Participant who has any Vested interest in his Accounts (i.e., whose Vested percentage under Section 5.10(a) exceeds 0%), all service prior to such Breaks in Service will be taken into account for the purposes of vesting the portion of his Account balance that accrues after any such breaks in service. 4. In the case of a non-Vested (i.e., a 0%-Vested) Participant who has five (5) or more consecutive One-Year Breaks in Service, all service prior to such Breaks in Service will be disregarded for the purposes of vesting the portion of his Account balance that accrues after such Breaks in Service unless upon returning to service the number of consecutive One-Year Breaks in Service is less than the number of Years of Service. 30 37 If such service is disregarded, separate accounts will be maintained for the Participant's pre-break and post-break Employer-derived Account. Both Accounts shall share in the earnings and losses of the fund. e. If any previous Participant shall be reemployed by the Employer before a One-Year Break in Service occurs, such Participant shall continue to participate in the Plan in the same manner as if such termination had not occurred. If any previous Participant shall be reemployed by the Employer after incurring a One-Year Break in Service, and such previous Participant received a distribution of such Participant's entire Vested interest (including where the Participant had no Vested amount in his account) prior to reemployment, such Participant's forfeited Account shall be restored only if the Participant repays the full amount distributed before the earlier of five (5) years after the first date on which the Participant is subsequently reemployed by the Employer or the close of the first period of five (5) consecutive One-Year Breaks in Service commencing after the distribution. If a distribution occurs for any reason other than a separation from service, the time for repayment may not end earlier than five (5) years after the date of the distribution. In the event the former Participant repays the full amount distributed, the undistributed portion of the Participant's Account must be restored in full, unadjusted by gains or losses occurring after the Valuation Date preceding the distribution. f. If the Plan's vesting schedule is changed or amended, or the Plan is amended in any way that directly or indirectly affects the computation of the Participant's nonforfeitable percentage, each Participant with at least three Years of Service with the Employer may elect, within a reasonable period after the adoption of the amendment or change, to have the Vested percentage computed under the Plan without regard to such amendment or change. The period during which the election may be made shall commence with the date the amendment is adopted or deemed to be made and shall end on the latest of: 1. sixty (60) days after the amendment is adopted; 2. sixty (60) days after the amendment becomes effective; or 3. sixty (60) days after the Participant is issued written notice of amendment by the Employer or Plan Committee. 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 such Participant's Employer-derived Account shall not be less than such Participant's percentage computed under the Plan without regard to such amendment. g. If any previous Participant shall be reemployed by the Employer before a One-Year Break in Service occurs, and if a distribution is made to such Participant at a time when 31 38 the Participant has a Vested right to less than one hundred percent (100%) of such Participant's Accounts, such Participant's Accounts shall have their Vested percentage increased as follows: 1. A separate Account shall be established for the Participant's interest in the Plan as of the time of the distribution, and 2. At any relevant time, the Participant's nonforfeitable portion of the separate Account will be equal to an amount ("X") determined by the formula: X = P(AB + (R x D)) - (R x D) For purposes of applying the formula: P is the Vested percentage at the relevant time, AB is the Account balance at the relevant time, D is the amount of the distribution, and R is the ratio of the Account balance at the relevant time to the Account balance after distribution. ARTICLE VI DISTRIBUTIONS The Participant or Participant's Beneficiary, where applicable, may elect the form or the time of the distribution where more than one type of distribution is available. SECTION 6.01 DISTRIBUTIONS WHILE IN-SERVICE. Except as provided in Section 6.10, this Plan does not provide for in-service distributions. SECTION 6.02 DISTRIBUTIONS UPON SEPARATION FROM SERVICE - SMALL ACCOUNT BALANCES. If a Participant separates from service with the Employer prior to attaining Normal Retirement Age for reasons other than death or Disability, and the value of the Participant's Vested Account as determined pursuant to Section 5.09 as of the immediately preceding Valuation Date adjusted for dividends on Company Stock allocated under Section 5.05 or 5.06, is not greater than $3,500, the Committee shall direct the Trustee to distribute the entire Vested portion of such Account to the Participant as soon as administratively feasible in accordance with this Article VI. The nonvested portion shall be treated as a Forfeiture. If the value of a Participant's Vested Account is zero, the Participant shall be deemed to have received a distribution of such Vested Account. 32 39 SECTION 6.03 DISTRIBUTIONS UPON SEPARATION FROM SERVICE - ACCOUNT BALANCES OVER $3,500. If a Participant separates from service with the Employer prior to attaining Normal Retirement Age for reasons other than death or Disability and the value of the Participant's Vested Account as determined pursuant to Section 5.09 as of the immediately preceding Valuation Date adjusted for dividends on Company Stock allocated under Section 5.05 or 5.06, exceeds $3,500, the Committee shall direct the Trustee to distribute to the Participant the Vested portion of such Participant's Account not later than the close of the Plan Year which is the sixth Plan Year following the Plan Year in which the Participant separated from service, if the Participant so elects. The non-Vested portion of a Participant's Account shall be treated as a Forfeiture. With respect to a Participant's Account which is subject to this Section 6.03, the Committee may direct the Trustee to segregate the value of such Account, and invest the segregated amount thereof in a separate, federally insured savings account, a certificate of deposit, common or collective trust fund of a bank, or deferred annuity or any other investment deemed prudent by the Committee until such time as the Account is distributed. In the event the value of such Vested Account is not segregated, the amounts shall remain in separate accounts for the terminated Participant. SECTION 6.04 DISTRIBUTIONS UPON RETIREMENT. In the event that a Participant attains Early or Normal Retirement Age, all Vested amounts credited to such Participant's Accounts shall become distributable. The Participant may continue employment with the Employer after attaining Early or Normal Retirement Age, and shall continue to share in Employer Contributions in accordance with Section 5.02. Upon a Participant's separation from service of the Employer following attainment of Early or Normal Retirement Age, the Committee shall direct the Trustee to distribute to the Participant the Vested portion of such Participant's Account balance, as determined pursuant to Section 5.09 as of the immediately preceding Valuation Date, adjusted for any dividends on Company Stock allocated under Section 5.05 or 5.06 not later than one year after the close of the Plan Year in which the Participant separated from service, if the Participant so elects. SECTION 6.05 DISTRIBUTIONS UPON DEATH. Upon a Participant's death, the Committee shall direct the Trustee to distribute the Participant's Vested Account balance, as determined pursuant to Section 5.09 as of the immediately preceding Valuation Date, adjusted for any dividends on Company Stock allocated under Section 5.05 or 5.06 to that Participant's Beneficiary not later than one (1) year after the close of the Plan Year in which the Participant died. Notwithstanding the immediately preceding sentence, in the case of a Beneficiary who is the Participant's spouse, such Beneficiary may elect to defer commencement of benefits to a date no later than the date 33 40 the Participant would have attained age seventy and one half (70 1/2). The Participant shall not name as a Beneficiary someone other than such Participant's Spouse, unless and until the Participant and Spouse designate, in writing on a valid waiver form provided by the Committee for such purpose, an alternate Beneficiary, which designation shall be witnessed by a notary public. In addition, the Participant may designate a Beneficiary other than such Participant's Spouse if: (1) the Participant is legally separated or has been abandoned and the Participant has a court order to such effect (and there is no "qualified domestic relations order" as defined in section 414(p) of the Code); (2) the Participant has no Spouse; or (3) the Spouse cannot be located. Where the Participant makes no designation, the Beneficiary shall be the Spouse, and if there is no Spouse, the Beneficiary shall be the Participant's estate. The Committee may require such proof of death and such evidence of the right of other persons to be Beneficiaries as it shall deem proper under the circumstances. The Committee's determination of death and of the right of any Beneficiary to receive payments shall be conclusive. The designation of a Beneficiary shall be made pursuant to a form approved by the Committee. A Participant may revoke or change a Beneficiary designation with the Committee by filing same with the Committee. In the event that no valid designation exists at the time of the Participant's death, the death benefit shall be payable to the estate. If the Participant was eligible for any distribution or distributions, but had not yet received all such distributions prior to death, the Trustee will distribute any remaining amounts credited to the Accounts of such Participant to the Beneficiary. SECTION 6.06 DISTRIBUTIONS UPON DISABILITY. Upon a Participant's Disability, the Committee shall direct the Trustee to distribute to the Participant, the value of the Participant's Vested Account balance, as determined pursuant to Section 5.09 as of the immediately preceding Valuation Date, adjusted for any dividends on Company Stock allocated under Section 5.05 or 5.06 not later than one year after the close of the Plan Year in which the Disability arose, unless the Participant elects to defer commencement of his benefits to a later date. SECTION 6.07 SPECIAL BENEFICIARY PROVISIONS. This Section 6.07 sets forth special distribution rules. a. If, after five (5) years have expired following reasonable efforts of the Committee to locate a Participant or Beneficiary, including sending a registered letter, return receipt requested to the last known address, the Committee is unable to locate the Participant or Beneficiary, then the amounts distributable to such Participant or Beneficiary shall, pursuant to applicable state and Federal laws, be treated as a Forfeiture under the Plan. Where a Participant or Beneficiary is located subsequent to the Forfeiture, such benefits shall be reinstated by the Committee, and shall not count as an annual addition under section 415 of the Code. 34 41 b. The Committee may instruct the Trustee to distribute a sum payable to a minor instead to his or her legal guardian, or if there is no guardian, to a parent or other responsible adult who maintains the residence of the minor. In the alternative, such distribution could be made to the appropriate custodian under the Uniform Gifts to Minors Act or Gift to Minors Act, if applicable under the state laws of the state in which the minor resides. Any payment in this method shall discharge all fiduciaries involved in the distribution including the Trustee, Employer, and Plan from liability regarding the transaction. c. A Participant's rights and benefits shall be subject to the rights afforded to an alternate payee under a qualified domestic relations order. In connection with a proper qualified domestic relations order under section 414(p) of the Code, a distribution shall be permitted if such distribution is authorized by the qualified domestic relations order, even if the Participant has not achieved a distributable event under the Plan. SECTION 6.08 CONSENT OF THE PARTICIPANT REQUIRED FOR DISTRIBUTION IF ACCOUNT BALANCES GREATER THAN $3,500. If the value of a Participant's Vested Account balance exceeds (or at the time of any prior distribution exceeded) $3,500, and the Account balance is immediately distributable, the Participant (or where the Participant has died, such Participant's Beneficiary) must consent to any distribution of such Account balance. An Account is immediately distributable if any part of the Account could be distributed to the Participant (or Surviving Spouse) before the Participant attains, or would have attained, if not deceased, the later of Normal Retirement Age or age sixty-two (62). If a Participant fails to consent to a distribution of his Accounts, such failure shall be deemed to be an election to defer the commencement of benefits. A Participant shall be given notice of such Participant's rights under this Section 6.08 no less than thirty (30) days and no more than ninety (90) days before the first day on which all events have occurred which entitle the Participant to such benefits, provided that the Participant may waive the thirty (30) day period in the manner permitted under section 411(a)(11) of the Code. The consent of the Participant shall not be required to the extent that a distribution is required to satisfy sections 401(a)(9) or 415 of the Code. In addition, upon termination of the Plan, if the Plan does not offer an annuity option (purchased from a commercial provider) and if the Company or any Affiliate does not maintain another Defined Contribution Plan (other than an ESOP), the Participant's Accounts may, without the Participant's consent, be distributed to the Participant. However, if the Company or an Affiliate maintains another Defined Contribution Plan (other than an ESOP), then the Participant's Accounts shall be transferred, without the Participant's consent, to such other plan, if the Participant does not consent to an immediate distribution. 35 42 SECTION 6.09 COMMENCEMENT OF BENEFITS. Notwithstanding any provision to the contrary, unless the Participant elects otherwise, distribution of benefits shall begin no later than the sixtieth (60th) day after the latest of the close of the Plan Year in which: a. the Participant attains age sixty-five (65) (or Normal Retirement Age, if earlier); b. occurs the tenth (10th) anniversary of the year in which the Participant commenced participation in the Plan; or c. the Participant terminates employment with the Employer. Notwithstanding the foregoing, the failure of a Participant or Beneficiary to consent to a distribution while a benefit is immediately distributable shall be deemed to be an election to defer commencement of payment of any benefit sufficient to satisfy this Section 6.09. SECTION 6.10 REQUIRED DISTRIBUTIONS. Notwithstanding any provision to the contrary, Participants who participate in the Plan after age seventy and one half (70 1/2) must receive Required Distributions in accordance with section 401(a)(9) of the Code the Regulations thereunder. SECTION 6.11 FINANCED SHARES. Except as required under Section 6.10 and section 401(a)(9) of the Code, the Trustee shall not distribute the portion of a Participant's Account attributable to the shares of Company Stock acquired with the proceeds of an Acquisition Loan until the close of the Plan Year in which such loan is repaid in full. SECTION 6.12 FORM OF DISTRIBUTION. The Participant may elect to receive a distribution of such Participant's Accounts in the form of a lump sum payment. Unless the Participant elects otherwise, distribution of the Participant's Accounts shall be in the form of substantially equal annual payments, for a period not to exceed five (5) years; provided, however, that in the case of a Participant with Accounts in excess of $500,000, the five (5) year distribution period shall be increased by (1) additional year (but not more than five (5) additional years) for each $100,000, or fraction thereof, that the Participant's Account balances exceed $500,000. For purposes of this Section 6.12, the dollar amounts shall be adjusted annually in the same manner as section 415(d) of the Code. Participant election shall be made in a manner and using such forms as may be prescribed by the Committee. 36 43 SECTION 6.13 METHOD OF PAYMENT. At the time a Participant's Vested Account is to be distributed whether by reason of death, Disability, retirement or separation from service prior to Normal Retirement Age, the Committee shall determine the fair market value of the Participant's Vested Account and the number of whole and fractional shares of Company Stock allocated to such Participant's Company Stock Account consistent with the valuation pursuant to Section 5.09 as of the most recent Valuation Date. The Committee shall direct the Trustee to distribute the Participant's Vested Account balance within the time specified for distribution in this Article VI by (1) delivery of Company Stock in the number of whole shares to which the Participant or Beneficiary is entitled from his Company Stock Account and (2) cash in an amount equal to the Vested balance of the Participant's Other Investments Account. Notwithstanding the preceding sentence, a Participant or Beneficiary may elect to receive the value of such Participant's Vested Other Investment Account entirely in whole shares of Company Stock. Any balance in the Participant's Other Investment Account shall be applied to acquire for distribution the maximum number of whole shares of Company Stock at the then fair market value. If Company Stock is not available for purchase by the Trustee, it shall hold such balance until Company Stock is acquired and then make such distribution. Prior to making any distribution, the Committee must notify the Participant in writing of this right to demand that the value of such Participant's Vested Other Investment Accounts be distributed solely in Company Stock. The fair market value of fractional shares in a Company Stock Account or Other Investment Account shall be distributed in cash. Notwithstanding any provision to the contrary, a Participant or Beneficiary shall have no right to demand that the Accounts be distributed in the form of Company Stock with respect to the portion of such Accounts which the Participant elected to have diversified pursuant to Section 4.07 of the Plan. If the Participant is entitled to a contribution or dividend for the last Plan Year of participation in the Plan and such contribution or dividend is allocated to such Participant's Account subsequent to the distribution of such Participant's Vested Account, such amount shall be distributed as soon as practicable after such amount is allocated to the Participant's Account. SECTION 6.14 TRUSTEE-TO-TRUSTEE TRANSFERS. The Trustee may make transfers directly to the trustee of another plan qualified under section 401(a) of the Code. 37 44 SECTION 6.15 ROLLOVERS TO OTHER PLANS OR IRAS. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Section 6.15, 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. A distributee may divide an eligible rollover distribution between a direct rollover and payment to the distributee only if the total distribution is at least five hundred dollars ($500). Prior to making any election under this Section 6.15, the distributee will receive notification in accordance with section 402(f) of the Code provided that he may waive the thirty (30) day period in the manner permitted thereunder. DEFINITIONS: a. Eligible rollover distribution. An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: 1. any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's beneficiary, or for a specified period of ten (10) years or more; 2. any distribution to the extent such distribution is required under section 401(a)(9) of the Code; and 3. 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). Notwithstanding any provision of this Section 6.15 to the contrary, the distribution of amounts totaling less than two hundred dollars ($200) in any one year shall not be considered eligible rollover distribution(s). b. Eligible retirement plan. An eligible retirement plan is an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 401(a) of the Code, that accepts that 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. c. Distributee. A distributee includes an employee or former employee. In addition, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified 38 45 domestic relations orders as defined in section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. d. Direct rollover. A direct rollover is a payment by the plan to the eligible retirement plan specified by the distributee. ARTICLE VII VOTING RIGHTS OF COMPANY STOCK SECTION 7.01 VOTING RIGHTS. Voting rights with respect to shares of Company Stock held in the Trust which have been allocated to Participants' Accounts are passed-through to the Participants. Each Participant shall have the right to give written directions to the Trustees on forms provided by the Trustee or Committee with respect to all voting rights in the shares of Company Stock allocated to such Participants' Accounts. The Trustee shall vote fractional shares of Company Stock allocated to Participant's Accounts in the aggregate to the greatest extent possible to reflect the voting direction of the Participant to whose Account fractional shares of Stock have been allocated. If a Participant does not direct the Trustee as to voting of all or any portion of the shares of Company Stock allocated to such Participant's Accounts, such voting rights shall be exercised by the Trustee only to the extent directed by the Participant. The Trustee shall vote all of the Unallocated Shares as directed by the Committee. Notwithstanding any provision of this Section 7.01 to the contrary, the Trustee shall vote all Company Stock in accordance with its fiduciary obligations under ERISA. SECTION 7.02 NOTICE REQUIRED. The Committee shall cause the Participants to be notified, not later than ten days prior to the date such voting rights are to be exercised, of all questions requiring a vote of the holders of shares of Company Stock. The Committee shall also cause to be included with such notice any materials and information ordinarily supplied to other holders of Company Stock in connection with any such vote. ARTICLE VIII PLAN ADMINISTRATION SECTION 8.01 DUTIES OF THE COMPANY. The Company shall have overall responsibility for the establishment, amendment, termination, administration, and operation of the Plan. 39 46 SECTION 8.02 THE COMMITTEE. The Committee shall be the "named fiduciary" (as defined in section 402(a)(2) of ERISA), the "Plan Administrator" (as defined in section 3(16) of ERISA and section 414(g) of the Code), and the agent for service of process of the Plan. The Committee shall consist of officers or other Employees of the Company, or any other persons who shall serve at the request of the Company. The Committee shall consist of at least two members, who shall be appointed (and removed with or without cause) by the Board of Directors of the Company. In the absence of such appointment, the Board of Directors of the Company shall serve as the Committee. The members of the Committee shall serve at the will of the Company, and the Board of Directors may from time to time remove any Committee member with or without cause and appoint their successors. Any member of the Committee may resign by delivering a written resignation to the Company and to the Committee, and this resignation shall become effective upon the date specified therein. In the event of a vacancy in membership, the president of the Company may appoint a person to fill the vacancy until the Board of Directors appoints a new Committee member. SECTION 8.03 APPOINTMENT OF ADVISOR. The Committee may employ such person as it deems necessary to assist in the administration of the Plan including but not limited to tax advice; amendment, termination, and operation of the Plan; and advice concerning reports filed with the Internal Revenue Service. Such advisor shall not be the Plan Administrator (as defined in section 3(16) of ERISA and section 414(g) of the Code). SECTION 8.04 POWERS AND DUTIES OF THE COMMITTEE. The Committee on behalf of the Participants and Beneficiaries of the Plan shall enforce the Plan and Trust in accordance with their terms, and shall have all powers necessary to carry out such provisions. The Committee shall interpret the Plan and Trust and shall determine all questions arising in the administration and application of the Plan and Trust. Any such interpretation or determination by the Committee shall be conclusive and binding on all persons. The Committee shall establish rules and regulations necessary for the proper conduct and administration of the Plan, and from time to time, shall change or amend these rules and regulations. The Committee shall also have the power to authorize all disbursements by the Trustee from the Trust in accordance with the Plan's terms. 40 47 SECTION 8.05 ORGANIZATION AND OPERATION. The Committee shall act by a majority of its members at the time in office, and such action may be taken either by a vote at a meeting or by written consent without a meeting. The Committee may authorize any one or more of its members to execute any document or documents on behalf of the Committee, in which event the Committee shall notify the Employer, in writing, of such authorization and the name or names of its member or members so designated. The Employer thereafter shall accept and rely on any documents executed by said member of the Committee or members as representing action by the Committee until the Committee shall file with the Employer a written revocation of such designation. The Committee may adopt such bylaws and regulations as it deems desirable for the conduct of its affairs and may employ and appropriately compensate such accountants, counsel, specialists, actuaries, and other persons as it deems necessary or desirable in connection with the administration and maintenance of the Plan. The Committee shall have the authority to control and manage the operation and administration of the Plan. SECTION 8.06 CLAIMS PROCEDURE. a. A claim for benefits under the Trust shall be filed on an application form supplied by the Committee. Written notice of the disposition of the claim shall be furnished to the claimant within ninety (90) days after an application form is received by the Committee, unless special circumstances (as determined by the Committee) require an extension for processing the claim. If such an extension is required, the Committee shall render a decision as soon as possible subsequent to the ninety (90) day period, but such decision shall not be rendered later than one hundred eighty (180) days after the application form is received by the Committee. Written notice of such extension shall be furnished to the claimant prior to the commencement of the extension indicating the special circumstances requiring such extension and the date by which the Committee expects to render the decision on the claim. In the event the claim is denied, the Committee shall set forth in writing the reasons for the denial and shall cite pertinent provisions of the Plan and Trust upon which the decision is based. In addition, the Committee shall provide a description of any additional material or information necessary for the claimant to perfect the claim, an explanation of why such information is necessary, and appropriate information as to the steps to be taken if the Participant or Beneficiary wish to submit such claim for review as provided in (b) below. b. A Participant or Beneficiary whose claim described in (a) above has been denied in whole or in part shall be entitled to the following rights if exercised within sixty (60) days after written denial of a claim is received: 1. to request a review of the claim upon written application to the Committee; 2. to review documents associated with the claim; and 41 48 3. to submit issues and comments in writing to the Committee. c. If a Participant or a Beneficiary requests a review of the claim under (b) above, the Committee shall conduct a full review (including a formal hearing, if desired) of such request, and a decision on such request shall be made within sixty (60) days after the Committee has received the written request for review from the Participant or the Beneficiary. Special circumstances (such as a need for full hearing on request) may allow the Committee to extend the decision on such request, but the decision shall be rendered no later than one hundred twenty (120) days after receipt of the request for review. Written notice of such an extension shall be furnished to the Participant or the Beneficiary prior to the commencement of the extension. The decision of the Committee on review shall be set forth in writing and shall include specific reasons for the decision as well as specific references to the pertinent provisions of the Plan or Trust on which the decision is based. SECTION 8.07 RECORDS AND REPORTS. a. The Committee shall be entitled to rely upon certificates, reports, and opinions provided by an accountant, tax or pension advisor, actuary or legal counsel employed by the Employer or Committee. The Committee shall keep a record of all its proceedings and acts, and shall keep all such books of account, records, and other data as may be necessary for the proper administration of the Plan. The regularly kept records of the Committee, the Employer, and the Trustee shall be conclusive evidence of the service of a Participant, such Participant's Compensation, age, marital status, status as an Employee, and all other matters contained therein and relevant to this Plan; provided, however, that a Participant may request a correction in the record of such Participant's age at any time prior to his retirement and such correction shall be made if within ninety (90) days after such request if the Participant furnishes a birth certificate, baptismal certificate, or other documentary proof of age satisfactory to the Committee in support of this correction. b. Each Participant and each Participant's designated Beneficiary must file with the Committee from time to time in writing a correct mailing address and each change of mailing address. Any communication, statement, or notice addressed to a Participant or Beneficiary at the last mailing address filed with the Committee, or if no address is filed with the Committee, the last mailing address as shown on the Employer's records, will be binding on the Participant and Beneficiary for all purposes of the Plan. Neither the Committee nor the Trustee shall be required to search for or locate a Participant or Beneficiary. 42 49 SECTION 8.08 LIABILITY. a. A member of the Committee shall not be liable for any act, or failure to act, of any other member of the Committee, except to the extent that such member: 1. knowingly participates in, or undertakes to conceal, an act or omission of another Committee member, knowing that such act or omission is a breach of fiduciary duty to the Plan; 2. fails to comply with the specific responsibilities required as a member of the Committee, and such failure enables another member of the Committee to commit a breach of fiduciary duty to the Plan; or 3. has knowledge of a breach of fiduciary duty to the Plan by another member of the Committee, unless such member makes reasonable effort under the circumstances to remedy such breach. b. Each member of the Committee shall be liable with respect to his own acts of willful misconduct or gross negligence concerning the Plan. The Employer shall indemnify the Committee or each of its members for part or all expenses, costs, or liabilities arising out of the performance of duties required by the terms of the Plan or Trust, except for those expenses, costs, or liabilities arising out of a member's willful misconduct or gross negligence. SECTION 8.09 RELIANCE AND STATEMENTS. The Committee, in any of its dealings with Participants hereunder, may conclusively rely on any written statement, representation, or documents made or provided by such Participants. SECTION 8.10 REMUNERATION AND BONDING. Unless otherwise determined by the Company, the members of the Committee shall serve without remuneration for services to the Plan and Trust. However, all expenses of the Committee shall be paid by the Trust except to the extent paid by the Employer. Such expenses shall include any expenses incidental to the functioning of the Committee, including but not limited to fees of accountants, legal counsel, and other specialists, or any other costs entailed in administering the Plan. Title I of ERISA requires certain persons with discretion over Plan assets to be bonded. Except as required by ERISA or other federal law, the members of the Committee shall serve without bond. 43 50 SECTION 8.11 COMMITTEE DECISIONS FINAL. The decision of the Committee in matters within its jurisdiction shall be final, binding, and conclusive upon the Employer and the Trustee and upon each Employee, Participant, former Participant, Beneficiary, and every other person or party interested or concerned. ARTICLE IX TRUST AGREEMENT SECTION 9.01 ESTABLISHMENT OF TRUST. The Company and the Trustee hereby enter into a Trust Agreement which, except to the extent such trust agreement is set forth in a valid separate and distinct document, is incorporated herein and which establishes a trust consisting of such sums of money and other property as may from time to time be contributed or transferred to the Trustee under the terms of the Plan, along with any property to which the Plan may from time to time convert, and which provides for the investment of Plan assets and the operation of the Trust. This Trust agreement, as amended from time to time, shall be deemed part of the Plan, and all rights and benefits provided to persons under the Plan shall be subject to the terms of the Trust agreement. If the trust agreement between the Company and the Trustee is set forth in a valid separate and distinct document, the amendment and restatement of this Plan shall be executed only by the Company and shall amend the terms of the Plan, but not any terms of the existing trust agreement. SECTION 9.02 CONTRIBUTIONS TO TRUSTEE. The Trustee shall accept any cash, and may accept any other property tendered to it as contributions hereunder, but shall not be under any duty to require the Employer or any other person to contribute to the Trust Fund or to determine whether the amount of any contribution has been correctly computed under the terms of the Plan. SECTION 9.03 PURPOSE OF THE TRUST. The purpose of this Trust is to invest primarily in and hold Company Stock for the benefit of Participants and the Beneficiaries of Participants. Accordingly, the Committee shall direct the Trustee as to the portion of the Trust Fund that shall be invested in Company Stock at any particular time. As directed by the Committee, the Trustee may also invest the Trust Fund in property other than Company Stock. Notwithstanding the foregoing, the Trustee shall keep sufficient liquid assets on hand to pay the amounts attributable to fractional shares in accordance with Article VI, and to pay cash distributions to those Participants who receive cash distributions. The Trust shall be a separate 44 51 entity from the Employer and its assets. In no event shall the Trust Fund ever be subject to the rights or claims of any creditor of the Employer. Except as provided in Section 9.01, it is expressly understood that the duties and obligations of the Trustee shall be only those expressly stated in this Article IX. SECTION 9.04 DISTRIBUTIONS. The Trustee shall from time to time make distributions from the Trust Fund to such persons, in such amounts, and in such manner as the Committee may direct. Instructions to the Trustee from the Committee need not specify the purpose of the distributions so ordered, and the Trustee shall not be responsible in any way for the propriety of such distributions or for the administration of the Plan. Any such instructions shall constitute a certification that each distribution directed is one which the Committee is authorized to direct. The Trustee shall not be responsible for the adequacy of the Trust Fund to meet and discharge any liabilities under the Plan. If a dispute arises regarding who is entitled to or should receive any distribution from the Trust Fund, the Trustee may withhold, or cause the withholding of, such distribution until the dispute has been resolved. SECTION 9.05 EXCLUSIVE BENEFIT. Except as the Committee may authorize the Trustee to return contributions to the Employer pursuant to the terms of the Plan, no part of the Trust Fund shall be used for or diverted to purposes other than for the exclusive benefit of Participants and their Beneficiaries and for defraying expenses of the Plan and Trust. The Employer shall have no beneficial interest in the assets of the Trust, and no part of the Trust shall ever revert to or be repaid to the Employer, directly or indirectly, except that upon written request, the Employer shall have a right to recover: a. a contribution to the Plan made by mistake of fact, if such contribution (to the extent made by mistake of fact) is returned to the Employer within one year after payment of such contribution; b. any contributions to the Plan conditioned upon initial qualification of the Plan under section 401(a) of the Code, if the Plan does not so qualify and such contributions are returned to the Employer within one year after the denial of qualification of the Plan and only, if a determination letter request is filed by the terms prescribed by law for filing the Employer's tax return for the taxable year in which the Plan is adopted; c. a contribution to the Plan, conditional on deductibility, which is disallowed as a deduction under section 404 of the Code, if such contribution (to the extent disallowed) is returned to the Employer within one year after the deduction is disallowed; and 45 52 d. any residual assets due to a section 415 excess contribution upon termination of the Plan, if all liabilities of the Plan to Participants and their Beneficiaries have been satisfied and the reversion does not contravene any provision of law. SECTION 9.06 EXPENSES OF THE PLAN AND TRUST. All legal, administrative, taxes, and other expenses of the Plan and Trust and the Trustee's fees (if any) shall be paid by the Trust, except to the extent paid by the Employer. SECTION 9.07 DUTIES AND RESPONSIBILITIES OF TRUSTEE. It shall be the duty of the Trustee to hold, in trust, Company Stock, cash, and other property from time to time received by it, and the Trustee shall have authority to manage and control the assets of the Plan pursuant to the terms of the Plan and this Trust, and subject to Section 4.07 of the Plan which permits certain Participants to diversify the investment of certain of their Accounts. The Trustee is to discharge such powers and duties solely in the interest of the Participants and Beneficiaries for the exclusive purpose of providing benefits to them, defraying reasonable expenses of administering the Plan, and with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. Except as otherwise provided herein, the Trustee shall invest the assets of the Trust Fund as directed by the Committee. Since the Trustee is directed by the Committee to invest the Trust Fund primarily in Company Stock, the Trustee shall not have a duty to diversify the investments of such Accounts to the extent such Accounts are invested in Company Stock. To the extent the Committee has not directed the Trustee as to the investment of the Trust Fund, the Trustee shall diversify such investments so as to minimize the risk of large losses, unless, under the circumstances, it is clearly prudent not to do so, or to the extent the Trustee is directed as to the investment of the Trust Fund by a Participant in accordance with Section 4.07 of the Plan. Further, the Trustee shall not make any investments or maintain the indicia of ownership of any assets of the Plan outside the jurisdiction of the District Courts of the United States. Any cash received by the Trustee as Employer Contributions or as earnings on the Trust Fund attributable to Unallocated Shares which is not applied to repay a current obligation under any Acquisition Loan shall be held in the Loan Suspense Account and either invested pursuant to Section 9.08, or used to satisfy another obligation of the Plan. Pending such investment or application of cash, the Trustee may retain cash uninvested, without liability for interest if it is prudent to do so. The Trustee shall not knowingly cause the Plan to engage in any transaction prohibited by section 4975 of the Code or by section 406 or 407(a) of ERISA in the absence of an exception therefor. The Trustee may hold, acquire, or invest in qualifying employer securities as defined in section 407(d)(5) of ERISA or qualifying employer real estate as defined in section 46 53 407(d)(4) of ERISA (or both) to the extent that the aggregate fair market value of such securities and property does not exceed the limitations set forth in section 407 of ERISA; provided, however, that all purchases of Company Stock shall be for no more than, and for no less than, adequate consideration. For this purpose, "adequate consideration" means the fair market value, determined in good faith by the Trustee. The Company and each Employer shall indemnify the Trustee for all expenses, costs, or liabilities arising out of the performances of its duties under the Plan or Trust, except to the extent it is judicially determined that any such expense, cost, or liability is due to the willful misconduct or gross negligence of the Trustee. The Trustee shall be protected in acting upon any notice, direction, certificate, or other paper or document reasonably believed by the Trustee to be genuine and to have been executed by a Participant, the Plan Administrator, the Employer, a duly appointed Investment Manager or by a duly authorized person or persons representing any of the foregoing. During any period of time that there is more than one Trustee, a Trustee shall not be liable for any act or failure to act of any other Trustee, except to the extent a Trustee (a) knowingly participates in, or undertakes to conceal, an act or omission of another Trustee, knowing that such act or omission is a breach of fiduciary duty to the Plan; (b) fails to comply with the specific responsibilities required as a Trustee, and such failure enables another Trustee to commit a breach of fiduciary duty to the Plan; or (c) has knowledge of a breach of fiduciary duty to the Plan by another Trustee and does not make reasonable effort under the circumstances to remedy such breach. SECTION 9.08 SPECIFIC POWERS AND DUTIES OF TRUSTEE. In addition to the powers and duties conferred upon it by other provisions of the Plan and except to the extent inconsistent with applicable law or with provisions of the Plan and Trust, the Trustee shall have the following powers regarding the Trust and Trust Fund: a. to sell at public or private sale, exchange, convey, transfer, lease, or otherwise dispose of, and also to grant options with respect to all or any part of any property at any time held in the fund, for such considerations, in cash or in credit, and upon such terms and conditions, as it shall deem advisable. In connection with the purchase of securities, margin accounts may be opened and maintained. If put or call options are traded, they must be traded on and purchased through a national securities exchange registered under the Securities Act of 1934, as amended, or if the options are not traded on the national securities exchange, they must be guaranteed by a member firm of the New York Stock Exchange; b. to compromise or settle any claim in respect of any debt or other obligation due to it as Trustee hereunder, to institute and prosecute any and all legal proceedings (including foreclosure proceedings) on behalf of the Plan, or to take any other action for the purpose of enforcing any such claim, and to change the rate of interest or extend the maturity date of any such debt or obligation; 47 54 c. to compromise or settle any claim with respect to any debt or other obligation due to third persons from it as Trustee hereunder; to define any and all legal proceedings in respect of any such claim; and to change the rate of interest on, extend the maturity date of, or otherwise modify the terms of any such debt or obligation; d. to join in and become a party to, or to oppose any reorganization (including any consolidation, merger, or other capital changes) affecting any corporate securities which may at any time be held in the Fund, or any plan or agreement for the protection of the interests of the holders of any such securities; to participate in any such protective plan or agreement or any such reorganization to the same extent and as fully as though it was the absolute and individual owner of such securities; to deposit with any Committee or depositories pursuant to any such protective Plan or agreement or any such reorganization any securities held in the Trust Fund; to make payments from the Trust Fund of and charges or assessments imposed by the terms of any such protective plan or agreement on any such reorganization; and to receive and continue to hold in the Trust Fund any property allotted to the Trust Fund by reason of the Trustee's participation therein; e. to vote, in person or by general or limited proxy, on any securities at any time held in the Trust Fund, at any meeting of security holders, with respect to any business which may come before the meeting; to execute general or limited proxies to one or more nominees; as holder of said securities, to consent to, approve and authorize any corporate act or proceeding, including any merger on consolidation, lease, mortgage or sale of corporate property, or dissolution or liquidation, whether or not proposed at any such meeting; to execute such instruments as may be necessary or appropriate therefore; and generally to exercise the powers of an owner with respect to stocks, bonds, securities, or other property; f. to exercise any conversion or subscription rights appurtenant to any securities at any time held in the Trust Fund or to sell any such rights; g. to execute, acknowledge and deliver any and all deeds, leases, assignments, and other instruments that it may deem necessary or proper in the exercise of any of its powers under this agreement; h. to cause any property at any time held in the Trust Fund to be registered in the name of a nominee of the Trustee, without disclosure of the Trust, or to hold in bearer form any securities at any time held in the Trust Fund so that they will pass by delivery, but any such registration or holding by the Trustee shall not release it from its responsibility for the safe custody and disposition of the Trust Fund, in accordance with the terms and provisions of this agreement; i. to improve, develop, repair, maintain, preserve, and operate any property held in the Trust Fund, or to invest and retain qualifying employer real property and lease such 48 55 property to the Employer as permitted under the appropriate sections of ERISA and regulations promulgated thereunder; j. to borrow from time to time money from persons or others (but not from a party in interest) for the purposes of the Trust created hereby on such terms and conditions as the Trustee may deem advisable; k. to lend securities for such consideration and upon such terms and conditions as the Trustee, in its discretion, deems appropriate; l. pursuant to direction by the Company or Committee, to borrow money from a party in interest or other persons where such borrowing constitutes an Acquisition Loan; m. to employ suitable agents and counsel, and to pay their reasonable expenses and compensation; n. to hold part or all of the Trust Fund uninvested in its own banking or trust department, if any, and the Trustee is further authorized to deposit, at interest, such funds of the Plans as it may from time to time deem appropriate in time deposits or savings accounts bearing a reasonable interest rate, including, specifically, deposits in the commercial banking departments in a Trustee bank; o. to invest and reinvest in Company Stock; p. to invest and reinvest in bonds, notes, debentures, stocks, options, mutual funds, life insurance policies, mortgages, and vendors' interest in contracts for sale of real property or other property, real, personal or mixed, in such manner and to such extent as is prudent under the circumstances; q. to transfer monies and assets of the Trust into common trust funds established for the Plan, including common trust funds held by a corporate Trustee (provided the Trustee is a national banking association); r. to pool all or any of the Trust, from time to time, with assets belonging to any other qualified employee pension benefit trust created by the Company or an Employer and to commingle such assets and make joint or common investments and carry joint accounts or behalf of this Plan and such other trust or trusts, allocating undivided shares or interests in such investments or accounts or any pooled assets of the two or more trusts in accordance with their respective interests; s. to do all acts, whether or not expressly authorized herein, which it may deem necessary and proper for the protection of the property held hereunder, and to carry out the purposes of the Plan; and t. to vote Company Stock in accordance with Article VII hereof. 49 56 If there is more than one Trustee designated and acting under this Trust, all actions by the Trustee must be adopted by a majority of the Trustees. SECTION 9.09 INVESTMENT MANAGER. Upon written notice to the Trustee and the Committee, the Company may appoint one or more investment managers as described in section 3(38) of ERISA, which shall have the power to manage, acquire, or dispose of all or part of the Trust assets in accordance with the provisions of the Plan and Trust agreement. The Committee and investment manager shall execute a written agreement specifying the Trust assets to be managed and the investment manager's duties and responsibilities with respect to such assets, and in such agreement the investment manager shall acknowledge that it is a fiduciary with respect to the Plan and Trust. The Committee may authorize the investment manager to give written instructions to the Trustee with respect to acquiring, managing, and disposing of assets managed by the investment manager, and the Trustee shall follow such instructions and shall be under no duty to make an independent determination regarding whether the instruction is proper. The fees and expenses of an investment manager shall be paid by the Trust, except to the extent paid by the Employer. SECTION 9.10 COMPENSATION OF TRUSTEE AND AGENTS. The Trustee shall be entitled to reasonable compensation for its services. Compensation shall be comparable to charges for similar services made from time to time by other Trustees in the geographic area in which the Trustee has its principal business. Any Trustee shall be entitled to reimbursement for expenses properly and actually incurred in the administration of the Trust. It may employ such agents, attorneys, accountants, or assistants as it may from time to time deem necessary or advisable and fix the compensation to be paid to them. Such counsel or other agents may be counsel or other agents consulted or employed by the Employer. The expenses of the Trustee and the compensation of the persons so employed shall be paid by the Trust Fund or the Employer, as the Committee shall determine, on at least an annual basis. An individual serving as Trustee who already receives full-time pay from the Employer shall not receive compensation from the Plan. SECTION 9.11 REPORTS OF TRUSTEE. The Trustee shall maintain records of receipts and disbursements and shall render reports as of the close of each final year of the Trust and within ninety (90) days following the resignation or removal of the Trustee shall file with the Committee an account for such year such form and containing such information as it deems necessary, provided that such information shall satisfy all applicable requirements imposed by ERISA. The records and accounts of the 50 57 Trustee may be audited annually by an independent firm of certified public accountants selected by the Committee. SECTION 9.12 RESIGNATION, REMOVAL, AND SUBSTITUTION OF TRUSTEE. A Trustee may resign at any time upon sixty (60) days notice to the Employer. A Trustee may be removed at any time by the Company upon sixty (60) days written notice to the Trustee, with or without cause. Upon resignation or removal of the Trustee, the Committee shall appoint a successor Trustee which shall have the same powers and duties as are conferred upon the Trustee hereunder. Upon the delivery by a predecessor Trustee to the successor Trustee of all property of the Trust Fund, less such reasonable amount as it shall deem necessary to provide for its expenses, compensation, and any taxes or advances chargeable or payable out of the Trust Fund, the successor Trustee thereupon shall have the same powers and duties as were conferred upon the predecessor Trustee. No successor Trustee shall have any obligation or liability with respect to the acts or omissions of its predecessors. In the event that a corporate Trustee merged or consolidated with another corporation or sells or transfers substantially all of its assets and business to another corporation, or is in any manner reorganized or reincorporated, then the resulting or acquiring corporation shall thereupon become the corporate Trustee hereunder without the execution of any instrument and without the need for any action by the Committee, any Participant or Beneficiary, or any other person having or claiming to have an interest in the Trust Fund or the Plan. The Trustee shall be appointed by the Committee. The appointment of a Trustee shall become effective as of the date the Committee receives the Trust's written acceptance of the appointment. The Trustees' signature on the Plan constitutes acceptance of the appointment. The Committee shall appoint a new Trustee, if the Trustee fails to accept its appointment in writing. SECTION 9.13 THE COMMITTEE. The Company shall certify to the Trustee from time to time the name(s) of the person(s) constituting the Committee. All directions to the Trustee by the Committee shall be in writing, properly certified by a Committee member. The Trustee shall be entitled to rely, without further inquiry upon all such written directions received from the Committee. SECTION 9.14 AMENDMENT AND TERMINATION. The Company shall have the right at any time, by an instrument in writing, duly executed and acknowledged and delivered to the Trustee, to modify, alter or amend this agreement, in whole or in part, and to terminate the Trust, in accordance with the express provisions of the 51 58 Plan. In no event, however, shall the duties, powers or liabilities of the Trustee hereunder be changed without its written consent. SECTION 9.15 IRREVOCABILITY. Subject to the provisions of the Plan, the Trust is declared to be irrevocable, and except as otherwise provided in Section 9.05, no part of the Trust Fund shall revert to or be recoverable by the Employer or be used for or diverted to any purposes other than for the exclusive benefit of Participants and Beneficiaries. The previous paragraph shall not apply to a "qualified domestic relations order," as defined in section 414(p) of the Code, and any other domestic relations order permitted to be so treated by the Trustee under the provisions of the Retirement Equity Act of 1984. The Committee shall establish a written procedure to determine the qualified status of domestic relations orders and to administer distributions under any domestic relations orders it determines to be qualified. To the extent provided under a "qualified domestic relations order," a former Spouse of a Participant shall be treated as the Participant's Spouse or Surviving Spouse for all purposes under the Plan. SECTION 9.16 PARTIES TO THE TRUST AGREEMENT. Any Employer which has adopted the Plan in accordance with the terms thereof shall become a party to this agreement, by signing the Plan or upon delivering a certified copy of a resolution to the effect that it agrees to adopt the Plan, to become a party to this agreement, and to be bound by all terms and conditions of the Plan and this agreement, as then in effect and as may thereafter be amended. The Committee shall have the sole authority to enforce this agreement and the Trustee shall in no event be required to deal with any person, except the Committee. The Trustee shall in all respects invest and administer the Trust Fund as a single fund for investment and accounting purposes, without identification as to individual Participants, Beneficiaries, or Employers. An Employer shall cease to be a party to this agreement upon delivering to the Trustee a certified copy of a resolution terminating its participation in the Plan. In such event, or in the event of the merger, consolidation, sale of property or stock, separation, reorganization, or liquidation of any corporation that is a party to this agreement, the Trustee, until directed otherwise by the Committee, shall continue to hold, in accordance with the provisions of this agreement, that portion of the Trust Fund which, pursuant to the determination of the Committee, is attributable to the participation in the Plan of the Employees and their Beneficiaries affected by such termination or by such transaction. 52 59 SECTION 9.17 TRUSTEE ACTION. If the Trustee consists of more than one person, the Trustees shall act by a majority of their number. The Trustees may authorize one or more specific Trustees to sign papers on their behalf. ARTICLE X AMENDMENT, TERMINATION, AND MERGER SECTION 10.01 AMENDMENT. The Company reserves the right to amend the Plan and Trust, by written amendment and resolution of the Board of Directors of the Company, to the extent permitted under the Code and ERISA. No amendment affecting the rights or duties of the Trustee shall be effective without the written consent of the Trustees. No amendment to the plan shall be effective to the extent that it has the effect of decreasing a Participant's accrued benefit. Notwithstanding the preceding sentence, a Participant's Account balance may be reduced to the extent permitted under section 412(c)(8) of the Code. For purposes of this paragraph, a plan amendment which has the effect of decreasing a Participant's Account balance or eliminating an optional form of benefit, with respect to benefits attributable to service before the amendment, shall be treated as reducing an accrued benefit. SECTION 10.02 TERMINATION. a. The Employer intends to continue the Plan indefinitely and to fund the Plan as required by law and its terms. However, the Company reserves the right to terminate the Plan at any time. If the Plan is totally or partially terminated, or in the event of a complete discontinuation of contributions under the Plan, a Participant whose participation in the Plan is terminated as a result of such total or partial termination or who is affected by the complete discontinuation of contributions to the Plan shall be one hundred percent (100%) Vested in such Participant's Accounts, determined as of the date of such total or partial termination. b. Upon termination of the Plan, the Employer shall allocate the assets of the Plan, after the payment of or set aside for the payment of all expenses, among the Participants and their Beneficiaries in accordance with the Code and ERISA. c. Upon termination of the Plan, and after all liabilities of the Plan to Participants and Beneficiaries have been satisfied, any residual assets of the Plan due to a section 415 excess contribution shall be distributed to the Employer, provided such distribution does not contravene any provision of the law or the Plan. 53 60 d. The allocation of benefits under this Article X shall be accomplished either through the continuance of the Trust, the creation of a new Trust, the payment of the benefits to be provided to the Participants or Beneficiaries, or the purchase of annuity contracts, as determined by the Employer. SECTION 10.03 MERGER, CONSOLIDATION, OR TRANSFER. The Company shall have the right at any time to merge or consolidate the Plan with any other Plan, or transfer the assets or liabilities of the Trust to any other Plan provided each Participant would (if the Plan were then terminated) receive a benefit immediately after such merger, consolidation or transfer which would equal or exceed the benefit the Participant would have been entitled to immediately before such merger, consolidation or transfer (if the Plan were then terminated). ARTICLE XI TOP-HEAVY PROVISIONS SECTION 11.01 APPLICABILITY. If the Plan is or becomes Top-Heavy in any Plan Year, the provisions of this Article XI shall supersede any conflicting provisions in the Plan. SECTION 11.02 TOP-HEAVY DEFINITIONS. Throughout this Section 11.02, certain words and phrases have meanings which are specifically defined for purposes of this Article XI of the Plan. These words and phrases can be identified in that the first letter of the word or words in the phrase are capitalized. The definitions of these words and phrases are set forth below and, to the extent inconsistent, supersede the definitions of any such words and phrases which are set forth in Article II, or any other Article of the Plan. a. "Key Employee" means any Employee or former Employee (and the Beneficiaries of such Employee) who at any time during the "determination period" was (1) an officer of the Employer, if such individual's annual Compensation exceeds fifty percent (50%) of the dollar limitation under section 415(b)(1)(A) of the Code; (2) an owner (or considered an owner under section 318 of the Code) of one of the ten largest interests in the Employer if such individual's Compensation exceeds one hundred percent (100%) of the dollar limitation under section 415(c)(1)(A) of the Code; (3) a five percent (5%) owner of the Employer; or (4) a one percent (1%) owner of the Employer who has an annual Compensation of more than $150,000. Compensation means Compensation as defined in section 415(c)(3) of the Code, but including amounts contributed by the Employer pursuant to a salary reduction agreement which are 54 61 excludable from the Employee's gross income under sections 125, 402(e)(3), 402(h) or 403(b) of the Code. The "determination period" is the Plan Year containing the Determination Date and the four preceding Plan Years. The determination of who is a Key Employee will be made in accordance with section 416(i)(1) of the Code and the Regulations thereunder. b. "Top-Heavy Plan" means, for the Plan Year, any of the following conditions exists: 1. If the Top-Heavy Ratio for this Plan exceeds sixty percent (60%) and this Plan is not part of any Required Aggregation Group or Permissive Aggregation Group of plans. 2. If this Plan is a part of a Required Aggregation Group of plans, but not part of a Permissive Aggregation Group of plans and the Top-Heavy Ratio for the Required Aggregation Group exceeds sixty percent (60%). 3. 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 sixty percent (60%). c. "Super-Top-Heavy Plan" means, for the Plan Year, the Plan would be Top-Heavy when "ninety percent (90%)" is substituted for "sixty percent (60%)" each place it appears in (b) above. d. "Top-Heavy Ratio" means the following: 1. If the Employer maintains one or more Defined Contribution Plans (including any simplified employee pension plan) and the Employer has not maintained any Defined Benefit Plan which during the five (5) year period ending on the Determination Date(s) has or has had accrued benefits, the Top-Heavy ratio for this Plan alone or for the required or Permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of the Account balances of all Key Employees as of the Determination Date(s) (including any part of any Account balance distributed in the five (5) year period ending on the Determination Date(s)), and the denominator of which is the sum of all Account balances (including any part of any Account balance distributed in the five (5) year period ending on the Determination Date(s)), both computed in accordance with section 416 of the Code and the Regulations thereunder. Both the numerator and denominator of the Top-Heavy Ratio are increased to reflect any contribution not actually made as of the Determination Date, but which is required to be taken into account on that date under section 416 of the Code and the Regulations thereunder. 55 62 2. If the Employer maintains one or more Defined Contribution Plans (including any simplified employee pension plan) and the Employer maintains or has maintained one or more Defined Benefit Plans which during the five (5) year period ending on the Determination Date(s) has or has had any accrued benefits, the Top-Heavy Ratio for any required or Permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of Account balances under the aggregated Defined Contribution Plan or Plans for all Key Employees, determined in accordance with (1) above, and the Present Value of accrued benefits under the aggregated Defined Benefit Plan or Plans for all Key Employees as of the Determination Date(s), and the denominator of which is the sum of the Account balances under the aggregated Defined Contribution Plan or Plans for all Participants, determined in accordance with (1) above, and the Present Value of accrued benefits under the Defined Benefit Plan or Plans for all Participants as of the Determination Date(s), as determined in accordance with section 416 of the Code and the Regulations thereunder. The accrued benefits under a Defined Benefit Plan in both the numerator and denominator of the Top-Heavy Ratio are increased for any distribution of an accrued benefit made in the five (5) year period ending on the Determination Date. 3. For purposes of (1) and (2) above, the value of Account balances and the Present Value of accrued benefits shall be determined as of the most recent Valuation Date that falls within or ends with the twelve (12) month period ending on the Determination Date, except as provided in section 416 of the Code and the Regulations thereunder for the first and second Plan Years of a Defined Benefit Plan. The Account balances and accrued benefits of a Participant (a) who is not a Key Employee, but who was a Key Employee in a prior year, or (b) who has not been credited with at least one Hour of Service with any Employer maintaining the Plan 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 section 416 of the Code and the Regulations thereunder. Deductible Employee contributions 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. The accrued benefit of a Participant other than a Key Employee shall be determined under either; (a) the method, if any, that uniformly applies for accrual purposes under all Defined Benefit Plans maintained by the Employer; or (b) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of section 411(b)(1)(C) of the Code. 56 63 e. "Permissive Aggregation Group" means 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 sections 401(a)(4) and 410 of the Code. f. "Required Aggregation Group" means: (1) 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 (2) any other qualified plan of the Employer which enables a plan described in (1) to meet the requirements of sections 401(a)(4) or 410 of the Code. g. "Determination Date" means for any Plan Year subsequent to the first Plan Year, the last day of the preceding Plan Year. For the first Plan Year of the Plan, the last day of that year. h. "Valuation Date" means the date as defined in Article II as of which Account balances or accrued benefits are valued for purposes of calculating the Top-Heavy Ratio. i. "Present Value" means amounts determined by using the interest and mortality rates specified in the applicable plans. Notwithstanding the foregoing, all determinations shall be made in accordance with section 416 of the Code and the Regulations thereunder. SECTION 11.03 MINIMUM ALLOCATION. a. Except as otherwise provided in (c) and (d) below, the Employer Contributions and Forfeitures allocated on behalf of any Participant who is not a Key Employee shall not be less than the lesser of three percent (3%) (four percent (4%), if the Plan is Super-Top-Heavy) of such Participant's Compensation or in the case where the Employer has no Defined Benefit Plan which designates this Plan to satisfy section 401 of the Code, the largest percentage of Employer Contributions and Forfeitures, as a percentage of the Key Employee's Compensation, allocated on behalf of any Key Employee for that year. The minimum allocation is determined without regard to any Social Security contribution. b. For purposes of computing the minimum allocation, Compensation means Compensation as defined in Article II. c. The provision in (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 (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 minimum 57 64 allocation or benefit requirement applicable to Top-Heavy Plans will be met in the other plan or plans. SECTION 11.04 NONFORFEITABILITY OF MINIMUM ALLOCATION. The minimum allocation required (to the extent required to be nonforfeitable under section 416(b)) may not be forfeited pursuant to section 411(a)(3)(D) of the Code. SECTION 11.05 ALLOCATION LIMITATIONS. In determining the Defined Contribution Fraction under section 415(e)(3)(B) of the Code and pursuant to Section 5.03, "one hundred percent (100%)" shall be substituted for "one hundred twenty-five percent (125%)," unless the minimum allocation percentage under section 416(c)(2)(A) of the Code and Section 11.03(a) of the Plan is increased from "three percent (3%)" to "four percent (4%)" and the Plan is a Super-Top-Heavy Plan. SECTION 11.06 TOP-HEAVY VESTING. a. For any Plan Year during which the Plan is Top-Heavy, the vesting schedule below will automatically apply to all benefits within the meaning of section 411(a)(7) of the Code, except those attributable to Employee contributions, including benefits accrued before the effective date of section 416 and benefits accrued before the Plan became Top-Heavy. Further, no decrease in a Participant's nonforfeitable percentage may occur in the event the Plan's status as Top-Heavy changes for any Plan Year. However, this Section 11.06 does not apply to the Account balance(s) of any Employee who does not have an Hour of Service after the Plan has initially become Top-Heavy. Such Employee's Account balance attributable to Employer contributions and Forfeitures will be determined without regard to the Section 11.06. b. The nonforfeitable interest of each Employee in his or her Account balance attributable to Employer contributions shall be as follows:
The nonforfeitable Years of Service: percentage is: Less than 2 years 0% At least 2, but less than 3 years 20% At least 3, but less than 4 years 40% At least 4, but less than 5 years 60% At least 5, but less than 6 years 80% 6 or more years 100%
58 65 c. If the vesting schedule under the Plan becomes subject to or is no longer subject to the above schedule for any Plan Year, because of the Plan's Top-Heavy status, such shift is an amendment to the vesting schedule and the election provided in Section 5.10(g) of the Plan shall be available. ARTICLE XII GENERAL PROVISIONS SECTION 12.01 GOVERNING LAW. The Plan and Trust are established under, and its validity, construction and effect shall be governed by the laws of the State of Texas. The parties to the Trust intend that the Trust be exempt from taxation under section 501(a) of the Code, and any ambiguities in its construction shall be resolved in favor of an interpretation which will affect such intention. SECTION 12.02 POWER TO ENFORCE. The Committee shall have authority to enforce the Plan on behalf of any and all persons having or claiming any interest in the Trust or Plan. SECTION 12.03 ALIENATION OF BENEFITS. Benefits under the Plan shall not be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be void, nor shall any such benefits be in any way liable for or subject to the debts, contracts, liabilities, engagements, or torts of any person entitled to such benefits. This Section 12.03 shall also apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a Participant pursuant to a domestic relations order, unless such order is determined to be a "qualified domestic relations order" as defined in section 414(p) of the Code, or any domestic relations order entered before January 1, 1985. SECTION 12.04 NOT AN EMPLOYMENT CONTRACT. The Plan is not and shall not be deemed to constitute a contract between the Employer and any Employees, or to be a consideration for, or an inducement to, or a condition of, the employment of any Employee. Nothing contained in the Plan shall give or be deemed to give an Employee the right to remain in the employment of the Employer or to interfere with the right to be retained in the employ of the Employer any legal or equitable right against the Employer, or to interfere with the right of the Employer to discharge or retire any Employee at any time. 59 66 SECTION 12.05 DISCRETIONARY ACTS. Any discretionary acts to be taken under the Plan with respect to the classification of Employees, contributions, or benefits shall be nondiscriminatory and uniform in nature and applicable to all persons similarly situated. SECTION 12.06 INTERPRETATION. If any provision or provisions of the Plan shall for any reason be invalid or unenforceable, the remaining provisions of the Plan shall be carried into effect, unless the effect thereof would be to materially alter or defeat the purposes of the Plan. All terms of the Plan and all discretion granted hereunder shall be uniformly and consistently applied to all the Employees, Participants, and Beneficiaries. ARTICLE XIII PARTICIPATING EMPLOYERS SECTION 13.01 ADOPTION BY OTHER EMPLOYERS. Notwithstanding anything herein to the contrary, with the consent of the Company, any Affiliate may adopt this Plan and all of the provisions hereof, and participate herein and be known as a participating Employer, by a properly executed document evidencing said intent and will of such participating Employer. SECTION 13.02 REQUIREMENTS OF PARTICIPATING EMPLOYERS. a. Each such participating Employer shall be required to use the same Trustee as provided in the Plan. b. The Trustee may, but shall not be required to, co-mingle, hold and invest as one Trust Fund all contributions made by participating Employers, as well as all increments thereof. However, the assets of the Plan shall, on an ongoing basis, be available to pay benefits to all Participants and Beneficiaries under the Plan without regard to the Employer or participating Employer who contributed such assets. c. The transfer of any Participant from or to an Employer participating in the Plan, whether such Participant is an Employee of the Company or a participating Employer, shall not affect such Participant's rights under the Plan, and all amounts credited to such Participant's Account as well as such Participant's accumulated service time with 60 67 the transferor or predecessor, and length of participation in the Plan, shall continue to accrue to such Participant's credit. d. Any expenses of the Trust which are to be paid by the Employer or borne by the Trust Fund shall be paid by each Participating Employer in the same proportion that the total amount standing to the credit of all Participants employed by such Employer bears to the total standing to the credit of all Participants. SECTION 13.03 DESIGNATION OF AGENT. Each participating Employer shall be deemed to be a part of this Plan; provided, however, that with respect to all of its relations with the Trustee and the Committee for the purpose of this Plan, each participating Employer shall be deemed to have designated irrevocably the Company as its agent. Unless the context of the Plan clearly indicates the contrary, the word "Employer" shall be deemed to include each participating Employer as related to its adoption of the Plan. SECTION 13.04 PARTICIPATING EMPLOYER'S CONTRIBUTION. Any contribution subject to allocation during each Plan Year shall be allocated among all Participants of all participating Employers in accordance with the provisions of this Plan. On the basis of the information furnished by the Committee, the Trustee shall keep separate books and records concerning the affairs of each Employer. In the event of an Employee transfer from one participating Employer to another, the employing Employer shall immediately notify the Trustee thereof. SECTION 13.05 DISCONTINUANCE OF PARTICIPATION. Any participating Employer shall be permitted to discontinue or revoke its participation in the Plan, and the Committee may terminate the participation of any participating Employer. At the time of any such discontinuance or revocation, satisfactory evidence thereof and of any applicable condition imposed shall be delivered to the Committee. Termination of a participating Employer's participation by the Committee shall be effected by written notice to the participating Employer when the Committee deems it appropriate, the Committee shall direct the Trustee thereafter to transfer, deliver, and assign Trust assets allocable to the Participants of such participating Employer to such new Trustee as shall have been designated by such participating Employer, in the event that it has established a separate plan for its Employees provided, however, that no such transfer shall be made, if the result is the elimination or reduction of any "accrued benefit" as described in Section 10.01. If no successor is designated, the Trustee shall retain such assets for the Employees of said participating Employer pursuant to the provisions of Article X. In no such event shall any part of the corpus or income of the Trust, as it relates to such participating Employer be used or 61 68 diverted for purposes other than for the exclusive benefit of the Employees of such participating Employer. SECTION 13.06 COMMITTEE'S AUTHORITY. The Committee shall have authority to make any and all necessary rules or regulations, binding upon all participating Employers and all Participants, to effectuate the purpose of this Article XIV. ARTICLE XIV SIGNATURE PAGE IN WITNESS WHEREOF, this Plan has been executed the day and year written below. This Plan may be executed in any number or counterparts, each of which shall be deemed an original and no other counterpart need be produced. Signed, sealed, and delivered on this 31st day of July, 1995. UNITED STATES LIME & MINERALS, INC. By: [ILLEGIBLE] -------------------------------- 62 EX-11 3 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (LOSS)
YEARS ENDED DECEMBER 31, ------------------------------------------------------- 1995 1994 1993 --------------- --------- -------- Income (loss) from continuing operations $ 4,260,000 1,916,000 (441,000) Income (loss) from discontinued operations - - 480,000 --------------- --------- -------- Net income $ 4,260,000 1,916,000 39,000 =============== ========= ========= Weighted average number of common shares outstanding 3,836,063 3,836,063 3,836,063 =============== ========= ========= Income (loss) per share of common stock: Continuing operations $ 1.11 0.50 (0.11) Discontinued operations - - 0.12 --------------- --------- -------- Net income $ 1.11 0.50 0.01 =============== ========= =========
NOTE: Outstanding stock options are excluded from the computation as the effective dilution in earnings per share data is less than 3%. EX-21 4 SUBSIDIARIES OF THE COMPANY 1 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY Arkansas Lime Company, an Arkansas Corporation Corson Lime Company, a Pennsylvania Corporation Texas Lime Company, a Texas Corporation EX-23.(A) 5 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23(a) 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 22, 1996, 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, 1995. ERNST & YOUNG LLP Dallas, Texas February 28, 1996 EX-23.(B) 6 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23(b) 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 February 1, 1994, 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, 1995. ARONSON, FETRIDGE & WEIGLE Rockville, Maryland February 28, 1996 EX-27 7 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 1000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1,161 0 5,509 0 5,332 12,236 53,927 37,503 29,793 6,080 0 529 0 0 18,220 29,793 41,419 41,419 30,572 30,572 5,185 0 723 5,282 1,022 4,260 0 0 0 4,260 1.11 1.11
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