-----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, OOugwgftsZaIKoiIdtXzpQeLTL3wvolfKFySz75iEzWY/qianeuhJAXVoJ4oI0bf M6LAI3A2UwctDmr3DLOfqQ== 0000950134-03-011652.txt : 20030813 0000950134-03-011652.hdr.sgml : 20030813 20030813171940 ACCESSION NUMBER: 0000950134-03-011652 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030813 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-04197 FILM NUMBER: 03842480 BUSINESS ADDRESS: STREET 1: 13800 MONTFORT DR STREET 2: SUITE 330 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 9729918400 MAIL ADDRESS: STREET 1: 13800 MONTDORT DR STREET 2: SUITE 330 CITY: DALLAS STATE: TX ZIP: 75240 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-Q 1 d08213e10vq.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------- For the quarterly period ended JUNE 30, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ........ to ........ Commission file number is 000-4197 UNITED STATES LIME & MINERALS, INC. ----------------------------------- (Exact name of registrant as specified in its charter) TEXAS 75-0789226 ---------------------------------- ----------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 13800 MONTFORT DRIVE, SUITE 330, DALLAS, TX 75240 - -------------------------------------------- ----------------------------- (Address of principal executive offices) (Zip Code) (972) 991-8400 ------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ------ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X ------ ------ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of August 8, 2003, 5,799,845 shares of common stock, $0.10 par value, were outstanding. Page 1 of 14 PART I. FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of dollars) (Unaudited)
JUNE 30, DECEMBER 31, 2003 2002 -------------- -------------- ASSETS Current Assets: Cash and cash equivalents $ 416 226 Trade receivables, net 7,295 5,202 Inventories 4,542 4,782 Prepaid expenses and other current assets 1,008 262 -------------- -------------- Total current assets 13,261 10,472 Property, plant and equipment, at cost: 116,001 114,062 Less accumulated depreciation (46,375) (43,656) -------------- -------------- Property, plant and equipment, net 69,626 70,406 Deferred tax assets, net 2,359 2,359 Other assets, net 1,286 1,282 -------------- -------------- Total assets $ 86,532 84,519 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current installments of debt $ 6,734 4,533 Accounts payable 2,326 2,472 Accrued expenses 1,453 953 -------------- -------------- Total current liabilities 10,513 7,958 Debt, excluding current installments 35,833 37,500 Other liabilities 629 755 -------------- -------------- Total liabilities 46,975 46,213 Stockholders' Equity: Common stock 580 580 Additional paid-in capital 10,392 10,392 Accumulated other comprehensive loss (254) (254) Retained earnings 28,839 27,588 -------------- -------------- Total stockholders' equity 39,557 38,306 -------------- -------------- Total liabilities and stockholders' equity $ 86,532 84,519 ============== ==============
See accompanying notes to condensed consolidated financial statements. Page 2 of 14 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands of dollars, except per share data) (Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------------------------- ------------------------------------------- 2003 2002 2003 2002 -------------------- ------------------- -------------------- ------------------- REVENUES $ 11,529 100.0% $ 10,961 100.0% $ 21,085 100.0% $ 19,938 100.0% Cost of revenues: Labor and other operating expenses 6,531 56.6% 6,467 59.0% 12,831 60.9% 12,069 60.5% Depreciation, depletion and amortization 1,539 13.4% 1,513 13.8% 3,046 14.4% 3,051 15.3% -------- -------- -------- -------- -------- -------- -------- -------- 8,070 70.0% 7,980 72.8% 15,877 75.3% 15,120 75.8% -------- -------- -------- -------- -------- -------- -------- -------- GROSS PROFIT 3,459 30.0% 2,981 27.2% 5,208 24.7% 4,818 24.2% Selling, general and administrative expenses 987 8.6% 1,015 9.3% 2,047 9.7% 1,973 9.9% -------- -------- -------- -------- -------- -------- -------- -------- OPERATING PROFIT 2,472 21.4% 1,966 17.9% 3,161 15.0% 2,845 14.3% -------- -------- -------- -------- -------- -------- -------- -------- Other expenses (income): Interest expense 1,038 9.0% 1,102 10.1% 2,059 9.8% 2,215 11.1% Other expense (income), net (699) (6.1)% 195 1.8% (711) (3.4)% 573 2.9% -------- -------- -------- -------- -------- -------- -------- -------- 339 2.9% 1,297 11.8% 1,348 6.4% 2,788 14.0% -------- -------- -------- -------- -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 2,133 18.5% 669 6.1% 1,813 8.6% 57 0.3% -------- -------- -------- -------- -------- -------- -------- -------- Income tax expense 320 2.8% 153 1.4% 272 1.3% 11 0.1% -------- -------- -------- -------- -------- -------- -------- -------- NET INCOME $ 1,813 15.7% $ 516 4.7% $ 1,541 7.3% $ 46 0.2% ======== ======== ======== ======== ======== ======== ======== ======== INCOME PER SHARE OF COMMON STOCK: Basic $ 0.31 $ 0.09 $ 0.27 $ 0.01 Diluted $ 0.31 $ 0.09 $ 0.27 $ 0.01
See accompanying notes to condensed consolidated financial statements. Page 3 of 14 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of dollars) (Unaudited)
JUNE 30, ------------------------------ 2003 2002 ------------ ------------ OPERATING ACTIVITIES: Net income $ 1,541 46 Adjustments to reconcile net income to net cash provided by operations: Depreciation, depletion and amortization 3,156 3,163 Amortization of financing costs 137 115 Loss (gain) on sale of assets 14 (3) Changes in operating assets and liabilities: Trade receivables, net (2,093) (1,952) Inventories 240 1,045 Prepaid expenses and other current assets (746) 633 Other assets, net (141) (23) Accounts payable and accrued expenses 354 70 Other liabilities (126) (62) ------------ ------------ Total adjustments 794 2,986 ------------ ------------ Net cash provided by operations $ 2,335 3,032 INVESTING ACTIVITIES: Purchase of property, plant and equipment $ (2,395) (2,132) Proceeds from sale of property, plant and equipment 6 44 ------------ ------------ Net cash used in investing activities $ (2,389) (2,088) FINANCING ACTIVITIES: Payment of common stock dividends $ (290) (293) Proceeds from borrowings 2,201 1,750 Repayment of debt (1,667) (2,166) ------------ ------------ Net cash provided (used) by financing activities $ 244 (709) ------------ ------------ Net increase in cash and cash equivalents 190 235 Cash and cash equivalents at beginning of period 226 606 ------------ ------------ Cash and cash equivalents at end of period $ 416 841 ============ ============ Supplemental cash flow information: Interest paid $ 1,922 2,101 Income taxes paid, net $ 5 442
See accompanying notes to condensed consolidated financial statements. Page 4 of 14 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Basis of Presentation Presentation. The condensed consolidated financial statements included herein have been prepared by the Company without independent audit. In the opinion of the Company's management, all adjustments of a normal and recurring nature necessary to present fairly the financial position, results of operations and cash flows for the periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the period ended December 31, 2002. The results of operations for the three-month and six-month periods ended June 30, 2003 are not necessarily indicative of operating results for the full year. Stock-based Compensation. The Company accounts for stock-based compensation using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Stock-based compensation expense associated with option grants was not recognized in the net income for the six-month periods ended June 30, 2003 and 2002, as all options granted have had exercise prices equal to the market value of the underlying common stock on the dates of grant. The following table illustrates the effect on net income and income per common share if the Company had applied the fair-value-based recognition provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation:
FOR THE SIX MONTHS ENDED JUNE 30, ------------------------------ 2003 2002 ------------ ------------ Net income as reported $ 1,541 46 Stock-based employee compensation expense determined under fair-value-based method for all awards, net of related tax effects (16) (33) ------------ ------------ Pro forma net income $ 1,525 13 ============ ============ Basic and diluted income per common share, as reported $ 0.27 0.01 Pro forma basic and diluted income per common share $ 0.26 0.00
Page 5 of 14 2. Embezzlement-Related Costs and Recoveries On January 31, 2002, the Company announced that it had discovered that an employee who had recently left the Company may have improperly diverted Company funds without authorization. Trading in the Company's common stock on the Nasdaq National Market(R) ("Nasdaq") was halted, and the Audit Committee of the Company's Board of Directors retained outside counsel to conduct a special investigation into the matter. The Audit Committee also retained an independent accounting firm to review the Company's internal controls and to make recommendations for improvement that the Company has implemented. The Company also contacted the Securities and Exchange Commission (the "SEC"), as well as criminal authorities, and cooperated with the SEC, Nasdaq, and criminal authorities with respect to their investigations into this matter. The Company's former Vice President - Finance, Controller, Treasurer, and Secretary, Larry Ohms (the "Former VP Finance"), over a period of four years beginning in 1998, embezzled approximately $2,179,000 from the Company. The Former VP Finance voluntarily resigned from the Company on January 22, 2002, approximately one week before the Company discovered the defalcations. The Former VP Finance has stated that no one else at the Company was involved in perpetrating the embezzlements. From the results of the special investigation and Mr. Ohms' testimony, the Company believes this statement to be accurate. In 2002, Mr. Ohms pleaded guilty to one count of wire fraud and one count of making a false statement to the SEC, and on March 24, 2003 he was sentenced to a term in federal prison and ordered to pay $2,179,000 in restitution to the Company. On March 14, 2002, the Company received $500,000 in insurance proceeds from the Company's insurance policies covering employee theft. The $500,000 was recorded on the Consolidated Balance Sheet at December 31, 2001 in prepaid expenses and other assets, and recognized in the Consolidated Statement of Operations in other income in the fourth quarter 2001. In addition, the Company retained counsel for assistance in its efforts to recover the embezzled funds from the Former VP Finance, and to pursue possible civil actions on behalf of the Company against third parties. The Company filed suit against the Former VP Finance and has obtained a judgment against him, including compensatory and punitive damages. The Former VP Finance has claimed not to have any funds. Recoveries are being recognized in the quarters in which the recoveries are realized, and the costs of the Company's special investigation, the Company's cooperation with the SEC, Nasdaq, and criminal authorities in their investigations and the Company's ongoing recovery efforts are being expensed as incurred. During the first half 2003, the Company recorded recoveries of $776,000 ($0.13 per share), net of income taxes ($913,000 gross), and embezzlement-related costs of $158,000 ($0.03 per share), net of income tax benefits ($186,000 gross), compared to embezzlement-related costs of $498,000 ($0.09 per share), net of income tax benefits ($622,000 gross), in the first half 2002. Page 6 of 14 3. Inventories
Inventories consisted of the following at: (In thousands of dollars) JUNE 30, DECEMBER 31, 2003 2002 ------------ ------------ Lime and limestone inventories: Raw materials $ 1,562 $ 1,704 Finished goods 827 942 ------------ ------------ 2,389 2,646 Parts inventories 2,153 2,136 ------------ ------------ Total inventories $ 4,542 $ 4,782 ============ ============
4. Banking Facilities and Other Debt On April 22, 1999, the Company entered into a credit agreement with a consortium of commercial banks for a $50,000,000 Senior Secured Term Loan (the "Loan"). The Loan is repayable over a period of approximately eight years, maturing on March 30, 2007, and requires monthly principal payments of $278,000, which began April 30, 2000, with a final principal payment of $26,944,000 on March 30, 2007, which equates to a 15-year amortization. The Company paid a fee equivalent to 2.50% of the Loan value to the placement agent. The interest rate on the first $30,000,000 of the Loan is 8.875%. The subsequent installments bear interest from the date they were funded at 3.52% above the secondary market yield of the United States Treasury obligation maturing May 15, 2005. The blended rate for the additional $20,000,000 is 9.84%. The Loan is secured by a first lien on substantially all of the Company's assets, with the exception of accounts receivable and inventories which secure the Company's $5,000,000 revolving credit facility. The Loan agreement contains covenants that restrict the incurrence of debt, guaranties and liens, and places certain restrictions on the payment of dividends and the sale of significant assets. The Company is also required to meet minimum debt service coverage ratios on an ongoing basis and maintain a minimum level of tangible net worth. On January 31, 2003, the maturity of the Company's $5,000,000 revolving credit facility was extended to July 31, 2003. From January 1, 2003 through March 2, 2003, the revolving credit facility bore interest at LIBOR plus a margin of 1.40% to 3.55%, in accordance with a defined rate spread based upon the Company's then-current ratio of total funded debt to earnings before interest, taxes, depreciation and amortization (EBITDA). On March 3, 2003, the Company entered into a Loan and Security Agreement with another bank for a $5,000,000 revolving credit facility to replace the prior facility. In addition, the Company obtained a new $2,000,000 equipment line of credit (available for financing or leasing large mobile equipment used in its operations) from the same bank. The new revolving credit facility is secured by the Company's accounts receivable and inventories, provides for an interest rate of LIBOR plus 2.75%, and matures on March 1, 2004. As of July 31, 2003, the Company's outstanding balance on the revolving credit facility was $2,200,000. The outstanding balance of the revolving credit facility was repaid in full on August 5, 2003 with proceeds from the private placement discussed below, and the Loan and Security Agreement was amended to allow the revolving credit facility to be increased to $6,000,000 at the Company's option. The average Page 7 of 14 interest rate for the revolving credit facilities in the first half 2003 was 4.06%. As of July 31, 2003, the Company had entered into approximately $700,000 of operating leases for mobile equipment under the $2,000,000 equipment line. A summary of outstanding debt at the dates indicated is as follows: (In thousands of dollars)
JUNE 30, DECEMBER 31, 2003 2002 ------------ ------------ Term loan $ 39,166 40,833 Revolving credit facility 3,401 1,200 ------------ ------------ Subtotal 42,567 42,033 Less current installments 6,734 4,533 ------------ ------------ Debt, excluding current installments $ 35,833 37,500 ============ ============
In April 2003, the Company engaged Frost Securities, Inc. ("Frost") to advise it on possible financing alternatives for the Phase II expansion of the Company's Arkansas facilities. Frost contacted potential sources of financing and obtained several term sheet proposals for a subordinated debt placement from outside investors. In conjunction with the review of the proposals and further negotiations, Frost and the Company renewed discussions with the Company's two largest shareholders and a third party to determine whether they would be interested in the investment on terms more favorable to the Company than those currently available from other potential outside investors. On August 5, 2003, the Company sold $14,000,000 of unsecured Subordinated Notes (the "Sub Notes") in a private placement to three entities, one of which is an affiliate of Inberdon Enterprises Ltd., the Company's majority shareholder, and another of which is an affiliate of Robert S. Beall, who owns approximately 11% of the Company's outstanding shares. The Company believes that the terms of the private placement are more favorable to the Company than the proposals previously received. Frost provided an opinion to the Company's Board of Directors that, from a financial point of view, the private placement was fair to the unaffiliated holders of the Company's common stock in relation to other potential subordinated debt transactions currently available to the Company. The net proceeds from the private placement will be used to fund the Phase II expansion of the Company's Arkansas facilities. Terms of the Sub Notes include: a maturity date of August 5, 2008, subject to acceleration upon a change in control; no mandatory principal payments prior to maturity; an interest rate of 14% (12% paid in cash and 2% paid in cash or in kind at the Company's option); and, except as discussed below, no optional prepayment prior to August 5, 2005 and a 4% prepayment penalty if repaid before maturity. The terms of the Sub Notes are identical to one another, except that the Sub Note for the affiliate of Inberdon Enterprises Ltd. does not prohibit prepayment prior to August 5, 2005 and does not require a prepayment penalty if repaid before maturity, resulting in a weighted average prepayment penalty of approximately 2.4% if the Sub Notes are repaid before maturity. The Sub Notes include covenants similar to the covenants for the Loan. The private placement also included six-year detachable warrants, providing the Sub Note investors the right to purchase an aggregate of 162,000 shares of the Company's common stock, at 110% of the average closing price of one share of common stock for the trailing 30 trading days Page 8 of 14 prior to closing, or $3.84. After August 5, 2008, or upon an earlier change in control, the investors may require the Company to repurchase any or all shares acquired through exercise of the warrants (the "Warrant Shares"). The repurchase price for each Warrant Share will equal the average closing price of one share of the Company's common stock for the 30 trading days preceding the date the Warrant Shares are put back to the Company. The investors are also entitled to certain registration rights for the resale of their Warrant Shares. As a result of certain negotiations with the Company's existing bank lenders, the Loan and the revolving credit facility were amended to approve the terms of the Sub Notes. As part of these amendments, the Company is prohibited from paying any dividends in cash through June 30, 2005 without the prior written consent of the bank lenders. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS. Any statements contained in this Report that are not statements of historical fact are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this Report, including without limitation statements relating to the Company's plans, strategies, objectives, expectations, intentions, and adequacy of resources, are identified by such words as "will," "could," "should," "believe," "expect," "intend," "plan," "schedule," "estimate," "anticipate," and "project." The Company undertakes no obligation to publicly update or revise any forward-looking statements. The Company cautions that forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from expectations, including without limitation the following: (i) the Company's plans, strategies, objectives, expectations, and intentions are subject to change at any time in the Company's discretion; (ii) the Company's plans and results of operations will be affected by its ability to manage its growth and modernization; (iii) the Company's ability to meet short-term and long-term liquidity demands; (iv) inclement weather conditions; (v) increased fuel costs; (vi) unanticipated delays or additional cost overruns in completing current or planned construction projects; (vii) reduced demand for the Company's products; and (viii) other risks and uncertainties set forth below or indicated from time to time in the Company's filings with the Securities and Exchange Commission, including the Company's Form 10-K for the fiscal year ended December 31, 2002. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operations was $2,335,000 for the six months ended June 30, 2003, compared to $3,032,000 for the six months ended June 30, 2002. The $697,000 decrease was the result of changes in working capital, partially offset by the $1,495,000 increase in net income in the 2003 period compared to the same period in 2002. The most significant working capital change was a $746,000 increase in prepaid expenses and other current assets in the first six months 2003, primarily due to the accrual of $813,000 of embezzlement-related recoveries, compared to a $633,000 decrease in the comparable 2002 period. The decrease in 2002 primarily resulted from the Company's receipt of the $500,000 in insurance proceeds from insurance policies covering employee theft. Also, in the 2002 period, reduced production due to operational problems at the Company's Texas plant was the primary reason for the additional $805,000 reduction in inventories compared to 2003. The Company invested $2,395,000 in capital expenditures in the first six months 2003, compared to $2,132,000 in the same period last year. Page 9 of 14 Net cash provided by financing activities was $244,000 in the first six months 2003, primarily from $2,201,000 of draws on the Company's revolving credit facility, partially offset by $1,667,000 repayment of debt and $290,000 payment of cash dividends. Financing activities used $709,000 net cash in the first six months 2002, primarily for $2,166,000 repayment of debt and $293,000 payment of cash dividends, partially offset by $1,750,000 of draws on the Company's revolving credit facility. On March 3, 2003, the Company entered into a Loan and Security Agreement with another bank for a new $5,000,000 revolving credit facility to replace the prior facility. In addition, the Company obtained a new $2,000,000 equipment line of credit (available for financing or leasing large mobile equipment used in its operations) from the same bank. The new revolving credit facility is secured by the Company's accounts receivable and inventories, provides for an interest rate of LIBOR plus 2.75%, and matures on March 1, 2004. As of July 31, 2003, the Company's outstanding balance on the revolving credit facility was $2,200,000. The outstanding balance of the revolving credit facility was repaid in full on August 5, 2003 with proceeds from the private placement discussed below, and the Loan and Security Agreement was amended to allow the revolving credit facility to be increased to $6,000,000 at the Company's option. The average interest rate for the revolving credit facilities in the first half 2003 was 4.06%. As of July 31, 2003, the Company had entered into approximately $700,000 of operating leases for mobile equipment under the new $2,000,000 equipment line. The Company believes that funds generated from operations, amounts available under the revolving credit facility and funds from the private placement will be sufficient to meet the Company's liquidity and ongoing capital needs for the year and to complete the Arkansas Phase II expansion project. In April 2003, the Company engaged Frost Securities, Inc. ("Frost") to advise it on possible financing alternatives for the Phase II expansion of the Company's Arkansas facilities. Frost contacted potential sources of financing and obtained several term sheet proposals for a subordinated debt placement from outside investors. In conjunction with the review of the proposals and further negotiations, Frost and the Company renewed discussions with the Company's two largest shareholders and a third party to determine whether they would be interested in the investment on terms more favorable to the Company than those currently available from other potential outside investors. On August 5, 2003, the Company sold $14,000,000 of unsecured Subordinated Notes (the "Sub Notes") in a private placement to three entities, one of which is an affiliate of Inberdon Enterprises Ltd., the Company's majority shareholder, and another of which is an affiliate of Robert S. Beall, who owns approximately 11% of the Company's outstanding shares. The Company believes that the terms of the private placement are more favorable to the Company than the proposals previously received. Frost provided an opinion to the Company's Board of Directors that, from a financial point of view, the private placement was fair to the unaffiliated holders of the Company's common stock in relation to other potential subordinated debt transactions currently available to the Company. The net proceeds from the private placement will be used to fund the Phase II expansion of the Company's Arkansas facilities. Terms of the Sub Notes include: a maturity date of August 5, 2008, subject to acceleration upon a change in control; no mandatory principal payments prior to maturity; an interest rate of 14% (12% paid in cash and 2% paid in cash or in kind at the Company's option); and, except as discussed below, no optional prepayment prior to August 5, 2005 and a 4% prepayment penalty if repaid before maturity. The terms of the Sub Notes are identical to one another, except that the Sub Note for the affiliate of Inberdon Enterprises Ltd. does not prohibit prepayment prior to August 5, 2005 and does not require a prepayment penalty if repaid before maturity, resulting in a weighted average prepayment penalty of approximately 2.4% if the Sub Notes are repaid before maturity. The Sub Notes include covenants similar to the covenants for the Loan. Page 10 of 14 The private placement also included six-year detachable warrants, providing the Sub Note investors the right to purchase an aggregate of 162,000 shares of the Company's common stock, at 110% of the average closing price of one share of common stock for the trailing 30 trading days prior to closing, or $3.84. After August 5, 2008, or upon an earlier change in control, the investors may require the Company to repurchase any or all shares acquired through exercise of the warrants (the "Warrant Shares"). The repurchase price for each Warrant Share will equal the average closing price of one share of the Company's common stock for the 30 trading days preceding the date the Warrant Shares are put back to the Company. The investors are also entitled to certain registration rights for the resale of their Warrant Shares. As a result of certain negotiations with the Company's existing bank lenders, the Loan and the revolving credit facility were amended to approve the terms of the Sub Notes. As part of these amendments, the Company is prohibited from paying any dividends in cash through June 30, 2005 without the prior written consent of the bank lenders. The Arkansas modernization and expansion project commenced with ground breaking in November 1999 and was scheduled to be completed in two phases. Phase I involved the redevelopment of the quarry plant, rebuilding of the railroad to standard gauge, the purchase of a facility to establish an out-of-state terminal in Shreveport, Louisiana, the installation of a rotary kiln with preheater and increased product storage and loading capacity. The kiln in Phase I produced its first lime in the fourth quarter 2000. The Company completed Phase I in the second quarter 2001. The total cost of Phase I was approximately $33,000,000. The $33,000,000 includes approximately $1,800,000 of costs associated with the pre-building of certain facilities for Phase II of the Arkansas project and the purchase of, but not all of the improvements to, the out-of-state terminal in Shreveport, Louisiana. The Company is financing the Phase II expansion principally through the August 5, 2003 private placement of $14,000,000 of the Sub Debt. The Phase II expansion will double the Arkansas plant's quicklime production capacity through the installation of a second kiln system substantially identical to the kiln system built in Phase I. The plans for Phase II currently include the completion of the out-of-state terminal in Shreveport, Louisiana for distribution of the Company's products. The estimated additional cost to complete Phase II is approximately $16,000,000. The Company plans to commence construction of the second kiln system in the third quarter 2003. The Company is not contractually committed to any planned capital expenditures until actual orders are placed for equipment. As of June 30, 2003, the Company had no material open orders. As of August 5, 2003, the Company had approximately $52,600,000 in total debt outstanding, including the $14,000,000 of Sub Notes. RESULTS OF OPERATIONS Revenues increased to $11,529,000 in the second quarter 2003 from $10,961,000 in the second quarter 2002, an increase of $568,000, or 5.2%. In the first half 2003, revenues increased $1,147,000 to $21,085,000 from $19,938,000 in the first half 2002, an increase of 5.8%. The increases in revenues for the second quarter and first half 2003 primarily resulted from increased pulverized limestone ("PLS") sales at the Company's Texas plant and revenues from natural gas surcharges discussed below. The Company's gross profit was $3,459,000 for the second quarter 2003, compared to $2,981,000 for the second quarter 2002, a 16.0% increase. Compared to the 2002 quarter, gross profit margin as a percentage of revenues and gross profit increased in the 2003 quarter primarily due to the increase in Page 11 of 14 PLS sales volume and reduced lime production during the second quarter 2002 at the Company's Texas plant caused by several operational problems. For the first half 2003, the Company's gross profit was $5,208,000, compared to $4,818,000 for the comparable 2002 period, a 8.1% increase. Gross profit margin as a percentage of revenues and gross profit increased in the first half 2003, compared to the same period last year, primarily due to the increase in PLS sales volume and reduced lime production during the second quarter 2002 at the Company's Texas plant. These improvements were partially offset in 2003 by increased natural gas costs and a winter ice storm in Texas that caused the loss of approximately two days of sales and a natural gas curtailment to the Company's Texas plant that resulted in reduced production levels during the first quarter 2003. The total negative price variance for natural gas in the first half 2003 was approximately $600,000 compared to the first half last year, partially offset by natural gas surcharges on PLS products implemented by the Company in early March 2003. Since that time, the surcharges have offset most of the increased natural gas costs. Although natural gas prices have declined from their highs during the first quarter 2003, they continue to exceed 2002 price levels. The Company expects natural gas prices to remain higher than in the previous year. Therefore, the Company intends to continue the natural gas surcharges on PLS products in a continued effort to offset most of the increased costs. Selling, general and administrative expenses ("SG&A") decreased by $28,000, or 2.7%, to $987,000 in the second quarter 2003, as compared to $1,015,000 in the second quarter 2002. As a percentage of sales, SG&A declined to 8.6% in the second quarter 2003 from 9.3% in the 2002 quarter. SG&A increased by $74,000, or 3.7%, to $2,047,000 in the first six months 2003, as compared to $1,973,000 in the comparable 2002 period. As a percentage of sales, SG&A declined to 9.7% in the first six months 2003 from 9.9% in 2002. Interest expense in the second quarter 2003 decreased $64,000, or 5.8%, to $1,038,000, compared to $1,102,000 in the second quarter 2002. Interest expense in the first six months 2003 decreased $155,000, or 7.0%, to $2,060,000, compared to $2,215,000 in the first six months 2002. The decrease in interest expense in 2003 primarily resulted from $3,333,000 in repayments on the Loan over the last 12 months. Other, net was $699,000 income in the second quarter 2003, as compared to $195,000 expense in the second quarter 2002. Other, net in the 2003 quarter consisted of interest, other income and $813,000 of embezzlement-related recoveries, partially offset by $105,000 of embezzlement-related costs. In the second quarter 2002, $247,000 of embezzlement-related costs was the primary other expense, partially offset by interest and other income. Other, net was $711,000 income in the first six months 2003, as compared to $573,000 expense in the comparable 2002 period. Other, net in the 2003 period consisted of interest, other income and $913,000 of embezzlement-related recoveries, partially offset by $186,000 of embezzlement-related costs. In the first half 2002, $622,000 of embezzlement-related costs was the primary other expense, partially offset by interest and other income. The Company's net income increased $1,297,000 to $1,813,000 ($0.31 per share) during the second quarter 2003, compared to net income of $516,000 ($0.09 per share) during the second quarter 2002. Page 12 of 14 For the first six months 2003, the Company reported net income of $1,541,000 ($0.27 per share), an increase of $1,495,000 compared to net income of $46,000 ($0.01 per share) during the comparable 2002 period. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Not Applicable. ITEM 4: CONTROLS AND PROCEDURES The Company's management, with the participation of the Company's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), evaluated the effectiveness the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the CEO and CFO concluded that the Company's disclosure controls and procedures as of the end of the period covered by this report were effective. No change in the Company's internal control over financial reporting occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. PART II. OTHER INFORMATION ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Shareholders was held May 2, 2003 in Dallas, Texas. The table below shows the proposal submitted to shareholders in the Company's Proxy Statement, dated April 4, 2003. Election of Directors
FOR WITHHELD --- -------- Timothy W. Byrne 5,521,043 61,546 Richard W. Cardin 5,548,146 34,443 Antoine M. Doumet 5,571,981 10,608 Wallace G. Irmscher 5,545,670 36,919 Edward A. Odishaw 5,546,646 36,943
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits: 10.1 Note and Warrant Purchase Agreement, dated as of August 5, 2003, by and among United States Lime & Minerals, Inc. and Credit Trust S.A.L., ABB Finance Limited and R.S. Beall Capital Partners, LP. 10.2 Form of 14% Subordinated PIK Note Due 2008. 10.3 Form of Common Stock Purchase Warrant. Page 13 of 14 10.4 Registration Rights Agreement, dated as of August 5, 2003, by and among United States Lime & Minerals, Inc. and Credit Trust S.A.L., ABB Finance Limited and R.S. Beall Capital Partners, LP. 10.5 Third Amendment to Credit Agreement dated as of August 5, 2003 among United States Lime & Minerals, Inc., Arkansas Lime Company, Texas Lime Company, the Lenders who are, or may become, a party to this Agreement, and National City Bank. 10.6 First Amendment to Loan and Security Agreement, dated August 5, 2003, among United States Lime & Minerals, Inc., Texas Lime Company, Arkansas Lime Company and National City Bank. 31.1 Section 302 Certification by the Chief Executive Officer. 31.2 Section 302 Certification by the Chief Financial Officer. 32.1 Section 906 Certification by the Chief Executive Officer . 32.2 Section 906 Certification by the Chief Financial Officer. b. Reports on Form 8-K: None SIGNATURES Pursuant to the requirements 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. August 13, 2003 By: /s/ Timothy W. Byrne ------------------------------------- Timothy W. Byrne President and Chief Executive Officer (Principal Executive Officer) August 13, 2003 By: /s/ M. Michael Owens ------------------------------------- M. Michael Owens Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Page 14 of 14 UNITED STATES LIME & MINERALS, INC. Quarterly Report on Form 10-Q Quarter Ended June 30, 2003 Index to Exhibits
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.1 Note and Warrant Purchase Agreement, dated as of August 5, 2003, by and among United States Lime & Minerals, Inc. and Credit Trust S.A.L., ABB Finance Limited and R.S. Beall Capital Partners, LP. 10.2 Form of 14% Subordinated PIK Note Due 2008. 10.3 Form of Common Stock Purchase Warrant. 10.4 Registration Rights Agreement, dated as of August 5, 2003, by and among United States Lime & Minerals, Inc. and Credit Trust S.A.L., ABB Finance Limited and R.S. Beall Capital Partners, LP. 10.5 Third Amendment to Credit Agreement, dated as of August 5, 2003, among United States Lime & Minerals, Inc., Arkansas Lime Company, Texas Lime Company, the Lenders who are, or may become, a party to this Agreement, and National City Bank. 10.6 First Amendment to Loan and Security Agreement, dated August 5, 2003, among United States Lime & Minerals, Inc., Texas Lime Company, Arkansas Lime Company and National City Bank. 31.1 Section 302 Certification by the Chief Executive Officer. 31.2 Section 302 Certification by the Chief Financial Officer. 32.1 Section 906 Certification by the Chief Executive Officer. 32.2 Section 906 Certification by the Chief Financial Officer.
EX-10.1 3 d08213exv10w1.txt NOTE AND WARRANT PURCHASE AGREEMENT Exhibit 10.1 NOTE AND WARRANT PURCHASE AGREEMENT THIS NOTE AND WARRANT PURCHASE AGREEMENT (this "Agreement") is made and entered into as of August 5, 2003, by and among United States Lime & Minerals, Inc., a Texas corporation (the "Company"), and each of those persons and entities, severally and not jointly, whose names are set forth on the Schedule of Purchasers attached hereto as Schedule A (which persons and entities are hereinafter collectively referred to as the "Purchasers" and each individually as a "Purchaser"). RECITALS: WHEREAS, the Company desires to issue and sell to the Purchasers 14% Subordinated PIK Notes Due 2008, in the form attached hereto as Exhibit A (the "Notes"), and warrants to purchase shares of common stock (the "Warrant Shares"), par value $0.10 per share, of the Company (the "Common Stock"), in the form attached hereto as Exhibit B (the "Warrants" and, together with the Notes and the Warrant Shares, the "Securities"), in the respective amounts set forth opposite each such Purchaser's name on Schedule A; WHEREAS, the Purchasers desire to purchase the Securities on the terms and conditions set forth herein; and WHEREAS, to induce the Purchasers to purchase the Securities, the Company is willing to enter into that certain Registration Rights Agreement, dated as of the Closing Date (as defined below), by and among the Company and the Purchasers (the "Registration Rights Agreement" and, together with this Agreement, the Notes and the Warrants, the "Purchase Documents"). NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises, representations, warranties, and covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Sale and Purchase of the Securities. 1.1 Sale and Purchase. Subject to the terms and conditions hereof, the Company hereby agrees to issue and sell to each Purchaser, severally and not jointly, and each Purchaser agrees to purchase from the Company, severally and not jointly, the Note and the Warrant in the respective amounts set forth opposite such Purchaser's name on Schedule A. The purchase price of each Note and Warrant shall be the principal amount of the Note set forth opposite each Purchaser's name on Schedule A. 1.2 Closing. The closing of the sale and purchase of the Notes and Warrants under this Agreement shall be held at 10:00 a.m. on August 5, 2003, at the principal executive offices of the Company (the "Closing"), or at such other time, date or place as the Company and the Purchasers subscribing to purchase at least a majority of the aggregate Original Principal Amount (as defined in the Notes) of all Notes may mutually agree (the date of the Closing is hereinafter referred to as the "Closing Date"). At the Closing, subject to the terms and conditions hereof, the Company will deliver to the Purchasers the Notes and Warrants against payment of the purchase price therefor in lawful money of the United States of America by certified or official bank check made payable to the order of the Company or wire transfer of immediately available funds to an account designated by the Company. The parties agree that the delivery of the Purchase Documents and any other documents at the Closing may be effected by means of an exchange of facsimile signatures with original copies to follow by mail or courier service. 2. Representations, Warranties and Covenants of the Purchasers. Each Purchaser, severally and not jointly, hereby represents and warrants to, and agrees with, the Company as follows: 2.1 Requisite Power and Authority. The Purchaser has all necessary power and authority under all applicable provisions of law to execute and deliver the Purchase Documents and to carry out their provisions. All action on the Purchaser's part required for the lawful execution and delivery of the Purchase Documents has been taken. Upon their execution and delivery, the Purchase Documents will be valid and binding obligations of the Purchaser, enforceable in accordance with their terms, except as limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights, and (ii) general principles of equity that restrict the availability of equitable remedies. 2.2 Investment Representations. The Purchaser understands that the Securities have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state securities laws. The Purchaser also understands that the Securities are being offered and sold pursuant to an exemption from registration contained in the Securities Act and applicable state securities laws (collectively, the "Acts") based in part upon the Purchaser's representations contained in this Agreement. The Purchaser hereby represents and warrants as follows: (a) Experience; Risk. The Purchaser has such knowledge and experience in financial and business matters that the Purchaser is capable of evaluating the merits and risks of the purchase of the Securities and of protecting the Purchaser's interests in connection therewith. The Purchaser is able to fend for itself in the transactions contemplated by the Purchase Documents and has the ability to bear the economic risk of the investment, including complete loss of the investment. (b) Investment. The Purchaser is acquiring the Securities for investment for its own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof, and the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. The Purchaser understands that the Securities have not been registered under the Acts by reason of a specific exemption from the registration provisions of the Acts which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser's representations as expressed herein. 2 (c) Information. The Purchaser has been furnished with all information which the Purchaser deems necessary to evaluate the merits and risks of purchasing the Securities and has had the opportunity to ask questions concerning the Securities and the Company, and all questions posed have been answered to the Purchaser's satisfaction. The Purchaser has been given the opportunity to obtain any additional information the Purchaser deems necessary to verify the accuracy of any information obtained concerning the Securities and the Company. The Purchaser understands that an investment in the Securities involves significant risks. (d) Restricted Securities; Need for the Company's Consent To Transfer. The Purchaser understands that the Securities will be "restricted securities" under the Acts inasmuch as they are being acquired from the Company in a transaction not involving a public offering, and that under such laws and applicable regulations the Securities may be resold without registration under the Acts only in certain limited circumstances. The Purchaser acknowledges that the Securities must be held indefinitely unless subsequently registered under the Acts or an exemption from such registration is available. In addition to restrictions under the Acts, the Purchaser may not sell, assign, pledge, dispose of or otherwise transfer the Notes or Warrants, or any interest therein, without the prior written consent of the Company. (e) Accredited Investor Status; Tax Implications. The Purchaser is an "accredited investor" within the meaning of Rule 501 promulgated under the Securities Act. The Purchaser has considered the Federal and state income tax implications of an investment in the Securities and has consulted with the Purchaser's own advisors with respect thereto. (f) Residence. If the Purchaser is an individual, then the Purchaser resides in the state identified in the address of the Purchaser set forth on Schedule A; if the Purchaser is a partnership, corporation, limited liability company or other entity, then the office or offices of the Purchaser in which its investment decision was made are located at the address or addresses of the Purchaser set forth on Schedule A. (g) Further Limitations on Disposition. Without in any way limiting the representations set forth above, the Purchaser further agrees not to make any permitted disposition of all or any portion of the Securities unless and until: (i) there is then in effect a registration statement under the Acts covering such proposed disposition and such disposition is made in accordance with such registration statement; or (ii) the Purchaser shall have notified the Company of the proposed disposition, and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition and, at the expense of the Purchaser or its transferee, with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such securities under any of the Acts. 3 (h) Legends. The Purchaser understands and agrees that the Securities will bear a legend substantially similar to the legend set forth below: THIS SECURITY [AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF] HAS [HAVE] NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. [NEITHER] THIS SECURITY [NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF] MAY [NOT] BE TRANSFERRED EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR (B) IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS. THIS SECURITY IS SUBJECT TO THAT CERTAIN NOTE AND WARRANT PURCHASE AGREEMENT, DATED AS OF AUGUST 4, 2003, BY AND AMONG THE COMPANY AND THE PURCHASERS NAMED THEREIN. In addition to the foregoing, the Securities will bear any other legend that may be required by applicable law, by the Company's Articles of Incorporation or Bylaws, or by any agreement between the Company and the Purchaser. (i) Subordination. The Purchaser understands that certain provisions of this Agreement, the Notes and Warrants, including without limitation certain provisions with respect to rights relating to payments, remedies and other benefits provided to the Purchaser, are subordinate to certain other debt of the Company pursuant to the terms and conditions of Section 4 of the Notes. (j) Broker's Fees. No agent, broker, investment banker, person or firm acting on behalf of or under the authority of the Purchaser is or will be entitled to any broker's or finder's fee or any other commission directly or indirectly in connection with the transactions contemplated by this Agreement. The Purchaser agrees to indemnify the Company for any claims, losses or expenses incurred by the Company in connection with any claim for any such fees or commissions. 3. Representations and Warranties of the Company. The Company hereby represents and warrants to each Purchaser as of the date of this Agreement as follows: 3.1 Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas. The Company has all requisite corporate power and authority to own and operate its properties and assets, to execute and deliver the Purchase Documents and to carry out the provisions of the Purchase Documents. The Company is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and 4 leased) makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on the Company or its business. 3.2 Authorization; Binding Obligation. All corporate action on the part of the Company necessary for the authorization of the Purchase Documents and the performance of all obligations of the Company thereunder at the Closing has been taken or will be taken prior to the Closing. This Agreement has been, and the Registration Rights Agreement, the Notes and the Warrants will be, when executed and delivered at the Closing, duly executed and delivered by the Company. This Agreement constitutes, and the Registration Rights Agreement, the Notes and the Warrants when executed and delivered at the Closing will constitute, valid and binding obligations of the Company enforceable in accordance with their terms, except as limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights, and (ii) general principles of equity that restrict the availability of equitable remedies. 3.3 Capitalization. As of the date hereof, the authorized capital stock of the Company consists of (i) 15,000,000 shares of Common Stock, 5,799,845 shares of which are issued and outstanding and (ii) 500,000 shares of Preferred Stock, par value $5.00 per share, none of which is issued. All outstanding shares have been duly authorized, validly issued and are fully paid and nonassessable. 3.4 SEC Reports. The Company has filed all forms, reports and documents required to be filed by the Company with the Securities and Exchange Commission (collectively, the "Company SEC Reports"). The Company SEC Reports (i) at the time they were filed complied as to form in all material respects with the applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 3.5 Warrant Shares. Upon issuance in accordance with the terms of the Warrants, the Warrant Shares will be duly authorized, validly issued, fully paid and nonassessable. The Company has reserved from its authorized shares of Common Stock such number of Warrant Shares as are issuable upon exercise of the Warrants. 3.6 Debt Obligations. Schedule B is a complete and correct listing of all of the Company's liabilities, obligations and indebtedness for borrowed money in excess of $1,000,000 as of the date hereof (collectively, "Debt"). The Company has performed and is in compliance in all material respects with all of the terms of such Debt and all instruments and agreements relating thereto. 3.7 Solvency. As of the Closing, the Company (i) has capital sufficient to carry on its business and transactions and (ii) does not intend to incur or believe (or have 5 reason to believe) that it will incur debts or liabilities beyond its ability to pay such debts or liabilities as they mature. 3.8 Compliance with Applicable Law. Except to the extent that the failure of such to be the case would not result in a material adverse effect on the Company or its business, the Company is in compliance with each governmental approval applicable to it and in compliance with all other applicable laws relating to it or any of its properties. 3.9 Governmental and Third Party Approvals. The Company has obtained all necessary approvals, authorizations and consents of any person and of all governmental authorities and courts having jurisdiction with respect to the transactions contemplated by this Agreement and the other Purchase Documents. 3.10 No Material Adverse Change. Since December 31, 2002, there has been no material adverse change in the properties, business, operations, prospects, or condition (financial or otherwise) of the Company and no event has occurred or condition arisen that would reasonably be expected to have a material adverse effect on the Company or its business. 3.11 Broker's Fees. Other than Frost Securities, Inc., no agent, broker, investment banker, person or firm acting on behalf of or under the authority of the Company is or will be entitled to any broker's or finder's fee or any other commission directly or indirectly in connection with the transactions contemplated by the Purchase Documents. The Company agrees to indemnify each Purchaser against any fee or commission payable by such Purchaser for which the Company is responsible. 4. Covenants of the Company. Except as otherwise waived by the holders of at least a majority of the aggregate Original Principal Amount of all Notes then outstanding (the "Majority Purchasers"), until all of the indebtedness represented by the Notes has been paid and satisfied in full, the Company will: 4.1 Preservation of Corporate Existence and Related Matters. Except as permitted by Section 4.13, preserve and maintain its corporate existence and all rights, franchises, licenses and privileges necessary to the conduct of its business, including without limitation all permits when and as necessary for the conduct of the Company's business as then contemplated, and qualify and remain qualified as a foreign corporation and authorized to do business in each jurisdiction where the nature and scope of its activities require it to so qualify under applicable law. 4.2 Maintenance of Property. Except as permitted by Section 4.14, protect and preserve all properties useful in and material to its business, the lack of which could result in a material adverse effect on the Company or its business, including copyrights, patents, trade names and trademarks; maintain in good working order and condition all buildings, equipment and other tangible real and personal property the lack of which could result in a material adverse effect on the Company or its business; and, from time to time, make or cause to be made all renewals, replacements and additions to such 6 property necessary for the conduct of its business, so that the business carried on in connection therewith may be properly and advantageously conducted at all times. 4.3 Insurance. Carry adequate insurance issued by an insurer acceptable to the Majority Purchasers, in amounts reasonably acceptable to the Majority Purchasers against all such liability and hazards as are usually carried by entities engaged in the same or a similar business similarly situated. Business interruption insurance shall be carried by the Company in an amount usually carried by entities engaged in the same or similar business similarly situated. 4.4 Accounting Methods and Financial Records. Maintain a system of accounting, and keep such books, records and accounts (which shall be true and complete in all material respects) as may be required or as may be necessary to permit the preparation of financial statements in accordance with generally accepted accounting principles as recognized by the American Institute of Certified Public Accountants and the Financial Accounting Standards Board, consistently applied and maintained on a consistent basis ("GAAP") and in compliance with the regulations of any governmental authority having jurisdiction over the Company or any of its properties. 4.5 Payment and Performance of Obligations. Pay and perform all obligations under the Purchase Documents, and to the extent that the failure to do so could result in a material adverse effect on the Company or its business, pay or perform (i) all taxes, assessments and other governmental charges that may be levied or assessed upon it or any of its property, and (ii) all other indebtedness, obligations and liabilities in accordance with customary trade practices; provided, however, that the Company may contest any item described in clauses (i) or (ii) of this Section 4.5 in good faith so long as adequate reserves are maintained with respect thereto in accordance with GAAP. 4.6 Compliance with Laws and Approvals. Observe and remain in compliance with all applicable laws and maintain in full force and effect all governmental approvals, in each case applicable to the conduct of the Company's business to the extent that the failure to do so could result in a material adverse effect on the Company or its business. 4.7 Environmental Laws. In addition to and without limiting the generality of Section 4.6, to the extent that the failure to do so could result in a material adverse effect on the Company or its business, (i) comply with, and ensure such compliance by all tenants and subtenants with all applicable Environmental Laws (as defined below) and obtain and comply with and maintain, and ensure that all tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws, (ii) conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws, and promptly comply with all lawful orders and directives of any governmental authority regarding Environmental Laws, and (iii) defend, indemnify and hold harmless the Purchasers, and their respective affiliates, employees, agents, officers and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or 7 unknown, contingent or otherwise, arising out of, or in any way relating to the presence of Hazardous Materials (as defined below), or the violation of, noncompliance with or liability under any Environmental Laws applicable to the operations of the Company, or any orders, requirements or demands of governmental authorities related thereto, including without limitation reasonable attorney's and consultant's fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing directly result from the gross negligence or willful misconduct of the party seeking indemnification therefor. For purposes of this Agreement: (i) "Environmental Laws" means any and all Federal, state and local laws, statutes, ordinances, rules, regulations, permits, licenses, approvals, interpretations and orders of courts or governmental authorities, relating to the protection of human health or the environment, including without limitation requirements pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, handling, reporting, licensing, permitting, investigation or remediation of Hazardous Materials, and (ii) "Hazardous Materials" means any substances or materials (a) which are or become defined as hazardous wastes, hazardous substances, pollutants, contaminants, chemical substances or mixtures or toxic substances under any applicable law, (b) which are toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human health or the environment and are or become regulated by any governmental authority, (c) the presence of which require investigation or remediation under any applicable law, (d) the discharge or emission or release of which require a permit or license under any applicable law or other governmental approval, (e) which are deemed to constitute a nuisance, a trespass or pose a health or safety hazard to persons or neighboring properties, or (f) which consist of underground or aboveground storage tanks, whether empty, filled or partially filled with any substance, or which contain asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived substances (in unsafe form) or waste, crude oil, nuclear fuel, natural gas or synthetic gas. 4.8 Compliance with ERISA. In addition to and without limiting the generality of Section 4.6, to the extent that the failure to do so could result in a material adverse effect on the Company or its business (i) comply with all applicable provisions of the Employee Retirement Income Security Act of 1974, and the rules and regulations thereunder, each as amended, supplemented or otherwise modified ("ERISA"), with respect to all Employee Benefit Plans (as defined below), (ii) not take any action or fail to take action the result of which could be a liability to the PBGC (as defined below) or to a Multiemployer Plan (as defined below), (iii) not participate in any prohibited transaction that could result in any civil penalty under ERISA or tax under the Code (as defined below), (iv) operate each Employee Benefit Plan in such a manner that will not incur any tax liability under Section 4980B of the Code or any liability to any qualified beneficiary as defined in Section 4980B of the Code, and (e) furnish to the Purchasers upon the request of the Majority Purchasers such additional information about any Employee Benefit Plan as may be reasonably requested by the Majority Purchasers. For purposes of this Agreement: (i) an "Employee Benefit Plan" means any employee benefit plan within the meaning of Section 3(3) of ERISA which (a) is maintained for employees of the Company, or any ERISA Affiliate (as defined below) or (b) has at any time within the preceding six years been maintained for the employees of the Company, or any current or 8 former ERISA Affiliate, (ii) "ERISA Affiliate" means any person who together with the Company is treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA, (iii) "Code" means the Internal Revenue Code of 1986, and the rules and regulations thereunder, each as amended, supplemented or otherwise modified, (iv) Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate is making, or is accruing an obligation to make, or within the six years immediately preceding, has made, contributions, and (v) "PBGC" means the Pension Benefit Guaranty Corporation or any successor agency. 4.9 Compliance with Agreements. Comply in all material respects with each term, condition and provision of all leases, agreements and other instruments entered into in the conduct of the Company's business (except to the extent that any term, condition and provision has been waived by the other parties to such leases, agreements and other instruments), including without limitation (i) the Credit Agreement, dated as of April 22, 1999, as amended by the First Amendment to Credit Agreement, dated as of December 27, 2000, a letter agreement dated March 4, 2003, and the Third Amendment to Credit Agreement, dated as of August 4, 2003, each as amended, restated or otherwise modified and in effect from time to time, by and among by and among the Company, Texas Lime Company, a Texas corporation ("TLC"), Arkansas Lime Company, an Arkansas corporation ("ALC"), the lenders referred to therein and National City Bank (successor to Wachovia Bank, National Association) and (ii) the Loan and Security Agreement, dated March 3, 2003, as amended by the First Amendment to Loan and Security Agreement, dated as of August 4, 2003, as amended, restated or otherwise modified and in effect from time to time, by and among the Company, TLC, ALC and National City Bank, the noncompliance with which could cause a material adverse effect on the Company or its business. 4.10 Conduct of Business. Engage only in businesses in substantially the same fields as the businesses conducted on the Closing Date and in lines of business reasonably related thereto. 4.11 Visits and Inspections. Permit each Purchaser, from time to time, at reasonable times and upon reasonable advance notice, to visit and inspect the Company's properties; inspect, audit and make extracts from its books, records and files, including without limitation management letters prepared by independent accountants; and discuss with its principal officers, and its independent accountants, its business, assets, liabilities, financial condition, results of operations and business prospects. 4.12 Further Assurances. Make, execute and deliver all such additional and further acts, things, deeds and instruments as the Majority Purchasers may reasonably require to document and consummate the transactions contemplated hereby and to vest completely in and assure each Purchaser its rights under the Purchase Documents. 4.13 Limitations on Mergers and Liquidation. Not merge, consolidate or enter into any similar combination with any other person or liquidate, wind-up or dissolve itself 9 (or suffer any liquidation or dissolution) except, provided that no Event of Default (as defined in Section 6) then exists or would occur as a result thereof: (a) any wholly-owned subsidiary of the Company may merge with the Company or with any other wholly-owned subsidiary of the Company; (b) any wholly-owned subsidiary of the Company may wind-up into the Company; and (c) the Company may merge, consolidate or enter into any similar combination with, or wind-up or dissolve itself into, any person which (i) expressly assumes joint and several liability for the indebtedness represented by the Notes and becomes a party to this Agreement pursuant to Section 7.2, (ii) is incorporated under the laws of the United States or any state thereof, and (iii) is solvent after giving affect thereto. 4.14 Limitations on Sale of Assets. Not convey, sell, lease, assign, transfer or otherwise dispose of 10% or more of the Company's property, business or assets, on a consolidated basis, including without limitation the sale of any receivables and leasehold interests and any sale-leaseback or similar transaction, whether now owned or hereafter acquired except, provided that no Event of Default then exists or would occur as a result thereof: (a) the sale of inventory in the ordinary course of business; (b) the sale of obsolete assets no longer used or usable in the business of the Company or any of its subsidiaries; (c) the transfer of assets to an entity pursuant to Section 4.13(c); (d) the sale or discount without recourse of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof; and (e) the sale of all or substantially all of the Company's assets to a person with which the Company could have merged pursuant to Section 4.13(c) hereof. 4.15 Use of Proceeds. Use all proceeds from the sale of the Notes to fund Phase II of Arkansas Lime Company as outlined in the Company's confidential business plan dated May 2003 and previously delivered to the Purchasers. 4.16 Financial Statements and Projections. Provide each Purchaser with the following financial statements and reports in the event the Company is no longer subject to any of the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended: (a) as soon as practicable and in any event within 50 days after the end of each of the first three fiscal quarters of each fiscal year, an unaudited consolidated and 10 consolidating balance sheet of the Company and its subsidiaries as of the close of such fiscal quarter and unaudited consolidated and consolidating statements of income, retained earnings and cash flows for the fiscal quarter then ended and that portion of the fiscal year then ended, including the notes thereto, all in reasonable detail setting forth in comparative form the corresponding figures for the preceding fiscal year and prepared by the Company in accordance with GAAP (except for the absence of footnotes) and, if applicable, containing disclosure of the effect on the financial position or results of operations of any change in the application of accounting principles and practices during the period, and certified by the principal financial and accounting officer of the Company to present fairly in all material respects the financial condition of Company and its subsidiaries as of their respective dates and the results of operations of the Company and its Subsidiaries for the respective periods then ended, subject to normal year end adjustments. (b) as soon as practicable and in any event within 125 days after the end of each fiscal year, an audited consolidated balance sheet of the Company and its subsidiaries as of the close of such fiscal year and audited consolidated statements of income, retained earnings and cash flows for the fiscal year then ended, including the notes thereto, all in reasonable detail setting forth in comparative form the corresponding figures for the preceding fiscal year and prepared by an independent certified public accounting firm acceptable to the Majority Purchasers in accordance with GAAP and, if applicable, containing disclosure of the effect on the financial position or results of operation of any change in the application of accounting principles and practices during the year, and accompanied by a report thereon by such certified public accountants that is not qualified with respect to scope limitations imposed by the Company or any of its subsidiaries or with respect to accounting principles followed by the Company or any of its subsidiaries not in accordance with GAAP. (c) At the time of delivery of any reports to the Senior Creditors (as defined in the Notes) which reports are required to be delivered to the Senior Creditors pursuant to any Senior Debt Documents (as defined in the Notes) ("Senior Reports"), such Senior Reports. 5. Conditions to Closing. 5.1 Conditions to the Purchasers' Obligations at the Closing. The Purchasers' obligations under Section 1 of this Agreement are subject to the satisfaction, at or prior to the Closing, of the following conditions: (a) Representations and Warranties True. The representations and warranties made by the Company in Section 3 shall be true and correct as of the Closing with the same force and effect as if they had been made on and as of the Closing Date. (b) Legal Investment. On the Closing Date, the offer, sale and issuance of the Securities shall be legally permitted by all laws and regulations to which the Purchasers and the Company are subject. 11 (c) Consents, Permits, and Waivers. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by this Agreement (except for such as may be properly obtained subsequent to the Closing). (d) No Default. No condition or event shall exist or have occurred which would constitute an Event of Default or, with the giving of notice, passage of time or both, would constitute an Event of Default. (e) Registration Rights Agreement. The Registration Rights Agreement shall have been executed and delivered by the Company. 5.2 Conditions to Obligations of the Company. The Company's obligations to offer, sell and issue the Securities are subject to the satisfaction, at or prior to the Closing, of the following conditions: (a) Representations and Warranties True. The representations and warranties made by each of the Purchasers in Section 2 shall be true and correct as of the Closing with the same force and effect as if they had been made on and as of the Closing Date. (b) Legal Investment. On the Closing Date, the offer, sale and issuance of the Securities shall be legally permitted by all laws and regulations to which the Purchasers and the Company are subject. (c) Consents, Permits, and Waivers. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by this Agreement (except for such as may be properly obtained subsequent to the Closing). 6. Events of Default. Except as otherwise consented to by the Majority Purchasers, each of the following shall constitute an "Event of Default," whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any governmental authority or otherwise: 6.1 Default in Payment of Principal. The Company shall default in any payment when and as due (whether at maturity, by reason of acceleration or otherwise) of principal on the Notes. 6.2 Other Payment Default. The Company shall default in the payment when and as due (whether at maturity, by reason of acceleration or otherwise) of interest accrued but unpaid on the Notes, and such default shall continue unremedied for five business days. 6.3 Misrepresentation. Any representation or warranty made or deemed to be made by the Company under the Purchase Documents or any amendment thereto shall at 12 any time prove to have been incorrect or misleading in any material respect when made or deemed made. 6.4 Default in Performance of Certain Covenants. The Company shall default in the performance or observance of any covenant or agreement contained in Section 4.13 or 4.14. 6.5 Default in Performance of Other Covenants and Conditions. The Company shall default in the performance or observance of any term, covenant, condition or agreement contained in this Agreement (other than as specifically provided for otherwise in Section 6.4) or any other Purchase Documents and such default shall continue for a period of 30 days after written notice thereof has been given to the Company by the Majority Purchasers in the manner provided herein. 6.6 Debt Cross-Default. The Company shall (i) be in default in the payment of any Indebtedness (as defined below) due to any party other than the Purchasers, the aggregate outstanding amount of which Indebtedness is in excess of $1,000,000, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created, or (ii) default in the observance or performance of any other agreement or condition relating to any Indebtedness (other than the Indebtedness referred to in clause (i) above), the aggregate outstanding amount of which other Indebtedness is in excess of $1,000,000 or contained in any instrument or agreement evidencing, securing or relating thereto or any other default or event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such other Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, with the giving of notice if required, any such other Indebtedness to become due prior to its stated maturity (any applicable grace period having expired). "Indebtedness," as applied to the Company, means without duplication: (a) all items (except items of capital stock, surplus or undivided profits) which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of the Company as at the date as of which Indebtedness is to be determined; (b) to the extent not included in the foregoing, all indebtedness, obligations, and liabilities secured by any mortgage, pledge, lien, conditional sale or other title retention agreement or other security interest to which any property or asset owned or held by the Company is subject, whether or not the indebtedness, obligations or liabilities secured thereby shall have been assumed by the Company; and (c) to the extent not included in the foregoing, all indebtedness, obligations and liabilities of others which the Company has directly or indirectly guaranteed, endorsed (other than for collection or deposit in the ordinary course of business), sold with recourse, or agreed (contingently or otherwise) to purchase or repurchase or otherwise acquire or in respect of which the Company has agreed to supply or advance funds (whether by way of loan, stock purchase, capital contribution or otherwise) or otherwise to become directly or indirectly liable. 6.7 Other Cross-Defaults. The Company shall default in the payment when due, or in the performance or observance, of any obligation or condition of any Material Contract (as defined below) unless, but only as long as, the existence of any such default is being contested by the Company in good faith by appropriate proceedings and 13 adequate reserves in respect thereof have been established on the books of the Company to the extent required by GAAP. "Material Contract" means any contract or agreement, written or oral, of the Company, the failure to comply with which could reasonably be expected to have a material adverse effect on the Company or its business. 6.8 Change in Control. Any person or group of persons (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) other than Inberdon Enterprises, Ltd. and its affiliates, shall obtain ownership or control in one or more series of transactions of more than 25% of the Common Stock or 25% of the voting power of the Company entitled to vote in the election of members of the board of directors of the Company, or there shall have occurred under any indenture or other instrument evidencing any Indebtedness in excess of $1,000,000 any "change in control" (as defined in such indenture or other evidence of Indebtedness) obligating the Company to repurchase, redeem or repay all or any part of the Indebtedness or capital stock provided for therein (any such event, a "Change in Control"). 6.9 Voluntary Bankruptcy Proceeding. The Company shall (i) commence a voluntary case under the Federal bankruptcy laws (as now or hereafter in effect), (ii) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition for adjustment of debts, (iii) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (iv) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, domestic or foreign, (v) admit in writing its inability to pay its debts as they become due, (vi) make a general assignment for the benefit of creditors, or (vii) take any corporate action for the purpose of authorizing any of the foregoing. 6.10 Involuntary Bankruptcy Proceeding. A case or other proceeding shall be commenced against the Company in any court of competent jurisdiction seeking (i) relief under the Federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding-up or adjustment of debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like for the Company or for all or any substantial part of its assets, domestic or foreign, and such case or proceeding shall continue without dismissal or stay for a period of 60 consecutive days, or an order granting the relief requested in such case or proceeding (including without limitation an order for relief under such Federal bankruptcy laws) shall be entered. 6.11 Failure of Agreements. Any provision of this Agreement or of any other Purchase Document shall for any reason cease to be valid and binding on the Company. 6.12 Judgment. A judgment or order for the payment of money which causes the aggregate amount of all such judgments to exceed $1,000,000 in any fiscal year shall be entered against the Company by any court and such judgment or order shall continue without discharge or stay for a period of 30 days. 14 7. General Provisions. 7.1 Governing Law; Jurisdiction. The Purchase Documents and all acts and transactions pursuant thereto and the rights and obligations of the parties thereto shall be governed, construed and interpreted in accordance with the laws of the State of Texas, without giving effect to principles of conflicts of law and choice of law that would cause the laws of any other jurisdiction to apply. EACH PURCHASER CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION LOCATED WITHIN DALLAS, TEXAS, AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THE PURCHASE DOCUMENTS MAY BE LITIGATED IN SUCH COURTS. EACH PURCHASER ACCEPTS FOR SUCH PURCHASER AND IN CONNECTION WITH SUCH PURCHASER'S RESPECTIVE RIGHTS UNDER THE PURCHASE DOCUMENTS, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THE PURCHASE DOCUMENTS. EACH PURCHASER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN THE MANNER SPECIFIED IN SECTION 7.6 OF THIS AGREEMENT. EACH PARTY HERETO IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE PURCHASE DOCUMENTS OR THE ACTIONS OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF. EACH PURCHASER FURTHER WARRANTS AND REPRESENTS THAT SUCH PURCHASER HAS REVIEWED THIS WAIVER WITH SUCH PURCHASER'S LEGAL COUNSEL, AND THAT SUCH PURCHASER KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE PURCHASE DOCUMENTS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 7.2 Successors and Assigns. This Agreement may not be assigned, conveyed or transferred without the prior written consent of the Company. As a condition of any such transfer, a Joinder to this Agreement in the form attached hereto as Schedule C must be duly executed and delivered by the permitted transferee to the Company. Subject to the foregoing, the rights and obligations of the Company and each Purchaser under this Agreement shall be binding upon and benefit their respective permitted successors and assigns. 7.3 Entire Agreement. This Agreement, the other Purchase Documents, the exhibits and schedules hereto and thereto and the Notes and Warrants delivered pursuant to the terms hereof constitute the full and entire understanding and agreement between 15 and among the parties with regard to the subjects hereof, and, except as provided in Section 4 of the Notes, are for the sole benefit of the parties hereto and their respective permitted successors and assigns and are not intended to confer any third-party benefit on any other person, and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein. Any previous agreement among the parties relative to the specific subject matter hereof is superseded by this Agreement. 7.4 Severability. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 7.5 Amendment or Waiver. The Purchase Documents may be amended, and any term or provision of the Purchase Documents may be waived (either generally or in a particular instance and either retroactively or prospectively), upon the written consent of the Company and the Majority Purchasers. Any such amendment of the Purchase Documents, or waiver of any term or provision of the Purchase Documents, made with such written consent of the Company and the Majority Purchasers shall be binding upon each Purchaser under this Agreement; provided, however, that, without the written consent of all of the Purchasers and the Company, no such amendment or waiver will be made which would (i) extend the time for payment of any principal or interest of any Note (ii) reduce the principal amount of or interest due under any Note, (iii) except as otherwise set forth in the Warrants, decrease the number of Warrant Shares that may be purchased under any Warrant, (iv) modify the Warrant Exercise Term (as defined in the Warrants), or (v) except as permitted by the terms of the Warrants, adjust the Exercise Price (as defined in the Warrants) set forth in the Warrants. 7.6 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified; (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day; (iii) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid; (iv) in the case of a Purchaser located within the continental United States, the next business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt; or (v) in the case of a Purchaser located outside of the continental United States, the third business day after deposit with an internationally recognized courier, with written verification of receipt. All communications shall be sent to the Company at the address as set forth on the signature page hereof and to each Purchaser at the address set forth on the signature page hereof, or at such other address as the Company or a Purchaser may designate by 10 days' advance written notice to the other parties hereto. 7.7 Expenses. Each party shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Agreement, except that the Company shall reimburse the Purchasers for their reasonable legal fees and expenses (not to exceed $25,000 in the aggregate) in connection with the negotiation and execution of this Agreement. 16 7.8 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 7.9 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 7.10 Notes Pari Passu. Except for matters related to prepayment as may be specifically set forth in any Note, the Notes shall rank equally without preference or priority of any kind over one another. 7.11 No Shareholder Rights. Nothing contained in the Purchase Documents (i) shall be construed as conferring upon any Purchaser the right to vote or to consent or to receive notice as a shareholder in respect of meetings of shareholders for the election of directors of the Company or any other matters or any rights whatsoever as a shareholder of the Company, and (ii) no dividends shall be payable or accrued in respect of the Warrants or the Warrant Shares, in both cases of (i) and (ii) until, and only to the extent that, the Warrants shall have been duly exercised for Warrant Shares properly registered in the name of the Purchaser. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 17 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth in the first paragraph hereof. THE COMPANY: UNITED STATES LIME & MINERALS, INC. By:________________________________________ Name: Timothy W. Byrne Title: President and Chief Executive Officer Address: 13800 Montfort Drive, Suite 330 Dallas, Texas 75240 Telephone: (972) 991-8400 Facsimile: (972) 385-1805 THE PURCHASERS: CREDIT TRUST S.A.L. ABB FINANCE, LIMITED By:__________________________________ By:__________________________________ Name: Elias Doumet Name:________________________________ Title: President Title:_______________________________ Address: ___________________________ Address: ___________________________ ___________________________ ___________________________ Telephone:___________________________ Telephone: Facsimile:___________________________ Facsimile: __________________________ R.S. BEALL CAPITAL PARTNERS, LP By: Trans Texas Financial Corp., its general partner By:__________________________________ Name: Robert S. Beall Title: President Address: 1903 Central Drive, Suite 102 Bedford, Texas 76021 Telephone: (817) 399-1100 Facsimile: (817) 399-1919 SCHEDULE A SCHEDULE OF PURCHASERS
Number of Warrant Shares Name and Address Principal Amount of Note Underlying Warrant ---------------- ------------------------ ------------------ CREDIT TRUST S.A.L. $5,500,000 63,643 _______________________________ _______________________________ _______________________________ ABB FINANCE, LIMITED $5,500,000 63,643 R.S. BEALL CAPITAL PARTNERS, LP $3,000,000 34,714
SCHEDULE B 1. The Credit Agreement, dated as of April 22, 1999, as amended by the First Amendment to Credit Agreement, dated as of December 27, 2000, a letter agreement dated March 4, 2003, and the Third Amendment to Credit Agreement, dated as of August 5, 2003, each as amended, restated or otherwise modified and in effect from time to time, by and among the members of the Company Group, the lenders referred to therein and National City Bank (successor to Wachovia Bank, National Association) pursuant to which such lenders have agreed to make loans to and otherwise provide credit to or for the benefit of the members of the Company Group. 2. The Loan and Security Agreement, dated March 3, 2003, as amended by the First Amendment to Loan and Security Agreement, dated as of August 5, 2003, as amended, restated or otherwise modified and in effect from time to time, by and among the members of the Company Group and National City Bank. SCHEDULE C JOINDER Made as of _______________________ Reference is made to the Note and Warrant Purchase Agreement (the "Agreement") entered into as of August 5, 2003, by and among United States Lime & Minerals, Inc., a Texas corporation (the "Company"), and each of those persons and entities (the "Purchasers"), severally and not jointly, whose names are set forth on the Schedule of Purchasers attached thereto as Schedule A. The undersigned, __________________________ (the "Joining Party"), represents and warrants to the Company that it is a permitted transferee under the Agreement. The Joining Party has read the Agreement and hereby agrees to be bound by all terms and conditions thereof to which the Purchasers are bound, such that the term "Purchaser," "Purchasers," and "Majority Purchasers" as and when used in the Agreement shall henceforth also include the Joining Party. ACKNOWLEDGED AND AGREED [__________________________________] By:_________________________________ Name:_______________________________ Title:______________________________ Telephone:__________________________ Facsimile:__________________________ EXHIBIT A FORM OF NOTE EXHIBIT B FORM OF WARRANT EX-10.2 4 d08213exv10w2.txt FORM OF 14% SUBORDINATED PIK NOTE DUE 2008 Exhibit 10.2 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS NOTE MAY NOT BE TRANSFERRED EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR (B) IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS. THIS NOTE IS SUBJECT TO THAT CERTAIN NOTE AND WARRANT PURCHASE AGREEMENT, DATED AS OF AUGUST 5, 2003, BY AND AMONG THE COMPANY AND THE PURCHASERS NAMED THEREIN. 14% SUBORDINATED PIK NOTE DUE 2008 $_____________ Note Issue Date: August 5, 2003 Note No. ___ For value received, United States Lime & Minerals, Inc., a Texas corporation (the "Company"), promises to pay to _________________ (the "Holder"), the principal amount of $5,500,000 (the "Original Principal Amount"), plus such additional amounts of principal as may be added, from time to time, to this Note pursuant to Section 1.3 below (the "Capitalized Principal Amount" and, together with the Original Principal Amount, the "Total Principal Amount"), together with interest on the unpaid balance of the Total Principal Amount from time to time outstanding, and interest on all past due amounts, both principal and accrued interest, all as provided in this 14% Subordinated PIK Note Due 2008 (this "Note"). All payments shall be made in lawful money of the United States of America at the principal offices of the Company or, at the option of the Company, may be made by certified or official bank check made payable to the order of the Holder and mailed to the Holder at the Holder's address set forth on the signature page hereof or by wire transfer of immediately available funds to an account designated by the Holder. This Note is one of a series of Notes issued pursuant to that certain Note and Warrant Purchase Agreement, dated as of August 5, 2003, by and among the Company and the Purchasers listed on Schedule A thereto (the "Note and Warrant Purchase Agreement"). In addition to the terms and conditions of the Note and Warrant Purchase Agreement, this Note is subject to the following terms and conditions: 1. Payment of Interest. 1.1 Interest will accrue on the unpaid Total Principal Amount and all past due amounts at a rate per annum equal to 14.0 percent (computed for the actual number of days elapsed on the basis of a year of 360 days). 1.2 The Company will pay accrued interest (i) quarterly in arrears, commencing on September 30, 2003 and continuing on each December 31, March 31, June 30 and September 30 thereafter, (ii) on the Maturity Date (as defined in Section 2), and (iii) thereafter on demand. 1.3 So long as no Event of Default (as defined in the Note and Warrant Purchase Agreement) has occurred and is continuing, prior to the Maturity Date the Company may elect not to pay in cash a portion of any interest payment that constitutes interest on this Note at a rate per annum of up to two percent, in which case such portion of such interest payment shall compound, effective as of such interest payment date, by adding such accrued and unpaid interest to the principal amount of this Note as Capitalized Principal Amount and accruing interest on the Total Principal Amount, including such Capitalized Principal Amount, resulting thereafter. The Company shall be deemed to have elected to compound a portion of each interest payment that constitutes interest on this Note at a rate per annum of two percent unless the Company gives the Holder written notice at least 10 days' prior to the next succeeding interest payment date that it intends to pay all or a portion of such interest in cash on such interest payment date. So long as an Event of Default is continuing, the Company shall pay all interest in cash. 2. Maturity Date. The Company agrees to pay in full the Total Principal Amount, and any interest accrued and unpaid thereon and all other unpaid amounts owing under this Note, on August 5, 2008 (the "Maturity Date"). 3. Prepayment. 3.1 The Company shall be entitled voluntarily to prepay the Original Principal Amount, in whole at any time or in part, consisting of $10,000 or multiples thereof, from time to time, on or after August 5, 2005 (the "Permitted Prepayment Date"). Except as set forth in Section 3.2, in the event of such voluntary prepayment of the Original Principal Amount on or after the Permitted Prepayment Date, or any prepayment prior to the Permitted Prepayment Date in the event that the then outstanding Original Principal Amount is accelerated pursuant to Section 5, the Holder shall be entitled to receive together with such prepayment of the Original Principal Amount so prepaid, (i) accrued and unpaid interest on the Original Principal Amount so prepaid through the date of prepayment and (ii) a prepayment premium equal to four percent multiplied by the portion of the Original Principal Amount that is being prepaid (the "Prepayment Premium"). If the Company elects to prepay all or any portion of the Original Principal Amount, the Company shall furnish written notice to the Holder with respect to such prepayment not less than 10 days prior to the date of prepayment. Such notice shall specify the amount of the Original Principal Amount to be prepaid on such date. 3.2 (a) In the event that the Company elects to prepay the Original Principal Amount of the Subordinated Note (as defined in Section 4.1(g)) held by Credit Trust s.a.l. (the "Credit Trust Note"), in whole at any time or in part, from time to time, before the Permitted Prepayment Date (except for a prepayment pursuant to the exercise of the Foreclosure Prepayment Right as provided in Section 9.2), then as a condition of 2 any such prepayment of the Credit Trust Note, the Company shall offer to prepay the Original Principal Amount of all Subordinated Notes then outstanding to the same extent and proportion, based upon the Original Principal Amount of the Credit Trust Note and of each of the other Subordinated Notes, and on the same terms as the prepayment of the Original Principal Amount of the Credit Trust Note except that the Holder of such other Subordinated Note will be entitled to receive together with such prepayment of the Original Principal Amount so prepaid a prepayment premium equal to two percent multiplied by the portion of the Original Principal Amount that is being prepaid. The closing of the prepayment of any of the Original Principal Amount of the Credit Trust Note shall take place concurrently with the closing of the prepayment of that portion of the Original Principal Amount of the Subordinated Note elected to be prepaid by the Holder. (b) In the event that the Company elects to prepay the Original Principal Amount of any Subordinated Notes, in whole at any time or in part, from time to time on or after the Permitted Prepayment Date (except for a prepayment pursuant to the exercise of the Foreclosure Prepayment Right as provided in Section 9.2), then as a condition of, and concurrently with, any such prepayment, the Company will prepay the Original Principal Amount of all Subordinated Notes then outstanding to the same extent and proportion, based upon the Original Principal Amount of each Subordinated Note; provided; however, that the Holders of the Subordinated Notes other than the Credit Trust Note will in every such case be entitled to receive together with such prepayment of the Original Principal Amount so prepaid the Prepayment Premium and, in no event, will Credit Trust s.a.l be entitled to payment of any Prepayment Premium. 3.3 The Company shall be entitled voluntarily to prepay the Capitalized Principal Amount in whole at any time or in part, from time to time. No Prepayment Premium or other penalty shall be due with respect to any such prepayment of Capitalized Principal Amount. Partial prepayments of the Capitalized Principal Amount shall be applied first to accrued but unpaid interest on the Capitalized Principal Amount being prepaid, and next to principal. If the Company elects to prepay all or any portion of the Capitalized Principal Amount, the Company shall furnish written notice to the Holder with respect to each prepayment not less than 10 days prior to the date of prepayment. Such notice shall specify the amount of the Capitalized Principal Amount to be prepaid on such date. 4. Subordination. 4.1 As used in this Note, the following terms shall have the following meanings: (a) "Company Group" shall mean and include each of the Company, Texas Lime Company, a Texas corporation, and Arkansas Lime Company, an Arkansas corporation. (b) "Senior Creditors" shall mean and include all of the holders for the time being of the Senior Debt or any portion of it. 3 (c) "Senior Debt" shall mean and include (i) all debt listed on Exhibit A hereto and (ii) all other duties, obligations, indebtedness and other liabilities (whether direct or indirect, liquidated or contingent, presently existing or arising in the future) of the Company to whomsoever owed which are secured by liens upon or security interests in any assets of the Company and/or any of its subsidiaries; provided, however, in no event shall it include any of the Subordinated Debt if any of such Subordinated Debt becomes secured. (d) "Senior Debt Documents" shall mean, collectively, any agreement, document, or instrument which evidences, secures or otherwise pertains to any of the Senior Debt. (e) "Senior Notes" shall mean the promissory notes evidencing the Senior Debt, as amended, restated or otherwise in effect from time to time and any other promissory notes or similar evidences of indebtedness now or hereafter evidencing the Senior Debt, as the same may in each case be amended, restated or otherwise in effect from time to time. (f) "Standstill Period" shall mean the period of one year commencing upon the occurrence of any Subordinated Debt Default; provided, however, that the Standstill Period shall toll during the pendency of any bankruptcy proceeding under the Federal bankruptcy laws or otherwise (as now or hereafter in effect) with respect to the Company. (g) "Subordinated Debt" shall mean the Total Principal Amount of and prepayment premium, if any, and interest on this Note and any and all other indebtedness and obligations now or hereafter existing or arising which are due under or evidenced by this Note and all of the other Notes issued under the Note and Warrant Purchase Agreement (collectively, the "Subordinated Notes"). (h) "Subordinated Debt Default" shall mean any default by the Company on account of any payment due under the Subordinated Debt. (i) "Subordinated Debt Documents" shall mean, collectively, any agreement, document, or instrument which evidences, secures or otherwise pertains to any of the Subordinated Debt. 4.2 The Holder and the Company each jointly and severally covenant and agree that the Subordinated Debt is and shall be subordinate, to the extent and in the manner hereinafter set forth, in right of payment to the irrevocable prior payment in full and performance of all present and future duties, obligations, indebtedness and liabilities (whether direct or indirect, liquidated or contingent, presently existing or arising in the future) under or in respect of the Senior Debt in any amount now or hereafter existing, whether in respect of the loans and other extensions of credit comprising the Senior Debt or in respect of Senior Debt Documents and whether for principal, premium, interest accruing (including without limitation interest accruing after the initiation of any Proceeding (as defined in Section 4.7(a) hereof)), fees, expenses or otherwise. 4 4.3 In furtherance of the foregoing, the Holder agrees that any and all Senior Debt Documents may be modified, amended, supplemented or restated in any manner and at any time without obtaining the consent of or providing notice to the Holder. 4.4 Nothing in this Section 4 shall limit or affect (i) the issuance to the Holder hereof of the Warrant (as defined in the Note and Warrant Purchase Agreement), (ii) the issuance by the Company of Warrant Shares (as defined in the Note and Warrant Purchase Agreement) upon the exercise of the Warrant, or (iii) any adjustment contemplated by the anti-dilution provisions of the Warrant; provided, however, that, if the Company is in default or the payment by the Company of the Aggregate Repurchase Price (as defined in the Warrant) would cause a default under or with respect to any Senior Debt, the Holder shall not exercise any right to "put" to or compel the Company to repurchase or redeem any Warrant Shares owned by the Holder. 4.5 The Holder by acceptance of this Note hereby covenants and agrees to give to each holder of Senior Debt hereinabove identified in clause (i) of the definition of "Senior Debt," and each other holder of Senior Debt the identity of whom shall have been furnished to the Holder in writing, prompt written notice of any Subordinated Debt Default, which notice shall be given at the same time as notice is given by the Holder to the Company. The Holder agrees not to ask for or demand, directly or indirectly, in cash or other property or by set-off, purchase, redemption or in any other manner (including without limitation from or by way of collateral), payment of all or any of the Subordinated Debt during any Standstill Period. Without limiting the generality and in furtherance of the foregoing, during any Standstill Period the Holder shall not, directly or indirectly, under any circumstances: (a) declare an Event of Default; (b) accelerate, for any reason whatsoever, the maturity of any amount due and owing on the Subordinated Debt; (c) assert, collect, sue upon, or enforce all, or any part of, the Subordinated Debt; (d) take any enforcement action against the Company or any of the properties or assets of the Company with respect to the Subordinated Debt; or (e) accept any collateral as security for the Subordinated Debt. 4.6 Notwithstanding the provisions of Sections 4.1 through 4.5 hereof, the Company shall be permitted to pay to the Holder, and the Holder shall be permitted to receive, regularly scheduled payments of interest at a rate per annum not in excess of the rate of interest stated in this Note and prepayments of the Original Principal Amount and the Capitalized Principal Amount in accordance with Section 3 of this Note, but only if (i) no event of default has occurred and is continuing under or with respect to any of the Senior Debt Documents and (ii) any such payment, after giving effect thereto, would not result in the occurrence of any such event of default referenced in (i) above. 5 4.7 In furtherance of the foregoing, the Holder covenants and agrees as follows: (a) Upon any distribution of all or any of the assets of the Company to creditors of the Company upon the dissolution, winding-up, liquidation, arrangement or reorganization of the Company (as the case may be), whether in any bankruptcy, insolvency, arrangement, reorganization or receivership proceeding or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Company (all of the foregoing collectively, "Proceedings"), or in the event that all amounts owing under any of the Senior Debt have become, or have been declared to be, due and payable (and have not been paid in accordance with their respective terms), then any payment or distribution of any kind (whether in cash, property or securities) which otherwise would be payable or deliverable upon or with respect to the Subordinated Debt shall be paid or delivered directly to a custodian designated in writing by the holders of a majority in principal amount of the Senior Debt, for application pro rata (in the case of cash) to or as collateral (in the case of non-cash property or securities) for the payment or prepayment of the Senior Debt to the extent necessary to pay the Senior Debt in full in accordance with Section 4.2. (b) If any Proceeding is commenced by or against the Company, each Senior Creditor is hereby irrevocably authorized and empowered (in its own name or in the name of the Holder or otherwise), but shall have no obligation, to demand, sue for, collect and receive every payment or distribution referred to in Section 4.7(a) hereof and give receipts therefor and to file claims and proofs of claim and take such other action (including without limitation voting the Subordinated Debt) as such Senior Creditor may deem necessary or advisable for the exercise or enforcement of any of the rights or interests of such Senior Creditor hereunder. (c) The Holder shall not ask for or demand, directly or indirectly, any guaranty, suretyship, or security or collateral, or accept any grant of any guaranty, suretyship, or security interest in, or transfer of, any property or assets, whether now owned or hereafter acquired, of any member of the Company Group as collateral for the Subordinated Debt, except for guaranties and sureties in connection with which the guarantor or surety waives its right of subrogation against each Senior Creditor. Any grant of a guaranty, suretyship, or security interest or transfer of property or assets by a member of the Company Group in favor of the Holder in violation of this Section 4.7(c) shall be deemed null and void and have no force or effect and any such grant or transfer prior to the payment in full of the Senior Debt in accordance with Section 4.2, or otherwise contrary to the provisions of this Section 4, shall be received by the Holder in trust for the pro rata benefit of the Senior Creditors and shall be disposed of in the manner provided in Section 4.7(a) hereof. 4.8 The Holder covenants and agrees that during any Standstill Period the Holder will not commence or join with any creditor in commencing any Proceeding or any other proceeding to enforce the Holder's rights with respect to the Subordinated Debt. 6 4.9 The Holder agrees that no payment or distribution to any Senior Creditor pursuant to the provisions of this Section 4 shall entitle the Holder to exercise any rights of subrogation in respect thereof until the Senior Debt shall have been irrevocably paid and satisfied in full in accordance with Section 4.2. 4.10 All rights and interests of the Senior Creditors, and all agreements and obligations of the Holders and the Company, under this Section 4 shall remain in full force and effect irrespective of: (a) any lack of validity or enforceability of the Senior Debt Documents; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Senior Debt, or any other amendment or waiver of or any consent to departure from the Senior Debt Documents; (c) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Senior Debt; (d) any other circumstance which might otherwise constitute a defense available to, or a discharge of the Company with respect to the Senior Debt or the Holder with respect to this Section 4; or (e) any increase in the amount of the Senior Debt. 4.11 This Section 4 is a continuing agreement and shall (i) remain in full force and effect until all of the Senior Debt shall have been irrevocably paid in full in accordance with Section 4.2, (ii) be binding upon the Holder and the Company and their respective permitted successors and assigns, and (iii) inure to the benefit of and be enforceable directly by the Senior Creditors, the Holder, the Company and their respective permitted successors, transferees and assigns. Without limiting the generality of the foregoing, each Senior Creditor may assign or otherwise transfer any of the Senior Notes held by it or any other evidence of the Senior Debt held by it to any other person or entity, and such other person or entity shall thereupon become vested with all the rights in respect thereof granted to the Senior Creditors herein or otherwise. Each of the Senior Creditors is hereby expressly declared to be a third-party beneficiary of this Section 4. 4.12 The provisions of this Section 4 subordinating the Subordinated Debt are solely for the purpose of defining the relative rights of the Senior Creditors and the Holder and shall not impair, as between the Holder and the Company, the obligation of the Company to pay the Subordinated Debt to the Holder strictly in accordance with its terms. Nothing contained in this Note shall be deemed to confer any rights upon the Company with respect to either the Senior Debt or the Subordinated Debt. 5. Covenants; Events of Default. This Note is subject to those certain covenants made by the Company in the Note and Warrant Purchase Agreement. The Total Principal Amount of the Subordinated Notes, together with any interest accrued but 7 unpaid thereon, shall become immediately due and payable upon declaration to such effect given in writing by the Majority Purchasers (as defined in the Note and Warrant Purchase Agreement ) after the occurrence and during the continuation of an Event of Default; provided, however, that upon the occurrence of an Event of Default described in Section 6.9 or Section 6.10 of the Note and Warrant Purchase Agreement such Total Principal Amount, together with interest accrued but unpaid thereon, shall become immediately due and payable automatically and without declaration and notice of any kind. 6. Registration of Note and Note Ledger. The Company shall maintain at its principal executive offices a register in which it shall register this Note and, immediately after any permitted transfer in accordance with Section 9, any New Note (as defined below). The Company shall maintain a note ledger with respect to this Note and any New Note, which ledger shall present the Total Principal Amount immediately after any addition of Capitalized Principal Amount to the Total Principal Amount, the Original Principal Amount then outstanding, the Capitalized Principal Amount then outstanding, and any prepayment made. 7. Loss, Theft, Destruction or Mutilation of This Note. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and, in the case of any such loss, theft or destruction, upon receipt of an indemnity agreement or other indemnity reasonably satisfactory to the Company or, in the case of any such mutilation, upon surrender and cancellation of such mutilated Note, the Company shall issue and deliver within five business days a new Note, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Note. 8. Governing Law. This Note and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Texas, without giving effect to principles of conflicts of law and choice of law that would cause the laws of any other jurisdiction to apply. 8 9. Successors and Assigns. 9.1 Except as set forth in Section 9.2, the Holder may not sell, assign, pledge, dispose of or otherwise transfer this Note, or any interest herein, without the prior written consent of the Company, which consent will not be unreasonably withheld. Subject to the preceding sentence, this Note may be transferred only upon surrender of this Note at the Company's principal executive offices for registration of transfer accompanied by (i) a written instrument of transfer in form satisfactory to the Company duly executed by the Holder, (ii) an opinion satisfactory to the Company with respect to the transfer in accordance with Federal and state securities laws, and (iii) a Joinder to the Note and Warrant Purchase Agreement in the form of Schedule C to the Note and Warrant Purchase Agreement duly executed by the permitted transferee. Thereupon, a new note (a "New Note") in the same Total Principal Amount with the same terms as this Note will be issued to, and registered in the name of, the transferee. Interest and principal are payable only to the registered holder of this Note or any New Note. The terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties. 9.2 The Holder may, upon prior written notice to the Company and in accordance with the terms of this Section 9.2 and Federal and state securities laws, transfer this Note, or any interest herein, in connection with a bona fide pledge of this Note, or such interest herein, without the prior written consent of the Company. In the event that the Holder pledges this Note, or any interest herein, (such pledged Note or interest, the "Third Party Collateral Security") to a third party (the "Pledgee") and the Pledgee at any time thereafter exercises its right to foreclose on the Third Party Collateral Security (a "Foreclosure Event"), the Holder shall give the Company and each other Holder of a Subordinated Note then outstanding written notice of such Foreclosure Event (the "Notice"). Holders of the other Subordinated Notes then outstanding shall have the right, pro rata based upon the Total Principal Amount of the Subordinated Notes owned by such other Holders, or in such other proportion as such Holders may agree, for a period of 10 days following receipt of the Notice (the "Purchase Period") to purchase all or a portion of this Note from the Pledgee for the Total Principal Amount or the applicable portion of the Total Principal Amount, as the case may be, by giving written notice to the Holder of the exercise of such right, with a copy to the Company, within the Purchase Period. If the Holders of the other Subordinated Notes then outstanding do not elect to purchase this Note in accordance with the previous sentence, then the Company shall have the right for a period of 10 days following the expiration of the Purchase Period (the "Foreclosure Payment Period") to prepay the balance of the Total Principal Amount of this Note in whole or in part, whether or not such prepayment occurs prior to the Permitted Prepayment Date, without payment of any Prepayment Premium (the "Foreclosure Prepayment Right"). In the event that the Company does not exercise its Foreclosure Prepayment Right in full, the Company shall have the right, for a period of 10 days following the expiration of the Foreclosure Payment Period, to direct that the Pledgee sell this Note for an amount equal to the unpaid balance of the Total Principal Amount to an affiliate of the Company. The closing of any such sale shall take place within 10 days following the expiration of the Foreclosure Payment Period. In the event that the Company does not exercise its Foreclosure Prepayment Right in full and this 9 Note is not purchased by an affiliate, then the Pledgee shall be free to sell this Note in accordance with Federal and state securities laws. Nothing in this Section 9.2 precludes the Company, its affiliates and the Holders of the other then outstanding Subordinated Notes from allocating the right to purchase this Note among themselves in such manner as they may mutually agree. Any transfer of this Note pursuant to this Section 9.2 shall be made in accordance with the procedures set forth in Section 9.1 (other than the first sentence thereof). 10. Amendment or Waiver. Subject to Section 7.5 of the Note and Warrant Purchase Agreement, any provision of this Note may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only upon the written consent of the Company and the Holder. No consent shall be required of any other person, including any Senior Creditor, to any such amendment or waiver. No delay or failure in exercising any rights or remedies under or with respect to this Note shall operate as a waiver of any rights or remedies of the Holder. The Holder's right to accelerate this Note for any late payment or the Company's failure to timely fulfill its other obligations hereunder or under the other Subordinated Debt Documents shall not be waived or deemed waived by the Holder by the Holder's having accepted a late payment or late payments in the past or the Holder otherwise not accelerating this Note or exercising other remedies for the Company's failure to timely perform its obligations hereunder or under the other Subordinated Debt Documents. 11. Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified; (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day; (iii) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid; (iv) if the Holder is located within the continental United States, the next business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt; or (v) if the Holder is located outside of the continental United States, the third business day after deposit with an internationally recognized courier, with written verification of receipt. All communications shall be sent to the Company at the address as set forth on the signature page hereof and to the Holder at the address set forth on the signature page hereof, or at such other address as the Company or the Holder may designate by 10 days' advance written notice to the other party hereto. 12. Titles and Subtitles. The titles of the sections and subsections of this Note are for convenience of reference only and are not to be considered in construing this Note. 13. Counterparts. This Note may be executed in two counterparts, each of which shall be an original, but both of which together shall constitute one instrument. 14. Benefits of this Agreement. Subject to Section 4, nothing in this Note shall be construed to give any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Note and this Note shall be for the sole and exclusive benefit of the Company and the Holder and any other permitted holder or holders of this Note. 10 15. Shareholders, Officers and Directors Not Liable. In no event shall any shareholder, officer or director of the Company be liable for any amounts due or payable pursuant to this Note. 16. Expenses. In addition to all other sums payable under this Note, the Company also agrees to pay to the Holder, on demand, all costs and expenses (including reasonable attorneys' fees, disbursements and expenses) incurred by the Holder in connection with the enforcement of the Company's obligations under this Note. 17. Presentment. The Company hereby waives presentment for payment, demand, protest, notice of intent to accelerate and notice of acceleration, notice of protest, and notice of dishonor, diligence in collecting and the filing of suit for the fixing of liability and all other notices of any kind whatsoever to which it may be entitled under applicable law or otherwise, except for any notice to which the Company may be entitled under this Note. 18. Maximum Lawful Rate of Interest. The rate of interest payable under this Note shall in no event exceed the maximum rate permissible under applicable law. If the rate of interest payable on this Note is ever reduced as a result of this Section 18 and at any time thereafter the maximum rate permitted under applicable law exceeds the rate of interest then provided for in this Note, then the rate provided for in this Note shall be increased to the maximum rate provided for under applicable law for such period as is required so that the total amount of interest received by the Holder is at least that which would have been received by the Holder but for the operation of the first sentence of this Section 18. 19. Entire Agreement. This Note and the other Subordinated Debt Documents embody the entire agreement and understanding between the Holder and the Company and other parties with respect to their subject matter and supersede all prior conflicting or inconsistent agreements, consents and understandings relating to such subject matter. The Company acknowledges and agrees that there is no oral agreement between the Company and the Holder which has not been incorporated in this Note and the other Subordinated Debt Documents. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 11 IN WITNESS WHEREOF, the Company has caused this Note to be duly executed and delivered by its authorized officer, as of the date first above written. UNITED STATES LIME & MINERALS, INC. By:_________________________________________ Name: Timothy W. Byrne Title: President and Chief Executive Officer Address: 13800 Montfort Drive, Suite 330 Dallas, Texas 75240 Telephone: (972) 991-8400 Facsimile: (972) 385-1805 AGREED TO AND ACCEPTED: By:_______________________________________ Name:_____________________________________ Title:____________________________________ Address: Telephone: Facsimile:________________________________ EXHIBIT A Listed Senior Debt All indebtedness, interest, fees, costs and expenses now existing or hereafter arising under or in connection with the following documents, as the same may be amended, restated or otherwise modified and in effect from time to time: 1. The Credit Agreement, dated as of April 22, 1999, as amended by the First Amendment to Credit Agreement, dated as of December 27, 2000, a letter agreement dated March 4, 2003, and the Third Amendment to Credit Agreement, dated as of August 5, 2003, each as amended, restated or otherwise modified and in effect from time to time, by and among the members of the Company Group, the lenders referred to therein and National City Bank (successor to Wachovia Bank, National Association) pursuant to which such lenders have agreed to make loans to and otherwise provide credit to or for the benefit of the members of the Company Group. 2. The Loan and Security Agreement, dated March 3, 2003, as amended by the First Amendment to Loan and Security Agreement, dated as of August 5, 2003, as amended, restated or otherwise modified and in effect from time to time, by and among the members of the Company Group and National City Bank. EX-10.3 5 d08213exv10w3.txt FORM OF COMMON STOCK PURCHASE WARRANT DRAFT DATED AUGUST 2, 2003 Exhibit 10.3 THIS WARRANT AND THE WARRANT SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NEITHER THIS WARRANT NOR THE WARRANT SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE TRANSFERRED EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR (B) IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS. THIS WARRANT IS SUBJECT TO THAT CERTAIN NOTE AND WARRANT PURCHASE AGREEMENT, DATED AS OF AUGUST 4, 2003, BY AND AMONG THE COMPANY AND THE PURCHASERS NAMED THEREIN. Warrant Issue Date: August 5, 2003 Warrant No. ______ COMMON STOCK PURCHASE WARRANT For value received, United States Lime & Minerals, Inc., a Texas corporation (the "Company"), hereby certifies that __________ (the "Holder") is entitled to purchase from the Company, at any time, or from time to time, during the Warrant Exercise Term (as defined below), in whole or in part, up to _________ shares (the "Warrant Shares") of the Company's common stock, par value $0.10 per share (the "Common Stock"), at a price per share equal to $3.85, as may be adjusted at any time, or from time to time, pursuant to Section 4 below (the "Exercise Price"). This warrant to purchase Warrant Shares (this "Warrant") is one of a series of warrants issued pursuant to that certain Note and Warrant Purchase Agreement, dated as of August 4, 2003, by and among the Company and the Purchasers listed on Schedule A thereto (the "Note and Warrant Purchase Agreement"). 1. Exercise of Warrant; Warrant Shares Put Right. 1.1 Exercise Term. This Warrant may be exercised at the principal executive offices of the Company during the period commencing on August 4, 2003 and ending at 5:00 p.m. local time on August 4, 2009 (the "Warrant Exercise Term"). 1.2 Cash Exercise. The purchase rights represented by this Warrant are exercisable by the Holder, in whole or in part, during the Warrant Exercise Term by the surrender of this Warrant, with the form of Subscription attached hereto as Annex A duly completed and executed by the Holder, to the Company at its principal executive offices accompanied by payment in cash, in lawful money of the United States of America, including by certified or official bank check made payable to the order of the Company or by wire transfer of immediately available funds to an account designated by the Company, of an amount equal to the Exercise Price multiplied by the number of Warrant Shares being purchased pursuant to such exercise of the Warrant. 1.3 Cashless Exercise. If the fair market value of one share of the Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), then in lieu of exercising this Warrant for cash, the Holder may elect to receive Warrant Shares equal to the value (as determined below) of this Warrant (or the portion thereof being exercised) by surrender of this Warrant, with the form of Subscription attached hereto as Annex A duly completed and executed by the Holder, to the Company at its principal executive offices, in which event the Company shall issue to the Holder a number of Warrant Shares computed using the following formula as of the date of such cashless exercise: X = Y(A - B) -------- A Where: X = the number of Warrant Shares to be issued to the Holder Y = the number of Warrant Shares purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised (at the date of such calculation) A = the fair market value of one share of the Common Stock (at the date of such calculation) B = the Exercise Price (as adjusted to the date of such calculation) For purposes of the above calculation, the fair market value of one share of the Common Stock shall be determined as follows: (a) If the Common Stock is traded on a national securities exchange or through The Nasdaq National Market or The Nasdaq SmallCap Market, the fair market value of one share of the Common Stock shall be deemed to be the average of the closing prices of the Common Stock on such exchange or market over the 30 trading days ending immediately preceding the date of the calculation set forth above; (b) If the Common Stock is not traded on a national securities exchange or through The Nasdaq National Market or The Nasdaq SmallCap Market, but the Common Stock is otherwise actively traded over-the-counter, the fair market value of one share of the Common Stock shall be deemed to be the average of the closing bid or sales price (whichever is applicable) over the 30 trading days ending immediately preceding the date of the calculation set forth above; and (c) If there is no active public market for the Common Stock, the fair market value of one share of the Common Stock shall be as reasonably determined by the 2 Company's Board of Directors or a duly appointed committee of the Board of Directors as of the date of the calculation set forth above (which determination shall be described in a written notice delivered to the Holder together with the certificate for Warrant Shares issued to the Holder). 1.4 Partial Exercise. This Warrant may be exercised at any time, or from time to time, during the Warrant Exercise Term for less than the full number of Warrant Shares then remaining subject to this Warrant; provided, however, that this Warrant may not be exercised in part for less than a whole number of Warrant Shares. Upon any such partial exercise, the Company at its expense will forthwith issue to the Holder a new Warrant or Warrants of like tenor exercisable for the number of Warrant Shares as to which rights have not been exercised (subject to adjustment as herein provided). 1.5 Issuance of Warrant Shares. As soon as practicable after the exercise of this Warrant, and in any event within 10 business days thereafter, the Company, at its expense, will cause to be issued in the name of the Holder or the Holder's nominee, or any permitted transferee of the Holder, and delivered to the Holder or the Holder's nominee or such transferee a certificate or certificates for the number Warrant Shares to which the Holder shall be entitled upon such exercise, plus, in lieu of any fractional share to which the Holder would otherwise be entitled, cash in an amount determined in accordance with Section 4.5. In lieu of delivering a certificate or certificates for such number of Warrant Shares, upon the Holder's instruction, the Company will authorize its transfer agent to deliver to the Holder or the Holder's nominee, or any permitted transferee of the Holder, such Warrant Shares through the Delivery/Withdrawal at Custodian ("DWAC") electronic transfer system. The Company agrees that the Warrant Shares so purchased shall be deemed to be issued to the Holder or the Holder's nominee, or the permitted transferee of the Holder, as the record owner of such Warrant Shares as of the close of business on the date on which this Warrant shall have been exercised for such Warrant Shares. 2. Warrant Shares Put Right. 2.1 Subject to the terms of Section 4 of the 14% Subordinated PIK Note Due 2008 payable to the Holder (the "Note"), the Holder shall be entitled to require the Company to repurchase any Warrant Shares that have been issued upon exercise of this Warrant (the "Warrant Shares Put Right"), at the Aggregate Repurchase Price (as defined below), at any time, or from time to time, on or after the earlier of August 4, 2008 or a Change in Control (as defined in the Note and Warrant Purchase Agreement). 2.2 The term "Repurchase Price" shall mean the repurchase price of one share of the Common Stock as determined below: (a) If the Common Stock is traded on a national securities exchange or through The Nasdaq National Market or The Nasdaq SmallCap Market, the Repurchase Price shall be deemed to be the average of the closing prices of the Common Stock on such exchange or market over the 30 trading days ending immediately preceding the date of receipt of the Warrant Shares Put Right Notice (as defined below); 3 (b) If the Common Stock is not traded on a national securities exchange or through The Nasdaq National Market or The Nasdaq SmallCap Market, but the Common Stock is otherwise actively traded over-the-counter, the Repurchase Price shall be deemed to be the average of the closing bid or sales price (whichever is applicable) over the 30 trading days ending immediately preceding the date of receipt of the Warrant Shares Put Right Notice; and (c) If there is no active public market for the Common Stock, the Repurchase Price shall be the greater of (i) the fair market value of one share of the Common Stock as reasonably determined and mutually agreed to by the Company and the Holder, without application of any minority, liquidity or similar discounts, or (ii) the book value of one Warrant Share, determined as of the date of receipt of the Warrant Shares Put Right Notice. 2.3 The term "Aggregate Repurchase Price" means a number equal to the product of the Repurchase Price multiplied by the number of Put Warrant Shares (as defined below). 2.4 In order to exercise the Warrant Shares Put Right, the Holder shall give the Company written notice (the "Warrant Shares Put Right Notice") that the Holder desires to exercise such right. The Holder shall be deemed to have exercised the Warrant Shares Put Right on the date on which the Company receives the Warrant Shares Put Right Notice. The Warrant Shares Put Right Notice shall set forth (i) the number of Warrant Shares the Holder desires the Company to repurchase (the "Put Warrant Shares") and (ii) a date of closing which shall be not less than 10 business days nor more than 20 business days from the date on which the Company receives the Warrant Shares Put Right Notice (the "Closing Date"). 2.5 The closing of the purchase and sale of the Put Warrant Shares (the "Closing") shall take place on the Closing Date at the principal executive offices of the Company at 10:00 a.m. local time, or such other time or place as the Company and Holder may mutually agree. At the Closing, the Company shall pay the Aggregate Repurchase Price for the Put Warrant Shares by certified or official bank check made payable to the order of the Holder or by wire transfer of immediately available funds to an account designated by the Holder, against delivery of a certificate or certificates representing the Put Warrant Shares, together with a stock power duly endorsed to the Company. 2.6 If the funds of the Company legally available for repurchase of Put Warrant Shares with respect to a given Warrant Share Put Right Notice are insufficient to repurchase all of such Put Warrant Shares, the Company shall use any funds which are legally available for such repurchase to repurchase the maximum possible number of such Put Warrant Shares. At any time thereafter when additional funds of the Company become legally available for the repurchase of such Put Warrant Shares, such funds will be used to repurchase the maximum possible number of such Put Warrant Shares remaining with respect to such Warrant Share Put Right Notice. 4 3. Negotiability. This Warrant is, and the Warrant Shares will be, issued upon the following terms: 3.1 Transfer of Warrant and Warrant Shares (a) The Holder may not sell, assign, pledge, dispose of or otherwise transfer this Warrant, or any interest therein, without the prior written consent of the Company. Subject to the preceding sentence, this Warrant may be transferred only upon surrender of the original Warrant at the Company's principal executive offices for registration of transfer accompanied by a duly executed written instrument of transfer in form satisfactory to the Company. Thereupon, a new warrant of like tenor and date and representing the right to purchase the Warrant Shares then remaining subject to this Warrant will be issued to, and registered in the name of, the transferee. The terms and conditions of this Warrant shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties. (b) The Holder further agrees not to make any permitted disposition of the Warrant or the Warrant Shares unless and until: (i) there is then in effect a registration statement under the Securities Act of 1933, as amended, and applicable state securities laws (collectively, the "Acts") covering such proposed disposition and such disposition is made in accordance with such registration statement; or (ii) the Holder shall have notified the Company of the proposed disposition, and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition and, at the expense of the Holder or its transferee, with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such securities under any of the Acts. 3.2 Transfer Taxes. The Company shall not be required to pay any Federal or state transfer tax or charge that may be payable in respect of any transfer involved in the transfer or delivery of this Warrant or the Warrant Shares including without limitation upon the issuance or delivery of certificates (or delivery through DWAC) of any Warrant Shares issued upon exercise hereof in a name other than that of the Holder, and shall not be required to issue or deliver any warrant issued in replacement of this Warrant or certificates (or delivery through DWAC) of any Warrant Shares upon the exercise of this Warrant until any and all such taxes and charges shall have been paid by the Holder or until the Holder has established to the Company's reasonable satisfaction that no such tax or charge is due. 3.3 No Rights as Shareholder. Prior to the exercise of this Warrant, the Holder shall not be entitled to any rights of a shareholder of the Company with respect to Warrant Shares for which this Warrant shall be exercisable including without limitation the right to vote, to receive dividends or other distributions (other than as set forth in Section 4.2) or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company. 5 4. Adjustments. 4.1 Adjustments Generally. In order to prevent dilution or enlargement of the rights granted hereunder, in the specific circumstances contemplated by this Section 4, the Exercise Price shall be subject to adjustment at any time, or from time to time, in accordance with this Section 4. Upon each adjustment of the Exercise Price pursuant to this Section 4, the Holder shall thereafter be entitled to acquire upon exercise, at the Exercise Price resulting from such adjustment, the number of Warrant Shares determined by (i) multiplying (a) the Exercise Price in effect immediately prior to such adjustment by (b) the number of Warrant Shares remaining issuable upon exercise hereof immediately prior to such adjustment, and (ii) dividing the product thereof by the Exercise Price resulting from such adjustment. 4.2 Subdivisions, Stock Dividends and Combinations. In case the Company shall at any time subdivide its outstanding shares of the Common Stock into a greater number of shares (including without limitation through any stock split effected by means of a dividend on the Common Stock which is payable in the Common Stock), the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced, and, conversely, in case the outstanding shares of the Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased. 4.3 Reorganization, Reclassification, Consolidation, Merger or Sale of Assets. If any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation shall be effected in such a way that holders of shares of the Common Stock shall be entitled to receive stock, securities, cash or other property with respect to or in exchange for the Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be made whereby the Holder shall have the right to acquire and receive upon exercise of this Warrant such shares of stock, securities, cash or other property of the successor corporation that a holder of Warrant Shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, reclassification, consolidation, merger or sale if this Warrant had been exercised immediately before such reorganization, reclassification, consolidation, merger or sale. The foregoing provisions shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers or sales and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant. In all events, appropriate adjustments (as determined by the Board of Directors of the Company) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant. 4.4 Adjustment by Board of Directors. If any event occurs as to which, in the opinion of the Board of Directors of the Company and as agreed by the Holder, the 6 provisions of this Section 4 are not strictly applicable or if strictly applicable would not fairly protect the rights of the Holder in accordance with the essential intent and principles of such provisions, then the Board of Directors may make such adjustment in the application of such provisions, in accordance with such essential intent and principles, as it deems appropriate so as to protect such rights as aforesaid. 4.5 Fractional Shares. The Company shall not issue fractions of Warrant Shares upon exercise of this Warrant or scrip in lieu thereof. If any fraction of a Warrant Share would, except for the provisions of this Section 4.5, be issuable upon exercise of this Warrant, then the Company shall in lieu thereof pay to the person entitled thereto an amount in cash equal to the current value of such fraction, calculated to the nearest one-hundredth of a Warrant Share, to be computed on the basis of the fair market value of one share of the Common Stock in accordance with the provisions of Section 1.3. 4.6 Certificate as to Adjustments. Whenever the Exercise Price shall be adjusted as provided in Section 4, the Company shall promptly compute such adjustment and furnish to the Holder a certificate setting forth such adjustment and showing in reasonable detail the facts requiring such adjustment, the Exercise Price that will be effective after such adjustment and the number of Warrant Shares and the amount, if any, of other shares or property that at the time would be received upon the exercise of this Warrant. 5. Exchange and Replacement of this Warrant. Subject to Section 3, this Warrant is exchangeable without expense upon the surrender hereof by the registered Holder at the principal executive offices of the Company for a new warrant or warrants of like tenor and date representing in the aggregate the right to purchase the Warrant Shares in such denominations as shall be designated by the Holder at the time of such surrender, subject to any adjustment pursuant to Section 4. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Company will make and deliver a new warrant of like tenor for the Warrant Shares then subject to this Warrant. 6. Reservation of Warrant Shares. The Company shall at all times reserve and keep available out of its authorized shares of Common Stock, solely for the purpose of issuance upon the exercise of this Warrant, such number of Warrant Shares as shall be issuable upon the exercise hereof. The Company covenants and agrees that, upon issuance in accordance with the terms of this Warrant, the Warrant Shares shall be duly authorized, validly issued, fully paid and nonassessable. 7. Governing Law. This Warrant and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Texas, without giving effect to principles of conflicts of law and choice of law that would cause the laws of any other jurisdiction to apply. 7 8. Amendment or Waiver. Subject to Section 7.5 of the Note and Warrant Purchase Agreement, any provision of this Warrant may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only upon the written consent of the Company and the Holder. No consent shall be required of any other party, including any Senior Creditor (as defined in the Note), to any such amendment or waiver. 9. Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified; (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day; (iii) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) if the Holder is located within the continental United States, the next business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt; or (v) if the Holder is located outside of the continental United States, the third business day after deposit with an internationally recognized courier, with written verification of receipt. All communications shall be sent to the Company at the address as set forth on the signature page hereof and to the Holder at the address set forth on the signature page hereof, or at such other address as the Company or the Holder may designate by 10 days' advance written notice to the other party hereto. 10. Titles and Subtitles. The titles of the sections and subsections of this Warrant are for convenience of reference only and are not to be considered in construing this Warrant. 11. Counterparts. This Warrant may be executed in two counterparts, each of which shall be an original, but both of which together shall constitute one instrument. 12. Benefits of this Warrant. Subject to Section 4 of the Note, nothing in this Warrant shall be construed to give any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant and this Warrant shall be for the sole and exclusive benefit of the Company and the Holder and any other permitted holder or holders of the Warrant or the Warrant Shares. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and delivered by its authorized officer, as of the date first above written. UNITED STATES LIME & MINERALS, INC. By:_________________________________________ Name: Timothy W. Byrne Title: President and Chief Executive Officer Address: 13800 Montfort Drive, Suite 330 Dallas, Texas 75240 Telephone: (972) 991-8400 Facsimile: (972) 385-1805 AGREED TO AND ACCEPTED: [_________________________________________] By:_______________________________________ Name:_____________________________________ Title:____________________________________ Address:__________________________________ Telephone:________________________________ Facsimile:________________________________ ANNEX A SUBSCRIPTION Date: ____________________ To: United States Lime & Minerals, Inc. Attn: Chief Financial Officer 13800 Montfort Drive, Suite 330 Dallas, Texas 75240 The undersigned (the "Purchaser"), pursuant to the provisions set forth in the attached Warrant, hereby irrevocably elects (a) to purchase _____ shares of common stock, par value $0.10 per share (the "Common Stock"), of United States Lime & Minerals, Inc. (the "Company") covered by such Warrant and herewith makes payment of $_________, representing the full purchase price for such shares of Common Stock at the price per share provided for in such Warrant, pursuant to the cash exercise provisions of Section 1.2 of the Warrant or (b) to exercise the Warrant with respect to __________ shares of the Common Stock, pursuant to the cashless exercise provisions of Section 1.3 of the Warrant [STRIKE (a) OR (b) AS APPLICABLE]. The Purchaser represents and warrants to the Company as follows: 1. Investment Representations. The Purchaser understands that the shares of Common Stock to be issued to the Purchaser in connection with this exercise (the "Warrant Shares") have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state securities laws. The Purchaser also understands that the Warrant Shares are being offered and sold pursuant to an exemption from registration contained in the Securities Act and applicable state securities laws (collectively, the "Acts") based in part upon the Purchaser's representations contained in this Subscription Agreement. 2. Experience; Risk. The Purchaser has such knowledge and experience in financial and business matters that the Purchaser is capable of evaluating the merits and risks of the purchase of the Warrant Shares and of protecting the Purchaser's interests in connection therewith. The Purchaser is able to fend for itself in the transactions contemplated by this Subscription Agreement and has the ability to bear the economic risk of the investment, including complete loss of the investment. 3. Investment. The Purchaser is acquiring the Warrant Shares for investment for its own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof, and the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. The Purchaser understands that the Warrant Shares have not been registered under the Acts by reason of a specific exemption from the registration provisions of the Acts which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser's representations as expressed herein. 4. Information. The Purchaser has been furnished with all information which it deems necessary to evaluate the merits and risks of purchasing the Warrant Shares and has had the opportunity to ask questions concerning the Warrant Shares and the Company, and all questions posed have been answered to the Purchaser's satisfaction. The Purchaser has been given the opportunity to obtain any additional information the Purchaser deems necessary to verify the accuracy of any information obtained concerning the Warrant Shares and the Company. The Purchaser understands that an investment in the Warrant Shares involves significant risks. 5. Restricted Securities; Restrictions on Transfer. The Purchaser understands that the Warrant Shares will be "restricted securities" under the Acts inasmuch as they are being acquired from the Company in a transaction not involving a public offering, and that under such laws and applicable regulations the Warrant Shares may be resold without registration under the Acts only in certain limited circumstances. The Purchaser acknowledges that the Warrant Shares must be held indefinitely unless subsequently registered under the Acts or an exemption from such registration is available. 6. Accredited Investor Status; Tax Implications. The Purchaser is an "accredited investor" within the meaning of Rule 501 promulgated under the Securities Act. The Purchaser has considered the Federal and state income tax implications of the exercise of the Warrant and the purchase and subsequent sale of the Warrant Shares and has consulted with the Purchaser's own advisors with respect thereto. 7. Residence. If the Purchaser is an individual, then the Purchaser resides in the state identified in the address of the Purchaser set forth on Schedule A to the Note and Warrant Purchase Agreement; if the Purchaser is a partnership, corporation, limited liability company or other entity, then the office or offices of the Purchaser in which its investment decision was made are located at the address or addresses of the Purchaser set forth on Schedule A the Note and Warrant Purchase Agreement. 8. Legend. The Purchaser understands that the Warrant Shares will bear a legend substantially similar to the legend set forth below: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE TRANSFERRED EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR (B) IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES ARE SUBJECT TO A PUT RIGHT AS DESCRIBED IN THAT CERTAIN COMMON STOCK PURCHASE WARRANT, DATED AUGUST 4, 2003 (WARRANT NO. ___) AND TO THE TERMS OF THAT CERTAIN REGISTRATION RIGHTS AGREEMENT, DATED AS OF AUGUST 4, 2003. ___________________________________ Signature Print name:________________________ Address:___________________________ EX-10.4 6 d08213exv10w4.txt REGISTRATION RIGHTS AGREEMENT Exhibit 10.4 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of August 5, 2003 by and among United States Lime & Minerals, Inc., a Texas corporation (the "Company"), and each of those persons and entities, severally and not jointly, whose names are set forth on the Schedule of Investors attached hereto as Schedule A (which persons and entities are hereinafter referred to as the "Investors," and each individually as an "Investor"). RECITALS: WHEREAS, the Company sold to the Investors on August 5, 2003 certain Common Stock Purchase Warrants (collectively, the "Warrants") permitting the Investors to purchase from the Company, at any time and from time to time during the Warrant Exercise Term (as defined in the Warrants), in whole or in part, up to an aggregate of 162,000 shares (the "Warrant Shares") of the Company's common stock, par value $0.10 per share (the "Common Stock"), at a per share price equal to $3.80 (subject to adjustment pursuant to the Warrants) (the "Exercise Price"); and WHEREAS, neither the Warrants nor the Warrant Shares have been registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state securities laws. NOW, THEREFORE, in consideration of the foregoing recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each of the Investors hereby agree as follows: 1. Registration of the Warrant Shares; Compliance with the Securities Act. 1.1 Registration Procedures. (a) Subject to the conditions of this Section 1: (i) at any time during the Warrant Exercise Term, the Majority Investors (as defined below) shall have the right (the "Demand Right"), exercisable by written notice to the Company signed by such Majority Investors (the "Demand Registration Request"), to require that the Company use its commercially reasonable efforts to prepare and file with the Securities and Exchange Commission (the "SEC"), within 60 days after the Company's receipt of the Demand Registration Request (or, if the sixtieth day after the Company's receipt of the Demand Registration Request is not a business day, then the first business day thereafter), a registration statement on Form S-3 (the "Registration Statement") to enable the resale of the Warrant Shares held by the Majority Investors, and any other Investor who joins in the Demand Registration Request pursuant to Section 1.1(a)(iv), from time to time through the automated quotation system of The Nasdaq National Market or in privately-negotiated transactions; provided, however, that the Demand Right shall be exercisable on one occasion only. The term "Majority Investors" means the holder or holders of not less than a majority of the shares of Common Stock subject to the Warrants (whether or not such shares of Common Stock have been issued upon exercise of the Warrants). From the date hereof until the date on which the SEC declares the Registration Statement effective, the Company shall use its commercially reasonable efforts to remain eligible to register the Warrant Shares on Form S-3; (ii) upon receipt of the Demand Registration Request, the Company shall use its commercially reasonable efforts to cause the Registration Statement to become effective within 60 days after the Registration Statement is filed by the Company with the SEC (or, if the sixtieth day is not a business day, the first business day thereafter); (iii) during the Registration Period (as defined below), the Company shall use its commercially reasonable efforts to keep the Registration Statement current and effective so as to permit the resale of the Warrant Shares included in the Registration Statement. The term "Registration Period" means, with respect to any Warrant Shares, the date commencing on the date on which the SEC declares the Registration Statement effective and ending on the earliest of (a) the second anniversary of the effective date of the Registration Statement, (b) the date on which such Warrant Shares may be sold pursuant to Rule 144 under the Securities Act within the volume limitations of Rule 144(e) under the Securities Act, (c) such time as such Warrant Shares have been sold pursuant to the Registration Statement or otherwise, (d) the date on which such Warrant Shares may be sold pursuant to Rule 144(k), and (e) the date on which the Warrant Shares Put Right (as such term is defined in the Warrants) may be exercised with respect to such Warrant Shares; (iv) the Company shall give written notice of any Demand Registration Request to each Investor that is not a Majority Investor (the "Company Notice") within 10 days from the date of the Company's receipt of any such Demand Registration Request. Following receipt of the Company Notice, each such Investor may join in the Demand Registration Request and require the Company to include such Investor's Warrant Shares in the Registration Statement to be filed pursuant to this Section 1.1 by notifying the Company within 10 days following such Investor's receipt of the Company Notice of its decision to include such Investor's Warrant Shares in the Registration Statement; (v) the Company shall furnish to each Investor with respect to the Warrant Shares registered under the Registration Statement such number of copies of the Registration Statement and prospectuses in conformity with the requirements of the Securities Act and such other documents as such Investor may reasonably request, in order to facilitate the public sale or other disposition of all or any of such Investor's Warrant Shares included in the Registration Statement; (vi) the Company shall file such documents required of the Company for normal securities law clearance, if any, in states specified in writing by the Investor and use its commercially reasonable efforts to maintain such qualifications 2 during the Registration Period; provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented; (vii) the Company shall bear all expenses in connection with the procedures in paragraphs (i) through (vi) of this Section 1.1(a) and the registration of the Warrant Shares pursuant to the Registration Statement, except with respect to (a) any legal or accounting fees incurred by any of the Investors in connection with the Registration Statement and any amendments thereto, and (b) any underwriting fees and selling commissions applicable to the sale of the Warrant Shares pursuant to the Registration Statement; and (viii) the Company shall advise the Investors promptly after the Company shall receive notice or obtain knowledge of the issuance of any stop order by the SEC delaying or suspending the effectiveness of the Registration Statement or of the initiation or threat of any proceeding for that purpose, and it will promptly use its commercially reasonable efforts to prevent the issuance of any stop order or to obtain the withdrawal of any stop order as soon as practicable if such stop order should be issued. (b) Each Investor agrees, severally and not jointly, that such Investor (i) will timely provide all such information and material and take all such actions as may be reasonably requested by the Company in order to enable the Company to comply with all applicable requirements of the SEC in connection with the exercise of the Demand Right and the Registration Statement, and (ii) will comply with the applicable provisions of the Securities Act and of such other securities laws as may be applicable in connection with any use of such prospectuses and resale of the Warrant Shares pursuant thereto. 1.2 Limitation on Demand Right. (a) The Company shall not be required to file the Registration Statement upon receipt of the Demand Registration Request pursuant to Section 1.1 if the Company shall furnish to the Majority Holders a certificate signed by the Chief Executive Officer of the Company stating that, in the good faith judgment of the Company, it would be detrimental to the Company for the Registration Statement to be effected at such time, in which event the Company shall have the right to defer such filing for a period of not more than 120 days following receipt of the Demand Registration Request. (b) Upon the expiration of the Registration Period with respect to any Warrant Shares, the Company shall have no obligation to include such Warrant Shares in the Registration Statement and, to the extent that any such Warrant Shares have previously been included in the Registration Statement, shall be entitled to deregister such Warrant Shares from the Registration Statement. 1.3 Transfer of Shares After Registration; Suspension; Black-Out. (a) Each Investor agrees that such Investor will not effect any disposition of the Warrant Shares or of its right to purchase the Warrant Shares that 3 would constitute a sale of such Warrant Shares within the meaning of the Securities Act except as contemplated in the Registration Statement referred to in Section 1.1 and as described below or as otherwise permitted by law, and that it will promptly notify the Company of any changes in the information set forth in the Registration Statement regarding such Investor or its plan of distribution. (b) The Company shall (i) if deemed necessary by the Company, prepare and file from time to time with the SEC a post-effective amendment to the Registration Statement or a supplement to the related prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that such Registration Statement will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and so that such prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and (ii) provide each Investor whose Warrant Shares are included in the Registration Statement copies of any documents filed pursuant to Section 1.3(b)(i). (c) Subject to paragraph (e) below, in the event of (i) any request by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to the Registration Statement or related prospectus or for additional information, (ii) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, (iii) the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Warrant Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or (iv) any event or circumstance which, upon the advice of the Company's counsel, necessitates the making of any changes in the Registration Statement or prospectus, or any document incorporated or deemed to be incorporated therein by reference, so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the prospectus, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, then the Company shall deliver a certificate in writing to each Investor whose Warrant Shares are included in the Registration Statement (the "Suspension Notice") to the effect of the foregoing and, upon receipt of such Suspension Notice, each such Investor will refrain from selling any Warrant Shares pursuant to the Registration Statement (a "Suspension") until such Investor's receipt of copies of a supplemented or amended prospectus prepared and filed by the Company, or until it is advised in writing by the Company that the current prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in any such prospectus. In the event of any Suspension, the Company will use its commercially reasonable efforts to cause the use of the prospectus so suspended to be 4 resumed as soon as reasonably practicable after the delivery of a Suspension Notice pursuant to this Section 1.3(c). (d) Subject to paragraph (e) below, the Company shall have the right, upon giving written notice to any Investor whose Warrant Shares are included in the Registration Statement of the exercise of such right, to require each such Investor not to sell any Warrant Shares pursuant to the Registration Statement for a reasonable period (as determined in good faith by the Company) from the date on which such notice is given (a "Black-Out Period"), if (i) the Company is engaged in or proposes to engage in discussions or negotiations with respect to, or has proposed or taken a substantial step to commence, or there otherwise is pending, any merger, acquisition, other form of business combination, divestiture, tender offer, financing or other transaction, or there is an event or state of facts relating to the Company, in each case which is material to the Company (any such negotiation, step, event or state of facts being herein called a "Material Activity"), (ii) in the good faith judgment of the Company, disclosure of such Material Activity would be necessary under applicable securities laws if resale pursuant to the Registration Statement were to continue, and (iii) such disclosure would, in the good faith judgment of the Company, be adverse to the interests of the Company ("Black-Out"). During any such Black-Out Period, each Investor agrees not to sell any Warrant Shares under the Registration Statement for such period of time as the Company may in good faith deem advisable. (e) Notwithstanding the foregoing paragraphs (c) and (d) of this Section 1.3, the Investors shall not be prohibited from selling Warrant Shares under the Registration Statement as a result of Suspensions or Black-Outs on more than two occasions of not more than 60 days each in any twelve-month period, unless, in the good faith judgment of the Company's Board of Directors, the sale of Warrant Shares under the Registration Statement in reliance on this Section 1.3(e) would be reasonably likely to cause a violation of the Securities Act or the Securities Exchange Act of 1934, as amended, and result in liability to the Company. (f) Provided that a Suspension or Black-Out is not then in effect, each Investor whose Warrant Shares are included in the Registration Statement may sell Warrant Shares under the Registration Statement, provided, however, that such Investor arranges for delivery of a current prospectus to the transferee of such Warrant Shares and otherwise complies with all Federal and state securities laws. (g) In the event of a sale of Warrant Shares by an Investor pursuant to the Registration Statement, such Investor must deliver, or cause to be delivered, to the Company's transfer agent, with a copy to the Company, a Certificate of Subsequent Sale substantially in the form attached hereto as Exhibit A. 1.4 Other Shareholders and Registrations. Each Investor acknowledges that the Company may include on the Registration Statement shares of Common Stock for resale by certain other shareholders of the Company, and that the Company may file other registration statements ("Other Registration Statements") for the sale of shares of Common Stock by the Company or the resale of shares of Common Stock by other 5 shareholders of the Company at any time. Each Investor acknowledges and agrees that the Company shall have no obligation to include any Warrant Shares or any other shares of capital stock of the Company owned by such Investor in any Other Registration Statements. 2. Indemnification. 2.1 Indemnification of the Investors. The Company agrees to indemnify and hold harmless each Investor (and each person, if any, who controls each Investor within the meaning of Section 15 of the Securities Act) from and against any losses, claims, damages or liabilities to which such Investor may become subject (under the Securities Act or otherwise) insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon, (i) any untrue statement of a material fact contained in the Registration Statement, as it may have been amended, at the time of effectiveness or any omission of a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made not misleading, or (ii) any failure by the Company to fulfill any undertaking included in the Registration Statement at the time of effectiveness. The Company will reimburse such Investor for any reasonable and documented legal expenses and any other actual, out-of-pocket expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim; provided, however, that the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of, or is based upon, an untrue statement made in such Registration Statement or any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Investor or any of its affiliates or representatives specifically for use in preparation of the Registration Statement or the failure of any Investor to comply with its covenants and agreements contained in Section 1.3 hereof respecting the sale of the Warrant Shares or any statement or omission in any prospectus that is corrected in any subsequent prospectus that was delivered to an Investor prior to the pertinent sale or sales by such Investor. The Company shall reimburse each Investor for the amounts provided for herein within a reasonable period of time after demand therefor. 2.2 Indemnification of the Company. Each Investor, severally and not jointly, agrees to indemnify and hold harmless the Company (and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, each officer of the Company who signs the Registration Statement and each director of the Company) from and against any losses, claims, damages or liabilities to which the Company (or any such controlling person, officer or director) may become subject (under the Securities Act or otherwise), insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon, (i) any failure by such Investor to comply with the covenants and agreements of such Investor contained in Section 1.3 hereof respecting any sale of the Warrant Shares, or (ii) any untrue statement of a material fact contained in the Registration Statement, as it may have been amended, at the time of effectiveness or any omission of a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances 6 under which they were made not misleading, if only to the extent such untrue statement or omission was made in reliance upon and in conformity with written information furnished by or on behalf of such Investor specifically for use in preparation of the Registration Statement as set forth in an instrument expressly permitting its use in the Registration Statement, and such Investor will reimburse the Company (or such controlling person, officer or director), as the case may be, for any legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim. Each Investor shall reimburse the Company for the amounts provided for herein within a reasonable time after demand therefor. 2.3 Indemnification Procedure. Promptly after receipt by any indemnified person of a notice of a claim or the beginning of any action in respect of which indemnity is to be sought against an indemnifying person pursuant to this Section 2, such indemnified person shall notify the indemnifying person in writing of such claim or of the commencement of such action, but the omission to so notify the indemnifying person will not relieve it from any liability which it may have to any indemnified person under this Section 2 (except to the extent that such omission materially and adversely affects the indemnifying person's ability to defend such action) or from any liability otherwise than under this Section 2. Subject to the provisions hereinafter stated, in case any such action shall be brought against an indemnified person, the indemnifying person shall be entitled to participate therein, and, to the extent that it shall elect by written notice delivered to the indemnified person promptly after receiving the aforesaid notice from such indemnified person, shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to such indemnified person. After notice from the indemnifying person to such indemnified person of its election to assume the defense thereof, such indemnifying person shall not be liable to such indemnified person for any legal expenses subsequently incurred by such indemnified person in connection with the defense thereof; provided, however, that, if there exists or shall exist a conflict of interest that would make it inappropriate, in the opinion of counsel to the indemnified person, for the same counsel to represent both the indemnified person and such indemnifying person or any affiliate thereof, the indemnified person shall be entitled to retain its own counsel at the expense of such indemnifying person; provided further, however, that no indemnifying person shall be responsible for the fees and expenses of more than one separate counsel (together with appropriate local counsel) for all indemnified persons. 2.4 Settlement. In no event shall any indemnifying person be liable in respect of any amounts paid in settlement of any action unless the indemnifying person shall have approved the terms of such settlement; provided, however, that such consent shall not be unreasonably withheld. No indemnifying person shall, without the prior written consent of the indemnified person, effect any settlement of any pending or threatened proceeding in respect of which any indemnified person is or could have been a party and indemnification could have been sought hereunder by such indemnified person, unless such settlement includes an unconditional release of such indemnified person from all liability on claims that are the subject matter of such proceeding. 2.5 Contribution. If the indemnification provided for in this Section 2 is unavailable to or insufficient to hold harmless an indemnified person in respect of any 7 losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying person shall contribute to the amount paid or payable by such indemnified person as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Company, on the one hand, and the Investor as well as any other Investors under such Registration Statement, on the other, in connection with the untrue statements or other matters which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, in the case of an untrue statement, whether the untrue statement relates to information supplied by the Company, on the one hand, or an Investor or other Investors, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement. The Company and each Investor agrees that it would not be just and equitable if contribution pursuant to this Section 2.5 were determined by pro rata allocation (even if the Investors were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above in this Section 2.5. The amount paid or payable by an indemnified person as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 2.5 shall be deemed to include any legal or other expenses actually and reasonably incurred by such indemnified person in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Each Investor's obligations in this Section 2.5 to contribute shall be in proportion to its sale of Warrant Shares to which such loss relates and shall not be joint with any other Investor. 2.6 Investor Acknowledgment and Waiver. Each Investor hereby acknowledges that it is a sophisticated business person who was represented by counsel during the negotiations regarding the provisions hereof, including without limitation the provisions of this Section 2, and is fully informed regarding said provisions. Each Investor further acknowledges that the provisions of this Section 2 fairly allocate the risks involved. Each Investor and the Company are advised that federal or state public policy as interpreted by the courts in certain jurisdictions may be contrary to certain of the provisions of this Section 2, and each Investor and the Company hereby expressly waive and relinquish any right or ability to assert such public policy as a defense to a claim under this Section 2 and further agree not to attempt to assert any such defense. 3. Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Texas, without giving effect to principles of conflicts of law and choice of law that would cause the laws of any other jurisdiction to apply. 4. Successors and Assigns. This Agreement may not be assigned, conveyed or transferred without the prior written consent of the Company. Subject to the foregoing, the rights and obligations of the Company and each Investor under this Agreement shall 8 be binding upon and benefit their respective permitted successors and assigns. The terms and provisions of this Agreement are for the sole benefit of the parties hereto and their respective permitted successors and assigns, and are not intended to confer any third-party benefit on any other person; provided, however, that any non-party entitled to be indemnified pursuant to Section 2.1 or 2.2 shall be entitled to rely on the provisions of Section 2. 5. Severability. In case any provision of the Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 6. Amendment or Waiver. Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only upon the written consent of the Company and the Majority Investors. Any amendment or waiver effected in accordance with this Section 6 shall be binding upon each Investor who did not consent in writing thereto. 7. Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified; (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day; (iii) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid; (iv) if the Investor is located within of the continental United States the next business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt; or (v) if the Investor is located outside of the continental United States, the third business day after deposit with an internationally recognized courier, with written verification of receipt. All communications shall be sent to the Company at the address as set forth on the signature page hereof and to each Investor at the address set forth on Schedule A attached hereto, or at such other address as the Company or each Investor may designate by 10 days' advance written notice to the other parties hereto. 8. Titles and Subtitles. The titles of the sections and subsections of the Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 9. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 10. Transferees of Warrant Shares. If an Investor transfers Warrant Shares to a third party that is not a signatory to this Agreement, the Company may, but shall not be obligated to, permit the transferee of such Warrant Shares to become a party to this Agreement by executing and delivering to the Company, with a copy to the Investors, a Joinder to this Agreement in the form attached hereto as Schedule B, in which event Schedule A shall be amended to reflect the transfer of such Warrant Shares and the addition of the transferee as a party to this Agreement. 9 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth in the first paragraph hereof. THE COMPANY: UNITED STATES LIME & MINERALS, INC. By:_________________________________________ Name: Timothy W. Byrne Title: President and Chief Executive Officer Address: 13800 Montfort Drive, Suite 330 Dallas, Texas 75240 Telephone: (972) 991-8400 Facsimile: (972) 385-1805 THE PURCHASERS: CREDIT TRUST S.A.L. ABB FINANCE, LIMITED By: ________________________________ By: ________________________________ Name: Elias Doumet Name: ______________________________ Title: President Title: _____________________________ Address: __________________________ Address: __________________________ __________________________ __________________________ Telephone:__________________________ Telephone: Facsimile:__________________________ Facsimile: _________________________ R.S. BEALL CAPITAL PARTNERS, LP By: Trans Texas Financial Corp., its general partner By:_________________________________ Name: Robert S. Beall Title: President Address: Telephone: Facsimile: SCHEDULE A SCHEDULE OF INVESTORS
NAME ADDRESS TELEPHONE/FACSIMILE - ---- ------- ------------------- CREDIT TRUST S.A.L. _______________________ Telephone:_________ _______________________ Facsimile::_________ ABB FINANCE, LIMITED Telephone: Facsimile::_________ R.S. BEALL CAPITAL Telephone: PARTNERS, LP Facsimile:
SCHEDULE B JOINDER Made as of _______________________ Reference is made to the Registration Rights Agreement (the "Agreement") entered into as of August 5, 2003, by and among United States Lime & Minerals, Inc., a Texas corporation, and each of those persons and entities (the "Investors"), severally and not jointly, whose names are set forth on the Schedule of Investors attached thereto as Schedule A. The undersigned, __________________________ (the "Joining Party") has read the Agreement and hereby agrees to be bound by all terms and conditions thereof to which the Investors are bound, such that the term "Investors" as and when used in the Agreement shall henceforth also include the Joining Party. ACKNOWLEDGED AND AGREED [_________________________________________] By:______________________________________ Name:____________________________________ Title:___________________________________ Telephone: ______________________________ Facsimile: ______________________________ Exhibit A CERTIFICATE OF SUBSEQUENT SALE [Company's Transfer Agent Address] RE: Sale of Shares of Common Stock of United States Lime & Minerals, Inc. (the "Company") pursuant to the Company's prospectus dated _____________, 200_ (the "Prospectus") Dear Sir/Madam: The undersigned hereby certifies, in connection with the sale of shares of Common Stock of the Company included in the table of selling shareholders in the Prospectus, that the undersigned has sold the following shares pursuant to the Prospectus and in a manner described under the caption "Plan of Distribution" in the Prospectus, and that such sale complies with all Federal and state securities laws applicable to the undersigned, including without limitation the prospectus delivery requirements of the Securities Act of 1933, as amended. Selling Shareholder (the beneficial owner):_____________________________________ Record Holder (e.g., if held in name of nominee):_______________________________ Restricted Stock Certificate No(s):_____________________________________________ Number of Shares Sold:__________________________________________________________ Date of Sale:___________________________________________________________________ In the event that you receive a stock certificate(s) representing more shares of Common Stock than have been sold by the undersigned, then you should return to the undersigned a newly issued certificate for such excess shares in the name of the Record Holder and bearing the same restrictive legend. Further, you should place a stop transfer on your records with regard to such certificate. Very truly yours, Dated: ________________________________ By: ___________________________ Print Name: ___________________ Title: ________________________ cc: United States Lime & Minerals, Inc. Attn: Chief Financial Officer 13800 Montfort Drive, Suite 330 Dallas, TX 75240 EX-10.5 7 d08213exv10w5.txt THIRD AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.5 THIRD AMENDMENT TO CREDIT AGREEMENT THIS THIRD AMENDMENT TO CREDIT AGREEMENT, dated as of the ___ day of August, 2003 (this "Third Amendment"), by and among UNITED STATES LIME & MINERALS, INC., a Texas corporation ("U.S. Lime"), TEXAS LIME COMPANY, a Texas corporation wholly owned by U.S. Lime ("TLC"), ARKANSAS LIME COMPANY, an Arkansas corporation wholly owned by U.S. Lime ("ALC") (U.S. Lime, TLC and ALC are collectively referred to as "Borrowers" and individually as a "Borrower"), the Lenders who are parties to the Credit Agreement described below (collectively, the "Lenders"), and NATIONAL CITY BANK, as successor Administrative Agent to Wachovia Bank, National Association, formerly known as First Union National Bank, as Administrative Agent for itself and the Lenders from time to time party thereto (the "Administrative Agent"). Background A Borrowers, Lenders, and Administrative Agent are parties to the Credit Agreement dated as of April 22, 1999, as amended by the First Amendment to Credit Agreement dated as of December 27, 2000, and a letter agreement dated March 4, 2003 (as amended, restated, or otherwise modified and in effect from time to time, the "Credit Agreement"), pursuant to which the Lenders agreed, subject to the terms and conditions of the Credit Agreement, to lend to Borrowers the sum of Fifty Million Dollars ($50,000,000) on a term loan basis secured by substantially all of the respective Borrowers' personal property other than Accounts, Inventory, and related personal property, and by mortgages or deeds of trust on certain real property owned by ALC and TLC. All initially capitalized terms used herein and not otherwise defined herein shall have the same meanings ascribed to such terms in the Credit Agreement. B Pursuant to an Assignment and Acceptance dated as of February 28, 2003, Wachovia Bank, National Association, formerly known as First Union National Bank ("Wachovia") assigned, and National City Bank ("NatCity") assumed, Wachovia's 34% Pro Rata Share of the Loans. In connection therewith, Wachovia resigned as Administrative Agent and Required Lenders consented to the appointment of NatCity as successor Administrative Agent pursuant to a letter agreement dated February 20, 2003. C U.S. Lime has incurred $14,000,000 of additional Debt to fund the second phase of ALC's plant construction (the "Phase II Debt"), evidenced by promissory notes of U.S. Lime copies of which are attached hereto as Exhibit "A" (the "Phase II Notes"). In connection with the Phase II Notes, U.S. Lime will issue to the holders of the Phase II Notes warrants to purchase an aggregate of 162,000 shares of U.S. Lime's common stock (the "Warrants"). Borrowers and Lenders desire to amend the Credit Agreement to permit the issuance of the Warrants, approve the terms of the Phase II Debt, provide for the curtailment of Dividends for a period of two years, and amend the Tangible Net Worth covenant. Required Lenders have agreed to approve the terms of the Phase II Debt and the other amendments effected hereby, subject to the terms, conditions and provisions hereof. 1 NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants set forth herein, the parties hereto, intending to be legally bound hereby, agree as follows: 1. Ratification. This Third Amendment is a modification of the Credit Agreement pursuant to Section 12.11 thereof. Except as expressly set forth herein, or in any amendment to any of the documents referred to herein, Borrowers, the Required Lenders and the Administrative Agent acknowledge and agree that each and every term, condition and provision of the Credit Agreement is hereby ratified and confirmed in full. The Required Lenders hereby consent to the amendment of the Working Capital Facility effected by the First Amendment to Loan and Security Agreement among the Borrowers and NatCity in substantially the form attached hereto as Exhibit "B" and to the Working Capital Facility as amended thereby. 2. Outstanding Indebtedness. Borrowers hereby unconditionally acknowledge that, as of the date hereof, the principal balance due and owing to the Lenders under the Credit Agreement is $39,166,666.23, and that such amount, together with interest thereon at the rates set forth therein, is owing to the Lenders without claim, counterclaim, recoupment, defense or setoff of any kind. 3. NatCity Individually and as Administrative Agent. Effective as of February 28, 2003: (i) all references to the Administrative Agent in the Credit Agreement shall mean and refer to NatCity in such capacity; and (ii) references in the Credit Agreement to First Union, as the provider of the Working Capital Facility, shall henceforth mean and refer to NatCity in such capacity. NatCity confirms and acknowledges the accuracy of the statements contained in paragraph B of the Background preamble set forth above. 4. Tangible Net Worth Covenant. Section 8.2 of the Credit Agreement is hereby amended and restated in its entirety as of the date hereof as follows: "Permit Tangible Net Worth as of the last day of any fiscal quarter to be less than the sum of $25,000,000 ($30,000,000 for the fiscal quarter ended June 30, 2003 and each fiscal quarter thereafter), plus 50% of Borrowers' cumulative Net Income from January 1, 1999 calculated for each succeeding fiscal quarter through the last day of such fiscal quarter. 5. Warrants. The undersigned Lenders hereby consent to the issuance of the Warrants. 6. Transactions With Affiliates. Borrowers represent and warrant to Lenders that the Phase II Notes, the Warrants, and the related Note and Warrant Purchase Agreement and Registration Rights Agreement (collectively, the "Phase II Debt Documents") fully disclose the transactions contemplated thereby, and there are no other documents or instruments delivered in connection with such transactions other than the Phase II Debt Documents and a related Confidential Memorandum dated May 2003 prepared by Frost Securities, Inc. with respect to U.S. Lime. The undersigned Lenders acknowledge that one or more of the holders of the Phase II Notes and Warrants is an Affiliate of Borrowers, and hereby approve the fairness and reasonableness of the Phase II Debt Documents as required by Section 9.9 of the Credit Agreement. 2 7. Suspension of Dividends. Section 9.7 of the Credit Agreement notwithstanding, during the two-year period commencing June 30, 2003 to June 30, 2005, U.S. Lime will not declare, pay or accrue any dividend payable in cash to any of its shareholders without the prior written consent of Required Lenders. 8. Amendments to Phase II Debt; Notice. U.S. Lime agrees (i) not to amend or modify the put right in the Common Stock Purchase Warrants issued to the holders of the Phase II Debt without the prior written consent of Administrative Agent, and (ii) to provide prompt written notice to Administrative Agent of any amendment, restatement or other modification of any of the Phase II Debt Documents. Upon the occurrence and continuance of an Event of Default, Borrowers shall promptly notify each Holder of the Phase II Notes thereof and the commencement of a Standstill Period (as defined in the Phase II Notes) if then applicable. 9. Representations and Warranties. To induce the Required Lenders to approve the modifications contemplated by this Third Amendment and the Phase II Debt, Borrowers jointly and severally represent and warrant to the Lenders and Administrative Agent as follows: 9.1 After giving effect to the modifications contained herein, all representations, warranties and covenants made by Borrowers to the Lenders and the Administrative Agent in the Credit Agreement (except those relating to a specific date) are true and correct in all material respects as of the date hereof, with the same force and effect as though made as of the date hereof; 9.2 No Event of Default or Default has occurred and is continuing under the Credit Agreement as of the date hereof, and neither the execution, delivery nor performance of the Phase II Notes or the Warrants results in the occurrence of any Event of Default or Default; 9.3 Each Borrower is a corporation validly subsisting under the laws of the state of its incorporation; the execution, delivery and performance of this Third Amendment and any other documents and instruments executed and delivered by the Borrowers to the Lenders or the Administrative Agent in connection herewith (i) are within each Borrower's corporate powers, (ii) have been duly authorized by each Borrower's Board of Directors, (iii) do not contravene any provision of law or any indenture, agreement or undertaking to which any Borrower is a party or by which it is otherwise bound, any Borrower's Articles of Incorporation or bylaws, or any resolution of the Board of Directors of any Borrower, and (iv) require no consent or approval of any governmental authority or any third party which has not been obtained; and 9.4 In the case of each Borrower, this Third Amendment and any other documents and instruments executed and delivered by such Borrower to the Lenders or the Administrative Agent in connection herewith have each been validly executed by, and are enforceable against, such Borrower in accordance with their respective terms. Any failure of any of the representations and warranties made by Borrowers in this Third Amendment to be true and correct in all material respects when made shall constitute an Event of Default under the Credit Agreement. 3 10. Conditions Precedent. The effectiveness of the amendments to the Credit Agreement and the consents set forth herein are subject to the satisfaction of the following conditions precedent: 10.1 Borrowers and NatCity, in its individual capacity and not as Administrative Agent, shall have executed and delivered an amendment to the Working Capital Facility; 10.2 Administrative Agent shall be a third party beneficiary of the subordination and standstill provisions contained in the Phase II Notes; 10.3 The Administrative Agent shall have received true, correct and complete copies of resolutions of the Board of Directors of each Borrower authorizing the execution, delivery and performance of this Third Amendment, and the other documents and instruments executed and delivered by any Borrower in connection herewith, including the Phase II Debt Documents, certified by such Borrower's Secretary as being true and complete copies of the originals thereof and remaining in full force and effect, not having been modified or rescinded; 10.4 No less than the Required Lenders shall have approved the modifications contemplated by, and authorized Administrative Agent to execute, this Third Amendment; 10.5 Borrowers shall have delivered to Administrative Agent true, correct and complete copies of all of the Phase II Debt Documents, and all other documents and instruments executed and delivered in connection therewith. All of the documents and instruments referred to in this Section 10 shall be satisfactory in form and substance to the Administrative Agent. Each of the Required Lenders approving this Third Amendment hereby authorizes the Administrative Agent to confirm such fact to the Borrowers in writing. 10.6 Borrowers hereby authorize Administrative Agent to submit one or more Uniform Commercial Code financing statements as fixture filings for recording in the real estate records of Caddo Parish, Louisiana. 11. Miscellaneous. 11.1 Entire Agreement. The Credit Agreement, as amended by this Third Amendment, and the other Loan Documents embody the entire agreement and understanding among the Lenders, the Administrative Agent and Borrowers. The Credit Agreement, together with this Third Amendment, and all documents executed and delivered in connection herewith, supersede all prior agreements and understandings relating to subject matter hereof. This Third Amendment together with the Credit Agreement, and the documents executed and delivered in connection herewith, shall be construed as one agreement, and in the event of any inconsistency, the provisions of any promissory note evidencing a portion of the Indebtedness shall control over the provisions of this Third Amendment. 11.2 Counterparts. This Third Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken 4 together, shall constitute but one and the same instrument. This Third Amendment shall be effective upon the execution and delivery of a counterpart hereof by each of the parties hereto. 11.3 Captions. The captions or headings in this Third Amendment are for convenience of reference only and in no way define, limit, or circumscribe the scope or intent of any provision of this Third Amendment. 11.4 Successors and Assigns; Governing Law. This Third Amendment shall be binding upon and inure to the benefit of the respective parties hereto and their successors and assigns and shall be governed by, and construed and enforced in accordance with, the internal laws of the Commonwealth of Pennsylvania without regard to its principles of conflicts of laws. [balance of page intentionally left blank] 5 IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned have executed this Third Amendment as of the day and year first written above. UNITED STATES LIME & MINERALS, INC., as Borrower By: ------------------------------------ Name: ----------------------------- Title: ---------------------------- TEXAS LIME COMPANY, as Borrower By: ------------------------------------ Name: ----------------------------- Title: ---------------------------- ARKANSAS LIME COMPANY, as Borrower By: ------------------------------------ Name: ----------------------------- Title: ---------------------------- NATIONAL CITY BANK, as Administrative Agent and Lender By: ------------------------------------ Name: ----------------------------- Title: ---------------------------- 6 Exhibit "A" Copies of Phase II Subordinated Notes 7 Exhibit "B" Form of First Amendment to Loan and Security Agreement 8 EX-10.6 8 d08213exv10w6.txt FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT EXHIBIT 10.6 FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of the ___day of August, 2003 (this "First Amendment"), by and among UNITED STATES LIME & MINERALS, INC., a Texas corporation ("U.S. Lime"), TEXAS LIME COMPANY, a Texas corporation wholly owned by U.S. Lime ("TLC"), ARKANSAS LIME COMPANY, an Arkansas corporation wholly owned by U.S. Lime ("ALC") (U.S. Lime, TLC and ALC are collectively referred to as "Borrowers" and individually as a "Borrower"), and NATIONAL CITY BANK ("Bank"). Background A. Borrowers and Bank are parties to a Loan and Security Agreement dated as of February 28, 2003 (as amended, restated, or otherwise modified and in effect from time to time, the "Loan Agreement") pursuant to which Bank agreed, subject to the terms and conditions of the Loan Agreement, to lend to Borrowers up to (i) Five Million Dollars ($5,000,000) on a revolving loan basis, and (ii) Two Million Dollars ($2,000,000) on a discretionary line of credit basis for equipment purchases, secured by Borrowers' Accounts, Inventory, and related personal property, and the equipment purchased with Advances. All initially capitalized terms used herein and not otherwise defined herein shall have the same meanings ascribed to such terms in the Loan Agreement. B. U.S. Lime has incurred $14,000,000 of additional Debt to fund the second phase of ALC's plant construction (the "Phase II Debt"), evidenced by promissory notes of U.S. Lime copies of which are attached hereto as Exhibit "A" (the "Phase II Notes"). In connection with the Phase II Notes, U.S. Lime will issue to the holders of the Phase II Notes warrants to purchase an aggregate of 162,000 shares of U.S. Lime's common stock (the "Warrants"). Borrowers and Lenders desire to amend the Loan Agreement to, inter alia, approve the terms of the Phase II Debt, provide for the curtailment of Dividends by U.S. Lime for a period of two years, amend the Tangible Net Worth covenant set forth in the Loan Agreement and provide for an increase in the maximum WC Line Amount thereunder. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants set forth herein, the parties hereto, intending to be legally bound hereby, agree as follows: 1. Ratification. This First Amendment is a modification of the Loan Agreement pursuant to Section 18.11 thereof. Except as expressly set forth herein, or in any amendment to any of the documents referred to herein, Borrowers and Bank acknowledge and agree that each and every term, condition and provision of the Loan Agreement is hereby ratified and confirmed in full. 1 2. Outstanding Indebtedness. Borrowers hereby unconditionally acknowledge that, as of the date hereof, the outstanding principal balance of the WC Line is $2,200,000 and that such amount, together with interest thereon at the rates set forth therein, is owing to Bank without claim, counterclaim, recoupment, defense or setoff of any kind. 3. Increase in Maximum WC Line Amount. The Phase II Debt constitutes an Additional Funding, and Borrowers may increase the maximum WC Line Amount to $6,000,000; provided that Borrowers shall give Bank not less than 10 days notice prior to the date of increase, and on or before such date, Borrowers shall have executed and delivered to Bank an amended and restated WC Line Note in the original principal amount of $6,000,000 together with such other documents and instruments Bank may require in order to effect the increase. 4. Tangible Net Worth Covenant. Section 8.2 of the Loan Agreement is hereby amended and restated in its entirety as of the date hereof as follows: "Permit Tangible Net Worth as of the last day of any fiscal quarter to be less than the sum of $25,000,000 ($30,000,000 for the fiscal quarter ended June 30, 2003 and each fiscal quarter thereafter), plus 50% of Borrowers' cumulative Net Income from January 1, 1999 calculated for each succeeding fiscal quarter through the last day of such fiscal quarter. 5. Transactions With Affiliates. Borrowers represent and warrant to Bank that the Phase II Notes, the Warrants and the related Note and Warrant Purchase Agreement and Registration Rights Agreement (collectively, the "Phase II Debt Documents") fully disclose the transactions contemplated thereby, and there are no other documents or instruments executed or delivered in connection with such transactions other than the Phase II Debt Documents and a related Confidential Memorandum dated May 2003 prepared by Frost Securities, Inc. with respect to U.S. Lime. Bank acknowledges that one or more of the holders of the Phase II Notes and Warrants is an Affiliate of Borrowers, and hereby approves the fairness and reasonableness of the Phase II Debt Documents as required by Section 9.9 of the Loan Agreement. 6. Warrants. The Bank hereby consents to the issuance of the Warrants. 7. Suspension of Dividends. Section 9.7 of the Loan Agreement notwithstanding, during the two-year period commencing June 30, 2003 to June 30, 2005, U.S. Lime will not declare, pay or accrue any dividend payable in cash to any of its shareholders without the prior written consent of Bank. 8. Amendments to Phase II Debt; Notice. U.S. Lime agrees (i) not to amend or modify the put right in the Common Stock Purchase Warrants issued to the holders of the Phase II Debt without the prior written consent of Bank, and (ii) to provide prompt written notice to Bank of any amendment, restatement or other modification of any of the Phase II Debt Documents. Upon the occurrence of an Event of Default, Borrowers shall promptly notify each holder of the Phase II Notes thereof and of the commencement of a Standstill Period (as defined in the Phase II Notes) if then applicable. 9. Representations and Warranties. To induce Bank to approve the modifications contemplated by this First Amendment and the Phase II Debt, Borrowers jointly and severally represent and warrant to Bank as follows: 2 9.1 After giving effect to the modifications contained herein, all representations, warranties and covenants made by Borrowers to Bank in the Loan Agreement (except those relating to a specific date) are true and correct in all material respects as of the date hereof, with the same force and effect as though made as of the date hereof; 9.2 No Event of Default or Default has occurred and is continuing under the Loan Agreement as of the date hereof, and neither the execution, delivery nor performance of the Phase II Notes or the Warrants results in the occurrence of any Event of Default or Default; 9.3 Each Borrower is a corporation validly subsisting under the laws of the state of its incorporation; the execution, delivery and performance of this First Amendment and any other documents and instruments executed and delivered by the Borrowers to Bank in connection herewith (i) are within each Borrower's corporate powers, (ii) have been duly authorized by each Borrower's Board of Directors, (iii) do not contravene any provision of law or any indenture, agreement or undertaking to which any Borrower is a party or by which it is otherwise bound, any Borrower's Articles of Incorporation or bylaws, or any resolution of the Board of Directors of any Borrower, and (iv) require no consent or approval of any governmental authority or any third party which has not been obtained; and 9.4 In the case of each Borrower, this First Amendment and any other documents and instruments executed and delivered by such Borrower to Bank in connection herewith have each been validly executed by, and are enforceable against, such Borrower in accordance with their respective terms. Any failure of any of the representations and warranties made by Borrowers in this First Amendment to be true and correct in all material respects when made shall constitute an Event of Default under the Loan Agreement. 10. Conditions Precedent. The effectiveness of amendments to the Loan Agreement and the consents set forth herein are subject to the satisfaction of the following conditions precedent: 10.1 Borrowers and Required Lenders (as defined in the Credit Agreement) shall have executed and delivered an amendment to the Credit Agreement; 10.2 Bank shall be a third party beneficiary of the subordination and standstill provisions contained in Phase II Notes; 10.3 The Bank shall have received true, correct and complete copies of resolutions of the Board of Directors of each Borrower authorizing the execution, delivery and performance of this First Amendment, and the other documents and instruments executed and delivered by any Borrower in connection herewith, including the Phase II Notes and the Warrants certified by such Borrower's Secretary as being true and complete copies of the originals thereof and remaining in full force and effect, not having been modified or rescinded; 3 10.4 Borrowers shall have delivered to Bank true, correct and complete copies of all of the Phase II Debt Documents, and all other documents and instruments executed and delivered in connection therewith. All of the documents and instruments referred to in this Section 10 shall be satisfactory in form and substance to the Bank. 11. Miscellaneous. 11.1 Entire Agreement. The Loan Agreement, as amended by this First Amendment, and the other Loan Documents embody the entire agreement and understanding among the Bank and Borrowers. The Loan Agreement, together with this First Amendment, and all documents executed and delivered in connection herewith, supersede all prior agreements and understandings relating to subject matter hereof. This First Amendment together with the Loan Agreement, and the documents executed and delivered in connection herewith, shall be construed as one agreement, and in the event of any inconsistency, the provisions of any promissory note evidencing a portion of the Indebtedness shall control over the provisions of this First Amendment. 11.2 Counterparts. This First Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument. This First Amendment shall be effective upon the execution and delivery of a counterpart hereof by each of the parties hereto. 11.3 Captions. The captions or headings in this First Amendment are for convenience of reference only and in no way define, limit, or circumscribe the scope or intent of any provision of this First Amendment. 11.4 Successors and Assigns; Governing Law. This First Amendment shall be binding upon and inure to the benefit of the respective parties hereto and their successors and assigns and shall be governed by, and construed and enforced in accordance with, the internal laws of the Commonwealth of Pennsylvania without regard to its principles of conflicts of laws. 11.5 Confession of Judgment. Borrowers ratify, confirm and restate the warrants of attorney to confess judgment contained in the various Loan Documents including, without limitation, those contained in the WC Line Note and the Equipment Line Note, and each and every other Loan Document containing any warrant of attorney to confess judgment. Borrowers ratify and confirm their understanding that by executing documents containing warrants of attorney to confess judgment against them, they have waived and are again hereby waiving the right to receive notice or opportunity to defend against the entry of a judgment against them before the entry of such judgment. These waivers are knowingly, voluntarily and intelligently made, with the intention of being legally bound hereby. [balance of page intentionally left blank] 4 IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned have executed this First Amendment as of the day and year first written above. UNITED STATES LIME & MINERALS, INC., as Borrower By: ------------------------------------ Name: ----------------------------- Title: ---------------------------- TEXAS LIME COMPANY, as Borrower By: ------------------------------------ Name: ----------------------------- Title: ---------------------------- ARKANSAS LIME COMPANY, as Borrower By: ------------------------------------ Name: ----------------------------- Title: ---------------------------- NATIONAL CITY BANK, as Bank By: ------------------------------------ Name: ----------------------------- Title: ---------------------------- 5 Exhibit "A" Copies of Phase II Subordinated Notes 6 EX-31.1 9 d08213exv31w1.txt SECTION 302 CERTIFICATION BY CEO EXHIBIT 31.1 SECTION 302 CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER I, Timothy W. Byrne, certify that: 1. I have reviewed this quarterly report on Form 10-Q of United States Lime & Minerals, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: August 13, 2003 /s/ Timothy W. Byrne ------------------------------------- Timothy W. Byrne President and Chief Executive Officer EX-31.2 10 d08213exv31w2.txt SECTION 302 CERTIFICATION BY CFO EXHIBIT 31.2 SECTION 302 CERTIFICATION BY THE CHIEF FINANCIAL OFFICER I, M. Michael Owens, certify that: 1. I have reviewed this quarterly report on Form 10-Q of United States Lime & Minerals, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: August 13, 2003 /s/ M. Michael Owens ------------------------------------------- M. Michael Owens Vice President and Chief Financial Officer EX-32.1 11 d08213exv32w1.txt SECTION 906 CERTIFICATION BY CEO EXHIBIT 32.1 SECTION 906 CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER I, Timothy W. Byrne, Chief Executive Officer of United States Lime & Minerals, Inc. (the "Company"), hereby certify that, to my knowledge: (1) The Company's periodic report on Form 10-Q for the quarterly period ended June 30, 2003 (the "Form 10-Q") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: August 13, 2003 /s/ Timothy W. Byrne -------------------------- Timothy W. Byrne President and Chief Executive Officer EX-32.2 12 d08213exv32w2.txt SECTION 906 CERTIFICATION BY CFO EXHIBIT 32.2 SECTION 906 CERTIFICATION BY THE CHIEF FINANCIAL OFFICER I, M. Michael Owens, Chief Financial Officer of United States Lime & Minerals, Inc. (the "Company"), hereby certify that to my knowledge: (1) The Company's periodic report on Form 10-Q for the quarterly period ended June 30, 2003 (the "Form 10-Q") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: August 13, 2003 /s/ M. Michael Owens --------------------------- M. Michael Owens Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----