-----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, JxWWjw2tI4p1BvsN3CUrKZGIKKJ1mY/JeiJGgbXID3nuXEMy0THvsjfksS3Mv7E5 zWa15fPTFx2U0B5i1qrTPg== 0000950134-97-002469.txt : 19970401 0000950134-97-002469.hdr.sgml : 19970401 ACCESSION NUMBER: 0000950134-97-002469 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED STATES LIME & MINERALS INC CENTRAL INDEX KEY: 0000082020 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 750789226 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-04197 FILM NUMBER: 97568864 BUSINESS ADDRESS: STREET 1: 12221 MERIT DRIVE SUITE 500 CITY: DALLAS STATE: TX ZIP: 75251 BUSINESS PHONE: 2149918400 MAIL ADDRESS: STREET 1: 12221 MERIT DRIVE STREET 2: SUITE 500 CITY: DALLAS STATE: TX ZIP: 75251 FORMER COMPANY: FORMER CONFORMED NAME: SCOTTISH HERITABLE INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: RANGAIRE CORP DATE OF NAME CHANGE: 19900405 FORMER COMPANY: FORMER CONFORMED NAME: ROBERTS MANUFACTURING CO INC DATE OF NAME CHANGE: 19690311 10-K405 1 FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 1996 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-4197 UNITED STATES LIME & MINERALS, INC. ----------------------------------- (Exact name of Registrant as specified in its charter) TEXAS 75-0789226 ----------------------- ----------------- (State of incorporation) (I.R.S. Employer Identification Number) 12221 MERIT DRIVE, SUITE 500, DALLAS, TEXAS 75251 - ------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (972) 991-8400 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Title of Each Class Name of Each Exchange on ------------------- ------------------------ Which Registered ---------------- None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, $.10 par value Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. [ X ] The aggregate market value of Common Stock held by non-affiliates as of February 28, 1997: $12,579,974. Number of shares of Common Stock outstanding as of February 28, 1997: 3,921,853. DOCUMENTS INCORPORATED BY REFERENCE Part III incorporates information by reference from the Registrant's definitive proxy statement to be filed for its 1997 Annual Meeting of Shareholders. Part IV incorporates certain exhibits by reference from the Registrant's previous filings. 2 TABLE OF CONTENTS PART I ITEM I. BUSINESS .................................................. 1 General ................................................... 1 Business and Products ..................................... 1 Product Sales ............................................. 1 Order Backlog ............................................. 2 Seasonality ............................................... 2 Limestone Reserves ........................................ 2 Mining .................................................... 3 Plant and Facilities ...................................... 3 Employees ................................................. 3 Competition ............................................... 4 Environmental Matters ..................................... 4 Disposition of Assets ..................................... 4 ITEM 2. PROPERTIES ................................................ 4 ITEM 3. LEGAL PROCEEDINGS ......................................... 4 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ....... 4 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ..................................... 5 ITEM 6. SELECTED FINANCIAL DATA ................................... 6 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ..................... 7 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ............... 11 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ..................... 12 PART III ................................................................ 12 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K ............................................. 12 SIGNATURES .............................................................. 15
-i- 3 UNITED STATES LIME & MINERALS, INC. FORM 10-K For the Year Ended December 31, 1996 PART I ITEM 1. BUSINESS. GENERAL. The business of United States Lime & Minerals, Inc. (the "Company" or the "Registrant"), which was incorporated in 1950, is the production and sale of lime and limestone products. The Company extracts high-quality limestone from its quarries and then processes the limestone for sale as aggregate, pulverized limestone, quicklime and hydrated lime. These operations are conducted through three wholly-owned subsidiaries of the Company: Arkansas Lime Company, Corson Lime Company and Texas Lime Company. References to the Company herein include references to its subsidiaries. The Company's principal corporate office is located at 12221 Merit Drive, Suite 500, Dallas, Texas 75251. BUSINESS AND PRODUCTS. The Company extracts raw limestone and then processes it for sale as aggregate, pulverized limestone, quicklime and hydrated lime. Aggregate is raw limestone which has been crushed to specified sizes. Pulverized limestone is a dried product ground to granular and finer sizes. Quicklime is produced when carbon dioxide is removed from limestone in a heat process called calcination. Hydrated lime is formed in a process called hydration in which water is added to quicklime to produce a soft powder. Aggregate is used by the construction industry in concrete, asphalt and road base. Pulverized limestone is used primarily in the production of construction materials such as asphalt paving and roofing shingles, as an additive to agriculture feeds and as a soil enhancement. Quicklime is used primarily in the manufacturing of paper products, in sanitation and water filtering systems and in metal processing. Hydrated lime is used primarily in municipal sanitation/water treatment, soil stabilization in highway and building construction, the production of chemicals and the production of construction materials such as stucco, plaster and mortar. PRODUCT SALES. The Company sells its lime and limestone products primarily in the states of Arkansas, Connecticut, Delaware, Kansas, Louisiana, Mississippi, Missouri, New Jersey, New Mexico, New York, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas and Virginia. Sales are made primarily by the Company's eight sales employees. Sales personnel call on potential customers and solicit orders which are generally made on a purchase-order basis. The Company also receives orders in response to bids that it prepares and submits to potential customers. Principal customers for the Company's lime and limestone products are highway, street and parking lot contractors, chemical producers, paper manufacturers, roofing shingle manufacturers, glass manufacturers, municipal sanitation/water treatment facilities, poultry and cattle feed producers, governmental agencies, steel producers and electrical utility companies. -1- 4 During the year ended December 31, 1996, approximately 1,500 customers accounted for the Company's sales of lime and limestone products. No single customer accounted for more than 10% of such sales. The Company is not subject to significant customer risks as its customers are considerably diversified as to geographic location and industrial concentration. However, given the nature of the lime and limestone industry, the Company's profits are very sensitive to changes in volume. Lime and limestone products are transported by rail and truck to customers generally within a radius of 400 miles of each of the Company's processing plants. Sales of lime and limestone products are highest during the months of March through November. Substantially all of the Company's sales are made within the United States. ORDER BACKLOG. The Company does not believe that backlog information accurately reflects anticipated annual revenues or profitability from year to year. SEASONALITY. The Company's sales have historically reflected seasonal trends, with the largest percentage of total annual revenues being realized in the second and third quarters. Low seasonal demand normally results in reduced shipments and revenues in the first quarter. Inclement weather conditions have a negative impact on the demand for lime and limestone products. LIMESTONE RESERVES. The Company extracts limestone from three open-pit quarries, all of which are Company-owned. The Cleburne Quarry is located 14 miles from Cleburne, Texas; the Batesville Quarry is located near Batesville, Arkansas; and the Corson Quarry is located at Plymouth Meeting, Pennsylvania. Access to each location is provided by paved roads. Texas Lime Company operates out of the Cleburne Quarry, which is situated upon a tract of land containing approximately 459 acres. In addition, the Company owns 2,149 acres of land adjacent to the Cleburne tract containing known high-quality limestone reserves in a bed averaging 28 feet in thickness, with an overburden which ranges from 0 to 50 feet. The Company also has mineral interests in the 560 acres of land adjacent to the Northwest boundary of the Company's property. This tract of land has 531 acres of proven limestone reserves. The calculated reserves are approximately 117,000,000 tons. Assuming the present level of production at the Quarry is maintained, the Company estimates the reserves are sufficient to sustain operations for approximately 100 years. Arkansas Lime Company operates out of the Batesville Quarry, which is situated upon a tract of 725 acres, 90 of which contain known deposits of high-quality limestone reserves. The average thickness of the chemical-quality limestone sequence in this deposit is approximately 70 feet, with an overburden averaging 35 feet. Additional drilling was done in 1996 to validate the present reserves. The total calculated available reserves are approximately 26,000,000 tons. Assuming the present level of production at the quarry is maintained, the Company estimates that reserves are sufficient to sustain operations for approximately 50 years. Corson Lime Company operates out of the Corson Quarry, which is situated at Plymouth Meeting, Pennsylvania upon a tract of land containing approximately 315 acres, approximately 153 acres of which are underlain by dolomitic limestone reserves. Permitted reserves are calculated to be approximately 79,000,000 tons at the Quarry. The overburden averages approximately 39 feet over the nonexposed portion of the Quarry. The Company estimates that, assuming the present level of production at the Quarry is maintained, the reserves are sufficient to sustain operations for approximately 50 years. -2- 5 MINING. The Company extracts limestone by the open-pit method at its three operating quarries. The open-pit method, which consists of removing the top layer of soil, trees and other substances and then extracting the exposed limestone, is generally less expensive than underground mining. The principal disadvantage of the open-pit method is that operations are subject to inclement weather. To extract limestone, the Company utilizes standard mining equipment which is Company-owned. After extraction, limestone is crushed, screened and ground in the case of aggregate and pulverized limestone, or further processed in kilns and hydrators in the case of quicklime and hydrated lime, before shipment. The Company has no knowledge of any recent changes in the physical quarrying conditions on any of its properties which have materially affected its operations, and no such changes are anticipated. PLANTS AND FACILITIES. The Company produces lime and limestone products in the following plants: The Texas plant is located adjacent to the Cleburne Quarry on a tract of land covering approximately 8.4 acres. This plant is equipped with three rotary kilns and has a daily-rated capacity of 1,200 tons of quicklime. The plant has pulverized limestone equipment which has a capacity to produce 550,000 tons of pulverized limestone annually, depending on the product mix. In addition to this plant, the Company owns a plant which is located near Blum, Texas on a tract of land covering approximately 40 acres. It is equipped with two vertical kilns and has a daily-rated capacity of 600 tons of quicklime. The Blum plant was acquired in 1989 and has not been operated since that time; however, the plant's storage and shipment facilities are currently being utilized. The Arkansas plant, situated on a tract of approximately 290 acres, is located roughly two miles from the Batesville Quarry and is connected to the Quarry by a Company-owned railway. Utilizing six vertical kilns, this plant has a daily-rated capacity of 345 tons of quicklime. The plant has two grinding systems which, depending on the product mix, has the capacity to produce 700,000 tons of pulverized limestone annually. The Pennsylvania plant is located adjacent to the Corson Quarry on a tract of land covering approximately 147 acres. It is equipped with a dual crushing system and six vertical kilns and has a daily-rated capacity of 8,000 tons of aggregate and 300 tons of quicklime. The Company maintains lime hydrating equipment and limestone drying equipment at all three plants. Storage facilities, lime and pulverized limestone products at each of its plants consist primarily of cylindrical tanks, which are considered by the Company to be adequate to protect its lime and limestone products and to provide an available supply for customers' needs at the existing volume of shipments. Equipment is maintained at each plant to load trucks and at the Arkansas and Blum plants to load railroad cars. The Company believes that its processing plants for the most part are being properly maintained and are adequately insured. Much of the equipment in the plants is aging and will require maintenance and repair in the future. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's expected capital expenditures for modernizing and re-equipping the plants. EMPLOYEES. The Company employed, at December 31, 1996, 318 persons, 38 of whom are engaged in sales, administrative and management activities. Of the Company's 280 production employees, 224 are covered by collective bargaining agreements. These agreements expire as follows: Pennsylvania facility in July 1998 Texas facility in November 1999 Arkansas facility in December 1999 -3- 6 COMPETITION. The lime and limestone industry has certain limiting factors, including: the availability of high-quality limestone (calcium carbonate) reserves, the ability to secure mining and operating permits for a facility, the cost of building processing plants to create the lime and limestone products and the transportation costs associated with delivering the products to customers. There is not a large number of producers in the United States as a whole, but producers tend to concentrate on known limestone formations where competition takes place on a local basis. The contraction of the U.S. steel industry in the late 1970's and the early 1980's created an excess of supply over demand, thus impacting prices and profit levels. The industry as a whole has expanded its customer base and, while still selling heavily to the steel industry, also counts paper producers and road builders among its major customers. In recent years, the environmental-related uses for lime have been expanding, including use in flue gas desulfurization and the treatment of both waste and potable water. ENVIRONMENTAL MATTERS. The Company's operations are subject to various federal, state and local environmental laws and regulations, including the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation, and Liability Act as well as the Toxic Substances Control Act. Management does not believe that any lack of compliance by the Company with applicable environmental laws will have a material adverse effect on the Company. In part in response to requirements of environmental regulatory agencies, the Company incurred capital expenditures of approximately $200,000 in 1996 on environmental compliance and is planning to incur approximately $200,000 in 1997 excluding major projects. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." In the judgment of management, forecastable expenditure requirements for the future are not of such dimension as to have a materially adverse effect on the Company's financial condition, results of operations, liquidity or competitive position. The Company's recurring costs associated with managing and disposing of potentially hazardous substances (such as fuels and lubricants used in operations) and maintaining pollution control equipment amounted to approximately $100,000 in 1996 and $150,000 in 1995. The Company has not been named as a potentially responsible party in any superfund cleanup site. DISPOSITION OF ASSETS. Effective July 15, 1992, substantially all of the assets and business of Virginia Lime Company ("VLC"), a wholly owned subsidiary of the Company, were sold to Eastern Ridge Lime Company, L.P. ITEM 2. PROPERTIES. Reference is made to Item 1 of this Report for a description of the properties of the Company, and such description is hereby incorporated by reference in answer to this Item 2. As discussed in Note 2 of Notes to Consolidated Financial Statements, plant facilities and mineral reserves are subject to encumbrances to secure the Company's loans. ITEM 3. LEGAL PROCEEDINGS. Information regarding legal proceedings is set forth in Note 6 of Notes to Consolidated Financial Statements and is hereby incorporated by reference in answer to this Item 3. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company did not submit any matters to a vote of security holders during the fourth quarter of 1996. -4- 7 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock is quoted on the Nasdaq National Market under the symbol "USLM." As of February 28, 1997, the Company had 899 shareholders of record. As of December 31, 1996, 500,000 shares of $5.00 par value preferred stock were authorized, and none was issued. The high and low sales prices for the Company's Common Stock for the periods indicated, as well as dividends declared, were:
1996 1995 ------------------------------------- ----------------------------------------- MARKET PRICE MARKET PRICE ------------ ------------ LOW HIGH DIVIDENDS LOW HIGH DIVIDENDS --- ---- --------- --- ---- --------- DECLARED DECLARED -------- -------- First Quarter $ 8 $11 3/4 $0.025 $5 1/2 $6 1/4 _ Second Quarter $ 11 3/8 $14 3/4 $0.025 $5 1/2 $6 3/4 $0.025 Third Quarter $ 8 3/4 $13 3/4 $0.025 $6 1/4 $8 1/4 $0.025 Fourth Quarter $ 7 3/4 $ 9 1/4 $0.025 $7 $8 3/4 $0.025
-5- 8 ITEM 6. SELECTED FINANCIAL DATA. (dollars in thousands, except per share amounts)
YEARS ENDED DECEMBER 31, --------------------------------------------------------- 1996 1995 1994 1993 1992 ------- ------ ------ ------- ------- Operating Results Revenues from continuing operations $40,159 41,419 36,865 32,359 35,950 ======= ====== ====== ======= ======= Net income (loss) From continuing operations $ 2,602 4,260 1,916(1) (441) 9,930(2) From discontinued operations -- -- -- 480 (462) ------- ------ ------ ------- ------- $ 2,602 4,260 1,916 39 9,468 ======= ====== ====== ======= ======= Income (loss) per share of common stock From continuing operations $ 0.67 1.11 0.50 (0.11) 2.59 From discontinued operations -- -- -- 0.12 (0.12) ------- ------ ------ ------- ------- $ 0.67 1.11 0.50 0.01 2.47 ======= ====== ====== ======= =======
AS OF DECEMBER 31, -------------------------------------------------------- 1996 1995 1994 1993 1992 ------------ ------ ------ ------ ------ Total Assets $ 31,319 29,793 27,397 29,937 30,182 ============ ====== ====== ====== ====== Long-Term Debt $ 3,238 4,381 6,225 9,622 -- ============ ====== ====== ====== ====== Stockholders' Equity Per Share $ 5.40 4.89 3.86 3.32 3.32 ============ ====== ====== ====== ====== Cash Dividends Declared Per Share $ 0.10 0.075 -- -- -- ============ ====== ====== ====== ====== Employees at Year-End 318 338 313 302 317 ============ ====== ====== ====== ======
- --------------- (1) Includes a gain of $372,000, net of related taxes ($425,000 gross), due to the expiration of certain potential post-closing obligations relating to the sale of VLC assets. (2) Includes a gain on sale of VLC assets of $10,679, net of related taxes. See "Management's Discussion and Analysis of Financial Condition and Results of Operations", and Notes to Consolidated Financial Statements. -6- 9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS The following table sets forth selected financial information of the Company expressed as a percentage of revenues for the periods indicated:
YEARS ENDED DECEMBER 31, ----------------------- 1996 1995 1994 ---- ---- ---- Revenues 100% 100% 100% Cost of revenues: Labor and other operating expenses (71) (67) (71) Depreciation, depletion and amortization (9) (8) (9) Amortization of costs in excess of net assets acquired -- -- (1) --- --- --- GROSS PROFIT 20 25 19 Selling, general and administrative expenses (11) (12) (13) --- --- --- OPERATING PROFIT 9 13 6 Other (deductions) income: Interest expense (1) (2) (2) Other - net -- 1 2 Federal and state income tax (2) (2) (1) --- --- --- Net income 6% 10% 5% === === ===
1996 VS 1995 Revenues decreased from $41,419,000 in 1995 to $40,159,000 in 1996, a decrease of $1,260,000 or 3.0%. This decrease was a result of a 6.9% decrease in sales volume, partially offset by a 3.9% increase in sales prices. Sales volumes were down at all plants, with the largest percentage of reductions attributed to the Arkansas and Texas plants. The single largest reason for Arkansas's reduced sales volume was the loss of a pulverized limestone customer. The increase in sales prices was attributed principally to the Texas plant. The Company's gross profit was $7,883,000 for 1996 compared to $10,543,000 for 1995, a 25.2% decrease. The decrease was the result of a number of factors. The lower sales volume reduced the gross profit as fixed costs, including greater depreciation expense, were absorbed by fewer units. The increased cost of fuel, particularly natural gas prices, impacted all three plants, but particularly the Pennsylvania plant. The Pennsylvania plant's continued operating and productivity problems accounted for approximately 50% of the reduction in gross profit. The 9% reduction in sales volume at the Arkansas plant also contributed to the decrease in gross profit. Selling, general and administrative ("SG&A") expenses decreased from $4,881,000 in 1995 to $4,359,000 in 1996, a 10.7% decrease. SG&A expenses declined as a percent of revenues to 10.9% in 1996, -7- 10 from 11.8% in 1995. The reduction in SG&A was primarily the result of lower bonus payments, professional fees and insurance costs. Interest expense decreased by $160,000 in 1996 from 1995, primarily due to lower debt outstanding The Company's net income for 1996 decreased $1,658,000 or 38.9% from $4,260,000 ($1.11 per share) in 1995, to $2,602,000 ($0.67 per share) principally due to the decrease in gross profit. 1995 VS 1994 Revenues increased from $36,865,000 in 1994 to $41,419,000 in 1995, an increase of $4,554,000 or 12.4%. This resulted from a 12.0% increase in sales volume and a 0.4% increase in sales prices. Sales volume was up at all plants in 1995. Sales prices received for lime and limestone products at the Arkansas and Texas plants increased slightly in 1995 compared to 1994. Sales prices received for lime and limestone products, including aggregates, at the Pennsylvania plant were down slightly when compared to 1994. The Company's gross profit was $10,543,000 for 1995 compared to $7,365,000 for 1994, a 43.2% increase. In addition to increased revenues, gross profit was enhanced by improved efficiencies at the plants and lower amortization of costs in excess of net assets acquired. SG&A expenses increased by $20,000 in 1995 compared to 1994. SG&A expenses declined as a percent of revenues to 11.8% in 1995, from 13.2% in 1994. Interest expense decreased by $161,000 in 1995 from 1994. This decrease was due to lower debt outstanding. The Company's net income for 1995 increased by $2,344,000 or 122.3% from $1,916,000 ($0.50 per share) in 1994, to $4,260,000 ($1.11 per share) principally due to the increase in gross profit. FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES The Company's financial condition is reflected by the following key financial measurements (dollars in thousands):
December 31, -------------------------------- 1996 1995 1994 --------- --------- --------- Total bank debt $ 4,381 5,524 7,368 Ratio of total liabilities to stockholders' equity .48 .59 .85 Working capital 5,439 6,156 5,443 Current ratio 1.88 2.01 1.96
In 1996, cash flow from operations was $7,050,000, a decline of $893,000 or 11.2% from 1995. In 1996, this cash flow fully funded the Company's capital expenditure program and reduced the Company's bank debt by $1,143,000. The Company has a financing agreement with a commercial bank. The agreement, as amended in November, 1996, provides for a five-year $8,000,000 term loan with monthly principal repayments of $95,238 maturing in October, 2000. The agreement also provides for a $6,000,000 revolving credit facility which matures in June, 1998. Both facilities are secured by substantially all of the Company's assets. Beginning in -8- 11 March, 1997, all borrowings under the agreement carry an interest rate of the bank's prime rate. In addition, the Company has the option to borrow at a LIBOR rate plus 2 1/2% for the term loan, and LIBOR plus 2 1/4% for the revolving credit facility. The terms of the agreement contain, among other provisions, requirements for maintaining defined levels of working capital, net worth, financial ratios and capital expenditure limitations. The covenants also restrict incurrence of debt, liens and lease obligations, mergers, and consolidation or acquisition of assets. As part of the same amended agreement, the Company has negotiated a $10,000,000 secured line of credit, which is available to finance capital expenditures. The term of any borrowings under this facility would match the assets financed, and the interest rate would be the same as for borrowings under the term loan portion of the Company's credit agreement. The Company has also arranged for a secured line of credit for purposes of acquisitions. This facility is for up to $10,000,000, and the interest rate would be the bank's prime rate. Both the capital expenditure and acquisition facilities are available, if not extended, through 1997 and are subject to approval by the bank. Capital expenditures for 1996 totaled $6,121,000 compared to $4,851,000 in 1995. The Company expects to spend $4,000,000 to $5,000,000 per year over the next several years to continue modernizing and re-equipping plant facilities to improve efficiency and reduce costs, to effect environmental improvements and to ensure that capacity is in place to meet market demand. Management believes that the necessary funds will be generated by operations. The Company is not contractually committed to any planned capital expenditures until actual orders are placed for equipment. In addition to the above capital expenditures, the Company currently plans to undertake major modernization and expansion projects at the Arkansas and Texas facilities. The Company has for some time considered constructing a new kiln at the Arkansas plant. As part of this process, a new plant-wide permit was recently obtained in order to be in position to build the new kiln. Recent firm bid proposals indicate that the current costs of the new kiln have increased substantially from the preliminary cost estimates supplied from the vendors. Because of this change, management believes it is now necessary to again review in detail the various kiln processing systems that can be employed at Arkansas. In addition, the crushing, handling, loadout, and storage facilities at Arkansas will be evaluated in order to develop a comprehensive modernization and expansion plan for this facility. The Company has decided to move ahead with the Texas modernization and expansion project at this time. The Texas plans are a result of a thorough study of both the projected replacement horizon of the existing equipment and certain current inefficiencies of the plant. The plans include the installation of a new stone crushing and stone handling system, the addition of a pre-heater to one of the existing kilns, additional storage, screening and shipping capacity, and a new support building which will house a laboratory and administrative and shop facilities. The planned Texas improvements will allow the Company to better serve its customers by improving both quality and service. With the improvements, the Company will be in a position to compete for customers who currently cannot use the Company's lime in their processes. The additional storage will improve both kiln utilization and the plant's ability to meet peek customer demand. The storage and load-out facilities will also substantially reduce the amount of time required for the loading of bulk quicklime trucks. The pre-heater addition to a current kiln will reduce fuel consumption and will also increase the plant's quicklime capacity by approximately 25%. These improvements will result in lower operating costs and in more efficient utilization of the work force. The cost of the Texas modernization and expansion project is currently expected to be approximately $20,000,000. The project is subject to obtaining various permits. This project will be financed from a combination of internally generated funds and banking facilities. -9- 12 The Company's results for 1996 were adversely impacted by the continued operating and productivity problems at the Pennsylvania plant. The Company continues to take corrective action to address these problems. Specifically, the Company has begun to implement certain projects to improve the profitability of the plant. They include: an electric power costs reduction program, an increase in capacity to produce manufactured sand, improvements in product yields, eliminating bottlenecks between the primary crusher and the secondary crushing plants, and improvements in work force productivity. The Company also implemented price increases at the beginning of 1997. As the management is working to restore the Pennsylvania facility to profitability, it is also considering other alternatives to ensure that this plant does not continue to impact adversely the Company's overall results. ENVIRONMENTAL MATTERS The Company's operations are subject to various environmental laws and regulations. In part in response to requirements of environmental regulatory agencies, the Company incurred capital expenditures of approximately $200,000 in 1996. In the judgment of management, forecastable expenditure requirements for the future are not of such dimension as to have a materially adverse effect on the Company's financial condition, results of operations, liquidity or competitive position. See "Business--Environmental Matters." -10- 13 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Auditors F1 Consolidated Financial Statements: Consolidated Balance Sheets as of December 31, 1996 and 1995 F2 Consolidated Statements of Income for the years ended December 31, 1996, 1995 and 1994 F4 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1995 and 1994 F5 Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 F6 Notes to Consolidated Financial Statements F7
-11- 14 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders United States Lime & Minerals, Inc. We have audited the consolidated balance sheets of United States Lime & Minerals, Inc. and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of United States Lime & Minerals, Inc. and subsidiaries at December 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Dallas, Texas January 24, 1997 -F1- 15 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands)
DECEMBER 31, -------------------- ASSETS Notes 1996 1995 ----- -------- -------- Current assets: Cash and cash equivalents $ 1,000 1,161 Trade receivables 1 5,152 5,509 Inventories 1 5,054 5,332 Prepaid expenses and other assets 434 234 -------- -------- Total current assets 11,640 12,236 Property, plant and equipment, at cost: Land 2,338 2,280 Buildings and building improvements 2,073 2,057 Machinery and equipment 53,816 48,104 Furniture and fixtures 753 724 Automotive equipment 805 762 -------- -------- 59,785 53,927 Less accumulated depreciation (41,045) (37,503) -------- -------- Net property, plant and equipment 18,740 16,424 Other assets, net 1, 4 939 1,133 -------- -------- TOTAL ASSETS $ 31,319 29,793 ======== ======
See accompanying notes to consolidated financial statements -F2- 16 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) (dollars in thousands)
DECEMBER 31, LIABILITIES AND -------------------- STOCKHOLDERS' EQUITY Notes 1996 1995 ----- -------- -------- Current liabilities: Current installments of long-term debt 2 $ 1,143 1,143 Accounts payable - trade 3,117 2,568 Accrued expenses: Salaries and wages 238 383 Insurance costs 228 436 Other expenses 1,475 1,550 -------- -------- Total current liabilities 6,201 6,080 Long-term debt, excluding current installments 2 3,238 4,381 Other liabilities 4 714 583 -------- -------- TOTAL LIABILITIES 10,153 11,044 Commitments and contingencies 6 Stockholders' equity: 2,5 Preferred stock, $5 par value, Authorized 500,000 shares; none issued -- -- Common stock, $.10 par value, authorized 15,000,000 shares; issued 5,294,065 shares 529 529 Additional paid-in capital 15,311 15,848 Retained earnings 19,888 17,844 Less treasury stock at cost; 1,372,212 shares and 1,458,002 shares of common stock (14,562) (15,472) -------- -------- Total stockholders' equity 21,166 18,749 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 31,319 29,793 ======== ========
See accompanying notes to consolidated financial statements -F3- 17 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per share amounts)
YEAR ENDED DECEMBER 31, -------------------------------- Notes 1996 1995 1994 ----- -------- -------- -------- Revenues $ 40,159 41,419 36,865 Cost of revenues: Labor and other operating expenses 28,684 27,679 26,017 Depreciation, depletion and amortization 3,592 3,197 3,191 Amortization of costs in excess of net assets acquired -- -- 292 -------- -------- -------- 32,276 30,876 29,500 -------- -------- -------- GROSS PROFIT 7,883 10,543 7,365 Selling, general and administrative expenses 4,359 4,881 4,861 -------- -------- -------- OPERATING PROFIT 3,524 5,662 2,504 Other deductions (income): Interest expense 2 563 723 884 Gains on sale of assets, net (21) (127) (436) Other, net (234) (216) (132) -------- -------- -------- 308 380 316 -------- -------- -------- INCOME BEFORE TAXES 3,216 5,282 2,188 Income taxes 3 614 1,022 272 -------- -------- -------- NET INCOME $ 2,602 4,260 1,916 ======== ======== ======== INCOME PER SHARE OF COMMON STOCK $ 0.67 1.11 0.50 ======== ======== ========
See accompanying notes to consolidated financial statements -F4- 18 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (dollars in thousands) Years ended December 31, 1996, 1995 and 1994
Common Stock ---------------------- Additional Amount Shares Paid-In Retained Treasury Due From Outstanding Amount Capital Earnings Stock ESOP Total ----------- --------- --------- --------- --------- --------- --------- BALANCES AT JANUARY 1, 1994 3,836,063 $ 529 15,848 12,022 (15,472) (185) 12,742 Reduction of amount due from ESOP (Note 4) -- -- -- -- -- 185 185 Adjustment to reflect minimum pension liability (Note 4) -- -- -- (41) -- -- (41) Net income -- -- -- 1,916 -- -- 1,916 --------- --------- --------- --------- --------- --------- --------- BALANCES AT DECEMBER 31, 1994 3,836,063 $ 529 15,848 13,897 (15,472) -- 14,802 Common stock dividends -- -- -- (286) -- -- (286) Adjustment to reflect minimum pension liability (Note 4) -- -- -- (27) -- -- (27) Net income -- -- -- 4,260 -- -- 4,260 --------- --------- --------- --------- --------- --------- --------- BALANCES AT DECEMBER 31, 1995 3,836,063 $ 529 15,848 17,844 (15,472) -- 18,749 Stock options exercised 85,790 -- (537) -- 910 -- 373 Common stock dividends -- -- -- (389) -- -- (389) Adjustment to reflect minimum pension liability (Note 4) -- -- -- (169) -- -- (169) Net income -- -- -- 2,602 -- -- 2,602 --------- --------- --------- --------- --------- --------- --------- BALANCES AT DECEMBER 31, 1996 3,921,853 $ 529 15,311 19,888 (14,562) -- 21,166 ========= ========= ========= ========= ========= ========= =========
See accompanying notes to consolidated financial statements -F5- 19 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
YEAR ENDED DECEMBER 31, ----------------------------- 1996 1995 1994 ------- ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,602 4,260 1,916 Adjustments to reconcile net income to net cash provided by operations: to net cash provided by operations: Depreciation, depletion and amortization 3,757 3,354 3,661 Gains on sale of assets, net (21) (127) (436) Amortization of financing costs 101 139 74 Changes in assets and liabilities: (Increase) / decrease in trade receivables 357 493 (1,031) (Increase) / decrease in inventories 278 (562) 1,747 (Increase) / decrease in prepaid expenses (200) 86 241 (Increase) / decrease in other assets 93 34 55 Increase / (decrease) accounts payable and accrued expenses 121 408 (272) Increase / (decrease) other liabilities (38) (142) (547) ------- ------- ------- Total adjustments 4,448 3,683 3,492 ------- ------- ------- Net cash provided by operations $ 7,050 7,943 5,408 ------- ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Purchase of property, plant and equipment $(6,121) (4,851) (2,682) Proceeds from sales of property, plant and equipment 69 176 95 ------- ------- ------- Net cash used in investing activities $(6,052) (4,675) (2,587) ======= ======= ======= CASH FLOWS FROM OPERATING ACTIVITIES: Proceeds from exercise of stock options $ 373 -- -- Payment of common stock dividends (389) (286) -- Proceeds from borrowings 800 2,200 1,400 Repayments of long-term debt (1,943) (4,044) (4,797) Amount due from ESOP, net of income taxes -- -- 185 ------- ------- ------- Net cash used in financing activities $(1,159) (2,130) (3,212) ------- ------- ------- Net increase (decrease) in cash and cash equivalents (161) 1,138 (391) Cash and cash equivalents at beginning of period 1,161 23 414 ------- ------- ------- Cash and cash equivalents at end of period $ 1,000 1,161 23 ======= ======= =======
See accompanying notes to consolidated financial statements. -F6- 20 UNITED STATES LIME & MINERALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Years ended December 31, 1996, 1995 and 1994 (1) Summary of Significant Accounting Policies (a) Organization The Company is a manufacturer of lime and limestone products supplying primarily the steel, paper, agriculture, municipal sanitation/water treatment and construction industries. The Company is headquartered in Dallas, Texas and operates lime and aggregate plants in Arkansas, Pennsylvania and Texas through its wholly owned subsidiaries, Arkansas Lime Company, Corson Lime Company and Texas Lime Company, respectively. (b) Principles of Consolidation The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All material intercompany balances and transactions have been eliminated. (c) Use of Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. (d) Statements of Cash Flows For purposes of reporting cash flows, the Company considers all certificates of deposit and highly-liquid debt instruments, such as U.S. treasury bills and notes, with original maturities of three months or less to be cash equivalents. Cash equivalents are carried at cost plus accrued interest, which approximates fair market value. Supplemental cash flow information is presented below:
1996 1995 1994 ---- ---- ---- Cash paid during the period for: Interest (net of amounts capitalized) $450 597 811 ==== ==== ==== Income taxes $902 789 261 ==== ==== ====
(e) Trade Receivables Trade receivables are presented net of the related allowance for doubtful accounts, which totaled $71 and $115 at December 31, 1996 and 1995, respectively. -F7- 21 UNITED STATES LIME & MINERALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) (f) Inventories Inventories are valued principally at the lower of cost or market determined using the average cost method. Such costs include materials, labor and production overhead. A summary of inventories is as follows:
DECEMBER 31, --------------- 1996 1995 ------ ------ Lime and limestone inventories: Raw materials $ 860 1,000 Finished goods 2,190 2,436 ------ ------ 3,050 3,436 Service parts inventories 2,004 1,896 ------ ------ $5,054 5,332 ====== ======
(g) Property, Plant and Equipment Depreciation of property, plant and equipment is being provided for by the straight-line and declining-balance methods over estimated useful lives as follows: Buildings and building improvements 3-40 years Machinery and equipment 3-20 years Furniture and fixtures 3-10 years Automotive equipment 3-8 years Maintenance and repairs are charged to expense as incurred; renewals and betterments are capitalized. When units of property are retired or otherwise disposed of, their cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is credited or charged to income. The Company reviews its long-term assets for impairment when changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment is measured as the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset less disposal costs. (h) Other Assets Other assets consist of the following:
DECEMBER 31, --------------- 1996 1995 ------ ------ Assets held for sale $ 33 33 Deferred stripping costs 717 783 Intangible asset, pension 138 165 Deferred financing costs 51 152 ------ ------ $ 939 1,133 ====== ======
-F8- 22 UNITED STATES LIME & MINERALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) It is the Company's policy to make available for sale assets considered excess and no longer necessary for operations. The carrying values of such assets are periodically reviewed and adjusted downward to market, when appropriate. Deferred stripping costs are amortized by the unit-of-production method based on the estimated recoverable reserves in the underlying area. Deferred financing costs are expensed over the shorter of the life of the debt or expected life of the loan using the interest method. (i) Environmental Expenditures Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the costs can be reasonably estimated. Generally, the timing of these accruals will coincide with completion of a feasibility study or the Company's commitment to a formal plan of action. (j) Stock Options The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) in accounting for its employee stock options. Under APB 25, if the exercise price of an employee's stock options equals or exceeds the market price of the underlying stock on the date of grant, no compensation expense is recognized. (k) Earnings Per Share of Common Stock Earnings per share of common stock are based on the weighted average number of shares outstanding during each year, which amounted to 3,890,646 shares for the year ended December 31, 1996 and 3,836,063 shares for the years ended December 31, 1995 and 1994. The dilutive affect of outstanding stock options was not significant during any of the periods presented. (l) Reclassifications Certain previously reported amounts have been reclassified to conform with the current presentation. -F9- 23 UNITED STATES LIME & MINERALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) (2) Long-Term Debt The Company has a financing agreement with a commercial bank. The agreement, as amended in November, 1996, provides for a five-year $8,000 term loan with monthly principal repayments of $95 maturing in October, 2000. The agreement also provides for a $6,000 revolving credit facility which matures in June, 1998. Both facilities are secured by substantially all of the Company's assets. Beginning in March, 1997, all borrowings under the agreement carry an interest rate of the bank's prime rate. In addition, the Company has the option to borrow at a LIBOR rate plus 2 1/2% for the term loan and LIBOR plus 2 1/4% for the revolving credit facility. The terms of the agreement contain, among other provisions, requirements for maintaining defined levels of working capital, net worth, financial ratios and capital expenditure limitations. The covenants also restrict incurrence of debt, liens and lease obligations, mergers, and consolidation or acquisition of assets. As part of the same amended agreement, the Company has negotiated a $10,000 secured line of credit, which is available to finance capital expenditures. The term of any borrowings under this facility would match the assets financed, and the interest rate would be the same as for borrowings under the term loan portion of the Company's credit agreement. The Company has also arranged for a secured line of credit for purposes of acquisitions. This facility is for up to $10,000, and the interest rate would be the bank's prime rate. Both the capital expenditure and acquisition facilities are available, if not extended, through 1997 and are subject to approval by the bank. A summary of long-term debt is as follows:
December 31, ------------------ 1996 1995 ------- ------- Term loan $ 4,381 5,524 Revolving credit facility -- -- ------- ------- Subtotal 4,381 5,524 Less current installments (1,143) (1,143) ------- ------- Long-term debt, excluding current installments $ 3,238 4,381 ======= =======
Amounts payable on long-term debt in 1997 and thereafter are: 1997, $1,143; 1998, $1,143; 1999, $1,143; 2000, $952. The carrying amount of the Company's long-term debt approximates its fair values. -F10- 24 UNITED STATES LIME & MINERALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) (3) Income Taxes Income tax expense for the years ended December 31, 1996, 1995 and 1994 was as follows:
1996 1995 1994 ----- ----- ----- Current - federal $ 416 743 156 Current - state and local 198 279 116 ----- --- --- Total income tax expense $ 614 1,022 272 ===== ===== ===
A reconciliation of income taxes expense computed at the federal statutory rate to income taxes expense for the years ended December 31, 1996, 1995 and 1994 is as follows:
1996 1995 1994 --------------------- ------------------- -------------------- Percent Percent Percent of pretax of pretax of pre-tax Amount income Amount income Amount income --------- ----------- -------- ---------- --------- ---------- Income taxes computed at the federal statutory rate $ 1,093 34.0% 1,796 34.0% 745 34.0% Increase (reductions) in taxes resulting from: General business credits carryforwards (162) (5.0) (248) (4.6) (130) (6.0) Excess of statutory depletion over cost depletion (415) (12.9) (612) (11.6) (408) (18.6) State income taxes, net of federal income tax benefit 131 4.0 176 3.3 77 3.5 Other (33) (1.0) (90) (1.7) (12) (0.1) ------- ---- ------- ---- ------- ---- Income tax expense $ 614 19.1% 1,022 19.4% 272 12.4% ======= ==== ======= ==== ======= ====
At December 31, 1996, the Company had deferred tax liabilities of $555, deferred tax assets of $3,657 and a valuation allowance of $3,102. The principal temporary difference related to the deferred tax liabilities is depreciation ($555). The principal temporary differences related to the deferred tax assets were net operating loss (NOL) carryforwards ($109), general business credits ($357), certain financial statement accruals ($598) and alternative minimum tax credit carryforwards ($2,593). At December 31, 1995, the Company had deferred tax liabilities of $653, deferred tax assets of $4,188 and a valuation allowance of $3,535. The principal temporary difference related to the deferred tax liabilities is depreciation ($653). The principal temporary differences related to the deferred tax assets were net operating loss (NOL) carryforwards ($1,047), general business credits ($510), certain financial statement accruals ($656) and alternative minimum tax credit carryforwards ($1,975). -F11- 25 UNITED STATES LIME & MINERALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) The Company has NOL carryforwards for tax purposes of $287 which will, if unused, expire in 2008. General business credits of $357 are available to reduce the Company's federal income tax, which expire starting 1997 through 2001. Deferred tax assets have been reduced by a valuation allowance as realization of some portion of these future tax benefits is dependent on generating sufficient taxable income. Favorable resolution of these uncertainties would result in the reduction of the valuation allowance. (4) Employee Retirement Plans The Company has a noncontributory defined benefit pension plan covering substantially all union employees of its wholly-owned subsidiary, Corson Lime Company. Benefits for the Corson Lime Union Pension Plan (Corson Plan) are based on certain multiples of years of service. The Company's funding policy is to contribute annually not less than the minimum required nor more than the maximum amount that can be deducted for federal income tax purposes. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future. The Company funded pension costs of $162 for 1996, $127 for 1995 and $96 for 1994. A summary of the funding status of the Corson Plan and the amounts recognized in the consolidated balance sheets are as follows:
DECEMBER 31, ------------------ 1996 1995 ------- ------- Actuarial present value of accumulated benefit obligation: Vested $ 1,417 1,347 Non-vested 13 6 ------- ------- Total $ 1,430 1,353 ======= ======= Projected benefit obligation $(1,430) (1,353) Plan assets at fair value, primarily listed securities and short-term investments 776 800 ------- ------- Projected benefit obligation in excess of plan assets (654) (553) Unrecognized net loss from past experience different from that assumed 426 252 Unrecognized net obligation at transition, being recognized over 15 years 8 9 Prior service cost not yet recognized in net periodic pension cost 131 156 Adjustment to recognize minimum liability (565) (417) ------- ------- Liability recognized in the consolidated balance sheets $ (654) (553) ======= =======
-F12- 26 UNITED STATES LIME & MINERALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) A summary of the components of net periodic pension expense for the Corson Plan follows:
Year Ended December 31, -------------------------- 1996 1995 1994 ----- ----- ----- Service cost - benefits earned during the period $ 40 41 48 Interest cost on projected benefit obligation 108 100 95 Actual return on plan assets 117 (32) (30) Net liability deferred for later recognition (186) (33) (30) Amortization of unrecognized net liability 11 10 5 Amortization of unrecognized prior service cost 25 23 23 ----- ----- ----- Net periodic pension expense $ 115 109 112 ===== ===== ===== Significant assumptions used in determination of pension expense consist of the following: Discount rate 8% 8% 8% Long-term rate of return on plan assets 9% 9% 9%
The Company also has a contributory retirement (401(k)) savings plan for nonunion employees. The Company contributions to the plan were $61 during 1996, $58 during 1995 and $23 during 1994. The Company has a contributory retirement (401(k)) savings plan for union employees of Texas Lime Company. The Company contributions to this plan were $14 in 1996, $12 in 1995 and $11 in 1994. In December 1986, the Company purchased 1,550,000 shares of its outstanding common stock for $10.50 per share. Subsequent to that purchase, 200,000 shares (300,000 shares after stock split) were sold to the Employee Stock Ownership Plan (ESOP) for $8.20 per share. The Company obtained a note receivable from the ESOP for the purchase of the shares, which was classified as a reduction of stockholders' equity. As of December 1994, the Company had made all of the necessary contributions to the ESOP to repay all principal and interest due on the note. The ESOP covers substantially all full-time nonunion employees and is designed to invest primarily in the Company's common stock. Contributions to the ESOP are currently made at the option of the Company. The Company did not make a contribution during 1996 or 1995 and contributed $205 during 1994. -F13- 27 UNITED STATES LIME & MINERALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) (5) Stock Option Plan The Company has a stock option plan under which options for shares of common stock may be granted to key employees. The options expire ten years from the date of grant and generally become exercisable after the expiration of one year from the grant date. As of December 31, 1996, 35,000 shares are available for future grant under this plan. A summary of the Company's stock option activity and related information for the years ended December 31, 1996, 1995 and 1994, is as follows:
1996 1995 1994 ------------------------- ---------------------------- ------------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Options Price Options Price Options Price ------------------------- ----------------------------- ------------------------- Outstanding at beginning of year 345,000 $ 6.52 215,000 4.77 235,000 4.75 Granted -- -- 160,000 8.25 20,000 5.00 Exercised (92,790) 4.80 -- -- -- -- Forfeited -- -- (30,000) 5.92 (40,000) 4.75 --------- -------- ------- Outstanding at end of year 252,210 7.15 345,000 6.52 215,000 4.77 ========= ======== ======= Exercisable at end of year 252,210 195,000 4.78 195,000 4.75 ========= ======== ======= Weighted average fair value of options granted during the year $ -- 2.15 ========= ======== Weighted average remaining contractual life in years 8.125 =========
-F14- 28 UNITED STATES LIME & MINERALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Statement of Financial Accounting Standards No. 123, "Accounting For Stock Based Compensation" (SFAS 123), requires the disclosure of pro forma net income and income per share of common stock information computed as if the Company had accounted for its employee stock options granted subsequent to December 31, 1994, under the fair value method set forth in SFAS 123. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for the 1995 grant: a risk-free interest rate of 6%; a dividend yield of 2%; and a volatility factor of .34. In addition, the fair value of these options was estimated based on an expected life of three years. The Black-Scholes options valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. In addition, because SFAS 123 is applicable only to options granted subsequent to December 31, 1994, the pro forma information does not reflect the pro forma effect of all previous stock option grants of the Company, and thus the pro forma information is not necessarily indicative of future amounts until SFAS 123 is applied to all outstanding stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options vesting period. The Company's pro forma information follows (in thousands, except per share amounts):
1996 1995 -------- -------- Pro forma net income $ 2,301 4,217 Pro forma earnings per share $ .59 1.10
(6) Commitments and Contingencies The Company leases some of the equipment used in its operations. Generally, the leases are for periods varying from one to five years and are renewable at the option of the Company. Total rent expense was $75 for 1996, $232 for 1995 and $134 for 1994. As of December 31, 1996, future minimum payments under non-cancelable operating leases are as follows: 1997, $77; 1998, $75; and 1999, $36. The Company is party to lawsuits and claims arising in the normal course of business, none of which, in the opinion of management, is expected to have a material adverse effect on the Company's financial condition, results of operation, liquidity or competitive position. -F15- 29 UNITED STATES LIME & MINERALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) (7) Summary of Quarterly Financial Data (unaudited)
March 31, June 30, September 30, December 31, 1996 1996 1996 1996 --------- ------ ------ ----- Revenues $ 8,523 11,583 10,452 9,601 ========= ====== ====== ===== Gross profit 1,810 3,063 1,890 1,120 ========= ====== ====== ===== Net income 503 1,471 571 57 ========= ====== ====== ===== Net income per share of common stock $ .13 .38 .15 .01 ========= ====== ====== =====
March 31, June 30, September 30, December 31, 1995 1995 1995 1995 ------- ------- ------- ------- Revenues $ 8,649 11,458 11,106 10,206 ======= ======= ======= ======= Gross profit 1,993 3,242 3,001 2,611 ======= ======= ======= ======= Net income 426 1,440 1,535 860 ======= ======= ======= ======= Net income per share of common stock $ .11 .38 .40 .22 ======= ======= ======= =======
-F16- 30 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. NONE PART III The information required in response to Items 10, 11, 12 and 13 is hereby incorporated by reference to the information under the captions "Election of Directors", "Executive Officer of the Company Who Is Not Also a Director", "Executive Compensation", "Voting Securities and Principal Shareholder", and "Shareholdings of Company Directors and Executive Officers" in the definitive Proxy Statement for the Company's 1997 Annual Meeting of Shareholders. The Company anticipates that it will file the definitive Proxy Statement with the Securities and Exchange Commission on or before April 30, 1997. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) 1. The following financial statements are included in Item 8: Report of Independent Auditors Consolidated Financial Statements: Consolidated Balance Sheets as of December, 31, 1996 and 1995; Consolidated Statements of Income for the years ended December 31, 1996, 1995 and 1994; Consolidated Statements of Stockholders' Equity for the years ended December, 31, 1996, 1995 and 1994; Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994; and Notes to Consolidated Financial Statements. 2. All financial statement schedules are omitted because they are not applicable or the required information is presented in the consolidated financial statements or the related notes. -12- 31 3. The following documents are filed with or incorporated by reference into this Report: 3(a) Articles of Amendment to the Articles of Incorporation of Scottish Heritable, Inc. dated January 25th, 1994 (incorporated by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File Number 0-4197). 3(b) Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3(b) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File number 0-4197). 3(c) Composite Copy of Bylaws of the Company, as currently in effect (incorporated by reference to Exhibit 3(b) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, File Number 0-4197). 10(a) United States Lime & Minerals, Inc. Employee Stock Ownership Plan, as restated and amended effective August 1, 1989 (incorporated by reference to Exhibit 10 (b) to the Company's Annual Report on form 10-K for the fiscal year ended December 31, 1995, File Number 0-4197). 10(b) Amendment No. Two to United States Lime & Minerals, Inc. Employee Stock Ownership Plan effective August 1, 1996. 10(c) United States Lime & Minerals, Inc. 401(k) Profit Sharing Plan effective August 1, 1983 as amended and restated effective January 1, 1997. 10(d) Texas Lime Company Bargaining Unit 401(k) Plan effective as of January 1, 1992 (incorporated by reference to Exhibit 19(f) to the Company's Quarterly Report on Form 10-Q for the quarter ended June, 30, 1992, File Number 0-4197). 10(e) Executive Retention Agreements dated as of June 10, 1992 between the Company and certain officers of the Company (incorporated by reference to Exhibit 19(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File Number 0-4197). 10(f) Employment Agreements between the Company and certain officers of the Company (incorporated by reference to Exhibit 19(c) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File Number 0-4197). 10(g) United States Lime & Minerals, Inc. 1992 Stock Option Plan (incorporated by reference to Exhibit A to the Company's definitive Proxy Statement for its 1992 Annual Meeting of Shareholders held on June 9, 1992, File Number 0-4197). 10(h) Stock Purchase Agreement dated October 23,1986 between Rangaire Corporation and InterFirst Bank Fort Worth, N.A. as trustee of the Rangaire Corporation Employee Stock Ownership Trust (incorporated by reference to Exhibit (c) (2) to the Company's Tender Offer Statement on Schedule 13E-4 for a tender offer first published sent or given to security holders on October 30, 1986, File Number 0-4197). 10(i) Employment Agreement dated as of September 27, 1993 between Scottish Heritable, Inc. and Robert F. Kizer (incorporated by reference to Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994, File Number 0-4197). -13- 32 10(j) Employment Agreement dated November 27, 1993 between Scottish Heritable, Inc. and Robert K. Murray (incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994, File Number 0-4197). 10(k) Separation Agreement effective as of December 19, 1996 between United States Lime & Minerals, Inc. and Robert K. Murray. 10(l) Loan and Security Agreement dated October 20, 1993 among Scottish Heritable, Inc. and subsidiaries and CoreStates Bank, N.A.(incorporated by reference to Exhibit 10(p) to the Company's Quarterly Report on Form 10-Q for the quarter ended September, 30, 1993, File Number 0-4197). 10(m) Asset Purchase Agreement dated as of July 13, 1992 among Eastern Ridge Lime Company, L.P., Virginia Lime Company, Eastern Ridge Lime, Inc., and Scottish Heritable, Inc. (incorporated by reference to Exhibit 2 to the Company's Current Report on Form 8-K dated July 15, 1992, File Number 0-4197). 10(n) First Amendment to Term Note dated as of March 1, 1994, among United States Lime & Minerals, Inc. and subsidiaries and CoreStates Bank, N.A. (incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,1994, File Number 0-4197). 10(o) Amendment No. 1 to Loan and Security Agreement dated as of December 23, 1994, among United States Lime & Minerals, Inc. and subsidiaries and CoreStates Bank, N.A. (incorporated by reference to Exhibit 10(y) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, File number 0-4197). 10(p) Amendment No. 2 to Loan and Security Agreement dated as of April 28, 1995, among United States Lime & Minerals, Inc. and subsidiaries and CoreStates Bank, N.A. (incorporated by reference to Exhibit 10(z) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, File number 0-4197). 10(q) Amendment No. 3 to Loan and Security Agreement dated as of September 29, 1995, among United States Lime & Minerals, Inc. and subsidiaries and CoreStates Bank, N.A. (incorporated by reference to Exhibit 10(aa) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, File number 0-4197). 10(r) Letter Agreement dated October 26, 1995, among United States Lime & Minerals, Inc. and subsidiaries and CoreStates Bank, N.A. 10(s) Amendment No. 5 to Loan and Security Agreement dated as of November 27, 1996, among United States Lime & Minerals, Inc. and subsidiaries and CoreStates Bank, N.A. 10(t) Consulting Agreement dated April 18, 1996 between United States Lime & Minerals, Inc. and Wallace G. Irmscher. 11 Statement re computation of per share earnings. 21 Subsidiaries of the Company. 23 Consent of Independent Auditors. 27 Financial Data Schedule. - ------------- Exhibits 10(a) through 10(g); 10(i) through 10(k); and 10(t) are management contracts or compensatory plans or arrangements required to be filed as exhibits. (b) The Company did not file any Current Reports on Form 8-K during the fourth quarter of 1996. -14- 33 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. UNITED STATES LIME & MINERALS, INC. Date: March 28, 1997 By: /s/ Robert F. Kizer --------------------- Robert F. Kizer, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Date: March 28, 1997 By: /s/ Robert F. Kizer --------------------- Robert F. Kizer, President, Chief Executive Officer, and Director (Principal Executive Officer) Date: March 28, 1997 By: /s/ Timothy W. Byrne ---------------------- Timothy W. Byrne, Senior Vice President of Finance & Admin., Chief Financial Officer, Treasurer, Secretary and Director (Principal Financial Officer) Date: March 28, 1997 By: /s/ Larry T. Ohms ------------------- Larry T. Ohms, Corporate Controller and Assistant Treasurer (Principal Accounting Officer) Date: March 28, 1997 By: /s/ Edward A. Odishaw ----------------------- Edward A. Odishaw, Director and Chairman of the Board Date: March 28, 1997 By: /s/ Antoine M. Doumet ----------------------- Antoine M. Doumet, Director and Vice Chairman of the Board Date: March 28, 1997 By: /s/ John J. Brown ------------------- John J. Brown, Director Date: March 28, 1997 By: /s/ Wallace G. Irmscher ------------------------- Wallace G. Irmscher, Director Date: March 28, 1997 By: /s/ Robert J. Smith --------------------- Robert J. Smith, Director
-15- 34 UNITED STATES LIME & MINERALS, INC. Annual Report on Form 10-K Index to Exhibits Certain exhibits to this annual report on Form 10-K have been incorporated by reference. For the list of these exhibits see Item 14 hereof. The following exhibits are being filed herewith:
EXHIBIT NO. EXHIBIT - ----------- ------- 10(b) Amendment No. Two to United States Lime & Minerals, Inc. Employee Stock Ownership Plan effective August 1, 1996. 10(c) United States Lime & Minerals, Inc. 401(k) Profit Sharing Plan effective August 1, 1983, as amended and restated effective January 1, 1997. 10(k) Separation Agreement effective as of December 19, 1996 between United States Lime & Minerals, Inc. and Robert K. Murray. 10(r) Letter Agreement dated October 26, 1995, among United States Lime & Minerals, Inc. and subsidiaries and CoreStates Bank, N.A. 10(s) Amendment No. 5 to Loan and Security Agreement dated as of November 27, 1996, among United States Lime & Minerals, Inc. and subsidiaries and CoreStates Bank, N.A. 10(t) Consulting Agreement dated April 18, 1996 between United States Lime & Minerals, Inc. and Wallace G. Irmscher. 11 Statement re computation of per share earnings. 21 Subsidiaries of the Company. 23 Consent of Independent Auditors. 27 Financial Data Schedule.
EX-10.(B) 2 AMENDMENT NO. 2 TO EMPLOYEE STOCK OWNERSHIP PLAN 1 EXHIBIT 10(b) SECOND AMENDMENT TO THE UNITED STATES LIME & MINERALS, INC. EMPLOYEE STOCK OWNERSHIP PLAN WHEREAS, United States Lime & Minerals, Inc. (the "Company") amended and restated the United States Lime & Minerals, Inc. Employee Stock Ownership Plan generally effective as of August 1, 1989 (the "Plan"); and WHEREAS, the Company desires to liberalize participant diversification rights in order to permit participants who have attained age fifty (50) and completed ten (10) years of service in the Plan to transfer all or a portion of their Plan benefits into diversified investments maintained under an individual retirement account; and WHEREAS, in response to the recent comments received from the Internal Revenue Service related to a pending determination letter request related to the Plan, the Company wishes to further amend the Plan to satisfy such comments. NOW, THEREFORE, pursuant to the powers reserved in Section 10.01 of the Plan, the Company does hereby amend the Plan, as follows: I. Section 4.07(a) of the Plan is amended, effective August 1, 1996, to read as follows: a. Each Qualified Participant, as defined below, shall be permitted to direct the Plan as to the investment of up to the Applicable Percentage, defined below, of such Participant's Accounts within one hundred and twenty (120) days after the last day of each Plan Year during the Participant's Qualified Election Period, as defined below. For the purposes of this Section 4.07: 1. "Qualified Participant" means a Participant who has attained age fifty (50) and who has completed at least ten (10) years of participation in the Plan. 2. "Qualified Election Period" means the period beginning with the Plan Year in which the Participant becomes a Qualified Participant and ending with the Plan Year in which the balance to the credit of Participant's Account is distributed 2 3. "Applicable Percentage" means with respect to any Plan Year in the Qualified Election period, the following percentage:
Plan Year Applicable Percentage --------- --------------------- 1 25% 2 50% 3 75% 4 and later 100%
II. Section 4.08(e) of the Plan is amended, effective August 1, 1989, to read as follows: Repayments of principal and interest on any Acquisition Loan shall be made by the Trustee (as directed by the Company or Committee) only from (I) Employer Contributions, paid in cash to enable the repayment of such Acquisition Loan; (2) Financed Shares or other collateral given for the loan in the event of default or foreclosure; (3) earnings on such Employer Contribution and any dividends or other earnings received by the Trust on such Financed Shares; (4) earnings attributable to such permissible collateral other than Financed Shares; and (5) the, proceeds of a subsequent Acquisition Loan incurred to repay an existing Acquisition loan repayments. The committee shall instruct the Trustee as to the priority and source of Acquisition Loan repayments. III. Section 9.05 of the Plan is amended, effective August 1, 1989 to read as follows: a. a contribution to the Plan made by mistake of fact, if such contribution (to the extent made by mistake of fact) is returned to the Employer within one year after payment of such contribution. While losses attributable to returned contributions will reduce the amount to be returned, any earnings attributable to returned contributions will not be returned. Such returns will only be made with Qualifying employer securities after other assets have been exhausted. 3 IV. Except as amended by this instrument, the Plan, as previously amended and restated, shall remain in full force and effect. IN WITNESS WHEREOF, the Company has caused this instrument to be executed as of this 26th day of December, 1996. UNITED STATES LIME & MINERALS, INC. By: /s/ TIMOTHY W. BYRNE --------------------------------------- Title: Sr. VP of Finance and Administration and Chief Financial Officer EX-10.(C) 3 401(K) PROFIT SHARING PLAN - 1/1/97 1 EXHIBIT 10(c) Plan number 002 (nonstandardized) SCUDDER 401(k) PLAN Adoption Agreement The undersigned (the "Employer") establishes or amends the (Sponsor automatically inserts employer's name) 401(k) Plan by completing this Adoption Agreement adopting or amending the plan in the form of the Prototype 401(k) Plan attached. I. ELIGIBILITY A. To become a Participant who is eligible to make a salary reduction election and/or to receive allocations of Deferred Cash Contributions, an Employee need not complete any period of Service [X] or, if this box is checked, an Employee must complete: [ ] (1) _____ Year of Service (insert no more than "1"). [X] (2) 6 consecutive months of service ----- (insert no more than "12"; no minimum number of hours can be required). B. An Employee who meets the above requirements for eligibility to make a salary reduction election and/or to receive allocations of Deferred Cash Contributions shall become such an eligible Participant on the first day the requirements are met [ ] or, if this box is checked, on the first day of the next month [X] or, if this box is checked, on the first day of the next pay period [ ] or, if this box is checked, on the first day of the next quarter of the Plan Year. [ ] or, if this box is checked, on the first day of the next Plan Year, or the first day of the seventh month of the Plan Year, whichever is earlier. C. To become a Participant who is eligible to receive allocations of Employer Matching Contributions and/or Employer Profit Sharing Contributions and to make Nondeductible Voluntary Contributions (if permitted by Section XIII), an Employee must complete l Year of Service [X] or, if this box is checked, an Employee must complete 1/2 Year(s) of Service, (insert "2" or less; ----- select more than 1 only if the Employer selects full and immediate vesting in Section V.A. and B. below; insert "0" for no waiting period). D. An Employee who meets the above requirements for eligibility to receive allocations of Employer Matching Contributions and/or Employer Profit Sharing Contributions and to make Nondeductive Voluntary Contributions (if permitted by Section XIII) shall become such an eligible Participant on the first day the requirements are met [ ] or, if this box is checked, on the first day of the next month 1 2 [X] or, if this box is checked, on the first day of the next pay period [ ] or, if this box is checked, on the first day of the next quarter of the Plan Year [ ] or, if this box is checked, on the first day of the next Plan Year, or the first day of the seventh month of the Plan Year, whichever is earlier. E. The number of Hours of Service required to have a Year of Service is 1000 [ ] or, if this box is checked, ______ (insert less than "1000"). F. A Year of Service (for the purpose of eligibility) shall be measured on the 12-consecutive-month period beginning on the Employee's initial date of employment and reemployment or an anniversary of that date [ ] or, if this box is checked, on the 12-consecutive-month period beginning on the Employee's initial date of employment or reemployment and each Plan Year commencing thereafter. G. For purposes of calculating periods of Service, the Employer shall calculate periods of Service based on an actual count of the Hours of Service an Employee performs [ ] or, if this box is checked, an Employee shall be credited with 45 Hours of Service for each week during which the Employee performs an actual Hour of Service. H. Before an Employee may become a Participant, the Employee need not attain any minimum age [ ] or, if this box is checked, an Employee must be at least ____ (insert "21" or less) years of age. I. All Employees are entitled to be Participants except (one or more may be selected): [ ] Non-resident aliens who receive no earned income from the Employer which constitutes income from sources within the United States; [X] Individuals covered by a collective bargaining contract which meets the requirements specified in the Plan; [ ] Salaried Employees; [ ] Hourly-paid Employees; [X] Leased Employees; [X] Piece-rate Employees; [ ] Employees paid by commission; [ ] Employees covered by another retirement plan to which the Employer is required to contribute; [ ] Employees of the following subsidiaries or affiliates: ------------------------------------------------------ ------------------------------------------------------ 2 3 [ ] Employees in the following non-discriminatory classification: ------------------------------------------------------ ------------------------------------------------------ Note: If Employees are excluded from the Plan under one or more of the classifications above (not including the first two classifications) the Plan must satisfy, on a continuing basis, the coverage, nondiscrimination, and participation requirements of Code Sections 410(b), 401(a)(4), and 401(a)(26). II. SALARY REDUCTIONS AND DEFERRED CASH CONTRIBUTIONS For each Plan Year, the Employer will make the following contribution to the Trust on behalf of each eligible Participant: A. [X] A Salary Reduction Contribution equal to the portion of the Compensation otherwise payable to the Participant that the Participant has elected to contribute to the Trust. The Participant's election shall specify the portion of the Compensation to be contributed, which amount shall be not less than 0% (insert "0" or more, but not more than the next chosen number) and not more than 20% (insert "20" or less, but not less than the previously chosen number) of the Participant's Compensation for the Plan Year. B. [ ] A Deferred Cash Contribution equal to that portion of the Deferred Cash Allocation which the eligible Participant has not elected to receive in cash. The Deferred Cash Allocation for this purpose shall be amount equal to the percentage of the eligible Participant's Compensation as is determined by the Employer for each Plan Year (which percentage shall be the same for each Participant) [ ] or, if this box is checked, ____% of the eligible Participant's Compensation. C. A Participant shall be entitled to a Deferred Cash Allocation and a Deferred Cash Contribution for a Plan Year if the Participant receives Compensation from the Employer during the Plan Year [X] and, if this box is checked, the Participant is employed on the last day of the Plan Year and is credited with at least 1000 (insert "1000" or less) Hours of Service during the Plan Year, or the Participant retires, dies or becomes disabled during the Plan Year. III. PROFIT SHARING CONTRIBUTIONS For each Plan Year, the Employer will not make an Employer Profit Sharing Contribution [X] or, if this box is checked, the Employer will make an Employer Profit Sharing Contribution. A. [ ] Fixed Formula For each Plan Year, the Employer will make an Employer Profit Sharing Contribution to the Trust in an amount equal to _____ % (not to exceed 15%) of each such eligible Participant's Compensation. 3 4 A Participant shall be entitled to an allocation of the fixed Employer Profit Sharing Contribution for a Plan Year if the Participant receives Compensation from the Employer during a Plan Year [ ] and, if this box is checked, the Participant is employed on the last day of the Plan Year, or the Participant retires, dies or becomes disabled during the Plan Year. [ ] and, if this box is checked, the Participant is credited with at least ____ (insert "1000" or less) Hours of Service during the Plan Year, or the Participant retires, dies or becomes disabled during the Plan Year. B. [X] Discretionary Formula For each Plan Year, the Employer will make an Employer Profit Sharing Contribution to the Trust equal to the amount, if any, determined by the Employer for such Plan Year. A Participant shall be entitled to an allocation of the discretionary Employer Profit Sharing Contribution for a Plan Year if the Participant receives Compensation from the Employer during the Plan Year [X] and, if this box is checked, the Participant is employed on the last day of the Plan Year, or the Participant retires, dies or becomes disabled during the Plan Year. [ ] and, if this box is checked, the Participant is credited with at least ______ (insert "1000" or less) Hours of Service during the Plan Year, or the Participant retires, dies or becomes disabled during the Plan Year. C. Employer Profit Sharing Contributions will be allocated to eligible Participants in the ratio that each eligible Participant's Compensation for the Plan Year bears to the total Compensation paid to all eligible Participants for the Plan Year, or [ ] if this box is checked, on an integrated basis in accordance with the provisions of Section 4.03(b)(ii) of the Plan. The Integration Level for a Plan Year will be the Social Security Wage Base for such Plan Year [ ] or, if this box is checked, $_____ (not in excess of the Social Security Wage Base). [ ] or, if this box is checked, ___% of the Social Security Wage Base (not in excess of 100%). The Integration Rate for a Plan Year will be the Maximum Disparity Rate for such Plan Year. [ ] or if this box is checked, ___% (not in excess of the Maximum Disparity Rate). 4 5 Note: An Employer may elect to integrate the Plan with Social Security only if the Employer does not maintain another qualified retirement plan integrated with Social Security. IV. MATCHING CONTRIBUTIONS A. For each Plan Year, the Employer will not make an Employer Matching Contribution [X] or, if this box is checked, the Employer will make an Employer Matching Contribution on behalf of each eligible Participant who, pursuant to Section VI below, is eligible to receive an allocation; such contribution shall be equal to the percentage indicated in (B) below of aggregate: [X] (1) Salary Reduction Contributions [ ] (2) Deferred Cash Contributions [ ] (3) Nondeductible Voluntary Contributions A Participant shall be entitled to an allocation of the Employer Matching Contribution for a Plan Year if the Participant makes contributions indicated above for the Plan Year [ ] and, if this box is checked, the Participant is employed by the Employer oft the last day of the Plan Year, or the Participant retires, dies or becomes disabled during the Plan Year. [ ] and, if this box is checked, the Participant is credited with at least ____ Hours of Service (insert "1000" or less) during the Plan Year, or the Participant retires, dies or becomes disabled during the Plan Year. B. The Employer Matching Contribution made on behalf of each eligible Participant shall be equal to a percentage of the Participant's contributions selected in (A) above; which percentage shall be equal to: [ ] (1) ___% [X] (2) the sum of 100 % of the first 2% of the Participant's Compensation, plus 0 % of the next 0 % of the Participant's Compensation. [ ] (3) the sum of % of such contributions up to ________dollars, plus % of such contributions which are in excess of dollars. [ ] (4) the percentage voted or declared by the Employer for the Plan Year. NOTE: if (2) or (3) above are completed with the second matching percentage (following the word "plus") greater than the first matching percentage (following the words "the sum of"), the IRS may deem the plan to be discriminatory under Code Section 401 (a) (4). C. The Employer Matching Contribution shall be limited as follows: [ ] (1) A Participant's aggregate contributions indicated in (A) above for a Plan Year in excess of ___% of the Participant's Compensation shall not be matched. 5 6 [ ] (2) A Participant's aggregate contributions indicated in (A) above for a Plan Year in excess of ____ dollars shall not be matched. [ ] (3) The Employer Matching Contribution for a Participant for a Plan Year shall not exceed% of the Participant's Compensation or ________ dollars. V. QUALIFIED NONELECTIVE CONTRIBUTIONS AND QUALIFIED MATCHING CONTRIBUTIONS For each Plan Year, the Employer will not make a Qualified Nonelective Contribution or a Qualified Matching Contribution [X] or, if this box is checked, in any Plan Year in which the Plan cannot satisfy one or more of the non-discrimination tests set forth in Article VI, the Employer may make a Qualified Nonelective Contribution and/or Qualified Matching Contribution to the Trust in an amount sufficient to enable the Plan to satisfy such tests. VI. VESTING OF EMPLOYER CONTRIBUTIONS NOTE: Make selections in Section VI. only if Employer Profit Sharing Contributions and/or Employer Matching Contributions have been selected. A. Employer Profit Sharing Contributions shall be immediately vested and nonforfeitable [ ] (1) or, if this box is checked, vested at the rate specified in Column I below. [ ] (2) or, if this box is checked, vested at the rate specified in Column 2 below. [ ] (3) or, if this box is checked, vested at the rate specified in Column 3 below. [ ] (4) or, if this box is checked, vested at the rate specified in Column 4 below which rate shall, if a graded rate is specified, be at least as rapid as the rate specified in Column 2 below or, if a cliff rate is specified, be at least as rapid as the rate specified in Column 3 below.
Column 1 Column 2 Column 3 Column 4 Vesting Top-Heavy 7-Year 5-Year Percentage Years Vesting Rate Graded Rate Cliff Rate Elected ----- ------------ ----------- ---------- ---------- 1 0% 0% 0% ---------- 2 20% 0% 0% ---------- 3 40% 20% 0% ---------- 4 60% 40% 0% ---------- 5 80% 60% 100% ---------- 6 100% 80% 100% ---------- 7 100% 100% 100% ----------
NOTE: Employer Profit Sharing Contributions must be immediately vested and nonforfeitable if the Employer makes the election in Section I.C. above and requires Employees to complete more than one Year of Service. 6 7 B. Employer Matching Contributions shall be immediately vested and nonforfeitable [ ] (1) or, if this box is checked, vested at the rate specified in Column 1 below [ ] (2) or, if this box is checked, vested at the rate specified in Column 2 below [ ] (3) or, if this box is checked, vested at the rate specified in Column 3 below [ ] (4) or, if this box is checked, vested at the rate specified in Column 4 below which rate shall, if a graded rate is specified, be at least as rapid as the rate specified in Column 2 below, or, if a cliff rate is specified, be at least as rapid as the rate specified in Column 3 below.
Column 1 Column 2 Column 3 Column 4 Vesting Top-Heavy 7-Year 5-Year Percentage Years Vesting Rate Graded Rate Cliff Rate Elected ----- ------------ ----------- ---------- ---------- 1 0% 0% 0% ---------- 2 20% 0% 0% ---------- 3 40% 20% 0% ---------- 4 60% 40% 0% ---------- 5 80% 60% 100% ---------- 6 100% 80% 100% ---------- 7 100% 100% 100% ----------
NOTE: Employer Matching Contributions must be immediately vested and nonforfeitable if the Employer makes the election in Section 1.C. above and requires Employees to complete more than one Year of Service. C. The following Service will not be included in determining Vesting Years unless checked below: [ ] (1) Service before the Employer maintained this Plan or a predecessor plan. [ ] (2) Service before the first Plan Year during which a Participant attained age 18. [ ] (3) Service before the first Plan Year to which ERISA is applicable, if this Plan is a continuation of an earlier plan which would have disregarded such service. D. Vesting Years and One-Year Breaks in Service for the purpose of vesting shall be measured on the 12 consecutive-month period beginning on the Participant's initial date of employment or an anniversary of that date [ ] or, if this box is checked, on the Plan Year. E. The Participant will have a Vesting Year only if the Participant is credited with at least 1000 Hours of Service [ ] or, if this box is checked, ____ (insert less than "1000"). F. If the Plan becomes a Top-Heavy Plan but thereafter ceases to be a Top-Heavy Plan, the vesting schedule in effect while the Plan was a Top-Heavy Plan will continue to be in effect for all existing and future Participants. 7 8 [ ] or, if this box is checked, the vesting schedule selected in Sections VI.A. or B. above, as the case may be, will apply for all Plan Years during which the Plan is not a Top-Heavy Plan. VII. SPECIAL RULES FOR ALLOCATIONS OF EMPLOYER CONTRIBUTIONS A. An otherwise eligible Participant who is a Highly Compensated Employee for a given Plan Year shall receive an allocation of any Employer Profit Sharing Contributions made pursuant to Section III. above and any reallocated forfeitures [ ] or, if this box is checked, shall not receive an allocation of any Employer Profit Sharing Contributions made pursuant to Section III. above and any reallocated forfeitures. B. An otherwise eligible Participant who is a Highly Compensated Employee for a given Plan Year shall receive an allocation of any Employer Matching Contributions made pursuant to Section III.B. above and any reallocated forfeitures [ ] or, if this box is checked, shall not receive an allocation of any Employer Matching Contributions made pursuant to Section IV. above and any reallocated forfeitures. C. Any minimum Top-Heavy allocations will be made First from this Plan [ ] or, if this box is checked, First from the _______ Plan (insert name of another qualified retirement plan maintained by the Employer). D. For any Plan Year for which the Plan is a Top-Heavy Plan, minimum allocations shall be made in accordance with the provisions of Section 23.03 [ ] or, if this box is checked, because the Employer maintains at least one other qualified retirement plan, minimum allocations shall be made at the following rate of Compensation: ___% (insert "3" or more). Note: Only consider checking the box in Section VII.D. ((the Employer sponsors two or more tax-qualified retirement plans and either (1) one of those plans is a defined benefit plan or (2) the plans do not have identical eligibility requirements. VIII. REALLOCATION OF FORFEITURES Any forfeiture which results from a Participant's termination of Service shall be reallocated as if it were a contribution of the same type (i.e., Employer Profit Sharing Contribution or Employer Matching Contribution) for the Plan Year following the Plan Year in which such forfeiture occurs [ ] or, if this box is checked, such forfeiture shall be applied to reduce the Employer's obligation to make Employer Matching Contributions and Fixed Profit Sharing Contributions for the Plan Year during which the forfeiture occurs. 8 9 IX. COMPENSATION A. Compensation shall be defined as follows for the purposes designated below: [ ] (1) W-2 Compensation. Compensation as reported on Form W-2 and as more fully defined in Section 2.09(a)(i) of the Plan. The above definition of Compensation shall apply for the purposes of allocating or determining: [ ] Salary Reduction Contributions [ ] Deferred Cash Contributions [ ] Employer Profit Sharing Contributions [ ] Employer Matching Contributions [ ] Non-discrimination tests contained in Article VI of the Plan. [ ] Section 415 Limitations on Allocations [X] (2) 415 Safe Harbor Compensation. "Compensation" as defined in Section 5.05(b)(ii) of this Plan. The above definition of Compensation shall apply for the purposes of allocating or determining: [ ] Salary Reduction Contributions [ ] Deferred Cash Contributions [ ] Employer Profit Sharing Contributions [ ] Employer Matching Contributions [X] Non-discrimination tests contained in Article VI of the Plan. [X] Section 415 Limitations on Allocations [ ] (3) Safe Harbor Alternative Definition. 415 Safe Harbor Compensation, reduced by all of the following items (even if includible in gross income): reimbursement or other expense allowances, fringe benefits (cash and non-cash), moving expenses, deferred compensation, and welfare benefits. The above definition of Compensation shall apply for the purposes of allocating or determining: [ ] Salary Reduction Contributions [ ] Deferred Cash Contributions [ ] Employer Profit Sharing Contributions [ ] Employer Matching Contributions [ ] Non-discrimination tests contained in Article VI of the Plan. [ ] Section 415 Limitations on Allocations [X] (4)a. Non Safe Harbor Alternative Definition. Compensation as indicated above but excluding: [ ] overtime pay; premiums for shift differential and call-in premiums; [X] bonuses; [ ] commissions; [ ] such other items as follows: ------------ ----------------------------------------- 9 10 The above definition of Compensation shall apply for the purposes of allocating or determining [X] Salary Reduction Contributions [ ] Deferred Cash Contributions [X] Employer Profit Sharing Contributions (non-integrated formula only) [X] Employer Matching Contributions. b. Non Safe Harbor Alternative Definition. Compensation as indicated above but excluding: [ ] overtime pay, premiums for shift differential and call-in premiums; [ ] bonuses; [ ] commissions; [ ] such other items as follows: ------------- --------------------------------------------- The above definition of Compensation shall apply for the purposes of allocating or determining [ ] Salary Reduction Contributions [ ] Deferred Cash Contributions [ ] Employer Profit Sharing Contributions (non-integrated formula only) [ ] Employer Matching Contributions. NOTE: If the Employer elects an alternative definition of Compensation by making a reduction pursuant to this IX.A.4 for purposes of allocating Employer Profit Sharing Contributions, then such alternative definition must be tested by the Administrator to show that it meets the nondiscrimination requirements of Section 414(s)(3) of the Code. B. Compensation [X] shall include [ ] shall not include A Participant's Salary Reduction Contributions, Deferred Cash Contributions (which the Participant did not elect to take in cash) and other amounts which are excluded from an Employee's gross income pursuant to Code Sections 125, 402(a)(8), 402(h)(1)(B), and 403(b). The above rule shall apply for the purposes of allocating or determining [X] Employer Profit Sharing Contributions [X] Employer Matching Contributions [X] Non-discrimination tests contained in Article VI of the Plan. C. Compensation [ ] shall include [X] shall not include amounts paid during that portion of the Plan Year during which the Employee is not eligible to participate in the Plan with respect to the allocation of Employer Profit Sharing Contributions and/or Employer Matching Contributions. 10 11 The above rule shall apply for the purposes of allocating or applying [X] Employer Profit Sharing Contributions [X] Employer Matching Contributions [X] Section 401(m) non-discrimination test contained in Article VI of the Plan. D. Compensation for purposes of applying the Section 401(k) non-discrimination test contained in Article VI of the Plan. [ ] shall include [X] shall not include amounts paid during that portion of the Plan Year during which the Employee is not eligible to make a salary reduction election and/or to receive allocations of Deferred Cash Contributions. NOTE: Participant's Salary Reduction Contributions, Deferred Cash Contributions (which the Participants do not elect to take in cash) and other amounts which are excluded from an Employee's gross income pursuant to Code Sections 125, 402(a)(8), 402(h)(1)(B), and 403(b) are not considered compensation for purposes of determining the Employer's permissible deduction under Code Section 404 or for purposes of applying the limitations on allocations to Participants' Accounts under Article V of the Plan and Code Section 415. X. NORMAL RETIREMENT DATE A Participant's Normal Retirement Date shall be age 59 1/2 [X] or, if this box is checked, age 65 (insert more than 59 1/2 but not more than 65). XI. IN-SERVICE HARDSHIP WITHDRAWALS A. In-service withdrawals by a Participant from his or her Employer Profit Sharing Contribution Account shall not be permitted unless the Participant has attained his or her Normal Retirement Date [X] or, if this box is checked, a Participant who has not attained his or her Normal Retirement Date and who is fully vested in his or her Employer Profit Sharing Contribution Account may request an in-service withdrawal from such account in case of hardship. B. In-service withdrawals by a Participant from his or her Employer Matching Contribution Account shall not be permitted unless the Participant has attained his or her Normal Retirement Date [X] or, if this box is checked, a Participant who has not attained his or her Normal Retirement Date and who is fully vested in his or her Employer Matching Contribution Account may request an in-service withdrawal from such account in case of hardship. C. In-service withdrawals by a Participant from his or her Salary Reduction Contribution Account, Deferred Cash Contribution Account and Qualified Nonelective Contribution Account shall not be permitted unless the Participant has attained his or her Normal Retirement Date 11 12 [X] or, if this box is checked, a Participant who has not attained his or her Normal Retirement Date may request an in-service withdrawal from his or her Salary Reduction Contribution Account and Deferred Cash Contribution Account in case of hardship. XII. DISTRIBUTION OPTIONS A Participant (or Beneficiary to the extent permitted under the Plan) may elect to receive a distribution of his or her vested Account balance in one or more of the following optional forms: [ ] (1) Distribution of the Participant's entire vested Account balance in monthly installments over a period equal to the shorter of 120 months or the Applicable Life Expectancy. [X] (2) Distribution of the Participant's entire vested Account balance in a lump sum. [ ] (3) Distribution of the Participant's entire vested Account balance in installment payments of a fixed amount, such payments to be made until exhaustion of the Participant's vested Account balance. [ ] (4) Distribution in kind. [ ] (5) Any reasonable combination of the foregoing or any reasonable time or manner of distribution within the above-stated limitations as elected by the Participant (or Beneficiary to the extent permitted under the Plan). XIII. NONDEDUCTIBLE VOLUNTARY CONTRIBUTIONS Nondeductible Voluntary Contributions by a Participant are not permitted [X] or, if this box is checked, are permitted. XIV. INVESTMENT Investment decisions with respect to all contribution sources shall be made by the Participant [ ] or, if this box is checked, by the Administrator with respect to all contribution sources. [ ] or, if this box is checked, by the Administrator with respect to Employer Matching Contributions, Employer Profit Sharing Contributions, Qualified Nonelective Contributions and Qualified Matching Contributions. XV. LOANS Loans to a Participant are not permitted [ ] or, if this box is checked, are permitted. Note: If you elect to permit loans to Participants, you must designate a Loan Trustee in Section XX. Scudder Trust Company will not act as Loan Trustee unless it expressly agrees to act as such. 12 13 XVI. EFFECTIVE DATE The Effective Date of this Plan or Amendment shall be the first day of the Employer's fiscal year during which the Plan is adopted or amended [ ] or, if this box is checked, _____________________. (insert date) XVII. PLAN AND LIMITATION YEARS A. The Plan Year shall be the same as the fiscal year of the Employer [ ] or, if this box is checked, shall end on the last day of the month of _____________. B. The Limitation Year shall be the Plan Year [ ] or, if this box is checked, shall be the 12 consecutive month period ending on the last day of the month of ________________. XVIII. AMENDMENT Execution of this Adoption Agreement is not an amendment to an existing plan [X] or, if this box is checked, is an amendment to an existing plan XIX. CALCULATION OF TOP HEAVY RATIO If the Employer has maintained, now or subsequently maintains one or more defined benefit plans, then, for purposes of calculating the Top-Heavy Ratio, Present Value shall be based upon the interest rate and mortality table employed as of the date in question for such purpose as specified in the most recently adopted or amended defined benefit plan maintained by the Employer [ ] or, if this box is checked, the interest rate and mortality table specified below. Interest Rate: ____________% Mortality Table: ___________ XX. APPOINTMENT OF TRUSTEES The Employer hereby designates the following Trustees: A. Scudder Trust Company shall act as Trustee under this Trust with respect to all assets of Plan except as provided below. B. __________ shall act as Trustee with respect to _____________. C. __________ shall act as Trustee with respect to _____________. D. __________ shall act as Loan Trustee. 13 14 XXI. LIMITATIONS ON ALLOCATIONS This section applies only for an Employer who maintains or has ever maintained: another qualified retirement plan (other than a plan which the Employer amended into the Prototype 401(k) Plan) in which any Participant in this Plan is or was a participant or could possibly become a participant, a welfare benefit fund (as defined in Code Section 419(e)), or an individual medical account (as defined in Code Section 415(1)(2)) under which amounts are treated as annual additions with respect to any Participant in this Plan. A. If the Participant is covered under another qualified defined contribution plan maintained by the Employer, other than a master or prototype plan, the provisions of Article V of the Plan will apply as if the other plan were a master or prototype plan [ ] or, if this box is checked, the attached rider describes the method by which the plans will limit total Annual Additions to the Maximum Permissible Amount described in Section 5.05 of the Plan and reduce any excess amount in a manner that precludes Employer discretion. B. If the Participant is, or has ever been, a participant in a defined benefit plan maintained by the Employer, the provisions of Article V of the Plan will apply [ ] or, if this box is checked, the attached rider describes the method by which the plans involved will satisfy the 1.0 limitation described in Section 5.04 of the Plan and reduce any excess amount in a manner that precludes Employer discretion. XXII. SIGNATURES The Employer (1) covenants and agrees that whenever a Participant makes a contribution the Employer shall ascertain that the Participant has received a copy of the current prospectus relating to any Designated Investment or other investment in which such contribution is to be invested where required by any state or federal law, and (2) by remitting any contribution to the Trustee the Employer shall be deemed to represent that the Employer has received a current prospectus of any investment in which it is to be invested where required by any state or federal law. An Employer adopting this Plan may not rely on the opinion letter issued by the National Office of the Internal Revenue Service as evidence that this Plan is qualified under Code Section 401. An Employer who wishes to obtain such reliance should apply for a determination letter from the appropriate Key District Director of the Internal Revenue Service to obtain reliance that the plan is qualified. This Adoption Agreement may be used in conjunction with basic plan document #02. Failure to properly complete this Adoption Agreement may result in the disqualification of the Plan. 14 15 All inquiries regarding this Plan should be made to Scudder Investor Services, Inc. by calling 1-800-323-6105, or by writing to Scudder Investor Services, Inc., Group Retirement Plans Department, Two International Place, Boston, MA, 02110. Scudder Investor Services, Inc. will notify each adopting Employer of any amendments made to, or of the discontinuance or abandonment of, this Plan. Trustee(s) Signature(s): SCUDDER TRUST COMPANY [ILLEGIBLE] By: /s/ SYDNEY STUDER - VICE PRESIDENT - ------------------------------------ ----------------------------------- Signature of Employer United States Lime & Minerals Inc. - ------------------------------------ ----------------------------------- Print Name of Employer Trustee 12221 Merit Drive. #500 - ------------------------------------ ----------------------------------- Street Address Trustee Dallas, TX 75251 - ------------------------------------ ----------------------------------- City State Zip Loan Trustee 75-0789226 - ------------------------------------ Employer Tax Identification Number December 31 - ------------------------------------ Employer's Fiscal Year (972) 991-8400 - ------------------------------------ Employer's Telephone Number 12/23/96 /s/ SYDNEY STUDER - ------------------------------------ ----------------------------------- Date Accepted by Scudder Investor Services, Inc. 100 - ------------------------------------ Expected Number of Participants 15 16 SCUDDER PROTOTYPE 401(k) PLAN Basic Plan Document 02 17 SCUDDER PROTOTYPE 401(k) PLAN Basic Plan Document 02
Page ---- ARTICLE I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2.01 "Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2.02 "Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2.03 "Administrator" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.04 "Adoption Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.05 "Annuity Starting Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.06 "Applicable Life Expectancy" . . . . . . . . . . . . . . . . . . . . . . . . 2 2.07 "Beneficiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.08 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.09 "Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.10 "Deductible Voluntary Contribution Account" . . . . . . . . . . . . . . . . . 7 2.11 "Deferred Cash Allocation" . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.12 "Deferred Cash Contribution Account" . . . . . . . . . . . . . . . . . . . . 8 2.13 "Deferred Cash Contributions" . . . . . . . . . . . . . . . . . . . . . . . . 8 2.14 "Designated Investment" . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.15 "Designation of Beneficiary" or "Designation" . . . . . . . . . . . . . . . . 8 2.16 "Disabled" or "Disability" . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.17 "Distributor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.18 "Earned Income" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.19 "Effective Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.20 "Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.21 "Employer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.22 "Employer Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.23 "Employer Profit Sharing Contribution Account" . . . . . . . . . . . . . . . 11 2.24 "Employer Profit Sharing Contributions" . . . . . . . . . . . . . . . . . . . 11 2.25 "Employer Matching Contribution Account" . . . . . . . . . . . . . . . . . . 12 2.26 "Employer Matching Contributions" . . . . . . . . . . . . . . . . . . . . . . 12 2.27 "Family Member" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.28 "First Required Distribution Year" . . . . . . . . . . . . . . . . . . . . . 12 2.29 "Highly Compensated Employee" . . . . . . . . . . . . . . . . . . . . . . . . 13 2.30 "Highly Compensated Participant" . . . . . . . . . . . . . . . . . . . . . . 15 2.31 "Hour of Service" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.32 "Integration Level" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2.33 "Integration Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.34 "Loan Trustee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.35 "Maximum Disparity Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.36 "Nondeductible Voluntary Contribution Account" . . . . . . . . . . . . . . . 23
18 2.37 "Nondeductible Voluntary Contributions" . . . . . . . . . . . . . . . . . . . 23 2.38 "Non-Highly Compensated Employee" . . . . . . . . . . . . . . . . . . . . . . 23 2.39 "Non-Highly Compensated Participant" . . . . . . . . . . . . . . . . . . . . 24 2.40 "Normal Retirement Date" or "Normal Retirement Age" . . . . . . . . . . . . . 24 2.41 "OASDI Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 2.42 "One-Year Break in Service" . . . . . . . . . . . . . . . . . . . . . . . . . 24 2.43 "Owner-Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 2.44 "Participant" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.45 "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.46 "Plan Year" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.47 "Prototype 401(k) Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.48 "Qualified Matching Contributions". . . . . . . . . . . . . . . . . . . . . . 25 2.49 "Qualified Nonelective Contributions" . . . . . . . . . . . . . . . . . . . . 26 2.50 "Qualified Nonelective Contribution Account" . . . . . . . . . . . . . . . . 26 2.51 "Rollover Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 2.52 "Rollover Contributions". . . . . . . . . . . . . . . . . . . . . . . . . . . 26 2.53 "Salary Reduction Contribution Account" . . . . . . . . . . . . . . . . . . . 27 2.54 "Salary Reduction Contributions" . . . . . . . . . . . . . . . . . . . . . . 27 2.55 "Self-Employed Individual" . . . . . . . . . . . . . . . . . . . . . . . . . 27 2.56 "Service" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 2.57 "Social Security Wage Base" . . . . . . . . . . . . . . . . . . . . . . . . . 27 2.58 "Sponsor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 2.59 "Spouse" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 2.60 "Trust" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 2.61 "Trust Fund" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 2.62 "Trustee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 2.63 "Valuation Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 2.64 "Vesting Years" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 2.65 "Year". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 2.66 "Year of Service" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 ARTICLE III. ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 3.01 Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 3.02 Interrupted Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 3.03 Transfer to Eligible Class . . . . . . . . . . . . . . . . . . . . . . . . . 31 3.04 Determination by Administrator . . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE IV. CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 4.01 Salary Reduction Contributions . . . . . . . . . . . . . . . . . . . . . . . 31 4.02 Deferred Cash Contributions . . . . . . . . . . . . . . . . . . . . . . . . . 33 4.03 Employer Profit Sharing Contributions . . . . . . . . . . . . . . . . . . . . 34 4.04 Employer Matching Contributions . . . . . . . . . . . . . . . . . . . . . . . 36 4.05 Nondeductible Voluntary Contributions . . . . . . . . . . . . . . . . . . . . 37
ii 19 4.06 Rollover Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 4.07 Transfers from Other Qualified Plans . . . . . . . . . . . . . . . . . . . . 38 4.08 Limitations on Contributions . . . . . . . . . . . . . . . . . . . . . . . . 39 4.09 Deductible Voluntary Contributions . . . . . . . . . . . . . . . . . . . . . 40 ARTICLE V. CODE SECTION 415 LIMITATIONS ON ALLOCATIONS . . . . . . . . . . . . . . . . . 40 5.01 Employers Maintaining No Other Plan . . . . . . . . . . . . . . . . . . . . . 40 5.02 Employers Maintaining Other Master or Prototype Defined Contribution Plans . . . . . . . . . . . . . . . . . . . . . . . . . 43 5.03 Employers Maintaining Other Defined Contribution Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 5.04 Employers Maintaining Defined Benefit Plans . . . . . . . . . . . . . . . . . 45 5.05 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 ARTICLE VI. LIMITATIONS ON DEFERRALS, MATCHING ALLOCATIONS AND VOLUNTARY CONTRIBUTIONS . . . . . . . . . . . . . . . . . . 53 6.01 Maximum Amount of Elective Deferrals . . . . . . . . . . . . . . . . . . . . 53 6.02 Limitation on Elective Deferrals . . . . . . . . . . . . . . . . . . . . . . 55 6.03 Limitation on Voluntary Nondeductible Contributions and Employer Matching Contributions . . . . . . . . . . . . . . . . . . . . . 61 6.04 Multiple Use Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 6.05 Further Limitations on Employer Matching Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 6.06 Special Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 ARTICLE VII. TIME AND MANNER OF MAKING CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . 69 7.01 Manner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 7.02 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 7.03 Separate Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 ARTICLE VIII. VESTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 8.01 When Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 8.02 Employer Profit Sharing Contribution and Employer Matching Contribution Forfeiture . . . . . . . . . . . . . . . . . . . . . . 71 8.03 Reemployment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 ARTICLE IX. DISTRIBUTIONS UPON DEATH . . . . . . . . . . . . . . . . . . . . . . . . . . 76 9.01 Distributions at Death . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 9.02 Children as Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 79 9.03 Nonconsensual Distributions to Beneficiaries . . . . . . . . . . . . . . . . 80 9.04 Eligible Rollover Distributions . . . . . . . . . . . . . . . . . . . . . . . 80 ARTICLE X. DISTRIBUTIONS AFTER SEPARATION FROM SERVICE . . . . . . . . . . . . . . . . . 80 10.01 Commencement of Distributions . . . . . . . . . . . . . . . . . . . . . . . . 80 10.02 Forms of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
iii 20 10.03 Required Minimum Distributions . . . . . . . . . . . . . . . . . . . . . . . 83 10.04 Nonconsensual Distributions . . . . . . . . . . . . . . . . . . . . . . . . . 83 10.05 Special One-Time Distribution Election . . . . . . . . . . . . . . . . . . . 83 10.06 Distribution on Account of Plan Termination . . . . . . . . . . . . . . . . . 85 10.07 Eligible Rollover Distribution . . . . . . . . . . . . . . . . . . . . . . . 85 ARTICLE XI IN-SERVICE WITHDRAWALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 11.01 In-service Withdrawal from Participant's Accounts . . . . . . . . . . . . . . 87 11.02 Rules Governing Hardship Withdrawals . . . . . . . . . . . . . . . . . . . . 89 11.03 Manner of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 11.04 Limitation on Distributions . . . . . . . . . . . . . . . . . . . . . . . . . 91 ARTICLE XII. LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 12.01 Availability of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 12.02 Spousal Consent Required . . . . . . . . . . . . . . . . . . . . . . . . . . 93 12.03 Equivalent Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 12.04 Limitation on Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 12.05 Maximum Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 12.06 Promissory Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 12.07 Adequate Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 12.08 Repayment By Payroll Reduction . . . . . . . . . . . . . . . . . . . . . . . 95 12.09 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 12.10 Level Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 12.11 Additional Repayment Rules . . . . . . . . . . . . . . . . . . . . . . . . . 96 12.12 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 12.13 Administration of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 12.14 Precedence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 ARTICLE XIII. TRUST PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 13.01 Manner of Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 13.02 Investment Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 13.03 Directed Powers of the Trustee . . . . . . . . . . . . . . . . . . . . . . . 101 13.04 Discretionary Powers of the Trustee . . . . . . . . . . . . . . . . . . . . . 104 13.05 Limitations in Investments . . . . . . . . . . . . . . . . . . . . . . . . . 105 13.06 Appointment of Investment Manager . . . . . . . . . . . . . . . . . . . . . . 107 13.07 Trustee: Number, Qualifications and Majority Action . . . . . . . . . . . . . 108 13.08 Change of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 13.09 Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 13.10 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 13.11 Certifications and Instructions . . . . . . . . . . . . . . . . . . . . . . . 111 13.12 Accounts and Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 13.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 13.14 Employment of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
iv 21 13.15 Compensation of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 13.16 Limitation of Trustee's Liability . . . . . . . . . . . . . . . . . . . . . . 113 13.17 Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 13.18 Enforcement of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . 114 13.19 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 13.20 Applicability to Loan Trustee . . . . . . . . . . . . . . . . . . . . . . . . 116 13.21 Applicability to Other Trust . . . . . . . . . . . . . . . . . . . . . . . . 116 ARTICLE XIV. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 14.01 Appointment of Administrator . . . . . . . . . . . . . . . . . . . . . . . . 116 14.02 Named Fiduciaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 14.03 Allocation of Responsibilities . . . . . . . . . . . . . . . . . . . . . . . 117 14.04 More Than One Administrator . . . . . . . . . . . . . . . . . . . . . . . . . 119 14.05 No Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 14.06 Record of Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 14.07 Bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 14.08 Agent for Service of Legal Process . . . . . . . . . . . . . . . . . . . . . 119 14.09 Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 14.10 Delegation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 14.11 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 ARTICLE XV. FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 ARTICLE XVI. BENEFIT RECIPIENT INCOMPETENT OR DIFFICULT TO ASCERTAIN OR LOCATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 16.01 Incompetency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 16.02 Difficulty to Ascertain or Locate . . . . . . . . . . . . . . . . . . . . . . 123 ARTICLE XVII. DESIGNATION OF BENEFICIARY . . . . . . . . . . . . . . . . . . . . . . . . . 123 ARTICLE XVIII. SPENDTHRIFT PROVISION AND DISTRIBUTIONS PURSUANT TO QUALIFIED DOMESTIC RELATIONS ORDERS . . . . . . . . . . . . . . . . . . . . . . . . 124 18.01 General Spendthrift Rule . . . . . . . . . . . . . . . . . . . . . . . . . . 124 18.02 Account Division and Distribution Pursuant to Qualified Domestic Relations Orders . . . . . . . . . . . . . . . . . . . . . 124 ARTICLE XIX. NECESSITY OF QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . 125 ARTICLE XX. AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . 126 20.01 Amendment or Termination by the Employer . . . . . . . . . . . . . . . . . . 126 20.02 Delegation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 20.03 Distribution of Accounts Upon Termination . . . . . . . . . . . . . . . . . . 129
v 22 ARTICLE XXI. TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 ARTICLE XXII. OWNER-EMPLOYEE PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 130 22.01 Purpose of Section . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 22.02 Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 22.03 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 ARTICLE XXIII. TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 23.01 Purpose of Section . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 23.02 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 23.03 Minimum Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 23.04 Nonforfeitability of Minimum Allocation . . . . . . . . . . . . . . . . . . . 139 23.05 Limitation on Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 139 23.06 Minimum Vesting Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . 139 23.07 Effect on Code Section 415 Limitations . . . . . . . . . . . . . . . . . . . 140 23.08 Termination of Top-Heavy Status . . . . . . . . . . . . . . . . . . . . . . . 141 ARTICLE XXIV. SPECIAL DISTRIBUTION RULES . . . . . . . . . . . . . . . . . . . . . . . . . 141 24.01 Special Distribution Rules for Certain Participants . . . . . . . . . . . . . 141 24.02 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 24.03 Distributions upon Death . . . . . . . . . . . . . . . . . . . . . . . . . . 145 24.04 Timing of Annuity Payments and Normal Distributions . . . . . . . . . . . . . 146 24.05 Form of Distribution and Optional Times for Commencement of Distribution . . . . . . . . . . . . . . . . . . . . . . . . 147 24.06 Elections for Former Participants . . . . . . . . . . . . . . . . . . . . . . 148 24.07 Election Period for Certain Elections by Separated Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 24.08 Benefit Form for Certain Former Participants . . . . . . . . . . . . . . . . 149 24.09 Notice of Waivability of Qualified Preretirement Survivor Annuity . . . . . . . 151 24.10 Notice of Waivability of Qualified Joint and Survivor Annuity . . . . . . . . . 153 ARTICLE XXV. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 25.01 Misrepresentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 25.02 No Enlargement of Plan Rights . . . . . . . . . . . . . . . . . . . . . . . . 154 25.03 No Enlargement of Employment Rights . . . . . . . . . . . . . . . . . . . . . 154 25.04 Written Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 25.05 No Release from Liability . . . . . . . . . . . . . . . . . . . . . . . . . . 154 25.06 Discretionary Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 25.07 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 25.08 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 25.09 No Reversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 25.10 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 25.11 Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 25.12 Prior Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
vi 23 Basic Plan Document 02 PROTOTYPE 401(k) PLAN ARTICLE I. INTRODUCTION The Employer has established this Plan (the "Plan"), consisting of the Adoption Agreement and the following provisions (the "Prototype 401(k) Plan") for the exclusive benefit of Participants and their Beneficiaries. ARTICLE II. DEFINITIONS Where the following words and phrases appear in this Plan, they shall have the respective meanings set forth below, unless their context clearly indicates a contrary meaning. The singular herein shall include the plural, and vice versa, and the masculine gender shall include the feminine gender, and vice versa, where the context requires. 2.01 "Account" shall mean the Trust assets held by the Trustee for the benefit of a Participant, which shall be the sum of the Participant's Salary Reduction Contribution Account, Deferred Cash Contribution Account, Employer Profit Sharing Contribution Account, Employer Matching Contribution Account, Nondeductible Voluntary Contribution Account, Deductible Voluntary Contribution Account, Rollover Account and Qualified Nonelective Contribution Account and any transfer account established pursuant to Section 4.07 hereof with respect to funds transferred to the Trust on the Participant's behalf. 2.02 "Act" shall mean the Employee Retirement Income Security Act of 1974, as amended. 24 2.03 "Administrator" shall mean the person or persons specified in Section 14.01 hereof. 2.04 "Adoption Agreement" shall mean the agreement by which the Employer has most recently adopted or amended the Plan. 2.05 "Annuity Starting Date" shall mean the first day of the first period for which an amount is paid to a Participant (other than loan(s) or in-service withdrawal(s)) from the Trust (whether or not such distributions are received in the form of an annuity). 2.06 "Applicable Life Expectancy" shall mean the life expectancy of the Participant or the joint life and last survivor expectancy of the Participant and Beneficiary calculated using the return multiples specified in Section 1.72-9 of the Treasury Regulations. Unless the Participant elects otherwise, life expectancies determined as of the First Required Distribution Year shall be calculated using the attained age of the Participant and, if applicable, the Beneficiary as of his or her birth date in the First Required Distribution Year. Life expectancies for subsequent calendar years shall be determined by reducing the life expectancy determined as of the First Required Distribution Year by one for each calendar year that has elapsed; provided, however, that the Participant may elect prior to April 1 of the year immediately following his or her First Required Distribution Year to have his or her life expectancy and, if the Participant's Beneficiary is his or her Spouse, the life expectancy of such Beneficiary, recalculated annually. If a Participant elects recalculation, life expectancies for each subsequent calendar year shall be determined using the attained ages of the Participant and, if applicable, his or her Beneficiary, as of their respective birth dates in such calendar year. 2 25 With respect to a Beneficiary who is entitled to receive a distribution after the death of a Participant, "Applicable Life Expectancy" shall mean the life expectancy of the Beneficiary calculated using the return multiples specified in Section 1.72-9 of the Treasury Regulations as of the Beneficiary's birth date in the calendar year in which distributions are required to commence, and reduced by one for each subsequent calendar year. If the Beneficiary is the Participant's Spouse, he or she may elect, prior to the time distributions are required to commence, to have his or her life expectancy recalculated annually. If a Spouse so elects, his or her life expectancy for each subsequent calendar year shall be determined as of his or her birth date in such calendar year. 2.07 "Beneficiary" shall mean any person or legal representative effectively designated by the Participant as a person entitled to receive benefits on or after the death of a Participant. Such term shall also include any person or legal representative designated by a Beneficiary as a person entitled to receive benefits on or after the death of such Beneficiary. 2.08 "Code" shall mean the Internal Revenue Code of 1986, as amended. Reference to a section of the Code shall include any comparable section or sections of future legislation that amends, supplements or supersedes such section. 2.09 "Compensation" shall mean: (a) except as provided in subsection (b), (c), and (d) and subject to the limitation of subsection (e), one of the following as elected by the Employer in the Adoption Agreement: (i) W-2 Compensation. Information required to be reported under Sections 6041, 6051 and 6052 of the Code (Wages, tips and other compensation as reported on 3 26 Form W-2). Compensation is defined as wages within the meaning of Section 3401(a) and all other payments of compensation to an Employee by the Employer (in the course of the Employer's trade or business) for which the Employer is required to furnish the Employee a written statement under Sections 6041(d), 6051(a)(3) and 6052. Compensation must be determined without regard to any rules under Section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Section 3401(a)(2)). (ii) 415 Safe Harbor Compensation. "Compensation" as defined in Section 5.05(b)(ii) of this Plan. (iii) Safe Harbor Alternative Definition. Compensation as defined in Section 2.09(a)(ii) above, reduced by all of the following items (even if includable in gross income): reimbursements or other expense allowances, fringe benefits (cash and non-cash), moving expenses, deferred compensation, and welfare benefits. (iv) In the case of a Self-Employed Individual, the determination of Compensation shall be made on the basis of the Self-Employed Individual's Earned Income. (b) If so specified in the Adoption Agreement, the Employer may elect to include in the definition of Compensation the Participant's Salary Reduction Contributions, Deferred Cash Contributions and any other amount which is contributed by the Employer pursuant to a salary reduction agreement and which is not includable in the gross income of the employee under sections 125, 402(e)(3), 402(h) or 403(b) of the Code. (c) If so specified in the Adoption Agreement, an Employer may elect to exclude from the definition any one or more of the following types of compensation: 4 27 (i) additional compensation for Participants working outside their regularly scheduled tour of duty such as overtime pay, premiums for shift differential and call-in premiums; (ii) bonuses; (iii) commissions; (iv) such other items as specified in the Adoption Agreement; provided, however, that if the Employer elects an alternative definition of Compensation pursuant to this Section 2.09(c) for purposes of allocating Employer Profit Sharing Contributions and forfeitures thereof, then such alternative definition must be tested by the Administrator to show that it meets the nondiscrimination requirements of Section 414(s)(3) of the Code. Such alternative definition of Compensation may not be used for purposes of Articles V, VI and XXIII. (d) If this Plan is adopted, (i) as an amendment to an existing plan, (ii) to remove a disqualifying provision which results from a change in the qualification requirements of the Code made by the Tax Reform Act of 1986 and such other legislation as set forth in Section 1.401(b)-1(b)(2)(ii) of the regulations under Code Section 401(b), and (iii) within the remedial amendment period applicable to such disqualifying provision, then for Plan Years beginning before the date such amendment is adopted, "Compensation" shall, subject to the limitation of subsection (e), mean compensation as defined under the terms of the plan prior to its amendment. (e) In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on 5 28 or after January 1, 1994, the annual Compensation of each Participant taken into account under the Plan for any determination period shall not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17) of the Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not to exceed 12 months, beginning in such calendar year over which Compensation is determined ("determination period"). If a determination period is a short Plan Year (i.e., shorter than 12 months), the OBRA '93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. In determining the Compensation of a Participant for purposes of this limitation, the rules of Section 414(q)(6) of the Code shall apply, except in applying such rules, the term "family" shall include only the Spouse of the Participant and any lineal descendants of the Participant who have not attained age 19 before the close of the year. If, as a result of the application of such rules the OBRA '93 annual compensation limit is exceeded, then (except for purposes of determining the portion of Compensation up to the integration level if this Plan provides for permitted disparity), the limitation shall be prorated among the affected individuals in proportion to each such individual's Compensation as determined under this Section prior to the application of this limitation. For Plan Years beginning on or after January 1, 1994, any reference in this Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA '93 annual compensation limit. 6 29 (f) Compensation shall be based on the amount actually paid to the Participant during the Plan Year. To the extent elected by the Employer in the Adoption Agreement, for purposes of allocating Employer Profit Sharing Contributions and/or Employer Matching Contributions and/or applying the Section 401(m) nondiscrimination test, Compensation shall be based on the amounts paid during that portion of the Plan Year during which the Employee is eligible to participate with respect to the allocation of such contributions. To the extent elected by the Employer in the Adoption Agreement, for purposes of applying the Section 401(k) nondiscrimination test, Compensation shall be based on the amount paid during that portion of the Plan Year during which the Employee is eligible to make a salary reduction election and/or to receive allocations of Deferred Cash Contributions. Notwithstanding the preceding sentence, compensation for the purposes of Article V (Code Section 415 Limitations on Allocations) shall be based on the amount actually paid or made available to the Participant during the Limitation Year. Compensation for the initial Plan Year for a new plan shall be based upon eligible Participants' Compensation, subject to the Adoption Agreement, from the Effective Date through the end of the first Plan Year. 2.10 "Deductible Voluntary Contribution Account" shall mean the separate account maintained pursuant to Section 7.03(g) for any deductible voluntary contributions under Code Section 219 that the Participant made for 1986 and earlier calendar years and the income, expenses, gains and losses attributable thereto. 2.11 "Deferred Cash Allocation" shall mean the contribution payable by the Employer to the Trust on behalf of a Participant subject to the Participant's right to elect to 7 30 receive all or a portion of such contribution in cash in lieu of having it contributed to the Trust on his or her behalf. 2.12 "Deferred Cash Contribution Account" shall mean the separate account maintained pursuant to Section 7.03(b) hereof for Deferred Cash Contributions allocated to the Participant and the income, expenses, gains and losses attributable thereto. 2.13 "Deferred Cash Contributions" shall mean contributions to the Trust by the Employer in accordance with Section 4.02 hereof. 2.14 "Designated Investment" shall mean either a collective investment trust for the collective investment of assets of employee pension or profit sharing trusts pursuant to Revenue Ruling 81-100, a commingled investment vehicle for the collective investment of assets of institutional investors, or a regulated investment company, for which Scudder, Stevens & Clark, Inc., its successor or any of its affiliates, acts as investment adviser and any of which are designated by Scudder Investor Services, Inc. or its successors as eligible for investment under the Plan. 2.15 "Designation of Beneficiary" or "Designation" shall mean the document executed by a Participant under Article XVII. 2.16 "Disabled" or "Disability" shall mean the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of 12 months or more, as certified by a licensed physician selected by the Participant and approved by the Employer. 2.17 "Distributor" shall mean Scudder Investor Services, Inc. or its successor. 8 31 2.18 "Earned Income" shall mean the net earnings from self-employment in the trade or business with respect to which the Plan is established, for which personal services of the Owner-Employee or Self-Employed Individual are a material income-producing factor. Net earnings will be determined without regard to items not included in gross income and the deductions allocable to such items, except that, for taxable years beginning after December 31, 1989, net earnings shall be determined with regard to the deduction allowed by Code Section 164(f). Net earnings are reduced by contributions by the Employer to a qualified plan, including this Plan, to the extent deductible under Code Section 404. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual Earned Income of each Participant taken into account under the Plan for any determination period shall not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17) of the Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not to exceed 12 months beginning in such calendar year over which Earned Income is determined ("determination period"). If a determination period is a short Plan Year (i.e., shorter than 12 months), the OBRA '93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. In determining the Earned Income of a Participant for purposes of this limitation, the rules of Section 414(q)(6) of the Code shall apply, except in applying such rules, the term "family" shall include only the Spouse of the Participant and any lineal descendants of the 9 32 Participant who have not attained age 19 before the close of the year. If, as a result of the application of such rules the OBRA '93 annual compensation limit is exceeded, then (except for purposes of determining the portion of Earned Income up to the integration level if this Plan provides for permitted disparity), the limitation shall be prorated among the affected individuals in proportion to each such individual's Earned Income as determined under this Section prior to the application of this limitation. For Plan Years beginning on or after January 1, 1994, any reference in this Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA '93 annual compensation limit. 2.19 "Effective Date" shall mean the date specified by the Employer in the Adoption Agreement. 2.20 "Employee" shall mean any individual who performs services in any capacity in the business of the Employer (including any individual deemed to be an employee of the Employer under Code Section 414(n) or (o)). 2.21 "Employer" shall mean the organization or other entity named as such in the Adoption Agreement and any successor organization or entity which adopts the Plan. If the organization or other entity named as Employer in the Adoption Agreement is a sole proprietorship or a professional corporation and the sole proprietor of such proprietorship or the sole shareholder of the professional corporation dies, then the legal representative of the estate of such sole proprietor or shareholder shall be deemed to be the Employer until such time as, through the disposition of such sole proprietor's or sole shareholder's estate or 10 33 otherwise, any organization or other entity succeeds to the interests of the sole proprietor in the proprietorship or the sole shareholder in the professional corporation. Unless the adopting organization or entity elects otherwise in the Adoption Agreement, any two or more organizations or entities which are members of (a) a controlled group of corporations (as defined under Code Section 414(b)) which includes the adopter, (b) a group of trades or businesses (whether or not incorporated) which are under common control (as defined under Code Section 414(c)) which includes the adopter, or (c) an affiliated service group (as defined under Code Section 414(m)) which includes the adopter, will be considered to be the Employer for the purposes of the Plan. Similarly, any other organization or entity which is required to be aggregated with the adopter pursuant to Code Section 414(o) and the regulations thereunder will be considered to be the Employer for the purposes of the Plan. 2.22 "Employer Contributions" shall mean Employer Profit Sharing Contributions, Employer Matching Contributions, Salary Reduction Contributions, Deferred Cash Contributions, Qualified Matching Contributions and Qualified Nonelective Contributions. 2.23 "Employer Profit Sharing Contribution Account" shall mean the separate account maintained pursuant to Section 7.03(c) hereof for Employer Profit Sharing Contributions allocated to the Participant and the income, expenses, gains and losses attributable thereto. 2.24 "Employer Profit Sharing Contributions" shall mean contributions to the Trust by the Employer in accordance with Section 4.03 hereof. Employer Profit Sharing Contributions may be fixed or discretionary as provided in the Adoption Agreement. 11 34 2.25 "Employer Matching Contribution Account" shall mean the separate account maintained pursuant to Section 7.03(d) hereof for Employer Matching Contributions allocated to the Participant and the income, expenses, gains and losses attributable thereto. 2.26 "Employer Matching Contributions" shall mean the contributions made to the Trust by the Employer in accordance with Section 4.04 hereof as matching contributions. 2.27 "Family Member" shall mean, with respect to a particular Employee, any individual who is a Spouse, lineal ascendant, lineal descendent, or a Spouse of a lineal ascendant or descendent of the Employee. "Family Member" as used in this Plan refers to an individual who is, or was during the Plan Year in question, an Employee. 2.28 "First Required Distribution Year" shall mean: (a) in the case of a Participant whose date of birth is July 1, 1917 or a later date, the calendar year during which the Participant attains age 70 1/2; (b) in the case of a Participant (i) whose date of birth is June 30, 1917 or an earlier date and (ii) who is not, and has not been at any time since the calendar year during which he or she attained age 65 1/2, a "5% owner" (as defined in Code Section 416(i)(1)(B)(i)) of the Employer (hereinafter a "5% owner"), the calendar year during which occurs the later of the Participant's separation from Service or the Participant's attainment of age 70 1/2, provided that if the Participant continues in Service after he or she attains age 70 1/2 and later becomes a 5% owner, such Participant's First Required Distribution Year shall be the calendar year during which the Participant attains the status of a 5% owner; (c) in the case of a Participant (i) whose date of birth is June 30, 1917 or an earlier date and (ii) who is, or has been at sometime since the calendar year during which he 12 35 or she attained age 65 1/2, a 5% owner, the calendar year during which the Participant attains age 70 1/2. 2.29 "Highly Compensated Employee" shall mean: (a) any Employee who was, at any time in the look-back year or determination year, a 5% owner; (b) any Employee who, in the look-back year: (i) earned more than $75,000 (as adjusted by the Secretary of the Treasury to reflect rises in the cost of living in accordance with Code Section 415(d)) in annual compensation, (ii) was an officer and earned more than 50% of the dollar limitation in effect for such year under Code Section 415(b)(1)(A); or (iii) earned more than $50,000 (as adjusted by the Secretary of the Treasury to reflect rises in the cost of living in accordance with Code Section 415(d)) in annual compensation and was among the top 20% of Employees when ranked on the basis of compensation paid during such year. For purposes of calculating the top 20% of Employees when ranked on the basis of compensation paid during the look-back year, there shall be excluded from the total number of Employees: (A) Employees with less than six months of Service, (B) Employees who normally work less than 17 1/2 hours per week, (C) Employees who normally work less than six months per year, (D) except as provided in Treasury Regulations, Employees covered by a collective bargaining agreement, (E) Employees who have not attained 21 years of age, and 13 36 (F) Employees who are nonresident aliens and who receive no earned income from the Employer that constitutes income from sources within the United States; (c) any Employee not described in paragraph (b) above but who is described in clause (i), (ii) or (iii) of paragraph (b) if the term "determination year" is substituted for the term "look-back year," and the Employee is among the 100 Employees who received the most compensation from the Employer during the determination year; and (d) any former Employee who has separated from Service but who was a Highly Compensated Employee as described in paragraph (a), (b) or (c) above when he separated from Service or at any time after he attained age 55. For purposes of this Section, "compensation" shall mean the amount paid during the look-back year or determination year, whichever is applicable, by the Employer to the Employee for services rendered (regardless of whether the individual was a Participant at the time) as reportable to the Federal Government for the purpose of withholding federal income taxes and increased by any amount to which Code Sections 125, 402(e)(3), 402(h)(1)(B) or 403(b) apply. Also for purposes of this Section, no more than 50 Employees or, if lesser, the greater of three Employees or 10% of Employees shall be treated as officers; however, if no officer has compensation in excess of the applicable stated dollar amount above in any year, the officer with the highest compensation shall be treated as described in paragraph (b) or (c), as applicable. For this purpose, the determination year shall be the Plan Year. The look-back year shall be the 12-month period immediately preceding the determination year. The Employer may elect to make the look-back year calculation for a determination on the basis of the 14 37 calendar year ending with or within the applicable determination year, as prescribed by Section 414(q) of the Code and the regulations issued thereunder. If an Employee is, during a determination year or look-back year, a Family Member of either a 5% owner who is an active or former Employee or a Highly Compensated Employee who is one of the ten most Highly Compensated Employees ranked on the basis of compensation paid by the Employer during such year, then the Family Member and the 5% owner or top-ten Highly Compensated Employee shall be aggregated. In such case, the Family Member and the 5% owner or top-ten Highly Compensated Employee shall be treated as a single Employee receiving compensation and Plan contributions or benefits equal to the sum of such compensation and contributions or benefits of the Family Member and 5% owner or top-ten Highly Compensated Employee. Finally, all interpretative questions concerning whether an individual constitutes a Highly Compensated Employee shall be resolved in a manner consistent with Department of Treasury and Internal Revenue Service interpretations of Code Section 414(q). 2.30 "Highly Compensated Participant" shall mean a Highly Compensated Employee who was, at any time during the Plan Year in question, eligible to participate in the Plan. 2.31 "Hour of Service" shall mean each hour credited to an Employee in the applicable computation period (a 12-consecutive month period) pursuant to subsection (a) or (b) below, as the case may be. (a) If the Employer has so selected in the Adoption Agreement, Hours of Service shall be credited on the basis of weeks of employment and the rules in paragraphs (i) through (iii) below shall apply as modified by paragraphs (iv) and (v) below. 15 38 (i) Each Employee shall be credited with 45 Hours of Service for each week in which the Employee would be credited with at least one hour of service under Section 2530.200b-2 of the Department of Labor Regulations which are incorporated herein by reference. In the case of a week which extends into two computation periods, the Hours of Service for such week shall be allocated between the two computation periods on a pro rata basis. (ii) In the case of a payment made or due to an Employee which is not calculated on the basis of units of time, the number of Hours of Service to be credited shall be equal to the amount of the payment divided by the Employee's most recent hourly rate of compensation as determined under Section 2530.200b-2 of the Department of Labor Regulations. (iii) No more than 501 Hours of Service shall be credited under this Section for any single continuous period (whether or not such period occurs in a single computation period) during which no duties or services are performed for the Employer (or any other corporation during a time when such corporation was related to the Employer within the meaning of Code Section 414), but for which the individual is paid. (iv) The following hours shall be considered to be hours of service for which an Employee would be credited under Section 2530.200b-2 of the Department of Labor Regulations for the purposes of subsection (a)(i) of this Section: (A) An hour for which an Employee is paid, or entitled to payment, for the performance of duties or services for the Employer. 16 39 (B) An hour for which an Employee is paid, or entitled to payment, by the Employer (or any other corporation during a time when such corporation was related to the Employer within the meaning of Code Section 414) on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including Disability), layoff, jury duty, military duty or leave of absence (unless such payment is made or due solely to comply with applicable workman's compensation, unemployment compensation or disability insurance laws or solely as reimbursement for the Employee's medical expenses). (C) An hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer (or any other corporation during a time when such corporation was related to the Employer within the meaning of Code Section 414). The same hours shall not be considered both under paragraph (iv)(A) or paragraph (iv)(B), as the case may be, and under this paragraph (iv)(C). Such hours shall be treated under paragraphs (i) through (iii) as occurring in the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made. (v) Solely for the purpose of determining whether a One-Year Break in Service has occurred, an Employee shall be credited with any Hours of Service which would otherwise have been credited to such Employee but for such absence from work during a Plan Year which commences after December 31, 1984 because of: such Employee's pregnancy, birth of a child of the Employee, placement of an adopted child with the 17 40 Employee, or caring for a natural or an adopted child for a period beginning immediately following birth or placement. Hours of Service shall be credited to an Employee pursuant to this paragraph in the manner indicated in paragraphs (i) through (iii) above for the computation period during which such absence begins, if the Employee would otherwise have suffered a One-Year Break in Service and, in all other cases, in the next following computation period. No more than 501 Hours of Service shall be credited under this paragraph by reason of any one placement or pregnancy. Notwithstanding any implication of this paragraph (v) to the contrary, no credit shall be given pursuant to this paragraph (v) unless the Employee makes a timely, written filing with the Administrator which establishes valid reasons for the absence and enumerates the days for which there was such an absence. (b) If the Employer has not selected in the Adoption Agreement to have Hours of Service credited on the basis of weeks of employment, Hours of Service shall mean: (i) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for the Employer. These hours shall be credited to the Employee for the computation period in which the duties are performed; (ii) Each hour for which an Employee is paid, or entitled to payment, by the Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including Disability), layoff, jury duty, military duty or leave of absence. No more than 501 Hours of Service shall be credited under this paragraph for any single continuous period (whether or not such period occurs in a single computation period). Hours 18 41 under this subsection shall be calculated and credited pursuant to section 2530.200b-2 of the Department of Labor Regulations which are incorporated herein by this reference; (iii) Solely for the purpose of determining whether a One-Year Break in Service has occurred, each hour which normally would have been credited to an Employee (or in any case in which such hours cannot be determined, eight hours per day of such absence) but for an absence from work during a Plan Year which commences after December 31, 1984 because of such individual's pregnancy, birth of a child of the Employee, placement of an adopted child with the Employee, or caring for an adopted or a natural child following placement or birth. Hours of Service shall be credited to an Employee pursuant to this paragraph for the computation period during which such absence begins if the individual would otherwise have suffered a One-Year Break in Service, and in all other cases, in the immediately following computation period. No more than 501 Hours of Service shall be credited under this paragraph by reason of any one placement or pregnancy. Notwithstanding any implication of this paragraph (iii) to the contrary, no credit shall be given under this paragraph (iii) unless the Employee makes a timely, written filing with the Administrator which establishes valid reasons for the absence and enumerates the days for which there was such an absence; (iv) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer. The same Hours of Service shall not be credited both under paragraph (i), (ii) or (iii), as the case may be, and under this paragraph (iv). These hours shall be credited to the Employee for the computation period or 19 42 periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made. (c) (i) Where the Employer maintains the plan of a predecessor employer, service for such predecessor employer shall be treated as Service of the Employer. Where the Employer does not maintain the plan of a predecessor employer, employment by a predecessor employer, upon the written election of the Employer made in a uniform and non-discriminatory manner, shall be treated as Service for the Employer. (ii) If the Employer is a member of (A) a controlled group of corporations (as defined under Code Section 414(b)), (B) a group of trades or businesses (whether or not incorporated) which are under common control (as defined under Code Section 414(c)), or (C) an affiliated service group (as defined under Code Section 414(m)), all service of an Employee for any member of such a group, or for any other entity required to be aggregated with the Employer pursuant to Code Section 414(o) and the regulations thereunder, shall be treated as if it were Service for the Employer for purposes of this Section. (iii) Except as provided below, service of any Employee who is considered a leased employee of the Employer under Code Section 414(n)(2) shall be treated as if it were Service for the Employer for purposes of this Section. However, qualified plan contributions or benefits provided by the leasing organization which are attributable to services performed for the Employer shall be treated as provided by the Employer. The provisions of this paragraph shall not apply to any leased employee if such individual: (A) is covered by a money purchase pension plan maintained by the leasing organization providing: 20 43 (1) a non-integrated employer contribution rate of at least 10% of compensation (as defined in Code Section 415(c)(3), but including amounts contributed by the Employer pursuant to a salary reduction agreement which are excludable from the Employee's gross income under Code Section 125, 402(e)(3), 402(h), or 403(b), (2) immediate participation for leasing organization employees who earn more than $1,000 in a year (other than employees who perform substantially all their services for the organization), and (3) full and immediate vesting, and (B) is a member of a group of leased employees which in the aggregate does not constitute more than 20% of the Employer's non-highly compensated work force (within the meaning of Code Section 414(n)(5)(C)(ii)). (C) For purposes of this Section, the term "leased employee" means any person who is not an Employee and who, pursuant to an agreement between the recipient and any other person, has performed services for the Employer (or for the Employer and related persons determined in accordance with Code Section 414(n)(6)) on a substantially full-time basis for a period of at least one year and such services are of a type historically performed by employees in the business field of the Employer. 2.32 "Integration Level" for a Plan Year shall mean the lesser of the Social Security Wage Base (as in effect on the first day of the Plan Year) or the dollar amount specified in the Adoption Agreement. 21 44 2.33 "Integration Rate" for the Plan Year shall mean the lesser of the Maximum Disparity Rate (as in effect on the first day of the Plan Year) or the rate specified in the Adoption Agreement. 2.34 "Loan Trustee" shall mean the person named in the Adoption Agreement to act as trustee solely for the purpose of administering the provisions of Article XII and holding the Trust assets to the extent that they are invested in loans pursuant to such Article. Loan assets shall be held in a separate trust if the person named as Loan Trustee is not the same person as the person named as Trustee. Scudder Trust Company will not act as Loan Trustee unless it specifically agrees in writing to act as such. 2.35 "Maximum Disparity Rate" shall mean the rate determined in accordance with paragraphs (a), (b) or (c) and (d) below. (a) If the Integration Level selected by the Employer in the Adoption Agreement is equal to the Social Security Wage Base or does not exceed the greater of $10,000 or 20 percent of the Social Security Wage Base, then, except as provided in (d) below, the Maximum Disparity Rate is equal to the greater of (i) 5.7 percent or (ii) the OASDI Rate. (b) If the Integration Level selected by the Employer in the Adoption Agreement exceeds the greater of $10,000 or 20 percent of the Social Security Wage Base but is less than or equal to 80 percent of the Social Security Wage Base, then, except as provided in (d) below, the Maximum Disparity Rate is equal to the greater of (i) 4.3 percent or (ii) the OASDI Rate multiplied by a fraction the numerator of which is 4.3 and the denominator of which is 5.7. 22 45 (c) If the Integration Level selected by the Employer in the Adoption Agreement exceeds 80 percent of the Social Security Wage Base but is less than the Social Security Wage Base, then, except as provided in (d) below, the Maximum Disparity Rate is equal to the greater of (i) 5.4 percent or (ii) the OASDI Rate multiplied by a fraction the numerator of which is 5.4 and the denominator of which is 5.7. (d) If allocations for a Plan Year are made on an integrated basis pursuant to Section 4.03(b)(ii) and the provisions of Section 23.03 are applicable for such Plan Year, then for purposes of determining the Integration Rate as applied to limit allocations under Section 4.03(b)(ii), the Maximum Disparity Rate determined in accordance with paragraph (a), (b) or (c) above shall be reduced by 3 percent. If the Employer has elected in the Adoption Agreement to make a 4 percent minimum allocation pursuant to Section 23.07(b), then 4 percent shall be substituted for 3 percent in the preceding sentence. 2.36 "Nondeductible Voluntary Contribution Account" shall mean the separate account maintained pursuant to the Section 7.03(e) hereof for Nondeductible Voluntary Contributions made by the Participant and the income, expenses, gains and losses attributable thereto. 2.37 "Nondeductible Voluntary Contributions" shall mean all contributions by Participants which are not deductible voluntary contributions under Code Section 219, Rollover Contributions, or contributions of accumulated deductible employee contributions (as defined in Code Section 72(o)(5)). 2.38 "Non-Highly Compensated Employee" shall mean an Employee who is neither a Highly Compensated Employee nor a Family Member of a Highly Compensated Employee. 23 46 2.39 "Non-Highly Compensated Participant" shall mean a Non-Highly Compensated Employee who was, at any time during the Plan Year in question, eligible to participate in the Plan. 2.40 "Normal Retirement Date" or "Normal Retirement Age" shall mean the date selected by the Employer in the Adoption Agreement. 2.41 "OASDI Rate" for a Plan Year shall mean that portion of the tax rate under Code Section 3111(a) in effect on the first day of the Plan Year which is attributable to old-age insurance. 2.42 "One-Year Break in Service" shall mean a 12-consecutive-month period in which an Employee does not complete more than 500 Hours of Service unless the number of Hours of Service specified in the Adoption Agreement for purposes of determining a Year of Service is less than 501, in which case a 12-consecutive-month period in which an Employee has fewer than that number of Hours of Service shall be a One-Year Break in Service. The computation period over which One-Year Breaks in Service shall be measured shall be the same computation period over which Years of Service are measured. 2.43 "Owner-Employee" shall mean an Employee who is a sole proprietor adopting this Plan as the Employer, or who is a partner owning more than 10% of either the capital or profits interest of a partnership adopting this Plan as the Employer. Solely for the purposes of Article XII hereof, an Owner-Employee shall also mean an Employee who owns (or is considered as owning within the meaning of Code Section 318(a)(1)) on any day during the Year, more than 5% of the Employer if the Employer is an electing small business corporation. 24 47 2.44 "Participant" shall mean an Employee who is eligible to participate in the Plan under Article III (other than, if this Plan is adopted as a nonstandardized plan, a Self-Employed Individual who elects not to be a Participant in the Plan) and any other person (including former Employees) with respect to whom any Account exists under the Plan. 2.45 "Plan" shall mean this 401(k) Plan and Adoption Agreement. 2.46 "Plan Year" shall mean the fiscal year of the Employer or a different 12-consecutive-month period as specified in the Adoption Agreement. A Plan Year may consist of less than a 12-consecutive-month period in the case of the initial Plan Year or a short Plan Year resulting from a change in Plan Year. 2.47 "Prototype 401(k) Plan" shall mean these Articles I to XXV. 2.48 "Qualified Matching Contributions" shall mean contributions made to the Trust by the Employer in accordance with Section 6.03(c) hereof on behalf of Non-Highly Compensated Participants to enable the Plan to satisfy one or more of the nondiscrimination tests set forth in Article VI. Qualified Matching Contributions are subject to full and immediate vesting and are distributable only in accordance with the distribution provisions, other than hardship distributions, that are applicable to Deferred Cash Contributions and Salary Reduction Contributions. The term "Qualified Matching Contributions" could, at the election of the Administrator, also apply to Employer Matching Contributions if such contributions are subject to full and immediate vesting and are distributable only in accordance with the distribution provisions, other than hardship distributions, that are applicable to Deferred Cash Contributions and Salary Reduction Contributions. 25 48 2.49 "Qualified Nonelective Contributions" shall mean contributions made to the Trust by the Employer in accordance with Section 6.02(c) hereof on behalf of Non-Highly Compensated Participants to enable the Plan to satisfy one or more of the nondiscrimination tests set forth in Article VI. Qualified Nonelective Contributions are subject to full and immediate vesting and are distributable only in accordance with the distribution provisions, other than hardship distributions, that are applicable to Deferred Cash Contributions and Salary Reduction Contributions. The term "Qualified Nonelective Contributions" could, at the election of the Administrator, also apply to Employer Profit Sharing Contributions if such contributions are subject to full and immediate vesting and are distributable only in accordance with the distribution provisions, other than hardship distributions, that are applicable to Deferred Cash Contributions and Salary Reduction Contributions. 2.50 Qualified Nonelective Contribution Account" shall mean the separate account maintained pursuant to Section 7.03(f) hereof for Qualified Matching Contributions and Qualified Nonelective Contributions allocated to the Participant and the income, expenses, gains and losses attributable thereto. 2.51 "Rollover Account" shall mean the separate account maintained pursuant to Section 7.03(h) hereof for any Rollover Contributions made by the Participant and the income, expenses, gains and losses attributable thereto. 2.52 "Rollover Contributions" shall mean contributions made to the Trust by Participants in accordance with Section 4.06 hereof. 26 49 2.53 "Salary Reduction Contribution Account" shall mean the separate account maintained pursuant to Section 7.03(a) hereof for Salary Reduction Contributions made on behalf of the Participant and the income, expenses, gains and losses attributable thereto. 2.54 "Salary Reduction Contributions" shall mean contributions made to the Trust by the Employer in accordance with Section 4.01 hereof as a result of the election by Participants to contribute part of their Compensation. 2.55 "Self-Employed Individual" shall mean an Employee who has Earned Income for the taxable year from the trade or business for which the Plan is established or would have had earned income but for the fact that the trade or business had no net profits for such year. 2.56 "Service" shall mean employment by the Employer and, if the Employer is maintaining the plan of a predecessor employer, or if the Employer is not maintaining the plan of a predecessor employer but has so elected in the manner described in Section 2.31 above, employment by such predecessor employer. 2.57 "Social Security Wage Base" for a Plan Year shall mean the maximum amount of annual earnings which may be considered wages under Code Section 3121(a)(1) as in effect on the first day of such Plan Year for purposes of the old-age, survivors, and disability insurance under Code Section 3111(a). 2.58 "Sponsor" shall mean any of the organizations (a) which have requested a favorable opinion letter from the National Office of the Internal Revenue Service for this Plan or (b) to which a favorable opinion letter for this Plan has been issued by the National Office of the Internal Revenue Service. 27 50 2.59 "Spouse" shall mean the Spouse or surviving Spouse of the Participant, provided that a former Spouse will be treated as the Spouse and a current Spouse will not be treated as the Spouse to the extent provided under a qualified domestic relations order (as defined in Code Section 414(p)). 2.60 "Trust" shall mean any trust established under Article XIII of this Plan for investment of the assets of the Plan. If more than one Trust is established under Article XIII, references herein to the Trust shall, as the context requires, refer to each such Trust, separately or all such Trusts, collectively. 2.61 "Trust Fund" shall mean with respect to a Trust the contributions to such Trust and any assets into which such contributions shall be invested or reinvested in accordance with Sections 13.01 and 13.03 of this Plan. If more than one Trust is established under Article XIII, references herein to the Trust Fund shall refer to the Trust Fund of each such Trust, separately, or all such Trusts, collectively, as the context requires. 2.62 "Valuation Date" shall mean, with respect to each Trust, the person or persons, including any successor or successors thereto, named in the Adoption Agreement to act as trustee of the such Trust and hold the assets of such Trust in accordance with Article XIII hereof. If more than one Trust is established under Article XIII, references herein to the Trustee shall, as the context requires, refer to the Trustee or Trustees of each such Trust. 2.63 "Valuation Date" shall mean the last day of each Plan Year and such other date(s) as may be designated by the Administrator from time to time. 2.64 "Vesting Years" shall be measured on the 12-consecutive-month computation period specified in the Adoption Agreement. 28 51 (a) A Participant will have a Vesting Year during any such computation period if the Participant completes the number of Hours of Service selected in the Adoption Agreement for purposes of computing a Year of Service. (b) When determining Vesting Years, unless the Employer has otherwise specified in the Adoption Agreement, there shall be excluded: (i) if this Plan is a continuation of an earlier plan which would have disregarded such service, Service before the first Plan Year to which the Act is applicable; (ii) Service before the first Plan Year in which the Participant attained age 18 and (iii) Service before the Employer maintained this Plan or a predecessor plan. 2.65 "Year" shall mean the fiscal year of the Employer. 2.66 "Year of Service" shall be measured on the 12-consecutive-month period computation period specified in the Adoption Agreement during which the Employee completes the number of Hours of Service specified in the Adoption Agreement. The initial date of employment or reemployment is the first day on which the Employee performs an Hour of Service. If the Employer specifies in the Adoption Agreement that the computation period after the initial computation period shall be the Plan Year which begins after the Employee's initial date of employment or reemployment, an Employee who is credited with the requisite number of Hours of Service in both the initial computation period and in the Plan Year which begins after the Employee's date of employment or reemployment shall be credited with two Years of Service. 29 52 ARTICLE III. ELIGIBILITY 3.01 Entry. Each Employee of the Employer, who on the Effective Date of this Plan meets the conditions specified in the Adoption Agreement, shall become eligible to participate in the Plan commencing with the Effective Date. Each other Employee of the Employer, including future Employees, shall become eligible to participate in the Plan when the eligibility requirements specified in the Adoption Agreement are met. For the purposes of this Plan's eligibility requirements, the exclusion concerning Employees who are covered by collective bargaining agreements applies to individuals who are covered by a collective bargaining contract between the Employer and Employee Representatives if contract negotiations considered retirement benefits in good faith, unless such contract specifically provides for participation in the Plan. For the purposes of this Section, "Employee Representatives" shall mean the representatives of an employee organization which engages in collective bargaining negotiations with the Employer provided that, owners, officers, and executives of the Employer do not comprise more than 50% of the employee organization's membership. 3.02 Interrupted Service. All Years of Service with the Employer are counted towards eligibility except that if the Employer has specified in the Adoption Agreement that more than one Year of Service is required before becoming a Participant eligible to receive allocations of Employer Matching Contributions and/or Employer Profit Sharing Contributions, and if the individual has a One-Year Break in Service before satisfying the relevant eligibility requirement, Service before such break will not be taken into account for purposes of determining when the individual is eligible to receive allocations of Employer Matching Contributions and/or Employer Profit Sharing Contributions once the individual 30 53 returns to the employ of the Employer. A former Employee who has met the entry requirements and who terminates Service with the Employer prior to becoming a Participant, or a former Participant, shall become a Participant immediately upon return to the employ of the Employer as a member of an eligible class of Employees. 3.03 Transfer to Eligible Class. In the event an Employee who is not a member of an eligible class of Employees becomes a member of an eligible class, such Employee shall participate immediately if such Employee has satisfied the minimum age and Service requirements and would have previously become a Participant had he or she been a member of an eligible class throughout the period of employment with the Employer. 3.04 Determination by Administrator. The Administrator shall have the discretionary authority to determine an Employee's eligibility to participate in the Plan and shall notify each Employee upon his or her admission as a Participant in the Plan. ARTICLE IV. CONTRIBUTIONS 4.01 Salary Reduction Contributions. If selected by the Employer in the Adoption Agreement, the Employer will make a Salary Reduction Contribution (for allocation to the eligible Participant's Salary Reduction Account) on behalf of each Participant who both has elected to have a portion of the Compensation which would otherwise have been paid to him or her for the Plan Year contributed to the Trust and has received Compensation during the Plan Year. With respect to such elective contributions, the following provisions shall apply: (a) an Employee shall be given an opportunity to elect, prior to the date as of which he or she becomes eligible in accordance with procedures set by the Administrator, 31 54 to have Salary Reduction Contributions made on his or her behalf or, in the case of an Employee who becomes eligible immediately upon becoming an Employee, as soon as is administratively possible following his or her initial date of eligibility; (b) Participants shall be given opportunities to elect to commence having Salary Reduction Contributions made on their respective behalves at such other time or times as the Administrator designates; (c) such elections may only be made on a prospective basis and pursuant to written, salary reduction agreements between the Employee and the Employer; (d) each such written, salary reduction agreement shall be in such form and subject to such rules as the Administrator may prescribe, and the agreement shall specify the percentage or amount of Compensation that the Participant desires to contribute (but in no event may such contribution exceed the percentage of Compensation specified in the Adoption Agreement); (e) a salary reduction agreement may be amended or terminated prospectively during the Plan Year at such times and in such manner as permitted by rules prescribed by the Administrator; (f) Salary Reduction Contributions made on behalf of a Participant shall be in an amount equal to the percentage or amount of Compensation specified in the eligible Participant's salary reduction agreement; provided, however, that at any time during a Plan Year the Administrator may reduce the rate of Salary Reduction Contributions to be made on behalf of any Participant for the remainder of the Plan Year to the extent the Administrator determines necessary to comply with the limitations of Section 4.08, and Articles V and VI 32 55 hereof. Any amount which cannot be contributed to the Trust because of those limitations shall be paid to the Participant in cash and such payment shall be subject to federal income and other tax withholding by the Employer. 4.02 Deferred Cash Contributions. If selected by the Employer in the Adoption Agreement, the Employer will make a Deferred Cash Contribution on behalf of each eligible Participant (as determined in accordance with the Adoption Agreement), in an amount equal to the Deferred Cash Allocation specified in the Adoption Agreement, as expressed as a percentage of such Participant's Compensation. With respect to Participants' elections not to have amounts contributed, the following provisions shall apply: (a) each Participant shall be afforded a reasonable opportunity to elect not to have Deferred Cash Allocations contributed to the Trust on his or her behalf at least once during each Plan Year and at such other time or times as the Administrator elects; (b) such elections may only be made pursuant to written agreements between the Participant and the Employer; (c) each such written agreement shall be in such form and subject to such rules as the Administrator may prescribe, and the election shall specify the amount of the Deferred Cash Allocation that the Participant desires to receive in cash; and (d) the amount which a Participant has elected to receive in cash pursuant to such an election shall be paid to the Participant by the Employer no later than the last day on which the Deferred Cash Contributions for the Plan Year in question must be paid to the Trust under Section 7.02 hereof. 33 56 Notwithstanding the above, the Deferred Cash Contribution otherwise to be made for a Participant may be reduced to the extent necessary to comply with the limitations of Section 4.08 hereof and shall be reduced to the extent necessary to comply with the limitations of Articles V and VI hereof. Any amount which cannot be contributed to the Trust because of those limitations shall be paid to the Participant in cash and such payment shall be subject to federal income and other tax withholding by the Employer. 4.03 Employer Profit Sharing Contributions. If selected by the Employer in the Adoption Agreement, for each Plan Year, the Employer will contribute, as Employer Profit Sharing Contributions, either a fixed amount or the amount determined by it in its discretion. Employer Profit Sharing Contributions, plus any forfeitures under Section 8.02 hereof, for a Plan Year shall be allocated as of the last day of such Plan Year among the Employer Profit Sharing Contribution Accounts of eligible Participants (as determined in accordance with the Adoption Agreement), as follows: (a) If a non-integrated formula is elected in the Adoption Agreement, such contribution and forfeitures shall be allocated to the Employer Profit Sharing Contribution Account of each eligible Participant in the ratio that each such Participant's Compensation for the Plan Year bears to the total Compensation paid to all eligible Participants for the Plan Year; and (b) If an integrated formula is elected in the Adoption Agreement, such contributions and forfeitures shall be allocated in the following steps: (i) First, Employer Profit Sharing Contributions and forfeitures will be allocated to the Employer Profit Sharing Contribution Account of each eligible Participant 34 57 in the ratio that the sum of each such Participant's Compensation and Compensation in excess of the Integration Level for the Plan Year bears to the sum of Compensation and Compensation in excess of the Integration Level for all such eligible Participants for the Plan Year, provided that the amount so credited to any such Participant's Employer Profit Sharing Contribution Account for the Plan Year shall not exceed the product of the Integration Rate times the sum of the Participant's Compensation and Compensation in excess of the Integration Level for the Plan Year. For purposes of this step, in the case of any Participant who has exceeded the cumulative permitted disparity limit described below, two times such Participant's Compensation for the Plan Year will be taken into account. (ii) Next, any remaining Employer Profit Sharing Contributions and forfeitures will be allocated to the Employer Profit Sharing Contribution Account of each eligible Participant in the ratio that each such Participant's Compensation for the Plan Year bears to the total Compensation paid to all eligible Participants for the Plan Year. (c) Overall permitted disparity limits. (i) Annual overall permitted disparity limit: Notwithstanding the preceding paragraphs, for any Plan Year this Plan benefits any Participant who benefits under another qualified plan or simplified employee pension, as defined in Section 408(k) of the Code, maintained by the Employer that provides for permitted disparity (or imputes disparity), Employer contributions and forfeitures will be allocated pursuant to the provisions of Section 4.03(a) rather than 4.03(b). (ii) Cumulative permitted disparity limit: Effective for Plan Years beginning on or after January 1, 1995, the cumulative permitted disparity limit for a 35 58 Participant is 35 total cumulative permitted disparity years. Total cumulative permitted years means the number of years credited to the Participant for allocation or accrual purposes under this Plan, any other qualified plan or simplified employee pension plan (whether or not terminated) ever maintained by the Employer. For purposes of determining the Participant's cumulative permitted disparity limit, all years ending in the same calendar year are treated as the same year. If the Participant has not benefitted under a defined benefit or target benefit plan for any year beginning on or after January 1, 1994, the Participant has no cumulative disparity limit. 4.04 Employer Matching Contributions. (a) If selected by the Employer in the Adoption Agreement, the Employer will make an Employer Matching Contribution (for allocation together with forfeitures under Section 8.02 below) to the Participant's Employer Matching Contribution Account on behalf of each eligible Participant (as determined in accordance with the Adoption Agreement) for each Plan Year that a contribution within one or more of the contribution categories selected by the Employer in the Adoption Agreement (i.e;, Salary Reduction Contributions, Deferred Cash Contributions, or Nondeductible Voluntary Contributions) is allocated to such Participant's Account. The Employer Matching Contribution made for an eligible Participant shall be in an amount determined in accordance with the Adoption Agreement and shall be allocated in the manner specified in the Adoption Agreement. (b) Notwithstanding any implication of the preceding subsection (a) to the contrary, the Employer Matching Contribution otherwise to be made for a Participant may be reduced to the extent necessary to comply with the limitations of Section 4.08 hereof and shall 36 59 be reduced to the extent necessary to comply with the limitations of Articles V. Any amount which cannot be contributed to the Trust because of these limitations will be retained by the Employer, and the Employer shall have no obligation to contribute such amount to the Trust. 4.05 Nondeductible Voluntary Contributions. If, in the Adoption Agreement, the Employer has specified that Participants may make Nondeductible Voluntary Contributions, a Participant may make such contributions to his or her Account; provided, however, that a Participant's right to make such contributions shall be subject to the conditions and limitations specified below: (a) The aggregate amount of a Participant's Nondeductible Voluntary Contributions shall not cause the Annual Addition (as defined in Section 5.05(a) hereof) to his or her Account to exceed the limitations set forth in Article V. (b) A Participant's Nondeductible Voluntary Contributions shall be allocated to his or her Nondeductible Voluntary Contribution Account under Section 7.03(e) hereof. (c) At any time during a Plan Year, the Administrator may cause a Participant to reduce the rate of his or her Nondeductible Voluntary Contributions for the remainder of the Plan Year to the extent the Administrator determines necessary to comply with the limitations of Article V and VI hereof. 4.06 Rollover Contributions. The Administrator may, in its discretion, direct the Trustee to accept a Rollover Contribution upon the express request of an Employee wishing to make such Rollover Contribution, subject to the consent of the Trustee if the contribution includes property other than cash. A Rollover Contribution shall mean a contribution which is an "eligible rollover distribution" within the meaning of Code Section 402(c)(4) or a "rollover 37 60 contribution" within the meaning of Code Section 408(d)(3)(A)(ii) and which satisfies all applicable provisions of the Code. Each Rollover Contribution made by an Employee shall be allocated to his or her Rollover Account pursuant to Section 7.03(h) hereof. Such Rollover Account shall be invested by the Trustee as part of the Trust Fund, pursuant to Article XIII hereafter. An Employee may make a contribution under this Section 4.06 whether or not he or she has satisfied the age and service participation requirements set forth in the Adoption Agreement. An Employee who makes a contribution under this Section 4.06 and does not otherwise qualify as a Participant is, nevertheless, deemed to be a Participant for the limited purpose of administering that contribution. The Administrator may, in its discretion, accept accumulated deductible employee contributions (as defined in Code Section 72(o)(5)) that were distributed from a qualified retirement plan and rolled over pursuant to Code Sections 402(c), 403(a)(4), or 408(d)(3). The rolled over amount will be added to the Participant's Deductible Voluntary Contribution Account. 4.07 Transfers from Other Qualified Plans. The Administrator may, in its discretion, direct the Trustee to accept the transfer of any assets held for a Participant's benefit under a qualified retirement plan of a former employer of such Participant. Such a transfer shall be made directly between the trustee or custodian of the former employer's plan and the Trustee in the form of cash or its equivalent, and shall be accompanied by written instruction showing separately the portion of the transfer attributable to types of contributions made by the former employer and pre-tax and after-tax contributions made by the Participant, respectively. Separate written instructions delivered by the Administrator shall identify the portion of the 38 61 transferred funds, if any, attributable to any period during which the Participant participated in a defined benefit plan, money purchase pension plan (including a target benefit plan), stock bonus plan or profit sharing plan which would otherwise have provided a life annuity form of payment to the Participant. The Trustee and recordkeeper shall be entitled to rely on such written instructions with respect to the character of the transferred funds. Except as otherwise provided in Article XXIV, the amounts transferred shall be allocated to separate accounts as provided in Section 7.03 that match the character of the transferred funds. 4.08 Limitations on Contributions. During a Plan Year, Employer Profit Sharing Contributions and Employer Matching Contributions may not, in the aggregate, exceed (a) 15% (or such larger percentage as may be permitted by the Code as a current deduction to the Employer with respect to any Plan Year) of the total Compensation (disregarding any exclusion from Compensation specified by the Employer in the Adoption Agreement) paid to, or accrued by the Employer for, Participants for the Year ending in the Plan Year, less (b) any amounts contributed as Salary Reduction Contributions and Deferred Cash Contributions, plus (c) any unused pre-'87 credit carryovers. For this purpose, a "pre-'87 credit carryover" is the amount by which Employer Contributions for a previous Year which commenced before January 1, 1987 were less than 15% of the total Compensation (disregarding any exclusion from Compensation specified by the Employer in the Adoption Agreement) paid or accrued by the Employer to Participants for such Year, but such unused pre-'87 credit carryover shall in no event permit the Employer Contributions for a Year to exceed 25% (or such larger percentage as may be permitted by the Code as a deduction to the Employer) of the total Compensation (disregarding any exclusion from Compensation specified by the Employer in 39 62 the Adoption Agreement) paid or accrued by the Employer to Participants for the Year ending in the Plan Year in question. 4.09 Deductible Voluntary Contributions. This Plan will not accept deductible voluntary contributions for taxable years beginning after December 31, 1986. Deductible voluntary contributions made in prior taxable years shall be maintained in the Participant's Deductible Voluntary Contribution Account and shall share in the gains and losses of the Trust Fund in accordance with Section 8.02(e). No part of a Participant's Deductible Voluntary Contribution Account may be used to purchase life insurance. A Participant may withdraw all or a portion of his or her Deductible Voluntary Contribution Account in accordance with Section 11.01. ARTICLE V. CODE SECTION 415 LIMITATIONS ON ALLOCATIONS 5.01 Employers Maintaining No Other Plan. (a) If a Participant does not participate in, and has never participated in another qualified plan, a welfare benefit fund (as defined in Code Section 419(e)), an individual medical account (as defined in Code Section 415(1)(2)), or a simplified employee pension (as defined in Code Section 408(k)) maintained by the Employer, the amount of the Annual Addition which may be credited to the Participant's Account for any Limitation Year shall not exceed the lesser of the Maximum Permissible Amount or any other limitation contained in the Plan. (b) If the Employer Contribution (including any forfeitures) that would otherwise be allocated to a Participant's Account would cause the Annual Addition for the 40 63 Limitation Year to exceed the Maximum Permissible Amount, the amount allocated will be reduced so that any Excess Amount shall be eliminated and, consequently, the Annual Addition for the Limitation Year will equal the Maximum Permissible Amount. (i) Prior to determining the Participant's actual Compensation for the Limitation Year, the Employer may determine the Maximum Permissible Amount for a Participant on the basis of a reasonable estimation of the Participant's Compensation for the Limitation Year, uniformly determined for all Participants similarly situated. (ii) As soon as is administratively feasible after the end of each Limitation Year, the Maximum Permissible Amount for the Limitation Year will be determined on the basis of Participants' actual Compensation for the Limitation Year. (c) If the allocation of forfeitures or the use by the Employer of the estimation described in Section 5.01(b)(i) above results in an Excess Amount, such Excess Amount shall be eliminated pursuant to the following procedure: (i) The portion of the Excess Amount consisting of Nondeductible Voluntary Contributions which are a part of the Annual Addition shall be returned to the Participant (with any income or gains attributable thereto) as soon as administratively feasible; (ii) At the election of the Administrator, if after the application of Subparagraph (i) an Excess Amount still exists, the portion of the Excess Amount consisting of Salary Reduction Contributions and Deferred Cash Contributions (with any income or gains attributable thereto) shall be returned to the Participant; (iii) If after the application of subparagraph (ii) an Excess Amount still exists and the Participant is covered by the Plan at the end of a Limitation Year, the 41 64 Excess Amount in the Participant's Account will be used to reduce Employer Contributions (including any allocation of forfeitures) for such Participant in the next Limitation Year, and each succeeding Limitation Year if necessary; (iv) If after the application of subparagraph (iii) an Excess Amount still exists and the Participant is not covered by the Plan at the end of a Limitation Year, the Excess Amount will be held unallocated in a suspense account. The suspense account will be applied to reduce proportionately future Employer Contributions (including any allocation of forfeitures) for all remaining Participants in the next Limitation Year, and each succeeding Limitation Year, if necessary. If a suspense account is in existence at any time during a Limitation Year pursuant to this subparagraph, it will not participate in the allocation of the Trust's investment gains and losses. In the event of termination of the Plan, the suspense account shall revert to the Employer to the extent it may not then be allocated to any Participant's Account. (v) If a suspense account is in existence at any time during a particular Limitation Year, all amounts in the suspense account must be allocated and reallocated to Participants' Accounts before any Employer Contributions or Nondeductible Voluntary Contribution may be made to the Plan for that Limitation Year. (d) Notwithstanding any other provision in subsections (a) through (c), the Employer shall not contribute any amount that would cause an allocation to the suspense account as of the date the contribution is allocated. 42 65 5.02 Employers Maintaining Other Master or Prototype Defined Contribution Plans. (a) This Section applies if, in addition to this Plan, a Participant is covered under another qualified Master or Prototype defined contribution plan, a welfare benefit fund (as defined in Code Section 419(e)), an individual medical account (as defined in Code Section 415(1)(2)), or a simplified employee pension (as defined in Code Section 408(k)) maintained by the Employer during any Limitation Year. The Annual Addition which may be allocated to any Participant's Account for any such Limitation Year shall not exceed the Maximum Permissible Amount, reduced by the sum of any portion of the Annual Addition credited to the Participant's account under such other plans, welfare benefit funds, and individual medical accounts for the same Limitation Year. (b) If the Annual Addition with respect to a Participant under other defined contribution plans, welfare benefit funds, individual medical accounts and simplified employee pensions maintained by the Employer of what would be portions of the Annual Addition (if the allocations were made under the Plan) are less than the Maximum Permissible Amount and the Employer Contribution that would otherwise be contributed or allocated to the Participant's Account under this Plan would cause the Annual Addition for the Limitation Year to exceed this limitation, the amount contributed or allocated will be reduced so that the Annual Addition under all such plans and funds for the Limitation Year will equal the Maximum Permissible Amount. (c) If the Annual Addition with respect to the Participant under such other defined contribution plans, welfare benefit funds, individual medical accounts and simplified employee pensions in the aggregate are equal to or greater than the Maximum Permissible 43 66 Amount, no amount will be contributed or allocated to the Participant's Account under this Plan for the Limitation Year. (d) Prior to determining the Participant's actual Compensation for the Limitation Year, the Employer may determine the Maximum Permissible Amount for a Participant in the manner described in Section 5.01(b)(i) provided the Employer complies with the provisions of Section 5.01(b)(ii). (e) If, pursuant to Section 5.02(d) or as a result of the allocation of forfeitures, a Participant's Annual Addition under this Plan and such Participant's annual additions under such other defined contributions plans, welfare benefit funds, individual medical accounts and simplified employee pensions would result in an Excess Amount for a Limitation Year, the Excess Amount will be deemed to consist of the annual additions last allocated, except that annual additions attributable to a simplified employee pension will be deemed to have been allocated first, followed by annual additions to a welfare benefit find or individual medical account, regardless of the actual allocation date. (f) If an Excess Amount was allocated to a Participant under this Plan on a date which coincides with the date an allocation was made under another plan, the Excess Amount attributed to this Plan will be the product of: (i) The total Excess Amount allocated as of such date, multiplied by (ii) the quotient obtained by dividing (A) the portion of the Annual Addition allocated to the Participant for the Limitation Year as of such date by 44 67 (B) the total Annual Addition allocated to the Participant for the Limitation Year as of such date under this and all the other qualified Master or Prototype defined contribution plans maintained by the Employer. (g) Any Excess Amount attributed to the Plan will be disposed in the manner described in Section 5.01. 5.03 Employers Maintaining Other Defined Contribution Plans. If a Participant is covered under another qualified defined contribution plan which is not a Master or Prototype plan, the Annual Addition credited to the Participant's Account under this Plan for any Limitation Year will be limited in accordance with the provisions of Section 5.02 above as though the plan were a Master or Prototype Plan, unless the Employer provides other limitations pursuant to the Adoption Agreement. 5.04 Employers Maintaining Defined Benefit Plans. If the Employer maintains, or at any time maintained, a qualified defined benefit plan covering any Participant in this Plan, the sum of the Participant's Defined Benefit Plan Fraction and Defined Contribution Plan Fraction will not exceed 1.0 in any Limitation Year. The Annual Addition which may be credited to the Participant's Account under this Plan for any Limitation Year will be limited in accordance with the provisions of Section 5:02 above, unless the Employer provides other limitations pursuant to the Adoption Agreement. 5.05 Definitions. For purposes of this Article, the following terms shall be defined as follows: 45 68 (a) Annual Addition. With respect to any Participant, the "Annual Addition" shall be the sum of the following amounts credited to a Participant's Account for the Limitation Year: (i) Employer Contributions; (ii) forfeitures; and (iii) Nondeductible Voluntary Contributions. For the purposes of calculating the amount of Employer Contributions credited to a Participant's Account, Excess Elective Deferrals distributed on or before the April 15 deadline described in Section 6.01(b) below shall not be considered to be amounts credited to the Participant's Account but Excess Contributions distributed to the Participant pursuant to Section 6.02 below, and Excess Aggregate Contributions distributed to, or forfeited by, the Participant pursuant to Section 6.03, 6.04 or 6.05 below shall be considered to be amounts credited to a Participant's Account. Any Excess Amount applied under Section 5.01(c)(iii) or (iv) or Section 5.02(e) hereof in a Limitation Year to reduce Employer Contributions will be considered part of the Annual Addition for such Limitation Year. Amounts allocated, after March 31, 1984, to an individual medical account (as defined in Code Section 415(1)(2)) which is part of a pension or an annuity plan maintained by the Employer, or to a simplified employee pension (as defined in Code Section 408(k)) maintained by the Employer, are treated as part of the Annual Addition. Also, amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, which are attributable to post-retirement medical benefits allocated to the separate account of a Key Employee (as defined in Section 23.02(a) hereof) 46 69 under a welfare benefit fund (as defined in Code Section 419(e)) maintained by the Employer, are treated as part of the Annual Addition but only for the purpose of determining whether the dollar limitation portion of the definition of Maximum Permissible Amount has been exceeded. (b) Compensation. For the purposes of this Article V, the term "Compensation" shall mean one of the following as selected by the Employer in the Adoption Agreement: (i) W-2 Compensation. Information required to be reported under Sections 6041, 6051 and 6052 of the Code (Wages, tips and other compensation as reported on Form W-2). Compensation is defined as wages within the meaning of Section 3401(a) and all other payments of compensation to an Employee by the Employer (in the course of the Employer's trade or business) for which the Employer is required to furnish the Employee a written statement under Sections 6041(d), 6051(a)(3) and 6052. Compensation must be determined without regard to any rules under Section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Section 3401(a)(2)). (ii) 415 Safe Harbor Compensation. Wages, salaries, and fees for professional services and other amounts received for personal services actually rendered in the course of employment with the Employer maintaining the Plan (including, but not limited to commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses), and excluding the following: (A) Employer contributions to a plan of deferred compensation which are not includable in the Participant's gross income for the taxable year in 47 70 which contributed, or Employer contributions under a simplified employee pension plan, or any distributions from a plan of deferred compensation; (B) Amounts realized from the exercise of a non-qualified stock option, or when property transferred to the Participant in connection with the performance of services either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (C) Amounts realized from the sale, exchange or other disposition of stock acquired under an incentive stock option; and (D) Other amounts which received special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity described in Code Section 403(b) (whether or not the amounts are actually excludable from the gross income of the Participant). (iii) Safe Harbor Alternative Definition. Compensation as defined in (ii) above, reduced by all of the following items (even if includable in gross income): reimbursements or other expenses allowances, fringe benefits (cash and non-cash) moving expenses, deferred compensation and welfare benefits. For any Self-Employed Individual, Compensation shall mean Earned Income. For purposes of applying the limitations of this Article V, Compensation for a Limitation Year is the Compensation actually paid or made available in gross income during such year. Notwithstanding the preceding sentence, Compensation for a Participant in a defined contribution plan who is permanently and totally disabled (as defined in Code Section 22(e)(3)) 48 71 is the Compensation such Participant would have received for the Limitation Year if the Participant was paid at the rate of Compensation paid immediately before becoming permanently and totally disabled; such imputed compensation for the disabled Participant may be taken into account only if the Participant is not a Highly Compensated Employee, and contributions made on behalf of such a Participant are nonforfeitable when made. (c) Defined Benefit Fraction. The "Defined Benefit Fraction" shall be a fraction, the numerator of which is the sum of the Participant's Projected Annual Benefits under all the defined benefit plans (whether or not terminated) maintained by the Employer, and the denominator of which is the lesser of 125% of the dollar limitation in effect for the Limitation Year under Code Section 415(b)(l)(A) or 140% of the Participant's Highest Average Compensation (including any adjustments required by Code Section 415(b)). Notwithstanding the above, if the Participant was a participant as of the first day of the first Limitation Year beginning after December 31, 1986 in one or more defined benefit plans maintained by the Employer which were in existence on May 6, 1986, the denominator of this fraction will not be less than 125% of the sum of the annual benefits under such plans which the Participant had accrued as of the end of the last Limitation Year beginning before January 1, 1987 (disregarding any changes in the terms and conditions of the Plan after May 5, 1986). The preceding sentence applies only if the defined benefit plans individually and in the aggregate satisfied the requirements of Code Section 415 for all Limitation Years beginning before January 1, 1987. 49 72 (d) Defined Contribution Dollar Limitation. The "Defined Contribution Dollar Limitation" shall be the greater of: (i) $30,000; or (ii) one-fourth (1/4) of the defined benefit dollar limitation set forth in Code Section 415(b)(i) as in effect for the Limitation Year. (e) Defined Contribution Fraction. The "Defined Contribution Fraction" shall be a fraction, the numerator of which is the sum of the Annual Additions to the Participant's account under all the defined contribution plans (whether or not terminated) maintained by the Employer for the current and all prior Limitation Years (including the Annual Additions attributable to the Participant's nondeductible employee contributions to all defined benefit plans, whether or not terminated, maintained by the Employer, and the Annual Additions attributable to all welfare benefit funds (as defined in Code Section 419(e)), individual medical accounts (as defined in Code Section 415(1)(2)) and simplified employee pensions (as defined in Code Section 408(k)), and the denominator of which is the sum of the Maximum Aggregate Amounts for the current and all prior Limitation Years of service with the Employer (regardless of whether a defined contribution plan was maintained by the Employer). The Maximum Aggregate Amount in any Limitation Year is the lesser of 125% of the dollar limitation in effect under Code Section 415(c)(1)(A) or 35% of the Participant's Compensation for such year. If the Participant was a participant as of the end of the first day of the first Limitation Year beginning after December 31, 1986 in one or more defined contribution plans maintained by the Employer which were in existence on May 6, 1986, the numerator of this fraction will be adjusted if the sum of this Defined Contribution Fraction and the Defined Benefit Fraction 50 73 would otherwise exceed 1.0 under the terms of this Plan. Under the adjustment, an amount equal to the product of: (i) the excess of the sum of the fractions over 1.0, multiplied by (ii) the denominator of this Defined Contribution Fraction, will be permanently subtracted from the numerator of this fraction. The adjustment is calculated using the fractions as they would be computed as of the end of the last Limitation Year beginning before January 1, 1987 (disregarding any changes in the terms and conditions of the Plan made after May 5, 1986 but using the Code Section 415 limitation applicable to the first Limitation Year beginning on or after January 1, 1987). This adjustment also will be made if at the end of the last Limitation Year beginning before January 1, 1984, the sum of the fractions exceeds 1.0 because of accruals or additions that were made before the limitations of this Section 5 became effective to any plans of the Employer in existence on July 1, 1982. For purposes of this paragraph, a Master or Prototype plan with an opinion letter issued before January 1, 1983, which was adopted by the Employer on or before September 30, 1983, is treated as a plan in existence on July 1, 1982. (f) Employer. "Employer" means the Employer that adopts this Plan and all members of (i) a controlled group of corporations (as defined in Code Section 414(b) as modified by Code Section 415(h)), (ii) commonly controlled trades or businesses (whether or not incorporated) (as defined in Code Section 414(c) as modified by Code Section 415(h)), or (iii) affiliated service groups (as defined in Code Section 414(m)) of which the Employer is a part and (iv) any other entity required to be aggregated with the employer pursuant to Code Section 414(o) and the regulations thereunder. 51 74 (g) Excess Amount. The "Excess Amount" is the excess of what would otherwise be a Participant's Annual Addition for the Limitation Year over the Maximum Permissible Amount. If at the end of a Limitation Year when the Maximum Permissible Amount is determined on the basis of the Participant's actual Compensation for the year, an Excess Amount results, the Excess Amount will be deemed to consist of the portion of the Annual Addition last allocated, except that the portion of the Annual Addition attributable to a welfare benefit fund will be deemed to have been allocated first regardless of the actual allocation date. (h) Highest Average Compensation. A Participant's "Highest Average Compensation" is his or her average Compensation for the three consecutive Years of Service with the Employer that produces the highest average. (i) Limitation Year. A "Limitation Year" is the Plan Year or any other 12-consecutive-month period specified by the Employer in the Adoption Agreement. All qualified plans maintained by the Employer must use the same Limitation Year. If the Limitation Year is amended to a different 12-consecutive-month period, the new Limitation Year must begin on a date within the Limitation Year in which the amendment is made. (j) Master or Prototype Plan. A "Master or Prototype" plan is a plan the form of which is the subject of a favorable opinion letter from the Internal Revenue Service. (k) Maximum Permissible Amount. For a Limitation Year, the "Maximum Permissible Amount" with respect to any Participant shall be the lesser of (i) the Defined Contribution Dollar Limitation or (ii) 25% of the Participant's Compensation for the Limitation Year. 52 75 The compensation limitation referred to in (ii) above shall not apply to contribution for medical benefits (within the meaning of Code Section 401(h) or Section 419A(f)(2)) which is otherwise treated as an Annual Addition under Code Section 415(l)(1) or 419A(d)(2). (l) Projected Annual Benefit. The "Projected Annual Benefit" is the annual retirement benefit (adjusted to an actuarial equivalent straight life annuity if such benefit is expressed in a form other than a straight life annuity or qualified joint and survivor annuity) to which the Participant would be entitled under the terms of the plan assuming: (i) the Participant will continue employment until normal retirement date under the plan (or current age, if later), and (ii) the Participant's compensation for the current Limitation Year and all other relevant factors used to determine benefits under the plan will remain constant for all future Limitation Years. ARTICLE VI. LIMITATIONS ON DEFERRALS, MATCHING ALLOCATIONS AND VOLUNTARY CONTRIBUTIONS. 6.01 Maximum Amount of Elective Deferrals. For each calendar year, the sum of (i) the Salary Reduction Contributions, (ii) Deferred Cash Contributions (together "Elective Deferrals") made on behalf of any Participant under this Plan, and (iii) similar contributions made under all other plans of the Employer with a cash or deferred feature shall not exceed the dollar limitation contained in Code Section 402(g) in effect at the beginning of such calendar year. Elective Deferrals shall not include amounts properly distributed to a Participant as an Excess Amount pursuant to Section 6.01(b). If, during any calendar year, more than the 53 76 maximum permissible amount under Code Section 402(g) is allocated pursuant to one or more cash or deferred arrangements to a Participant's accounts under the Plan and any other plan described in Code Sections 401(k), 408(k), 403(b), 457, or 501(c)(18), the following provisions shall apply: (a) The Participant may, but is not required to, assign to this Plan all or part of such contributions in excess of the maximum permissible amount (hereinafter "Excess Elective Deferrals") by notifying the Administrator by March 1 of the calendar year next succeeding the calendar year in which such contributions are made. To be effective, such notice must be in writing, state that Excess Elective Deferrals have been made on behalf of such Participant for the preceding calendar year, and be submitted to the Administrator. A Participant is deemed to notify the Administrator of any Excess Elective Deferrals that arise by taking into account only those Excess Elective Deferrals made to this Plan and any other plans of this Employer. (b) To the extent a Participant timely assigns, or is deemed to assign, Excess Elective Deferrals to the Plan pursuant to (a) above, the Administrator shall direct the Trustee to distribute such Excess Elective Deferrals, adjusted for income or loss allocable thereto pursuant to Section 6.01(c) below, to the Participant no later than the April 15 of the calendar year next succeeding the calendar year in which such Excess Elective Deferrals were made. (c) Excess Elective Deferrals shall be adjusted for any income or loss up to the last day of the calendar year in which such Excess Elective Deferrals were made. The income or loss allocable to Excess Elective Deferrals is (i) the income or loss allocable to the 54 77 Participant's Salary Reduction Contribution Account and/or Deferred Cash Contribution Account, as the case may be, for the taxable calendar year multiplied by a fraction, the numerator of which is such Participant's Excess Elective Deferrals for the year and the denominator is the balance of such account or accounts, as the case may be, determined as the beginning of the calendar year plus any Salary Reduction Contributions or Deferred Cash Contributions made during the calendar year without regard to any income or loss occurring during such calendar year or (ii) such other amount determined under any reasonable method, provided that such method is used consistently for all Participants in calculating the distributions required under this Article VI for the Plan Year, and is used by the Plan to allocate income or loss to Participants' Accounts. Income or loss allocable to the period between the end of the calendar year and the date of distribution shall be disregarded in determining income or loss. Excess Elective Deferrals shall be treated as an Annual Addition under the Plan, unless such amounts are distributed no later than the first April 15 following the close of the calendar year. 6.02 Limitation on Elective Deferrals. (a) For each Plan Year, the Average Deferral Percentage of the group of Highly Compensated Participants for the Plan Year may not exceed the greater of (i) 1.25 times the Average Deferral Percentage of the group of Non-Highly Compensated Participants for the same Plan Year; or (ii) the lesser of 2 times the Average Deferral Percentage of all such Non-Highly Compensated Participants, or such Average Deferral Percentage plus 2 percentage points. 55 78 For purposes of this Section 6.02, the "Average Deferral Percentage" of a specified group of Participants for a Plan Year shall be the average of the ratios (calculated separately for each Participant in such group) of (A) the amount of the Contributions actually paid over to the Trust on behalf of each Participant for each Plan Year to (B) the Participant's Compensation for the Plan Year. For purposes of this Section 6.02, "Compensation" shall have the same meaning as in Section 2.09(a); provided, however, that to the extent elected by the Employer in the Adoption Agreement "Compensation" shall exclude amounts paid for the period when the Participant was not eligible to make Elective Deferrals and/or shall include the amounts set forth in Section 2.09(b). For purposes of this Section 6.02, "Contributions" shall include both Elective Deferrals (including Excess Elective Deferrals of Highly Compensated Participants) and Qualified Nonelective Contributions, if any. Such Contributions shall not include (1) Excess Elective Deferrals of Non-Highly Compensated Participants that arise solely from Elective Deferrals made under this Plan or other plans of the Employer, and (2) Elective Deferrals that are taken into account in the Contribution Percentage Test (provided the Average Deferral Percentage test is satisfied both with and without exclusion of these Elective Deferrals). For purposes of computing Average Deferral Percentages, each Employee who would be a Participant but for the failure to make Elective Deferrals shall be treated as a Participant on whose behalf no Elective Deferrals are made. (b) Special Rules: (i) The deferral percentage of a Highly Compensated Participant for the Plan Year who is eligible to have Elective Deferrals allocated to his or her accounts under two or more arrangements described in Code Section 401(k), that are maintained by the 56 79 Employer, shall be determined as if such Elective Deferrals were made under a single arrangement. If a Highly Compensated Participant participates in two or more cash or deferred arrangements that have different Plan Years, all cash or deferred arrangements ending with or within the same calendar year shall be treated as a single arrangement. Notwithstanding the foregoing, certain plans shall be treated as separate if mandatorily disaggregated under regulations promulgated under Code Section 401(k). (ii) In the event that this Plan satisfies the requirements of Code Section 401(k), 401(a)(4), or 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such Code sections only if aggregated with this Plan, then this Section 6.02 shall be applied by determining the Average Deferral Percentages of Employees as if all such plans were a single plan. For Plan Years beginning after the December 31, 1989, plans may be aggregated in order to satisfy Code Section 401(k) only if they have the same Plan Year. (iii) For purposes of determining the deferral percentage of a Participant who is a 5% owner or one of the top ten Highly Compensated Employees, the Elective Deferrals (and, if applicable, Qualified Nonelective Contributions) and Compensation of such Participant shall include the Elective Deferrals (and, if applicable, Qualified Nonelective Contributions) and Compensation for the Plan Year of his Family Members. Such Family Members shall be disregarded as separate Participants in determining the Average Deferral Percentage both for Non-Highly Compensated Participants and for Highly Compensated Participants. 57 80 (iv) For purposes of applying the Average Deferral Percentage test, Elective Deferrals and Qualified Nonelective Contributions must be made before the last day of the 12-month period immediately following the Plan Year to which contributions relate. (v) The Employer shall maintain records sufficient to demonstrate satisfaction of the Average Deferral Percentage test and the amount of Qualified Nonelective Contributions, if any, used in such test. (vi) The determination and treatment of the deferral percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. (vii) If, in any Plan Year, the Plan benefits Employees otherwise excludable from the Plan if the Plan had imposed the greatest minimum age and service conditions permissible under Section 410(a) of the Code, and the Employer applies Section 410(b) of the Code separately to the portion of the Plan that benefits only Employees who satisfy age and service conditions under the Plan that are lower than the greatest minimum age and service conditions permissible under Section 410(a) and to the portion of the Plan that benefits Employees who have satisfied the greatest minimum age and service conditions permissible under Section 410(a), the Plan shall be treated as comprising two separate Plans and the Average Deferral Percentage test set forth in subsection (a) shall be applied separately for each group of Employees in each Plan. (c) If, for any Plan Year, the Plan is unable to satisfy the Average Deferral Percentage test set forth in subsection (a) above, the Employer may make a Qualified Nonelective Contribution to the Trust in an amount determined at the discretion of the 58 81 Employer on behalf of the group of Non-Highly Compensated Participants who were actively employed on the last day of the Plan Year and who were eligible to participate in the Plan for the entire Plan Year. The Qualified Nonelective Contribution will be allocated as follows: (i) The lowest paid Participant in the group will be allocated an amount equal to the lowest of (1) 25% of the Participant's Compensation for the Plan Year; (2) the Maximum Permissible Amount applicable to the Participant; or (3) the full amount of the Qualified Nonelective Contribution. (ii) The next lowest paid Participant will be allocated an amount equal to the lowest of (1) 25% of the Participant's Compensation for the Plan Year; (2) the Maximum Permissible Amount applicable to the Participant; or (3) the balance of the Qualified Nonelective Contribution after the above allocation. (iii) The allocation in step (ii) will be applied individually to each remaining Participant in the group, in ascending order of Compensation, until the Qualified Nonelective Contribution is fully allocated. Once the Qualified Nonelective Contribution is fully allocated, no further allocation will be made to the remaining Participants in the group. (d) If, for any Plan Year, after taking into account the Qualified Nonelective Contributions made by the Employer pursuant to Subsection (c) above, if any, the Administrator shall determine the aggregate amount of Elective Deferrals of Highly Compensated Participants for such Plan Year exceeds the maximum amount of such contributions permitted by the Average Deferral Percentage test set forth in subsection (a) above, the Administrator shall reduce such excess contributions made on behalf of Highly Compensated Participants in order of their deferral percentages, beginning with the highest of 59 82 such percentages (hereinafter "Excess Contributions"). For each Highly Compensated Participant who is so affected, the Administrator shall reduce amounts credited to his or her Salary Reduction Contribution Account and Deferred Cash Contribution Account in proportion to the Participant's Salary Reduction Contributions and Deferred Cash Contributions for the Plan Year. Excess Contributions of each Participant who is subjected to the Family Member aggregation rules shall be allocated among the Family Members of such Participant in proportion to the Elective Deferrals (and amounts treated as Elective Deferrals) of each Family Member that is combined to determine the combined deferral percentage. Such Excess Contributions, plus any income and minus any loss allocable thereto, shall be distributed to each affected Highly Compensated Participant no later than the last day of the Plan Year following the Plan Year in which such Excess Contributions were made. If Excess Contributions are not distributed before the date which is 2-1/2 months after the last day of the Plan Year in which such Excess Contributions arose, a 10% excise tax shall be imposed on the Employer maintaining the Plan with respect to such amounts. Excess Contributions shall be treated as an Annual Addition under the Plan. (e) Excess Contributions shall be adjusted for any income or loss up to and including the last day of the Plan Year for which such Excess Contributions were made. The income or loss allocable to Excess Contributions is (i) the income or loss allocable to the Participant's Salary Reduction Contribution Account and/or Deferred Cash Contribution Account, as the case may be, for the Plan Year multiplied by a fraction, the numerator of which is such Participant's Excess Contributions for the year and the denominator is the balance of such Account or Accounts, as the case may be, determined as of the beginning of 60 83 the Plan Year plus any Salary Reduction Contributions and/or Deferred Cash Contributions made during the Plan Year without regard to any income or loss occurring during such Plan Year, or (ii) such other amount determined under any reasonable method, provided that such method is used consistently for all Participants in calculating any distributions required under this Article VI for the Plan Year and is used by the Plan in allocating income or loss to Participants' Accounts. Income or loss allocable to the period between the end of the Plan Year and the date of distribution shall be disregarded. 6.03 Limitation on Voluntary Nondeductible Contributions and Employer Matching Contributions. (a) For each Plan Year, the Average Contribution Percentage of the group of Highly Compensated Participants for the Plan Year may not exceed the greater of (i) 1.25 times the Average Contribution Percentage of the group of Non-Highly Compensated Participants for the same Plan Year, or (ii) the lesser of 2 times the Average Contribution Percentage of all such Non-Highly Compensated Participants, or such Average Contribution Percentage plus 2 percentage points. For purposes of this Section 6.03, the "Average Contribution Percentage" of a specified group of Participants for a Plan year shall be the average of the ratios (expressed as a percentage and calculated separately for each Participant in such group) of (A) the Contribution Percentage Amounts actually paid over to the Trust on behalf of each Participant to (B) the Participant's Compensation for the Plan Year. For purposes of this Section 6.03, "Compensation" shall have the same meaning as in Section 2.09; provided, however, that to the extent elected by the Employer in the Adoption Agreement, "Compensation" shall exclude 61 84 amounts paid for the period when the Participant was not eligible to participate in the Plan with respect to the allocation of Employer Matching Contributions or with respect to the making of Voluntary Nondeductible Contributions and/or shall include the amounts set forth in Section 2.09(b). For purposes of this Section 6.03, "Contribution Percentage Amounts" shall be the sum of Voluntary Nondeductible Contributions and Employer Matching Contributions. Such Contribution Percentage Amounts shall not include Employer Matching Contributions that are forfeited either to correct Excess Aggregate Contributions or because the contributions to which they related are Excess Deferrals, Excess Contributions, or Excess Aggregate Contributions. In determining the Contribution Percentage Amounts, the Administrator may include Qualified Nonelective Contributions that are not used in satisfying the Average Deferral Percentage test of Section 6.02 and Qualified Matching Contributions. The Administrator also may elect to use Elective Deferrals in the Contribution Percentage Amounts so long as the Average Deferral Percentage test is met before the Elective Deferrals are used in the Average Contribution Percentage test and continues to be met following the exclusion of those Elective Deferrals that are used to meet the Average Contribution Percentage test. For purposes of computing Average Contribution Percentages, each Employee who is eligible to make Voluntary Nondeductible Contributions or Elective Deferrals or to receive an Employer Matching Contribution shall be taken into account as a Participant, whether or not he is actually making, or entitled to receive, such contributions to the Trust. (b) Special Rules: (i) For purposes of this Section 6.03, the contribution percentage of a Highly Compensated Participant for the Plan Year who is eligible to have Contribution 62 85 Percentage Amounts allocated to his or her accounts under two or more plans described in Code Section 401(a), or arrangements described in Code Section 401(m) that are maintained by the Employer, shall be determined as if the total of such Contribution Percentage Amounts was made under each plan. Notwithstanding the foregoing, certain plans shall be treated as separate if mandatorily disaggregated under regulations under Code Section 401(m). (ii) In the event that this Plan satisfies the requirements of Code Section 401(m), 401(a)(4) or 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such sections of the Code only if aggregated with this Plan, then this Section 6.03 shall be applied by determining the Contribution Percentage of Participants as if all such plans were a single plan. For Plan Years beginning after December 31, 1989, plans may be aggregated in order to satisfy Code Section 401(m) only if they have the same Plan Year. (iii) For purposes of determining the Contribution Percentage of a Participant who is a 5% owner or one of the top-ten Highly Compensated Employees, the Contribution Percentage Amounts and Compensation of such Participant shall include the Contribution Percentage Amounts and Compensation for the Plan Year of his Family Members. Such Family Members shall be disregarded as separate Employees in determining the Average Contribution Percentage both for Non-Highly Compensated Participants and for Highly Compensated Participants. (iv) For purposes of applying the Average Contribution Percentage test, Voluntary Nondeductible Contributions are considered to have been made in the Plan Year in which contributed to the Trust. Employer Matching Contributions, Elective 63 86 Deferrals, Qualified Matching Contributions and Qualified Nonelective Contributions will be considered made for a Plan Year if made no later than the end of the 12-month period immediately following the Plan Year to which such Contributions relate. (v) The Employer shall maintain records sufficient to demonstrate satisfaction of the Average Contribution Percentage test and the amount of Qualified Matching Contributions and Qualified Nonelective Contributions, if any, used in such test. (vi) The determination and treatment of the contribution percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. (vii) If, in any Plan Year, the Plan benefits Employees otherwise excludable from the Plan if the Plan had imposed the greatest minimum age and service conditions permissible under Section 410(a) of the Code, and the Employer applies Section 410(b) of the Code separately to the portion of the Plan that benefits only Employees who satisfy age and service conditions under the Plan that are lower than the greatest minimum age and service conditions permissible under Section 410(a) and to the portion of the Plan that benefits Employees who have satisfied the greatest minimum age and service conditions permissible under Section 410(a), the Plan shall be treated as comprising two separate Plans and the Average Contribution Percentage test set forth in subsection (a) shall be applied separately for each group of Employees in each Plan. (c) If, for any Plan Year, the Plan is unable to satisfy the Average Contribution Percentage test set forth in subsection (a) above, in lieu of distributing excess Contribution Percentage Amounts to Highly Compensated Participants as provided in 64 87 subsection (d) below, the Employer may make a Qualified Matching Contribution to the Trust on behalf of Non-Highly Compensated Participants in an amount sufficient to enable the Plan to meet the Average Contribution Percentage test set forth in subsection (a) above. Such Qualified Matching Contribution shall be allocated to the Qualified Nonelective Contribution Account of each Non-Highly Compensated Participant who is eligible to participate in the Plan at any time during the Plan Year in the same manner as the allocation of Employer Matching Contributions. (d) If, for any Plan Year, the Administrator shall determine that the aggregate Contribution Percentage Amounts of Highly Compensated Participants for such Plan Year exceeds the maximum amount permitted by the Average Contribution Percentage test in subsection (a) above, the Administrator shall reduce such excess Contribution Percentage Amounts made on behalf of Highly Compensated Participants in order of their contribution percentages, beginning with the highest of such percentages (hereinafter "Excess Aggregate Contributions"). The foregoing determination shall be made after first determining Excess Elective Deferrals pursuant to Section 6.01, and then determining Excess Contributions pursuant to Section 6.02. For each Highly Compensated Participant who is affected, the Administrator shall reduce, on a pro rata basis, amounts credited to his or her Voluntary Nondeductible Contribution Account and his or her Employer Matching Contribution Account. Excess Aggregate Contributions of each Highly Compensated Participant who is subject to the Family Member aggregation rules shall be allocated among the Family Members in proportion to the Voluntary Nondeductible Contributions and Employer Matching Contributions (and amounts treated as Contribution Percentage Amounts) of each Family Member that is 65 88 combined to determine the combined contribution percentage. Subject to the provisions of Section 6.05, Excess Aggregate Contributions which are attributable to the sum of Voluntary Nondeductible Contributions and fully vested Employer Matching Contributions plus any income and minus any loss allocable thereto, shall be distributed to each affected Highly Compensated Participant no later than the last day of the Plan Year following the Plan Year in which such Excess Aggregate Contributions were made. If such Excess Aggregate Contributions are not distributed within 2-1/2 months after the last day of the Plan Year in which such Excess Aggregate Contributions arose, a 10% excise tax shall be imposed on the Employer maintaining the Plan with respect to those amounts. Excess Aggregate Contributions which are attributable to Employer Matching Contributions which are not fully vested, plus any income and minus any loss allocable thereto, shall be forfeited and shall be applied to reduce future Employer Matching Contributions. Excess Aggregate Contributions shall be treated as an Annual Addition under the Plan. (e) Excess Aggregate Contributions shall be adjusted for any income or loss up to and including the last day of the Plan Year for which such Excess Aggregate Contributions were made. The income or loss allocable to Excess Aggregate Contributions is (i) the income or loss allocable to the Participant's Voluntary Nondeductible Contribution Account and/or Employer Matching Contribution Account, as the case may be, for the Plan Year multiplied by a fraction, the numerator of which is such Participant's Excess Aggregate Contributions for the year and the denominator is the balance of such Account or Accounts, as the case may be, determined as of the beginning of the Plan Year plus any Voluntary Nondeductible Contributions and/or Employer Matching Contributions made during the Plan 66 89 without regard to any income or loss occurring during such Plan Year, or (ii) such other amount determined under any reasonable method, provided that such method is used consistently for all Participants in calculating any distributions required under this Article VI for the Plan Year and is used by the Plan in allocating income or loss to Participants' Accounts. Income or loss allocable to the period between the end of the Plan Year and the date of distribution shall be disregarded. 6.04 Multiple Use Test. If one or more Highly Compensated Participants participate in both a cash or deferred arrangement and a plan subject to the Average Contribution Percentage test maintained by the Employer and the sum of the Average Deferral Percentage and Average Contribution Percentage of those Highly Compensated Participants subject to either or both tests exceeds the Aggregate Limit, then unless the Employer elects to make a Qualified Nonelective Contribution or a Qualified Matching Contribution to the Trust to the extent necessary to enable the Plan to satisfy the Aggregate Limit, the Contribution Percentage Amounts of those Highly Compensated Participants who also participate in a cash or deferred arrangement will be reduced (beginning with such Highly Compensated Participant whose contribution percentage is the highest) so that the Aggregate Limit is not exceeded. The amount by which each Highly Compensated Participant's Contribution Percentage Amount is reduced shall be treated as an Excess Aggregate Contribution. The Average Deferral Percentage and Average Contribution Percentage of the Highly Compensated Participants are determined after any corrections required to meet the Average Deferral Percentage and Average Contribution Percentage tests in Sections 6.02 and 6.03. Multiple use does not occur if both the Average Deferral Percentage and Average Contribution Percentage of the Highly 67 90 Compensated Employees do not exceed 1.25 multiplied by the Average Deferral Percentage and Average Contribution Percentage of the Non-Highly Compensated Employees. For purposes of this Section 6.04, the "Aggregate Limit" shall mean the sum of (i) 125 percent of the greater of the Average Deferral Percentage of the Non-Highly Compensated Participants for the Plan Year or the Average Contribution Percentage of the Non-Highly Compensated Participants under the Plan subject to Code Section 401(m) for the Plan Year beginning with or within the Plan Year of the cash or deferred arrangement and (ii) the lesser of 200% of, or two percentage points plus the lesser of such Average Deferral Percentage or Average Contribution Percentage. "Lesser" shall be substituted for "greater" in (i) and "greater" shall be substituted for "lesser" after "two percentage points plus the" in (ii) if such substitution would result in a larger Aggregate Limit. 6.05 Further Limitations on Employer Matching Contributions. Notwithstanding anything to the contrary in the foregoing, any Employer Matching Contributions related to a Participant's Excess Deferrals, Excess Contributions and/or Excess Aggregate Contributions shall be forfeited by such Participant and such amounts shall be applied to reduce future Employer Matching Contributions. 6.06 Special Rules. Any amount distributed to a Highly Compensated Participant pursuant to this Article VI shall not be subject to any of the consent rules for Participants and sponsors contained in Articles IX, X and XXIV, below. Amounts distributed pursuant to this Article VI shall be allocated on a pro rata basis among the Designated Investments in which a Participant's Account is invested; provided, however, that the Administrator or the Participant may specify an alternative manner in which distributions shall be allocated. 68 91 ARTICLE VII. TIME AND MANNER OF MAKING CONTRIBUTIONS 7.01 Manner. Unless otherwise agreed to by the Trustee, contributions to said Trustee shall be made only in cash. All contributions may be made in one or more installments. 7.02 Time. Employer Contributions (other than Salary Reduction Contributions and Deferred Cash Contributions) with respect to a Plan Year shall be made before the time limit, including extensions thereof, for filing the Employer's federal income tax return for the Year with or within which the particular Plan Year ends (or such later time as is permitted by regulations authorized by the Secretary of the Treasury or delegate or such earlier time as the Secretary of the Treasury or delegate prescribes with respect to contributions used to satisfy the nondiscrimination tests set forth in Article VI above). Unless the Secretary of the Treasury prescribes a later date in regulations, Salary Reduction and Deferred Cash Contributions shall be made within 30 days after the date on which, in the absence of the Participant's election to make such contributions, such amounts would have been payable to the Participant as cash compensation. Nondeductible Voluntary Contributions for a given Limitation Year (as defined in Section 5.05(i) above) must be made during such Limitation Year or within 30 days of the end of the Limitation Year. Rollover Contributions may be made at any time acceptable to the Administrator in accordance with Section 4.06 hereof. All contributions shall be paid to the Administrator for transfer to the Trustee, as soon as possible, or, if acceptable to the Administrator and the Trustee, such contributions may be paid directly to the Trustee. The Administrator shall transfer such contributions to the Trustee as soon as possible. The Administrator may establish a payroll deduction system or other 69 92 procedure to assist the making of Nondeductible Voluntary Contributions to the Trust, and the Administrator may from time to time adopt rules or policies governing the manner in which such contributions may be made so that the Plan may be conveniently administered. 7.03 Separate Accounts. For each Participant, a separate account shall be maintained for each of the following types of contributions and the income, expenses, gains and losses attributable thereto: (a) Salary Reduction Contributions, if selected in the Adoption Agreement; (b) Deferred Cash Contributions, if selected in the Adoption Agreement; (c) Employer Profit Sharing Contributions, if selected in the Adoption Agreement; (d) Employer Matching Contributions, if selected in the Adoption Agreement; (e) Nondeductible Voluntary Contributions, if selected in the Adoption Agreement, with separate accounts maintained for pre-1987 Nondeductible Voluntary Contributions and post-1986 Nondeductible Voluntary Contributions; (f) Qualified Nonelective Contributions and Qualified Matching Contributions, if selected in the Adoption Agreement; (g) Deductible Voluntary Contributions, if Participants made such contributions in past years; and (h) Rollover Contributions, if, pursuant to Section 4.06 hereof, the Administrator directs the Trustee to accept such contributions. 70 93 In addition, pursuant to Section 8.03 hereof, separate accounts will be maintained for the pre-break and post-break Employer Contributions made on behalf of a Participant who has Service excluded from the calculations of Vesting Years. Notwithstanding the above, if a Participant's rights to one or more types of Employer Contributions are immediately and fully nonforfeitable and are subject to the same distribution rules, such types of contributions may be maintained in a single account. ARTICLE VIII. VESTING 8.01 When Vested. A Participant shall always have a fully vested and nonforfeitable interest in his or her Nondeductible Voluntary Contribution Account, Deductible Voluntary Contribution Account, Salary Reduction Contribution Account, Deferred Cash Contribution Account, Qualified Nonelective Contribution Account and Rollover Account. A Participant's interest in his or her Employer Profit Sharing Contribution Account and Employer Matching Contribution Account shall be vested and nonforfeitable at Normal Retirement Date, death while in Service, Disability, upon termination (including a complete discontinuance of Employer Contributions) or partial termination of the Plan and otherwise only to the extent specified in the Adoption Agreement. 8.02 Employer Profit Sharing Contribution and Employer Matching Contribution Forfeitures. If a Participant's employment with the Employer is terminated before his or her Employer Profit Sharing Contribution Account and/or Employer Matching Contribution Account is (are) fully vested in accordance with Section 8.01, this Section 8.02 shall apply. 71 94 (a) The portion of the Participant's Employer Profit Sharing Contribution Account and/or Employer Matching Contribution Account which is to be forfeited pursuant to subsection (b) below shall be treated as follows: (i) if the Employer has not specified otherwise in the Adoption Agreement, the forfeiture shall be allocated as if it were an Employer Profit Sharing Contribution or Employer Matching Contribution, as the case may be, for the Plan Year following the Plan Year in which such forfeiture occurs, or (ii) if the Employer so specifies in the Adoption Agreement, the forfeiture(s) shall be applied to reduce the Employer's obligation to make Employer Matching Contributions for the Plan Year following the Plan Year in which the forfeiture occurs, provided that if the amount of the forfeiture to be reallocated exceeds the Employer's then unsatisfied obligation to make Employer Matching Contributions for the Plan Year, the forfeiture shall be applied to reduce the Employer's obligation to make fixed Employer Profit Sharing Contributions for the Plan Year following the Plan Year in which the forfeiture occurs. If the Plan does not provide for fixed Employer Profit Sharing Contributions, or the amount of forfeiture to be reallocated exceeds the Employer's then unsatisfied obligation to make fixed Employer Profit Sharing Contributions, the forfeiture shall be reallocated as if it were an additional discretionary Employer Profit Sharing Contribution made for the Plan Year following the Plan Year in which the forfeiture occurs. (b) If the Participant elects to receive a distribution of the value of his vested account balances in his or her Employer Profit Sharing Contribution and Employer Matching Contribution Accounts in a lump sum pursuant to the provisions of Section 10.02(a)(ii) or 72 95 receives a nonconsensual distribution pursuant to Section 10.04, the nonvested portion of his or her Employer Profit Sharing Contribution and Employer Matching Contribution Accounts shall be treated as a forfeiture and reallocated pursuant to the provisions of Section 8.02(a). For this purpose, if the value of a Participant's vested account balance in his or her Employer Profit Sharing Contribution and Employer Matching Contribution Accounts is zero, the Participant shall be deemed to have received a distribution of such vested account balance. A Participant's vested account balance shall not include accumulated deductible employee contributions within the meaning of Code Section 72(o)(5)(B) for Plan Years beginning prior to January 1, 1989. In all other cases, the nonvested portion of a Participant's Employer Profit Sharing Contribution and Employer Matching Contribution Accounts shall be treated as a forfeiture and reallocated pursuant to the provisions of Section 8.02(a) when such Participant incurs five consecutive One-Year Breaks in Service. (c) No forfeitures shall occur solely as a result of withdrawal of Deductible Voluntary Contributions, Nondeductible Voluntary Contributions, or Rollover Contributions. 8.03 Reemployment (a) If a former Participant who was not fully vested in his or her Employer Profit Sharing Contribution and/or Employer Matching Contribution Accounts at termination of employment is reemployed after incurring five consecutive One-Year Breaks in Service, he or she shall have no right to any forfeited account balance. Any undistributed vested portion of his or her Employer Profit Sharing Contribution Account shall be held in a separate vested Employer Profit Sharing Contribution Account, and future Employer Profit Sharing 73 96 Contributions on his or her behalf shall be credited to a new Employer Profit Sharing Contribution Account until such Participant becomes fully vested in such Account where upon such Participant's old and new Employer Profit Sharing Contribution Accounts shall be merged. Any undistributed vested portion of his or her Employer Matching Contribution Account shall be held in a separate vested Employer Matching Contribution Account, and future Employer Matching Contributions on his or her behalf shall be credited to a new Employer Matching Contribution Account until such Participant becomes fully vested in such Account whereupon such Participant's old and new Employer Matching Contribution Accounts shall be merged. (b) The following provisions shall apply with respect to a former Participant who was not fully vested in his or her Employer Profit Sharing Contribution and/or Employer Matching Contribution Accounts at termination of employment, and who is reemployed before he or she incurs five consecutive One-Year Breaks in Service: (i) If no amounts have been forfeited from his or her Employer Profit Sharing Contribution Account and/or Employer Matching Contribution Account, the amounts remaining in his or her Employer Profit Sharing Contribution Account and/or Employer Matching Contribution Account shall be restored to his or her credit. (ii) If the nonvested portion of the Participant's Employer Profit Sharing Contribution Account and/or Employer Matching Contribution Account has been forfeited, and the Participant has previously received the vested portions of his or her Employer Profit Sharing Contribution Account and/or Employer Matching Contribution Account, he or she shall have the right to repay to the Plan the full amount of such prior 74 97 distribution. Such repayment must be made on or before the earlier of five years after the first date on which the Participant is subsequently reemployed by the Employer, or the close of the first period of five consecutive One-Year Breaks in Service following the date of distribution. Upon such repayment, the amount of any such repayment plus the value of the forfeited portion of such Accounts as of the date of forfeiture shall be credited to such Accounts. (iii) If the Participant is deemed to have received a distribution from his Employer Profit Sharing Contribution Account and/or Employer Matching Contribution Account pursuant to Section 8.02(b), and his entire Employer Profit Sharing Contribution Account and/or Employer Matching Contribution Account has been forfeited, upon the reemployment of such Participant, the value of his Employer Profit Sharing Contribution Account and/or Employer Matching Contribution Account as of the date of the forfeiture shall be restored to his credit within a reasonable time after his or her reemployment. (iv) Restoration of the previously forfeited amount shall be funded by current unallocated forfeitures, additional Employer contributions, or any combination thereof at the Employer's discretion. Such restoration shall not be treated as an Annual Addition under Article V. (v) Any Employer Profit Sharing Contributions to which such Participant becomes entitled after reemployment shall be credited to his or her Employer Profit Sharing Contribution Account. Any Employer Matching Contributions to which such Participant becomes entitled after reemployment shall be credited to his or her Employer Matching Contribution Account. The portion of such Accounts to which he or she will be 75 98 entitled upon subsequent termination of employment will be based upon his or her aggregate Vesting Years before and after the break. ARTICLE IX. DISTRIBUTIONS UPON DEATH 9.01 Distributions at Death. If a Participant dies at a time when he or she has a vested Account balance, this Section shall apply with respect to such vested Account balance. (a) The Trustee shall, at the direction of the Administrator, distribute a Participant's vested Account balance in accordance with the provisions of this Article IX. The Administrator's direction shall include notification of the Participant's death, the existence or non-existence of a surviving spouse; the amounts, or method of calculating the amounts, to be distributed on given dates; and such other information required by the Trustee. (b) If the Participant has validly named a Beneficiary or Beneficiaries in compliance with Article XVII, his or her vested Account balance shall be distributed to the Beneficiary or Beneficiaries so named. To the extent that any portion of a vested Account balance of a deceased Participant is not governed by an effective Designation of Beneficiary, that portion of the vested Account balance shall be distributed to the deceased Participant's Spouse or if that is not possible, to the estate of the deceased Participant. (c) If the Participant has validly elected a form of distribution permitted under Section 10.02 which complies with the applicable provisions of subsection (d) below (a "permissible form of distribution") with respect to his or her vested Account balance, such vested Account balance shall be distributed in accordance with such election whether or not distributions have commenced prior to the Participant's death. With respect to any portion of 76 99 a deceased Participant's vested Account balance for which the Participant had not validly elected a permissible form of distribution prior to his or her death, distribution shall be made in such permissible form as the Participant's Beneficiary (or Beneficiaries) may elect in writing with the Trustee. In the absence of such a valid election by the Beneficiary, the Participant's vested Account balance shall be distributed as follows: (i) if distributions have commenced prior to the Participant's death, in the form selected by the Participant, (ii) if distributions have not commenced prior to the Participant's death, and if the Beneficiary is the Spouse, in substantially equal installment payments over the Spouse's Applicable Life Expectancy, or, if the Beneficiary is not the Spouse, in a lump sum. (d) Distribution to the Participant's Beneficiary shall be made according to the following provisions: (i) If the Participant dies before distributions have commenced on account of the Participant's attainment of his or her First Required Distribution Year and if the Beneficiary is not the Spouse, the Participant's entire vested Account balance must be distributed to the Participant's Beneficiary either (A) on or before December 31 of the calendar year during which occurs the fifth anniversary of the Participant's death, or (B) in substantially equal annual or more frequent installments over a period not exceeding the Applicable Life Expectancy of the oldest Beneficiary (as determined as of the date of the Participant's death) provided that such distributions commence before the second January 1 which follows the Participant's death. 77 100 (ii) If the Participant dies before distributions have commenced on account of the Participant's attainment of his or her First Required Distribution Year and if the Beneficiary is the Spouse, the Participant's entire vested Account balance must be distributed to the Participant's Spouse either (A) in a lump sum payable, or in installments which will be completely paid, on or before December 31 of the calendar year during which occurs the fifth anniversary of the date of the Participant's death, or (B) in annual installments over the Spouse's life or a period not longer than the Spouse's Applicable Life Expectancy provided that such distribution is commenced before the later of (1) the first January 1 following the calendar year during which the Participant would have attained age 70 1/2 had the Participant not died or (2) the second January 1 which follows the Participant's death. (iii) If a Participant dies after distributions have commenced on account of the Participant's attainment of his or her First Required Distribution Year, distributions to the Participant's Spouse, Beneficiary or estate shall continue over a period at least as rapid as the period selected by the Participant. (e) If a Beneficiary dies after the Participant (or in the case of a Beneficiary designated by another Beneficiary, after such other Beneficiary) and before such deceased Beneficiary receives full payment of the portion of the vested Account balance to which he or she is entitled, the Trustee shall, upon direction of the Administrator, distribute the funds to which the deceased Beneficiary is entitled to the Beneficiary or Beneficiaries validly named on the most recent Designation of Beneficiary filed by the deceased Beneficiary. To the extent that any portion of the funds to which the deceased Beneficiary was entitled are not governed by an effective Designation of Beneficiary, the funds shall be distributed to the deceased 78 101 Beneficiary's surviving Spouse, or if that is not possible, to the estate of the deceased Beneficiary. The Administrator's direction shall include notification of the Beneficiary's death and the existence or non-existence of a surviving Spouse and such other information required by the Trustee. Such finds shall be distributed as follows: (i) If distributions had commenced before the Participant's death, distribution to the beneficiary of a deceased Beneficiary shall continue over a period at least as rapid as that selected by the Participant. (ii) If the deceased Beneficiary was the surviving Spouse of the Participant and had not begun to receive distributions from the Participant's Account at the time of his or her death, the Participant's vested Account balance shall be distributed to the deceased Beneficiary's Beneficiary according to the provisions of Sections 9.01(c) applied as if the deceased Beneficiary were the Participant. In addition, the surviving Spouse's Beneficiaries shall be treated as Beneficiaries during any future application of this Section. (iii) If neither subparagraph (i) nor (ii) above apply, the Participant's vested Account balance shall be distributed to the deceased Beneficiary's Beneficiary either (A) on or before December 31 of the calendar year during which occurs the fifth anniversary of the Participant's death or (B) in substantially equal annual or more frequent installments over the remainder of the Applicable Life Expectancy of the oldest Beneficiary of the Participant as determined at the Participant's death provided that distributions commence before the second January 1 which follows the Participant's death. 9.02 Children as Beneficiaries. For the purposes of Section 9.01, to the extent provided by Treasury regulations, any distribution paid to a Participant's child shall be treated 79 102 as paid to the Participant's surviving Spouse if the remaining portion of the Participant's vested Account balance with respect to which such child is a Beneficiary becomes payable to the surviving Spouse when the child reaches the age of majority (or such other designated event permitted under the Treasury regulations). 9.03 Nonconsensual Distributions to Beneficiaries. Notwithstanding any provision of this Article, Article X or Article XXIV to the contrary, the Administrator may direct the entire vested Account balance of a deceased Participant (exclusive of his or her Rollover Account and Deductible Voluntary Contribution Account) be distributed if the amount distributed will be equal to $3,500 or less. The Administrator may make such direction without obtaining the consent of any Beneficiary. 9.04 Eligible Rollover Distributions. If the Participant's Beneficiary is a surviving Spouse, the provisions of Section 10.07 shall apply to distributions made pursuant to Article IX. ARTICLE X. DISTRIBUTIONS AFTER SEPARATION FROM SERVICE 10.01 Commencement of Distributions. The Trustee shall, at the direction of the Administrator, distribute a Participant's vested Account balance in accordance with the provisions of this Article X. The Administrator's direction shall include the amounts, or method of calculating the amounts, to be distributed on given dates and such other information required by the Trustee. In the event distribution is to be made in the form of an annuity contract, the Administrator shall also direct the Trustee with regard to the purchase of such a contract, including the selection of an appropriate insurance carrier. Except as otherwise 80 103 provided in this Article X, distributions of a Participant's vested Account balance shall commence within 60 days after the close of the Plan Year during which occurs the later of (a) the Participant's Normal Retirement Date or (b) the earlier of (i) the Participant's separation from Service or (ii) the end of his or her First Required Distribution Year. Payment of benefits may, at the discretion of the Trustee, be paid directly to the Participant or to the Administrator, as payee agent. If the Participant's vested Account balance (exclusive of his or her Rollover Account and Deductible Voluntary Contribution Account) is greater than $3,500, written consent of the Participant is required for any earlier distribution. A Participant may file an election with the Administrator to request that distributions commence in accordance with one of the following options provided that the distribution shall otherwise comply with the requirements of the Plan (including, but not limited to, Section 10.03): (A) Distributions commencing before the Participant's Normal Retirement Date if the Participant is Disabled or experiences a separation from Service. (B) Distributions commencing after the normal time of distribution described above; provided, however, that any such deferred distribution must commence no later than 60 days after the end of the Participant's First Required Distribution Year. 10.02 Forms of Distribution. (a) Upon a Participant's separation from Service (for reasons other than death), he or she may file an election with the Administrator to request to receive a distribution of his or her vested Account balance in one or more of the following optional forms, provided that the distribution shall otherwise comply with the requirements of this 81 104 Plan and provided that the optional forms have been designated by the Employer in the Adoption Agreement: (i) Distribution of the Participant's entire vested Account balance in monthly installments over a period equal to the shorter of 120 months or the Applicable Life Expectancy. The monthly amount shall normally be the balance of the Participant's vested Account balance divided by the remaining number of months in such period, all rounded to the nearest cent. However, the amount of each monthly installment may be recomputed and adjusted from time to time no more frequently than monthly as the Trustee may reasonably determine. (ii) Distribution of the Participant's entire vested Account balance in a lump sum. (iii) Distribution of the Participant's entire vested Account balance in installment payments of a fixed amount, such payments to be made until exhaustion of the Participant's vested Account balance. (iv) Distribution in kind. (v) Any reasonable combination of the foregoing or any reasonable time or manner of distribution within the above-stated limitations. (vii) Any distribution option that is a "protected benefit" under Code Section 411(d)(6). (b) To the extent permitted by applicable law and consistent with the provisions of this Article X, amounts distributed pursuant to this Article X shall be allocated on a pro rata basis among the Participant's Accounts and among the Designated Investments in 82 105 which each Account is invested; provided, however, that the Participant may specify to the Administrator an alternative manner in which distributions shall be so allocated. 10.03 Required Minimum Distributions. In the case of each Participant, the annual distribution from his or her Account shall be determined by the Administrator in accordance with the regulations under Code Section 401(a)(9), including the minimum distribution incidental benefit requirement of Section 1.401(c)(9)-2 of such regulations and must equal or exceed the amount equal to the quotient obtained by dividing the Participant's Account balance at the beginning of the calendar year by the lesser of (a) the Applicable Life Expectancy, or (b) if the Participant's Spouse is not the Beneficiary, the applicable divisor determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of the regulations under Code Section 401(a)(9). 10.04 Nonconsensual Distributions. Notwithstanding any provision of Article IX, this Article or Article XXIV to the contrary, the Administrator may direct that the entire vested Account balance of a Participant (exclusive of his or her Rollover Account and Deductible Voluntary Contribution Account) be distributed if the amount distributed will be equal to $3,500 or less. The Administrator may make such direction (a) only if the Participant has not previously attained his or her Annuity Starting Date and (b)regardless of whether the Participant requests or otherwise consents to such distribution. 10.05 Special One-Time Distribution Election. Notwithstanding any Plan provision to the contrary, distribution on behalf of any Participant, including a 5% owner, may be made in accordance with the following requirements (regardless of when such distribution commences): 83 106 (a) The distribution is one which would not have disqualified the Plan under Code Section 401(a)(9) as it was in effect prior to its amendment by the Deficit Reduction Act of 1984. (b) The distribution is in accordance with a method of distribution designated by the Participant whose interest in the Plan is being distributed or, if the Participant has died, by a beneficiary of such Participant. (c) Such designation was in writing, was signed by the Participant or the beneficiary, and was made before January 1, 1984. (d) The Participant had accrued a benefit under the Plan as of December 31, 1983. (e) The method of distribution designated by the Participant or the beneficiary specifies the time at which distribution will commence, the period over which distributions will be made, and in the case of any distribution upon the Participant's death, the Beneficiaries of the Participant are listed in order of priority. (f) If the distribution is one to which the provisions of Article XXIV hereof would otherwise have applied and the Participant is married, the Participant's Spouse consents to the election in a writing filed with the Administrator. A distribution upon death will not be covered by this Section unless the information in the designation contains the required information described above with respect to the distributions to be made upon the death of the Participant. For any distribution which commenced before January 1, 1984, but continues after December 31, 1983, the Participant; or the Beneficiary, to whom such distribution is being 84 107 made, will be presumed to have designated the method of distribution under which the distribution is being made if the method of distribution was specified in writing and the distribution satisfies the requirement in subsections (a) and (e) above. If a designation is revoked, any subsequent distribution must satisfy the requirements of Code Section 401(a)(9) as amended. Any changes in the designation will be considered to be a revocation of the designation. However, the mere substitution or addition of another Beneficiary (one not named in the designation) under the designation will not be considered to be a revocation of the designation, so long as such substitution or addition does not alter the period over which distributions are to be made under the designation, directly or indirectly (for example, by altering the relevant measuring life). 10.06 Distribution on Account of Plan Termination. Subject to the provisions of Section 11.04, if the Employer terminates the Plan or completely discontinues making Employer Contributions to the Trust, the Administrator has discretion pursuant to Section 20.03 below to distribute, or retain in the Trust, Participants' Account balances. 10.07 Eligible Rollover Distribution. (a) This Section applies to distributions made by the Trustee on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Section, a Distributee may elect, at the time and in the manner prescribed by the Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. 85 108 (b) An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or life expectancies) of the Distributee and the Distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code Section 401(a)(9); and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (c) An Eligible Retirement Plan is an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), or a qualified trust described in Code Section 401(a), that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving Spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (d) A Distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving Spouse and the Employee's or former Employee's Spouse or former Spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are Distributees with regard to the interest of the Spouse or former Spouse. (e) A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. 86 109 If a distribution is one to which Code Sections 401(a)(11) and 417 do not apply, such distribution may commence less than 30 days after the notice required under Section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that: (i) the Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (ii) the Participant, after receiving the notice, affirmatively elects a distribution. ARTICLE XI. IN-SERVICE WITHDRAWALS 11.01 In-service Withdrawal from Participant's Accounts. This Section 11.01 shall apply only to Participants who remain in the employ of the Employer. (a) Nondeductible Voluntary Contribution Account. A Participant may withdraw all or a portion of his or her Nondeductible Voluntary Contribution Account upon notice to the Administrator; provided, however, that a Participant who withdraws any amount from his or her Nondeductible Voluntary Contribution Account which previously generated an Employer Matching Contribution shall be prohibited from making a nondeductible voluntary contribution for six calendar months, beginning with the calendar month immediately following the date of withdrawal. (b) Rollover Account. A Participant may withdraw all or a portion of his or her Rollover Account upon notice to the Administrator. 87 110 (c) Deductible Voluntary Contribution Account. A Participant may withdraw all or a portion of his or her Deductible Voluntary Contribution Account upon notice to the Administrator. (d) Employer Profit Sharing Contribution Account. Upon attainment of his or her Normal Retirement Date, a Participant may withdraw all or a portion of his or her Employer Profit Sharing Contribution Account upon notice to the Administrator. If elected by the Employer in the Adoption Agreement, a Participant who has not attained his or her Normal Retirement Date but who is fully vested in his or her Employer Profit Sharing Contribution may submit a request to the Administrator for a withdrawal of all or a portion of his or her Employer Profit Sharing Contribution Account. The Administrator may permit such a withdrawal only if the Participant can demonstrate to the satisfaction of the Administrator that he or she is suffering from "hardship" as defined in Section 11.02 below. (e) Employer Matching Contribution Account. Upon attainment of his or her Normal Retirement Date, a Participant may withdraw all or a portion of his or her Employer Matching Contribution Account upon notice to the Administrator. If elected by the Employer in the Adoption Agreement, a Participant who has not attained his or her Normal Retirement Date but who is fully vested in his or her Employer Matching Contribution Account may submit a request to the Administrator for a withdrawal of all or a portion of his or her Employer Matching Contribution Account. The Administrator may permit such a withdrawal only if the Participant can demonstrate to the satisfaction of the Administrator that he or she is suffering from "hardship" as defined in Section 11.02 below. 88 111 (f) Salary Reduction Contribution Account. Deferred Cash Contribution Account and Qualified Nonelective Contribution Account. Upon attainment of his or her Normal Retirement Date, a Participant may withdraw all or a portion of his or her Salary Reduction Contribution Account, Deferred Cash Contribution Account and/or Qualified Nonelective Contribution Account upon notice to the Administrator. If elected by the Employer in the Adoption Agreement, a Participant who has not attained his or her Normal Retirement Date may submit a request to the Administrator for a withdrawal of all or a portion of his or her Salary Reduction Contribution Account or Deferred Cash Contribution Account (but not earnings on such accounts after December 31, 1988). The Administrator may permit such a withdrawal only if the Participant can demonstrate that he or she is suffering from "hardship" as defined in Section 11.02 below. 11.02 Rules Governing Hardship Withdrawals. A Participant shall be considered to be suffering from "hardship" only if the distribution is both made on account of an immediate and heavy financial need of the Participant and is necessary to satisfy such financial need, determined in accordance with objective, nondiscretionary standards as set forth in this Section. (a) An "immediate and heavy financial need" shall be deemed to include, and shall be limited to, the following: (i) Expenses incurred or necessary for medical care described in Code Section 213(d) of the Participant, his or her Spouse, or any dependents of the Participant (as defined in Code Section 152); 89 112 (ii) Purchase (excluding mortgage payments) of a principal residence for the Participant; (iii) Payment of tuition, related educational fees and room and board for the next 12 months of post-secondary education for the Participant, his or her Spouse, children, or dependents; or (iv) The need to prevent the eviction of the Participant from his or her principal residence or foreclosure on the mortgage of the Participant's principal residence. (b) A distribution will be treated as "necessary" to satisfy an immediate and heavy financial need of the Participant only if: (i) The Participant has obtained all distributions, other than hardship distributions, and all nontaxable loans under all plans maintained by the Employer; (ii) All plans maintained by the Employer provide that the Participant's Salary Reduction Contributions and/or Deferred Cash Contributions (and Nondeductible Voluntary Contributions) will be suspended for 12 months after the receipt of the hardship distribution; (iii) The distribution is not in excess of the amount of an immediate and heavy financial need (including amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution); and (iv) All plans maintained by the Employer provide that the Participant may not make Salary Reduction Contribution and/or Deferred Cash Contributions for the Participant's taxable year immediately following the taxable year of the hardship distribution in excess of the applicable limit under Code Section 402(g) for such taxable year less the 90 113 amount of such Participant's Salary Reduction Contributions and/or Deferred Cash Contributions for the taxable year of the hardship distribution. 11.03 Manner of Distribution. A distribution under this Article shall be made in a lump-sum payment to the Participant. In each case in which a partial distribution is made from a Participant's Account, the amount distributed from such Account pursuant to this Article XI shall be allocated on a pro rata basis among the Designated Investments in which such Account is invested; provided, however, that the Administrator or the Participant may specify an alternative manner in which such distribution shall be so allocated. 11.04 Limitation on Distributions. Notwithstanding anything to the contrary elsewhere herein, the amounts credited to a Participant's Salary Reduction Contribution Account and Deferred Cash Contribution Account, and Qualified Nonelective Contribution Account shall not be distributable to a Participant or his or her Beneficiary until the Participant separates from Service on account of retirement, disability, death or termination of employment or upon the occurrence of one of the following events: (a) Termination of the Plan without the establishment of another defined contribution plan, other than an employee stock ownership plan (as defined in Code Section 4975(e) or Section 409) or a simplified pension plan as defined in Code Section 408(k). (b) The disposition by a corporation to an unrelated corporation of substantially all of the assets (within the meaning of Code Section 409(d)(2)) used in a trade or business of such corporation if such corporation continues to maintain this Plan after the disposition, but only with respect to Participants who continue employment with the corporation acquiring such assets. 91 114 (c) The disposition by a corporation to an unrelated entity of such corporation interest in a subsidiary (within the meaning of Code Section 409(d)(3)) if such corporation continues to maintain this Plan, but only with respect to Participants who continue employment with such subsidiary. (d) The attainment of age 59-1/2 by the Participant. (e) In the case of the Participant's Salary Reduction Contribution Account and Deferred Cash Contribution Account, the hardship of the Participant as described in Section 11.02. All distributions that may be made pursuant to one or more of the foregoing distributable events are subject to the spousal and Participant consent requirements (if applicable) contained in Code Sections 411(a)(11) and 417. In addition, distributions made after March 31, 1988, that are triggered by an event enumerated in Sections 11.04(a)-(c) must be made in a lump sum. ARTICLE XII. LOANS 12.01 Availability of Loans. If, in the Adoption Agreement, the Employer has specified that loans to Participants are permitted, the Loan Trustee shall, upon the direction of the Administrator, make one or more loans, including any renewal thereof, to a Participant who is an Employee or, in the discretion of the Administrator, a former Employee (other than a Participant who is an Owner-Employee). Any such loan shall be subject to such terms and conditions as the Administrator shall determine pursuant to a written uniform policy adopted by the Administrator for this purpose, which policy shall be incorporated herein as part of the 92 115 Plan, at least as restrictive as required by this Article, and, contain specific provisions setting forth: (a) the identity of the person or positions authorized to administer the loan program; (b) a procedure for applying for loans; (c) the basis upon which loans will be approved or denied; (d) limitations, in addition to those described in this Article XII, on the types and amount of loans offered; (e) the procedure under the program for determining a reasonable rate of interest; (f) the types of collateral which may secure a loan; and (g) the events constituting default and the steps that will be taken to preserve plan assets in the event of such default. 12.02 Spousal Consent Required. If this Plan is adopted as a plan which is subject to the special annuity rules discussed in Article XXIV below, to obtain a loan, a Participant must obtain the consent of his or her Spouse, if any, within the 90-day period before the time his or her Account balance is used as security for the loan. Furthermore, a new consent is required if an increase in the amount of the security-is necessary and any of the remaining balance of the Account is used. A spousal consent to a loan must be in writing, witnessed by a Plan representative or notary public, and acknowledge that as a result of a default in repayment of the loan the Spouse may be entitled to a lesser death benefit than he or she would otherwise receive under the Plan. A Spouse shall be deemed to consent to any loan which is outstanding at the time of his or her marriage to the Participant. 12.03 Equivalent Basis. No such loan may be made to a disqualified person within the meaning of Code Section 4975(e), unless such loans are available to all active Participants on a reasonably equivalent basis and are not made available to Highly Compensated 93 116 Employees in an amount which, when stated as a percentage of any such Participant's Account, is greater than is available to any other Participants. 12.04 Limitation on Amount. The amount of any such loan, when added to the outstanding balance of all other loans from the Trust (and any other qualified retirement plans of the Employer) to the Participant, shall not exceed the lesser of: (a) $50,000 reduced by the amount by which (i) the highest outstanding balance of all such loans to the Participant during the one-year period ending on the day before the date on which the loan is made exceeds (ii) the outstanding balance of such loans to the Participant on the date on which such loan is made; or (b) the amount determined pursuant to the following chart:
Vested Maximum Account Balance Amount of Loan --------------- -------------- $0 - $100,000 50% of vested Account balance over $100,000 $50,000.
The value of the Participant's Account balance shall be as determined by the Administrator; provided, however, that such determination shall in no event take into account the portion of the Participant's Account attributable to the Participant's Deductible Voluntary Contribution Account. 12.05 Maximum Term. The term of any such loan shall not exceed five years; provided, however, that such limitation shall not apply to any loan used for the purchase of a dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as a principal residence of the Participant. 94 117 12.06 Promissory Note. Any such loan shall be evidenced by a promissory note executed by the Participant and payable to the Loan Trustee, on the earliest of (i) a fixed maturity date meeting the requirements of Section 12.05 above, (ii) the Participant's death (iii) the Participant's separation from service if the loan policy does not permit loans to former Employees. Such promissory note shall evidence such terms as are required by this Article. 12.07 Adequate Security. Each loan and related promissory note shall be secured by an assignment of no more than 50 percent of the Participant's Account to the Loan Trustee. A Participant may also provide such other or additional security for the loan as the Loan Trustee may require or permit. 12.08 Repayment By Payroll Reduction. In addition to executing a promissory note, the Participant who desires to take out a loan shall enter into a payroll reduction agreement with the Employer or such other form of repayment agreement with the Employer as the Administrator permits from time to time. The Participant shall enter into such agreement on or before the date when the loan is made. Such agreement shall provide that, if the Participant defaults on the loan while he or she is still an Employee, the Employer shall be entitled to reduce the Participant's pay in sufficient increments to ensure that, over a reasonable period of time, the amount with respect to which the Participant has defaulted plus any interest owed and any costs of collection incurred by the Loan Trustee will be repaid to the Trust. The Employer shall promptly pay to the Loan Trustee all amounts that the Employer withholds from a Participant's pay pursuant to such a payroll reduction agreement or other repayment agreement. The Administrator and/or Loan Trustee shall credit all amounts withheld from a 95 118 Participant's pay or collected pursuant to a repayment agreement to the relevant Participant's Account as payments of amounts owed on the note. 12.09 Interest. Any such loan shall be subject to a reasonable rate of interest. 12.10 Level Amortization. A Participant shall repay the principal of any loan according to a schedule which shall provide for level amortization over a period of the loan, with payments to be made no less frequently than quarterly. 12.11 Additional Repayment Rules. If a Participant fails to make a payment in accordance with the schedule developed in accordance with the requirements of Section 12.10 above, the Administrator shall notify the Participant in writing that if the relevant loan principal and accumulated and unpaid interest thereon is not paid within 30 days, action will be taken to collect such amounts plus any cost of collection. When collecting such amounts, the Loan Trustee may utilize any of the remedies available to it including those provided by the promissory note, a payroll reduction agreement entered into pursuant to Section 12.08 and applicable law. If a note is not paid when the Participant's benefits hereunder are to be distributed, then any unpaid portion of such loan, and unpaid interest thereon, and any costs of collection incurred by the Loan Trustee shall be deducted by the Loan Trustee from the Participant's Account before benefits are paid from or purchased out of the Account. Such deduction shall, to the extent thereof, cancel the indebtedness of the Participant. Notwithstanding any implication of the preceding sentence to the contrary, no attachment of the Participant's Account which is subject to Section 11.04 shall occur until a distributable event occurs as specified in Section 11.04. 96 119 12.12 Accounting. Loans shall be made on a pro rata basis among the Participant's Accounts and among the Designated Investments in which each Account is invested and shall be treated as an investment of each such Account, provided, however, that the Administrator or the Participant may specify an alternative manner in which such loan shall be so allocated. Notwithstanding the foregoing, no loans shall be made from the Participant's Deductible Voluntary Contribution Account, and without the consent of the Distributor, no loans shall be made from the Participant's Accounts invested in qualifying employer securities. 12.13 Administration of Loans. Except as expressly provided otherwise in this Article XII, the Administrator shall have the sole responsibility for all administrative tasks relating to loans made pursuant hereto including, but not limited to, the issuance of any appropriate notices or information returns required under the Code or other applicable law. 12.14 Precedence. This Article overrides Section 18.01 below. ARTICLE XIII. TRUST PROVISIONS 13.01 Manner of Investment. Except as expressly provided otherwise herein, all contributions made pursuant to the Plan and any assets in which such contributions shall be invested or reinvested shall be held in trust by one or more Trustee pursuant to the provisions of this Agreement of Trust. Certain assets of the Plan (including, but not limited to, insurance contracts and shares of securities of an Employer that are not publicly traded) may be held by the Administrator or such other entity as the Trustee may appoint as subcustodian on behalf of the Trustee. Except to the extent that a Participant's Account is invested in a loan pursuant to Article XII hereof, the Account of a Participant may only be invested and reinvested in 97 120 Designated Investments, unless the Distributor consents to such other investments. If the Administrator or the Participant, as the case may be, has elected to have a portion of an Account invested in investments other than Designated Investments, and the Distributor has given its consent, the Trustee shall invest such amount in such investments, directed by the Administrator or other person with investment discretion and in accordance with Section 13.03 hereof. Both the Designated Investments and investments other than Designated Investments available for investment may be limited by the Administrator who may impose separate rules for separate accounts or for terminated Participants. Investment in more than one Designated Investment is not permitted unless the value of the Participant's Account and the value of the investment in each additional Designated Investment exceed amounts from time to time determined by the Distributor. If the Trustee invests in one or more collective investment funds (whether or not the Trustee acts as trustee thereof) for the collective investment of assets of employee pension or profit-sharing trusts pursuant to Revenue Ruling 81-100, and such collective investment fund constitutes a qualified trust under the applicable provisions of the Code, such collective investment funds shall constitute part of the Plan, and the instrument creating such funds shall constitute part of this Agreement of Trust while any portion of the Trust is so invested. 13.02 Investment Decision. (a) The decision as to the investment of an Account shall be made by the person designated in the Adoption Agreement or as provided in this Section 13.02, and the Trustee shall have no responsibility for determining how an Account is to be invested or to see that investment directions communicated to it comply with the terms of the Plan. Each such 98 121 person, including the Administrator, a Participant or a Beneficiary, is hereby designated a "named fiduciary" within the meaning of Sections 402(a)(2) and 403(a)(1) of the Act, with respect to the Accounts over which he or she may exercise investment control. If the decision is made by the Participant, then (subject to Section 13.02(d) below) the Participant shall convey investment instructions to the Administrator and the Administrator shall promptly transmit those instructions to the Trustee. Further, if the decision is to be made by the Participant, the right to make such a decision shall remain with the Participant upon retirement and shall pass to his or her Beneficiary upon death; provided, however, that upon termination of Service by a Participant, the Administrator shall have the right to make investment decisions with respect to the portion of such Participant's Account which is not vested pursuant to Article VIII and any suspense account maintained under the Plan. In the event that all or a portion of a Participant's Account is assigned to an "alternate payee" pursuant to a "qualified domestic relations order," such alternate payee shall have the right to make investment decisions with respect to such portion and any earnings thereon to the same extent as the Participant. (b) The person designated to make the decision as to the investment of an Account may direct that the investment medium of an Account be changed, provided that no such change may be made from or to an investment other than a Designated Investment except to the extent permitted under Section 13.01 above and by the terms of that other investment vehicle. Notwithstanding the foregoing, the Administrator may from time to time establish uniform, nondiscretionary rules with respect to the frequency or times at which changes in the investment medium of the Account may be made. If the Distributor determines in its own 99 122 judgment that there has been trading of Designated Investments in the Accounts of the Participants, any Designated Investment may refuse to sell to such Accounts. When an investment is being made or changed, the person designated to do so shall specify the type of Account to which the change refers. (c) Except as provided in subsection (a) above, if any decision as to investments is to be made by the Administrator, it shall be made on a uniform basis with respect to all Participants. (d) The Administrator and the Trustee may adopt procedures permitting Participants to convey their investment instructions directly to the Trustee or to the transfer agent for the Designated Investment or for any other investment permitted by the Distributor. (e) Whenever a Participant is the person designated to make the decision as to the investment of an Account, the Administrator shall ascertain that the Participant has received a copy of the current prospectus relating to any Designated Investment in which such Account is to be invested where required by any state or federal law. With respect to contributions designated for investment by a Participant, by remitting such a contribution to the Trustee, the Administrator shall be deemed to warrant to the Trustee for the benefit of the appropriate Designated Investment and its principal underwriter (if applicable) that the Participant has received all such prospectuses. By remitting any other contribution to the Trustee, the Administrator shall be deemed to warrant to the Trustee for the benefit of the appropriate Designated Investment and its principal underwriter (if applicable) that the Administrator has received a current prospectus of any Designated Investment in which the contribution is to be invested where required by any state or federal law. 100 123 13.03 Directed Powers of the Trustee. To the extent that a portion of the Trust assets are invested other than in Designated Investments pursuant to Section 13.01 above, the Trustee shall have the following powers and authority in the administration of the Trust to be exercised at the direction of the Administrator or other person with investment discretion: (a) To purchase, receive or subscribe for any securities or other property and to retain in trust such securities or other property. (b) To sell for cash or credit, to convert, redeem, or exchange securities for other securities or other property, to tender securities pursuant to tender offers, or otherwise to dispose of any securities or other property at any time held by the Trustee. (c) To settle, compromise, or submit to arbitration any claims, debts or damages, due or owing to or from the Trust Fund, to commence or defend suits or legal proceedings and to represent the Trust Fund in all suits or legal proceedings; provided, however, that the Trustee shall have the right, in its sole discretion, to bring, join in or oppose any such suits or legal proceedings where it may be adversely affected by the outcome, individually or as Trustee, or where it is advised by counsel that such action is required on its part by the Act or other applicable law. (d) To exercise any conversion privilege and/or subscription right available in connection with any securities or other property at any time held by it; to oppose or to consent to the reorganization, consolidation, merger or readjustment of the finances of any corporation, company or association, or to the sale, mortgage, pledge or lease of the property of any corporation, company or association, the securities of which may at any time be held by it and to do any act with reference thereto, including the exercise of options, the making of 101 124 agreements or subscriptions and the payment of expenses, assessments or subscriptions which may be deemed necessary or advisable in connection therewith, and to hold and retain any securities or other property which it may so acquire, and to deposit any property with any protective, reorganization or similar committee or with depositories designated thereby, to delegate power thereto, and to pay or agree to pay part of the expenses and compensation of any such committee and any assessments levied with respect to property so deposited; provided, however, that the Trustee shall not be responsible for taking any action or exercising any right described in this subsection (d) with respect to securities or other property of the Trust Fund unless, at least three business days prior to the date on which such power is to be exercised, it or its agents (i) are in actual possession or control of such securities or property (if such possession or control is necessary to exercise any such power) and (ii) have received instructions from the Administrator to exercise any such power. (e) To exercise, personally, by proxy or by general or limited power of attorney, any right appurtenant to any securities or other property held by it at any time. (f) To invest and reinvest all or any part of the assets of the Trust Fund, and to hold part of the Trust Fund uninvested. (g) To employ suitable agents and counsel and to pay their reasonable expenses and compensation as expenses of the Trust. (h) To purchase, enter into, sell, hold and generally deal in any manner in and with contracts for the immediate delivery of financial instruments of any issuer or of any other property, to grant, purchase, sell, exercise, permit to exercise, permit to be held in escrow and otherwise to acquire, dispose of, hold and generally deal in any manner with or in 102 125 all forms of options in any combination; and, in connection with its exercise of the powers hereinabove granted, to deposit any securities or other property as collateral with any broker-dealer or other person, and to take all other appropriate action in connection with such contracts. (i) To deposit or pledge any securities or other property as collateral with any broker-dealer or other person (including the Trustee), and to permit securities or other property to be held by or in the name of others or in transferable form. (j) To borrow money, with or without security, from any legally permissible source, to encumber property of the Trust Fund to secure repayment of such indebtedness, to assume liens on properties acquired by the Trust, and to acquire properties subject to liens. (k) To form corporations and to create trusts to hold title to any securities or other property of the Trust Fund. (l) To acquire and hold securities which constitute qualifying employer securities with respect to a Plan (as such term is defined in Section 407 of the Act); provided that the Trustee shall have no responsibility for determining whether such acquisition or holding complies with the Act; and provided further that the Administrator shall be responsible for filing all reports required under federal or state securities laws with respect to the Trust Fund's ownership of qualifying employer securities (including without limitation any reports required under Section 13 or 16 of the Securities Exchange Act of 1934, as amended) and shall immediately notify the Trustee in writing of any requirement to stop purchases or sales of employer securities pending the filing of any report, and the Trustee shall provide to the 103 126 Administrator such information on the Trust Fund's ownership of qualifying employer securities as the Administrator may reasonably request in order to comply with federal or state securities laws and the Act; (m) To convert any monies into any currency through foreign exchange transactions (which may be effected with the Trustee or an affiliate of the Trustee to the extent permitted under the Act); and (n) Generally, to do all acts, whether or not expressly authorized, which may be considered necessary or desirable for the protection or enhancement of the Trust Fund or to carry out any of the foregoing powers and the purposes of the Trust Fund. 13.04 Discretionary Powers of the Trustee. The Trustee shall have the following powers and authority in the administration of the Trust to be exercised in its sole discretion: (a) To register any securities held by it hereunder in its own name or in the name of a nominee with or without the addition of words indicating that such securities are held in a fiduciary capacity and to hold any securities in bearer form and to deposit any securities or other property in a depository, clearing corporation, or similar corporation, either domestic or foreign. (b) To make, execute and deliver, as Trustee hereunder, any and all instruments in writing necessary or proper for the accomplishment of any of the powers referred to in Section 13.03 or in this Section 13.04. (c) To employ suitable agents, custodians, subcustodians, and counsel including but not limited to entities which are affiliates of the Trustee and, subject to applicable law, to pay their reasonable compensation and expenses as expenses of the Trust. 104 127 (d) With the consent of the Administrator, to loan securities held in the Trust to brokers or dealers or other borrowers under such terms and conditions as the Trustee, in its absolute discretion, deems advisable, to secure the same in any manner permitted by law and the provisions of this Agreement, and during the term of any such loan, to permit the loaned securities to be transferred into the name of and voted by the borrowers or others, and, in connection with the exercise of the powers hereinabove granted, to hold any property deposited as collateral by the borrower pursuant to any master loan agreement in bulk, together with the unallocated interests of other lenders, and to retain any such property upon the default of the borrower, whether or not investment in such property is authorized under this Agreement, and to receive compensation therefor out of any amounts paid by or charged to the account of the borrower. 13.05 Limitations in Investments. Notwithstanding the above, the following restrictions on the investment of a Participant's Account shall apply: (a) No part of a Participant's Deductible Voluntary Contribution Account may be used to purchase life insurance. (b) At most, less than one-half of the aggregate Employer Contributions allocated to a Participant's Employer Contribution Account may be used to pay premiums attributable to the purchase of ordinary life insurance contracts (life insurance contracts with both nondecreasing death benefits and non-increasing premiums). (c) No more than one-quarter of aggregate Employer Contributions allocated to a Participant's Account may be used to pay premiums on term life insurance contracts, 105 128 universal life insurance contracts, and all other life insurance contracts which are not ordinary life insurance contracts. (d) One-half of the amount used to pay premiums on ordinary life insurance contracts plus the amount used to pay premiums on all other life insurance contracts may not exceed an amount equal to one-quarter of the aggregate Employer Contributions allocated to a Participant's Account. (e) No part of a Participant's Account shall be applied towards the purchase of any insurance contract unless (i) the Trustee applies for and is the owner of such contract, (ii) the contract provides that all contract proceeds shall be paid to the Trustee, and (iii) the contract provides for distributions to the Participant's Spouse, as necessary to ensure compliance with the applicable requirements of Articles IX, X, and XXIV. (f) Amounts used to pay premiums on, or purchase, any insurance contract(s) on the life of a Participant shall be paid first from that portion of the Participant's Nondeductible Voluntary Contribution Account which represents Nondeductible Voluntary Contributions made by the Participant prior to January 1, 1987, provided that the Plan, as of May 5, 1986, permitted withdrawal of Nondeductible Voluntary Contributions before separation from Service. Amounts used to pay premiums on, or purchase, any insurance contract(s) on the life of a Participant which exceed that portion of the Participant's Nondeductible Voluntary Contribution Account described in the preceding sentence shall be paid first from the portion of the Participant's Nondeductible Voluntary Contribution Account which represents the remaining Nondeductible Voluntary Contributions made by the 106 129 Participant and then, except as provided in paragraph (a) above, from such other of the Participant's Accounts as the Administrator directs pursuant to the Participant's election. (g) Except as provided in Section 22.01, any insurance contract(s) on the life of a Participant will be converted to cash or distributed to the Participant as of the Participant's Annuity Starting Date. (h) Any dividends or credits earned on insurance contract(s) will be allocated to the Account of the Participant for whose benefit the contract is held, provided, however, that if an insurance contract was purchased with a Participant's Nondeductible Voluntary Contributions, such dividends or credits which are attributable to the Participant's Nondeductible Voluntary Contributions shall, to the extent treated as a return of premium, be credited to the Participant's Nondeductible Voluntary Contribution Account. If a Participant's Account is invested in one or more insurance contracts, the Trustee is required to pay over all proceeds of the contract(s) to the Participant's Beneficiary or Beneficiaries in accordance with the terms of this Plan and under no circumstances shall the Trust retain any contract proceeds. 13.06 Appointment of Investment Manager. Subject to Sections 13.01 and 13.03 above, the Administrator may designate, and the Employer may contract with, Scudder, Stevens & Clark Inc., or its successor or any affiliate, or any other qualified entity to act as investment manager (within the meaning of the Act), and may at any time revoke such designation. If an investment manager is so designated, the Trustee shall follow all investment directions given by the investment manager with respect to the retention, investment and reinvestment of the Plan assets to the extent they are under the control of such investment 107 130 manager. If permitted by the Trustee, the investment manager may issue orders for the purchase and sale of securities, including orders through any affiliate of such investment manager. Such an investment manager is specifically allowed to direct or make investments in any Designated Investment and any other investments to which the Distributor has given its consent. The Trustee shall not be liable for following any direction given by, or any actions of, an investment manager so appointed. 13.07 Trustee: Number, Qualifications and Majority Action. (a) The Employer shall designate one or more Trustees for each Trust. Any natural person and any corporation having power under applicable law to act as a trustee of a pension or profit sharing plan may be a Trustee. No person shall be disqualified from being a Trustee by being employed by the Employer, by being the Administrator, by being a trustee under any other qualified retirement plan of the Employer or by being a Participant in this Plan or such other qualified plan. (b) A Trustee holding office as sole Trustee with respect to a Trust hereunder shall have all the powers and duties herein given to the Trustees hereunder. When the number of Trustees with respect to a Trust is three, any two of them may act, but the third Trustee shall be promptly informed of the action. When there are two or more Trustees with respect to a Trust, they may, by written instrument communicated to the Employer and the Administrator, allocate among themselves the powers and duties herein given to the Trustee hereunder. If such an allocation is made, to the extent permitted by applicable law, no Trustee shall be liable either individually or as a trustee for loss to the Plan from the acts or omissions of another Trustee with respect to duties allocated to such other Trustee. 108 131 13.08 Change of Trustee. (a) Any Trustee may resign as Trustee upon notice in writing to the Employer, and the Employer may remove any Trustee upon notice in writing to each Trustee. The removal of a Trustee shall be effective immediately, except that a corporation serving as a Trustee shall be entitled to 60 days' notice which it may waive, and the resignation of a Trustee shall be effective immediately, provided that, if the Trustee is the sole Trustee, neither a removal nor a resignation of a Trustee shall be effective until a successor Trustee has been appointed and has accepted the appointment. If within 60 days of the delivery of the written resignation or removal of a sole Trustee, another Trustee shall not have been appointed and have accepted, the resigning or removed Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee or may terminate the Plan pursuant to Section XVIII of the Prototype Plan. The Trustee shall not be liable for the acts and omissions of any successor Trustee. (b) At any time when the number of Trustees is one or two the Employer may but need not appoint, respectively two or one additional Trustees. Such an appointment and the acceptance thereof shall be in writing, and shall take effect upon the delivery of written notice thereof to all the Trustees and the Administrator and such acceptance by the appointed Trustee, provided that if a corporation is a Trustee then in the absence of its consent, such an appointment of an additional or successor Trustee shall not become effective until 60 days after its receipt of notice. (c) Although any Employer adopting the Plan may choose any Trustee who is willing to accept the Trust, the Distributor or its successor may make or may have made 109 132 tentative standard arrangements with any bank or trust company with the expectation it will be used as the Trustee by a substantial group of Employers. It is also contemplated that more favorable results can be obtained with a substantial volume of business, and that it may become advisable to remove such bank or trust company as Trustee and substitute another Trustee. Therefore, anything in the prior two subsections notwithstanding, each Employer adopting this Plan hereby agrees that the Distributor may, upon a date specified in a notice of at least 30 days to the affected Employer and in the absence of written objection by the Employer received by the Distributor before such date, (i) remove any Trustee and in that case, or if such a Trustee has resigned as to a group of Employers, (ii) appoint a successor Trustee, provided such action is taken with respect to all Employers similarly circumstanced of which the Distributor has knowledge, and provided such notice is given in writing and mailed postage prepaid to the Employer at the latest address furnished to the Distributor directly or supplied to it by such Trustee which is to be succeeded. If within 60 days after a Trustee's resignation or removal pursuant to this subsection (i), the Distributor has not appointed a successor which has accepted such appointment the resigning or removed Trustee may petition an appropriate court for the appointment of its successor. The resigning or removed Trustee shall not be liable for the acts and omissions of such successor. (d) Successor Trustees qualifying under this Section shall have all rights and powers and all the duties and obligations of original Trustees. 13.09 Valuation. Annually, on the Valuation Date, or more frequently in the discretion of the Trustee, the assets of each Trust shall be valued at fair market value and the accounts of the Trust shall be proportionately adjusted to reflect income, gains, losses or 110 133 expenses, if the system of accounting does not directly accomplish all such adjustments. Each account shall share in income gains, losses, or expenses connected with an asset in which it is invested according to the proportion which the account's investment in the asset bears to the total amount of the Trust Fund invested in the asset. Any dividends or credits earned on insurance contracts shall be allocated to the specific account of the Participant from which the funds originated for investment in the contract. The Trust Fund shall be administered separately from, and shall not include any assets being administered under, any other plan of an Employer. Interim valuations, if any, shall be applied uniformly and in a nondiscriminatory manner for all Employees. 13.10 Registration. Any assets in the Trust Fund may be registered in the name of the Trustee or any nominee designated by the Trustee. 13.11 Certifications and Instructions. (a) Any pertinent vote or resolution of the Board of Directors of the Employer (if it is a corporation) shall be certified to the Trustee over the signature of the Secretary or an Assistant Secretary of the Employer and under its corporate seal. The Employer shall promptly furnish to the Trustee appropriate certification evidencing the appointment and termination of the individual or individuals serving as Administrator under Section 14.01 of the Plan. (b) The Administrator shall furnish to the Trustee appropriate certification of the individual or individuals authorized to give notice on behalf of the Administrator and providing specimens of their signatures. All requests, directions, requisitions for money and instructions by the Administrator to the Trustee shall be in writing and signed. There may be 111 134 standing requests, directions, requisitions or instructions to the extent acceptable to the Trustee. 13.12 Accounts and Approval. (a) The Trustee shall keep accurate and detailed accounts of all investments, receipts and disbursements and other transactions, hereunder, and all books and records relating thereto shall be open at all reasonable times to inspection and audit by any person or persons designated by the Administrator or by the Employer. (b) Within 90 days following the close of each Plan Year the Trustee may, and upon the request of the Employer or the Administrator shall, file with the Administrator and the Employer a written report setting forth all securities or other investments (including insurance contracts) purchased and sold, all receipts, disbursements and other transactions effected by it during the period since the date covered by the next prior report, and showing the securities and other property held at the end of such period, and such other information about the Trust Fund as the Administrator shall request. Unless the Employer or Administrator, within 90 days from the date of mailing of such report, objects to the contents of such report, the report shall be deemed approved. Any such objections shall set forth the specific grounds on which they are based. 13.13 Taxes. The Trustee may assume that any taxes assessed on or in respect of the Trust Fund are lawfully assessed unless the Administrator shall in writing advise the Trustee that in the opinion of counsel for the Employer such taxes are not lawfully assessed. In the event that the Administrator shall so advise the Trustee, the Trustee, if so requested by the Administrator and suitable provision for their indemnity having been made, shall contest the 112 135 validity of such taxes in any manner deemed appropriate by the Administrator or counsel for the Employer. The word "taxes" in this Article shall be deemed to include any interest or penalties that may be levied or imposed in respect to any taxes assessed. Any taxes, including transfer taxes incurred in connection with the investment or reinvestment of the assets of the Trust Fund that may be levied or assessed in respect to such assets shall, if allocable to the Accounts of specific Participants, be charged to such Accounts, and if not so allocable, they shall be equitably apportioned among all such Participants' Accounts. 13.14 Employment of Counsel. The Trustee may employ legal counsel (who may be counsel for the Employer) and shall be fully protected in acting or refraining from acting, upon such counsel's advice in respect to any legal questions. 13.15 Compensation of Trustee. An individual Trustee who is an Employee of the Employer shall not be compensated for services as Trustee. A corporation, or an individual who is not an Employee of the Employer, serving as a Trustee shall be entitled to reasonable compensation for services; such compensation shall be paid in accordance with Article XV. 13.16 Limitation of Trustee's Liability. (a) The Trustee shall have no duty to take any action other than as herein specified, unless the Administrator shall furnish it with instructions in proper form and such instructions shall have been specifically agreed to by it, or to defend or engage in any suit unless it shall have first agreed in writing to do so and shall have been fully indemnified to its satisfaction. (b) The Trustee may conclusively rely upon and shall be protected in acting in good faith upon any written representation or order from the Administrator or any other 113 136 notice, request, consent, certificate or other instrument or paper believed by the Trustee to be genuine and properly executed, or any instrument or paper if the Trustee believes the signature thereon to be genuine. (c) The Trustee shall not be liable for interest on any reasonable cash balances maintained in the Trust. (d) The Trustee shall not be obligated to, but may, in its discretion, receive a contribution directly from a Participant. (e) The Employer shall indemnify and save harmless the Trustee from and against any and all liability to which the Trustee may be subjected by reason of any act, conduct or failure to act (except willful misconduct or gross negligence) in its capacity as Trustee, including all expenses reasonably incurred in its defense. 13.17 Successor Trustee. Any corporation into which a corporation acting as a Trustee hereunder may be merged or with which it may be consolidated, or any corporation resulting from any merger, reorganization or consolidation to which such Trustee may be a party, shall be the successor of the Trustee hereunder, without the necessity of any appointment or other action, provided the Trustee does not resign and is not removed. 13.18 Enforcement of Provisions. To the extent permitted by applicable law, the Employer and the Administrator shall have the exclusive right to enforce any and all provisions of this Agreement on behalf of all Employees or former Employees of the Employer or their Beneficiaries or other persons having or claiming to have an interest in the Trust Fund or under the Plan. In any action or proceeding affecting the Trust Fund or any property constituting a part or all thereof, or the administration thereof or for instructions to 114 137 the Trustee, the Employer, the Administrator and the Trustee shall be the only necessary parties and shall be solely entitled to any notice of process in connection therewith; any judgment that may be entered in such action or proceeding shall be binding and conclusive on all persons having or claiming to have any interest in the Trust Fund or under the Plan. 13.19 Voting. The Trustee shall deliver, or cause to be executed and delivered, to the Administrator, or to such individuals designated by the Administrator, all notices, prospectuses, financial statements, proxies and proxy soliciting materials received by the Trustee relating to securities held by the Trust. The Administrator shall deliver these to the individuals entitled to make investment decisions pursuant to Section 13.02 hereof (if the Adoption Agreement so provides this may be the Participant or a Beneficiary) to the extent that the Administrator has decided to pass-through voting to such individuals. Each individual, including the Administrator, with voting rights, is hereby designated a "named fiduciary," within the meaning of Section 402(a)(2) and 403(a)(1) of the Act, with respect to the Accounts over which he or she may exercise voting rights. With respect to proxies, proxy solicitation materials,and other voting matters, the Trustee shall vote securities held by the Trust in accordance with the written instructions (as expressed in a properly completed and executed proxy) of the Administrator or of the individuals entitled to make investment decisions pursuant to Section 13.02 as expressed in a properly completed and executed proxy. Such instructions shall be delivered to the Trustee by the Administrator, or such person designated by the Administrator. With respect to securities issued by the Employer, voting instructions shall be delivered directly to the Trustee by the individuals entitled to make investment decisions' with respect to such securities and the Trustee shall maintain the 115 138 confidentiality, and shall not disclose the contents, of any such vote except as otherwise required by law or a court of competent jurisdiction. The Trustee and the Administrator may establish a procedure whereby any votes relating to securities issued by the Employer are delivered by the Administrator to the Trustee provided that the contents of such votes are not made known to the Administrator. If, however, the Trustee has not received instructions with respect to how to vote given securities at least five full business days (or such shorter period as the Trustee, in its discretion, may determine) prior to the meeting at which such securities are to be voted, the Trustee shall not vote such securities unless otherwise required by law. 13.20 Applicability to Loan Trustee. Where appropriate, the foregoing provisions of this Article shall apply to the Loan Trustee on the same basis as if the Loan Trustee were the Trustee. 13.21 Applicability to Other Trust. The provisions of this Article XIII shall apply with respect to a separate trust which is created hereby but shall not apply to a separate trust created pursuant to a separate trust agreement. ARTICLE XIV. ADMINISTRATION 14.01 Appointment of Administrator. From time to time, the Employer may, by identifying such person(s) in writing to both the Trustee and the Participants, appoint one or more persons as Administrator (hereinafter referred to in the singular). Such Administrator shall have all power and authority necessary to carry out the terms of the Plan. A person appointed as Administrator may also serve in any other fiduciary capacity, including that of Trustee, with respect to the Plan. The Administrator may resign upon 15 days' advance 116 139 written notice to the Employer, and the Employer may at any time revoke the appointment of the Administrator with or without cause. The Employer shall exercise the power and fulfill the duties of the Administrator if at any time an Administrator has not been properly appointed in accordance with this Section or the position is otherwise vacant. 14.02 Named Fiduciaries. The "Named Fiduciaries" within the meaning of the Act shall be the Administrator, each Trustee and each Participant and Beneficiary with voting rights and/or investment rights. 14.03 Allocation of Responsibilities. Responsibilities under the Plan shall be allocated among the Trustee, the Administrator and the Employer as follows: (a) Trustee: The Trustee shall have exclusive responsibility to hold, manage and invest, pursuant to instructions communicated to it in accordance with Section 13.02 above, the funds received by it subject to the powers granted to it under Article XIII hereof. Notwithstanding the preceding sentence, to the extent that loans are made to Participants in accordance with Article XII hereof, the Trustee shall not be responsible for management of the portion of Trust assets subject to such loans and the Loan Trustee shall be responsible for administering such Trust assets in accordance with provisions of Article XII. (b) The Administrator: The Administrator shall have the responsibility and authority to control the operation and administration of the Plan in accordance with its terms including, without limiting the generality of the foregoing, (i) any investment decisions assigned to it under the Adoption Agreement or the Plan or transmission to the Trustee of any Participant investment decision under Section 13.02; (ii) interpretation of the Plan, conclusive determination of all questions of eligibility, status, benefits and rights under the Plan and 117 140 certification to the Trustee of all benefit payments under the Plan; (iii) hiring of persons to provide necessary services to the Plan not provided by Employees; (iv) preparation and filing of all statements, returns and reports required to be filed by the Plan with any agency of government; (v) compliance with all disclosure requirements of all state or federal law; (vi) maintenance and retention of all Plan records as required by law, except those required to be maintained by the Trustee; and (vii) all functions otherwise assigned to it under the terms of the Plan. (c) Employer: The Employer shall be responsible for the design of the Plan, as adopted or amended, the designation of the Administrator and each Trustee (and, if appropriate, the Loan Trustee) as provided in the Plan, the delivery to the Administrator and the Trustee of employee information necessary for operation of the Plan (including, without limitation, dates of birth, hire, and death; compensation amounts; and dates of death of beneficiaries), the timely making of the Employer Contributions pursuant to Articles IV and VII, and the exercise of all functions provided in or necessary to the Plan except those assigned in the Plan to other persons. (d) This Section is intended to allocate individual responsibility for the prudent execution of the functions assigned to each of the Trustees, the Loan Trustee, the Administrator and the Employer and none of such responsibilities or any other responsibility shall be shared among them unless specifically provided in the Plan. Whenever one such person is required by the Plan to follow the directions of another, the two shall not be deemed to share responsibility, but the person who gives the direction shall be responsible for giving it 118 141 and the responsibility of the person receiving the direction shall be to follow it insofar as it is on its face proper under applicable law. 14.04 More Than One Administrator. If more than one individual is appointed as Administrator, such individuals shall either exercise the duties of the Administrator in concert, acting by a majority vote or allocate such duties among themselves by written agreement delivered to the Employer and the Trustee. In such a case, the Trustee may rely upon the instruction of any one of the individuals appointed as Administrator regardless of the allocation of duties among them. 14.05 No Compensation. The Administrator shall not be entitled to receive any compensation from the funds held under the Plan for its services in that capacity unless so determined by the Employer or required by law. 14.06 Record of Acts. The Administrator shall keep a record of all its proceedings, acts and decisions, and all such records and all instruments pertaining to Plan administration shall be subject to inspection by the Employer at any time. The Employer shall supply, and the Administrator may rely on the accuracy of, all Employee data and other information needed to administer the Plan. 14.07 Bond. The Administrator shall be required to give bond for the faithful performance of its duties to the extent, if any, required by the Act, the expense to be borne by the Employer. 14.08 Agent for Service of Legal Process. The Administrator shall be agent for service of legal process on the Plan. 119 142 14.09 Rules. The Administrator may adopt or amend and shall publish to the Employees such rules and forms for the administration of the Plan, and may employ or retain such attorneys, accountants, physicians, investment advisors, consultants and other persons to assist in the administration of the Plan as it deems necessary or advisable. 14.10 Delegation. To the extent permitted by applicable law, the Administrator may delegate all or part of its responsibilities hereunder and at any time revoke such delegation, by written statement communicated to the delegate and the Employer. The Trustee may, but need not, act on the instructions of such a delegate. The Administrator shall annually review the performance of all such delegates. 14.11 Claims Procedure. It is anticipated that the Administrator will administer the Plan to provide Plan benefits without waiting for them to be claimed, but the following procedure is established to provide additional protection to govern unless and until a different procedure is established by the Administrator and published to the Participants and Beneficiaries. (a) Manner of Making Claim. A claim for benefits by a Participant or Beneficiary to be effective under this procedure must be made to the Administrator and must be in writing unless the Administrator formally or by course of conduct waives such requirements. (b) Notice of Reason for Denial. If an effective claim is wholly or partially denied, the Administrator shall furnish such Participant or Beneficiary with written notice of the denial within 60 days after the original claim was filed. This notice of denial shall set forth in a manner calculated to be understood by the claimant (i) the reason or reasons for 120 143 denial, (ii) specific reference to pertinent plan provisions on which the denial is based, (iii) a description of any additional information needed to perfect the claim and an explanation of why such information is necessary, and (iv) an explanation of the Plan's claims procedure. (c) The Participant or Beneficiary shall have 60 days from receipt of the denial notice in which to make written application for review by the Administrator. The Participant or Beneficiary may request that the review be in the nature of a hearing. The Participant or Beneficiary shall have the rights (i) to have representation, (ii) to review pertinent documents, and (iii) to submit comments in writing. (d) The Administrator shall issue a decision on such review within 60 days after receipt of an application for review, except that such period may be extended for a period of time not to exceed an additional 60 days if the Administrator determines that special circumstances (such as the need to hold a hearing) requires such extension. The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision is based. (e) The Employer shall indemnify and hold harmless the Administrator, if the Administrator is not the Employer, and any employees of the Employer who performs the function of the Administrator for the Employer, if the Administrator is the Employer, (collectively, an "Indemnitee"), from any and all claims, loss, damages, expenses (including reasonable counsel fees approved by the Employer) and liability (including any reasonable amounts paid in settlement with the Employer's approval), arising from any act or omission of 121 144 such Indemnitee, except when the same is judicially determined to be due to the willful misconduct or gross negligence of such Indemnitee. ARTICLE XV. FEES AND EXPENSES All reasonable fees and expenses of the Administrator or Trustee incurred in the performance of their duties hereunder or under the Trust may be paid by the Employer; and to the extent not so paid by the Employer, said fees and expenses shall be deemed to be an expense of the Trust and shall be charged against the assets of the Trust, including any forfeitures that have not been reallocated or applied to reduce Employer Contributions. In addition, if the Plan permits Participant-directed investment of Accounts, expenses that are allocable to the Accounts of specific Participants shall be charged against the respective Participants' Accounts in accordance with procedures adopted by the Administrator from time to time. ARTICLE XVI. BENEFIT RECIPIENT INCOMPETENT OR DIFFICULT TO ASCERTAIN OR LOCATE 16.01 Incompetency. If any portion of the Trust Fund becomes distributable to a minor or to a Participant or Beneficiary who, as determined in the sole discretion of the Administrator, is physically or mentally incapable of handling his or her financial affairs, the Administrator may direct the Trustee to make such distribution either to the legal representative or custodian of the incompetent or to apply such distribution directly for the 122 145 incompetent's support and maintenance. Payments which are made in good faith shall completely discharge the Employer, Administrator and Trustee from liability therefor. 16.02 Difficulty to Ascertain or Locate. If it is impossible or difficult to ascertain or locate the person who is entitled to receive any benefit under the Plan, the Administrator in its discretion may direct that such benefit (a) be retained in the Trust, (b)be paid to a court pending judicial determination of the right thereto, or (c) be forfeited and reallocated pursuant to the provisions of Section 8.02(a)(i) or (ii) above, as the case may be, provided that as a result the Employer shall incur an obligation to restore the individual's Account balance or otherwise pay the individual his or her benefit if the individual is subsequently ascertained or located. ARTICLE XVII. DESIGNATION OF BENEFICIARY Each Participant and Beneficiary may submit a properly executed Designation of Beneficiary to the person designated under this Article XVII to keep such records. In order to be effective, such designation must have been properly executed and submitted to the appropriate person before the death of the Participant or Beneficiary, as the case may be; and, for a Participant who is survived by his or her Spouse, unless the Participant leaves 100% of his or her benefit to such Spouse, must be accompanied, or preceded, by the consent of such Spouse. Such consent of the Spouse must (a) be in writing; (b)acknowledge that the effect of such consent is that the Spouse may receive no benefits under the Plan; (y) be witnessed by a Plan representative or a notary public; and (c) be either (i) a limited consent to the payment of death benefits to a specific person or persons or (ii) expressly permit the Participant to 123 146 designate another person or other persons without obtaining further consent of the Spouse. The last effective Designation accepted by the appropriate person shall be controlling, and whether or not fully dispositive of the Participant's Account, thereupon shall revoke all Designations previously submitted by the Participant or Beneficiary, as the case may be. If a Participant's Beneficiary(ies) predeceases the Participant, the remaining living Beneficiary(ies) shall receive their proportionate share of the Participant's Account as if such deceased Beneficiary(ies) had never been designated. Similar rules shall apply with respect to contingent Beneficiaries. Each such executed Designation is hereby specifically incorporated herein by reference and shall be construed and enforced in accordance with the laws of the state in which the Trustee has its principal place of business. The Administrator shall be the person responsible for accepting and safekeeping Designation of Beneficiary Forms unless the Trustee agrees in writing to accept and safekeep such forms. ARTICLE XVIII. SPENDTHRIFT PROVISION AND DISTRIBUTIONS PURSUANT TO QUALIFIED DOMESTIC RELATIONS ORDERS 18.01 General Spendthrift Rule. No interest of any Participant or Beneficiary shall be assigned, anticipated or alienated in any manner nor shall it be subject to attachment, to bankruptcy proceedings or to any other legal process or to the interference or control of creditors or others, except (a) to the extent that Participants may secure loans from the Trust with their Accounts pursuant to Article XII hereof and (b) pursuant to Section 18.02 hereof. 18.02 Account Division and Distribution Pursuant to Qualified Domestic Relations Orders. A Participant's vested Account may be assigned pursuant to a qualified domestic 124 147 relations order as defined in Code Section 414(p). If, and to the extent that, any portion of a Participant's vested Account is payable to an alternate payee pursuant to a qualified domestic relations order within the meaning of Sections 401(a)(13)(B) and 414(p) of the Code, the provisions of said order shall govern the payment thereof. An order shall not fail to constitute a qualified domestic relations order within the meaning of Sections 401(a)(13)(B) and 414(p) of the Code if the order provides for a payment to be made to an alternate payee prior to the time the Participant would be entitled to receive a benefit payment hereunder. The Administrator shall be responsible for determining whether an order constitutes a qualified domestic relations order. ARTICLE XIX. NECESSITY OF QUALIFICATION This Plan is established with the intent that it shall qualify under Code Section 401(a) as that Section exists at the time the Plan is established. If the Plan as adopted by the Employer fails to attain such qualification, the Plan will no longer participate in the relevant sponsor's prototype 401(k) plan and will be considered an individually designed plan. If the Plan as adopted by the Employer fails to attain or retain such qualification, the Employer shall promptly either amend the Plan under Code Section 401(b) so that it does qualify, or direct the Trustee to terminate the Trust, and distribute all the assets of the Trust equitably among the contributors thereto in proportion to their contributions, and the Plan and Trust shall be considered to be rescinded and of no force and effect. 125 148 ARTICLE XX. AMENDMENT AND TERMINATION 20.01 Amendment or Termination by the Employer. The Employer by action of the Board of Directors, other governing board, general partner or sole proprietor, as the case may be, may at any time, and from time to time amend this Prototype Plan and the Adoption Agreement (including a change in any election it has made in the Adoption Agreement), or suspend or terminate this Plan by giving written notice to the Trustee, but the Trust may not thereby be diverted from the exclusive benefit of the Participants, their Beneficiaries, survivors or estates, or the administrative expenses of the Plan, nor revert to the Employer, nor may an allocation or contribution theretofore made be changed thereby, nor may any amendment directly or indirectly deprive a Participant of such Participant's nonforfeitable rights to benefits accrued to the date of the amendment. No amendment to the Plan shall be effective to the extent that it would have the effect of decreasing a Participant's Account balance or eliminating an optional form of distribution. Notwithstanding the preceding sentence, a Participant's Account balance may be reduced to the extent permitted under Code Section 412(c)(8). Furthermore, if the vesting schedule of the Plan is amended, in the case of an Employee who is a Participant as of the later of the date such amendment is adopted or the date it becomes effective, the nonforfeitable percentage (determined as of such date) of such Employee's right to his Employer-derived Account balance will not be less than his percentage computed under the Plan without regard to such amendment. The Employer may (a) change the choice of options in the Adoption Agreement, (b) add overriding language in the Adoption Agreement when such language is necessary to satisfy 126 149 the requirements of Code Section 415 or to avoid duplication of minimum benefits or accruals under Code Section 416 because of the required aggregation of multiple plans, or (c) adopt a model amendment published by the Internal Revenue Service which specifically provides that the adoption of such a model amendment will not cause the Plan to be treated as an individually designed plan. Any other amendment by the Employer will constitute a substitution by the Employer of an individually designed plan for the sponsor's prototype plan. After such an amendment, the Plan shall no longer participate in the sponsor's prototype plan and the general amendment procedure of the Internal Revenue Service governing individually designed plans will be applicable. If an amendment changing the vesting schedule is executed (including execution of this Adoption Agreement as an amendment to an existing plan), Participants with three or more Vesting Years (five or more Vesting Years for Participants who have not been credited with an Hour of Service in a Plan Year beginning after December 31, 1988) before the expiration of the election period described in the next sentence shall have the right to elect the vesting schedule in effect on the day before the election period. The election period shall commence on the date the amendment is adopted and end on the latest of (x) 60 days after the amendment is adopted, (y) 60 days after the Effective Date, or (z) 60 days after the Participant is issued written notice of the amendment by the Administrator. Failure to so elect shall be treated as a rejection and such election or rejection shall be final. Nothing contained herein shall constitute an agreement or representation by any Sponsor or the Distributor that it will continue to maintain its sponsorship of the Plan indefinitely. 127 150 20.02 Delegation. The Employer hereby delegates to the Sponsor the authority to amend so much of the Adoption Agreement and this Prototype 401(k) Plan as is in prototype form and, to the extent to which the Employer could effect such amendment, the Employer shall be deemed to have consented to any amendment so made. When an election within the prototype form has been made by the Employer, it shall be deemed to continue after amendment of the prototype form unless and until the Employer expressly further amends the election, notwithstanding that the provision for the election in the amended prototype form is in a different form or place; provided, however, that if the amended form inadvertently fails to provide means to duplicate exactly the earlier election, such earlier election shall continue until such further amendment. The immediately preceding sentence is subject to the qualification that each Employer hereby delegates to the Sponsor, in the event of such an amendment of the prototype form, authority to determine conclusively that such a continuation of an earlier election by the Employer is not advisable and to make the election for the Employer in the amended prototype form which in the judgment of the Sponsor most nearly corresponds with the election made by the Employer before the amendment of the prototype form, provided the following procedure is followed: the election for the Employer may be made with respect to any specified Employers as to whom it may be made applicable singly, or such election may be made with respect to all Employers as to whom it may be made applicable as a group; and the election shall be made as of an effective date which has been specified in a notice mailed or delivered, at the last address(es) of the Employer(s) on the records of the Distributor, to the Employer(s) at least 20 days before the end of the remedial amendment period. Such notice may be mailed to Employers to whom it cannot be applicable by reason of a previous election 128 151 made by the Employer or otherwise, but it shall be effective only as to those Employers who have received the notice and have not themselves made a new election with respect to that item since the amendment of the prototype form and previous to the effective date of such election by the Sponsor. In the case of a mass submitter plan, the Sponsor delegates its authority to make elections, or to make amendments, to the mass submitter who shall make such elections or amendments on behalf of the Sponsor and the Sponsor shall be deemed to have consented to any such election or amendment so made. The foregoing delegations of authority to make elections, or to make amendments, shall not impose any duty on the Sponsor or, if applicable, the mass submitter to make a given election or amendment and shall not affect the interpretation of the Plan if any so delegated authority is not used. 20.03 Distribution of Accounts Upon Termination. Upon termination or partial termination of the Plan or complete discontinuance of Employer Contributions under it, the rights of all Participants (or, in the case of a partial termination, the Participants affected thereby) to amounts theretofore credited to their Accounts under the Plan shall be fully vested and nonforfeitable. Upon any such termination or discontinuance, the Administrator shall determine whether to pay the interests of Participants, and Beneficiaries immediately, to retain such interest in the Trust and pay them in the future according to Articles IX and X (or Article XXIV, if applicable) or to use what other methods the Administrator deems advisable in order to furnish whatever benefits the Trust will provide; provided any such distributions pursuant to this Section shall comply with the requirements of Articles IX or X (or Article XXIV, if applicable) hereof. 129 152 ARTICLE XXI. TRANSFERS Nothing contained herein shall prevent the merger or consolidation of the Plan with, or transfer of assets or liabilities of the Plan to, another plan meeting the requirements of Code Section 401(a) or the transfer to the Plan of assets or liabilities of another such plan so qualified under the Code. Any such merger, consolidation or transfer shall be accompanied by the transfer of such existing records and information as may be necessary to properly allocate such assets among Participants, including any tax or other information necessary for the Participants or persons administering the plan which is receiving the assets. The terms of such merger, consolidation or transfer must be such that if this Plan is then terminated, the requirements of Section 20.01 hereof would be satisfied and each Participant would receive a benefit immediately after the merger, consolidation or transfer equal to or greater than the benefit he or she would have received if the Plan had terminated immediately before the merger, consolidation or transfer. If this Plan is a transferee plan with respect to all or a portion of a Participant's Account, the optional forms of distribution described in Article X shall include any optional form of distribution which the Participant could have elected under the transferor plan and which would otherwise comply with the provisions of this Plan. ARTICLE XXII. OWNER-EMPLOYEE PROVISIONS 22.01 Purpose of Section. This Section is intended to insure that the Plan complies with Code Section 401(d). Any ambiguity herein will be construed to that end, and this Article will override any other provision of the Plan with which it may be inconsistent. 130 153 22.02 Control. For purposes of this Article, "Control" means the ownership directly or indirectly of the entire interest in an unincorporated trade or business or more than 50% of either the capital interest or the profits interest in a partnership. For the purposes of applying the preceding sentence, an Owner-Employee, or two or more Owner-Employees shall be treated as owning any interest in a partnership which is owned, directly or indirectly, by a partnership which such Owner-Employee, or such two or more Owner-Employees, are considered to Control. 22.03 Limitations. No benefits shall be provided to an Owner-Employee under this Plan unless: (a) if an Owner-Employee or group of Owner-Employees Controls the trade or business covered by this Plan and also Control as an Owner-Employee or Owner-Employees one or more other trades or businesses, this Plan and the plans established for such other trades or businesses, when taken together, form a single plan which satisfies the requirements of Code Sections 401(a) and (d) with respect to the employees of all the controlled trades or businesses; (b) if an Owner-Employee or group of Owner-Employees Controls another trade or business but does not Control the trade or business covered by this Plan, the employees of such other trades or businesses are included in a plan which satisfies the requirements of Sections 401(a) and (d) of the Code and which provides contributions and benefits for such employees which are not less favorable than those provided for Owner-Employees under this Plan; and 131 154 (c) if an Owner-Employee is covered under the qualified retirement plans of two or more trades or businesses which he or she does not Control and the Owner-Employee Controls a trade or business, contributions or benefits for the employees under the plan of the trade or business which the Owner-Employee Controls are not less favorable than those provided for the Owner-Employee in the most favorable qualified retirement plan of the trade(s) or business(es) which the Owner-Employee does not Control. ARTICLE XXIII. TOP-HEAVY PROVISIONS 23.01 Purpose of Section. This Article is intended to insure that the Plan complies with Code Section 416. If the Plan is or becomes Top-Heavy in any Plan Year, the provisions of this Section will supersede any conflicting provision in the Plan. 23.02 Definitions. The terms used in this Section shall have the following meanings: (a) Key Employee: Any Employee or former Employee (and the Beneficiaries of such Employee) who at any time during the determination period was (i) an officer of the Employer having an annual compensation greater than 50% of the amount in effect under Code Section 415(b)(1)(A) for the Plan Year (subject to the limitation that no more than the lesser of (A) 50 Employees or the greater of 3 Employees or 10% of the Employees shall be deemed to be officers), (ii) an owner (or considered an owner under Code Section 318) of 1 of the 10 largest interests in the Employer if both such individual was an owner of more than a .5% interest in the Employer (aggregated with the Employer for this purpose are all members of (A) a controlled group of corporations (as defined in Code Section 414(b) as modified by Code Section 415(h)), (B) commonly controlled trades or businesses 132 155 (whether or not incorporated) (as defined in Code Section 414(c) as modified by Code Section 415(h)), or (C) affiliated service groups (as defined in Code Section 414(m)) of which the Employer is a part) and such individual's compensation exceeds the dollar limitation under Code Section 415(c)(1)(A), (iii) a 5% owner of the Employer, or (iv) a 1-percent owner of the Employer who has an annual compensation of more than $150,000. The determination period is the Plan Year containing the Determination Date and the 4 preceding Plan Years. The determination of who is a Key Employee will be made in accordance with Code Section 416(i)(1) and the regulations thereunder. (b) Top-Heavy Plan. This Plan is Top-Heavy if any of the following conditions exist: (i) If the Top-Heavy Ratio for this Plan exceeds 60% and this Plan is not part of any Required Aggregation Group or Permissive Aggregation Group of plans. (ii) If this Plan is a part of a Required Aggregation Group of plans but not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the Required Aggregation Group of plans exceeds 60%. (iii) If this Plan is a part of a Required Aggregation Group and part of a Permissive Aggregation Group of plans and the Top-Heavy Ratio for the Permissive Aggregation Group exceeds 60%. (c) Top-Heavy Ratio. (i) If the Employer maintains one or more defined contribution plans (including any Simplified Employee Pension Plan within the meaning of Code Section 408(k)) and the Employer has not maintained any defined benefit plan which during the five-year 133 156 period ending on the Determination Date(s) has or has had accrued benefits, Top-Heavy Ratio for this Plan alone or for the Required Aggregation Group or Permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of the account balances under all of the plans as of the Determination Date(s) (including any part of any account balance distributed in the five-year period ending on the Determination Date(s)) of all Key Employees who have received compensation from the Employer (other than benefits under a qualified retirement plan) at any time during the five-year period ending on the Determination Date(s), and the denominator of which is the sum of all account balances as of the Determination Date(s) (including any part of any account balance distributed in the five-year period ending on the Determination Date(s)), of all Participants who have received compensation from the Employer (other than benefits under a qualified retirement plan) at any time during the five-year period ending on the Determination Date(s). Both the numerator and denominator of the fraction shall be computed in accordance with Code Section 416 and the Treasury Regulations promulgated thereunder. In addition, both the numerator and denominator of the Top-Heavy Ratio shall be increased to reflect any contribution which is not actually made as of the Determination Date(s), but which is required to be taken into account on that date under Code Section 416 and the Treasury Regulations promulgated thereunder. (ii) If the Employer maintains one or more defined contribution plans (including any Simplified Employee Pension Plan within the meaning of Code Section 408(k)) and the Employer maintains or has maintained one or more defined benefit plans which during the five-year period ending on the Determination Date(s) has or has had accrued benefits, the Top-Heavy Ratio for any Required Aggregation Group or Permissive Aggregation Group, as 134 157 appropriate, is a fraction, the numerator of which is the sum of (A) account balances under the defined contribution plans as of the Determination Date(s) (including any part of any account balance distributed in the five-year period ending on the Determination Date(s)) of all Key Employees who have received compensation from the Employer (other than benefits under a qualified retirement plan) at any time during the five-year period ending on the Determination Date(s) and (B) the present value of accrued benefits under the defined benefit plans for all Key Employees, who have received compensation from the Employer (other than benefits under a qualified retirement plan) at any time during the five-year period ending on the Determination Date(s) and the denominator of which is the sum of (A) the account balances under the defined contribution plans as of the Determination Date(s) (including any part of any account balance distributed in the five-year period ending on the Determination Date(s)) of all participants who have received compensation from the Employer (other than benefits under this Plan) at any time during the five-year period ending on the Determination Date(s) and (B) the present value of accrued benefits under the benefit plans for all participants who have received compensation from the Employer (other than benefits under this Plan) at any time during the five-year period ending on the Determination Date(s). Both the numerator and denominator of the fraction shall be computed in accordance with Code Section 416 and Treasury Regulations promulgated thereunder. In addition, both the numerator and denominator of the Top-Heavy Ratio shall be increased for aggregate distribution(s) of an account balance or an accrued benefit made during the five-year period ending on the Determination Date(s) and any contribution to a defined contribution plan not actually made as 135 158 of the Determination Date(s), but which is required to be taken into account on that date under Code Section 416 and the Treasury Regulations promulgated thereunder. (iii) For purposes of (i) and (ii) above, the value of account balances and the present value of accrued benefits will be determined as of the most recent Valuation Date that falls within, or ends with, the 12-month period ending on the Determination Date, except as provided in Code Section 416 and the Treasury Regulations promulgated thereunder for the first and second plan years of a defined benefit plan. The account balances and accrued benefits of a Participant who has not been credited with at least one Hour of Service at any time during the five-year period ending on the Determination Date, will be disregarded. The calculation of the Top-Heavy Ratio, and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Code Section 416 and the Treasury Regulations promulgated thereunder. Deductible employee contributions under any qualified plan maintained by the Employer will not be taken into account for purposes of computing the Top-Heavy Ratio. When aggregating plans the value of account balances and accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year. For Plan Years commencing after December 31, 1986 for the purpose of determining the Top-Heavy Ratio, if any target benefit or defined benefit plan is included in the Required Aggregation Group, the accrued benefit of an Employee other than a Key Employee shall be determined under the method that uniformly applies for accrual purposes under all qualified retirement plans maintained by the Employer, or if there is no such method, as if such benefit 136 159 accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rate of Code Section 411(b)(1)(C). (d) Permissive Aggregation Group. The Required Aggregation Group of plans plus any other plan or plans of the Employer which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of Code Sections 401(a)(4) and 410. (e) Required Aggregation Group. (i) Each qualified plan of the Employer in which at least one Key Employee participates or participated at any time during the determination period (regardless of whether the plan has terminated), and (ii) any other qualified plan of the Employer which enables a plan described in (i) to meet the requirements of Code Sections 401(a)(4) or 410. (f) Determination Date. For any Plan Year subsequent to the first Plan Year, the Determination Date shall be the last day of the preceding Plan Year. For the first Plan Year of the Plan, the Determination Date shall be the last day of that year. (g) Valuation Date. Shall be the last day of the Plan Year. (h) Present Value. Present Value shall be based only on the interest rate and the mortality table specified by the Employer in the Adoption Agreement. 23.03 Minimum Allocation. (a) In any Plan Year in which this Plan is Top-Heavy, except as otherwise provided in subsections (c) and (d) below, the Employer Contributions and forfeitures allocated, or during a Plan Year which begins after December 31, 1988, Employer Profit Sharing Contributions and forfeitures allocated to the Participant's Employer Profit Sharing 137 160 Contribution Account, on behalf of any Participant who is not a Key Employee shall not be less than the lesser of 3% of such Participant's Compensation or, in the case where the Employer has no defined benefit plan which designates this Plan to satisfy Code Section 401, the largest percentage of Employer Contributions and forfeitures stated as a percentage of a Key Employee's Compensation, allocated on behalf of any Key Employee for that Plan Year. The minimum allocation is determined without regard to any Social Security contribution by the Employer. Salary Reduction Contributions, Employer Matching Contributions and Qualified Matching Contributions may not be taken into account to satisfy this minimum allocation. This minimum allocation shall be made even though, under other provisions of this Plan, the Participant would not otherwise be entitled to receive an allocation, or would have received a lesser allocation for the year because (i) the Participant failed to complete the minimum number of Hours of Service specified in the Adoption Agreement for receiving an allocation, (ii) the Participant's Compensation was less than a stated amount, or (iii) the Participant made insufficient mandatory contributions to receive an Employer Matching Contribution. (b) For purposes of computing the minimum allocation, "Compensation" shall have the same meaning as in Section 5.05(b) hereof. (c) The provision in subsection (a) above shall not apply to any Participant who was not employed by the Employer on the last day of the Plan Year. (d) The provision in subsection (a) above shall not apply to any Participant to the extent the Participant is covered under any other plan or plans of the Employer, and the 138 161 Employer has provided in the Adoption Agreement that the minimum allocation or benefit requirement applicable to Top-Heavy Plans will be met in such other plan or plans. 23.04 Nonforfeitability of Minimum Allocation. The minimum allocation required (to the extent required to be nonforfeitable under Code Section 416(b)) may not be forfeited under Code Section 411(a)(3)(B) or 411(a)(3)(D). 23.05 Limitation on Compensation. For Plan Years beginning after January 1, 1994, only the first $150,000 (or such other amount as may be prescribed by the Secretary of the Treasury or his or her delegate) of a Participant's Compensation for the Plan Year shall be taken into account for purposes of allocating Employer Contributions under this Article XXIII. 23.06 Minimum Vesting Schedule. Unless the Employer has specified a more rapid vesting schedule in the Adoption Agreement, for any Plan Year in which this Plan is Top-Heavy, the following minimum vesting schedule shall apply:
Nonforfeitable Percentage of Employer Profit Sharing and Vesting Years Matching Contribution Accounts ------------- ------------------------------ 1 0% 2 20 3 40 4 60 5 80 6 or more 100
The minimum vesting schedule applies to all benefits within the meaning of Code Section 411(a)(7) attributable to Employer Contributions and forfeitures, including benefits accrued before the effective date of Code Section 416 and benefits accrued before the Plan became Top-Heavy. Further, no reduction in a Participant's nonforfeitable percentage may occur in 139 162 the event the Plan's status as Top-Heavy changes for any Plan Year. If conversion of the Plan into a Top-Heavy Plan has resulted in a change of the Plan's vesting schedule to the minimum vesting schedule discussed above, the change shall be treated as an amendment to the Plan and the election referred to in Section 20.01 hereof shall apply. This Section does not apply to the Employer Profit Sharing Contribution Account and Employer Matching Contribution Account balances of any Participant who does not have an Hour of Service after the Plan has initially become Top-Heavy and such Participant's vested Employer Profit Sharing Contribution Account and Employer Matching Contribution Account balance will be determined without regard to this Section. 23.07 Effect on Code Section 415 Limitations. Notwithstanding anything to the contrary in Article V above, the following provisions apply if the Plan is Top-Heavy: (a) In any Plan Year in which the Top-Heavy Ratio exceeds 90% (and the Plan therefore becomes super Top-Heavy) the denominators of the Defined Benefit Fraction (as defined in Section 5.05(c) above) and the Defined Contribution Fraction (as defined in Section 5.05(d) above) shall be computed using 100% of the dollar limitation stated therein instead of 125%. (b) In any Plan Year in which the Top-Heavy Ratio exceeds 60%, but is less than 90%, the denominators of the Defined Benefit Fraction (as defined in Section 5.05(c) above) and the Defined Contribution Fraction (as defined in Section 5.05(e) above) shall be computed using 100% of the dollar limitation described therein instead of 125%, unless the Employer has specified in the Adoption Agreement that the minimum allocation provisions of Section 23.03 above shall be computed using 4% of a Participant's Compensation, in which 140 163 case the dollar limitations of the Defined Benefit Fraction (as defined in Section 5.05(c) above) and the Defined Contribution Fraction (as defined in Section 5.05(e) above) shall continue to be computed using 125% of the dollar limitations. 23.08 Termination of Top-Heavy Status. If the Plan ceases to be Top-Heavy for any Plan Year and if the Employer has not specified otherwise in the Adoption Agreement, the minimum vesting schedule described in Section 23.06 shall continue to apply. If the Employer has specified in the Adoption Agreement that, upon conversion of the Plan to non-Top-Heavy status, Participants' vested benefits are to be determined according to a schedule other than the minimum vesting schedule described in Section 23.06 hereof, such change in vesting schedules shall be treated as an amendment, and the election referred to in Section 20.01 hereof shall apply. ARTICLE XXIV. SPECIAL DISTRIBUTION RULES 24.01 Special Distribution Rules for Certain Participants. If (a) it is determined that this Plan is a direct or indirect transferee (where such transfer occurred after December 31, 1984) of a defined benefit plan, money purchase pension plan (including a target benefit plan), stock bonus or profit sharing plan which would otherwise provide a life annuity form of payment with respect to a Participant (including a plan which was amended into this Plan), (b) the Plan is amended so as to allow a Participant to elect to receive his or her benefits in the form of a life annuity and a Participant elects to receive his or her benefits in such form, (c) the Plan is amended to provide that absent a Qualified Election of a Participant's surviving Spouse, someone other than the Participant's surviving Spouse becomes entitled to the 141 164 Participant's vested Account balance, or (d) if someone other than the Participant's surviving Spouse is the beneficiary of any insurance purchased with funds from the Participant's Account, then the provisions of Sections 24.03 to 24.05 below shall apply in lieu of Article IX above and Sections 10.01 and 10.02 above. The Administrator shall specify in writing to the Trustee the Participants' Accounts (or frozen amounts in such Accounts) to which the provisions of Section 24.03 to 24.05 shall apply. For the purposes of determining whether the provisions of this Article apply, the Trustee shall be entitled to rely conclusively on written instructions, if any, received by the Trustee from the Administrator concurrent with the transfer. Furthermore, where the transfer is, or was, not accompanied by written instructions specifying conditions under which specific provisions of this Article would apply, the Trustee shall be entitled to conclusively presume that this Article does not apply. 24.02 Definitions. For the purpose of this Section, the following terms shall have the specified meanings: (a) "Election Period" shall mean the period which begins on the first day of the Plan Year in which the Participant attains age 35 and which ends on the date of the Participant's death. If a Participant separates from Service prior to the first day of the Plan Year in which he or she attains age 35, the Election Period with respect to his or her Vested Account Balance (as of his or her date of separation) shall begin on his or her date of separation. (b) "Qualified Election" shall mean a valid waiver of a Qualified Joint and Survivor Annuity or Qualified Preretirement Survivor Annuity, as the case may be. To be 142 165 valid, the waiver must be in writing and Participant's Spouse must consent to it in writing. The Spouse's consent to the waiver (i) must be witnessed by a Plan representative or notary public and (ii) must be (A) a general consent to the provision of a form (or forms) of distribution to any alternative person (or alternative persons); (B)a limited consent to the provision of a specific form (or specific forms) of distribution to a specific alternate person (or specific alternate persons); or (iii) a limited consent which is specific with respect to form or alternative payee. Notwithstanding the foregoing consent requirement, if the Participant establishes to the satisfaction of a Plan representative that such written consent may not be obtained because there is no Spouse or the Spouse cannot be located, a waiver will nonetheless be deemed a Qualified Election. Any consent necessary for a Qualified Election will be valid only with respect to the Spouse who signs the consent, or in the event of a deemed Qualified Election, the Spouse whose consent could not be obtained or who could not be located. Additionally, a revocation of a prior waiver may be made by a Participant without the consent of the Spouse at any time before the commencement of distributions or benefits. The number of revocations shall be unlimited. Each such revocation shall once again make the Qualified Joint and Survivor Annuity or Qualified Preretirement Survivor Annuity applicable, as the case may be. No consent obtained pursuant to this Section shall be valid unless the Participant has received the relevant notice as provided in Sections 24.09 and 24.10. (c) "Qualified Joint and Survivor Annuity" shall mean, in the case of a married Participant, an annuity which can be purchased with the Participant's Vested Account Balance for the life of the Participant with a survivor annuity for the life of the Spouse equal to 50% of the amount of the annuity which is payable during the joint lives of the Participant and 143 166 the Spouse. In the case of an unmarried Participant, Qualified Joint and Survivor Annuity shall mean an annuity which can be purchased with a Participant's Vested Account Balance for the life of the Participant. (d) "Special Qualified Election" shall mean a valid waiver of a Qualified Preretirement Survivor Annuity for the period beginning on the date of such election and ending on the first day of the Plan Year in which the Participant attains age 35. To be valid, the waiver must be (i) in writing, (ii) made prior to the first day of the Plan Year in which the Participant attains age 35, and (iii) preceded by a written explanation to the Participant of the Qualified Preretirement Survivor Annuity in such terms as are comparable to the explanation required by Section 24.09 and 24.10. Any election made pursuant to this Section shall be void as of the first day of the Plan Year in which the Participant attains age 35 and Qualified Preretirement Survivor Annuity coverage shall be automatically reinstated as of such date. Any future election to waive the Qualified Preretirement Survivor Annuity must be a Qualified Election. (e) "Vested Account Balance" shall mean the Participant's vested portion of his or her Account consisting of the sum of the balances of Participant's Nondeductible Voluntary Contributions Account, Deductible Voluntary Contribution Account, Rollover Account, Salary Reduction Contributions Account, Deferred Cash Contribution Account and Nonelective Contribution Account and the vested portions of a Participant's Employer Profit Sharing Account and Employer Matching Account, reduced by any loans outstanding on the Annuity Starting Date which are secured by the Participant's Account balance. 144 167 24.03 Distributions upon Death. (a) Qualified Preretirement Survivor Annuity. (i) Unless either paragraph (ii) below applies or the Participant has selected an optional form of distribution within the Election Period pursuant to a Qualified Election or a Special Qualified Election, if the Participant dies before the earlier of (A) his or her Annuity Starting Date or (B) his or her First Required Distribution Date, then the Trustee shall, upon the direction of the Administrator, apply 50% of the Participant's Vested Account Balance toward the purchase of an annuity contract for the life of the Spouse. (ii) Notwithstanding the provisions of paragraph (i) above, prior to the earlier of (A) Spouse's Annuity Starting Date or (B) the Spouse's First Required Distribution Year, the Spouse of a Participant may deliver a written election to the Administrator whereby the Spouse elects not to have 50% of the Participant's Vested Account Balance applied toward the purchase of an annuity contract for the Spouse's life. Similarly, after the earlier of (A) the Spouse's Annuity Starting Date or (B) the Spouse's First Required Distribution Year, the Spouse may deliver a written election to the Administrator whereby the Spouse elects to terminate distributions pursuant to the Qualified Preretirement Survivor Annuity and to receive the liquidated value of the remainder of the Qualified Preretirement Survivor Annuity in an alternative form. In the case where a Spouse makes either of such elections, the portion of the deceased Participant's Vested Account Balance which would otherwise have been distributed pursuant to this subsection shall be distributed pursuant to the provisions of subsection (b) below. 145 168 (iii) In the case of a Spouse of a deceased Participant who is scheduled to receive a Qualified Preretirement Survivor Annuity and who does not otherwise elect, at the instruction of the Administrator, the Trustee shall apply 50% of the deceased Participant's Vested Account Balance toward an annuity under which payments begin as of the later of the Participant's separation from Service or (what would have been) the Participant's Normal Retirement Date. A Spouse of a deceased Participant may elect a commencement date which is earlier than the date discussed in the previous sentence by filing a written election to that effect with the Administrator; the Trustee shall begin to make payments on such earlier date upon instruction from the Administrator. (b) Other Distributions at Death. If the Participant dies after he or she has begun to receive distributions pursuant to Section 24.04 below, this subsection shall apply with respect to the Participant's entire Vested Account Balance. With respect to any Vested Account Balance, or portion thereof, to which subsection (a) did not apply, the provisions of Article IX shall govern the distribution thereof. 24.04 Timing of Annuity Payments and Normal Distributions. Payment of benefits under the Qualified Joint and Survivor Annuity or distributions pursuant to the normal form of distribution discussed in Section 24.05(b) below shall commence within 60 days after the close of the Plan Year during which occurs the later of (a) the Participant's Normal Retirement Date or (b) the earlier of (i) the Participant's separation from Service or (ii) the end of his or her First Required Distribution Year. Payment of benefits may, at the discretion of the Trustee, be paid directly to the Participant or to the Administrator, as payee agent. If the Participant's vested Account balance (exclusive of his or her Rollover Account and Deductible Voluntary 146 169 Contribution Account) is greater than $3,500, written consent of the Participant is required for any earlier distribution. A Participant may file an election with the Administrator to request that distributions commence in accordance with one of the following options provided that the distribution shall otherwise comply with the requirements of the Plan (including, but not limited to, Section 10.03): (A) Distributions commencing before the Participant's Normal Retirement Date if the Participant is Disabled or experiences a separation from Service. (B) Distributions commencing after the normal time of distribution described above; provided, however, that any such deferred distribution must commence no later than 60 days after the end of the Participant's First Required Distribution Year. 24.05 Form of Distribution and Optional Times for Commencement of Distribution. The Vested Account Balance of a Participant to which Section 24.03 above does not apply, shall be distributed in a form determined according to this Section. (a) Unless the Participant elects an optional form of distribution pursuant to a Qualified Election or a Special Qualified Election within 90 days before his or her Annuity Starting Date, the Participant's Vested Account Balance shall be paid in the form of a Qualified Joint and Survivor Annuity. (b) If the Participant was eligible to receive a Qualified Joint and Survivor Annuity and he or she elects an optional form of distribution set forth in Article X pursuant to a Qualified Election or a Special Qualified Election within 90 days before his or her Annuity Starting Date, then the Participant's Vested Account Balance will be distributed in the form selected by the Participant and the provisions of Article X shall apply. 147 170 (c) All annuity contracts purchased and distributed by the Plan to a Participant or a Beneficiary shall be nontransferable when distributed and the terms of such contracts shall comply with the requirements of the Plan. 24.06 Elections for Former Participants. An opportunity to make the applicable distribution elections discussed in this Section must be given to any living former Participant who had not begun receiving benefits from this Plan on August 23, 1984 and who would not otherwise receive the benefit forms prescribed by Section 24.05 above. (a) In the case of a former Participant who: (i) would have been entitled to receive his or her benefits in the form of a life annuity had he or she completed an Hour of Service during a Plan Year commencing after December 31, 1984, (ii) was credited with Service under this Plan or a predecessor plan in a plan year beginning after December 31, 1975, and (iii) had at least ten years of Vesting Service when he or she separated from Service, the former Participant must be given an opportunity to elect to receive his or her benefits in accordance with the provisions of Section 24.05 above. (b) In the case of a former Participant: (i) who was credited with service under this Plan or a predecessor plan after September 1, 1974; (ii) who was not credited with service under this plan or a predecessor plan in a plan year beginning after December 31, 1975; and 148 171 (iii) whose benefits would have been payable in the form of a life annuity, the Participant must be given an opportunity to elect to receive his or her benefits in accordance with the provisions of Section 24.08 below. (c) In the case of a former Participant who: (i) satisfies the requirements of subsection (a) but does not exercise the election made available to him or her in subsection (a), or (ii) satisfies the requirements of subsection (a) other than the requirement of paragraph (iii), the former Participant shall have his or her benefits distributed in accordance with the provisions of Section 24.08 below. 24.07 Election Period for Certain Elections by Separated Participants. The period during which a former Participant entitled to make an election pursuant to Section 24.06 above shall commence on August 23, 1984 and end on the earlier of the former Participant's death or the date benefits would otherwise commence to said former Participant. 24.08 Benefit Form for Certain Former Participants. The benefits of a former Participant who is entitled to elect, and has elected to have his or her benefits distributed pursuant to this Section or a former Participant whose benefits are required to be distributed in accordance with the provisions of this Section shall be distributed in accordance with the following provisions: (a) If benefits in the form of a life annuity become payable to a married former Participant who: (i) begins to receive payments under the Plan on or after Normal Retirement Age; or 149 172 (ii) dies on or after Normal Retirement Age while still working for the Employer; or (iii) begins to receive payments prior to Normal Retirement Age; or (iv) separates from Service on or after attaining Normal Retirement Age (or the qualified early retirement age) after satisfying the eligibility requirement for the payment of benefits under the Plan and thereafter dies before beginning to receive such benefits; then such benefits will be received under this plan in the form of a Qualified Joint and Survivor Annuity, unless the former Participant has elected otherwise during the election period. For this purpose, the election period must begin at least six months before the Participant attains qualified early retirement age and end not more than 90 days before the commencement of benefit distributions. Any election hereunder must be in writing and delivered to the Administrator; such election may be changed by the former Participant at any time by delivery of written notification of such change and/or a separate written election to the Administrator. (b) A former Participant who is employed at the start of the election period defined below will be given the opportunity to elect, during such election period, to have a survivor annuity payable on death. If the former Participant elects the survivor annuity, payments under such annuity must not be less than the payments which would have been made to the Spouse under the Qualified Joint and Survivor Annuity if the former Participant had retired on the day before his or her death. Any election under this provision must be in writing and delivered to the Administrator; such election may be changed by the former Participant at any time by delivery of written notification of such change and/or a separate 150 173 written election to the Administrator. The election period begins on the later of (i) the 90th day before the former Participant attains the qualified early retirement age or (ii) the date on which participation begins, and ends on the date the former Participant terminates employment with the Employer. (c) The qualified early retirement age referred to in this Section shall mean the latest of: (i) the earliest date, under the Plan, on which the former Participant may elect to receive retirement benefits: (ii) the first day of the 120th month beginning before the former Participant reaches Normal Retirement Age: or (iii) the date the former Participant began participation. 24.09 Notice of Waivability of Qualified Preretirement Survivor Annuity. (a) In the case of a Participant who is scheduled to receive Qualified Preretirement Survivor Annuity coverage pursuant to Section 24.03 hereof, the Administrator shall provide to the Participant within the applicable period as determined pursuant to subsection (b) below, a written explanation of: (i) the terms and conditions of a Qualified Preretirement Survivor Annuity; (ii) the Participant's right to make, and the effect of, an election to waive Qualified Preretirement Survivor Annuity coverage; (iii) the rights of a Participant's Spouse; and (iv) the Participant's right to make, and the effect of, a revocation of a previous election to waive Qualified Preretirement Survivor Annuity coverage. 151 174 (b) The applicable period during which the Administrator shall provide the written explanation described in subsection (a) above shall mean, with respect to a given Participant, whichever of the following periods ends last: (i) The period beginning when the individual becomes a Participant and ending a reasonable period of time thereafter; (ii) The period beginning on the first day of the Plan Year during which the Participant attains age 32 and ending on the last day of the Plan Year during which the Participant attains age 34; (iii) The period that begins with a Participant's separation from Service when the Participant separates from Service before attaining age 35 and ends a reasonable period of time after such separation from Service; (iv) The period of time that begins on the effective date of a Plan amendment which causes the Plan to no longer fully subsidize the cost of the Qualified Preretirement Survivor Annuity and ends a reasonable period of time after the effective date of such an amendment; or (v) The period of time which begins when Section 24.03(a) above first applies in the case of the Participant and ends a reasonable period of time thereafter. For purposes of applying the preceding paragraph, a reasonable period ending after the enumerated events described in (i), (iv) and (v) is the end of the two-year period beginning one year prior to the date the applicable event occurs and ending one year after that date. In the case of a Participant who separates from service before the Plan Year in which age 35 is attained, notice shall be provided within the two-year period beginning one year prior to 152 175 separation and ending one year after separation. If such a Participant thereafter returns to employment with the Employer, the applicable period for such Participant shall be redetermined. 24.10 Notice of Waivability of Qualified Joint and Survivor Annuity. In the case of a Participant who is scheduled to receive a Qualified Joint and Survivor Annuity pursuant to the provisions of Section 24.05 hereof, the Administrator shall provide to the Participant, no less than 30 days and no more than 90 days prior to the annuity starting date, a written explanation of: (a) the terms and conditions of a Qualified Joint and Survivor Annuity; (b)the Participant's right to make, and the effect of, an election to waive distribution in the form of a Qualified Joint and Survivor Annuity; (c) the rights of the Participant's Spouse; and (d) the Participant's right to make, and the effect of, a revocation of a previous election to waive distribution in the form of the Qualified Joint and Survivor Annuity. Distribution to a Participant may commence seven days after the foregoing explanation is given, provided that: (i) the Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (ii) the Participant, after receiving the explanation, affirmatively elects a distribution. 153 176 ARTICLE XXV. MISCELLANEOUS 25.01 Misrepresentation. Notwithstanding any other provision herein, if an Employee misrepresents his or her age or any other fact, any benefit payable hereunder shall be the smaller of: (a) the amount that would be payable if no facts had been misrepresented, or (b) the amount that would be payable if the facts were as misrepresented. 25.02 No Enlargement of Plan Rights. It is a condition of the Plan, and each Participant by participating herein expressly agrees, that he or she shall look solely to the assets of the Trust for the payment of any benefit under the Plan. 25.03 No Enlargement of Employment Rights. Nothing appearing in or done pursuant to the Plan shall be construed (a) to give any person a legal or equitable right or interest in the assets of the Trust or distribution therefrom, nor against the Employer, except as expressly provided herein or (b) to create or modify any contract of employment between the Employer and any Employee or obligate the Employer to continue the services of any Employee. 25.04 Written Orders. In taking or omitting to take any action under this Plan, the Trustee may conclusively rely upon and shall be protected in acting upon any written orders from or determinations by the Employer or the Administrator as appropriate, or upon any other notices, requests, consents, certificates or other instruments or papers believed by it to be genuine and to have been properly executed, and so long as it acts in good faith, in taking or omitting to take any other action. 25.05 No Release from Liability. Nothing in the Plan shall relieve any person from liability for any responsibility under Part 4 of Title I of the Act. Subject thereto, neither Trustee, Loan Trustee, Administrator or Distributor nor any other person shall have any 154 177 liability under the Plan, except as a result of negligence or wilful misconduct, and in any event the Employer shall fully indemnify and save harmless all persons from any liability except that resulting from their negligence or wilful misconduct. 25.06 Discretionary Actions. The Administrator shall have discretionary authority to determine eligibility for benefits and construe the terms of the Plan. Any discretionary action, including the granting of a loan pursuant to Article XII hereof, to be taken by the Employer or the Administrator under this Plan shall be non-discriminatory in nature and all Employees similarly situated shall be treated in a uniform manner. 25.07 Headings. Headings herein are primarily for convenience of reference, and if they conflict with the text, the text shall control. 25.08 Applicable Law. This Plan and Trust shall, to the extent state law is applicable, be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the state in which (a) if the Trustee is a corporation, the Trustee has its principal place of business; (b)if the Trustee is an individual, the Trustee resides; or (c) if the Trustee is individuals, where a Majority of the individuals serving as Trustee reside. The Employer's execution of the Adoption Agreement may be acknowledged where required by applicable law. 25.09 No Reversion. Notwithstanding any other contrary provision of the Plan, but subject nevertheless to Articles XVIII, no part of the assets in the Trust shall revert to the Employer, and no part of such assets, other than that amount required to pay taxes or administrative expenses, shall be used for any purpose other than exclusive benefit of Employees or their Beneficiaries. However, the Employer may request a return, and this 155 178 Section shall not prohibit return, of an amount to the Employer under any of the following circumstances: (a) if the amount was all or part of an Employer Contribution which was made as a result of a mistake of fact and the amount contributed or, if less, the then current value is returned to the Employer within one year after the date on which the mistaken payment of the contribution was made, or (b) if the amount was all or part of an Employer Contribution which was conditioned on deductibility under Code Section 404, such deduction was disallowed with respect to such amount and this condition is not satisfied and the amount is returned to the Employer within one year after the date on which the deduction is disallowed, or (c) if the amount was all or part of an Employer Contribution which was conditioned on the initial qualification of the Plan under Code Section 401(a), the Plan receives an adverse determination with respect to this qualification and the amount is returned to the Employer within one year after the date on which such adverse determination is made, but only if the application for the determination is made by the time prescribed by law for filing the Employer's return for the taxable year in which the Plan was adopted, or such later date as the Secretary of Treasury may prescribe. For the purposes of this Section, all Employer Contributions are conditioned on initial qualification of the Plan under Code Section 401(a), qualification of the Plan as amended under Code Section 401(a), and deductibility under Code Section 404. 156 179 25.10 Notices. The Employer will provide the notice to other interested parties contemplated under Code Section 7476 before requesting a determination by the Secretary of the Treasury or his or her delegate with respect to the qualification of the Plan. 25.11 Conflict. In the event of any conflict between the provisions of this Plan and the terms of any contract or agreement issued thereunder or with respect thereto, the provisions of the Plan shall control. In particular, the proceeds of any life insurance contract purchased by the Trustee and not governed by an effective Designation of Beneficiary form shall be paid to the Participant's Spouse regardless of who is named as the beneficiary or beneficiaries in the contract. 25.12 Prior Benefits. If the optional form of benefits under the Plan prior to adoption of the Prototype 401(k) Plan (the "Prior Benefits") were different than the optional form of benefits as provided in the Prototype 401(k) Plan, then the portion of a Participants' Account which are attributable to participation in the Plan prior to adoption of the Prototype 401(k) Plan shall be subject to such Prior Benefits and, in the discretion of the Administrator the remaining portion of the Participants' Account shall also be subject to such Prior Benefits. The Administrator shall notify the Trustee as to what portion, if any, of the Participants' Account is subject to such Prior Benefits and give a full description of such Prior Benefits; and, separate accounts shall be maintained for each type of contribution (as provided in Section 7.03) for such portion. 157 EX-10.(K) 4 SEPARATION AGREEMENT DATED 12/19/96 1 EXHIBIT 10(k) [UNITED STATES LIME & MINERALS, INC. LETTERHEAD] December 11, 1996 Mr. Robert K. Murray United States Lime & Minerals, Inc. 12221 Merit Drive, Suite 500 Dallas, Texas 75251 Dear Bob: We appreciate your service to United States Lime & Minerals, Inc. and its wholly owned subsidiaries (hereinafter "U.S. Lime"). This is to confirm our discussions concerning the termination of your position, effective December 15, 1996, as Vice President - Operations for U.S. Lime, and U.S. Lime's offer and your acceptance of this proposed Separation Agreement on the terms set forth below. 1. SPECIAL SEPARATION BENEFITS. In consideration of your continued services and the General Release and the Confidentiality of Separation Agreement and Nondisparagement provisions of this Agreement, and contingent upon your acceptance of the terms of this Agreement, U.S. Lime offers you the following Special Separation Benefits: a. Salary Continuation. U.S. Lime offers to continue to pay you compensation in an amount equivalent to your regular monthly salary for a period of six months from January 1, 1997 to June 30, 1997. You will be paid for the last two weeks of December 1996, from the vacation you have earned. These payments are subject to all legal deductions and will be paid to you in equal installments on regularly scheduled U.S. Lime paydays. b. Fringe Benefits. For a period of six months from January 1, 1997 U.S. Lime offers to continue your current employee fringe benefits with the exception of the company car and further vacation accrual. You will have the use of the company car until January 15, 1997. During the salary continuation period, you will be considered an employee for purposes of exercising your option under the Company's 1992 Stock Option Plan. c. Moving Costs. U.S. Lime will reimburse you for the reasonable costs to move your household items and personal goods in an amount not to exceed $6,000. 2 By execution of this Agreement, you acknowledge and agree that U.S. Lime has no legal obligation to enter into such Separation Agreement with you. You also acknowledge and agree that your acceptance of benefits pursuant to such Separation Agreement and the attendant obligations as described in this Agreement are in consideration of the promises and undertakings of U.S. Lime as set forth in this Agreement. You further acknowledge and agree that should you breach any of your obligations set forth in this Agreement (i) U.S. Lime will have no obligation to make payments to you under this Agreement, but that all other provisions of this Agreement shall remain in full force and effect, and (ii) you may be required to repay any payments made to you and reimburse U.S. Lime for any payments made on your behalf pursuant to this Agreement. 2. USE OF CONFIDENTIAL INFORMATION. You agree that all of the documents and information to which you have had access during your employment are confidential and may not be disseminated or disclosed by you to any other parties, except as required by law or judicial process. In the event it appears you will be compelled by law or judicial process to disclose such confidential information, you should notify U.S. Lime in writing immediately upon your receipt of a subpoena or other legal process to avoid potential liability. 3. GENERAL RELEASE. In consideration of the Special Separation Benefits described above, you and your family members, heirs, successors, and assigns (hereinafter collectively the "Releasing Parties") hereby release, acquit, and forever discharge any and all claims and demands of whatever kind or character, whether vicarious, derivative, or direct, that you or they, individually, collectively, or otherwise, may have or assert against: (i) U.S. Lime, (ii) any of U.S. Lime's subsidiaries or affiliated companies, or (iii) any officer, director, stockholder, agent, employee, representative, attorney, or any successor or assign of the entities just named (collectively the "Released Parties"). This General Release includes but is not limited to any claim or demand based on any state, federal, or local statutory or common law that applies or is asserted to apply, directly or indirectly, to your employment relationship or the termination of your employment relationship with U.S. Lime, including but not limited to any claim for wrongful discharge, unlawful discrimination on the basis of race, color, religion, sex, national origin, age, citizenship status, disability, or any other form of discrimination prohibited by jaw, retaliation, breach of contract (express or implied), breach of any duty of good faith and fair dealing, violation of the public policy of the United States, the State of Texas, or any other state, tortious interference with contract or prospective contractual relations, promissory estoppel, detrimental reliance, invasion of privacy, assault, battery, conspiracy, intentional or negligent infliction of emotional distress, defamation, duress, fraud or misrepresentation, loss of consortium, or any other alleged negligent or intentional tort, or any violation of Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Employee Retirement Income Security Act of 1974, the Americans with Disabilities Act of 1990, the Family and Medical Leave Act, the Fair Labor Standards Act, the Fair Credit Reporting Act, The Texas Workers' Compensation Act or any other State or Federal statute, arising out of your employment relationship or the termination of your employment relationship with U.S. Lime. 3 The effect of your acceptance of this Agreement is to waive, release, and forever discharge any and all claims, demands, actions, or causes of action of whatever kind or character that any of the Releasing Parties may now or hereafter have against U.S. Lime or any of the other Released Parties for any liability, whether vicarious, derivative, or direct, except for violations of this Agreement. This includes, but is not limited to, any claims for damages (actual or punitive), back wages, future wages, bonuses, reinstatement, accrued vacation leave benefits, past and future employee benefits (except as to which there is vested entitlement on June 30, 1997) including, but not limited to, contributions to your employee benefit plans, compensatory damages, liquidated damages, penalties, equitable relief, attorney's fees, costs of court, interest, and any and all other loss, expense, or detriment of whatever kind resulting from, growing out of, connected with, or related in any way to your employment relationship or the termination of your employment relationship with U.S. Lime. This general release does not apply to any rights or claims that may arise as a result of violations of this Agreement. Should you or any of the other Releasing Parties violate this Agreement, the Releasing Parties may be required to repay any payments made to you or reimburse U.S. Lime for any payments made on your behalf pursuant to this Separation Agreement. The Releasing Parties also may be held liable for any of the Released Parties' damages caused by the violation, including without limitation their costs and attorney's fees incurred in defending against such action. 4. CONFIDENTIALITY OF SEPARATION AGREEMENT AND NON-DISPARAGEMENT. In consideration of the Special Separation Benefits described above, you agree that the terms of this Agreement shall be and remain confidential, and shall not be disclosed by you to any party other than your spouse, attorney, and accountant or tax return preparer if such persons have agreed to keep such information confidential, and except as may be required by law or judicial process. You further agree that, except as requested by U.S. Lime or as compelled by law or judicial process, you will not institute or prosecute, or cooperate in the institution of prosecution of, any proceeding or lawsuit relating to the hiring, employment, or termination of employment of you or others by U.S. Lime. You agree not to make any statement, oral or written, that directly or indirectly impugns the quality or integrity of U.S. Lime's or any of the other Released Parties' business practices, or make any other disparaging or derogatory remarks about any of the Released Parties to any other parties. You further agree and acknowledge that should you breach this obligation, you may be required to repay any payments made to you or reimburse U.S. Lime for any payments made on your behalf pursuant to this Agreement. 5. EXPIRATION OF OFFER. U.S. Lime's offer of this proposed Separation Agreement will expire at midnight on the twenty-first day following the date of this letter. You may accept this offer at any time before expiration by executing this Agreement and returning it to the undersigned representative of U.S. Lime. 4 6. EFFECTIVE DATE. This Agreement will become effective and enforceable seven days after you execute it ("Effective Date"). At any time before the Effective Date of this Agreement, you may revoke your acceptance. You also agree to re-execute this Agreement at any time on or after June 30, 1997 if U.S. Lime requests that you do so. 7. CONSULTATION WITH AN ATTORNEY. You have the right to consult an attorney before executing this Agreement. 8. VOLUNTARY AGREEMENT. You acknowledge that your execution of this Agreement is knowing and voluntary, that you have had a reasonable time to deliberate regarding its terms, and that you have had the right to consult with an attorney if you so desired. ------------------------- If you are in agreement with the foregoing provisions, please execute the attached duplicate copy of this letter in the space provided below. This letter shall then constitute a valid and binding agreement by and between U.S. Lime and you, effective as of seven (7) days after the date of execution. Sincerely, UNITED STATES LIME & MINERALS, INC. By: /s/ TIMOTHY W. BYRNE ----------------------------------- ACCEPTED AND AGREED TO: /s/ ROBERT K. MURRAY - --------------------------------- ROBERT K. MURRAY Date Signed: 12/12/96 -------------------- 5 I, Robert K. Murray, hereby resign as a Officer of United States Lime & Minerals, Inc. In addition, I further resign as an Officer and Director from Arkansas Lime Company, Corson Lime Company, Texas Lime Company and Colorado Lime Company. /s/ ROBERT K. MURRAY 12/12/96 - ----------------------------------- -------------------------- Robert K. Murray Date EX-10.(R) 5 LETTER AGREEMENT DATED 10/26/95 1 EXHIBIT 10(r) [CORESTATES BANK, N.A. LETTERHEAD] October 26, 1995 Timothy W. Byrne Vice President - Finance UNITED STATES LIME & MINERALS, INC. 12221 Merit Drive Suite 500 Dallas, TX 75231 Re: Loan and Security Agreement dated October 20, 1993, as Amended, By and Among United States Lime & Minerals, Inc. (Formerly known as Scottish Heritable, Inc.), Corson Lime Company, Texas Lime Company and Arkansas Lime Company (collectively the "Borrowers") and CoreStates Bank N.A. ("Bank") Dear Tim: We refer to the Loan and Security Agreement dated October 20,1993, as amended by Amendment No. 1 to Loan and Security Agreement dated as of December 23, 1994, Amendment No. 2 to Loan and Security Agreement dated April 28, 1995, and Amendment No. 3 to Loan and Security Agreement dated September 29, 1995 (collectively, the "Loan Agreement"). Initially capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement unless the context clearly requires to the contrary. Section references are to sections of the Loan Agreement. Borrowers and Bank hereby agree that notwithstanding the provisions of Section 7.1.12 of the Loan Agreement (last amended by Amendment No. 2), Borrowers may make Capital expenditures in any Fiscal year not to exceed $5,000,000 in the aggregate. When fully executed by Bank and Borrowers, this letter will constitute an amendment to the Loan Agreement as a contract to be construed under the internal laws of the Commonwealth of Pennsylvania. All provisions of the Loan Agreement not modified hereby shall remain in full force and effect. 2 Timothy V. Byrne, Vice President - Finance October 26, 1995 Page 2 Please indicate Borrowers' acceptance of the terms of this letter agreement in the space provided below. Very truly yours, CORESTATES BANK, N.A. By: /s/ CLIFFORD W. KEWLEY ----------------------- Clifford W. Kewley, Vice President THE TERMS OF THE FORGOING LETTER AGREEMENT ARE AGREED TO AND ACCEPTED THIS ___ DAY OF _________________, 1995 UNITED STATES LIME & MINERALS, INC. (Formerly known as Scottish Heritable, Inc.) By: /s/ TIMOTHY W. BYRNE ----------------------------------------- CORSON LIME COMPANY By: /s/ TIMOTHY W. BYRNE ----------------------------------------- ARKANSAS LIME COMPANY By: /s/ TIMOTHY W. BYRNE ----------------------------------------- TEXAS LINE COMPANY By: /s/ TIMOTHY W. BYRNE ----------------------------------------- EX-10.(S) 6 AMENDMENT NO. 5 TO LOAN & SECURITY AGREEMENT 1 EXHIBIT 10(s) AMENDMENT NO. 5 TO LOAN AND SECURITY AGREEMENT AMENDMENT NO. 5 TO LOAN AND SECURITY AGREEMENT (this "Fifth Amendment") dated this 27th day of November, 1996 by and between UNITED STATES LIME & MINERALS, INC. (formerly known as Scottish Heritable, Inc.), a Texas corporation ("USL"), CORSON LIME COMPANY, a Pennsylvania corporation ("CLC"), TEXAS LIME COMPANY, a Texas corporation ("TLC"), ARKANSAS LIME COMPANY, an Arkansas corporation ("ALC", and together with USL, CLC, and TLC, collectively referred to as the "Borrowers") and CORESTATES BANK, N.A., a national banking association ("Bank"). BACKGROUND A. Borrowers and Bank entered into a Loan and Security Agreement dated October 20, 1993, since amended by Amendment No.1 to Loan and Security Agreement dated as of December 23, 1994, Amendment No. 2 to Loan and Security Agreement dated April 28, 1995, Amendment No. 3 to Loan and Security Agreement dated September 29, 1995 and that certain Letter Agreement dated October 26, 1995 (collectively, the "Loan Agreement"), pursuant to which Bank made available to Borrowers certain credit facilities specifically described in the Loan Agreement. All initially-capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement unless the context clearly requires to the contrary. B. Borrowers have requested that Bank further amend the terms of the Loan Agreement to (i) add Adjusted LIBOR as an interest rate option (ii) extend the Termination Date to June 30, 1998 and extend the maturity date for the Term Loan to October l, 2000, (iii) add one noncommitted secured line of credit in the amount of $10,000,000 to be used to finance equipment purchases and improvements to current plant and equipment and one secured discretionary line of credit in the amount of $10,000,000 to be used for acquisitions, (iv) increase the annual limit on Capital Expenditures, and (v) amend certain financial covenants set forth in the Loan Agreement. Bank has agreed to such changes subject to the terms and conditions hereof. 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 of Loan Documents. This Fifth Amendment is a supplement to and a modification of the Loan Agreement pursuant to Section 9.2 thereof. To the extent not 1 2 modified hereby, each and every term, condition, covenant, representation, warranty, and each and all of the other provisions set forth in the Loan Agreement, are hereby ratified and confirmed in full. 2. Additional Definitions. Each of the terms listed below shall have the meaning herein ascribed to it for the purposes hereof, the Loan Agreement and for each of the Loan Documents. All capitalized terms not defined herein shall have the meaning ascribed to them respectively in the Loan Agreement. "Acquisition Line of Credit" means the aggregate secured discretionary line of credit facility under which Bank makes Acquisition Loans to one or more of the Borrowers, as more fully described in and subject to the terms of Section 2.6 hereof. "Acquisition Loan(s)" means collectively, those loans extended by Bank in its sole discretion to Borrowers pursuant to the Acquisition Line of Credit, as more fully described in and subject to the terms of Section 2.6 hereof. "Acquisition Note" means each note of Borrowers payable to the order of the Bank to evidence Borrowers' joint and several repayment obligations under this Agreement with respect to the Acquisition Line of Credit. "Adjusted LIBOR" means the LIBOR finally adjusted and determined with respect to the following formula: [LIBOR] * Adj. LR = ----------- [1.00 - RP] Adj. LR = Adjusted LIBOR LIBOR = London Interbank Offered Rate RP = Reserve Percentage pertaining to eurocurrency liabilities - ---------- * the amount in brackets being rounded upwards if necessary, to the next higher 1/16 of 1% "Adjusted LIBOR Loan(s)" means applicable portions of the Revolving Credit, the Term Loan and the Capital Expenditure Line of Credit bearing interest at a rate determined with reference to the Adjusted LIBOR. "Base Rate Loan(s)" means applicable portions of the Revolving Credit, the Term Loan, the Capital Expenditure Line 2 3 of Credit and the Acquisition Line of Credit bearing interest at the Base Rate. "Capital Expenditure Line of Credit" means the aggregate secured noncommitted line of credit facility under which Bank makes Capital Expenditure Loans to one or more of the Borrowers, as more fully described in and subject to the terms of Section 2.5 hereof. "Capital Expenditure Loan(s)" means those loans extended by Bank in its sole discretion to Borrowers pursuant to the Capital Expenditure Line of Credit as more fully described in and subject to the terms of Section 2.5 hereof. "Capital Expenditure Note(s)" means each note of Borrowers payable to the order of the Bank to evidence Borrowers' joint and several repayment obligations under this Agreement with respect to the Capital Expenditure Line of Credit. "Conversion Date" means, with respect to a Loan, the Business Day on which a portion of the Loan is converted to or continued as an Adjusted LIBOR Loan. "Dollars" and the symbol "$" mean the lawful money of the United States of America. "Interest Period" means that period of time applicable to an Adjusted LIBOR Loan as determined pursuant to Section 2.4.8.2 hereof. "Interest Rate Determination Date" means each date for determining the Adjusted LIBOR with respect to an Interest Period. The Interest Rate Determination Date shall be the second London Business Day prior to the first day of the related Interest Period for each Adjusted LIBOR Loan. "Interest Rate Option" means the Base Rate or the Adjusted LIBOR selected by Borrower for all or any part of the Revolving Credit, the Term Loan or the Capital Expenditure Line of Credit. "LIBOR" means the rate per annum at which deposits of Dollars are offered to Bank by prime banks in the London Eurodollar Interbank Market at or about 11:00 A.M. London time, two London Business Days prior to the first day of the applicable Interest Period for a period equal to the period of such Interest Period in an amount substantially equal to the principal amount requested to be converted to or continued as an Adjusted LIBOR Loan. 3 4 "London Business Day" means any Business Day on which commercial banks are open for international business (including dealings in Dollar deposits) in London and Philadelphia. "Notice of LIBOR Election" means a notice substantially in the form of Schedule 2.4.8.1 attached hereto and made a part hereof. "Reserve Percentage" means for any day that maximum percentage (expressed as a decimal), whether or not incurred, which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System, for determining the reserve requirement for a member bank of the Federal Reserve System in Philadelphia with respect to "Eurocurrency liabilities" (as such term is defined in Regulation D) (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Adjusted LIBOR Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of Bank to United States residents). "Rules" means any law, regulation, regulatory guideline or directive or rule of practice whether or not having the force of law by which Bank is bound or to which it adheres. 3. Definition Amendments. 3.1 The following definitions are hereby amended and restated in their entirety: "Loans" means collectively, the Cash Advances, ACH Advances, the Term Loan, the Capital Expenditure Loans and the Acquisition Loans, and a "Loan" means any Cash Advance, ACH Advance, the Term Loan, Capital Expenditure Loan or Acquisition Loan. "Loan Documents" means this Agreement, the Note, the Term Note, any Capital Expenditure Note and any Acquisition Note, the individual Mortgages, the ACH Documents, the Pledge Agreement, all financing statements and fixture filings filed or recorded in connection with this Agreement, and all certificates of Borrowers, or any Borrower, delivered pursuant to the requirements of this Agreement. "Notes" means collectively, the Note, the Term Note, any Capital Expenditure Note and any Acquisition Note, any substitution therefor and any extension, supplement, amendment or addendum thereto. 4 5 "Termination Date" means June 30, 1998 or such later date as may be agreed to in writing by Bank. 3.2 The references to "80%" and "50%" in the definition of "Borrowing Base" are hereby deleted and replaced with "90%" and "80%", respectively. 4. Base Rate Revision. 4.1 The first clause of the first sentence of Section 2.1.1 is hereby amended and restated in its entirety as follows: Borrowers shall pay interest on the unpaid principal balance of all Cash Advances at a rate per annum equal to the Base Rate, with the first payment 4.2 The first sentence of Section 2.2.2 is hereby amended and restated in its entirety as follows: The Term Loan shall bear interest on the unpaid principal balance thereof at a rate per annum equal to the Base Rate. 5. Conversion to Adjusted LIBOR; Capital Expenditure Line of Credit; Acquisition Line of Credit. The Loan Agreement is hereby amended by adding thereto the following sections: 2.4.8 Adjusted LIBOR Loans; Interest Rate Option. The Cash Advances under Revolving Credit shall henceforth bear interest on the unpaid principal balance thereof from the Funding Date of each Cash Advance or the Funding Date or Conversion Date of each Adjusted LIBOR Loan to maturity (whether by acceleration or otherwise): (i) with respect to Base Rate Loans as set forth in the Loan Agreement, or (ii) with respect to Adjusted LIBOR Loans at the Adjusted LIBOR for the applicable Interest Period on the relevant Interest Rate Determination Date plus two and one-fourth percent (2.25%) per annum, calculated on the basis of a 360-day year and charged for the actual number of days elapsed. The Term Loan and the Capital Expenditure Line of Credit shall henceforth bear interest on the unpaid principal balance thereof from the Funding Date of the Term Loan or the Capital Expenditure Loan or the Funding Date or Conversion Date of each such Adjusted LIBOR Loan to maturity (whether by acceleration or otherwise): (i) with respect to Base Rate Loans as set forth in the Loan Agreement, or (ii) with respect to Adjusted LIBOR Loans at the Adjusted LIBOR on the relevant Interest Rate Determination Date plus two and one-half percent (2.50%) per annum, calculated on the basis of a 360-day year and charged for the actual number of days elapsed. The basis for determining the Interest Rate Option with 5 6 respect to portions of the Revolving Credit, the Term Loan and the Capital Expenditure Line of Credit shall be selected by Borrower at the time a Notice of Borrowing or a Notice of LIBOR Election is submitted to Bank. 2.4.8.1 Notice of LIBOR Election. Whenever Borrower desires to change or continue the Interest Rate Option on a portion of the Revolving Credit, the Term Loan or the Capital Expenditure Line of Credit to the Adjusted LIBOR, Borrower shall deliver by overnight delivery or facsimile telecopy to Bank a properly completed and executed Notice of LIBOR Election no later than 11:00 A.M. at least three London Business Days in advance of the proposed Conversion Date or expiration of the current Interest Period. The Notice of LIBOR Election shall specify: (i) the proposed Conversion Date (which shall be a Business Day); (ii) the amount of the Revolving Credit, the Term Loan or the Capital Expenditure Line of Credit affected; and (iii) the initial or continuation Interest Period(s) therefor; provided that the minimum amount of any conversion to or continuation of Adjusted LIBOR Loans shall be $500,000 and integral multiples of $100,000 in excess of that amount. If at the termination of any Interest Period, Borrower fails to submit a Notice of LIBOR Election to convert or to continue Adjusted LIBOR Loans, then such Loans shall automatically be and become Base Rate Loans as of the termination of the relevant Interest Period. Subject to Section 2.4.8.6 hereof, Adjusted LIBOR Loans may only be converted into Base Rate Loans on the expiration date of the Interest Period applicable thereto; provided, that no portion of the outstanding Revolving Credit, Term Loan or the Capital Expenditure Line of Credit may be converted into Adjusted LIBOR Loans or continued as Adjusted LIBOR Loans: (i) when any Event of Default or Unmatured Event of Default has occurred and is continuing, or (ii) if the Interest Period relating to the Adjusted LIBOR of such conversion or continuation would extend beyond the Termination Date or the maturity date for either the Term Loan or the applicable Capital Expenditure Loan. A Notice of Borrowing or Notice of Rate Election shall be irrevocable on and after the related Interest Rate Determination Date, and Borrower shall be bound to make, continue or convert the applicable portion of the Revolving Credit, the Term Loan or the Capital Expenditure Line of Credit, as applicable, in accordance therewith. 2.4.8.2 Interest Periods. In connection with each Adjusted LIBOR Loan, Borrower shall elect an Interest Period to be applicable to such Adjusted LIBOR Loan, which Interest Period shall be either a one, two, three or six month period; provided that: 6 7 (A) the Interest Period for any Adjusted LIBOR Loan shall commence on the Funding Date or Conversion Date of such Adjusted LIBOR Loan; (B) except as provided in subsection 2.4.8.2(C) hereof, if an Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; (C) any Interest Period which: (i) begins on the last Business Day of a calendar month (or a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the relevant calendar month, or (ii) would expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in that month, such Interest Period shall expire on the last Business Day of the month; (D) with respect to any Adjusted LIBOR Loan, no Interest Period shall extend beyond the Termination Date or the applicable maturity date for either the Term Loan or the Capital Expenditure Loans; and (E) there shall be no more than five (5) outstanding Adjusted LIBOR Loans at any time; 2.4.8.3 Interest Payments. Interest shall be payable as follows: (i) with respect to Base Rate Loans, Borrowers shall pay interest on the unpaid principal balance of all Cash Advances, the Term Loan, the Capital Expenditure Loans or the Acquisition Loans, as applicable, at the Base Rate, with the first payment to be made on the first Business Day of the month following the month containing the Funding Date for the applicable Cash Advance or Loan, and thereafter on the first Business Day of each consecutive month and at maturity; and (ii) with respect to Adjusted LIBOR Loans, interest shall be due and payable to Bank in arrears on and to the last day of the Interest Period applicable to such Adjusted LIBOR Loan; provided however, that interest on Adjusted LIBOR Loans with Interest Periods of six months shall be paid in arrears on and to the last day of the third-month and the last day of the relevant Interest Period. 2.4.8.4 Adjusted LIBOR. (A) Bank shall give Borrower prompt notice of the Adjusted LIBOR determined for an Interest Period, and absent manifest error, each determination of such rates by Bank shall be conclusive and binding for all purposes hereof. 7 8 (B) If Borrower requests conversion to or continuation of the Adjusted LIBOR for an Interest Period and (i) Bank determines that, by reason of circumstances affecting the interbank Eurodollar market generally, deposits in U.S. Dollars (in the applicable amounts) are not then being offered to banks in the London Interbank Eurodollar Market for the selected Interest Period, or (ii) Bank shall certify that the relevant rates of interest referred to in the definition of Adjusted LIBOR will not accurately reflect the cost to Bank of making or maintaining Adjusted LIBOR Loans for the Interest Periods therefor, then Bank shall give notice thereof to Borrower, whereupon until Bank notifies Borrower that the circumstances giving rise to such suspension no longer exist, the obligation of Bank to convert to or continue portions of the Revolving Credit, the Term Loan or the Capital Expenditure Line of Credit as Adjusted LIBOR Loans shall be suspended so long as such circumstances exist. (C) If, after the date hereof, the adoption of or any change in Rules, or change in the interpretation or administration thereof, by a governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by Bank (or Bank's holding company) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for Bank to convert or maintain loans at the Adjusted LIBOR, Bank will forthwith notify Borrower of the circumstances and the interest rates on the applicable portions of the outstanding Adjusted LIBOR Loans shall be deemed to have been converted to Base Rate Loans on either (i) the last day of the then current Interest Period if Bank may lawfully continue to maintain loans at the Adjusted LIBOR to such day, or (ii) immediately if Bank may not lawfully continue to maintain loans at the Adjusted LIBOR to such day. (D) If any governmental authority, central bank or other comparable authority shall at any time impose, modify or deem applicable any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), any tax (including without limitation, any United States interest equalization tax or similar tax however named applicable to the acquisition or holding of debt obligations and any interest or penalties with respect thereto), duty, charge, fee, deduction, or withholding, with respect to Adjusted LIBOR Loans, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, Bank, or shall impose on Bank or the London Interbank Eurodollar Market any other condition affecting loans at the Adjusted LIBOR and the result of any of the foregoing is to increase the cost to Bank of making or maintaining the interest rate at the Adjusted LIBOR or to reduce the amount of any sum received or receivable by Bank under this 8 9 Agreement, and any of the Notes by an amount deemed by Bank to be material, Bank will promptly notify Borrower of any event of which it has knowledge occurring after the date hereof. If such event occurs during any Interest Period or if Borrower requests conversion to the Adjusted LIBOR after notification of the event, said event will entitle Bank to compensation pursuant to this subsection (but without duplication of any adjustment made pursuant to 2.4.8.4(E)). A certificate of Bank claiming compensation under this subsection and setting forth the additional amount or amounts to be paid to Bank hereunder shall be conclusive in the absence of manifest error. (E) The LIBOR shall be adjusted automatically on and as of the effective day of any change in the relevant Reserve Percentage. (F) Promptly upon notice from Bank to Borrower, Borrower will pay, prior to the date on which penalties attach thereto, all present and future stamp, documentary and other similar taxes, levies, or costs and charges whatsoever imposed, assessed, levied or collected on or in respect of the Adjusted LIBOR Loans solely as a result of the interest rate being determined by reference to the Adjusted LIBOR and/or the provisions of this Agreement relating to the Adjusted LIBOR and/or the recording, registration, notarization or other formalization of any thereof and/or payments of principal, interest or other amounts made on or in respect of portions of the Revolving Credit, the Term Loan or the Capital Expenditure Line of Credit when and as a result of the fact that the interest rate is determined by reference to the Adjusted LIBOR (all such taxes, levies, costs and charges being herein collectively called "Eurodollar Rate Tax"). Promptly after the date on which payment of any such Eurodollar Rate Tax is due pursuant to applicable law, Borrower will, at the request of Bank, furnish to Bank evidence that Borrower has met its obligations under this subsection. Borrower will indemnify Bank against, and reimburse Bank on demand for, any Eurodollar Rate Tax, as determined by Bank in its good faith discretion. Bank shall provide Borrower with appropriate receipts for any payments or reimbursements made by Borrower pursuant to this subsection. A certificate of Bank as to any amount payable pursuant to this Section shall, absent manifest error, be final, conclusive and binding on all parties hereto. (G) Failure on the part of Bank to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital with respect to any Interest Period shall not constitute a waiver of Bank's right to demand compensation with respect to such Interest Period or any other Interest Period. The protection of this Section shall be available to Bank regardless of any possible 9 10 contention of the invalidity or inapplicability of the law, Rule, regulation, guideline or other change or condition which shall have occurred or been imposed. Any claim for compensation must be made no later than 12 months after the Termination Date. 2.4.8.5 Funding Losses. If Borrower fails to borrow, or consummate any conversion to, or to continue, an Adjusted LIBOR Loan after a Notice of Borrowing or Notice of LIBOR Election has been delivered to Bank and as provided herein, Borrower shall reimburse Bank on demand for any resulting loss or expense incurred by Bank, including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, provided that Bank shall have delivered to Borrower a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. 2.4.8.6 Prepayment Premium For Adjusted LIBOR Loans. All prepayments shall be applied first to Base Rate Loans to the extent outstanding, then to Adjusted LIBOR Loans, unless otherwise specified by Borrowers and consented to by Bank, such consent not to be unreasonably withheld. Adjusted LIBOR Loans may be prepaid or converted to Base Rate Loans before the expiration date of the Interest Period applicable thereto only upon payment to Bank of prepayment compensation determined as follows: (i) on the prepayment date, the remaining payments of principal and interest that would otherwise have become payable during or at the expiration of the Interest Period pertaining to the principal being prepaid shall be discounted to a present value at a rate per annum equal to the "Prepayment Yield to Maturity", as hereinafter defined, plus any costs for reserves or assessments or for reinvesting the amount being prepaid or converted, and if such discounted value shall exceed the unpaid principal amount being prepaid or converted, then the prepayment premium shall be an amount equal to such excess; otherwise no prepayment premium shall be payable; (ii) the "Prepayment Yield to Maturity" shall mean the yield to maturity of the debt obligation of the United States Treasury (excluding those commonly known as "Flower Bonds") having a term substantially equal to the term of the relevant Interest Period maturity date nearest in expiration of the relevant Interest Period. The maturity date and yield to maturity of such United States Treasury obligations shall be determined on the basis of quotations published in the Wall Street Journal or similar publication on the prepayment date or Conversion Date. If there shall be more than one such debt obligation of the United States Treasury maturing nearest in time to the expiration of the relevant Interest Period, the Prepayment Yield to Maturity shall be the arithmetic average of the yields to maturity of all such obligations. 10 11 2.5 Capital Expenditure Line of Credit. 2.5.1 Amount. Provided that no event of Default or Unmatured Event of Default has occurred and is continuing and subject to the terms and conditions set forth herein, Bank may in its sole discretion, commencing on November ___________, 1996, and expiring on December 31, 1997, lend to Borrowers upon Borrowers' written request from time to time certain principal amounts determined and approved by the Bank not to exceed $10,000,000 in the aggregate for the purpose of financing Borrowers' capital expenditures made in the normal course of business, in the form of one or more term loans. Each such Capital Expenditure Loan shall mature on a date determined and approved by the Bank which is reflective of the useful and/or depreciable life of the equipment or other items to be purchased by Borrower(s), but in no event shall such maturity date be later than a date which is seven (7) years following the Funding Date of such Capital Expenditure Loan. In addition to the security set forth in Section 3 of the Loan Agreement, Bank may require in its sole discretion as a condition to the extension of a Capital Expenditure Loan, that Borrowers grant to Bank a security interest in the equipment or other items to be purchased by Borrowers with the proceeds of any Capital Expenditure Loan. 2.5.2 Interest Rate. The Capital Expenditure Loans shall bear interest on the unpaid principal balance thereof at the Base Rate or Adjusted LIBOR, as the Borrowers may select, in accordance with the provisions of Section 2.4.8 hereof. 2.5.3 Payment of Principal and Interest. Each Capital Expenditure Loan shall be payable in installments of principal as the Bank may determine in its sole discretion at the time such Capital Expenditure Loan is extended by the Bank. Interest shall be paid as provided in Section 2.4.8.3 of the Loan Agreement. 2.5.4 Capital Expenditure Note. To evidence Borrowers' joint and several repayment obligations under the Capital Expenditure Loans, Borrowers shall execute and deliver a Capital Expenditure Note each time a Capital Expenditure Loan is extended by the Bank in the original principal amount equal to such Capital Expenditure Loan. The terms of the Capital Expenditure Notes shall reflect the terms of payment determined by the Bank in accordance with Section 2.5.3 hereof. 2.5.5 Conditions Precedent. In addition to the terms and conditions set forth in this Section 2.5, as conditions precedent to the extension by Bank of each Capital Expenditure Loan,- Borrowers agree to provide to Bank, in form and 11 12 substance satisfactory to Bank and Bank's counsel, the following documents, items and instruments: 2.5.5.1 a Capital Expenditure Note pursuant to Section 2.5.4 hereof; 2.5.5.2 resolutions adopted by the Boards of Directors of each Borrower authorizing the execution, delivery and performance of the Capital Expenditure Note, certified by Borrower's Secretary to be in full force and effect as of the date the Capital Expenditure Loan is extended; and 2.5.5.3 invoices or bills of sale setting forth the purchase price for the items to be acquired with the proceeds of the Capital Expenditure Loans. 2.6 Acquisition Line of Credit. 2.6.1 Amount. Provided that no event of Default or Unmatured Event of Default has occurred and is continuing and subject to the terms and conditions set forth here+n, Bank may in its sole discretion, commencing on November, 1996, and expiring on December 31, 1997, extend to Borrowers from time to time upon Borrowers' written request the Acquisition Line of Credit for purposes of providing temporary, initial financing for acquisitions by Borrowers of entities and/or assets in the construction materials, limestone products or related industries (each, an "Acquisition"), pursuant to which Bank may extend Acquisition Loans to Borrowers, in amounts determined and approved by the Bank which, if not exhausting the unadvanced portion of the Acquisition Line of Credit or Borrowing. Base, as the case may be, the Borrowers may, from time to time, repay, and, subject to the terms determined by the Bank at the time- the Acquisition Loans are extended to Borrowers, reborrow. Borrowers may not reborrow Acquisition Loans pursuant to the Acquisition Line of Credit after December 31, 1997. 2.6.2 Interest Rate. The Acquisition Loans shall bear interest on the unpaid principal balance thereof at the Base Rate. Interest on the outstanding principal balance of each Acquisition Loan shall be payable monthly on the first business day of each month, commencing with the first month following the Funding Date of such Acquisition Loan, and at maturity. 2.6.3 Repayment of Principal; Prepayment. The outstanding principal balance of, and any accrued and unpaid interest on, all Acquisition Loans, and all Bank's Costs pertaining thereto, shall be payable as determined by the Bank in its sole discretion exercised at the time of the Acquisition Loan 12 13 provided that each Acquisition Loan shall be paid in full on the earlier to occur of (i) the date on which permanent financing for the Acquisition funded by such Acquisition Loan is obtained, but no later than nine (9) months following Funding Date of a particular Acquisition Loan, (ii) December 31, 1997, or (iii) the date on which the Acquisition Loan is payable as provided in Section 8.2 hereof. 2.6.4 Acquisition Note. To evidence Borrowers' joint and several repayment obligations under the Acquisition Line of Credit, Borrowers shall execute and deliver an Acquisition Note concurrently with the funding of each Acquisition Loan. The terms of the Acquisition Notes shall reflect the terms of payment determined by the Bank in accordance with Sections 2.6.2 and 2.6.3 hereof. 2.6.5 Conditions Precedent. In addition to the terms and conditions set forth in this Section 2.6, as conditions precedent to the extension by Bank of each Acquisition Loan, Borrowers agree to provide to Bank, in form and substance satisfactory to Bank and Bank's counsel, the following documents, items and instruments: 2.6.5.1 an Acquisition Note pursuant to Section 2.6.4 hereof; 2.6.5.2 resolutions adopted by the Boards of Directors of each Borrower authorizing the execution, delivery and performance of the Acquisition Note, certified by Borrower's Secretary to be in full force and effect as of the date the Acquisition Loan is extended; and 2.6.5.3 a copy of the definitive or proposed acquisition agreement, together with copies of-all other relevant documentation relating to the proposed acquisition. 6. Maturity Date. In the first sentence of Section 2.2.3 of the Loan Agreement, the reference to "October l, 1998", is hereby deleted and replaced with "October l, 2000". 7. Capital Expenditures. Section 7.1.12 of the Loan Agreement is hereby amended and restated in its entirety as follows: Make Capital Expenditures in any Fiscal Year in excess of $15,000,000; or 8. Financial Covenants. 8.1 Section 6.1.13.2 of the Loan Agreement is hereby amended and restated in its entirety as follows: 13 14 Maintain at all times the ratio of Borrowers' consolidated Total Liabilities to consolidated Net Worth at no greater than 1.75 to l. Borrowers' ratio of Total Liabilities to Net Worth shall be tested quarterly upon Bank's receipt of Borrowers' quarterly consolidated Financial Statements; 8.2 Section 6.1.13.3 of the Loan Agreement is hereby amended and restated in its entirety as follows: Maintain at all times the ratio of Borrowers' Cash Flow to Borrowers' Fixed Obligations at no less than 1.5 to 1, which ratio shall be tested quarterly upon receipt of Borrowers' quarterly consolidated Financial Statements, on a rolling four-quarter historical basis commencing with the four consecutive Calendar Quarters ending December 31, 1996. 9. Conditions Precedent. As conditions precedent to the effectiveness of this Fifth Amendment, Borrower acknowledges that Bank shall have received, in form and substance reasonably satisfactory to Bank and Bank's counsel, in addition to this Fifth Amendment, the following documents, items and instruments: 9.1 the Amended and Restated Note executed by Borrowers substantially in the form attached hereto as Exhibit A; 9.2 the Amended and Restated Term Note executed by Borrowers substantially in the form attached hereto as Exhibit B; 9.3 resolutions adopted by the Boards of Directors of each Borrower authorizing the execution, delivery and performance of this Fifth Amendment, the Amended and Restated Note, Amended and Restated Term Note certified by Borrower's Secretary to be in full force and effect as of the date hereof; and 9.4 Such additional documents or instruments as Bank may reasonably require. Upon Borrower's satisfaction of all of the foregoing conditions precedent, Bank, in consideration of the execution and delivery of the replacement promissory notes described herein to evidence the Loans as modified hereby, shall return to Borrowers the original promissory notes in Bank's possession evidencing the Loans prior to the date hereof, marked "cancelled and replaced." 14 15 In the event Bank agrees to fund any Acquisition Loan or any Capital Expenditure Loan, Bank shall have received on or before the Funding Date thereof, in form and substance reasonably satisfactory to Bank and Bank's counsel, a promissory note or notes, as applicable, and such collateral and other documentation as Bank may reasonably require. 10. Miscellaneous. 10.1 Integration. This fifth Amendment, the Loan Agreement, and the other loan documents shall be construed as one agreement, and in the event of any inconsistency, the provisions of this Fifth Amendment shall control the provisions of any other Loan Document, except for the Notes. This Fifth Amendment, the Loan Agreement, the Notes, and the other Loan Documents, contain all of the agreements of the parties hereto with respect to the subject matter of each thereof and supersede all prior or contemporaneous agreements with respect to such subject matter. 10.2 Survivorship. The terms of this Fifth Amendment and all agreements, representations, warranties or covenants made by Borrower in the Loan Agreement and the other Loan Documents shall survive the issuance and payment of the Notes and shall continue as long as any portion of the Indebtedness shall remain outstanding and unpaid, provided, however, that the covenants set forth in Section 1.6 and 6.2 of the Loan Agreement shall survive the payment of the Indebtedness. 10.3 Successors and Assigns; Governing Law. This Fifth Amendment shall be binding upon and inure to the benefit of the respective-successors and assigns of the parties hereto; provided however that no Borrower shall assign this Fifth Amendment, or any of its respective rights or duties arising hereunder, without the prior written consent of Bank. This Fifth Amendment shall be construed and enforced in accordance with the internal laws of the Commonwealth of Pennsylvania. 10.4 WAIVER OF JURY TRIAL. EACH BORROWER AND BANK EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT BY ANY PARTY WITH RESPECT TO THE LOAN AGREEMENT, AS AMENDED HEREBY, OR AS AMENDED HEREAFTER, ANY LOAN DOCUMENT OR THE INDEBTEDNESS. 10.5 Partial Invalidity. If any provision of this Fifth Amendment shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, but this Fifth Amendment shall be construed as if such invalid or unenforceable provision had never been contained herein. 15 16 10.6 Headings. The heading of any paragraph contained in this Fifth Amendment is for convenience of reference only and shall not be deemed to amplify, limit, modify or give full notice of the provisions thereof. 10.7 Counterparts. This Fifth Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties hereto have executed this Fifth Amendment under seal, intending to be legally bound hereby, on the day and year first above written. Bank: CORESTATES BANK, N.A. By: /s/ CLIFFORD W. KEWLEY ---------------------------------- Clifford W. Kewley, Vice President Borrowers: UNITED STATES LIME & MINERALS, INC. (formerly known as Scottish Heritable, Inc.) By: /s/ ROBERT F. KIZER ---------------------------------- CORSON LIME COMPANY By: /s/ TIMOTHY W. BYRNE ---------------------------------- ARKANSAS LIME COMPANY By: /s/ TIMOTHY W. BYRNE ---------------------------------- TEXAS LIME COMPANY By: /s/ TIMOTHY W. BYRNE ---------------------------------- 16 17 AMENDED AND RESTATED TERM NOTE $4,476,194 November 27th, 1996 FOR VALUE RECEIVED, UNITED STATES LIME & MINERALS, INC. (formerly known as Scottish Heritable, Inc.), a Texas corporation, CORSON LIME COMPANY, a Pennsylvania corporation, TEXAS LIME COMPANY, a Texas corporation, and ARKANSAS LIME COMPANY, an Arkansas corporation (collectively referred to as "Borrowers"), jointly and severally promise to pay to the order of CoreStates Bank, N.A., a national banking association ("Bank"), the principal sum of Four Million Four Hundred Seventy-six Thousand One Hundred Ninety-four ($4,476,194) Dollars together with interest on the unpaid principal amount hereof accrued from the date hereof to maturity (whether by acceleration or otherwise) or earlier repayment at a rate per annum equal to the Base Rate or, with respect to such portion of the Term Loan as is converted to or continued as an Adjusted LIBOR Loan, at a rate based on the applicable Adjusted LIBOR on the relevant Interest Rate Determination Date plus two and one-half percent (2.50%) per annum, payable in accordance with Section 2.2 of the Loan and Security Agreement, as amended (the Fifth Amendment of which is dated of even date herewith) by and between Borrowers and the Bank (the "Loan Agreement") and as hereinafter provided. All initially capitalized terms not otherwise defined herein shall have the same meanings as ascribed to them in the Loan Agreement unless the context clearly requires to the contrary. Principal shall be payable in 47 equal consecutive monthly installments of principal of $95,238.17 each, due on the first Business Day of each consecutive month, beginning on the first Business Day of the month following the date hereof and continuing monthly thereafter on the first Business Day of each month, with a final payment of all of the remaining outstanding principal balance, together with all accrued and unpaid interest and Bank's Costs pertaining thereto due and payable on October 1, 2000. Interest on Base Rate Loans shall be payable monthly, in arrears through the last Business Day of each month, on the first Business Day of each month, with the first payment to made on the first Business Day of the first month following the date hereof and at maturity. Interest payments on Adjusted LIBOR Loans shall be payable, in arrears, on and to, but not including, the last day of the Interest Period applicable to that Loan (subject to the provisions of Section 2.4.8.3 of the Loan Agreement); provided, 1 18 however, that interest on such Loans with Interest Periods of 6 months shall be payable, in arrears, on and to the last day of the third month of such Interest Periods, as the case may be, and the last day of the relevant Interest Period, subject as aforesaid. Interest shall be calculated on the basis of a 360 day year, but charged for the number of days actually elapsed during any year or part thereof. Borrowers may prepay the entire amount of the principal of the Term Loan at any time, or in portions of $50,000 or an integral multiple from time to time, without premium or penalty during the term thereof, provided that Adjusted LIBOR Loans may be prepaid only as provided in Section 2.4.8.6 of the Loan Agreement. All payments of principal, interest, and fees hereunder shall be made by Borrowers jointly and severally without defense, set off, or counterclaim and in same day funds and delivered to Bank not later than 12:00 noon (Philadelphia time) on the date due at Bank's office located at The Widener Building, 11th Floor, 1339 Chestnut Street, Philadelphia, Pennsylvania 19101 or such other place as shall be designated in writing for such purpose in accordance with the terms of the Loan Agreement. Each Borrower authorizes Bank to charge such Borrower's demand deposit account with Bank in order to cause timely payment to be made to Bank of all principal, interest and fees hereunder as provided in Section 1.5 of the Loan Agreement. Subject to Section 2.4.8.2, whenever any payment on this Amended and Restated Term Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of interest on this Amended and Restated Term Note. Any principal payment hereon and, to the extent permitted by applicable law, any interest payment hereon which is not paid when due, and any other amount due to Bank under the Loan Agreement or any other Loan Document not paid when due, in any case whether at stated maturity, by notice of prepayment, by acceleration or otherwise, shall thereafter bear interest payable upon demand at a rate per annum which is three percent (3%) in excess of the Base Rate. It shall be an event of default hereunder if an Event of Default shall have occurred under the Loan Agreement (a "Default"). In addition to other remedies of Bank as set forth in this Amended and Restated Term Note, the Loan Agreement, or any other Loan Document, upon the occurrence of a Default which shall 2 19 be continuing, Bank may, without demand, by written notice to Borrowers, cause this Amended and Restated Term Note to become immediately due and payable in the manner, upon the conditions and with the effect provided in the Loan Agreement. THE FOLLOWING SETS FORTH A WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWERS. IN GRANTING THIS WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWERS, BORROWERS, FOLLOWING CONSULTATION WITH (OR DECISION NOT TO CONSULT WITH) SEPARATE COUNSEL FOR BORROWERS, AND WITH KNOWLEDGE OF THE LEGAL EFFECT HEREOF, HEREBY WAIVES ANY AND ALL RIGHTS BORROWERS HAVE, OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY TO BE HEARD UNDER THE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF PENNSYLVANIA. BORROWERS SPECIFICALLY ACKNOWLEDGE THAT BANK HAS RELIED ON THIS WARRANT OF ATTORNEY IN GRANTING THE FINANCIAL ACCOMMODATIONS DESCRIBED HEREIN. UPON THE OCCURRENCE AND CONTINUANCE OF ANY DEFAULT, BORROWERS, INDIVIDUALLY AND COLLECTIVELY, HEREBY IRREVOCABLY AUTHORIZE AND EMPOWER ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR BORROWERS OR ANY BORROWER IN ANY AND ALL ACTIONS, AND TO: (I) ENTER JUDGMENT AGAINST BORROWERS OR ANY BORROWER FOR THE PRINCIPAL SUN HEREOF, TOGETHER WITH ACCRUED AND UNPAID INTEREST; OR (II) SIGN FOR BORROWERS OR ANY BORROWER AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN AMICABLE ACTION OR ACTIONS TO CONFESS JUDGMENT AGAINST BORROWERS OR ANY BORROWER FOR ALL OR ANY PART OF THE INDEBTEDNESS; AND IN EITHER CASE FOR INTEREST AND COSTS TOGETHER WITH A REASONABLE COLLECTION FEE. EACH BORROWER FURTHER IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR AND TO ENTER JUDGMENT AGAINST BORROWERS OR ANY BORROWER AND IN FAVOR OF BANK OR ANY HOLDER HEREOF WITH RESPECT TO AN AMICABLE ACTION OF REPLEVIN OR ANY OTHER ACTION TO RECOVER POSSESSION OF ANY COLLATERAL PURSUANT TO THE LOAN AGREEMENT. BORROWERS WAIVE ALL RELIEF FROM ANY AND ALL APPRAISEMENT OR EXEMPTION LAWS NOW OR IN FORCE OR HEREINAFTER ENACTED. IF A COPY OF THIS AMENDED AND RESTATED TERM NOTE, VERIFIED BY AFFIDAVIT OF AN OFFICER OF BANK OR ANY OTHER HOLDER HEREOF, SHALL BE FILED IN ANY PROCEEDING OR ACTION WHEREIN JUDGMENT IS TO BE CONFESSED, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL HEREOF AND SUCH VERIFIED COPY SHALL BE SUFFICIENT WARRANT FOR ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR AND CONFESS JUDGMENT AGAINST BORROWERS OR ANY BORROWER AS PROVIDED HEREIN. JUDGMENT MAY BE CONFESSED FROM TIME TO TIME UNDER THE AFORESAID POWERS WHICH SHALL NOT BE EXHAUSTED BY ONE EXERCISE THEREOF. Borrowers hereby individually and collectively waive presentment, demand for payment, notice of dishonor, protest or notice of protest and any and all notices or demands and, to the full extent permitted by law, the right to plead any statute of 3 20 limitations as a defense to any demand hereunder in connection with the delivery, acceptance or performance of this Amended and Restated Term Note. The joint and several liabilities and obligations of Borrowers hereunder shall be unconditional without regard to the liability or obligations of any other party and shall not be in any manner affected by any indulgence whatsoever granted or consented to by Bank, including, but not limited to, any extension of time, renewal, waiver or other modification. Any failure of Bank to exercise any right hereunder shall not be construed as a waiver of the right to exercise the same or any other right at any time and from time to time thereafter. This Amended and Restated Term Note shall be governed as to its validity, interpretation and effect by the internal laws of the Commonwealth of Pennsylvania. Any and all actions at law or in equity relating to this Amended and Restated Term Note and the Indebtedness shall be brought, and jurisdiction may be had, in the courts of the Philadelphia County, Pennsylvania, or at the election of the holder hereof, the United States District Court for the Eastern District of Pennsylvania. Borrowers consent in advance to service of process by registered mail, return receipt requested, to the address set forth in Section 9.3 of the Loan Agreement. EACH BORROWER AND BANK EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT BY ANY PARTY WITH RESPECT TO THE INDEBTEDNESS OR ANY LOAN DOCUMENT. This Amended and Restated Term Note may not be changed or amended orally but only by an agreement in writing and signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. This Amended and Restated Term Note is secured by and entitled to the benefits of certain other Loan Documents. If any provision of this Amended and Restated Term Note shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, but this Amended and Restated Term Note shall be construed as if such invalid or unenforceable provision had never been contained herein. Borrowers promise to pay all Bank's Costs and expenses, including reasonable attorneys' fees, as provided in Section 1.6 of the Loan Agreement, incurred in the collection and enforcement of this Amended and Restated Term Note. Each Borrower and endorsers of this Amended and Restated Term Note hereby consent to renewals 4 21 and extensions of time at or after the maturity hereof, without notice. IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrowers have executed this Amended and Restated Term Note, as an instrument under seal, the day and year first above written. UNITED STATES LIME & MINERALS, INC. By: /s/ ROBERT F. KIZER ------------------------------------ CORSON LIME COMPANY By: /s/ TIMOTHY W. BYRNE ------------------------------------ TEXAS LIME COMPANY By: /s/ TIMOTHY W. BYRNE ------------------------------------ ARKANSAS LIME COMPANY By: /s/ TIMOTHY W. BYRNE ------------------------------------ 5 22 AMENDED AND RESTATED NOTE $6,000,000 November 27th, 1996 FOR VALUE RECEIVED, UNITED STATES LIME & MINERALS, INC. (formerly known as Scottish Heritable, Inc.), a Texas corporation, CORSON LIME COMPANY, a Pennsylvania corporation, TEXAS LIME COMPANY, a Texas corporation, and ARKANSAS LIME COMPANY, an Arkansas corporation (collectively referred to as "Borrowers"), jointly and severally promise to pay to the order of CoreStates Bank, N.A., a national banking association ("Bank"), the lesser of (x) Six Million Dollars ($6,000,000) or (y) the aggregate unpaid principal amount of all Cash Advances made by Bank to the Borrowers or any Borrower under the Loan and Security Agreement, as amended (the Fifth Amendment of which is dated of even date herewith) by and between Borrowers and Bank ("Loan Agreement"), together with interest on the unpaid principal amount hereof accrued from the date hereof to the Termination Date (whether by acceleration or otherwise) or earlier repayment at a rate per annum equal to the Base Rate or, with respect to such portion of the Revolving Credit made as, converted to or continued as an Adjusted LIBOR Loan, at a rate based on the applicable Adjusted LIBOR on the relevant Interest Rate Determination Date plus two and one-quarter percent (2.25%) per annum, payable in accordance with Section 2.1 of the Loan Agreement and as hereinafter provided, on the Termination Date. All initially capitalized terms not otherwise defined herein shall have the same meanings as ascribed to them in the Loan Agreement unless the context clearly requires to the contrary. Interest on Base Rate Loans shall be payable monthly, in arrears through the last Business Day of each month, on the first Business Day of each month, with the first payment to made on the first Business Day of the first month following the date hereof and at maturity. Interest payments on Adjusted LIBOR Loans shall be payable, in arrears, on and to, but not including, the last day of the Interest Period applicable to that Loan (subject to the provisions of Section 2.4.8.3 of the Loan Agreement); provided, however, that interest on such Loans with Interest Periods of 6 months shall be payable, in arrears, on and to the last day of the third month of such Interest Periods, as the case may be, and the last day of the relevant Interest Period, subject as aforesaid. Interest shall be calculated on the basis of a 360 day year, but charged for the number of days actually elapsed during any year or part thereof. 23 Any principal payment on Cash Advances not paid when due and, to the extent permitted by applicable law, any interest payment on Cash Advances not paid when due, and any other amount due to Bank under the Loan Agreement or any other Loan Document not paid when due, in any case whether at stated maturity, by notice of prepayment, by acceleration or otherwise, shall thereafter bear interest payable upon demand at a rate per annum which is two and three-fourths percent (2-3/4%) per annum in excess of the Base Rate. This Amended and Restated Note is issued pursuant to and entitled to the benefits of the Loan Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which Cash Advances evidenced hereby were made and are to be repaid. All payments of principal and interest in respect of this Amended and Restated Note shall be made by Borrowers without defense, setoff or counterclaim in same day funds and delivered to Bank not later than 12:00 noon (Philadelphia time) on the date due to Bank at the Banks' offices at The Widener Building, 11th Floor, 1339 Market Street, Philadelphia, Pennsylvania 19101 or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Loan Agreement. Each of Bank and any subsequent holder of this Amended and Restated Note agrees, by its acceptance hereof, that before disposing of this Amended and Restated Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Amended and Restated Note shall not limit or otherwise affect the obligation of Borrowers hereunder with respect to payments of principal or interest on this Amended and Restated Note. Subject to Section 2.4.8.2 of the Loan Agreement, whenever any payment on this Amended and Restated Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of interest on this Amended and Restated Note. Each Borrower authorizes Bank to charge such Borrower's demand deposit account with Bank in order to cause timely payment to be made to Bank of all principal, interest and fees hereunder as provided in Section 1.5 of the Loan Agreement. This Amended and Restated Note is subject to mandatory prepayment and repayment at the option of the Borrowers as provided in Sections 2.4.6 and 2.1.2 of the Loan Agreement, provided that 2 24 Adjusted LIBOR Loans may be prepaid only as provided in Section 2.4.8.6 of the Loan Agreement. This Amended and Restated Note is secured by and entitled to the benefits of certain other Loan Documents. The liabilities and obligations of Borrowers hereunder shall be unconditional without regard to the liability or obligations of any other party and shall not be in any manner affected by any indulgence whatsoever granted or consented to by Bank, including, but without being limited to, any release by any party of any Collateral, extension of time, renewal, waiver or other modification. Any failure of Bank to exercise any right hereunder shall not be construed as a waiver of the right to exercise the same or any other right at any time and from time to time thereafter. This Amended and Restated Note shall be governed as to its validity, interpretation and effect by the internal laws of the Commonwealth of Pennsylvania for contracts made and to be performed in Pennsylvania. Each Borrower consents to the jurisdiction of the courts of Philadelphia County, Pennsylvania, or at the election of the holder hereof, the United States District Court for the Eastern District of Pennsylvania, in any and all actions and proceedings by Bank arising under or in any way related to this Amended and Restated Note or the Loan Agreement or the transactions contemplated thereby. Notwithstanding anything herein to the contrary, an action to enforce the Bank's rights with respect to the Collateral may be brought in any jurisdiction in which the Collateral is located. Notwithstanding Section 9.8 of the Loan Agreement, with respect to any action of foreclosure, ejectment, distraint, distress, expulsion, removal or other disentitlement of any parcel of Real Estate, the provisions of the applicable Mortgage shall control the provisions of any other Loan Document. EACH BORROWER AND BANK EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT BY ANY PARTY WITH RESPECT TO THIS AMENDED AND RESTATED NOTE OR THE LOAN AGREEMENT. It shall be an event of default hereunder if an Event of Default shall have occurred under the Loan Agreement (a "Default"). Upon the occurrence of a Default which shall be continuing, the unpaid balance of the principal amount of this Amended and Restated Note, together with all accrued but unpaid interest thereon, and all other Indebtedness may become, or may by written notice to Borrowers be declared to be, due and payable in the manner, upon the conditions, and with the effect, provided in the Loan Agreement. 3 25 THE FOLLOWING SETS FORTH A WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWERS. IN GRANTING THIS WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWERS, BORROWERS, FOLLOWING CONSULTATION WITH (OR DECISION NOT TO CONSULT WITH) SEPARATE COUNSEL FOR BORROWERS, AND WITH KNOWLEDGE OF THE LEGAL EFFECT HEREOF, HEREBY WAIVES ANY AND ALL RIGHTS BORROWERS HAVE, OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY TO BE HEARD UNDER THE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF PENNSYLVANIA. BORROWERS SPECIFICALLY ACKNOWLEDGE THAT BANK HAS RELIED ON THIS WARRANT OF ATTORNEY IN GRANTING THE FINANCIAL ACCOMMODATIONS DESCRIBED HEREIN. UPON THE OCCURRENCE AND CONTINUANCE OF ANY DEFAULT, BORROWERS, INDIVIDUALLY AND COLLECTIVELY, HEREBY IRREVOCABLY AUTHORIZE AND EMPOWER ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR BORROWERS OR ANY BORROWER IN ANY AND ALL ACTIONS, AND TO: (I) ENTER JUDGMENT AGAINST BORROWERS OR ANY BORROWER FOR THE PRINCIPAL SUM HEREOF, TOGETHER WITH ACCRUED AND UNPAID INTEREST; OR (II) SIGN FOR BORROWERS OR ANY BORROWER AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN AMICABLE ACTION OR ACTIONS TO CONFESS JUDGMENT AGAINST BORROWERS OR ANY BORROWER FOR ALL OR ANY PART OF THE INDEBTEDNESS; AND IN EITHER CASE FOR INTEREST AND COSTS TOGETHER WITH A REASONABLE COLLECTION FEE. EACH BORROWER FURTHER IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR AND TO ENTER JUDGMENT AGAINST BORROWERS OR ANY BORROWER AND IN FAVOR OF BANK OR ANY HOLDER HEREOF WITH RESPECT TO AN AMICABLE ACTION OF REPLEVIN OR ANY OTHER ACTION TO RECOVER POSSESSION OF ANY COLLATERAL PURSUANT TO THE LOAN AGREEMENT. BORROWERS WAIVE ALL RELIEF FROM ANY AND ALL APPRAISEMENT OR EXEMPTION LAWS NOW OR IN FORCE OR HEREINAFTER ENACTED. IF A COPY OF THIS AMENDED AND RESTATED NOTE, VERIFIED BY AFFIDAVIT OF AN OFFICER OF BANK OR ANY OTHER HOLDER HEREOF, SHALL BE FILED IN ANY PROCEEDING OR ACTION WHEREIN JUDGMENT IS TO BE CONFESSED, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL HEREOF AND SUCH VERIFIED COPY SHALL BE SUFFICIENT WARRANT FOR ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR AND CONFESS JUDGMENT AGAINST BORROWERS OR ANY BORROWER AS PROVIDED HEREIN. JUDGMENT MAY BE CONFESSED FROM TIME TO TIME UNDER THE AFORESAID POWERS WHICH SHALL NOT BE EXHAUSTED BY ONE EXERCISE THEREOF. The terms of this Amended and Restated Note may not be changed or amended orally but only by an agreement in writing and signed by the party against whom enforcement of any waiver, change, modification, or discharge is sought. Borrowers and endorsers, if any, of this Amended and Restated Note hereby waive presentment, demand for payment, notice of dishonor, protest or notice of protest and any and all notices or demands in connection with the delivery, acceptance, 4 26 performance, extension or renewal of this Amended and Restated Note. Borrowers promise to pay all costs and expenses, including reasonable attorneys' fees, all as provided in Sections 1.6 and 3.1.5 of the Loan Agreement, incurred in the collection and enforcement of this Amended and Restated Note. Borrowers and endorsers, if any, of this Amended and Restated Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. If any provision of this Amended and Restated Note shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, but this Amended and Restated Note shall be construed as if such invalid or unenforceable provision had never been contained herein. IN WITNESS WHEREOF, Borrowers have caused this Amended and Restated Note to be executed and delivered by their respective duly authorized officers, on the day and year first above written. UNITED STATES LIME & MINERALS, INC. By: /s/ ROBERT F. KIZER ------------------------------------ CORSON LIME COMPANY By: /s/ TIMOTHY W. BYRNE ------------------------------------ TEXAS LIME COMPANY By: /s/ TIMOTHY W. BYRNE ------------------------------------ ARKANSAS LIME COMPANY By: /s/ TIMOTHY W. BYRNE ------------------------------------ 5 27 TRANSACTIONS ON NOTE
Amount of Outstanding Amount of Principal Principal Loan Made Paid Balance Notation Date This Date This Date This Date Made By - ---- --------- --------- --------- -------
6 EX-10.(T) 7 CONSULTING AGREEMENT DATED 4/18/96 1 EXHIBIT 10(t) [UNITED STATES LIME & MINERALS, INC. LETTERHEAD] April 18, 1996 Mr. Wallace G. Irmscher 51 Marsh Creek Road Amelia Island, Florida 32034 Dear Jack, This letter is to confirm our understanding of the consulting work that you will be undertaking for United States Lime & Minerals, Inc. The following will highlight these understandings: 1) You will provide consulting services which will assist U.S. Lime in pursuing acquisitions and/or expansion opportunities. 2) You will, on average, spend three to four days per month on these consulting activities. 3) You will be paid $2,000.00 per month, plus you will be reimbursed for reasonable out of pocket expenses which you incur on our behalf. 4) You will be directed by me in these undertakings and you will keep me appraised of your work with periodic oral and written reports. 5) These arrangements for your consulting services will cover a one year period starting April 1st, 1996, unless either you or I terminate this understanding, for any reason, before the end of one year. Jack, I appreciate your commitment to our Company and I look forward to developing new opportunities for U.S. Lime. If you have any questions, please let me know. Very truly yours, /s/ ROBERT F. KIZER Robert F. Kizer, President and Chief Executive Officer cc: Ed Odishaw EX-11 8 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
Years Ended December 31, ----------------------------------------- 1996 1995 1994 ----------------------------------------- Net income $ 2,602,000 4,260,000 1,916,000 =========== ========= ========= Weighted average number of common shares outstanding 3,890,646 3,836,063 3,836,063 =========== ========= ========= Net income per share of common stock $ 0.67 1.11 0.50 =========== ========= =========
Note: Outstanding stock options are excluded from the computation as the effective dilution in earnings per share data is less than 3%. EX-21 9 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY Arkansas Lime Company, an Arkansas Corporation Corson Lime Company, a Pennsylvania Corporation Texas Lime Company, a Texas Corporation EX-23 10 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-58311) pertaining to the United States Lime & Minerals, Inc. 1992 Stock Option Plan, as amended, of our report dated January 24, 1997, with respect to the consolidated financial statements of United States Lime & Minerals, Inc. and subsidiaries included in the Annual Report on Form 10-K for the year ended December 31, 1996. ERNST & YOUNG LLP Dallas, Texas March 26, 1997 EX-27 11 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 1,000 0 5,152 0 5,054 11,640 59,785 41,045 31,319 6,201 0 0 0 529 20,637 31,319 40,159 40,159 32,276 32,276 4,359 0 563 3,216 614 2,602 0 0 0 2,602 .67 .67
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