-----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, TQ/LBK3LHgVfFTRlUeWi1dYYyb0WCTpccUPlRglbmanB7ko/zlOTA6O8JhOKaVk8 g830odF+RgWj0JKSp2RceA== 0000950134-98-002209.txt : 19980323 0000950134-98-002209.hdr.sgml : 19980323 ACCESSION NUMBER: 0000950134-98-002209 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980320 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: SEC FILE NUMBER: 000-04197 FILM NUMBER: 98570301 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 YEAR ENDED DECEMBER 31, 1997 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-4197 United States Lime & Minerals, Inc. ------------------------------------------------------ (Exact name of Registrant as specified in its charter) Texas 75-0789226 ------------- ---------------- (State of incorporation) (I.R.S. Employer Identification Number) 12221 Merit Drive, Suite 500, Dallas, Texas 75251 - ---------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (972) 991-8400 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Title of Each Class Name of Each Exchange on Which Registered ------------------- ------------------------ None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, $.10 par value Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. [X] The aggregate market value of Common Stock held by non-affiliates as of March 10, 1998: $13,940,263. Number of shares of Common Stock outstanding as of March 10, 1998: 3,951,853. DOCUMENTS INCORPORATED BY REFERENCE Part III incorporates information by reference from the Registrant's definitive Proxy Statement to be filed for its 1998 Annual Meeting of Shareholders. Part IV incorporates certain exhibits by reference from the Registrant's previous filings. 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 . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Plant and Facilities . . . . . . . . . . . . . . . . . . . 3 Employees . . . . . . . . . . . . . . . . . . . . . . . . . 3 Competition . . . . . . . . . . . . . . . . . . . . . . . . 4 Environmental Matters . . . . . . . . . . . . . . . . . . . 4 Disposition of Assets . . . . . . . . . . . . . . . . . . . 4 ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . 5 ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . 5 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . 5 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . 5 ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . 6 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . 7 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . . . . . . . . . . . . . . . . . . 11 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . 12 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . 13 PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . 13 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-i- UNITED STATES LIME & MINERALS, INC. FORM 10-K For the Year Ended December 31, 1997 PART I ITEM 1. BUSINESS. --------- General. The business of United States Lime & Minerals, Inc. (the "Company" or the "Registrant"), which was incorporated in 1950, is the production and sale of lime and limestone products. The Company extracts high-quality limestone from its quarries and then processes the limestone for sale as aggregate, pulverized limestone, quicklime and hydrated lime. In 1997, these operations were conducted through three wholly-owned subsidiaries of the Company: Arkansas Lime Company, Corson Lime Company and Texas Lime Company. References to the Company herein include references to its subsidiaries. The Company sold substantially all of the assets of its subsidiary, Corson Lime Company on June 21, 1997. See "Business - Disposition of Assets." The Company's principal corporate office is located at 12221 Merit Drive, Suite 500, Dallas, Texas 75251. Business and Products. The Company extracts raw limestone and then processes it for sale as aggregate, pulverized limestone, quicklime and hydrated lime. Aggregate is raw limestone that has been crushed to specified sizes. Pulverized limestone, also referred to as ground calcium carbonate, is a dried product ground to granular and finer sizes. Quicklime is produced when carbon dioxide is removed from limestone in a heat process called calcination. Hydrated lime is formed in a process called hydration in which water is added to quicklime to produce a soft powder. Aggregate is used by the construction industry in concrete, asphalt and road base. Pulverized limestone is used primarily in the production of construction materials such as asphalt paving and roofing shingles, as an additive to agriculture feeds and as a soil enhancement. Quicklime is used primarily in the manufacturing of paper products, in sanitation and water filtering systems, in metal processing and in soil stabilization for highway and building construction. Hydrated lime is used primarily in municipal sanitation and water treatment, in soil stabilization for highway and building construction, in the production of chemicals and in the production of construction materials such as stucco, plaster and mortar. Product Sales. In 1997, the Company sold its lime and limestone products primarily in the states of Arkansas, Connecticut, Delaware, Kansas, Louisiana, Mississippi, Missouri, New Jersey, New Mexico, New York, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas and Virginia. Sales at Arkansas Lime Company and Texas Lime Company are made primarily by the Company's six sales employees. Sales personnel call on potential customers and solicit orders which are generally made on a purchase-order basis. The Company also receives orders in response to bids that it prepares and submits to potential customers. Principal customers for the Company's lime and limestone products are highway, street and parking lot contractors, chemical producers, paper manufacturers, roofing shingle manufacturers, glass manufacturers, municipal sanitation and water treatment facilities, poultry and cattle feed producers, governmental agencies, steel producers and electrical utility companies. -1- Excluding Corson Lime Company sales, approximately 650 customers accounted for the Company's sales of lime and limestone products during the year ended December 31, 1997. No single customer accounted for more than 10% of such sales. The Company is not subject to significant customer risks as its customers are considerably diversified as to geographic location and industrial concentration. However, given the nature of the lime and limestone industry, the Company's profits are very sensitive to changes in volume. Lime and limestone products are transported by rail and truck to customers generally within a radius of 400 miles of each of the Company's processing plants. Sales of lime and limestone products are highest during the months of March through November. Substantially all of the Company's sales are made within the United States. Order Backlog. The Company does not believe that backlog information accurately reflects anticipated annual revenues or profitability from year to year. Seasonality. The Company's sales have historically reflected seasonal trends, with the largest percentage of total annual revenues being realized in the second and third quarters. Lower seasonal demand normally results in reduced shipments and revenues in the first and fourth quarters. Inclement weather conditions generally have a negative impact on the demand for lime and limestone products. Limestone Reserves. The Company currently extracts limestone from two open-pit quarries, both of which are Company-owned. The Cleburne Quarry is located 14 miles from Cleburne, Texas; the Batesville Quarry is located near Batesville, Arkansas. Access to each location is provided by paved roads. Texas Lime Company operates out of the Cleburne Quarry, which is situated upon a tract of land containing approximately 460 acres. In addition, the Company owns approximately 2,300 acres of land adjacent to the Cleburne tract containing known high-quality limestone reserves in a bed averaging 28 feet in thickness, with an overburden which ranges from 0 to 50 feet. The Company also has mineral interests in approximately 560 acres of land adjacent to the Northwest boundary of the Company's property. The total calculated reserves are approximately 115,000,000 tons. Assuming the present level of production at the quarry is maintained, the Company estimates the reserves are sufficient to sustain operations for approximately 100 years. Arkansas Lime Company operates out of the Batesville Quarry, which is situated on a tract of approximately 725 acres of land that contains a known deposit of high-quality limestone. The average thickness of the high-quality limestone deposit is approximately 70 feet, with an average overburden of 35 feet. Total calculated reserves are approximately 25,500,000 tons on this tract of land. In 1997, the Company purchased approximately 325 additional acres adjacent to the present quarry containing additional high-quality limestone. Prior to the purchase, the Company conducted a study that determined that this tract contains high-quality limestone reserves of approximately 31,000,000 tons with an average thickness of approximately 75 feet, with an average overburden of 20 feet. The Company estimates that, with the purchase of the additional reserves and assuming present quarry production levels are maintained, the total reserves are sufficient to sustain operations for approximately 100 years. Mining. The Company extracts limestone by the open-pit method at its two operating quarries. The open-pit method, which consists of removing the top layer of soil, trees and other substances and then extracting the exposed limestone, is generally less expensive than underground mining. The principal disadvantage of the open-pit method is that operations are subject to inclement weather. To extract limestone, the Company utilizes standard mining -2- equipment which is Company-owned. After extraction, limestone is crushed, screened and ground in the case of aggregate and pulverized limestone, or further processed in kilns and hydrators in the case of quicklime and hydrated lime, before shipment. The Company has no knowledge of any recent changes in the physical quarrying conditions on any of its properties which have materially affected its mining operations, and no such changes are anticipated. Plants and Facilities. The Company produces lime and limestone products in the following plants: The Texas plant is located adjacent to the Cleburne Quarry on a tract of land covering approximately 10 acres. This plant is equipped with three rotary kilns and has a daily-rated capacity of 1,200 tons of quicklime. The plant has pulverized limestone equipment which has a capacity to produce 550,000 tons of pulverized limestone annually, depending on the product mix. The Company is currently undertaking a major modernization and expansion project at the Texas facility. The Texas project includes the installation of a new stone crushing and handling system, the addition of a preheater to one of the existing kilns, additional storage, screening and shipping capacity and a new support building which will house a laboratory and administrative and shop facilities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." In addition to this plant, the Company owns a plant which is located near Blum, Texas on a tract of land covering approximately 40 acres. It is equipped with two vertical kilns and has a daily-rated capacity of 600 tons of quicklime. The Blum plant was acquired in 1989 and its kilns have not been operated since that time; however, the plant's storage and shipment facilities are currently being utilized. The Arkansas plant, situated on a tract of approximately 290 acres, is located roughly two miles from the Batesville Quarry and is connected to the quarry by a Company-owned railway. Utilizing six vertical kilns, this plant has a daily-rated capacity of 300 tons of quicklime. The plant has two grinding systems which, depending on the product mix, have the capacity to produce 700,000 tons of pulverized limestone annually. The Company has completed an evaluation of, and has determined to proceed wit, a planned major modernization and expansion project at the Arkansas facility. The Arkansas plan includes the addition of a new 1,200 ton per day rotary kiln,a new stone crushing, handling and transport system, a new hydrator and additional lime and ground calcium carbonate storage and loadout facilities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." The Company maintains lime hydrating equipment and limestone drying equipment at both plants. Storage facilities for lime and pulverized limestone products at each plant consist primarily of cylindrical tanks, which are considered by the Company to be adequate to protect its lime and limestone products and to provide an available supply for customers' needs at the existing volume of shipments. Equipment is maintained at each plant to load trucks and at the Arkansas and Blum plants to load railroad cars. The Company believes that its processing plants are adequately maintained and insured. Much of the equipment in the plants is aging and therefore will require future maintenance and repair. However, the Texas and Arkansas modernization and expansion projects will improve the overall reliability of the plants' equipment. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" regarding the Company's expected capital expenditures for modernizing, expanding and re-equipping the plants. -3- Employees. The Company employed, at December 31, 1997, 201 persons, 30 of whom are engaged in sales, administrative and management activities. Of the Company's 171 production employees, 131 are covered by collective bargaining agreements. These agreements expire as follows: Texas facility in November 1999 Arkansas facility in December 1999 Competition. The lime and limestone industry has certain limiting factors, including: the availability of high-quality limestone (calcium carbonate) reserves, the ability to secure mining and operating permits for a facility, the cost of building processing plants to create the lime and limestone products and the transportation costs associated with delivering the products to customers. There is not a large number of producers in the United States as a whole, but producers tend to concentrate on known limestone formations where competition takes place on a local basis. The industry as a whole has expanded its customer base and, while still selling heavily to the steel industry, also counts paper producers and road builders among its major customers. In recent years, the environmental-related uses for lime have been expanding, including use in flue gas desulfurization and the treatment of both waste and potable water. There is a continuing trend of consolidation in the lime and limestone industry. In addition to the consolidations, and often in conjunction with consolidations, many lime producers have undergone modernization and expansion projects to upgrade their processing equipment in an effort to improve their operating efficiency. The Company's current modernization and expansion projects should allow it to continue to be competitive in the future. In addition, the Company will continue to evaluate external opportunities for expansion. Environmental Matters. The Company's operations are subject to various federal, state and local environmental laws and regulations, including the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation, and Liability Act, as well as the Toxic Substances Control Act. Management does not believe that any lack of compliance by the Company with applicable environmental laws would have a materially adverse effect on the Company. In part in response to requirements of environmental regulatory agencies, the Company incurred capital expenditures of approximately $117,000 in 1997 and $200,000 in 1996 on environmental compliance and is planning to incur approximately $100,000 in 1998 excluding major capital projects. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." In the judgment of management, forecastable expenditure requirements for the future are not of such dimension as to have a materially adverse effect on the Company's financial condition, results of operations, liquidity or competitive position. The Company's recurring costs associated with managing and disposing of potentially hazardous substances (such as fuels and lubricants used in operations) and maintaining pollution control equipment amounted to approximately $80,000 in 1997 and $100,000 in 1996. The Company has not been named as a potentially responsible party in any superfund cleanup site. Disposition of Assets. Effective June 21, 1997, Corson Lime Company, a wholly owned subsidiary of the Company, ceased operations and sold substantially all of its aggregate and lime assets for $8,231,000 in cash, including a $376,000 note collected in October 1997. The proceeds, net of expenses, generated by the sale were used to partially fund the Texas plant modernization and expansion project. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 7 of Notes to Consolidated Financial Statements for discussions regarding the disposition. -4- ITEM 2. PROPERTIES. ----------- Reference is made to Item 1 of this Report for a description of the properties of the Company, and such description is hereby incorporated by reference in answer to this Item 2. As discussed in Note 2 of Notes to Consolidated Financial Statements, plant facilities and mineral reserves are subject to encumbrances to secure the Company's loans. ITEM 3. LEGAL PROCEEDINGS. ------------------ Information regarding legal proceedings is set forth in Note 6 of Notes to Consolidated Financial Statements and is hereby incorporated by reference in answer to this Item 3. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. ---------------------------------------------------- The Company did not submit any matters to a vote of security holders during the fourth quarter of 1997. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. ------------------------------------------------------------- The Company's Common Stock is quoted on the Nasdaq National Market under the symbol "USLM." As of March 10, 1998, the Company had 882 stockholders of record. As of December 31, 1997, 500,000 shares of $5.00 par value preferred stock were authorized, and none was issued. The high and low sales prices for the Company's Common Stock for the periods indicated, as well as dividends declared, were:
1997 1996 --------------------------- --------------------------- Market Price Dividends Market Price Dividends Low High Declared Low High Declared ------- ------- ------ ------- ------- ------ First Quarter $ 6 1/4 $ 9 $0.025 $ 8 $11 3/4 $0.025 Second Quarter $ 6 5/8 $ 9 1/8 $0.025 $11 3/8 $14 3/4 $0.025 Third Quarter $ 7 1/2 $ 9 1/4 $0.025 $ 8 3/4 $13 3/4 $0.025 Fourth Quarter $ 6 5/8 $ 9 1/2 $0.025 $ 7 3/4 $ 9 1/4 $0.025
-5- ITEM 6. SELECTED FINANCIAL DATA. ------------------------ (dollars in thousands, except per share amounts)
Years Ended December 31, ------------------------------------------- 1997 1996 1995 1994 1993 ------- ------- ------- ------- ------- Operating Results Revenues from continuing operations $32,404 40,159 41,419 36,865 32,359 ======= ======= ======= ======= ======= Net income (loss) From continuing operations $ 3,096 a 2,602 4,260 1,916 b (441) From discontinued operations - - - - 480 ------- ------- ------- ------- ------- $ 3,096 2,602 4,260 1,916 39 ======= ======= ======= ======= ======= Income (loss) per share of common stock Basic earnings per common share: From continuing operations $ 0.79 0.67 1.11 0.50 (0.11) From discontinued operations - - - - 0.12 ------- ------- ------- ------- ------- $ 0.79 0.67 1.11 0.50 0.01 ======= ======= ======= ======= ======= Diluted earnings per common share: From continuing operations $ 0.78 0.66 1.11 0.50 (0.11) From discontinued operations - - - - 0.12 ------- ------- ------- ------- ------- $ 0.78 0.66 1.11 0.50 0.01 ======= ======= ======= ======= =======
As of December 31, ------------------------------------------- 1997 1996 1995 1994 1993 ------- ------- ------- ------- ------- Total assets $33,520 31,319 29,793 27,397 29,937 Long-term debt, excluding current installments $ 2,167 3,238 4,381 6,225 9,622 Stockholders' equity per outstanding share $ 6.11 5.40 4.89 3.86 3.32 Cash dividends per share $ 0.10 0.10 0.075 - - Employees at year-end 201 318 338 313 302
___________________________________ a. Includes a loss on sale of Corson Lime Company assets of $405, net of related tax benefit ($506 gross), and the recognition of $2,300 in previously reserved deferred tax assets. b. Includes a gain of $372, net of related taxes ($425 gross), due to the expiration of certain potential post-closing obligations relating to the sale of Virginia Lime Company assets. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Notes to Consolidated Financial Statements. -6- 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, -------------------------------- 1997 1996 1995 ------ ------ ------ Revenues 100 % 100 % 100 % Cost of revenues Labor and other operating expenses (73) (71) (67) Depreciation, depletion and amortization (10) (9) (8) ------ ------ ------ Gross profit 17 20 25 Selling, general and administrative expenses (14) (11) (12) ------ ------ ------ Operating profit 3 9 13 Other (deductions) income: Interest expense (1) (1) (2) Other, net 2 - 1 Federal and state income tax benefit (expense) 6 (2) (2) ------ ------ ------ Net income 10 % 6 % 10 % ====== ====== ======
1997 vs 1996 Revenues decreased from $40,159,000 in 1996 to $32,404,000 in 1997, a decrease of $7,755,000 or 19.3%. This decrease was a result of a 17.9% decrease in sales volume, due to the sale of the Corson Lime Company assets in the second quarter of 1997 as well as a reduction in sales at the Arkansas plant, and a 1.4% decrease in sales prices. Excluding Corson, revenues decreased by $825,000, or 2.9%, from 1996, resulting from a 1.9% decrease in sales volume and 1.0% decrease in sales prices. The decreased sales volume at Arkansas was partially due to the loss of a large pulverized limestone customer in 1996 as well as the loss of certain quicklime customers due to an inability to meet customer demand and increased competition in the area. The Company's gross profit was $5,419,000 for 1997 compared to $7,883,000 for 1996, a 31.3%, or $2,464,000 decrease. The decrease was the result of a number of factors. The lower sales volume, particularly at Arkansas, reduced the gross profit as fixed costs, including increased depreciation expense, -7- were absorbed by fewer units. The increased cost of fuel, particularly natural gas prices, impacted all three plants. Corson's continued operating and productivity problems up to the date of sale, as well as the $506,000 loss on the sale of its assets, also contributed to the reduction in gross profit. Selling, general and administrative ("SG&A") expenses increased from $4,359,000 in 1996 to $4,520,000 in 1997, a 3.7% increase. SG&A expenses increased as a percent of revenues to 13.9% in 1997, from 10.9% in 1996. While SG&A expenses were reduced as a result of the sale of Corson's assets, SG&A was negatively impacted by a one-time severance payment due to a former employee under an employment agreement and additional professional consulting fees in 1997. Interest expense decreased by $195,000 in 1997 from 1996, due to lower debt outstanding and the capitalization of $85,000 in 1997 interest costs related to the modernization and expansion project at the Texas facility. Other, net, increased by $243,000 in 1997 from 1996. This increase is primarily due to increased interest income resulting from increased cash reserves, certain royalty income on stone sales from the Blum facility and the sale of certain surplus Texas assets. Income tax (benefit) expense was impacted by the reduction in the deferred tax asset valuation allowance which produced a corresponding income tax benefit of $2,300,000 recorded in the second quarter of 1997. See Note 3 of Notes to Consolidated Financial Statements. The Company's net income for 1997 increased $494,000, or 19.0%, from $2,602,000 ($0.67 basic earnings per share and $0.66 diluted) in 1996, to $3,096,000 ($0.79 basic earnings per share and $0.78 diluted). This increase is attributable principally to the 1997 recognition of $2,300,000 ($0.59 basic earnings per share and $0.58 diluted) in previously reserved deferred tax assets, but was partially offset by the reduction in gross profit which includes a $405,000, net of tax benefit ($0.10 basic and diluted earnings per share), loss on the sale of the Corson assets. 1996 vs 1995 Revenues decreased from $41,419,000 in 1995 to $40,159,000 in 1996, a decrease of $1,260,000, or 3.0%. This decrease was a result of a 6.9% decrease in sales volume, which was partially offset by a 3.9% increase in sales prices. Sales volumes were down at all plants, with the largest percentage of reductions attributed to the Arkansas and Texas plants. The single largest reason for Arkansas' reduced sales volume was the loss of a large pulverized limestone customer in 1996. The increase in sales prices was attributed principally to the Texas plant. The Company's gross profit was $7,883,000 for 1996 compared to $10,543,000 for 1995, a 25.2% decrease. The decrease was the result of a number of factors. The lower sales volume reduced the gross profit as fixed costs, including greater depreciation expense, were absorbed by fewer units. The increased cost of fuel, particularly natural gas prices, impacted all three plants, but particularly the Corson plant. The Corson plant's continued operating and productivity problems accounted for approximately 50% of the reduction in gross profit. The 9% reduction in sales volume at the Arkansas plant also contributed to the decrease in gross profit. SG&A expenses decreased from $4,881,000 in 1995 to $4,359,000 in 1996, a 10.7% decrease. SG&A expenses declined as a percent of revenues to 10.9% in 1996, from 11.8% in 1995. The reduction in SG&A was primarily the result of lower bonus payments, professional fees and insurance costs. -8- Interest expense decreased by $160,000 in 1996 from 1995, primarily due to lower debt outstanding. The Company's net income for 1996 decreased $1,658,000, or 38.9%, from $4,260,000 ($1.11 basic and diluted earnings per share) in 1995, to $2,602,000 ($0.67 basic earnings per share and $0.66 diluted), principally due to the decrease in gross profit. FINANCIAL CONDITION. - -------------------- Liquidity and Capital Resources. The Company's financial condition is reflected by the following key financial measurements (dollars in thousands):
December 31, ------------------------------------ 1997 1996 1995 -------- -------- -------- Total bank debt $ 3,238 4,381 5,524 Ratio of total bank debt to total capitalization .12 .17 .23 Ratio of total liabilities to stockholders' equity .39 .48 .59 Working capital $ 2,421 5,439 6,156 Current ratio 1.34 1.88 2.01
In 1997, cash flow from operations was $7,264,000, an increase of $214,000, or 3.0%, from 1996. In 1997, this cash flow, in conjunction with the proceeds of the sale of the Corson assets, fully funded the Company's capital expenditure program and reduced the Company's bank debt by $1,143,000. The Company has a financing agreement with a commercial bank. The agreement, as amended and restated in December 1997, provides for a $15,000,000 five-year secured term loan with monthly principal repayments of $179,000 beginning no later than July 1998 and maturing in June 2003. From January 1998 through June 1998, interest only payments are required. This facility is secured by substantially all of the Company's property, plant and equipment. The agreement also provides for a $4,000,000 unsecured revolving credit facility which matures in December 1999. Both loans bear interest at the bank's prime rate but may, at the option of the Company, be converted into LIBOR-based loans that bear interest at LIBOR plus 1.65% for the term loan and LIBOR plus 1.5% for the revolving credit facility. The agreement also allows the Company to convert all or a portion of the outstanding loans to a fixed rate loan by establishing a fixed rate with the bank or through the use of interest rate protection agreements with the bank. Fixed interest rates will be quoted by the bank at the time of the request and will be based upon then- current market conditions. The terms of the agreement contain, among other provisions, requirements for maintaining a defined net worth and certain financial ratios. The covenants also restrict incurrance of debt, liens and lease obligations, mergers, and consolidations and acquisitions of assets. As part of the same amended and restated loan agreement, the Company negotiated a $25,000,000 secured line of credit to provide temporary financing for capital expenditures and acquisitions until such time as permanent financing can be arranged. Any borrowings under this facility would be at the bank's prime rate or, at the discretion of the Company, may be converted into a LIBOR-based loan bearing interest at LIBOR plus 2%. The capital expenditure and acquisition line of credit is available, if not extended, through September 1998 and is subject to approval by the bank. Capital expenditures for 1997 totaled $11,872,000 compared to $6,121,000 in 1996. Of the 1997 expenditures, approximately $6,720,000 were related to -9- the modernization and expansion project at the Texas facility. Excluding expenditures for major modernization and expansion projects, the Company expects to spend $2,000,000 to $3,000,000 per year over the next several years. These expenditures are considered normal recurring maintenance and re- equipping projects at the plant facilities to improve efficiency and reduce costs, to effect environmental improvements and to ensure that capacity is in place to meet market demand. In addition to the above recurring capital expenditures, the Company is currently undertaking a major modernization and expansion project at the Texas facility and has approved a similar project for the Arkansas facility. The Texas project includes the installation of a new stone crushing and handling system, the addition of a preheater to one of the existing kilns, additional storage, screening and shipping capacity, and a new support building which will house a laboratory and administrative and shop facilities. The Texas improvements should allow the Company to better serve its customers by improving both quality and service. With the improvements, the Company expects to be in a better position to compete for customers who currently cannot use the Company's lime in their processes. The stone crushing system will significantly reduce the amount of fines (undersized pebbles and dust) generated by the existing system, thereby increasing yields while providing a more consistently sized stone for the kiln feed system which will increase production yield and improve fuel efficiency. The new stone handling system will significantly reduce trucking and labor costs in the quarry, as well as improve the reliability of the feed systems to both the kilns and the ground calcium carbonate systems. The additional storage will improve both kiln utilization and the plant's ability to meet peak customer demand. The storage, screening and load-out facilities will also substantially reduce the amount of time required for the loading of bulk quicklime trucks. The preheater addition to a current kiln along with the improvement in the crushing system will reduce fuel consumption and will also increase the plant's quicklime capacity by approximately 25%. These improvements will result in lower operating costs and in a more efficient utilization of the work force. The cost of the Texas modernization and expansion project is expected to be approximately $22,000,000. Although delays or changes in the cost of the project could occur due to inclement weather, changes in the design or cost overruns, none is anticipated at this time. This project is being financed through a combination of internally generated funds from operations, the proceeds from the sale of the Corson assets and the previously discussed banking facilities. The Texas project is being constructed in phases and significant progress has been made. The new support building has been completed and the stone crushing and handling system should be completed by the second quarter of 1998. The storage, screening and loadout improvements as well as the preheater should be complete by the fourth quarter of 1998. The Company has secured all the necessary permits for construction, with the exception of the permit for the preheater addition which is in the final stages of the approval process. Although delays in the final approval for the construction of the preheater could occur, none is expected. The Arkansas improvements will be constructed in two phases. The first phase, scheduled for completion in 1999, includes the addition of a new 1,200-ton per day rotary kiln, a new stone crushing and handling system, and new lime and ground calcium carbonate storage and loadout facilities. The second phase of the project includes a new hydrator, a rock transportation system and additional lime storage facilities. The second phase of the project is currently scheduled for completion in 2002. However, significant increases in product sales could result in an earlier implementation of the second phase of the plan. Kiln system design and permit applications are currently being finalized and bid proposals have been requested for key components of the project. The preliminary cost estimates for the project phases are approximately $27,000,000 and $5,000,000, respectively. The project is contingent upon satisfactory permitting from the various regulatory agencies. The Company expects to finance this project through a combination of internally generated funds from operations and/or alternative sources of financing. The Arkansas improvements should allow the Company to better serve its customers by improving both quality and service while increasing the production capacity of quicklime and hydrated lime. With the improvements, -10- the Company expects to be in a better position to compete for customers who currently cannot use the Company's lime in their processes due to insufficient production capacity at the plant or quality constraints. The new rotary kiln will have lower operating costs and a greater capacity than the six shaft kilns currently in use. In addition to increasing capacity, this kiln will also be able to consistently produce high-quality lime for use by certain manufacturing customers who currently do not buy lime from the Arkansas facility. The new stone crushing system will allow the Company to increase quarry capacity and produce aggregate products with materials that are not suitable for the production of lime. This system will be designed to produce the appropriate size feed for the rotary kiln and will increase handling and transport capacity while significantly reducing labor requirements. The new hydrator will increase capacity and produce hydrated lime more efficiently than the current systems. The storage, screening and load-out facilities will also substantially reduce the amount of time required for the loading of bulk quicklime trucks and railcars. The planned modernization and expansion project will increase both production and shipping capacity, will lower operating costs and will allow for a more efficient utilization of the work force. The Company is not contractually committed to any planned capital expenditures until actual orders are placed for equipment. As of February 28, 1998, the Company's liability for open equipment and construction orders, all of which were related to the Texas modernization and expansion project, totaled approximately $2,300,000. This amount, as well as other future billings related to the Texas modernization and expansion project, will be recorded as work is performed and billed to the Company. As of March 17, 1998, the Company had approximately $8,140,000 in long- term debt outstanding under the amended and restated term loan, up from the $3,238,000 at December 31, 1997. The additional borrowings in 1998 have been used to fund the modernization and expansion project at the Texas facility. Environmental Matters. The Company's operations are subject to various environmental laws and regulations. In part in response to requirements of environmental regulatory agencies, the Company incurred capital expenditures of approximately $117,000 in 1997 and $200,000 in 1996. In the judgment of management, forecastable environmental expenditure requirements for the future are not of such dimension as to have a materially adverse effect on the Company's financial condition, results of operations, liquidity or competitive position. See "Business--Environmental Matters." -11- Year 2000 Compliance. The Company has conducted a review of its computer systems to identify the systems that could be affected by the year 2000 issue and is developing an implementation plan to resolve the issue. The Company presently believes that, with modifications to existing software in conjunction with conversion to new year 2000 compliant software, the year 2000 problem will not pose significant operational problems for the Company's computer systems. The Company believes that the costs associated with ensuring year 2000 compliance will not materially affect the Company's future operating results or financial condition. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. ----------------------------------------------------------- NOT APPLICABLE -12- 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, 1997 and 1996 F2 Consolidated Statements of Income for the Years Ended December 31, 1997, 1996 and 1995 F4 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1997, 1996 and 1995 F5 Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 F6 Notes to Consolidated Financial Statements F7
-13- REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders United States Lime & Minerals, Inc. We have audited the consolidated balance sheets of United States Lime & Minerals, Inc. and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of United States Lime & Minerals, Inc. and subsidiaries at December 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Dallas, Texas January 30, 1998 -F1- UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (dollars in thousands)
December 31, ---------------------- ASSETS Notes 1997 1996 ------- -------- -------- Current assets: Cash and cash equivalents $ 2,787 1,000 Trade receivables, net 1 3,624 5,152 Inventories 1 3,001 5,054 Prepaid expenses and other assets 111 434 -------- -------- Total current assets 9,523 11,640 Property, plant and equipment, at cost: 1 Land 2,764 2,338 Building and building improvements 736 2,073 Machinery and equipment 47,631 53,816 Furniture and fixtures 556 753 Automotive equipment 615 805 -------- -------- 52,302 59,785 Less accumulated depreciation (30,896) (41,045) -------- -------- Property, plant and equipment, net 21,406 18,740 Deferred tax assets, net 3 2,537 - Other assets, net 1, 4 54 939 -------- -------- Total assets $ 33,520 31,319 ======== ========
See accompanying notes to consolidated financial statements -F2- UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Continued) (dollars in thousands)
December 31, LIABILITIES AND ---------------------- STOCKHOLDERS' EQUITY Notes 1997 1996 ------- -------- -------- Current liabilities: Current installments of long-term debt 2 $ 1,071 1,143 Accounts payable - trade 4,437 3,117 Accrued expenses: Salaries and wages 447 238 Insurance costs 461 228 Other expenses 686 1,475 -------- -------- Total current liabilities 7,102 6,201 Long-term debt, excluding current installments 2 2,167 3,238 Other liabilities 4 101 714 -------- -------- Total liabilities 9,370 10,153 Commitments and contingencies 6 - - Stockholders' equity: 2, 4 Preferred stock, $5 par value; authorized 500,000 shares; none issued - - Common stock, $0.10 par value; authorized 15,000,000 shares; issued 5,294,065 shares 529 529 Additional paid-in capital 15,135 15,311 Retained earnings 22,729 19,888 Less treasury stock at cost; 1,342,212 shares and 1,372,212 shares of common stock (14,243) (14,562) -------- -------- Total stockholders' equity 24,150 21,166 -------- -------- Total liabilities and stockholders' equity $ 33,520 31,319 ======== ========
See accompanying notes to consolidated financial statements -F3- UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES Consolidated Statements of Income (dollars in thousands, except per share amounts)
Years Ended December 31, ---------------------------- Notes 1997 1996 1995 ------- -------- -------- -------- Revenues $ 32,404 40,159 41,419 Cost of revenues: Labor and other operating expenses 23,548 28,684 27,679 Depreciation, depletion and amortization 3,437 3,592 3,197 -------- -------- -------- 26,985 32,276 30,876 -------- -------- -------- Gross profit 5,419 7,883 10,543 Selling, general and administrative expenses 4,520 4,359 4,881 -------- -------- -------- Operating profit 899 3,524 5,662 Other deductions (income): Interest expense 2 368 563 723 Loss (gain) on sale of assets, net 14 (21) (127) Other, net (477) (234) (216) -------- -------- -------- (95) 308 380 -------- -------- -------- Income before taxes 994 3,216 5,282 Income tax (benefit) expense, net 3 (2,102) 614 1,022 -------- -------- -------- Net income $ 3,096 2,602 4,260 ======== ======== ======== Income per share of common stock: 1, 8 Basic earnings per common share $ 0.79 0.67 1.11 ======== ======== ======== Diluted earnings per common share $ 0.78 0.66 1.11 ======== ======== ========
See accompanying notes to consolidated financial statements -F4- UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (dollars in thousands) Years Ended December 31, 1997, 1996, and 1995
Common Stock ---------------- Addt'l Shares Paid-In Retained Treasury Outstanding Amt. Capital Earnings Stock Total ----------- ---- ------- -------- -------- ------- Balances at January 1, 1995 3,836,063 $529 15,848 13,897 (15,472) 14,802 Common stock dividends - - - (286) - (286) Adjustments to reflect minimum pension liability (Note 4) - - - (27) - (27) Net income - - - 4,260 - 4,260 --------- ---- ------- -------- -------- ------- Balances at December 31, 1995 3,836,063 $529 15,848 17,844 (15,472) 18,749 Stock options exercised 85,790 - (537) - 910 373 Common stock dividends - - - (389) - (389) Adjustments to reflect minimum pension liability (Note 4) - - - (169) - (169) Net income - - - 2,602 - 2,602 --------- ---- ------- -------- -------- ------- Balances at December 31, 1996 3,921,853 $529 15,311 19,888 (14,562) 21,166 Stock options exercised 30,000 - (176) - 319 143 Common stock dividends - - - (394) - (394) Adjustments to reflect minimum pension liability (Note 4) - - - 139 - 139 Net income - - - 3,096 - 3,096 --------- ---- ------- -------- -------- ------- Balances at December 31, 1997 3,951,853 $529 15,135 22,729 (14,243) 24,150 ========= ==== ======= ======== ======== =======
See accompanying notes to consolidated financial statements -F5- UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (dollars in thousands)
Years Ended December 31, ---------------------------- 1997 1996 1995 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,096 2,602 4,260 Adjustments to reconcile net income to net cash provided by operations: Depreciation, depletion and amortization 3,503 3,757 3,354 Amortization of financing costs 50 101 139 Increase in deferred income tax benefit (2,537) - - Loss (gain) on sale of assets 14 (21) (127) Loss on sale of Corson Lime Company assets 506 - - Changes in assets and liabilities: (Increase)/decrease in trade receivables 1,528 357 493 (Increase)/decrease in inventories 332 278 (562) (Increase)/decrease in prepaid expenses (19) (200) 86 (Increase)/decrease in other assets 292 93 34 Increase/(decrease) in accounts payable and accrued expenses 973 121 408 Increase/(decrease) in other liabilities (474) (38) (142) -------- -------- -------- Total adjustments 4,168 4,448 3,683 -------- -------- -------- Net cash provided by operations $ 7,264 7,050 7,943 CASH FLOWS USED IN INVESTING ACTIVITIES: Purchase of property, plant and equipment $(11,872) (6,121) (4,851) Proceeds from sale of Corson Lime Company assets, net of expenses 7,745 - - Proceeds from sales of property, plant and equipment 44 69 176 -------- -------- -------- Net cash used in investing activities $ (4,083) (6,052) (4,675) CASH FLOWS USED IN FINANCING ACTIVITIES: Proceeds from exercise of stock options $ 143 373 - Payment of common stock dividends (394) (389) (286) Proceeds from borrowings 2,900 800 2,200 Repayments of debt (4,043) (1,943) (4,044) -------- -------- -------- Net cash used in financing activities $ (1,394) (1,159) (2,130) -------- -------- -------- Net increase (decrease) in cash and cash equivalents 1,787 (161) 1,138 Cash and cash equivalents at beginning of period 1,000 1,161 23 -------- -------- -------- Cash and cash equivalents at end of period $ 2,787 1,000 1,161 ======== ======== ========
See accompanying notes to consolidated financial statements -F6- UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (dollars in thousands, except per share amounts) Years Ended December 31, 1997, 1996 and 1995 (1) Summary of Significant Accounting Policies ------------------------------------------ (a) Organization The Company is a manufacturer of lime and limestone products supplying primarily the steel, paper, agriculture, municipal sanitation and water treatment and construction industries. The Company is headquartered in Dallas, Texas and operates lime and aggregate plants in Arkansas and Texas through its wholly owned subsidiaries, Arkansas Lime Company and Texas Lime Company, respectively. Through June 21, 1997, the Company also operated in Pennsylvania through a wholly owned subsidiary, Corson Lime Company (see Note 7 of Notes to Consolidated Financial Statements). (b) Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated. (c) Use of Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. (d) Statements of Cash Flows For purposes of reporting cash flows, the Company considers all certificates of deposit and highly-liquid debt instruments, such as U.S. treasury bills and notes, with original maturities of three months or less to be cash equivalents. Cash equivalents are carried at cost plus accrued interest, which approximates fair market value. Supplemental cash flow information is presented below:
1997 1996 1995 Cash paid during the period for: ---- ---- ---- Interest (net of amounts capitalized) $ 321 450 597 ==== ==== ==== Income taxes $ 654 902 789 ==== ==== ====
(e) Trade Receivables Trade receivables are presented net of the related allowance for doubtful accounts, which totaled $80 and $71 at December 31, 1997 and 1996, respectively. -F7- UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (dollars in thousands, except per share amounts) (f) Inventories Inventories are valued principally at the lower of cost or market determined using the average cost method. Such costs include materials, labor and production overhead. A summary of inventories is as follows:
December 31, ------------------ 1997 1996 Lime and limestone inventories: ------- ------- Raw materials $ 624 860 Finished goods 844 2,190 ------- ------- 1,468 3,050 Service parts inventories 1,533 2,004 ------- ------- $ 3,001 5,054 ======= =======
(g) Property, Plant and Equipment For constructed assets, the capitalized cost includes the cash price paid by the Company for labor and materials plus interest and project management costs that are directly related to the constructed assets. Total interest costs of $85 were capitalized for the year ended December 31, 1997. No interest was capitalized in 1996 or 1995. Depreciation of property, plant and equipment is being provided for by the straight-line and declining-balance methods over estimated useful lives as follows: Buildings and building improvements 3 - 40 years Machinery and equipment 3 - 20 years Furniture and fixtures 3 - 10 years Automotive equipment 3 - 8 years Maintenance and repairs are charged to expense as incurred; renewals and betterments are capitalized. When units of property are retired or otherwise disposed of, their cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is credited or charged to income. The Company reviews its long-term assets for impairment in accordance with the guidelines of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121"). SFAS 121 requires that when changes in circumstances indicate that the carrying amount of an asset may not be recoverable, the Company should determine if impairment of value exists. Impairment is measured as the amount by which the carrying amount of the asset exceeds the expected future undiscounted cash flows from the use and eventual disposal of the assets under review. Any write-downs are treated as a permanent reduction in the carrying value of the assets. -F8- UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (dollars in thousands, except per share amounts) (h) Other Assets Other assets consist of the following:
December 31, -------------- 1997 1996 ---- ---- Assets held for sale $ - 33 Deferred stripping costs - 717 Intangible asset, pension - 138 Deferred financing costs 54 51 ---- ---- $ 54 939 ==== ====
It is the Company's policy to make available for sale assets considered excess and no longer necessary for operations. The carrying values of such assets are periodically reviewed and adjusted downward to market, when appropriate. The deferred stripping costs, all of which were related to Corson Lime Company ("Corson"), were amortized by the unit-of-production method based on the estimated recoverable reserves in the underlying area. The deferred stripping costs were written-off in 1997 in conjunction with the sale of the Corson assets. See Note 7 of Notes to Consolidated Financial Statements. Deferred financing costs are expensed over the shorter of the life of the debt or expected life of the loan using the straight-line method. (i) Environmental Expenditures Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the costs can be reasonably estimated. Generally, the timing of these accruals will coincide with completion of a feasibility study or the Company's commitment to a formal plan of action. (j) Stock Options The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), in accounting for its employee stock options. Under APB 25, if the exercise price of an employee's stock options equals or exceeds the market price of the underlying stock on the date of grant, no compensation expense is recognized. The Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), in 1996. SFAS 123 requires companies that elect to continue applying the provisions of APB 25 to provide pro forma disclosures for employee stock compensation awards as if the fair-value-based method defined in SFAS 123 had been applied. See Note 5 of Notes to Consolidated Financial Statements. -F9- UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (dollars in thousands, except per share amounts) (k) Earnings Per Share of Common Stock Effective December 31, 1997, Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"), was implemented by the Company. SFAS 128 requires the presentation of basic and diluted earnings per share for all periods presented. As such, earnings per share for prior years have been recalculated and are presented in accordance with the guidelines of SFAS 128. See Note 8 of Note to Consolidated Financial Statements. (l) Reclassifications Certain previously reported amounts have been reclassified to conform with the current presentation. (2) Long-Term Debt -------------- The Company has a financing agreement with a commercial bank. The agreement, as amended and restated in December 1997, provides for a $15,000 five-year secured term loan with monthly principal repayments of $179 beginning no later than July 1998 and maturing in June 2003. From January 1998 through June 1998, interest only payments are required. This facility is secured by substantially all of the Company's property, plant and equipment. The agreement also provides for a $4,000 unsecured revolving credit facility which matures in December 1999. Both loans bear interest at the bank's prime rate but may, at the option of the Company, be converted into LIBOR-based loans that bear interest at LIBOR plus 1.65% for the term loan and LIBOR plus 1.5% for the revolving credit facility. The agreement also allows the Company to convert all or a portion of the outstanding loans to a fixed rate loan by establishing a fixed rate with the bank or through the use of interest rate protection agreements with the bank. Fixed interest rates will be quoted by the bank at the time of the request and will be based upon then-current market conditions. The terms of the agreement contain, among other provisions, requirements for maintaining a defined net worth and certain financial ratios. The covenants also restrict incurrance of debt, liens and lease obligations, mergers, and consolidations and acquisitions of assets. As part of the same amended and restated agreement, the Company negotiated a $25,000 secured line of credit to provide temporary financing for capital expenditures and acquisitions until such time as permanent financing can be arranged. Any borrowings under this facility would be at the bank's prime rate or, at the discretion of the Company, may be converted into a LIBOR-based loan bearing interest at LIBOR plus 2%. The capital expenditure and acquisition line of credit is available, if not extended, through September 1998 and is subject to approval by the bank. -F10- UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (dollars in thousands, except per share amounts) A summary of long-term debt is as follows:
December 31, ----------------- 1997 1996 ------- ------- Term loan $ 3,238 4,381 Revolving credit facility - - ------- ------- Subtotal 3,238 4,381 Less current installments 1,071 1,143 ------- ------- Long-term debt, excluding current installments $ 2,167 3,238 ======= =======
Amounts payable on the $3,238 of long-term debt outstanding as of December 31, 1997 to be paid in 1998 and thereafter are: 1998, $1,071; 1999, $2,143; 2000, $24. Additional amounts the Company will draw under the amended and restated loan agreement will be paid out in accordance with the description above and are not included in this payment schedule. The carrying amount of the Company's long-term debt approximates its fair value. (3) Income Taxes ------------ Income tax (benefit) expense for the years ended December 31, 1997, 1996 and 1995 was as follows:
1997 1996 1995 ------- ------- ------- Current income tax expense $ 435 614 1,022 Deferred income tax benefit (237) - - ------- ------- ------- Income tax expense 198 614 1,022 Recognition of previously reserved deferred tax assets (2,300) - - ------- ------- ------- Income tax (benefit) expense, net $ (2,102) 614 1,022 ======= ======= =======
-F11- UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (dollars in thousands, except per share amounts) A reconciliation of income taxes computed at the federal statutory rate to income tax (benefit) expense for the years ended December 31, 1997, 1996 and 1995 is as follows:
1997 1996 1995 -------------- -------------- --------------- Percent Percent Percent of pretax of pretax of pretax Amount income Amount income Amount income ------ ------- ------ ------- ------ -------- Income taxes computed at the federal statutory rate $ 338 34.0% 1,093 34.0% 1,796 34.0% Increase (reductions) in taxes resulting from: Recognition of previously reserved deferred tax assets (2,300) (231.4) - - - - General business credit carryforwards - - (162) (5.0) (248) (4.6) Statutory depletion in excess of cost depletion (431) (43.4) (415) (12.9) (612) (11.6) State income taxes, net of federal income tax benefit 191 19.2 131 4.0 176 3.3 Other 100 10.1 (33) (1.0) (90) (1.7) ------ ------- ------ ------- ------ ------- Income tax (benefit) expense, net $(2,102) (211.5)% 614 19.1% 1,022 19.4% ======= ======= ====== ======= ====== =======
As reported in the Company's consolidated financial statements and notes contained in its Form 10-K for the year ended December 31, 1996, the Company had deferred tax assets which were previously fully reserved by a valuation allowance in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). The unrecognized deferred tax assets related primarily to net operating loss carryforwards, general business credit carryforwards and alternative minimum tax credit carryforwards. Generally, the provisions of SFAS 109 require deferred tax assets to be reduced by a valuation allowance if, based on the weight of available evidence, it is "more likely" than not that some portion or all of the deferred tax assets will not be realized. SFAS 109 requires an assessment of all available evidence, both positive and negative, to determine the amount of any required valuation allowance. No benefit was given to the deferred tax assets at December 31, 1996 due to uncertainties related to their utilization. As a result of the sale of the Corson assets (see Note 7 of Notes to Consolidated Financial Statements), the Company reviewed the deferred tax assets and concluded that the uncertainties as to their realization had been favorably resolved, in that the net operating loss carryforwards and -F12- UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (dollars in thousands, except per share amounts) the general business credit carryforwards are expected to be fully utilized. The Company's future taxable income, enhanced by the sale of the Corson assets, indicates future utilization of the alternative minimum tax credit carryforwards in the upcoming years. The post-Corson sale assessment as to the ultimate realization of the deferred tax assets indicates that it is more likely than not that the deferred tax assets will be realized. As a result, the Company reduced the deferred tax assets' valuation allowance in the second quarter of 1997 by $2,300, recording the deferred tax assets and recognizing that amount in federal and state income tax (benefit) expense, net . At December 31, 1997, the Company had deferred tax liabilities of $629 and deferred tax assets of $3,166. The principal temporary difference related to the deferred tax liabilities was depreciation ($344). The principal temporary differences related to the deferred tax assets were the tax benefit of net operating loss ("NOL") carryforwards ($279) and alternative minimum tax credit carryforwards ($2,777). At December 31, 1996, the Company had deferred tax liabilities of $555, deferred tax assets of $3,657 and a valuation allowance of $3,102. The principal temporary difference related to the deferred tax liabilities was depreciation ($555). The principal temporary differences related to the deferred tax assets were the tax benefit of NOL carryforwards ($109) and alternative minimum tax credit carryforwards ($2,593). Included in deferred tax assets were the tax benefit of NOL carryforwards for tax purposes of $279, which, if unused, will expire from 2008 through 2012. Also included were general business credits of $55 that are available to reduce the Company's federal income tax, which, if unused, expire in 2001. (4) Employee Retirement Plans ------------------------- The Company has a noncontributory defined benefit pension plan covering substantially all union employees previously employed by its wholly-owned subsidiary, Corson. Benefits for the Corson Lime Union Pension Plan (the "Corson Plan") are based on certain multiples of years of service. In June 1997, the Company sold substantially all of the assets of Corson to an unrelated third party. In connection with the sale of the assets, the Board of Directors resolved that all active participants in the Corson Plan as of July 31, 1997 shall be fully vested and that no employee shall be admitted to the Corson Plan after July 31, 1997. The Board of Directors further resolved that all benefit accruals under the Corson Plan shall cease as of July 31, 1997. There is no material impact on the net assets of the Corson Plan as of December 31, 1997 as a result of the freezing of the Plan. In conjunction with the freezing of the Corson Plan, the Company determined that it was in its best interest to fully fund the Corson Plan -F13- UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (dollars in thousands, except per share amounts) so as to minimize any future impact on the Company's results of operations. The 1997 contributions were intended to provide for all benefits earned for the participants' vested benefits under the Corson Plan. The Company funded pension costs of $607 for 1997, $162 for 1996 and $127 for 1995. A summary of the funding status of the Corson Plan and the amounts recognized in the consolidated balance sheets is as follows:
December 31, ---------------- 1997 1996 ------- ------- Actuarial present value of accumulated benefit obligation: Vested $ 1,480 1,417 Non-vested - 13 ------- ------- Total $ 1,480 1,430 ======= ======= Projected benefit obligation $(1,480) (1,430) Plan assets at fair value, primarily listed securities and short-term investments 1,488 776 ------- ------- Projected benefit obligation in excess of plan assets - (654) Plan assets in excess of projected benefit obligation 8 - Unrecognized net loss from past experience different from that assumed 345 426 Unrecognized net obligation at transition, being recognized over 15 years - 8 Prior service cost not yet recognized in net periodic pension cost - 131 Adjustments to recognize minimum liability (353) (565) ------- ------- Liability recognized in the consolidated balance sheets $ - (654) ======= =======
A summary of the components of net periodic pension expense for the Corson Plan follows:
Years Ended December 31, ------------------------ 1997 1996 1995 ------ ------ ------ Service cost - benefits earned during the period $ 21 40 41 Interest cost on projected benefit obligations 116 108 100 Actual return on plan assets (168) 117 (32) Liability deferred for later recognition, net 64 (186) (33) Amortization of unrecognized net liability 11 11 10 Amortization of unrecognized prior service cost 13 25 23 ------ ------ ------ Net periodic pension expense $ 57 115 109 ====== ====== ====== Significant assumptions used in determination of pension expense consist of the following: Discount rate 8% 8% 8% Long-term rate of return on plan assets 9% 9% 9%
-F14- UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (dollars in thousands, except per share amounts) The Company also has a contributory retirement (401(k)) savings plan for nonunion employees. The Company contributions to the plan were $46 during 1997, $61 during 1996 and $58 during 1995. The Company has a contributory retirement (401(k)) savings plan for union employees of Texas Lime Company. The Company contributions to this plan were $13 in 1997, $14 in 1996 and $12 in 1995. In December 1986, the Company purchased 1,550,000 shares of its outstanding common stock, accounted for as treasury stock in the consolidated balance sheets, for $10.50 per share. Subsequent to that purchase, 300,000 shares, after stock split, were sold to the Employee Stock Ownership Plan ("ESOP") for $8.20 per share. The ESOP covers substantially all full-time nonunion employees and is designed to invest primarily in the Company's common stock. Contributions to the ESOP are currently made at the option of the Company. The Company did not make a contribution during 1997, 1996 or 1995. (5) Stock Option Plan ----------------- The Company has a stock option plan under which options for shares of common stock may be granted to key employees. The options expire ten years from the date of grant and generally become exercisable after the expiration of one year from the grant date. As of December 31, 1997, 70,000 shares were available for future grant under this plan. A summary of the Company's stock option activity and related information for the years ended December 31, 1997, 1996 and 1995 is as follows:
1997 1996 1995 ------------- ------------- ------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Options Price Options Price Options Price ------- ----- ------- ----- ------- ----- Outstanding at beginning of year 252,210 $6.83 355,000 $6.34 215,000 $4.77 Granted - - - - 160,000 8.25 Exercised (30,000) 4.75 (92,790) 4.80 - - Forfeited (35,000) 8.25 (10,000) 8.25 (20,000) 4.75 ------- ----- ------- ----- ------- ----- Outstanding at end of year 187,210 6.90 252,210 6.83 355,000 6.34 ======= ===== ======= ===== ======= ===== Exercisable at end of year 187,210 6.90 252,210 6.83 195,000 4.78 ======= ===== ======= ===== ======= ===== Weighted average fair value of options granted during the year $ - $ - $2.15 ===== ===== ===== Weighted average remaining contractual life in years 7.12 8.13 ===== =====
-F15- SFAS 123 requires the disclosure of pro forma net income and income per share of common stock information computed as if the Company had accounted for its employee stock options granted subsequent to December 31, 1994 under the fair-value-based method set forth in SFAS 123. The fair value for these options was estimated at the date of grant using the Black-Scholes option valuation model with the following weighted average assumptions for the 1995 grant: a risk-free interest rate of 6%; a dividend yield of 2%; and a volatility factor of 0.34. In addition, the fair value of these options was estimated based on an expected life of three years. The Black-Scholes options valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. In addition, because SFAS 123 is applicable only to options granted subsequent to December 31, 1994, the pro forma information does not reflect the pro forma effect of all previous stock option grants of the Company, and thus the pro forma information is not necessarily indicative of future amounts. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the expected life of the options. The Company's pro forma information follows:
1997 1996 1995 ------- ------- ------- Pro forma net income $ 3,035 2,495 4,246 Pro forma earnings per share: Basic earnings per share $ 0.77 0.64 1.11 Diluted earnings per share $ 0.77 0.63 1.10
(6) Commitments and Contingencies ----------------------------- The Company leases some of the equipment used in its operations. Generally, the leases are for periods varying from one to five years and are renewable at the option of the Company. Total rent expense was $280 for 1997, $75 for 1996 and $232 for 1995. As of December 31, 1997, future minimum payments under noncancelable operating leases are as follows: 1998, $75; and 1999, $36. The Company has placed purchase orders for certain pieces of constructed equipment related to the Texas plant's modernization and expansion project. Under the terms of the construction agreements, the Company receives periodic billings for work performed to date. As of December 31, 1997, approximately $6,700 of billings related to the Texas project had been received and paid by the Company. As of December 31, 1997, the Company's liability for open equipment and construction orders, all of which were related to the Texas modernization and expansion project, -F16- UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (dollars in thousands, except per share amounts) totaled approximately $2,500. This amount, as well as other future billings related to the Texas and Arkansas modernization and expansion project, will be recorded as work is performed and billed to the Company. The Company is party to lawsuits and claims arising in the normal course of business, none of which, in the opinion of management, is expected to have a material adverse effect on the Company's financial condition, results of operation, liquidity or competitive position. (7) Sale of Corson Lime Company Assets ---------------------------------- Effective June 21, 1997, Corson, a wholly owned subsidiary of the Company, sold substantially all of its aggregate and lime assets for $8,231 in cash, including a $376 note collected in October 1997. A portion of the proceeds from the sale was used to pay down the outstanding balance under the Company's revolving credit facility of $2,900. The remainder of the proceeds was used to partially fund the Texas plant's modernization and expansion project. The sale resulted in a loss of $506 ($405 net of tax benefit), which is included in labor and other operating expenses in the accompanying consolidated statements of operations. (8) Earnings Per Share ------------------ The following table sets forth the computation of basic and diluted earnings per share:
December 31, ------------------------------- 1997 1996 1995 Numerator: --------- --------- --------- Net income for basic and diluted earnings per common share $ 3,096 2,602 4,260 Denominator: Denominator for basic earnings per common share - weighted-average shares 3,929,579 3,890,646 3,836,063 Effect of dilutive securities: Employee stock options 15,928 55,071 10,966 --------- --------- --------- Denominator for diluted earnings per common share - adjusted weighted-average shares and assumed conversions 3,945,507 3,945,717 3,847,029 ========= ========= ========= Basic earnings per common share $ 0.79 0.67 1.11 ========= ========= ========= Diluted earnings per common share $ 0.78 0.66 1.11 ========= ========= =========
-F17- UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (dollars in thousands, except per share amounts) (9) Summary of Quarterly Financial Data (unaudited) -----------------------------------------------
March 31, June 30, Sept 30, Dec 31, 1997 1997 1997 1997 -------- -------- -------- -------- Revenues $ 7,808 10,350 7,725 6,521 -------- -------- -------- -------- Gross profit 595 1,118 2,521 1,185 -------- -------- -------- -------- Net income (488) 2,176 1,321 87 ======== ======== ======== ======== Net income per common share: Basic earnings per share $ (0.12) 0.55 0.34 0.02 ======== ======== ======== ======== Diluted earnings per share $ (0.12) 0.55 0.33 0.02 ======== ======== ======== ========
March 31, June 30, Sept 30, Dec 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 common share: Basic earnings per share $ 0.13 0.38 0.15 0.01 ======== ======== ======== ======== Diluted earnings per share $ 0.13 0.37 0.14 0.01 ======== ======== ======== ========
-F18- ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. --------------------------------------------------------------- NONE PART III The information required in response to Items 10, 11, 12 and 13 is hereby incorporated by reference to the information under the captions "Election of Directors", "Executive Officers of the Company Who Are Not Also Directors", "Executive Compensation", "Voting Securities and Principal Shareholder" and "Shareholdings of Company Directors and Executive Officers" in the definitive Proxy Statement for the Company's 1998 Annual Meeting of Shareholders. The Company anticipates that it will file the definitive Proxy Statement with the Securities and Exchange Commission on or before April 30, 1998. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. ---------------------------------------------------------------- (a) 1. The following financial statements are included in Item 8: Report of Independent Auditors Consolidated Financial Statements: Consolidated Balance Sheets as of December, 31, 1997 and 1996; Consolidated Statements of Income for the Years Ended December 31, 1997, 1996, and 1995; Consolidated Statements of Stockholders' Equity for the Years Ended December, 31, 1997, 1996 and 1995; Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995; and Notes to Consolidated Financial Statements. 2. All financial statement schedules are omitted because they are not applicable or the required information is presented in the consolidated financial statements or the related notes. -13- 3. The following documents are filed with or incorporated by reference into this Report: 3(a) Articles of Amendment to the Articles of Incorporation of Scottish Heritable, Inc. dated January 25th, 1994 (incorporated by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File Number 0-4197). 3(b) Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3(b) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File number 0-4197). 3(c) Composite Copy of Bylaws of the Company, as currently in effect (incorporated by reference to Exhibit 3(b) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, File Number 0-4197). 10(a) United States Lime & Minerals, Inc. Employee Stock Ownership Plan, as restated and amended effective August 1, 1989 (incorporated by reference to Exhibit 10 (b) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, File Number 0-4197). 10(b) Amendment No. Two to United States Lime & Minerals, Inc. Employee Stock Ownership Plan effective August 1, 1996 (incorporated by reference to Exhibit 10(b) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, File Number 0-4197). 10(c) United States Lime & Minerals, Inc. 401(k) Profit Sharing Plan effective August 1, 1983, as amended and restated effective January 1, 1997 (incorporated by reference to Exhibit 10(c) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, File Number 0-4197). 10(d) Texas Lime Company Bargaining Unit 401(k) Plan effective as of January 1, 1992 (incorporated by reference to Exhibit 19(f) to the Company's Quarterly Report on Form 10-Q for the quarter ended June, 30, 1992, File Number 0-4197). 10(e) Executive Retention Agreement dated as of June 10, 1992 between the Company and Timothy W. Byrne (incorporated by reference to Exhibit 19(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File Number 0-4197). 10(f) Employment Agreement between the Company and Timothy W. Byrne (incorporated by reference to Exhibit 19(c) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File Number 0-4197). 10(g) United States Lime & Minerals, Inc. 1992 Stock Option Plan (incorporated by reference to Exhibit A to the Company's definitive Proxy Statement for its 1992 Annual Meeting of Shareholders held on June 9, 1992, File Number 0-4197). 10(h) Employment Agreement dated as of September 27, 1993 between the Company and Robert F. Kizer (incorporated by reference to Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994, File Number 0-4197). -14- 10(i) Consulting Agreement dated April 18, 1996 between the Company and Wallace G. Irmscher (incorporated by reference to Exhibit 10(t) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, File Number 0-4197). 10(j) Amendment to the Texas Lime Company Bargaining Unit 401(k) Plan dated January 1, 1992, effective November 9, 1997. 10(k) Asset Purchase Agreement among Corson Lime Company, United States Lime & Minerals, Inc., and Highway Materials, Inc., dated as of April 22, 1997 (incorporated by reference to Exhibit 2 to the Company's Current Report on Form 8-K dated June 21, 1997, File Number 0-4197). 10(l) Amended and Restated Loan and Security Agreement dated December 30, 1997 among United States Lime & Minerals, Inc., Arkansas Lime Company and Texas Lime Company and CoreStates Bank, N.A. 10(m) Arkansas Lime Company Bargaining Unit 401(k) Plan effective as of January 1, 1998. 10(n) Mutual Release Agreement dated as of February 27, 1998 between the Company and Robert F. Kizer. 10(o) Employment Agreement dated as of April 17, 1997 between the Company and Johnney G. Bowers. 21 Subsidiaries of the Company. 23 Consent of Independent Auditors 27 Financial Data Schedule. _______________________________ Exhibits 10(a) through 10(j), and 10(m) through 10(o) are management contracts or compensatory plans or arrangements required to be filed as exhibits. (b) The Company did not file any Current Reports on Form 8-K during the fourth quarter of 1997. -15- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. UNITED STATES LIME & MINERALS, INC. Date: March 20, 1998 By: \s\ Timothy W. Byrne ----------------------------------- Timothy W. Byrne, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Date: March 20, 1998 By: \s\ Timothy W. Byrne ----------------------------------- Timothy W. Byrne, President, Chief Executive Officer, Chief Financial Officer and Director (Principal Executive and Financial Officer) Date: March 20, 1998 By: \s\ Larry T. Ohms ----------------------------------- Larry T. Ohms, Corporate Controller and Assistant Treasurer (Principal Accounting Officer) Date: March 20, 1998 By: \s\ Edward A. Odishaw ----------------------------------- Edward A. Odishaw, Director and Chairman of the Board Date: March 20, 1998 By: \s\ Antoine M. Doumet ----------------------------------- Antoine M. Doumet, Director and Vice Chairman of the Board Date: March 20, 1998 By: \s\ John J. Brown ----------------------------------- John J. Brown, Director Date: March 20, 1998 By: \s\ Wallace G. Irmscher ----------------------------------- Wallace G. Irmscher, Director -16- UNITED STATES LIME & MINERALS, INC. Annual Report on Form 10-K Index to Exhibits Certain exhibits to this Annual Report on Form 10-K have been incorporated by reference. For the list of these exhibits see Item 14 hereof. The following exhibits are being filed herewith: Exhibit No. Exhibit ---------- --------------------------------------------------------------- 10(j) Amendment to the Texas Lime Company Bargaining Unit 401(k) Plan dated January 1, 1992, effective November 9, 1997. 10(l) Amended and Restated Loan and Security Agreement dated December 30, 1997 among United States Lime & Minerals, Inc., Arkansas Lime Company and Texas Lime Company and CoreStates Bank, N.A. 10(m) Arkansas Lime Company Bargaining Unit 401(k) Plan effective as of January 1, 1998. 10(n) Mutual Release Agreement dated as of February 27, 1998 between the Company and Robert F. Kizer. 10(o) Employment Agreement dated as of April 17, 1997 between the Company and Johnney G. Bowers. 21 Subsidiaries of the Company. 23 Consent of Independent Auditors. 27 Financial Data Schedule. EX-10.J 2 AMENDMENT TO TEXAS LIME COMPANY BARGAINING UNIT 401(K) PLAN AMENDMENT TO THE Texas Lime Company Bargaining Unit 401(k) Plan Pursuant to Article XX, Section 20.01, of the Texas Lime Company Bargaining Unit 401(k) Plan (the "Plan"), Texas Lime Company (the "Employer"), hereby amends the Plan, effective November 9, 1997, as follows: Section II, subsection A. of the Adoption Agreement is amended in the following manner: The maximum percentage of Compensation which a Participant may contribute to the Plan through Salary Reduction Contributions shall be increased to 20% from the current maximum of 6%. Section IV, subsection B. and C. of the Adoption Agreement are amended by substituting the following selection: The Employer Matching Contribution shall equal 100% of the first 1% of an Employee's Compensation plus 50% of the next 1% of Compensation on which Salary Reductions are made. Each Employee's aggregate contributions in excess of 2% of Compensation shall not be matched. Effective November 9, 1998, the Employer Matching Contribution shall equal 100% of the first 100% of an Employee's Compensation plus 50% of the next 2% of Compensation on which Salary Reduction Contributions are made. Each Employee's aggregate contributions in excess of 3% of Compensation shall not be matched. As evidence of the adoption of this amendment, Texas Lime Company have caused this amendment to be executed by the appropriate officers as of January 12, 1998. Texas Lime Company Scudder Investor Services, Inc. By: /s/ Timothy W. Byrne By: /s/ Sydney S. Tucker ------------------------- ------------------------- Title: President Title: Vice President Date: January 12, 1998 Date: January 20, 1998 EX-10.L 3 AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT CORESTATES BANK, N.A. ("Bank") UNITED STATES LIME & MINERALS, INC. ARKANSAS LIME COMPANY TEXAS LIME COMPANY ("Borrowers") $15,000,000 Term Loan $4,000,000 Revolving Credit $25,000,000 Line of Credit December 30, 1997 AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT ("Agreement") is made this 30th day of December, 1997 by and among UNITED STATES LIME & MINERALS, INC., a Texas corporation (formerly known as Scottish Heritable, Inc.) ("U.S. Lime"), TEXAS LIME COMPANY, a Texas corporation ("TLC"), ARKANSAS LIME COMPANY, an Arkansas corporation ("ALC") (U.S. Lime, TLC and ALC being collectively referred to as the "Borrowers" and individually as a "Borrower"; TLC and ALC being sometimes collectively referred to as the "Subsidiaries"), and CORESTATES BANK, N.A., a national banking association ("Bank"). Background A. Each of the Subsidiaries is in the business of quarrying, crushing and pyroprocessing native limestone by burning in kilns to produce quick lime, hydrated lime, pulverized limestone and aggregate for agricultural, construction and industrial purposes. TLC owns and operates a quarry and processing facility in Cleburne, Johnson County, Texas. ALC owns and operates a quarry and processing facility in Batesville, Independence County, Arkansas. B. U.S. Lime owns all of the issued and outstanding capital stock of each of the Subsidiaries. C. This Agreement is a continuation of, and amends and restates, that certain Loan and Security Agreement dated October 20, 1993, as amended by Amendment No. 1 to Loan and Security Agreement dated as of December 23, 1994, Amendment No. 2 to Loan and Security Agreement dated April 28, 1995, Amendment No. 3 to Loan and Security Agreement dated September 29, 1995, a letter agreement dated October 26, 1995, and Amendment No. 5 to Loan and Security Agreement dated November 27, 1996, pursuant to which Bank has made available to Borrowers certain credit facilities specifically described therein (collectively, the "Prior Loan Agreement," and including all documents and instruments delivered in connection with the Prior Loan Agreement, the "Prior Documents"). D. Bank and Borrowers agree hereby to amend and restate the Prior Documents as follows: (i) the term loan facility shall be continued and restated as a five-year $15,000,000 secured amortizing term loan; (ii) the revolving credit facility shall be continued and restated as a two-year $4,000,000 unsecured revolving credit facility, with a provision for the issuance by Bank of up to $750,000 in the aggregate face amount of standby letters of credit; and (iii) there shall be established a nine-month $25,000,000 secured discretionary line of credit facility to be used for acquisitions and capital expenditures. Bank has agreed to extend such credit facilities to Borrowers, subject to the terms and conditions hereinafter more particularly set forth. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants set forth herein, the parties hereto, intending to be legally bound hereby, agree as follows: 1. DEFINITIONS; CERTAIN RULES OF CONSTRUCTION 1.1 Defined Terms. Each of the terms listed below shall have the meaning herein ascribed to it for the purposes hereof and for each of the Loan Documents. Initially capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Uniform Commercial Code as enacted in Pennsylvania. "Adjusted LIBOR" means the LIBOR finally adjusted and determined in accordance with the following formula: [LIBOR]* Adj. LR = ----------- [1.00 - RP] Adj. LR = Adjusted LIBOR LIBOR = London Interbank Offered Rate RP = Reserve Percentage pertaining to eurocurrency liabilities _______________ * the amount in brackets shall be rounded upwards if necessary, to the next higher 1/16 of 1% "Adjusted LIBOR Loans" mean Cash Advances or applicable portions of the Revolving Credit Loan, Line of Credit Loan or the Term Loan bearing interest at a rate determined with reference to the Adjusted LIBOR. "Affiliate" means and refers to, as applied to any Person, any other person directly or indirectly controlling, or who through one or more Persons is controlled by or under common control with that Person. "Control" (including with correlative meanings the terms "controlling," "controlled by," and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and/or policies of that Person, whether through the ownership of voting securities, by contract, or otherwise. "Agreement" means this Amended and Restated Loan and Security Agreement, any schedules, exhibits, riders, extensions, supplements, amendments, or modifications hereto, and any further restatements hereof. "ALC" means Arkansas Lime Company, an Arkansas corporation. "Application and Agreement for Standby Letter of Credit" means the Application and Agreement for Standby Letter of Credit substantially in the form of Schedule 1.1(a) attached hereto and made a part hereof. 2 "Authorized Officer" means any of the officers of any Borrower selected by Borrowers to represent them in dealings with Bank, which officers are listed on the certificate to be delivered to Bank at Closing or any replacement certificate with respect thereto subsequently delivered to Bank. "Bank" means CoreStates Bank, N.A., a national banking association, and its successors and assigns. "Bank's Costs" means all reasonable out of pocket costs and expenses of any kind paid or incurred by Bank in connection with the preparation, execution, delivery, amendment, modification, administration or termination of this Agreement or any other Loan Document, any amendments, modifications, extensions hereto or thereto or any forbearance hereof or thereof, any transaction contemplated herein and the preservation, enforcement, defense and protection of Bank's rights, remedies, obligations and liabilities in any manner concerning this Agreement or any other Loan Document, any transaction contemplated herein or therein, including, but not limited to: (a) expenditures of every nature and kind of Borrowers paid or incurred by Bank pursuant to Section 3.1.4 hereof with respect to maintenance of Collateral; (b) filing, recording, publication, appraisal, search and title insurance costs related to the Collateral, including, but not limited to, costs paid to perfect, maintain perfected and preserve the existence of the liens on the Collateral and to search the public record to ensure the absence of liens thereon; (c) costs incurred in collecting and gaining possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale and advertising to sell the Collateral; (d) out of pocket expenses, including without limitation reasonable attorneys' fees, paid or incurred by Bank in enforcing, obtaining legal advice in preparing, reviewing, consummating, amending, restructuring, extending, terminating, defending, or preserving or protecting Bank's rights, remedies, obligations or liabilities in any manner concerning, this Agreement, any Loan Document or any amendments hereto or thereto, any transaction contemplated herein or therein; and (e) wire transfer charges incurred in connection with advances and repayments hereunder in such amounts as Bank may from time to time establish for such service consistent with the Bank's normal and customary charges at the time. "Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy", as now or hereafter in effect, or any successor statute. "Base Rate" shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the Prime Rate (computed on the basis of the actual number of days elapsed over a year of 360 days) in effect on such day. 3 "Base Rate Loans" mean Cash Advances or applicable portions of the Revolving Credit Loan, the Line of Credit Loan, or the Term Loan bearing interest at a rate with reference to the Base Rate. "Borrowers" means collectively U.S. Lime and all of the Subsidiaries. "Business Day" means any day other than a Saturday, a Sunday, or another day on which national banks are closed. "Calendar Quarter" means the three month period ending on the last day of March, June, September and December of each year. "Capital Expenditures" mean any plant or equipment expenditure or other expenditure which, in accordance with GAAP, is classified as a capital expenditure. "Capital Lease" means any lease of any property (real, personal or mixed) which, in conformity with GAAP, is or should be accounted for as a capital lease on the consolidated balance sheet of Borrowers. "Capital Lease Expense" means, with respect to any Person for any period, the aggregate, with respect to all Capital Leases of such Person, of the portions of the rental payments payable in respect of such period under such Leases which are accounted for as principal in accordance with GAAP. "Cash" means money, currency or a credit balance in a Deposit Account. "Cash Advance" means any advance of cash to any Borrower under the Revolving Credit (including draws under Letters of Credit), and under the Line of Credit, subject to and in accordance with the provisions of Article 2 hereof. "Cash Equivalents" means (i) marketable direct obligations issued or unconditionally guarantied by the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof, (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having the highest rating obtainable from either Standard & Poor's Corporation or Moody's Investors Service, Inc., (iii) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having the highest rating obtainable from either Standard & Poor's Corporation or Moody's Investors Service, Inc., (iv) certificates of deposit, demand accounts or bankers' acceptances maturing within one year from the date of acquisition thereof issued by Bank or commercial banks organized under the laws of the United States of America or any state thereof or the District of Columbia, each 4 having combined capital and surplus of not less than $100,000,000, (v) the dollar value of shares of money market mutual funds governed by the Investment Company Act of 1940, and (vi) repurchase agreements and reverse repurchase agreements with securities dealers of recognized national standing relating to any of the obligations referred to in the foregoing clause (i); provided that the terms of such agreement comply with the guidelines set forth in the Federal Financial Institutions Examination Council Supervisory Policy -- Repurchase Agreements of Depository Institutions with Securities Dealers and Others as adopted by the Comptroller of the Currency on October 31, 1985 (the "Supervisory Policy"); and further provided that possession or control of the underlying securities is established as provided in the Supervisory Policy. "Cash Flow" means Net Income after provision for all taxes, plus: (i) changes in deferred taxes; (ii) depreciation and amortization; (iii) Interest Expense, including the interest and principal portions of Capital Leases; (iv) Operating Lease Expense; and (v) other non-cash charges to income. "Closing" and "Closing Date" means the day on which the Term Loan is funded hereunder. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor code or statute. "Collateral" with respect to each Borrower shall mean the assets and Real Estate of the Borrower in which a security interest or lien is granted by such Borrower to the Bank pursuant to Section 3.1 hereof. "Debt" means for any Person at any date, without duplication and as determined in accordance with GAAP, (i) all obligations of such Person for borrowed money, (ii) all indebtedness of such Person evidenced by bonds (other than surety, appeal, payment, performance and similar types of bonds), debentures, notes or other similar instruments with an original maturity in excess of one year, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable and accrued liabilities, in each case arising in the ordinary course of business, (iv) the capitalized amounts of all obligations of such Person as lessee under Capital Leases, (v) all obligations of others secured by a lien on any asset of such Person, whether or not such obligation is assumed by such Person, but in each case not to exceed the lesser of the amount of such obligation or the fair market value at the time of the liened asset, and (vi) the net liability of such Person on all Debt of others which is guaranteed by such Person. "Deposit Account" means a demand, time, savings, passbook or like account with a federally insured bank or savings and loan association, other than an account evidenced by a negotiable certificate of deposit. 5 "Designated Officer" means Clifford W. Kewley or any other person designated in writing by the Bank as its representative for the purpose of receiving notice hereunder. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "Event of Default" means each of the events or circumstances set forth in Section 8.1 hereof. "Financial Statements" means the consolidated financial statements of the Borrowers of the type described in Section 6.1.1 hereof, together with all notes pertaining thereto. "Fiscal Year" means the twelve-month period ending on December 31 of each year. "Fixed Obligations" means in respect of any Calendar Quarter the sum of the following, except in each case to the extent payable to another Borrower, (i) all principal payments payable during such Calendar Quarter by a Borrower on account of any Debt plus (ii) the Borrowers' aggregate Operating Lease Expense and Interest Expense for such Calendar Quarter including, without limitation or duplication, the aggregate of all amounts payable by the Borrowers or any of them during such Calendar Quarter under any Capital Lease except the portion thereof included under clause (i) above as Capital Lease Expense, and except that in all events amounts payable at maturity on the Revolving Credit Note and the Line of Credit Note, or otherwise in respect of the Revolving Credit and the Line of Credit, respectively, shall not be deemed to be Fixed Obligations for purposes hereof. "Fixed Rate" means, in the event that Borrowers have elected to pay interest on all or a portion of the Term Loan at a fixed rate pursuant to Section 2.1.1 hereof, a rate of interest per annum determined in Bank's reasonable sole discretion, pursuant to Section 2.1.4 hereof with respect to Bank's quotation of the Fixed Rate. "Fixed Rate Loan" means a Loan bearing interest at the Fixed Rate. "Funding Date" means the Business Day, other than the Closing Date, on which a Cash Advance is made. "GAAP" means generally accepted accounting principles as set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board. In the event of any change in GAAP after the date hereof, the parties agree to amend any and all of the financial covenants contained in this Agreement which may be affected by the change in such manner or manners as may be necessary to avoid the existence or threat of an Event of Default or Unmatured Event of Default which would or might otherwise result from such change. 6 "Governmental Approvals" means all authorizations, consents, approvals, licenses and exemptions of, registrations and filings with, and reports to, all governmental bodies, including without limitation, permits issued by the United States Environmental Protection Agency, the Texas Natural Resources Conservation Commission and the Arkansas Department of Pollution Control and Ecology. "Indebtedness" means all amounts due from Borrowers or any Borrower to Bank pursuant to Article 2, Section 1.6 or otherwise arising out of or in connection with this Agreement or any other agreement, understanding, relationship or arrangement between Borrowers and Bank, now existing or hereafter incurred. "Interest Expense" means all payments by Borrowers with respect to interest on the Indebtedness or any other obligation of Borrowers, other than an obligation owing to another Borrower, on which interest is paid. "Interest Period" means that period of time applicable to an Adjusted LIBOR Loan as determined pursuant to Section 2.4.4 hereof. "Interest Rate Determination Date" means each date for determining the interest rate on an Adjusted LIBOR Loan in respect of an Interest Period. The Interest Rate Determination Date shall be the second London Business Day prior to the first day of the related Interest Period for an Adjusted LIBOR Loan. "Interest Rate Option" means the Fixed Rate, the Base Rate or the Adjusted LIBOR selected by Borrowers as permitted by this Agreement. "Letter of Credit" means any letter of credit issued by Bank pursuant to Section 2.2 hereof. "LIBOR" means the rate per annum at which deposits of dollars are offered to Bank by prime banks in the London Eurodollar interbank market at or about 11:00 A.M. London time in such interbank market, two London Business Days prior to the first day of the applicable Interest Period for a period equal to the period of such Interest Period in an amount substantially equal to the principal amount requested to be lent at, maintained as or converted to an Adjusted LIBOR Loan. "Line of Credit" means the aggregate secured line of credit facility under which Bank may make Cash Advances to one or more of the Borrowers, in the maximum principal amount outstanding at any one time of $25,000,000, as more fully described in and subject to the terms of Section 2.3 hereof. 7 "Line of Credit Loans" means Loans made under the Line of Credit. "Line of Credit Note" means each promissory note of Borrowers payable to the order of Bank to evidence Borrowers' joint and several repayment obligations under this Agreement with respect to the Line of Credit. "Line of Credit Termination Date" means, with respect to the Line of Credit, the date that is nine months after the Closing Date, and all extensions of such date agreed to in writing by Bank pursuant to Section 2.3.1 hereof. "Loans" means collectively the Term Loan, the Revolving Credit Loan and the Line of Credit Loan, and a "Loan" means any one of the Term Loan, the Revolving Credit Loan or the Line of Credit Loan. "Loan Documents" means this Agreement, the Notes, the individual Mortgages, as amended and confirmed by the Mortgage Confirmations, all financing statements and fixture filings filed or recorded in connection with this Agreement, and all certificates of Borrowers, or any Borrower, delivered pursuant to this Agreement. "London Business Day" means any Business Day on which commercial banks are open for international business (including dealings in Dollar deposits) in London and Philadelphia. "Materially Adverse Effect" means a substantial adverse effect upon the financial condition, results of operations or business prospects of any Borrower or upon the ability of any Borrower to perform, punctually when due in each case, all of its obligations under the Loan Documents. "Maximum Available Credit" means the maximum amount of the Loans which may be outstanding under this Agreement as determined in accordance with Section 2.4.13 hereof. "Mortgage Confirmations" means the Acknowledgment and Confirmation of Mortgage, Assignment of Leases, Rents and Profits, Security Agreement, Financing Statement and Fixture Filing of even date herewith, executed by ALC in favor of Bank, and the Acknowledgment, Confirmation of, and Amendment to Deed of Trust, Assignment of Rents, Security Agreement, Financing Statement and Fixture Filing, each of even date herewith, executed by TLC in favor of Bank, which Mortgage Confirmations shall be substantially in the forms set forth in Schedule 1.1(b) attached hereto and made a part hereof. "Mortgages" means collectively the mortgage granted by ALC and TLC individually to Bank, each dated as of October 20, 1993 and executed in connection with the Prior Documents, as confirmed and amended by the Mortgage Confirmations. 8 "Net Income" means for any period the consolidated net income of U.S. Lime and its subsidiaries for such period, as determined in accordance with GAAP. "Net Worth" means the sum of each Borrower's (i) capital stock, (ii) cumulative retained earnings; (iii) additions to capital; (iv) capital in excess of par or stated value; and (v) any other account which, in accordance with GAAP constitutes shareholders' equity; less the sum of each Borrower's (a) treasury stock, and (b) any capital write-down resulting from any re-appraisal of assets or investments previously recorded on Borrowers' consolidated balance sheet at the lower amount. "Notes" means the Revolving Credit Note, the Line of Credit Note and the Term Note, and any substitution therefor and any extension, supplement, amendment or addendum thereto. "Notice of Borrowing" means a notice substantially in the form of Schedule 2.4.1, attached hereto and made a part hereof. "Notice of Rate Election" means a notice substantially in the form of Schedule 2.4.2 attached hereto and made a part hereof. "Operating Lease" means any lease of any property (real, personal or mixed) which is not a Capital Lease and on which a Borrower is the lessee and a Person other than a Borrower is the lessor or assignee thereof. "Operating Lease Expense" with respect to any period means the aggregate of all rental payments required to be made by or on behalf of any Borrower as lessee under an Operating Lease in respect of such period. "PBGC" means the Pension Benefit Guaranty Corporation. "Permits" means all permits, licenses and approvals required by law and sufficient for the operation of each Borrower's Real Estate for the use and in the manner presently used and operated by such Borrower, including without limitation the business of quarrying, crushing and pyro-processing native limestone, which permits are listed on Schedule 1.1(c) hereto; such Permits shall include, without limitation, mining and extraction permits, and air and water quality permits. "Permitted Liens" means (i) liens for taxes, assessments or governmental charges or claims which are not overdue or which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, if a reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor; (ii) statutory liens of landlords and liens of carriers, warehousemen, materialmen, repairmen, suppliers and other like liens incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith by appropriate 9 proceedings promptly instituted and diligently conducted, if a reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor; (iii) liens (other than any lien imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation or unemployment insurance and other types of social security; (iv) liens incurred or deposits made to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (v) any judgment lien; provided that, within 45 days after the entry of the judgment secured thereby, such judgment shall be discharged or execution thereof shall be stayed pending appeal; and further provided that such judgment shall be discharged within 60 days after the expiration of any such stay; (vi) the rights of tenants under leases or subleases not interfering with the ordinary conduct of any Borrower's business; (vii) minor irregularities of title, easements, rights-of-way, encroachments, zoning provisions, covenants, conditions, restrictions and other similar charges, encumbrances and governmental restrictions not interfering with the ordinary conduct of the business of any Borrower; (viii) purchase money security interests permitted pursuant to Section 7.1.2 hereof; (ix) the interest of the lessor under leases permitted hereunder under which a Borrower is the lessee; and (x) liens set forth on Schedule 5.1.3 hereto. "Person" means an individual, corporation, partnership, joint venture, trust or unincorporated organization, or a government or any agency or political subdivision thereof. "Prime Rate" means that rate of interest per annum announced by Bank from time to time as its "Prime Rate", which may not represent the lowest rate charged by Bank to other borrowers, or to any class of borrowers at any time, or from time to time, calculated on a 360 day basis but charged for the number of days actually elapsed during any year or part thereof. "Prior Documents" and "Prior Loan Agreement" each shall have the meaning ascribed to it in Paragraph C of the "Background" hereof. "Real Estate" means all of the real property owned individually or collectively by Borrowers as set forth, together with the name and record titleholder thereof, on Schedule 1.1(d) attached hereto and made a part hereof, all easements appurtenant to or benefitting the real property, all improvements, fixtures, machinery and equipment necessary or incidental to the general operation and maintenance thereof and all replacements thereof and additions thereto, all as more particularly described on Schedule 1.1(d), it being agreed, however, that the term "Real Estate" shall not include any of the excepted parcels of real estate identified on Schedule 3.1.1 hereto. "Reserve Percentage" means for any day that maximum percentage (expressed as a decimal), whether or not incurred, which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System, for determining the reserve requirement for a member bank of the Federal Reserve System in Philadelphia with respect to Adjusted LIBOR "Eurocurrency 10 liabilities" (as such term is defined in Regulation D) (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Adjusted LIBOR Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of Bank to United States residents). "Revolving Credit" means the aggregate unsecured revolving credit facility under which Bank makes Cash Advances to one or more of the Borrowers, and issues Letters of Credit, in the maximum principal amount outstanding at any one time of $4,000,000 as more fully described in and subject to the terms of Section 2.2 hereof. "Revolving Credit Loans" means Loans made under the Revolving Credit. "Revolving Credit Note" means the amended and restated promissory note of Borrowers payable to the order of the Bank to evidence Borrowers' joint and several repayment obligations under the Revolving Credit. "Revolving Credit Termination Date" means, with respect to the Revolving Credit, the date that is 24 months after the Closing Date, or such later date as may be agreed to in writing by Bank. "RICO" means the Racketeer Influenced and Corrupt Organizations Act, as amended by the Comprehensive Crime Control Act of 1984, 18 U.S.C. Sections 1961-68. "Rule" means and includes any law, rule or regulation binding upon the Bank as well as any guideline or similar directive issued by a governmental agency having regulatory jurisdiction over the Bank which the Bank observes or with which it complies, whether or not such guideline or directive technically has the force of law. "Term Loan" means the secured term loan in the maximum principal amount of $15,000,000 as more fully described in and subject to the terms of Section 2.1 hereof. "Term Loan Amortization Date" means, with respect to the Term Loan, the date that is the earlier of: (i) the date that construction is completed and Borrowers have commenced pyro-processing of limestone for commercial sale from the modified number 6 kiln located at Cleburne, Johnson County, Texas, or (ii) July 1, 1998. "Term Loan Indebtedness" means all amounts due from Borrowers or any Borrower to Bank arising under or in connection with the Term Loan and the Term Note, including without limitation Bank's Costs. "Term Loan Termination Date" means, with respect to the Term Loan, 11 the date that is 60 months after the Term Loan Amortization Date. "Term Note" means the amended and restated term note of Borrowers payable to the order of the Bank to evidence Borrowers' joint and several repayment obligations under the Term Loan. "TLC" means Texas Lime Company, a Texas corporation. "Total Liabilities" means, with respect to a Person, the sum of all liabilities reflected on such Person's balance sheet and as otherwise required by GAAP. "Unmatured Event of Default" means and refers to any event, act, or occurrence which with the passage of time or giving of notice or both would become an Event of Default. "Unused Fee" means, with respect to the Revolving Credit, the fees provided for in Section 2.2.8 hereof. "Working Capital" as of any date means Borrowers' consolidated current assets less Borrowers' consolidated current liabilities consolidated as of such date, all determined, both as to classification of items and amounts, in accordance with GAAP, provided that for these purposes in no event shall consolidated current liabilities include the principal amount owing on the Revolving Credit Note or the Line of Credit Note, or otherwise in respect of the Revolving Credit or the Line of Credit. 1.2 Construction of Definitions. All terms defined herein shall be construed to include the plural or the singular, and references to persons in the masculine or neuter gender shall refer to all genders, as the context requires. 1.3 Accounting Reports and Principles. The character or amount of any asset, liability, account or reserve and of any item of income or expense to be determined, and any consolidation or other accounting computation to be made, and the construction of any definition containing a financial term, pursuant to this Agreement or any other Loan Document, shall be construed, determined or made, as the case may be, in accordance with GAAP, consistently applied and in effect as of the date of such determination, computation or construction, unless such principles are inconsistent with any express provision of this Agreement. 1.4 Business Day. Whenever any payment or other obligation hereunder or under any other Loan Document is due on a day other than a Business Day, such shall be paid or performed on the Business Day next following the prescribed due date, except as otherwise specifically provided for herein to the contrary, and such extension of time shall be included in the computation of interest and charges. Any reference made herein or in any other Loan Document to an hour of day shall refer to the then prevailing Philadelphia, Pennsylvania time, unless specifically provided herein to the contrary. 12 1.5 Charging Accounts. Whenever Borrowers are obligated, pursuant to Article 2 or Section 1.6 hereof, or pursuant to the Notes, or any other Loan Document, to make payments of any nature to Bank, Bank shall be entitled, and each Borrower hereby authorizes Bank to draw against any deposit account owned by such Borrower at Bank on account of such fees and expenses or payments due. Upon such drawing, Bank shall deliver to each Borrower a notice setting forth, in reasonable detail, the amount of the fees, expenses and/or payments to be satisfied by such draw, and the name or number of the account or accounts from which the draw was made. 1.6 Bank's Costs. Borrowers shall pay the amount of all unpaid Bank's Costs within ten (10) days after receipt of a detailed written notice thereof from Bank. If not paid within such ten (10) day period, all past due and owing interest payments, fees and all past due Bank's Costs shall bear interest at the then applicable Base Rate. 1.7 Prior Documents. This Agreement shall be a continuation of, and shall amend and restate, the Prior Loan Agreement. The parties hereto agree that the provisions of the Prior Loan Agreement with respect to security for the Term Loan shall not be terminated hereby, but shall remain in full force and effect for the term hereof. 2. THE LOANS 2.1 Term Loan. The maximum principal amount of the Term Loan, as continued, amended and restated hereby, shall be $15,000,000. On the date of Closing, Bank shall continue the principal balance of the Term Loan outstanding on the date of Closing under the Prior Loan Agreement as a portion of the Term Loan hereunder. Subject to Borrower's satisfaction of the conditions precedent set forth in Section 4.1 hereof prior to any additional advance, Bank shall fund the portion of the Term Loan not outstanding under the Prior Loan Agreement from time to time, but not more frequently then four times in any calendar month, in amounts not less than $100,000 or integral multiples of $50,000 in excess of such amount, upon Borrower's submission to Bank of a summary of costs and expenses incurred to date in connection with Borrower's plant modernization and expansion project in Cleburne, Texas and a completed and executed Notice of Borrowing. 2.1.1 Term Loan Interest Rate. The Term Loan shall bear interest at the Interest Rate Options selected by Borrowers pursuant to a Notice of Borrowing delivered to Bank within the applicable time period(s) for such desired Interest Rate Option (or at the Base Rate if notice is not given within the applicable time period(s) for other Interest Rate Options). The Term Loan shall bear interest on the unpaid principal balance thereof, (i) with respect to Base Rate Loans, at the Base Rate, (ii) with respect to Adjusted LIBOR Loans at the Adjusted LIBOR plus 1.65% per annum on the relevant Interest Rate Determination Date, and (iii) with respect to Fixed Rate Loans, at the Fixed Rate. During the term of the Term Loan, Borrowers may request, by submitting to Bank a Notice of Rate Election, to change or continue the Interest Rate Option on all or a portion of the Term Loan to a 13 rate based on the applicable Base Rate, Adjusted LIBOR, or the Fixed Rate. 2.1.2 Payment of Principal and Interest. Principal with respect to the Term Loan shall be paid in 59 equal monthly installments of $178,571 each, commencing on the first Business Day of the month next following the Term Loan Amortization Date, with a final balloon payment of the remaining outstanding principal balance of the Term Loan, together with all accrued and unpaid interest and Bank's Costs pertaining thereto, due on the Term Loan Termination Date. Each installment of principal hereunder, including the final balloon payment, shall be due on the first Business Day of each month. Interest on the Term Loan shall be payable as set forth in Section 2.4.5 hereof, at the Interest Rate Option selected pursuant to Section 2.4.2 hereof. 2.1.3 Term Note. To evidence Borrowers' joint and several obligations under the Term Loan, Borrowers shall execute and deliver to Bank the Term Note. 2.1.4 Quotations of Fixed Rate. Upon the joint written request of the Borrowers from time to time, the Bank agrees to quote to the Borrowers a fixed rate per annum to which the Bank would be willing to convert the interest rate under the Term Loan for the remaining term thereof, or a portion of such remaining term, all as specified in the Borrowers' written request for such quotation. If the quoted rate is acceptable to the Borrowers (it being understood that nothing contained in this Section shall obligate the Borrowers to borrow from the Bank, or the Bank to lend to the Borrowers, on any terms, other than those set forth in this Agreement, which are not mutually agreeable to all parties at the time), the Borrowers shall so notify the Bank by submitting to Bank a properly completed and executed Notice of Rate Election. At any time when the Term Loan bears interest at the Fixed Rate, Borrowers may not convert the interest rate under the Term Loan to the Base Rate or the Adjusted LIBOR, unless Borrowers shall have paid to Bank the conversion premium set forth in Section 2.4.8.3 hereof. 2.2 Revolving Credit. 2.2.1 Revolving Credit. Provided that no Event of Default or Unmatured Event of Default has occurred and is continuing and subject to the terms and conditions set forth herein, commencing on the Closing Date and expiring on the Revolving Credit Termination Date, Bank shall extend to Borrowers the Revolving Credit, pursuant to which Bank: (i) shall extend Cash Advances to Borrowers, in amounts not to exceed $4,000,000, and which, if not exhausting the unadvanced portion of the Revolving Credit, shall be at least $50,000 or integral multiples thereof requested by the Borrowers (within the limits of the Revolving Credit), which the Borrowers may, from time to time, repay, and, subject to the terms hereof, reborrow; and (ii) shall, within the limits of the Revolving Credit, issue Letters of Credit in the aggregate face amount issued at any one time not to exceed the sum of $750,000. Borrowers may not reborrow under the Revolving Credit after the Revolving Credit Termination Date. 2.2.2 Revolving Credit Interest Rate. Cash Advances under the 14 Revolving Credit shall bear interest on the unpaid principal balance thereof from the Funding Date of each Cash Advance until paid in full (whether by acceleration or otherwise), with respect to Base Rate Loans at the Base Rate, and with respect to Adjusted LIBOR Loans at the Adjusted LIBOR plus 1.5% per annum on the relevant Interest Rate Determination Date. The applicable basis for determining the Interest Rate Option with respect to each Revolving Credit Loan shall be selected by Borrowers at the time a Notice of Borrowing or Notice of Rate Election is given pursuant to Sections 2.4.1 and 2.4.2 hereof. 2.2.3 Payment of Principal and Interest. The outstanding principal balance of, and any accrued and unpaid interest on, all Cash Advances under the Revolving Credit, and all Bank's Costs pertaining thereto, shall be payable on the earlier to occur of (i) the Revolving Credit Termination Date, or (ii) the date on which the same is payable as provided in Section 8.2 hereof. Interest on the Revolving Credit shall be payable as provided in Section 2.4.5 hereof. 2.2.4 Revolving Credit Note. To evidence Borrowers' joint and several obligations under the Revolving Credit, Borrowers shall execute and deliver to Bank the Revolving Credit Note. 2.2.5 Renewal. Upon being so requested by Borrowers in writing at least 90 days prior to the Revolving Credit Termination Date, Bank may, but shall not be obligated to, renew the Revolving Credit for one year by giving written notice to Borrowers in the manner set forth in Section 9.3 hereof on or before 60 days prior to the Revolving Credit Termination Date. In the event Bank fails to provide any notice to Borrowers regarding renewal of the Revolving Credit, the Revolving Credit Termination Date shall not be extended and all outstanding Cash Advances under the Revolving Credit and all interest and Bank's Costs pertaining thereto shall become due and payable as provided in Section 2.2.3 hereof. 2.2.6 Letters of Credit. Upon Bank's receipt of any Borrower's completed and executed Application and Agreement for Irrevocable Standby Letter of Credit, specifying the face amount, the expiration date, and the payment terms of the intended Letter of Credit at least two (2) Business Days before the proposed date of issuance, Bank shall issue a Letter of Credit to a beneficiary designated by such Borrower for the purpose of collateralizing such of that Borrower's obligations arising in the ordinary course of business as are required to be secured by a Letter of Credit. The maximum aggregate face amounts of issued Letters of Credit hereunder shall not exceed $750,000 at any one time. No Letter of Credit hereunder shall be issued with an expiration date exceeding one year, and no Letter of Credit shall be issued after the Revolving Credit Termination Date. Each Letter of Credit shall be renewable at the option of such Borrower, provided however that no Letter of Credit may be renewed for a term exceeding the Revolving Credit Termination Date. 2.2.6.1 Reduction of Revolving Credit. Letters of Credit issued by Bank shall be considered a use of the Revolving Credit and shall reduce, dollar-for-dollar, the available borrowings thereunder, and, upon the 15 termination or reduction of a Letter of Credit, shall increase the available borrowings dollar-for-dollar, subject to the provisions of Section 2.2.7 hereof, with respect to the maximum available credit under the Revolving Credit. 2.2.6.2 Draws Under Letter of Credit. All draws paid under Letters of Credit shall be deemed to be Cash Advances under the Revolving Credit to be repaid in accordance with the provisions of Section 2.2.3 hereof, and shall bear interest from the date of such draw at the Base Rate unless and until Borrowers have provided Bank with a properly completed and executed Notice of Rate Election selecting an alternate rate of interest for all or a portion of such Letter of Credit. 2.2.6.3 Letter of Credit Fees. Borrowers agree to pay to Bank a fee at an annual rate of 1.5% of the face amount of each Letter of Credit issued by Bank, payable quarterly in arrears by the Borrower which is the account party thereof, commencing on the last day of the Calendar Quarter containing the date of issuance and continuing quarterly thereafter. If any Letter of Credit shall be subject to a variable face amount schedule, the fee for such Letter of Credit shall be determined on a daily average basis. 2.2.7 Maximum Revolving Credit. If the outstanding principal balance of all Cash Advances under the Revolving Credit, plus the face amount of all issued and outstanding Letters of Credit (as the same may have been reduced), exceeds $4,000,000 at any time, Borrowers shall immediately repay such excess to Bank without demand or notice. 2.2.8 Unused Fee. Borrowers agree to pay to Bank a fee at an annual rate of 35/100 of one percent (.35%) per annum of the aggregate daily average unused portion of the Revolving Credit from the Closing Date to the Revolving Credit Termination Date, payable in arrears on the last day of each Calendar Quarter and on the Revolving Credit Termination Date. 2.3 Line of Credit. 2.3.1 Line of Credit. Subject to the terms and conditions set forth herein, and provided that no Event of Default or Unmatured Event of Default has occurred and is continuing, commencing on the Closing Date and terminating on the Line of Credit Termination Date, Bank may in its sole discretion, from time to time on Borrowers' written request, extend to Borrowers the Line of Credit pursuant to which Bank may make Cash Advances to Borrowers in an aggregate amount not to exceed $25,000,000, which amounts shall be in the sole discretion of Bank and shall be at least $250,000 or integral multiples thereof, and which Borrowers may, from time to time, borrow, repay and reborrow. Upon being so requested in writing by Borrowers, Bank may, but shall not be obligated to, extend the Line of Credit Termination Date for additional 3 month periods by giving notice to Borrowers on or before the final day of the month next preceding the then existing Line of Credit Termination Date. If no request is made by Borrowers, or if request is made but no notice of extension is given by Bank on or before the aforementioned date, on the Line of Credit Termination Date all Cash Advances under the Line 16 of Credit shall become due and payable in accordance with Section 2.3.3 hereof and the Line of Credit shall terminate. 2.3.2 Line of Credit Interest Rate. The Line of Credit Loans shall bear interest on the unpaid principal balance thereof from the Funding Date until paid in full (whether by acceleration or otherwise): with respect to Base Rate Loans at the Base Rate, and with respect to Adjusted LIBOR Loans at the Adjusted LIBOR plus 2% per annum on the relevant Interest Rate Determination Date. The applicable basis for determining the Interest Rate Option with respect to each Line of Credit Loan shall be selected by Borrowers at the time a Notice of Borrowing or Notice of Rate Election is given pursuant to Sections 2.4.1 and 2.4.2 hereof. 2.3.3 Payment of Principal and Interest. The outstanding principal balance of, and any accrued and unpaid interest on, each Cash Advance under the Line of Credit, and all Bank's Costs pertaining thereto, shall be payable at the date determined by Bank, after consulting with Borrowers, in Bank's reasonable sole discretion exercised at the Funding Date of the applicable Line of Credit Loan, provided that each Line of Credit Loan shall be paid in full on the earliest to occur of: (i) the date on which permanent financing is obtained for the acquisition or Capital Expenditure funded by such Line of Credit Loan, (ii) the Line of Credit Termination Date, or (iii) the date on which the same is payable as provided in Section 8.2 hereof. Interest on the Line of Credit shall be payable as provided in Section 2.4.5 hereof. 2.3.4 Line of Credit Note. To evidence Borrowers' joint and several obligations under the Line of Credit, Borrowers shall execute and deliver Line of Credit Note(s) to Bank. The terms of each Line of Credit Note shall reflect the terms of payment determined by Bank in accordance with this Section 2.3. 2.3.5 Maximum Line of Credit. If the outstanding principal balance of all Cash Advances under the Line of Credit exceeds $25,000,000, Borrowers shall immediately repay such excess to Bank without demand or notice. 2.3.6 Conditions Precedent. In addition to the terms and conditions set forth in this Section 2.3, as conditions precedent to the extension by Bank of each Line of Credit Loan, Borrowers agree to provide to Bank, in form and substance satisfactory to Bank and Bank's counsel, the following: 2.3.6.1 a Line of Credit Note. 2.3.6.2 resolutions adopted by the Boards of Directors of each Borrower authorizing the execution, delivery and performance of the Line of Credit Note, certified by each Borrower's Secretary to be in full force and effect as of the applicable Funding Date. 2.3.6.3 a copy of the definitive or proposed agreement 17 for the acquisition or Capital Expenditure to which such Line of Credit Loan relates, together with copies of all other relevant documentation relating thereto. 2.3.6.4 such additional documents or instruments as Bank may reasonably require. 2.4 General Provisions. 2.4.1 Notice of Borrowing. Subject to Sections 2.1, 2.2 and 2.3 hereof, whenever Borrowers desire to borrow under this Agreement, including the unadvanced portion of the Term Loan to be funded at Closing, Borrowers shall deliver by facsimile to Bank a properly completed and executed Notice of Borrowing; with respect to Adjusted LIBOR Loans, such Notice of Borrowing shall be delivered no later than 11:00 A.M. (Philadelphia time) at least three London Business Days in advance of the proposed Funding Date, and with respect to Base Rate Loans, such Notice of Borrowing shall be delivered no later than 11:00 A.M. (Philadelphia time) at least one Business Day in advance of the proposed Funding Date. The Notice of Borrowing shall specify (i) the proposed Funding Date (which shall be a Business Day), (ii) the amount of the proposed Cash Advance (or loan under the Term Loan) , (iii) whether the amount to be loaned is initially to consist of a Fixed Rate Loan (solely with respect to the Term Loan), Base Rate Loan or Adjusted LIBOR Loan or a combination thereof, and (iv) if such amount or any portion thereof is initially to be an Adjusted LIBOR Loan, the initial Interest Period therefor. Cash Advances may be continued as or converted into another Interest Rate Option in the manner provided in Section 2.4.2 hereof upon the submission to Bank of a properly completed and executed Notice of Rate Election. A Notice of Borrowing or a Notice of Rate Election for an Adjusted LIBOR Loan shall be irrevocable on and after the related Interest Rate Determination Date, and Borrowers shall be bound to make, continue or convert a Loan in accordance therewith. 2.4.2 Notice of Rate Election; Failure to Give Notice. Whenever Borrowers desire to change or continue the Interest Rate Option on all or a portion of any Loan under this Agreement, Borrowers shall deliver to Bank a Notice of Rate Election. Borrowers shall deliver such Notice of Rate Election: (i) with respect to Base Rate Loans and Fixed Rate Loans, at least one Business Day in advance of the proposed change or continuation, and (ii) with respect to Adjusted LIBOR Loans, no later than 11:00 A.M. (Philadelphia time) at least three London Business Days in advance of the proposed change or continuation. The Notice of Rate Election shall specify: (a) the proposed date of change or continuation (which shall be a Business Day); (b) the type of Loan and amount thereof affected; (c) the Interest Rate Option being selected; and (d) with respect to Adjusted LIBOR Loans, the Interest Periods therefor; provided that the minimum amount of any Adjusted LIBOR Loan shall be $100,000 and integral multiples of $50,000 in excess of that amount. If at the termination of any Interest Period, Borrowers have failed to submit a Notice 18 of Rate Election, as aforesaid, to convert or to continue Adjusted LIBOR Loans, then such Loans shall automatically be and become Base Rate Loans as of the termination of the relevant Interest Period. Upon the expiration of any Interest Period applicable to Revolving Credit Loans or Line of Credit Loans bearing interest based on the Adjusted LIBOR, such Loans shall be deemed repaid and reborrowed upon the submission to Bank of a properly completed and executed Notice of Rate Election pertaining thereto within the requisite time periods for a change or continuation of an Interest Rate Option, and the succeeding Interest Period(s) of such continued Loans shall commence on the first day of the Interest Period of the Loans deemed to be reborrowed and continued. Adjusted LIBOR Loans may only be converted into Base Rate Loans or Fixed Rate Loans on the expiration date of an Interest Period applicable thereto. In addition, no outstanding Loans may be continued after the expiration of the Interest Period applicable thereto as, or be converted into: (i) Fixed Rate Loans or Adjusted LIBOR Loans, when any Event of Default or Unmatured Event of Default has occurred and is continuing; and (ii) Adjusted LIBOR Loans, if the Interest Period relating to such conversion or continuation would extend beyond the maturity date of such Loan. If on any day a Loan is outstanding with respect to which a Notice of Rate Election has not been delivered to Bank in accordance with the terms of this Agreement specifying the basis for determining the Interest Rate Option, then that Loan shall bear interest at the rate based on the Base Rate for such type of Loan as determined pursuant to this Agreement. 2.4.3 Funding. Upon satisfaction of the conditions precedent specified in Section 4.1 (in the case of the initial Cash Advances and the unadvanced portion of the Term Loan) and Section 4.2 (in the case of all subsequent Cash Advances under the Revolving Credit and the Line of Credit), Bank shall cause such Cash Advances and loan under the Term Loan to be made available to Borrowers on the Funding Date pertaining thereto by depositing the amount thereof in the designated account of Borrowers with Bank. 2.4.4 Interest Periods. In connection with each Adjusted LIBOR Loan, Borrowers shall elect an Interest Period to be applicable to such Loan, which Interest Period shall be either a 30, 60, 90 or 180 day period; provided that: 2.4.4.1 the first Interest Period for any Loan shall commence on the Funding Date of such Loan; 2.4.4.2 if an Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided however that for any Interest Period in respect of an Adjusted LIBOR Loan which: (i) begins on the last Business Day of a calendar month (or a day for which there is no numerically corresponding 19 day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the relevant calendar month, or (ii) would expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in that month, such Interest Period shall expire on the last Business Day of the month; 2.4.4.3 with respect to any Term Loan, Revolving Credit Loan or Line of Credit Loan, no Interest Period shall extend beyond the Term Loan Termination Date, Revolving Credit Termination Date or Line of Credit Termination Date, respectively; 2.4.4.4 there shall be no more than nine total Interest Periods outstanding at any time; 2.4.4.5 no Interest Period with respect to any Adjusted LIBOR Loan may extend beyond a date on which Borrowers are required to make a scheduled payment of principal which would require a payment to be made with respect to such Adjusted LIBOR Loan. 2.4.5 Interest Payments. Subject to Section 2.4.8 hereof with respect to prepayments, interest shall be payable on the Loans as follows: 2.4.5.1 interest on each Base Rate Loan and Fixed Rate Loan shall be payable monthly in arrears on the first day of each month; the first payment shall be made on the first day of the month next following the Closing Date or the Funding Date, as the case may be, and the final payment shall be made at maturity. 2.4.5.2 interest on each Adjusted LIBOR Loan shall be payable in arrears on the last day of the Interest Period applicable to that Loan; provided however that interest on Adjusted LIBOR Loans with Interest Periods of 180 days shall be paid in arrears on the 90th day and on the last day of the relevant Interest Period. 2.4.6 Post-Maturity Interest. Any principal payments on the Loans not paid when due and, to the extent permitted by applicable law, any interest payment on the Loans not paid when due, and any other amount due to Bank under this Agreement or any other Loan Document not paid when due, in any case whether at stated maturity, by notice of prepayment, by acceleration or otherwise, shall thereafter bear interest payable upon demand at a rate which is, with respect to Adjusted LIBOR Loans only, 5% per annum in excess of the Adjusted LIBOR until the expiration of the then applicable Interest Period, and after the expiration of the then applicable Interest Period, and in all cases with respect to Base Rate Loans and Fixed Rate Loans, at a rate which is 2.75% per annum in excess of the Base Rate for Revolving Credit Loans and Line of Credit Loans, and 3% per annum in excess of the Base Rate for the Term Loan. 2.4.7 Adjusted LIBOR and Base Rate. 20 2.4.7.1 Bank shall give Borrowers prompt notice of the Adjusted LIBOR determined for an Interest Period, and absent manifest error, each determination of such rates by Bank shall be conclusive and binding for all purposes hereof. 2.4.7.2 If Borrowers request that all or any portion of the Loans bear interest at the Adjusted LIBOR, and Bank determines that, by reason of circumstances affecting the interbank Eurodollar market generally, deposits in U.S. Dollars (in the applicable amounts) are not being offered to banks in the interbank Eurodollar market for the selected Interest Period, then Bank shall forthwith give notice thereof to Borrowers, whereupon until Bank notifies Borrowers that the circumstances giving rise to such suspension no longer exist, (a) the obligation of Bank to permit the Loans to bear interest at the Adjusted LIBOR shall be suspended so long as such circumstances exist, and (b) Borrowers shall convert the interest rates on the applicable portions of the outstanding Loans to the Base Rate on the last day of the then current Interest Period. 2.4.7.3 If, after the date of this Agreement, the adoption of or any change in Rules, or change in the interpretation or administration thereof, by a governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by Bank with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for Bank to make or maintain or fund loans at the Adjusted LIBOR, the interest rates on the applicable portions of the outstanding Loans shall be deemed to have been converted to the rate determined for the type of Loan with reference to the Base Rate on either (i) the last day of the then current Interest Period if Bank may lawfully continue to maintain loans at the Adjusted LIBOR to such day, or (ii) immediately if Bank may not lawfully continue to maintain loans at the Adjusted LIBOR to such day. 2.4.7.4 If any governmental authority, central bank or other comparable authority shall at any time impose, modify or deem applicable any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), any tax (including without limitation, any United States interest equalization tax or similar tax however named applicable to the acquisition or holding of debt obligations and any interest or penalties with respect thereto), duty, charge, fee, deduction, withholding special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, Bank, or shall impose on Bank or the interbank Eurodollar market any other condition affecting loans at the Adjusted LIBOR, and the result of any of the foregoing is to increase the cost to Bank of making or maintaining the interest rate at the Adjusted LIBOR or to reduce the amount of any sum received or receivable by Bank under this Agreement, any of the Notes by an amount deemed by Bank to be material, then within five days after demand by Bank, Borrowers shall pay to Bank such additional amount or amounts as will compensate Bank for such increased cost or reduction. Bank will promptly notify Borrowers of any event of which it has knowledge occurring after the date hereof, which will entitle Bank to compensation pursuant to this Section. A certificate of Bank claiming 21 compensation under this Section and setting forth the additional amount or amounts to be paid to Bank hereunder shall be conclusive in the absence of manifest error. 2.4.7.5 The Adjusted LIBOR shall be adjusted automatically on and as of the effective day of any change in the relevant Reserve Percentage. 2.4.7.6 Promptly upon notice from Bank to Borrowers, Borrowers will pay, prior to the date on which penalties attach thereto, all present and future stamp, documentary and other similar taxes, levies, or costs and charges whatsoever imposed, assessed, levied or collected on or in respect of the Loans solely as a result of the interest rate being determined by reference to the Adjusted LIBOR and/or the provisions of this Agreement relating to the Adjusted LIBOR and/or the recording, registration, notarization or other formalization of any thereof and/or payments of principal, interest or other amounts made on or in respect of a Loan or portion of a Loan when the interest rate is determined by reference to the Adjusted LIBOR (all such taxes, levies, costs and charges being herein collectively called "Eurodollar Rate Tax"). Bank shall, upon request of Borrowers, provide evidence to Borrowers of the imposition of any such Eurodollar Rate Tax. Promptly after the date on which payment of any such Eurodollar Rate Tax is due pursuant to applicable law, Borrowers will, at the request of Bank, furnish to Bank evidence, in form and substance satisfactory to Bank, that Borrowers have met their obligations under this Section. Borrowers will indemnify Bank against, and reimburse Bank on demand for, any Eurodollar Rate Tax, as determined by Bank in its good faith discretion. Bank shall provide Borrowers with appropriate receipts for any payments or reimbursements made by Borrowers pursuant to this Section. A certificate of Bank as to any amount payable pursuant to this Section shall, absent manifest error, be final, conclusive and binding on all parties hereto. 2.4.7.7 If Bank shall determine that (i) any current Rule, law, regulation, or guideline, the adoption or imposition of any Rules, law, regulation, or guideline any change in any Rules, law, regulation or guideline, or the adoption, imposition or change in the interpretation or administration thereof by a governmental authority, central bank or comparable agency charged with the interpretation and administration thereof, or (ii) compliance by Bank (or any lending office or any holding company of Bank) with any request, guideline or directive whether or not having the force of law regarding special deposit, capital adequacy, risk based capital, capital or reserve maintenance, capital ratio, or similar requirements against loans or loan commitments or any commitments to extend credit or other assets of or any deposits or other liabilities taken or entered into by Bank (including the capital adequacy guidelines promulgated by the Board of Governors of the Federal Reserve System) and the result of any event referred to in clauses (i) or (ii) above (x) shall be to increase the cost to Bank of making or maintaining, or to impose upon Bank or increase any capital requirement applicable as a result of the making or maintenance of, the Loans or the obligations of Borrowers hereunder or (y) has or would have the effect of reducing the rate of return or amounts receivable hereunder on any Loan as a consequence of its obligations pursuant to this Agreement or Loans made by Bank pursuant hereto to a level below that which Bank (or Bank's holding 22 company) could have achieved but for such adoption, imposition, change or compliance (taking into consideration such Bank's policies and the policies of Bank's holding company with respect to capital adequacy) by an amount deemed by such holder to be material (which adoption, imposition, change, or increase in capital requirements or reduction in amounts receivable may be determined by Bank's good faith allocation of the aggregate of such cost increase, capital increase or imposition or reductions in amounts receivable resulting from such events), then, from time to time, Borrowers shall pay to Bank, on demand by Bank as set forth below, such additional amount or amounts as will be necessary to restore the rate of return to Bank from the date of such change, together with interest on such amount from the date demanded until payment thereof in full at the rate provided in this Agreement. Bank (or Bank's holding company) shall be entitled to compensation pursuant to this Section. A certificate of Bank claiming compensation under this Section and setting forth the increased cost, reduction in amounts receivable additional amount or amounts necessary to compensate Bank (or Bank's holding company) hereunder shall be delivered to Borrowers and shall be conclusive in the absence of manifest error. Borrowers shall pay Bank the amount shown as due on any such certificate delivered by Bank within 10 days after Borrowers' receipt of same. If Bank demands compensation under this Section, Borrowers may, upon 30 Business Days' prior notice to Bank, prepay in full, in accordance with Section 2.4.8 hereof, the then outstanding: (i) Base Rate Loans and/or the Fixed Rate Loan, together with accrued interest thereon to the date of prepayment, and with respect to Fixed Rate Loans, together with the respective prepayment premium as provided in Section 2.4.8.3; and/or (ii) Adjusted LIBOR Loans together with accrued interest thereon to the date of prepayment along with the respective prepayment penalty as provided in Section 2.4.8.2 hereof. Concurrently with prepaying such Base Rate Loans, Fixed Rate Loan and Adjusted LIBOR Loans, Borrowers may borrow from Bank Cash Advances at an Interest Rate Option not so affected. 2.4.7.8 Failure on the part of Bank to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital with respect to any period shall not constitute a waiver of Bank's right to demand such compensation with respect to such period or any other period; provided however that Bank shall demand such compensation not later than six months after Bank has received notice of such increased costs or reduction in amounts received or receivable or reduction in return on capital. The protection of this Section shall be available to Bank regardless of any possible contention of the invalidity or inapplicability of the law, rule, regulation, guideline or other change or condition which shall have occurred or been imposed. 2.4.7.9 The Base Rate shall be determined and adjusted daily. 2.4.8 Prepayment. 2.4.8.1 Voluntary Prepayments. Any Base Rate Loan or Fixed Rate Loan may be prepaid at any time upon one Business Day's written notice to Bank, in whole or in integral multiples of $50,000. Borrowers' 23 prepayment of a Base Rate Loan shall be without premium or penalty. Borrowers' prepayment of a Fixed Rate Loan shall be subject to the prepayment premium set forth in Section 2.4.8.3 hereof. Any Adjusted LIBOR Loan may be prepaid prior to the expiration date of the Interest Period applicable thereto subject to the provisions of Section 2.4.8.2 hereof, in integral multiples of $50,000, and then only upon 2 days prior notice to Bank. In the event that Borrowers do not specify the Loan to which a prepayment is to be applied, such prepayment shall be applied (first to interest then to principal) first to the Revolving Credit Loans, second to the Term Loan, and third to the Line of Credit Loans. 2.4.8.2 Prepayment Premium For Adjusted LIBOR Loans. Adjusted LIBOR Loans may be prepaid as set forth in Section 2.4.8.1 hereof only upon payment to Bank of a prepayment premium determined as follows: (i) on the prepayment date, the remaining payments of principal and interest that would otherwise have become payable at the expiration of the Interest Period pertaining to the principal being prepaid shall be discounted to a present value at a rate per annum equal to the "Prepayment Yield to Maturity", as hereinafter defined, plus any costs for reserves or assessments or for reinvesting the amount being prepaid, and if such discounted value shall exceed the unpaid principal amount being prepaid, then the prepayment premium shall be an amount equal to such excess; otherwise no prepayment premium shall be payable; and (ii) for purposes of this Section 2.4.8.2, the "Prepayment Yield to Maturity" shall mean the yield to maturity of the debt obligation of the United States Treasury (excluding those commonly known as "Flower Bonds") maturing nearest in time to the expiration of the relevant Interest Period. The maturity date and yield to maturity of such United States Treasury obligation shall be determined on the basis of quotations published in the Wall Street Journal on the prepayment date. If there shall be more than one such debt obligation of the United States Treasury maturing nearest in time to the expiration of the relevant Interest Period, the Prepayment Yield to Maturity shall be the arithmetic average of the yields to maturity of all such obligations. Notwithstanding the foregoing, no amount so prepaid may be reborrowed prior to the last day of the Interest Period pertaining to the Loan prepaid. 2.4.8.3 Prepayment and Conversion Premium for Fixed Rate Loans. Fixed Rate Loans may be prepaid as set forth in Section 2.4.8.1 hereof, and may be converted to a Base Rate Loan or an Adjusted LIBOR Loan as set forth in Sections 2.1.4 and 2.4.2 hereof, only upon payment to Bank of a prepayment or conversion premium, determined on the prepayment or conversion date, as follows: (i) the remaining payments of principal and interest that would otherwise have been payable over the remainder of the period for which Borrowers have elected for the Term Loan to bear interest at the Fixed Rate, pertaining to the principal being prepaid, shall be discounted to a present value at a rate per annum equal to the "Prepayment Yield to Maturity," plus any costs for reserves or assessments or for reinvesting the amount being prepaid, and if such discounted value shall exceed the unpaid principal amount being prepaid, then the prepayment or conversion premium shall be an amount equal to such excess; otherwise no prepayment or conversion premium shall be payable; and (ii) for purposes of this Section 2.4.8.3, the "Prepayment Yield 24 to Maturity" shall mean the yield to maturity of the debt obligation of the United States Treasury (excluding those commonly known as "Flower Bonds") maturing nearest in time to the expiration of the period for which Borrowers have elected for the Term Loan to bear interest at the Fixed Rate. The maturity date and yield to maturity of such United States Treasury obligation shall be determined on the basis of quotations published in the Wall Street Journal on the conversion date. If there shall be more than one such debt obligation of the United States Treasury maturing nearest in time to the expiration of the period for which Borrowers have elected for the Term Loan to bear interest at the Fixed Rate, the Prepayment Yield to Maturity shall be the arithmetic average of the yields to maturity of all such obligations. 2.4.9 Funding Losses. If the Borrowers fail to borrow any Adjusted LIBOR Loans after a Notice of Borrowing or Notice of Rate Election has been given to Bank as provided in this Article 2, Borrowers shall reimburse Bank on demand for any resulting loss or expense incurred by it (or by any existing or prospective participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, provided that Bank shall use commercially reasonable efforts to mitigate any such loss and Bank shall have delivered to the Borrowers a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. 2.4.10 Manner and Time of Payment. All payments of principal, interest and fees hereunder and under the Notes shall be made by Borrowers without notice, set off or counterclaim and in immediately available same day funds and delivered to Bank not later than 12:00 noon (Philadelphia time) on the date due at the address set forth in Section 9.3 hereof, for the account of Bank; funds received by Bank after that time shall be deemed to have been paid by Borrowers on the next succeeding Business Day. 2.4.11 Use of Proceeds. The proceeds of the Term Loan shall be used by Borrowers for construction, equipping and operating of their respective plants. The proceeds of the Revolving Credit Loan shall be used by Borrowers for working capital and other corporate purposes. The proceeds of the Line of Credit Loan shall be used by Borrowers as temporary, initial financing for acquisitions of entities and/or assets, and other Capital Expenditures, in the construction materials, limestone products or related industries. 2.4.12 Conditional Payment. Borrowers agree that checks and other instruments received by Bank in payment or on account of the Indebtedness constitute only conditional payment until such items are actually paid to Bank. Subject to Section 2.4.8.1 hereof, Borrowers waive any right they may have to direct the application of any and all payments at any time or times hereafter received by Bank on account of the Indebtedness. Borrowers agree that Bank shall have the continuing exclusive right to apply and reapply such payments in any manner as Bank may deem advisable, notwithstanding any entry by Bank upon its books. 2.4.13 Maximum Available Credit for All Loans. Notwithstanding anything herein to the contrary, the sum of (i) the 25 outstanding principal balance of the Term Loan, and (ii) the outstanding principal balance of all outstanding Cash Advances, including the aggregate face amount of all issued Letters of Credit, shall not exceed $44,000,000. The maximum available credit under this Agreement shall not exceed the sum of (a) $44,000,000, plus (b) all interest, Bank's Costs and any other amount due from Borrowers to Bank hereunder or pursuant to any other Loan Document. 2.4.14 Mandatory Payments. In the event that the principal amount outstanding under (i) the Revolving Credit shall at any time exceed $4,000,000, (ii) the Term Loan shall at any time exceed $15,000,000, or (iii) the Line of Credit shall at any time exceed $25,000,000, then in any such case, Borrowers shall immediately pay such excess to Bank. 2.4.15 SWAP Agreements. Borrowers and Bank may, but shall not be obligated to, enter into one or more interest rate protection agreements on terms mutually agreeable to all parties at the time, to permit Borrowers to hedge their interest rate liabilities hereunder. 3. SECURITY 3.1 Collateral Generally. 3.1.1 Security Interest in Assets. The parties hereto hereby ratify and confirm all terms in the Prior Documents with respect to security for the Term Loan, which shall secure payment of the Term Loan Indebtedness hereunder. As additional security for payment of the Term Loan Indebtedness, each Borrower hereby grants to Bank a security interest in and lien on all of such entity's right, title and interest in, as, to and under all of the following assets whether now owned or hereafter created, acquired or reacquired: 3.1.1.1 Equipment wherever located, and all parts thereof and all accessions, additions, attachments, improvements, substitutions and replacements thereto and therefor (including without limitation, all special mobile equipment, all dozers, graders, scrapers, forklifts, loaders, drilling rigs, scales, railcars, screens, hoppers, conveyors, generators, trailers, dollies, crushing, grinding, and sizing plants, kilns, baggers, and all other machinery, equipment and fixtures used or useful in quarrying, transporting, burning and processing limestone and related products for sale); 3.1.1.2 all motor vehicles, supplies, stores of fuel and lubricants, parts, engines, tires, and treads; 3.1.1.3 all General Intangibles; 3.1.1.4 all replacements and accessions to any of the foregoing; 26 3.1.1.5 all policies of insurance covering any of the foregoing and all insurance proceeds in connection therewith; and 3.1.1.6 all products, rents, profits, returns and income of and from any of the foregoing and all cash and noncash proceeds of the foregoing (including proceeds which constitute property of the types described in Sections 3.1.1.1 -- 3.1.1.5 above). In addition, each Subsidiary, pursuant to the Mortgages, has granted to Bank a first mortgage and lien on the Real Estate identified on Schedule 1.1(d) owned by each of them, respectively, which Mortgages have been amended and confirmed by the Mortgage Confirmations. Notwithstanding anything to the contrary herein, Bank has not encumbered and the parties agree that the Collateral shall not include the parcels of real property which are identified on Schedule 3.1.1 hereof. Except for dispositions of worn out and obsolete equipment and equipment which the applicable Borrower certifies is no longer used or useful in the conduct of such Borrower's business and vehicles in the ordinary course of business, no Collateral shall be released from the security interests, mortgages and liens granted hereby and by the Mortgages, as amended and confirmed by the Mortgage Confirmations, until the Term Loan has been paid in full. 3.1.2 Financing Statements and Other Documents. Each Borrower agrees to execute and deliver to Bank any and all Financing Statements and other documents and instruments requested by Bank to perfect or keep perfected any security interest, created under this Agreement or under any other Loan Document, under the Uniform Commercial Code as adopted in any state having jurisdiction over the Collateral, and any such additional security agreements, financing statements, continuation statements and other security instruments creating or continuing a lien upon the Collateral as Bank may reasonably require in connection with the security interests created by this Agreement. Each Borrower hereby appoints Bank as such Borrower's attorney-in-fact to execute, upon the Borrower's failure to do so within 15 days following the Bank's reasonable request, and file in such Borrower's name all documents and instruments which Bank may deem necessary or appropriate to perfect and continue perfected the security interests in the Collateral created by this Agreement. 3.1.3 Mortgages and Leasehold Mortgage. ALC and TLC each agrees to execute, convey and deliver to Bank, a Mortgage Confirmation amending and confirming the Mortgages. The Mortgages, as amended and confirmed by the Mortgage Confirmations, shall be continuing liens for such portion of the current outstanding Term Loan Indebtedness indicated in the Mortgage Confirmations, on good and marketable fee simple title to the Real Estate described therein, free and clear of all prior liens, except Permitted Liens and title exceptions approved by Bank, and shall be insured at Borrowers' expense by a reputable title insurance company or companies reasonably satisfactory to Bank. 3.1.4 Maintenance of Collateral. Upon the failure of the applicable Borrower to do so within 20 days following the Bank's reasonable request, and except as may be contested in good faith with adequate reserves, 27 as determined in the sole reasonable discretion of Bank, having been set aside therefore, the Bank may at its option pay and discharge taxes, liens, security interests and other encumbrances pertaining to the Collateral (except Permitted Liens), and may pay for the repair of any damage to the Collateral, the maintenance and preservation thereof and for insurance thereon required by the terms of Section 6.1.6 hereof not paid by Borrowers pursuant to the terms hereof. Borrowers agree to reimburse Bank, within three Business Days after notice thereof from Bank to Borrowers, for any such payment made. Until paid, all costs incurred by Bank under this Section 3.1.4 shall be deemed to be additional principal under the Term Loan, bear interest at the per annum rate set forth in Section 2.1.1 hereof and be secured by the Collateral. 3.1.5 Security for Line of Credit. As security for the repayment of each Cash Advance under the Line of Credit, each Borrower shall grant to Bank a purchase money security interest in and lien on the asset purchased with the proceeds of such Cash Advance contemporaneously with the funding thereof. 4. CONDITIONS PRECEDENT 4.1 Conditions to Funding. As conditions precedent to the initial borrowing hereunder, Borrowers shall deliver to Bank, in form and substance satisfactory to Bank and its counsel, in addition to this Agreement, the following documents and instruments: 4.1.1 the Term Note; 4.1.2 the Revolving Credit Note; 4.1.3 the Mortgage Confirmations; 4.1.4 Intentionally deleted. 4.1.5 title insurance commitments satisfactory to Bank endorsing the policies of title insurance in favor of Bank delivered with respect to each of the Mortgages, insuring the continuing priority of the liens of the Mortgages, as amended and confirmed by the Mortgage Confirmations, in the dollar amounts set forth in the Mortgages; 4.1.6 A copy of the respective articles or certificate of incorporation, By-laws, and resolutions adopted by each Borrower's Board of Directors authorizing such Borrower to execute, deliver and perform this Agreement, the Notes and each of the other Loan Documents to which such Borrower is a party, and appointing the Authorized Officers for purposes of this Agreement, all certified by each Borrower's Secretary, Treasurer or Assistant Secretary to be true and correct copies of the originals and to be in full force and effect as of the date of Closing; 4.1.7 An incumbency and signature certificate with respect to the officers of each of the Borrowers authorized to execute and deliver this 28 Agreement, the Notes, and any other Loan Documents to which such Borrower is a party; 4.1.8 Original certificate(s) of insurance meeting the criteria set forth in Section 6.1.6 hereof; 4.1.9 Such security interest, lien and judgment searches pertaining to Borrowers as Bank may reasonably request; 4.1.10 Such Financing Statements and Fixture Filings and other evidence of Bank's security interest in and lien on the Collateral as Bank may reasonably request; 4.1.11 The opinion of Borrowers' counsel, dated the date of Closing, in all respects reasonably satisfactory to Bank and Bank's counsel; 4.1.12 A good standing or subsistence certificate, as applicable, or telegram from the Secretaries of State of the states of incorporation of each of the Borrowers to that effect, and certificates or telegrams indicating that each Borrower is duly qualified as a foreign corporation in each state in which such qualification is required; 4.1.13 A Notice of Borrowing with respect to the Term Loan and any Cash Advance, including any Letter of Credit, requested as of the Closing Date; 4.1.14 A certificate dated the Closing Date executed by U.S. Lime's chief financial officer confirming U.S. Lime's solvency as provided in Section 5.1.9 hereof; 4.1.15 The consolidated Financial Statements of Borrowers as at and for the nine months ended September 30, 1997 and 1996 (unaudited), certified by the chief financial officer of U.S. Lime as having been prepared in all material respects in accordance with all applicable requirements of Form 10-Q of the Securities and Exchange Commission under the Securities Exchange Act of 1934 and as reflecting, in the opinion of the Borrowers' managements, all adjustments of a normal and recurring nature necessary to present fairly the financial position, results of operations and cash flows of U.S. Lime and its subsidiaries on a consolidated basis for the periods presented in accordance with GAAP; 4.1.16 A certificate executed by the Vice President and Chief Financial Officer of each Borrower confirming that: (i) each of the representations and warranties made herein by such Borrower is true and correct; (ii) such Borrower has fully performed each and every covenant to be performed by such Borrower on or prior to the Closing Date; and (iii) such Borrower has satisfied each of the unwaived conditions set forth in this Section 4.1; 4.1.17 A mineral reserve study of recent date, with respect to the quantity and quality of mineral reserves of TLC, prepared by a qualified 29 independent geologist, satisfactory to Bank; 4.1.18 Copies of the Permits; and 4.1.19 Such additional documents or instruments as Bank may reasonably require. 4.2 Conditions Precedent to Each Cash Advance. Provided no Event of Default or Unmatured Event of Default has occurred and is continuing, Bank will make Cash Advances hereunder only upon the fulfillment of the following conditions: (i) all representations and warranties made by Borrowers in Article 5 hereof or in any other Loan Document shall be true, complete and correct with the same force and effect as if made on the date of the proposed Cash Advance, except (a) the representations and warranties contained in Section 5.1.4 shall apply to the most recent Financial Statements delivered pursuant to Section 6.1.1 hereof, and (b) any other representation and warranty contained in Article 5 which relate to facts which have changed to an extent permitted by this Agreement or to an extent consented to by the Bank shall apply to the facts as so changed; (ii) Borrowers shall be in compliance with all of the terms and conditions hereof, of the Notes, and of all other Loan Documents, in each case on and as of the Funding Date; and (iii) Bank shall have received, within the times therefor set forth in Section 2.4.1, a fully-completed and executed Notice of Borrowing. 5. REPRESENTATIONS AND WARRANTIES. 5.1 Each Borrower, for itself and for all Borrowers where so indicated, represents and warrants to Bank as follows: 5.1.1 Good Standing; Ownership of Subsidiaries. Each Borrower is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation; has the corporate power and authority to own and operate its respective assets and Real Estate and to carry on such Borrower's business where and as contemplated; is duly qualified as a foreign corporation to do business in, and is in good standing in, every jurisdiction where the nature of such Borrower's business requires such qualification. Each Borrower's chief executive office is located at 12221 Merit Drive, Suite 500, Dallas, Texas. U.S. Lime owns all of the issued and outstanding capital stock of the Subsidiaries, and except for the Subsidiaries, U.S. Lime does not have any subsidiaries and does not conduct business under any other trade name, or in joint venture or partnership with any Person. None of the Subsidiaries has any subsidiary. 5.1.2 Power and Authority. The making, execution, issuance and performance by the Borrowers of this Agreement, the Notes, and the other Loan Documents, have been duly authorized respectively by all necessary corporate action of each Borrower and will not violate any provision of law or regulation or of the respective charters or by-laws of the Borrowers; will not 30 violate any agreement, trust or other indenture or instrument to which Borrowers or any of them is a party or by which Borrowers or any of them or any of its or their property is bound, so that this Agreement, the Notes, and all of the other Loan Documents when executed and delivered will be valid and binding obligations of the Borrowers and each of them, enforceable in accordance with their respective terms. 5.1.3 Priority of Liens; Location and Condition of Collateral. With the exception of Permitted Liens and except as provided in Schedule 5.1.3 hereto, (i) each Borrower owns its respective Collateral free and clear of all liens, encumbrances, security interests or other rights of third parties, excepting only the rights and interests granted Bank herein and in the Loan Documents, and (ii) upon perfection of Bank's security interest in the Collateral, Bank will have a first priority security interest in the Collateral owned by Borrowers. Except for moveable equipment such as trailers, equipment in repair off-premises or otherwise in transit, warehoused equipment, all in the ordinary course of business, all tangible assets of Borrowers constituting Collateral will be located on each Borrower's respective Real Estate. None of the personal property or fixtures located on any parcel of the Real Estate is owned by any Person other than the Borrower which is the record titleholder to such parcel of Real Estate, except for interests in such personal property and fixtures which constitute Permitted Liens and except for matters disclosed in Schedule 5.1.3 hereto. 5.1.4 Financial Condition. The consolidated balance sheets of U.S. Lime and its subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996, together with the notes thereto and the accompanying opinion of Ernst & Young, LLP, independent certified public accountants, all heretofore furnished to the Bank, present fairly, in all material respects, the consolidated financial position of U.S. Lime and its subsidiaries at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with GAAP. The condensed consolidated balance sheets of U.S. Lime and its subsidiaries as of September 30, 1997 (unaudited) and December 31, 1996 and the related condensed consolidated statements of operations and of cash flows of U.S. Lime and its subsidiaries for the nine months ended September 30, 1997 and September 30, 1996 (unaudited), all heretofore furnished to the Bank, have been prepared in all material respects in accordance with all applicable requirements of Form 10-Q of the Securities and Exchange Commission under the Securities Exchange Act of 1934 and, in the opinion of the Borrowers' managements, reflect all adjustments of a normal and recurring nature necessary to present fairly the financial position, results of operations and cash flows of U.S. Lime and its subsidiaries on a consolidated basis for the periods presented in accordance with GAAP, except that certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. Except as set forth on such Financial Statements and on Schedule 5.1.4 hereto, the Borrowers do not have any material fixed, accrued or contingent obligation or liability for taxes or otherwise that is not disclosed or reserved against on its balance sheets. The Borrowers have 31 filed all tax returns required to be filed by them with any taxing authority and have paid all taxes with respect thereto. Since December 31, 1996, there have been no changes in the condition of the Borrowers' financial position or otherwise, from that set forth in the Consolidated Balance Sheets as of said date that would have a Materially Adverse Effect upon the Borrowers, other than changes, if any, previously disclosed to Bank in writing. The Borrowers do not believe, and have no reason to believe, that there has been or will be a change relating to the business of the Borrowers that would cause a Materially Adverse Effect on the Borrowers or any of them. 5.1.5 No Litigation. Except (i) those matters referred to in the notes to Borrowers' consolidated Financial Statements, (ii) those matters on Schedule 5.1.5 hereto, and (iii) worker's compensation claims covered by insurance, there are no suits or proceedings pending, or, to the knowledge of Borrowers, or any of them, threatened against or affecting the Borrowers, or any of them, and neither any Borrower nor the Borrowers are in default in the performance of any agreement to which any Borrower or Borrowers may be a party or by which any Borrower or Borrowers are bound, or with respect to any order, writ, injunction, or any decree of any court, or any federal, state, municipal or other government agency or instrumentality, domestic or foreign, which suits, proceedings and defaults in the aggregate could have a Materially Adverse Effect on any Borrower or Borrowers. 5.1.6 Compliance. To the best of its knowledge, each Borrower has all Governmental Approvals necessary for the conduct of such Borrower's business, except for Governmental Approvals the failure to obtain which could not have a Materially Adverse Effect on such Borrower, and the conduct of each Borrower's business is not and has not been in violation of any such Governmental Approvals or any applicable federal or state law, rule or regulation, which violation could have a Materially Adverse Effect on such Borrower or Borrowers. No Borrower requires any Governmental Approvals to enter into, or perform under, this Agreement, the Notes, or any other Loan Document. 5.1.7 Compliance with Regulations U and X. No Borrower is engaged principally, or as one of such Borrower's important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meanings of Regulations U and X of the Board of Governors of the Federal Reserve System). 5.1.8 ERISA. With respect to each employee pension benefit plan (within the meaning of Section 3(2) of ERISA other than any "multiemployer plan" within the meaning of Section 3(37) of ERISA) (hereinafter, a "Plan"), maintained for employees of any Borrower or of any trade or business (whether or not incorporated) which is under common control with such Borrower (within the meaning of Section 4001(b)(1) of ERISA), and except as disclosed in Schedule 5.1.8 or as heretofore disclosed to the Bank in writing (i) there is no accumulated funding deficiency (within the meaning of Section 302 of ERISA or Section 412 of the Code), as of the last day of the 32 most recent plan year of such Plan heretofore ended, taking into account contributions made or to be made within the time prescribed by Section 412(c) (10) of the Code; (ii) to the best of the Borrower's knowledge, each such Plan has been maintained in accordance with its terms and ERISA; and (iii) there has been no "reportable event" within the meaning of Section 4043 of ERISA and the regulations thereunder for which the 30-day notice requirement has not been waived. No Borrower has incurred any liability to the PBGC other than required insurance premiums, all of which that have become due as of the date hereof have been paid. Schedule 5.1.8 hereto sets forth all multiemployer plans to which Borrowers or any Borrower is a party and the most recent information received by Borrowers or such Borrower from any multiemployer plan (within the meaning of Section 3(37) of ERISA), regarding the estimated amount of potential liability for a complete withdrawal from any such multiemployer plan based on the assumptions used by any such multiemployer plan for purposes of providing the estimate. 5.1.9 Solvency. 5.1.9.1 The aggregate present fair saleable value of the assets of Borrowers (sold as a whole) after giving effect to the funding of all Loans hereunder exceeds the amount that will be required to be paid on or in respect of the Debts and other liabilities (including contingent liabilities) of Borrowers as they mature. 5.1.9.2 The assets of Borrowers do not in the aggregate constitute unreasonably small capital for Borrowers to conduct their business as now conducted and as proposed to be conducted, including the capital needs of Borrowers. 5.1.9.3 Borrowers do not intend to, nor do Borrowers believe that they will, incur Debts beyond their ability to pay as such Debts mature (taking into account the timing and amounts of cash to be received by Borrowers and of amounts to be payable on or in respect of Debt of Borrowers). The cash available to Borrowers, after taking into account all other anticipated sources and uses of the cash of Borrowers, is anticipated to be sufficient to pay all amounts on or in respect of the Indebtedness when the Indebtedness or any part thereof is required to be paid. 5.1.9.4 The aggregate fair value of Borrowers' assets exceeds the aggregate of all their liabilities. 5.1.10 RICO. Neither Borrowers nor any Borrower have engaged in any conduct or taken or omitted any actions which will, or could, if the facts and circumstances relative thereto were discovered, give rise to a criminal indictment or civil action against Borrowers or any Borrower under RICO. 5.1.11 Labor Matters. Except to the extent set forth on Schedule 5.1.11 hereto, (i) no Borrower is a party to any collective bargaining agreement; (ii) no Borrower has experienced any strike, labor 33 dispute, slowdown or work stoppage due to labor disagreements which could have a Materially Adverse Effect on such Borrower or Borrowers or on the value of the Collateral or on the enforceability of the Indebtedness (including realizing on the Collateral); (iii) to the best knowledge of each Borrower, after due inquiry, there is no such strike, dispute, slowdown or work stoppage threatened against any Borrower which would have a Materially Adverse Effect on such Borrower, and (iv) no labor petitions have been filed or union organizing activity conducted during the past six months pertaining to any Borrower. 5.1.12 Business. Borrowers enjoy peaceful and undisturbed possession under all leases of real or personal property of which any Borrower is lessee, to the extent material to the business of such Borrower. Borrowers or the applicable Borrower own or possess the right to use all the franchises, rights, licenses, goodwill and trademarks necessary for the conduct of their business as now conducted or as contemplated to be conducted. Borrowers own, lease or have the right to use, all assets, franchises, rights, licenses, goodwill and trademarks, and employ all employees and/or engage such independent contractors, as are necessary to operate the business conducted by each Borrower; and all of such tangible assets are in good working order, normal wear and tear excepted. 5.1.13 Vehicle Title and Registration. All of each Borrower's motor vehicles which under applicable law are required to be registered, are properly registered (or such registration has been properly applied for) in the name of such Borrower, and such motor vehicles and related equipment are fit for use and available for use without repair (except for maintenance and repair in the ordinary course of business and except for deterioration or obsolescence of such motor vehicles and other equipment not, taken as a whole, material to the conduct of Borrower's Business), and the ownership of such motor vehicles which, under applicable law, is evidenced by a Certificate of Title is properly titled in the name of the applicable Borrower. 5.1.14 Environmental. 5.1.14.1 Except as set forth in Schedule 5.1.14 or where failure to comply would not have or result in a Materially Adverse Effect on any Borrower or Borrowers, or the conduct of Borrowers' or any Borrower's Business, each Borrower has, to such Borrower's knowledge, in the conduct of its business, and the ownership and use of its properties, complied with all federal, state and local laws, rules, regulations, judicial decisions and decrees pertaining to the use, storage or disposal of hazardous waste or toxic materials. 5.1.14.2 To each Borrower's knowledge, except as set forth in Schedule 5.1.14 or where the presence of a hazardous substance, pollutant, contaminant, waste or residue waste or solid waste would not have or result in a Materially Adverse Effect on such Borrower or on the conduct of such Borrower's business: (i) no hazardous substance, pollutant or contaminant 34 (as defined in Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. '9601, as amended by the Superfund Amendments and Re-authorization Act of 1986 (Pub. L. No. 99-499, 100 Stat. 1613 (1986) (SARA) or 40 CFR Part 261, whichever is applicable) is present on any of the Real Estate in any quantity in excess of those allowed by applicable law; (ii) as to Real Estate located in Arkansas, Texas and any other jurisdiction: no hazardous substance or waste is present on such Real Estate in excess of amounts permitted under applicable state or local environmental laws, rules, regulations or ordinances; (iii) no Borrower has been identified in any litigation, administrative proceedings or investigation as a responsible party for any liability under the above referenced laws; and (iv) all materials that are located on any of the Real Estate in lawful amounts are properly stored and maintained in containers appropriate for such purposes. 5.1.15 Debt and Guaranties. Except as reflected in the Financial Statements furnished pursuant to Section 5.1.4 hereof or in the notes thereto or in Schedule 5.1.15 hereto, no Borrower has any Debt in excess of $100,000 in the aggregate nor has guarantied the payment or performance of any material debts or obligations of any other Person except for the guaranty of checks or other negotiable instruments for collection or as permitted pursuant to Section 7.1.1 hereof. 5.1.16 Real Estate. With respect to the Real Estate: 5.1.16.1 Except as set forth on Schedule 5.1.5 hereto, there is no litigation pending or threatened which would in any way affect any of the following: title to any parcel of the Real Estate or any part thereof; the validity or priority of the lien of any Mortgage; issuance or validity of any zoning variance or other zoning or subdivision approval affecting any parcel of the Real Estate; any building permit or certificate of occupancy which has been issued in connection with any Real Estate or any part thereof; 5.1.16.2 Except for Permits the lack of which would not result in a Materially Adverse Effect, each Borrower has obtained all Permits, and all appeal periods allowed with respect thereto have expired without any appeal having been filed by any person; all Permits are in full force and effect and all parcels of the Real Estate comply, in all material respects, with all requirements of law including those relating to building, zoning, subdivision and environmental protection; 5.1.16.3 No part of any of the parcels of Real Estate has during the period of its ownership by a Borrower been damaged or taken by, or is under cloud of, eminent domain proceedings; 5.1.16.4 Except as set forth on Schedule 5.1.16.4 hereto, none of the parcels of Real Estate is now damaged or injured as a result of any fire, explosion, accident, flood or other casualty; 35 5.1.16.5 All parcels of the Real Estate have unqualified access to and from a public road; and 5.1.16.6 Except as set forth on Schedule 5.1.16.6 hereto, none of the parcels of Real Estate is located within the 100-year flood line of any river, stream or body of water. 5.1.17 Trademarks. Except as set forth in Schedule 5.1.17 hereto, each Borrower owns its respective trademarks free and clear of all liens, claims, encumbrances and security interests, maintains such trademarks in the principal register of the United States Patent and Trademark Office and the applicable registry of all states listed on Schedule 5.1.17 hereto, and has the unrestricted right to grant to Bank the trademark liens and other rights granted in this Agreement with respect thereto. 5.1.18 Other Contractual Obligations. The Loans do not violate any other contractual obligation of Borrowers or any of them. 5.1.19 Investment Company Act. None of the Borrowers is an Investment Company within the meaning of the Investment Company Act of 1940. 5.1.20 Public Utility Holding Company Act. None of the Borrowers is a Public Utility Holding Company within the meaning of the Public Utility Holding Company Act. 5.1.21 Title to Assets. Borrowers have title to their respective Collateral and good and marketable fee simple title to their respective parcels of the Real Estate, free and clear of all liens, encumbrances, security interests or other rights of third parties, except for Permitted Liens. 5.1.22 Capitalization. The authorized capital stock of U.S. Lime consists of: (i) 15,000,000 shares of Common Stock, $.10 par value per share, of which 3,951,853 shares are issued and outstanding as of the Closing Date; and (ii) 500,000 shares of Preferred Stock, $5.00 par value per share, [none] of which shares have been issued. Except to the extent issued under employee stock option plans, there are no outstanding agreements, options, warrants, convertible securities or rights pursuant to which shares of U.S. Lime's capital stock, or securities, warrants, options or rights, convertible into or exercisable, directly or indirectly, for shares of capital stock of U.S. Lime, are issuable by U.S. Lime. 5.1.23 Texas Real Estate. To the best of each Borrower's knowledge after due inquiry, (i) from the date of TLC's acquisition of its Real Estate, neither TLC nor any other Borrower has received any claim for, or paid any, royalties, fees or other payments for the extraction of oil, gas, or other hydrocarbons, limestone, gravel, crushed rock, sand or other minerals of any kind or character over, under or produced from Real Estate owned by TLC, and (ii) none of the mineral rights reserved or conveyed to third parties 36 listed on Schedule B to Commonwealth Land Title Insurance Company Commitment for the Real Estate owned by TLC delivered pursuant to Section 4.1.5 hereof has interfered in any material respect with the operations of TLC's business. 5.2 Accuracy of Representations; No Default. The information set forth herein, in the Notes, on each of the Schedules hereto, and all of the other Loan Documents and each document previously delivered by a Borrower to Bank in connection herewith is complete and accurate and contains full and true disclosure of pertinent financial and other information in connection with the Loans. None of the foregoing contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the information contained herein or therein not misleading or incomplete. No Event of Default or Unmatured Event of Default hereunder, under the Notes, any other Loan Document, or under any of them has occurred. 6. AFFIRMATIVE COVENANTS 6.1 Borrowers' Covenants. As long as any portion of the Indebtedness remains outstanding and unpaid or Bank has any credit facility available to Borrowers or any Borrower, Borrowers covenant and agree that, in the absence of prior written consent of Bank, Borrowers will: 6.1.1 Financial Statements. Furnish to Bank, not later than one hundred twenty-five (125) days after the close of each Fiscal Year, U.S. Lime's Annual Report containing a consolidated balance sheet, of U.S. Lime and its subsidiaries as of the last day of such Fiscal Year and related consolidated statements of operations, stockholders' equity and cash flow for such Fiscal Year, audited by Ernst & Young, LLP or other independent certified public accountants of recognized standing in the financial community. In addition, Borrowers will furnish to Bank, within fifty (50) days of the close of each Calendar Quarter other than the last quarter of each Fiscal Year, a condensed consolidated balance sheet of U.S. Lime and its subsidiaries as of the last day of such Calendar Quarter and related condensed consolidated statements of operations and of cash flow of U.S. Lime and its subsidiaries for such Calendar Quarter. Each set of Financial Statements delivered to Bank pursuant to this Section 6.1.1 shall be certified by an Authorized Officer of U.S. Lime as having been prepared in all material respects in accordance with all applicable requirements of Form 10-Q of the Securities and Exchange Commission under the Securities Exchange Act of 1934 and as reflecting, in the opinion of the Borrowers' managements, all adjustments of a normal and recurring nature necessary to present fairly the financial position, results of operations and cash flows of U.S. Lime and its subsidiaries on a consolidated basis for the periods presented in accordance with GAAP. Each Borrower shall furnish Bank together with all Financial Statements a certificate, substantially in the form of Schedule 6.1.1 hereto, executed by an Authorized Officer, which certificate shall state that the signer: (i) has reviewed the terms of this Agreement and has made, or caused to be made under his supervision, a review in reasonable detail of the transactions and condition of Borrowers during the accounting period covered by such Financial Statements and that such review has not disclosed the existence during or at the end of such accounting period, and (ii) does not have knowledge of the 37 existence as at the date of the certificate, of any condition or event which constitutes an Event of Default or Unmatured Event of Default, or if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action such Borrower has taken, is taking and proposes to take with respect thereto, it being agreed that so long as the Borrowers have a common Authorized Officer the substance of such certificate may be combined into a single certificate. Borrowers shall deliver to Bank, within 30 days of Bank's request, copies of any internal supporting schedules and other information regarding the consolidation of Borrower's Financial Statements; 6.1.2 Other Financial Information. With reasonable promptness furnish to Bank all financial and business information provided to stockholders of U.S. Lime, the Securities and Exchange Commission, the NASDAQ, and such additional information and data concerning the business and financial condition of Borrowers as may be reasonably requested by Bank. Each Borrower shall afford Bank or its agents access to the financial books, records, computer tapes and properties of such Borrower at all reasonable times and permit Bank or its agents to make copies and abstracts of same and to remove such copies and abstracts from such Borrower's premises. Bank shall with respect to any and all financial statements or other reports, documents, data and materials delivered by a Borrower to Bank pursuant to this Agreement, to the extent that the information contained therein has not otherwise been disclosed in such a manner as to render the same no longer confidential, maintain the confidential nature of the information contained therein; provided, however, that Bank may disclose such information to: (a) its employees, agents, attorneys and accountants who would ordinarily have access to the same in the normal course of the performance of their duties; (b) prospective participating lenders who shall maintain the confidential nature of such information; and (c) such third parties as may be necessary in connection with or in response to (i) compliance with any Rule, subpoena or investigation or (ii) any order, decree, judgment, subpoena, notice of discovery or similar ruling or pleading issued, filed or served (x) by or under authority of any court, tribunal, arbitration panel or any governmental agency, commission, authority, board or similar entity or (y) in connection with any proceeding, case or other matter pending before any court, tribunal, arbitration panel or any governmental agency, commission, authority, board or similar entity; provided, however, that in connection with the submission of any information to any commiss ion, authority, board or similar entity, the Bank shall request that the information submitted be kept confidential; 6.1.3 Deposits at Bank. U.S. Lime shall maintain its principal operating accounts (excepting locally maintained payroll, petty cash and local collection accounts) with Bank; 6.1.4 Taxes and Claims. Promptly pay and discharge all taxes, governmental charges and assessments levied and assessed or imposed upon any Borrower's assets or any portion thereof, or upon the purchase, ownership, delivery, leasing, possession, use, operation, return or other disposition thereof, or upon the rentals, receipts or earnings therefrom, or upon or with respect to this Agreement, the Notes, or any other Loan Document, and pay all 38 other claims which, if unpaid, might become liens or charges, other than Permitted Liens, upon the assets of any Borrower, provided, however, that nothing in this Section 6.1.4 shall require Borrowers or any Borrower to pay any such taxes or assessments prior to the date on which they otherwise would become delinquent or as long as Borrowers or such Borrower shall in good faith contest the amount or validity thereof and shall establish reserves against such taxes and assessments in kind and amount satisfactory to Bank and, in the case of Federal tax liens, cause same to be extinguished or bonded; 6.1.5 Existence. Except in each case to the extent that the failure to do so would not have a Materially Adverse Effect on the Borrowers as a whole, (i) maintain the corporate existence of each Borrower and all necessary foreign qualifications in good standing, (ii) continue to comply with all applicable statutes, Rules and regulations with respect to the conduct of such Borrower's business and (iii) maintain all Permits, provided that the foregoing shall not be deemed to prohibit the merger or consolidation of any Borrower or subsidiary of a Borrower into or with a Borrower or another subsidiary of a Borrower; 6.1.6 Insurance. Maintain personal liability, casualty, workers' compensation, property damage, flood and business interruption insurance with respect to each Borrower's business and assets, in such amounts, against such hazards and liabilities, and with such companies as may be reasonably satisfactory to Bank, all such policies covering the Collateral to insure Bank as its interests may appear. Each Borrower shall, unless Bank shall otherwise agree in writing to the contrary, maintain insurance as follows: (i) Insurance against loss or damage to the Real Estate and to all of each Borrower's inventory, equipment, furniture, fixtures and machinery wherever located, by fire and any of the risks covered by insurance of the type now known as "all risk" coverage in an amount not less than that percentage of the full replacement cost of all buildings and improvements now or hereafter erected thereon (exclusive of the cost of excavations, foundations, and footings below the lowest basement floor), required to satisfy any applicable coinsurance requirement in such policy and with not more than $100,000 deductible from the loss payable for any casualty. The policies of insurance carried in accordance with this subparagraph (i) shall contain the "Replacement Cost Endorsement"; (ii) Business interruption insurance for the period of time needed for restoration with 90 days coverage for ordinary payroll in such amounts as are satisfactory to Bank; (iii) Comprehensive public liability insurance (including coverage for elevators and escalators, if any, on any Real Estate and, if any construction of new improvements thereon occurs after execution of this Agreement, completed operations coverage for one year after construction of the improvements has been completed) on an "occurrence basis" against claims for "personal injury", including without limitation bodily injury, death or property damage occurring on, in or about such Real Estate and the adjoining streets, sidewalks and passageways, such insurance to afford immediate minimum 39 protection to a limit of not less than that required by Bank with respect to personal injury or death to any one or more persons or damage to property; (iv) Worker's compensation insurance (including employer's liability insurance) for all employees of each Borrower in such amount as is reasonably satisfactory to Bank, or, if minimum amounts are established by law, in such amounts; (v) During the course of any construction or repair of improvements on any Real Estate, builder's completed value risk insurance against "all risks of physical loss", including collapse and transit coverage, during such construction or repair, with deductibles not to exceed $100,000, in non-reporting form, covering the total value of work performed and equipment, supplies and materials furnished. If requested by Bank, such policy of insurance shall contain the "permission to occupy upon completion of work or occupancy" endorsement; (vi) Boiler and machinery insurance covering pressure vessels, air tanks, boilers, machinery, pressure piping, heating, air conditioning and elevator equipment and escalator equipment, with respect to such portions of the Real Estate as contain equipment of such nature, and insurance against loss of occupancy or use arising from any breakdown of such equipment, in such amounts as are reasonably satisfactory to Bank. 6.1.6.1 Each policy of insurance required by the terms of this Section shall contain an endorsement or agreement by the insurer that any loss shall be payable in accordance with the terms of such policy notwithstanding any act or negligence of such Borrower which might otherwise result in forfeiture of such insurance, and also an agreement by the insurer waiving all rights of setoff, counterclaims or deductions against such Borrower. 6.1.6.2 Each policy of insurance required by the terms of this Section shall be issued by a company reasonably satisfactory to Bank, shall be in an amount reasonably satisfactory to Bank, and if insuring against damage to any of the Real Estate, shall have attached to it, in forms satisfactory to Bank, both a mortgagee clause in favor of Bank, not subject to contribution, and a lender's loss payable endorsement for the benefit of Bank. Each Borrower shall furnish Bank, with a copy of the original with respect to all required insurance coverage. Bank consents to each Borrower providing any of the required insurance through blanket policies carried by Borrowers and covering more than one location, provided that Borrowers furnish Bank with a signed certificate of insurance for each such policy setting forth the coverage, the limits of liability, the name of the carrier, the policy number, and the expiration date. Borrowers shall make appropriate provisions whereby the applicable insurance carriers will furnish to Bank at least thirty (30) days prior to the expiration of each such policy, written notice in the event that any of the coverages required to be maintained under this Section 6.1.6 will not be renewed upon expiration and ten (10) days prior written notice of the cancellation of all or any portion of such coverages. All such policies, including policies for any amounts carried in excess of the required minimum 40 and policies not specifically required by Bank, shall be in form reasonably satisfactory to Bank, shall be maintained in full force and effect, shall be delivered (or a certificate with respect thereto shall be delivered) to Bank, shall contain a provision that such policies will not be cancelled or materially amended, which term shall include any reduction in the scope or limits of coverage, without at least thirty (30) days prior written notice to Bank. If the insurance, or any part thereof, shall expire, or be withdrawn, or become void or unsafe by reason of any Borrower's breach of any condition thereof, or become void or unsafe by reason of the value or impairment of the capital of any company in which the insurance may then be carried, or if for any reason whatever the insurance shall be unsatisfactory to Bank in its reasonable judgment, such Borrower or Borrowers shall place new insurance reasonably satisfactory to Bank. Borrowers shall make appropriate provisions with the applicable insurance carriers to name Bank as additional loss payee for the coverages required by this Section 6.1.6. 6.1.6.3 In the event any Borrower fails to provide, maintain, keep in force or deliver and furnish to Bank the policies of insurance required by this Agreement, Bank may upon notice to the Borrower procure such insurance or single-interest insurance for such risks covering Bank's interest, and such Borrower will pay all premiums thereon promptly upon demand by Bank. 6.1.6.4 In the event of loss in excess of $350,000 in the case of any single incident, each affected Borrower will give immediate notice thereof to Bank, and Bank may make proof of loss if not made promptly by such Borrower. Each insurance company concerned is hereby authorized and directed to make payment under its respective policy or policies in respect of any such loss, including return of unearned premiums, directly to Bank instead of to such Borrower and Bank jointly, and such Borrower appoints Bank, irrevocably, as such Borrower's attorney-in-fact to endorse any draft therefor. Subject to the provisions of Section 6.1.6.5 of this Agreement, Bank shall have the right to retain and apply the proceeds of any such insurance on account of any such loss, at its election, to reduction of the indebtedness secured hereby, or to restoration or repair of the property damaged. If Bank becomes the owner of the Real Estate, or any part thereof by foreclosure or otherwise, such policies, including all right, title and interest of the Borrowers thereunder, shall become the absolute property of Bank. 6.1.6.5 Notwithstanding the provisions of Section 6.1.6.4 hereof, in the event of any damage by fire or other casualty covered by insurance wherein the insurance proceeds are not in excess of $1,000,000, the Bank will immediately release the insurance proceeds to the affected Borrower for either repair or reconstruction, or both. If the amount of the insurance proceeds exceeds $1,000,000, such proceeds shall be made available to the affected Borrower for such purposes upon the following terms and conditions: (i) The work will be performed by a reputable general contractor satisfactory to Bank in the exercise of reasonable business 41 judgment, pursuant to plans and specifications satisfactory to Bank, in the exercise of reasonable business judgment. (ii) The insurance proceeds will be held by Bank (or at the request of either the Bank or the affected Borrower by an escrowee satisfactory to Bank and such Borrower) in trust, to be disbursed periodically as the work progresses in amounts not exceeding 90% of the value of labor and materials incorporated into the work. The remaining 10% will be released to such Borrower upon final completion of the work in accordance with the aforesaid plans and specifications, and upon a receipt of a release of liens from all contractors and subcontractors engaged in the work. (iii) If the entire insurance proceeds are not used for restoration, the excess proceeds shall be disbursed to such Borrower. If the cost of the work will exceed the available insurance proceeds, the affected Borrower will pay for restoration work in an amount equal to such excess prior to the disbursement of the insurance proceeds. (iv) Notwithstanding the foregoing, if at the time of occurrence there exists an Event of Default, this subsection shall not apply and the provisions of Section 6.1.6.4 above, shall apply instead and if at the time of the occurrence an Unmatured Event of Default exists the proceeds shall be held by the Bank until the same either is cured or becomes an Event of Default. 6.1.7 Defense of Actions. Promptly defend all actions, proceedings or claims affecting the Borrowers or any Borrower or its or their business property which, if adversely determined, could cause a Materially Adverse Effect on Borrowers or such Borrower and promptly notify Bank of the institution of, or any change in, any such action, proceeding or claim (except in the case of a workers compensation or general liability claim) if the same is in excess of $75,000 for any single action, proceeding or claim and $350,000 in the aggregate, or would have a Materially Adverse Effect on the financial condition of Borrowers or such Borrower or its or their property, if adversely determined; 6.1.8 Maintenance of Assets. Maintain, preserve, protect and keep in good order and condition all of the Collateral and all other property used or useful in the conduct of each Borrower's business and, from time to time, make all necessary or appropriate repairs, replacements and improvements thereto; 6.1.9 Further Assurances. Provide Bank at any time or from time to time on request with such mortgages, assignments, certificates of title or Financing Statements and such additional instruments or documents as Bank may, in Bank's sole discretion, deem necessary in order to perfect, protect and maintain the security interest in and lien on the Collateral granted to Bank pursuant to the terms hereof and the other Loan Documents; 6.1.10 Notice of Events. Promptly give written notice to Bank 42 of the occurrence of any Event of Default and any event which causes any representation or warranty made in Article 5 hereof to be untrue at any time or which would cause Borrowers or any Borrower to be in default hereunder, under the Notes or any other Loan Document for any other reason, or of any material casualty to any of Borrowers' or such Borrower's assets; 6.1.11 Compliance with Agreements. Comply in all material respects with all material agreements (including, but not limited to, collective bargaining agreements with all labor unions) to which any Borrower is a party the failure to do so could result in a Materially Adverse Effect. 6.1.12 ERISA. Comply in all material respects with the requirements of ERISA applicable to any employee pension benefit plan (within the meaning of Section 3(2) of ERISA), sponsored by Borrowers or any Borrower. With respect to any such plan, other than any "multiemployer plan" (within the meaning of Section 3(37) of ERISA), in the case of a "reportable event" within the meaning of Section 4043 of ERISA and the regulations thereunder for which the 30-day notice requirement has not been waived, or in the case of any other event or condition which presents a material risk of the termination of any such plan by action of the PBGC, Borrowers, or any Borrower, Borrowers shall furnish to Bank a certificate of the chief financial officer of U.S. Lime identifying such reportable event or such other event or condition and setting forth the action, if any, that Borrowers or such Borrower intends to take or has taken with respect thereto, together with a copy of any notice of such reportable event or such other event or condition filed with the PBGC or any notice received by Borrowers or such Borrower from the PBGC evidencing the intent of the PBGC to institute proceedings to terminate any such plan. Such certificate of the chief financial officer or such other notice to be furnished to Bank in accordance with the preceding sentence shall be given in the manner provided for in Section 9.3 hereof: (i) within 30 days after any Borrower knows of such reportable event or such other event or condition; (ii) as soon as possible upon receipt of any such notice from the PBGC; or (iii) concurrently with the filing of any such notice with the PBGC, as the case may be. For purposes of this Section, Borrowers shall be deemed to have all knowledge attributable to the administrator of any such plan. 6.1.13 Financial Covenants. Comply with the following financial covenants: 6.1.13.1 Minimum Net Worth. Maintain at all times a consolidated Net Worth of not less than an amount which during the Calendar Quarter of the Borrowers ending December 31, 1997 shall be $20,000,000 and which in each subsequent Calendar Quarter shall be at least the sum of (i) the minimum consolidated Net Worth required to be maintained by the Borrowers under this Section 6.1.13.1 during the immediately preceding Calendar Quarter plus (ii) an amount equal to 50% of the consolidated Net Income of the Borrowers for such immediately preceding Calendar Quarter. Net Worth shall be tested quarterly upon Bank's receipt of Borrowers' quarterly consolidated Financial Statements; 6.1.13.2 Ratio of Total Liabilities to Net Worth. 43 Maintain at all times the ratio of Borrowers' consolidated Total Liabilities to consolidated Net Worth at no greater than 1.5 to 1.0. Borrowers' ratio of Total Liabilities to Net Worth shall be tested quarterly upon Bank's receipt of Borrowers' quarterly consolidated Financial Statements; 6.1.13.3 Ratio of Cash Flow to Fixed Obligations. Maintain at all times the ratio of Borrowers' Cash Flow to Fixed Obligations at no less than 1.25 to 1.0. Borrowers' ratio of Cash Flow to Fixed Obligations shall be tested quarterly upon receipt of Borrower's quarterly consolidated Financial Statements, on a rolling four-quarter historical basis commencing with the four consecutive Calendar Quarters ending December 31, 1997. 6.1.14 Equipment; Motor Vehicles. Cause all Equipment which, under applicable law, is required to be registered, to be registered properly in the name of the applicable Borrower, and cause all motor vehicles or other equipment the ownership of which, under applicable law, is evidenced by a certificate of title to be properly titled in the applicable Borrower's name, and, except in the case of automobiles and pickup trucks, to have Bank's lien on such motor vehicles and other equipment properly noted on the certificate of title with respect thereto. 6.1.15 Mortgages. Perform, as and when due, all of such Borrower's obligations (both monetary and non-monetary) under all mortgages and deeds of trust that encumber any part of the Real Estate but are not one of the Loan Documents, within such applicable notice or cure period as may be allowed such Borrower pursuant to the relevant mortgage or deed of trust, and pay and discharge, at or before maturity, all of such Borrower's material obligations and liabilities under such mortgages and deeds of trust, except where the same may be contested in good faith by appropriate proceedings, and will maintain, in accordance with GAAP, appropriate reserves for the accrual of any of the same. 6.1.16 Notice of Changes. Immediately upon learning of the same notify Bank of: (i) the occurrence or imminent occurrence of any event which causes or would imminently cause (A) any material adverse change in the business, property, prospects or financial condition of any Borrower, (B) any representation or warranty made by any Borrower hereunder to be untrue, incomplete or misleading when made, or (C) the occurrence of any Event of Default or Unmatured Event of Default hereunder; (ii) the institution of, or the issuance of any order, judgment, decree or other process in, any litigation, investigation, prosecution, proceeding or other action by any governmental authority or other Person against any Borrower which does, or could, materially adversely affect such Borrower; (iii) any material casualty to any material part of the Collateral or other property of any Borrower; and (iv) any change in the number or identity of any of the Borrowers' directors or executive officers. 6.1.17 Audits. Permit Bank to audit such Borrower's premises, books and records from time to time, including without limitation, audits of the Permits, and reimburse Bank's expenses and fees therefor for one such audit during any calendar year. Bank intends to cause its internal audit department personnel to perform such audits, but in the event Bank desires, or 44 is required, to employ independent auditors, the reimbursable costs for such auditors shall not exceed $10,000 per audit. 6.1.18 Term Loan Amortization Date. Use their best efforts to complete construction and commence pyro-processing of limestone for commercial sale from the modified number 6 kiln located at TLC's plant in Cleburne, Texas, prior to July 1, 1998. 6.2 Indemnification. Each Borrower hereby indemnifies and agrees to protect, defend, and hold harmless Bank and Bank's directors, officers, employees, agents, attorneys and shareholders from and against any and all losses, damages, expenses or liabilities of any kind or nature and from any suits, claims, or demands, including all reasonable counsel fees incurred in investigating, evaluating or defending such claim, suffered by any of them and caused by, relating to, arising out of, resulting from, or in any way connected with the gross negligence or willful misconduct of such Borrower under this Agreement, the Notes, or any other Loan Documents and any transaction contemplated herein or therein (other than actions also arising out of or connected with the willful misconduct or gross negligence of Bank or actions brought in good faith by Borrowers against Bank), including, but not limited to, claims based upon any act or failure to act by Bank in connection with any Loan Document and any transaction contemplated therein. If any Borrower shall have knowledge of any claim or liability hereby indemnified against, it shall give prompt written notice thereof to Bank. THIS COVENANT SHALL SURVIVE PAYMENT OF THE INDEBTEDNESS. 6.2.1 Bank shall give Borrowers prompt notice of all suits or actions instituted against Bank with respect to which Borrowers have indemnified Bank, and Borrowers shall timely proceed to defend any such suit or action. Bank shall also have the right, at Bank's expense to participate in or, at Bank's election, if Borrowers have not timely defended such suit or action to assume the defense or prosecution of such suit, action, or proceeding, and in the latter event Borrowers may employ counsel and participate therein. If Bank assumes the defense of any suit or action under the terms hereof, Bank shall have the right to adjust, settle, or compromise any claim, suit, or judgment after notice to Borrowers, and the right of Bank to indemnification under this Agreement shall extend to any money paid by the Bank in settlement or compromise of any such claims, suits, and judgments in good faith, after notice to Borrowers. The Bank will not adjust, settle or compromise any claim or suit involving an allegation of fraud, breach of fiduciary duty, criminal activity or other misconduct on the part of a Borrower or any of its directors or officers without the written consent of the Borrower which consent shall not be unreasonably withheld. 6.2.2 If any suit, action, or other proceeding is brought by Bank against any Borrower or Borrowers for breach of its or their covenant of indemnity herein contained, separate suits may be brought as causes of action accrue, without prejudice or bar to the bringing of subsequent suits on any other cause or causes of action, whether theretofore or thereafter accruing. 46 7. NEGATIVE COVENANTS 7.1 Covenants of Borrower. As long as any portion of the Indebtedness shall remain outstanding and unpaid or Bank has any credit facility available to Borrowers hereunder, each Borrower covenants and agrees that, in the absence of prior written consent of the Bank, such Borrower will not: 7.1.1 Create, assume, incur or become liable under any guaranty for, any indebtedness for borrowed money to, any Person, other than: (i) Loans from Bank to Borrowers; (ii) trade indebtedness for the purchase of supplies and services in the ordinary course of business; (iii) indebtedness existing as of the date hereof and disclosed in Schedule 5.1.15 attached hereto; (iv) indebtedness arising in connection with a Permitted Lien or other encumbrance permitted by Section 7.1.2 hereof; (v) the guaranty in the ordinary course of business of checks or other negotiable instruments for collection; and (vi) inter-company indebtedness; 7.1.2 Except as set forth on Schedule 5.1.3 attached hereto, create, incur, assume or permit to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon any of its properties or assets, whether now owned or hereafter acquired, except: (i) mortgages or other security interests granted to secure money borrowed from Bank; and (ii) liens for taxes or governmental claims not yet due or which are being duly contested and reserved in accordance with Section 6.1.4 hereof; (iii) liens or security interests in equipment or other assets used in such Borrower's business not yet paid for in full in favor of the manufacturer or seller thereof, which secures the obligation to pay the purchase price for such equipment or assets and which, at any one time outstanding in the aggregate do not exceed $250,000; and (iv) Permitted Liens. 7.1.3 Except for Permitted Liens, salvage dispositions and other dispositions in the ordinary course of business, sales of assets in the ordinary course of business, the sale or other disposition of "other assets held for sale", sell, enter into an agreement of sale for, convey, lease, assign, transfer, pledge, grant a security interest, mortgage or lien in, otherwise encumber or dispose of, the Collateral other than sales to another Borrower or a subsidiary thereof; 7.1.4 Except as set forth on Schedule 5.1.15 attached hereto, and except for miscellaneous employee travel and other advances and guarantees not to exceed $20,000 in each case and $100,000 in the aggregate, and as otherwise permitted under Section 7.1.10, make loans to, invest in the securities of, or endorse, guaranty, or otherwise become a surety except in the ordinary course of business for the payment or performance of any liability or obligation of, any individual, firm or corporation other than a Borrower or a subsidiary thereof, except that Borrowers may invest in Cash Equivalents; 7.1.5 Change the general character of any Borrower's business from that in which it is currently engaged or proposes to be engaged; remove any of such Borrower's tangible assets with a book value of more than $150,000 that are now located on such Borrower's Real Estate to a location other than 46 another parcel of such Borrower's or another Borrower's Real Estate and any Borrower may, in the ordinary course of business, cause or permit the removal of moveable equipment, or equipment in repair or the like off-premises or otherwise in transit and may have inventory or equipment in transit or in warehouses; enter into proceedings in total or partial dissolution; merge or consolidate with or into any other corporation, or permit another corporation to merge into it, or acquire all or substantially all of the assets or securities of any other Person; pay or declare any dividends or distribution on any of such Borrower's capital stock; except for dividends and other distributions payable in stock and except for dissolutions into, mergers and consolidations with, acquisitions of assets or securities of, and dividends and other distributions to, another Borrower or a subsidiary thereof and except that the Bank will not unreasonably withhold its consent to any proposed acquisition in which the consideration and liabilities assumed does not exceed $250,000; provided however that, subject to the financial covenants contained in Section 6.1.13 hereof, U.S. Lime may declare and pay dividends on its common stock if at the time of declaration and after giving effect thereto (as if then paid), the aggregate amount of all dividends so declared and paid by U.S. Lime in any Fiscal Year shall not exceed 25% of the average of the Borrowers' consolidated Net Incomes for the two immediately preceding Fiscal Years; 7.1.6 Use any part of the proceeds of the Loans to purchase or carry, or to reduce, retire or refinance any credit incurred to purchase or carry, any margin stock (within the meaning of Regulations U and X of the Board of Governors of the Federal Reserve System) or to extend credit to others for the purpose of purchasing or carrying any margin stock. If requested by Bank, the Borrower will furnish to Bank statements in conformity with the requirements of Federal Reserve Form U-1 referred to in said Regulation; 7.1.7 Engage in any conduct or take or fail to take any actions which will, or could, if the facts and circumstances relative thereto were discovered, give rise to any criminal indictment or civil action against Borrowers or any Borrower under RICO; 7.1.8 Amend its Articles of Incorporation or Bylaws in a manner adverse to interests of the Bank or the Collateral; 7.1.9 Except for dividends and distributions and other transactions permitted under Section 7.1.5 and except as part of a reasonable overall compensation structure, enter into any transaction with any officer, director or shareholder (other than another Borrower) of any entity comprising a Borrower, or any Affiliate (other than another Borrower) of any of them, for less than full value or on terms or conditions not consistent with transactions in similar circumstances with other Persons; 7.1.10 Make any loan or guaranty any loan to any of such Borrower's or another Borrower's officers and directors except for advances made in the ordinary course of business with respect to relocation, travel, 47 entertainment or like expenses incurred in the discharge of their duties to such Borrower and except as otherwise permitted by Section 7.1.4; 7.1.11 Except as provided in Schedule 5.1.14, use, generate, treat, store, dispose of, or otherwise introduce any hazardous substances, pollutants, contaminants, hazardous waste, residual waste, or solid waste (as defined above in Section 5.1.14) into or on any of the Real Estate beyond the levels permitted by applicable law and will not cause, suffer, allow or permit anyone else to do so in violation of any applicable statute, law, ordinance, rule or regulation; 7.1.12 Incur any Operating Lease Expense in excess of $500,000 in any Fiscal Year, unless otherwise consented to in writing by Bank, which consent will not be unreasonably withheld. 8. DEFAULT 8.1 Events of Default. The occurrence of any one or more of the following events shall constitute an "Event of Default" hereunder, under the Notes, the Mortgages, as amended and confirmed by the Mortgage Confirmations, and under each of the other Loan Documents: 8.1.1Failure by Borrowers to pay any principal or interest on the Loans, or any portion thereof as the same becomes due, and with respect to any other Indebtedness, such failure shall continue unremedied for 10 days following written notice thereof; 8.1.2 Failure by a Borrower to observe or perform any agreement, condition, undertaking or covenant in this Agreement or any other Loan Document, or in any other agreement by, between, or among Borrowers and Bank, and such failure shall continue for a period of thirty (30) days after notice from Bank or for such longer period of grace, if any, not to exceed 90 days except as may be provided under the circumstances in the Loan Document and provided, further, that if such failure is incapable of a complete cure within such 30-day period, the grace period shall be extended as necessary to permit the completion of the cure so long as the Borrower shall within the grace period specified have commenced the cure thereof and shall thereafter prosecute the same to completion with diligence and continuity; or a failure by a Borrower to observe or perform any material agreement, condition, undertaking or covenant in any other instrument evidencing or securing payment of an obligation for borrowed money if the effect of such failure is to permit the creditor or a trustee therefor to accelerate the maturity of any material indebtedness of a Borrower; 8.1.3 Any representation or warranty made in this Agreement or any other Loan Document or any statement or information in any report, certificate, Financial Statement or other instrument furnished by any Borrower in connection with the making of this Agreement or the making of the Loans hereunder or in compliance with the provisions hereof shall have been materially false or erroneous in any material respect when made, deemed made, or furnished; 8.1.4 Any Borrower shall become insolvent or unable to pay its 48 debts as they mature, or file a voluntary petition or proceeding seeking liquidation, reorganization or other relief with respect to itself under any provision of any state or Federal bankruptcy or insolvency statute, or make an assignment or any other transfer of assets for the benefit of its creditors, or apply for or consent to the appointment of a receiver for its assets, or suffer the filing against its property of any attachment or garnishment or take any corporate action to authorize any of the foregoing; or an involuntary case or other proceeding shall be commenced against any Borrower seeking liquidation, reorganization or other relief with respect to its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such attachment, garnishment, involuntary case or other proceeding shall remain undismissed and unstayed for a period of sixty days (it being understood that no delay period applies with respect to any default hereunder by reason of the filing of a voluntary petition by any Borrower under any state or federal Bankruptcy or insolvency statute or the making of an assignment or other transfer of assets for the benefit of any Borrower's creditors or by reason of any Borrower applying for or consenting to the appointment of a receiver for such Borrower's assets); or an order for relief shall be entered against any Borrower under any provision of any state or federal Bankruptcy or insolvency statute as now or hereafter in effect; 8.1.5 Any Borrower shall cease to conduct its business substantially as it is now conducted (except for seasonal plant closures for vacations and other reasons); and Bank reasonably determines that such event materially and adversely affects Borrower's ability to repay the Indebtedness; 8.1.6 Entry of a final judgment or judgments against any Borrower by a court of law or equity in an amount exceeding an aggregate of $1,000,000, enforcement of which judgment or judgments has not been stayed, vacated, bonded or satisfied within 45 days after entry and which is not covered by insurance; 8.1.7 Except for Permitted Liens and as otherwise permitted in Section 7.1.2 hereof, imposition of any lien or series of liens against any Borrower or such Borrower's property, arising by operation of law in an amount in excess of an aggregate of, $500,000 which are not discharged, bonded or stayed pending appeal within thirty (30) days of entry; 8.1.8 Except for mergers, consolidations, dissolutions and other transactions permitted by Section 7.1.5, loss or partial invalidity of any Borrower's corporate existence which existence is not restored within 30 days or loss of substantially all of such Borrower's assets which loss is not covered by insurance; 8.1.9 Regardless of the intent or knowledge of any Borrower, if the validity, binding nature or enforceability of any material term, provision, condition, covenant or agreement contained in this Agreement, any other Loan Document or in any other existing or future agreement between Borrowers or such Borrower on the one hand and Bank on the other shall be wrongfully disputed by, on behalf of, or in the right or name of such Borrower 49 or if any such material term, provision, condition, covenant or agreement shall be found or declared to be invalid, non-binding, unenforceable or avoidable by any governmental authority or court and the parties cannot agree upon substitutions therefor within 30 days; or 8.1.10 Inberdon Enterprises, Ltd., shall cease to own at least 25% of the issued and outstanding capital stock of U.S. Lime, except that Bank may, upon the request of Inberdon Enterprises, Ltd., consent from time to time to its ownership of lesser percentages of U.S. Lime's issued and outstanding capital stock, which consent the Bank will not unreasonably withhold; 8.2 Remedies on Default. Upon the occurrence and during the continuation of any Event of Default, Bank may forthwith declare all Indebtedness to be immediately due and payable, without protest, demand or other notice (which are hereby expressly waived by Borrowers) and, in addition to the rights specifically granted hereunder or now or hereafter existing in equity, at law, by virtue of statute or otherwise (each of which rights may be exercised at any time and from time to time), may exercise the rights and remedies available to Bank at law or in equity or under this Agreement, the Notes and any of the other Loan Documents or any other agreement between Borrowers and Bank in accordance with the respective provisions thereof. 8.3 Assembly of Collateral. Upon the occurrence and during the continuation of any Event of Default, Bank may require each Borrower, at such Borrower's expense, to assemble the Collateral and make it available to Bank at the place or places to be designated by Bank and with respect to the Real Estate, to vacate each premises upon thirty day's written notice. Each Borrower will pay, as part of the Indebtedness and obligations hereby secured, all amounts (including but not limited to Bank's reasonable attorneys' fees, where permitted by applicable law) reasonably incurred by the Bank: (i) for taxes, levies, and insurance on, or maintenance of, such Collateral; and (ii) in taking possession of, disposing of, or preserving such Collateral, with interest on all of same at the Base Rate plus 3.5% following demand for the payment thereof until paid. The requirement of reasonable notice of the time and place of disposition of such Collateral by Bank shall be conclusively met if such notice is personally delivered, delivered by overnight courier, facsimile telecopied or mailed, postage prepaid, to such Borrower's address as specified in this Agreement at least ten days before the time of the sale or disposition. Bank may bid upon and purchase any or all of such Collateral at any public sale thereof. Bank may dispose of all or any part of such Collateral in one or more lots or parcels and at one or more times and from time to time, and upon such terms and conditions, including a credit sale, as it determines in its sole discretion. Bank shall apply the net proceeds of any such disposition of such Collateral or any part thereof, after deducting all costs of Bank incurred in connection therewith, or incidental to the holding, preparing for sale, in whole or part, of the Collateral, including attorneys' fees, and with interest thereon at the Base Rate plus 3% in such order as Bank may elect, to the Indebtedness and obligations secured hereunder, subject to the provisions of this Agreement, whereupon the 50 remaining proceeds shall be paid to such Borrower or any other party entitled thereto. 8.4 Set-Off Rights Upon Default. Upon the occurrence and during the continuance of any Event of Default, in addition to any remedies set forth above, Bank shall have the right at any time and from time to time without notice to Borrowers (any such notice being expressly waived by Borrowers), and to the fullest extent permitted by applicable Rules, to set off, to exercise any banker's lien or any right of attachment or garnishment and apply any and all balances, credits, deposits (time or demand, provisional or final), accounts or monies at any time held by Bank and other indebtedness at any time owing by Bank to or for the account of Borrowers, against any and all Indebtedness or other obligations of Borrowers now or hereafter existing under this Agreement or any other Loan Document, whether or not Bank shall have made any demand hereunder or thereunder. 8.5 Singular or Multiple Exercise; Non-Waiver. The remedies provided herein, and in each of the other Loan Documents, or otherwise available to Bank at law or in equity and any warrants of attorney therein contained, shall be cumulative and concurrent, and may be pursued singly, successively or together at the sole discretion of Bank, and may be exercised as often as occasion therefor shall occur; and the failure to exercise any such right or remedy shall in no event be construed as a waiver or release of the same. 9. MISCELLANEOUS 9.1 Integration. This Agreement and the other Loan Documents shall be construed as one agreement, and in the event of any inconsistency, the provisions of the Notes shall control over the provision of this Agreement or the other Loan Documents, and the provisions of this Agreement shall control the provisions of any other Loan Document except the Notes. This Agreement and the other Loan Documents contain all the agreements of the parties hereto with respect to the subject matter of each thereof and supersede all prior or contemporaneous agreements with respect to such subject matter. 9.2 Modification. Modifications, waivers or amendments of or to the provisions of this Agreement or any other Loan Document shall be effective only if set forth in a written instrument signed by Bank and the Borrowers. 9.3 Notices. Any notice or other communication by one party hereto to the other shall be in writing and shall be deemed to have been validly given if delivered or mailed, first class mail, postage prepaid, addressed as follows, or to such other address as may be designated by the addressee from time to time or telecopied to the numbers set forth below or to any such other number as may be designated by the addressee in a written notice to the other parties hereto: 51 If to any Borrower or Borrowers: c/o United States Lime & Minerals, Inc. 12221 Merit Drive, Suite 500 Dallas, TX 75251 Attn: Timothy W. Byrne, President Facsimile: (972) 385-1340 With a copy to: Morgan Lewis & Bockius LLP 2000 One Logan Square Philadelphia, PA 19103-6993 Attn: James A. Hunter, Jr., Esq. Facsimile: (215) 963-5299 If to Bank: CoreStates Bank, N.A. 1339 Chestnut Street Transportation, Leasing and Construction Industry Services 11th Floor, Widener Building FC #1-8-11-24 Philadelphia, PA 19101 Attn: Clifford Kewley, Vice President Facsimile: (215) 786-7704 With a copy to: Mesirov Gelman Jaffe Cramer & Jamieson 1735 Market Street 38th Floor Philadelphia, PA 19103-7598 Attn: Jeffrey O. Greenfield, Esquire Facsimile: (215) 994-1111 9.4 Survival. The terms of this Agreement and all agreements, representations, warranties and covenants herein made by Borrowers, and in any other Loan Document shall survive the issuance and payment of the Notes and shall continue as long as any portion of the Indebtedness shall remain outstanding and unpaid; provided, however, that Borrowers' covenants set forth in Sections 1.6 and 6.2 above shall survive the payment of the Indebtedness. 52 Borrowers hereby acknowledge that Bank has relied upon the foregoing in making the Loans. 9.5 Closing. Closing hereunder shall be made at such time and place as the parties hereto may determine. 9.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto; provided, however that Borrowers shall not assign this Agreement, or any rights or duties arising hereunder, without the express prior written consent of Bank. 9.7 Governing Law. This Agreement shall be construed and enforced in accordance with the internal laws of the Commonwealth of Pennsylvania. 9.8 Jurisdiction. Any and all and actions at law or in equity relating to this Agreement and the Indebtedness shall be brought, and jurisdiction shall be had exclusively, in the courts of the Commonwealth of Pennsylvania or the United States District Court for the Eastern District of Pennsylvania. Each Borrower consents in advance to service of process by registered or certified mail, return receipt requested, to the address of such Borrower listed in Section 9.3 hereof. 9.9 Waiver of Jury Trial. EACH BORROWER AND BANK EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT BY ANY PARTY WITH RESPECT TO THIS AGREEMENT OR THE INDEBTEDNESS. 9.10 Excess Payments. If Borrowers shall pay any interest under the terms of the Notes at a rate higher than the maximum rate allowed by applicable law, then such excess payment shall be credited as a payment of principal unless Borrowers notify Bank in writing to return the excess payment to Borrowers. 9.11 Partial Invalidity. If any provision of this Agreement shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, but this Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein. 9.12 Headings. The heading of any Article or Section contained in this Agreement is for convenience of reference only and shall not be deemed to amplify, limit, modify or give full notice of the provisions thereof. 53 9.13 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts taken together, shall constitute but one and the same agreement. IN WITNESS WHEREOF, Borrowers and Bank have executed this Agreement under seal, intending to be legally bound hereby, and Bank has received this Agreement in Philadelphia, Pennsylvania, the day and year first above written. BANK: CORESTATES BANK, N.A. By: \s\ Clifford W. Keweley ____________________________ Clifford W. Kewley, Vice President BORROWERS: UNITED STATES LIME & MINERALS, INC. By: \s\ Timothy W. Byrne ____________________________ Timothy W. Byrne, President TEXAS LIME COMPANY By: \s\ Timothy W. Byrne ____________________________ Timothy W. Byrne, President ARKANSAS LIME COMPANY By: \s\ Timothy W. Byrne ____________________________ Timothy W. Byrne, President 54 AMENDED AND RESTATED TERM NOTE $15,000,000 December 30, 1997 FOR VALUE RECEIVED, UNITED STATES LIME & MINERALS, INC., a Texas corporation (formerly known as Scottish Heritable, Inc.), TEXAS LIME COMPANY, a Texas corporation, and ARKANSAS LIME COMPANY, an Arkansas corporation (collectively referred to herein as "Borrowers"), jointly and severally promise to pay to the order of CORESTATES BANK, N.A., a national banking association, its successors and assigns ("Bank"), the principal sum of Fifteen Million Dollars ($15,000,000) together with interest thereon at (i) with respect to Base Rate Loans, the Base Rate per annum, (ii) with respect to Adjusted LIBOR Loans, the Adjusted LIBOR per annum on the relevant Interest Rate Determination Date plus one and sixty-five one-hundredths of a percent (1.65%), and (iii) with respect to Fixed Rate Loans, the Fixed Rate per annum, payable in accordance with Section 2.1 of the Amended and Restated Loan and Security Agreement dated of even date herewith (the "Loan Agreement") by and among Bank and Borrowers. This Amended and Restated Term Note (this "Term Note") replaces Borrowers' Term Note dated October 20, 1993 in the original principal amount of $8,000,000, but does not evidence repayment thereof. This Term Note is issued pursuant to and entitled to the benefits of the Loan Agreement to which reference is hereby made for a more complete statement of the terms and conditions with respect hereto. All initially capitalized terms not otherwise defined herein shall have the same meanings as ascribed to them in the Loan Agreement unless the context clearly requires to the contrary. Principal shall be paid in 59 equal monthly installments of $178,571 each, commencing on the date (the "Term Loan Amortization Date") that is the earlier of: (i) the date that construction is completed and Borrowers commence pyro-processing of limestone for commercial sale from the modified number 6 kiln located at Cleburne, Johnson County, Texas, or (ii) July 1, 1998, with a final balloon payment of the remaining outstanding principal balance of the Term Loan, together with all accrued and unpaid interest and Bank's Costs pertaining thereto, due on the date that is 60 months after the Term Loan Amortization Date. Each installment of principal hereunder, including the final balloon payment, shall be due on the first Business Day of each month. Interest shall be payable on the outstanding principal balance hereof as set forth in Section 2.4.5 of the Loan Agreement, at the Interest Rate Option selected pursuant to Section 2.4.2 of the Loan Agreement. Interest shall be calculated on the basis of a 360 day year, and charged for the number of days actually elapsed during any year or part thereof. This Term Note may be prepaid at the times, in the amounts and with the prepayment premiums set forth in Section 2.4.8 of the Loan Agreement. All payments of principal, interest, and fees hereunder shall be made by Borrowers jointly and severally without defense, set off, or counterclaim and in same day funds and delivered to Bank not later than 12:00 noon (Philadelphia time) on the date due at Bank's office located at 1339 Chestnut Street, Transportation, Leasing and Construction Industry Services, 11th Floor, Widener Building, FC #1-8-11-24, Philadelphia, PA 19101, or such other place as shall be designated in writing for such purpose in accordance with the terms of the Loan Agreement. Each Borrower authorizes Bank to charge such Borrower's demand deposit account with Bank in order to cause timely payment to be made to Bank of all principal, interest and fees hereunder as provided in Section 1.5 of the Loan Agreement. Whenever any payment on this Term Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of interest on this Term Note. Any principal payment hereon not paid when due, and to the extent permitted by applicable law, any interest payment hereon not paid when due, and any other amount due to Bank hereunder, under the Loan Agreement or under any other Loan Document not paid when due, in any case whether at stated maturity, by notice of prepayment, by acceleration or otherwise, shall thereafter bear interest payable upon demand at a rate which is, with respect to Adjusted LIBOR Loans only, 5% per annum in excess of the Adjusted LIBOR until the expiration of the then applicable Interest Period, and after the expiration of the then applicable Interest Period, and in all cases with respect to Base Rate Loans and Fixed Rate Loans, at a rate which is 3% per annum in excess of the Base Rate. It shall be an event of default hereunder if an Event of Default shall have occurred under the Loan Agreement (a "Default"). In addition to other remedies of Bank as set forth in this Term Note, the Loan Agreement, or any other Loan Document, upon the occurrence of a Default which shall be continuing, Bank may, without demand, by written notice to Borrowers, cause this Term Note to become immediately due and payable in the manner, upon the conditions and with the effect provided in the Loan Agreement. THE FOLLOWING SETS FORTH A WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWERS OR ANY BORROWER. IN GRANTING THIS WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWERS OR ANY BORROWER, EACH BORROWER, FOLLOWING CONSULTATION WITH (OR DECISION NOT TO CONSULT WITH) SEPARATE COUNSEL FOR SUCH BORROWER, AND WITH KNOWLEDGE OF THE LEGAL EFFECT HEREOF, HEREBY WAIVES ANY AND ALL RIGHTS SUCH BORROWER HAS, OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY TO BE HEARD UNDER THE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF PENNSYLVANIA. EACH BORROWER SPECIFICALLY ACKNOWLEDGES THAT BANK HAS RELIED ON THIS WARRANT OF ATTORNEY IN GRANTING THE FINANCIAL (2) ACCOMMODATIONS DESCRIBED HEREIN. EACH BORROWER IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR SUCH BORROWER IN ANY AND ALL ACTIONS, AND UPON THE OCCURRENCE OF A DEFAULT TO: (I) ENTER JUDGMENT AGAINST SUCH BORROWER FOR THE PRINCIPAL SUM HEREOF; OR (II) SIGN FOR SUCH BORROWER AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN AMICABLE ACTION OR ACTIONS TO CONFESS JUDGMENT AGAINST SUCH BORROWER FOR ALL OR ANY PART OF THE INDEBTEDNESS; AND IN EITHER CASE FOR INTEREST AND COSTS TOGETHER WITH A REASONABLE COLLECTION FEE. EACH BORROWER FURTHER IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR AND ENTER JUDGMENT AGAINST SUCH BORROWER AND IN FAVOR OF BANK OR ANY HOLDER HEREOF WITH RESPECT TO AN AMICABLE ACTION OF REPLEVIN OR ANY OTHER ACTION TO RECOVER POSSESSION OF ANY COLLATERAL. EACH BORROWER WAIVES ALL RELIEF FROM ANY AND ALL APPRAISEMENT OR EXEMPTION LAWS NOW IN FORCE OR HEREAFTER ENACTED. IF A COPY OF THIS NOTE, VERIFIED BY AFFIDAVIT OF AN OFFICER OF BANK OR ANY OTHER HOLDER HEREOF, SHALL BE FILED IN ANY PROCEEDING OR ACTION WHEREIN JUDGMENT IS TO BE CONFESSED, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL HEREOF AND SUCH VERIFIED COPY SHALL BE SUFFICIENT WARRANT FOR ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR AND CONFESS JUDGMENT AGAINST EACH BORROWER AS PROVIDED HEREIN. JUDGMENT MAY BE CONFESSED FROM TIME TO TIME UNDER THE AFORESAID POWERS WHICH SHALL NOT BE EXHAUSTED BY ONE EXERCISE THEREOF. Borrowers hereby individually and collectively waive presentment, demand for payment, notice of dishonor, protest or notice of protest and any and all notices or demands and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder in connection with the delivery, acceptance or performance of this Term Note. The joint and several liabilities and obligations of Borrowers hereunder shall be unconditional without regard to the liability or obligations of any other party and shall not be in any manner affected by any indulgence whatsoever granted or consented to by Bank, including, but not limited to, any extension of time, renewal, waiver or other modification. Any failure of Bank to exercise any right hereunder shall not be construed as a waiver of the right to exercise the same or any other right at any time and from time to time thereafter. This Term Note shall be governed as to its validity, interpretation and effect by the internal laws of the Commonwealth of Pennsylvania. Any and all actions at law or in equity relating to this Term Note and the Indebtedness shall be brought, and jurisdiction may be had, in the courts of Philadelphia County, Pennsylvania, or at the election of the holder hereof, the United States District Court for the Eastern District of Pennsylvania. Borrowers (3) consent in advance to service of process by registered mail, return receipt requested, to the address set forth in Section 9.3 of the Loan Agreement. EACH BORROWER AND BANK EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT BY ANY PARTY WITH RESPECT TO THE INDEBTEDNESS OR ANY LOAN DOCUMENT.\ This Term Note may not be changed or amended orally but only by an agreement in writing and signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. This Term Note is secured by and entitled to the benefits of certain other Loan Documents. If any provision of this Term Note shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, but this Term Note shall be construed as if such invalid or unenforceable provision had never been contained herein. Borrowers promise to pay all Bank's Costs and expenses, including reasonable attorneys' fees, as provided in Section 1.6 of the Loan Agreement, incurred in the collection and enforcement of this Term Note. Each Borrower and endorsers of this Term Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice. IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrowers have executed this Term Note, as an instrument under seal, the day and year first above written. UNITED STATES LIME & MINERALS, INC. By: \s\ Timothy W. Byrne ----------------------------- Timothy W. Byrne, President TEXAS LIME COMPANY By: \s\ Timothy W. Byrne ----------------------------- Timothy W. Byrne, President ARKANSAS LIME COMPANY By: \s\ Timothy W. Byrne ----------------------------- Timothy W. Byrne, President (4) AMENDED AND RESTATED NOTE $4,000,000 December 30, 1997 FOR VALUE RECEIVED, UNITED STATES LIME & MINERALS, INC., a Texas corporation (formerly known as Scottish Heritable, Inc.), TEXAS LIME COMPANY, a Texas corporation, and ARKANSAS LIME COMPANY, an Arkansas corporation (collectively referred to herein as "Borrowers"), jointly and severally promise to pay to the order of CORESTATES BANK, N.A., a national banking association, its successors and assigns ("Bank"), the lesser of (x) Four Million Dollars ($4,000,000) or (y) the aggregate unpaid principal amount of all Cash Advances made by Bank to Borrowers or any Borrower under the Amended and Restated Loan and Security Agreement of even date herewith, by and among Borrowers and Bank ("Loan Agreement"), which principal amount and all accrued and unpaid interest thereon and Bank's Costs pertaining thereto shall be payable on the date that is 24 months after the date hereof, or such later date as may be agreed to in writing by Bank. This Amended and Restated Note (this "Note") replaces Borrowers' Note dated October 20, 1993 in the original principal amount of $6,000,000, but does not evidence repayment thereof. This Note is issued pursuant to and entitled to the benefits of the Loan Agreement to which reference is hereby made for a more complete statement of the terms and conditions with respect hereto. All initially capitalized terms used herein shall have the same meanings as ascribed to them in the Loan Agreement unless the context clearly requires to the contrary. Borrowers promise to pay interest on the unpaid principal amount of all Cash Advances from the date made to maturity (whether by acceleration or otherwise) or earlier repayment, with respect to Base Rate Loans at the Base Rate per annum, and with respect to Adjusted LIBOR Loans at the Adjusted LIBOR on the relevant Interest Rate Determination Date plus 1.5% per annum, payable in accordance with Section 2.2 of the Loan Agreement. Interest shall be payable on the outstanding principal balance hereof as set forth in Section 2.4.5 of the Loan Agreement, at the Interest Rate Option selected pursuant to Section 2.4.2 of the Loan Agreement. Interest shall be calculated on the basis of a 360 day year, and charged for the number of days actually elapsed during any year or part thereof. This Note may be prepaid at the times, in the amounts and with the prepayment premiums set forth in Section 2.4.8 of the Loan Agreement. All payments hereunder shall be made by Borrowers jointly and severally without defense, set off, or counterclaim and in same day funds and delivered to Bank not later than 12:00 noon (Philadelphia time) on the date due at Bank's office located at 1339 Chestnut Street, Transportation, Leasing and 1 Construction Industry Services, 11th Floor, Widener Building, FC #1-8-11-24, Philadelphia, PA 19101, or such other place as shall be designated in writing for such purpose in accordance with the terms of the Loan Agreement. Each Borrower authorizes Bank to charge such Borrower's demand deposit account with Bank in order to cause timely payment to be made to Bank of all principal, interest and fees hereunder as provided in Section 1.5 of the Loan Agreement. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of interest on this Note. Any principal payment hereon not paid when due, and to the extent permitted by applicable law, any interest payment hereon not paid when due, and any other amount due to Bank hereunder, under the Loan Agreement or under any other Loan Document not paid when due, in any case whether at stated maturity, by notice of prepayment, by acceleration or otherwise, shall thereafter bear interest payable upon demand at a rate which is, with respect to Adjusted LIBOR Loans only, 5% per annum in excess of the Adjusted LIBOR until the expiration of the then applicable Interest Period, and after the expiration of the then applicable Interest Period, and in all cases with respect to Base Rate Loans, at a rate which is 2.75% per annum in excess of the Base Rate. It shall be an event of default hereunder if an Event of Default shall have occurred under the Loan Agreement (a "Default"). In addition to other remedies of Bank as set forth in this Note, the Loan Agreement, or any other Loan Document, upon the occurrence of a Default which shall be continuing, Bank may, without demand, by written notice to Borrowers, cause this Note to become immediately due and payable in the manner, upon the conditions and with the effect provided in the Loan Agreement. THE FOLLOWING SETS FORTH A WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWERS OR ANY BORROWER. IN GRANTING THIS WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWERS OR ANY BORROWER, EACH BORROWER, FOLLOWING CONSULTATION WITH (OR DECISION NOT TO CONSULT WITH) SEPARATE COUNSEL FOR SUCH BORROWER, AND WITH KNOWLEDGE OF THE LEGAL EFFECT HEREOF, HEREBY WAIVES ANY AND ALL RIGHTS SUCH BORROWER HAS, OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY TO BE HEARD UNDER THE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF PENNSYLVANIA. EACH BORROWER SPECIFICALLY ACKNOWLEDGES THAT BANK HAS RELIED ON THIS WARRANT OF ATTORNEY IN GRANTING THE FINANCIAL ACCOMMODATIONS DESCRIBED HEREIN. EACH BORROWER IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY 2 COURT OF RECORD TO APPEAR FOR SUCH BORROWER IN ANY AND ALL ACTIONS, AND UPON THE OCCURRENCE OF A DEFAULT TO: (I) ENTER JUDGMENT AGAINST SUCH BORROWER FOR THE PRINCIPAL SUM HEREOF; OR (II) SIGN FOR SUCH BORROWER AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN AMICABLE ACTION OR ACTIONS TO CONFESS JUDGMENT AGAINST SUCH BORROWER FOR ALL OR ANY PART OF THE INDEBTEDNESS; AND IN EITHER CASE FOR INTEREST AND COSTS TOGETHER WITH A REASONABLE COLLECTION FEE. EACH BORROWER FURTHER IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR AND ENTER JUDGMENT AGAINST SUCH BORROWER AND IN FAVOR OF BANK OR ANY HOLDER HEREOF WITH RESPECT TO AN AMICABLE ACTION OF REPLEVIN OR ANY OTHER ACTION TO RECOVER POSSESSION OF ANY COLLATERAL. EACH BORROWER WAIVES ALL RELIEF FROM ANY AND ALL APPRAISEMENT OR EXEMPTION LAWS NOW IN FORCE OR HEREAFTER ENACTED. IF A COPY OF THIS NOTE, VERIFIED BY AFFIDAVIT OF AN OFFICER OF BANK OR ANY OTHER HOLDER HEREOF, SHALL BE FILED IN ANY PROCEEDING OR ACTION WHEREIN JUDGMENT IS TO BE CONFESSED, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL HEREOF AND SUCH VERIFIED COPY SHALL BE SUFFICIENT WARRANT FOR ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR AND CONFESS JUDGMENT AGAINST EACH BORROWER AS PROVIDED HEREIN. JUDGMENT MAY BE CONFESSED FROM TIME TO TIME UNDER THE AFORESAID POWERS WHICH SHALL NOT BE EXHAUSTED BY ONE EXERCISE THEREOF. Borrowers hereby individually and collectively waive presentment, demand for payment, notice of dishonor, protest or notice of protest and any and all notices or demands and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder in connection with the delivery, acceptance or performance of this Note. The joint and several liabilities and obligations of Borrowers hereunder shall be unconditional without regard to the liability or obligations of any other party and shall not be in any manner affected by any indulgence whatsoever granted or consented to by Bank, including, but not limited to, any extension of time, renewal, waiver or other modification. Any failure of Bank to exercise any right hereunder shall not be construed as a waiver of the right to exercise the same or any other right at any time and from time to time thereafter. This Note shall be governed as to its validity, interpretation and effect by the internal laws of the Commonwealth of Pennsylvania. Any and all actions at law or in equity relating to this Note and the Indebtedness shall be brought, and jurisdiction may be had, in the courts of Philadelphia County, Pennsylvania, or at the election of the holder hereof, the United States District Court for the Eastern District of Pennsylvania. Borrowers consent in advance to service of process by registered mail, return receipt requested, to the address set forth in Section 9.3 of the Loan Agreement. 3 EACH BORROWER AND BANK EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT BY ANY PARTY WITH RESPECT TO THE INDEBTEDNESS OR ANY LOAN DOCUMENT. This Note may not be changed or amended orally but only by an agreement in writing and signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. This Note is entitled to the benefits of certain other Loan Documents. If any provision of this Note shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, but this Note shall be construed as if such invalid or unenforceable provision had never been contained herein. Borrowers promise to pay all Bank's Costs and expenses, including reasonable attorneys' fees, as provided in Section 1.6 of the Loan Agreement, incurred in the collection and enforcement of this Note. Each Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice. IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrowers have executed this Note, as an instrument under seal, the day and year first above written. UNITED STATES LIME & MINERALS, INC. By: \s\ Timothy W. Byrne ----------------------------- Timothy W. Byrne, President TEXAS LIME COMPANY By: \s\ Timothy W. Byrne ----------------------------- Timothy W. Byrne, President ARKANSAS LIME COMPANY By: \s\ Timothy W. Byrne ----------------------------- Timothy W. Byrne, President 4 EX-10.M 4 ARKANSAS LIME COMPANY BARGAINING UNIT 401(K) PLAN PROTOTYPE 401(k) PLAN ARTICLE I. INTRODUCTION The Employer has established this Plan (the "Plan"), consisting of the Adoption Agreement and the following provisions (the "Prototype 401(k) Plan") for the exclusive benefit of Participants and their Beneficiaries. ARTICLE II. DEFINITIONS Where the following words and phrases appear in this Plan, they shall have the respective meanings set forth below, unless their context clearly indicates a contrary meaning. The singular herein shall include the plural, and vice versa, and the masculine gender shall include the feminine gender, and vice versa, where the context requires. 2.01 "Account" shall mean the Trust assets held by the Trustee for the benefit of a Participant, which shall be the sum of the Participant's Salary Reduction Contribution Account, Deferred Cash Contribution Account, Employer Profit Sharing Contribution Account, Employer Matching Contribution Account, Nondeductible Voluntary Contribution Account, Deductible Voluntary Contribution Account, Rollover Account and Qualified Nonelective Contribution Account and any transfer account established pursuant to Section 4.07 hereof with respect to funds transferred to the Trust on the Participant's behalf. 2.02 "Act" shall mean the Employee Retirement Income Security Act of 1974, as amended. 2.03 "Administrator" shall mean the person or persons specified in Section 14.01 hereof. 2.04 "Adoption Agreement" shall mean the agreement by which the Employer has most recently adopted or amended the Plan. 2.05 "Annuity Starting Date" shall mean the first day of the first period for which an amount is paid to a Participant (other than loan(s) or in-service withdrawal(s)) from the Trust (whether or not such distributions are received in the form of an annuity). 2.06 "Applicable Life Expectancy" shall mean the life expectancy of the Participant or the joint life and last survivor expectancy of the Participant and Beneficiary calculated using the return multiples specified in Section 1.72-9 of the Treasury Regulations. Unless the Participant elects otherwise, life expectancies determined as of the First Required Distribution Year shall be calculated using the attained age of the Participant and, if applicable, the Beneficiary as of his or her birth date in the First Required Distribution Year. Life expectancies for subsequent calendar years shall be determined by reducing the life expectancy determined as of the First Required Distribution Year by one for each calendar year that has elapsed; provided, however, that the Participant may elect prior to April 1 of the year immediately following his or her First Required Distribution Year to have his or her life expectancy and, if the Participant's Beneficiary is his or her Spouse, the life expectancy of such Beneficiary, recalculated annually. If a Participant elects recalculation, life expectancies for each subsequent calendar year shall be determined using the attained ages of the Participant and, if applicable, his or her Beneficiary, as of their respective birth dates in such calendar year. With respect to a Beneficiary who is entitled to receive a distribution after the death of a Participant, "Applicable Life Expectancy" shall mean the life expectancy of the Beneficiary calculated using the return multiples specified in Section 1.72-9 of the Treasury Regulations as of the Beneficiary's birth date in the calendar year in which distributions are required to commence, and reduced by one for each subsequent calendar year. If the Beneficiary is the Participant's Spouse, he or she may elect, prior to the time distributions are required to commence, to have his or her life expectancy recalculated annually. If a Spouse so elects, his or her life expectancy for each subsequent calendar year shall be determined as of his or her birth date in such calendar year. 2.07 "Beneficiary" shall mean any person or legal representative effectively designated by the Participant as a person entitled to receive benefits on or after the death of a Participant. Such term shall also include any person or legal representative designated by a Beneficiary as a person entitled to receive benefits on or after the death of such Beneficiary. 2.08 "Code" shall mean the Internal Revenue Code of 1986, as amended. Reference to a section of the Code shall include any comparable section or sections of future legislation that amends, supplements or supersedes such section. 2.09 "Compensation" shall mean: (a) except as provided in subsection (b), (c), and (d) and subject to the limitation of subsection (e), one of the following as elected by the Employer in the Adoption Agreement: (i) W-2 Compensation. Information required to be reported under Sections 6041, 6051 and 6052 of the Code (Wages, tips and other compensation as reported on Form W-2). Compensation is defined as wages within the meaning of Section 3401(a) and all other payments of compensation to an Employee by the Employer (in the course of the Employer's trade or business) for which the Employer is required to furnish the Employee a written statement under Sections 6041(d), 6051(a)(3) and 6052. Compensation must be determined without regard to any rules under Section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Section 3401(a)(2)). (ii) 415 Safe Harbor Compensation. "Compensation" as defined in Section 5.05(b)(ii) of this Plan. (iii) Safe Harbor Alternative Definition. Compensation as defined in Section 2.09(a)(ii) above, reduced by all of the following items (even if includible in gross income): reimbursements or other expense allowances, fringe benefits (cash and non-cash), moving expenses, deferred compensation, and welfare benefits. (iv) In the case of a Self-Employed Individual, the determination of Compensation shall be made on the basis of the Self-Employed Individual's Earned Income. (b) If so specified in the Adoption Agreement, the Employer may elect to include in the definition of Compensation the Participant's Salary Reduction Contributions, Deferred Cash Contributions and any other amount which is contributed by the Employer pursuant to a salary reduction agreement and which is not includible in the gross income of the employee under sections 125, 402(e)(3), 402(h) or 403(b) of the Code. (c) If so specified in the Adoption Agreement, an Employer may elect to exclude from the definition any one or more of the following types of compensation: (i) additional compensation for Participants working outside their regularly scheduled tour of duty such as overtime pay, premiums for shift differential and call-in premiums; (ii) bonuses; (iii) commissions; (iv) such other items as specified in the Adoption Agreement; provided, however, that if the Employer elects an alternative definition of Compensation pursuant to this Section 2.09(c) for purposes of allocating Employer Profit Sharing Contributions and forfeitures thereof, then such alternative definition must be tested by the Administrator to show that it meets the nondiscrimination requirements of Section 414(s)(3) of the Code. Such alternative definition of Compensation may not be used for purposes of Articles V, VI and XXIII. (d) If this Plan is adopted, (i) as an amendment to an existing plan, (ii) to remove a disqualifying provision which results from a change in the qualification requirements of the Code made by the Tax Reform Act of 1986 and such other legislation as set forth in Section 1.401(b)-1(b)(2)(ii) of the regulations under Code Section 401(b), and (iii) within the remedial amendment period applicable to such disqualifying provision, then for Plan Years beginning before the date such amendment is adopted, "Compensation" shall, subject to the limitation of subsection (e), mean compensation as defined under the terms of the plan prior to its amendment. (e) In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual Compensation of each Participant taken into account under the Plan for any determination period shall not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17) of the Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not to exceed 12 months, beginning in such calendar year over which Compensation is determined ("determination period"). If a determination period is a short Plan Year (i.e., shorter than 12 months), the OBRA '93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. In determining the Compensation of a Participant for purposes of this limitation, the rules of Section 414(q)(6) of the Code shall apply, except in applying such rules, the term "family" shall include only the Spouse of the Participant and any lineal descendants of the Participant who have not attained age 19 before the close of the year. If, as a result of the application of such rules the OBRA '93 annual compensation limit is exceeded, then (except for purposes of determining the portion of Compensation up to the integration level if this Plan provides for permitted disparity), the limitation shall be prorated among the affected individuals in proportion to each such individual's Compensation as determined under this Section prior to the application of this limitation. For Plan Years beginning on or after January 1, 1994, any reference in this Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA '93 annual compensation limit. (f) Compensation shall be based on the amount actually paid to the Participant during the Plan Year. To the extent elected by the Employer in the Adoption Agreement, for purposes of allocating Employer Profit Sharing Contributions and/or Employer Matching Contributions and/or applying the Section 401(m) non-discrimination test, Compensation shall be based on the amounts paid during that portion of the Plan Year during which the Employee is eligible to participate with respect to the allocation of such contributions. To the extent elected by the Employer in the Adoption Agreement, for purposes of applying the Section 401(k) non-discrimination test, Compensation shall be based on the amount paid during that portion of the Plan Year during which the Employee is eligible to make a salary reduction election and/or to receive allocations of Deferred Cash Contributions. Notwithstanding the preceding sentence, compensation for the purposes of Article V (Code Section 415 Limitations on Allocations) shall be based on the amount actually paid or made available to the Participant during the Limitation Year. Compensation for the initial Plan Year for a new plan shall be based upon eligible Participants' Compensation, subject to the Adoption Agreement, from the Effective Date through the end of the first Plan Year. 2.10 "Deductible Voluntary Contribution Account" shall mean the separate account maintained pursuant to Section 7.03(g) for any deductible voluntary contributions under Code Section 219 that the Participant made for 1986 and earlier calendar years and the income, expenses, gains and losses attributable thereto. 2.11 "Deferred Cash Allocation" shall mean the contribution payable by the Employer to the Trust on behalf of a Participant subject to the Participant's right to elect to receive all or a portion of such contribution in cash in lieu of having it contributed to the Trust on his or her behalf. 2.12 "Deferred Cash Contribution Account" shall mean the separate account maintained pursuant to Section 7.03(b) hereof for Deferred Cash Contributions allocated to the Participant and the income, expenses, gains and losses attributable thereto. 2.13 "Deferred Cash Contributions" shall mean contributions to the Trust by the Employer in accordance with Section 4.02 hereof. 2.14 "Designated Investment" shall mean either a collective investment trust for the collective investment of assets of employee pension or profit sharing trusts pursuant to Revenue Ruling 81-100, a commingled investment vehicle for the collective investment of assets of institutional investors, or a regulated investment company, for which Scudder, Stevens & Clark, Inc., its successor or any of its affiliates, acts as investment adviser and any of which are designated by Scudder Investor Services, Inc. or its successors as eligible for investment under the Plan. 2.15 "Designation of Beneficiary" or "Designation" shall mean the document executed by a Participant under Article XVII. 2.16 "Disabled" or "Disability" shall mean the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of 12 months or more, as certified by a licensed physician selected by the Participant and approved by the Employer. 2.17 "Distributor" shall mean Scudder Investor Services, Inc. or its successor. 2.18 "Earned Income" shall mean the net earnings from self-employment in the trade or business with respect to which the Plan is established, for which personal services of the Owner-Employee or Self-Employed Individual are a material income-producing factor. Net earnings will be determined without regard to items not included in gross income and the deductions allocable to such items, except that, for taxable years beginning after December 31, 1989, net earnings shall be determined with regard to the deduction allowed by Code Section 164(f). Net earnings are reduced by contributions by the Employer to a qualified plan, including this Plan, to the extent deductible under Code Section 404. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual Earned Income of each Participant taken into account under the Plan for any determination period shall not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17) of the Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not to exceed 12 months, beginning in such calendar year over which Earned Income is determined ("determination period"). If a determination period is a short Plan Year (i.e., shorter than 12 months), the OBRA '93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. In determining the Earned Income of a Participant for purposes of this limitation, the rules of Section 414(q)(6) of the Code shall apply, except in applying such rules, the term "family" shall include only the Spouse of the Participant and any lineal descendants of the Participant who have not attained age 19 before the close of the year. If, as a result of the application of such rules the OBRA '93 annual compensation limit is exceeded, then (except for purposes of determining the portion of Earned Income up to the integration level if this Plan provides for permitted disparity), the limitation shall be prorated among the affected individuals in proportion to each such individual's Earned Income as determined under this Section prior to the application of this limitation. For Plan Years beginning on or after January 1, 1994, any reference in this Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA '93 annual compensation limit. 2.19 "Effective Date" shall mean the date specified by the Employer in the Adoption Agreement. 2.20 "Employee" shall mean any individual who performs services in any capacity in the business of the Employer (including any individual deemed to be an employee of the Employer under Code Section 414(n) or (o)). 2.21 "Employer" shall mean the organization or other entity named as such in the Adoption Agreement and any successor organization or entity which adopts the Plan. If the organization or other entity named as Employer in the Adoption Agreement is a sole proprietorship or a professional corporation and the sole proprietor of such proprietorship or the sole shareholder of the professional corporation dies, then the legal representative of the estate of such sole proprietor or shareholder shall be deemed to be the Employer until such time as, through the disposition of such sole proprietor's or sole shareholder's estate or otherwise, any organization or other entity succeeds to the interests of the sole proprietor in the proprietorship or the sole shareholder in the professional corporation. Unless the adopting organization or entity elects otherwise in the Adoption Agreement, any two or more organizations or entities which are members of (a) a controlled group of corporations (as defined under Code Section 414(b)) which includes the adopter, (b) a group of trades or businesses (whether or not incorporated) which are under common control (as defined under Code Section 414(c)) which includes the adopter, or (c) an affiliated service group (as defined under Code Section 414(m)) which includes the adopter, will be considered to be the Employer for the purposes of the Plan. Similarly, any other organization or entity which is required to be aggregated with the adopter pursuant to Code Section 414(o) and the regulations thereunder will be considered to be the Employer for the purposes of the Plan. 2.22 "Employer Contributions" shall mean Employer Profit Sharing Contributions, Employer Matching Contributions, Salary Reduction Contributions, Deferred Cash Contributions, Qualified Matching Contributions and Qualified Nonelective Contributions. 2.23 "Employer Profit Sharing Contribution Account" shall mean the separate account maintained pursuant to Section 7.03(c) hereof for Employer Profit Sharing Contributions allocated to the Participant and the income, expenses, gains and losses attributable thereto. 2.24 "Employer Profit Sharing Contributions" shall mean contributions to the Trust by the Employer in accordance with Section 4.03 hereof. Employer Profit Sharing Contributions may be fixed or discretionary as provided in the Adoption Agreement. 2.25 "Employer Matching Contribution Account" shall mean the separate account maintained pursuant to Section 7.03(d) hereof for Employer Matching Contributions allocated to the Participant and the income, expenses, gains and losses attributable thereto. 2.26 "Employer Matching Contributions" shall mean the contributions made to the Trust by the Employer in accordance with Section 4.04 hereof as matching contributions. 2.27 "Family Member" shall mean, with respect to a particular Employee, any individual who is a Spouse, lineal ascendant, lineal descendent, or a Spouse of a lineal ascendant or descendent of the Employee. "Family Member" as used in this Plan refers to an individual who is, or was during the Plan Year in question, an Employee. 2.28 "First Required Distribution Year" shall mean: (a) in the case of a Participant whose date of birth is July 1, 1917 or a later date, the calendar year during which the Participant attains age 70 1/2; (b) in the case of a Participant (i) whose date of birth is June 30, 1917 or an earlier date and (ii) who is not, and has not been at any time since the calendar year during which he or she attained age 65 1/2, a "5% owner" (as defined in Code Section 416(i)(1)(B)(i)) of the Employer (hereinafter a "5% owner"), the calendar year during which occurs the later of the Participant's separation from Service or the Participant's attainment of age 70 1/2, provided that if the Participant continues in Service after he or she attains age 70 1/2 and later becomes a 5% owner, such Participant's First Required Distribution Year shall be the calendar year during which the Participant attains the status of a 5% owner; (c) in the case of a Participant (i) whose date of birth is June 30, 1917 or an earlier date and (ii) who is, or has been at sometime since the calendar year during which he or she attained age 65 1/2, a 5% owner, the calendar year during which the Participant attains age 70 1/2. 2.29 "Highly Compensated Employee" shall mean: (a) any Employee who was, at any time in the look-back year or determination year, a 5% owner; (b) any Employee who, in the look-back year: (i) earned more than $75,000 (as adjusted by the Secretary of the Treasury to reflect rises in the cost of living in accordance with Code Section 415(d)) in annual compensation, (ii) was an officer and earned more than 50% of the dollar limitation in effect for such year under Code Section 415(b)(1)(A); or (iii) earned more than $50,000 (as adjusted by the Secretary of the Treasury to reflect rises in the cost of living in accordance with Code Section 415(d)) in annual compensation and was among the top 20% of Employees when ranked on the basis of compensation paid during such year. For purposes of calculating the top 20% of Employees when ranked on the basis of compensation paid during the look-back year, there shall be excluded from the total number of Employees: (A) Employees with less than six months of Service, (B) Employees who normally work less than 17 1/2 hours per week, (C) Employees who normally work less than six months per year, (D) except as provided in Treasury Regulations, Employees covered by a collective bargaining agreement, (E) Employees who have not attained 21 years of age, and (F) Employees who are nonresident aliens and who receive no earned income from the Employer that constitutes income from sources within the United States; (c) any Employee not described in paragraph (b) above but who is described in clause (i), (ii) or (iii) of paragraph (b) if the term "determination year" is substituted for the term "look-back year," and the Employee is among the 100 Employees who received the most compensation from the Employer during the determination year; and (d) any former Employee who has separated from Service but who was a Highly Compensated Employee as described in paragraph (a), (b) or (c) above when he separated from Service or at any time after he attained age 55. For purposes of this Section, "compensation" shall mean the amount paid during the look-back year or determination year, whichever is applicable, by the Employer to the Employee for services rendered (regardless of whether the individual was a Participant at the time) as reportable to the Federal Government for the purpose of withholding federal income taxes and increased by any amount to which Code Sections 125, 402(e)(3), 402(h)(1)(B) or 403(b) apply. Also for purposes of this Section, no more than 50 Employees or, if lesser, the greater of three Employees or 10% of Employees shall be treated as officers; however, if no officer has compensation in excess of the applicable stated dollar amount above in any year, the officer with the highest compensation shall be treated as described in paragraph (b) or (c), as applicable. For this purpose, the determination year shall be the Plan Year. The look-back year shall be the 12-month period immediately preceding the determination year. The Employer may elect to make the look-back year calculation for a determination on the basis of the calendar year ending with or within the applicable determination year, as prescribed by Section 414(q) of the Code and the regulations issued thereunder. If an Employee is, during a determination year or look-back year, a Family Member of either a 5% owner who is an active or former Employee or a Highly Compensated Employee who is one of the ten most Highly Compensated Employees ranked on the basis of compensation paid by the Employer during such year, then the Family Member and the 5% owner or top-ten Highly Compensated Employee shall be aggregated. In such case, the Family Member and the 5% owner or top-ten Highly Compensated Employee shall be treated as a single Employee receiving compensation and Plan contributions or benefits equal to the sum of such compensation and contributions or benefits of the Family Member and 5% owner or top-ten Highly Compensated Employee. Finally, all interpretative questions concerning whether an individual constitutes a Highly Compensated Employee shall be resolved in a manner consistent with Department of Treasury and Internal Revenue Service interpretations of Code Section 414(q). 2.30 "Highly Compensated Participant" shall mean a Highly Compensated Employee who was, at any time during the Plan Year in question, eligible to participate in the Plan. 2.31 "Hour of Service" shall mean each hour credited to an Employee in the applicable computation period (a 12-consecutive month period) pursuant to subsection (a) or (b) below, as the case may be. (a) If the Employer has so selected in the Adoption Agreement, Hours of Service shall be credited on the basis of weeks of employment and the rules in paragraphs (i) through (iii) below shall apply as modified by paragraphs (iv) and (v) below. (i) Each Employee shall be credited with 45 Hours of Service for each week in which the Employee would be credited with at least one hour of service under Section 2530.200b-2 of the Department of Labor Regulations which are incorporated herein by reference. In the case of a week which extends into two computation periods, the Hours of Service for such week shall be allocated between the two computation periods on a pro rata basis. (ii) In the case of a payment made or due to an Employee which is not calculated on the basis of units of time, the number of Hours of Service to be credited shall be equal to the amount of the payment divided by the Employee's most recent hourly rate of compensation as determined under Section 2530.200b-2 of the Department of Labor Regulations. (iii) No more than 501 Hours of Service shall be credited under this Section for any single continuous period (whether or not such period occurs in a single computation period) during which no duties or services are performed for the Employer (or any other corporation during a time when such corporation was related to the Employer within the meaning of Code Section 414), but for which the individual is paid. (iv) The following hours shall be considered to be hours of service for which an Employee would be credited under Section 2530.200b-2 of the Department of Labor Regulations for the purposes of subsection (a)(i) of this Section: (A) An hour for which an Employee is paid, or entitled to payment, for the performance of duties or services for the Employer. (B) An hour for which an Employee is paid, or entitled to payment, by the Employer (or any other corporation during a time when such corporation was related to the Employer within the meaning of Code Section 414) on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including Disability), layoff, jury duty, military duty or leave of absence (unless such payment is made or due solely to comply with applicable workman's compensation, unemployment compensation or disability insurance laws or solely as reimbursement for the Employee's medical expenses). (C) An hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer (or any other corporation during a time when such corporation was related to the Employer within the meaning of Code Section 414). The same hours shall not be considered both under paragraph (iv)(A) or paragraph (iv)(B), as the case may be, and under this paragraph (iv)(C). Such hours shall be treated under paragraphs (i) through (iii) as occurring in the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made. (v) Solely for the purpose of determining whether a One-Year Break in Service has occurred, an Employee shall be credited with any Hours of Service which would otherwise have been credited to such Employee but for such absence from work during a Plan Year which commences after December 31, 1984 because of: such Employee's pregnancy, birth of a child of the Employee, placement of an adopted child with the Employee, or caring for a natural or an adopted child for a period beginning immediately following birth or placement. Hours of Service shall be credited to an Employee pursuant to this paragraph in the manner indicated in paragraphs (i) through (iii) above for the computation period during which such absence begins, if the Employee would otherwise have suffered a One-Year Break in Service and, in all other cases, in the next following computation period. No more than 501 Hours of Service shall be credited under this paragraph by reason of any one placement or pregnancy. Notwithstanding any implication of this paragraph (v) to the contrary, no credit shall be given pursuant to this paragraph (v) unless the Employee makes a timely, written filing with the Administrator which establishes valid reasons for the absence and enumerates the days for which there was such an absence. (b) If the Employer has not selected in the Adoption Agreement to have Hours of Service credited on the basis of weeks of employment, Hours of Service shall mean: (i) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for the Employer. These hours shall be credited to the Employee for the computation period in which the duties are performed; (ii) Each hour for which an Employee is paid, or entitled to payment, by the Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including Disability), layoff, jury duty, military duty or leave of absence. No more than 501 Hours of Service shall be credited under this paragraph for any single continuous period (whether or not such period occurs in a single computation period). Hours under this subsection shall be calculated and credited pursuant to section 2530.200b-2 of the Department of Labor Regulations which are incorporated herein by this reference; (iii) Solely for the purpose of determining whether a One-Year Break in Service has occurred, each hour which normally would have been credited to an Employee (or in any case in which such hours cannot be determined, eight hours per day of such absence) but for an absence from work during a Plan Year which commences after December 31, 1984 because of such individual's pregnancy, birth of a child of the Employee, placement of an adopted child with the Employee, or caring for an adopted or a natural child following placement or birth. Hours of Service shall be credited to an Employee pursuant to this paragraph for the computation period during which such absence begins if the individual would otherwise have suffered a One-Year Break in Service, and in all other cases, in the immediately following computation period. No more than 501 Hours of Service shall be credited under this paragraph by reason of any one placement or pregnancy. Notwithstanding any implication of this paragraph (iii) to the contrary, no credit shall be given under this paragraph (iii) unless the Employee makes a timely, written filing with the Administrator which establishes valid reasons for the absence and enumerates the days for which there was such an absence; (iv) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer. The same Hours of Service shall not be credited both under paragraph (i), (ii) or (iii), as the case may be, and under this paragraph (iv). These hours shall be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made. (c) (i) Where the Employer maintains the plan of a predecessor employer, service for such predecessor employer shall be treated as Service of the Employer. Where the Employer does not maintain the plan of a predecessor employer, employment by a predecessor employer, upon the written election of the Employer made in a uniform and non-discriminatory manner, shall be treated as Service for the Employer. (ii) If the Employer is a member of (A) a controlled group of corporations (as defined under Code Section 414(b)), (B) a group of trades or businesses (whether or not incorporated) which are under common control (as defined under Code Section 414(c)), or (C) an affiliated service group (as defined under Code Section 414(m)), all service of an Employee for any member of such a group, or for any other entity required to be aggregated with the Employer pursuant to Code Section 414(o) and the regulations thereunder, shall be treated as if it were Service for the Employer for purposes of this Section. (iii) Except as provided below, service of any Employee who is considered a leased employee of the Employer under Code Section 414(n)(2) shall be treated as if it were Service for the Employer for purposes of this Section. However, qualified plan contributions or benefits provided by the leasing organization which are attributable to services performed for the Employer shall be treated as provided by the Employer. The provisions of this paragraph shall not apply to any leased employee if such individual: (A) is covered by a money purchase pension plan maintained by the leasing organization providing: (1) a non-integrated employer contribution rate of at least 10% of compensation (as defined in Code Section 415(c)(3), but including amounts contributed by the Employer pursuant to a salary reduction agreement which are excludable from the Employee's gross income under Code Section 125, 402(e)(3), 402(h), or 403(b), (2) immediate participation for leasing organization employees who earn more than $1,000 in a year (other than employees who perform substantially all their services for the organization), and (3) full and immediate vesting, and (B) is a member of a group of leased employees which in the aggregate does not constitute more than 20% of the Employer's non-highly compensated work force (within the meaning of Code Section 414(n)(5)(C)(ii)). (C) For purposes of this Section, the term "leased employee" means any person who is not an Employee and who, pursuant to an agreement between the recipient and any other person, has performed services for the Employer (or for the Employer and related persons determined in accordance with Code Section 414(n)(6)) on a substantially full-time basis for a period of at least one year and such services are of a type historically performed by employees in the business field of the Employer. 2.32 "Integration Level" for a Plan Year shall mean the lesser of the Social Security Wage Base (as in effect on the first day of the Plan Year) or the dollar amount specified in the Adoption Agreement. 2.33 "Integration Rate" for the Plan Year shall mean the lesser of the Maximum Disparity Rate (as in effect on the first day of the Plan Year) or the rate specified in the Adoption Agreement. 2.34 "Loan Trustee" shall mean the person named in the Adoption Agreement to act as trustee solely for the purpose of administering the provisions of Article XII and holding the Trust assets to the extent that they are invested in loans pursuant to such Article. Loan assets shall be held in a separate trust if the person named as Loan Trustee is not the same person as the person named as Trustee. Scudder Trust Company will not act as Loan Trustee unless it specifically agrees in writing to act as such. 2.35 "Maximum Disparity Rate" shall mean the rate determined in accordance with paragraphs (a), (b) or (c) and (d) below. (a) If the Integration Level selected by the Employer in the Adoption Agreement is equal to the Social Security Wage Base or does not exceed the greater of $10,000 or 20 percent of the Social Security Wage Base, then, except as provided in (d) below, the Maximum Disparity Rate is equal to the greater of (i) 5.7 percent or (ii) the OASDI Rate. (b) If the Integration Level selected by the Employer in the Adoption Agreement exceeds the greater of $10,000 or 20 percent of the Social Security Wage Base but is less than or equal to 80 percent of the Social Security Wage Base, then, except as provided in (d) below, the Maximum Disparity Rate is equal to the greater of (i) 4.3 percent or (ii) the OASDI Rate multiplied by a fraction the numerator of which is 4.3 and the denominator of which is 5.7. (c) If the Integration Level selected by the Employer in the Adoption Agreement exceeds 80 percent of the Social Security Wage Base but is less than the Social Security Wage Base, then, except as provided in (d) below, the Maximum Disparity Rate is equal to the greater of (i) 5.4 percent or (ii) the OASDI Rate multiplied by a fraction the numerator of which is 5.4 and the denominator of which is 5.7. (d) If allocations for a Plan Year are made on an integrated basis pursuant to Section 4.03(b)(ii) and the provisions of Section 23.03 are applicable for such Plan Year, then for purposes of determining the Integration Rate as applied to limit allocations under Section 4.03(b)(ii), the Maximum Disparity Rate determined in accordance with paragraph (a), (b) or (c) above shall be reduced by 3 percent. If the Employer has elected in the Adoption Agreement to make a 4 percent minimum allocation pursuant to Section 23.07(b), then 4 percent shall be substituted for 3 percent in the preceding sentence. 2.36 "Nondeductible Voluntary Contribution Account" shall mean the separate account maintained pursuant to the Section 7.03(e) hereof for Nondeductible Voluntary Contributions made by the Participant and the income, expenses, gains and losses attributable thereto. 2.37 "Nondeductible Voluntary Contributions" shall mean all contributions by Participants which are not deductible voluntary contributions under Code Section 219, Rollover Contributions, or contributions of accumulated deductible employee contributions (as defined in Code Section 72(o)(5)). 2.38 "Non-Highly Compensated Employee" shall mean an Employee who is neither a Highly Compensated Employee nor a Family Member of a Highly Compensated Employee. 2.39 "Non-Highly Compensated Participant" shall mean a Non-Highly Compensated Employee who was, at any time during the Plan Year in question, eligible to participate in the Plan. 2.40 "Normal Retirement Date" or "Normal Retirement Age" shall mean the date selected by the Employer in the Adoption Agreement. 2.41 "OASDI Rate" for a Plan Year shall mean that portion of the tax rate under Code Section 3111(a) in effect on the first day of the Plan Year which is attributable to old-age insurance. 2.42 "One-Year Break in Service" shall mean a 12-consecutive-month period in which an Employee does not complete more than 500 Hours of Service unless the number of Hours of Service specified in the Adoption Agreement for purposes of determining a Year of Service is less than 501, in which case a 12-consecutive-month period in which an Employee has fewer than that number of Hours of Service shall be a One-Year Break in Service. The computation period over which One-Year Breaks in Service shall be measured shall be the same computation period over which Years of Service are measured. 2.43 "Owner-Employee" shall mean an Employee who is a sole proprietor adopting this Plan as the Employer, or who is a partner owning more than 10% of either the capital or profits interest of a partnership adopting this Plan as the Employer. Solely for the purposes of Article XII hereof, an Owner-Employee shall also mean an Employee who owns (or is considered as owning within the meaning of Code Section 318(a)(1)) on any day during the Year, more than 5% of the Employer if the Employer is an electing small business corporation. 2.44 "Participant" shall mean an Employee who is eligible to participate in the Plan under Article III (other than, if this Plan is adopted as a nonstandardized plan, a Self-Employed Individual who elects not to be a Participant in the Plan) and any other person (including former Employees) with respect to whom any Account exists under the Plan. 2.45 "Plan" shall mean this 401(k) Plan and Adoption Agreement. 2.46 "Plan Year" shall mean the fiscal year of the Employer or a different 12-consecutive-month period as specified in the Adoption Agreement. A Plan Year may consist of less than a 12-consecutive-month period in the case of the initial Plan Year or a short Plan Year resulting from a change in Plan Year. 2.47 "Prototype 401(k) Plan" shall mean these Articles I to XXV. 2.48 "Qualified Matching Contributions" shall mean contributions made to the Trust by the Employer in accordance with Section 6.03(c) hereof on behalf of Non-Highly Compensated Participants to enable the Plan to satisfy one or more of the non-discrimination tests set forth in Article VI. Qualified Matching Contributions are subject to full and immediate vesting and are distributable only in accordance with the distribution provisions, other than hardship distributions, that are applicable to Deferred Cash Contributions and Salary Reduction Contributions. The term "Qualified Matching Contributions" could, at the election of the Administrator, also apply to Employer Matching Contributions if such contributions are subject to full and immediate vesting and are distributable only in accordance with the distribution provisions, other than hardship distributions, that are applicable to Deferred Cash Contributions and Salary Reduction Contributions. 2.49 "Qualified Nonelective Contributions" shall mean contributions made to the Trust by the Employer in accordance with Section 6.02(c) hereof on behalf of Non-Highly Compensated Participants to enable the Plan to satisfy one or more of the non-discrimination tests set forth in Article VI. Qualified Nonelective Contributions are subject to full and immediate vesting and are distributable only in accordance with the distribution provisions, other than hardship distributions, that are applicable to Deferred Cash Contributions and Salary Reduction Contributions. The term "Qualified Nonelective Contributions" could, at the election of the Administrator, also apply to Employer Profit Sharing Contributions if such contributions are subject to full and immediate vesting and are distributable only in accordance with the distribution provisions, other than hardship distributions, that are applicable to Deferred Cash Contributions and Salary Reduction Contributions. 2.50 "Qualified Nonelective Contribution Account" shall mean the separate account maintained pursuant to Section 7.03(f) hereof for Qualified Matching Contributions and Qualified Nonelective Contributions allocated to the Participant and the income, expenses, gains and losses attributable thereto. 2.51 "Rollover Account" shall mean the separate account maintained pursuant to Section 7.03(h) hereof for any Rollover Contributions made by the Participant and the income, expenses, gains and losses attributable thereto. 2.52 "Rollover Contributions" shall mean contributions made to the Trust by Participants in accordance with Section 4.06 hereof. 2.53 "Salary Reduction Contribution Account" shall mean the separate account maintained pursuant to Section 7.03(a) hereof for Salary Reduction Contributions made on behalf of the Participant and the income, expenses, gains and losses attributable thereto. 2.54 "Salary Reduction Contributions" shall mean contributions made to the Trust by the Employer in accordance with Section 4.01 hereof as a result of the election by Participants to contribute part of their Compensation. 2.55 "Self-Employed Individual" shall mean an Employee who has Earned Income for the taxable year from the trade or business for which the Plan is established or would have had earned income but for the fact that the trade or business had no net profits for such year. 2.56 "Service" shall mean employment by the Employer and, if the Employer is maintaining the plan of a predecessor employer, or if the Employer is not maintaining the plan of a predecessor employer but has so elected in the manner described in Section 2.31 above, employment by such predecessor employer. 2.57 "Social Security Wage Base" for a Plan Year shall mean the maximum amount of annual earnings which may be considered wages under Code Section 3121(a)(1) as in effect on the first day of such Plan Year for purposes of the old-age, survivors, and disability insurance under Code Section 3111(a). 2.58 "Sponsor" shall mean any of the organizations (a) which have requested a favorable opinion letter from the National Office of the Internal Revenue Service for this Plan or (b) to which a favorable opinion letter for this Plan has been issued by the National Office of the Internal Revenue Service. 2.59 "Spouse" shall mean the Spouse or surviving Spouse of the Participant, provided that a former Spouse will be treated as the Spouse and a current Spouse will not be treated as the Spouse to the extent provided under a qualified domestic relations order (as defined in Code Section 414(p)). 2.60 "Trust" shall mean any trust established under Article XIII of this Plan for investment of the assets of the Plan. If more than one Trust is established under Article XIII, references herein to the Trust shall, as the context requires, refer to each such Trust, separately or all such Trusts, collectively. 2.61 "Trust Fund" shall mean with respect to a Trust the contributions to such Trust and any assets into which such contributions shall be invested or reinvested in accordance with Sections 13.01 and 13.03 of this Plan. If more than one Trust is established under Article XIII, references herein to the Trust Fund shall refer to the Trust Fund of each such Trust, separately, or all such Trusts, collectively, as the context requires. 2.62 "Trustee" shall mean, with respect to each Trust, the person or persons, including any successor or successors thereto, named in the Adoption Agreement to act as trustee of the such Trust and hold the assets of such Trust in accordance with Article XIII hereof. If more than one Trust is established under Article XIII, references herein to the Trustee shall, as the context requires, refer to the Trustee or Trustees of each such Trust. 2.63 "Valuation Date" shall mean the last day of each Plan Year and such other date(s) as may be designated by the Administrator from time to time. 2.64 "Vesting Years" shall be measured on the 12-consecutive-month computation period specified in the Adoption Agreement. (a) A Participant will have a Vesting Year during any such computation period if the Participant completes the number of Hours of Service selected in the Adoption Agreement for purposes of computing a Year of Service. (b) When determining Vesting Years, unless the Employer has otherwise specified in the Adoption Agreement, there shall be excluded: (i) if this Plan is a continuation of an earlier plan which would have disregarded such service, Service before the first Plan Year to which the Act is applicable; (ii) Service before the first Plan Year in which the Participant attained age 18 and (iii) Service before the Employer maintained this Plan or a predecessor plan. 2.65 "Year" shall mean the fiscal year of the Employer. 2.66 "Year of Service" shall be measured on the 12-consecutive-month period computation period specified in the Adoption Agreement during which the Employee completes the number of Hours of Service specified in the Adoption Agreement. The initial date of employment or reemployment is the first day on which the Employee performs an Hour of Service. If the Employer specifies in the Adoption Agreement that the computation period after the initial computation period shall be the Plan Year which begins after the Employee's initial date of employment or reemployment, an Employee who is credited with the requisite number of Hours of Service in both the initial computation period and in the Plan Year which begins after the Employee's date of employment or reemployment shall be credited with two Years of Service. ARTICLE III. ELIGIBILITY 3.01 Entry. Each Employee of the Employer, who on the Effective Date of this Plan meets the conditions specified in the Adoption Agreement, shall become eligible to participate in the Plan commencing with the Effective Date. Each other Employee of the Employer, including future Employees, shall become eligible to participate in the Plan when the eligibility requirements specified in the Adoption Agreement are met. For the purposes of this Plan's eligibility requirements, the exclusion concerning Employees who are covered by collective bargaining agreements applies to individuals who are covered by a collective bargaining contract between the Employer and Employee Representatives if contract negotiations considered retirement benefits in good faith, unless such contract specifically provides for participation in the Plan. For the purposes of this Section, "Employee Representatives" shall mean the representatives of an employee organization which engages in collective bargaining negotiations with the Employer provided that, owners, officers, and executives of the Employer do not comprise more than 50% of the employee organization's membership. 3.02 Interrupted Service. All Years of Service with the Employer are counted towards eligibility except that if the Employer has specified in the Adoption Agreement that more than one Year of Service is required before becoming a Participant eligible to receive allocations of Employer Matching Contributions and/or Employer Profit Sharing Contributions, and if the individual has a One-Year Break in Service before satisfying the relevant eligibility requirement, Service before such break will not be taken into account for purposes of determining when the individual is eligible to receive allocations of Employer Matching Contributions and/or Employer Profit Sharing Contributions once the individual returns to the employ of the Employer. A former Employee who has met the entry requirements and who terminates Service with the Employer prior to becoming a Participant, or a former Participant, shall become a Participant immediately upon return to the employ of the Employer as a member of an eligible class of Employees. 3.03 Transfer to Eligible Class. In the event an Employee who is not a member of an eligible class of Employees becomes a member of an eligible class, such Employee shall participate immediately if such Employee has satisfied the minimum age and Service requirements and would have previously become a Participant had he or she been a member of an eligible class throughout the period of employment with the Employer. 3.04 Determination by Administrator. The Administrator shall have the discretionary authority to determine an Employee's eligibility to participate in the Plan and shall notify each Employee upon his or her admission as a Participant in the Plan. ARTICLE IV. CONTRIBUTIONS 4.01 Salary Reduction Contributions. If selected by the Employer in the Adoption Agreement, the Employer will make a Salary Reduction Contribution (for allocation to the eligible Participant's Salary Reduction Account) on behalf of each Participant who both has elected to have a portion of the Compensation which would otherwise have been paid to him or her for the Plan Year contributed to the Trust and has received Compensation during the Plan Year. With respect to such elective contributions, the following provisions shall apply: (a) an Employee shall be given an opportunity to elect, prior to the date as of which he or she becomes eligible in accordance with procedures set by the Administrator, to have Salary Reduction Contributions made on his or her behalf or, in the case of an Employee who becomes eligible immediately upon becoming an Employee, as soon as is administratively possible following his or her initial date of eligibility; (b) Participants shall be given opportunities to elect to commence having Salary Reduction Contributions made on their respective behalves at such other time or times as the Administrator designates; (c) such elections may only be made on a prospective basis and pursuant to written, salary reduction agreements between the Employee and the Employer; (d) each such written, salary reduction agreement shall be in such form and subject to such rules as the Administrator may prescribe, and the agreement shall specify the percentage or amount of Compensation that the Participant desires to contribute (but in no event may such contribution exceed the percentage of Compensation specified in the Adoption Agreement); (e) a salary reduction agreement may be amended or terminated prospectively during the Plan Year at such times and in such manner as permitted by rules prescribed by the Administrator; (f) Salary Reduction Contributions made on behalf of a Participant shall be in an amount equal to the percentage or amount of Compensation specified in the eligible Participant's salary reduction agreement; provided, however, that at any time during a Plan Year the Administrator may reduce the rate of Salary Reduction Contributions to be made on behalf of any Participant for the remainder of the Plan Year to the extent the Administrator determines necessary to comply with the limitations of Section 4.08, and Articles V and VI hereof. Any amount which cannot be contributed to the Trust because of those limitations shall be paid to the Participant in cash and such payment shall be subject to federal income and other tax withholding by the Employer. 4.02 Deferred Cash Contributions. If selected by the Employer in the Adoption Agreement, the Employer will make a Deferred Cash Contribution on behalf of each eligible Participant (as determined in accordance with the Adoption Agreement), in an amount equal to the Deferred Cash Allocation specified in the Adoption Agreement, as expressed as a percentage of such Participant's Compensation. With respect to Participants' elections not to have amounts contributed, the following provisions shall apply: (a) each Participant shall be afforded a reasonable opportunity to elect not to have Deferred Cash Allocations contributed to the Trust on his or her behalf at least once during each Plan Year and at such other time or times as the Administrator elects; (b) such elections may only be made pursuant to written agreements between the Participant and the Employer; (c) each such written agreement shall be in such form and subject to such rules as the Administrator may prescribe, and the election shall specify the amount of the Deferred Cash Allocation that the Participant desires to receive in cash; and (d) the amount which a Participant has elected to receive in cash pursuant to such an election shall be paid to the Participant by the Employer no later than the last day on which the Deferred Cash Contributions for the Plan Year in question must be paid to the Trust under Section 7.02 hereof. Notwithstanding the above, the Deferred Cash Contribution otherwise to be made for a Participant may be reduced to the extent necessary to comply with the limitations of Section 4.08 hereof and shall be reduced to the extent necessary to comply with the limitations of Articles V and VI hereof. Any amount which cannot be contributed to the Trust because of those limitations shall be paid to the Participant in cash and such payment shall be subject to federal income and other tax withholding by the Employer. 4.03 Employer Profit Sharing Contributions. If selected by the Employer in the Adoption Agreement, for each Plan Year, the Employer will contribute, as Employer Profit Sharing Contributions, either a fixed amount or the amount determined by it in its discretion. Employer Profit Sharing Contributions, plus any forfeitures under Section 8.02 hereof, for a Plan Year shall be allocated as of the last day of such Plan Year among the Employer Profit Sharing Contribution Accounts of eligible Participants (as determined in accordance with the Adoption Agreement), as follows: (a) If a non-integrated formula is elected in the Adoption Agreement, such contribution and forfeitures shall be allocated to the Employer Profit Sharing Contribution Account of each eligible Participant in the ratio that each such Participant's Compensation for the Plan Year bears to the total Compensation paid to all eligible Participants for the Plan Year; and (b) If an integrated formula is elected in the Adoption Agreement, such contributions and forfeitures shall be allocated in the following steps: (i) First, Employer Profit Sharing Contributions and forfeitures will be allocated to the Employer Profit Sharing Contribution Account of each eligible Participant in the ratio that the sum of each such Participant's Compensation and Compensation in excess of the Integration Level for the Plan Year bears to the sum of Compensation and Compensation in excess of the Integration Level for all such eligible Participants for the Plan Year, provided that the amount so credited to any such Participant's Employer Profit Sharing Contribution Account for the Plan Year shall not exceed the product of the Integration Rate times the sum of the Participant's Compensation and Compensation in excess of the Integration Level for the Plan Year. For purposes of this step, in the case of any Participant who has exceeded the cumulative permitted disparity limit described below, two times such Participant's Compensation for the Plan Year will be taken into account. (ii) Next, any remaining Employer Profit Sharing Contributions and forfeitures will be allocated to the Employer Profit Sharing Contribution Account of each eligible Participant in the ratio that each such Participant's Compensation for the Plan Year bears to the total Compensation paid to all eligible Participants for the Plan Year. (c) Overall permitted disparity limits. (i) Annual overall permitted disparity limit: Notwithstanding the preceding paragraphs, for any Plan Year this Plan benefits any Participant who benefits under another qualified plan or simplified employee pension, as defined in Section 408(k) of the Code, maintained by the Employer that provides for permitted disparity (or imputes disparity), Employer contributions and forfeitures will be allocated pursuant to the provisions of Section 4.03(a) rather than 4.03(b). (ii) Cumulative permitted disparity limit: Effective for Plan Years beginning on or after January 1, 1995, the cumulative permitted disparity limit for a Participant is 35 total cumulative permitted disparity years. Total cumulative permitted years means the number of years credited to the Participant for allocation or accrual purposes under this Plan, any other qualified plan or simplified employee pension plan (whether or not terminated) ever maintained by the Employer. For purposes of determining the Participant's cumulative permitted disparity limit, all years ending in the same calendar year are treated as the same year. If the Participant has not benefited under a defined benefit or target benefit plan for any year beginning on or after January 1, 1994, the Participant has no cumulative disparity limit. 4.04 Employer Matching Contributions. (a) If selected by the Employer in the Adoption Agreement, the Employer will make an Employer Matching Contribution (for allocation together with forfeitures under Section 8.02 below) to the Participant's Employer Matching Contribution Account on behalf of each eligible Participant (as determined in accordance with the Adoption Agreement) for each Plan Year that a contribution within one or more of the contribution categories selected by the Employer in the Adoption Agreement (i.e., Salary Reduction Contributions, Deferred Cash Contributions, or Nondeductible Voluntary Contributions) is allocated to such Participant's Account. The Employer Matching Contribution made for an eligible Participant shall be in an amount determined in accordance with the Adoption Agreement and shall be allocated in the manner specified in the Adoption Agreement. (b) Notwithstanding any implication of the preceding subsection (a) to the contrary, the Employer Matching Contribution otherwise to be made for a Participant may be reduced to the extent necessary to comply with the limitations of Section 4.08 hereof and shall be reduced to the extent necessary to comply with the limitations of Articles V. Any amount which cannot be contributed to the Trust because of these limitations will be retained by the Employer, and the Employer shall have no obligation to contribute such amount to the Trust. 4.05 Nondeductible Voluntary Contributions. If, in the Adoption Agreement, the Employer has specified that Participants may make Nondeductible Voluntary Contributions, a Participant may make such contributions to his or her Account; provided, however, that a Participant's right to make such contributions shall be subject to the conditions and limitations specified below: (a) The aggregate amount of a Participant's Nondeductible Voluntary Contributions shall not cause the Annual Addition (as defined in Section 5.05(a) hereof) to his or her Account to exceed the limitations set forth in Article V. (b) A Participant's Nondeductible Voluntary Contributions shall be allocated to his or her Nondeductible Voluntary Contribution Account under Section 7.03(e) hereof. (c) At any time during a Plan Year, the Administrator may cause a Participant to reduce the rate of his or her Nondeductible Voluntary Contributions for the remainder of the Plan Year to the extent the Administrator determines necessary to comply with the limitations of Article V and VI hereof. 4.06 Rollover Contributions. The Administrator may, in its discretion, direct the Trustee to accept a Rollover Contribution upon the express request of an Employee wishing to make such Rollover Contribution, subject to the consent of the Trustee if the contribution includes property other than cash. A Rollover Contribution shall mean a contribution which is an "eligible rollover distribution" within the meaning of Code Section 402(c)(4) or a "rollover contribution" within the meaning of Code Section 408(d)(3)(A)(ii) and which satisfies all applicable provisions of the Code. Each Rollover Contribution made by an Employee shall be allocated to his or her Rollover Account pursuant to Section 7.03(h) hereof. Such Rollover Account shall be invested by the Trustee as part of the Trust Fund, pursuant to Article XIII hereafter. An Employee may make a contribution under this Section 4.06 whether or not he or she has satisfied the age and service participation requirements set forth in the Adoption Agreement. An Employee who makes a contribution under this Section 4.06 and does not otherwise qualify as a Participant is, nevertheless, deemed to be a Participant for the limited purpose of administering that contribution. The Administrator may, in its discretion, accept accumulated deductible employee contributions (as defined in Code Section 72(o)(5)) that were distributed from a qualified retirement plan and rolled over pursuant to Code Sections 402(c), 403(a)(4), or 408(d)(3). The rolled over amount will be added to the Participant's Deductible Voluntary Contribution Account. 4.07 Transfers from Other Qualified Plans. The Administrator may, in its discretion, direct the Trustee to accept the transfer of any assets held for a Participant's benefit under a qualified retirement plan of a former employer of such Participant. Such a transfer shall be made directly between the trustee or custodian of the former employer's plan and the Trustee in the form of cash or its equivalent, and shall be accompanied by written instruction showing separately the portion of the transfer attributable to types of contributions made by the former employer and pre-tax and after-tax contributions made by the Participant, respectively. Separate written instructions delivered by the Administrator shall identify the portion of the transferred funds, if any, attributable to any period during which the Participant participated in a defined benefit plan, money purchase pension plan (including a target benefit plan), stock bonus plan or profit sharing plan which would otherwise have provided a life annuity form of payment to the Participant. The Trustee and recordkeeper shall be entitled to rely on such written instructions with respect to the character of the transferred funds. Except as otherwise provided in Article XXIV, the amounts transferred shall be allocated to separate accounts as provided in Section 7.03 that match the character of the transferred funds. 4.08 Limitations on Contributions. During a Plan Year, Employer Profit Sharing Contributions and Employer Matching Contributions may not, in the aggregate, exceed (a) 15% (or such larger percentage as may be permitted by the Code as a current deduction to the Employer with respect to any Plan Year) of the total Compensation (disregarding any exclusion from Compensation specified by the Employer in the Adoption Agreement) paid to, or accrued by the Employer for, Participants for the Year ending in the Plan Year, less (b) any amounts contributed as Salary Reduction Contributions and Deferred Cash Contributions, plus (c) any unused pre-'87 credit carryovers. For this purpose, a "pre-'87 credit carryover" is the amount by which Employer Contributions for a previous Year which commenced before January 1, 1987 were less than 15% of the total Compensation (disregarding any exclusion from Compensation specified by the Employer in the Adoption Agreement) paid or accrued by the Employer to Participants for such Year, but such unused pre-'87 credit carryover shall in no event permit the Employer Contributions for a Year to exceed 25% (or such larger percentage as may be permitted by the Code as a deduction to the Employer) of the total Compensation (disregarding any exclusion from Compensation specified by the Employer in the Adoption Agreement) paid or accrued by the Employer to Participants for the Year ending in the Plan Year in question. 4.09 Deductible Voluntary Contributions. This Plan will not accept deductible voluntary contributions for taxable years beginning after December 31, 1986. Deductible voluntary contributions made in prior taxable years shall be maintained in the Participant's Deductible Voluntary Contribution Account and shall share in the gains and losses of the Trust Fund in accordance with Section 8.02(e). No part of a Participant's Deductible Voluntary Contribution Account may be used to purchase life insurance. A Participant may withdraw all or a portion of his or her Deductible Voluntary Contribution Account in accordance with Section 11.01. ARTICLE V. CODE SECTION 415 LIMITATIONS ON ALLOCATIONS 5.01 Employers Maintaining No Other Plan. (a) If a Participant does not participate in, and has never participated in another qualified plan, a welfare benefit fund (as defined in Code Section 419(e)), an individual medical account (as defined in Code Section 415(1)(2)), or a simplified employee pension (as defined in Code Section 408(k)) maintained by the Employer, the amount of the Annual Addition which may be credited to the Participant's Account for any Limitation Year shall not exceed the lesser of the Maximum Permissible Amount or any other limitation contained in the Plan. (b) If the Employer Contribution (including any forfeitures) that would otherwise be allocated to a Participant's Account would cause the Annual Addition for the Limitation Year to exceed the Maximum Permissible Amount, the amount allocated will be reduced so that any Excess Amount shall be eliminated and, consequently, the Annual Addition for the Limitation Year will equal the Maximum Permissible Amount. (i) Prior to determining the Participant's actual Compensation for the Limitation Year, the Employer may determine the Maximum Permissible Amount for a Participant on the basis of a reasonable estimation of the Participant's Compensation for the Limitation Year, uniformly determined for all Participants similarly situated. (ii) As soon as is administratively feasible after the end of each Limitation Year, the Maximum Permissible Amount for the Limitation Year will be determined on the basis of Participants' actual Compensation for the Limitation Year. (c) If the allocation of forfeitures or the use by the Employer of the estimation described in Section 5.01(b)(i) above results in an Excess Amount, such Excess Amount shall be eliminated pursuant to the following procedure: (i) The portion of the Excess Amount consisting of Nondeductible Voluntary Contributions which are a part of the Annual Addition shall be returned to the Participant (with any income or gains attributable thereto) as soon as administratively feasible; (ii) At the election of the Administrator, if after the application of Subparagraph (i) an Excess Amount still exists, the portion of the Excess Amount consisting of Salary Reduction Contributions and Deferred Cash Contributions (with any income or gains attributable thereto) shall be returned to the Participant; (iii) If after the application of subparagraph (ii) an Excess Amount still exists and the Participant is covered by the Plan at the end of a Limitation Year, the Excess Amount in the Participant's Account will be used to reduce Employer Contributions (including any allocation of forfeitures) for such Participant in the next Limitation Year, and each succeeding Limitation Year if necessary; (iv) If after the application of subparagraph (iii) an Excess Amount still exists and the Participant is not covered by the Plan at the end of a Limitation Year, the Excess Amount will be held unallocated in a suspense account. The suspense account will be applied to reduce proportionately future Employer Contributions (including any allocation of forfeitures) for all remaining Participants in the next Limitation Year, and each succeeding Limitation Year, if necessary. If a suspense account is in existence at any time during a Limitation Year pursuant to this subparagraph, it will not participate in the allocation of the Trust's investment gains and losses. In the event of termination of the Plan, the suspense account shall revert to the Employer to the extent it may not then be allocated to any Participant's Account. (v) If a suspense account is in existence at any time during a particular Limitation Year, all amounts in the suspense account must be allocated and reallocated to Participants' Accounts before any Employer Contributions or Nondeductible Voluntary Contribution may be made to the Plan for that Limitation Year. (d) Notwithstanding any other provision in subsections (a) through (c), the Employer shall not contribute any amount that would cause an allocation to the suspense account as of the date the contribution is allocated. 5.02 Employers Maintaining Other Master or Prototype Defined Contribution Plans. (a) This Section applies if, in addition to this Plan, a Participant is covered under another qualified Master or Prototype defined contribution plan, a welfare benefit fund (as defined in Code Section 419(e)), an individual medical account (as defined in Code Section 415(1)(2)), or a simplified employee pension (as defined in Code Section 408(k)) maintained by the Employer during any Limitation Year. The Annual Addition which may be allocated to any Participant's Account for any such Limitation Year shall not exceed the Maximum Permissible Amount, reduced by the sum of any portion of the Annual Addition credited to the Participant's account under such other plans, welfare benefit funds, and individual medical accounts for the same Limitation Year. (b) If the Annual Addition with respect to a Participant under other defined contribution plans, welfare benefit funds, individual medical accounts and simplified employee pensions maintained by the Employer of what would be portions of the Annual Addition (if the allocations were made under the Plan) are less than the Maximum Permissible Amount and the Employer Contribution that would otherwise be contributed or allocated to the Participant's Account under this Plan would cause the Annual Addition for the Limitation Year to exceed this limitation, the amount contributed or allocated will be reduced so that the Annual Addition under all such plans and funds for the Limitation Year will equal the Maximum Permissible Amount. (c) If the Annual Addition with respect to the Participant under such other defined contribution plans, welfare benefit funds, individual medical accounts and simplified employee pensions in the aggregate are equal to or greater than the Maximum Permissible Amount, no amount will be contributed or allocated to the Participant's Account under this Plan for the Limitation Year. (d) Prior to determining the Participant's actual Compensation for the Limitation Year, the Employer may determine the Maximum Permissible Amount for a Participant in the manner described in Section 5.01(b)(i) provided the Employer complies with the provisions of Section 5.01(b)(ii). (e) If, pursuant to Section 5.02(d) or as a result of the allocation of forfeitures, a Participant's Annual Addition under this Plan and such Participant's annual additions under such other defined contributions plans, welfare benefit funds, individual medical accounts and simplified employee pensions would result in an Excess Amount for a Limitation Year, the Excess Amount will be deemed to consist of the annual additions last allocated, except that annual additions attributable to a simplified employee pension will be deemed to have been allocated first, followed by annual additions to a welfare benefit fund or individual medical account, regardless of the actual allocation date. (f) If an Excess Amount was allocated to a Participant under this Plan on a date which coincides with the date an allocation was made under another plan, the Excess Amount attributed to this Plan will be the product of: (i) the total Excess Amount allocated as of such date, multiplied by (ii) the quotient obtained by dividing (A) the portion of the Annual Addition allocated to the Participant for the Limitation Year as of such date by (B) the total Annual Addition allocated to the Participant for the Limitation Year as of such date under this and all the other qualified Master or Prototype defined contribution plans maintained by the Employer. (g) Any Excess Amount attributed to the Plan will be disposed in the manner described in Section 5.01. 5.03 Employers Maintaining Other Defined Contribution Plans. If a Participant is covered under another qualified defined contribution plan which is not a Master or Prototype plan, the Annual Addition credited to the Participant's Account under this Plan for any Limitation Year will be limited in accordance with the provisions of Section 5.02 above as though the plan were a Master or Prototype Plan, unless the Employer provides other limitations pursuant to the Adoption Agreement. 5.04 Employers Maintaining Defined Benefit Plans. If the Employer maintains, or at any time maintained, a qualified defined benefit plan covering any Participant in this Plan, the sum of the Participant's Defined Benefit Plan Fraction and Defined Contribution Plan Fraction will not exceed l.0 in any Limitation Year. The Annual Addition which may be credited to the Participant's Account under this Plan for any Limitation Year will be limited in accordance with the provisions of Section 5.02 above, unless the Employer provides other limitations pursuant to the Adoption Agreement. 5.05 Definitions. For purposes of this Article, the following terms shall be defined as follows: (a) Annual Addition. With respect to any Participant, the "Annual Addition" shall be the sum of the following amounts credited to a Participant's Account for the Limitation Year: (i) Employer Contributions; (ii) forfeitures; and (iii) Nondeductible Voluntary Contributions. For the purposes of calculating the amount of Employer Contributions credited to a Participant's Account, Excess Elective Deferrals distributed on or before the April 15 deadline described in Section 6.01(b) below shall not be considered to be amounts credited to the Participant's Account but Excess Contributions distributed to the Participant pursuant to Section 6.02 below, and Excess Aggregate Contributions distributed to, or forfeited by, the Participant pursuant to Section 6.03, 6.04 or 6.05 below shall be considered to be amounts credited to a Participant's Account. Any Excess Amount applied under Section 5.01(c)(iii) or (iv) or Section 5.02(e) hereof in a Limitation Year to reduce Employer Contributions will be considered part of the Annual Addition for such Limitation Year. Amounts allocated, after March 31, 1984, to an individual medical account (as defined in Code Section 415(1)(2)) which is part of a pension or an annuity plan maintained by the Employer, or to a simplified employee pension (as defined in Code Section 408(k)) maintained by the Employer, are treated as part of the Annual Addition. Also, amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, which are attributable to post-retirement medical benefits allocated to the separate account of a Key Employee (as defined in Section 23.02(a) hereof) under a welfare benefit fund (as defined in Code Section 419(e)) maintained by the Employer, are treated as part of the Annual Addition but only for the purpose of determining whether the dollar limitation portion of the definition of Maximum Permissible Amount has been exceeded. (b) Compensation. For the purposes of this Article V, the term "Compensation" shall mean one of the following as selected by the Employer in the Adoption Agreement: (i) W-2 Compensation. Information required to be reported under Sections 6041, 6051 and 6052 of the Code (Wages, tips and other compensation as reported on Form W-2). Compensation is defined as wages within the meaning of Section 3401(a) and all other payments of compensation to an Employee by the Employer (in the course of the Employer's trade or business) for which the Employer is required to furnish the Employee a written statement under Sections 6041(d), 6051(a)(3) and 6052. Compensation must be determined without regard to any rules under Section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Section 3401(a)(2)). (ii) 415 Safe Harbor Compensation. Wages, salaries, and fees for professional services and other amounts received for personal services actually rendered in the course of employment with the Employer maintaining the Plan (including, but not limited to commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses), and excluding the following: (A) Employer contributions to a plan of deferred compensation which are not includible in the Participant's gross income for the taxable year in which contributed, or Employer contributions under a simplified employee pension plan, or any distributions from a plan of deferred compensation; (B) Amounts realized from the exercise of a non-qualified stock option, or when property transferred to the Participant in connection with the performance of services either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (C) Amounts realized from the sale, exchange or other disposition of stock acquired under an incentive stock option; and (D) Other amounts which received special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity described in Code Section 403(b) (whether or not the amounts are actually excludable from the gross income of the Participant). (iii) Safe Harbor Alternative Definition. Compensation as defined in (ii) above, reduced by all of the following items (even if includible in gross income): reimbursements or other expenses allowances, fringe benefits (cash and non-cash) moving expenses, deferred compensation and welfare benefits. For any Self-Employed Individual, Compensation shall mean Earned Income. For purposes of applying the limitations of this Article V, Compensation for a Limitation Year is the Compensation actually paid or made available in gross income during such year. Notwithstanding the preceding sentence, Compensation for a Participant in a defined contribution plan who is permanently and totally disabled (as defined in Code Section 22(e)(3)) is the Compensation such Participant would have received for the Limitation Year if the Participant was paid at the rate of Compensation paid immediately before becoming permanently and totally disabled; such imputed compensation for the disabled Participant may be taken into account only if the Participant is not a Highly Compensated Employee, and contributions made on behalf of such a Participant are nonforfeitable when made. (c) Defined Benefit Fraction. The "Defined Benefit Fraction" shall be a fraction, the numerator of which is the sum of the Participant's Projected Annual Benefits under all the defined benefit plans (whether or not terminated) maintained by the Employer, and the denominator of which is the lesser of 125% of the dollar limitation in effect for the Limitation Year under Code Section 415(b)(l)(A) or 140% of the Participant's Highest Average Compensation (including any adjustments required by Code Section 415(b)). Notwithstanding the above, if the Participant was a participant as of the first day of the first Limitation Year beginning after December 31, 1986 in one or more defined benefit plans maintained by the Employer which were in existence on May 6, 1986, the denominator of this fraction will not be less than 125% of the sum of the annual benefits under such plans which the Participant had accrued as of the end of the last Limitation Year beginning before January 1, 1987 (disregarding any changes in the terms and conditions of the Plan after May 5, 1986). The preceding sentence applies only if the defined benefit plans individually and in the aggregate satisfied the requirements of Code Section 415 for all Limitation Years beginning before January 1, 1987. (d) Defined Contribution Dollar Limitation. The "Defined Contribution Dollar Limitation" shall be the greater of: (i) $30,000; or (ii) one-fourth (1/4) of the defined benefit dollar limitation set forth in Code Section 415(b)(i) as in effect for the Limitation Year. (e) Defined Contribution Fraction. The "Defined Contribution Fraction" shall be a fraction, the numerator of which is the sum of the Annual Additions to the Participant's account under all the defined contribution plans (whether or not terminated) maintained by the Employer for the current and all prior Limitation Years (including the Annual Additions attributable to the Participant's nondeductible employee contributions to all defined benefit plans, whether or not terminated, maintained by the Employer, and the Annual Additions attributable to all welfare benefit funds (as defined in Code Section 419(e)), individual medical accounts (as defined in Code Section 415(1)(2)) and simplified employee pensions (as defined in Code Section 408(k)), and the denominator of which is the sum of the Maximum Aggregate Amounts for the current and all prior Limitation Years of service with the Employer (regardless of whether a defined contribution plan was maintained by the Employer). The Maximum Aggregate Amount in any Limitation Year is the lesser of 125% of the dollar limitation in effect under Code Section 415(c)(l)(A) or 35% of the Participant's Compensation for such year. If the Participant was a participant as of the end of the first day of the first Limitation Year beginning after December 31, 1986 in one or more defined contribution plans maintained by the Employer which were in existence on May 6, 1986, the numerator of this fraction will be adjusted if the sum of this Defined Contribution Fraction and the Defined Benefit Fraction would otherwise exceed l.0 under the terms of this Plan. Under the adjustment, an amount equal to the product of: (i) the excess of the sum of the fractions over l.0, multiplied by (ii) the denominator of this Defined Contribution Fraction, will be permanently subtracted from the numerator of this fraction. The adjustment is calculated using the fractions as they would be computed as of the end of the last Limitation Year beginning before January 1, 1987 (disregarding any changes in the terms and conditions of the Plan made after May 5, 1986 but using the Code Section 415 limitation applicable to the first Limitation Year beginning on or after January 1, 1987). This adjustment also will be made if at the end of the last Limitation Year beginning before January 1, 1984, the sum of the fractions exceeds 1.0 because of accruals or additions that were made before the limitations of this Section 5 became effective to any plans of the Employer in existence on July 1, 1982. For purposes of this paragraph, a Master or Prototype plan with an opinion letter issued before January 1, 1983, which was adopted by the Employer on or before September 30, 1983, is treated as a plan in existence on July 1, 1982. (f) Employer. "Employer" means the Employer that adopts this Plan and all members of (i) a controlled group of corporations (as defined in Code Section 414(b) as modified by Code Section 415(h)), (ii) commonly controlled trades or businesses (whether or not incorporated) (as defined in Code Section 414(c) as modified by Code Section 415(h)), or (iii) affiliated service groups (as defined in Code Section 414(m)) of which the Employer is a part and (iv) any other entity required to be aggregated with the employer pursuant to Code Section 414(o) and the regulations thereunder. (g) Excess Amount. The "Excess Amount" is the excess of what would otherwise be a Participant's Annual Addition for the Limitation Year over the Maximum Permissible Amount. If at the end of a Limitation Year when the Maximum Permissible Amount is determined on the basis of the Participant's actual Compensation for the year, an Excess Amount results, the Excess Amount will be deemed to consist of the portion of the Annual Addition last allocated, except that the portion of the Annual Addition attributable to a welfare benefit fund will be deemed to have been allocated first regardless of the actual allocation date. (h) Highest Average Compensation. A Participant's "Highest Average Compensation" is his or her average Compensation for the three consecutive Years of Service with the Employer that produces the highest average. (i) Limitation Year. A "Limitation Year" is the Plan Year or any other 12-consecutive-month period specified by the Employer in the Adoption Agreement. All qualified plans maintained by the Employer must use the same Limitation Year. If the Limitation Year is amended to a different 12-consecutive-month period, the new Limitation Year must begin on a date within the Limitation Year in which the amendment is made. (j) Master or Prototype Plan. A "Master or Prototype" plan is a plan the form of which is the subject of a favorable opinion letter from the Internal Revenue Service. (k) Maximum Permissible Amount. For a Limitation Year, the "Maximum Permissible Amount" with respect to any Participant shall be the lesser of (i) the Defined Contribution Dollar Limitation or (ii) 25% of the Participant's Compensation for the Limitation Year. The compensation limitation referred to in (ii) above shall not apply to contribution for medical benefits (within the meaning of Code Section 401(h) or Section 419A(f)(2)) which is otherwise treated as an Annual Addition under Code Section 415(l)(1) or 419A(d)(2). (l) Projected Annual Benefit. The "Projected Annual Benefit" is the annual retirement benefit (adjusted to an actuarial equivalent straight life annuity if such benefit is expressed in a form other than a straight life annuity or qualified joint and survivor annuity) to which the Participant would be entitled under the terms of the plan assuming: (i) the Participant will continue employment until normal retirement date under the plan (or current age, if later), and (ii) the Participant's compensation for the current Limitation Year and all other relevant factors used to determine benefits under the plan will remain constant for all future Limitation Years. ARTICLE VI. LIMITATIONS ON DEFERRALS, MATCHING ALLOCATIONS AND VOLUNTARY CONTRIBUTIONS. 6.01 Maximum Amount of Elective Deferrals. For each calendar year, the sum of (i) the Salary Reduction Contributions, (ii) Deferred Cash Contributions (together "Elective Deferrals") made on behalf of any Participant under this Plan, and (iii) similar contributions made under all other plans of the Employer with a cash or deferred feature shall not exceed the dollar limitation contained in Code Section 402(g) in effect at the beginning of such calendar year. Elective Deferrals shall not include amounts properly distributed to a Participant as an Excess Amount pursuant to Section 6.01(b). If, during any calendar year, more than the maximum permissible amount under Code Section 402(g) is allocated pursuant to one or more cash or deferred arrangements to a Participant's accounts under the Plan and any other plan described in Code Sections 401(k), 408(k), 403(b), 457, or 501(c)(18), the following provisions shall apply: (a) The Participant may, but is not required to, assign to this Plan all or part of such contributions in excess of the maximum permissible amount (hereinafter "Excess Elective Deferrals") by notifying the Administrator by March 1 of the calendar year next succeeding the calendar year in which such contributions are made. To be effective, such notice must be in writing, state that Excess Elective Deferrals have been made on behalf of such Participant for the preceding calendar year, and be submitted to the Administrator. A Participant is deemed to notify the Administrator of any Excess Elective Deferrals that arise by taking into account only those Excess Elective Deferrals made to this Plan and any other plans of this Employer. (b) To the extent a Participant timely assigns, or is deemed to assign, Excess Elective Deferrals to the Plan pursuant to (a) above, the Administrator shall direct the Trustee to distribute such Excess Elective Deferrals, adjusted for income or loss allocable thereto pursuant to Section 6.01(c) below, to the Participant no later than the April 15 of the calendar year next succeeding the calendar year in which such Excess Elective Deferrals were made. (c) Excess Elective Deferrals shall be adjusted for any income or loss up to the last day of the calendar year in which such Excess Elective Deferrals were made. The income or loss allocable to Excess Elective Deferrals is (i) the income or loss allocable to the Participant's Salary Reduction Contribution Account and/or Deferred Cash Contribution Account, as the case may be, for the taxable calendar year multiplied by a fraction, the numerator of which is such Participant's Excess Elective Deferrals for the year and the denominator is the balance of such account or accounts, as the case may be, determined as the beginning of the calendar year plus any Salary Reduction Contributions or Deferred Cash Contributions made during the calendar year without regard to any income or loss occurring during such calendar year or (ii) such other amount determined under any reasonable method, provided that such method is used consistently for all Participants in calculating the distributions required under this Article VI for the Plan Year, and is used by the Plan to allocate income or loss to Participants' Accounts. Income or loss allocable to the period between the end of the calendar year and the date of distribution shall be disregarded in determining income or loss. Excess Elective Deferrals shall be treated as an Annual Addition under the Plan, unless such amounts are distributed no later than the first April 15 following the close of the calendar year. 6.02 Limitation on Elective Deferrals. (a) For each Plan Year, the Average Deferral Percentage of the group of Highly Compensated Participants for the Plan Year may not exceed the greater of (i) 1.25 times the Average Deferral Percentage of the group of Non-Highly Compensated Participants for the same Plan Year; or (ii) the lesser of 2 times the Average Deferral Percentage of all such Non-Highly Compensated Participants, or such Average Deferral Percentage plus 2 percentage points. For purposes of this Section 6.02, the "Average Deferral Percentage" of a specified group of Participants for a Plan Year shall be the average of the ratios (calculated separately for each Participant in such group) of (A) the amount of the Contributions actually paid over to the Trust on behalf of each Participant for each Plan Year to (B) the Participant's Compensation for the Plan Year. For purposes of this Section 6.02, "Compensation" shall have the same meaning as in Section 2.09(a); provided, however, that to the extent elected by the Employer in the Adoption Agreement "Compensation" shall exclude amounts paid for the period when the Participant was not eligible to make Elective Deferrals and/or shall include the amounts set forth in Section 2.09(b). For purposes of this Section 6.02, "Contributions" shall include both Elective Deferrals (including Excess Elective Deferrals of Highly Compensated Participants) and Qualified Nonelective Contributions, if any. Such Contributions shall not include (1) Excess Elective Deferrals of Non-Highly Compensated Participants that arise solely from Elective Deferrals made under this Plan or other plans of the Employer, and (2) Elective Deferrals that are taken into account in the Contribution Percentage Test (provided the Average Deferral Percentage test is satisfied both with and without exclusion of these Elective Deferrals). For purposes of computing Average Deferral Percentages, each Employee who would be a Participant but for the failure to make Elective Deferrals shall be treated as a Participant on whose behalf no Elective Deferrals are made. (b) Special Rules: (i) The deferral percentage of a Highly Compensated Participant for the Plan Year who is eligible to have Elective Deferrals allocated to his or her accounts under two or more arrangements described in Code Section 401(k), that are maintained by the Employer, shall be determined as if such Elective Deferrals were made under a single arrangement. If a Highly Compensated Participant participates in two or more cash or deferred arrangements that have different Plan Years, all cash or deferred arrangements ending with or within the same calendar year shall be treated as a single arrangement. Notwithstanding the foregoing, certain plans shall be treated as separate if mandatorily disaggregated under regulations promulgated under Code Section 401(k). (ii) In the event that this Plan satisfies the requirements of Code Section 401(k), 401(a)(4), or 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such Code sections only if aggregated with this Plan, then this Section 6.02 shall be applied by determining the Average Deferral Percentages of Employees as if all such plans were a single plan. For Plan Years beginning after December 31, 1989, plans may be aggregated in order to satisfy Code Section 401(k) only if they have the same Plan Year. (iii) For purposes of determining the deferral percentage of a Participant who is a 5% owner or one of the top ten Highly Compensated Employees, the Elective Deferrals (and, if applicable, Qualified Nonelective Contributions) and Compensation of such Participant shall include the Elective Deferrals (and, if applicable, Qualified Nonelective Contributions) and Compensation for the Plan Year of his Family Members. Such Family Members shall be disregarded as separate Participants in determining the Average Deferral Percentage both for Non-Highly Compensated Participants and for Highly Compensated Participants. (iv) For purposes of applying the Average Deferral Percentage test, Elective Deferrals and Qualified Nonelective Contributions must be made before the last day of the 12-month period immediately following the Plan Year to which contributions relate. (v) The Employer shall maintain records sufficient to demonstrate satisfaction of the Average Deferral Percentage test and the amount of Qualified Nonelective Contributions, if any, used in such test. (vi) The determination and treatment of the deferral percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. (vii) If, in any Plan Year, the Plan benefits Employees otherwise excludable from the Plan if the Plan had imposed the greatest minimum age and service conditions permissible under Section 410(a) of the Code, and the Employer applies Section 410(b) of the Code separately to the portion of the Plan that benefits only Employees who satisfy age and service conditions under the Plan that are lower than the greatest minimum age and service conditions permissible under Section 410(a) and to the portion of the Plan that benefits Employees who have satisfied the greatest minimum age and service conditions permissible under Section 410(a), the Plan shall be treated as comprising two separate Plans and the Average Deferral Percentage test set forth in subsection (a) shall be applied separately for each group of Employees in each Plan. (c) If, for any Plan Year, the Plan is unable to satisfy the Average Deferral Percentage test set forth in subsection (a) above, the Employer may make a Qualified Nonelective Contribution to the Trust in an amount determined at the discretion of the Employer on behalf of the group of Non-Highly Compensated Participants who were actively employed on the last day of the Plan Year and who were eligible to participate in the Plan for the entire Plan Year. The Qualified Nonelective Contribution will be allocated as follows: (i) The lowest paid Participant in the group will be allocated an amount equal to the lowest of (1) 25% of the Participant's Compensation for the Plan Year; (2) the Maximum Permissible Amount applicable to the Participant; or (3) the full amount of the Qualified Nonelective Contribution. (ii) The next lowest paid Participant will be allocated an amount equal to the lowest of (1) 25% of the Participant's Compensation for the Plan Year; (2) the Maximum Permissible Amount applicable to the Participant; or (3) the balance of the Qualified Nonelective Contribution after the above allocation. (iii) The allocation in step (ii) will be applied individually to each remaining Participant in the group, in ascending order of Compensation, until the Qualified Nonelective Contribution is fully allocated. Once the Qualified Nonelective Contribution is fully allocated, no further allocation will be made to the remaining Participants in the group. (d) If, for any Plan Year, after taking into account the Qualified Nonelective Contributions made by the Employer pursuant to Subsection (c) above, if any, the Administrator shall determine the aggregate amount of Elective Deferrals of Highly Compensated Participants for such Plan Year exceeds the maximum amount of such contributions permitted by the Average Deferral Percentage test set forth in subsection (a) above, the Administrator shall reduce such excess contributions made on behalf of Highly Compensated Participants in order of their deferral percentages, beginning with the highest of such percentages (hereinafter "Excess Contributions"). For each Highly Compensated Participant who is so affected, the Administrator shall reduce amounts credited to his or her Salary Reduction Contribution Account and Deferred Cash Contribution Account in proportion to the Participant's Salary Reduction Contributions and Deferred Cash Contributions for the Plan Year. Excess Contributions of each Participant who is subjected to the Family Member aggregation rules shall be allocated among the Family Members of such Participant in proportion to the Elective Deferrals (and amounts treated as Elective Deferrals) of each Family Member that is combined to determine the combined deferral percentage. Such Excess Contributions, plus any income and minus any loss allocable thereto, shall be distributed to each affected Highly Compensated Participant no later than the last day of the Plan Year following the Plan Year in which such Excess Contributions were made. If Excess Contributions are not distributed before the date which is 2-1/2 months after the last day of the Plan Year in which such Excess Contributions arose, a 10% excise tax shall be imposed on the Employer maintaining the Plan with respect to such amounts. Excess Contributions shall be treated as an Annual Addition under the Plan. (e) Excess Contributions shall be adjusted for any income or loss up to and including the last day of the Plan Year for which such Excess Contributions were made. The income or loss allocable to Excess Contributions is (i) the income or loss allocable to the Participant's Salary Reduction Contribution Account and/or Deferred Cash Contribution Account, as the case may be, for the Plan Year multiplied by a fraction, the numerator of which is such Participant's Excess Contributions for the year and the denominator is the balance of such Account or Accounts, as the case may be, determined as of the beginning of the Plan Year plus any Salary Reduction Contributions and/or Deferred Cash Contributions made during the Plan Year without regard to any income or loss occurring during such Plan Year, or (ii) such other amount determined under any reasonable method, provided that such method is used consistently for all Participants in calculating any distributions required under this Article VI for the Plan Year and is used by the Plan in allocating income or loss to Participants' Accounts. Income or loss allocable to the period between the end of the Plan Year and the date of distribution shall be disregarded. 6.03 Limitation on Voluntary Nondeductible Contributions and Employer Matching Contributions. (a) For each Plan Year, the Average Contribution Percentage of the group of Highly Compensated Participants for the Plan Year may not exceed the greater of (i) 1.25 times the Average Contribution Percentage of the group of Non-Highly Compensated Participants for the same Plan Year, or (ii) the lesser of 2 times the Average Contribution Percentage of all such Non-Highly Compensated Participants, or such Average Contribution Percentage plus 2 percentage points. For purposes of this Section 6.03, the "Average Contribution Percentage" of a specified group of Participants for a Plan year shall be the average of the ratios (expressed as a percentage and calculated separately for each Participant in such group) of (A) the Contribution Percentage Amounts actually paid over to the Trust on behalf of each Participant to (B) the Participant's Compensation for the Plan Year. For purposes of this Section 6.03, "Compensation" shall have the same meaning as in Section 2.09; provided, however, that to the extent elected by the Employer in the Adoption Agreement, "Compensation" shall exclude amounts paid for the period when the Participant was not eligible to participate in the Plan with respect to the allocation of Employer Matching Contributions or with respect to the making of Voluntary Nondeductible Contributions and/or shall include the amounts set forth in Section 2.09(b). For purposes of this Section 6.03, "Contribution Percentage Amounts" shall be the sum of Voluntary Nondeductible Contributions and Employer Matching Contributions. Such Contribution Percentage Amounts shall not include Employer Matching Contributions that are forfeited either to correct Excess Aggregate Contributions or because the contributions to which they related are Excess Deferrals, Excess Contributions, or Excess Aggregate Contributions. In determining the Contribution Percentage Amounts, the Administrator may include Qualified Nonelective Contributions that are not used in satisfying the Average Deferral Percentage test of Section 6.02 and Qualified Matching Contributions. The Administrator also may elect to use Elective Deferrals in the Contribution Percentage Amounts so long as the Average Deferral Percentage test is met before the Elective Deferrals are used in the Average Contribution Percentage test and continues to be met following the exclusion of those Elective Deferrals that are used to meet the Average Contribution Percentage test. For purposes of computing Average Contribution Percentages, each Employee who is eligible to make Voluntary Nondeductible Contributions or Elective Deferrals or to receive an Employer Matching Contribution shall be taken into account as a Participant, whether or not he is actually making, or entitled to receive, such contributions to the Trust. (b) Special Rules: (i) For purposes of this Section 6.03, the contribution percentage of a Highly Compensated Participant for the Plan Year who is eligible to have Contribution Percentage Amounts allocated to his or her accounts under two or more plans described in Code Section 401(a), or arrangements described in Code Section 401(m) that are maintained by the Employer, shall be determined as if the total of such Contribution Percentage Amounts was made under each plan. Notwithstanding the foregoing, certain plans shall be treated as separate if mandatorily disaggregated under regulations under Code Section 401(m). (ii) In the event that this Plan satisfies the requirements of Code Section 401(m), 401(a)(4) or 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such sections of the Code only if aggregated with this Plan, then this Section 6.03 shall be applied by determining the Contribution Percentage of Participants as if all such plans were a single plan. For Plan Years beginning after December 31, 1989, plans may be aggregated in order to satisfy Code Section 401(m) only if they have the same Plan Year. (iii) For purposes of determining the Contribution Percentage of a Participant who is a 5% owner or one of the top-ten Highly Compensated Employees, the Contribution Percentage Amounts and Compensation of such Participant shall include the Contribution Percentage Amounts and Compensation for the Plan Year of his Family Members. Such Family Members shall be disregarded as separate Employees in determining the Average Contribution Percentage both for Non-Highly Compensated Participants and for Highly Compensated Participants. (iv) For purposes of applying the Average Contribution Percentage test, Voluntary Nondeductible Contributions are considered to have been made in the Plan Year in which contributed to the Trust. Employer Matching Contributions, Elective Deferrals, Qualified Matching Contributions and Qualified Nonelective Contributions will be considered made for a Plan Year if made no later than the end of the 12-month period immediately following the Plan Year to which such Contributions relate. (v) The Employer shall maintain records sufficient to demonstrate satisfaction of the Average Contribution Percentage test and the amount of Qualified Matching Contributions and Qualified Nonelective Contributions, if any, used in such test. (vi) The determination and treatment of the contribution percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. (vii) If, in any Plan Year, the Plan benefits Employees otherwise excludable from the Plan if the Plan had imposed the greatest minimum age and service conditions permissible under Section 410(a) of the Code, and the Employer applies Section 410(b) of the Code separately to the portion of the Plan that benefits only Employees who satisfy age and service conditions under the Plan that are lower than the greatest minimum age and service conditions permissible under Section 410(a) and to the portion of the Plan that benefits Employees who have satisfied the greatest minimum age and service conditions permissible under Section 410(a), the Plan shall be treated as comprising two separate Plans and the Average Contribution Percentage test set forth in subsection (a) shall be applied separately for each group of Employees in each Plan. (c) If, for any Plan Year, the Plan is unable to satisfy the Average Contribution Percentage test set forth in subsection (a) above, in lieu of distributing excess Contribution Percentage Amounts to Highly Compensated Participants as provided in subsection (d) below, the Employer may make a Qualified Matching Contribution to the Trust on behalf of Non-Highly Compensated Participants in an amount sufficient to enable the Plan to meet the Average Contribution Percentage test set forth in subsection (a) above. Such Qualified Matching Contribution shall be allocated to the Qualified Nonelective Contribution Account of each Non-Highly Compensated Participant who is eligible to participate in the Plan at any time during the Plan Year in the same manner as the allocation of Employer Matching Contributions. (d) If, for any Plan Year, the Administrator shall determine that the aggregate Contribution Percentage Amounts of Highly Compensated Participants for such Plan Year exceeds the maximum amount permitted by the Average Contribution Percentage test in subsection (a) above, the Administrator shall reduce such excess Contribution Percentage Amounts made on behalf of Highly Compensated Participants in order of their contribution percentages, beginning with the highest of such percentages (hereinafter "Excess Aggregate Contributions"). The foregoing determination shall be made after first determining Excess Elective Deferrals pursuant to Section 6.01, and then determining Excess Contributions pursuant to Section 6.02. For each Highly Compensated Participant who is affected, the Administrator shall reduce, on a pro rata basis, amounts credited to his or her Voluntary Nondeductible Contribution Account and his or her Employer Matching Contribution Account. Excess Aggregate Contributions of each Highly Compensated Participant who is subject to the Family Member aggregation rules shall be allocated among the Family Members in proportion to the Voluntary Nondeductible Contributions and Employer Matching Contributions (and amounts treated as Contribution Percentage Amounts) of each Family Member that is combined to determine the combined contribution percentage. Subject to the provisions of Section 6.05, Excess Aggregate Contributions which are attributable to the sum of Voluntary Nondeductible Contributions and fully vested Employer Matching Contributions plus any income and minus any loss allocable thereto, shall be distributed to each affected Highly Compensated Participant no later than the last day of the Plan Year following the Plan Year in which such Excess Aggregate Contributions were made. If such Excess Aggregate Contributions are not distributed within 2-1/2 months after the last day of the Plan Year in which such Excess Aggregate Contributions arose, a 10% excise tax shall be imposed on the Employer maintaining the Plan with respect to those amounts. Excess Aggregate Contributions which are attributable to Employer Matching Contributions which are not fully vested, plus any income and minus any loss allocable thereto, shall be forfeited and shall be applied to reduce future Employer Matching Contributions. Excess Aggregate Contributions shall be treated as an Annual Addition under the Plan. (e) Excess Aggregate Contributions shall be adjusted for any income or loss up to and including the last day of the Plan Year for which such Excess Aggregate Contributions were made. The income or loss allocable to Excess Aggregate Contributions is (i) the income or loss allocable to the Participant's Voluntary Nondeductible Contribution Account and/or Employer Matching Contribution Account, as the case may be, for the Plan Year multiplied by a fraction, the numerator of which is such Participant's Excess Aggregate Contributions for the year and the denominator is the balance of such Account or Accounts, as the case may be, determined as of the beginning of the Plan Year plus any Voluntary Nondeductible Contributions and/or Employer Matching Contributions made during the Plan without regard to any income or loss occurring during such Plan Year, or (ii) such other amount determined under any reasonable method, provided that such method is used consistently for all Participants in calculating any distributions required under this Article VI for the Plan Year and is used by the Plan in allocating income or loss to Participants' Accounts. Income or loss allocable to the period between the end of the Plan Year and the date of distribution shall be disregarded. 6.04 Multiple Use Test. If one or more Highly Compensated Participants participate in both a cash or deferred arrangement and a plan subject to the Average Contribution Percentage test maintained by the Employer and the sum of the Average Deferral Percentage and Average Contribution Percentage of those Highly Compensated Participants subject to either or both tests exceeds the Aggregate Limit, then unless the Employer elects to make a Qualified Nonelective Contribution or a Qualified Matching Contribution to the Trust to the extent necessary to enable the Plan to satisfy the Aggregate Limit, the Contribution Percentage Amounts of those Highly Compensated Participants who also participate in a cash or deferred arrangement will be reduced (beginning with such Highly Compensated Participant whose contribution percentage is the highest) so that the Aggregate Limit is not exceeded. The amount by which each Highly Compensated Participant's Contribution Percentage Amount is reduced shall be treated as an Excess Aggregate Contribution. The Average Deferral Percentage and Average Contribution Percentage of the Highly Compensated Participants are determined after any corrections required to meet the Average Deferral Percentage and Average Contribution Percentage tests in Sections 6.02 and 6.03. Multiple use does not occur if both the Average Deferral Percentage and Average Contribution Percentage of the Highly Compensated Employees do not exceed 1.25 multiplied by the Average Deferral Percentage and Average Contribution Percentage of the Non-Highly Compensated Employees. For purposes of this Section 6.04, the "Aggregate Limit" shall mean the sum of (i) 125 percent of the greater of the Average Deferral Percentage of the Non-Highly Compensated Participants for the Plan Year or the Average Contribution Percentage of the Non-Highly Compensated Participants under the Plan subject to Code Section 401(m) for the Plan Year beginning with or within the Plan Year of the cash or deferred arrangement and (ii) the lesser of 200% of, or two percentage points plus the lesser of such Average Deferral Percentage or Average Contribution Percentage. "Lesser" shall be substituted for "greater" in (i) and "greater" shall be substituted for "lesser" after "two percentage points plus the" in (ii) if such substitution would result in a larger Aggregate Limit. 6.05 Further Limitations on Employer Matching Contributions. Notwithstanding anything to the contrary in the foregoing, any Employer Matching Contributions related to a Participant's Excess Deferrals, Excess Contributions and/or Excess Aggregate Contributions shall be forfeited by such Participant and such amounts shall be applied to reduce future Employer Matching Contributions. 6.06 Special Rules. Any amount distributed to a Highly Compensated Participant pursuant to this Article VI shall not be subject to any of the consent rules for Participants and sponsors contained in Articles IX, X and XXIV, below. Amounts distributed pursuant to this Article VI shall be allocated on a pro rata basis among the Designated Investments in which a Participant's Account is invested; provided, however, that the Administrator or the Participant may specify an alternative manner in which distributions shall be allocated. ARTICLE VII. TIME AND MANNER OF MAKING CONTRIBUTIONS 7.01 Manner. Unless otherwise agreed to by the Trustee, contributions to said Trustee shall be made only in cash. All contributions may be made in one or more installments. 7.02 Time. Employer Contributions (other than Salary Reduction Contributions and Deferred Cash Contributions) with respect to a Plan Year shall be made before the time limit, including extensions thereof, for filing the Employer's federal income tax return for the Year with or within which the particular Plan Year ends (or such later time as is permitted by regulations authorized by the Secretary of the Treasury or delegate or such earlier time as the Secretary of the Treasury or delegate prescribes with respect to contributions used to satisfy the nondiscrimination tests set forth in Article VI above). Unless the Secretary of the Treasury prescribes a later date in regulations, Salary Reduction and Deferred Cash Contributions shall be made within 30 days after the date on which, in the absence of the Participant's election to make such contributions, such amounts would have been payable to the Participant as cash compensation. Nondeductible Voluntary Contributions for a given Limitation Year (as defined in Section 5.05(i) above) must be made during such Limitation Year or within 30 days of the end of the Limitation Year. Rollover Contributions may be made at any time acceptable to the Administrator in accordance with Section 4.06 hereof. All contributions shall be paid to the Administrator for transfer to the Trustee, as soon as possible, or, if acceptable to the Administrator and the Trustee, such contributions may be paid directly to the Trustee. The Administrator shall transfer such contributions to the Trustee as soon as possible. The Administrator may establish a payroll deduction system or other procedure to assist the making of Nondeductible Voluntary Contributions to the Trust, and the Administrator may from time to time adopt rules or policies governing the manner in which such contributions may be made so that the Plan may be conveniently administered. 7.03 Separate Accounts. For each Participant, a separate account shall be maintained for each of the following types of contributions and the income, expenses, gains and losses attributable thereto: (a) Salary Reduction Contributions, if selected in the Adoption Agreement; (b) Deferred Cash Contributions, if selected in the Adoption Agreement; (c) Employer Profit Sharing Contributions, if selected in the Adoption Agreement; (d) Employer Matching Contributions, if selected in the Adoption Agreement; (e) Nondeductible Voluntary Contributions, if selected in the Adoption Agreement, with separate accounts maintained for pre-1987 Nondeductible Voluntary Contributions and post-1986 Nondeductible Voluntary Contributions; (f) Qualified Nonelective Contributions and Qualified Matching Contributions, if selected in the Adoption Agreement; (g) Deductible Voluntary Contributions, if Participants made such contributions in past years; and (h) Rollover Contributions, if, pursuant to Section 4.06 hereof, the Administrator directs the Trustee to accept such contributions. In addition, pursuant to Section 8.03 hereof, separate accounts will be maintained for the pre-break and post-break Employer Contributions made on behalf of a Participant who has Service excluded from the calculations of Vesting Years. Notwithstanding the above, if a Participant's rights to one or more types of Employer Contributions are immediately and fully nonforfeitable and are subject to the same distribution rules, such types of contributions may be maintained in a single account. ARTICLE VIII. VESTING 8.01 When Vested. A Participant shall always have a fully vested and nonforfeitable interest in his or her Nondeductible Voluntary Contribution Account, Deductible Voluntary Contribution Account, Salary Reduction Contribution Account, Deferred Cash Contribution Account, Qualified Nonelective Contribution Account and Rollover Account. A Participant's interest in his or her Employer Profit Sharing Contribution Account and Employer Matching Contribution Account shall be vested and nonforfeitable at Normal Retirement Date, death while in Service, Disability, upon termination (including a complete discontinuance of Employer Contributions) or partial termination of the Plan and otherwise only to the extent specified in the Adoption Agreement. 8.02 Employer Profit Sharing Contribution and Employer Matching Contribution Forfeitures. If a Participant's employment with the Employer is terminated before his or her Employer Profit Sharing Contribution Account and/or Employer Matching Contribution Account is (are) fully vested in accordance with Section 8.01, this Section 8.02 shall apply. (a) The portion of the Participant's Employer Profit Sharing Contribution Account and/or Employer Matching Contribution Account which is to be forfeited pursuant to subsection (b) below shall be treated as follows: (i) if the Employer has not specified otherwise in the Adoption Agreement, the forfeiture shall be allocated as if it were an Employer Profit Sharing Contribution or Employer Matching Contribution, as the case may be, for the Plan Year following the Plan Year in which such forfeiture occurs, or (ii) if the Employer so specifies in the Adoption Agreement, the forfeiture(s) shall be applied to reduce the Employer's obligation to make Employer Matching Contributions for the Plan Year following the Plan Year in which the forfeiture occurs, provided that if the amount of the forfeiture to be reallocated exceeds the Employer's then unsatisfied obligation to make Employer Matching Contributions for the Plan Year, the forfeiture shall be applied to reduce the Employer's obligation to make fixed Employer Profit Sharing Contributions for the Plan Year following the Plan Year in which the forfeiture occurs. If the Plan does not provide for fixed Employer Profit Sharing Contributions, or the amount of forfeiture to be reallocated exceeds the Employer's then unsatisfied obligation to make fixed Employer Profit Sharing Contributions, the forfeiture shall be reallocated as if it were an additional discretionary Employer Profit Sharing Contribution made for the Plan Year following the Plan Year in which the forfeiture occurs. (b) If the Participant elects to receive a distribution of the value of his vested account balances in his or her Employer Profit Sharing Contribution and Employer Matching Contribution Accounts in a lump sum pursuant to the provisions of Section 10.02(a)(ii) or receives a nonconsensual distribution pursuant to Section 10.04, the nonvested portion of his or her Employer Profit Sharing Contribution and Employer Matching Contribution Accounts shall be treated as a forfeiture and reallocated pursuant to the provisions of Section 8.02(a). For this purpose, if the value of a Participant's vested account balance in his or her Employer Profit Sharing Contribution and Employer Matching Contribution Accounts is zero, the Participant shall be deemed to have received a distribution of such vested account balance. A Participant's vested account balance shall not include accumulated deductible employee contributions within the meaning of Code Section 72(o)(5)(B) for Plan Years beginning prior to January 1, 1989. In all other cases, the nonvested portion of a Participant's Employer Profit Sharing Contribution and Employer Matching Contribution Accounts shall be treated as a forfeiture and reallocated pursuant to the provisions of Section 8.02(a) when such Participant incurs five consecutive One-Year Breaks in Service. (c) No forfeitures shall occur solely as a result of withdrawal of Deductible Voluntary Contributions, Nondeductible Voluntary Contributions, or Rollover Contributions. 8.03 Reemployment (a) If a former Participant who was not fully vested in his or her Employer Profit Sharing Contribution and/or Employer Matching Contribution Accounts at termination of employment is reemployed after incurring five consecutive One-Year Breaks in Service, he or she shall have no right to any forfeited account balance. Any undistributed vested portion of his or her Employer Profit Sharing Contribution Account shall be held in a separate vested Employer Profit Sharing Contribution Account, and future Employer Profit Sharing Contributions on his or her behalf shall be credited to a new Employer Profit Sharing Contribution Account until such Participant becomes fully vested in such Account where upon such Participant's old and new Employer Profit Sharing Contribution Accounts shall be merged. Any undistributed vested portion of his or her Employer Matching Contribution Account shall be held in a separate vested Employer Matching Contribution Account, and future Employer Matching Contributions on his or her behalf shall be credited to a new Employer Matching Contribution Account until such Participant becomes fully vested in such Account whereupon such Participant's old and new Employer Matching Contribution Accounts shall be merged. (b) The following provisions shall apply with respect to a former Participant who was not fully vested in his or her Employer Profit Sharing Contribution and/or Employer Matching Contribution Accounts at termination of employment, and who is reemployed before he or she incurs five consecutive One-Year Breaks in Service: (i) If no amounts have been forfeited from his or her Employer Profit Sharing Contribution Account and/or Employer Matching Contribution Account, the amounts remaining in his or her Employer Profit Sharing Contribution Account and/or Employer Matching Contribution Account shall be restored to his or her credit. (ii) If the nonvested portion of the Participant's Employer Profit Sharing Contribution Account and/or Employer Matching Contribution Account has been forfeited, and the Participant has previously received the vested portions of his or her Employer Profit Sharing Contribution Account and/or Employer Matching Contribution Account, he or she shall have the right to repay to the Plan the full amount of such prior distribution. Such repayment must be made on or before the earlier of five years after the first date on which the Participant is subsequently reemployed by the Employer, or the close of the first period of five consecutive One-Year Breaks in Service following the date of distribution. Upon such repayment, the amount of any such repayment plus the value of the forfeited portion of such Accounts as of the date of forfeiture shall be credited to such Accounts. (iii) If the Participant is deemed to have received a distribution from his Employer Profit Sharing Contribution Account and/or Employer Matching Contribution Account pursuant to Section 8.02(b), and his entire Employer Profit Sharing Contribution Account and/or Employer Matching Contribution Account has been forfeited, upon the reemployment of such Participant, the value of his Employer Profit Sharing Contribution Account and/or Employer Matching Contribution Account as of the date of the forfeiture shall be restored to his credit within a reasonable time after his or her reemployment. (iv) Restoration of the previously forfeited amount shall be funded by current unallocated forfeitures, additional Employer contributions, or any combination thereof at the Employer's discretion. Such restoration shall not be treated as an Annual Addition under Article V. (v) Any Employer Profit Sharing Contributions to which such Participant becomes entitled after reemployment shall be credited to his or her Employer Profit Sharing Contribution Account. Any Employer Matching Contributions to which such Participant becomes entitled after reemployment shall be credited to his or her Employer Matching Contribution Account. The portion of such Accounts to which he or she will be entitled upon subsequent termination of employment will be based upon his or her aggregate Vesting Years before and after the break. ARTICLE IX. DISTRIBUTIONS UPON DEATH 9.01 Distributions at Death. If a Participant dies at a time when he or she has a vested Account balance, this Section shall apply with respect to such vested Account balance. (a) The Trustee shall, at the direction of the Administrator, distribute a Participant's vested Account balance in accordance with the provisions of this Article IX. The Administrator's direction shall include notification of the Participant's death, the existence or non-existence of a surviving spouse; the amounts, or method of calculating the amounts, to be distributed on given dates; and such other information required by the Trustee. (b) If the Participant has validly named a Beneficiary or Beneficiaries in compliance with Article XVII, his or her vested Account balance shall be distributed to the Beneficiary or Beneficiaries so named. To the extent that any portion of a vested Account balance of a deceased Participant is not governed by an effective Designation of Beneficiary, that portion of the vested Account balance shall be distributed to the deceased Participant's Spouse or if that is not possible, to the estate of the deceased Participant. (c) If the Participant has validly elected a form of distribution permitted under Section 10.02 which complies with the applicable provisions of subsection (d) below (a "permissible form of distribution") with respect to his or her vested Account balance, such vested Account balance shall be distributed in accordance with such election whether or not distributions have commenced prior to the Participant's death. With respect to any portion of a deceased Participant's vested Account balance for which the Participant had not validly elected a permissible form of distribution prior to his or her death, distribution shall be made in such permissible form as the Participant's Beneficiary (or Beneficiaries) may elect in writing with the Trustee. In the absence of such a valid election by the Beneficiary, the Participant's vested Account balance shall be distributed as follows: (i) if distributions have commenced prior to the Participant's death, in the form selected by the Participant, (ii) if distributions have not commenced prior to the Participant's death, and if the Beneficiary is the Spouse, in substantially equal installment payments over the Spouse's Applicable Life Expectancy, or, if the Beneficiary is not the Spouse, in a lump sum. (d) Distribution to the Participant's Beneficiary shall be made according to the following provisions: (i) If the Participant dies before distributions have commenced on account of the Participant's attainment of his or her First Required Distribution Year and if the Beneficiary is not the Spouse, the Participant's entire vested Account balance must be distributed to the Participant's Beneficiary either (A) on or before December 31 of the calendar year during which occurs the fifth anniversary of the Participant's death, or (B) in substantially equal annual or more frequent installments over a period not exceeding the Applicable Life Expectancy of the oldest Beneficiary (as determined as of the date of the Participant's death) provided that such distributions commence before the second January 1 which follows the Participant's death. (ii) If the Participant dies before distributions have commenced on account of the Participant's attainment of his or her First Required Distribution Year and if the Beneficiary is the Spouse, the Participant's entire vested Account balance must be distributed to the Participant's Spouse either (A) in a lump sum payable, or in installments which will be completely paid, on or before December 31 of the calendar year during which occurs the fifth anniversary of the date of the Participant's death, or (B) in annual installments over the Spouse's life or a period not longer than the Spouse's Applicable Life Expectancy provided that such distribution is commenced before the later of (1) the first January 1 following the calendar year during which the Participant would have attained age 70 1/2 had the Participant not died or (2) the second January 1 which follows the Participant's death. (iii) If a Participant dies after distributions have commenced on account of the Participant's attainment of his or her First Required Distribution Year, distributions to the Participant's Spouse, Beneficiary or estate shall continue over a period at least as rapid as the period selected by the Participant. (e) If a Beneficiary dies after the Participant (or in the case of a Beneficiary designated by another Beneficiary, after such other Beneficiary) and before such deceased Beneficiary receives full payment of the portion of the vested Account balance to which he or she is entitled, the Trustee shall, upon direction of the Administrator, distribute the funds to which the deceased Beneficiary is entitled to the Beneficiary or Beneficiaries validly named on the most recent Designation of Beneficiary filed by the deceased Beneficiary. To the extent that any portion of the funds to which the deceased Beneficiary was entitled are not governed by an effective Designation of Beneficiary, the funds shall be distributed to the deceased Beneficiary's surviving Spouse, or if that is not possible, to the estate of the deceased Beneficiary. The Administrator's direction shall include notification of the Beneficiary's death and the existence or non-existence of a surviving Spouse and such other information required by the Trustee. Such funds shall be distributed as follows: (i) If distributions had commenced before the Participant's death, distribution to the beneficiary of a deceased Beneficiary shall continue over a period at least as rapid as that selected by the Participant. (ii) If the deceased Beneficiary was the surviving Spouse of the Participant and had not begun to receive distributions from the Participant's Account at the time of his or her death, the Participant's vested Account balance shall be distributed to the deceased Beneficiary's Beneficiary according to the provisions of Sections 9.01(c) - (d) applied as if the deceased Beneficiary were the Participant. In addition, the surviving Spouse's Beneficiaries shall be treated as Beneficiaries during any future application of this Section. (iii) If neither subparagraph (i) nor (ii) above apply, the Participant's vested Account balance shall be distributed to the deceased Beneficiary's Beneficiary either (A) on or before December 31 of the calendar year during which occurs the fifth anniversary of the Participant's death or (B) in substantially equal annual or more frequent installments over the remainder of the Applicable Life Expectancy of the oldest Beneficiary of the Participant as determined at the Participant's death provided that distributions commence before the second January 1 which follows the Participant's death. 9.02 Children as Beneficiaries. For the purposes of Section 9.01, to the extent provided by Treasury regulations, any distribution paid to a Participant's child shall be treated as paid to the Participant's surviving Spouse if the remaining portion of the Participant's vested Account balance with respect to which such child is a Beneficiary becomes payable to the surviving Spouse when the child reaches the age of majority (or such other designated event permitted under the Treasury regulations). 9.03 Nonconsensual Distributions to Beneficiaries. Notwithstanding any provision of this Article, Article X or Article XXIV to the contrary, the Administrator may direct the entire vested Account balance of a deceased Participant (exclusive of his or her Rollover Account and Deductible Voluntary Contribution Account) be distributed if the amount distributed will be equal to $3,500 or less. The Administrator may make such direction without obtaining the consent of any Beneficiary. 9.04 Eligible Rollover Distributions. If the Participant's Beneficiary is a surviving Spouse, the provisions of Section 10.07 shall apply to distributions made pursuant to Article IX. ARTICLE X. DISTRIBUTIONS AFTER SEPARATION FROM SERVICE 10.01 Commencement of Distributions. The Trustee shall, at the direction of the Administrator, distribute a Participant's vested Account balance in accordance with the provisions of this Article X. The Administrator's direction shall include the amounts, or method of calculating the amounts, to be distributed on given dates and such other information required by the Trustee. In the event distribution is to be made in the form of an annuity contract, the Administrator shall also direct the Trustee with regard to the purchase of such a contract, including the selection of an appropriate insurance carrier. Except as otherwise provided in this Article X, distributions of a Participant's vested Account balance shall commence within 60 days after the close of the Plan Year during which occurs the later of (a) the Participant's Normal Retirement Date or (b) the earlier of (i) the Participant's separation from Service or (ii) the end of his or her First Required Distribution Year. Payment of benefits may, at the discretion of the Trustee, be paid directly to the Participant or to the Administrator, as payee agent. If the Participant's vested Account balance (exclusive of his or her Rollover Account and Deductible Voluntary Contribution Account) is greater than $3,500, written consent of the Participant is required for any earlier distribution. A Participant may file an election with the Administrator to request that distributions commence in accordance with one of the following options provided that the distribution shall otherwise comply with the requirements of the Plan (including, but not limited to, Section 10.03): (A) Distributions commencing before the Participant's Normal Retirement Date if the Participant is Disabled or experiences a separation from Service. (B) Distributions commencing after the normal time of distribution described above; provided, however, that any such deferred distribution must commence no later than 60 days after the end of the Participant's First Required Distribution Year. 10.02 Forms of Distribution. (a) Upon a Participant's separation from Service (for reasons other than death), he or she may file an election with the Administrator to request to receive a distribution of his or her vested Account balance in one or more of the following optional forms, provided that the distribution shall otherwise comply with the requirements of this Plan and provided that the optional forms have been designated by the Employer in the Adoption Agreement: (i) Distribution of the Participant's entire vested Account balance in monthly installments over a period equal to the shorter of 120 months or the Applicable Life Expectancy. The monthly amount shall normally be the balance of the Participant's vested Account balance divided by the remaining number of months in such period, all rounded to the nearest cent. However, the amount of each monthly installment may be recomputed and adjusted from time to time no more frequently than monthly as the Trustee may reasonably determine. (ii) Distribution of the Participant's entire vested Account balance in a lump sum. (iii) Distribution of the Participant's entire vested Account balance in installment payments of a fixed amount, such payments to be made until exhaustion of the Participant's vested Account balance. (iv) Distribution in kind. (v) Any reasonable combination of the foregoing or any reasonable time or manner of distribution within the above-stated limitations. (vii) Any distribution option that is a "protected benefit" under Code Section 411(d)(6). (b) To the extent permitted by applicable law and consistent with the provisions of this Article X, amounts distributed pursuant to this Article X shall be allocated on a pro rata basis among the Participant's Accounts and among the Designated Investments in which each Account is invested; provided, however, that the Participant may specify to the Administrator an alternative manner in which distributions shall be so allocated. 10.03 Required Minimum Distributions. In the case of each Participant, the annual distribution from his or her Account shall be determined by the Administrator in accordance with the regulations under Code Section 401(a)(9), including the minimum distribution incidental benefit requirement of Section 1.401(c)(9)-2 of such regulations and must equal or exceed the amount equal to the quotient obtained by dividing the Participant's Account balance at the beginning of the calendar year by the lesser of (a) the Applicable Life Expectancy, or (b) if the Participant's Spouse is not the Beneficiary, the applicable divisor determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of the regulations under Code Section 401(a)(9). 10.04 Nonconsensual Distributions. Notwithstanding any provision of Article IX, this Article or Article XXIV to the contrary, the Administrator may direct that the entire vested Account balance of a Participant (exclusive of his or her Rollover Account and Deductible Voluntary Contribution Account) be distributed if the amount distributed will be equal to $3,500 or less. The Administrator may make such direction (a) only if the Participant has not previously attained his or her Annuity Starting Date and (b) regardless of whether the Participant requests or otherwise consents to such distribution. 10.05 Special One-Time Distribution Election. Notwithstanding any Plan provision to the contrary, distribution on behalf of any Participant, including a 5% owner, may be made in accordance with the following requirements (regardless of when such distribution commences): (a) The distribution is one which would not have disqualified the Plan under Code Section 401(a)(9) as it was in effect prior to its amendment by the Deficit Reduction Act of 1984. (b) The distribution is in accordance with a method of distribution designated by the Participant whose interest in the Plan is being distributed or, if the Participant has died, by a beneficiary of such Participant. (c) Such designation was in writing, was signed by the Participant or the beneficiary, and was made before January 1, 1984. (d) The Participant had accrued a benefit under the Plan as of December 31, 1983. (e) The method of distribution designated by the Participant or the beneficiary specifies the time at which distribution will commence, the period over which distributions will be made, and in the case of any distribution upon the Participant's death, the Beneficiaries of the Participant are listed in order of priority. (f) If the distribution is one to which the provisions of Article XXIV hereof would otherwise have applied and the Participant is married, the Participant's Spouse consents to the election in a writing filed with the Administrator. A distribution upon death will not be covered by this Section unless the information in the designation contains the required information described above with respect to the distributions to be made upon the death of the Participant. For any distribution which commenced before January 1, 1984, but continues after December 31, 1983, the Participant, or the Beneficiary, to whom such distribution is being made, will be presumed to have designated the method of distribution under which the distribution is being made if the method of distribution was specified in writing and the distribution satisfies the requirement in subsections (a) and (e) above. If a designation is revoked, any subsequent distribution must satisfy the requirements of Code Section 401(a)(9) as amended. Any changes in the designation will be considered to be a revocation of the designation. However, the mere substitution or addition of another Beneficiary (one not named in the designation) under the designation will not be considered to be a revocation of the designation, so long as such substitution or addition does not alter the period over which distributions are to be made under the designation, directly or indirectly (for example, by altering the relevant measuring life). 10.06 Distribution on Account of Plan Termination. Subject to the provisions of Section 11.04, if the Employer terminates the Plan or completely discontinues making Employer Contributions to the Trust, the Administrator has discretion pursuant to Section 20.03 below to distribute, or retain in the Trust, Participants' Account balances. 10.07 Eligible Rollover Distribution. (a) This Section applies to distributions made by the Trustee on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Section, a Distributee may elect, at the time and in the manner prescribed by the Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. (b) An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or life expectancies) of the Distributee and the Distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code Section 401(a)(9); and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (c) An Eligible Retirement Plan is an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), or a qualified trust described in Code Section 401(a), that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving Spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (d) A Distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving Spouse and the Employee's or former Employee's Spouse or former Spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are Distributees with regard to the interest of the Spouse or former Spouse. (e) A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. If a distribution is one to which Code Sections 401(a)(11) and 417 do not apply, such distribution may commence less than 30 days after the notice required under Section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that: (i) the Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (ii) the Participant, after receiving the notice, affirmatively elects a distribution. ARTICLE XI. IN-SERVICE WITHDRAWALS 11.01 In-service Withdrawal from Participant's Accounts. This Section 11.01 shall apply only to Participants who remain in the employ of the Employer. (a) Nondeductible Voluntary Contribution Account. A Participant may withdraw all or a portion of his or her Nondeductible Voluntary Contribution Account upon notice to the Administrator; provided, however, that a Participant who withdraws any amount from his or her Nondeductible Voluntary Contribution Account which previously generated an Employer Matching Contribution shall be prohibited from making a nondeductible voluntary contribution for six calendar months, beginning with the calendar month immediately following the date of withdrawal. (b) Rollover Account. A Participant may withdraw all or a portion of his or her Rollover Account upon notice to the Administrator. (c) Deductible Voluntary Contribution Account. A Participant may withdraw all or a portion of his or her Deductible Voluntary Contribution Account upon notice to the Administrator. (d) Employer Profit Sharing Contribution Account. Upon attainment of his or her Normal Retirement Date, a Participant may withdraw all or a portion of his or her Employer Profit Sharing Contribution Account upon notice to the Administrator. If elected by the Employer in the Adoption Agreement, a Participant who has not attained his or her Normal Retirement Date but who is fully vested in his or her Employer Profit Sharing Contribution may submit a request to the Administrator for a withdrawal of all or a portion of his or her Employer Profit Sharing Contribution Account. The Administrator may permit such a withdrawal only if the Participant can demonstrate to the satisfaction of the Administrator that he or she is suffering from "hardship" as defined in Section 11.02 below. (e) Employer Matching Contribution Account. Upon attainment of his or her Normal Retirement Date, a Participant may withdraw all or a portion of his or her Employer Matching Contribution Account upon notice to the Administrator. If elected by the Employer in the Adoption Agreement, a Participant who has not attained his or her Normal Retirement Date but who is fully vested in his or her Employer Matching Contribution Account may submit a request to the Administrator for a withdrawal of all or a portion of his or her Employer Matching Contribution Account. The Administrator may permit such a withdrawal only if the Participant can demonstrate to the satisfaction of the Administrator that he or she is suffering from "hardship" as defined in Section 11.02 below. (f) Salary Reduction Contribution Account, Deferred Cash Contribution Account and Qualified Nonelective Contribution Account. Upon attainment of his or her Normal Retirement Date, a Participant may withdraw all or a portion of his or her Salary Reduction Contribution Account, Deferred Cash Contribution Account and/or Qualified Nonelective Contribution Account upon notice to the Administrator. If elected by the Employer in the Adoption Agreement, a Participant who has not attained his or her Normal Retirement Date may submit a request to the Administrator for a withdrawal of all or a portion of his or her Salary Reduction Contribution Account or Deferred Cash Contribution Account (but not earnings on such accounts after December 31, 1988). The Administrator may permit such a withdrawal only if the Participant can demonstrate that he or she is suffering from "hardship" as defined in Section 11.02 below. 11.02 Rules Governing Hardship Withdrawals. A Participant shall be considered to be suffering from "hardship" only if the distribution is both made on account of an immediate and heavy financial need of the Participant and is necessary to satisfy such financial need, determined in accordance with objective, nondiscretionary standards as set forth in this Section. (a) An "immediate and heavy financial need" shall be deemed to include, and shall be limited to, the following: (i) Expenses incurred or necessary for medical care described in Code Section 213(d) of the Participant, his or her Spouse, or any dependents of the Participant (as defined in Code Section 152); (ii) Purchase (excluding mortgage payments) of a principal residence for the Participant; (iii) Payment of tuition, related educational fees and room and board for the next 12 months of post-secondary education for the Participant, his or her Spouse, children, or dependents; or (iv) The need to prevent the eviction of the Participant from his or her principal residence or foreclosure on the mortgage of the Participant's principal residence. (b) A distribution will be treated as "necessary" to satisfy an immediate and heavy financial need of the Participant only if: (i) The Participant has obtained all distributions, other than hardship distributions, and all nontaxable loans under all plans maintained by the Employer; (ii) All plans maintained by the Employer provide that the Participant's Salary Reduction Contributions and/or Deferred Cash Contributions (and Nondeductible Voluntary Contributions) will be suspended for 12 months after the receipt of the hardship distribution; (iii) The distribution is not in excess of the amount of an immediate and heavy financial need (including amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution); and (iv) All plans maintained by the Employer provide that the Participant may not make Salary Reduction Contribution and/or Deferred Cash Contributions for the Participant's taxable year immediately following the taxable year of the hardship distribution in excess of the applicable limit under Code Section 402(g) for such taxable year less the amount of such Participant's Salary Reduction Contributions and/or Deferred Cash Contributions for the taxable year of the hardship distribution. 11.03 Manner of Distribution. A distribution under this Article shall be made in a lump-sum payment to the Participant. In each case in which a partial distribution is made from a Participant's Account, the amount distributed from such Account pursuant to this Article XI shall be allocated on a pro rata basis among the Designated Investments in which such Account is invested; provided, however, that the Administrator or the Participant may specify an alternative manner in which such distribution shall be so allocated. 11.04 Limitation on Distributions. Notwithstanding anything to the contrary elsewhere herein, the amounts credited to a Participant's Salary Reduction Contribution Account and Deferred Cash Contribution Account, and Qualified Nonelective Contribution Account shall not be distributable to a Participant or his or her Beneficiary until the Participant separates from Service on account of retirement, disability, death or termination of employment or upon the occurrence of one of the following events: (a) Termination of the Plan without the establishment of another defined contribution plan, other than an employee stock ownership plan (as defined in Code Section 4975(e) or Section 409) or a simplified pension plan as defined in Code Section 408(k). (b) The disposition by a corporation to an unrelated corporation of substantially all of the assets (within the meaning of Code Section 409(d)(2)) used in a trade or business of such corporation if such corporation continues to maintain this Plan after the disposition, but only with respect to Participants who continue employment with the corporation acquiring such assets. (c) The disposition by a corporation to an unrelated entity of such corporation interest in a subsidiary (within the meaning of Code Section 409(d)(3)) if such corporation continues to maintain this Plan, but only with respect to Participants who continue employment with such subsidiary. (d) The attainment of age 59-1/2 by the Participant. (e) In the case of the Participant's Salary Reduction Contribution Account and Deferred Cash Contribution Account, the hardship of the Participant as described in Section 11.02. All distributions that may be made pursuant to one or more of the foregoing distributable events are subject to the spousal and Participant consent requirements (if applicable) contained in Code Sections 411(a)(11) and 417. In addition, distributions made after March 31, 1988, that are triggered by an event enumerated in Sections 11.04(a)-(c) must be made in a lump sum. ARTICLE XII. LOANS 12.01 Availability of Loans. If, in the Adoption Agreement, the Employer has specified that loans to Participants are permitted, the Loan Trustee shall, upon the direction of the Administrator, make one or more loans, including any renewal thereof, to a Participant who is an Employee or, in the discretion of the Administrator, a former Employee (other than a Participant who is an Owner-Employee). Any such loan shall be subject to such terms and conditions as the Administrator shall determine pursuant to a written uniform policy adopted by the Administrator for this purpose, which policy shall be incorporated herein as part of the Plan, at least as restrictive as required by this Article, and, contain specific provisions setting forth: (a) the identity of the person or positions authorized to administer the loan program; (b) a procedure for applying for loans; (c) the basis upon which loans will be approved or denied; (d) limitations, in addition to those described in this Article XII, on the types and amount of loans offered; (e) the procedure under the program for determining a reasonable rate of interest; (f) the types of collateral which may secure a loan; and (g) the events constituting default and the steps that will be taken to preserve plan assets in the event of such default. 12.02 Spousal Consent Required. If this Plan is adopted as a plan which is subject to the special annuity rules discussed in Article XXIV below, to obtain a loan, a Participant must obtain the consent of his or her Spouse, if any, within the 90-day period before the time his or her Account balance is used as security for the loan. Furthermore, a new consent is required if an increase in the amount of the security is necessary and any of the remaining balance of the Account is used. A spousal consent to a loan must be in writing, witnessed by a Plan representative or notary public, and acknowledge that as a result of a default in repayment of the loan the Spouse may be entitled to a lesser death benefit than he or she would otherwise receive under the Plan. A Spouse shall be deemed to consent to any loan which is outstanding at the time of his or her marriage to the Participant. 12.03 Equivalent Basis. No such loan may be made to a disqualified person within the meaning of Code Section 4975(e), unless such loans are available to all active Participants on a reasonably equivalent basis and are not made available to Highly Compensated Employees in an amount which, when stated as a percentage of any such Participant's Account, is greater than is available to any other Participants. 12.04 Limitation on Amount. The amount of any such loan, when added to the outstanding balance of all other loans from the Trust (and any other qualified retirement plans of the Employer) to the Participant, shall not exceed the lesser of: (a) $50,000 reduced by the amount by which (i) the highest outstanding balance of all such loans to the Participant during the one-year period ending on the day before the date on which the loan is made exceeds (ii) the outstanding balance of such loans to the Participant on the date on which such loan is made; or (b) the amount determined pursuant to the following chart: Vested Maximum Account Balance Amount of Loan $0 - $100,000 50% of vested Account balance over $100,000 $50,000. The value of the Participant's Account balance shall be as determined by the Administrator; provided, however, that such determination shall in no event take into account the portion of the Participant's Account attributable to the Participant's Deductible Voluntary Contribution Account. 12.05 Maximum Term. The term of any such loan shall not exceed five years; provided, however, that such limitation shall not apply to any loan used for the purchase of a dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as a principal residence of the Participant. 12.06 Promissory Note. Any such loan shall be evidenced by a promissory note executed by the Participant and payable to the Loan Trustee, on the earliest of (i) a fixed maturity date meeting the requirements of Section 12.05 above, (ii) the Participant's death (iii) the Participant's separation from service if the loan policy does not permit loans to former Employees. Such promissory note shall evidence such terms as are required by this Article. 12.07 Adequate Security. Each loan and related promissory note shall be secured by an assignment of no more than 50 percent of the Participant's Account to the Loan Trustee. A Participant may also provide such other or additional security for the loan as the Loan Trustee may require or permit. 12.08 Repayment By Payroll Reduction. In addition to executing a promissory note, the Participant who desires to take out a loan shall enter into a payroll reduction agreement with the Employer or such other form of repayment agreement with the Employer as the Administrator permits from time to time. The Participant shall enter into such agreement on or before the date when the loan is made. Such agreement shall provide that, if the Participant defaults on the loan while he or she is still an Employee, the Employer shall be entitled to reduce the Participant's pay in sufficient increments to ensure that, over a reasonable period of time, the amount with respect to which the Participant has defaulted plus any interest owed and any costs of collection incurred by the Loan Trustee will be repaid to the Trust. The Employer shall promptly pay to the Loan Trustee all amounts that the Employer withholds from a Participant's pay pursuant to such a payroll reduction agreement or other repayment agreement. The Administrator and/or Loan Trustee shall credit all amounts withheld from a Participant's pay or collected pursuant to a repayment agreement to the relevant Participant's Account as payments of amounts owed on the note. 12.09 Interest. Any such loan shall be subject to a reasonable rate of interest. 12.10 Level Amortization. A Participant shall repay the principal of any loan according to a schedule which shall provide for level amortization over a period of the loan, with payments to be made no less frequently than quarterly. 12.11 Additional Repayment Rules. If a Participant fails to make a payment in accordance with the schedule developed in accordance with the requirements of Section 12.10 above, the Administrator shall notify the Participant in writing that if the relevant loan principal and accumulated and unpaid interest thereon is not paid within 30 days, action will be taken to collect such amounts plus any cost of collection. When collecting such amounts, the Loan Trustee may utilize any of the remedies available to it including those provided by the promissory note, a payroll reduction agreement entered into pursuant to Section 12.08 and applicable law. If a note is not paid when the Participant's benefits hereunder are to be distributed, then any unpaid portion of such loan, and unpaid interest thereon, and any costs of collection incurred by the Loan Trustee shall be deducted by the Loan Trustee from the Participant's Account before benefits are paid from or purchased out of the Account. Such deduction shall, to the extent thereof, cancel the indebtedness of the Participant. Notwithstanding any implication of the preceding sentence to the contrary, no attachment of the Participant's Account which is subject to Section 11.04 shall occur until a distributable event occurs as specified in Section 11.04. 12.12 Accounting. Loans shall be made on a pro rata basis among the Participant's Accounts and among the Designated Investments in which each Account is invested and shall be treated as an investment of each such Account, provided, however, that the Administrator or the Participant may specify an alternative manner in which such loan shall be so allocated. Notwithstanding the foregoing, no loans shall be made from the Participant's Deductible Voluntary Contribution Account, and without the consent of the Distributor, no loans shall be made from the Participant's Accounts invested in qualifying employer securities. 12.13 Administration of Loans. Except as expressly provided otherwise in this Article XII, the Administrator shall have the sole responsibility for all administrative tasks relating to loans made pursuant hereto including, but not limited to, the issuance of any appropriate notices or information returns required under the Code or other applicable law. 12.14 Precedence. This Article overrides Section 18.01 below. ARTICLE XIII. TRUST PROVISIONS 13.01 Manner of Investment. Except as expressly provided otherwise herein, all contributions made pursuant to the Plan and any assets in which such contributions shall be invested or reinvested shall be held in trust by one or more Trustee pursuant to the provisions of this Agreement of Trust. Certain assets of the Plan (including, but not limited to, insurance contracts and shares of securities of an Employer that are not publicly traded) may be held by the Administrator or such other entity as the Trustee may appoint as subcustodian on behalf of the Trustee. Except to the extent that a Participant's Account is invested in a loan pursuant to Article XII hereof, the Account of a Participant may only be invested and reinvested in Designated Investments, unless the Distributor consents to such other investments. If the Administrator or the Participant, as the case may be, has elected to have a portion of an Account invested in investments other than Designated Investments, and the Distributor has given its consent, the Trustee shall invest such amount in such investments, directed by the Administrator or other person with investment discretion and in accordance with Section 13.03 hereof. Both the Designated Investments and investments other than Designated Investments available for investment may be limited by the Administrator who may impose separate rules for separate accounts or for terminated Participants. Investment in more than one Designated Investment is not permitted unless the value of the Participant's Account and the value of the investment in each additional Designated Investment exceed amounts from time to time determined by the Distributor. If the Trustee invests in one or more collective investment funds (whether or not the Trustee acts as trustee thereof) for the collective investment of assets of employee pension or profit-sharing trusts pursuant to Revenue Ruling 81-100, and such collective investment fund constitutes a qualified trust under the applicable provisions of the Code, such collective investment funds shall constitute part of the Plan, and the instrument creating such funds shall constitute part of this Agreement of Trust while any portion of the Trust is so invested. 13.02 Investment Decision. (a) The decision as to the investment of an Account shall be made by the person designated in the Adoption Agreement or as provided in this Section 13.02, and the Trustee shall have no responsibility for determining how an Account is to be invested or to see that investment directions communicated to it comply with the terms of the Plan. Each such person, including the Administrator, a Participant or a Beneficiary, is hereby designated a "named fiduciary" within the meaning of Sections 402(a)(2) and 403(a)(1) of the Act, with respect to the Accounts over which he or she may exercise investment control. If the decision is made by the Participant, then (subject to Section 13.02(d) below) the Participant shall convey investment instructions to the Administrator and the Administrator shall promptly transmit those instructions to the Trustee. Further, if the decision is to be made by the Participant, the right to make such a decision shall remain with the Participant upon retirement and shall pass to his or her Beneficiary upon death; provided, however, that upon termination of Service by a Participant, the Administrator shall have the right to make investment decisions with respect to the portion of such Participant's Account which is not vested pursuant to Article VIII and any suspense account maintained under the Plan. In the event that all or a portion of a Participant's Account is assigned to an "alternate payee" pursuant to a "qualified domestic relations order," such alternate payee shall have the right to make investment decisions with respect to such portion and any earnings thereon to the same extent as the Participant. (b) The person designated to make the decision as to the investment of an Account may direct that the investment medium of an Account be changed, provided that no such change may be made from or to an investment other than a Designated Investment except to the extent permitted under Section 13.01 above and by the terms of that other investment vehicle. Notwithstanding the foregoing, the Administrator may from time to time establish uniform, nondiscretionary rules with respect to the frequency or times at which changes in the investment medium of the Account may be made. If the Distributor determines in its own judgment that there has been trading of Designated Investments in the Accounts of the Participants, any Designated Investment may refuse to sell to such Accounts. When an investment is being made or changed, the person designated to do so shall specify the type of Account to which the change refers. (c) Except as provided in subsection (a) above, if any decision as to investments is to be made by the Administrator, it shall be made on a uniform basis with respect to all Participants. (d) The Administrator and the Trustee may adopt procedures permitting Participants to convey their investment instructions directly to the Trustee or to the transfer agent for the Designated Investment or for any other investment permitted by the Distributor. (e) Whenever a Participant is the person designated to make the decision as to the investment of an Account, the Administrator shall ascertain that the Participant has received a copy of the current prospectus relating to any Designated Investment in which such Account is to be invested where required by any state or federal law. With respect to contributions designated for investment by a Participant, by remitting such a contribution to the Trustee, the Administrator shall be deemed to warrant to the Trustee for the benefit of the appropriate Designated Investment and its principal underwriter (if applicable) that the Participant has received all such prospectuses. By remitting any other contribution to the Trustee, the Administrator shall be deemed to warrant to the Trustee for the benefit of the appropriate Designated Investment and its principal underwriter (if applicable) that the Administrator has received a current prospectus of any Designated Investment in which the contribution is to be invested where required by any state or federal law. 13.03 Directed Powers of the Trustee. To the extent that a portion of the Trust assets are invested other than in Designated Investments pursuant to Section 13.01 above, the Trustee shall have the following powers and authority in the administration of the Trust to be exercised at the direction of the Administrator or other person with investment discretion: (a) To purchase, receive or subscribe for any securities or other property and to retain in trust such securities or other property. (b) To sell for cash or credit, to convert, redeem, or exchange securities for other securities or other property, to tender securities pursuant to tender offers, or otherwise to dispose of any securities or other property at any time held by the Trustee. (c) To settle, compromise, or submit to arbitration any claims, debts or damages, due or owing to or from the Trust Fund, to commence or defend suits or legal proceedings and to represent the Trust Fund in all suits or legal proceedings; provided, however, that the Trustee shall have the right, in its sole discretion, to bring, join in or oppose any such suits or legal proceedings where it may be adversely affected by the outcome, individually or as Trustee, or where it is advised by counsel that such action is required on its part by the Act or other applicable law. (d) To exercise any conversion privilege and/or subscription right available in connection with any securities or other property at any time held by it; to oppose or to consent to the reorganization, consolidation, merger or readjustment of the finances of any corporation, company or association, or to the sale, mortgage, pledge or lease of the property of any corporation, company or association, the securities of which may at any time be held by it and to do any act with reference thereto, including the exercise of options, the making of agreements or subscriptions and the payment of expenses, assessments or subscriptions which may be deemed necessary or advisable in connection therewith, and to hold and retain any securities or other property which it may so acquire, and to deposit any property with any protective, reorganization or similar committee or with depositories designated thereby, to delegate power thereto, and to pay or agree to pay part of the expenses and compensation of any such committee and any assessments levied with respect to property so deposited; provided, however, that the Trustee shall not be responsible for taking any action or exercising any right described in this subsection (d) with respect to securities or other property of the Trust Fund unless, at least three business days prior to the date on which such power is to be exercised, it or its agents (i) are in actual possession or control of such securities or property (if such possession or control is necessary to exercise any such power) and (ii) have received instructions from the Administrator to exercise any such power. (e) To exercise, personally, by proxy or by general or limited power of attorney, any right appurtenant to any securities or other property held by it at any time. (f) To invest and reinvest all or any part of the assets of the Trust Fund, and to hold part of the Trust Fund uninvested. (g) To employ suitable agents and counsel and to pay their reasonable expenses and compensation as expenses of the Trust. (h) To purchase, enter into, sell, hold and generally deal in any manner in and with contracts for the immediate delivery of financial instruments of any issuer or of any other property, to grant, purchase, sell, exercise, permit to exercise, permit to be held in escrow and otherwise to acquire, dispose of, hold and generally deal in any manner with or in all forms of options in any combination; and, in connection with its exercise of the powers hereinabove granted, to deposit any securities or other property as collateral with any broker-dealer or other person, and to take all other appropriate action in connection with such contracts. (i) To deposit or pledge any securities or other property as collateral with any broker-dealer or other person (including the Trustee), and to permit securities or other property to be held by or in the name of others or in transferable form. (j) To borrow money, with or without security, from any legally permissible source, to encumber property of the Trust Fund to secure repayment of such indebtedness, to assume liens on properties acquired by the Trust, and to acquire properties subject to liens. (k) To form corporations and to create trusts to hold title to any securities or other property of the Trust Fund. (l) To acquire and hold securities which constitute qualifying employer securities with respect to a Plan (as such term is defined in Section 407 of the Act); provided that the Trustee shall have no responsibility for determining whether such acquisition or holding complies with the Act; and provided further that the Administrator shall be responsible for filing all reports required under federal or state securities laws with respect to the Trust Fund's ownership of qualifying employer securities (including without limitation any reports required under Section 13 or 16 of the Securities Exchange Act of 1934, as amended) and shall immediately notify the Trustee in writing of any requirement to stop purchases or sales of employer securities pending the filing of any report, and the Trustee shall provide to the Administrator such information on the Trust Fund's ownership of qualifying employer securities as the Administrator may reasonably request in order to comply with federal or state securities laws and the Act; (m) To convert any monies into any currency through foreign exchange transactions (which may be effected with the Trustee or an affiliate of the Trustee to the extent permitted under the Act); and (n) Generally, to do all acts, whether or not expressly authorized, which may be considered necessary or desirable for the protection or enhancement of the Trust Fund or to carry out any of the foregoing powers and the purposes of the Trust Fund. 13.04 Discretionary Powers of the Trustee. The Trustee shall have the following powers and authority in the administration of the Trust to be exercised in its sole discretion: (a) To register any securities held by it hereunder in its own name or in the name of a nominee with or without the addition of words indicating that such securities are held in a fiduciary capacity and to hold any securities in bearer form and to deposit any securities or other property in a depository, clearing corporation, or similar corporation, either domestic or foreign. (b) To make, execute and deliver, as Trustee hereunder, any and all instruments in writing necessary or proper for the accomplishment of any of the powers referred to in Section 13.03 or in this Section 13.04. (c) To employ suitable agents, custodians, subcustodians, and counsel including but not limited to entities which are affiliates of the Trustee and, subject to applicable law, to pay their reasonable compensation and expenses as expenses of the Trust. (d) With the consent of the Administrator, to loan securities held in the Trust to brokers or dealers or other borrowers under such terms and conditions as the Trustee, in its absolute discretion, deems advisable, to secure the same in any manner permitted by law and the provisions of this Agreement, and during the term of any such loan, to permit the loaned securities to be transferred into the name of and voted by the borrowers or others, and, in connection with the exercise of the powers hereinabove granted, to hold any property deposited as collateral by the borrower pursuant to any master loan agreement in bulk, together with the unallocated interests of other lenders, and to retain any such property upon the default of the borrower, whether or not investment in such property is authorized under this Agreement, and to receive compensation therefor out of any amounts paid by or charged to the account of the borrower. 13.05 Limitations in Investments. Notwithstanding the above, the following restrictions on the investment of a Participant's Account shall apply: (a) No part of a Participant's Deductible Voluntary Contribution Account may be used to purchase life insurance. (b) At most, less than one-half of the aggregate Employer Contributions allocated to a Participant's Employer Contribution Account may be used to pay premiums attributable to the purchase of ordinary life insurance contracts (life insurance contracts with both nondecreasing death benefits and non-increasing premiums). (c) No more than one-quarter of aggregate Employer Contributions allocated to a Participant's Account may be used to pay premiums on term life insurance contracts, universal life insurance contracts, and all other life insurance contracts which are not ordinary life insurance contracts. (d) One-half of the amount used to pay premiums on ordinary life insurance contracts plus the amount used to pay premiums on all other life insurance contracts may not exceed an amount equal to one-quarter of the aggregate Employer Contributions allocated to a Participant's Account. (e) No part of a Participant's Account shall be applied towards the purchase of any insurance contract unless (i) the Trustee applies for and is the owner of such contract, (ii) the contract provides that all contract proceeds shall be paid to the Trustee, and (iii) the contract provides for distributions to the Participant's Spouse, as necessary to ensure compliance with the applicable requirements of Articles IX, X, and XXIV. (f) Amounts used to pay premiums on, or purchase, any insurance contract(s) on the life of a Participant shall be paid first from that portion of the Participant's Nondeductible Voluntary Contribution Account which represents Nondeductible Voluntary Contributions made by the Participant prior to January 1, 1987, provided that the Plan, as of May 5, 1986, permitted withdrawal of Nondeductible Voluntary Contributions before separation from Service. Amounts used to pay premiums on, or purchase, any insurance contract(s) on the life of a Participant which exceed that portion of the Participant's Nondeductible Voluntary Contribution Account described in the preceding sentence shall be paid first from the portion of the Participant's Nondeductible Voluntary Contribution Account which represents the remaining Nondeductible Voluntary Contributions made by the Participant and then, except as provided in paragraph (a) above, from such other of the Participant's Accounts as the Administrator directs pursuant to the Participant's election. (g) Except as provided in Section 22.01, any insurance contract(s) on the life of a Participant will be converted to cash or distributed to the Participant as of the Participant's Annuity Starting Date. (h) Any dividends or credits earned on insurance contract(s) will be allocated to the Account of the Participant for whose benefit the contract is held, provided, however, that if an insurance contract was purchased with a Participant's Nondeductible Voluntary Contributions, such dividends or credits which are attributable to the Participant's Nondeductible Voluntary Contributions shall, to the extent treated as a return of premium, be credited to the Participant's Nondeductible Voluntary Contribution Account. If a Participant's Account is invested in one or more insurance contracts, the Trustee is required to pay over all proceeds of the contract(s) to the Participant's Beneficiary or Beneficiaries in accordance with the terms of this Plan and under no circumstances shall the Trust retain any contract proceeds. 13.06 Appointment of Investment Manager. Subject to Sections 13.01 and 13.03 above, the Administrator may designate, and the Employer may contract with, Scudder, Stevens & Clark Inc., or its successor or any affiliate, or any other qualified entity to act as investment manager (within the meaning of the Act), and may at any time revoke such designation. If an investment manager is so designated, the Trustee shall follow all investment directions given by the investment manager with respect to the retention, investment and reinvestment of the Plan assets to the extent they are under the control of such investment manager. If permitted by the Trustee, the investment manager may issue orders for the purchase and sale of securities, including orders through any affiliate of such investment manager. Such an investment manager is specifically allowed to direct or make investments in any Designated Investment and any other investments to which the Distributor has given its consent. The Trustee shall not be liable for following any direction given by, or any actions of, an investment manager so appointed. 13.07 Trustee: Number, Qualifications and Majority Action. (a) The Employer shall designate one or more Trustees for each Trust. Any natural person and any corporation having power under applicable law to act as a trustee of a pension or profit sharing plan may be a Trustee. No person shall be disqualified from being a Trustee by being employed by the Employer, by being the Administrator, by being a trustee under any other qualified retirement plan of the Employer or by being a Participant in this Plan or such other qualified plan. (b) A Trustee holding office as sole Trustee with respect to a Trust hereunder shall have all the powers and duties herein given to the Trustees hereunder. When the number of Trustees with respect to a Trust is three, any two of them may act, but the third Trustee shall be promptly informed of the action. When there are two or more Trustees with respect to a Trust, they may, by written instrument communicated to the Employer and the Administrator, allocate among themselves the powers and duties herein given to the Trustee hereunder. If such an allocation is made, to the extent permitted by applicable law, no Trustee shall be liable either individually or as a trustee for loss to the Plan from the acts or omissions of another Trustee with respect to duties allocated to such other Trustee. 13.08 Change of Trustee. (a) Any Trustee may resign as Trustee upon notice in writing to the Employer, and the Employer may remove any Trustee upon notice in writing to each Trustee. The removal of a Trustee shall be effective immediately, except that a corporation serving as a Trustee shall be entitled to 60 days' notice which it may waive, and the resignation of a Trustee shall be effective immediately, provided that, if the Trustee is the sole Trustee, neither a removal nor a resignation of a Trustee shall be effective until a successor Trustee has been appointed and has accepted the appointment. If within 60 days of the delivery of the written resignation or removal of a sole Trustee, another Trustee shall not have been appointed and have accepted, the resigning or removed Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee or may terminate the Plan pursuant to Section XVIII of the Prototype Plan. The Trustee shall not be liable for the acts and omissions of any successor Trustee. (b) At any time when the number of Trustees is one or two the Employer may but need not appoint, respectively two or one additional Trustees. Such an appointment and the acceptance thereof shall be in writing, and shall take effect upon the delivery of written notice thereof to all the Trustees and the Administrator and such acceptance by the appointed Trustee, provided that if a corporation is a Trustee then in the absence of its consent, such an appointment of an additional or successor Trustee shall not become effective until 60 days after its receipt of notice. (c) Although any Employer adopting the Plan may choose any Trustee who is willing to accept the Trust, the Distributor or its successor may make or may have made tentative standard arrangements with any bank or trust company with the expectation it will be used as the Trustee by a substantial group of Employers. It is also contemplated that more favorable results can be obtained with a substantial volume of business, and that it may become advisable to remove such bank or trust company as Trustee and substitute another Trustee. Therefore, anything in the prior two subsections notwithstanding, each Employer adopting this Plan hereby agrees that the Distributor may, upon a date specified in a notice of at least 30 days to the affected Employer and in the absence of written objection by the Employer received by the Distributor before such date, (i) remove any Trustee and in that case, or if such a Trustee has resigned as to a group of Employers, (ii) appoint a successor Trustee, provided such action is taken with respect to all Employers similarly circumstanced of which the Distributor has knowledge, and provided such notice is given in writing and mailed postage prepaid to the Employer at the latest address furnished to the Distributor directly or supplied to it by such Trustee which is to be succeeded. If within 60 days after a Trustee's resignation or removal pursuant to this subsection (i), the Distributor has not appointed a successor which has accepted such appointment the resigning or removed Trustee may petition an appropriate court for the appointment of its successor. The resigning or removed Trustee shall not be liable for the acts and omissions of such successor. (d) Successor Trustees qualifying under this Section shall have all rights and powers and all the duties and obligations of original Trustees. 13.09 Valuation. Annually, on the Valuation Date, or more frequently in the discretion of the Trustee, the assets of each Trust shall be valued at fair market value and the accounts of the Trust shall be proportionately adjusted to reflect income, gains, losses or expenses, if the system of accounting does not directly accomplish all such adjustments. Each account shall share in income gains, losses, or expenses connected with an asset in which it is invested according to the proportion which the account's investment in the asset bears to the total amount of the Trust Fund invested in the asset. Any dividends or credits earned on insurance contracts shall be allocated to the specific account of the Participant from which the funds originated for investment in the contract. The Trust Fund shall be administered separately from, and shall not include any assets being administered under, any other plan of an Employer. Interim valuations, if any, shall be applied uniformly and in a non-discriminatory manner for all Employees. 13.10 Registration. Any assets in the Trust Fund may be registered in the name of the Trustee or any nominee designated by the Trustee. 13.11 Certifications and Instructions. (a) Any pertinent vote or resolution of the Board of Directors of the Employer (if it is a corporation) shall be certified to the Trustee over the signature of the Secretary or an Assistant Secretary of the Employer and under its corporate seal. The Employer shall promptly furnish to the Trustee appropriate certification evidencing the appointment and termination of the individual or individuals serving as Administrator under Section 14.01 of the Plan. (b) The Administrator shall furnish to the Trustee appropriate certification of the individual or individuals authorized to give notice on behalf of the Administrator and providing specimens of their signatures. All requests, directions, requisitions for money and instructions by the Administrator to the Trustee shall be in writing and signed. There may be standing requests, directions, requisitions or instructions to the extent acceptable to the Trustee. 13.12 Accounts and Approval. (a) The Trustee shall keep accurate and detailed accounts of all investments, receipts and disbursements and other transactions hereunder, and all books and records relating thereto shall be open at all reasonable times to inspection and audit by any person or persons designated by the Administrator or by the Employer. (b) Within 90 days following the close of each Plan Year the Trustee may, and upon the request of the Employer or the Administrator shall, file with the Administrator and the Employer a written report setting forth all securities or other investments (including insurance contracts) purchased and sold, all receipts, disbursements and other transactions effected by it during the period since the date covered by the next prior report, and showing the securities and other property held at the end of such period, and such other information about the Trust Fund as the Administrator shall request. Unless the Employer or Administrator, within 90 days from the date of mailing of such report, objects to the contents of such report, the report shall be deemed approved. Any such objections shall set forth the specific grounds on which they are based. 13.13 Taxes. The Trustee may assume that any taxes assessed on or in respect of the Trust Fund are lawfully assessed unless the Administrator shall in writing advise the Trustee that in the opinion of counsel for the Employer such taxes are not lawfully assessed. In the event that the Administrator shall so advise the Trustee, the Trustee, if so requested by the Administrator and suitable provision for their indemnity having been made, shall contest the validity of such taxes in any manner deemed appropriate by the Administrator or counsel for the Employer. The word "taxes" in this Article shall be deemed to include any interest or penalties that may be levied or imposed in respect to any taxes assessed. Any taxes, including transfer taxes incurred in connection with the investment or reinvestment of the assets of the Trust Fund that may be levied or assessed in respect to such assets shall, if allocable to the Accounts of specific Participants, be charged to such Accounts, and if not so allocable, they shall be equitably apportioned among all such Participants' Accounts. 13.14 Employment of Counsel. The Trustee may employ legal counsel (who may be counsel for the Employer) and shall be fully protected in acting or refraining from acting, upon such counsel's advice in respect to any legal questions. 13.15 Compensation of Trustee. An individual Trustee who is an Employee of the Employer shall not be compensated for services as Trustee. A corporation, or an individual who is not an Employee of the Employer, serving as a Trustee shall be entitled to reasonable compensation for services; such compensation shall be paid in accordance with Article XV. 13.16 Limitation of Trustee's Liability. (a) The Trustee shall have no duty to take any action other than as herein specified, unless the Administrator shall furnish it with instructions in proper form and such instructions shall have been specifically agreed to by it, or to defend or engage in any suit unless it shall have first agreed in writing to do so and shall have been fully indemnified to its satisfaction. (b) The Trustee may conclusively rely upon and shall be protected in acting in good faith upon any written representation or order from the Administrator or any other notice, request, consent, certificate or other instrument or paper believed by the Trustee to be genuine and properly executed, or any instrument or paper if the Trustee believes the signature thereon to be genuine. (c) The Trustee shall not be liable for interest on any reasonable cash balances maintained in the Trust. (d) The Trustee shall not be obligated to, but may, in its discretion, receive a contribution directly from a Participant. (e) The Employer shall indemnify and save harmless the Trustee from and against any and all liability to which the Trustee may be subjected by reason of any act, conduct or failure to act (except willful misconduct or gross negligence) in its capacity as Trustee, including all expenses reasonably incurred in its defense. 13.17 Successor Trustee. Any corporation into which a corporation acting as a Trustee hereunder may be merged or with which it may be consolidated, or any corporation resulting from any merger, reorganization or consolidation to which such Trustee may be a party, shall be the successor of the Trustee hereunder, without the necessity of any appointment or other action, provided the Trustee does not resign and is not removed. 13.18 Enforcement of Provisions. To the extent permitted by applicable law, the Employer and the Administrator shall have the exclusive right to enforce any and all provisions of this Agreement on behalf of all Employees or former Employees of the Employer or their Beneficiaries or other persons having or claiming to have an interest in the Trust Fund or under the Plan. In any action or proceeding affecting the Trust Fund or any property constituting a part or all thereof, or the administration thereof or for instructions to the Trustee, the Employer, the Administrator and the Trustee shall be the only necessary parties and shall be solely entitled to any notice of process in connection therewith; any judgment that may be entered in such action or proceeding shall be binding and conclusive on all persons having or claiming to have any interest in the Trust Fund or under the Plan. 13.19 Voting. The Trustee shall deliver, or cause to be executed and delivered, to the Administrator, or to such individuals designated by the Administrator, all notices, prospectuses, financial statements, proxies and proxy soliciting materials received by the Trustee relating to securities held by the Trust. The Administrator shall deliver these to the individuals entitled to make investment decisions pursuant to Section 13.02 hereof (if the Adoption Agreement so provides this may be the Participant or a Beneficiary) to the extent that the Administrator has decided to pass-through voting to such individuals. Each individual, including the Administrator, with voting rights, is hereby designated a "named fiduciary," within the meaning of Section 402(a)(2) and 403(a)(1) of the Act, with respect to the Accounts over which he or she may exercise voting rights. With respect to proxies, proxy solicitation materials, and other voting matters, the Trustee shall vote securities held by the Trust in accordance with the written instructions (as expressed in a properly completed and executed proxy) of the Administrator or of the individuals entitled to make investment decisions pursuant to Section 13.02 as expressed in a properly completed and executed proxy. Such instructions shall be delivered to the Trustee by the Administrator, or such person designated by the Administrator. With respect to securities issued by the Employer, voting instructions shall be delivered directly to the Trustee by the individuals entitled to make investment decisions with respect to such securities and the Trustee shall maintain the confidentiality, and shall not disclose the contents, of any such vote except as otherwise required by law or a court of competent jurisdiction. The Trustee and the Administrator may establish a procedure whereby any votes relating to securities issued by the Employer are delivered by the Administrator to the Trustee provided that the contents of such votes are not made known to the Administrator. If, however, the Trustee has not received instructions with respect to how to vote given securities at least five full business days (or such shorter period as the Trustee, in its discretion, may determine) prior to the meeting at which such securities are to be voted, the Trustee shall not vote such securities unless otherwise required by law. 13.20 Applicability to Loan Trustee. Where appropriate, the foregoing provisions of this Article shall apply to the Loan Trustee on the same basis as if the Loan Trustee were the Trustee. 13.21 Applicability to Other Trust. The provisions of this Article XIII shall apply with respect to a separate trust which is created hereby but shall not apply to a separate trust created pursuant to a separate trust agreement. ARTICLE XIV. ADMINISTRATION 14.01 Appointment of Administrator. From time to time, the Employer may, by identifying such person(s) in writing to both the Trustee and the Participants, appoint one or more persons as Administrator (hereinafter referred to in the singular). Such Administrator shall have all power and authority necessary to carry out the terms of the Plan. A person appointed as Administrator may also serve in any other fiduciary capacity, including that of Trustee, with respect to the Plan. The Administrator may resign upon 15 days' advance written notice to the Employer, and the Employer may at any time revoke the appointment of the Administrator with or without cause. The Employer shall exercise the power and fulfill the duties of the Administrator if at any time an Administrator has not been properly appointed in accordance with this Section or the position is otherwise vacant. 14.02 Named Fiduciaries. The "Named Fiduciaries" within the meaning of the Act shall be the Administrator, each Trustee and each Participant and Beneficiary with voting rights and/or investment rights. 14.03 Allocation of Responsibilities. Responsibilities under the Plan shall be allocated among the Trustee, the Administrator and the Employer as follows: (a) Trustee: The Trustee shall have exclusive responsibility to hold, manage and invest, pursuant to instructions communicated to it in accordance with Section 13.02 above, the funds received by it subject to the powers granted to it under Article XIII hereof. Notwithstanding the preceding sentence, to the extent that loans are made to Participants in accordance with Article XII hereof, the Trustee shall not be responsible for management of the portion of Trust assets subject to such loans and the Loan Trustee shall be responsible for administering such Trust assets in accordance with provisions of Article XII. (b) The Administrator: The Administrator shall have the responsibility and authority to control the operation and administration of the Plan in accordance with its terms including, without limiting the generality of the foregoing, (i) any investment decisions assigned to it under the Adoption Agreement or the Plan or transmission to the Trustee of any Participant investment decision under Section 13.02; (ii) interpretation of the Plan, conclusive determination of all questions of eligibility, status, benefits and rights under the Plan and certification to the Trustee of all benefit payments under the Plan; (iii) hiring of persons to provide necessary services to the Plan not provided by Employees; (iv) preparation and filing of all statements, returns and reports required to be filed by the Plan with any agency of government; (v) compliance with all disclosure requirements of all state or federal law; (vi) maintenance and retention of all Plan records as required by law, except those required to be maintained by the Trustee; and (vii) all functions otherwise assigned to it under the terms of the Plan. (c) Employer: The Employer shall be responsible for the design of the Plan, as adopted or amended, the designation of the Administrator and each Trustee (and, if appropriate, the Loan Trustee) as provided in the Plan, the delivery to the Administrator and the Trustee of employee information necessary for operation of the Plan (including, without limitation, dates of birth, hire, and death; compensation amounts; and dates of death of beneficiaries), the timely making of the Employer Contributions pursuant to Articles IV and VII, and the exercise of all functions provided in or necessary to the Plan except those assigned in the Plan to other persons. (d) This Section is intended to allocate individual responsibility for the prudent execution of the functions assigned to each of the Trustees, the Loan Trustee, the Administrator and the Employer and none of such responsibilities or any other responsibility shall be shared among them unless specifically provided in the Plan. Whenever one such person is required by the Plan to follow the directions of another, the two shall not be deemed to share responsibility, but the person who gives the direction shall be responsible for giving it and the responsibility of the person receiving the direction shall be to follow it insofar as it is on its face proper under applicable law. 14.04 More Than One Administrator. If more than one individual is appointed as Administrator, such individuals shall either exercise the duties of the Administrator in concert, acting by a majority vote or allocate such duties among themselves by written agreement delivered to the Employer and the Trustee. In such a case, the Trustee may rely upon the instruction of any one of the individuals appointed as Administrator regardless of the allocation of duties among them. 14.05 No Compensation. The Administrator shall not be entitled to receive any compensation from the funds held under the Plan for its services in that capacity unless so determined by the Employer or required by law. 14.06 Record of Acts. The Administrator shall keep a record of all its proceedings, acts and decisions, and all such records and all instruments pertaining to Plan administration shall be subject to inspection by the Employer at any time. The Employer shall supply, and the Administrator may rely on the accuracy of, all Employee data and other information needed to administer the Plan. 14.07 Bond. The Administrator shall be required to give bond for the faithful performance of its duties to the extent, if any, required by the Act, the expense to be borne by the Employer. 14.08 Agent for Service of Legal Process. The Administrator shall be agent for service of legal process on the Plan. 14.09 Rules. The Administrator may adopt or amend and shall publish to the Employees such rules and forms for the administration of the Plan, and may employ or retain such attorneys, accountants, physicians, investment advisors, consultants and other persons to assist in the administration of the Plan as it deems necessary or advisable. 14.10 Delegation. To the extent permitted by applicable law, the Administrator may delegate all or part of its responsibilities hereunder and at any time revoke such delegation, by written statement communicated to the delegate and the Employer. The Trustee may, but need not, act on the instructions of such a delegate. The Administrator shall annually review the performance of all such delegates. 14.11 Claims Procedure. It is anticipated that the Administrator will administer the Plan to provide Plan benefits without waiting for them to be claimed, but the following procedure is established to provide additional protection to govern unless and until a different procedure is established by the Administrator and published to the Participants and Beneficiaries. (a) Manner of Making Claim. A claim for benefits by a Participant or Beneficiary to be effective under this procedure must be made to the Administrator and must be in writing unless the Administrator formally or by course of conduct waives such requirements. (b) Notice of Reason for Denial. If an effective claim is wholly or partially denied, the Administrator shall furnish such Participant or Beneficiary with written notice of the denial within 60 days after the original claim was filed. This notice of denial shall set forth in a manner calculated to be understood by the claimant (i) the reason or reasons for denial, (ii) specific reference to pertinent plan provisions on which the denial is based, (iii) a description of any additional information needed to perfect the claim and an explanation of why such information is necessary, and (iv) an explanation of the Plan's claims procedure. (c) The Participant or Beneficiary shall have 60 days from receipt of the denial notice in which to make written application for review by the Administrator. The Participant or Beneficiary may request that the review be in the nature of a hearing. The Participant or Beneficiary shall have the rights (i) to have representation, (ii) to review pertinent documents, and (iii) to submit comments in writing. (d) The Administrator shall issue a decision on such review within 60 days after receipt of an application for review, except that such period may be extended for a period of time not to exceed an additional 60 days if the Administrator determines that special circumstances (such as the need to hold a hearing) requires such extension. The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision is based. (e) The Employer shall indemnify and hold harmless the Administrator, if the Administrator is not the Employer, and any employees of the Employer who performs the function of the Administrator for the Employer, if the Administrator is the Employer, (collectively, an "Indemnitee"), from any and all claims, loss, damages, expenses (including reasonable counsel fees approved by the Employer) and liability (including any reasonable amounts paid in settlement with the Employer's approval), arising from any act or omission of such Indemnitee, except when the same is judicially determined to be due to the willful misconduct or gross negligence of such Indemnitee. ARTICLE XV. FEES AND EXPENSES All reasonable fees and expenses of the Administrator or Trustee incurred in the performance of their duties hereunder or under the Trust may be paid by the Employer; and to the extent not so paid by the Employer, said fees and expenses shall be deemed to be an expense of the Trust and shall be charged against the assets of the Trust, including any forfeitures that have not been reallocated or applied to reduce Employer Contributions. In addition, if the Plan permits Participant-directed investment of Accounts, expenses that are allocable to the Accounts of specific Participants shall be charged against the respective Participants' Accounts in accordance with procedures adopted by the Administrator from time to time. ARTICLE XVI. BENEFIT RECIPIENT INCOMPETENT OR DIFFICULT TO ASCERTAIN OR LOCATE 16.01 Incompetency. If any portion of the Trust Fund becomes distributable to a minor or to a Participant or Beneficiary who, as determined in the sole discretion of the Administrator, is physically or mentally incapable of handling his or her financial affairs, the Administrator may direct the Trustee to make such distribution either to the legal representative or custodian of the incompetent or to apply such distribution directly for the incompetent's support and maintenance. Payments which are made in good faith shall completely discharge the Employer, Administrator and Trustee from liability therefor. 16.02 Difficulty to Ascertain or Locate. If it is impossible or difficult to ascertain or locate the person who is entitled to receive any benefit under the Plan, the Administrator in its discretion may direct that such benefit (a) be retained in the Trust, (b) be paid to a court pending judicial determination of the right thereto, or (c) be forfeited and reallocated pursuant to the provisions of Section 8.02(a)(i) or (ii) above, as the case may be, provided that as a result the Employer shall incur an obligation to restore the individual's Account balance or otherwise pay the individual his or her benefit if the individual is subsequently ascertained or located. ARTICLE XVII. DESIGNATION OF BENEFICIARY Each Participant and Beneficiary may submit a properly executed Designation of Beneficiary to the person designated under this Article XVII to keep such records. In order to be effective, such designation must have been properly executed and submitted to the appropriate person before the death of the Participant or Beneficiary, as the case may be; and, for a Participant who is survived by his or her Spouse, unless the Participant leaves 100% of his or her benefit to such Spouse, must be accompanied, or preceded, by the consent of such Spouse. Such consent of the Spouse must (a) be in writing; (b) acknowledge that the effect of such consent is that the Spouse may receive no benefits under the Plan; (y) be witnessed by a Plan representative or a notary public; and (c) be either (i) a limited consent to the payment of death benefits to a specific person or persons or (ii) expressly permit the Participant to designate another person or other persons without obtaining further consent of the Spouse. The last effective Designation accepted by the appropriate person shall be controlling, and whether or not fully dispositive of the Participant's Account, thereupon shall revoke all Designations previously submitted by the Participant or Beneficiary, as the case may be. If a Participant's Beneficiary(ies) predeceases the Participant, the remaining living Beneficiary(ies) shall receive their proportionate share of the Participant's Account as if such deceased Beneficiary(ies) had never been designated. Similar rules shall apply with respect to contingent Beneficiaries. Each such executed Designation is hereby specifically incorporated herein by reference and shall be construed and enforced in accordance with the laws of the state in which the Trustee has its principal place of business. The Administrator shall be the person responsible for accepting and safekeeping Designation of Beneficiary Forms unless the Trustee agrees in writing to accept and safekeep such forms. ARTICLE XVIII. SPENDTHRIFT PROVISION AND DISTRIBUTIONS PURSUANT TO QUALIFIED DOMESTIC RELATIONS ORDERS 18.01 General Spendthrift Rule. No interest of any Participant or Beneficiary shall be assigned, anticipated or alienated in any manner nor shall it be subject to attachment, to bankruptcy proceedings or to any other legal process or to the interference or control of creditors or others, except (a) to the extent that Participants may secure loans from the Trust with their Accounts pursuant to Article XII hereof and (b) pursuant to Section 18.02 hereof. 18.02 Account Division and Distribution Pursuant to Qualified Domestic Relations Orders. A Participant's vested Account may be assigned pursuant to a qualified domestic relations order as defined in Code Section 414(p). If, and to the extent that, any portion of a Participant's vested Account is payable to an alternate payee pursuant to a qualified domestic relations order within the meaning of Sections 401(a)(13)(B) and 414(p) of the Code, the provisions of said order shall govern the payment thereof. An order shall not fail to constitute a qualified domestic relations order within the meaning of Sections 401(a)(13)(B) and 414(p) of the Code if the order provides for a payment to be made to an alternate payee prior to the time the Participant would be entitled to receive a benefit payment hereunder. The Administrator shall be responsible for determining whether an order constitutes a qualified domestic relations order. ARTICLE XIX. NECESSITY OF QUALIFICATION This Plan is established with the intent that it shall qualify under Code Section 401(a) as that Section exists at the time the Plan is established. If the Plan as adopted by the Employer fails to attain such qualification, the Plan will no longer participate in the relevant sponsor's prototype 401(k) plan and will be considered an individually designed plan. If the Plan as adopted by the Employer fails to attain or retain such qualification, the Employer shall promptly either amend the Plan under Code Section 401(b) so that it does qualify, or direct the Trustee to terminate the Trust, and distribute all the assets of the Trust equitably among the contributors thereto in proportion to their contributions, and the Plan and Trust shall be considered to be rescinded and of no force and effect. ARTICLE XX. AMENDMENT AND TERMINATION 20.01 Amendment or Termination by the Employer. The Employer by action of the Board of Directors, other governing board, general partner or sole proprietor, as the case may be, may at any time, and from time to time amend this Prototype Plan and the Adoption Agreement (including a change in any election it has made in the Adoption Agreement), or suspend or terminate this Plan by giving written notice to the Trustee, but the Trust may not thereby be diverted from the exclusive benefit of the Participants, their Beneficiaries, survivors or estates, or the administrative expenses of the Plan, nor revert to the Employer, nor may an allocation or contribution theretofore made be changed thereby, nor may any amendment directly or indirectly deprive a Participant of such Participant's nonforfeitable rights to benefits accrued to the date of the amendment. No amendment to the Plan shall be effective to the extent that it would have the effect of decreasing a Participant's Account balance or eliminating an optional form of distribution. Notwithstanding the preceding sentence, a Participant's Account balance may be reduced to the extent permitted under Code Section 412(c)(8). Furthermore, if the vesting schedule of the Plan is amended, in the case of an Employee who is a Participant as of the later of the date such amendment is adopted or the date it becomes effective, the nonforfeitable percentage (determined as of such date) of such Employee's right to his Employer-derived Account balance will not be less than his percentage computed under the Plan without regard to such amendment. The Employer may (a) change the choice of options in the Adoption Agreement, (b) add overriding language in the Adoption Agreement when such language is necessary to satisfy the requirements of Code Section 415 or to avoid duplication of minimum benefits or accruals under Code Section 416 because of the required aggregation of multiple plans, or (c) adopt a model amendment published by the Internal Revenue Service which specifically provides that the adoption of such a model amendment will not cause the Plan to be treated as an individually designed plan. Any other amendment by the Employer will constitute a substitution by the Employer of an individually designed plan for the sponsor's prototype plan. After such an amendment, the Plan shall no longer participate in the sponsor's prototype plan and the general amendment procedure of the Internal Revenue Service governing individually designed plans will be applicable. If an amendment changing the vesting schedule is executed (including execution of this Adoption Agreement as an amendment to an existing plan), Participants with three or more Vesting Years (five or more Vesting Years for Participants who have not been credited with an Hour of Service in a Plan Year beginning after December 31, 1988) before the expiration of the election period described in the next sentence shall have the right to elect the vesting schedule in effect on the day before the election period. The election period shall commence on the date the amendment is adopted and end on the latest of (x) 60 days after the amendment is adopted, (y) 60 days after the Effective Date, or (z) 60 days after the Participant is issued written notice of the amendment by the Administrator. Failure to so elect shall be treated as a rejection and such election or rejection shall be final. Nothing contained herein shall constitute an agreement or representation by any Sponsor or the Distributor that it will continue to maintain its sponsorship of the Plan indefinitely. 20.02 Delegation. The Employer hereby delegates to the Sponsor the authority to amend so much of the Adoption Agreement and this Prototype 401(k) Plan as is in prototype form and, to the extent to which the Employer could effect such amendment, the Employer shall be deemed to have consented to any amendment so made. When an election within the prototype form has been made by the Employer, it shall be deemed to continue after amendment of the prototype form unless and until the Employer expressly further amends the election, notwithstanding that the provision for the election in the amended prototype form is in a different form or place; provided, however, that if the amended form inadvertently fails to provide means to duplicate exactly the earlier election, such earlier election shall continue until such further amendment. The immediately preceding sentence is subject to the qualification that each Employer hereby delegates to the Sponsor, in the event of such an amendment of the prototype form, authority to determine conclusively that such a continuation of an earlier election by the Employer is not advisable and to make the election for the Employer in the amended prototype form which in the judgment of the Sponsor most nearly corresponds with the election made by the Employer before the amendment of the prototype form, provided the following procedure is followed: the election for the Employer may be made with respect to any specified Employers as to whom it may be made applicable singly, or such election may be made with respect to all Employers as to whom it may be made applicable as a group; and the election shall be made as of an effective date which has been specified in a notice mailed or delivered, at the last address(es) of the Employer(s) on the records of the Distributor, to the Employer(s) at least 20 days before the end of the remedial amendment period. Such notice may be mailed to Employers to whom it cannot be applicable by reason of a previous election made by the Employer or otherwise, but it shall be effective only as to those Employers who have received the notice and have not themselves made a new election with respect to that item since the amendment of the prototype form and previous to the effective date of such election by the Sponsor. In the case of a mass submitter plan, the Sponsor delegates its authority to make elections, or to make amendments, to the mass submitter who shall make such elections or amendments on behalf of the Sponsor and the Sponsor shall be deemed to have consented to any such election or amendment so made. The foregoing delegations of authority to make elections, or to make amendments, shall not impose any duty on the Sponsor or, if applicable, the mass submitter to make a given election or amendment and shall not affect the interpretation of the Plan if any so delegated authority is not used. 20.03 Distribution of Accounts Upon Termination. Upon termination or partial termination of the Plan or complete discontinuance of Employer Contributions under it, the rights of all Participants (or, in the case of a partial termination, the Participants affected thereby) to amounts theretofore credited to their Accounts under the Plan shall be fully vested and nonforfeitable. Upon any such termination or discontinuance, the Administrator shall determine whether to pay the interests of Participants, and Beneficiaries immediately, to retain such interest in the Trust and pay them in the future according to Articles IX and X (or Article XXIV, if applicable) or to use what other methods the Administrator deems advisable in order to furnish whatever benefits the Trust will provide; provided any such distributions pursuant to this Section shall comply with the requirements of Articles IX or X (or Article XXIV, if applicable) hereof. ARTICLE XXI. TRANSFERS Nothing contained herein shall prevent the merger or consolidation of the Plan with, or transfer of assets or liabilities of the Plan to, another plan meeting the requirements of Code Section 401(a) or the transfer to the Plan of assets or liabilities of another such plan so qualified under the Code. Any such merger, consolidation or transfer shall be accompanied by the transfer of such existing records and information as may be necessary to properly allocate such assets among Participants, including any tax or other information necessary for the Participants or persons administering the plan which is receiving the assets. The terms of such merger, consolidation or transfer must be such that if this Plan is then terminated, the requirements of Section 20.01 hereof would be satisfied and each Participant would receive a benefit immediately after the merger, consolidation or transfer equal to or greater than the benefit he or she would have received if the Plan had terminated immediately before the merger, consolidation or transfer. If this Plan is a transferee plan with respect to all or a portion of a Participant's Account, the optional forms of distribution described in Article X shall include any optional form of distribution which the Participant could have elected under the transferor plan and which would otherwise comply with the provisions of this Plan. ARTICLE XXII. OWNER-EMPLOYEE PROVISIONS 22.01 Purpose of Section. This Section is intended to insure that the Plan complies with Code Section 401(d). Any ambiguity herein will be construed to that end, and this Article will override any other provision of the Plan with which it may be inconsistent. 22.02 Control. For purposes of this Article, "Control" means the ownership directly or indirectly of the entire interest in an unincorporated trade or business or more than 50% of either the capital interest or the profits interest in a partnership. For the purposes of applying the preceding sentence, an Owner-Employee, or two or more Owner-Employees shall be treated as owning any interest in a partnership which is owned, directly or indirectly, by a partnership which such Owner-Employee, or such two or more Owner-Employees, are considered to Control. 22.03 Limitations. No benefits shall be provided to an Owner-Employee under this Plan unless: (a) if an Owner-Employee or group of Owner-Employees Controls the trade or business covered by this Plan and also Control as an Owner-Employee or Owner-Employees one or more other trades or businesses, this Plan and the plans established for such other trades or businesses, when taken together, form a single plan which satisfies the requirements of Code Sections 401(a) and (d) with respect to the employees of all the controlled trades or businesses; (b) if an Owner-Employee or group of Owner-Employees Controls another trade or business but does not Control the trade or business covered by this Plan, the employees of such other trades or businesses are included in a plan which satisfies the requirements of Sections 401(a) and (d) of the Code and which provides contributions and benefits for such employees which are not less favorable than those provided for Owner-Employees under this Plan; and (c) if an Owner-Employee is covered under the qualified retirement plans of two or more trades or businesses which he or she does not Control and the Owner-Employee Controls a trade or business, contributions or benefits for the employees under the plan of the trade or business which the Owner-Employee Controls are not less favorable than those provided for the Owner-Employee in the most favorable qualified retirement plan of the trade(s) or business(es) which the Owner-Employee does not Control. ARTICLE XXIII. TOP-HEAVY PROVISIONS 23.01 Purpose of Section. This Article is intended to insure that the Plan complies with Code Section 416. If the Plan is or becomes Top-Heavy in any Plan Year, the provisions of this Section will supersede any conflicting provision in the Plan. 23.02 Definitions. The terms used in this Section shall have the following meanings: (a) Key Employee: Any Employee or former Employee (and the Beneficiaries of such Employee) who at any time during the determination period was (i) an officer of the Employer having an annual compensation greater than 50% of the amount in effect under Code Section 415(b)(1)(A) for the Plan Year (subject to the limitation that no more than the lesser of (A) 50 Employees or (B) the greater of 3 Employees or 10% of the Employees shall be deemed to be officers), (ii) an owner (or considered an owner under Code Section 318) of 1 of the 10 largest interests in the Employer if both such individual was an owner of more than a .5% interest in the Employer (aggregated with the Employer for this purpose are all members of (A) a controlled group of corporations (as defined in Code Section 414(b) as modified by Code Section 415(h)), (B) commonly controlled trades or businesses (whether or not incorporated) (as defined in Code Section 414(c) as modified by Code Section 415(h)), or (C) affiliated service groups (as defined in Code Section 414(m)) of which the Employer is a part) and such individual's compensation exceeds the dollar limitation under Code Section 415(c)(1)(A), (iii) a 5% owner of the Employer, or (iv) a 1-percent owner of the Employer who has an annual compensation of more than $150,000. The determination period is the Plan Year containing the Determination Date and the 4 preceding Plan Years. The determination of who is a Key Employee will be made in accordance with Code Section 416(i)(1) and the regulations thereunder. (b) Top-Heavy Plan. This Plan is Top-Heavy if any of the following conditions exist: (i) If the Top-Heavy Ratio for this Plan exceeds 60% and this Plan is not part of any Required Aggregation Group or Permissive Aggregation Group of plans. (ii) If this Plan is a part of a Required Aggregation Group of plans but not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the Required Aggregation Group of plans exceeds 60%. (iii) If this Plan is a part of a Required Aggregation Group and part of a Permissive Aggregation Group of plans and the Top-Heavy Ratio for the Permissive Aggregation Group exceeds 60%. (c) Top-Heavy Ratio. (i) If the Employer maintains one or more defined contribution plans (including any Simplified Employee Pension Plan within the meaning of Code Section 408(k)) and the Employer has not maintained any defined benefit plan which during the five-year period ending on the Determination Date(s) has or has had accrued benefits, Top-Heavy Ratio for this Plan alone or for the Required Aggregation Group or Permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of the account balances under all of the plans as of the Determination Date(s) (including any part of any account balance distributed in the five-year period ending on the Determination Date(s)) of all Key Employees who have received compensation from the Employer (other than benefits under a qualified retirement plan) at any time during the five-year period ending on the Determination Date(s), and the denominator of which is the sum of all account balances as of the Determination Date(s) (including any part of any account balance distributed in the five-year period ending on the Determination Date(s)), of all Participants who have received compensation from the Employer (other than benefits under a qualified retirement plan) at any time during the five-year period ending on the Determination Date(s). Both the numerator and denominator of the fraction shall be computed in accordance with Code Section 416 and the Treasury Regulations promulgated thereunder. In addition, both the numerator and denominator of the Top-Heavy Ratio shall be increased to reflect any contribution which is not actually made as of the Determination Date(s), but which is required to be taken into account on that date under Code Section 416 and the Treasury Regulations promulgated thereunder. (ii) If the Employer maintains one or more defined contribution plans (including any Simplified Employee Pension Plan within the meaning of Code Section 408(k)) and the Employer maintains or has maintained one or more defined benefit plans which during the five-year period ending on the Determination Date(s) has or has had accrued benefits, the Top-Heavy Ratio for any Required Aggregation Group or Permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of (A) account balances under the defined contribution plans as of the Determination Date(s) (including any part of any account balance distributed in the five-year period ending on the Determination Date(s)) of all Key Employees who have received compensation from the Employer (other than benefits under a qualified retirement plan) at any time during the five-year period ending on the Determination Date(s) and (B) the present value of accrued benefits under the defined benefit plans for all Key Employees, who have received compensation from the Employer (other than benefits under a qualified retirement plan) at any time during the five-year period ending on the Determination Date(s) and the denominator of which is the sum of (A) the account balances under the defined contribution plans as of the Determination Date(s) (including any part of any account balance distributed in the five-year period ending on the Determination Date(s)) of all participants who have received compensation from the Employer (other than benefits under this Plan) at any time during the five-year period ending on the Determination Date(s) and (B) the present value of accrued benefits under the defined benefit plans for all participants who have received compensation from the Employer (other than benefits under this Plan) at any time during the five-year period ending on the Determination Date(s). Both the numerator and denominator of the fraction shall be computed in accordance with Code Section 416 and Treasury Regulations promulgated thereunder. In addition, both the numerator and denominator of the Top-Heavy Ratio shall be increased for aggregate distribution(s) of an account balance or an accrued benefit made during the five-year period ending on the Determination Date(s) and any contribution to a defined contribution plan not actually made as of the Determination Date(s), but which is required to be taken into account on that date under Code Section 416 and the Treasury Regulations promulgated thereunder. (iii) For purposes of (i) and (ii) above, the value of account balances and the present value of accrued benefits will be determined as of the most recent Valuation Date that falls within, or ends with, the 12-month period ending on the Determination Date, except as provided in Code Section 416 and the Treasury Regulations promulgated thereunder for the first and second plan years of a defined benefit plan. The account balances and accrued benefits of a Participant who has not been credited with at least one Hour of Service at any time during the five-year period ending on the Determination Date, will be disregarded. The calculation of the Top-Heavy Ratio, and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Code Section 416 and the Treasury Regulations promulgated thereunder. Deductible employee contributions under any qualified plan maintained by the Employer will not be taken into account for purposes of computing the Top-Heavy Ratio. When aggregating plans the value of account balances and accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year. For Plan Years commencing after December 31, 1986 for the purpose of determining the Top-Heavy Ratio, if any target benefit or defined benefit plan is included in the Required Aggregation Group, the accrued benefit of an Employee other than a Key Employee shall be determined under the method that uniformly applies for accrual purposes under all qualified retirement plans maintained by the Employer, or if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rate of Code Section 411(b)(1)(C). (d) Permissive Aggregation Group. The Required Aggregation Group of plans plus any other plan or plans of the Employer which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of Code Sections 401(a)(4) and 410. (e) Required Aggregation Group. (i) Each qualified plan of the Employer in which at least one Key Employee participates or participated at any time during the determination period (regardless of whether the plan has terminated), and (ii) any other qualified plan of the Employer which enables a plan described in (i) to meet the requirements of Code Sections 401(a)(4) or 410. (f) Determination Date. For any Plan Year subsequent to the first Plan Year, the Determination Date shall be the last day of the preceding Plan Year. For the first Plan Year of the Plan, the Determination Date shall be the last day of that year. (g) Valuation Date. Shall be the last day of the Plan Year. (h) Present Value. Present Value shall be based only on the interest rate and the mortality table specified by the Employer in the Adoption Agreement. 23.03 Minimum Allocation. (a) In any Plan Year in which this Plan is Top-Heavy, except as otherwise provided in subsections (c) and (d) below, the Employer Contributions and forfeitures allocated, or during a Plan Year which begins after December 31, 1988, Employer Profit Sharing Contributions and forfeitures allocated to the Participant's Employer Profit Sharing Contribution Account, on behalf of any Participant who is not a Key Employee shall not be less than the lesser of 3% of such Participant's Compensation or, in the case where the Employer has no defined benefit plan which designates this Plan to satisfy Code Section 401, the largest percentage of Employer Contributions and forfeitures stated as a percentage of a Key Employee's Compensation, allocated on behalf of any Key Employee for that Plan Year. The minimum allocation is determined without regard to any Social Security contribution by the Employer. Salary Reduction Contributions, Employer Matching Contributions and Qualified Matching Contributions may not be taken into account to satisfy this minimum allocation. This minimum allocation shall be made even though, under other provisions of this Plan, the Participant would not otherwise be entitled to receive an allocation, or would have received a lesser allocation for the year because (i) the Participant failed to complete the minimum number of Hours of Service specified in the Adoption Agreement for receiving an allocation, (ii) the Participant's Compensation was less than a stated amount, or (iii) the Participant made insufficient mandatory contributions to receive an Employer Matching Contribution. (b) For purposes of computing the minimum allocation, "Compensation" shall have the same meaning as in Section 5.05(b) hereof. (c) The provision in subsection (a) above shall not apply to any Participant who was not employed by the Employer on the last day of the Plan Year. (d) The provision in subsection (a) above shall not apply to any Participant to the extent the Participant is covered under any other plan or plans of the Employer, and the Employer has provided in the Adoption Agreement that the minimum allocation or benefit requirement applicable to Top-Heavy Plans will be met in such other plan or plans. 23.04 Nonforfeitability of Minimum Allocation. The minimum allocation required (to the extent required to be nonforfeitable under Code Section 416(b)) may not be forfeited under Code Section 411(a)(3)(B) or 411(a)(3)(D). 23.05 Limitation on Compensation. For Plan Years beginning after January 1, 1994, only the first $150,000 (or such other amount as may be prescribed by the Secretary of the Treasury or his or her delegate) of a Participant's Compensation for the Plan Year shall be taken into account for purposes of allocating Employer Contributions under this Article XXIII. 23.06 Minimum Vesting Schedule. Unless the Employer has specified a more rapid vesting schedule in the Adoption Agreement, for any Plan Year in which this Plan is Top-Heavy, the following minimum vesting schedule shall apply: Nonforfeitable Percentage of Employer Profit Sharing and Vesting Years Matching Contribution Accounts 1 0% 2 20 3 40 4 60 5 80 6 or more 100 The minimum vesting schedule applies to all benefits within the meaning of Code Section 411(a)(7) attributable to Employer Contributions and forfeitures, including benefits accrued before the effective date of Code Section 416 and benefits accrued before the Plan became Top-Heavy. Further, no reduction in a Participant's nonforfeitable percentage may occur in the event the Plan's status as Top-Heavy changes for any Plan Year. If conversion of the Plan into a Top-Heavy Plan has resulted in a change of the Plan's vesting schedule to the minimum vesting schedule discussed above, the change shall be treated as an amendment to the Plan and the election referred to in Section 20.01 hereof shall apply. This Section does not apply to the Employer Profit Sharing Contribution Account and Employer Matching Contribution Account balances of any Participant who does not have an Hour of Service after the Plan has initially become Top-Heavy and such Participant's vested Employer Profit Sharing Contribution Account and Employer Matching Contribution Account balance will be determined without regard to this Section. 23.07 Effect on Code Section 415 Limitations. Notwithstanding anything to the contrary in Article V above, the following provisions apply if the Plan is Top-Heavy: (a) In any Plan Year in which the Top-Heavy Ratio exceeds 90% (and the Plan therefore becomes super Top-Heavy) the denominators of the Defined Benefit Fraction (as defined in Section 5.05(c) above) and the Defined Contribution Fraction (as defined in Section 5.05(d) above) shall be computed using 100% of the dollar limitation stated therein instead of 125%. (b) In any Plan Year in which the Top-Heavy Ratio exceeds 60%, but is less than 90%, the denominators of the Defined Benefit Fraction (as defined in Section 5.05(c) above) and the Defined Contribution Fraction (as defined in Section 5.05(e) above) shall be computed using 100% of the dollar limitation described therein instead of 125%, unless the Employer has specified in the Adoption Agreement that the minimum allocation provisions of Section 23.03 above shall be computed using 4% of a Participant's Compensation, in which case the dollar limitations of the Defined Benefit Fraction (as defined in Section 5.05(c) above) and the Defined Contribution Fraction (as defined in Section 5.05(e) above) shall continue to be computed using 125% of the dollar limitations. 23.08 Termination of Top-Heavy Status. If the Plan ceases to be Top-Heavy for any Plan Year and if the Employer has not specified otherwise in the Adoption Agreement, the minimum vesting schedule described in Section 23.06 shall continue to apply. If the Employer has specified in the Adoption Agreement that, upon conversion of the Plan to non-Top-Heavy status, Participants' vested benefits are to be determined according to a schedule other than the minimum vesting schedule described in Section 23.06 hereof, such change in vesting schedules shall be treated as an amendment, and the election referred to in Section 20.01 hereof shall apply. ARTICLE XXIV. SPECIAL DISTRIBUTION RULES 24.01 Special Distribution Rules for Certain Participants. If (a) it is determined that this Plan is a direct or indirect transferee (where such transfer occurred after December 31, 1984) of a defined benefit plan, money purchase pension plan (including a target benefit plan), stock bonus or profit sharing plan which would otherwise provide a life annuity form of payment with respect to a Participant (including a plan which was amended into this Plan), (b) the Plan is amended so as to allow a Participant to elect to receive his or her benefits in the form of a life annuity and a Participant elects to receive his or her benefits in such form, (c) the Plan is amended to provide that absent a Qualified Election of a Participant's surviving Spouse, someone other than the Participant's surviving Spouse becomes entitled to the Participant's vested Account balance, or (d) if someone other than the Participant's surviving Spouse is the beneficiary of any insurance purchased with funds from the Participant's Account, then the provisions of Sections 24.03 to 24.05 below shall apply in lieu of Article IX above and Sections 10.01 and 10.02 above. The Administrator shall specify in writing to the Trustee the Participants' Accounts (or frozen amounts in such Accounts) to which the provisions of Section 24.03 to 24.05 shall apply. For the purposes of determining whether the provisions of this Article apply, the Trustee shall be entitled to rely conclusively on written instructions, if any, received by the Trustee from the Administrator concurrent with the transfer. Furthermore, where the transfer is, or was, not accompanied by written instructions specifying conditions under which specific provisions of this Article would apply, the Trustee shall be entitled to conclusively presume that this Article does not apply. 24.02 Definitions. For the purpose of this Section, the following terms shall have the specified meanings: (a) "Election Period" shall mean the period which begins on the first day of the Plan Year in which the Participant attains age 35 and which ends on the date of the Participant's death. If a Participant separates from Service prior to the first day of the Plan Year in which he or she attains age 35, the Election Period with respect to his or her Vested Account Balance (as of his or her date of separation) shall begin on his or her date of separation. (b) "Qualified Election" shall mean a valid waiver of a Qualified Joint and Survivor Annuity or Qualified Preretirement Survivor Annuity, as the case may be. To be valid, the waiver must be in writing and Participant's Spouse must consent to it in writing. The Spouse's consent to the waiver (i) must be witnessed by a Plan representative or notary public and (ii) must be (A) a general consent to the provision of a form (or forms) of distribution to any alternative person (or alternative persons); (B) a limited consent to the provision of a specific form (or specific forms) of distribution to a specific alternate person (or specific alternate persons); or (iii) a limited consent which is specific with respect to form or alternative payee. Notwithstanding the foregoing consent requirement, if the Participant establishes to the satisfaction of a Plan representative that such written consent may not be obtained because there is no Spouse or the Spouse cannot be located, a waiver will nonetheless be deemed a Qualified Election. Any consent necessary for a Qualified Election will be valid only with respect to the Spouse who signs the consent, or in the event of a deemed Qualified Election, the Spouse whose consent could not be obtained or who could not be located. Additionally, a revocation of a prior waiver may be made by a Participant without the consent of the Spouse at any time before the commencement of distributions or benefits. The number of revocations shall be unlimited. Each such revocation shall once again make the Qualified Joint and Survivor Annuity or Qualified Preretirement Survivor Annuity applicable, as the case may be. No consent obtained pursuant to this Section shall be valid unless the Participant has received the relevant notice as provided in Sections 24.09 and 24.10. (c) "Qualified Joint and Survivor Annuity" shall mean, in the case of a married Participant, an annuity which can be purchased with the Participant's Vested Account Balance for the life of the Participant with a survivor annuity for the life of the Spouse equal to 50% of the amount of the annuity which is payable during the joint lives of the Participant and the Spouse. In the case of an unmarried Participant, Qualified Joint and Survivor Annuity shall mean an annuity which can be purchased with a Participant's Vested Account Balance for the life of the Participant. (d) "Special Qualified Election" shall mean a valid waiver of a Qualified Preretirement Survivor Annuity for the period beginning on the date of such election and ending on the first day of the Plan Year in which the Participant attains age 35. To be valid, the waiver must be (i) in writing, (ii) made prior to the first day of the Plan Year in which the Participant attains age 35, and (iii) preceded by a written explanation to the Participant of the Qualified Preretirement Survivor Annuity in such terms as are comparable to the explanation required by Section 24.09 and 24.10. Any election made pursuant to this Section shall be void as of the first day of the Plan Year in which the Participant attains age 35 and Qualified Preretirement Survivor Annuity coverage shall be automatically reinstated as of such date. Any future election to waive the Qualified Preretirement Survivor Annuity must be a Qualified Election. (e) "Vested Account Balance" shall mean the Participant's vested portion of his or her Account consisting of the sum of the balances of Participant's Nondeductible Voluntary Contributions Account, Deductible Voluntary Contribution Account, Rollover Account, Salary Reduction Contributions Account, Deferred Cash Contribution Account and Nonelective Contribution Account and the vested portions of a Participant's Employer Profit Sharing Account and Employer Matching Account, reduced by any loans outstanding on the Annuity Starting Date which are secured by the Participant's Account balance. 24.03 Distributions upon Death. (a) Qualified Preretirement Survivor Annuity. (i) Unless either paragraph (ii) below applies or the Participant has selected an optional form of distribution within the Election Period pursuant to a Qualified Election or a Special Qualified Election, if the Participant dies before the earlier of (A) his or her Annuity Starting Date or (B) his or her First Required Distribution Date, then the Trustee shall, upon the direction of the Administrator, apply 50% of the Participant's Vested Account Balance toward the purchase of an annuity contract for the life of the Spouse. (ii) Notwithstanding the provisions of paragraph (i) above, prior to the earlier of (A) Spouse's Annuity Starting Date or (B) the Spouse's First Required Distribution Year, the Spouse of a Participant may deliver a written election to the Administrator whereby the Spouse elects not to have 50% of the Participant's Vested Account Balance applied toward the purchase of an annuity contract for the Spouse's life. Similarly, after the earlier of (A) the Spouse's Annuity Starting Date or (B) the Spouse's First Required Distribution Year, the Spouse may deliver a written election to the Administrator whereby the Spouse elects to terminate distributions pursuant to the Qualified Preretirement Survivor Annuity and to receive the liquidated value of the remainder of the Qualified Preretirement Survivor Annuity in an alternative form. In the case where a Spouse makes either of such elections, the portion of the deceased Participant's Vested Account Balance which would otherwise have been distributed pursuant to this subsection shall be distributed pursuant to the provisions of subsection (b) below. (iii) In the case of a Spouse of a deceased Participant who is scheduled to receive a Qualified Preretirement Survivor Annuity and who does not otherwise elect, at the instruction of the Administrator, the Trustee shall apply 50% of the deceased Participant's Vested Account Balance toward an annuity under which payments begin as of the later of the Participant's separation from Service or (what would have been) the Participant's Normal Retirement Date. A Spouse of a deceased Participant may elect a commencement date which is earlier than the date discussed in the previous sentence by filing a written election to that effect with the Administrator; the Trustee shall begin to make payments on such earlier date upon instruction from the Administrator. (b) Other Distributions at Death. If the Participant dies after he or she has begun to receive distributions pursuant to Section 24.04 below, this subsection shall apply with respect to the Participant's entire Vested Account Balance. With respect to any Vested Account Balance, or portion thereof, to which subsection (a) did not apply, the provisions of Article IX shall govern the distribution thereof. 24.04 Timing of Annuity Payments and Normal Distributions. Payment of benefits under the Qualified Joint and Survivor Annuity or distributions pursuant to the normal form of distribution discussed in Section 24.05(b) below shall commence within 60 days after the close of the Plan Year during which occurs the later of (a) the Participant's Normal Retirement Date or (b) the earlier of (i) the Participant's separation from Service or (ii) the end of his or her First Required Distribution Year. Payment of benefits may, at the discretion of the Trustee, be paid directly to the Participant or to the Administrator, as payee agent. If the Participant's vested Account balance (exclusive of his or her Rollover Account and Deductible Voluntary Contribution Account) is greater than $3,500, written consent of the Participant is required for any earlier distribution. A Participant may file an election with the Administrator to request that distributions commence in accordance with one of the following options provided that the distribution shall otherwise comply with the requirements of the Plan (including, but not limited to, Section 10.03): (A) Distributions commencing before the Participant's Normal Retirement Date if the Participant is Disabled or experiences a separation from Service. (B) Distributions commencing after the normal time of distribution described above; provided, however, that any such deferred distribution must commence no later than 60 days after the end of the Participant's First Required Distribution Year. 24.05 Form of Distribution and Optional Times for Commencement of Distribution. The Vested Account Balance of a Participant to which Section 24.03 above does not apply, shall be distributed in a form determined according to this Section. (a) Unless the Participant elects an optional form of distribution pursuant to a Qualified Election or a Special Qualified Election within 90 days before his or her Annuity Starting Date, the Participant's Vested Account Balance shall be paid in the form of a Qualified Joint and Survivor Annuity. (b) If the Participant was eligible to receive a Qualified Joint and Survivor Annuity and he or she elects an optional form of distribution set forth in Article X pursuant to a Qualified Election or a Special Qualified Election within 90 days before his or her Annuity Starting Date, then the Participant's Vested Account Balance will be distributed in the form selected by the Participant and the provisions of Article X shall apply. (c) All annuity contracts purchased and distributed by the Plan to a Participant or a Beneficiary shall be nontransferable when distributed and the terms of such contracts shall comply with the requirements of the Plan. 24.06 Elections for Former Participants. An opportunity to make the applicable distribution elections discussed in this Section must be given to any living former Participant who had not begun receiving benefits from this Plan on August 23, 1984 and who would not otherwise receive the benefit forms prescribed by Section 24.05 above. (a) In the case of a former Participant who: (i) would have been entitled to receive his or her benefits in the form of a life annuity had he or she completed an Hour of Service during a Plan Year commencing after December 31, 1984, (ii) was credited with Service under this Plan or a predecessor plan in a plan year beginning after December 31, 1975, and (iii) had at least ten years of Vesting Service when he or she separated from Service, the former Participant must be given an opportunity to elect to receive his or her benefits in accordance with the provisions of Section 24.05 above. (b) In the case of a former Participant: (i) who was credited with service under this Plan or a predecessor plan after September 1, 1974; (ii) who was not credited with service under this plan or a predecessor plan in a plan year beginning after December 31, 1975; and (iii) whose benefits would have been payable in the form of a life annuity, the Participant must be given an opportunity to elect to receive his or her benefits in accordance with the provisions of Section 24.08 below. (c) In the case of a former Participant who: (i) satisfies the requirements of subsection (a) but does not exercise the election made available to him or her in subsection (a), or (ii) satisfies the requirements of subsection (a) other than the requirement of paragraph (iii), the former Participant shall have his or her benefits distributed in accordance with the provisions of Section 24.08 below. 24.07 Election Period for Certain Elections by Separated Participants. The period during which a former Participant entitled to make an election pursuant to Section 24.06 above shall commence on August 23, 1984 and end on the earlier of the former Participant's death or the date benefits would otherwise commence to said former Participant. 24.08 Benefit Form for Certain Former Participants. The benefits of a former Participant who is entitled to elect, and has elected to have his or her benefits distributed pursuant to this Section or a former Participant whose benefits are required to be distributed in accordance with the provisions of this Section shall be distributed in accordance with the following provisions: (a) If benefits in the form of a life annuity become payable to a married former Participant who: (i) begins to receive payments under the Plan on or after Normal Retirement Age; or (ii) dies on or after Normal Retirement Age while still working for the Employer; or (iii) begins to receive payments prior to Normal Retirement Age; or (iv) separates from Service on or after attaining Normal Retirement Age (or the qualified early retirement age) after satisfying the eligibility requirement for the payment of benefits under the Plan and thereafter dies before beginning to receive such benefits; then such benefits will be received under this plan in the form of a Qualified Joint and Survivor Annuity, unless the former Participant has elected otherwise during the election period. For this purpose, the election period must begin at least six months before the Participant attains qualified early retirement age and end not more than 90 days before the commencement of benefit distributions. Any election hereunder must be in writing and delivered to the Administrator; such election may be changed by the former Participant at any time by delivery of written notification of such change and/or a separate written election to the Administrator. (b) A former Participant who is employed at the start of the election period defined below will be given the opportunity to elect, during such election period, to have a survivor annuity payable on death. If the former Participant elects the survivor annuity, payments under such annuity must not be less than the payments which would have been made to the Spouse under the Qualified Joint and Survivor Annuity if the former Participant had retired on the day before his or her death. Any election under this provision must be in writing and delivered to the Administrator; such election may be changed by the former Participant at any time by delivery of written notification of such change and/or a separate written election to the Administrator. The election period begins on the later of (i) the 90th day before the former Participant attains the qualified early retirement age or (ii) the date on which participation begins, and ends on the date the former Participant terminates employment with the Employer. (c) The qualified early retirement age referred to in this Section shall mean the latest of: (i) the earliest date, under the Plan, on which the former Participant may elect to receive retirement benefits: (ii) the first day of the 120th month beginning before the former Participant reaches Normal Retirement Age: or (iii) the date the former Participant began participation. 24.09 Notice of Waivability of Qualified Preretirement Survivor Annuity. (a) In the case of a Participant who is scheduled to receive Qualified Preretirement Survivor Annuity coverage pursuant to Section 24.03 hereof, the Administrator shall provide to the Participant within the applicable period as determined pursuant to subsection (b) below, a written explanation of: (i) the terms and conditions of a Qualified Preretirement Survivor Annuity; (ii) the Participant's right to make, and the effect of, an election to waive Qualified Preretirement Survivor Annuity coverage; (iii) the rights of a Participant's Spouse; and (iv) the Participant's right to make, and the effect of, a revocation of a previous election to waive Qualified Preretirement Survivor Annuity coverage. (b) The applicable period during which the Administrator shall provide the written explanation described in subsection (a) above shall mean, with respect to a given Participant, whichever of the following periods ends last: (i) The period beginning when the individual becomes a Participant and ending a reasonable period of time thereafter; (ii) The period beginning on the first day of the Plan Year during which the Participant attains age 32 and ending on the last day of the Plan Year during which the Participant attains age 34; (iii) The period that begins with a Participant's separation from Service when the Participant separates from Service before attaining age 35 and ends a reasonable period of time after such separation from Service; (iv) The period of time that begins on the effective date of a Plan amendment which causes the Plan to no longer fully subsidize the cost of the Qualified Preretirement Survivor Annuity and ends a reasonable period of time after the effective date of such an amendment; or (v) The period of time which begins when Section 24.03(a) above first applies in the case of the Participant and ends a reasonable period of time thereafter. For purposes of applying the preceding paragraph, a reasonable period ending after the enumerated events described in (i), (iv) and (v) is the end of the two-year period beginning one year prior to the date the applicable event occurs and ending one year after that date. In the case of a Participant who separates from service before the Plan Year in which age 35 is attained, notice shall be provided within the two-year period beginning one year prior to separation and ending one year after separation. If such a Participant thereafter returns to employment with the Employer, the applicable period for such Participant shall be redetermined. 24.10 Notice of Waivability of Qualified Joint and Survivor Annuity. In the case of a Participant who is scheduled to receive a Qualified Joint and Survivor Annuity pursuant to the provisions of Section 24.05 hereof, the Administrator shall provide to the Participant, no less than 30 days and no more than 90 days prior to the annuity starting date, a written explanation of: (a) the terms and conditions of a Qualified Joint and Survivor Annuity; (b) the Participant's right to make, and the effect of, an election to waive distribution in the form of a Qualified Joint and Survivor Annuity; (c) the rights of the Participant's Spouse; and (d) the Participant's right to make, and the effect of, a revocation of a previous election to waive distribution in the form of the Qualified Joint and Survivor Annuity. Distribution to a Participant may commence seven days after the foregoing explanation is given, provided that: (i) the Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (ii) the Participant, after receiving the explanation, affirmatively elects a distribution. ARTICLE XXV. MISCELLANEOUS 25.01 Misrepresentation. Notwithstanding any other provision herein, if an Employee misrepresents his or her age or any other fact, any benefit payable hereunder shall be the smaller of: (a) the amount that would be payable if no facts had been misrepresented, or (b) the amount that would be payable if the facts were as misrepresented. 25.02 No Enlargement of Plan Rights. It is a condition of the Plan, and each Participant by participating herein expressly agrees, that he or she shall look solely to the assets of the Trust for the payment of any benefit under the Plan. 25.03 No Enlargement of Employment Rights. Nothing appearing in or done pursuant to the Plan shall be construed (a) to give any person a legal or equitable right or interest in the assets of the Trust or distribution therefrom, nor against the Employer, except as expressly provided herein or (b) to create or modify any contract of employment between the Employer and any Employee or obligate the Employer to continue the services of any Employee. 25.04 Written Orders. In taking or omitting to take any action under this Plan, the Trustee may conclusively rely upon and shall be protected in acting upon any written orders from or determinations by the Employer or the Administrator as appropriate, or upon any other notices, requests, consents, certificates or other instruments or papers believed by it to be genuine and to have been properly executed, and so long as it acts in good faith, in taking or omitting to take any other action. 25.05 No Release from Liability. Nothing in the Plan shall relieve any person from liability for any responsibility under Part 4 of Title I of the Act. Subject thereto, neither Trustee, Loan Trustee, Administrator or Distributor nor any other person shall have any liability under the Plan, except as a result of negligence or willful misconduct, and in any event the Employer shall fully indemnify and save harmless all persons from any liability except that resulting from their negligence or willful misconduct. 25.06 Discretionary Actions. The Administrator shall have discretionary authority to determine eligibility for benefits and construe the terms of the Plan. Any discretionary action, including the granting of a loan pursuant to Article XII hereof, to be taken by the Employer or the Administrator under this Plan shall be non-discriminatory in nature and all Employees similarly situated shall be treated in a uniform manner. 25.07 Headings. Headings herein are primarily for convenience of reference, and if they conflict with the text, the text shall control. 25.08 Applicable Law. This Plan and Trust shall, to the extent state law is applicable, be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the state in which (a) if the Trustee is a corporation, the Trustee has its principal place of business; (b) if the Trustee is an individual, the Trustee resides; or (c) if the Trustee is individuals, where a majority of the individuals serving as Trustee reside. The Employer's execution of the Adoption Agreement may be acknowledged where required by applicable law. 25.09 No Reversion. Notwithstanding any other contrary provision of the Plan, but subject nevertheless to Articles V and XVIII, no part of the assets in the Trust shall revert to the Employer, and no part of such assets, other than that amount required to pay taxes or administrative expenses, shall be used for any purpose other than exclusive benefit of Employees or their Beneficiaries. However, the Employer may request a return, and this Section shall not prohibit return, of an amount to the Employer under any of the following circumstances: (a) if the amount was all or part of an Employer Contribution which was made as a result of a mistake of fact and the amount contributed or, if less, the then current value is returned to the Employer within one year after the date on which the mistaken payment of the contribution was made, or (b) if the amount was all or part of an Employer Contribution which was conditioned on deductibility under Code Section 404, such deduction was disallowed with respect to such amount and this condition is not satisfied and the amount is returned to the Employer within one year after the date on which the deduction is disallowed, or (c) if the amount was all or part of an Employer Contribution which was conditioned on the initial qualification of the Plan under Code Section 401(a), the Plan receives an adverse determination with respect to this qualification and the amount is returned to the Employer within one year after the date on which such adverse determination is made, but only if the application for the determination is made by the time prescribed by law for filing the Employer's return for the taxable year in which the Plan was adopted, or such later date as the Secretary of Treasury may prescribe. For the purposes of this Section, all Employer Contributions are conditioned on initial qualification of the Plan under Code Section 401(a), qualification of the Plan as amended under Code Section 401(a), and deductibility under Code Section 404. 25.10 Notices. The Employer will provide the notice to other interested parties contemplated under Code Section 7476 before requesting a determination by the Secretary of the Treasury or his or her delegate with respect to the qualification of the Plan. 25.11 Conflict. In the event of any conflict between the provisions of this Plan and the terms of any contract or agreement issued thereunder or with respect thereto, the provisions of the Plan shall control. In particular, the proceeds of any life insurance contract purchased by the Trustee and not governed by an effective Designation of Beneficiary form 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. EX-10.N 5 MUTUAL RELEASE AGREEMENT - ROBERT F. KIZER N O T I C E Various state and federal laws prohibit employment discrimination based on age, sex, race, color, national origin, religion, handicap or veteran's status. These laws include, without limitation: (1) Title VII of the Civil Rights Act of 1964; (2) the Age Discrimination in Employment Act of 1967; (3) the Employee Retirement Income Security Act of 1974; and (4) various Texas state and local employment statutes, regulations and ordinances. These laws are enforced through the Equal Employment Opportunity Commission, the Department of Labor and Texas state and local employment rights agencies. In addition, you are hereby advised to consult with an attorney prior to executing this Mutual Release Agreement, being sure that you thoroughly review and understand the effects of the Agreement before executing it. MUTUAL RELEASE AGREEMENT This MUTUAL RELEASE AGREEMENT (this "Agreement") is between UNITED STATES LIME & MINERALS, INC., a Texas corporation (the "Company"), and ROBERT F. KIZER, a former director, officer and employee of the Company ("Kizer"), and has been executed on this 27th day of February, 1998 (the "Settlement Date"). On December 6, 1997, the Company terminated Kizer's employment as an officer, employee and agent of the Company under Kizer's Employment Agreement dated as of September 27, 1993, a copy of which is attached hereto (the "Employment Agreement"). Capitalized terms used in this Agreement but not defined herein are used as defined in the Employment Agreement The Company and Kizer now wish to compromise, settle and resolve all actual and potential differences and disputes between them, without the uncertainties, risk and expense of arbitration or litigation. Each of the parties has agreed, intending to be legally bound, as follows: 1. Termination. The Company and Kizer agree that, effective December 6, 1997, the Company terminated Kizer's employment as an officer, employee and agent of the Company without cause pursuant to Section 2(b) of the Employment Agreement. The Company and Kizer further agree that Kizer is, therefore, entitled, pursuant to Section 2(f) of the Employment Agreement, to be paid the Severance Amount on the Effective Date of this Agreement (as defined below). The Company and Kizer also agree that Kizer has resigned as a Director of the Company effective upon his receipt of the Severance Amount on the Effective Date of this Agreement. 2. Mutual General Releases. Kizer hereby releases, acquits and discharges the Company and its subsidiaries and their respective affiliates, shareholders, directors, officers, employees and agents (collectively, the "Company Releasees") from, and agrees not to sue any of the Company Releasees for, and the Company hereby releases, acquits and discharges Kizer and his executors, administrators and heirs (collectively, the "Kizer Releasees") from, and agrees not to sue any of the Kizer Releasees for, any and all claims, actions, causes of action, suits, demands, judgments, costs, fees (including attorneys' fees), charges, damages, losses and other liabilities and obligations of any manner whatsoever, from the beginning of time through the Settlement Date, including without limitation claims arising out of or related to the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967 (the "ADEA"), and the Employee Retirement Income Security Act of 1974 (collectively, "Claims"), excluding only Claims directly arising out of or related to a breach of this Agreement or of those provisions of the Employment Agreement that continue to apply after termination of Kizer's employment occurring after the Settlement Date, or any Claims under the Company's Employee Stock Ownership Plan or Section 401(k) Plan arising after the Settlement Date. In addition, Kizer and the Company agree that he or it will not assist or encourage anyone else in the filing or prosecution of any Claims against the Company Releasees or the Kizer Releasees, respectively. 2 3. Additional Consideration to Kizer (a) Subject to and in reliance on the terms and conditions hereof, the Company agrees as follows: (i) to pay to Kizer his Base Salary and other benefits for service through December 6, 1997, which payment in full is hereby acknowledged by Kizer; (ii) to pay to Kizer his Base Salary and benefits through January 5, 1998, which payment in full is hereby acknowledged by Kizer; (iii) to treat January 5, 1998 as the date on which Kizer's health coverage caused for purposes of Kizer's COBRA rights; (iv) to treat February 25, 1998 as the date on which Kizer's employment with the Company's subsidiaries terminated for purposes of Kizer's outstanding options to purchase shares of the Company's Common Stock granted under the Company's 1992 Stock Option Plan, with the three-month post-termination exercise period expiring at close of business on May 25, 1998; and (v) to pay to Kizer, on the Effective Date of this Agreement, the aggregate sum of Two Hundred, Seventy Thousand Dollars and No Cents ($270,000.00) (the "Settlement Payment"), less One-Hundred, One Thousand, Thirty-Five Dollars and No Cents ($101,035.00) of withholding for all applicable taxes and other amounts which may properly be withheld, including additional federal income tax withholding at Kizer's request, for a net amount of One Hundred, Sixty-Eight Thousand, Nine 3 Hundred, Sixty-Five Dollars and No Cents ($168,965.00), (A) in full and total satisfaction of the Company's obligation to pay the Severance Amount, and (B) in full and total satisfaction and settlement of any Claims, including without limitation under the ADEA, that Kizer may have against the Company Releasees, including in such Settlement Payment certain consideration for the release of such Claims in addition to anything of value to which Kizer is otherwise already entitled under the Employment Agreement or otherwise. (b) The Company further agrees that Kizer shall continue to be indemnified by the Company against third-party claims arising by reason of his service as a director and officer of the Company and its subsidiaries to the fullest extent provided by applicable law and the Company's By-laws as in effect on the Settlement Date. The Company further agrees that it shall take no steps that would impair Kizer's coverage for his service as a director and officer of the Company and its subsidiaries under the Company's directors' and officers' liability insurance as in effect on the Settlement Date. (c) Kizer acknowledges and agrees that the Settlement Payment includes the full amount of the Base Salary and benefits to which he is entitled as the Severance Amount under Section 2(f) of the Employment Agreement. Kizer further acknowledges and agrees that the Settlement Payment includes an amount for the full and total satisfaction and settlement of any Claims, including without limitation under the ADEA, that Kizer may have against the Company Releasees, including in such Settlement Payment certain additional consideration for the release of such Claims in 4 addition to anything of value to which Kizer is otherwise already entitled under the Employment Agreement or otherwise. 4. No Admission. By executing this Agreement, neither the Company nor Kizer, directly or indirectly, or by implication, admits any violation of any law, statute, regulation or ordinance. 5 Enforceability. (a) Kizer acknowledges and agrees that he has been considering and negotiating the terms of this Agreement with the Company for at least twenty-one (21) calendar days, and that he has asked the Company to finalize and execute this Agreement not later than the date hereof in order to conclude the negotiating process as soon as possible. Kizer further acknowledges and agrees that he has been advised by an attorney throughout the 21-day period, and that Kizer has read and fully understands all of the provisions of this Agreement. (b) Kizer also acknowledges that, for a period of seven (7) calendar days following the Settlement Date, he may revoke this Agreement. This Agreement shall be effective on March 6, 1998, once the Company receives an executed letter from Kizer, dated such date in the form attached hereto, confirming that he has not revoked and does not intend to revoke this Agreement and that it is enforceable (the "Effective Date of this Agreement"). If such letter is not received by the Company by 5:00 p.m. Dallas time on March 6, 1998, this Agreement shall become null and void. 6. Governing Law. This Agreement shall be interpreted and applied under the laws of the State of Texas. 5 7. Entire Agreement. Both parties agree that this Agreement and those provisions of the Employment Agreement that continue to apply after termination of Kizer's employment constitute the entire agreement of the parties. 8. Notices. Any notice, statement, payment or other communication required or permitted to be given hereunder shall be in writing and shall be delivered in person, by certified or registered United States or Canada mail, return receipt requested, by overnight delivery service, or by telecopy, at the address set forth below. Either party may by notice to the other party hereto change the address of the party to whom notice is to be given. The date of notice shall be the date delivered, if delivered in person, or the date received, if delivered by mail, by overnight delivery service, or by telecopy. 9. Waiver. No waiver by any party to this Agreement of any breach or default shall be effective unless the same shall be in writing and signed. No waiver by any party of any breach or default of any term or provision of this Agreement shall be construed to constitute a waiver of, or consent to, the present or future breach or default of that or any other term or provision hereof. 10. Severability of Provisions. If any term or provision of this Agreement is held to be invalid or unenforceable, and cannot be amended or reformed such that such term or provision is thereafter valid and enforceable, such term or provision shall be severed and stricken from this Agreement, and in all other respects this Agreement shall remain in full force and effect. 6 11. Counterpart Execution. This Agreement may be executed in separate counterparts, and all executed counterparts together shall constitute one and the same counterpart. EXECUTED the date first above written. Witness: /s/ Mary Beth Hughes /s/ Robert F. Kizer - --------------------- --------------------- Name: Robert F. Kizer 5924 Cast1ebar Lane Plano, Texas 75093 TELECOPY: (972) 403-9003 UNITED STATES LIME & MINERALS, INC. By: /s/ Edward A. Odishaw --------------------- Edward A. Odishaw, Chairman of the Board of Directors 12221 Merit Drive, Suite 500 Dallas, Texas 75251 TELECOPY: (972) 385-1340 7 Robert F. Kizer 5924 Castlebar Lane Plano, Texas 75093 March 6, 1998 Edward A. Odishaw, Chairman Board of Directors United States Lime & Minerals, Inc. 12221 Merit Drive, Suite 500 Dallas, TX 75251 Dear Ed: This is to confirm that I have not taken, and do not intend to take, any action to revoke the Mutual Release Agreement executed by me and United States Lime & Minerals, Inc. on February 27, 1998 (the "Agreement"). I further confirm my understanding that the Agreement is enforceable. Pursuant to the Agreement, I hereby request that the net amount of the Settlement Payment be paid to me immediately. Sincerely yours, /s/ Robert F. Kizer Robert F. Kizer EX-10.O 6 EMPLOYMENT AGREEMENT - JOHNNEY G. BOWERS EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is made on April 17, 1997, by and between United States Lime & Minerals, Inc. (the "Employer"), 12221 Merit Drive, Suite 500, Dallas, TX 75251 and Johnney G. Bowers (the "Employee"). A. Employer is engaged in the business of lime and limestone. B. Employer desires to have the services of Employee. C. Employee is willing to be employed by Employer. Therefore, the parties agree as follows: 1. Best Efforts of Employee. Employee agrees to perform faithfully, industriously and to the best of Employee's ability, experience and talents, all of the duties that may be required by the express and implicit terms of this Agreement, to the reasonable satisfaction of Employer. Such duties shall be provided at Dallas, Texas and at such other place(s) as the needs, business or opportunities of the Employer may require from time to time. 2. Compensation of Employee. As compensation for the services provided by Employee under this Agreement, Employer will pay Employee the following: a. The annual salary paid to Employee shall be $130,000 per annum to be paid in periodic monthly installments. b. Employee shall be supplied with a motor vehicle. Employer shall bear the reasonable acquisition, repair, and running expenses relating thereto. The non-business use of the motor vehicle shall be added to the taxable wages of Employee pursuant to the Employer's policy. c. Employee shall be entitled to participate in all employer retirement, insurance, long-term disability and other fringe benefit programs of Employer. d. Employee shall be eligible to participate in stock option programs as may be issued by the Board of Directors from time to time, but any such stock option program shall be at the sole discretion of the Board of Directors. e. Employer shall conduct an annual job performance review for the mutual benefit of Employer and Employee, and Employee shall be eligible to receive an annual performance bonus based on both Employee's job performance and the Company's financial performance but any such bonus amount shall be at the sole discretion of the Employer. Employment Agreement April 17, 1997 Page 2 f. Employee shall be entitled to four weeks of paid vacation per year. Such vacation must be taken at a time mutually convenient to Employer and Employee and must be approved by Employer. Requests for vacation shall be submitted to Employee's immediate supervisor in advance of the requested date such vacation would commence. Unused vacation time may not be accumulated and carried over to the next year. 3. Title of Employee. The Employee will hold the title of Vice President of Manufacturing and currently report to the President and CEO. 4. Reimbursement for Expenses in Accordance With Employer Policy. The Employer will reimburse Employee for "out-of-pocket" expenses in accordance with Employer policies in effect from time to time. 5. Relocation Expenses. Employer shall reimburse Employee for moving expenses to move Employee from his residence to the Dallas, Texas vicinity. Employer will also pay for the Employee's Real Estate fees on the sale of his residence. 6. Termination. a. Employer shall have the right to terminate Employee's employment hereunder without cause at any time; except that immediately upon such termination, Employer shall make a payment to Employee in the amount of fifty percent of his then annual salary as defined in Paragraph 2a above (currently $130,000) in a form mutually agreeable to both parties in compliance with IRS rules and regulations. Upon any such termination defined above, Employee agrees to provide Employer with a general release agreeable to both parties. b. Company shall have the right to terminate Employee's employment hereunder for cause without making termination payment to Employee in the event Employee (i) engages in any competition with any business of Employer without the prior written approval of Employer; (ii) commits fraud, theft, larceny or any other crime (other than minor misdemeanors); (iii) fails or refuses to obey lawful instructions or commits an act of willful misconduct or disloyalty; (iiii) is guilty of habitual insobriety, inattention to his duties or negligence in the performance of his duties; or (iiiii) is unable to perform his duties because of death or disability. Employee shall be deemed to be disabled under Employer's disability policy for executive officers as in effect at that time. Employment Agreement April 17, 1997 Page 3 7. Confidentiality. Employee recognizes that Employer has and will have inventions, business affairs, products, fixture plans, machinery, trade secrets, apparatus, process information, prices, customer lists, discounts, technical information, costs, product design information, and other vital information (collectively, "Information") which are valuable, special and unique assets of Employer. Employee agrees that Employee will not at any time or in any manner, either directly or indirectly, divulge, disclose or communicate in any manner any Information to any third party without the prior written consent of the Employer. Employee will protect the Information and treat it as strictly confidential. A violation by Employee of this paragraph shall be a material violation of this Agreement and will justify legal and/or equitable relief. a. Unauthorized Disclosure of Information. If it appears that Employee has disclosed (or has threatened to disclose) information in violation of this Agreement, Employer shall be entitled to an injunction to restrain Employee from disclosing, in whole or in part, such Information, or from providing any services to any party to whom such information has been disclosed or may be disclosed. Employer shall not be prohibited by this provision from pursuing other remedies, including a claim for losses and damages. b. Confidentiality After Termination of Employment. The confidentiality provisions of this Agreement shall remain in full force and effect for a period of 3 years after the termination of Employee's employment. 8. Entire Agreement. This Agreement contains the entire agreement of the parties and there are no other promises or conditions in any other agreement whether oral or written. This Agreement supersedes any prior written or oral agreements between the parties. 9. Amendment. This Agreement may be modified or amended, if the amendment is made in writing and is signed by both parties. 10. Miscellaneous. a. Notice. Any notice contemplated hereunder shall be by personal service and effective upon the date of such service. b. Texas Law. This agreement and any disputes thereunder shall be construed under the laws of Texas. Employment Agreement April 17, 1997 Page 4 c. Arbitration. Any dispute hereunder shall be resolved by binding arbitration according to the rules of the American Arbitration Association, and any such arbitration shall be held within 50 miles of the office to which Employee is or was assigned at the time of the arising of such dispute. Accepted By Johnney G. Bowers By: \s\ Johnney G. Bowers --------------------------- Johnney G. Bowers Accepted by United States Lime & Minerals, Inc. By: \s\ Robert F. Kizer --------------------------- Robert F. Kizer, President & CEO EX-21 7 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 SUBSIDIARIES OF THE COMPANY Arkansas Lime Company, an Arkansas Corporation Texas Lime Company, a Texas Corporation EX-23 8 CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-58311) pertaining to the United States Lime & Minerals, Inc. 1992 Stock Option Plan, as amended, of our report dated January 30, 1998, with respect to the consolidated financial statements of United States Lime & Minerals, Inc. and subsidiaries included in the Annual Report on Form 10-K for the year ended December 31, 1997. ERNST & YOUNG LLP Dallas, Texas March 16, 1998 EX-27 9 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 2,787 0 3,624 0 3,001 9,523 52,302 30,896 33,520 7,102 0 0 0 529 23,621 33,520 32,404 32,404 26,985 26,985 4,520 0 368 994 (2,102) 3,096 0 0 0 3,096 .79 .78
EX-27.1 10 RESTATED FINANCIAL DATA SCHEDULE FOR FYE 12/31/96
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 .66
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